Mr. ROBINSON. The probabilities are that we will want to ask the indulgence of the committee at the proper time for presentation of some of our views on this testimony.

The ACTING CHAIRMAN. Mr. Robinson, the chairman is called out temporarily and I do not know what his plans are: I can not speak for him, but I have no doubt you will be given the opportunity to do that.

Senator CUMMINS. Mr. Chairman, there are representatives of other roads here, I am sure, who desire to be heard. There is the representative of the Kansas City, Mexico & Orient, I think. Who is the gentleman that represents that road?

Mr. D. J. HAFF. I am counsel and Dr. De Bernardi is general manager. Mr. De Bernardi is the vice president and general manager of the Kansas City, Mexico & Orient Railroad, a man of 35 years experience in the railroad business, formerly with the Missouri Pacific. STATEMENT OF MR. A. DE BERNARDI, VICE PRESIDENT AND GENERAL MANAGER OF THE KANSAS CITY, MEXICO & ORIENT RAILROAD, KANSAS CITY, MO.

The CHAIRMAN. Mr. De Bernardi, will you give your full name and address, and your road to the stenographer, please?

Mr. DE BERNARDI. I am now vice president and general manager of the Kansas City, Mexico & Orient Railroad. I have been with them six months. Prior to that time, for a period of 35 years, I was connected with the Missouri Pacific Railroad in all capacities, from laborer in the maintenance of way department to general superintendent, including slight train service and telegraph service. Therefore, my experience has been very largely in construction, maintenance, and operation. I am not well versed in finances.

When I came here it was not my intention to go before the committee, as I said, but so far I have not heard evidence that directly touched upon the conditions of this road, and I have tried here to briefly say what we expect to be, what we were, and what we need

now.

The Kansas City, Mexico & Orient Railroad Co. was planned from Kansas City, Mo., across Kansas, Oklahoma, Texas, and northern Mexico, to the west coast of Topolobampo, approximately 1,600 miles. Seven hundred and thirty-seven miles from Wichita, Kans., to Alpine, Tex., are constructed and in continuous operation. It is in good physical condition, reasonably well equipped with motive power and cars. It has a large modern locomotive and car shop at Wichita, Kans., and fair repair facilities at San Angelo, Tex. There are also approximately 140 miles of right of way in Kansas and Texas on which the grade is completed.

Furthermore, which may not be of interest to the committee, there are 230 miles in old Mexico, constructed and nearly all now in operation, the northern part of Mexico.

At Wichita, Kans., the present northern terminus, connections are made with four trunk lines. It also connects with several roads at intermediate points, and the Southern Pacific at Alpine, Tex., which is only about 60 miles from the Mexican border. This connection, and with the Texas Pacific, at Sweetwater, forms a through route to west Texas and southern California, and we have considerable

business that way, particularly now since some of the more direct lines are very badly congested and we are not.

It developed and serves good agricultural territory in Kansas, Oklahoma, and north Texas, and serves exclusively 227 miles south from San Angelo, Tex. There is no other railroad anywhere near us for this 227 miles.

The original cost in the United States, in approximate figures, is $22,000,000, and in old Mexico, $5,500,000. This capital was raised, or practically so, and construction was in progress until the depression of 1907 and 1908, which affected all roads. Then, subsequently, the Mexican War, and the road was forced into the hands of a receiver. During two years that it was in the hands of the receiver, 100 addirional miles were authorized by the court and were constructed. That is the extreme southwest portion, forming the connection with the Southern Pacific.

At the end of two years they reorganized and the road emerged with only $6,000,000 or preferred indebtedness in the United States, all authorized by the court.

It then seemed well on its way to completion, when the European war of 1914 again interrupted, because considerable of the capital was coming from England, a great deal of it. Of course, that was immediately stopped, and although there were 737 miles here in continuous operation, by reason of it not being finished to either terminus, particularly to Kansas City, where we would have friendly connections, and by friendly connections I mean roads that are not competitors, all of our connections now being competitors, and very naturally give us no business that they can afford, and we subsist entirely upon our own solicitation. They were forced by your laws to respect the routing of the shipper prior to this very recent order, which of course, now has obliterated that. But, on that account, and a very sever drouth in Texas for two years, the worst drouth in the history of the State, the general advance of our costs, including labor and materials and the general low rates, if I will be pardoned for that suggestion, its earnings were insufficient to meet its interest and obligations again, and in April, 1917, it was again forced into the hands of the court, with Mr. W. T. Kemper, of Kansas City, Mo., serving as sole receiver with no salary whatever. He had some interest in the property.

This court authorized an issue of $2,500,000 receiver's certificates to adjust some of the old accounts and provide a working capital to tide through the war. You understand, this receivership came after the declaration of war.

A portion of these have been sold, but taking over of operation of the lines by the Government stopped the sale of the remainder. Therefore, there is no further financial assistance available from that

source.

During the three-year period referred to here as the standard period, I believe, ending June 30, 1917, the cost of maintenance and operation, including interest on the securities authorized by the court, this $6,000,000, exceeded the earnings. Therefore, provisions for compensation under article 1 proposed by the bill would, of course, be fatal.

We feel that the provision made in article 3 is entirely too long a route for poor roads.

However, during the last of 1917, through intense solicitation and some additional economies, we began to make a better showing. The earnings for October, 1917, exceeded all expenses, including the interest on this $6,000,000 gold notes, had we been paying interest. Of course, being in the hands of a receiver, we were not paying interest. We had every reason to believe that we were well on our way to success, until the taking over of the roads by the Government, practically stopping active solicitation, and the fact that the freight we have solicited may be diverted from us. In some instances we are the short line and in many others we are not, but as I remarked a while ago, we are entirely dependent upon our competitors to give us their business now.

Instructions are out by the Government to disregard the shipper's routings. This order will affect the Orient road very seriously, this taking over by the Government. I am not prepared to say, gentlemen, to what extent that will be. It may be that this order will double our earnings, and it may cut them half in two. We have no basis from which we can figure. Neither have we any idea what is in store for us in the way of increased cost of labor.

The Government has also taken over that important factor in connection with our operation. Under these conditions and with an already large pay roll and material bills to be met currently, if we now fail to earn these expenses, with no definite provision made by Congress to protect such lines, there will be no alternative except that we permanently suspend operations and dispose of the property as junk.

It may not be of interest to the committee, but I will say that at present prices that could be done and more than cover all of our outstanding preferred indebtedness. Our locomotives, rail and junk, would do that. But, of course, we know that the Government had no such intention when they took us over.

In this particular case, the suspension would leave a very large area of agricultural and stock territory with no railway facilities whatever, which, of course, would be resented by them, as it would mean utter ruin to them.

Therefore, under these conditions that we have set forth here, I can not but feel that inasmuch as you have taken charge of us, and have interrupted the flow of our traffic and possibly our expenses, that it is only due us that we be guaranteed by the Congress, definitely guaranteed, I will say, for our operating expenses, including maintenance, and the interest on such obligations as are now approved by the United States court.

It is possible we will not need that protection. If we are used to a greater extent than we have been in the past, we can take care of ourselves. If we had been let alone in the general course of events as they were, we were prepared then to take care of ourselves from our earnings, and if we failed in that, then from the sale of our receiver's certificates, and we feel, if you please, that we should be afforded that full protection and not only we, but the people whom we serve throughout this 740 miles of territory.

This would make us safe. It would enable us and others in our class to be retained in service for such use as the Government may need, and I think they will need us, and likewise to serve the people in that territory, and we respectfully ask that some definite provision