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I do not hesitate to advise that the alleged "corrupt combination” if proved in actions to be instituted on your motion will be effectual to vacate any or all of the contracts tainted therewith, and I will proceed to institute such actions in the name of the People, immediately on receipt of a resolution of your board requesting me to do so.

Very respectfully,
Your ob'dt servant,
J. H. MARTINDALE,

Atlorney-General.

At a meeting of the Contracting Board, held at Syracuse on Wed. nesday, October 23, 1867, present: F. A. Alberger, S. T. Hayt, R C. Dorn, Canal Commissioners; J. P. Goodsell, State Engineer and Surveyor; N. S. Benton, Auditor.

The following reply to a communication of the Attorney-General, of the 9th inst., was received and read:

Hon. JOHN H. MARTINDALE, Attorney-General:

Sir: We have the honor to acknowledge the receipt of your letter of the 9th instant, covering a copy of the preamble and resolution of the Constitutional Convention of the 12th of September last, reciting that it appears by authoritative testimony, that a corrupt combination was entered into in December last, by the bidders for certain contracts for the repairs of the State canals, wliereby such contracts were given to the bighest bidders instead of tbe lowest, as the law contemplates, thereby involving the State in unwarrantable and wasteful expenditure; and resolving that it is the opinion of the Convention, the Attorney-General onght immediately to commence legal proceedings, to vacate such proceedings in relation to officials of the State implicated, if any, as shall vindicate the honor of the State, and protect its interest in the future; and for the reasons stated in your letter, you suggest that a resolution of the Contracting Board is desirable, perhaps indispensable, authorizing and directing you to institute legal proceedings, to set aside and vacate those repair contracts for fraud, as we read the context of your letter, for you certainly cannot need any authority from this board to institute proceedings against State officials, guilty or innocent, in order to vindicate the honor and protect the future interest of the State.

After consultation and mature reflection, the Contracting Board respectfully decline to furnish you with the resolution indicated, and after expressing a hope that this refusal on our part may not impede or obstruct the course of public justice," hinder the setting aside of fraudulent and corrupt contracts, or render powerless the arm of the law to vindicate the honor and protect the interest of the State, if any such offenses have been perpetrated, we will proceed to state the reasons why we decline to have any part or lot in the proceedings designated in the preamble and resolution of the Convention referred to in your letter. We do not know the fact, but we assume that the "authoritative testimony on the files of the Convention," mentioned in the preamble, refers to the printed report of what is called the Legislative investigating committee, made to the Convention, and printed by its order, and if we are correct in this, we respectfully dissent from the bestowment of that dignified appellation upon a mass of verbiage, that does not bear upon its face any authentic marks of a judicial procedure, and we aver, that this alleged testimony is nothing more nor less than the copy of the stenographer's notes of what certain persons stated, when called before the committee or the chairman and interrogated: that these notes were not copied out, and the copies submitted to, approved of and signed by the persons whose evidence or testimony it purports to be. The statements and assertions may be as false or uptrue as any

fiction can be, and the affiant cannot be convicted of perjury, for he has not admitted that what is there written out is his testimony; and not only this, the committee in this proceeding have not only departed entirely from all precedent in like cases, but have failed to follow the rule directed by the statute in such cases provided, and we cannot withhold an expression of surprise upon reading the asserted fact, that by reason of a corrupt combination among the bidders in December last for the repair contracts: Such contracts were given to the highest bidders instead of the lowest as the law contemplates."

Not one of the seven contracts awarded in December last, nor the eight awarded in March following, was given to the highest bidders, four of these contracts were given to the lowest bidders, as follows: Section 12, Erie canal, awarded to the lowest bidder for $8,952.00; highest bid, $51,000.00 ; Section one, Oswego canal, awarded to the lowest bidder for $18,500.00; highest bid, 30,000. ; Cayuga and

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Seneca canal, awarded to the lowest bidder for $20,000.00; highest bid, $45,000.00; Chemung canal and feeder, awarded to the lowest bidder for $36,000.00; highest bid, $45,000.00. Section 10, Erie canal, awarded upon the fifth lowest bid for $34,000.00. The four preceding lower bids being rejected for informality; highest bid, $13,000.00. Section 3, Champlain canal, awarded to the third lowest bid for $17,550.00. The two preceding lower bids being rejected for informality ; highest bid, $30,000.00.

