The daily phoenix. (Columbia, S.C.) 1865-1878, March 02, 1875, Supplement, Image 5
SUPPLEMENT TO
The Daily Phranix.
&EPLY OlN T UE SfATK THEAS CK ER
Ta the Special Joint CoBjmlltee.
? ?t ' -? " : ' f \
EXEOUTTVa DBrtlftTMKNT,
''.?;., Office or State Trsasoukb,
Columbia. 8. 0., March 1, 1875.
$ 10? Honorable the Howe of Representatives :
" GfEKTtjKiiEN?I liHve carefully read the re?
port of the special joint committee appointed
"to ascertain what bouds of the State have
baeSiftifided under the act to reduce the vat*
??ne oT tho public debt and provide (or tho
payment of the same; what interest coupons'
have been funded under the said act; uod also
whether the Hinds for tho payment of interest
raised under tho said act have been koptaepo
rato and apart from all other funds, as pro?
vided for In tho said sot and Ss otherwise pro?
vided by luw,n and hsvo the honor to make
the following reply.:., ,,uli j .
I would state, in the first place, that I have
not taken the trouble to verify tho stntotnent
of the committee with regard to tho funding
of detached coupons. It may or it may not
be correct. The committee aro entiro'novlcea
in distinguishing the cluss'of bonds to which
the coupons belong by the, face of the coupons.
That can be successfully done only by experts.
The question, however, is immaterial, and I
sin perfectly willing to aocede tho correctness
of the committee's statement, and argue the
case upon that assumption. I simply refer to
the matter here, because the entire premises
or the committee may bo incorrect, add their
conclusions, therefore, worthless.
The* points of the committee may :be enu?
merated as follows: "?
1. The committee blame roe for funding cer?
tain hypothecated bonds.
2. The committee, declare tho funding of
$241,011 coupons that. matured ou or before
July 1,' 1871, a fraud upon the State.
3. The committee deolarp the' funding of
$194,846 coupons that were cut off bonds, as
is alleged, before they were hypothecated, as
a fraud upon the State.
4. Tho committee declare the funding of
$6,960 of coupons of conversion; bonds, out
off, as.is, alleged, before they were ezohuuged,
as a fraud upon the State,
6. The committee, declare the , funding of
$9,205 of coupons that belong to bonds '' can?
celed unused " aa a fraud upon tho State.
G. The committee charge a want of vigi?
lance.
7. The committed charge a diversion of the
interest fund. ' 1
- It might be successfully answered, in a
general manner, so far SB the first three alle?
gations of fraud are cofttemed, that the law
authorised. tbe funding' of these coupons.
Section 1 of the act to 'reduce the volume of
the public debt enumerates tho classes of
bonds tO be funded. Soot ion 2 then states
that the coupons belonging to tho bonds enu?
merated in the first section should also be
funded.
It may have been " a freed upon tho State "
for the legislature to have enacted such a law,
but it certainly was not a fraud upon my part
to have executed it. But' I do not think it was
a fraud in either case.
I might safely rest. tho case Upon the au?
thority and requirement of the luv, but 1 am
not content to do so, and will, therefore, dis
ouss the points ..mado . by the committee
seriatim: * ?
1. The committee- state that I have funded
I Conds that "the unanimous voice of the
senate said should not bo funded," while they
knew it had been done before they uttered
that voice.-1 am under the impression, though
it may seem strange to " the unanimous voice
of the senate," thai when I entered upon the
dutios of my office I took a solemn oath, and
gave a bond of $100,000, to obey the consti?
tution and the laws of tbe State, not M the
unanimous voice of the son a to."
If "the unanimous .voice of the senate"
could only get a majority of the house and
tbe governor to agree with them, and then
proceed in a constitutional manner to oxpress
their will in the form of a statute repealing
the existing law under which I am now act?
ing, then it would he my duty to obey "the
unanimous voice of the senate," and the ma?
jority of the house, and the wishes of tho gov?
ernor. 'But Until that takes place I shall feel
compelled to pursue the even tenor of my
way, notwithstanding "the unanimous voice
of the senate."
