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University of California Berkeley
VOL. XXIV
MAY, 1910
NO. 5
HAMPTON'S MAGAZINE
(?^v^^-^ H j - /
LG&P**' */ M^!< 4M&&M&S*** <**' *<*t*f<s& jay&terrv (^S^lt^****^
Winning an Empire and the Cost
of the Winning
A HISTORY OF THE METHODS EMPLOYED BY THE SOUTHERN PACIFIC
RAILROAD SYSTEM IN MANUFACTURING MULTIMILLIONAIRES
By Charles Edward ^Russell
Author of "The Heart of the Railroad Problem," "Beating Men to Make Them Good," etc.
Illustrations by Clarence Rowe. George Varian, and C. F. Peters
As to the specific cause of the increased cost of
living, President Taft to-day frankly told various
of his callers that he was unable to account for it.
News despatch jrom Washington, December 30, 1909.
JOHN MILLER came, a young man, from
Virginia to California, in 1870, and found
employment with the California Pacific Rail-
road as clerk and ticket agent at the South
Vallejo station. He was capable and indus-
trious; and capable railroad men were few
in California.
A year later, when some men in the rail-
road way at Sacramento wanted an efficient
accountant they learned of Miller, sent for
him, looked him over, and thought he would
do; so he went up to Sacramento and entered
upon his new job, which was better than his
old one had been. It was with the Contract
and Finance Company, of which a kindly old
man known as Uncle Mark Hopkins was the
president. The office was right over Hunt-
ington & Hopkins' hardware store in K
Street, and across the hall were the offices of
the Central Pacific Railroad, of which Uncle
Mark Hopkins was treasurer and a director.
Young Mr. Miller's task was to assist the
paymaster of the Contract and Finance Com-
pany, and to keep books not the main books
of the concern, for these were always kept by
William E. Brown, the company's secretary,
but certain other books that he called aux-
iliary books.
To build and keep in repair the lines of the
Central Pacific and of railroads with other
names was the business of the Contract and
Finance Company, but the books that young
Mr. Miller kept did not contain a complete
record of these matters; they related to minor
phases of the work in hand.
Young Mr. Miller was observant as well
as studious, and when, some months after he
entered the office, he observed Mr. Brown to
be employed diligently upon the main books
of the concern, the nature of this employ-
ment aroused young Mr. Miller's curiosity.
He took occasion when Mr. Brown was ab-
sent to examine the books that Mr. Brown
kept, and found them to contain matter of
much interest.
In fact, the more he examined them, the
more interested he became. They were
books that recorded the building and repair-
ing of railroad lines for the Central Pacific
what the work actually cost and what had
been paid for it * and might, therefore, be
deemed to be among the most juiceless and
unattractive volumes in the world ; but young
Mr. Miller found them remarkably diverting.
Finally, he became so much interested that,
like the careful student he was, he made from
day to day a series of abstracts and memo-
randa of the matter wherewith he was being
entertained, and these he took home, per-
haps for more deliberate enjoyment in quiet
hours.
MR. MILLER KEEPS HIS LITERARY TREASURES
SECRET
He did not let Mr. Brown nor anyone else
know of the literary treasures he had found,
but just read and made abstracts and copies
and put them away.
* Pacific Railroad Commission Report, testimony of Miller,
pp. 2881-82.
603
604
Hampton's Magazine
I am not to suppose that he knew Charles
Reade's "Hard Cash," that he was familiar
with the character of Young Skinner therein,
nor that suspicion evil sprite! had been
aroused in his breast by Reade's somewhat
cruel jest about man as a cooking animal:
but unconsciously he came to enact rather
closely a vivid passage in a sensational novel,
the while he furnished a significant chapter
in railroad history.
Of a sudden, one day in September, 1873,
Mr. Brown entered the office and hailed
young Mr. Miller with glad tidings.
"The Contract and Finance Company has
elected you to the office of secretary," said
Mr. Brown. " I have resigned and am going
to Europe. And now here is a set of new
books for you to go to work with."
Young Mr. Miller was duly gratified. He
took possession of the nice new books and
observed that they had already been opened
in Mr. Brown's handwriting,* each account
starting with a balance apparently carried
over from the old books.
About noon he went forth, as was his habit,
to his midday repast, leaving Mr. Brown in
the office with the old books and with the
new. When, an hour later, he returned he
found Mr. Brown there and the new books
there, but the old books had disappeared,
nor did young Mr. Miller ever see them again.
So far as the world knows, only two other
persons had that pleasure.
Some time after Mr. Miller had departed
in search of luncheon, in came, for no par-
ticular purpose, young Mr. Yost. Mr. Yost
was private secretary to Mr. Leland Stan-
ford, who was President of the Central Pacific
and one of the owners of the Contract and
Finance Company. Mr. Yost saw the old
books. He saw them in the hands of Uncle
Mark Hopkins. And Uncle Mark, with his
coat off, was busily at work packing those
books into boxes and fastening the boxes with
screws. f
The next day Mr. Brown started for Eu-
rope. Thereafter all trace of the old books
was lost ; also all trace of the books of Charles
Crocker and Company, the contracting firm
to which the Contract and Finance Com-
pany was the successor.
By some persons the loss was grievously
mourned, these being chiefly persons that had
certain lawsuits and needed the books for
* Pacific Railroad Commission Report, testimony of Miller,
pp. 2880-02.
t Ibid., testimony of D. Z. Yost, p. 9717.
evidence. But their grief availed them noth-
ing, even when it led them to cause the arrest
of the most eminent officers of the Central
Pacific and when, in a dirty, common police
court, these gentlemen were compelled to
declare their ignorance about the books that
never were found. According to a current
belief in California these books now repose
at the bottom of the River Seine, which is in
France; and that seems a very strange place
indeed for books to repose in.
MR. MILLER IS ARRESTED ON CHARGES OF
EMBEZZLEMENT
For about a year young Mr. Miller dis-
charged the duties of secretary to the Con-
tract and Finance Company, being also made
secretary to the Western Development Com-
pany, another very nice company with much
the same owners and exactly the same pur-
poses.
Some suspicion then arose that his books
and accounts were not in the admirable and
apple-pie order to be expected of first-class
accountants and really nice companies, and
Mr. J. O'B. Gunn, auditor of the Central
Pacific, made a quiet observation of these
matters. On his oral * report, young Mr.
Miller was arrested and indicted, charged
with embezzlement. We are not to suppose
that he had been corrupted by evil example,
which is ever in wait for youth, but only that
he had grown careless, maybe, or something
of that kind.
He was not at once prosecuted, possibly
because of his youth or good looks. Instead,
certain negotiations began, lasting for a
month, in which young Mr. Miller was every
day in consultation with the highest officers
of the Central Pacific,! who were also, by a
curious coincidence, the highest officers of the
Contract and Finance Company and its sole
owners.
After a time, Mr. Miller's wife called upon
former Judge N. Greene Curtis (who had
once defended a man for the Central Pacific)
and engaged him as her husband's counsel.
To him Mr. Miller delivered all his memo-
randa and abstracts.
The trial of Mr. Miller took place in San
Francisco, whither meantime the offices of all
the companies here mentioned had been re-
moved. All the witnesses against him were
officers and employees of the Central Pacific. J
* Pacific Railroad Commission Report, testimony of Gunn,
p. 3003.
t Ibid., testimony of Miller, p. 2888.
t Ibid.
/If
HOW THE WELLS-FARGO EXPRESS WENT THROUGH IN THE DAYS BEFORE
THE RAILROAD.
605
606
Hampton's Magazine
It appears that the prosecution was af-
flicted with a kind of languor, resulting per-
haps from the climate, which is known to
be at times enervating. Young Mr. Miller
was acquitted. From the courtroom former
Judge Curtis went straightway to his room
in the Cosmopolitan Hotel, took all the ab-
stracts and memoranda that Mr. Miller had
given to him, and put them into the grate,
where doubtless they were presently con-
sumed * in a cheerful blaze.
These abstracts and memoranda were of
the cost of the work done by the Contract
and Finance Company and the amounts re-
ceived therefor.f
Young Mr. Miller, thus happily cleared
from blame, disappeared from the public
view. The next heard of him was as a pros-
perous farmer and owner of a fine ranch in
the Sacramento Valley, and as a buyer of coal
lands. J As previously he had been an ac-
countant on a moderate salary, followed by
a year of idleness and (presumably) heavy
legal expenses, this affluence occasioned some
remark. Mr. Miller farmed on, neverthe-
less, and so, by a figure of speech, did the
Contract and Finance Company, the Western
Development Company and the Central Pa-
cific Company.
All this, it will be admitted, is of itself a
strange and entertaining little narrative. And
now to fit it into its true place in Southern
Pacific history, where, properly viewed, I am
sure you will greatly admire it.
CHARLES CROCKER'S CONTRACTING
TRANSACTIONS
The contracting firm of Charles Crocker
and Company was composed of Mr. Charles
Crocker and, according to his testimony, of
nobody else. Previously, he had been a dry
goods merchant in the Plaza at Sacramento
and then, in 1861, one of the organizers and
first directors of the Central Pacific. He was
the contractor that built for that road its first
few miles. The dual capacity of director
and contractor (by which, of course, a man
must as director vote contracts to himself
as contractor) seems to have aroused criti-
cism among, doubtless, the captious and un-
sympathetic, and the next few miles were
done by many contractors in small bits.
When undesirable persons had been frozen
from the enterprise, Mr. Crocker resigned
* Pacific Railroad Commission Report, testimony of Curtis,
P- 3033-
t Ibid., testimony of Miller, p. 2880
t Ibid., p. 2891.
from the directorate, where he was succeeded
by his brother, and took the contract for the
rest of the road from the thirty-first mile to
a point near the state boundary, or one hun-
dred and thirty-eight miles from Sacramento.
This contract disappeared with the books
that, in 1873, young Mr. Yost saw Mr. Hop-
kins pack into boxes.
So far as can now be ascertained, it must
have been of extremely loose terms. No
lump sum was named. Mr. Crocker, com-
posing the firm of Charles Crocker and Com-
pany, built the railroad, and the Central
Pacific Company paid his bills whatever
they were and without question. This seems
to have been the substance of the arrange-
ment.
As the firm composed of one man went
along it needed money, which was supplied
to it (or to him, as you prefer) by the Central
Pacific Railroad Company, consisting of him-
self and three others, from the proceeds of
bonds that had been granted by the govern-
ment.
He was supplied also with the bonds them-
selves, and with the company's stock. He
said afterwards that for the first eighteen
miles he received $250,000 in cash, $50,000
in stock, and $100,000 in bonds.*
It is interesting to note that for at least
eleven of these miles the Central Pacific
Company received from the government
$528,000, which was more than enough to
build the whole eighteen.
For some of the miles Charles Crocker and
Company secured as much as $300,000 or
even $400,000! a mile. For excavating earth
they, he, or it, received from 40 cents to $1.50
a yard, and for excavating rock as much as
$10 a yard. |
In 1867, the one-man firm completed the
one hundred and thirty-eighth mile, and the
remainder of the work was transferred to the
Contract and Finance Company, of which
young Mr. Miller was subsequently the sec-
retary.
I said in my article last month that for a
very peculiar reason, Mr. Crocker did not re-
tain the stocks and bonds he received for his
work in constructing the railroad. The pe-
culiar reason was that he turned over all
* Pacific Railroad Commission Report, testimony of Charles
Crocker, p. 3640.
t Ibid., p. 3645.
t Ibid., p. 3640.
QUESTION. If I should recall it to your mind, would you re-
member that the higher priced excavation was very much larger
in number of yards entered on your estimate from which you
received your payments, than the ordinary earth?
ANSWER. I do not remember about it.
Winning an Empire and the Cost of the Winning
607
these securities, amounting to
more than $10,000,000,* to his
successor, the Contract and Fi-
nance Company, which immedi-
ately distributed them among its
stockholders.
And who were they?
Messrs. Leland Stanford, C.
P. Huntington, Mark Hopkins,
and Charles Crocker.
It is time we should take a look
at this extraordinary concern, for
the part it played in the affairs of
our railroad, as well
as its relations to
* Pacific Railroad Com-
mission Report, p. 3640-
MARK HOPKINS HIMSELF PACKED UP THE
OLD BOOKS OF THE CONTRACT AND
FINANCE COMPANY. THEY THEN
MYSTERIOUSLY DISAPPEARED.
public interests now,
are of vital importance.
The Central Pacific
Railroad Company was
organized under the
constitution and laws of
California, which forbid
the stock of a railroad
company to be issued
except for cash or its
equivalent. Not less than ten per cent must
be paid for when the railroad is organized
and the rest by installments in cash or its
equivalent.
Also these laws forbid a railroad to issue
bonds in excess of its stock.*
As fast as the railroad was constructed it
was receiving $48,000 a mile from the gov-
ernment and ;it was also authorized to issue
its own bonds for the like amount, but it
could not do this in excess of its stock issue.
Observe, therefore, that it was obliged to
* See Section 456 of the Civil Code.
608
Hampton's Magazine
issue stock before it could issue its bonds,
and for the stock issued it was obliged to pay
in cash or its equivalent.
Now, bills of a contractor for work done
in constructing a railroad are to that railroad
clearly the equivalent of cash.
The company had started with $8,500,000
of capital stock. As the work went on this
was increased to $20,000,000 and finally
reached $100,000,000, issued from time to
time as required, until in 1873 the amount
had reached $62,608,800.
Naturally, the four gentlemen conducting
the enterprise desired to get possession of
that stock (which carried with it control of
the road) and to get it without paying for it.
One way to that desirable result was through
a contracting agency that would present bills
for its work (these bills being its equivalent
of cash), accept in payment thereof the stock
and bonds of the company, and subsequently
return these securities, less the actual expenses,
to the four gentlemen. The greater its bills
the more stock would thus be sent upon the
circuit. All that was needed for the perfec-
tion of this device was a good handy pretext
for the final distribution of the accumulated
securities among the four gentlemen.
A firm composed of one person could not
very well perform this function, but to a cor-
poration it was easy, because a corporation
can always distribute its assets among its
stockholders. If the Central Pacific stock
composed the assets of such a corporation
and the stockholders among whom they
were to be distributed were the four gentle-
men, how lovely that would be!
To suppose that these conclusions so obvi-
ous to you and me escaped the attention of
the four wise gentlemen of Sacramento were
to wrong their intellectual acumen; only, since
Uncle Mark Hopkins' exploits as a book pack-*
er, the details of their operations are obscure.
Still, you may care to note that in Decem-
ber, 1867, the Contract and Finance Com-
pany was organized with a capital of $5,000,-
ooo not one cent of which was ever paid
for by three dummy organizers * who subse-
quently transferred their stock to Messrs.
Stanford, Huntington, Hopkins, and Crocker,
and that this company received Mr. Crocker's
$10,000,000 of securities and properly dis-
tributed them,-]- where they would do the
most good to Messrs. Stanford, Huntington,
Hopkins, and Crocker.
* Pacific Railroad Commission Report, testimony of William
E. Brown, p. 2895.
t Ibid., testimony of Charles Crocker, Brown, and others.
INDIANS ATTACKING THE UNION PACIFIC THE RAILROAD AT TIMES HIRED
EX-SOLDIERS FOR ITS DEFENSE.
Winning an Empire and the Cost of the Winning
609
The Contract and Fi-
lance Company pro-
ceeded with the construc-
tion work from the one
hundred and thirty-
eighth mile to the junc-
tion with the Union Pa-
cific, fifty - three miles
west of Ogden.
Of the extravagant ex-
penditures caused by the
insane race for mileage
with the Union Pacific
we have already spoken.
How much other unjusti-
fied expense appeared on
the books will never be
known.
When the Pacific Rail-
road Commission tried to
ascertain the facts, its ex-
pert engineer presented
to it a statement that the
entire line of the Central
Pacific from Sacramento
to five miles west of Og-
den, 690 miles, cost to
construct $3 2, 589, 1 1 7. 93.
Adding the $2,130,000 paid to the Union
Pacific for the overlapped parts, this makes
the total construction cost $34,719,117.93, or
$50,317 a mile.*
How much of this, again, is real, nobody
knows, but if we accept it as veritable, there
was to offset it:
United States government bonds. . $27,500,000
Central Pacific bonds practically
guaranteed by the government.. . . 27,500,000
Land Grant t 30,000,000
Assistance voted by California
counties 1,000,000
LOUIS McLANE, MANAGER OF WELLS,
FARGO AND COMPANY. BY THREATS
OF COMPETITION THE BIG FOUR
SECURED ONE THIRD OF
ITS STOCK.
t $86,000,000
ess alleged cost of construction. . . . 34,719,147.93
And depreciation of currency % 7,000,000
road Company deliv-
ered to Charles Crocker
and Company and the
Contract and Finance
Company $62,000,000 *
of Central Pacific stock,
and this treasure trove
was divided as assets
among the stockholders
of the Contract and Fi-
nance Company.
