"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.
"There has been a law on the statute-books since 1850, yet more
stringent, which provides that 'before any work shall be contracted
for on any canals of the State the division engineer shall cause
to be ascertained, with all practical accuracy, the quantity of
embankment, excavation, and masonry, and the quality and quantity of
all materials to be used, and all other items of work to be placed
under contract, a statement of which, together with maps, plans, and
specifications corresponding with those adopted by the Canal Board,
and on file in the office of the State Engineer and Surveyor, shall
be publicly exhibited to persons proposing for work to be let.'
"These most explicit provisions of law have been very rarely
observed. Contracts have not only been let without the preliminary
surveys, maps, plans, and estimates, but one of the most familiar
abuses on the canals of late years has been to change the plan
of work after the contract is signed, by which the contractor
gets relieved from the unprofitable portions of his work, and is
furnished a pretext for establishing a new scale of prices, in
connivance with the auditing officers. Illustrations of this method
of defrauding the State may be found in several of the reports
submitted to the Executive. The most costly one to the State is
described in our first report. The contract for substituting slope
and vertical wall for the bench wall between the Port Schuyler and
the lower Mohawk aqueduct provided originally for 14,000 cubic yards
of slope wall and only 9000 of vertical wall. As if distrustful
of the influence of the contractor over its own agents, the
Legislature, within six months after the time this work could have
begun, in appropriating money to carry it on, absolutely prohibited
the expenditure of more than five per cent. of the appropriation
for vertical wall. Regardless, however, of this restriction, and
regardless of the terms of the contract which provided for twice as
much slope as vertical wall, nearly ninety-five per cent. of the
cost of the work on that contract was incurred upon vertical wall
and work incident to such construction, while not a single yard of
slope wall was built; and as a consequence, an improvement which
could have been readily and well done for the original appropriation
of $84,645 has already cost the State about half a million for
wretched work, and is still far from completion. No attention was
ever paid to the provision of the act requiring the change of plan
from slope to vertical wall, with the maps, plans, and estimates for
such new work to be submitted to and approved by the Canal Board,
and advertised and let to the lowest bidder.
"Nor does the infidelity of the State's agents appear to have
stopped here. While the records of the canal commissioners and of
the Canal Board certify that the preliminary surveys, maps, plans,
specifications, estimates, etc., required by law were actually
produced before them and approved by them and by the State Engineer;
in point of fact, no such precautions for the protection of the
State, so far as we have been able to ascertain, were actually
taken.[8]
[8] See first report to the Executive, pages 15, 16, and 17.
"It is obvious that the abuses to which we have invited your
attention cannot be remedied except:
"_First_, by concentrating responsibility for the administration of
the canals in fewer hands;
"_Second_, by lodging somewhere a more efficient power for the
suspension or removal of offenders;
"_Third_, by providing more specific, complete, and efficient laws
for preventing and punishing abuses when disclosed; and,
"_Fourth_, by providing for the vigorous prosecution and punishment
of unfaithful servants.
"Under the present organization the responsibility for a
non-compliance with the provisions of the laws for the repair
and maintenance of the canals is so distributed between nine
State officers, composing the Canal Board, and the auditor, the
superintendents, the division, resident and assistant Engineers,
that it is nearly impossible to bring any one of them to justice,
unless all, or at least a large majority, are of accord in that
purpose. Could one person be held responsible for the acts of
all of his subordinates, the remedy would be simple and probably
adequate. Should the people ratify the proposed amendment of the
Constitution, which is designed to clothe a new officer, to be
called Superintendent of Public Works, with the powers now vested
in the canal commissioners, together with other powers necessary to
his functions, this evil of divided responsibility will be greatly
diminished. At present the powers of removal and suspension of
unfaithful officers are altogether inadequate.
