cancelled without any payment being made to the said Charles Lefevre in respect thereof. Inasmuch as on the 29th day of April last there was an extraordinary drawing of £50,000 nominal of the bonds of 1870 Loan, payable the 1st of July, 1871, the trustees shall immediately upon the execution hereof hand to the said Charles Lefevre in cash or bonds of the said loan at the price of £75 (at the option of the said Charles Lefevre), a sum equal to the nominal amount of so many of the said drawn bonds as had been issued on the day when the drawing took place, in order to enable the said Charles Lefevre to make due provision for the redemption thereof.'

66

The

Shortly before and at the time when these sums of money were being thus irregularly paid away, continuous default was being made in respect of the payments due under the railway contracts. contractors were constantly urging Don Carlos Gutierrez to fulfil the contracts, but little notice was taken of their pressing applications.

"It seems also to have been known to the Minister that the funds which could be realized would be insufficient for the service of the loans, for, according to the Historical Account,'—

"In the middle of the year 1871, in spite of all the efforts and sacrifices made to place the bonds and debentures of the three contracted loans, there were still unplaced bonds to the amount of £2,000,000 nominal value. Even if this sum had been realized as the rest was realized, not only would it have been insufficient to complete the construction of half the line, but it would hardly have covered the interest and redemption of the said loans up to the end of the year 1872.

"In the opinion of your Committee, these additional drawings were determined upon and carried out with a clear and distinct object. By the deed of the 21st of April, 1871, it is stated that the sale of the Honduras Government Stocks had at that time become difficult,' and there can be no doubt that it was to facilitate their sale that the Honduras Minister authorized such additional drawings as Mr. Lefevre should deem expedient. The fact that they took place and the terms in which they were announced had the natural effect of deceiving the public, inducing them to form a false opinion of the financial condition and resources of Honduras, and tempting them to become purchasers of bonds at prices far above their value. No reference to these additional drawings is made in the Historical Account' placed before your committee by Don Carlos Gutierrez.

"Your committee have now to call attention to further unjustifiable dealings with the funds of the loans of 1869 and 1870.

"According to the terms of the agreements of the 17th of June, 1870, Mr. Lefevre was entitled, upon taking and paying for the bonds of the 1870 Loan for the purpose of sale from time to time, to receive them with the coupons attached; and he had permission granted to him by the parties to those documents to obtain the interest which had accrued due on the bonds when he received and paid for them.

VOL. XXXV.

61

"But the course which was pursued was different to and went far beyond these terms. On the 1st of January, 1871, only £633,900 stock (nominal value) was in the hands of the public, the balance of the £2,500,000 being held by the trustees. The interest, therefore, which had to be paid amounted to £31,695, yet the trustees gave to Mr. Lefevre £125,000, the sum which would have been due for the half-yearly interest on the whole loan of £2,500,000 if it had been issued. Mr. Lefevre thus received at this date £93,305 in respect of bonds which he had not paid for and which were unissued, and which sum, therefore, he was not entitled to under the terms of the deed of the 17th of June, 1870. When the next half-yearly interest became due (the 1st July, 1871) £47,310 would have paid the interest on the £946,200 stock then in the hands of the public. Again, Mr. Lefevre received £125,000, or £77,690 beyond the sum required for the payment of the interest, or to which he was entitled.

"When the drawing for the purposes of the amortization took place, on the 31st of December, 1870, £16,100 was required to pay off the bonds actually drawn, and which were held by the public; yet £75,000 was paid to Mr. Lefevre, being £58,900 beyond what was required and should have been paid. The sum of £58,900 thus paid over to Mr. Lefevre was entered in the books of the trustees as 'commission.'

"The deed of the 27th of July, 1871, to which Don Carlos Gutierrez, Henri Louis Bischoffsheim, Henri Raphael Bischoffsheim, C. Lefevre, and Messrs. Ford and Widdecombe were parties, contains the following clause :

"The said Charles Lefevre shall be entitled to retain for his own use the amount of the interest from time to time payable on such of the said bonds as shall for the time being remain in the hands of the trustees unissued, and the trustees shall cut off the coupons representing such interest from the said unissued bonds and cancel the same. If any of the bonds for the time being remaining in the hands or under the control of the trustees unissued shall have been drawn for redemption, then the said Charles Lefevre shall be entitled to retain for his own use so much of the funds in his hands as would otherwise have been applicable to the amortization of the said drawn bonds, and the said trustees shall thereupon cancel the same and all coupons attached thereto.'