And who were they?
Messrs. Stanford,
Huntington, Hopkins,
and Crocker, who were
also the chief owners of
the Central Pacific, who
never paid a cent for
their Contract and Fi-
nance stock, and who by
this device secured also
$62,000,000 of Central
Pac ific stock w ith out pay-
ing a cent for that.f
On this stock so ob-
tained were declared in
the next seven years
dividends amounting to
$12,000,000 all obtained from the con-
tributions of the public.
When these matters came many years after-
wards to be reviewed, Governor Stanford
tried to show that when the construction work
was done, the Contract and Finance Com-
pany owed a great deal of money several
million dollars,! in fact.
This statement led to a remarkable revela-
tion. When William E. Brown, former sec-
retary of the Contract and Finance Company,
was asked about the matter, he said that at
the end of the construction period the Con-
tract and Finance Company owed (presum-
Balance $44,280,882 . 07
In other words, they built the road for
about one half of the government sub-
sidy and pocketed the rest.
Other goodly profits pertained to these mat-
ters, and on top of all, the Central Pacific Rail-
* William E. Brown, Secretary of the Contract and Finance
Company, testified (see p. 2897 of the Pacific Railroad Com-
mission Report), that his company got 886,020 a mile for con-
struction.
t Before the Forty-Eighth Congress, Representative Barclay
Henley showed that the whole road could have been constructed
for its land grant alone.
J Pacific Railroad Commission Report, testimony of Stanford,
p. 2465.
* Up to 1873, when the last division of stock took place. The
progress of these operations may be seen readily from the follow-
ing table of the capital stock of the Central Pacific Railroad
Company:
Year Amount
1866 $8,580,600
1867 14,923,400
1868 24,679,000
1869 40,168,100
1870 51,079,200
1871 59,644,000
1872 59,644,000
1873 62,608.800
t QUESTION. Then it was, substantially, that the builders of
the road under the contract should take all the bonds of what-
ever character there were, as you have stated, and the amount
of stock to authorize you to issue those bonds under your own
first mortgage?
ANSWER. Yes. sir.
Pacific Railroad Commission Report, testimony of Leland
Stanford, p. 2646.
t Ibid., Stanford's testimony, p. 2669.
010
Hampton's Magazine
ably to Messrs. Stanford, Huntington, Hop-
kins, and Crocker) $1,636,000, against which
it held the notes of the Central Pacific Com-
pany for $6,000,000, and that in payment
of the $6,000,000 of notes the Central Pacific
(owned by the same men) delivered $7,-
000,000 of land grant bonds ; * so that in-
stead of being a debtor when it completed its
work, the Contract and Finance Company
was a peculiarly happy kind of a creditor.
EVERYTHING WENT TO THE BIG FOUR
And what became of those $7,000,000 of
bonds exchanged for $6,000,000 of notes held
against $1,636,000 of debt?
Why, all went by the assets route to the
pockets of the same wise and fortunate four,
Messrs. Stanford, Huntington, Hopkins, and
Crocker.f
Subsequently, all these assets with the $62,-
000,000 of stock obtained for nothing and all
the other perquisites, "melons," good things,
graft, "rake-offs," and clever deals, were
merged into one of the most valuable railroad
stocks in the world, on which to this day we
are paying the colossal interest charges.
But in estimating the immediate profits of
the Big Four we must not, to be sure, over-
look the fact that for a part of the time of
construction, currency was much depreciated
and its depreciation added heavily to the cost
of everything that was bought. But the real
building work was done after the end of the
war when currency was rising in value and
the first mortgages were gold!
Moreover, to offset the loss on currency
were some items usually neglected in these
considerations.
Thus, the road was operated as fast as it
was built as part of a continental rail and
stage line, and from this operation there ac-
cumulated, by 1869, above all expense and
interest charges, close upon $3,000,000 of net
profits.
Also, to head off a rival line building east-
ward to Placerville, the wise and happy four
built a connecting wagon road from Dutch
Flat through the Carson Valley (charged to
Central Pacific construction account), and
* Pacific Railroad Commission Report. Brown's testimony,
p. 2682.
t "It is found that Messrs. Stanford, Huntington, Hopkins, and
Crocker received over $142,000,000 in cash and securities
through the Contract and Finance Company, Western Develop-
ment Company, and Pacific Improvement Company, and divi-
dends of the Central Pacific. In addition to this sum of $142,-
000,000 they also made large profits in the operation of fifteen
or more companies which were directly or remotely sapping the
revenues of the Central Pacific Company."
Pacific Railroad Commission Report, p. 143.
this road gathered for them at trifling ex-
pense tolls estimated at $3,000,000 * an
enterprise that had the further advantage of
ruining the rival railroad so that it fell by its
own collapse into the Central Pacific's pos-
session. I
OTHER FORTUNE-MAKING MACHINES OF THE
BIG FOUR
No sooner was the first transcontinental
railroad line opened, the gateway established,
and the toll taker at work, than the four thus
pleasantly endowed began to establish other
gates to take further toll. They had started
with next to nothing apiece, and now, after
nine years, they shared a stupendous fortune
that was, indeed, much more than wealth in
hand since it was an infallible and unceasing
machine for gathering more and still more
wealth.
As they constructed the Central Pacific, it
stopped at Sacramento, ninety miles east of
San Francisco, with which the Sacramento
River connected it, as did also the Western
Pacific, another and earlier railroad project,
liberally aided with government grants as an
incipient transcontinental route. The main
line of the Western Pacific really ended at
San Jose, fifty miles south of San Francisco,
but it had a branch to Oakland on San
Francisco Bay and opposite the city.
In 1867 the contractors that had under-
taken to build the Western Pacific became
"embarrassed," and the Contract and Fi-
nance Company completed the road and
took all of the stock, issued and unissued, all
the bonds and all of the land grants not
previously allotted to the first contractors,
delivering the whole to the Central Pacific,
composed of Messrs. Stanford, Huntington,
Hopkins, and Crocker. The land grants were
exceedingly rich and the possession of the
road thus cheaply secured carried the Central
Pacific from Sacramento to San Francisco
Bay and gave it an invaluable terminus. +
Another rival road, the California Pacific,
had been projected to build over the Beck-
vvith pass through the Sierras to an Eastern
* By Daniel W. Strong, who was a Dutch Flat pioneer and one
of the original founders of the Central Pacific.
t Bancroft's "History of California," p. 553.
j The true nature of this transaction is now not likely lo be
disclosed, but the reason for the first contractors' troubles
seems to have aroused some speculation. In Robinson versus
the Central Pacific filed in San Francisco in 1876, very dam-
aging allegations are made concerning the matter, the sub-
stance thereof being that the Central Pacific unfairly obtained
$2,000,000 of Western Pacific bonds and about $3,000,000 of
other valuable properties. It is certain that the Western Pacific
cost the Central Pacific little and was an immensely profitable
acquisition.
Winning an Empire and the Cost of the Winning
611
nnection. In 1869 it was completing its
line from Vallejo to Sacramento by a shorter
and better route than the Western Pacific.
The Central Pacific tried hard to keep the
California Pacific from entering Sacramento,
and at one time a pitched battle between the
armed forces of the two companies was im-
minent; but while the contestants were wait-
ing for a court decision, the California Pacific
stole a march and got into the city.* This was
in 1870.
Being thus defeated, the Central Pacific
had recourse to strategy. In 1871, it agreed
to buy the California Pacific for $1,579,000.
It had previously secured from it a contract
for the Contract and Finance Company to
.build and repair certain sections of line.
When this work was done, the Contract and
Finance Company presented a bill for $i, 600,-
ooo, which neatly offset the purchase price f
and left a margin. Some bonds were used
as counters in this unique deal, but the sub-
stance of it was that the happy four got the
California Pacific practically for nothing.
LEASES ADD TO THE WEALTH OF THE FOUR
They now went through the formality of
leasing it to themselves for $550,000 a year,
afterwards increased to $600,000. The par
value of the stock was $12,000,000, having an
actual value of less than $3,000,000, secured
for practically nothing and charged up to the
public at $550,000 a year.
Twenty-four years later the sworn value of
this property was $1,404,935 and all that time
$550,000 to $600,000 on its account had been
extracted annually from the public by the
four of Sacramento.
In those years the road had paid in rentals
alone $13,600,000 almost exactly ten times
its value. For all of which the public has
paid. Moreover, this rental was charged to
operating expenses, the public was required
to make the road profitable above such ex-
penses, J and rates were and are based upon
the reasonableness of such profits!
Subsidiary properties gathered in with the
California Pacific included the San Fran-
cisco and North Pacific, and the San Francisco
and Humboldt Bay Railroads, with a nominal
capital of $17,200,000; and having these
roads in its possession, the Central held San
Francisco, and indeed all California, in its
grip, and could charge what it pleased.
* Bancroft's " History of California." vol. vii.
t Ibid., p. 584.
t As to the general policy of these leases, see Pacific Railroad
Commission Report, p. 113.
This was always Mr. Huntington's idea,
to maintain at whatever cost an absolute
monopoly of the traffic; to allow the public
no chance of escape; and to control the state
through the control of the primal necessity
of transportation. For many years he de-
voted to this object more attention than to
all other objects together until he was ob-
sessed by it.
Now he looked out upon the field and saw
that his supremacy might be threatened from
two directions. On the north, the Northern
Pacific was slowly advancing from St. Paul;
on the south, he was menaced afar by the
Texas Pacific and others. He determined to
fortify both approaches.
He saw that from the south, where the easy
routes were, he faced most danger. There-
fore, as soon as the Central Pacific was com-
pleted, he and his three friends organized the
Southern Pacific Railroad to build south-
ward and seize the southern gate of Cali-
fornia.
Here comes in once more our old friend,
the Contract and Finance Company.
The grand secret of making fortunes, Mr.
Huntington had discovered, was to manipu-
late evidences of debt.
If you could bond a railroad enterprise,
then do its work at extravagant or fictitious
prices, then take its bonds in payment and
"FROM THE COURTROOM JUDGE CURTIS
WENT STRAIGHTWAY TO HIS HOTEL AND
PUT THE MEMORANDA IN THE GRATE."
612
Hampton's Magazine
its stock as a bonus, you had the public in
debt to you and could always make the pub-
lic pay interest on that debt, to your own
great emolument.
That is what he meant when he said a few
years before his death, "I made my money by
going into debt" a neat bit of word-play,
since the debt he went into was always debt on
which he contrived the public should pay the
interest to him.
To this end, the Contract and Finance
Company was a perfect instrument; it was,
in fact, even now at work in more than one
direction.
The Central Pacific owners had made with
themselves, as the Contract and Finance Com-
pany, a most remarkable contract by which
the Contract and Finance Company under-
took all the Central Pacific's repairs and
maintenance, charged 10 per cent profit
thereon, and used the Central Pacific's tools,
shops, and plants in the work.
This, for a simple little piece of money-
making by-play, seems hard to be excelled.
Having the same owners, the Southern
Pacific now contracted with itself as the Con-
tract and Finance Company for the building
of the new line, and again the terms of ar-
rangement were most peculiar and profit-
able.
For its immediate uses the Contract and
Finance Company received through its own-
ers cash, bonds, coupons, and other valuable
things from the Central Pacific's earnings and
treasury, and paid interest thereon, some-
times as much as 12 per cent a year.* It
repeatedly raided the Central Pacific's sink-
ing fund or other surpluses, obtaining once
$3,000,000 and once $5,000,000, although
these funds did not belong to the Central
Pacific but to the government and the people
of the United States.
With funds so secured much railroad line
was built. On lines so constructed bonds
were issued, and stock. Bonds and stock so
issued were delivered to the Contract and
Finance Company in payment of construc-
tion work done at abnormal prices. Finally,
as assets of this company, the bonds and
stock were distributed among its stockholders,
who were the four happy gentlemen of Sacra-
mento.
In other words, the earnings of the Central
Pacific, secured by charges upon the public,
built the Southern Pacific, and the Southern
* Pacific Railroad Commission Report, testimony of \V. E.
Brown, p. 2908.
Pacific bonds, stock and land grant were
"velvet:" *
Not a cent of the stock got upon the mar-
ket; it all went as fast as the presses issued
it, into the coffers of the Sacramento four.
Beautiful!
WESTERN DEVELOPMENT SUCCEEDS THE CON-
TRACT AND FINANCE COMPANY
The Contract and Finance Company did
not long survive in these goodly matters.
In 1875, its four owners took the very un-
usual step of disincorporating it, which en-
abled its affairs to be wound up and its
books destroyed.
In its stead was organized the Western
Development Company same ownership
(with the addition of David D. Colton) same
purposes,! and $5,000,000 of capital, of which
not a dollar was paid in.
It succeeded to the contracts of the Con-
tract and Finance Company, including the
Southern Pacific work. How well it fared on
its way through fertile fields we may judge
from the fact that on September 4, 1877, two
years after it started, it distributed among its
happy stockholders the following assets it
had accumulated in its peculiar ministra-
tions :
Southern Pacific stock $13,500,000
Southern Pacific bonds 6,300,000
Amador Branch bonds 675,000
Berkeley Branch bonds 100,000
Los Angeles Branch bonds JSo 00
Amador Branch stock 674,000
Berkeley Branch stock 1 00,000
Total for this sitting $21,362,500
Fair for a day's work!
The contract with the Contract and Fi-
nance Company, and later with the Western
Development Company, was to construct and
equip the whole line of railroad for $40,000
a mile in first mortgage bonds "and the bal-
ance in capital stock" whatever that might
* Pacific Railroad Commission Report, pp. 2984, 2665, 2678,
and particularly the testimony of Stanford at p. 2665 and of
C. F. Crocker at p. 2999.
t By Commissioner Littler Is it not true that the Western
Development Company is an instrument by which Messrs.
Stanford. Huntington, Crocker, and Hopkins performed work
and furnished materials to the Central Pacific Railroad Com-
pany and that they, as officers of the Central Pacific Railroad
Company, furnished the Western Development Company with
funds belonging to the Central Pacific Company and charged
a profit of 10 per cent on all work done and materials furnished,
which profit they appropriated to their own use?
ANSWER. I do not call that a true statement. ... I do not
understand that they used the Western Development Company
as officers of the Central Pacific but in their individual capacity.
Pacific Railroad Commission Report, testimony of F. S.
Douty, p. 2695. Quoted here also as a specimen of the ideas
of business ethics that seemed to permeate this interesting
company.
Winning an Empire and
the Cost of the Winning
613
mean, since the actual cost of construction
could not have exceeded $25,000 a mile * for
most of the distance.
For this the fat land grants from the fed-
eral government alone would have more than
sufficed, and the rich donations from local
sources were chiefly additions to the profits
of the four. The state of California gave
thirty acres of land at Mission Bay, San
Francisco, a very valuable endowment. The
city of San Francisco gave $1,000,000; other
cities, counties, and towns gave $1,002,000.
Congress, at Mr. Huntington's instigation,
had bestowed upon the enterprise half the
land in a strip forty miles wide along its entire
line, or 12,800 acres for every mile con-
structed. Much of this land was exceedingly
rich, but if it were worth no more than the
government's price to settlers, $2.50 an acre,
the whole would have been worth $29,824,000 ;
while at the excessive rate of $40,000 a mile,
the whole line from San Francisco to the
southeastern boundary of the state, including
the branches, would have cost to build only
$37,000,000.
This was an arrangement that constituted
a great triumph of Mr. Huntington's ability
in the lobby, but it was to have unlooked-for
and bloody consequences.
THE PACIFIC IMPROVEMENT COMPANY
The Western Development Company
lasted three years, when it followed the Con-
tract and Finance Company into the limbo
of things better forgotten, and was succeeded
by the Pacific Improvement Company, same
owners (except one) same purposes, same
capital, same absence of payments therefore.
This company, inheriting the contracts of
the Western Development Company, carried
the building of the Southern Pacific to the
state boundary at the Colorado River, and
thence across Arizona and New Mexico,
where had been organized by the same .own-
ers the Southern Pacific Railroad Company
of Arizona and the Southern Pacific Railroad
Company of New Mexico.
