HISTORY OF THE GREAT AMERICAN FORTUNES

CHAPTER III

THE GOULD FORTUNE RESUMED



When haled in 1887 before that inquisitorial governmental body, the Pacific Railway Commission, Jay Gould vouchsafed little information ;  such as was elicited from him was of the most meager character.  He said that he had become the owner of a controlling interest in the Union Pacific Railroad Company in 1873 by the purchase of one hundred thousand shares, and that these holdings were subsequently increased to two hundred thousand shares.1  Sage testified that he himself had begun buying Union Pacific stock in 1868 or 1869.2  As soon as the grasp of these men and their associates was assured, their industriousness began.  Without any intermediate ceremony two hundred thousand shares of stock were forthwith issued, all certificates of nothing else than their self-arrogated power of present and future exploitation.

This manufacture, without any interference from law, of additional titles of ownership, was only one of their numerous and conterminous activities.  Their most plastic and successful plan, by which they were enabled to compound loot on a most magnificent scale, was that of buying in, as individuals, various railroads, and then selling them at exorbitant prices to the Union Pacific Railroad Company, which corporatively they controlled.  It was a plan which, although theoretically regarded in law as fraudulent, was nevertheless audaciously carried on with complete immunity.


A GREAT OPPORTUNITY FOR FRAUD.


With its extraordinary opportunities for self-enrichment on a great scale, this plan was one commonly practiced by the puissant capitalists of the times.  It had not by any means originated with Gould and Sage ;  other railroad capitalists had richly profited by it ;  so thoroughly has it commended itself as one of the simplest and most effective means of transferring wealth, that a long succession of magnates have consecutively availed of it to this very day.  Three generations of Vanderbilts have repeatedly demonstrated its value ;  those illustrious generalissimos of the ranks of wealth, J. Pierpont Morgan and E.H. Harriman, have been two more of the radiant cluster who have proved its enduring worth.

By this fraudulent process, incalculable sums of money, mounting into the hundreds of millions, have been seized with facility.  So pregnant with spoils has it been that even the United States Industrial Commission of 1901, distinguished for its easy-going conventions and acquiescent attitude, could not forbear saying in its mild, deferential way of transactions in which buyer and seller were the same parties :  “ The possibilities of fraudulent profits are something enormous under such conditions.  Formerly transactions of this kind were often effected by individuals who represented another person, or by families who were dominant influences in the directorate. ... With the enormous increase both in number and magnitude of such transactions, the capital required now exceeds the actual investment capacity of any except a few great fortunes.”3

Reduced to simple language this is authoritative confirmation of the truism that none but the mighty rich have the means to engage in a great campaign of theft.  Yet to focus attention upon the frauds of these particular capitalists, without inquiring into the good work which at bottom they were doing, would be grievously one-sided and misleading.  Notwithstanding their prodigious frauds, Vanderbilt and Gould and all the other masterful capitalists were, without being conscious of it, performing a great evolutionary service of the highest importance.  It was they who were among the leaders in consolidating and centralizing transportation and industrial utilities ;  in effacing the old wasteful competition and the warfare of the little capitalists ;  and in establishing an era of systematic, concentrated private control.  It was done despite statutory law and judicial decisions, in spite of every obstacle, for it had to be done ;  it was an inevitable stage of progress preceding further stages.  In doing it, however, the great barons were prompted by selfish greed only ;  they fixed their own price, a colossal price, taxing the producer to pay whatever toll they demanded.


THE PLUNDERING OF RAILROAD SYSTEMS.


One of the railroads that Gould, Sage, Sidney Dillon4 and their accessories bought as individuals, and then sold to themselves as directors of the Union Pacific, was the Kansas Pacific.  This line, about three hundred and ninety-four miles in length, was another of the many railroads the history of which was replete with unbroken corruption.  Its chief assets were an issue of Government bonds, and a land grant of three million acres in Kansas and Colorado.