"Under the terms of this deed, the loans of 1869 and 1870 were dealt with and further payments of interest and sinking fund, in respect of bonds not issued to or paid for by Mr. Lefevre continued to be made to him.

"Thus, in September, 1871, and in March and September, 1872, he received £140,703 in excess of the sums required to pay the interest and sinking fund on the issued portion of the loan of 1869; and in January and July, 1872, he was paid £45,970 for similar excess in relation to the loan of 1870. These two sums, amounting to £186,673, have to be added to £229,895 taken prior to the deed

of the 27th of July, 1871, and a total of £416,568 is thus shown to have been paid to Mr. Lefevre in respect of the interest and sinking fund on bonds he did not hold and had not paid for.

"For the payments of the sums amounting to £229,895, which were made before the 27th of July, 1871, your Committee can find no excuse; the evidence discloses no authority for such payments being made. The deed of the 27th of July, 1871, is not retrospective in its terms, and does not purport to ratify any past payments.

"Although this deed does assume to authorize the payments made subsequently to its date, yet, in the opinion of your Committee, the whole sum of £416,568 so paid to Mr. Lefevre has been diverted from the purposes for which the loan was issued, without any proper cause or justification.

"In tracing the disposal of the proceeds of the 1869 and 1870 loans, it must be remembered that your Committee had no evidence before them relating to the funds resulting from three-fifths of the loan of 1869; only two-fifths of the loan was realized in this country, the remainder was disposed of in Paris before August, 1870, and no account of the application of the funds resulting from such portion of the loan could be obtained.

"The two-fifths of the 1869 loan and the whole of the loan of 1870 produced net £2,051,511; out of this sum only £145,254 has been paid to the railway contractors; a sum of £923,184 would have been sufficient to discharge the interest and sinking fund in respect of the issued bonds of the three loans, yet the trustees, as has been above stated, paid to Mr. Lefevre £1,339,752, or £416,568 beyond the sum so required to be paid upon the issued bonds of the loans.

"There was paid to him for commissions (apart from expenses) on the three loans, out of the above proceeds, the sum of £216,852. These two sums, amounting to £633,420, have thus been received by Mr. Lefevre to his own use out of the net proceeds of a portion of the loan of 1869 and that of 1870.

"He also received out of the same proceeds £41,090, being the difference between £370,000 cash paid to him by the trustees and £328,190 scrip returned by him to them. This £41,090 probably represents the premiums paid on the purchase of the scrip before or immediately after the allotment of the loan, and was certainly a misapplication of the proceeds of the loan.

"Mr. Lefevre was also paid out of these proceeds a further sum of £57,318, nearly the whole of which seems to be a payment in discharge of an allowance of £8 per bond in respect of the dealings in the 1867 loan. If these two sums, making £98,408, be added to the £633,420 received by Mr. Lefevre, it will be seen that out of the £2,051,511 in the hands of the trustees, the product of the above loans, £731,828 was paid to Mr. Lefevre.

"In addition to this £731,828 it will be remembered that Mr. Lefevre received £50,000 to maintain the credit of Honduras.' "He also on the 18th of June, 1872, obtained £173,570 by

delivering to the trustees as above-mentioned 5,042 bonds of the 1870 loan at £75 per bond, and 33,000 bonds of the 1869 loan at 104 francs per bond, and retaking them at the same time from the trustees at £50 and 104 francs per bond respectively.

"Mr. Lefevre had contracted to pay for these bonds, and they had been issued to him at the prices of £75 and 140 francs respectively, and the remission in the price therefore amounted to a gift to him of £173,570. By adding this gift of £173,570 and the above-mentioned £50,000 to the sum of £731,828 it will be seen that out of this portion of the loan of 1869 and the loan of 1870 Mr. Lefevre has received in cash or by the remission of his contracts £955,398.