But the committee that made that recom?
mendation, and " the unanimous voice of the
senate," do not, iu my judgment, comprehend
tho real question at issue when they advise
that certain bonds hypothecated in New York
should hot be funded because mouey had
been raised upon them in excess of the amount
authorized.
The State had received tho money and used
it during the 'administration of my 'prede?
cessor, ahd the question now Is nur the right
of the parties who hsd tho collaterals, or off
tho third parties who may have obtained pos?
session of tbem by purchase under forfeiture,
to fund tbem, for of thoeo propositions, espe?
cially the latter, there can be no question in
the minds of those who understand common
legal and business principle*, notwithstanding
"the unanimous voice of the senate." But
will the State redeem the bonds from the par?
ties who hold them now as collaterals, by
paying them baok their money which it used,
and receiving the bonds in return, a proceed?
ing Which the holden of tbe hypothecated
heads very anxiously dedre t r?*y, '
The proper thing for tbe StJite to do, it
seems to jnei is to make * ofanpuuvlon, and
see whether it la hesvable to pay the-debt it
?t>wes to these partls? from whom the money
was obtained by'a tax levied upon tho; people
now, or to give connolidatinn botsda ?a*Vb'eu Of
the collaterals which they hoj$fj Here ia the
real question : The committee appointed "to
ascertain what 'bauds of tho' Stole were
\*h ? .-v ...
?If.
pledged by the financial agent of the Stute as
collateral security for State loans," Ac. stated
that the Stato was iudcbted to sundry persona,.
:in"*New "York for the sum of $5*7,622.60,
borrowed by the financial agent at various
dates between September, 1871, and October,
1872. This sum was secured by $1,848,300
of Shite bonds. Tho two years and a half
interest due on the amount borrowed would
aggregate, at tho rate of seven por cent, per
annum, about $90,000, making a total of
about $643,000. Now, tho real question if>,
whether it is best to issuo about $925,000 of
consolidation bonds m lieu of tho bonds hy?
pothecated, or to levy n tax now to pay this
debt of about $643,000.
In conversing with that distinguished
financier, Hon. G. A. Trouholm, as to which
of these two courses it would be best to pur
aue, bo stated that it would be best for the
State to pay tho doht it owed by the issue
of consolidation bonds, iu liou of the bonds
outstanding, rather than to levy additionul
tazos upon the people nt prcsout; or, at any
rate, ho rcmarkod, that the Stato did not lose
the equity of redemption by funding them.
But downright repudiation, which "the
unanimous voice of tho senate" attempts,
seems to me a violation of ono of tho com?
mandments I
2. The committee regard the funding of
coupons that matured on or bofore July 1,
1871, a fraud upou the State, because, as they
affirm, the State was paying interest on its
public debt iu gold, "and as there is evory
reason to believo that the whole ot the inter?
est due by the Slate from 1868 to July, 1871,
or after, was paid previous to October 31, 1871,
tho committee are compelled to believe that
these coupons were not n valid claim against
the Slate, and that, therefore, it was u fraud
to fund them."
This ia tho substance of the committee's
reasons for making so grave a charge as
fraud against the State?a mero inference that
Inasmuch as tho State was paying interest, it
was highly probable that if tho coupons wero
outstanding at that time, they would havo
been presented for payment, and paid. I
graut tho probability of their being presented
for payment, but their non-prescnlalion is not
prosumptivo evidence of fraud; there is
another and more certain method of proving
fraud than relying upou such possibilities or
probabilities.
to The question of the payment of interest and
the legality of outstanding coupons is not a
subject of conjecture?it is a matter of positive
record in tho offico of tho treasury ; and, as I
have said in my testimony, I mado tho subject
of tbe interest upon tho public debt u matter
of careful study before I funded any detached
coupons. I ascertained that there wero
coupon3 in the treasury as vouchers corre?
sponding to the amount of iulorest recorded as I
paid. I would hero remark incidentally that
all coupons, and indeed all vouchers, in my
office were canceled before I entered it, as
Captain Little testified before the committee.
