Letters and Literary Memorials of Samuel J. Tilden, v. 2 — Background and Themes

There were expended for repairs and maintenance during the same period $2,247,297.01

Damages during the same period 305,796.68 ---------- 2,553,093.69 ------------ Balance against the State $650,103.05

"If to this be added the interest on the canal debt, the cost of collection, and the difference between miscellaneous expenses and receipts, as set forth in detail in Exhibit B, the loss to the State from the canals during the last fiscal year will be found to amount to the enormous sum of $1,412,470.79.

"The cost of repairs and maintenance is so obviously out of all proportion with the necessities of a system of completed structures like our canals, which have little that is complicated or perishable about them, that we are forced to seek the explanation of it in their administration.

"Our investigation was not long in revealing the fact that the canals have not been managed upon the principles which would govern any man in the administration of his private estate. The interests of the public have been systematically disregarded. The precautions with which the Legislature has attempted to defend this property from peculation and fraud, and secure for it faithful and efficient service, have been deliberately and persistently disregarded; while the responsibility of its agents has been so divided and distributed as to leave the State comparatively remediless and at the mercy of the predatory classes, who have been, if they do not continue to be, a formidable political power.

"The more conspicuous evidences of mismanagement which our investigation has disclosed may be divided into three categories:

"_First_, as to the modes of letting contracts.

"_Second_, as to the modes of measuring and estimating work to the contractors.

"_Third_, as to the facilities for procuring legislative relief.

"_First_, as to the mode of letting the contracts:

"It seems to have been the practice for years to let contracts upon conditions which exclude honest contractors and confine this business, at least as to what are termed 'extraordinary repairs,' almost exclusively to large capitalists. The large deposits required from contractors discouraged bidders with small means, while the encouragement offered to unbalanced bidding, by a neglect to enforce the faithful performance of the provisions of the contract, have a tendency to exclude all who bid fair prices, with the honest intention of giving the State fair work for them. Till since the commencement of this investigation we do not know of a single instance in which any forfeiture of his deposit had been enforced against any contractor; while we believe we do no one any injustice in saying that no contract has been let since 1868 the provisions of which have been properly complied with.

"There has been a corresponding disregard of all the provisions of law regulating the letting of the contracts. The law wisely required a preliminary survey, with maps, specifications, and estimates to be made by the division engineer, approved by the State Engineer and by the Canal Board, before a contract could be let. The purpose of these precautions was to ascertain the amount and probable cost of the work as a means of determining the relative merits of the respective bids, and to serve as a protection against false or erroneous estimates of engineers. These precautions have been almost universally neglected. The result has been that the amount of work and materials required in the actual construction varied so widely from the quantities let that in nearly every instance the person receiving the contract proved in the end to have been the highest instead of the lowest bidder;[4] and we cannot resist the conclusion that these precautions in many instances were neglected with the intent to afford greater facilities for defrauding the State. These evils have been greatly aggravated by the frequent changes of the engineers on the canals and the loss of knowledge as to work done, which the removed engineers carried away with them.

[4] A striking illustration of this may be found in the first report of this commission to the Governor, on the Port Schuyler and lower Mohawk aqueduct contract.

"_Second_, as to the mode of measuring and estimating work to the contractors:

"This responsible duty, involving, as it should, a perfect familiarity with the terms of the contract and with the character of the work in progress, has been devolved, not by law, but in practice, entirely upon assistants who are not sworn; who, but in few instances, have been found to possess a competent knowledge of engineering; and who, in most cases, appear to owe their positions, and therefore to have been in a greater or less degree dependent upon the political favor and influence of the contracting class. It will be hardly a matter of surprise, therefore, that in not more than a single instance that has come under our scrutiny have we found the work faithfully measured, or a single contract closed, under which the contractor has not received more than he was entitled to.

"Under these influences, operating in favor of the contractor and to the prejudice of the State, a system of fraudulent estimates and measurements has become so established that though in direct and flagrant violation of the very language of the contract, it is deliberately defended by those who profit by it, on the ground that it has been sanctioned by long usage. For example: it has been a practice of the engineers to allow the contractor for excavating behind vertical wall, on a slope of one to one, without regard to the necessity for such excavation, and whether the excavation was made or not.

