The San Francisco Call. Newspaper, May 17, 1902, Page 3

THE SAN FBAfiCISCO CALL, SATURDAY, MAY 17, 1902 RECORDS SHOW THAT GAGE’'S ADMINISTRATION ~ AIDED IN PLUNDERING OF PUBLIC SCHOOL FUND Sharp Eastern Men Pluck State. Governor Does Not Stop Cinch. Big Premiums Paid for Bonds. io! many thousands bond The enrich 1 the East action, for which ponsible ex-officio, concealed for who knew nd they are given of those whom they mis- of the transac- 2 6 per cent bonds of amount of $235,000, nded and retired, through its ser- that the Kern ed to refund, and ven so much pub- eedings in both the f County and the f California that every ntelligence in fact, went into the the old bonds and us and also ac- was accom- subject of future offi- d be incred. fated by of the courts and in ntioned amento. records are given to reflect which in its representatives. fvely ornia has been sham due to a mistake, | ear, to the shame | th State gov- | engaged in the pur- th of securities with. | rning them. No | | Y earth could be | € handling of so | hey e r pockets. Where they been enriched is not def- That is an ive theme. Board of an ersfield to pay Chicago bond-buyers, s of dollars bonds 6 per cent Bakersfield the State officials are the t of as they are in the East. n of the transaction bonds is mentioned a on is visible on the butter followers of dministration at Sac- know that Eastern men oad theilr securities at a > make California a jage administration. vrath that will fol- be deep and abid- , through the enter- ut this morning. EEVANE AND POST SIT. Daniel Kevane and Assistant Attorney General Post, acting as the State Board of Examiners, made the purchase of two lots of Kern County six per cent bonds. For one lot of fifty bonds, having the face velue of $50,000, they paid $61061 66. For | another lot of face On thirty-seven, having the lue of $37,000, they paid $45,185 63. larger lot the premium paid ice of twenty per cent above the face ziue of bonds about to be taken in. lot the sum of $141 66 ac- erest was paid by the State. On of bonds the State was premium of $508) 8) on with interest added of n six months from the ctions the bords were 1 County, which paid alue of themand six months’ rate of 6 per cent per would have been re- 1 not the entire matter 1p by the Supreme Court of fornia at the time Kevane and Post lcaded up for the State. In six months Xern County had the same securities in hand for $16,637 29 less than the State paid for them. The initial story of the bond transac- n, so far as Kern County is concerned it, may be br told. The county some years ago wanted a County Hos- al, Hall of Records, a bullding for its rh school, furniture for its County Jail, bridges to span the Kern River and re. pairs upon its roads. To provide these ft bad recourse to the familiar method of raising money—the issuance of bonds, In 1893 it was decided by the voters of Kern County to issue 6 per cent bonds as serials, redeemable at the option of the county, in the amount of $250,00. These were issued and marketed. With the pro- ceeds of the sale of the bonds quite ex- tensive improvements of the nature indj- cated in the foregoing were effected. Ba- kersfield was adorned with buildings, the HROUGH the Gage adminis- | of the affairs of Cali- r of | lars have been taken from school fund of this State| | speculators | shameful | the has many of the matter the full facts have been | te who suffer by | the | the | | the | | portions of the Tecords | | cares for the pub-| | of California may see| | d been plundered. | | upon | | this been placed be- | the bond buyers of | is men- | haritable view Accepting the expla- | ervants have e money belonged to did not exercise | thousands | ornia has lost-have How There is another | ire matter. Kern Supér\’is-‘ one else a chance tanding the offer of a | an was included in the | | gave to the| | ore been paid for them | — | 7 Z 2 "/f?