I then saw from the records of tho treasury
that tbere was a large amount due to tho ac
a count of the interest on tho public debt.
' Tho committee stato that thoy discover,
-from the reports of the comptroller-general,
that the stale treasurer paid $14,384.16 moro
Interest for tho four years, 1868, 1869, 1870,
1871, than the comptroller-general's estiraat.es
called for. This may or may not bo truo. I
have not taken the trouble to verify it, as it is
immaterial. The comptroller-general's esti?
mates aro not tho proper sources from which
the account of interest on the public doht may
be ascertained. This account, as well us all
others, is upon tho ledgers of the treasurer's
and comptroller-general's offices, and appears
upon the debtors aud creditors statement of
the oomptrollor-geuoral's and treasurer's Be
ports, where it will be seen that instead of
the account being over-paid $14,384.16, the
Slate really owed, October 81, 1871, tho sum
of $997,571.06, loss $430.324.75, tho amount
paid by Mr. Kimpton, and accounted for by
the treasurer iu his account of tho following
fiscal year.
I present here an account of tho interest
on the public debt from 1868 to October,
1871:
AMOUNT OF INTEREST DUE.
Oct. 31, 1869.$ 843,078 12
Oct. 31, 1870. 519,447 50
Oct. 31, 1871. 632,261 97
$1,804,781 59
AMOUNT PAID BY N. O. PAKKEIl.
Oct. 31, 1869.$629,269 12
Oct. 31, 1870. 190,879 44
Oct. 31, 1871. 177,067 98?$897,216 51
Seo comptrollor-generul's report,
1871-72. 997,571 05
Amount paid by H. H. Kimptou,
1869-'70-'71 . 430,324 75
Interest outstanding to October
31, 1871. $567,246 30
3. The committee dcclaro tho funding of
$196,845 of coupons that wore cut off of
bonds, as is alleged, before thoy wero hypothe?
cated, as a fraud upon tho State.
To sustain this charge tho committee stato
that "as the report of tho special joint com?
mittee appointed to ascertain what bonds of
the State ware pledged by the financial agent
of the State shows that these bonds wero
pledged by the financial agent for Stato loans
after the maturity of these coupons, it is ovi
dent that theso bonds must have been the
proporty of the State at the time those cou?
pons matured. Of course thoso coupons must
have been tho properly of the State as well;
and their surrender and receipt for the pur?
pose of fit riding, and the issuing of consoli?
dated bonds or certificates of stock in their
place, was a fiaud upon the State."
There la an Important error of fact coolly
assumed in this paragraph, which it ia very
important should be pointed out, and tho con?
clusion of the committee then falls to the
grcanxl.
Any one unacquainted with tho facts would
naturally in/or that the hypothecation of the
hoods referred to in this report, as taking place
after the maturity of these- coupons, was tho
jiroHiypothscation of these bonds.
Thai is positively incorrect, to my certain
kuowledge, and has been again end again
shown to be so. These bonds sre alleged in
tliat committee's report to have been hypothe?
cated in 1372, and stated so as to appear that
this was their first hypothecation ; whereas
they were hypothecated for tho llrst time in
18G0, soon after thoy were authorized to bo
issued, and doubtless may havo been hypothe?
cated twenty times between these two pe?
riods. The fact of theBe hunt's having been
hypothecated llrst in 18G9 annihilates tho
conclusions of the committee.
There is also nn error of law implied, but
not expressed, in this part of tho committee's
report, and which was more fully exhibited by
tho committee in their examination ot me
during the investigation.
Tho committee assume?or, at least, its
chairman, Senator Dunn, does?that all cou?
pons that mature upon bonds during their
hypothecation and before their sale are tho
property of tho State, and, therefore, should
not bo used in nn)' manner whatever, and
should be cut off when the bonds are sold
and returned to the State.
