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Aneurin - "Y Gododin"

Charles Egbert Craddock (real name: Murfree, Mary Noailles) - "Down the Ravine"

Georg Ebers - "Joshua, Volume 5."

Gilbert Parker - "The World For Sale, Volume 3."

Great Fortunes from Railroads

G >> Gustavus Myers >> Great Fortunes from Railroads





GOULD AND FISK THROW OVER DREW.

The next development was characteristic. Having no longer any need
for their old accomplice, Gould and Fisk, by tactics of duplicity,
gradually sheared Drew and turned him out of the management to
degenerate into a financial derelict. It was Drew's odd habit,
whenever his plans were crossed, or he was depressed, to rush off to
his bed, hide himself under the coverlets and seek solace in sighs
and self-compassion, or in prayer--for with all his unscrupulousness
he had an orthodox religious streak. When Drew realized that he had
been plundered and betrayed, as he had so often acted to others, he
sought his bed and there long remained in despair under the blankets.
The whimsical old extortionist never regained his wealth or standing.
Upon Drew's effacement Gould caused himself to be made president and
treasurer of the Erie Railroad, and Fisk vice-president and
controller.

When Gould and Fisk began to turn out more watered stock various
defrauded malcontent stockholders resolved to take an intervening
hand. This was a new obstacle, but it was coolly met. Gould and Fisk
brought in gangs of armed thugs to prevent these stockholders from
getting physical possession of the books of the company. Then the New
York Legislature was again corrupted.

A bill called the Classification Act, drafted to insure Gould and
Fisk's legal control, was enacted. This bill provided that only one-
fifth of the board of directors should be retired in any year. By
this means, although the majority of stockholders might be opposed to
the Gould-Fisk management, it would be impossible for them to get
possession of the road for at least three years, and full possession
for not less than five years.

But to prevent the defrauded large stockholders from getting
possession of the railroad through the courts, another act was
passed. This provided that no judgement to oust the board of
directors could be rendered by any court unless the suit was brought
by the Attorney-General of the State. It was thus only necessary for
Gould and Fisk to own the Attorney-General entirely (which they took
pains, of course, to do) in order to close the courts to the
defrauded stockholders. On a trumped-up suit, and by an order of one
of the Tweed judges, a receiver was appointed for the stock owned by
foreign stockholders; and when any of it was presented for record in
the transfer book of the Erie railroad, the receiver seized it. In
this way Gould and Fisk secured practical possesssion of $6,000,000
of the $50,000,000 of stock held abroad.


ALLIANCE WITH CORRUPT POLITICS AND JUDICIARY.

From 1868 to 1872 Gould, abetted by subservient directors, issued two
hundred and thirty-five thousand more shares of stock. [Footnote:
Fisk was murdered by a rival in 1872 in a feud over Fisk's mistress.
His death did not interrupt Gould's plans.] The frauds were made
uncommonly easy by having Tweed machine as an auxiliary; in turn,
Tweed, up to 1871, controlled the New York City and State dominant
political machine, including the Legislature and many of the judges.
To insure Tweed's connivance, they made him a director of the Erie
Railroad, besides heavily bribing him. [Footnote: "Did you ever
receive any money from either Fisk or Gould to be used in bribing the
Legislature?" Tweed was asked by an aldermanic committee in 1877,
after his downfall.

A. "I did sir! They were of frequent occurrence. Not only did I
receive money but I find by an examination of the papers that
everybody else who received money from the Erie railroad charged it
to me."--Documents of the Board of Aldermen, 1877, Part II, No.
8:49.] With Tweed as an associate they were able to command the
judges who owed their elevation to him. Barnard, one of Tweed's
servile tools, was sold over to Gould and Fisk, and so throughly did
this judge prostitute his office at their behest that once, late at
night, at Fisk's order, he sportively held court in the apartment of
Josie Mansfield, Fisk's mistress. [Footnote: The occasion grew out of
an attempt of Gould and Fisk in 1869 to get control of the Albany and
Sesquehanna Railroad. Two parties contested--The Gould and the
"Ramsey," headed by J. Pierpont Morgan. Each claimed the election of
its officers and board of directors. One night, at half-past ten
o'clock, Fisk summoned Barnard from Poughkeepsie to open chambers in
Josie Mansfield's rooms. Barnard hurried there, and issued an order
ousting Ramsey from the presidency. Judge Smith at Rochester
subsequently found that Ramsey was legally elected, and severely
denounced Gould and Fisk--"Letters of General Francis C. Barlow,
Albany": 1871.

