HISTORY OF THE GREAT AMERICAN FORTUNES
To detail the story of the acquisition of other great American fortunes, would, even if presented in the most compact way, require a whole series of further volumes.
The important facts alone of the fortunes derived from the Standard Oil Companythe Rockefellers and the associated lesser but large fortunes such as the Flagler, Archbold, Harkness, Rogers and otherswould, at the very least, fill a large volume. This company was a generator of multimillionaires. The ways by which the power and wealth of the Standard Oil Company, formed in 1870, were built up were set forth in many an official investigation in the past, the whole making a narrative of the debauching of politics and law-making bodies, the frequent control of the judiciary, defiance or circumvention of law, obtaining of secret rebates from railroad companies, ruthless crushing of competitors, and arrogation of monopoly. The Standard Oil Company was the first trust devised, and its example was followed by many other industrial organizations.
Soon after its formation, the Standard Oil Company adopted the method of bringing persuasion or pressure to bear upon railroad owners to discriminate in its favor in giving low freight rates. This, in 1878, moved William H. Vanderbilt to declare before the New York Legislative Committee Investigating Railroads that if the policy continued, the Standard Oil Company interests, with the enormous profits they were making, could soon own the railroads of America. This apprehension or prediction turned out to be considerably true.
Public agitation was furious, for the doctrine that free competition was the life of trade was then deeply rooted in the popular mind. In the West and Southwest the Farmers Alliance, and in the East the Knights of Labor, demanded legislation against monopolies and railroad favoritism. Likewise the large number of small manufacturers and dealers. In response, State after State enacted laws which, of course, had no jurisdiction outside of State boundaries. But to prevent even such laws from being enforced, public officials were subsidized and political organizations corrupted. Then came a popular demand for a national law; resolutions and memorials denounced trust oppression and the acts of arrogant millionaires and plutocratic nabobs. The Interstate Commerce Commission was established in 1887 to propitiate public opinion demanding a regulatory power over railroads, but its powers were long weak.
In introducing his bill for the suppression of trusts, Senator John Sherman, in 1890 related how the popular mind is agitated with problems that disturb the social order, and among them none is more threatening than the inequality of condition, of wealth and of opportunity that has grown within a single generation out of the concentration of capital into vast combinations to control production and trade and to bring down competition. Various powerful members in the United States Senate at that very time were either Standard Oil beneficiaries or lawyers who had represented great corporations. Congress passed the Sherman Anti-Trust act which declared combinations in restraint of trade illegal. But as the law contained only a slight penalty, making a mere misdemeanor of the act of monopolizing products, it did not in the slightest degree prove a deterrent.
THE POLITICS OF BUSINESS
The Sherman Anti-Trust law as well as other laws were indifferently brushed aside by the magnates rushing forward to organize trusts ; only a year after the enactment of the Sherman Anti-Trust law, the Havemeyers and associates formed the American Sugar Refining Company, a combination of one hundred and twenty-one plants. From their sugar refinery, that of Havemeyer & Elder, the Havemeyers had already become multimillionaires, and their fortune and the fortunes of their associates were enormously enhanced by the inordinate profits of the Sugar Trust. While the Rockefellers and their colleagues ever maintained a policy of profound silence, acknowledging nothing and disclosing nothing, Henry O. Havemeyer frankly, realistically admitted before a special committee of the United States Senate, in 1894, that trusts, railroad companies, corporations of all kinds, and rich individuals periodically contributed large amounts for campaign election purposes ; such politics of business, he testified, was the custom of every individual and corporation or firm, trust or whatever you like to call it. Always in State campaigns, he further testified, the dominant party received the contribution.
This corruption was widespread and continuous. In return, official favors and immunity from molestation, or at any rate from serious prosecution was expectedand was given. And in such cases as disclosures and the indignation of public opinion forced officials to take some action, the result did not inconvenience the money magnates. This fact was illustrated by many cases, one of which is here to the point. In a previous chapter we have passingly referred to the great custom-house frauds committed for the benefit of the combination called the Sugar Trust, but now that we are specifically touching upon the origin of the Havemeyer and other fortunes from that industry, an extensive elucidation is called for. Under the caption Frauds upon the Revenue, the 1909 Annual Report of the Attorney-General of the United States (pp. 11 and 12) gave this account :
THE SUGAR INDUSTRY AND FRAUD
An investigation was undertaken during the year 1907 into certain alleged frauds upon the Government in the underweighing of sugars imported into the United States by the American Sugar Refining Cornpany and its predecessor, Messrs. Havemeyer & Elder. This investigation resulted, among other things, in a suit by the United States against the American Sugar Refining Company based upon proof of systematic frauds practiced in the weighing of sugars on the docks of the Havemeyer & Elder refineries in Brooklyn, N.Y., between the years 1901 and 1907.