Erie canal, section one, awarded upon the fourth lowest bid, for $84,000, including 100,000 yards excavation of the Albany basin, spread over the five years—the three preceding lower bids being rejected for informality ; highest bid, $98,000. Erie canal, section 11, awarded upon the second lowest bid for $43,500, the preceding lowest bid being rejected for informality. Deducting from this bid $5,000 a year for raising and securing the canal banks in Rochester as directed by a special act of the Legislature, and the annual charge is $38,500; highest bid, without this extra expense, $59,000. These facts are taken from the recorded proceedings of the Contracting Board, and may be seen in the committee's report, and they show that the recital in the Convention preamble is not sustained or supported in any particular—that in no single instance was an award made by the board of a contract to the highest bidder—that four contracts were awarded to the lowest bidders, and the other four to the lowest legal bidders, after rejecting lower proposals that were informal and defective; We hold that the board must adhere strictly to its regulations, reject all informal and defective proposals, and then decide whether those which are regular and formal shall be accepted and acted upon, or rejected as excessive in price or disadvantageous to the State: The surmised assumption or pretense that these papers have been or are altered, changed or tampered with in any way or shape with the assent of the board, after they came into its possession, is too ridiculous and idle to call out a refutation. The papers, after being opened, read and marked, are placed in a safe in charge of the Secretary until the board is ready to examine and canvass them, and award the contracts in accordance with uniform usage and pursuant to law.

This board cannot, consistent with its public duty, and maintain any degree of self respect, consent to be a party to a proceeding

stop here,

based upon erroneous and untrue assumptions of facts, and for causes which we had no knowledge of, which have only been developed by ex-parte evidence, taken in secret. But we do not

In asking for proposals for public works, materials and supplies, this board, and every other board in this State and country, adopt, prescribe and publish to the world the rules, regulations and conditions upon which and under which such proposals will be received and acted upon.

These rules, regulations and conditions were framed to subserve and protect the public interests, and not those of the contractors, and we are quite free to admit we have at all times adhered to these regulations in acting upon proposals and awarding contracts, but that adherence was not more strict and critical in December last than on other and former occasions, nor were the rejections of informal and defective bids more numerous at that letting in proportion than at others; nor were the causes of rejections different. This board may have rejected proposals for immaterial departures from the regulations, because we could not always determine when it would be safe for the interests of the State to open the door to miscellaneous and promiscuous proposals, and beside, while acting upon the bids offered we had no right to prefer an informal and defective proposal because it was the lowest, to one that was formal and in all respects legal, although higher in price. We could reject the one for defectiveness and the other for excessiveness of price, and advertise anew for proposals.

Were the prices on which the December contracts were awarded by this board excessive or disadvantageous to the State ? This board did not think so then, and does not think so now. We shall endeavor to dispose of this branch of our subject with the best light in our possession. We cannot determine precisely what price would be an adequate compensation to keep up good navigation upon a section of the canal for one or five years, and therefore we shall not make any pretensions in that direction. All we shall say is, we can approximate, bringing to our aid all the light and experience we have. The first question we shall discuss is, were the new contracts more beneficial to the State than the old, and were they more onerous to the contractors and to what extent? We say they were both. The new contracts impose upon the contractors every labor and

service and the furnishing of every material needful or necessary to keep up and maintain good navigation upon the canals, the prospective security of the canal banks and mechanical structures with. out any additional extra pay or other compensation than that specified in the contract. In this the State obtained a great advan. tage, as will be seen before we dispose of this subject. The new contracts are subject to be recalled at the pleasure of the Legislature, the old ones were not; the new contracts require the contractor to pay $7,000 on and for every break or breach in the canal during the life of the contract; the old contracts only required the payment of $4,000. The new contracts impose upon the contractor the payment of all damages arising to the State or an individual by reason of the negligence, default or misconduct of the contractor—the old ones did not, and the State has often been called upon to submit to or pay such damages. In November, 1866, the board experiencing the injurious effects of the system upon the interests of the State under the contracts as they had been running and then stood, determined to effect a reformation if in its power. During the period of about nine years the State bad paid to the contractors, extra on their con. tracts, $369,073.09, besides $192,241.32 for repairing breaks, mainly owing to Legislative generosity. A three-fold system of expendi tures existed, first, by the Commissioners; second, Superintendents; and third, through the contractors. This board could not repeal the contract law, but we could confine the expenditure to that channel, and we did, so far as the new contracts are concerned, and if permitted intend to pursue it. The payments made for repairs on the canals during the twelve years preceding the 1st of October, 1866, in the aggregate, were as follows:

By Canal Commissioners..
By Canal Superintendents. ...
Paid to Contractors for repairs and breaks

$1,892,111 01 4,840,082 82 4,846,067 25

Aggregate
Yearly average

$10,578,261 19

881,521 72

By a carefully compiled table from the books and papers in the Canal Department, we show there was expended by the superin. tendents of repairs upon the several sections of the canals, the year next preceding their being let by contract, $796,390.35. This

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