and G——­on account of the Honduras Railway Loan, and that two others were loading at Truxillo with similar cargoes on the same account.  These cargoes had not been cut by the Honduras Government.  It had bought them from timber merchants, and they were found to be of most inferior quality.  In the opinion of the Committee “the purchase of these cargoes and the announcement of their arrival in the form above referred to, were intended to induce, and did induce, the public to believe that the hypothecated forests were providing means for paying the interest upon the loan.”

With the help of this fraud, and with a free and extensive market made on the Stock Exchange, the 1870 Honduras 10 per cent. loan for L2,500,000 nominal was successfully issued at 80.  It also had a sinking fund of 3 per cent., which was to pay it off in fifteen years.  Mr. L——­ again handled the operation, having taken over the contract from Messrs. B——­ and G——.  But the success of the issue was more than hollow.  It was empty.  For Mr. L——­, in the process of making the market to promote it, had bought nearly the whole loan.  Applicants had evidently sold nearly as fast as they applied; for on the 15th December, when the last instalment was to be paid, less than L200,000 bonds remained in the hands of the public.  Nevertheless by October, 1872, nearly the whole of the loan had been somehow disposed of to investors or speculators.  One of the means taken to stimulate the demand for them was the announcement of extra drawings of bonds at par, over and above the operation of the 3 per cent, sinking fund, provided by the prospectus.

There is no need to linger over the complicated details of this sordid story.  The Committee’s report sums up, as follows, the net results of the 1869 and 1870 loans of Honduras:—­

“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 L2,051,511; out of this sum only L145,254 has been paid to the railway contractors; a sum of L923,184 would have been sufficient to discharge the interest and sinking fund in respect of the issued bonds of the three loans, yet the trustees ... paid to Mr. L——­L1,339,752 or L416,568 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 L216,852.  He also received out of the same proceeds L41,090, being the difference between L370,000 cash paid to him by the trustees and L328,910 scrip returned by him to them.  This L41,090 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.