As a matter of fact, it may be interpolated, the Custom House records published by the Sun of New Yorkthen a morning newspaperon November 11, 1909, showed that the frauds had been going on for at least two decades. The Suns front-page, nine-column article, running over to the second page, giving the evidence began : The Sugar Trust has stolen boldly and enormously, as the subjoined article shows, from the United States Treasury for at least twenty years. It stole with the assistance of officials employed by the United States. It was nursed and protected in its stealings by powerful politicians. . . Those who knew that the Sugar Trust was a thief and who sought for legal proof in the Custom House records were referred to the thief itself. . . . The facts show that the Sugar Trust could not have stolen upwards of $30,000,000 without the cognizance of Treasury officials and the patronage of politicians. . . . It stole from 5 to 10 per cent of the duty on every cargo. . . . The Sugar Trusts power was such that it secured a special rate of estimating duties. This enabled it to juggle figures in the New York Custom House. . . . Shippers of sugar the world over knew of this robbery. Carriers knew it. Weighers knew it. Officials within the Custom House itself must have known it. The Sugar Trust silenced revelations. Further, the article declared, the $30,000,000 that the American Sugar Refining Company had stolen in 20 years had been done with the assistance and connivance of powerful and petty politicians, including men of both of the old political parties who shared in the plunder.
Returning to the U.S. Attorney-Generals Report we find this record : The evidence in the suit revealed a long-continued system of defrauding the Government, of unparalleled depravity. The Government obtained a judgment. This resulted, late in April, 1909, in the making of a compromise whereby the company paid to the Government the amount of the judgment of $134,411.03, and in addition the sum of $2,000,000, on account of duties fraudulently withheld by it on account of shortweighing of sugar imported by the American Sugar Refining Company of New York and the American Sugar Refining Company at the Havemeyer & Elder Refineries in Brooklyn or at its Jersey City refinery. This compromise was approved by the Secretary of the Treasury and by this department, and was accepted in full settlement of all civil liabilities. . .
GREAT THEFTS COMPROMISED
In its article the Sun ridiculed the trivial judgment thus accepted from a corporation capitalized at $90,000,000. It pointed out that the Federal District Attorney, in his opening address to the same jury which accorded the judgment, had declared that the Government could have asked for a far greater sum on Custom House entries in the previous three years, a period not covered by the statute of limitations. For it was upon this statute that the American Sugar Refining Company was able to base its main defense against full restitution. Even so, the Sun article stated, counsel for the company had informed its directors that a total of $9,000,000 could have been demanded.
But what of criminal proceedings ? In making the settlement the Government had expressly reserved the right to prosecute all individuals responsible, even went on the U.S. Attorney-Generals Report with a deferential tone, if such individuals were officers of the company. His report continued : The evidence has disclosed a network of corruption, not confined to the American Sugar Company, extending over a period of years, affecting both importers and officers of the Government, and it is as yet premature to state the precise extent of the conspiracy or the amount of the revenue of which the Government has been defrauded. Yet he feared that the statute of limitations may have run in favor of many of the malefactors who are responsible for these frauds.
But who in this case were criminally prosecuted and were convicted ? A few employees. Henry O. Havemeyer had died in 1907 ; besides dominating the sugar industry he had been a power in the world of finance as a director of the National City Bank. But other directors and officers of the American Sugar Refining Company could have been reached by law. Not one was incommoded by a criminal process, and the Sugar Trust kept on its flourishing way deriving continuous great profits from a high tariff and from secret low freight rates from railroads enabling it to overreach competitors. And, of course, there were the usual trust stock waterings and manipulations.
Public agitation kept demanding punishment of the men higher up in the Sugar Trust responsible for the frauds practiced upon the Government. The principals of the American Sugar Refining Company were, obviously enough, a matter of record, but in a singular expedition purporting to be an effort to find out the identity of the chief culprits, a House of Representatives investigating committee, in 1911, incidentally brought out information as to stock juggling. The head of a nominally separate but subsidiary company of the American Sugar Refining Company testified that he himself had issued $10,000,000 of the common stock of that company to Henry O. Havemeyer without any cash consideration. Havemeyer lived in a spacious Fifth Avenue mansion and became renowned as an art connoisseur and collector. There was considerable mystery about his will ; his lawyers filed only a memorandum and not the will itself ; evidently they wanted to withhold from the public the amount of the actual estate he left. The only information given was that the will contained no public bequests ; that the entire estate was given in trust for the benefit of his three children ; and that $50,000 yearly was given to his widow during her life. A valuation of his estate, made in 1910 by State Appraisers, showed that the value of ascertainable property in his possession at the time of his death was $14,500,000. His family presented his art collection to the Metropolitan Museum of Art. These are only a few illuminating facts regarding the sugar industry and its developing trust from which a number of multimillionaire fortunes have come. In World War and post-World War years when, as we have said, there was widespread great profiteering, the American Sugar Refining Companys dividends on its common stock ran from 8½ to 10 per cent.