The records of this suit (as set forth in Lansing's Reports, New York
Supreme Court. I:308, etc.) show that each of the contesting parties
accused the other of gross fraud, and that the final decision was
favorable to the "Ramsey" party. See the chapters on J. Pierpont
Morgan in Vol. III of this work.] When the English stockholders sent
over a large number of shares to be voted in for a new management, it
was Barnard who allowed this stock to be voted by Gould and Fisk. At
another time Gould and Fisk called at Barnard's house and obtained an
injunction while he was eating breakfast.

It was largely by means of his corrupt alliance with the Tweed "ring"
that Gould was able to put through his gigantic frauds from 1868 to
1872.

Gould was, indeed, the unquestioned master mind in these
transactions; Fisk and the others merely executed his directions. The
various fraudulent devices were of Gould's origination. A biographer
of Fisk casually wrote at the time: "Jay Gould and Fisk took William
M. Tweed into their board, and the State Legislature, Tammany Hall
and the Erie 'ring' were fused together and have contrived to serve
each other faithfully." [Footnote: "A Life of James Fisk, Jr.," New
York, 1871.] Gould admitted before a New York State Assembly
investigating committee in 1873 that, in the three years prior to
1873, he had paid large sums to Tweed and to others, and that he had
also disbursed large sums "which might have been used to influence
legislation or elections." These sums were facetiously charged on the
Erie books to "India Rubber Account"--whatever that meant.

Gould cynically gave more information. He could distinctly recall, he
said, "that he had been in the habit of sending money into various
districts throughout the State," either to control nominations or
elections for Senators or members of the Assembly. He considered
"that, as a rule, such investments paid better than to wait until the
men got to Albany." Significantly he added that it would be as
impossible to specify the numerous instances "as it would be to
recall the number of freight cars sent over the Erie Railroad from
day to day." His corrupt operations, he indifferently testified,
extended into four different States. "In a Republican district I was
a Republican; in a Democratic district, a Democrat; in a doubtful
district I was doubtful; but I was always for Erie." [Footnote:
Report of, and Testimony Before, the Select Assembly Committee, 1873,
Assembly Documents, Doc. No. 98: xx, etc.] The funds that he thus
used in widespread corruption came obviously from the proceeds of his
great thefts; and he might have added, with equal truth, that with
this stolen money he was able to employ some of the most eminent
lawyers of the day, and purchase judges.


GOULD'S TRADING CLASS SUPPORT

Those writers who are content with surface facts, or who lack
understanding of popular currents, either state, or leave the
inference, that it was solely by bribing and trickery that Gould was
able to consummate his frauds. Such assertions are altogether
incorrect. To do what he did required the support, or at least
tolerance, of a considerable section of public opinion. This he
obtained. And how? By posing as a zealous anti-monopolist.

The cry of anti-monopoly was the great fetich of the entire middle
class; this class viewed with fear the growing concentration of
wealth; and as its interests were reflected by a large number of
organs of public opinion, it succeeded in shaping the thoughts of no
small a section of the working class.

While secretly bribing, Gould constantly gave out for public
consumption a plausible string of arguments, in which act, by the
way, he was always fertile. He represented himself as the champion of
the middle and working classes in seeking to prevent Vanderbilt from
getting a monopoly of many railroads. He played adroitly upon the
fears, the envy and the powerful mainsprings of the self interest of
the middle class by pointing out how greatly it would be at the mercy
of Vanderbilt should Vanderbilt succeed in adding the Erie Railroad
and other railroads to his already formidable list.

It was a time of all times when such arguments were bound to have an
immense effect; and that they did was shown by the readiness with
which the trading class excused his corruption and frauds on the
ground that he seemed to be the only man who proved that he could
prevent Vanderbilt from gobbling up all of the railroads leading from
New York City. With a great fatuousness the middle class supposed
that he was fighting for its cause.

The bitterness of large numbers of the manufacturing, jobbing and
agricultural classes against Commodore Vanderbilt was deep-seated. By
an illegal system of preferential freight rates to certain
manufacturers, Vanderbilt put these favorites easily in a position
where they could undersell competitors. Thus, A. T. Stewart, one of
the noted millionaire manufacturers and merchants of the day, instead
of owing his success to his great ability, as has been set forth,
really derived it, to a great extent, from the secret preferential
freight rates that he had on the Vanderbilt railroads. A variety of
other coercive methods were used by Vanderbilt. Special freight
trains were purposely delayed and run at snail's pace in order to
force shippers to pay the extraordinary rates demanded for shipping
over the Merchant's Dispatch, a fast freight line owned by the
Vanderbilt family.

