tion, and in any event under his contract herein before referred to he was not obligated to consent to the segregation therein set forth unless a deal for the purchase of the interests of the Henshaw associates should be consummated by August 1, 1911. Thereupon, said O. H. Shoup and this affiant decided to acquire for the Reed Investment Co. the interests of the Henshaw associates, and, at · the same time, thought it best to protect the Midwest Oil Co. against annoyance, litigation, or delays that might be incident to any dispute between the Henshaw associates and the said Fitzhugh and his wife involving directly or indirectly the contract between Fitzhugh and his wife and the Midwest Oil Co., the existence of which dispute first came to the notice of this affiant in the conference with the Henshaws. Therefore, on behalf of the Reed Investment Co. they took an option to purchase the interest of the Henshaw associates in said oil placer mining claims for $325,000 and the said O. H. Shoup and this affiant, in behalf of the Reed Investment Co., took also an option to purchase for $25,000 the claim of said Henshaw associates against the said Fitzhugh and his wife for an accounting. The last-mentioned option was taken to protect the Midwest Oil Co. in the event the contention made by Fitzhugh at said time at San Francisco should ever be sustained, to wit, the contention that the Midwest Oil Co. was not only obliged to bring about a segregation of the land but was also compelled to effect a full settlement of the personal rights of action and accounting existing between Henshaw and his associates on the one side and Fitzhugh and his wife on the other, and to effect said settlement at its own expense. Affiant and said O. H. Shoup also felt that as soon as Fitzhugh's anger subsided he might and probably would be willing to pay the sum of $25,000 to clear the matter up, especially if the claim should be asserted by someone other than the Henshaw interests, and for this reason the details of the transaction were not disclosed to Fitzhugh. At no time during the nine years that has elapsed since this affiant considered said relations between the Henshaw group and the Fitzhugh group has any lawyer or anyone else connected with the questions of title concerning said lands ever differed with the conclusion reached by this affiant in the summer of 1911 that the form and substance of the contracts signed by said Henshaw individually and by said Fitzhugh individually had any bearing upon the question of bona fide locators until the report of the present investigator has been called to my attention. During the conference at San Francisco in July, 1911, Fitzhugh always contended that the contract dated November 16, 1909, did not apply to locations to be made by himself, his wife, and the Henshaw locators, but only applied to interests that might be acquired in lands patented or located by others; while the said Henshaw associates contended that it applied to all interests that were acquired, whether such acquisition was by purchase or by locations under the mining law. Through all the heated discussions which then occurred, the bona fides of all the associates in all the locations and the fact that Fitzhugh and William G. Henshaw in all contracts were representing their respective groups were asserted. Upon their return from San Francisco said O. H. Shoup and this affiant reported to the Midwest Oil Co. and the Reed Investment Co. that said locations were bona fide in all respects. The option contract between the Henshaw associates and the Reed Investment Co. was executed on the 24th day of July, 1911, and the sum of $35,000 cash paid on account thereof. William G. Henshaw signed the contract individually and as attorney in fact for his associates, and at the time exhibited the power of attorney under which he was acting. Contemporaneously, individually, and as attorney in fact for said other locators, he executed a deed to the Reed Investment Co. conveying said locators' interests, which deed was placed in escrow to be delivered whenever the payments provided by said option should be completed. It was agreed that separate deeds should be prepared which should convey separately to said the Reed Investment Co., or its nominee, the undivided three-fourths of the Henshaw associates in each claim, which should be substituted for said single deed as soon as the deeds could be drawn and the necessary signatures and acknowledgements could be obtained. This was done, and within two or three months, and long before the option was exercised by the Reed Investment Co., there were substituted for the one deed in escrow separate deeds for each claim, each of which deeds was executed and acknowledged by the six associates of the Henshaw group, whose respective names appeared as locators on the claim described in the deed. In October, 1912, after the Reed Investment Co. had exercised its option and had purchased the interests of the Henshaw associates in said oil placer min ing claims and paid the entire purchase price therefor and after the option to purchase for $25,000 said claim of the Henshaw associates against said Fitzhugh and his wife had been exercised, not by the Midwest Oil Co. nor any company in which it was directly or indirectly interested, but by the Reed Investment Co. through the