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went to the Isthmus he found that he had little or no experience in construction and was obliged to relieve him. Mr. Prescott, who was the superintendent of the railroad, had been an assistant superintendent under Colonel Shaler and was made superintendent under Mr. Wallace. He was found by Mr. Stevens unequal to the task, as was perfectly apparent from the bad state of congestion that existed on the Panama Railroad at this time.

But Mr. Wallace says that Mr. Dauchy was there, and quite as competent as he was, as acting chief engineer, to carry on the work. I need only refer to General Davis's comment on the condition of things when Mr. Dauchy was in charge to refute Mr. Wallace's statement upon this subject. More than this, Mr. Wallace contradicts himself by his conduct in respect to Mr. Dauchy, for he says in his letter of June 8, already an exhibit:

The greatest handicap at this time is the lack of several high-class assistants. All the men here are loyal and perfectly competent in the handling of their several divisions or bureaus as the work now exists, but, in view of the large amount of organization and expansive work, several high-salaried men are needed who should be personally selected by the chief engineer. Since my original appointment as chief engineer this matter has been given constant thought, and a great many men considered for the more important positions that have not yet been filled, particularly that of assistant chief engineer.

Refusal after refusal has been met with, although as high as $15,000 per annum has been offered in a tentative way. This position is a most difficult one to fill, probably much more so than it would be to select a successor to the chief engineer, as his assistant must necessarily have ability fully equal to that of his superior, and be perfectly competent to step into his place should ill health, inclination, or any other reason cause the chiel engineer to leave the service. It is absolutely necessary that a man of this character should be secured without further delay, and that he be personally selected by and be a man in whom the chief engineer has perfect confidence. It will also be necessary to employ other high-class men in the immediate future. It was the intention of the chief engineer to secure these men on his recent return to the United States after personal conferences and full investigation of their records, but the important matters connected with the reorganization of the Commission and the Panama Railroad have prevented; and on account of the demoralization which had occurred during my absence, due to the deaths of Messrs. Johnston and West, and the illness of General Davis, and the general unsettled state of affairs existing on the Isthmus, owing to the reorganization of the Commission, it appeared highly desirable for me to return to Panama than to allow the question of personnel to be taken up at a later date.

If it was true that Mr. Dauchy was a competent man to carry on the work of organization and expansion of the organization, and keep a firm hand and overcome the panic and the confusion that was existing on the Isthmus, Mr. Wallace would have made him his assistant chief engineer, or principal assistant engineer, two officials provided for in his plan of organization. Instead of that, in his elaborate plan of organization, he retained him merely as resident engineer at Culebra. Nothing could more emphatically testify to the fact that Mr. Wallace did not regard Mr. Dauchy as equal to the position in which he left him. Again, if this was the most opportune time, as Mr. Wallace says, that would be likely to come in the next year for him to leave the Isthmus, why was it necessary for him in his telegram to me to ask that he be ordered from the Isthmus? He answers this in his letter of June 8, which I have already quoted above. He says:

The suggested order to return to the United States for a conference with you, prior to your leaving for the Philippines, was to cause a better effect on the men here than if they understood that I had returned of my own volition, as it would be natural to suppose that you might desire a personal conference with me in relation to the work here before your departure for a considerable absence from the country.

In other words, he wished me to enable him to present to the employees and workmen on the Isthmus a fictitious reason for his leaving the Isthmus. Why did he wish it to appear that he was not leaving the Isthmus at his own volition? Only one answer can be made to this, and that is that he knew that his leaving the Isthmus of his own volition would only add to the panic and the demoralization which existed on the Isthmus when he did leave. The truth was that the yellowfever panic was at its height when he left the Isthmus; the number of cases, the number of deaths, and the number who ran away from the Isthmus on that account were highest in June when Mr. Wallace left. Mr. Wallace left Mr. Dauchy with final authority not only as chief engineer, but also in the running of the railroad, for by a special order he placed Mr. Prescott under Mr. Dauchy, with the somewhat useless provision that if Mr. Prescott did not agree with Mr. Dauchy he might appeal to the vice-president and general manager, Mr. Wallace, in the United States. I append hereto, as Exhibit 24, the order which he left on this subject. Now, the fact was that Mr. Dauchy, so far as appears, had never had any experience in managing and running a railroad. He was simply a railroad engineer. Mr. Prescott had shown himself to be entirely unable to cope with the congestion which then existed on the Isthmus, and which was likely to become a great deal more severe. Because of the reorganization, and through the efforts of Mr. Shonts and Mr. Wallace, and the new blood which was brought into the organization, the material, machinery, and lumber, for which requisitions had been so long delayed in filling, were now all on the move to the Isthmus, and Mr. Wallace knew that within the next succeeding six weeks or two months an enormous amount of material, machinery, and lumber must arrive on the Isthmus and must be disposed of and must be put into constructive work if the organization was to be made effective at all. Indeed, it had already begun to arrive. The increased congestion came, and there was great difficulty in securing delivery from the ships by the railway of the necessary lumber for the longdelayed construction by which roofs were to be put over our employees and laborers. I append official statement of material and machinery arriving on Isthmus, May, June, July, and August, 1905; marked Exhibit No. 24.

