Friday, December 16, 2005

Question: Canadian Pacific Locomotive #4744 [also SP corporate organization, taxes, credit mobilier, robber barons, Ames tools, panic of 1873]

From: "Clifford Harwood"

I have a question about the final disposition of Central Pacific [sic] #4744, a Montreal Locomotive Works, M640, diesel locomotive, built in February of 1971.

Rated at 4000 HP, I believe this was a Canadian version of an ALCo. My list does not distinguish between Central Pacific and Canadian Pacific.

If it was, in fact, Canadian Pacific, then my hunt will go on.

If I am barking up the wrong tree, let me know. ...


Blogger CPRR Discussion Group said...


Canadian Pacific Locomotive #4744 is not a Central Pacific RR locomotive.

For CPRR locomotive rosters, see the links at the bottom Locomotive Exhibit webpage.

The Central Pacific locomotives were 19th century smaller steam engines, not diesel.

Prior to the end of the 19th century, the Central Pacific became part of the Southern Pacific Railroad, and although the CPRR continued as a paper corporate entity to the middle of the 20th century, 20th equipment would not have been labeled as CPRR because the railroad no longer operated under that name. So you can probably safely assume that anything 20th century or later labeled "CP" is from the Canadian Pacific Railway.

12/16/2005 12:41 PM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

So, when S.P. sold Nevada & California (Carson & Colorado) to Central Pacific in 1914 and leased it back from Central Pacific from 1916-1959, this was a paper ruse (tax dodge) perpetrated by S.P.

Well it worked for me. S.P. on paper had me believing that Central Pacific was alive and well until 1959.

All of the rolling stock was reslugged S.P. and listed as S.P.

Narrowguage. S.P. listed it all as leaseback from Central Pacific. They only merged it back into S.P. in order to file for deactivation on May 26, 1960. They darn near tore out the tracks as the last train pulled into Laws.

What a scam.

12/16/2005 2:46 PM  
Blogger CPRR Discussion Group said...

Regarding corporate organization, also see:

"Corporate Family Tree for the Union Pacific Railroad, including the Southern Pacific and Central Pacific Railroads."

"Railroad Reorganization" By Stuart Daggett, Ph.D., Harvard Economic Studies, 1908.

12/16/2005 2:50 PM  
Blogger CPRR Discussion Group said...

From: "Don Snoddy"

One reason this happened was that there were many joint facility agreements in place with the Central Pacific as the contracting party. Legally it was easier to keep the company on paper that to go to all the hassle of renegotiating existing contracts. A lot of these joint facility agreements were 99 years. I suspect that by 1959 few enough of them still existed because of abandonments and other consolidations that the lawyers could figure out what to do them.


12/17/2005 8:36 AM  
Anonymous Anonymous said...

Clifford Harwood,

Can you explain further?

How did the corporate organization to which you are objecting save taxes?

What makes this a "scam?"

All corporations are paper entities created under state (or occasionally federal) statutes, so why does it matter to you (or to anyone else not owning the stock) whether the name of the parent or subsidiary corporation is painted on the rolling stock, which entity held which asset, or how the multi-corporate hierarchy was structured?

Did they do something that violated some provision of the tax code? In a famous comment, Judge Learned Hand stated that "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

If Congress insisted on imposing a complicated tax code with provisions that they decided should favor a particular railroad corporate organization, what is the problem with the company responding to such legal incentives? Don't the officers of a public corporation have an ethical and legal obligation to act in the best interest of the shareholders, for example to minimize taxes paid?

12/17/2005 9:13 AM  
Blogger CPRR Discussion Group said...

How could a corporate organization created in the 19th century be a tax "scam"? The income tax didn't exist until 1913 when the 16th Amendment to the U.S. Constitution was passed.

12/17/2005 9:27 AM  
Blogger CPRR Discussion Group said...

This ... message is so mixed up in both facts and fancy ... Corporate histories can and are very complicated at times. ... Too many mistakes and too much speculation.

—Lynn Farrar

12/18/2005 4:03 PM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

I understand that companies move money losing divisions around within themselves to take advantage of the "write off" provisions of corporate taxes.

I also understand that they had to pay each county for the right-of-way.

I also understand that S.P. needed to meet certain criteria before they could apply to shut down a rail line.

This particular maneuver amounted to buying (merging) with a corporation, selling property to that corporation, allowing that corporation to hold it for at least a year and a day and then lease it back (from themselves) for 45 years.

Perhaps there were provisions in C.P. contracts that created exemptions, under which the S.P. Narrowguage could be "umbrella" protected.