The Southern Pacific of Arizona had an
authorized capital of $20,000,000 (none of
which was paid in f) and bonds of $10,000,-
ooo. The Southern Pacific of New Mexico
had similarly a capital stock of $10,000,000
* In a region of no greater difficulties Receiver Farley, of the
St. Paul and Pacific, was at this time building and equipping a
railroad on $10,000 a mile. In 1877, Jay Gould told Mr. Hunt-
ington that he was building a branch of the Union Pacific at
$9,500 a mile.
t Pacific Railroad Commission Report, testimony of F. S.
Douty, p. 2708.
"CONGRESS, AT THE INSTIGATION OF MR.
HUNTINGTON. BESTOWED 12,800 ACRES
PER MILE ON THE RAILROAD."
(none of which was paid in) and bonds of
$5,000,000.
The Pacific Improvement Company built
for the Arizona road 384.17 miles, and for the
New Mexico road 107.25 miles. The con-
tract called for $25,000 a mile in bonds and
practically all the stock.*
When completed, the road was leased by
its owners to themselves as the Central Pacific,
on extravagant terms from which the Central
Pacific made great profits and drove its stock
toward par.
The Southern Pacific stock, secured for
nothing in this deal, is now worth i37f.f
The Pacific Improvement Company like-
wise seems to have done a prosperous trade
* Pacific Railroad Commission Report, testimony of F. S.
Douty, p. 2708.
t These leases worked both ways for their profit. "They
constructed 1,171 miles of adjunct lines at a cost of $27,216,-
931.01. On account of that construction, in addition to a
small cash payment, they issued bonds to themselves to the
amount of $.33,722,000. and stock to the amount of $49,005,800,
making a total issue of $82,727,800, of which $55,531,554 repre-
sented inflation. Then as directors of the Central Pacific they
took leases of their own lines for the Central Pacific for $3,490,-
828.81 per annum, which was at the rate of nearly 13 per cent."
Pacific Railroad Commission Report, p. 143.
614
Hampton's Magazine
in its line. At a meeting held April 1 1, 1882,
as shown by its minute book, it distributed
among its stockholders these securities that
it had gathered in its own sweet way:
Southern Pacific of Arizona stock $19,994,800
Southern Pacific of Arizona bonds 2,572,000
Southern Pacific of New Mexico stocks . 6,688,800
Southern Pacific of New Mexico bonds. 4,180,000
Monterey Railroad Company stock. . . . 284,000
Monterey Railroad Company bonds. . . . 248,000
Total at this sitting $33,967,600
I find also that, in 1894, it transferred to the
land department of the Central Pacific Rail-
road property worth something like $20,-
000,000, including more than 125,000 acres
of rich land and 125 town sites on the line
of the Southern Pacific of California. From
which I infer that in the midst of other and
exacting cares the thrifty owners had not
overlooked the profit that lies in knowing
where the stations are to be placed when you
lay out a railroad.
VARIED SOURCES OF WEALTH AND POWER
But to return to earlier history. While the
Southern Pacific was reaping bonds and
things as it moved eastward, Mr. Henry
Villard, in control of the Northern Pacific,
was rapidly pushing westward. His main
object was Portland, but men easily foresaw
that he would wish to build a branch south-
ward toward San Francisco.
The Central Pacific undertook to check-
mate him by building north a line called the
California and Oregon Railroad and by form-
ing an amalgamation called the Northern,
both constructed in the same way by the
Western Development Company or the Pa-
cific Improvement Company, on terms that
filled the coffers of the four gentlemen and
piled up capitalization and interest thereon.
I cannot do more than give some bare idea
of these operations by citing a few instances
from many, for to relate all the myriad
sources of profit would fill a great volume.
There was one piece of road 103 miles long
from Delta, California, to the state line, be-
longing nominally to the California and Ore-
gon branch of the Central Pacific's happy
family and constructed by the Pacific Im-
provement Company. On this the price
charged for construction was $4,500,000 in
bonds and 50,000 shares of stock, together
worth in the market $8,340,000. The actual
cost of construction was $3,505,609; the net
profit, representing also an unnecessary ad-
dition to the debt load that we must pay, was
$4,834,391.
To own a construction company, a railroad
company, and a good reliable printing press,
is better than to own a mint. Nothing can
limit your fortune but the extent of your
greed.
In the same manner, these gentlemen -or-
ganized the South Pacific Coast Railroad
Company, with a line eighty miles long, on
which the bonded indebtedness was $5,-
500,000 and the stock $6,000,000. The
bonds alone represented almost $70,000 a
mile. All of the bonds and all of the stock
were taken by the Pacific Improvement Com-
pany for building the road, and, in 1886, the
Pacific Improvement Company passed along
all of these securities to the Southern Pacific,
whose owners had gone through the formality
of leasing their own property to themselves
on an arrangement that left the rental and the
interest on the bonds and dividends on the
stock (if any dividends were paid) all to be
dug out of the road by means of freight and
passenger rates.
Similar processes were followed with the
Northern and with the Northern California.
The Northern was an accretion of ten smaller
roads, most of them with overlapping leases.
It managed to pile up a stock issue of $9,-
182,000, with bonds at the rate of $30,000
a mile for 386 miles, its total mileage. In the
end this conglomerate with all its leases was
leased to the Southern Pacific and its stock
exchanged for Southern Pacific stock in the
hands of the toll taker, and the whole thing
dumped on us who pay.
Year after year, the interests of these men
spread in many directions. They went into
banking, politics, legislation, land-owning,
navigation, and newspapers and, with par-
ticularly unfortunate results to the public,
they went into street railroads. They in-
creased their investments and power and
turned the profits made from one greedy
enterprise into power to secure more greedy
enterprises and gain more profits and more
power.
Sometimes they used their power as a ban-
dit uses his pistol and sometimes as a confi-
dence man uses his skill, yet on calm review
it appears that at no time were they more
than the successful exponents of the legit-
imatized spirit of their age, nor doing aught
that was not sanctioned by the code of morals
the age had accepted.
Of their greater exploits we shall have to
Winning an Empire and the Cost of the Winning
G15
jak at length hereafter, but for your re-
freshing, meanwhile, here is a little example
of the bandit or highwayman style of busi-
ness.
SECURING THE WELLS-FARGO COMPANY
We go back first to the stagecoach days,
hen John Butterfield's twenty-one day
stage from St. Louis via El Paso to San Fran-
cisco had been well established, the business
grew too great for an individual and a com-
pany took charge of it. The Civil War drove
the stages from the easy southern route to a
road across the center of the country, be-
ginning at Omaha.
With this change the company was reor-
ganized, and under its new name, Wells,
Fargo and Company, with Louis McLane of
New York as its manager, soon became an
institution in the West, operating a great ex-
press and banking business as well as stage-
coaches. When the Central Pacific was com-
pleted, Wells, Fargo and Company entered
into an arrangement to carry on its express
operations over the railroad.
The next year, however, 1870, the Wells-
Fargo people were dismayed to learn that
Messrs. Stanford, Huntington, Hopkins, and
Crocker, with Mr. Lloyd Tevis, had organ-
ized the Pacific Express Company and pur-
posed to compete for the express carrying
trade. Competition with the men that owned
the railroad and could do what they pleased
with rates was no competition at all, but
merely a game of stand and deliver.
The Pacific Express Company went no
further than to print some stationer)' and
open an office, when Wells, Fargo and Com-
pany surrendered. For a gift of one third
of the capital stock of Wells, Fargo and Com-
pany, the Pacific Express Company agreed
to go out of business.
One third of the Wells-Fargo stock was
$3> 333 >333 -33 thus acquired for the cost of a
bunch of stationery. This seems fairly good
business.
Afterwards the new stockholders put up
one third of $500,000 to develop the banking
end of the Wells-Fargo concern. Still later,
$1,250,000 of Wells-Fargo stock was issued
to the Central and Southern Pacific * (Stan-
ford, Huntington, Hopkins, and Crocker) in
return for a new traffic arrangement, and the
whole great business of the express company
passed into the hands of the railroad, where
* PaciQc Railroad Commission Report, testimony of Lloyd
Tevis, p. 3123.
it remained until the beginning of the present
year.
These I cite as examples of the great profits.
But the thrift of the fortunate gentlemen de-
spised not the day of small things, also.
They built for $40,000 a bridge over the
Colorado River and, owning it themselves,
they leased it to the Southern Pacific, which
they controlled, at $12,000 a year, which they
charged into the railroad's operating ex-
penses and made a basis for rates.
They bought the steamer Solano, worth
$100,000,* and, owning it themselves, they
leased it to the Northern Railroad, which
they controlled, at $90,000 a year, and they
charged the $90,000 into that railroad's oper-
ation expenses and made it likewise a basis
for rates.
Whenever they executed a neat bit of graft,
it was always charged either into capital or
into operating expenses or into both, and
wherever it was charged there it remains, and
as you will see in another article, we pay
for "it.
THIRTY-FOUR MILLIONS IN DIVIDENDS
All this time at the old original Central
Pacific gateway the takings had been goodly
and incessant. As soon as the cars began to
run over the Sierra Nevada, the surplus earn-
ings began to accumulate. At first these
seem to have been used to build other lines,
but by September, 1873, the business was so
good that, in addition to the money slipped
over to side enterprises, there was plainly
enough for a dividend. From that time and
with the exceptions of 1878 and 1879, the
dividends ranged from 6 to 10 per cent a
year until 1884.
Then the dividends stopped. In that year,
1884, the stock was worth 80 and more, and
for the first time its owners parted with it.
They sold the bulk of their holdings to an
English syndicate under a remarkable ar-
rangement that left the original holders still
in control of the property. After that the
road ceased to be profitable. Only Central
Pacific stock was sold to the English. The
original holders retained their stock in the
Southern Pacific, which might now, of course,
be deemed to be a rival line to the Central
Pacific from whose earnings it had been
built! f
After ten years had passed without divi-
* Sworn statement of A. N. Towne, General Manager of the
Southern Pacific.
t Congressional Record, 48th Cong., First Session, p. 4821.
The Gree Gree Bush
By James B. Connolly
Author of "Out of Gloucester," "The Wireless Night of Hai-Po Bay" etc.
Illustrations by Maynard Dlxon
QUEER how a man knocking around the
world gets here a hint, there a hint, of
a thing that has been puzzling him for years,
and at last, all of a sudden usually, finds he
has all the missing threads straight and un-
tangled in his palm. I have in mind the
case of Bowles. Bowles wasn't his right
name at all, but we'll call him that, for it was
under that name he enlisted in the navy,
where they still speak of him as the "Gree
Gree Man." But that enlistment occurred
later.
Bowles came of a family up our way that,
well, the newspaper men I had a brother a
newspaper man used often to sit down and
wonder if the Bowleses really did believe
themselves so much better than ordinary peo-
ple, or were they just trying to fool themselves,
too. There is probably not much going on
in a city that a dozen good police reporters
don't pretty near get to the bottom of if
they're really interested. Bowies' people
were great hypocrites and Bowles, being
brought up to believe that he was better stuff
than other young fellows, naturally broke
when the strain came.
Before he was out of college he had done a
dozen things that another boy would have
been put away for. But one day he just had
to jump out, and in a hurry; and cut off from
leaving the city by train or steamer, he sailed
on a bark that was bound for the West Coast
of Africa, on one of a line of old hookers that
used to sail more or less regularly for the
West Coast, going out with a small holdful
rum, striped calico, brass wire, and so on,
missionaries sometimes and coming back
with a big holdful of ivory, palm oil, pepper,
and things like that. A nice, quiet business
that used to pay about a thousand per cent
one time. Perhaps it does yet. And it was a
great relief to all the Bowleses when young
Bowles got away without getting caught, and
they didn't care how long he stayed away.
What I am about to say now of Bowies'
doings on the West Coast is the summing up
of what I learned at different times from a
dozen people a couple of ship captains, a
bosun's mate in the navy, a dozen sailormen,
stokers, and so on, who happened to be on the
West Coast when Bowles was there. Out
there Bowles fell in with old Chief Thomson,
who used to run things pretty much to suit
himself over a country larger than many a
European nation controlled.
Thomson was a name the white traders
gave him. It may have been that Bowles,
though Kipp was the name he took out there,
possibly Bowles, coming of a hard-fibered
trading ancestry, showed the old fellow a
few new commercial tricks. He must have
been of some material use, for old Chief was
too shrewd and Bowles too cold-blooded for
anybody to suspect it was a matter of senti-
ment. So fat and wide that he had to swing
his legs sideways like a duck when he walked
that was old Chief, but respected by all
the white people, even though he was as
complete an old villain as ever lived in some
ways, for he had force, and he was a man who
meant well by his own people; that is, after
he'd had his fill of eating, drinking, and
general pleasuring.
Old Chief was at the head of half a dozen
secret societies at least half a dozen. Africa
is rotten with secret societies, worse than any
white country. Among white peoples, of
course, those who want political office or a
good grocery trade that kind are the great
"joiners"; but down there it was the cere-
monies that attracted them as much as any-
thing. In places there they still practice some
of the things they used to do ages ago. It is
hard to make people believe this, although in
our own country the negroes still practice
voodooism, and in Jamaica and Hayti they
still practice Obeaism. One society, how-
ever, old Chief Thomson made little secret of
Africa for the Africans was what it meant.
And by an African he meant a black, and
618
Scientific Corruption of Politics
MR. HUNTINGTON'S DEALINGS WITH MEMBERS OF CONGRESS IN FURTHERING
THE DESIRES OF THE SOUTHERN PACIFIC RAILROAD
By Charles Edward Russell
Author of "The Heart of the Railroad Problem," "Beating Men to Make Them Good" etc.
Portraits by S. G. Cahan
In the White House one day :
Mr. C. P. Huntington Mr. President, when you called on me in New York for a sub-
scription for the campaign there did I not draw my check to you for $ 1 00,000 ?
The President of the United States You did, Mr. Huntington.
Mr. Huntington Then am I not entitled to the appointment I asked of you ?
The President of the United States You are, Mr. Huntington, and you shall have it.
T T NLUCKILY this dialogue is not a bit of
U imagination nor an excerpt from fic-
tion, but part of an actual conversation.
I have no doubt many other similar con-
versations have occurred at the White House
and elsewhere. This is the only one I have
been able to verify. It is verified by the man
that heard it.
Suppose the appointment Mr. Huntington
desired to have been to a federal judgeship.
Suppose the man he chose for the place to
have been one of his attorneys and hench-
men. Suppose an issue between the people
and the railroad to come before this judge.
Toward which side would you expect the
judge to incline?
And then you are to understand that al-
though this instance of compulsive power
over the government of the nation seems very
startling and abnormal, it was of small mo-
ment compared with the total power to which
the railroad company attained.
Beginning in 1862, when Leland Stanford
was elected Governor of
California, the railroad
monopoly upon new lines
steadily developed what in
the end became incompa-
rably the greatest political
machine ever known.
We shall say far too
little if we merely say
that this machine domi-
nated the government of
As to the specific cause of the increased
cost of living President Taft to-day frankly
told various of his callers that he was unable
to account for it. News dispatch from
Washington, December 30, 1909.
They increased the cost of living. . .
They charged all that the traffic would bear
and appropriated a share of the profits of
every industry by charging the greater part
of the difference between the actual cost of
production and the price of the article in
the market. Pacific Railroad Commission
Report, p. 141.
843
California. It was the government and
all the branches thereof, not merely di-
recting but performing.
Discerning men that wished to have a bill
passed, a bill signed, an appointment made,
a plan adopted, wasted no time with the pup-
pets that nominally held office. They went
directly to Mr. Stanford or Mr. Huntington
and asked for what they wanted. This was
the custom even when the thing wanted had
nothing to do with any railroad interest,
when it might be something philanthropic or
for the public good.
The real capitol of the state was moved from
Sacramento into the office of the Central Pa-
cific in San Francisco. There public policies
were shaped, public questions decided, public
appointments determined; not merely for the
state, but often for towns and counties and
occasionally, in a historic way, for the nation.
The political organization that achieved
these stupendous results in politics came to
be an overshadowing influence in social and
business affairs also. For
most young men that cher-
ished any ambition it held
the future in its grasp; it
could make or unmake.
If a young man wished to
distinguish himself in poli-
tics or in a public career, he
had no chance except by
close alliance with the rail-
road company ; if he sought
844
Hampton's Magazine
any nomination, he must seek it through the
company's agents.