"We recommend, in addition, that the division and resident
engineers, and such others engineers as it may be necessary, in the
opinion of the State Engineer and Surveyor, to employ temporarily
upon any particular work, should be appointed by the State Engineer
and Surveyor, with the approval of the Canal Board, subject to
removal by the State Engineer and Surveyor alone. In case of
every such temporary employment, we would recommend that the rate
of compensation be fixed by the Canal Board before such person
employed enters upon duty; that he be required to file the usual
oath of office, and that he be only paid by the auditor of the Canal
Department upon his oath to the correctness of the items charged for
expenses and time, and a certificate of the approval of the State
Engineer and Surveyor attached.
"No modification of the Constitution or of the law, however, will
ever work any substantial reform unless adequate provision is made
in some way for a more vigorous prosecution of unfaithful servants.
The law is no protection unless its penalties are enforced against
those who violate it; the justice that sleeps might as well be dead.
Had the laws been enforced promptly when they had been notoriously
violated, our canals would not only now be out of debt, but a
fruitful source of revenue to the State. It is our conviction that
the Legislature will do well to see if this arm of the government
ought not to be strengthened. The evidence here submitted will
show that very large sums of money have been taken annually from
the State by the fraudulent connivance of the State agents with
contractors, which should be reclaimed and restored to the treasury
and an example made of all the parties participating in the
robberies. The preparation of the testimony in these prosecutions,
covering, as it must in most cases, a series of years, the actions
of a large number of public officers, and servants, and involving a
scientific examination of great varieties of work and a familiarity
with the principles of engineering and the field work of the
engineers, and with the accounts preserved in our public archives,
will involve an amount of labor and expense for which at present
there is no adequate provision.
"The commission was occupied in the taking of testimony until after
the present session of the Legislature had commenced. The testimony
could not be written out by the stenographer and put into the hands
of the printer until the latter part of the month of January. This
will explain any apparent delay in the transmission of this report,
there being obvious inconveniences in sending part in print and
part in manuscript. There has been no delay in its preparation,
except what was the natural and inevitable result of efforts of
the commission to render its contents readily accessible to your
Excellency and to the legislative bodies.
"For the expenses of the commission the sum of $30,000 was
appropriated by the last Legislature. The expenses will exceed this
sum about $5000, for which we respectfully ask an appropriation.
For greater convenience in presenting the testimony taken, we had
it printed at a cost of over $4000. This, together with the legal
expenses growing out of the proceedings to establish the authority
of the commission to compel the production of books and papers and
the witnesses to testify, occasioned this deficiency.
"JOHN BIGELOW,
"D. MAGONE, JR.,
"A. E. ORR,
"JOHN D. VAN BUREN, JR.
"ALBANY, _February 14, 1876_."
"EXHIBIT D.
"The commission to investigate the affairs of the canals of the
State present to the honorable commissioners of the canal fund:
"That Hon. Francis S. Thayer, Auditor of the Canal Department, has
violated his duty as such auditor 'in respect to the public moneys
in his charge and subject to his draft':
"_First._--In that, on the 21st day of July, 1874, he procured the
passage of a resolution by the commissioners of the canal fund
whereby $200,000 of the sinking fund was directed to be invested in
the taxes to be levied pursuant to chapter 462 of the laws of 1874;
and after procuring the passage of such resolution did set apart
said sum in violation of the Constitution. That the auditor's motive
was to benefit George D. Lord. That in carrying out such intent the
auditor paid $120,497.02 of said sum of $200,000, so set apart,
within two days thereafter to Thad. C. Davis, as the agent of George
D. Lord. That this was a violation of the Constitution, see article
seven, sections two and thirteen. That the auditor is responsible
for this misapplication of money, see his testimony, pages 2544,
2546.
"_Second._--In that, on or about the 1st day of December, 1874,
there being money subject to the warrant of the auditor for
that purpose, the said auditor refused payment to S. R. Wells,
administrator, of an award in his favor for $5207.50 on the false
pretence that he had no funds, and immediately after such refusal
negotiated the purchase, and did purchase, the said award at about
$200 less than it called for of principal and interest, and on the
9th day of February, 1875, audited the said claim at the sum of
$5454.92, and drew his warrant therefor in favor of George A. Stone,
as assignee.