What I call a scam, just may be good business practices.

I have no business education.

Perhaps I spoke out of turn. ...

12/19/2005 6:05 PM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)
Subject: Corporate Family Tree

Many familiar and unfamiliar names.
Many connections and a lot of history.
Mind boggling.
Thank you.

12/19/2005 6:16 PM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

Corporate taxes and right-of-way fees.

I don't recall Corporations ever paying income tax.

It was also easy to change names and walk away from debt. A company could shut-down and then reappear after a time, debt free. This did not change until the 1970's when it was ruled that if a business was restarted, under the same name underwhich it was dissolved, the debts remained in force, even if there was a new owner.

12/19/2005 6:28 PM  
Blogger CPRR Discussion Group said...

Corporations do pay income taxes.

12/19/2005 6:32 PM  
Blogger CPRR Discussion Group said...

From: "Wendell Huffman"

If a money-loosing branch railroad was valuable as a "write off," why would the company close it down?

12/20/2005 12:25 PM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

Those of us who live in ignorant bliss always lumped all of this into "corporate taxes."

I learn something new every day.

Thank you.

12/20/2005 12:44 PM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

I am reminded that in the 19th Century, railroad owners were referred to as "The Robber Barons" in the press.

This is what happens when they publicize the works of an unscrupulous man and ignore the likes of Mr. Judah.

The press hasn't changed much.

They can still turn a hero into a goat and a cold blooded murderer into an icon and hero.

My heroes are the people who built this country. They had vision. Vision overcomes all human frailty.

People like Judah, Edison and Ford stepped up, put it all on the line and followed the vision.

I will endeavor to learn an accurate history of the railroads. I will examine all aspects of a situation before making any remark.

Mr. Judah remains my hero of the "Big Four." [sic]

12/20/2005 12:48 PM  
Blogger CPRR Discussion Group said...

Actually, Theodore D. Judah was the Chief Engineer who planned the Central Pacific Railroad, and successfully lobbied Congress for support, not one of the financial "Big Four," the associates who orchestrated building his railroad after Judah's untimely death.

For an alternate view about the "Big Four," see the FAQ about "robber barons."

But, as for the Union Pacific, the history of the Credit Mobilier scandal hardly supports your thesis that "vision overcomes all human frailty."

12/20/2005 1:16 PM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

It was Judah's vision and the "Big Four" money.

12/21/2005 9:35 AM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

Good question. Why did S.P. shut-down the S.P. Narrowguage (C&C/N&C)?

12/21/2005 9:36 AM  
Blogger CPRR Discussion Group said...

From: "littlechoochoo81"
Subject: SP - CP corporate organization

Corporate histories can and are very complicated at times. ... While at SP I was continually asked by management to reply to "accusations" such as this, and at times by prominent politicians, who felt like taking a swipe at the railroad. ... I can smell a muckraker at a great distance. ...

Please be careful in describing corporate histories of CP and any other predecessor companies of Southern Pacific Company which was renamed to Southern Pacific Transportation Co in 1969. As to Central Pacific it remained a viable railroad company in OWNERSHIP OF PROPERTIES OF EVERY KIND until 1959 at which time it was consolidated with SP Company. OPERATION of CP's properties by SP Company began on April 1, 1885. Along the way from 1863 to 1959 there were a number of consolidations with other railroad companies and in 1899 Central Pacific RAILROAD went through a reorganization and name change to Central Pacific RAILWAY. These consolidations were usually to maximize efficiencies of operation and had to take into account mortgages of each individual railroad company's properties. In the state of California stockholders were held accountable for a company's debts, thus new railroad lines were most often incorporated under a separate name. The 1899 reorganization was due in part to the repayment of the government debt incurred in original construction and the guarantee by SP Company of this debt.

This is a quick once over on complexities of corporate histories and is not necessarily a complete picture. Southern Pacific COMPANY had in the course of its long history nearly 400 predecessor companies.

And even today I have read of one author's account of the "little" Denver & Rio Grande Railroad buying Southern Pacific Transportation Company. Not so. The Anschutz Corporation first acquired D&RGW and then later acquired SPT Co. and merged D&RGW into SPT Co. This illustrates my point of being careful in dealing with corporate histories.

—Lynn Farrar

12/21/2005 4:42 PM  
Blogger CPRR Discussion Group said...