If he was a lawyer, the railroad company
could make him distinguished and successful,
or it could deprive him of clients and make
him a failure. If he wished to be a judge,
the railroad company chose the judges; he
must apply through the company.
If the young man was in business, the com-
pany could make him prosperous or it could
ruin him.
If he published or edited a newspaper or a
magazine, he could obtain subsidies from the
railroad company; or risk bankruptcy if he
had its ill-will.
The very position in society of his wife and
therefore her comfort and peace of mind, his
own standing in the community, the position
and to some extent the opportunities of his
children came to depend chiefly and some-
times w holly upon his attitude toward this
truly imperial power that had seized the
State of California.*
NEWSPAPERS AND CHURCHES SUBJECT TO
SOUTHERN PACIFIC INFLUENCE
This power controlled also most of the
channels of public opinion. Some newspa-
pers and magazines it owned outright and
published in its interest; hundreds of others
it controlled through subsidies, the secret
pay roll, advertising, and passes. Very well
known newspapers and famous editors were
regularly paid for their influence; one editor
was hired at $10,000 a year merely to write
and to publish eulogies of Mr. Stanford.
This power went into the church also and
into the schools. It secured the assistance of
clergymen, educators, and historians.
Many a clergyman with an annual pass in
his pocket went about speaking well of the
railroad and of the four men of Sacramento.
If the pass were insufficient to get him, why,
there was always the liberal subscription to
the church charity. Church societies were
not forgotten, nor Sunday schools. One de-
nomination organized a league with branches
all about the state. Almost at once this
league was controlled by men favorable to
the railroad company.
No trick escaped the vigilance that steered
the machine and had no partisan preference
in politics, no denomination in religion, but,
* They exerted a terrorism over merchants and over communi-
ties, thus interfering with the lawful pursuits of the people. ' They
participated in election contests. By secret cuts and rapid
fluctuations they menaced business, paralyzed capital and re-
tarded investment and development. Pacific Railroad Com-
mission Report, p. 141.
worked and plotted and mined without ceas-
ing to augment and maintain colossal Power.
All these and still other influences were
like strings attached to many puppets, and
all the strings led into the office of the railroad
company. With one pull upon the strings
the many puppets were set dancing.
A great part of their dancing was designed
to conceal the real movements of the com-
pany, to make deviltry appear plausible, or
to prevent the people at large from seeing
that popular government had been abolished.
After a time a condition resulted in which
the railroad company could not undertake an
act so injurious that great numbers of respect-
able men would not applaud and support it;
and the public became calloused to charges of
wholesale corruption that were opposed or
refuted from so many eminent sources.
After a time, too, there grew up a condition
in which neither any laws nor constitutions, nor
any kind of public revolt nor public protest,
nor the nation, nor contracts, nor pledges, nor
guaranteed rights, nor any consideration of
morals, nor any other creature, seemed to avail
against this Power that year after year defied
every attempt to restrain it, until men lost
heart and settled into sullen submission un-
der a tyranny they could not throw off.
Periodically there had been angry revolt
when the people attempted to regain their
government ; anti-railroad conventions had
been held, good and honest men nominated
and elected to office. Every such rebellion
had ended in the same abject failure.
The good men elected to office found them-
selves utterly unable to combat a system so
vast and so marvelously buttressed. With the
best of intentions and the most resolute will
they were always defeated and helpless.
The state courts had stood by the com-
pany; or if these courts, too, happened to be
captured temporarily by the people, then the
company (which was interstate) resorted to
the federal courts and thence invariably re-
turned triumphant, so that no essential con-
dition was changed. In a few months the
people relapsed into their lethargy and the
company regained the full measure of its
political ascendency.
It could do as it pleased, this company;
the state had created it, and now it had dis-
placed its creator. It could do as it pleased
and levy upon the people practically unlim-
ited tribute. It had the power to make trans-
portation rates and through these rates it
caused the people to pay for every cent ex-
Scientific Corruption of Politics
845
. *~. ,-"" '"?Z''~- 'f* t ' ; ~j' ~:_ --":'-' "!' ' ~,
pended by its political machine. Every sub-
sidy, every "legal expense," every dollar
paid for "explaining things," every charity
subscription, every hired legislative agent,
every county boss, every phase of the vast
organization, was
charged against
the people and
taken from them
in transportation
rates not once, but
many times.
The people paid
for their own un-
doing.
They paid for it
then, they pay for
it now, they will
continue to pay for
it more and more
in cash taken out
of their earnings
and expressed in
the increased cost
of living.
This great po-
litical machine was
much more ef-
ficient than Tam-
many's or any
other machine that
ever existed, be-
cause it was non-
partisan; it domi-
nated the Demo-
cratic organization
as easily as the Re-
publican. Politi-
cal manipulation it
reduced coldly to
the exact principles of science and business.
It made politics a matter of scientific corrup-
tion and perfect organization, and by these
means it secured astonishing results.
In every county in California the railroad
company maintained an expert political man-
ager whose employment was to see that the
right men (for the railroad company) were
chosen as convention delegates, the right kind
of candidates named and elected, and the
right things done by men in office.
Often this manager would be the Repub-
lican boss of a Republican county, or the
Democratic boss of a Democratic county. In
important or doubtful counties he would be
merely the railroad boss with whom the Re-
publican boss and the Democratic boss must
COLLIS POTTER HUNTINGTON IN HIS PRIME. FROM
1862 UNTIL 1896 UNDOUBTEDLY THE
GREATEST RAILROAD GENIUS
OF HIS TIMES.
deal for money, votes, and success. Under
him he had as many subordinates as he
needed to care perfectly for the wards and
rural districts, and through these assistants
he watched, reported, and forestalled any at-
tempt to defeat or
evade the system.
At the head of
this vast depart-
ment was always
a man of peculiar
gifts known for-
mally as the rail-
road company's
General Solicitor,
but by the cynical
part of the public
called by a name
far more expressive
if less euphonious.
He had a staff of
well - drilled and
able assistants; to
each of these a sub-
department was as-
signed. One looked
after the Nevada
legislature, one
cared for Utah, one
for Arizona, one
for New Mexico,
one for local poli-
tics in San Fran-
cisco. Each had
his own corps of
assistants and am-
ple funds to buy
such public of-
ficers as he might
need.
With such an organization, so supplied
with money, and so defended by respecta-
bility, the railroad company could select its
own United States senators, members of
Congress, County Supervisors, and every-
thing between.
The money cost, of course, was great; but
as the cost was saddled directly upon the
people, this was not a matter of importance
to the company. It was equipped with funds
to buy whatever was needed, and it had
very active support in ways and from men
that cost little or nothing. This at first seems
strange, but on reflection will be found to be
true and to represent a universal condition
in this country. The railroad company
took and still takes advantage of the follow-
846
Hampton's Magazine
JOHN H. MITCHELL, SENATOR FROM OREGON
IN 1877.
ing elements that exist in every commu-
nity:
1. Men that can be fooled by party loyalty.
2. Men that are eager for political careers
and know there is no chance except by serv-
ing the money power.
3. Merchants that can be controlled
through their banks, or terrorized,* or brought
into line with rebates.
4. Men that believe the railroad company
and all great corporations to be part of "our
set" and feel a class-conscious satisfaction
in allying themselves against the riffraff and
the ignorant rabble " envious of us of the
better orders."
5. Men that are fooled by the purchased
press.
6. Men that can be had for a pass or two.
Beyond these remains the class that must
be secured with money, including bosses,
heelers, professional politicians, repeaters,
colonizers, floaters, lodging-house keepers,
the keepers of dives and disorderly houses
that cannot be controlled through the police,
the saloon keepers that cannot be controlled
through the breweries.
All of these were fully utilized by the
political department and secured for the rail-
* Pacific Railroad Commission Report, p. 141.
road company the control of the state legis-
lature.
THE POLITICIANS' SCALE OF PRICES
Expenses, of course, did not end when the
state officers were chosen. Many senators
and representatives worked on the basis of a
regular salary of $5,000 merely to kill all bills
that the company wished to have killed, but
with the proviso that for passing bills the
company wished to have passed there must
be extra compensation.
All United States senatorships were also
outside of the regular price, and charged as
extras. To elect a senator for the full term,
the regular price was $3,000 a vote; for terms
of four years or two years, discounts were
made from this tariff.
Besides, there were local bosses to be
paid and their rates were sometimes un-
reasonable. Thus Abe Ruef, the convicted
boss of San Francisco, told Detective Burns
that William F. Herrin, the present po-
litical manager for the Southern Pacific,
paid him $14,000 for the control of the
San Francisco county delegation to the
Republican State Convention of 1906, which
was rather a high price; and on special
occasions the prices of senatorships and other
offices have been suddenly advanced in a
way that would be very annoying to the rail-
road company if it were not able to charge
the price to the public.
About all this let no one think there is
surmise or inference; least of all is there
any exaggeration. We are dealing with an
inside view of the situation furnished chiefly
by one that was long of the railroad's political
department, a high executive that for years
beheld and was a part of every movement in
the game. This man, James W. Rea, of
San Jose, personally honest in spite of his
employment, has made an explicit and de-
tailed statement concerning all of these con-
ditions.* The railroad company has had am-
ple opportunity to deny what Mr. Rea has
averred on his own knowledge and from his
own long experience, and the railroad com-
pany has not challenged one word of his
story. So, then, even if it were not sup-
ported in a thousand ways by ten thousand
facts and witnesses, fair-minded men would
say that here must be the plain, unpleasant
truth.
Yet all this time we are to bear in mind
that this monstrous and corrupt machine was
*San Francisco Call, July 4, 1908.
Scientific Corruption of Politics
847
not deliberately designed by the four men of
Sacramento nor at first desired by them, not-
withstanding the unequaled power that it
conferred. In truth it was at first forced
upon them by conditions and then grew be-
cause of other conditions and not because of
any man's depravity. Many causes com-
bined, as in human affairs many causes al-
ways do combine, to press them irresistibly
along the one course.
They were themselves the victims of con-
ditions.
There was, first, Stanford's natural apti-
tude for politics and political maneuvering,
and his election as the first Republican gov-
ernor of California; but there were also many
other and greater influences.
From the beginning, the whole enterprise
was involved in politics because of the grants
and subsidies that were sought from cities,
counties, and the state.
Then, it needed much legislation for vari-
ous purposes, and it began to face many
harassing lawsuits growing out of its peculiar
and illegal tricks of management. The easy
way to get the laws it needed, to kill laws
that interfered with it, and to win the control
of the courts, was through political action.
As to the kind of action, there was always
the example of Mr. Huntington's brilliant
success with Congress. Men would hardly
be flesh and blood if they were not impressed
with that.
THE " BIG FOUR'S " TASTE IN STOCKS
Of the original supporters of Engineer
Judah's railroad project were four stockhold-
ers that had not been frightened out of the
enterprise by Mr. Huntington's threat of
"buy, sell, or the work stops." These were
Samuel Brannan, the two Lambards, of
Sacramento, and John R. Robinson. After
the completion of the road all men saw that
its business was enormous and its profits
must be great, but for some years there were
either no dividends or the dividends were
disproportionate to the earnings. Brannan,
the Lambards, and Robinson therefore
brought suits against Stanford, Huntington,
Hopkins, and Crocker for an accounting of
profits alleged to have been diverted.
These suits had a very peculiar history.
In all of them the allegations shown by the
bills of complaint were of most outrageous
fraud. Thus the bill in the Robinson case,
a digest of which I have before me, alleges
that neither Stanford, Huntington, Hopkins,
WILLIAM M. STEWART, SENATOR FROM
NEVADA IN 1877,
nor Crocker ever paid a cent for their stock ;*
that the only stock ever paid for was that held
by Robinson, the Lambards, Brannan,
and the counties of San Francisco, Placer,
and Sacramento; that these counties had
bought stock as subsidies and that Stanford,
Huntington, Hopkins, and Crocker subse-
quently repurchased this stock out of the
earnings of the road; that after these four
men had seized control of the road they never
held a stockholders' meeting, never paid for
their stock, and appropriated for their own
use $15,000,000 worth of real estate granted
to the road for terminals by the city of San
Francisco, the city of Sacramento, and the
State of Nevada.
The bill recites the huge gifts received
from the United States, from the State of
California and the various counties, and
then declares the actual cost of building f the
road to have been as follows:
* This allegation should be compared with the finding of the
minority report of the Pacific Railroad Commission, which at
page 9 charges Leland Stanford with swearing on September 18,
1871, that 854,283,190 of Central Pacific stock had been paid
in, whereas the paid in stock was only $760,000. This is desig-
nated in the report as one of the false statements under oath con-
tained in affidavits now on file in the Interior Department at
Washington.
t It is interesting to compare these statements with certain
testimony given before the Pacific Railroad Commission. For
instance, take the charge made for building from the eastern base
of the Sierras across the plains. This was, as above stated, at
the foothill rate, $32,000, although the act provided that on
ordinary or nearly level ground the rate should be only $16,000
848
Hampton's Magazine
For the first 18 miles $11,500 a mile
For the next 150 miles less
than 42,000 a mile
For the remainder of the road
to the six hundred and nine-
tieth mile less than 21,000 a mile
On this the four men of Sacramento drew
from the federal government $16,000 a mile
for the first seven miles, $48,000 a mile for the
next 150 miles, and $32,000 a mile for the rest
of the distance.
If the road had been built at actual cost,
the entire charge for construction and equip-
ment would have been $19,212,960 as against
the $55,000,000 and more charged by the
Contract and Finance Company which was
another name for Stanford, Huntington, Hop-
kins, and Crocker.
The bill also alleged that of the first mort-
gage bond issue of $27,500,000 these men had
seized $22,000,000 for themselves, and that
great sums of money that rightfully should
have been available for dividends had been
diverted and withheld.
In spite of the grave nature of these
charges against their personal honor, the
men implicated did not allow the cases to
come to trial where they could prove their
innocence.* On the contrary, they compro-
mised each suit by buying the stock held by
the complainant. For some of this stock
the price paid was $400 a share, for some
$500, and for some $1,700.
As the highest estimate of the real market
value of the stock was at this time about 60,
it will be seen that the gentlemen had luxuri-
ous taste in such things.
It appears also from certain testimony and
may be noted as of interest that the attorneys
that brought the suits, Alfred A. Cohen, De-
los Lake, and John B. Felton, subsequent-
ly passed into the employ of the railroad
company and remained there until they
died.t
These and many other significant incidents,
the growing unrest in the state, the bitter
complaints of shippers and merchants, the
a mile. At page 3662 of the testimony, Mr. Charlei "Crocker
being on the stand, I find this:
Question Is it not a fact that four fifths of the distance be-
tween Reno and Promontory Point [525 miles] consists of easy,
rolling land, where there was no special difficulty of construction?
Answer Yes.
This means that for these 420 miles Messrs. Stanford, Hunt-
ington, Hopkins and Crocker charged the Government $13,440,-
ooo; whereas they should have charged but $6,720,000. The
charge to the Government more than sufficed to build these 420
miles and left $3.000,000 in the hands of the Big Four besides
the land grant, their own bonds at $32,000 a mile and all the
stock that they issued.
The equal of this operation has not been known in the history
of railroad building.
* Pacific Railroad Commission Report, p. 2779.
t Ibid., pp. 2775, 2776, 2779, 2831, 3653.
feeling plainly expressed that the railroad
monopoly was a menace to the public, indi-
cated the necessity of controlling public func-
tions and building a political institution. In
plain terms, if the power of the government
were not seized the people were practically
certain to inflict vast injuries upon, or per-
haps destroy, the profits that these four saw
looming ahead of them. From one point of
view political control was a matter of self-
preservation; later, of course, it became a
matter of enormous advantage, but at first
it was only a necessity.
POLITICAL CONTROL A MATTER OF NECESSITY
If there had been nothing else, the relations
of these four men to the federal government
would have driven them inevitably into poli-
tics. The $27,500,000 of government bonds
issued in their behalf were a lien on their
property and they were obligated to pay the
annual interest. Their purpose was to de-
fault on these interest payments for the pres-
ent and eventually to evade the payment
of principal and interest. Their only chance
to succeed in any such scheme was to become
a great political power, and first of all to own
the State of California arid wield it as a solid
block in Congress and in the national con-
ventions.
There was also to be considered the chance
of enormous profits that lay in getting from
Congress more rich grants from the public
domain for their various plans of railroad
extension, because in one such grant would
lie' a return greater than the entire cost of
political control, including the expenses of
"explaining" many things to many public
men; and there must have been something
very alluring in the idea of defraying by pub-
lic grants the cost of heading off competition
and maintaining the traffic monopoly of the
West.