These were but a few of the many schemes for their private graft that
the Vanderbilts put in force. The agricultural class was taxed
heavily on every commodity shipped; for the transportation of milk,
for example, the farmer was taxed one-half of what he himself
received for milk. These taxes, of course, eventually fell upon the
consumer, but the manufacturer and the farmer realized that if the
extortions were less, their sales and profits would be greater. They
were in a rebellious mood and gladly welcomed a man such as Gould who
thwarted Vanderbilt at every turn. Gould well knew of this bitter
feeling against Vanderbilt; he used it, and thrust himself forward
constantly in the guise of the great deliverer.

As for the small stockholders of the Erie railroad, Gould easily
pacified them by holding out the bait of a larger dividend than they
had been getting under the former regime. This he managed by the
common and fraudulent expedient of issuing bonds, and paying
dividends out of proceeds. So long as the profits of these small
stockholders were slightly better than they had been getting before,
they were complacently satisfied to let Gould continue his frauds.
This acquiescence in theft has been one of the most pronounced
characteristics of the capitalistic investors, both large and small.
Numberless instances have shown that they raise no objections to
plundering management provided that under it their money returns are
increased.

The end of Gould's looting of the Erie railroad was now in sight.
However the small stockholders might assent, the large English
stockholders, some of whom had invidious schemes of their own in the
way of which Gould stood, were determined to gain control themselves.


GOULD'S DIRECTORS BRIBED TO RESIGN.

They made no further attempt to resort to the law. A fund of $300,000
was sent over by them to their American agents with which to bribe a
number of Gould's directors to resign. As Gould had used these
directors as catspaws, they were aggrieved because he had kept all of
the loot himself. If he had even partly divided, their sentiments
would have been quite different. The $300,000 bribery fund was
distributed among them, and they carried out their part of the
bargain by resigning. [Footnote: Assembly Document No. 98, 1873: xii
and xiii. The English stockholders took no chances on this occasion.
The committee reported that not until the directors had resigned did
they "receive their price." ] The Assembly Investigating Committee of
1873 referred carelessly to the English stockholders as being
"impatient at the law's delay" and therefore taking matters into
their own hands. If a poor man or a trade union had become "impatient
at the law's delay" and sought an illegal remedy, the judiciary would
have quickly pronounced condign punishment and voided the whole
proceeding. The boasted "majesty of law" was a majesty to which the
underdogs only were expected to look up to in fear and trepidation.

When the English stockholders elected their own board Gould obtained
an injunction from the courts. This writ was absolutely disregarded,
and the anti-Gould faction on March 11, 1872, seized possession of
the offices and books of the company by physical force. Did the
courts punish these men for criminal contempt? No effort was made to.
Many a worker or labor union leader had been sent to jail (and has
been since), for "contempt of court," but the courts evidently have
been willing enough to stomach all of the contempt profusely shown
for them by the puissant rich. The propertyless owned nothing, not to
speak of a judge, but the capitalists owned whole strings of judges,
and those whom they did not own or corrupt were generally influenced
to their side by association or environment. "All of this," reported
the Assembly Investigating Committee of 1873, speaking of the means
employed to overthrow Gould, "has been done without authority of
law." But no law was invoked by the officials to make the
participants account for their illegal acts.


THE LEGISLATURE BRIBED AGAIN.

It seems that the entire amount, including the large fees paid to
agents and lawyers, corruptly expended by the English capitalists in
ousting Gould, was $750,000. Did they foot this bill out of their own
pockets? By no means. They arranged the reimbursements by voting this
sum to themselves out of the Erie Railroad treasury; [Footnote:
Assembly Document No. 98, 1873: xii and xvi.] that is to say, they
compelled the public to shoulder it by adding to the bonded burdens
on which the people were taxed to pay interest.