California Oil Land Co. which it organized to take over said contract, new trouble arose between said Fitzhugh on the one side and the Midwest Oil Co. and assignees of the Reed Investment Co. on the other side, arising out of the refusal of Fitzhugh to execute certain settlement contracts with third parties after having agreed in advance to their execution. This refusal on the part of said Fitzhugh had occasioned the necessity for the Midwest Oil Co. and the Henshaw grantees to make, execute, and deliver to conflicting claimants with whom the settlement contracts had been made a written guaranty protecting said conflicting claimants against any assertion of said Fitzhugh of any rights or interests on his part or that of his wife in and to 25 cents per barrel for oil taken from certain parts of the lands which had been conceded to said conflicting claimants. This guaranty was a matter of serious import to the guarantors and vitally affected the question of their future financial positions; it was a constant source of worry; repeated demands upon said Fitzhugh to carry out his agreement were ignored by him notwithstanding his counsel urged him, as a matter of honor and good faith, to execute the contracts of settlement. As said Fitzhugh continued obdurate, it was finally determined by the California Oil Land Co. that inasmuch as said Fitzhugh was blocking the progress of affairs in which the successors of the Reed Investment Co were interested. an attempt should be made in the courts to enforce the claim for accounting against said Fitzhugh and wife which had been so purchased from said Henshaw. As a result thereof a suit was brought in the District Court of Natrona County, Wyo., by the California Oil Land Co. against said William M. Fitzhugh and Mary E. Fitzhugh, in which said claim acquired by the California Oil Land Co. from the said Henshaw associates was asserted. an accounting was demanded by the plaintiff from said defendants and the plaintiff in said bill offered to account to the defendants for whatever might be due them from the plaintiff on account of the transactions involved by their mutual sale of the complete title to all of said oil lands, whether patented or in placer locations. This suit resulted in a compromise settlement as the chief result of which said Fitzhugh in the compromise agreement confirmed the settlement with conflicting claimants and cleared up other diverse transactions with reference to land that he had verbally authorized to be made but had previously declined to sanction in writing. This clearance was evidenced by contract dated July 29, 1913, as it settled and determined extraneous matters which had caused friction between the parties and had no effect upon any issues raised in the suit and was made between a large number of parties, including the Fitzhughs, and evidenced the approval by the Fitzhughs of the validity of title settlements and might be deemed to affect their titles, it was placed of record in Natrona County. The suit was settled by a contract dated July 29, 1913, in which the Fitzhughs assigned to the California Oil Land Co. 19 per cent of the sums being and becoming due them after May 1, 1913, under their contract with the Midwest Oil Co. This figure of 19 per cent was a purely arbitrary figure, adopted to settle cross-accounting demands, and bears no relation to the demands of either party. As this contract involved only the assignment of a right to receive money payments from the Midwest Oil Co., which accepted the assignment, this affiant felt that there was no reason for placing it of record. In May, 1912, it was decided to apply for patents to a large number of said oil placer claims. Said applications were made in the name of the Midwest Oil Co. and O. H. Shoup, each as the owner of an undivided one-eighth, and in the name of the Henshaw associates as the owners of record of the remaining three-fourths of each claim. For the purpose of enabling the applications to be signed all the Henshaw associates, numbering about 16. readily and without any protest executed powers of attorney, authorizing their names to be signed to all proper and necessary papers. Thereafter, in the early part of the year 1915, it became advisable in the opinion of the then holders of the interests of said California associates and of the Midwest Oil Co. and O. H. Shoup, as successors in interest of said William M. Fitzhugh and wife, to apply to the United States for temporary relief permits under the law of August 25, 1914; the patent applications for such property were then pending in the names of the original locators other than said William M. Fitzhugh and his wife, and it became necessary following the requirements of the United States General Land Office to secure to certain papers the signatures of said California associates other than the said William M. Fitzhugh and his wife; that thereupon each and every one of said associates in the month of February, 1915, individually and personally executed powers of attorney to make, execute, and deliver the papers which should be required by the General Land Office in connection with the filing of said applications for temporary relief. Subsequently, in May, 1917, William M. Fitzhugh and his wife brought a suit in the Federal court of Arizona against the Midwest Oil Co. and the successors to the