HISTORY OF THE GREAT AMERICAN FORTUNES

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.”


GOULD EMBARKS ON HIS CONSPIRACY.


After the opening of the Civil War, gold was exceedingly scarce, and commanded a high premium.  The supply of this metal, this yellow dross, which to a considerable degree regulated the world’s relative values of wages and commodities, was monopolized by the powerful banking interests.  In 1869 but fifteen million dollars of gold was in actual circulation in the United States.

Notwithstanding the increase of industrial productive power, the continuous displacement of obsolete methods by the introduction of labor-saving machinery, and the consecutive discovery of new means for the production of wealth, the task of the worker was not lightened.  He had, for the most part, after great struggles, secured a shorter workday, but if the hours were shorter the work was more tense and racking than in the days before steam-driven machinery supplanted the hand tool.  The mass of the workers were in a state of dependence and poverty.  The land, industrial and financial system, operating in the three-fold form of rent, interest and profit, tore away from the producer nearly the whole of what he produced.  Even those factory-owning capitalists exercising a personal and direct supervision over their plants, were often at the mercy of the clique of bankers who controlled the money marts.

Had the supply of money been proportionate to the growth of population and of business, this process of expropriation would have been less rapid.  As it was, the associated monopolies, the international and national banking interests, and the income classes in general, constricted the volume of money into as narrow a compress as possible.  As they were the very class which controlled the law-making power of Government, this was not difficult.

The resulting scarcity of money produced high rates of interest.  These, on the one hand, facilitated usury, and, on the other, exacted more labor and produce for the privilege of using that money.  Staggering under burdensome rates of interest, factory owners, business men in general, farmers operating on a large scale, and landowners with tenants, shunted the load on to the worker.  The producing population had to foot the additional bill by accepting wages which had a falling buying power, and by having to pay more rent and greater prices for necessities.  Such conditions were certain to accelerate the growth of poverty and the centralization of wealth.

Gould’s plan was to get control of the outstanding fifteen millions of dollars of gold, and fix his own price upon them.  Not only from what was regarded as legitimate commerce would he exact tribute, but he would squeeze to the bone the whole tribe of gold speculators — for at that time gold was extensively speculated in to an intensive degree.

With the funds stolen from the Erie Railroad treasury, he began to buy in gold.  To accommodate the crowd of speculators in this metal, the Stock Exchange had set apart a “ Gold Room,” devoted entirely to the speculative purchase and sale of gold.  Gould was confident that his plan would not miscarry if the Government would not put in circulation any part of the ninetyfive million dollars in gold hoarded as a reserve in the National Treasury.  The urgent and all-important point was to ascertain whether the Government intended to keep this sum entirely shut out from circulation.


HE BRIBES GOVERNMENT OFFICIALS.


To get this inside information he succeeded in corruptly winning over to his interests A.R. Corbin, a brother-in-law of President Grant.  The consideration was Gould’s buying two million dollars’ worth of gold bonds, without requiring margin or security, for Corbin’s account.1  Thus Gould thought he had surely secured an intimate spy within the authoritative precincts of the White House.  As the premium on gold constantly rose, these bonds yielded Corbin as much sometimes as $25,000 a week in profits.  To insure the further success of his plan, Gould subsidized General Butterfield, whose appointment as sub-treasurer at New York Corbin claimed to have brought about.  Gould testified in 1870 that he had made a private loan to Butterfield, and that he had carried speculatively $1,500,000 for Butterfield’s benefit.  These statements Butterfield denied.2

Through Corbin, Gould attempted to pry out Grant’s policies, and with Fisk as an interlocutor, Gould personally attempted to draw out the President.  To their consternation they found that Grant was not disposed to favor their arguments.  The prospect looked very black for them.  Gould met the situation with matchless audacity.  By spreading subtle rumors, and by inspiring press reports through venal writers, he deceived not only the whole of Wall Street, but even his own associates, into believing that high Government officials were in collusion with him.  The report was assiduously disseminated that the Government did not intend to release any of its hoard of gold for circulation.  The premium, accordingly, shot up to 146.  Soon after this, certain financial quarters suspected that Gould was bluffing.  The impression spreading that he could not depend upon the Government’s support, the rate of the premium declined, and Gould’s own array of brokers turned against him and sold gold.


GOULD BETRAYS HIS PARTNERS.