It is a well-established legal principle that
the party holding bonds as collateral security
havo a right to collect tho intorest upon theni
which matures during their hypothecation.
"This principle ol law," says an eminent
authority, " which allows a pledgee to havo
the benefit of all iutorest or incremont accru?
ing upon or from the thing pledged is familiar
and unquestionable, and is specially stated iu
'Story ou Bailments,' section 314, and else?
where. The inlcrcBt accruing on bonds under
Hypothecation is a part of tho pledge itself,
and is not tho property of the pledgor in any
other house than the bonds themselves."
Beforo the committee, therefore, can sus?
tain themselves in tho position they have
taken, it behooves them to show that tho par?
ties to whom the bonds wero pledged did not
exercise this their undoubted right.
4. The committee declare that the funding of
$0,9ii0 of coupons of conversion bonds, which
matured beforo tho bonds were used in ex?
change, is a fraud upon the State.
The committee affirm that these coupons
matured January and July, 1871, and that, '-as
these bouds are shown by the records iu tho
treasury to havo been issued at various dates,
botweon November, 1871, and March, 1872, it
is cvidonl that these coupons, which matured
many months before, were the property of the
State at the time of their maturity; and their
surrender and receipt for tho purpose of fund?
ing, and the issuing of consolidation bonds in
their places, was a fraud upon tho State."
The term " issued " refers bore, I presume,
to the period at which these conversion bonds
wero permanently exchanged for other bonds.
It is a matter of fact, to which Mr. Parker and
Captain Littlo will testify, that theso bonds
wore outstanding prior to that time, in accord?
ance with a custom of Mr. Parker and Mr.
Kimpton, in pursuance of tho act of March
20, 18G9 (seo volume 14 Statutes at Large,
page 259), cuabling the financial agent to
hypothecate any securities ho may have in his
possession belonging to tho State.
The facts connectod with this case ore po
culiar, and I distinctly recollect thorn.
Thu last lime that I ever sealed any bonds
of the Stato while secretary of staio was in
October, 1871. It was then that I tirst dis?
covered that the conversion bonds wero being
used iu what I deemed an illegal manner, and
I positively refused to seal any more. The
process ol conversion, however, was contin?
ued by Mr. Parkor, aud ho had thon to recall
such conversion bonds as Mr. Kimpton could
release from hypothecation iu New York, and
use them, when returned to tho treasury, for
the purposes of conversion. Theso bonds
wero returnod with the matured coupons cut
off
5. Tho committee declare that tho funding
of $9,205 of coupons belonging to bonds la?
beled canceled, unused," is a fraud against
the State.
Tho committee do not state at what time
theso particular coupons were fundud. If
that fuct were stated, 1 could more easily verify
or disprove this statement. It would consume a
vory groat amount of timo for me now to ex?
amine every ono of the $801,030 of detached
coupons which the cigiit members of the
committee took two weeks to examine. It
would bo very easy for them to furnish tho
data uocossary to prove this statement, as
thoy examined tho packages of detached cou?
pons in tho chronological order iu which they
were put up as vouchers.
My object in thus dwelling on the impor?
tance of the verification of this Statement of
the funding of tho coupons of these particu?
lar bonds, while iiidifibrent to tho verification
of the assertions upon which the three pre?
vious charges are based, is this: The correct?
ness of the statement with regard lo tho
funding oj certain coupons, upon which the
first three charges arc made, is a matter, iu
my judgment, immaterial; and if any such
coupons ns thoy sr.y havo been funded aro not
yet funded, I will fund them whenever pre?
sented, as directed by law, until the law in
that ruspect be modified or repealed. But with
regard to the funding of the coupous of these
particular bonds, the circumstances attending
thorn aro different, and I would hesitate, as I
have done, to fund them for this reason: Sec
lion 1 of tho act to reduce the volume of tho
public debt recites tho amount and class of
bonds that shall bo funded. Sectiou 2 of sa id
act slates that tho coupons belonging to tho
bonds enumerated in section 1 shall also be
funded, aud these particular bonds, labeled
?'canceled, unused," iu the treasury, are not
included in the amount of bonds of that class
authorized to be funded. It might, therefore,
vory proporly bo questioned as lo whether
the outstanding coupons of theso bonds
should he funded. If tho letter of tho law
should be strictly applied, theso coupons
ought not to be funded; hut if tho spiiit and
intent of tho law were taken into considera?