LAW BRUSHED ASIDE
Trust magnates were superior to law and could well afford to contemplate it with disdain. More anti-trust legislation enacted by Congress in years subsequent to 1890 did not accordingly retard the organization of a host of industrial trusts. Between 1894 and 1901, hundreds were formed with an aggregate capital of $4,000,000,000. And even if, prompted by great public agitation, the Government did make a brave show of bringing criminal proceedings, the highest court found a way of interpreting. In particular, in a suit against the Standard Oil Company, the Supreme Court of the United States applied what it termed the rule of reason; to prove a trust criminal, the ruling held, it was necessary to prove it undue or unreasonable. As for the civil aspect the consequences of decisions caused some rearrangement of trust construction but neither impaired power or revenues. A way was easily found of continuing with the components as legally distinct but all remaining under the ownership of the same men or interests. Before the decreed dissolution of the Standard Oil Company in 1911, it had yielded gigantic total sums in dividends. How did dissolution and the resolving of one company into a group of companies affect the revenues ? From the dissolution to the end of 1927, according to compilations made by Dow, Jones & Company, leading stock-market statisticians, the dividend distributions of the group of Standard Oil Companies totalled $3,297,140,707. Of this sum $1,909,06,462 was in cash, and $1,388,079,245 in stock dividends.
At its maximum the fortune of John D. Rockefeller, the principal of the Rockefeller brothers, perhaps exceeded $1,000,000,000. After devoting all of his energetic years to acquisition, he had personally retired from business. Storms of denunciation had been leveled at him ; his corporation and his methods had been an endless target of attack. He had surmounted proddings which would have made a nervous wreck of many men. His endurance was such as to sustain a vitality which, with the most careful ministrations, prolonged his life decade after decade until now he is approaching the centenarian age.
A CHANGE OF TECHNIQUE
Before about the year 1910 money magnates, battling with much hostile opinion, believed in the corrupt use of money to overcome it. To procure necessary legislation, to strangle inimical legislative proposals and to circumvent such laws as were enacted, indirection based upon the distribution of masses of money was depended upon. Lobbies, flush with funds, were maintained at legislative centers; their operations provoked such scandals and finally became so offensive that laws were passed in an attempt to regulate them. The subsidizing of a portion of the newspaper press and magazines was a regular procedure.
There now came a notable change of technique on the part of a number of corporations. Jerome D. Greene, a Rockefeller spokesman, thus put the case in his testimony before the U.S. Commission on Industrial Relations, on February 2, 1915 : But as to publicity, there are two meanings to that word, Mr. Chairman. The word has been given quite a black eye, chiefly because of a discredited method of publicity. I am referring now to the method of ingratiating the public and winning over the support of newspapers either through the publication of advertisements, which may be thought to bring pressure on the expression of editorial opinion, or by the deliberate buying up of editorial and news space, if that is possible. Suspicion that that has been done has undoubtedly existed in the United States. Now, that method of publicity has been entirely discredited and its place has been taken in the enlightened usage, I think, of most of our corporations by a method of frankly stating the facts from an interested point of view of the corporations. . . Greene added that the chief exponent of that honest, candid and fair method of publicity . . . is Mr. Ivy L. Lee.
PUBLIC RELATIONS COUNSEL
The Commission examined Lee at great length, and much testimony was brought out as to his varied activities and the retainers from corporations which he drew. The fact emerged that he was one of the most industrious of the high-salaried propagandists invested with the impressive appellation of public relations counsel. This term seemed to carry the implication that the corporations were fully taking the public into their confidence and appealing to its good will and fair judgment. But the Commissions Final Report ridiculed the claim that certain literature thus distributed by a central bureau was fair publicity. It was entirely partial, and some of it the Commission denounced as not only untrue and misleading but containedin one noteworthy instance involving a strike in Coloradoa positively malicious and libelous assertion regarding labor unions.
More facts as to Lees activities came out in a hearing before a U.S. Senate Sub-Committee on Naval Affairs, in 1929-1930. According to the testimony of William B. Shearer, a paid propagandist for war-shipbuilding corporations, the Council of American Shipbuilders considered that the pacifist influence in America had become too great, and so had hired Lee to counteract it, paying him $150,000 for his services in spreading publicity. These were only some of Lees manifold activities which, in his later years, included services for some foreign Governments. In the systematic campaigns carried on in America by multimillionaires and corporations to modify or otherwise shape public opinion great sums were spent.