From the very granting of the charter the corruption was so well established that none but the densely obtuse could be ignorant of it.  But what mattered the means used ?  The greater the corruption, the more certainty was there that the ensuing privileges, powers and profits would be all the richer.  And the more attractive the prospects, the more eager in their cupidity were the luminaries of the financial world to thrust in a hand.  Eminent bankers sharply competed to participate in the financing of the project ;  the floating of the Kansas Pacific loan was finally awarded to two banking firms.  One of these was Dabney, Morgan and Co., of which J. Pierpont Morgan was a member, and the other the house of Morris K. Jesup and Co., the head of which subsequently managed to become enrolled among the galaxy of glorified philanthropists.5  In their advertisements in 1869 these bankers glowingly descanted upon the splendid land grant of the Kansas Pacific — a grant, which they assured all intending investors, would be more than sufficient security for loans.


BLACKMAILING AND PILLAGE.


But the usual culmination came.  The Kansas and Pacific project was no exception to the invariable experience in railroad affairs.  It was assiduously plundered by the men on top of the heap, and the following of petty investors were neatly cheated out.  Obviously, stripped as it was, the market value of its stock sunk to an insignificant point.  Gould had been waiting for precisely this opportunity, but he did not avail himself of it before he had put through a sort of blackmailing scheme by which he could all the more effectually force the Kansas Pacific into his ownership.

With a loquacity that ought to have aroused keen suspicion, he proclaimed his purpose to break down the monopoly held by the Kansas Pacific ;  once more he posed as a middle-class benefactor.  Thereupon he began, or, rather, ordered, the building of a railroad in Colorado which trenched competitively upon part of the very territory the Kansas Pacific owners regarded as their own assured domain.  Gould’s scheme worked to perfection ;  Kansas Pacific stock was forced lower still, and its affrighted owners were speedily compelled to come to terms.  No sooner had Gould obtained possession of the Kansas Pacific, and consolidated it with the Union Pacific, than he at once abandoned the Colorado Railroad.6

Just how much of Kansas Pacific Railroad stock Gould, Sage and Dillon respectively secured is not clear, but the amount of booty that they collectively took in by the fraudulent process of selling this railroad and other railroads to themselves as masters of the Union Pacific, is quite clear.  No mean operation was it — something massive was there about it — such as might evoke a wondering admiration on the part of a society wherein great thefts were placed in an exalted category.

In the juggling exchange of stocks and bonds and the fraudulent diversion of funds, they stole (the Government termed it “ misappropriated ”) more than $20,000,000 in the Kansas Pacific, the Denver, South Park and Pacific, and other consolidations alone.  From the volumes of the Pacific Railway Commission’s report and investigation, certain definite facts are ascertainable.  Both the majority report, that of Commissioners Littler and Anderson, and the minority report of Commissioner Pattison, set forth that the frauds of the Union Pacific Railroad Company, under the direction of Gould, Sage and Dillon, were truly gigantic.

Millions of acres of public land were stolen outright.  Not less than seven million acres were sold without any patent from the Government.7  Coal lands of inestimable value were fraudulently seized.8  Millions of dollars were fraudulently shuffled from one corporation to an other.  The stock of the Union Pacific was inflated from $38,000,000 to $50,000,000, the bonded indebtedness from $88,000,000 to $126,000,000, and sundry other indebtedness from about $4,000,000 to nearly $10,000,000.  The majority report referred “ to the lavish and reckless distribution of the assets of the company in dividends ” and expressed sharp curiosity as to why the Union Pacific Railroad Company, although doing a large and profitable business, “ found itself early in 1884 on the verge of bankruptcy.”

While these huge stealings were going on, and after a Government action for “ misappropriation of assets ” had been begun, Gould and his accomplices took steps to grant themselves immunity from legal consequences.  “ It appears,” says the majority report, “ that, while this litigation was pending, certain proceedings were taken by the directors whereby by their own acts and votes they undertook to release themselves from any obligations or liabilities to the company.”


FORTY MILLION DOLLARS GOULD’S SHARE.