I want to support Lynn's description of SP corporate history. I regularly find myself in an extended description when someone asks me "when did CP become SP?" I generally describe it as a progressive absorbsion of various parts of CP functions by SP Company (not railroad) between 1885 and 1959. I also observe that SP Railroad was similarly absorbed by SPCo between 1885 and (as I recall) 1956.

Corporate forms and structures of SP and related companies were very much a moving target, adapting and changing as corporate law was modified and changed over the years. For instance in (I think) 1912 the annual corporation fee (or some such similar fee or tax) was significantly increased, resulting in a number of corporations being closed down or absorbed into other related corporations. I think this is the impetus for Nevada & California being folded into Central Pacific in 1912, for instance.

In the 1870s the Central Pacific Railroad was the corporate structure that the Associates typically leased other companies to – as for instance the Southern Pacific - Southern Division. By the early 1880s this was creating some problems, partly because CP had a large number of share holders making it cumbersome to separate CP Railroad interests from leased line interests, and partly I believe because Texas required railroads operating within the state to have headquarters within the state. So on March 17, 1884 SPCo was formed specifically as a holding company, and in the following year SPRR (March 1, 1885), CPRR (April 1, 1885) and other companies were leased to it.

In Texas the result was the separate Texas lines operations we are familiar with, with all the Texas lines leased to the new holding company SPCo but operated by their own respective companies. Prior to that, the Texas lines were integrated with the western lines, once the CP assumed control of the Galveston Harrisburg and San Antonio on Dec 1, 1881 and the Morgan Lines around 1883 (I'd love an exact date). All lines were physically linked with the driving of the last spike on the Pecos River Bridge on Jan 12, 1883.


12/22/2005 10:35 AM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

My initial belief was correct and my rethink was incorrect, proving that we can over think things.

Corporate structure is daunting if not frightening. A number of model railroaders, including me, have attempted to properly restructure a particular railroad in order to resurrect it in miniature.

I have found it much easier to locate photos and recreate a town or facility, than to determine the actual corporate structure.

I have managed to recreate the town of Laws, California (est. 1881) which was picked clean after 1929. The only actual structures to survive are the station and two houses. The museum provided photos and history.

I love history and I especially love steam railroad history.

I have a 26 foot (1:87 scale) Central Pacific box car, given to me from an estate. It is part of a small contingent of pre-1900 box cars from western railroads.

These miniatures were manufactured before World War II. On special occasions, the #119 will pull a string of these, followed by a period wood caboose.

If I have said anything out of turn ... please attribute it to ignorance rather than insult.

Thank you.

12/22/2005 11:58 AM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

I try not to mix frailty with greed.

I also recall that Mr. Ames, of the Ames Tool Company, made handsome profits from supplying all of the tools used in the construction of the transcontinental railroad.

I never bought into the "Robber Barrons" label, as applied to the "Big Four," but Mr. Oake Ames and company got greedy and took everyone down into the mud with them.

How much of the Stock Market crash of 1875 can be attributed to this fiasco?

12/22/2005 1:30 PM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

Thank you. A few of us here in Southern California like to accurately recreate miniatures of rolling stock, from rare photos.

Note: When I have finished downtown Laws, the museum at Laws will prepare a display area, where I can duplicate the buildings on my layout and build a 1:87 scale model of downtown Laws at the museum.

12/22/2005 1:32 PM  
Blogger CPRR Discussion Group said...

Ames supplied some of the tools, but not all.

See examples of shovels used on the CPRR marked both "Ames" and "Crocker." Chris Graves notes that there are also "Hopkins" shovels.

12/22/2005 1:42 PM  
Blogger CPRR Discussion Group said...

From: "Don Snoddy"
Subject: Credit Mobilier

I don't think much of the 1875 crash can be attributed to Oakes Ames. The Credit Mobilier investigation took place in 1872 and while it bankrupted Oakes, his brother and the rest of his family came out OK. Oakes didn't get greedy. He gave free stock to his friends in Congress. In return there was some expectation of support for Pacific Railroad legislation. Oakes was censured by congress and died very shortly after.

Thomas Durant was by far greedier than anyone else on the UP side of the fence. His goal was to make all the money he could building the road, then bail out. The Ames family wanted to make their money long term by running the road. Durant and his cronies came up with the Credit Mobilier, and the idea that if you held stock in UP you would also hold stock in the Credit Mobilier.

The idea of a separate company to do the construction was not unique to UP, CP had the Contract & Finance Company which did the same thing for them.


12/22/2005 2:26 PM  
Blogger CPRR Discussion Group said...