"As nearly all vertical wall is constructed in the winter or early spring, and when the banks are frozen, the cut is usually vertical or nearly so, and any charge for such excavation is a fraud upon the State. The contracts also uniformly provide that the contractor shall be allowed nothing for the filling in of the place supposed to be excavated behind the walls, if such filling is from earth already paid for as excavation, unless he is obliged to draw his material more than 200 feet on the line of the canal. This provision has also come to be treated as obsolete, and the State seems to have been uniformly charged not only for excavation which had not been made, but for filling up the assumed excavation which, had it been made, the State was not bound to pay for. The profits derived in this indirect way through the fraudulent connivance of the agents of the State, has led to an enormous expenditure for works wholly unnecessary, and which to keep in repair must continue to subject the State to a very considerable yearly expense.

"One of the principal expenditures upon the canals since 1868 for extraordinary repairs has been made in the construction of vertical and slope walls which have been, as we think, very unwisely substituted for the old walls, the capacity of the canals before their removal having been ample for all their business.

"Between the 1st of January, 1868, and the 1st of July, 1875, there have been built forty-three and one-third miles, linear measure, of vertical wall, at a total cost, including the removal of bench walls which they displaced, of $1,589,885, the cost per linear foot averaging $6.95.

"These walls, besides costing four or five times as much as the slope walls, are less durable, much more expensive to keep in repair, and possess no substantial advantage except in large towns, the commerce of which requires special facilities for docking. But of the forty-three and one-third miles built since 1868, it cannot be pretended that so many as three were needed to meet such exigencies.

"Without stopping at present to inquire if the business of the canal justified the removal of the old bench walls at all, it is very certain that a good slope wall would have been preferable throughout nine-tenths, at least, of the entire extent upon which vertical wall has been constructed; and, at the rate paid for slope wall during this period, would have resulted in an economy to the State of not less than $1,300,000, or nearly $200,000 a year.

"An important item in the cost of this vertical wall was made up of the fictitious estimates to which we have already alluded. Assuming that the State was uniformly charged with fictitious excavation and embankment along the entire length of this vertical wall--and we have no satisfactory proof that a single rod of it was entitled to be excepted--the loss to the State from this source alone cannot be estimated at less than $230,000.

"We have found all the other more important provisions of these contracts as uniformly disregarded. We have torn down and carefully examined the work under more than forty contracts; and we cannot name one in which the work comes up, even approximately, to the specifications. The contracts define with great precision the size and character of the stone to be used, the mode of their disposition, the thickness and other dimensions of the wall, the character of the cement and sand, the quality of lining, and what else is needed to insure durability and a capacity to resist the shocks from loaded boats to which the walls of canals are constantly subjected. In no one of the forty-odd contracts that we examined did we find the stone either in size or disposition; the dimensions of the wall; the quality of the sand, lime, cement, and gravel, to correspond with the specifications. The consequences to the State are not only that it has been called upon to pay for a higher class of work than it has received, but that it is exposed to a large annual expenditure to keep these ill-constructed and for the most part worthless walls in repair. It has been a not uncommon circumstance for the superintendent to be called upon to repair the earlier work under a vertical wall contract while other portions of the structure were still in progress. To keep this class of walls in repair promises to be one of the principal sources of expense for the future maintenance of our canals.[5]

[5] See statement of Professors Michie and Wheeler, of the United States Military Academy at West Point, on page 12 of first report of this commission to the Governor.

"Nor is this system of fictitious estimates confined to vertical wall. Since 1868 fifty-three and two-thirds miles of slope wall have been built. By the terms of the contracts these walls should have had an average thickness of at least fifteen inches, measured perpendicularly to the slope. None of the stone composing it should have been less than twelve inches in length at right angles to the face, and the rear of the wall was to rest on a base of clean, hard gravel nine inches thick. The engineers have uniformly estimated these walls at the specified thickness of fifteen inches, while in point of fact we have not found on any of our canals a single stretch of slope wall, constructed since 1868, that would average over ten inches. Of course, the stones are usually smaller than the minimum size required by the specifications, and we did not find a single specimen of the clean, hard gravel lining required by the contract; so that the State has been made to pay, throughout the whole forty-three and two-thirds miles of slope wall, for one-third more of constructed wall than it has received--full prices for a very inferior quality of stone--and for lining the whole work, though not a single yard of the required quality appears to have been ever furnished.