The minority report was even severer and more searching.  It set forth that the Union Pacific and the Kansas Pacific had received about $35,000,000 in advances from the Government, little of which had been paid back, and that up to 1887 the sum of $136,314,010.73 “ had been dissipated ” by the directors of these two railroads.9  Fully $84,000,000 of watered stock had been issued.  “ The Union Pacific Company,” the minority report went on, “ has received $176,294,793.53 in surplus earnings and land sales during eighteen years, and if its stock had been fully paid, as Congress required that it should be, and as its officers certified under oath that it was, nearly all of that money would be applicable to-day to the payment of the Government debt.  The company has paid out $28,650,770 in dividends, and $82.742,850 in interest on bonds, nearly all of which was distributed to shareholders without consideration.  It has sunk over $10,000,000 in Denver, South Park and Pacific ;  it paid out $10,000,000 to Jay Gould and his associates for branch lines and other investments which were worthless.” . . . Commissioner Pattison estimated that Jay Gould’s personal profit from his manipulation of the Union Pacific amounted to probably $40,000,000.10

A large part of the sum that Pattison included in his estimate of the total theft from the origin of the Union Pacific Railroad was, as we have seen, stolen by Gould’s predecessors in the Credit Mobilier swindle.

Inasmuch as technical financial terms often present mystifying difficulties to the unaccustomed, a definition of stocks and bonds may not here be out of place ;  the more appropriately so since it will explain how the manipulators of railroad and other property constituted themselves both shareholders and creditors.

If they desired a railroad to be on a paying basis, they, as stockholders, took its dividends ;  if it suited their ulterior purposes to bankrupt it, they, as bondholders, could foreclose and buy it back at a bargain price.  In the phrase of the street, they could “ play both ends against the middle.”  Bonds and stocks, although both classed as capital, differ in certain salient respects.  Bonds are certificates of indebtedness theoretically issued to those who have made loans to a corporation, and can be effaced upon payment of the principal.  Stocks, on the other hand, are certificates of ownership theoretically issued to investors ;  by their nature they are in law perpetual.  In brief, then, the stockholders are the owners of a corporation ;  the bondholders its creditors.


THE FARCE OF THE COURTS.


The query can here naturally be expected :  Why was Gould not prosecuted for his malefactions ?  How was it possible for him to have carried through his immense thefts without some visitation of criminal proceedings ?  So long as he robbed the people, the great plodding, powerless multitude, without any real representation in political office, it could be understood that his license would in nowise be interfered with, seeing that all law was at the command of the rich freebooters.  But Gould plundered his own class as well ;  outraged, betrayed and pillaged his own associates ;  they were men of power ;  why did not they invoke the terrors of criminal law ?

Well, some of them did.  But it profited them no more than it did his opponents in his famous Erie steals.  Threatened with jail several times, Gould easily contrived to keep out of it, as did his similars in every great capitalist fraud.  An indictment found against him on May 13, 1879, by the Grand Jury of Monmouth County, New Jersey, for alleged fraudulent transactions, did not trouble him in the least.  The charge in this case was made by the Lehigh Car Manufacturing Company that it had supplied cars to him on false representations ;  that it had agreed to accept as payment first-mortgage bonds of the New Jersey Central Railroad, only to discover, when too late, that these bonds were spurious “ consolidation bonds ” representing a consolidation that was never made.

Out of this indictment Gould somehow wriggled, and nine years later he was as successful in snuffing out another case of criminal proceedings.

This was in 1888 ;  powerful adversaries sought hard to put him in prison ;  and it was the knowledge of their power and persistence that thoroughly alarmed Gould.

Certain of these opponents were disgruntled bondholders of the Denver Pacific Railroad, and they were assisted by the owner of an important New York newspaper whose interests Gould had crossed and thwarted in the telegraph and submarine cable field.  The charge revolved around a tricky piece of perjury by which Gould, Sage and Dillon, in their railroad consolidations, had embezzled several million dollars in the jugglin ;  of thirty thousand shares of Denver Pacific stock.  These bondholders had begun an action against Gould and Sage in New York, in 1885, for restitution ;  the newspaper owner daily emitted savage maledictory broadsides against Gould, and demanded his punishment.  And to cap it all, the foreman of the Grand jury sitting was a fellow capitalist, whom Gould had cheated fifteen years before in one of his railroad transactions.