Entrapped ;  Gould realized that something had to be done, and done quickly, if he were to escape complete ruin, holding as he did the large amount of gold that he had bought at steep prices.  By plausible fabrications he convinced Fisk that Grant was really an ally.  Gould had bought a controlling interest in the Tenth National Bank.  This institution Gould and Fisk now used as a fraudulent manufactory of certified checks.  These they turned out to the amount of tens of millions of dollars.  With the spurious checks they bought from thirty to forty millions in gold.3  Such an amount of gold did not, of course, exist in circulation.  But the law permitted gambling in it as though it really existed.  Ordinary card gamblers, playing for actual money, were under the ban of the law ;  but the speculative gamblers of the Stock Exchange who bought and sold goods which frequently did not exist, carried on their huge fraudulent operations with the full sanction of the law.  Gould’s plan was not intricate.  Extensive purchases of gold naturally—as the laws of trade went—were bound to increase constantly its price.

By September, 1869, Gould and his partners not only held all of the available gold in circulation, but they held contracts by which they could call upon bankers, manufacturers, merchants, brokers and speculators for about seventy millions of dollars more of the metal.  To the banking, manufacturing and importing interests gold, as the standard, was urgently required for various kinds of interfluent business transactions :  to pay international debts, interest on bonds, customs dues or to move the crops.  They were forced to borrow it at Gould’s own price.  This price was added to the cost of operation, manufacture and sale, to be eventually assessed upon the consumer.  Gould publicly announced that he would show no mercy to anyone.  He had a list, for example, of two hundred New York merchants who owed him gold ;  he proposed to print their names in the newspapers, demanding settlement at once, and would have done so, had not his lawyers advised him that the move might be adjudged criminal conspiracy.4

The tension, general excitement and pressure in business circles were such that President Grant decided to release some of the Government’s gold, even though the reserve be diminished.  In some mysterious way a hint of this reached Gould.  The day before “ Black Friday ” he resolved to betray his partners, and secretly sell gold before the price abruptly dropped.  To do this with success it was necessary to keep on buying, so that the price would be run up still higher.

Such methods were prohibited by the code of the Stock Exchange which prescribed certain rules of the game, for while the members of the Exchange allowed themselves the fullest latitude and the most unchecked deception in the fleecing of outside elements, yet among themselves they decreed a set of rules forbidding any sort of double-dealing in trading with one another.  To draw an analogy, it was like a group of professional card sharps deterring themselves by no scruples in the cheating of the unwary, but who insisted that among their own kind fairness should be scrupulously observed.  Yet, rules or no rules, no one could gainsay the fact that many of the foremost financiers had often and successfully used the very enfillading methods that Gould now used.

While Gould was secretly disposing of his gold holdings, he was goading on his confederates and his crowd of fifty or more brokers to buy still more.5  By this time, it seems, Fisk and his partner in the brokerage business, Belden, had some stray inklings of Gould’s real plan ;  yet all that they knew were the fragments Gould chose to tell them, with perhaps some surmises of their own.  Gould threw out just enough of an outline to spur on their appetite for an orgy of spoils.  Undoubtedly, Gould made a secret agreement with them by which he could repudiate the purchases of gold made in their names.  Away from the Stock Exchange Fisk made a ludicrous and dissolute enough figure, with his love of tinsel, his show and braggadacio, his mock military prowess, his pompous, windy airs and his covey of harlots.  But in Wall Street he was a man of affairs and power ;  the very assurance that in social life made him ridiculous to a degree, was transmuted into a pillar of strength among the throng of speculators who themselves were mainly arrant bluffs.  A dare-devil audacity there was about Fisk that impressed, misled and intimidated ;  a fine screen he served for Gould plotting and sapping in the background.


THE MEMORABLE “BLACK FRIDAY”


The next day, “ Black Friday,” September 24, 1869, was one of tremendous excitement and gloomy apprehension among the money changers.  Even the exchanges of foreign countries reflected the perturbation.  Gould gave orders to buy all gold in Fisk’s name ;  Fisk’s brokers ran the premium up to 151 and then to 161.  The market prices of railroad stocks shrank rapidly ;  failure after failure of Wall Street firms was announced, and fortunes were swept away.  Fearing that the price of gold might mount to 200, manufacturers and other business concerns throughout the country frantically directed their agents to buy gold at any price.  All this time Gould, through certain brokers, was secretly selling ;  and while he was doing so, Fisk and Belden by his orders continued to buy.