"To confirm our own judgments, and to be sure that we were not applying an erroneous standard to the work done in the prism of the canals, we invited Professors Peter S. Michie and J. B. Wheeler, of the United States Military Academy at West Point, to go over a large proportion of what we had already visited and to give us the benefit of their judgment about it. Their report is annexed, and will be found to accord in all substantial particulars with the opinions we have felt it our duty to express in our previous report to his Excellency the Governor, and in this communication, in reference to all the contract work on the canals that has fallen under our observation.

"_Third_, as to the facilities afforded by the Legislature to contractors for procuring legislative relief:

"These facilities appear to have been grossly and corruptly abused under the discretionary power conferred upon the Canal Board by the Legislature. Numbers of contracts have been cancelled when such portions of the work as were let on terms profitable to the contractor had been executed, while those portions of the work that were let upon terms more advantageous to the State were left unexecuted. In such cases it not unfrequently happened that this remaining work was let to the same parties, under a new contract, at much higher rates. When the Canal Board was found to turn a deaf ear to such appeals, these applications for relief would be addressed directly to the Legislature, where the fear of doing injustice, and the want of the time and familiarity with the subject necessary for investigating its details, often permitted the allowance of awards conceived in fraud and without a single legal or equitable merit.

"An illustration of this class of abuses will be found in the fifth and seventh reports of this commission to the Governor. For one of them--the case of the award for the relief of John Hand--George D. Lord, a member of the Assembly which made the award, is now under indictment, it appearing that the claim made in his behalf was altogether fraudulent and the alleged proofs fictitious. Another award was also made to George D. Lord of $119,000 for alleged losses under contracts with the State for work in Buffalo harbor. This was, to all appearances, as much greater an abuse of legislative credulity, as the amount exceeded that which was realized under the award to John Hand. The limited technical knowledge of canal administration possessed by a large majority of State legislators, and the claims of other important business upon their attention, make it impossible for them to properly scrutinize appeals of this character, which are usually pressed by designing men, perfectly familiar with all the resources for deception which our complicated canal system afforded, prior to the constitutional amendment of 1874.

"In view of the systematic infidelity of the agents of the State which this investigation has disclosed, is it surprising that the expenditures for extraordinary repairs alone on our canals have amounted, since 1867, to $8,444,827.24, or to nearly as much as the whole of our canal debt, less the sinking fund, which on the 30th of September, 1875, was $8,638,314.49? Of these expenditures for extraordinary repairs it is our belief that fully seventy per cent. have been inconsiderate, unwise, and unprofitable to the State.[6]

[6] Cost of extraordinary repairs made since the year 1867, including the year 1875:

Erie and Champlain $6,602,858 60 Oswego 583,555 22 Cayuga and Seneca 163,480 76 Chemung 220,328 34 Crooked Lake 74,145 93 Chenango 255,073 77 Black River 120,410 22 Genesee Valley 369,478 20 Oneida Lake 50,063 60 Baldwinsville 5,432 70 ------------- Total $8,444,827 34

"The facts which have been brought to light in the course of this investigation have constrained us already to recommend rigorous proceedings to be taken against the following parties:

"First.--Against Denison, Belden & Co. for the recovery of large sums of money which they appear to have received unlawfully under their contracts for work between Port Schuyler and the lower Mohawk aqueduct, and for work east of the city of Utica, both on the Erie Canal. The claims of the State against these parties are fully set forth in the first and second reports of this commission to the Governor, and suits are in progress.

"Second.--George D. Lord has been indicted by a grand jury of Erie County, upon the facts disclosed by this commission, for bribery in procuring an act of the Legislature for the relief of one John Hand. The history of this case will be found in the fifth report of this commission to the Governor.

"Third.--Thaddeus C. Davis, late member of the Board of Canal Appraisers, has also been indicted for a conspiracy to cheat the State. The circumstances which made him amenable to the criminal courts are set forth in the fifth, seventh, and eighth reports of this commission to the Governor.

"A civil suit has also been instituted against Davis to recover moneys fraudulently obtained from the State by himself in conjunction with George D. Lord.

"Fourth.--Indictments have also been found upon the testimony furnished by the commission against the following other high officials: Alexander Barkley, ex-canal commissioner; John Kelly, late superintendent of section No. 12 of the Erie Canal; J. Frederick Behn, division engineer of the western section; and D. Clinton Welch, ex-superintendent of section No. 12.

