De Lesseps’ plan contemplated the building of a sea-level canal, 42
miles in length, from shore to shore, 100 feet wide and 28 feet deep.
His authority from the Colombian Government amounted to merely a right
to excavate the canal, the Colombian Government retaining jurisdiction
over the soil and the people. The estimate of the cost of the type
of canal proposed was fixed by the French company at $120,000,000.
The work of construction was inaugurated on February 1, 1881, with
ceremony by the officers of the French company, and was participated
in by officials of France, Panama and Colombia. But within a very short
time, owing to the magnitude of the scale of operations, coupled with
wasteful business methods, the first fund of $120,000,000 was expended.
The company put out a second issue of stock which they offered to the
people of France as the first issue had been offered. This second issue
was taken up as the first had been, but with some suspicion on the
part of the buyers. The second issue sold at a considerable discount;
still they found purchasers, and again the coffers of the company were
supplied with cash.
But the wastefulness and extravagance of the company continuing, the
proceeds from the second issue of stock were soon exhausted and a
third issue was offered. The sale of the third issue was made with a
great deal of difficulty, and premiums were given to prominent men
of influence or authority, or any line of business, providing they
would use that influence in the marketing of the company’s shares.
So flagrant did these irregularities become that they culminated in
criminal prosecutions.
The sum total of the capital stock subscribed to by the buyers of
the French Panama Company’s shares was $393,505,100. This great
volume of stock sold to the purchasers produced for the company only
$201,546,740, the difference of $191,958,360 being lost in discounts
and premiums paid in marketing the stock.