Then there were coming a great many additions to the force. By reference to the exhibit already put in it will be found that in May there were 1,753 white employees on the Isthmus, which was reduced by the last day of June to 1,641, but that in July this was increased to 2,402, and in August to 2,695, or more than 1,000 in two months. In June the number of colored employees was 8,117, which increased in July by 1,736 to 9,855. In other words, in white and black there was an increase within the two months next succeeding Mr. Wallace's departure of nearly 3,000 employees. It has been seen from General Davis's report and Mr. Dauchy's report how little accommodation there was for them on the Isthmus. There were 2,000 houses on the Isthmus left by the French suitable and needed for occupancy by our employees if reconstructed and repaired. Mr. Wallace had succeeded in reconstructing or repairing about 350 when he left. The testimony of Governor Magoon and of Mr. Shonts shows the inadequate. provision there was for the food. I commend to you Governor Magoon's report of conditions on the Isthmus at that time, made March 30, 1906, and filed as Exhibit 25.

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The duty of the hour was to infuse esprit de corps into a frightened and stampeded force of employees, to house and feed an influx of 3,000 new employees, to take care of and distribute properly over the Isthmus a great amount of machinery and construction material, to clearan inadequate railway of greatly congested commercial business, and to perfect an organization with not half the needed leading assistants. This was the time which Mr. Wallace selected to retire for a vacation to study plans. The post of danger and responsibility and honor under such conditions was on the Isthmus, and it was no time to turn things over to a subordinate. In the letter of March 15 which Mr. Wallace wrote me, and which I have already introduced, he uses the expression "I prefer to remain on the firing line," indicating at that time, when he had no thought of leaving, where the post of importance was for the chief engineer.

I submit to the committee, in view of the facts that I have given, there is not the slightest support in this record for the astounding statement by Mr. Wallace which he made, first in his letter of June 8, again in the statement which he made to the press on July 30, and again in his evidence before this committee, that there was no time in the history of the construction of the canal when the chief engineer might better be spared from the Isthmus than when he left, on the 16th of June last.

In Mr. Wallace's evidence before the committee he does admit that there was demoralization after he left, but he says that my criticism of . him at our interview which, with the approval of the President, I published, created the demoralization. I quote from his evidence:

And when Mr. Stevens arrived on the Isthmus, about the 1st of August, I have been informed that he found things in a very demoralized condition. Now, that was not due to my resignation. It was due to the treatment when I resigned, and also resulted from the fact that as the men that I left on that Isthmus had seen their chief discredited in a way, and knew that a successor was to fill his position that had been selected with an idea that everything that I had done was subject to criticism, there was not a man there that felt his place was secure, and the result was there was naturally complete demoralization.

Upon this point, Governor Magoon says in his report of March 20, 1906:

The difficulties and discomforts of the situation were many and distressing. Everyone felt that Wallace had abandoned the situation, and that his action countenanced similar action on the part of others, and that the inevitable result would be that imperative action by the executive committee, which should be had at once, must of necessity be long delayed and probably deferred until such time as to make the action unavailing. Had means of departure from the Isthmus been immediately available, I believe we would have had both a panic and a rout. Before it was pos

sible for any considerable number of our people to leave the Isthmus, the papers arrived containing the expression of views made by Secretary Taft at the time of his interview with Mr. Wallace in New York. The effect of reading this published statement was immediate, far-reaching, and beneficial.

The ordinary comment was, "Well, that ought to stop the cold-footed brigade,” or some expression of like tenor. It brought to the attention of all of us what had been lost sight of in the general discomfort—that there was something more involved in the enterprise in which we were engaged than our personal comfort or personal advantage; it aroused the spirit which is so important to armies or other large bodies of men engaged in a common endeavor that they owed allegiance to the cause, and having once entered upon the accomplishment of a purpose they must of necessity sacrifice personal advantage to the public enterprise. There were many evidences that came to my knowledge and to my personal observation that the effect of the publications of the Secretary's remarks promoted, if it did not create, in the minds of the Americans on the Isthmus the sentiment to which I have referred.

Mr. Wallace deserted the Government at a time when his presence on the Isthmus was indispensable, and instead of making abundant provision, as he says, for the preservation of the interests of the Government, he utterly ignored those interests and selected a time for his departure that could not have been more disastrous. The great good fortune which we had in happening within three days upon Mr. Stevens and securing his acceptance was not due in any way to Mr. Wallace's intervention, and the dangers which were averted by this piece of good luck are not due in the slightest degree to Mr. Wallace's care or desire to save the interests of his employer which he had thus deserted.