tion (of which I shall apeak more, fully here?
after), there would be no objection to tho
funding of those coupons, inasmuch as the
spirit and intent of the law contemplated tho
funding of all outstanding coupous, except the
coupons of the conversion bonds declared to
be illegal.
It is duo to myself to state rnoro fully the
circumstances attending the rejection of tho
$1,300 or $1,100 of coupons reforrcd toin this
connection by tho committee, and which, in
tho manner referred to, might place mo at a
disadvantage in tho opinion of some.
When inj- attention was called by Captain
Little to tho ?1,300 or $1,400 of these cou?
pons presented for funding I was surprised,
and staled to him that 1 was not aware that
any coupons at all had been cut off thoso
bonds, us I understood tho term "unused" to
mean that thoy had not been used at all by
my predecessor, and, therefore, had never
boon issued from tho treasury. 1 thou in?
quired of him if any coupons of those bonds
had previously been presented for fund?
ing, and he assured mo that none had been,
aR he had n list of thorn before him always
nnd woidd have delected them.
I then obtained a list of the UUipberS of the .
bonds, and gave instructions to my clerk not to
fund any coupous belonging to them.
There arc live coupons cut off each particu?
lar bond. The bonds amount to $101,000,
and arc seven per cent, bunds, thus show?
ing that $17,675 of coupons havo neon takeu
off.
Tho committee assert that $9.205 of theso
coupons have been funded into $4,002.50 of
consolidation bonds. Captain Little assured
mo, as I havo stated above, that none of
these coupous had been funded. When that
question of fact is settled, I stand ready to
give to the Slato one-hall of the $4,002.50 of
consolidation bonds issued in exchange for
tho $9,205 of coupons surrendered when a
court of law shall decide, in view nl the spirit
and intent of the law, that I should do so.
The comptroller-general will doubtless
remedy his mistako also, if necessary, by
giving his half oi iho bonds required. It is
a singular fact that, notwithstanding tho
comptroller-general is equally responsible
with mo for the faithful execution of the law,
the committee visit their censure upon mo
iilon?*, while he is not referred to iu tho most
distant manner.
I still maintain, however, as n matter of
jiistire. that tho holders of these coupons have
just as much right to fund them as those who
funded other coupons issued iu tho same
manner. As a question of law. howover, it
may very properly he questioned.
These very $101,000 of bonds, now marked
"canceled, unused," in tho treasury, were
issued to Mr. Kimpton in 18C9,andalterwards
returned by him in October, 1S71. ns 103*
journal shows. The coupons which matured
while they were iu use were doubtless cut
off, as was the case with tho coupons of all
other bonds.
Tho commilteo have made u very serious
mistake in the numbers of these bonds given
by them in their report, and instead of giviug
$101,000 of bonds, they have given $131.000
Tho numbers, as my journal shows, uro 777
to SIS, S20 to fc27, S?9 to 9015, 9S3 to 985,
and not 329 to 906?a difference of thirty
bonds.
If tho committee have estimated from
829 to 90G, instead of 859 to 906, in
making up tho number of coupons,
they have charged me with tho wrongful
funding of the coupons of thirty bonds, which
would make a very great difference iu their
aggregate. Whore is the committee's expert?
G. 1 am charged with a want of vigilauco
til the execution of the '?funding law."
Tiio best reply to this charge, which is
very singular under the circumstances, is to
relato bricliy tho history ot this law, and then
mention certain facts which tho commilteo
might havo referred to in their report.
When 1 became treasurer 111 December.