The Stock Exchange, according to the descriptions of many eye-witnesses, was an extraordinary sight that day.  On the most perfunctory occasions the scenes enacted there might have well filled the exotic observer with unmeasured amazement.  But never had it presented so thoroughly a riotous, even bedlamic aspect as on this day, Black Friday ;  never had greed and the fear born of greed, displayed themselves in such frightful forms.

Here could be seen many of the money masters shrieking and roaring, anon rushing about with whitened faces, indescribably contorted, and again bellowing forth this order or that curse with savage energy and wildest gesture.  The puny speculators had long since uttered their doleful squeak and plunged down into the limbo of ruin, completely engulfed ;  only the big speculators, or their commission men, remained in the arena, and many of these like trapped rats scurried about from pillar to post.  The little fountain in the “ Gold Room ” serenely spouted and bubbled as usual, its cadence lost in the awful uproar ;  over to it rushed man after man splashing its cooling water on his throbbing head.  Over all rose a sickening exhalation, the dripping, malodorous sweat of an assemblage worked up to the very limit of mental endurance.

What, may we ask, were these men snarling, cursing and fighting over ?  Why, quite palpably over the division of wealth that masses of working men, women and children were laboriously producing, too often amid sorrow and death.  While elsewhere pinioned labor was humbly doing the world’s real work, here in this “ Gold Room,” greed contested furiously with greed, cunning with cunning over their share of the spoils.  Without their structure of law, and Government to enforce it, these men would have been nothing ;  as it was, they were among the very crests of society ;  the makers of law, the wielders of power, the pretenders to refinement and culture.

Baffled greed and cunning outmatched and duplicity doubled against itself could be seen in the men who rushed from the “Gold Room” hatless and frenzied — some literally crazed — when the price of gold advanced to 162.  In the surrounding streets were howling and impassable crowds, some drawn thither by curiosity and excitement, others by a fancied interest ;  surely, fancied, for it was but a war of eminent knaves and knavish gamblers.  Now this was not a “disorderly mob” of workers such as capitalists and politicians created out of orderly workers’ gatherings so as to have a pretext for clubbing and imprisoning ;  nay it all took place in the “ conservative ” precincts of sacrosant Wall Street, the abiding place of “ law and order.”  The participants were composed of the “ best classes ;”  therefore, by all logic it was a scene supereminently sane, respectable and legitimate ;  the police, worthy defenders of the peace, treated it all with an awed respect.

Suddenly, early in the afternoon, came reports that the United States Treasury was selling gold ;  they proved to be true.  Within fifteen minutes the whole fabric of the gold manipulation had gone to pieces.  It is narrated that a mob, bent on lynching, searched for Gould, but that he and Fisk had sneaked away through a back door and had gone uptown.

Jay Gould, Who, in a Brief Period, Possessed Himself of a Vast Fortune The general belief was that Gould was irretrievably ruined.  That he was secretly selling gold at an exorbitant price was not known ;  even his own intimates, except perhaps Fisk and Belden, were ignorant of it.  All that was known was that he had made contracts for the purchase of enormous quantities of fictitious gold at excessive premiums.  As a matter of fact, his underhand sales had brought him eleven or twelve million dollars profit.  But if his contracts for purchase were enforced, not only would these profits be wiped out, but also his entire fortune.


ELEVEN MILLIONS POCKETED BY JUDICIAL COLLUSION.


Ever agile and resourceful, Gould quickly extricated himself from this difficulty.  He fell back upon the corrupt judiciary.  Upon various flimsy pretexts, he and Fisk, in a single day, procured twelve sweeping injunctions and court orders.6  These prohibited the Stock Exchange and the Gold Board from enforcing any rules of settlement against them, and enjoined Gould and Fisk’s brokers from settling any contracts.  The result, in brief, was that judicial collusion allowed Gould to pocket his entire “ profits,” amounting, as the Congressional Committee of 1870 reported, to about eleven million dollars, while relieving him from any necessity of paying up his far greater losses.  Fisk’s share of the eleven millions was almost nothing ;  Gould retained practically the entire sum.  Gould’s confederates and agents were ruined, financially and morally ;  scores of failures, dozens of suicides, the despoilment of a whole people, were the results of Gould’s handiwork.