From: (Clifford Harwood)

One of my obscure sources related that Ames Tool had a nearly exclusive "deal" with U.P. which is why Ames Tool took credit for being the tool supplier to the transcontinental railroad. By today's standards it would be like being a prime supplier to NASA for a major space exploration project. Ames Tool later laid claim to being tool supplier for the Panama Canal.

12/23/2005 7:09 PM  
Blogger CPRR Discussion Group said...

Subject: Credit Mobilier

I believe Mr. Harwood is referring to the Panic of 1873. In that fiasco Dr. Durant of UP fame is reputed to have lost his fortune which he apparently used to build a railroad in the Adirondacks Mountains. Don Snoddy probably knows details.

—Lyn Farrar

12/24/2005 6:33 PM  
Blogger CPRR Discussion Group said...

From: "Don Snoddy"
Subject: RE: Credit Mobilier

It was the Saratoga Railroad. I think if you watch that Great Wonderful Spectacular Gary Cooper movie "Saratoga Trunk" you will get some idea of what was going on.

Yes, Durant lost everything in the panic of 1873 and died a broken man. Between the panic and the Credit Mobilier scandal Durant did not fare too well. The Credit Mobilier on the other hand went on well into the 1880's. There are some accounting records from that era in the UP Collection in Lincoln.


12/25/2005 12:46 PM  
Blogger CPRR Discussion Group said...

The railroad building boom left firms overextended and was one of the causes of the Panic of 1873.

12/25/2005 6:59 PM  
Blogger CPRR Discussion Group said...

From: "Edson T. Strobridge"

The Ames Tool Co. was a major supplier of tools, especially shovels, to the Huntington and Hopkins Hardware company in Sacramento. They in turn supplied the mining trade and when the Central Pacific was organized supplied tools, including shovels in great quantity to the CPRR, Charles Crocker & Co. and most likely to the other subcontractors working to construct the railroad. The Huntington and Hopkins Hardware company continued as a major supplier of tools and equipment to the Central Pacific Railroad, their contractors and to Charles Crocker for many years and the Oliver Ames Co. was a large supplier of much of the merchandise that was sold.

I find it hard to believe that the Ames Tool Co. can be considered as only a "Tool supplier to half the Transcontinental Railroad " when in fact they were a big supplier of tools in California, especially of their shovels, many of which were used in building the railroad.

—Ed Strobridge

12/27/2005 1:18 AM  
Blogger CPRR Discussion Group said...


Several people have pointed out my error in limiting the Ames tools to the Union Pacific. I stand corrected. Many thanks for that. :-)


12/27/2005 1:20 AM  
Blogger CPRR Discussion Group said...

Subject: Reasons for creating subsidiaries and deleting them

Originally, all railroads were incorporated by special charters from state legislatures, which meant that the terms of the charter, while following the same general forms, had to be hashed out through debate and votes. Anytime additional powers or extensions of time were desired, the promoters had to go through the process all over again to get a charter supplement. Between ca. 1850 and ca. 1875, most if not all states went to general incorporation laws, whereby charter powers were uniform and promoters had to file with a state executive agency stating they had met the capital requirements, etc.

Because railroad companies were granted eminent domain and because of the competition for valuable routes, special act charters were usually very specific in assigning end points, although the company often had a lot of discretion as to the exact route in between. Likewise, branching powers were severely limited or altogether absent. Liberality in branching powers might depend on whether the state or its chief cities were heavily invested and the level of political control. General law incorporation was even more specific in limiting branching rights, hence the necessity of creating a new company for each branch or extension of any size, even if the company only existed long enough to merge its rights into the parent company. Different state tax laws and domiciling requirements were also factors in perpetuating subsidiaries.

As to the great merging of subsidiaries after the 1920s, that was indeed driven by the desire to eliminate duplicate officers and accounting. However, much of the system building of the pre-1880 period involved the acquisition of well established local lines, usually at a good guaranteed dividend and the payment of all fixed charges. The owners of well-situated pioneer lines like the Camden & Amboy, Philadelphia, Germantown & Norristown, Northern Central, Little Miami, etc. got very good deals. Imagine having a 999-year CD at 7-10% interest. The result was that the stock was kept in the hands of the descendants of the original owners, and it was very difficult for the lessee to acquire it. In the above examples, the companies remained nominally independent until the final bankruptcy of the lessee impaired the value of the stock. The acquisition of sufficient minority shares was a big part of the timing of when subsidiaries could move from the "leased line" to "controlled line" category and then to be merged.

—Chris Baer

[from the R&LHS Newsgroup.]

1/25/2006 9:18 PM  

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