1S72, I immediately sought an interview with
Governor Moses, aud eonforred with him on
tho financial condition of tho State I told
him of my earnest desire to place tho finances
of the State in as sound a condition as possi?
ble under the circumstances, ami restore the
credit of the State: and that if our debts
were adjusted and settled in an equitable
manner, and the payment of interest on our
bonded debt resumed, and our assessment of
property and rale of taxation reduced, and
iho tax levy made in a specific manner, a cer?
tain amount for each particular object or class
of objects, and then collected with more care
and strictness, and, ubovo all things, if the
disbursement of the taxes was made iu ac?
cordance with the levy, that is, when the en?
ure amount raised from the levy was dis?
bursed, each class of objects should have re?
ceived its proportionale share of the whole?
if such a course was pursued, I slated to
Governor Moses, I thought tho people would
bo satisfied, and tho State would bo prosper?
ous. Governor Moses told tue that he would
leave all such matters to mo, and to do just
what I thought proper.
I then went to Xow York, and after con?
ferring with several distinguished financiers,
1 adopted the plan with regard to our bonded
debt which had been pursued by tho States of
Illinois, Indiana aud Michigan, in tho earlier
pint of their history, under circumstances simi?
lar to our own, and which is being seriously
considered now by tho States of North Caro?
lina and Virginia
1 then had a most thorough investigation of
tho whole subject of the bonded debt in every
respect, nindo by one who was thoroughly
competent to perform tho task. Seven months
of constant and unremitting labor wero spent
by us iu the investigation aud study of this
subject. The law was thou Ira mod by culling
those features of tho laws of those States re?
ferred to above that wero suitable to our cir?
cumstances, aud udding such additional fea?
tures as would make Iho law as strong as pos
! :1.1c.
I distinctly remember determining upon this
feature of tire law, as contained in section 2 or
the act with regard to the funding of the in?
terest upon the debt. I know from tho man?
ner in which our bond* hnd been hypothecated
in New York, it would probably be difficult to
trace the coupons belonging to them in every
instance.
I, therefore, decided that it would bo better
for the welfare of tho Sluto. and tho restora?
tion of our credit, by tho resumption of the
payment or the interest which had been sus?
pended for several yours, to include the inter?
est outstanding, and it is so included in sec?
tion 2 of the act iu distinct und emphatic
terms.
When the legislature was considering this
section of the act, th-tl was tho proper time to
examine this subjoct. But the general assem?
bly then wisely concluded that it was fur bet?
ter to settle the whole geueral subject than
to bo wasting tho time on comparatively
trifling features of it, especially as they
compelled the holders, juBt on account of such
irregularity, as well ns tho inability of State,
' through the misfortunes of the war, and tho
i extravagances subsequent thereto, to tnko
, bonds equal to one-half only of those they sur?
rendered.
I Tho law has elicited from the Charleston
News and Courier this compliment, that it was
l framed by iho ablest lawyers and most dis?
tinguished financiers of the State. The
editors did not, perhaps, know who wero the
real authors of tho law, and to whom, there?
fore, this compliment was justly applicable.
It was appreciated, howovor, all the same.
The bill was then introduced in the legisla?
ture, and" its passage carefully watched and
urged with all tho power and influence which
my position as treasurer gave mc.
It was passed by tho legislature substan?
tially as prepared on December 22, 1873.
And now I began to experience tho effect
of one of those mistaken views of economy
practiced by the legislature. I had asked tho
general assembly for an appropriation of
$10,000 to have plates engraved and bonds
and stocks printed, the records necessary for
such elaborate transactions, tho additional
clerical forco necessary for tho careful execu?
tion of tho law, and making the proper adver?
tisements to the bond holders, scattered all
over the country.
The general assembly appropriated just one
half ol the amount that my most careful esti?
mates called for, although tho execution of
this law will save tho Stato $13,000,000, by
the reducing the volumo of the public dobt
from twelve to six millions of dolars, and
saving tho State twenty years' iutcrest at six
per cout. upon that amount of principal.