From his Erie railroad thefts, the gold conspiracy and other maraudings, Gould now had about twenty-five or thirty million dollars.  Perhaps the sum was much more.  Having sacked the Erie previous to his being ousted in 1873, he looked out for further instruments of plunder.

Money was power ;  the greater the thief the greater the power ;  and Gould, in spite of abortive lawsuits and denunciations, had the cardinal faculty of holding on to the full proceeds of his piracies.  In 1873 there was no man more rancorously denounced by the mercantile classes than Gould.  If one were to be swayed by their utterances, he would be led to believe that these classes, comprising the wholesale and retail merchants, the importers and the small factory men, had an extraordinarily high and sensitive standard of honesty.  But this assumption was sheer pretense, at complete variance with the facts.  It was a grim sham constantly shattered by investigation.  Ever, while vaunting its own probity and scoring those who defrauded it, the whole mercantile element was itself defrauding at every opportunity.


SOME COMPARISONS WITH GOULD.


One of the numberless noteworthy and conclusive examples of the absolute truth of this generalization was that of the great frauds perpetrated by the firm of Phelps, Dodge and Company, millionaire importers of tin, copper, lead and other metals.

So far as public reputation went, the members of the house were the extreme opposites of Gould.  In the wide realm of commercialism a more stable and illustrious firm could not be found.  Its wealth was conventionally “ solid and substantial ;”  its members were lauded as “ high-toned ” business men “ of the old-fashioned school,” and as consistent church communicants and expansive philanthropists.  Indeed, one of them was regarded as so glorious and uplifting a model for adolescent youth, that he was chosen president of the Young Men’s Christian Association ;  and his statue, erected by his family, to-day irradiates the tawdry surroundings of Herald Square, New York City.  In the Blue Book of the elect, socially and commercially, no names could be found more indicative of select, strong-ribbed, triple-dyed respectability and elegant social poise and position.

In the dying months of 1872, a prying iconoclast, unawed by the glamor of their public repute and the contemplation of their wealth, began an exhaustive investigation of their custom house invoices.  This inquiring individual was B.G. Jayne, a special United States Treasury agent.  He seems to have been either a duty-loving servant of the people, stubbornly bent upon ferreting out fraud wherever he found it, irrespective of whether the criminals were powerful or not, or he was prompted by the prospect of a large reward.  The more he searched into this case, the more of a mountainous mass of perjury and fraud revealed itself., On January, 3, 1873, Jayne set the full facts before his superior, George S. Boutwell, Secretary of the Treasury.

“. . . According to ordinary modes of reckoning,” he wrote, “ a house of the wealth and standing of Phelps, Dodge and Company would be above the influences that induce the ordinary brood of importers to commit fraud.  That same wealth and standing became an almost impenetrable armor against suspicion of wrong-doing and diverted the attention of the officers of the Government, preventing that scrutiny which they give to acts of other and less favored importers.”  Jayne went on to tell how he had proceeded with great caution in “ establishing beyond question gross under-valuations,” and how United States District Attorney Noah Davis (later a Supreme Court justice) concurred with him that fraud had been committed.


THE GREAT FRAUDS OF PHELPS, DODGE AND COMPANY.


The Government red tape showed signs at first of declining to unwind, but further investigation proved the frauds so great, that even the red tape was thrilled into action, and the Government began a suit in the United States District Court at New York for $1,000,000 for penalties for fraudulent custom-house undervaluations.  It sued William E. Dodge, William E. Dodge, Jr., D. Willis James, Anson Phelps Stokes, James Stokes and Thomas Stokes as the participating members of the firm.

The suit was a purely civil one ;  influential defrauders were not inconvenienced by Government with criminal actions and the prospect of prison lodging and fare ;  this punishment was reserved exclusively for petty offenders outside of the charmed circle.  The sum of $1,000,000 sued for by the Government referred to penalties due since 1871 only ;  the firm’s duplicates of invoices covering the period before that could not be found ;  “they had probably been destroyed ;”  hence, it was impossible to ascertain how much Phelps, Dodge and Company had defrauded in the previous years.

The firm’s total importations were about $6,000,000 a year ;  it was evident, according to the Government officials, that the frauds were not only enormous, but that they had been going on for a long time.  These frauds were not so construed “ by any technical construction, or far-fetched interpretation,” but were committed “ by the firm’s deliberately and systematically stating the cost of their goods below the purchase price for no conceivable reason but to lessen the duties to be paid to the United States.”