\'l‘\ll'[,)/"l‘)"/’f T i A VoJE 2xlve. CLAIM THAT DREW $10,000 PREMIUM Office of the State Board of Examiners. i SACRAMENTO, Jan. 21, 1899. .. The annexed account for $61,061 66 presented by the Cali- fornia State Bank for fifty (50) Kern County 6 per cent bonds, issued December Ist, 1893, premium and interest, is approved for the sum of sivty-one thousand sixty-one G6-100 dollars, payable No. 4699. out of the State School Land Fund. 50 fiscal year. ( Secretary of State Board of Ezxaminers. Assistant Attorney General. ] ] 2 Governor of California. Secretary of State. C. N.FOST, DANIEL KEVANE, J ‘SAQUNUDYT] PADOG 2D} No. 4;0. Land Fund. 50 fiscal year. ANOTHER WASTE OF PUBLIC COIN. Office of the State Board of Examiners. SACRAMENTO, Jan. 21, 1899. The annexed account for $45,18563 presented by tional Bark of D. O. Mills & Co. for thirty-seven (37) Kern | County 6 per cent bonds, issue December 1st, 1893, premium and interest, is approved for the sum of forty-five thousand one hundred and eighty-five 63-100 dollars, payable out of the State School he Na- lu : g Governor of California. EU > 2 Secretary of State. [ & C. N. POST, o Assistant Attorney General. | § DANIEL KEVANE, & Secretary of State Board of Examiners. 3. e Temy THE CounTy f//@c S e O R MEMBERS OF STATE BOARD OF EXAMINERS WHO PURCHASED KERN COUNTY BONDS AT A FIGURE FAR IN ADVANCE OF THEIR VALUE, AND BUILDINGS CONSTRUCTED WITH ORIGINAL ISSUE. e jail was rendered habitable and the gen- eral aspect and convenience of the city as a county seat was largely bettered. All of the 6 per cent bonds of 1893 were originally purchased by the Illinois Loan and Trust Company. By 1597 $15,000 of the 1593 bonds had matured and had been re- | tired and canceled. Then another Illinois tond company, Trowbridge & Co., incor- porated, of Chicago, came upon the scene. They sent a man out to California to work up a proposition that they were prepared to submit, which was to refund the remaining and. outstanding $2%,000 of 6 per cents with 4 per cents, to run as serials for a period of ten years, when the Jast of the series would mature. The offer included payment of the 6 per cents of 1893 at par, with accrued interest at the rate of 4% per cent per annum. This propo- sition was submitted and. accepted at a meeting of the Kern Supervisors of Sep- tember 24, 1897. Those present and vot- ing to accept the proposition were Super- visors Taylor, Shields, Bohna, Bottoms apd Jastro. The amount of $23,00 was made payable annually. In the last year $28,000 would become due and payable, the interest being paid semi-annually. BANEKER MACK PROTESTS. So far no voice had been heard in pro- test, but directly after the vote by the Kern County Supervisors Julius J. Mack, 2 banker of Bakersfield, filed suit in the Superior Court for Kern County against H. A. Jastro, C. J. E. Taylor, Henry Bohna, Jerry Shields and T. J. Bottoms, asking that a contract they had made with Trowbridge & Co. be set aside, and that the Supervisors, who were those ramed in the complaint, be restrained from carrying out the contract for the 1 jesue and delivery of the refunding bonds. Some of the allegations in the complaint filed by Banker Mack make interesting reading. The complaint is in part as fol- lows: That on the 24th day of September, A. D 1897, sald defendants, duly and regularly as. sembled at their usual place of meeting and duly organized as a Board of Supervisors, to- wit. at their rooms in the Courthouse in the fown of Bakersfield, in sald county of Kern, by an ordinance duly and regularly made and passed by them, decided to refund sald county indebtedness and specified the amount of bonds ‘Wwhich they proposed to issue, to-wit, bonds in the sum of two hundred and thirty-five thou. sand dollars, bearing interest at the rate of four and one-half per centum per annum; all of said bonds to run ten years from dat e thereof, and then to mature in v Snapet . thes the following That sald election (special bond election) w; duly and regularly held in 5ald county ot Kere as provided by law, upon the said 9th day of November, A. D. 1897; that prior to such elec- tion due notice thereof was given by publica- tion in the Kern County Californian, Kern Courty Echo, Kern Standard and Kern County Gazetie, weekly newspapers published within sald county of Kern, in accordance with law and the orders of the Board of Supervisors; that on the 15th day of November, A. D. 1897 sald defendants duly assembled as a board of can- vassers in their rooms in the Courthouse. in said town of Bakersfield, county of Kern, ‘and proceeded to and did canvass the returhs. of said election, and thereupon ascertained that two-thirds of the electors of said county of Kern, voting at such election, had voted in favor of said bonds. i That sald defendants are about to proceed t fssue the amount of bonds specified ag afore said, ($235,000); that on or about the 2lst day of /September, A.'D. 1897, said defendants, while pretending o act as Supervisors of said county of Kern, made, signed and delivered to Trow. bridge & Co., a corporation having its prin- cipal place of business