Tho consequence was, that after having tho
plates for the bonds engraved and the bonds
printed, and obtaining the necessary records
and stationery, and making such udvortise
moots as wore absolutely essential to com?
mence tho execution of the law, I had no
money left to employ the only^ie who was
thoroughly prepared, by fourtoTu months of
study of this subject, to act as clerk, and I.
therefore, lost his valuable services.
I theu spent sevoral months, with the in?
valuable aid of my book-kcoper, in devising
a system for the execution of tho law, and
the preparation of a plan of records for the
transactions, and selecting the style and class of
bonds and slocks. It was Juno 1,1874, eigh?
teen months after I entered my office, and began
carefully to study tho subject before I was
prepared to enter upon the actual work of
funding.
I then had to depute my chief clerk, who
had not given special attention to this sub?
ject, to perform the work of funding, in addi?
tion to all his other duties, and it has only
been by most earnest and unremitting vigi?
lance that no more mistakes have occurred
under the circumstances than tho, probable
one which I have acknowledged.
This leads mo to mention certain facts
which the committee might have referred to
in then- report, as an act of simplo justice to
me and my assistant.
They examined $864,03(1 of detached cou?
pons, put up in fifty or sixty different packages
as vouchers, und hundreds of thousands of
bonds, and compared them with the transac?
tions as recorded in tho books, aud found
them in every single case to be perfectly cor?
rect.
But, moro than this, iho law positively for?
bids tho funding of $3.0?."i,000 of tho conver
!on bonds and the coupons belonging thereto,
while it requires $1,577,500 of the sumo class
of bonds aud coupons to bo funded. Theso
bonds aud coupons wero distinguishable by
their numbers und tho color of their nun -
hers.
Senator Dunn, the chairman of the joint
committee, watched for tho bonds and cou?
pons of the bonds that wore prohibited by
law from being funded with all the vigilance
that a sleepless malice can inspire, and, to his
evident chagrin aud mortification, did not dis?
cover a single one. I do not think that it is
necessary for me to say anything more in
reply to tho chargo of tho want of vigilance
from a committee who made a hasty aud su?
perficial examination of three hours a duy for
two weeks of a most difheolt and complicated
subject, which thoy acknowledged, when they
entered my office, they knew Hille about.
I havo watched over tho execution of this
law with tho utmost care, and challcngo the
most rigid scrutiny of any one or all in the
Stato or out of it who aru competent to mako
an investigation.
It will be soon by reference to my annual
report for the fiscal year ending October 31,
1874, that tho interest fund had a balance to
its credit of $105,481.87. Now, porinit mo to
relate au occurrence which, if it had been
otherwise, would havo been a real diversion
of the interest fund
The board, composed of the governor,
comptroller-general, treasurer, chairman com?
mittee of thianoo and chairman committee on
way s und means, who were authorized in the
"act lo reduce the volume of the public debt''
._-n. \
to apply a surplus remaining in tfie. ..treasuryr
after' flie payment oftho 3uid interest, to the
extinguishment of the public debt, end to do
do othor purpose, desired to apply this bal- .
ance last Tall to the purchase of bonds.
I objected, stating that that would be ?
diversion of tho fund, as tho phrase, "after
tho payment of tho said interest," meant all
the interest that would be duo after all the
bonds were exchanged that could be. ex?
changed; lor, if any other construction were
put upon these words, the funding law would
be utterly destroyed, inasmuch as the interest
on tho old bonds to January 1, 1874, only
were authorized to bo funded, und I would
have no money on hand to pay the interest
duly 1, 1874, on tho consolidation bonds, and
there would thou be no inducement to make
the xchnnge. The board was very much
disappointed at this construction, but tho in?
terest fund was not diverted.
AS TO thi2 funds FOU TUG i'avmknt OF INTKB
E8T.
7. Tho inquiry upon this point which theoom
mitteoe was authorized to m.iko is, "whether
tho funds for the payment of interest raised
under tho said act have boon kopt separate
and apart from all othor funds, as provided for
iu the said act, aud as otherwise provided by
law.