It is said that I neglected the interests of the United States by dismissing Mr. Wallace and not availing myself of his offer to remain in an advisory capacity and give us the benefit of the studies which he had never committed to paper at that time, but which he proposed to commit to paper in the two months of contemplative retirement. I was not impressed with that suggestion at the time, and have not been since. However valuable his report, its loss would never have equaled the detriment to the discipline and esprit of the service, had he been permitted to retire from the post of danger and responsibility in such an emergency and yet thereafter to enjoy the prestige of association with the canal enterprise. But more than this, he had advised me in February that he had committed his views to a report. In his letter of February 23, already among the exhibits, he wrote me on the subject of his report as follows:

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In regard to canal matters, I presume by the time this reaches you the Isthmian Canal Commission will have acted upon the recommendations contained in the report of the engineering committee, consisting of Professor Burr, Mr. Parsons, and General Davis, which was recently in session for three weeks on the Isthmus. placed at the disposal of this committee the results of my studies during the eight months I have held the position of chief engineer of this work, as contained in my report to the Commission dated February 1.

If the Commission shall have taken favorable action on the engineering committee's report by the time you receive this letter, the principal engineering questions requiring expert council will have been settled. Those that remain for further consideration will be connected with the details of the Gamboa dam and spillway, and the utilization of this dam for the generation of electrical power; but all of the problems in reference to the general plan and design of the canal itself will have been disposed of, except those which will of necessity have to be decided by the chief engineer on the ground from time to time as they may arise.

The measures which were immediately taken to make up for Mr. Wallace's retirement are set forth in Exhibit 26, hereto appended. The members of the Canal Commission and Mr. Stevens were able to furnish the consulting board with the needed data.

Mr. Wallace said in his defense published June 30, and in his evidence, that he was prevented by the presence of Mr. Cromwell from telling me all the real reasons for his leaving the office of chief engineer and refusing to go back to the Isthmus, and so contented himself with stating only one, to wit, that he had had a better offer. But in a letter which has been published in full at page which he wrote to Mr. Shonts on June 26, the day after the Manhattan Hotel interview, but before its publication, he says:

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*** The business proposition that I have now under consideration is of such an important character and opens out such a wide field for future prosperity to me that I can not possibly see how I would be justified in declining it. My family and those of my friends with whom I have consulted with regard to it have been absolutely a unit in urging me to form the new connection.

There were so many sides to this matter that I thought it best for the Secretary of War and myself to discuss it in all its features and at length. I also did not feel that it would be fair to the Secretary to let the matter go over until after he had left the country.

Of course, both of these statements can not be true.

Again, he says that one of his reasons which he did not tell me after leaving the Isthmus was, in effect, that he felt that he could not get along with Mr. Shonts; that Mr. Shonts was incompetent, and that he felt certain that in the future there would be a break between them, and that it was wise for him to leave in advance of that. Yet in this same letter of June 26th he said to Mr. Shonts:

I desire to express to you my warm personal regard, and my thanks for the kind and generous way in which you have treated me in all matters connected with the work, and to assure you that your personality had nothing whatever to do with the step that I am taking; in fact, in considering the questions from both sides, one of the strong inducements for me to remain was your pleasant personality and our warm personal friendship.

On the other hand, the probability of your being disconnected with this work, either in the near or immediate future, which seemed to come to me intuitively, and the probability of the position being filled by some men with whom I could not harmoniously act, was one of the strong inducements that controlled me.

Here again Mr. Wallace is refuted out of his own mouth.

Again, Mr. Wallace says that he understood that Mr. Shonts had had the assurance that he would have a free hand in the management of matters. Doubtless it was true that there was given to Mr. Shonts general executive control of all the affairs of the Commission. This was quite in accord with the order of April 1, in which it was provided with respect to the chairman of the Commission that, in addition to having charge of the fiscal affairs of the Commission, the purchase and delivery of all materials and supplies, the accounts, bookkeeping and audits, and the commercial operations in the United States of the Panama Railroad and steamship lines, that he should have charge of the general concerns of the Commission, subject to the supervision and direction of the Secretary of War, and this was in accord with the recommendation of Mr. Wallace of December 5, 1904, already included in the exhibits, in which he suggested that the chairman should have general charge of the executive functions of the Commission, and should be also a committee on purchases of materials and supplies.

Again, Mr. Wallace says that another reason for his leaving the canal service was because of the all-pervasive influence of Mr. Cromwell. Neither in his interviews with Judge Magoon nor in his published statement of June 30th, nor in his letter to Mr. Shonts did he mention any such ground. This he advanced for the first time when he came before this committee. The instance of Mr. Cromwell's pervasive influence, which Mr. Wallace dwells upon as pointing to disaster, was the appointment by the executive committee of the railroad company of Mr. Wallace as superintendent of the railway in March, 1905. I have explained how this appointment came to be made and that it was at my instance because of Wallace's suggestion to me that it was necessary for him to control the operations of the railroad. Mr. Cromwell has handed me the letter which Mr. Wallace wrote him in answer to his dispatch announcing that he had been appointed superintendent of the railroad, and it is as follows:

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