at Chicago, In the State of Illinols, a certain document in writing to- wit: It is hereby agreed by and between Trow- bridge & Co. (Incorporated) of Chicago, Tllinols, party of the first part, and the Board of Super- Visors of Kern County, California, party of the second part, that the party of the first part shall purchase at par or face value and accrued e Interest, and sald party of the second part shall sell at sald ,rice $235,000, legal refunding bonds of sald county, drawing Interest at four and one-half per centum per annum, payable semi- annually, dated on or abeut December 1, 1897 (not later than December 15, 1897), and due as follows (then follow the dates of redemption): GIVES COGENT REASONS. Banker Mack then set forth the reasons for his opposition to the deal for bonds with Trowbridge & Co., which were sub- stantial ones. As summarized they were as follows: First—That the agreement made by the Supervisors with Trowbridge & Co. was in violation of law and in excess of the power of the Kern County Supervisors to enter into. Second—If the terms of the agreement between the Kern Supervisors and Trow- bridge & Co. were carrled out the tax- payers of Kern County would suffer dam- age, as the consideration mentioned in the agreement referred was far below the market value of the proposed bonds, which would, if sold according to law to the highest bidder, bring more money. Third—That divers persons and cor- porations were anxious, willing and ready to purchase the refunding bonds as soon as they should be issued for a price far in excess of their par value and accrued interest, and that he (Mack), if permitted to do so, would purchase the bonds for a sum or price far in excess of the par or face value and accrued interest thereon. Mr. Mack had turned the light on the stock deal so far as he was able. The case went into the Superior Court and Judge J. W. Mahon decided in Mack's jfnvor and against the proposed issue and ‘deliverance of the bonds under the con- tract made by the Board of Supervisors of Kern County to Trowbridge & Co, In these proceedings enough' publicity was given to the fact that Kern County was, proposing to retire the 6 per cent bonds, that were afterward disastrously bought by Kevane and Post for the State, to attract the attention of any State of- Sk ficlal or bond purchaser who might be induced to invest. REACHES SUPREME COURT. But the Supervisors and Trowbridge & Co. were not inclined to give up the fight in Kern County. An appeal was taken to the Supreme Court of California in the names of the several members of the Board of Supervisors of Kern from the decision of the Superior Court. The records of the Supreme Court of the State show that transcripts on appeal were filed Feb- | ruary 8, 1898, and Febtnag 25, The case was in the Supreme Court on appeal until September 16, 1899, when a decision was handed down sustaining the Super- visors of Kern County, and the bond issue was thereby approved. It was less than three months be- fore this, and after the proceedings relative to the bonds that were to take the place of the Kern County six per cents had been in the courts of the Etate and of common knowledge to every intelligent lawyer in the State for nearly two years, namely, from September, 1897, that Messrs. Kevane and Post bought the six per cents cn the ridiculous terms mentioned. That the purchasers for the State were the persons mentioned there is no possible chance to dispute. They were acting as the State Board of Examiners. Gage was absent, neglecting his duty. Kevane was the State government and transacted the business of the State for his incompetent chief, The evidence that only Kevane and Post acted and that the transaction in which they were concerned went through is evidenced by two claims and attached memoranda as they are found in the office of the State Controller. TELLTALE MEMORANDA. One of these claims tells the complete story of the purchase of the $50,000 lot of g P tesISTANT L ATTORNEY ) GENZRAL £, Zos 7 CourT FoysE» bonds and-the other tells of the $37,000 lot. The signatures are only those of Kevane and Post. The memoranda at- tached thereto are as follows: ; SACRAMENTO, Cal., June 21, 1899. The State of Callfornia to the California State Bank—Dr. Fifty Kern County six (6) per cent bonds. denominations one thousand dollars each, dated December 1, 1893, and are numbered from Nos. 201 to 250, both inclusive, with interest pay- able thereon semi-anndally, on December 1 and June 1 of each year, each of said bonds having unpaid coupons attached thereto from 1 to_No. 40, both numbers inclusive. Principal .. Premium at $121 84 Interest thereon from June 1 17, inclusive $50,000 00 10,920 00 141 66 Total ..ceveee $61,061 66 SACRAMENTO, June 21, 1899. The State of California to the National Bank of D. O. Mills & Co.