Chicago, Saginaw and Canada Railroad Co. - 1873 dated $1,000 Railway Gold Bond
Inv# RB5901 Bond
Michigan
$1,000, £200 Uncanceled Gold Bond printed by National Bank-Note Co., New York. All 60 coupons remain below bond. Relating to the Chicago, Saginaw and Canada Railroad Co. Bonds:
A notable historical case of bond fraud pertains to the bonds issued by the Chicago, Saginaw and Canada Railroad Co. (CS&C). It has been claimed that these securities are payable in gold by us. However, we did not issue these bonds, nor are they payable in gold, nor are they backed or guaranteed by us or any entity of the United States Government. In 1873, CS&C issued 5,500 thirty-year gold-backed bearer bonds, which offered a seven percent interest rate to fund the construction of a proposed railroad. A full-size image of a CS&C bond can be viewed (99K JPG file, uploaded 1/24/98). In 1876, creditors of CS&C compelled the company into bankruptcy, leading to the acquisition of its assets by a predecessor of CSX Transportation, Inc. ("CSX"). The predecessor of CSX did not take on any of CS&C's existing debts, including the railroad bonds. All claims for payment under the bonds, each with a face value of $1,000, were settled during the bankruptcy proceedings 112 years ago.
At that time, investors submitted their bonds for payment from the proceeds of the foreclosure sale, receiving less than 25 cents on the dollar. Following the bankruptcy, the bonds were stored in court archives until they were later found in the basement of a federal building. A museum in Grand Rapids, Michigan, offered these bonds along with other historical information about the railroad as collector's items for $29.95 each. Despite any misleading valuations (104K JPG file, uploaded 1/24/98) that may suggest otherwise, the bonds hold no value beyond being collectible memorabilia, as CSX has explicitly denied any responsibility for their redemption, and they are certainly not payable in gold. Refer to Adams (26K TXT file, uploaded 9/28/98); 31 U.S.C. § 5118(d)(2) (2.5K TXT file, uploaded 9/28/98).
A bond is a document of title for a loan. Bonds are issued, not only by businesses, but also by national, state or city governments, or other public bodies, or sometimes by individuals. Bonds are a loan to the company or other body. They are normally repayable within a stated period of time. Bonds earn interest at a fixed rate, which must usually be paid by the undertaking regardless of its financial results. A bondholder is a creditor of the undertaking.
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