May 6, 1909

CON

Oswald Smith Crocket

Conservative (1867-1942)

Mr. CKOCKET.

Then on page 55 Mr. Winslow says:

When we had any payment to make prior to my being secretary, money would be paid to Mr. Allen. He would get enough to pay Mr. Barnes on his running account and then pay into his private account and from that check out.

At Page 58:

*Q. Prom his private account and the funds of the company were in his private name in the bank?-A. He would make provision for *anything he knew was coming due by getting the money from the Peoples' Bank. It would be deposited to Mr. Allen's account.

Now Mr. Speaker, I ask the members of this House what they think of the financial business of this company amounting to over $900,000 being transacted upon such a basis as that. And yet the Minister of Public Works would endeavour to make the members of the House believe that there were adequate records and adequate data from which this commission could have arrived at the expenditure of every dollar of the money of the Company. The Minister of Public Works made reference to a statement made by Mr. Shannon, the auditor of the Intercolonial, who went down to investigate the affairs of this company in order to determine the question of the payment of the Federal subsidy.

At Page 476, of the volume entitled Orders in Council and Documents we have a report of Mr. Shannon, and I notice in it this statement:

After the contractors relinquished the work

That was of the 15 mile section from Chipman to Minto which they had undertaken to build for $117,000.

After the contractors relinquished the wo; k, the company requested them to go on and complete the work, and the company would pay the actual cost of the same. To ascertain therefore the actual cost, I requested that I should b9 furnished with all vouchers, cheques, &c., but this I found to be impossible.

That is the statement of Mr. Shannon, auditor of the Intercolonial Eailway, the Mr CROCKET.

same gentleman to whom the Minister of Public Works referred last night as having examined these accounts in detail. Furthermore with reference to the absence of records and books, I wish to quote from the evidence of Mr. G. N. Babbitt, Deputy Receiver General of the province of New Brunswick. There has been issued by the New Brunswick Coal and Railway Company, bonds to the amount of $450,000, all of which were guaranteed by the Provincial Secretary on behalf of his government. Mr. Babbitt was asked whether there was any registration or record of these bonds in his office at Fredericton, he being the deputy receiver general and the one who should have that record. On page 27 I find this evidence:

Q. After this, did you or did you not yourself personally know that the government guaranteed any bonds which bad been issued by the company?-A. Yes, I knew there were orders passed to do it.

Q. In the way of information in your office? -A. The bonds were not brought to the office and recorded.

Q. Did you ever see the bonds yourself at all?-A. No, I never did.

Q. They never came near your office at all? -A. No.

Q. Personally you do not know to whom they were delivered or what became of them ? -A. No.

Q. You say that no registration was made of these bonds in your books?-A. Yes.

What do you think of that way of transacting business by the government of any province in this Dominion? Here was an issue of $450,000 bonds guaranteed by the province and no register or record kept of them in the government office at Fredericton. Furthermore on page 28:

Q. Had any coupons been paid by you as Deputy Receiver General in connection with the bonds which has been guaranteed?-A. Oh, yes.

Q. Have you any idea as to the amount of general coupons you paid?-A. Yes.

Q. About what amount ?-A. The full

amount.

Q. What would that be?-A. About $18,000, $9,000 on the half year.

Q. They would be coupons on how many thousand dollars worth of bonds?-A. $450,000 at four per cent.

Q. That is the only way yon know the bonds had actually been issued, was by paying the interest coupon on them?-A. Yes, I might say that.

Q. Yvu said the first coupon-the first conpon was presented for payment in what year? Was all that issue of $450,000 out then?-A. The July coupon, 1905, due July 2, 1905.

So that the Deputy Receiver General actually had no knowledge of the issue of these guaranteed bonds until 1904 after the great bulk of them had been issued and disposed of and had no record of them at Fredericton. Further I want to refer to the evidence of