—Dr. ‘Thirty-seven Kern County six (6) per cent bonds, dated December 1, 1883, and are num- bered from No. 16 to 25 and Nos. 174 to 200, inclusive, with interest payable thereon semi- annually, on December 1 and June 1 of each year, each of said bonds having w cou- pons attached thereto from No. 12 to 49, both numbers_inclusiv: Principal .. Premium at Interest thereon f June 17, inclusive: Total «veeveceseduseocssens..§$45,185 63 The claims signed by Kevane and Post, by which the accounts submitted by the banks and collection agencies for the bond owners were approved, tell their own story. These were the papers necessary to compel the Treasurer to pay. While the signatures of the Gage officials are not produced, the text is given without variation. These several papers speak to the taxpayers eloquently of the wrong that has been committed. The Board of Examiners includes Gov- ernor Gage. In this important crisis he was absent from the board. What this neglect of duty has cost the State in di- version of cash to outside bond specula- tors and in loss of self-respect to this great commonwealth of California Is ob- vious. The side light thrown by the transaction on the claim of the adminis- tration to being businesslike is too strong to be ignored. BONDS GAVE WARNING. Of course th#s transaction became known at Sacramento to certain high of. ficials about the State capital. There was some quiet talk, but no information was vouchsafed to the press voluntarily either early or late. Governor Gage heard of the undercurrent of unfavorable com- ment. did Kevane. So possibly did Assistant Attorney General Post, but he says that he did not know of the proceed- ings to call in the Kern County 6 per cents when he voted with Kevane to buy them. In the wording of the old § per cents occurs the following: The county of Kern, in the State of Cali- fornia, for value recelved promises to pay or order, at the office of the Treasurer of the town, sald county, in the town of ‘Bakersfleld, county of Kern, Stdte of Califor- nis, on the 1st day of December, nineteen hun- dred _and thirteen, OR AT ANY B BE- FORE THAT DATE, AT THE PLEASURE OF THE COUNTY, the sum of one thousand dol- lars, gold coin of the United States, with inter- est at the rate of 8 per cent per annum, etc. The foregoing words would have been sufficlent to warn any man buying secu- ritles for his own use to inquire into the to % | Officials Are Culpably Blind. Thousands Are Lost From Folly. Whole Deal Is Brought to Light. status of the securities when so large a sum as 387,000 was involved. The only other indispensable facts in this connection, although there are enough minor ones of the same general sort to fill large newspaper space, are supplied by the acts of the Legislature and Governor Gage in 1901. Prior to that a report of the State Board of Examiners had appeared in which they comgratulated themselves for “saving the State.” Then, in 1901, a Senate bill was introduced, which passed the Senate on February L and the House on February 19, 1901, that took the power from the State Board of Examiners to act on its own motion in making other bond purchases for the in- vestment of moneys proceeding from the school lands of the State, and bestowed upon the State Treasurer the power to make the investments. There were other things in the bill that went through the two houses of the Legislature. When the bill came to Governor Gage he vetoed it. he Board of Examiners has the same power that it had before it made the strange deal described in the foregoing and Governor Gage, in the light of all the facts, vetoed the bill mentioned. THE VETOED BILL. The text of the bill that was vetoed by Governor Gage is as follows: Sectlon 1—Section six hundred and eighty of the Political Code is hereby amended so as to read as follows: 680—Whenever and as often as there is in the State Treasury the sum of ten thousand dollars as the proceeds of the sale of State school lands, the State Treasurer, by and with the advice and approval of the State Board of Examiners, shall invest the same in the civil funded bonds of this State, or in the bonds of the United States, or in the bonds of the sev- eral