Reed Investment Co. This suit contained many charges and countercharges, but no contention or suggestion of any lack of validity in the titles themselves was raised in any stage of it. In May, 1918, the Midwest Oil Co. purchased from the Fitzhughs certain conceded rights held by them, and in connection with this purchase insisted upon a dismissal of the suit as to it. The suit went on to trial on the merits against the remaining defendants and was adjudged against the plaintiffs and in favor of defendants. That during all the years that have elapsed from the time of said original dealings with said William G. Henshaw and his associates, who, as this affiant recalls, number some 16 or 17 persons, there has never been the slightest contradiction made by any of said associates of the truth of the representations made by said William H. Henshaw and F. W. Henshaw as to their valid connection with and participation in the location of said oil placer mining claims, nor any question or challenge raised by any of them or by anyone else concerning the facts stated that they had participated in said matter in entire good faith, until the present report concerning which the affidavit is made. That affiant has not now and for a long time past has not had any financial interest whatsoever in either the Midwest Oil Co. or any of the Reed companies; that he is not now nor for a long time past has he been in the employ of either or any of said companies. He makes this affidavit freely and voluntarily of his recollection of events solely in the interests of justice. K. C. SCHUYLER. Subscribed and sworn to before me this 6th day of December, A. D. 1920. My commission expires April 9th, 1924. [SEAL.] WILLIAM DITTMAR, Notary Public. (The affidavit of O. H. Shoup is as follows:) DEPARTMENT OF THE INTERIOR, SOLICITOR'S OFFICE, December 7, 1920. UNITED STATES OF AMERICA, O. H. Shoup, of legal age, being duly sworn, on his oath deposes and says: I am a resident of the State of Colorado, and am now governor of that State; that from November of 1910 to December of 1911 I was a director, secretary, and treasurer of the Reed Investment Co.; that thereafter for several years I was its vice president. From the organization of the Midwest Oil Co. in 1911 until March of 1914 I was president of the Midwest Oil Co. In the summer of 1911, acting for the Reed Investment Co. and the Midwest Oil Co., with the advice of K. C. Schuyler, I conducted the negotiations for the acquisition of the interests in the Salt Creek oil field of Wyoming, then owned by William M. Fitzhugh and his wife and William G. Henshaw and his associates. I have read the affidavit of K. C. Schuyler, dated the 6th day of December, 1920, and filed with the Department of the Interior, and I know of my own knowledge that all facts stated in that affidavit are true. From the beginning of operations in the Salt Creek field until about three weeks ago I have never heard any statement, nor even an intimation, that any of the locators associated with Fitzhugh and Henshaw were dummies. Acting under the very best legal advice we could obtain, our corporations purchased for very large cash and other considerations these interests of the Fitzhughs, of Henshaw and his associates, in the belief that the locations had been made in good faith and were in all respects valid. In this belief, and under the advice of our attorneys, these corporations raised, by means of sales of stock and loans from banks, large sums of money to build pipe lines, to drill wells, and to purchase necessary equipment. Large and shifting numbers of shareholders became interested to the extent of large sums of money in these titles. The Fitzhugh and Henshaw groups of associates made their locations in Salt Creek under the direction of able attorneys. In addition to the assurances which we received from the Henshaws and from Fitzhugh, who were all prominent and reputable citizens of California, we also had every evidence that the locations had been made, not only in good faith, but with painstaking care. In going over the field personally I saw that the claims had been carefully surveyed, substantial permanent posts were erected on each claim marking its boundaries, the notices required by law had been posted, I saw that affidavits of discovery had been filed in the recorder's office, and saw in the field that a well-equipped camp involving the expenditure of a large amount of money had been established to carry on drill operations, and I also personally saw that work was proceeding rapidly and in an orderly manner. I had seen all of these evidences of the businesslike and orderly manner in which the Fitzhugh-Henshaw group were proceeding many months before the summer of 1911. Every possible thing tended to assure us and to give us confidence in the experience, integrity, and care of the legal and operating staffs of the Fitzhugh-Henshaw group, and we were particularly impressed by our knowledge of the large expenditures made by these people, as evidenced by the wells, equipment, and camp in the field where the Fitzhugh-Henshaw locations had been made. The officers of our corporations have always believed the representations made to us when we purchased the Fitzhugh and the Henshaw claims; we have always dealt with these titles in good faith; we have raised large sums of money