5781 MAY 6, 1909 5782

the then provincial secretary, Mr. Tweedie, now governor of the province, upon the question of the accounts, page 524: Q As a matter of fact, did you ever look to see if they did keep accounts?-A Yes. Q You found they did not?-A. They did not keep them satisfactorily to me. I raised the devil with them. But he does not seem to have raised any books. We have the evidence of the Minister of Public Works himself upon this question at page 703: Q. Did you ever see an acoount-book of the company showing the moneys received or disbursed by the New Brunswick Coal and Railway Company?-A. No. That was the answer which the Minister of Public Works gave-the gentleman who made the speech yesterday. These hooks will probably be kept by Mr. Winslow, the treasurer of the company, or Mr. Allen, the secretary. Both these gentlemen unfortunately died before this investigation began. Q. I have the only book, so they say?-A. Who says? , , Q. Here is the book and the only book of account except what was kept at Norton, 1 think there are about half a dozen pages in it. I do not see any account at all of this there?-A. I cannot help that. Q. Notwithstanding that you were in the interests of the province, you and the provincial secretary, appointed to see that the provincial moneys were correctly accounted for and expended, you never took pains to see whether the company kept books or not?-A. Mr. Allen was a gentleman of high standing and Mr. Winslow was the treasurer. In view of the evidence I have quoted, hon. members ought to know pretty well what value to attach to a statement made by the Minister of Public Works. All this, I wish lion, members to bear in mind, despite this section ' 2 of the Act of 1901, which authorized the guaranteeing of these bonds. Section 6: The company shall keep such books and accounts as may from time to time be required by the Lieutenant Governor in Council, and such books and accounts shall at all times be open to the inspection of the Lieutenant Governor in Council or such person as he may appoint to inspect and audit the same. And all books and accounts shall be each half year audited by the expert accountant appointed by the Lieutenant Governor in Council, and the expense of such audit shall be borne by the company. Think of the record of evidence such as I have adduced this forenoon, in the face of a statutory provision of that kind. Then I ask hon. members if they take any stock in the statement made| by the Minister o1 Public Works yesterday afternoon that there was no justification for the reflections made upon him. I also dealt in part last evening with the minister's defence to the charge that the government had illegally paid subsidies out of the treasury of New Brunswick and in contravention of the provisions of the Act. I pointed out that under the Act of 1882, there was a subsidy of $3,000 per mile for the line from Chipman to Gibson, a distance of 45 miles, and that the total subsidy was $135,000. Of that line only 15 miles have been built up to the present which, on the basis of $3,000 a mile, would make the maximum subsidy available $45,000. Prior to the appearance on the scene of the New Brunswick Coal and Railway Company, $13,000 of that subsidy had been paid on account of work done on that 15 miles. So that there was payable in subsidies to the New Brunswick Coal and Railway Company, on account of this 15 mile section, under the Act of 1882, but $32,000. Notwithstanding that the government of New Brunswick, on representations made to it by the Minister of Public Works (Mr. Pugsley), paid $57,000, or $25,000 for which there was no authority of any kind in law. I pointed out further that of that $25,000, $2,550 had been paid on orders which were held by the Minister of Public Works and by Mr. W. T. Whitehead, another member of the Liberal machine; in New Brunswick. These orders had been obtained a few days after the contract was entered into between the Central Railway and Mr. de Bertram in the year 1895. Mr. Pugsley obtained his order the very day after that contract was entered into-Mr. Pugsley and Mr. Skinner jointly. In order that there may be no misapprehension, I propose to put on the record these assignments because the Minister of Public Works referred yesterday afternoon to these statements of these assignments to him as something with reference to which there was some error. I shall have to crave the indulgence of the House to put these statements on record. At page 92 of vol. labelled 'orders in council relating to the Central Railway,' we have this document: St. John, October 9, 1895. To the Hon. James Mitchell, Provincial Secretary. Dear Sir,-I hereby request that you pay to ffm, Pugsley and Chas. Skinner, or their order, the sum of $7,500 out of part of the subsidy made payable to me under the agreement dated October 4, 1905, and made between the Central Railway and Her Majesty Queen Victoria, represented by the provincial secretary, and which agreement is for the building of a line from Chipman to the Newcastle coal fields, a distance of 15 miles, so soon as the same may fall due and as it may become payable. And for the purpose of securing such payment to the said Wm. Pugsley and Chas. Skinner, or their order, I hereby, in consideration of the sum of $1 to me paid by them, receipt of which I acknowledge, assign to 1 them, their executors, administrators or as-

signs, the said sum of $7,500, part of said subsidies aforesaid.

Topic:   SUPPLY-HON. WM. PUGSLEY AND THE REPORT OF THE CENTRAL RAILWAY COMMISSION.
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LOUIS G. DE BERTRAM.


That is the day after the contract was entered into, this assignment was made by Dr. de Bertram, who got the contract, to Pugs ley and Skinner. Then there was an order a little later in favour of W. T. Whitehead of which I have made mention. At page 97 we have this further communication: St. John, New Brunswick, November 18, 1895. To the Honourable The Receiver General of New Brunswick, Sir,-Tou will please pay to the order of the Bank of New Brunswick the sum of $2,750 out of the first moneys which shall be coming to us from you as such receiver general, under the letter of order of Louis G. de Bertram, dated the 5th day of October, 1895, and filed with you on the 8th inst., said moneys being a portion of the subsidy to be paid by the provmce for and in respect of the extension ot the Central Railway from Chipman to the Newcastle coal fields. C. N. SKINNER, WM. PUGSLEY. Then there is a letter on page 98 to Mr. Babbitt: St. John, New Brunswick, „ November 18, 1895.