"George A. Stone had no interest in the transaction, and the auditor
testifies that it was purchased for his brother-in-law, E. J. McKie.
As to the evidence of this charge, see testimony of S. R. Wells,
page 37 (folio 513 to folio 517); testimony of D. Willers, Jr., page
42 (folios 571 and 572); testimony of the auditor, pages 2507-2511;
that the profit went to the benefit of the auditor, see pages 2595.
"_Third._--In that, on the 11th day of March, 1875, there being
money subject to the warrant of the auditor for that purpose, the
said auditor refused payment to George M. Case of an award in his
favor for $9768.71, on the false pretence that he had no funds, and,
immediately after such refusal, negotiated the purchase, and did
purchase, the said award, including accrued interest, at $10,510.73,
and did on the twentieth day of May thereafter audit said claim for
the full amount thereof, including interest, to wit, $10,730.60, and
drew his warrant therefor in favor of George A. Stone, assignee.
"George A. Stone had no interest in the purchase, as appeared by his
testimony, pages 2160-2229, and the auditor testified that he made
the purchase for his brother-in-law, E. J. McKie.
"As to the evidence, see testimony of Auditor Thayer, pages 2507,
2586, 2595.
"_Fourth._--In that, on the 15th day of March, 1875, the auditor
purchased a certificate in favor of E. H. French for $1184.26 at a
discount of $24.64. It was paid May twentieth thereafter at its full
face. As to evidence of this transaction, see testimony of Auditor
Thayer, same pages and folios referred to above as to George M.
Case's certificate.
"_Fifth._--In that, on the 12th day of April, 1875, the auditor
purchased sixteen canal commissioners' certificates, amounting in
the aggregate to $29,962, from Nehemiah L. Osborne at a discount of
seven per cent. per annum from the face thereof, but for what length
of time the discount was made we are unable to ascertain, further
than that the time was in excess of the time between the purchase
and payment by the auditor.
"These certificates were paid May 20, 1875, to George A. Stone. That
the auditor derived a personal advantage from this transaction, see
testimony of George A. Stone and of Auditor Thayer, pages 2229, 2595.
"_Sixth._--In that, on the 28th day of April, 1875, the auditor
purchased from H. D. Denison five canal commissioners' certificates,
of the aggregate amount of $49,610, at a discount of seven per
cent. per annum, but for what time he discounted them we have not
been able to ascertain, further than that it was in excess of
the time between the purchase and payment. On the twentieth day
of May thereafter the auditor audited said certificates and drew
his warrant for the payment thereof in favor of George A. Stone,
assignee, at $50,542.06, and the amount gained went to the personal
advantage of the auditor. As to evidence of this transaction, see
testimony of George A. Stone, page 2229; Francis S. Thayer, page
2476.
"_Seventh._--In that, on the 29th day of April, 1875, the auditor
purchased from H. D. Denison six canal commissioners' certificates,
of the aggregate amount of $30,687, at a discount of seven per cent.
per annum, but for what length of time he discounted them we have
not been able to ascertain, further than that it was greater than
the time between the purchase and payment; that on the twentieth
day of May thereafter the auditor audited these certificates and
drew his warrant therefor in favor of George A. Stone at $31,153.03.
That the personal gain from this transaction went to the personal
advantage of Francis S. Thayer, see his testimony, page 2595.
"_Eighth._--That the auditor drew his warrant in payment for a
canal commissioners' certificate, in favor of John D. Hamilton, for
$38,000, on the 28th day of June, 1875, in violation of law in this:
that he paid it without the sworn certificate of an engineer, as
required by statute.
"_Ninth._--In this, that the auditor, in June, 1875, purchased a
canal commissioners' certificate, subject to his own audit, from
James P. Buck, for $6496.28, at a discount of ten per cent. For the
evidence of specification, see testimony of James P. Buck, page 2216.