MAGNATES TAKE ON A NEW CHARACTER
Meanwhile, a number of leading millionaires gave themselves a new characterthat of humanitarians and philanthropists. This they did by establishing Foundations. One of the first to enter this field was Andrew Carnegie, to whom we have had occasion to refer in a previous chapter. This leads us to say that even a compressed account of his concern, Carnegie & Company, and the wealth it brought to him, and, in a lesser degree, to Frick, Schwab and others would of itself require numerous chapters. One source of that wealth was underpaid and overworked employeesa system leading, in 1892, to a great strike at Homestead, Pa. Armed Pinkerton detectives utilized by the company provoked slaughter. Another factor enhancing the wealth of Carnegie and associates was a high tariff, and a third the secret low freight rates granted by railroads.
Called as a witness, Carnegie informed the U.S. Commission on Industrial Relations, on February 5, 1915, that in pursuance of my decision to cease accumulation and begin distribution of my surplus wealth, he had retired from business in 1901. This, he should have added, was the time his plant was merged in the United States Steel Corporation. He related how he had given many millions in gifts and pensions to his workmen, $24,000,000 to the Carnegie Institute of Pittsburgh, and other large sums in other directions. The Carnegie Corporation of New York had been chartered in 1911 to aid schools, libraries, scientific research and similar purposes. Despite the huge sums which Carnegie gave for such endowments, his net estate at his death, as shown by an appraisal in 1920, was $23,247,161.
John D. Rockefeller had, on May 14, 1913, incorporated the Rockefeller Foundation chartered to promote schools, libraries, scientific research and assist educational institutions. His original gift to this institution comprised securities then having a market value of $100,000,000. Further, he established a group of other Foundations, all heavily endowed. He himself gave this explanation to the U. S. Industrial Commission : The sole motive underlying the various Foundations which I have established has been the desire to devote a portion of my fortune to the service of my fellow men. The Commissions Final Report presented conclusions which gave aspects different from the rather widely prevalent view which regarded the Foundations as wholly grounded upon philanthropic principles. For impinging upon the passing older generation which had been shocked or outraged by the acts of big wealth seekers, a new generation largely unfamiliar with those enormities had come. Such men as Carnegie and Rockefeller stood out to many, by reason of huge sums of money donated, as collossi of benevolence and philanthropy
ASCRIBED SOURCE OF THE FUNDS
The funds of these Foundations, the Final Report stated, are largely invested in securities of corporations dominant in American industry. . . . The policies of these Foundations must inevitably be colored, if not controlled, to conform to the policies of such corporations. The funds of the Foundation represent largely the result either of the exploitation of American workers through the payment of low wages or the exploitation of the American public through the exaction of high prices. . . . The power of these Foundations is practically unlimited, except that they may not directly engage in business for profit. . . . Foundations are subject to no public control, and their powers can be curbed only by the difficult process of amending or revoking their charters. . . . The extent of the possible influence [in shaping education and opinion] of these Foundations . . . is shown by a large amount of evidence in the possession of the Commission. Examples were cited of a degree of control over the teachings of professors in our colleges and universities which constitutes a most serious menace. In a separate memorandum two members of the Commission declared that many of these endowments in private hands have a beneficial effect but they recommended a Federal Fund for Social Welfare in order that the Nation may compete with or displace private Foundations in this vital matter.
A survey of Foundations in America made in 1931 showed ninety-one, with capital resources then aggregating $800,000,000, of which $673,000,000 was concentrated in New York City. The resources of the various Rockefeller organizations were placed at $250,000,000, and those of the Carnegie organizations at $237,000,000. In a single year the ninety-one Foundations had disbursed $52,000,000.
John D. Rockefeller, Sr., had long since turned over his securities and estates to his son of the same name. On more than one occasion in public addresses John D. Rockefeller, Jr., had depreciated the effect of great money inheritances and the value of money as judged by the much greater importance of humanitarian needs. He has been, in fact, a man of deep religious convictions and personal kindliness. But the conditions surrounding him apparently left him with no alternative but to hold on to the wealth entrusted to him. The extent of the wealth held by him in oil companies alone was shown by the records of the Securities and Exchange Commission early in 1935. The law establishing this body requires statements from large holders of stocks. At the end of November, 1934, John D. Rockefeller, Jr., held a total of 1o,181,020 shares of common stock in the Standard Oil Company of California, the Standard Oil Company of New Jersey, and the Socony-Vacuum Company, leading units of that industry. At that date the market value of these stocks was in the vicinity of $245,000,000. His statement listed himself as the beneficial owner of more than 1o per cent of the stock of the three companies, and further informed the Commission that he had transferred 1,592,400 of the shares, but did not specify to whom.