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Geo. N.@

Topic:   SUPPLY-HON. WM. PUGSLEY AND THE REPORT OF THE CENTRAL RAILWAY COMMISSION.
Subtopic:   LOUIS G. DE BERTRAM.
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ANDREW G. BLAIR.


Then there is a letter on the following page from Mr. Babbitt to the manager of ^ew Brunswick in accordance with this instruction. At page 100 there is this further order to the Receiver General of New Brunswick: November 26, 1895. To the Receiver General of the Province of New Brunswick. You will please pay to David O. Connell of tne city of St. John, m the city and county of e j2yl or to tls °.rder' the sum of $2,000 out of the moneys which will be coming to us under a certain assignment or transfer from Louis G. da Bertram to us, bearing date the 5th day of October, 1895, of the sum of $7,500, portion of the subsidy which will he payable by the province of New Brunswick to the said Louis G. de Bertram as the assignee of the Central Railway Company in respect of the extension of the Central Railway from Chip-Mr. CROCKET. man, m the county of Queens to the Newcastle coal fields, and which subsidy to the said amount of $7,500 was by the said transfer dated the 5tli day of October, 1895, and assigned and transferred to us. The transfer hereby given to the said David O'Connell of the said sum of $2,000 is subject to a 'previous assignment heretofore made by us to the Bank of New Brunswick of $2,750.


C. N. SKINNER,


. WM. PUGSLEY. Then there is a letter from Mr. Pugsley to the deputy Receiver General asking him to send to Mr. David O'Connell a letter similar to the one he had sent the Bank of New Brunswick, so that the House will see that, as soon as this assignment was procured from de Bertram, the Hon. Mr. Pugsley at once pledged it and raised money, through the bank and from Mr. David O'Connell, who was a money lender in the city of St. John. At page 103 there is a further letter to the Deputy Receiver General as follows: „ St. John, June 4, 1896. G. N. Babbitt, Esq., Deputy Receiver General, Fredericton, N.B. Dear Sir, Mr. Skinner and I have handed to Mr. Trueman, which he will forward to you, a further order against the subsidy coming to us re Central Railway for $550 Will you kindly send him a letter addressed to the bank, similar to. the one sent to Mr. O Connell. This comes next after the orders to the B.N.A., B.B.N.A., and Mr. Connell on file with you



Yours truly,


WILLIAM PUGSLEY


So that there were outstanding against this assignment of $7,500 of the subsidy for Messrs. Pugsley and Skinner, orders to the amount of $5,300. Now, on May 28, 1896 an order in council was passed authorizing the payment of $8,000 of subsidy on account or work to the amount of $23,000 that had been done on that 15 mile section, and immediately we find further correspondence and directions from Mr. Pugsley. At page 105 will be found the following letter ° St. John, June 3, 1896. To the Receiver General of the province of New Brunswick. You will please pay to the Bank of New Brunswick the sum of five hundred and fifty dollars out of the subsidy which will be payable by the province in respect of the extenSion of the Central Railway from Chipman to the Newcastle coal fields on account of the assignment to us by Louis G. de Bertram of $7,500 of said subsidy. This amount is to he a charge on the balance due us on said amount as per memo, below next after balance of $1,250 due said hank, $700 due Bank of British North America and $1,550 due David O'Connell. Yours truly,


WILLIAM PUGSLEY, C. N. SKINNER.


This is the further memo: Amount of assignment to C. N. Skinner and W. I'ugsley $7,500 Amount paid on first estimate 2,250



And another portion of the record, which is very suggestive, I think, in connection with the assignment of these subsidies to Messrs. Pugsley and Skinner, is a letter which will be found at page 192 of the book entitled 'Orders in Council and Documents.' Amount due B. N. B $1,250 Amount due B. B. N. A 700 Amount due D. O'Connell 1,550



Balance now pledged for $550.. .. 1,750



Now, on page 131 of this tile there is a statement of $8,000 of bonds that was issued to pay this subsidy and the disposition of them, and this is the statement as it appears on record: Central Railway-Date of Bonds. 1896. Forward $139,000. May 28, 1870 to 1885, sold to O'Hara & Co., proceeds used to Pay- Merchants Bank $2,000 (Bank B. N. A 300


?