The wonderful career of Mr. Huntington
in Washington showed the way by which
these things could be done. He had laid the~
cornerstone of the enterprise in political
manipulation and the illicit control of public
officers. But for his achievements with Con-
gress there would have been no colossal for-
tunes for him and his associates, and without
the like achievements in Sacramento and
Washington no more millions could be added
to these fortunes even if still greater disasters
did not occur.
Governor Stanford at all times, Mr. Crock-
er much of the time, and Mr. Hopkins
Scientific Corruption of Politics
849
some of the time, looked out for Sacramento.
I shall recite now some of the strange ex-
penditures they made. In some cases these
were charged up to " expense," in some to
"legal expenses"; in all cases they were with-
out explanation.* You are to understand
that I am quoting from an incomplete list,
covering only a few of the years :
railroad and son of the original contractor,
some explanation of these and cognate mys-
teries. I will give a specimen of Mr. Crocker's
examination. He was asked:
" What was the nature of these payments? "
To which he answered lucidly: "They
were general in their character."
.On being pressed for a more specific defi-
nition he said that they were "expenses for
Dec. 31. Leland Stanford $171,781.89 various purposes." Being again pressed to
Dec. 31. Leland Stanford . 8,877.15 b e explicit, he said:
^T. Letnlstntrd. ^33 " ^ng and everything that they, [the
jg^ officers of the company] might consider ad-
Feb. 6. Western Development Com- vantageous to the company and which re-
P an 7 26,000.00 quired the expenditure of money."
Feb. 8. Leland Stanford 20,000.00
Feb. 17. Leland Stanford 20,000.00 Question Do you know, directly or indirectly, of
July 30 to Sept. 30, 1877. Leland the expenditure of any money on account of the
Stanford 83,418.09 Central Pacific Railroad Company for the purpose
Aug. 30. D. D. Colton 1,000.00 of influencing legislation?
Sept. 22. Western Development MR. COHEN (attorney for company and the same
Company 50,000.00 Cohen that brought the Robinson suit). I advise
Sept. 22. Western Development you not to answer that question.
Company 29,974. 13 WITNESS. By advice of counsel I decline to an-
Nov. 2. D. D. Colton 7,500.00 swer that question.*
l8 Sept. 7. Leland Stanford . 50,000.00 As ] * he inevitable results of such a sys-
Oct. 26. Mark Hopkins 5,000.00 tern, dealing on a vast scale in rottenness, I
Nov. i. Leland Stanford 83,418.00 will give a few incidents much more signifi-
Dec. 27. Leland Stanford . 52,5- cant than any description could possibly be.
1 Feb. 14. Leland Stanford.. 10,000.00 From them the discerning will see clearly
June 7. Leland Stanford 13,000.00 enough what .a bedraggled political prosti-
June 28. Leland Stanford 111,431.25 tute California has become.
Sept. 3. Leland Stanford . 12,000.00 Mr Rea says that when Mr p elton was
iS:2 7 . LelandTanford.. ..::: 6.% nominated for the United States Senate
Oct. 4. D. D. Colton 3,290.00 he was to fill an unexpired or short term.
Nov. 12. Leland Stanford 46,816.94 Sixty members of the legislature organized a
Nov. 12. Leland Stanford ... 18,168.71 strikers' Union or Black Horse Brigade and
1 March 25. C. Crocker. . 26,452.60 demanded $180,000 in a lump sum for their
March 28. C. Crocker 3,100.00 votes. This, for a short term, was a strong
May i. C. Crocker 40,000.00 advance over market rates.
May 6. C Crocker.. 40,000.00 Mr. Rea protested vigorously. The strik-
JUne c 2 o 9 mpany eSt . ern T.^ 40,745.25 in g le g islator * ^rred, and then informed
July 23. Leland Stanford '500.00 Mr. Rea that they had determined to insist
Aug. 2. Leland Stanford 789.50 upon their terms and unless they got $180,000
Sept. 27. Leland Stanford.... 38,156.03 t h ey wou ld proceed at once to elect one
When the Pacific Railroad Commission Johnson, an unknown farmer of the Sari
.sought to learn something about these ex- Joaquin Valley.
penditures Mr. Stanford, under oath, could This same James W. Rea, to whom we are
not remember about them or else took refuge indebted for this close inside view of the
in a refusal to answer, whereupon Justice machine at work, was at one time a state
Field and Judge Lorenzo Sawyer sustained railroad commissioner. In that capacity he
his refusal. made a ruling that, for reasons not necessary
to detail here, the Southern Pacific did not
THE MYSTERY OF MR. STANFORD'S SPENDING like. Officers of the railroad and other in-
Then the Commission tried to obtain from terests demanded that this ruling be reversed.
Charles F. Crocker, Vice-President of the Rea refused to reverse it. He was then
*See Pacific Railroad Commission Report, p. 2999. Mr. threatened with the venal press. He defied
Cohen, attorney for the railroad, here makes an admission about
these expenditures that can be construed to mean only the worst * Pacific Railroad Commission Report, testimony of C. F.
about them. Crocker, p. 2998.
850
Hampton's Magazine
the venal press. At last he was summoned
before C. P. Huntington, who happened to be
then in San Francisco. Huntington asked him
to reverse his ruling. Once more Rea declined.
"Then," said Mr. Huntington, "I shall
have to give the word to impeach you in the
legislature and I hate very much to do it."
MR. REA IS NOT IMPEACHED
So within a few days the legislature be-
gan impeachment proceedings against Rea.
There was pending at the time a reassess-
ment bill that would be an advantage to the
railroad and for which many legislators had
been bribed to vote. When Rea was testify-
ing before the House in the impeachment
trial he ripped into this reassessment bill,
exposed its true nature, and denounced the
corruption that had been used in its behalf.
The next day the official records were muti-
lated so as to take from the stenographer's
report every reference he had made to the
reassessment bill. The public, therefore,
never knew that he had made a revelation
on this subject, and the House proceeded to
pass the impeachment bill.
Mr. Rea had, however, impressed certain
facts upon certain senators, and one of the
facts was that he knew perfectly well what
were the conditions in that body, which sen-
ators were getting $5,000 a year each as
"negatives" that is to say, for merely kill-
JOHN B. GORDON, SENATOR FROM GEORGIA
IN 1877.
ing bills that the railroad desired to have
killed and which of them had received more
for extra services. Some of these got the
idea that he intended to make a sweeping
and sensational expose of the whole business
of bribery. They came to him and opened ne-
gotiations that ended in the dropping of the
impeachment proceedings and the concealing
of disagreeable facts about eminent statesmen. *
People became so accustomed to such
stories that conditions were regarded as a
matter of course, and were talked of with a
certain naive candor inexpressibly startling
to visitors of a more Puritanical habit.
When, in 1885, Leland Stanford was elect-
ed to the United States Senate (an event that
was to have unexpected results) the state
laughed and discussed the price as it would
discuss the orange market. A few days after
the legislature's action the late Senator James
G. Fair was standing in front of the Palace
Hotel in San Francisco, meditatively gazing
into the street and chewing a toothpick.
A reporter approached, and, being old
friends, the two began to chat. "Senator,"
said the reporter, "how much do you think
Stanford's election cost him?"
"Well," said Senator Fair, pausing evi-
dently to make some mental calculations, " I
can judge of that only by my own experience.
From what it cost me in Nevada I should say
it must have cost Stanford not less than a
million."
Under the blight of years of railroad domi-
nation the public conscience was slowly seared
and corruptionists grew bold while the public-
service corporations seemed to work together.
At the session of 1897 the San Francisco
Examiner unearthed a condition of legislative
corruption that would have appalled another
state. To complete the evidence some tele-
grams were needed that had been sent via the
Western Union. An investigating committee
subpoenaed these telegrams. The Western
Union undertook to rush them out of the state
over the Central Pacific. Just before they could
cross the Nevada line the Examiner succeeded
in reaching a village constable with antique
courage. He held up the train, found the
box containing the telegrams, and sent it
back to Sacramento under guard.
When it was opened it was found to con-
tain evidence that the railroad company had
not changed its methods since the days when
Mr. Huntington "explained things."
* See Mr. Rca's full statement and examination in the San
Francisco Call, July 4, 1908.
Scientific Corruption of Politics
To be seen at its best, any such incident
should be studied in connection with the table
of unexplained expenditures * o Jered on
page 852 and then in connection with the
Southern Pacific's rate tariff. Into these it
will be found to fit quite charmingly. Of
course every excursion into the legislature
vote market was charged up with the rest to
"legal expenses" and (also with the rest)
went into the capitalization upon which
we are privileged to pay of our substance
in the increased cost of living.
MR. HUNTING-TON'S WASHINGTON CAREER
We shall now, if you please, return to Mr.
Huntington in Washington and see how he
fared in the underworld. It is really an ex-
traordinary story, for he went there a country
merchant without experience in public af-
fairs, without acquaintance or influence, and
he managed to win from Congress first one
huge grab at the public resources and then
another, until he appeared the very Colossus
of lobbyists. In the history of Congress no
man has come before it with balder proposi-
tions of private gain nor maintained them
with anything like his success.
Yet about this we should be under no
misapprehension. Mr. Huntington was no
wonder-worker, no spellbinder, no wielder of
the magic of eloquence. He was a practical
man. We are not to believe that he entered
Washington an unlettered trader and by force
of argument swayed great statesmen to his
will. He led against Congress a band of
legislative experts, well supplied with money;
they did the rest.
From 1862 until 1896, he spent most of his
time in Washington and attended and nar-
rowly scrutinized every session of Congress.
In those thirty-four years he passed through
Congress a great many bills that he wanted
to have passed; he killed innumerable bills
that he wanted to have killed; he utterly
wrecked and ruined the almost life-long plans
of his one great competitor; he exercised in all
administrations and upon most departments a
sinister and imperial power; and on only two
occasions was he really defeated.
The history of parliamentary government
shows no fellow to this career.
I am going to let Mr. Huntington tell what
he will about it.
He had in his employ in 1862, and for
many years thereafter, one General Franchot,
quite well known in Washington; also one
* Pacific Railroad Commission Report..
JOHN P. JONES. SENATOR FROM NEVADA IN
1877.
Beard, one Bliss, one Sherrill, and others.
Before the Pacific Railroad Commission in
1887, he was asked about the nature of
General Franchot's ministrations.
"He was," said Mr. Huntington, largely,
"a very honorable man whom I had known
since I was a boy, and he had my entire con-
fidence."
The Commission had discovered (from
other sources) that Franchot drew from Mr.
Huntington $30,000 or $40,000 every year
without vouchers, and Mr. Huntington was
asked to throw light on this strange fact. He
said:
"We had to get men to explain a thousand
things. A man who has not had the experi-
ence could hardly imagine the number of
people that you have to explain these mat-
ters to." *
Still, the Commission was not quite content
with this luminous answer and wanted to
know more. It appeared that in 1873, for
instance, General Franchot's work in Wash-
ington had cost $61,000, without any vouch-
ers. Mr. Huntington sounded still the pipe
of praise.
"He was," said he, "of the strictest integ-
* Pacific Railroad Commission Report, Testimony of Hunt-
ington, p 25.
Southern Pacifi
(Without adeq
1872
Jan. 13. B. Franchot.. $33.00
Jan. 18. B. Franchot.. 13,200.00
Mch. 11. O. P. Hunt-
ington 1,000.00
c Disbursements
uate Vouchers) f<
July 12. S. L. H. Bar-
low $2,000.00
at Washington
:>r "Expenses"
1878.
Jan. 11. C. P. Hunt-
ington $1,150.00
Aug. 18. B. B. Mit-
chell 1 500 00
Aug. 21. S. W. Kel-
Jan. 28. I.E. Gates... 1,600.00
Feb. 14. L.Stanford.. 1,000.00
Feb. 20. C. P. Hunt-
ington 2,500.00
Mch. 15. B. Franchot. 1,000.00
Mch. 23. C. P. Hunt-
Sept. 12. LymanTrum-
ball 10,000.00
ington 500.00
Apr. 26. C. P. Hunt-
ington 500.00
Sept. . B. Franchot. 15,698.92
Oct. 4. C. P. Hunt-
ington 500.00
Mch. 18. C. P. Hunt-
ington 5 500 00
Mch. 19. C. P. Huiit-
May 11. C. P. Hunt-
ington 500.00
Oct. 5. C. P. Hunt-
ington 4.500.00
April 12. I.E. Gates. . 1,750.00
Apr. IS. I. E. Gates. . 200.00
May 4. J a m e s H.
May 17. C. P. Hunt-
ington 1,000,00
Oct. 14. C. P. Hunt^
ington 6,300.00
May 17. B. Franchot. 5,000.00
June 5. B. Franchot. . 5,000.00
July 31. C. P. Hunt-
ington. . . . 500.00
Oct. 17. I. E. Gates... 5,000.00
Oct. 21. I.E. Gates., . 5,000.00
Oct. 23. I.E. Gates... 1,000.00
Oct. 26. I. E. Gates.. . 700.00
Oct. 30. I. E. Gates.. . 1,000.00
Oct. 10. Legal Ex-
penses 2,500.00
May 20. I. E. Gates. . 5,000.00
May 2.5. I. E. Gates. . 2,500.00
May 27. I .E. Gates. . 5,000.00
June 7. L. Stanford . . 13,000.00
June 22. I. E. Gates. . 2,000.00
June 25. I. K. Gates. . 500.00
June 28. L.Stanford.. 111,431.25
June 29. Joseph H.
Bell 38,500.00
Aug. 24. C. P. Hunt-
ington 500.00
Sept. 24. B. Franchot. 19,295.50
Oct. 2. I. E. Gates. . . 5,000.00
Nov. 1. I. E. Gates. . . 500.00
Nov. 15. C. P. Hunt-
ington. . . . 1,000.00
Nov. 3. D. D. Colton. 8,000.00
Nov. 8. D. D. Colton. 8,000.00
Nov. 13. I. E. Gates. . 1,000.00
Nov. 14. I. E. Gates. . 1,000.00
Nov. 15. I. E. Gates. . 1,000.00
Nov. 16. C. P. Hunt-
ington 5,000.00
June 29. C. P. Hunt-
ington 99,167.20
Nov. 21. I. E. Gates. . 500.00
Nov. 29. I. E. Gates. . 4,000.00
Dec. 28. I. E. Gates . . 200.00
Dec 31. "Services in
1872" 13,233.33
Aug. 2. A. J. Howell. . 200.00
Aug. 3. James A.
Dec. 1. I. E. Gates. . . 3,000.00
Dec. 7. I. E. Gates . . . 1,000.00
Aug. 15. C. P. Hunt-
ington 42 855 06
Total $72,401.83
Total $17S,i*u.:i7
Aug. 15. New York
1874.
Jan. 13. B. Franchot. $500.00
Jan. 16. I. E. Gates... 200.00
Mch. 14. Fisk& Hatch 12,139.94
May 14. C. P. Hunt-
ington 500.00
1877.
Jan. 3. "Legal ex-
penses . $10,000.00
Aug. 19. T. M. Nor-
wood . 287 95
Aug. 29. JohnBoyd.. 200.00
Sept. 3. Leland Stan-
ford 12,000.00
Jan. 8. I. E. Gates.. . . 5,000.00
Jan. 15. "Legal ex-
penses" . 5,000.00
Sept. 3. A. J. Howell. 200.00
Sept. 3. J. A. George. 150.00
Sept. 4. T. M. Nor-
wood 1 000 00
June 15. Fisk & Hatch 1,910.00
June 22. C. P. Hunt-
ington 20,000.00
Feb. 6. Western De-
velopment Company 26,000.00
Feb. 19. I.E. Gates.. 10,000.00
Feb. 26. C. P. Hunt-
ington . 5 000 00
Sept. 4. S. T. Gage... 3,000.00
Sept. 14. I.E. Gates.. 1,500.00
Sept. 14. O. M. Brad-
ford 75 00
June 27. B. Franchot. 3,700.00
July 9. B. Franchot.. 150.00
July 10. I. E. Gates . . 200.00
July 11. I. E. Gates. . 200.00
Sept. 11. O. P. Hunt-
ington 5,000.00
Mch. 9. I. E. Gates.. . 2,000.00
Mch. 12. Jas. H.