for development, and from time to time have settled adverse claims by exchange of some lands and titles and by the leasing of other lands to third parties. As to the Henshaw claim against Fitzhugh, we did not attach any particular importance to it when we bought it. It was only a detail in a large situation. The matter in controversy was new to us, we had only impressions as to the rights of the parties, and we did not care to become involved in the controversy, nor to be attacked by Henshaw through Fitzhugh. We bought the claims against Fitzhugh in the interest of harmony. The Midwest Oil Co. never had any interest in the purchase of this claim. It was once offered to Fitzhugh, but he refused to settle the claim by buying it. Fitzhugh proved to be contentious and quarreled with nearly every one with whom he had business relations. He started trouble and, so, a suit was filed against him to hold the situation in the field level and to oblige him to carry out certain arrangements which we had made with other parties with his consent. The suit did not relate to lands nor titles, but merely to the adjustment of certain personal relations between individuals, and was never understood by me, or any of us, to have any bearing at all on the good faith of the locators. I have no financial interest in the Midwest Oil Co. nor in the Reed companies, but during my connection with those companies large numbers of persons invested their money in them and made possible the creation of a large new industry in the State of Wyoming. I now understand that the FitzhughHenshaw titles have passed largely to other corporations and that stockholders to the number of many thousands have vital interests at stake. I have come freely and voluntarily to Washington, D. C., to make this affidavit in recognition of the equities, and investments, and rights which have been thus established. Further affiant saith not. O. H. SHOUP. Subscribed and sworn to before me this 7th day of December, 1920. Senator WALSH. Will you tell us, Mr. Finney, in a general way, what is the nature of the contents of these two affidavits? Mr. FINNEY. Well, the Schuyler affidavit, which is very lengthy, undertakes to recite the history of his having been employed by the Reed Investment Co. to go out to Salt Creek and endeavor to acquire some oil land and investigate the title of locators there; that he found Fitzhugh was claiming certain locations, very desirable loca tions, and he then goes on and tells who Fitzhugh is, and all that sort of thing; and that Henshaw was a judge in a California court; and then he gives the various history of these negotiations and says. that he knew nothing of any dummy locations or efforts or anything of that kind, if there was any such thing. Shoup's shorter affidavit is to the same effect. Senator WALSH. Perhaps you had better read the Shoup affidavit. Mr. FINNEY. This is the affidavit of O. H. Shoup (reading): (The affidavit read by the witness is as above set forth, on p. 139.) Senator WALSH. Do the affidavits disclose what they did actually pay for these claims? Mr. FINNEY. I think not, Senator. It does in part, I think, too. The Schuyler does. Let me see. Well, he says, originally the Widwest Oil Co., when it bought the Fitzhugh and Mary Fitzhugh interests, agreed to pay Fitzhugh and his wife the equivalent of 25 cents per barrel for all oil to be produced therefrom. My recollection is that afterwards they bought their interests for a cash consideration. That was later. It involved a couple of million dollars, I think. That would be somewhere in the record, probably. Senator WALSH. What I would like to know is just exactly what consideration actually passed. Mr. FINNEY. Now, here, in reference to the Reed Investment Co., he says: Therefore, on behalf of the Reed Investment Co. they took an option to purchase the interests of the Henshaw associates in said oil placer mining claims for $325,000, and the said O. H. Shoup and this affiant, in behalf of the Reed Investment Co., took also an option to purchase for $25,000 the claim of said Henshaw associates against the said Fitzhugh and his wife for an accounting. Senator WALSH. That is just an option to purchase. Senator WALSH. Yes; but what did they pay and how did they pay it? Mr. FINNEY. Well, that I do not want to state without reading the affidavit clear through. Senator WALSH. Well, let it go for the present, then, Mr. Finney. Mr. FINNEY. My recollection is, however, that that money was actually paid to the Henshaw-that $325,000 for the Henshaw interests, and, as I say, Fitzhugh was given first a 25-cents-a-barrel contract which was after redeemed for a couple of million dollars. Senator WALSH. Does the affidavit disclose how much the Henshaw interests had actually expended in their work? Mr. FINNEY. No, sir. Senator WALSH. Well, we will recur to that, then, later on, Mr. Finney. Mr. FINNEY. Yes, sir. Then here seems to be a memorandum on the devolution of the stock of the Midwest Oil Co. It is a three-page memorandum, not signed, but it is in the record. Senator WALSH. Before we pass the other, the representation made by these people was only with respect to the bona fides of their purchase of the Fitzhugh-Henshaw locations. Apparently they made no showing, and attempted to make no showing, as to the bona fides of 105775-28-PT 1-10 |