Bank N.

B 1,500

W. T. Whitehead 300

D. O'Connell

450J. Barnes 3,450

8,000

See ledger, 1896, page 636.

St. John, May 16, 1904.

G. N. Babbitt,

Deputy Receiver General,

Fredericton.

Dear Mr. Babbitt,-A note of the New Brunswick Coal and Railway Company of $14,106 came due to-day at the Bank of New Brunswick and I have given the bank a sight draft on you for the amount. Attached to the draft is a letter from Hon. Mr. Tweedie engaging to pay the bank the $14,000 on the 4th of April last, and the $106 is for the interest.

An order in council was passed for the payment, and I am sending^ a copy of Mr. Tweedie's letter to him to-night asking him to instruct you to pay the amount and likewise to pay an amount of $5,600 odd to David O'Connell.

Mark that, Mr. Speaker, a direction in the year 1904 to pay out of further subsidies provided by an order in council the sum of $5,600 to the same David O'Connell, who held Mr. Pugsley's order under the first assignment and who was Mr. Pugsley's creditor in that connection.

Now, hon. members who have followed the documents which I have read will see that these payments to the Bank of British North America, the Bank of New Brunswick and D. O'Connell were under the orders of Messrs. Pugsley and Skinner, totalling $2,250. The Bank of New Brunswick was paid $1,500, which left a balance of $1,275 referred to in Mr. Pugsley's memo.

D. O'Connell was paid $450 on account of $2,000, which, left $1,550 due to Mr. O'Connell. There was a further payment of $300 to the Bank of British North America, presumably on the order of Mr. Trueman. Then, Mr. Whitehead was paid $300 on his order for $1,000. So that is the way in which the $8,000 was disposed of that was authorized by order in council of May, 1896.

Now, Mr. Speaker, in view of these facts the -order in council to which I referred last night, dated 12th April, 1902, which was after the Minister of Public Works (Mr. Pugsley) had re-entered the New Brunswick cabinet, becomes very interesting. That order in council, as I pointed out, provided that there should be deducted from the subsidies payable on account of the 15 mile section, not only $13,000 previously paid under the old contract, but a further sum of $8,000 to pay these very orders on account of which the Minister of Public Works (Mr. Pugsley) had already received $2,250, and Mr. Whitehead $300.

This cheque can be given to the Bank of Nova Scotia at Fredericton to-morrow if you get the Premier's authority for payment.. The exact amount is $5,630. These two accounts together will make less than $20,000 which is the sum which X assume the Premier will direct you to pay on subsidy account. This is pursuant to the statute passed at the last session, which authorized the payment on branch lines and is authorized by the engineer's report. He reports 7-7 miles completed, and there is grading for some distance further, and also the chief engineer of the company reports about a mile of additional rails ready to be laid upon the extension to another of the coal miles. You need not accept the draft until you hear from the Premier, and if it should be necessary to hold it over for a day or two, get the bank to so instruct its Fredericton agent.

Yours very truly,

Topic:   SUPPLY-HON. WM. PUGSLEY AND THE REPORT OF THE CENTRAL RAILWAY COMMISSION.
Subtopic:   WILLIAM PUGSLEY, C. N. SKINNER.
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WM. PUGSLEY.


And in that way the entire amount of the subsidies which were authorized for the construction of the branch lines was disposed of, ($20,000) and of that sum David O'Connell, money lender, of the city of St. John, received $5,600 under the direction of Wm. Pugsley. Now I think, in view of this record, the statement which the Minister of Public Works made, and the strictures he passed upon the commission for commenting upon this matter, will not carry very much weight, either in this House or with anybody who reads his speech, and who reads the record that I have adduced.



