As a part of the campaign, during the period mentioned, wide publicity was given by the management of the California Pacific to financial difficulties, real or alleged, with which the company was confronted. Thus in June 1875, the board of directors confessed a judgment of $1,309,041.84 to one J. P. Haggin, assignee of certain claims of the Central Pacific, the Contract and Finance Company, and the associates, for advances previously made. Mr. Haggin had no interest in the matter, merely allowing the use of his name.[162] The following month, Vice-President Gray, of the California Pacific, made an extremely pessimistic report to his directors, declaring that the company’s deficit to date was $1,370,061.71, and that a large part of the outstanding bond issues of the company were represented by no construction that he was able to discover. On July 25, 1874, finally, a local capitalist named Michael Reese, acting in all probability on behalf of the associates, filed sensational charges against Mr. Latham, formerly general manager of the California Pacific, which called forth as sensational a reply.[163] These various activities roused holders of California Pacific Railroad Extension bonds to petition to have the California Pacific declared bankrupt, and drew forth a statement from the company, on the other hand, that it did not regard these bonds as constituting a valid legal claim upon it. The result was a compromise. The extension bondholders surrendered their 7 per cent bonds for a reduced amount in new 6 per cent securities, and the outstanding income bonds likewise exchanged their holdings for 3 per cent bonds. Both classes of bonds were guaranteed by the Central Pacific, and in consideration of the guaranty the California Pacific was leased to the Central Pacific on July 1, 1876, for 29 years, at a rental of $550,000 per year, plus three-fourths of the net earnings of the company above that amount. At a subsequent period in December, 1879, when the Central Pacific was about to turn a considerable volume of business over the short line by way of Benicia, the California Pacific gave up its right to payments over the $550,000 minimum in consideration of a fixed additional payment of $50,000 a year.[164] By and large, the California Pacific proved a good investment for the larger company, especially after the Northern Railway had been built and a new route established between Oakland and Sacramento. The reason for its original acquisition was, nevertheless, in all probability, not the chance of a direct profit, but the advantage expected from a monopolistic control of the territory north of San Francisco Bay. CHAPTER VII BUILDING OF THE SOUTHERN PACIFIC San Francisco and San José Railroad