It was a formidable combination arrayed against him.  Gould knew it.  He realized at once that he had better settle with the complaining bondholders and light out and with dispatch ;  he thereupon came to terms with them, and then fled on his yacht and remained in foreign parts until the statute of limitations could be pleaded with success in his behalf, so far as criminal proceedings were concerned.


A WIDE TRAIL OF CORRUPTION.


Still another question, although an idle one, may arise :  How was Gould able to get the laws necessary for his numerous frauds, and immunity from legislative and other official action ?  The Pacific Railway Commissioners’ report does not answer this question elucidatively.  The minority report, however, sheds a few more rays upon his methods.  “ Hundreds of thousands of dollars,” it says, “ have been disbursed at the State and National capitals for the purpose of influencing legislation.”11  Frequent references are made to “ payments for improper purposes.”  However, even if the commission had not explained in its meager, grudging way the corruption following Gould everywhere, it could be taken for granted ;  his trail of bribery and fraud had been a public stench for full twenty years, in which respect he differed much from most contemporary wealth-seekers, for whereas he acquired both name and game they, too, had the game, yet so cunningly was it bagged that they were able to slip into the cover of good repute.  Also, let this fact not be overlooked ;  that the widespread bribery was but a form of procuring license to prey at pleasure.  To get laws sanctioning theft, and official connivance at the retention of the proceeds, it was necessary to divide among the politicians (including some of those on the bench) a certain portion of the spoils.

By about the year 1883 Gould discarded the Union Pacific after having, as he believed, looted the marrow out of it.  Doubtless his conclusion was aright, seeing that no further immediate booty was in sight in that particular line and at that day.  But in the fullness of time, namely, fifteen years later, when the country’s population and resources had greatly expanded, a worthy successor, in the person of Harriman, came irresistibly along to imitate and elaborate Gould’s methods.  Not to the purpose is it here to anticipate the narrative of Harriman’s career ;  this will be faithfully found in its proper place ;  but one more addendum is needed to give a kind of finishing touch to the tale of the Kansas Pacific Railroad, if only to show that others knew how to begin where Gould left off.

The $40,000,000 or thereabouts in loot which Gould appropriated came in considerable part from the Kansas Pacific transaction.  The final swindling of the Government out of much of the advances that it had given for this road, occurred in 1898 — at the precise time when Harriman was bursting brilliantly into wealth and Power.

The Government held a remaining claim against the Kansas Pacific for $13,000,000.  A fraudulent plan had been concocted to have the Government sell its lien at one-half of the amount due ;  a most deftly preconceived plan it was, and only on the eve of its consummation was there any noise raised.  Turpie offered a motion in the United States Senate that the sale be not confirmed ;  supporting that motion, Senator Allen rose on February 16, 1898, and remarked that “we might as well enact a statute taking $6,700,000 out of the Treasury and make an absolute donation of it.  It would be no more criminal, no more in violation of the statutory rights of the people.”12  Senator Morgan, of Alabama, denounced the sale as robbery, Harris called it a swindle, and its promoters thieves.  Robust language, but it did not interfere with the hasty sale for $6,000,000 of the Government’s lien on that very same day.


VAST AREAS OF COAL FIELDS STOLEN.


To form any adequate conception of Gould’s thefts in his manipulation and management of the Union Pacific consolidation, a mere money computation falls flat.  The resources expropriated by Gould and by his descendants cannot be expressed in money terms.  For example, the enormous coal deposits expropriated from the people — who can say what their exact money value is ?  The Interstate Commerce Commission announces that practically the entire coal supply of Oklahoma, Utah and Wyoming is owned and monopolized by the Gould railway system, principally by the Denver and Rio Grande Railroad, which was one of a number of Western railroad lines that Gould held onto and bequeathed to his children.