"The auditor claims he made this purchase for his brother-in-law, E.
J. McKie.
"_Tenth._-In this, that on the 2d day of July, 1875, the auditor
purchased canal commissioners' certificates, subject to his own
audit, to the amount of $49,953.91, at a discount of eight per
cent. and accrued interest, in favor of the purchaser. For evidence
of this purchase, see testimony of Willard Johnson, page 2386;
testimony of F. S. Thayer, page 2514.
"_Eleventh._--In that, in addition to those above enumerated, the
auditor purchased, between the 9th day of March and the 14th day of
July, 1875, canal commissioners' drafts and certificates, subject
to his own audit, to the amount of $64,959.81, all of which he
afterward audited and drew his warrants in payment thereof. As to
the evidence of these several transactions, see testimony of George
A. Stone, page 2241; that the auditor derived a direct personal
advantage from these transactions, see testimony of Francis S.
Thayer, page 2595.
"JOHN BIGELOW,
"A. E. ORR,
"JOHN D. VAN BUREN, JR.,
"D. MAGONE, JR.,
"_Commissioners_."
"EXHIBIT E
"COPY OF THE REQUISITION OF THE COMMISSIONERS OF THE CANAL FUND
"The undersigned hereby certify that, at a meeting of the
commissioners of the canal fund, held at the Canal Department, in
the city of Albany, on the 28th day of December, 1875, at 10 o'clock
A. M.,
"Present--William Dorsheimer, Lieutenant-Governor; Diedrich Willers,
Jr., Secretary of State; Nelson K. Hopkins, Comptroller; Thomas
Raines, Treasurer; Daniel Pratt, Attorney-General,
"The following proceedings were had:
"On motion of the Attorney-General, it was
"_Resolved_, That a requisition is made upon his Excellency the
Governor to suspend Francis S. Thayer, the auditor of the Canal
Department, and to appoint a suitable person to perform his duties,
if it shall be made to appear to him that the said auditor has
violated his duty in respect to the public moneys in his charge and
subject to his draft, the particulars of which alleged violations
of duty appear in the report of the commission to investigate the
affairs of the canals of the State, which has been submitted to this
board, and which is herewith transmitted.
"The members of the board who voted in favor of the adoption
of said resolution were as follows: The Lieutenant-Governor,
Attorney-General, and Secretary of State. The Comptroller voted in
the negative. The Treasurer was not present when the vote was taken,
by reason of illness.
"WILLIAM DORSHEIMER,
"_Lieutenant-Governor_.
"DANIEL PRATT,
"_Attorney-General_.
"DIEDRICH WILLERS, JR.,
"_Secretary of State_."
"EXHIBIT F
"EXECUTIVE ORDER FOR THE SUSPENSION OF AUDITOR THAYER
"STATE OF NEW YORK: EXECUTIVE CHAMBER,
"ALBANY, _December, 1875_.
"_Whereas_, The commissioners of the canal fund, by their
requisition hereto annexed, have required or recommended the
suspension from office of Francis S. Thayer, the auditor of the
Canal Department; and, whereas, it has been made to appear to me
that the said Francis S. Thayer, as such auditor, has violated his
duty in respect to the public moneys in his charge and subject to
his draft;
"Now, therefore, in pursuance of the provisions of section 2, of
chapter 783 of the laws of 1857, I do hereby suspend the said
Francis S. Thayer from his office as auditor of the Canal Department.
"In witness whereof, I hereunto set my name and cause to be affixed
the privy seal of the State this 28th day of December, 1875.
{ State of New York. }
{ Excelsior. } "SAMUEL J. TILDEN."
{ Executive Privy Seal. }
"By the Governor,
"CHAS. STEBBINS,
"_Private Secretary_.
"Indorsed: Order by Samuel J. Tilden, Governor, suspending Francis
S. Thayer, auditor of the Canal Department.
"Filed December 28, 1875, at four and a half o'clock P.M.
"DIEDRICH WILLERS, JR.,
"_Secretary of State_."