"Fifth.--Upon testimony furnished by this commission, the commissioners of the canal fund made a requisition upon the Governor for the removal of Francis S. Thayer, late Auditor of the Canal Department, and on the twenty-eighth day of December last Mr. Thayer was suspended upon charges of unlawfully trafficking in canal certificates and violating his duty as auditor 'in respect to the public moneys in his charge and subject to his draft.' The charges preferred by the commission upon which the commissioners of the canal fund and the Governor acted, together with their proceedings thereon, respectively, are hereunto annexed.[7] The testimony by which these charges were established will be found in volume three of the accompanying testimony, at pages 1140, 2070, 2156, 2162, 2180, 2215, 2226, 2239, 2256, 2305, 2347, 2379, 2381, 2382, 2383, 2385, 2389, 2407, 2414, 2417, 2420, 2422, 2426, 2445, 2460, 2461, 2534, 2560, 2585, 2587.

[7] See Exhibits D, E, F.

"The following sums in cash, or evidences of indebtedness, obtained from the State through fraud, have already been reclaimed by and restored through the commission to the treasury:

Canal Commissioner's certificates of indebtedness, issued on account of the second John Hand award:

No. 179, dated Feb. 10, 1875 $2,500 00 No. 181, " " " 9,355 00 No. 182, " " " 4,000 00 No. 183, " " " 1,000 00 No. 185, " " " 2,000 00

[Nos. 179, 181, 182, and 185 were returned by Lewis J. Bennett; No. 183 was returned by Wm. H. Bowman, Esq.]

Returned in cash by Lewis J. Bennett, on account of the first John Hand award 3,199 50

Cash returned by Ellis Webster and Son, on account of money received on false vouchers 582 68 ----------- ---------- _Forward_ $22,637 18

_Carried forward_ $22,637 18

Plenary authority conferred upon the Commission by the parties interested, to cancel the Canal Commissioner's certificates of Feb. 10th, 1875, issued on account of the second John Hand award, delivered as a gift by Lewis H. Bennett to Thad. C. Davis, then Canal Appraiser; by Davis given to ex-Canal Commissioner Alexander Barkley, who claims to have mailed it to Lewis H. Bennett, though it appears from the evidence before us that, if mailed, it never reached him 2,000 00

Canal Commissioner's certificate, No. 184, issued Feb. 10th, 1875, under the second John Hand award, to Lewis J. Bennett, for $16,000, by him delivered under an agreement to the agent of Geo. D. Lord, and rendered void through testimony elicited by the Commission 16,000 00

--------- 16,000 00 $40,637 18

Accrued interest to February 14, 1876 2,259 21 __________

"The following sums are shown by the reports of this commission to the Executive to have been estimated to the contractors for work that was never performed, or was improperly paid for through erroneous classification, and for which the receivers should be required to make restitution:

Denison, Belden & Co.: Port Schuyler to lower Mohawk aqueduct $157,337 02 Denison, Belden & Co.: East of the city of Utica 16,121 35 Willard Johnson: Lower side-cut lock, West Troy 30,595 65 Denison, Belden & Co.: Bullard's Bend contract 85,547 62 E. W. Williams: Building vertical walls at Rome 3,041 08 Flagler & Reilley: Fort Plain contract 5,845 35 S. D. Keller: Jordan Level contract 36,568 39 N. S. Gere: Jordan Level contract 8,801 90 Thomas Gale: Jordan Level contract 6,667 94 Hiram Candee: Jordan Level contract 17,567 33 ___________ $368,093 63 Add to this the balance yet due for money paid under the first John Hand award 30,782 36 ___________ Total $398,875 99

"Large as these sums appear, we are fully impressed with the belief that they form but a fraction of the amount that is due to the State from similar sources.

"For the purpose of ascertaining more precisely the extent of this class of liabilities, and to protect the State in future from the irregularities and improvidence out of which they have arisen, we recommend that the Canal Board be clothed with ample powers and authority for taking testimony.

"A perusal of the testimony and the reports to the Executive herewith submitted clearly establish the fact that our canals are a burden to the States less, perhaps, through the imperfection of our laws, than the mode in which they have been administered.

"Every appropriation for new work and extraordinary repairs on the canals for the six years from 1867 to 1873 contained a provision that no part or portion of the money therein appropriated 'for new work or work on change of plan' should be expended or paid, nor any contract involving such expenditure and payment be made on behalf of the States, until the maps, plans, and estimates of such new work had been submitted to and approved by the Canal Board.