These long-continuing frauds could not have been possible without the custom-house officials having been bribed to connive.  The practice of bribing customs officers was an old and common one.  In his report to the House of Representatives on February 23, 1863, Representative Van Wyck, chairman of an investigating committee, fully described this system of bribery.  In summarizing the evidence brought out in the examination of fifty witnesses he dealt at length with the custom house officials who for large bribes were in collusion with brokers and merchants.  “ No wonder,” he exclaimed, “ the concern [the custom house] is full of fraud, reeking with corruption.”7

Great was the indignation shown at the charges by the flustered members of the firm ;  most stoutly these “ eminently proper ” men asserted their innocence.8  In point of fact (as has been shown in the chapters on the Astor fortune) several of them had long been slyly defrauding in other fields, particularly by the corrupt procuring of valuable city land before and during the Tweed regime.  They had also been enriching them selves by the corrupt obtaining of railroad grants.  There was a scurrying about by Phelps, Dodge and Company to explain that some mistake had been made ;  but the Government steadfastly pressed its action ;  and Secretary Boutwell curtly informed them that if they were innocent of guilt, they had the opportunity of proving so in court.  After this ultimatum their tone changed ;  they exerted every influence to prevent the case from coming to trial, and they announced their willingness to compromise.  The Government was induced to accept their offer ;  and on February 24, 1873, Phelps, Dodge and Company paid to the United States Treasury the sum of $271,017.23 for the discontinuance of the milliondollar suit for custom-house frauds.9


THEIR PRESENT WEALTH TRACED TO FRAUD.


From these persistent frauds came, to a large extent, the great collective and individual wealth of the members of this firm, and of their successors.  It was also by reason of these frauds that Phelps, Dodge and Company were easily able to outdo competitors.  Only recently, let it be added, they formed themselves into a corporation with a capital of $50,000,000.  With the palpably great revenues from their continuous frauds, they were in an advantageous position to buy up many forms of property.  Beginning in 1880 the mining of copper, they obtained hold of many very rich mining properties ;  their copper mines yield at present (1909) about 100,000,000 pounds a year.  Phelps, Dodge and Company also own extensive coal mines and lines of railroads in the southwest Territories of the United States.  Ten thousand employees are directly engaged in their copper and coal mines and smaller works, and on the 1,000 miles of railroad directly owned and operated by them.

So greatly were the members of the firm enriched by their frauds that when D. Willis James, one of the partners sued by the Government for fraudulent undervaluations, died on September 13, 1907, he left an estate of not less than $26,967,448.  John F. Farrel, the appraiser, so reported in his report filed on March 28, 1908, in the transfer tax department of the Surrogate’s department, New York City.  But as the transfer tax has been, and is, continuously evaded by ingenious anticipatory devices, the estate, it is probable, reached much more.

James owned (accepting the appraiser’s specific report at a time when panic prices prevailed) tens of millions of dollars worth of stock in railroad, mining, manufacturing and other industries.  He owned, for instance, $2,750,000 worth of shares in the Phelps-Dodge Copper Queen Mining Company ;  $1,419,510 in the Old Dominion Company, and millions more in other mining companies.  His holdings in the Great Northern Railway, the history of which is one endless chain of fraud, amounted to millions of dollars — $3,840,000 of preferred stock ;  $3,924,000 of common stock ;  $1,715,000 of stock in the Great Northern Railway iron ore properties ;  $1,405,000 of Great Northern Railway shares in the form of subscription receipts, and so on.  He was a large holder of stock in the Northern Pacific Railway, the development of which, as we shall see, has been one of incessant frauds.  His interest in the “ good will ” of Phelps, Dodge and Company was appraised at $180,000 ;  his interest in the same firm at $945,786 ;  his cash on deposit with that firm at $475,000.10

In the defrauding of the United States Government, however, Phelps, Dodge and Company were doing no uncommon thing.  The whole importing trade was incessantly and cohesively thriving upon this form of fraud.  In his annual report for 1874, Henry C. Johnson, United States Commissioner of Customs, estimated that tourists returning from Europe yearly smuggled in as personal effects 257,810 trunks filled with dutiable goods valued at the enormous sum of $128,905,000.  “ It is well known,” he added, “that much of this baggage is in reality intended to be put upon the market as merchandise, and that still other portions are brought over for third parties who have remained at home.  Most of those engaged in this form of importation are people of wealth ” . . .11  Similar and additional facts were brought out in great abundance by a United States Senate committee appointed, in 1886, to investigate customs frauds in New York.  After holding many sessions this committee declared that it had found “ conclusive evidence that the undervaluation of certain kinds of imported merchandise is persistently practiced to an alarming extent at the port of New York.”12  At all other ports the customs frauds were notorious.