counties, or of the several municipalities, or of the several school districts of this State, the investments to be made in such manner and on such terms as the State Treasurer, by and with the advice and approval of the State Board of Examiners, shall deem for the best interests of the State school fund; provided, no bonds of any county, or of any munici- pality, or of any school district, shall be pur- chased of which the debt, debfs or Habilities at the time exceed 15 per cent of the assessed value of the taxable property of sald county, or of said municipality, or of sald school dis- triet. Section 2—This act shall take effect fmme- atately. ARGUES FOR BOARD. Had the Governor approved of this bill the Examiners would have been com- pelled to take a back seat for the State Treasurer in this matter. The language of the veto says that the Governor saw no reason for taking from the Board of Examiners their present powers. The substantial part of the veto is as follows: I herewith return to your honorable body without my approval Semate bill No. 199, en- titled “An act to amend section 680 of the Political Code, relating to the investment of i proceeding from the sale of State school ands."” 4 It is proposed by the present bill to amend section 650 of the Political Code by taking from the State Board of Examiners the power of in- vesting the proceeds of the sale of State school lands In the civil funded bonas of this State, United States bonds, and in bonds of the sev- eral counties, and giving this power to the State Treasurer, to be exercised by and with the approval of the Board of Examiners, and with like further power to said State Treas- urer to invest sald money in bonds of the sev- eral municipalities and school districts of this State. 1 percelve no reason nor necessity for this transfer of duty from the Board of Examiners, and danger may be apprehended from author- izing the investment of such school funds in municipal and school district bonds. It would be difficult for the State Treasurer and Board of Examiners to become acquainted and sat fled with these various classes of securities for investment, and besides entailing great labor upon the Attorney General in their examin- ation, it 1s not unilkely that politics might in the. fiiture enter a3 a factor in the negotiations for the sale of suéh municipal and school dis- trict securities, thus imperiling the safety of these funds. 1t is preferable that the school money should remain partly uninvested, waiting the better class of securities, than that the capital should be subjected to the risk of future complications and embarrassments which might arise under the proposed bill. 0 That the chances for successfully raid- ing the California State school fund were carefully calculated in the East before the unparalleled attempt was made is un- questioned. There were bondholders who Wanted to unload profitably before the re- funding could be brought about, and the State of California furnished a shining mark for them. . AUDITOR BAEHR CITED FOR CONTEMPT OF COURT TRefuses to Draw a Warrant for Juror’s Fees Indorsed by Judge Cook. Harry Baehr, City Auditor, has been cited to appear before Judge Cook Mon- day morning to show cause why he should not be punished for contempt of court. He was at first cited to appear this morning, but the Judge was notified that Attorney Cobb, who represents the Auditor, would be out of the city to-day and the change was made to Monday orning. mAn ag\dav(t was flled yesterday morn- ing by Andrew Jackson, one of the jurors who had been sitting in Judge Cook’s court since January, that he hae Jaid before the Auditor on April 1 a bill for §26 for fees as a juror in_thirteen cases, which was indorsed by the Judge under section 1143 of the Penal Code. It had been marked by the Auditor as “al- lowed” on April 18, and indorsed as core rect by A. B. Mahoney, County Clerk, but the Auditor had refused at different umes since then to draw the warrant for the amount. It was therefore asked that the Auditor be cited to appear and show cause why he refuses to recognize the order of the Judge. CRAM'S SUPERIOR ATL A ear-load of Call Superior Aflases has arrived and they are mow ready for distribu- tion. ATl subscribers to The Call are entitled to a copy of this great book at the prem- of $1 50. Out of bacribers desiring = copy of this splendid prem~ fum will be supplied om ree ceipt of $1 50. Al mall orders will be shipped by ex- press at subscriber’s expense. 1 A5 SRR A M s O Y g