"Of the remainder of the proceeds of these loans, the Honduras Government received £58,930; the trustees were paid £16,374; the engineer, £6,675; and the expenses of the loan amounted to £30,112. Messrs. Bischoffsheim and Goldschmidt received £47,000, for what purpose is not shown, out of which they returned £23,701, and a sum of £10,000 for commission; £6,000 was expended in the purchase of federal stock. These sums account for all the moneys received by Messrs. Davies and Barnes, and Ford and Widdecombe, on account of the two loans, with the exception of £103,852 paid over to the new trustees in October, 1872. The principal portion of this sum of £103,852 appears to have been expended in payment of the interest due on the 1869 loan in March, 1873, and £4,000 of it forms a portion of the £145,254 paid as above stated to the railway contractors.

"Your Committee have thus endeavoured to show the amount of moneys which has been received on the part of the Honduras Government and its agents, and has to some extent rendered apparent the manner in which those moneys have been disposed of. It will be observed that the object of raising these loans was always stated to be the construction of a railway across the Republic of Honduras, from the Atlantic to the Pacific; thus

'The 1867 loan was announced as being contracted to be applied towards the construction of an Inter-Oceanic Railway,' &c.

"The Paris loan of 1869 was 'to be exclusively devoted to the completion of the line already in process of construction.'

"The loan of 1870 was raised to complete the Inter-Oceanic Railway, and to place the line from sea to sea in thorough and efficient working order.'

"In accordance with these announcements three contracts were entered into between the representatives of the Government of Honduras and Messrs. M'Candlish and Waring. By the first contract, dated the 25th of October, 1867, which was entered into in connection with the issue of the loan of 1867, £500,000 was to be paid for the construction of the first section of the railway (fifty-three miles) from Puerto Caballos, on the Atlantic, to Santiago.

"By the second contract made subsequently to the issue of the Paris loan of 1869 (March 17, 1870), a sum which, after allowing

some uncertain deductions, appears to amount to £930,000 was to be paid for the making of the line from Santiago to Comayagua (eightyone miles). By the third contract (June 10, 1870), £800,000 was to be paid for the construction of the third section from Comayagua to the Bay of Fonseca on the Pacific (92 miles). By the agreement of the 17th of June, 1870, it was provided that £800,000 should be applied to discharge the liability under this third contract.

"The total sum, therefore, contracted and required to be paid for the railway amounted to £2,230,000, but the payments to the contractors have amounted to only £689,745, leaving £1,540,255 unpaid. The following summary shows from what source these payments have been made :

First contract (to be paid from 1867 loan)........ £500,000
Payments made out of funds of that

loan, in cash and bonds ........ £446,048

Payments from proceeds of 1869 and

1870 loans

Second contract

Third contract

Deficiency on first contract..

Deficiency.

Payments from funds of 1869 and 1870 loans ... 217,232
Deficiency on second and third contracts

Total deficiency

........

..£1,512,768

.£1,540,255

"Of the sums amounting to £243,697, paid out of the 1869 and 1870 loans, £61,731 certainly, and £36,712 probably, came out of the proceeds of the 1869 loan; £141,254 from proceeds of the 1870 loan and the 'mixed fund,' and £4,000 was paid by the last trustees after the 16th of October, 1872.

"The portion of the proceeds of the 1867 loan, devoted to the construction of the railway under the deed of the 30th of June, 1868viz., £500,000-has to the extent of £446,048 been duly paid to the contractors. The great default occurs in relation to the loans of 1869 and 1870. To meet the liability under the railway contracts entered into in connection with these loans, amounting to £1,730,000, only £217,232 has been applied out of the funds resulting from them.

"The defaults in the payments under these contracts appear to have commenced in October, 1870. Urgent demands were made from time to time by Messrs. Waring, but the contracts were not fulfilled, and in consequence of such non-payments the works were suspended on the 15th of May, 1872. At that time the first section of the railway from Puerto Caballos to Santiago was opened for traffic, and was nearly paying its working expenses; it is, however, now closed and abandoned. But little progress was made with the works on the second and third sections.

"Your Committee desire to call attention to the fact that in the