How was the ownership of these extensive coal fields obtained ? Here we do not have to encounter any intricacies of stock and bond finance ;  they were simply seized with just enough formalities to give some color of complying with the law.  Behind these thin formalities lay a long path of “ fraud, perjury and violence,” says the Interstate Commerce Commission’s report of 1908.  In commonplace official diction the story of the seizure of these deposits is there told ;  how for forty years or more the Gould and other railroad corporations have employed dummy “ occupiers ” — mainly women — to file fictitious entries on public coal lands, and then have had the claims transferred.  An inexpensive method it has been, ridiculously easy to get much for little ;  the dummy “ occupiers ” were paid $50 or $100 each to do their fraudulent work.  And if a coal or an oil deposit could not be obtained by fraud, then — if the numerous testimony taken by the Interstate Commerce Commission is correct — force was used to oust such individual occupants as had lawfully acquired the land.13

Continuously, since 1866, these thefts of coal and oil lands have gone on with but occasional stoppages due to official investigations.  These in nowise served to prevent a fiercer resumption.  The Interstate Commerce Commission recently reported that the Gould and Harriman lines in a large region beyond the Mississippi “ absolutely dominate the mining, transportation and selling of coal along their lines.”  Uncounted paragraphs and strings of affidavits, all embodied in the official volumes, sustain the charges of fraud, perjury and violence.  Yet the beneficiaries of those colossal frauds have good reason to smile amusedly at all such futile investigations ;  the ownership of most of the stolen property, however procured, is theirs ;  some the Government succeeded in getting back, but proportionately little.  On the whole, the beneficiaries are well satisfied.

Let it not be supposed that Gould’s mind was so preoccupied with his Union Pacific piracies that he was oblivious to opportunities elsewhere.  Far from it.  This undersized man, with his mild voice and inconspicuous, almost effeminate, personality, was, indeed, an irrepressible conquerer, seizing and pillaging not merely wherever he went, but in many places and in different fields simultaneously.  In his own chosen method of warfare, his mind was an extraordinarily versatile one, wonderfully gifted at computation, with the virile ability to keep track of a vast variety of involved transactions at the same time.  With the law end of them he did not have to concern himself ;  at call he could always hire a corps of the most dexterous attorneys, none of whom scrupled to take as payment a fraction of his thefts.  Lawyers, some of whom became judges in the highest courts in the country, and other lawyers who had been judges and had resigned to draw large retainers from the very corporations in whose favor they had handed down decisions, pleaded and plotted for Gould.  An excellent client he was ;  the litigations in which he was involved were extensive.


GOULD’S TEXAS PACIFIC UNDERTAKING.


Wherever he appeared, the lesser frauds were overwhelmed and flung out and he, the great fraud, substituted himself in their places.  This he again demonstrated in his appropriation and looting of the Texas Pacific Railroad.  This line had received the usual Government subsidies and land-grant gratuities.  The corruption used in the procuring of these was fully revealed in the celebrated “ Huntington letters,” which came to light later in a suit arising between two railroad factions.  The writer of these letters was a man who knew ;  a preŽminent corrupter himself ;  he was none other than Collis P. Huntington, one of the dictating railroad magnates of the period.  In 1876, 1877 and 1878, the years covered by his letters, a furious competition in corruption was in progress at Washington, and Huntington wrote unreservedly of it.14

After Congress passed the Texas Pacific Railroad Act, Gould turned up with a scheme closely resembling the Credit Mobilier swindle.  Forming a construction company he entered into a contract with the Texas Pacific Railroad Company to build the westward extension, embracing about six hundred miles.  For this work $12,000,000 in bonds was to be paid, and a stock bonus of another $12,000,000.  A very remarkable contract it was, tantamount to giving Gould a present of the system ;  its execution could be explained only upon the premise that Gould had bought up a sufficient number of the railroad directors, with an assurance that they would get a generous dip into the plunder.  For by the terms of the contract, the stockholders of the Texas Pacific owned a one-sixth interest only in the construction company ;  this left the Gould syndicate with $10,000,000 in stock, which easily sufficed to give it the mastery of the road.  It placed him in a position where he could elect its directors, make further contracts with himself on any basis he chose, manipulate its affairs, and, in general, make them dovetail with his many other schemes.


MORE RAILROAD SYSTEMS GATHERED IN.