Storrs 1 125 35
Sept. 23. D. D. Colton. 1,200.00
Sept. 23. J. A. George. 150.00
Sept. 27. I. E. Gates . . 5,000.00
Sept. 27. J. G. Prent iss 60.00
Sept. 28. I. E. Gates. . 2,000.00
Ort. 1. D. D. Colton.. 3,460.00
Oct. 1. John Boyd. . . 200.00
Oct. 1. JohnBoyd.... 204.00
Oct. 1. J. A. Howell . . 200.00
Oct. 1. J. A. George... 250.00
Oct. 3. I. E. Gates.. .. 5,000.00
Oct. 4. D. D. Colton.. 3,290.00
Oct. 5. I. E. Gates.. . . 2,000.00
Oct. 7. I. E. Gates.,.. 1,000.00
Oct. 7. J.E.Forney.. 300.00-
Oct. 10. I. E. Gates . . 2,000.00
Oct. 19. I. E. Gates . . 6,000.00
Oct. 22. I.E. Gates.. 3,500.00
Oct. 24. C. P. Hunt-
Oct. 16. I. E. Gates... 281.00
Oct. 23. I. E. Gates.. . 200.00
Nov. Gen. Dwyer, U.
S. Commissioner. .. 1,000.00
Dec. 2. "W. A. W.,"
paid by C. P. Hunt-
ington . . 4,863.48
Mch. 24. I. E. Gates.. 500.00
Mch. 29. I. E. Gates.. 5,000.00
Apr. 23. C. H. Sher-
rill... 15,000.00
May 9. C. H. Sher-
rill . . 300.00
May 24. I. E. Gates. . 5,000.0.)
June 2. C. H. Sherrill. 2,000.00
June 4. C. H. Sherrill. 1,000.00
June 30. C. P. Hunt-
ington 5 000 00
Dec. 29. C. P. Hunt-
ington 2,000.00
Total $52,844.42
1876.
Jan. 4. N. T. Smith,
for amount paid H.
Brown $5,000.00
July 2. I. E. Gates.. . . 200.00
Sept. 5. C. P. Hunt-
ington 1,000.00
Sept. 7. "Lega ex-
penses" 10,440.00
Jan. 24. C. P. Hunt-
Sept. 15. C. P. Hunt-
ington 1,000.00
Oct. 26. I.E. Gates.. 10,000.00
Oct. 28. I.E. Gates.. 10,000.00
Nov. 2. JohnBoyd... 224.00
Nov. 2. T. M. Nor-
wood 1 083 98
Mch. 31. I.E. Gates.. 5,000.00
Apr. 1. C. P. Hunt-
ington 5,000.00
Sept. 20. C. P. Hunt-
ington 3,000.00
Oct. 5. C. P. Hunt-
Apr. 6. C. P. Hunt-
ington 5,000.00
Oct. 15. C. P. Hunt-
Nov. 11. I. E. Gates. . 500.00
Nov. 13. I. E. Gates. . 1,500.00
Nov. 21. C. H. Sher-
rill 1 000 00
Apr. 19. "Attorney"
fee 5,000.00
Oct. 24. C. P. Hunt-
May 4. Anna Fran- _ '"*>"- -vv v, *.""
chot 25,000.00 Oct. 26. H. Hopkm ;
Nov. 21. O. M. Brad-
May 12. I. E. Gates. . 5,000.00
May 15. I. E. Gates . . 5,000.00
May 19. I.E. Gates.. 1,000.00
June 2. S. C. Pome-
Nov. 1. Leland Stan-
ford 83 418 08
Nov. 22. J. A. George. 100.00
Nov. 27. I. E. Gates. . 500.00
Nov. 27. T. M. Nor-
wood 500.00
Nov. 9. I. E. Gates. . . 5.000.00
Nov. 16. I. E. Gates. . 5,000 00
Dec. 8. I.E. Gates... 2.500.00
Dec. 18. I.E. Gates.. 5,000.00
Dec. 19. I. E. Gates.. 1,000.00
Dec. 26. C. P. Hunt-
ington 2 000 00
June 3. I. E. Gates. . . 5,000.00
June 19. I. E. Gates. . 10,000.00
June . New York
newspapers, Tribune,
Times, World, and
Dec. 2. JohnBoyd.... 200.00
Dec. 5. I. E. Gates. . . 10,000.00
Dec. 9. I. E. Gates. . . 2,800.00
Dec. 17. I. E. Gates. . 10,500.00
Dec. 23. J o h n H .
Flagg 100.00
Dec. 28 Leland Stan-
ford 52 500 00
July 19. C. H. Sher-
Dec. 26. I. E. Gates . . 500.00
July 26. I.E. Gates . . 10,000.00
Total ... . . $279,483.43
Total... ...$447,630.10
* Tables from Pacific Railroad Commission Report.
Scientific Corruption of Politics
853
rity and as pure a man as ever lived; and
when he said to us, 'I want $10,000,' I knew
it was proper to let him have it and 1 let him
have it." *
Examination by Commissioner Anderson:
Question. How could Mr. Franchot personally
earn $30,000 or $40,000 a year in explaining things
to members of Congress?
Answer. He had to get help. He had lots of
attorneys to help him.
Q. Whom did he have?
A. I never asked him.
Q. How do you know he had?
A. Because he told me so. He said, " For these
explanations I have to pay out a little here and a
little there and that aggregates a great deal." t
Q. In addition to explaining with words do you
not suppose they explained with champagne and ex-
pensive dinners?
A. Very likely. I never gave a dinner in Wash-
ington.
Q. Was not a great deal of it spent in cigars
and champagne dinners?
A. I think so. Not so much, but perhaps some
of it was to get some able man to sit down and ex-
plain in the broadest sense what we wanted to have
done.J
It appears that up to 1887, the total expen-
ditures of the Southern Pacific at Washington
(without adequate vouchers) were $5,497,-
538. The important point about these ex-
penditures is that they were, for the most part,
of money that really belonged to the people
of the United States because it was money
that should have been paid into the National
Treasury as interest on the road's indebted-
ness. To use public funds to induce public
servants to give away more public funds
seems an extraordinary achievement in the his-
tory of legislation, but one of which the South-
ern Pacific gentlemen were easily capable.
MR. HUNTIXGTON IS INCAUTIOUS
Subsequently Mr. Huntington, examined
under oath, was asked this question:
Q. In regard to the range of discussion that was
to be permitted between the members of Congress
and the apostles that you sent to them, was that
generally confined to Mr. Franchot and Mr. Sher-
rill, or did you take a hand in that?
A. Probably it was done more or less by General
Franchot, Mr. Sherrill, and myself.
Q. As a matter of fact, did they from time to
time consult with you ?
A. They did.
And then for the first and only time in
all these examinations Mr. Huntington was
shaken out of his wary self-possession and
ability to dodge and twist.
* Pacific Railroad Commission Report, Testimony of Hunt-
ington, p. 3d. t Ibid., p. 38. J Ibid., p. 38.
Pacific Railroad Commission Report, p. 30.
Q. But what I want to get at particularly is that
no portion of these moneys was to be considered as
covered by the ordinary expenditures of a railroad
for purchases of property and materials. Those
would be specific vouchers. So that as to all the unex-
plained vouchers we may assume that they were for
moneys expended for imparting information to Con-
gress, or to the Departments, or for some purpose of
that character?
A. That I cannot say. Most of the money was
expended, no doubt, to prevent Congress and the
Departments from robbing us of our property.*
I put down all these things to complete
the study of an intensely interesting human
document. You observe, no doubt, how
agilely Mr. Huntington glides over the thin-
nest places and how honest he looks, how
plausible he makes his cause look.
So, then, we should have interest in
noting on page 852 some of Mr. Hun-
tington's unexplained vouchers, observing
first that "I. E. Gates" was a confidential
clerk in his employ and that here, as in the
former case, the list we present is not com-
plete.
Eleven years of expenditures for "explain-
ing" things in behalf of the Central Pacific
and Southern Pacific being some of the
unexplained vouchers charged to "expenses"
upon which the officers of the company
refused to throw any light make this show-
ing:
187 $63,581.03
1871 13,498.72
1872 73,361.83
1873 7.348.46
1874 52,844.94
1875 197,311.54
1876 299,301.37
1877 279,573-44
1878 471,081.06
1879 244,298.08
1880 197,809.36
Total. .$1,900,009.83
In the foregoing lists the most interesting
exhibits are those for 1877-78 when Hunt-
ington was defeating Tom Scott, and for the
years in which the legislature was in session
at Sacramento. In running over the lists of
unexplained expenditures one can usually de-
fine the legislative sessions by the crowded
entries.
In 1884, the sums drawn by Charles F.
Crocker without explanation, total $404,-
710, and in the early part of 1885, $55,000.
S. T. Gage, one of the railroad's legislative
agents, drew out $18,150 in 1884 and $119,-
341 in the first part of 1885 about the
time that Leland Stanford was drawing
$40,066.95 for a similarly unexplained pur-
pose.
Here is the way sorne of these items look
in the rccord3 for part of one month:
* Pacific Railroad Commission Report, p. 37 << scq.
854
Hampton's Magazine
March, 1885.
7. S. T. Gage. .$2,500
10. Charles F.
Crocker.. . . 5,000
12. S. T. Gage. . 3,000
16. Charles F.
Crocker. . . . 29,000
17. S. T. Gage.. 41,000
1 8. S. T. Gage. . 3,000
19. S. T. Gage. . 9,000
20. S. T. Gage. $15, ooo
21. S. T. Gage.. 21,000
23. Charles F.
Crocker. . . . 15,500
23. S. T. Gage for
H. H.Cum-
mings 1,250
23. S. T. Gage. . 8,500
Total SiS3,75o
All without explanation. The legislature
was in session. It was the legislature that
about this time elected Leland Stanford to
the United States Senate to succeed J. T.
Farley, Democrat.
HUNTINGTON'S QUARREL WITH STANFORD
Mr. Huntington was not pleased with the
legislature's choice. For years he and Stanford
had been growing estranged. The reason is
generally understood in California ; but being
related to private life need not be gone into
here. Huntington had thought A. A. Sargent
should go back to the Senate and he took un-
usual ways to make known his resentment
when Stanford took the place for himself.*
In 1888 he suddenly gave out an interview
containing a statement that was construed to
mean that Stanford had paid $503,000 of the
railroad company's money for his election to
the Senate. This angered Stanford and an
open breach was imminent. It was patched
up in some way, the common report being that
Stanford had threatened Huntington with
counter revelations.
Subsequently Huntington revenged himself
by securing Stanford's removal as president
of the Central Pacific, which place he had
held continuously since the organization of
the company in 1861.
Very interesting disclosures might have
been made on both sides concerning other
uses of the company's money. Thus it ap-
pears now that one of the most famous edi-
tors of San Francisco was on the pay roll at
$10,000 a year, a famous Washington corre-
spondent for an immaculate New York news-
paper received $5,000 a year, and one reading
the lists is continually startled by the recur-
rence of names that are also the names of
senators and public officers very prominent
in their day.
All of these expenditures are unexplained
otherwise than as "expenses" or "legal ex-
penses."
But the final light as to Mr. Huntington's
*See Mr. Charles D wight Willard's interesting book, "The
Free Harbor Contest," p. 59.
methods in Washington and what he meant
by "explaining things" is contained in the
following remarkable correspondence:*
NEW YORK, November 6, 1874.
FRIEND COLTON: As you now seem to be one of us
I shall number your letters, or rather mine to you,
as with those sent to my other associates in Cali-
fornia. ... I notice what you say of Hager and
Luttrell, and notwithstanding what T. says, I know
he can be persuaded to do what is right in relation
to the C. P. and S. P. but some political friend must
see him, and not a railroad man, for if any of our
men went to see him he would be sure to lie about
it and say that money was offered him, but some
friend must see him and give him solid reasons why
he should help his friends. Yours truly, C. P.
HUNTINGTON.
The congressional directories give the
names of John S. Hager, of San Francisco, as
a Senator from California in the Forty-third
Congress and John K. Luttrell, of Santa Rosa,
as a Representative in the Forty-fifth Congress.
NEW YORK, November 20, 1874.
FRIEND COLTON: Herewith I send copy of bill that
Tom Scott proposes to put through Congress this
winter. Now I wish you would at once get as many
of the associates together as you can and let me
know what you then want. Scott sent me these
copies fixed as he wants them and asked me to help
him pass them through Congress, or if I would not do
it as he has fixed them, then he asked me to fix it so
that I will, or in a way that I will support it.
Now do attend to this at once and in the meantime
I will fix it here and then see how near \ve are to-
gether when yours gets here. Scott is prepared to pay
or promises to pay a large amount of money to pass
his bill, but I do not think he can pass it, although I
think that this coming session of Congress will be
composed of the hungriest set of men that ever got
together and the d only knows what they will
do. ...
Would it not be well for you to send some party
down to Arizona to get a bill to build in the Terri-
torial legislature granting the right to build a R. R.
east from the Colorado River (leaving the river
near Fort Mojave), have the franchise free from
taxation on its property and so that the rates of
fare and freight cannot be interfered with until the
dividends of the common stock shall exceed ten per
cent ? I think that would be about as good as a
land grant. It would not do to have it known that
we had any interest in it, for the reason that it would
cost us much more money to get such a bill through
if it was known that it was for us. And then Scott
would fight it if he thought we had anything to do
with it. If such a bill was passed, I think there could
at least be got from Congress a wide strip for right
of way, machine shops, etc. Yours truly, C. P.
HUNTIXGTON.
NEW YORK, December i, 1874.
FKIEND COLTON: Your letters of November 2oth,
2ist and 22d are received. . . . Has any of our peo-
ple endeavored to do anything with Low and Fris-
bie? They are both men that can be convinced.
... I will see Luttrell when he comes over and
talk with him, and maybe he and we can work
* Evidence in Ellen M. Colton vs. Stanford, el al.
Scientific Corruption of Politics
855
together, but if we can brush him out it would have
a good effect and then we could or at least try to
get some better timber to work with. . . . And in
this connection it would help us very much if we
could fix up California Pacific income and exten-
sions on the basis we talked of even if we had to
pay something to convince Low and Frisbie. Yours
truly, C. P. HUNTINGTON.
DEFEATING A "WILD HOG"
NEW YORK, May r, 1875.
FRIEND COLTON: Yours of the i7th of April, No.
17, is received and contents carefully noted. . . .
I notice what you say of Luttrell; he is a wild hog;
don't let him come back to Washington, but as the
House is to be largely Democratic, and if he was to
be defeated, likely it would be charged to us, hence
I should think it would be well to beat him with a
Democrat; but I would defeat him anyway and if he
got the nomination, put up another Democrat and run
against him, and in that way elect a Republican.
Beat him. Yours truly, C. P. HUNTINGTON.
NEW YORK, September 27, 1875.
FRIEND COLTON: Yours of the i8th with indosure
as stated is received. . . . Scott is making the strongest
possible effort to pass his bill the coming session of
Congress. ... If we had a franchise to build a road
or two roads through Arizona (we contracting, but
having it in the name of another party), then have
some party in Washington to make a local fight and
asking for the guarantee of their bonds by the United
States, and if that could not be obtained, offering to
build the road without any, and it could be used
against Scott in such a way that I do not believe any
politician would dare vote for it. Can you have
Safford call the legislature together and grant such
charters as we want at a cost of say $25,000? If
we could get such a charter as I spoke to you of it
would be worth much money to us. . . . Yours truly,
C. P. HUNTINGTON.
Safford was Governor of Arizona.
NEW YORK, October 19, 1875.
FRIEND COLTON: ... I have given Gilbert C.
Walker a letter to you. He is a member of the
Forty-fourth Congress, ex-Governor of Virginia, and
a slippery fellow, and I rather think in Scott's in-
terest, but not sure. I gave him a pass over C.
P. and got one for him on U. P. So do the best
you can with him but do not trust him much.
Yours truly, C. P. HUNTINGTON.
The Congressional Directory gives the
name of Gilbert C. Walker, of Richmond,
Virginia, as a member of the Forty-fourth
Congress.
NEW YORK, November 10, 1875.
FRIEND COLTON: . . . Dr. Gwin is also here.
I think the doctor can do us some good if he can
work under cover, but if he is to come to the surface
as our man I think it would be better that he should
not come, as he is very obnoxious to very many on
the Republican side of the House. ... I am, how-
ever, disposed to think that Gwin can do us some
good; but not as our agent but as an anti-subsidy
Democrat, and also as a Southern man with much
influence. . . . But Gwin must not be known as
our man. . . . Yours, etc., C. P. HUNTINGTON.