But his cousin, Percy A. Rockefeller, could not bear money losses brought about by the great industrial depression commencing in 1929, and sold stocks short in the aim to recoup himself. This Rockefeller was a son of William Rockefeller, a brother of John D. Rockefeller, Sr., and an associate in the original promotion and later rulership of the Standard Oil Company. By force of inherited wealth he became one of Americas leading industrialists and financiers ; at one time he was a director of fifty-one corporations. The short selling of stocks caused a great public scandal. Summoned as a witness by the U.S. Senate Committee on Banking and Currency, investigating stock exchange practices, he defended his course. The tremendous depreciation since 1929, he testified, had cost him a great many, many millions ; he needed money ; and, he declared, his short selling had netted him only $550,000 which sum, he stated, was slight compared to his tremendous losses.
Members of the Rockefeller family married into other plutocratic families. The narrative of these connections and of the origin of the associated great fortunes would necessitate many chapters.
WHERE THE DUKE RICHES CAME FROM
In the years since 1933, Doris Duke has figured much in publicity as the richest girl in the world. Although this description is perhaps superlative, the wealth inherited by her is great. She is the daughter of James B. Duke who, after giving away $40,000,000, left an estate appraised, at the time of his death in 1925, at more than $101,000,000. By the terms of the will, a third of her inheritance was to be turned over to her when she was 21which was in 1933. She was to receive half of the remainder when she reached the age of 25, and the balance five years later. In 1927 her share was appraised at $53,000,000, but the downward course of the prices of securities during the depression reduced the sumfor the time being at any rate.
This was one of many multimillionaire fortunes from the tobacco industry. The casual reference to Duke in an earlier chapter and some facts there given as to the operations of the Tobacco Trust, is but a small part of a great amount of data, an appropriate account of which would fill a quarter of a volume. The Duke family (W. Duke, Sons & Company) started as manufacturers of cigarette tobacco. They, with four other cigarette manufacturers, launched in 1890, a combination called the American Tobacco Company, with a capital of $25,000,000 largely watered stock, or as the U.S. Commissioner of Corporations reported, an amount vastly in excess of tangible assets. James B. Duke was made President of this company which at its inception secured control of go per cent of the cigarette business in America, making in its first years more than $4,000,000 annuallyvery large average profits, reported the U.S. Commissioner of Corporations. The American Tobacco Company then extended its domination over other branches of the tobacco industry, consolidating and merging other concerns, eighty-six in all. The total capitalization of the American Tobacco Company was run up to $235,000,000.
The full story of the huge profits, the issuance of large stock dividends in addition to ordinary dividends, the inflation of stock issues, the manipulation of stock and other methods filled 475 pages of the report of the U.S. Commissioner of Corporations in 1911. Meanwhile, then as later, as official reports showed, most of the small tobacco growers in America had the hardest time making a bare living; the sums paid to them for their product were beaten down to the scantiest prices. Their lot was distressing. In 1911 the Supreme Court of the United States ordered the dissolution of the Tobacco Trust, but as in the case of the Standard Oil Company, its components rearranged their position and kept on flourishing.
DUKE PERPETUATES HIS NAME
Already, by 1905, James B. Duke was noted as the Croesus of the tobacco trade, and rated a lofty multimillionaire. He then began the construction of a million-dollar palace on an estate of 2,500 acres bought by him near Somerville, N.J., and on the improvement and adornment of this estate he spent more great sums, reported at perhaps $2,000,000. Other multimillionaires had, by the sheer outlay of money, glorified and perpetuated themselves as philanthropists by establishing institutions bearing their names. But such institutions were new. James B. Duke went a long step further. In 1924 he set aside a $40,000,000 fund in securities for the benefit of Trinity College, at Durham, N.C., on condition that it change its name to Duke University ; if it declined, the fund was to be used in creating a new institution. The offer was not declined, and in recent years Dukes money has been used to erect a great group of new buildings at Duke University. There was wide and severe criticism of Dukes action but it passed away, and in 1934 the Dean of Duke University Medical School was able, without contradiction, to laud James B. Duke as a great philanthropist whose aim was to uplift mankind. Benjamin N. Duke, a brother, died in 1929, leaving a multimillionaire fortune.
BECOME WEALTHY BECAUSE THRIFTY
The instances given in this Epilogue, following the amplification in the chapters, are but a few of a large number showing the actual processes by which great fortunes have been amassed. Yet when Daniel Guggenheim was questioned by Chairman Frank P. Walsh, at a hearing Of the U. S. Commission on Industrial Relations, on January 21, 1915, as to wealth possessors, he thus explained the source of their wealth : These men and women have become wealthy because they have been thrifty. In America I think we can assume that the most of those who have become wealthy in the last ten or fifteen years have been thrifty. This was gravely told to a Commission, the members of which were exceedingly well informed on a multitude of recent reports of investigating committees disclosing the realistic facts. And in a rather similar way, Julius Rosenwald, head of Sears, Roebuck & Company, declared in an interview in 1930 that 95 per cent of the great fortunes were due to luck. Rosenwalds estate was estimated at $50,000,000.