The Texas Pacific was one of the four main lines that Gould and Sage obtained control of by their well-known methods.  These it is scarcely necessary to recapitulate.  Another of their lines was the Wabash, composed of sixty-eight originally separate little railroads in Ohio, Michigan, Indiana, Illinois, Missouri and Iowa.  Within five years of the time they gained hold of the Wabash, Gould and Sage had obtained a great series of privileges from various States, looted the railroad of millions of dollars, and then had thrown it into bankruptcy.l5  So nauseatingly fraudulent were their methods, that Judge Gresham, of the United States Circuit Court — one of the few judges of independent character — removed receivers whom Gould and Sage had caused to be appointed, and accompanied this act with a caustic denunciation ;  all of which had no effect upon Gould’s ownership ;  he retained its control and it descended to his family.

Each new haul gave Gould and Sage a still greater supply of resources with which to manipulate other railroads and other public utility systems into their control.  The Missouri Pacific, with its chain of railroads for the building of which the State of Missouri had advanced $25,000,000, was next added to the list.  It suited the plan of Gould and Sage not to drive this railroad into bankruptcy as they had the others.  In this instance they had a special design.  By fraudulently diverting freight traffic at the expense of their other railroads, they so increased its “ earnings ” that its stock commanded a high value ;  the selling of the stock at the apex price yielded them large sums.  Then they would depreciate the value of the stock and buy it back.  The Missouri Pacific is to-day one of the most prized possessions of the Gould family ;  its control is so compactly a matter of callow family inheritance that only recently, in 1909, Kingdon Gould, a grandson of Jay Gould, was installed as a director.

All of these various systems were annexed by Gould in approximately the same years that he was plundering the Union Pacific.  Shall we enter into a recital of the network of details by which the final result was accomplished ?  The maneuvering, the coercion here, the bribery there, the undermining of this faction of capitalists, and the overthrow of that, the legal devices and long-drawn law suits — all these form a complex narrative which, if copiously described, would be confusing and wearisome.  But the battering methods Gould used in getting hold of other properties are worth an outline, showing as they do, the manner in which the railroad and industrial kings fought out their wars.


VANDERBILT BLACKMAILED AND OUTGENERALED.


In looking about for new properties to add to their possessions, Gould and Sage, when sacking the Union Pacific Railroad, decided that the Western Union Telegraph system should be theirs.  Any other set of capitalists would have hesitated long before venturing such a plan, for that company, the strongest of all the telegraph companies, was controlled by William H. Vanderbilt, the richest capitalist in the United States.  Gould and Sage were not at all deterred by the prospect ;  they had a plan by which they could force out Vanderbilt ;  it was none other than the species of blackmailing scheme which they had used to coerce the Kansas Pacific directors, a scheme which Vanderbilt himself had employed, and which competing capitalists had used against him.

This oft-used scheme of the day was the very simple one of building a competitive telegraph line.  Again Gould came forward with the posture of being an “ antagonist of monopolies ”;  sweetly did he discourse on the necessity of complete competition.  It was at this time that Senator Vest minted his trenchant comment upon the professions of the money seekers, “ When they speak they lie ;  when they are silent they are stealing,” an epigram deserving of perpetuation.

Along the line of the Union Pacific Railroad and of their other railroads, Gould and Sage ordered the construction of a telegraph line, with the fixed purpose of compelling Vanderbilt either to buy or to sell.  So seriously was the business of the Western Union Telegraph Company cut in upon, that, in self-protection, it was finally forced to buy Gould’s competing line for about, it was understood, $10,000,000.  Having pocketed this large sum wrenched from Vanderbilt and his associates, Gould then plunged in and took away their entire telegraph system.  By every trick and art of Stock Exchange speculative methods, Gould forced down the price of Western Union stock, and gradually bought in quantities.  To Vanderbilt’s complete surprise and extreme mortification, Gould turned up in 1881 not only with a control of the Western Union, but also of the American Union Telegraph Company which he had sold to Vanderbilt but a short time previously.


THE MONEY ARISTOCRACY AND GOULD.