William M. Gwin, of San Francisco, appears
in the congressional directories as a Sena-
tor from California in the Thirty-sixth Con-
gress.
December 10, 1875.
FRIEND COLTON: ... I had a talk with Bris-
tow, Secretary of the Treasury. He will be likely
to help us fix up our matters with the government
on a fair basis. Yours truly, C. P. HUNTINGTON.
Benjamin H. Bristow, of Kentucky, was
Secretary of the Treasury in the second ad-
ministration of Grant.
Here are extracts from other letters signed
"Yours truly, C. P. Huntington," and ad-
dressed "Friend Colton."
THE "DAM INTERVIEWERS" BOTHER HIM
NEW YORK, December 22, 1875.
... I think the Doctor will return to California
in January. I have just returned from Washington.
The Doctor (Gwin) was unfortunate about the
R. R. committee; that is, there was not a man put
on the committee that was on his list, and I must
say I was deceived and he was often with Kerr and
K. was at his rooms and spent nearly one evening.
The committee is not necessarily a Texas Pacific,
but it is a commercial com. and I have not much
fear but that they can be convinced that ours
is the right bill for the country. If things could
have been left as we fixed them last winter there
would have been little difficulty in defeating Scott's
bill; but their only argument is it is controlled by
the Central. That does not amount to much be-
yond this: It allows members to vote for Scott's bill
for one reason, and give the other, that it was to
break up a great monopoly, etc. If these dam
interviewers would keep out of the way it would be
much easier traveling.
Michael C. Kerr, of Indiana, was Speaker
of the House.
Yours of December 3oth and the ist inst., Nos. 120
and 121 received: also your telegram that William
B. Carr has had for his services $60,000 S. P. bonds;
then asking how much more I think his services are
worth for the future. That is a very difficult ques-
tion to answer as I do not know how many years
Mr. Carr has been in our employ or how far in the
future we should want him. In view of the many
things we now have before Congress, and also in
this sinking fund that we wish to establish, in which
we propose to put all the company's lands in Utah
and Nevada, it is very important that his friends in
Washington should be with us, and if that could
be brought about by paying Carr, say, $10,000 to
$20,000 per year, I think we could afford to do it,
but of course not until he had controlled his friends.
They could hurt us very much in this land matter-,
although I would not propose to put the land in at
any more than it is worth, say $2.50 an acre. I
would like to have you get a written proposition
from Carr in which he would agree to control his
friends for a fixed sum, then send it to me. . . .
William B. Carr was an influential poli-
tician in San Francisco.
856
Hampton's Magazine
JAMES W. REA, WHO EXPOSED THE WORK-
INGS OF THE RAILROAD IN THE CALI-
FORNIA LEGISLATURE.
NEW YORK, January 17, 1876.
... I have received several letters and tele-
grams from Washington to-day, all calling me there,
as Scott will certainly pass his Texas Pacific bill
if I do not come over and I shall go over to-night,
but I think he could not pass his bill if I should
help him; but of course I cannot know this for cer-
tain, and just what effort to make against him is
what troubles me. It costs money to fix things so
that I would know that his bill would not pass. I
believe with $200,000 I can pass our bill, but I take
it that it is not worth this much to us.
NEW YORK, January 29, 1876.
. . . Then on our side we have Sargent, Booth,
Jones, Cole, and Gorham in the Senate to help us.
. . Scott is working mostly among the commer-
cial men. He switched Senator Spencer of Ala-
bama, and Walker of Virginia, this week, but you
know they can be switched back with proper argu-
ments when they are wanted; but Scott is asking
for so much that he can promise largely to pay when
he wins, and you know I keep on high ground. All
the members in the House from California are doing
first rate except Piper, and he is a damned hog;
anyway you can fix him. I wish you would write a
letter to Luttrell saying that I say he is doing first
rate, and is very able, etc., and send me a copy.
According to the congressional directories
Aaron A. Sargent and Newton Booth were
Senators from California. John P. Jones
was a Senator from Nevada. Cornelius Cole
had been a Senator from California in the
Forty-third Congress. George C. Gorham
was Secretary of the Senate. The name
" George C. Gorham " appears in the Hunt-
ington accounts. George E. Spencer was a
Senator from Alabama in the Forty-fifth
Congress. Gilbert C. Walker was a Repre-
sentative from Virginia. William A. Piper
was a Representative from California. He
was of radical views. By this time it would
seem that Luttrell had been convinced.
ROSCOE CONKLING AS ONE OF " OUR BEST
FRIENDS"
NEW YORK, April 27, 1876.
. . . Scott has several parties here that I think
do nothing else except write articles against the
Central Pacific and its managers, then get them
published in such papers as he can get to publish
them at small cost, then sends the papers every-
where, and there is no doubt but that he has done
much to turn public sentiment against us. If it
was known that the C. P. did not control the S. P.
I think we could beat him all the time, although he
has about the same advantages over us in Wash-
ington that we have over him in Sac. [Sacramento].
If he wants some committeeman away he gets some
fellow (his next friend) to ask him to take a ride
to New York or anywhere else, of course on a free
pass, and away they go together. Then Scott has
always been very liberal in such matters. Scott got
a large number of that drunken, worthless dog
Piper's speeches printed and sent them broadcast
over the country. He has flooded Texas with them.
The Sac. Record-Union hurts us very much by
abusing our best friends. There was a no. [num-
ber] of that paper came over some little time since
that abused Conkling, Stewart and some other of
our friends, with Bristow's name up for president.
... If I owned the paper I would control it or
burn it. ...
Roscoe Conkling was a Senator from New
York. His name occurs in the Huntington
accounts. William M. Stewart was a Sen-
ator from Nevada. Bristow was a prominent
candidate for the Presidency; at the time this
letter was written he was Secretary of the
Treasury. The Sacramento Record-Union
was at that time called a railroad organ.
NEW YORK, May 2, 1876.
Herewith I send copy of telegraphic dispatch that
came over yesterday. Who is this Webster? Is it
not possible to control the agent of the Associated
Press in San Francisco? The matters that hurt
the C. P. and S. P. most here are the dispatches
that come from S. F. (San Francisco). Scott has a
wonderful power over the press, which I suppose he
has got by giving them free passes for many years
over his roads. . .
NEW YORK, May 12, 1876.
... I sent Hopkins an article yesterday cut
from the Commercial Advertiser; * to-day I met one
of the editors, Norcutt; he told me Scott paid for
having it published; that he would not have let it
gone into the papers if it had been left to him,
etc. .
* This newspaper has passed into new hands since the date of
this letter.
Scientific Corruption of Politics
857
NEW YORK, June 7, 1876.
.... I hope Luttrell will be sent back to Con-
gress. It would be a misfortune if he were not.
Wigginton has not always been right, but he is a
good fellow and is growing every day. Page is
always right, and it would be a misfortune to Cal.
not to have him in Congress. Piper is a damned
hog and should not come back. It is shame enough
for a great commercial city like S. F. to send a
scavenger like him to Congress once. . . .
NEW YORK, June 12, 1876.
.... I notice what you say of Wigginton, Lut-
trell, and Piper. The latter should be defeated at
almost any cost.
Peter D. Wigginton, of Merced, and Hor-
ace F. Page, of Placerville, were Representa-
tives from California in the Forty-fifth Con-
gress.
June 24, 1876.
Parrott (Gorham) is, or was, writing a brief on
fares and freight to influence, I was told, one of the
Judges of the Supreme Court. They are sure to
do their worst but my better judgment tells me that
we cannot afford to take the scamps into camp.
NEW YORK, March 7, 1877.
.... I notice you are looking after the state
railroad commissioners. I think it is time. ... I
stayed on in Washington two days to fix up R. R.
Committee in the Senate. Scott was there working
for the same thing, but I beat him for once, certain,
as the committee is just as we want it, which is a
very important thing for us. ...
March 14, 1877.
.... After the Senate R. R. Committee was
made up Scott went to Washington in a special train,
and got one of our men off and one of his on, but
they did not give him the com. Gordon, of Georgia,
was taken off, and Bogy, of Missouri, put on.
John B. Gordon, of Atlanta, was a Senator
from Georgia; Lewis V. Bogy of St. Louis
was a Senator from Missouri in the Forty-
fifth Congress.
I gave to-day a letter to Senator Conover of
Florida. He is a good fellow enough and our
friend after he is convinced we are right.
Simon P. Conover was a Senator from
Florida in the Forty-fifth Congress.
MILLION AND A HALF PROFITS IN TWO
MONTHS !
NEW YORK, March 24, 1877.
.... You write: "Our receipts are not enough
to meet payrolls and imperative demands here." I
have no knowledge of what the receipts have been
this month, but for January and February, this
year, on all our roads, they were nearly three millions
of dollars, which was nearly $400,000 more than in
the same months of 1876, and one half must have
been profits.
April 3, 1877.
.... We should be very careful to get a U. S.
Senator from Cal. that will be disposed to use us
fairly arid then have the power to help us. Sargent,
I think will be friendly, and there is no man in
the Senate that can push a measure further than
he. .
STEPHEN J. FIELD, OF CALIFORNIA, JUS-
TICE IN THE UNITED STATES SU-
PREME COURT FROM 1863 TO 1897.
Aaron A. Sargent was a Senator from
California in the Forty-fifth Congress.
NEW YORK, April 20, 1877.
I wrote Crocker on the i2th inst. in relation to
Jones' Los Angeles road. A few days after I saw
Jones I met Gould. He told me Keene had bought
it [meaning the railroad at Los Angeles owned by
Senator Jones, of Nevada]. Of course, I said I was
glad to hear it, as we did not want the road at any
price; that I made Jones an offer for it because we
wanted him to help us with our (C. P. and U. P.)
sinking fund bill in Congress, and was very glad it
had got (the railroad) out of the way, and that I
saw nothing now to prevent friendly relations be-
tween Jones and ourselves, &c.
On the Sunday following A. A. Selover came to
my house and said he came from Gould and Keene
and that in the panic or break in Panama a few days
before Jones would have been broken if G. and K.
had not come in to help him out, and to do it they
had to take Jones' railroad, &c., and he asked
me, after some beating about, if we wanted the road
at $480,000. I told him that we did not want it at
all but that we would take it so as to work in har-
mony with Jones, and that I had made him an offer
as I wrote Crocker, and my impression was our
people would do that now, but I was quite sure we
would rather G. and K. would keep the road, if
by that Jones could be made our friend, &c.
What do you all think of this? I am rather disposed
to think G. and K. have not bought the road but
hold it as collateral.
NEW YORK, May 7, 1877.
.... I notice what you say of Conover, the
Florida Senator. He is a clever fellow but don't
go any money on him. . . . The $70,000 that I let
Jones have are tied up for ten years. I think we
can make more than the interest on the amount paid
for Jones' road out of our other roads by not run-
ning the Jones road at all; and Jones is very good-
858
Hampton's Magazine
natured now and we need his help in Congress very
much; and I have no doubt we shall have it. We
must have friends in Congress from the West coast,
as it is very important, I think, that we kill the open
highway, and get a fair sinking fund bill by which
we can get time beyond the maturity of the bonds
that the government loaned us to pay the indebted-
ness; and I think if any Republican is elected in
Sargent's place, he (Sargent) is worth to us, if he
comes back as our friend, as much as any six new
men, and he should be returned.
INGALLS A "GOOD FELLOW"
NEW YORK, May 15, 1877.
Yours of the 7th inst. is received. I am glad you
are paying some attention to General Taylor and
Mr. Kasson. Taylor can do us much good in the
South. I think, by the way, he would like to get
some position with us in Cal. Mr. Kasson has
always been our friend in Congress and as he is
a very able man, has been able to do us much good
and he has never * us one dollar. I think
I have written you before about Senator Conover.
He may want to borrow some money, but we are
so short this summer I do not see how we can let
him have any in Cal.
I have just given Senator Ingalls, of Kansas, a
letter to you. He is a good fellow and can do us
much good. . . . Senator Morton is coming over;
also his brother-in-law, Burbank. They are good
fellows, but B. means business; not here but in W.
Scott is working everywhere for his open highway,
but I think we can beat him ; but it will cost money.
The Congressional Directory gives the
name of Oliver P. Morton as a Senator
from Indiana.
June i, 1877.
.... There has been quite a number of Senators
and M. C. in the office here in the last few days; they
all say Scott is making his greatest effort on his Texas
and Pacific (open highway) and most of them think
he will pass it; this man Hayes, most people say,
is for it to conciliate the South; he may be, but I
hardly believe he is; but I have no doubt he is for
many things he should not be for. . . .
The reference is to President Hayes.
NEW YORK, September 10, 1877.
FRIEND COLTON: ... As to Colonel Hyde writ-
ing a report about the harbor of San Diego. I
would like such a report as he could write, and if
he would write one to suit for $250 I would give it,
and if he would not we shall have to go without
it. ...
NEW YORK, October 5, 1877.
Yours, No. 15, is received. I notice your remarks
on our matter in Cal. I have no doubt there is
many things to annoy you. The dispatches about
crossing the Colorado come over very well. I t ink
Gould has had as much to do with stopping us on
the bridge as Scott has, although I have had no
reason for so thinking up to this morning (see clip
* See Pacific Railroad Commission Report, p. 3851 In the
original the word left blank here is said to look like " cost." Some
authorities agreed to accept it as "lost," which although it
seems to make no sense had doubtless a more dulcet sound in
some ears. John A. Kasson, of Des Moines, was a Representative
from Iowa and later United States Minister to Austria. John J.
Ingalls, of Atchison, was a Senator from Kansas.
from Tribun-e), except Jim Wilson, of Iowa, is their
man, and has much influence with McCrary.
Sec. of War was in Washington when the first
order went out to stop work on the bridge, and Gould
came in twice, and Dillon once, to tell me that the
Sec. of the Interior had his war paint on and was to
attack us in his message, etc., etc. I thought at the
time they were trying to cover up something, and
rather supposed it was to check us on S. P. ...
George W. McCrary, of Iowa, was Secretary
of War in the administration of Hayes. Carl
Schurz was Secretary of the Interior in the
same administration. The bridge was at a
government reservation. McCrary and Schurz
stopped it. James Wilson, of Traer, was a
Representative from Iowa in the Forty-fourth
Congress. According to " Who's Who," the
home of James Wilson, at present Secretary of
Agriculture, is at Traer, Tama County, Iowa,
and he was in Congress from 1873 to 1877
and from 1883 to 1885.
NEW YORK, October 20, 1877.
.... I think Safford had better be in Washing-
ton at the commencement of the regular session, to
get Congress to confirm the Acts of Arizona.
I saw Axtell, Governor of New Mexico, and he
said he thought if we would send to him such a bill
as we wanted to have passed into a law, he could
get it passed with very little or no money; when if
we sent a man there they would stick him for large
amounts. . . .
October 30, 1877.
.... The committees are made up for the Forty-
fifth Congress. I think the R. R. Com. is right, but
the Com. on Territories I do not like. A different
one was promised me. ... I think there never
was so many strikers in Washington before.
" JIM " KEENE ALSO READY TO PAY MONEY
November 9, 1877.
.... I do not think we can get any legislation
this session for extension of land grants or for chang-
ing line of road unless we pay more for it than it is
worth. . . . Some parties are making great effort
to pass a bill through Congress that will compel the
U. P. and C. P. to pay large sums into a sinking
fund, and I have some fears that such a bill may
pass. Jim Keene and others of Jay Gould's ene-
mies are in it and will pay money to pass.
NEW YORK, November 15, 1877.
.... If we are not hurt this session it will be
because we pay much money to prevent it, and you
know how hard it is to get it to pay for such pur-
poses. ... I think Congress will try very hard to
pass some kind of bill to make us commence paying
on what we owe the government. . . . Every year
the fight grows more and more expensive. . . .
NEW YORK, November 22, 1877.
.... Matters never looked worse in Washing-
ton than they do at this time. It seems as though
all the strikers in the world were there. I send with
this copy of one of their letters I received yesterday,
all of the same tenor. The one I send is from ex-
Senator Pomerov.
"Scientific Corruption of Politics" will be continued on page 879.
Scientific Corruption of Politics
879
Scientific Corruption of Politics
Continued from page 858
The inclosure is a letter of advice from
'omeroy to Huntington, outlining a scheme
>y which Congress could be controlled for
ic railroad, and closing with fulsome ex-
pressions. For Pomeroy, see Mark Twain's
'Gilded Age"; also Mr. Huntington's ac-
mnts for 1876. Pomeroy had been a Sen-
itor from Kansas in the Forty-third Con-
ress.