Tho conclusions of the committee upon this
point are presented in their report with great
emphasis and confidence. They declared thai
"these hinds have not been kept separate and
apart from all other funds, as WUS required by
law." 1 take issue with tho committee upon
tins conclusion, and T assert, with equal em?
phasis and coufidenco, that I have never for
one moment or in one instance violated any
law in my management of any fund of tbe
State.
Tho committee are very liberal in bold
statements, unsupported by proof or argu?
ments, but there ia a plentiful lack of such
reasoning or principles of law as would better ?<
have become a report which bears the sigoa
lure of at least otie gentleman who may be
regarded as qualified by his ability and pro?
fession to discuss tho questions involved. I
do not propose to follow the example of tho
committee; on tho contrary, I intend to show .
that from some causes?whether malice, igno
rance, or inadvertence is now immaterial?
they havo now arraigned me before the pub?
lic upon n false and unfounded charge in re?
spect to the matter now under consideration.
The committee content themselves with ex oa*
thedra announcements that my conduct is a
"ilagraut violation of tho law ;" that my con?
struction of the law is "as monstrous as the
violation itself;" that my reasoning is a
' bold assertion," and my action is "to deride
tho contract made by the State with ih*
holders of the bonds." It may be becoming
and competent for this very learned commit?
tee to announce conclusions without deigning
to point out any grouude for such conclusions,
but I shall claim no such privilege, and shall
feel it incumbent upon mo to set forth the
grounds upon which I confidently claim that
my conduct has been at all points and tlmea
in strict accordance with law.
The first provision of law which bears upon
the prescut question is found in the ninth seo
tion of the supply act of December 22, 1873
(acts of 1873-74, pago 516), and is in these
words: "That the proceeds from the taxes
levied in the first sevon sections of this act
shall be kept by the state treasurer Separata
and apart from each other and from other pub ?
lie funds, und shall be applied to the purpose*
for which they are respectively levied and
none other."
The same section re-appears in the supply
set of March 14, 1874 (acts 1873-74, pag*
659).
Tho next provision of law that bears on
this question is found in the seventh section
oftho "act to reduce volume of, public debt,"
&c, passed December 22, 1873 (acts of 1873
74, poire 521), which provides "that the funds
so created shall be kept separate and apart
from nil other funds, and shall be applied,
first, to paynioot of tho annually accruing in?
terest upon the bonds and certificates of stock
herein authorized; second, the surplus re?
maining in the treasury after the payment of
the said interest shall be applied on or before
the first day of July of each year to the ex?
tinguishment of tho public debt, and to no
other purpose."
These are the provisions of law which reg?
ulate my duty in the premises, and the aim
pie qucstiou is, what do they require of me as
treasurer? What is meant by the words
11 separate and apart from other funds," and
"shall be applied to no other purposo?"
There uro two rules of construction which
arc applicable to the construction of statute**?
the one, which may bo called the literal, and
the othor, which may bo called the reasonable.
In some cases the literal construction may be
the only admissible one, and in other cases it
may be equally apparent that tho words of
statutes wero not intended to be used in their
literal sense. This latter view has passed
into a familiar maxim of the law : " Qui
haeret in Hiera, haere! in cortice." " Be who
dings to the letter clings to Die l>ark."
But tho one great canon of construction
which prevails on all occasions is the spirit
and intent of the law.
Indeed under this broad rule are included
other principles of construction, which ox press
tho wisdom of centuries of jurisprudence,
such as, that a statute must, always receive a
reasonable construction; that such a construc?
tion shall be adopted sb will remnrtvthe^Jrtt
complained or, and that, of two odtflH
structions, that oa* shall bo prefH
best promotes the general good. ?
Let us seo now whether thefl
quoted from the etattitea is such afl
us to adopt a literal constructioaM
tiiflcaut words are "shall be ke^|
and apart from all other funds." v| I
would a literal compliance with thH H
require? It would plainly requireB H
material, tangible separation of th<H H
the State into several visible miiPsesH