To complete their control they bribed the New York Legislature to
repeal the Classification Act. As has been shown, the Legislature of
1872 was considered a "reform" body, and it also has been brought out
how Vanderbilt bribed it to give him invaluable public franchises and
large grants of public money. In fact, other railroad magnates as
well as he systematically bribed; and it is clear that they
contributed jointly a pool of money both to buy laws and to prevent
the passage of objectionable acts. "It appears conclusive," reported
the Assembly Investigating Committee of 1873, "that a large amount--
reported by one witness at $100,000--was appropriated for legislative
purposes by the railroad interest in 1872, and that this [$30,000]
was Erie's proportion." [Footnote: Ibid., xvii.] One of the
lobbyists, James D. Barber, "a ruling spirit in the Republican
party," admitted receiving $50,000 from the Vanderbilts. [Footnote:
Ibid., 633.] While uniting to suppress bills feared by them all, each
of the magnates bribed to foil the others' purposes.


GOULD'S DIRECT ERIE THEFTS WERE $12,000,000.

What did Gould's plunder amount to? His direct thefts, by reason of
his Erie frauds, seem to have reached more than twelve million
dollars, all, or nearly all, of which he personally kept.

That sum, considering the falling prices of commodities after the
panic of 1873, and comparable with current standards of cost and
living, was equivalent to perhaps double the amount at present.
Various approximations of his thefts were made. After a minute
examination of the Erie railroad's books, Augustus Stein, an expert
accountant, testified before the "Hepburn Committee" (the New York
Assembly Investigating Committee of 1879) that Gould had himself
pocketed twelve or thirteen million dollars. [Footnote: Q.--Do you
think you could remember the aggregate amount of wrong-doing on the
part of Mr. Gould that you have discovered?

A.--I could give an estimate throwing off a couple of millions here
and there; I could say that it amounted to--that is, what we
discovered--amounted to about twelve or thirteen million dollars.--
Railroad Investigation of the State of New York, 1879, ii: 1765.]

This, however, was only one aspect. Between 1868 and 1873 Gould and
his accomplices had issued $64,000,000 of watered stock. Gould, so
the Erie books revealed, had charged $12,000,000 as representing the
outlay for construction and equipment, yet not a new rail had been
laid, nor a new engine put in use, nor a new station built. These
twelve millions or more were what he and his immediate accomplices
had stolen outright from the Erie Railroad treasury. Considerable
sums were, of course, paid corruptly to politicians, but Gould got
them all back, as well as the plunder of his associates, by
personally manipulating Erie stock so as to compel them to sell at a
great loss to themselves, and a great profit to himself. Furthermore,
in these manipulations of stock, he scooped in more millions from
other sources.

Had it not been for his intense greed and his constitutional
inability to remain true to his confederates, Gould might have been
allowed to retain the proceeds of his thefts. His treachery to one of
them, Henry N. Smith, who had been his partner in the brokerage firm
of Smith, Gould and Martin, resulted in trouble. Gould cornered the
stock of the Chicago and Northwestern Railroad; to put it more
plainly, he bought up the outstanding available supply of shares, and
then ran the price up from 75 to 250. Smith was one of a number of
Wall Street men badly mulcted in this operation, as Gould intended.
Seeking revenge, Smith gave over the firm's books, which were in his
possession, to General Barlow, counsel for the Erie Railroad's
protesting stockholders. [Footnote: Railroad Investigation, etc.,
v:531] Evidence of great thefts was quickly discovered, and an action
was started to compel Gould to disgorge about $12,000,000. A criminal
proceeding was also brought, and Gould was arrested and placed under
heavy bonds.


AN EXTRAORDINARY "RESTITUTION."

Apparently Gould was trapped. But a wonderful and unexpected
development happened which filled the Wall Street legion with
admiration for his craft and audacity. He planned to make his very
restitution the basis for taking in many more millions by
speculation; he knew that when it was announced that he had concluded
to disgorge, the market value of the stock would instantly go up and
numerous buyers would appear.

Secretly he bought up as much Erie stock as he could. Then he
ostentatiously and with the widest publicity declared his intension
to make restitution. Such a cackling sensation it made! The price of
Erie stock at once bounded up, and his brokers sold quantities of it
to his great accruing profit. The pursuing stockholders assented to
his offer to surrender his control of the Erie Railroad, and to
accept real estate and stocks seemingly worth $6,000,000. But after
the stockholders had withdrawn their suits, they found that they had
been tricked again. The property that Gould had turned over to them
did not have a market value of more than $200,000. [Footnote:
Railroad Investigation, etc. 1879, iii: 2503. One of the very rare
instances in which any of Gould's victims was able to compel him to
disgorge, was that described in the following anecdote, which went
the rounds of the press: "An old friend had gone to Gould telling him
that he had managed to save up some $20,000, and asking his advice as
to how he should invest it in such a manner as to be absolutely safe,
for the benefit of his family. Gould told him to invest it in a
certain stock, and assured him that the investment would be
absolutely safe as to income, and, besides, its market value would
shortly be greatly enhanced.