Upon obtaining control of the Western Union Telegraph Company, Gould immediately increased its stock and kept on increasing it.  Triumphant, gorged with spoils and power, Gould did not have to court the support of all that was considered solid and respectable among the money aristocracy.  They knew him to be a great thief, and he knew their caliber, despite the exterior that they had woven about themselves.  The instinct of kind for kind is unerring ;  which instinct in a money world is reinforced by that invariable principle of action whereby wealth-seekers rally around him who proves his supreme ability to get away with the plunder.  The vanquished are expeditiously deserted ;  the successful flocked about.  Such fellow kings of wealth as John Jacob Astor, J. Pierpont Morgan, Collis P. Huntington and others were among the noble array to be found in Gould’s board of directors ;  a notable lot many, or all, of whom had pursued careers more or less paralleling Gould’s  ;  a sophisticated confraternity they comprised, fully and finely capable of understanding one another.

All were wary old stagers ;  Gould could not easily overreach them ;  while all of them were not quite as astute as Sage, most were widely schooled in every devious tactic and ruse of financial and industrial warfare.  Their safety lay in their lack of trust ;  the very reverse of the virtues they preached was developed by the necessities of their conflict.  But when a credulous man, such as Cyrus W. Field, the originator of the submarine cable, stepped along with his confiding faith in Gould’s friendship, spoliation and ruin were easy accomplishments.  Field was simple enough to believe in Gould ;  only after Gould had mercilessly squeezed his wealth out of him, and had turned him adrift a bankrupt, did Field, too late, begin to realize that friendship had no place in the competitive whirligig.  Field had little reason to whine over his misfortunes ;  the wealth that Gould tore from him was the product of a series of frauds in the results of which he was very willing to share.


GOULD SWEEPS IN ELEVATED RAILROADS.


This fleecing of Field happened in Gould’s thimblerigging of elevated railroad stocks in New York city.  No part whatever had Gould in the building of this elevated system ;  the franchises by which the roads were constructed and operated had been obtained by bribery.  After other capitalists had done the bribing and had shown how profitable these elevated railroads were, Gould and Sage reached out for their ownership.

It was fairly well established before the Hepburn Legislative committee, in 1879, that about $650,000 had been expended in bribes to get the charter of one of these elevated railroad companies, the Gilbert, later called the Metropolitan.  Under examination, Jose F. Navarro, one of the officials of the company, testified that up to the time the building of this railroad was started, $650,000 had been spent.  Questioned as to whether it had been expended at New York or at Albany (the seat of the Legislature) he replied that he did not know.  It was quite clear from the interrogatories and answers that this $650,000 had been used as a corruption fund.16  Probably a similar sum had been used to get the franchise of the other elevated railroad, the New York.

The old device, so familiar in railroad building, of organizing a construction company, was employed in the building of the elevated railroads.  A company called the New York Loan and Improvement Company was brought forth to carry on the work of construction.  The same men were directors of both construction company and elevated railroad companies, and made fraudulent contracts with themselves.17  Such capitalists and “philanthropists” as George M. Pullman, John P. Kennedy”18 and others profited heavily from these fraudulent transactions ;  they were, at the same time, reaping wealth elsewhere by many other methods of the same character.

After the first two elevated railroads were built, a new scheme of plunder was conceived and carried out.  A company called the Manhattan was chartered with a capital of $2,000,000, ostensibly to build elevated railways.  But it did not build a single foot ;  the same clique in control of the New York Loan and Improvement Company turned up in control of the Manhattan, and they leased the two existing roads to the Manhattan.  Little actual cash did this lease cost them ;  they illegally increased the Manhattan’s capital stock from $2,000,000 to $13,000,000, which amount they divided as loot.19  By stockjobbing methods Gould and Sage then crushed out most of the small stockholders, and secured control.  They proceeded to water the stock still more, consolidate the whole system, and crowd out the more powerful stockholders.


FIELD THROWN OUT.


Certain of the heavy stockholders, such as Field, stood in with Gould and Sage, but others bitterly fought the various fraudulent moves and expedients that Gould and Sage brought into play.  The outcome of the ensuing legal contest could be forecasted.  Gould seldom went into court without owning his judge.  The judicial tool this time was Westbrook of the New York Supreme Court ;  when Gould had started out in his career of theft, Westbrook had been his first lawyer.  Now as judge, Westbrook issued orders and injunctions backing up Gould and Sage’s fraudulent acts.  His subservience was so notorious that he once held court in Gould’s private office in the Western Union Telegraph Company’s office and issued an injunction.20

After becoming absolute masters of the elevated railway systems in New York city Gould and Sage no longer had any use for Field.  At the first opportunity the stock market was rigged to divest Field, and he was thrown out to linger and die a ruined man.