Apart from their profit in ordinary times, the profits of all kinds of corporations in war and post-war times were extraordinary, and as a business man Rosenwald thoroughly knew, of course, that fortunes were based upon profit and that many a fortune had been further vastly swollen by flagrant profiteering. Only a few years before Rosenwald uttered his dictum, the Federal Trade Commission had, in a series of reports, exposed war-time profits, and this information widely published in the newspapers was a matter of common knowledge. The average rates of net income on investment of four of the most important successor companies of the old American Tobacco Company ranged from 1916 to 1920 from 12½ to more than 21 per cent, and these high returns were kept up in spite, stated the Federal Trade Commission of extensive declines in leaf tobacco prices. Similar outrageous profiteering by corporations dealing in anthracite coal, lumber, meat products, steel and various other commodities was specifically recorded by the Federal Trade Commission.
Some of the Guggenheim and Rosenwald wealth was used to endow Foundations named after them. The narrative of how the great aggregate wealth of the Guggenheims was amassed would require a series of chapters. Briefly, a few facts may be here mentioned. The founder was Meyer Guggenheim who had come to America as an immigrant. Successively he made and vended stove polish, and manufactured embroideries. As they grew up all of his seven sons became associated with him in the smelting business in which he later embarked.
In its unity of purpose and solidarity of interests the Guggenheim family resembled the Rothschilds. In 1899 they organized the American Smelting and Refining Company which acquired gold, silver, copper, lead, nickel and other mines and smelting plants in the United States and elsewhere, chiefly Mexico. They rapidly became multimillionaires, and in 1907 Simon Guggenheim was elected a United States Senator from Colorado. Facts brought out before the Ways and Means Committee of the House of Representatives showed the profits of the American Smelting and Refining Company to have been $8,000,000 in 1905, $10,000,000 in 1906 and $7,000,000 in 1907. Charges were made in 1910 by United States Senator Bristow that in Congress tariff rates on lead had been manipulated in favor of the Smelter Trust. The individual Guggenheims, as testimony before the U.S. Commission on Industrial Relations in 1915 showed, had extended their financial interests to include a great variety of industrial, transportation and other corporations. In 1930 announcement was made of the consolidation of a $375,000,000 company of all of the vast nitrate deposits in Chile, the Government of which owns 65 per cent, and the Guggenheim interests the remainder. In this company both the Chilean Government and Guggenheim holdings were included. As for the American Smelting and Refining Company-at this writing Simon Guggenheim is its headit is rated as the largest corporation of its nature in the world, and it has a group of twenty-one subsidiary companies. These are but a few items, not omitting patent matters and litigation indicating the development of the Guggenheims fortunes.
ASCENT OF THE MELLONS
A few years ago the Wall Street journal classed Andrew W. Mellon as one of the four richest Americans. In the decades when the Rockefeller and other great fortunes were being heaped together and great publicity was devoted to them and their acts, hardly any attention was given-at least outside Pittsburgh-to the Mellon family. In Wall Street financial books dealing with capitalists thirty years ago not a mention was to be found of the Mellons.
Here, again, an adequate narrative of the elaboration of means by which the Mellon wealth wag acquired would fill many, many chapters. It would begin with the establishment by judge Thomas Mellon of a private bank, T. Mellon & Sons, in Pittsburgh. In this bank judge Mellon clustered a variety of interests, and left his fortune to his three sons, Andrew W., Richard B. and James Ross. Soon after the year 1900 Andrew W. Mellon formed the Mellon National Bank. He himself recently told some of the story of his rapid ascent to great wealth. This occurred at a hearing in Pittsburgh before the Board of Tax Appeals, in 1935. One of the Pittsburgh banks in which he had become a director was the Fidelity Trust Company. This organized the Union Trust Company to do a reciprocal business, and Andrew W. Mellon was made its President. From an original capital of $100,000, the Union Trust Company expanded until it became a $300,000,000 institution. Such was the outline given by Mellon, but the ways in which this aggrandizement was accomplished were not detailed, and the analysis of them would make a long account.
DELUGES OF PROFIT
At the same hearing facts were produced giving another instance of how expeditiously the Mellons amassed wealth and ever a stream of more wealth. Andrew W. and Richard B. Mellon had launched the huge Aluminum Company of Americacalled the Aluminum Trustthe transactions, operations and profits of which would alone cover several chapters. Two engineers, McClintic and Marshall, recently graduated from Lehigh University, presented the plan of a steel-fabricating plant at Pottstown, Pa. The two Mellon brothers each agreed to invest $75,000, keeping in return 6o per cent of the stock of the McClintic-Marshall Construction Company, capitalized at $250,000.