The frauds of the whiskey distillers in cheating the Government out of the internal revenue tax were so enormous as to call forth several Congressional investigations ;13 the millions of dollars thus defrauded were used as private capital in extending the distilleries ;  virtually all of the fortunes in the present Whiskey Trust are derived in great part from these frauds.  The banks likewise cheated the Government out of large sums in their evasion of the stamp tax.  “ This stamp tax,” reported the Comptroller of Currency in 1874, “is to a considerable extent evaded by banks and more frequently by depositors, by drawing post notes, or bills of exchange at one day’s sight, instead of on demand, and by substituting receipts for checks.”14

It was from these various divisions of the capitalist class that the most caustic and virtuous tirades against Gould came.  The boards of trade and chambers of commerce were largely made up of men who, while assuming the most vaniloquent pretensions, were themselves malodorous with fraud.  To read the resolutions passed by them, and to observe retrospectively the supreme airs of respectability and integrity they individually took on, one would conclude that they were all men of whitest, most irreproachable character.  But the official reports contradict their pretensions at every turn ;  and they are all seen in their nakedness as perjurers, cheats and frauds, far more sinister in their mask than Gould in his carelessly open career of theft and corruption.  Many of the descendants of that sordid aggregation live to-day in the luxury of inherited cumulative wealth, and boast of a certain “ pride of ancestry ” and “ refinement of social position ;”  it is they from whom the sneers at the “ lower classes ” come ;  and they it is who take unto themselves the ordaining of laws and of customs and definitions of morality.15

From the very foundation of the United States Government, not to mention what happened before that time, the custom-house frauds have been continuous up to the very present, without any intermission.  The recent suits brought by the Government against the Sugar Trust for gigantic frauds in cheating in the importation of sugar, were only an indication of the increasing frauds.  The Sugar Trust was compelled to disgorge about $2,000,000, but this sum, it was admitted, was only a part of the enormous total out of which it had defrauded the Government.  The further great custom-house scandals and court proceedings in 1908 and 1909 showed that the bribery of custom-house weighers and inspectors had long been in operation, and that the whole importing class, as a class, was profiting heavily by this bribery and fraud.  While the trials of importers were going on in the United States Circuit Court at New York, despatches from Washington announced, on October 22, 1909, that the Treasury Department estimated that the same kind of frauds as had been uncovered at New York, had flourished for decades, although in a somewhat lesser degree, at Boston, Philadelphia, Norfolk, New Orleans, San Francisco and at other ports.

“ It is probable,” stated these subdued despatches, “that these systematic filchings from the Government’s receipts cover a period of more than fifty years, and that in this, the minor officials of the New York Custom House have been the greatest offenders, although their nefarious profits have been small in comparison with the illegitimate gains of their employers, the great importers.  These are the views of responsible officials of the Treasury Department.”  These despatches stated the truth very mildly.  The frauds have been going on for more than a century, and the Government has been cheated out of a total of hundreds upon hundreds of millions of dollars, perhaps billions.

And the thieving importers of these times comprise the respectable and highly virtuous chambers of commerce and boards of trade, as was the case in Gould’s day.  They are ever foremost in pompously denouncing the very political corruption which they themselves cause and want and profit from ;  they are the fine fellows who come together in their solemn conclaves and resolve this and resolve that against “ law-defying labor unions,” or in favor of “ a reform in our body politic,” etc., etc.  A glorious crew they are of excellent, most devout church members and charity dispensers ;  sleek, self-sufficient men who sit on Grand Juries and Trial Juries, and condemn the petty thieves to conviction carrying long terms of imprisonment.  Viewing commercial society, one is tempted to conclude that the worthiest members of society, as a whole, are to be found within the prisons ;  yes, indeed, the time may not be far away, when the stigma of the convict may be considered a real badge of ancestral honor.

But the comparison of Gould and the trading classes is by no means complete without adding anew a contrast between how the propertied plunderers as a class were immune from criminal prosecution, and the persecution to which the working class was subjected.