 

1 Pacific Railway Commission, U.S. Senate Executive Documents, First Session, Fiftieth Congress, i : 53 and 447.

2 Ibid., 340.

3 Final Report of the Industrial Commission, 1902, xix: 326-327.

4 Dillon was the founder of an extensive fortune ;  his descendants are among the prominent railroad owners of the United States.

5 His estate, after his death on January 22, 1908, was estimated at $12,814,894 in net personal and real estate.  A large portion of the estate was in railroad securities.

6 Pacific Railway Commission, i:175.

7 Pacific Railway Commission, i : 192.

8 Ibid.

9 Pacific Railway Commission, i:147.  The Government subsequently compelled the Union Pacific to make a sort of settlement.

10 Ibid., i:150.

11 Pacific Railway Commission, i : 192.

12 The Congressional Record, Fifty-fifth Congress, Second Session, Vol. iii, Part II: 1761.

13 One of the capitalists connected with Gould and Sage was David H. Moffatt, Jr. Moffatt was an official of the Denver Pacific Railway and Telegraph Company, and was associated with Gould and Sage in the Union Pacific Railroad.  He became one of the foremost millionaires in Colorado.  Some of his methods were revealed in a case before the Supreme Court of the United States.  The Government had brought suit to cause the cancellation of two patents of land in Colorado, granted about ten years before, in 1873.  This land was partly a valuable mineral tract, containing large deposits of coal and iron.  The Government won its case in the lower courts, and Moffatt appealed.  In its decision the Supreme Court held that Government land officials had conspired to defraud the Government ;  that patents of land were made out in fictitious names of alleged settlers ;  that the affidavits were forged, and that Moffatt was the real beneficiary and “knew of the false and fraudulent character of alleged preemptions.”  (United States Reports, Vol. CXII:24-32.)  In this particular case, Moffatt was defeated, but it is very likely that he was successful in similar instances of acquiring mineral lands.

14 In a letter dated December 17, 1877, Huntington wrote :  “ Jay Gould went to Washington about two weeks since, and I know saw Mitchell, Senator from Oregon.  Since which time money has been used very freely in Washington. . . . Gould has large amounts in cash and he pays it without stint to carry his points.”  In a letter dated May 3, 1878, Huntington wrote that the Texas and Pacific “ folks offered one member of Congress $1,000 cash down, $5,000 when the bill passed and $10,000 of the bonds” if he would vote for the bill, etc., etc.

15 A detailed account of this wrecking transaction appeared in the “ North American Review,” issue of February, 1888.

16 Railroad Investigation of the State of New York, 1879, v : 43.  These franchises originated during the period of the Tweed regime.  The New York Legislature was then being frequently corrupted.  When the franchise for the Bleecker Street and Fulton Ferry surface line, New York City, was obtained, $434,000 of its bonds were distributed gratuitously.  (See “The History of Public Franchises in New York City,” p. 121.)

17 Ibid., 12.

18 Of Pullman some facts have been brought out in Vol. i of this work.  Another example of his methods and standards at about this time may be instructive.  After Jacob Sharp had bribed the New York City Board of Aldermen with $500,000 in cash, in 1884, to give Sharp a franchise for a surface railway on Broadway, the owners of the franchise issued $952,000 in stock and $2,500,000 in bonds for the construction of a railway only three miles in length, and the real cost of which was only $160,000.  These bonds were unlawfully and dishonestly issued.  Pullman knew that fact, and also of the bribery.  In exchange for cars supplied by him, he received $150,000 of these bonds at fifty cents on the dollar.—See report of, and testimony before, the New York Senate Investigating Committee, “ Senate Committee — Broadway Railroad, 1886 ”: 181.

19  Railroad Investigation of the State of New York, 1879, v : 6 and 7.

20 The New York State Assembly later impeached Judge Westbrook for malfeasance in office ;  but from the Senate, as trial body, he managed to get a verdict of acquittal.