When the relations created between the Government and these companies by
the legislation referred to is considered, it is astonishing that the
claim should be made that the directors of these roads owed no duty
except to themselves in their construction; that they need regard no
interests but their own, and that they were justified in contracting
with themselves and making such bargains as resulted in conveying
to their pockets all the assets of the companies. As a lienor the
Government was vitally interested in the amount of the mortgage to which
its security had been subordinated, and it had the right to insist that
none of the bonds secured by this prior mortgage should be issued
fraudulently or for the purpose of division among these stockholders
without consideration.
The doctrine of complete independence on the part of the directors of
these companies and their freedom from any obligation to care for other
interests than their own in the construction of these roads seems to
have developed the natural consequences of its application, portrayed as
follows in the majority report of the commissioners:
The result is that those who have controlled and directed the
construction and development of these companies have become possessed
of their surplus assets through issues of bonds, stocks, and payment
of dividends voted by themselves, while the great creditor, the United
States, finds itself substantially without adequate security for the
repayment of its loans.
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