"The man did as advised by Gould, and the stock promptly started to
go down. Lower and lower it went, and seeing the steady depreciation
in the price of the stock, and hearing stories to the effect that the
dividends were to be passed, the man wrote to Gould asking if the
investment was still good. Gould replied to his friend's letter,
assuring him that the stories had no foundation in fact and were
being circulated purely for market effect.

"But still the stock declined. Each day the price went to new lower
figures on the Stock Exchange, and finally the rumors became fact,
and the Directors passed the dividend. The man had seen the savings
of years vanish in a few months and realized that he was a ruined
man.

"Goaded to an almost insane frenzy, he rushed into Gould's office the
afternoon the Directors announced the passing of the dividend, and
told Gould that he had been deliberately and grossly deceived and
that he was ruined. He wound up by announcing his intention of
shooting Gould then and there.

"Gould heard his quondam friend through. There could be no mistaking
the man's intent. He was evidently half crazed and possessed of an
insane desire to carry out his threat. Gould turned to him and said:
'My dear Mr.---' calling him by name, 'you are laboring under a most
serious misapprehension. Your money is not lost. If you will go down
to my bank tomorrow morning, you will find there a balance of $25,000
to your credit. I sold out your stock some time ago, but had
neglected to notify you.' The man looked at him in amazement and,
half doubting, left the office.

"As soon as he had left the office Gould sent word to his bank to
place $25,000 to this man's credit. The man spent a sleepless night,
torn by doubts and fears. When the bank opened for business he was
the first man in line, and was nearly overcome when the cashier
handed him the sum that Gould had named the previous afternoon.

"Gould had evidently decided in his own mind that the man was
determined to kill him, and that the only way to save his life and
his name was to pay the man the sum he had lost plus a profit, in the
manner he did. But as a sidelight on the absolutely cold-blooded
self-possession of the man, it is interesting."]


THE SECOND STAGE OF THE GOULD FORTUNE

Gould's thefts from the Erie railroad were, however, only one of his
looting transactions during those busy years. At the same time, he
was using these stolen millions to corner the gold supply. In this
"Black Friday" conspiracy (for so it was styled) he fradulently
reaped another eleven million dollars to the accompaniment of a
financial panic, with a long train of failures, suicides and much
disturbance and distress.




CHAPTER XI

THE GOULD FORTUNE BOUNDS FORWARD


The "gold conspiracy" as plotted and consummated by Gould was in its
day denounced as one of the most disgraceful events in American
history. To adjudge it so was a typical exaggeration and perversion
of a society caring only about what was passing in its upper spheres.
The spectacular nature of this episode, and the ruin it wrought in
the ranks of the money dealers and of the traders, caused its
importance to be grossly misrepresented and overdrawn.


THE ABUSE OF GOULD OVERDONE

It was not nearly as discreditable as the gigantic and repulsive
swindles that traders and bankers had carried on during the dark
years of the Civil War. The very traders and financiers who beslimed
Gould for his "gold conspiracy" were those who had built their
fortunes on blood-soaked army contracts. Nor could the worst aspects
of Gould's conspiracy, bad as they were, begin to vie in disastrous
results with the open and insidious abominations of the factory and
landlord system. To repeat, it was a system in which incredible
numbers of working men, women and children were killed off by the
perils of their trades, by disease superinduced and aggravated by the
wretchedness of their work, and by the misery of their lot and
habitations. Millions more died prematurely because of causes
directly traceable to the withering influences of poverty.

But this unending havoc, taking place silently in the routine
departments of industry, and in obscure alleyways, called forth
little or no notice. What if they did suffer and perish? Society
covered their wrongs and injustices and mortal throes with an
inhibitive silence, for it was expected that they, being lowly,
should not complain, obtrude grievances, or in any way make
unpleasant demonstrations. Yet, if the prominent of society were
disgruntled, or if a few capitalists were caught in the snare of ruin
which they had laid for others, they at once bestirred themselves and
made the whole nation ring with their outcries and lamentations.
Their merest whispers became thunderous reverberations. The press,
the pulpit, legislative chambers and the courts became their strident
voices, and in all the influential avenues for directing public
opinion ready advocates sprang forth to champion their plaints, and
concentrate attention upon them. So it was in the "gold conspiracy."

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