Now, Mr. Speaker, with reference to the illegal guaranteeing of bonds. Last night I quoted the several Acts that were passed from the year 1901 to 1904 in relation to the guarantee of bonds of the New Brunswick Coal and Railway Company. 1 showed that under the Act of 1901 not one dollar of these bonds was entitled to be guaranteed until the whole line of 45 miles from Chipman to Gibson was completed and in operation. I showed furthermore that in 1902 a further Act was passed amending the Act of 1901, in this way, that the bonds might be guaranteed upon progress estimates, but always bearing in mind the cost of the completed work relative to the cost of the whole line; providing furthermore, that there should be retained out of the bonds of the company a sufficient amount to provide for a coal plant, which was valued at $50,000. So down to the year 1904, under these two Acts in relation to the issue of bonds on the Gibson-Chipmain section, the government only had authority at any time to guarantee a proportionate amount on this 15 mile sec tion. I showed furthermore that under this Act of 1902, an estimate which was made in January, 1903, by the engineer, Evans, of the relative cost of the two sections, the 15 mile section and the 30 mile section which is unconstructed, the 15 mile section being estimated at $130,000 and the uncoustructed section at $213,000, showed that the unconstructed portion of 30 miles of this railway was entitled to at least sixty-one per cent of the guarantee of these bonds, and that there was available for the constructed portion of the 15 miles less than thirty-nine per cent. Now working that out, it would be clear to anybody who cared to examine the record, that deducting, in the first place $50,000 to provide for bonds for the coal plant, which was never done away with, there was left for this whole section of 45 miles $200,000. Sixty-one per cent of that amount would give $122,000 to the 30 mile section, and $78,000 to the 15 mile section, and that allows for the increased estimate of the cost per mile of the 15 mile section over the cost of the construction of the 30 mile section. So there was left $78,000. Now from that $78,000 should be deducted an amount of $40,000 which the provincial government by order in council guaranteed to pay to the Dominion government for rails supplied by the Intercolonial to the contractors for use on the 15 mile section, amounting to $40,000. That order in council specifically provided that the company should deposit with the Receiver General bonds covering the purchase price of those rails, $40,000, and that order in council had never been altered, and has never been altered down to this date. So if you take $40,000 from the $78,000, the govern-Mr. CROCKET. ment could legally guarantee only $38,000 bonds in respect of the 15 mile section. Notwithstanding that, the rails have never been paid for, the government in New Brunswick owe the federal government for those rails to-day, the coal plant has never been provided, and the whole amount of $250,000 has been guaranteed for the construction of 15 miles of this railway. And yet the Minister of Public Works criticised and attacked, and vehemently attacked, this Royal Commission for holding that he as a member of the government was responsible for the illegal guaranteeing of bonds of the New Brunswick Goal and Railway Company. Now, Sir, the Minister of Public Works produced a statement which he said he addressed to the late Mr. Shadbolt, manager of the Royal Trust Company in St. John, on the 6th of August, 1903, in reference to the distribution of certain bonds which the company had. In 1903, after these Acts were passed to which I have alluded^ there was a further Act passed authorizing, in addition to the guaranteeing of $250,000 for the construction of the Gibson-Chipman line, a further guaranteeing of bonds to the amount of $200,000 for the purchase of the Central Railway from Norton to Chipman, $180,000 of which was said to be for the purchase of the road, and $20,000 to recoup the company for improvements they had put upon it. I will quote a section from the Act of 1903, this is the proviso: Provided however that before guaranteeing the said bonds hereby authorized to the amount of $200,000 in respect to the said Central Railway, it shall be made to appear to the Lieutenant Governor in Council that a clear title has been obtained by the said, The New Brunswick Coal and Railway Company, to the said Central Railway, and that the bonds so to be guaranteed, together with the said bonds to the amount of $250,000 authorized by said Act 1 Edward VII, chapter 12? are secured by a first mortgage upon the said whole line of railway from Norton to Gibson. Before such bonds in this section provided for shall be so guaranteed hereunder, all bonds of the said, The New Brunswick Coal and Railway Company, which are secured by mortgage to the Royal Trust Company of Montreal, shall be cancelled and a new first mortgage to secure the whole issue of $450,000 to the satisfaction of the Lieutenant Governor in Council shall be executed covering the said whole line from Norton to Gibson. 2. The rate of interest upon the said bonds so to be issued under this section shall not exceed four per cent per annum. The rate of interest provided on the $250,000 bonds for the Chipman-Gibson line was three per cent. This Act provided for a new issue covering a loan of $450,000 and for the substitution of four per cent bonds for the three per cent bonds that had been previously issued. Bearing that sec- tion in mind, I wish to draw the attention of the House to a statement to which the Minister of Public Works referred yesterday afternoon. This statement will be found at page 518 of the documents relating to the New Brunswick Coal and Railway Company: Bank of Montreal, St. John, New Brunswick, Memorandum for E. M. Shadbolt, Esq., agent _ Royal Trust Company at St. John. You will please deliver the bonds of the New Brunswick Coal and Railway Company guaranteed by the province, as follows: To Bank of Montreal, 140 bonds.. ..$ 70,000 To the Bank of British North America 40 bonds 20,000 To the Bank of New Brunswick, 54 bonds 27,000 To the Bank of New Brunswick, for Peoples' Bank of New Brunswick, 140 bonds 70,000


May 6, 1909