Although all sections of the commercial and financial class were cheating, swindling and defrauding with almost negligible molestation from Government, the workers could not even plead for the right to work without drawing down upon themselves the full punitive animosity of governing powers whose every move was one of deference to the interests of property.  Apart from the salient fact that the prisons throughout the United States were crowded with poor criminals, while the machinery of the criminal courts was never seriously invoked against the commercial and financial classes, the police and other public functionaries would not even allow the workers to meet peacefully for the petitioning of redress.  Organized expressions of discontent are ever objectionable to the ruling class, not so much for what is said, as for the movements and reconstructions they may lead to — a fact which the police authorities, inspired from above, have always well understood.


THE CLUBBING OF THE UNEMPLOYED.


“ The winter of 1873-74,” says McNeill,

was one of extreme suffering.  Midwinter found tens of thousands of people on the verge of starvation, suffering for food, for the need of proper clothing, and for medical attendance.  Meetings of the unemployed were held in many places, and public attention called to the needs of the poor.  The men asked for work and found it not, and children cried for bread. ... The unemployed and suffering poor of New York City determined to hold a meeting and appeal to the public by bringing to their attention the spectacle of their poverty.  They gained permission from the Board of Police to parade the streets and hold a meeting in Tompkins Square on January 13, 1874, but on January 12 the Board of Police and Board of Parks revoked the order and prohibited the meeting.  It was impossible to notify the scattered army of this order, and at the time of the meeting the people marched through the gates of Tompkins Square. . . . When the square was completely filled with men, women and children, without a moment’s warning, the police closed in upon them on all sides.
      One of the daily papers of the city confessed that the scene could not be described.  People rushed from the gates and through the streets, followed by the mounted officers at full speed, charging upon them without provocation.  Screams of women and children rent the air, and the blood of many stained the streets, and to the further shame of this outrage it is to be added that when the General Assembly of New York State was called to this matter they took testimony, but made no sign.16

Thus was the supremacy of “ law and order ” maintained.  The day was saved for well-fed respectability, and starving humanity was forced back into its despairing haunts, there to reflect upon the club-taught lesson that empty stomachs should remain inarticulate.  For the flash of a second, a nameless fright seized hold of the gilded quarters, but when they saw how well the police did their dispersing work, and choked up with their clubs the protests of aggregated suffering, self-confidence came back, revelry was resumed, and the saturnalia of theft went on unbrokenly.

And a lucky day was that for the police.  The methods of the ruling class were reflected in the police force ;  while perfumed society was bribing, defrauding and expropriating, the police were enriching themselves by a perfected system of blackmail and extortion of their own.  Police Commissioners, chiefs, inspectors, captains and sergeants became millionaires, or at least, very rich from the proceeds of this traffic.  Not only did they extort regular payments from saloons, brothels and other establishments on whom the penalties of law could be visited, but they had a standing arrangement with thieves of all kinds, rich thieves as well as what were classed as ordinary criminals, by which immunity was sold at specified rates.17  The police force did not want this system interfered with ;  hence at all times toadied to the rich and influential classes as the makers of law and the creators of public opinion.  To be on the good side of the rich, and to be praised as the defenders of law and order, furnished a screen of incalculable utility behind which they could carry on undisturbedly their own peculiar system of plunder.



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1 Gold Panic Investigation, House Report No. 31, Forty-first Congress, Second Session, 1870:157.  Corbin’s venality in lobbying for corrupt bills was notorious ;  he admitted his complicity before a Congressional Investigating Committee in 1857.

2 Gold Panic Investigation, etc., 160.

3 Gold Panic Investigation: 13.

4 Gold Panic Investigation, etc., 13.

5 “ Gould, the guilty plotter of all these criminal proceedings,” reported the Congressional Investigating Committee of 1870, “determined to betray his own associates, and silent, and imperturbable, by nods and whispers directed all.”—Gold Panic Investigation : 14.