So much money did this company make and so fast that in thirteen years its profits enabled it to increase its plant capacity six times; it acquired a string of subsidiary corporations which it owned partly or wholly ; by 1930 it had assets of $64,000,000 ; and during a series of years it paid its four stockholders upwards of $8,000,000 in dividends prior to its purchase in 1931 by the Bethlehem Steel Company. The Mellons share of the purchase price was $12,600,000. On an investment of $150,000 they had madeso the figures as reported evidencedmore than $17,000,000.
But these details were merest fragments of the whole story of the vast network of banks and corporations of many kinds from which great revenues flowed into the Mellon strongboxes. The Aluminum Cooking Utensil Company, the Aluminum Seal Company, the Gulf Oil Corporation and other oil producing and refining companies, coal and coke, water, electric power and other companies-these were in the extensive list.
Andrew W. Mellon became Ambassador to Great Britain, and served as Secretary of the Treasury under Presidents Harding, Coolidge and Hoover. It was after a different political administration, that of President Franklin D. Roosevelt, came in power that the Bureau of Internal Revenue charged a deficiency of $3,000,000 in Andrew W. Mellons income tax return for 1931, and the hearing above referred to was an appeal from that finding. At this hearing his own financial secretary on February 25, 1935, testified as follows : That in his income tax returns this former Secretary of the Treasury had ignored a rule which was promulgated during his tenure of office and which he himself had approved in 1929a rule requiring taxpayers to report holding of tax-exempt securities. That, in 1932, Andrew W. Mellon, on the expressed ground that he wished to divest himself of business cares and devote himself more thoroughly to philanthropic matters in which I am particularly interested, had turned over millions of dollars in securities to his two children but he had indirectly retained control over those securities. The data as produced by Andrew W. Mellons financial secretary was specific as well as highly complicated, but out of it all seemed to protrude the fact that there was no time at which Mellon did not ingeniously safeguard his cash interests. At this writing no decision by the Board of Tax Appeals has been made. R.B. Mellon died in 1933, leaving an estate which, in a document filed by appraisers with the Register of Wills, in Pittsburgh, in May 1935, was valued at $21,615,000, not including real estate. Almost all of that sum was represented by stocks. A few years previously his wealth had been estimated at a much greater amount, but the slump in stock prices had doubtless affected it.
TOUCHING UPON THE DU PONTS
However abbreviated, a competent description of the origin and expansion of the du Pont fortune would entail chapter after chapter. It would have to begin more than a century and a quarter ago when a du Pont established the first small gunpowder plant in Delaware, and give the history up to the present of E.I. du Pont de Nemours & Company, leading manufacturers of explosives. Long the dominating financial power in Delaware, the du Ponts sequentially developed political power. After two decades of leadership in the Republican organization of that State, T. Coleman du Pont was elected United States Senator in 1921. He was of the Kentucky branch of the du Pont family and, in 1902, had been made head of the du Pont plants after the death of Eugene du Pont. T. Coleman du Pont died in 1930. From 1916 to that date he had made gifts of more than $10,000,000, mainly to members of his family, and he left an estate appraised in 1933 at $17,520,642an estate which, of course, had been larger during the times when stock prices were high.
WORLD WAR PROFITS
From the World Wars start American manufacturers of munitions made huge profits. The startling facts regarding these were brought out, in 1934, by a Special Committee of the United States Senate investigating the munitions industry. According to the committees findings, E.I. du Pont de Nemours & Company took in a gross of $1,245,000,000 for supplying material to warring Governments, including the American, between 1915 and 1918, inclusive, and during that period paid dividends of 458 per cent on a par value of its stock. Further, that a large part of these profits were so arranged as to be used as funds for a great expansion of the companys activities in the peace years following.
As high as 80 per cent of profits, the du Ponts asserted in reply, went to pay excess profit taxes. Their clear profit from war sales was, however, extremely large. This was convincingly shown by the opulent dividends distributed by the du Pont Company ; on the common stock a regular dividend of $1.50 and an extra dividend of $28.50 in 1915; a regular dividend of $6.00 and an extra dividend of $94.00 in 1916 ; a regular dividend of $18, and an extra dividend of $33 in 1917 ; a regular dividend of $18 and an extra dividend of $3 in 1918. Six of the du Pont family were listed as in the class of multimillionaires each having in war and post-war years a yearly income of $1,000,000 or more. This list also included, it may be here noted, the names of J. Pierpont Morgan, James B. Duke, Andrew W. Mellon, Arthur Curtiss James, George F. Baker, Henry Ford, and sundry othersone hundred and eighty-one individuals in all.
ABUNDANT FUNDS TO EXPAND
The seizure of German patents by the United States Government, in 1917, after Americas entry into the War opened the wide way to the du Ponts embarking in the dyestuffs industry. Their scope was enlarged to include the making of rayon, paints, lacquers, varnishes, cellophane, ammonia, acids, chemicals of various kinds and other products. The capitalization of the E.I. du Pont de Nemours & Company was expanded to $450,000,000 of which the greater part in 1936 was outstanding stock. The companys net income in 1935 was a shade more than $62,000,000. The control of this company, as shown by returns to the Securities and Exchange Commission in 1936, was vested in nine of the du Ponts, eight of whom were directors, and five heavy stockholders.
Obviously, with their enormous revenues, ever piling up, the du Ponts were in an opportune position to extend their holdings and by the sovereign impact of their cash make themselves overlords in other industrial fields. In the diversity of their investments, a foremost possession is their great ownership of stock in the General Motors Corporation, automobile manufacturers. A report of the Securities and Exchange Commission, on July 16, 1936, showed the enormous du Pont holdings. Indirectly, through the General Motors Securities Company, the E.I. du Pont de Nemours & Company owned 9,843,750 shares, which at stock market prices had a value of about $690,000,000. At the same time the du Pont Company was the beneficial owner of 156,250 shares, and four of the du Ponts were directors of General Motors Corporation, with a direct total ownership of 222,615 shares.
ONE BIG FACT ABOUT HENRY FORD
But we cannot suffer this epilogue to run on interminably. The temptation is strong to include a sketch of Henry Fords career, but even this would be of great length. One outstanding fact will merely be noted. What has been the result to the Ford Motor Company of 33 years of manufacturing ? On this point we have the statement of his own spokesman, William J. Cameron. In a radio address on June 14, 1936, Cameron declared that the Ford Motor Company in that period had made 24,500,000 automobiles, the profit on which was $782,016,144 or an average of $20 a car.
The purport of Camerons statement, thus put forward in behalf of the Ford Motor Company, was to show that the profits of the company were by no means as great as commonly supposed. He figured out the $782,016,144 as profits after deducting taxes and other commitments. He admitted that it looks like a lot of money but he explained that much of it had gone into company plants. He might have added that whether the profits were distributed or partly used to enlarge plants, the result was the further enrichment of the Fords. The financial results of years vary, but we have some criterion of the great income of the Fords personally from the Federal income tax they paid in 1925. In an earlier chapter we have explained that this was the only year in which Federal income-tax payments were made public, and we gave the sums paid by Henry Ford and his son Edsel Ford. In that year they, with one exception, headed the list of the twenty-five largest income-tax payers in America. Henry Ford paid $2,608,806, and Edsel Ford $2,158,055 Federal income tax.
And, much as the necessity presses to bring this matter to a close, we have to mention at least one of the large fortunes derived from 5 and 10 cent chain stores. From his multitude of chain stores F.W. Woolworth derived a fortune estimated at $35,000,000 at his death in 1919. So fast did profits roll in that in 1926 a stock dividend of 50 per cent was declared. When his widow died, in 1924, her estate, valued at $55,416,721 net, was bequeathed equally to her two daughters Helena W. McCann and Mrs. Jessie W. Donahue, and a granddaughter, Barbara Hutton. Woolworths two daughters in 1936 were the two largest stockholders of the F.W. Woolworth Company common stockMrs. McCann owned 565,006 shares and Mrs. Donahue, 609,250 shares.
20½ PER CENT PROFITAND WAGE REDUCTIONS
A few years ago, on the occasion of the fiftieth anniversary, the F.W. Woolworth Company published a glowing eulogy of the founder and an exaltation of the companys progress. The reverse side was brought out in Congress where complaints were made of the salesgirls in the establishment having to work for a wage of $11 a week. Also, on December 11, 1934, there was disclosed at Ottawa the same situation by the Canadian Parliamentary Commission investigating mass buying and chain stores. Leslie G. Harrington, manager for Canada, of the F.W. Woolworth Company admitted that while making profits of 20½ per cent, the company, in 1932-1933 had reduced the wages of its employees 10 per cent. The average weekly wage, he stated, for full-time saleswomen in Woolworth stores in Canada was $10.80, and some were getting as little as $7. Questioned by the Commissions counsel as to what was the justification for the companys making this wage cut when it was drawing such handsome profits, Harrington gave the reason. The wage reduction, he explained, was demanded by the New York office because a similar cut was being made in the United States.
And so, having a roster of more multi-millionaires in reserve, we call a halt to this edifying history, the facts in which impart their own moral and conclusion.