6 Gold Panic Investigation, etc., 18.

7 The Congressional Globe, Appendix, Thirty-seventh Congress, Third Session, 1862-3, Part ii: 118.
      “ During the last session the Secretary had the honor of transmitting the draft of a bill for the detection and prevention of fraudulent entries at the custom-houses, and he adheres to the opinion that the provisions therein embodied are necessary for the protection of the revenue. . . . For the past year the collector, naval officer, and surveyor of New York have entertained suspicions that fraudulent collusions with some of the customs officers existed.  Measures were taken by them to ascertain whether these suspicions were well founded.  By persistent vigilance facts were developed which have led to the arrest of several parties and the discovery that a system of fraud has been successfully carried on for a series of years.  These investigations are now being prosecuted under the immediate direction of the Solicitor of the Treasury, for the purpose of ascertaining the extent of those frauds and bringing the guilty parties to punishment.  It is believed that the enactment at the last session of the bill referred to would have arrested, and that its enactment now will prevent hereafter, the frauds hitherto successfully practiced.”—Annual Report for 1862 of Salmon P. Chase, Secretary of the Treasury.  No matter what laws were passed, however, the frauds continued, and the importers kept on bribing.

8 If the degree of the scandal that the unearthing of these frauds created is to be judged by the extent of space given to it by the newspapers, it must have been large and sensational.  See issues of the New York “Times” and other newspapers of January 11, 1873, January 29, 1873, March 20, 1873, and April 20, 1873.  A full history of the case, with the official correspondence from the files of the Treasury Department, is to be found in the New York “Times,” issue of April 28, 1873.

9 See House Executive Documents, Forty-third Congress, First Session, 1874, Doc. No. 124:78. Of the entire sum of $271,017.23 paid by Phelps, Dodge and Company to compromise the suit, Chester A. Arthur, then Collector of the Port, later President of the United States, received $21,906.01 as official fees ;  the Naval Officer and the Surveyor of the Port each were paid the same sum by the Government, and Jayne received $65,718.03 as his percentage as informer.
      One of the methods of defrauding the Government was peculiar.  Under the tariff act there was a heavy duty on imported zinc and lead, while works of art were admitted free of duty.  Phelps, Dodge and Company had zinc and lead made in Europe into crude Dianas, Venuses and Mercurys and imported them in that form, claiming exemption from the customs duty on the ground of their being “works of art.”

10 At his death he was eulogistically described as “the merchant philanthropist.”  On the day after the appraiser’s report was filed, the New York “Times,” issue of March 29, 1908, said :  “Mr. James was senior member of the firm of, Phelps, Dodge & Co., of 99 John Street.  His interest in educational and philanthropic work was very deep, and by his will he left bequests amounting to $1,195,000 to various charitable and religious institutions.  The residue of the estate, amounting to $24,482,653, is left in equal shares to his widow and their son.”  On the same day that the appraiser’s report was filed a large gathering of unemployed attempted to hold a meeting in Union Square to plead for the starting of public work, but were brutally clubbed, ridden down and dispersed by the police.

11 Executive Documents, Forty-third Congress, Second Session, 1874, No. 2:225.

12 U.S. Senate Report, No. 1990, Forty-ninth Congress, Second Session, Senate Reports, iii, 1886-87.

13 Reports of Committees, Fortieth Congress, Third Session, 1869-70. Report No. 3, etc.

14 Executive Document, No. 2, 1874:140.

15 It is worthy of note that several of the descendants of the Phelps-Dodge-Stokes families are men and women of the highest character and most radical principles.  J.G. Phelps Stokes, for instance, joined the Socialist party to work for the overthrow of the very system on which the wealth of his family is founded.  A man more devoted to his principles, more keenly alive to the injustices and oppressions of the prevailing system, more conscientious in adhering to his views, and more upright in both public and private dealings, it would be harder to find than J.G. Phelps Stokes.  He is one of the very few distinguished exceptions among his class.

16 “The Labor Movement”: 147-148.  In describing to the committee on grievances the horrors of this outrage, John Swinton, a writer of great ability, and a man whose whole heart was with the helpless, suffering and exploited, closed his address by quoting this verse :

“There is a poor blind Samson in our land,
      Shorn of his strength and bound with bonds of steel,
Who may in some grim revel raise his hand,
      And shake the pillars of the Commonweal.”

17 The very police captain, one Williams, who commanded the police at the Tompkins Square gathering was quizzed by the “ Lexow Committee” in 1893 as to where he got his great wealth.  He it was who invented the term “ Tenderloin,” signifying a district from which large collections in blackmail and extortion could be made.  By 1892, the annual income derived by the police from blackmailing and other sources of extortion was estimated at $7,000,000.  (See “Investigation of the Police Department of New York City,” 1894, v:5734.)  With the establishment of Greater New York the amount about doubled, or, perhaps, trebled.