November 24, 1877.
... I notice what you write of the Santa Mon-
road. I am satisfied with that trade and when
3U write pay Jones no part of the $25,000, because
icre is an unsettled account of, say, $6,000. I think
3U forget his position. I have paid him the $25,-
ooo as he told me he needed it very much. Jones
can do us much good and says he will.
December 5, 1877.
... I have just received telegram from Wash-
ington that Matthews and Windom have been put
on Senate R. R. Com. in place of Howe and
Ferry. This looks as though the Texas and P.
had control of the Senate as far as appointing corns,
are concerned. I am not happy to-day.
Stanley Mathews, of Cincinnati, was a Sen-
ator from Ohio; William Windom, of Wi-
nona, was a Senator from Minnesota; Timo-
thy O. Howe, of Green Bay, was a Senator
from Wisconsin ; Thomas W. Ferry, of Grand
Haven, was a Senator from Michigan.
WHEN* MONEY WAS USED VERY FREELY
December 17, 1877.
. . . The Texas and P. Company have been
fighting us for years, but have had but little
money, but have used passes and promises largely;
but the latter, as they say, is about played out, and
some little time ago they joined teams as I am told,
with the Northfern] P[acific]. They had a little
money to use as they had no mortgage or floating
debt as I am told. They have made a little money
on this end of their road and I think are using it.
Jay Gould went to Washington about two weeks
since and I know saw Mitchell, Senator from Ore-
gon, since which time money has been used very
freely in Washington and some parties have been
hard at work for the T. & P. N. P., that never
work except for ready cash, and Senator Mitchell
is not for us as he was, although he says he is, but I
know he is not. Gould has large amounts of cash
and he pays it without stint to carry his points. . . .
John H. Mitchell, of Portland, was a Sena-
tor from Oregon.
January 12, 1878.
. . . Matters do not look well in Washington,
but I think we shall not be much hurt, although the
boys are very hungry and it will cdst considerably
to be saved.
January 22, 1878.
... The World * again published to-day that
the C. P. and S. P. [Central Pacific and Southern
Pacific] owe fourteen millions floating debt, and it
hurts us very much, and I don't see how we can
carry our floating debt here unless this debt can in
some way be transferred; that is the larger portion
of it. The World is controlled by Tom Scott. A
few months ago I could have had it in our interest,
by paying its losses, or in other words, paying the
bills that they (the World) could not pay, which
would be from $2,000 to $5,000 a month. I did not
think it wise to do it. ...
February 23, 1878.
. . . The Sub. Com. of the R. R. Com. of the
House have agreed to report Scott's T. and P. bills
through to San Diego and I am disposed to think
the full Com. will report it to the House. It can be
stopped but I doubt whether it would be worth the
cost. . . . Scott no doubt will promise all the, say,
$40,000,000, that the act would give him. . . .
(Letter of March 4, 1878, suggested that army
officers be let in on the Oakland water front job.)
NEW YORK, May 3, 1878.
. . . The Texas and Pacific folks are working
hard on their bill, and say they are sure to pass it,
but I do not believe it. They offered one M. C.
one thousand dollars cash down, five thousand
when the bill passed, and ten thousand of the bonds
when they got them, if he would vote for the bill.
NEW YORK, June 30, 1878.
I think your letter to McFarland was good. . . .
I think in all the world's history never before was
such a wild set of demagogues honored with the
name of Congress. We have been hurt some but
some of the worst bills have been defeated but we
cannot stand many such Congresses.
NEW YORK, September 30, 1878.
... I think you are right about Field not sit-
ting in the Gallatin suit. . . .
Albert Gallatin had been a member of the
firm of Huntington & Hopkins at Sacra-
mento. He brought suit to prevent the
Central Pacific from setting aside its sinking
fund. Justice Stephen J. Field was of the
Supreme Court of the United States. For
many years he was actively supported in
some quarters for the Democratic nomina-
tion for the Presidency. 'The California
State Democratic convention of 1884, held
at Stockton, considered charges against Jus-
tice Field based upon his decisions in cases
wherein the Southern Pacific Railroad was
interested. As a result of these charges the
* This newspaper has undergone changes of editorial manage-
ment and ownership since the date of this letter.
8 r
880 Hampton's Magazine
convention formally read Justice Field out scribed in Mr. Franklin Hichborne's book
of the Democratic party. on that subject.* This is the influence that
I have used the past tense in describing is determining to-day who shall be governor,
the political degradation of this State of Cali- who shall fill every office below him, who
fornia, but I might as well have written it in shall be judges.
the present. Forms have changed somewhat Finally, this is the influence, concealed and
and methods; the essence of the situation sinister, that stopped the graft prosecution
remains the same. in San Francisco; that enabled Ruef, Cal-
Still, the huge political machine works on houn, and Schmitz to escape; that defeated
corrupting and corrupting. Still, the railroad Francis J. Heney at the polls; and morally
boss operates in every county, and still the head this is the influence responsible for the hand
spider sits in his office and spins his evil webs. that tried to assassinate him.
This is the influence that brought to naught
the WOrk Of the reformers in the last SCS- -,*"Story of the Session of the California Legislature," by
. Franklin Hichborne, San Francisco; 1909. It is really a most
SlOn Of the legislature, as graphically de- meritorious work and ought to be widely noted.
Nora
By Arthur Stringer
WHY is it, now, me Nora
Will niver shpake av Hugh?
Will niver pass a joke wid him
The way she used to do?
Toime was that gurl'd blather
Av Hughie, noon and night!
Now iv'ry toime he swings the gate
Her face goes starin' white!
I've spied no row nor ruction;
They meet as friend wid friend;
And still, I'm toldt, he walks with her
Beyont the boreen's end.
I've done me best by Nora;
That gurl's as thrue as day,
Wid all her big and wishtful eyes,
Wid all her bashful way'
But white before me turf-fire
She sits widout a word,
This gurl av mine who used to sing
As mad as any bird!
Faith, since she lost her mother,
I've left that colleen free
To come and go but toimes there are
When men are slow to see!
For wanst I spied her rockin'
And sobbin' here, alone
Now, can there be some throuble up
Her mother might 've known?
peaking of Widows and Orphans
By Charles Edward Russell
Author of "TAe Heart of the Railroad Problem," "Seating Men to Make Them Good," etc.
Illustrations by Clarence Rowe and C. F. Peters
EDITORIAL NOTE. Here is perhaps the most vivid and dramatic chapter of Mr. Russell's
series on the Central Pacific Millionaire Mill. The story told on the witness stand by the
widow of Mr. Huntington's "Friend Colton," and the story of the settlers that lost their lives in
their contest with the railroad power will be found of extraordinary interest and significance.
As to the specific cause of the increased cost of
living, President Taft to-day frankly told various
of his callers that he was unable to account for it.
News Despatch from Washington, December 30,
1909.
THE STRANGE EXPERIENCES OF
MRS. COLTON
ON October 8, 1878, General David D.
Colton was brought to his home in San
Francisco suffering from a perilous wound
that he had received either in some mysterious
accident or from somebody's dagger.
Mrs. Colton was then in New York. She
was telegraphed for and hastened homeward
in special trains, but could not reach San
Francisco until October i4th, five days after
her husband's death.
General Colton was in several ways re-
markable, but chiefly as the only man that
Collis P. Huntington seemed to like or in
whom he placed the least confidence. For
two of his partners Huntington entertained un-
disguised contempt, and for the third (one may
say) a kind of tolerance; but he seemed really
drawn toward Colton in his long career
almost the solitary instance of human weak-
ness and one that cost him dear.
In earlier days in California, Colton had
been a rather picturesque figure. He was
once the sheriff of Siskiyou County and in
that capacity had bravely withstood and
quelled a mob. In San Francisco he prac-
ticed law, did some work for the multifarious
and usually shady enterprises of the Southern
Pacific, organized the form of its plunder
that was called the Rocky Mountain Coal and
Iron Company, and by his superior clever-
ness won Huntington's reluctant regard.
Before long he was admitted to the partner-
ship; not, of course, to all of the good things
nor to many of them, but to choice bits that
made him a millionaire. Thus when the West-
ern Development Company was organized, he
received a one-ninth share of that precious con-
cern; and he was president of and held much
stock in the Rocky Mountain Coal and Iron,
which was then selling to the Central Pacific
at $8 a ton coal that >vas worth $4 or less.
WHEN THE WIDOW RELIED ON THE OLD
FRIENDS
General Colton's will left everything to
Mrs. Colton, who was appointed sole execu-
trix. She had known almost nothing about
his business and she was greatly prostrated
by his sudden death; but with confidence she
relied upon his late associates, who had been
his and her dear friends. As she wrote to
Mr. Huntington in the early days of her
affliction, "I know that you and Mr. Crocker
will advise and take care of the wife of David
D. Colton." Particularly to her near neigh-
bor, Charles Crocker, she looked for gui-
dance, because the families had been very
intimate. When Mr. and Mrs. Crocker went
to Europe, Mrs. Colton took the two oldest
Crocker boys into her household as if they
were her own children.*
When General Colton died or was killed
Mr. Crocker was on his way home from
abroad. He spent a few days in New York
and conferred there with Mr. Huntington.
* Colton versus Stanford el al., testimony, pp. 2485-90.
79
80
Hampton's Magazine
On the night of his arrival in San Francisco,
Mrs. Colton saw with great relief his carriage
drive up to his door, and at once sent him a
note asking him to come to see her. He ex-
cused himself for that night, but visited her
the next morning and wept as he dwelt upon
General Colton's splendid qualities, and his
own and Mrs. Colton's great loss, by which
he seemed to be greatly affected.
Meanwhile, Mr. Charles E. Green, Gen-
eral Colton's secretary, had prepared for Mrs.
Colton an inventory of the estate. It showed
possession of the following securities: *
408 shares Rocky Mountain Coal and Iron stock.
10,000 shares Occidental and Oriental Steamship
Company stock.
20,000 shares Central Pacific Railroad Company-
stock.
34,000 shares Southern Pacific stock.
5>555 1 shares .Western Development Company
stock.
749 shares Amador Branch Railroad stock,
in shares Berkeley branch Railroad stock.
2,640 shares California Pacific stock.
556 shares Colorado Steam Navigation stock.
650 First Mortgage Southern Pacific bonds,
$1,000 each.
100 First Mortgage Southern Pacific bonds, $500
each.
75 First Mortgage Amador Branch bonds,
ii First Mortgage Berkeley Branch bonds.
3 Los Angeles County Bridge bonds.
In a few days Mr. Crocker called again,
and, as Mrs. Colton said afterwards, she was
impressed with a great change in his manner.
Apparently he had mastered his grief for his
dead friend and his lips found no more words
of condolence for the widow. On the con-
trary, he was stern and severe. f He said
austerely that General Colton had left his
affairs much confused; that he was in debt
to his associates and to the companies with
which he had been connected; that many of
the securities in his estate had been obtained
by means of a dividend of the Western
Development Company; J that this dividend
had been improperly declared by General
Colton without warrant, and that all persons
sharing in that dividend would be obliged to
return the securities received from it.
"We are going to return our dividends,"
he concluded, "and as you have got to return
yours you had better do so to-day before
night. Will you? "
* Many of these securities can be traced by reference to the
Pacific Railroad Commission Report, testimony of Doughty, p.
3256.
t Colton versus Stanford el al., testimony, pp. 2485-90.
j I take this to be the dividend of September 4. 1877, de-
scribed in a previous article. More than a year seems to have
elapsed before the discovery that the securities must be returned
and by the way, they never were returned.
Colton versus Stanford el al., testimony, p. 2792.
Mrs. Colton, being much taken aback
said she would seek advice and decide wha
to do. Mr. Crocker went on that Genera
Colton, a short time before his death, hac
subscribed for 30,000 shares of a new issue
of Southern Pacific stock. This stock, Mr
Crocker said, would be heavily assessed to
build the road.* Of course, he said, she
would not wish to pay the assessments am
she had better cancel the subscription a
once. She made haste to say that she cer
tainly would, and he went his Way.f
A few days later he returned and his man
ner was still more forbidding. He said (ac
cording to Mrs. Colton) that the Western
Development Company was insolvent, heav
ily in debt, and must have the return o
all the securities included in that imprope
dividend to which he had before referred
that General Colton owed his late associate
$1,000,000, for which he had deposited a
collateral 20,000 shares of Central Pacific :
and 20,000 shares of Southern Pacific stock
but that the value of the collateral would no
cover the face of the note; that the 408 share
of Rocky Mountain Coal and Iron in Gen
eral Colton's effects really belonged to hi
four associates, being held in trust for them
and finally, that General Colton proved to be
greatly in debt to all the companies. He de
manded a settlement of all these claims anc
told her if she wished she could have them
verified by her personal counsel.
CHARGES AND COUNTER CHARGES
Now, Mrs. Colton's personal counsel was
of course, her husband's personal counsel
who was Mr. Samuel M. Wilson, whom Mr
Crocker had highly recommended. Mr
Wilson was also one of the Central Pacific':?
regular and trusted attorneys and, according
to subsequent testimony, in receipt of a salan
of $12,000 a year from the railroad com
pany. Mrs. Colton had already sough
this gentleman's advice. She told Mr
Crocker she would be guided by Mr. Wilson.
Mr. Crocker's manner on this visit was so
* It is singular, but I can find no indication anywhere that
this stock was ever assessed, and cert-iinly there was not the
slightest reason why it should be. As for the building of the
road, that, as we have previously seen, was provi led out of.
the earnings and sinking fund rf the Central P:-.cn> and out of
the Western Development and Pacific Improvement Companies.
t Colton versus Stanford el al., testimony, p. 2797.
t In 1877 Central Pacific paid 8 per cent dividends. Neither
Central Pacific nor Southern Pacific was on the market, both
being closely held by Mr. Stanford and his friends. An 8 per
cent stock ought to be worth at least 80, at which price Gen-
eral Colton's Central Pacific collateral would be worth $1,600.-
ooo without considering the Southern Pacific stock, which is
now worth 137.
Colton v rsus Stanford el al., testimony, p. 6626.
81
82
Hampton's Magazine
disagreeable and the widow was now so thor-
oughly alarmed that when he sent word of
his next call she thought it well to have some
women friends about her, and thus avoided
the discussion of business. Mr. Crocker did
not come again and she never spoke with him
thereafter.
Mr. Wilson was now presumably investi-
gating General Colton's affairs. After a
time, he informed Mrs. Colton that the situa-
tion was far worse than Mr. Crocker had
pictured it. General Colton was not only
heavily in debt to the companies he repre-
sented, but his associates charged him with
repeated acts of embezzlement. They had
told Wilson (he said) that all the securities
in the estate would not suffice to pay the
General's debts; that they held enough
claims to take from Mrs. Colton * everything
she had, including her home; and they
threatened, in a manner " stern and severe
and determined and implacable," that unless
she made a settlement and surrendered her
stocks and bonds they would make public
her husband's criminal acts and blacken his
name and memory.
Mr. Wilson was good enough to say that
he did not believe these charges, but the rail-
road company had all the books and records
and, therefore, to prove General Colton's in-
nocence would be impossible, f Hence the
best plan was to make terms with the asso-
ciates. Mrs. Colton was greatly distressed.
Her misery was somewhat lightened when
Mr. Wilson suggested that she employ a
mediator, who, because of his ability and
experience, was likely to secure some con-
cession. The helping hand thus in her dark
hours extended to the widow was the hand
of Mr. Lloyd Tevis, who, Mr. Wilson said,
would be just the man. Mr. Tevis is not
unknown in these annals, having been the
originator of the ingenious plan whereby
the Big Four got possession of Wells, Fargo
& Co.,J of which branch of the Big Four's
activities he was now the president.
Mr. Tevis made what he called an investi-
gation and reported (according to Mrs. Col-
ton) that General Colton's debt was of great
magnitude and the Western Development
Company was insolvent, but Messrs. Stan-
ford) Huntington, and Crocker had been in-
duced to make a concession to the widow
of their old friend. She must deliver to
them all the securities that were in contro-
versy, but 200 of the Southern Pacific bonds
might be deposited with Wells, Fargo & Co.,
and from these she might for ten years draw
the interest.
In other words, they granted her a pension
for ten years.
Of the rest of the fortune they made a
thorough job.' They even insisted that 50
shares of Southern Pacific that General Col-
ton had given to his daughter as a wedding
present should be returned to them * and that
Mrs. Colton should surrender uncut interest
coupons amounting to $6,000.
The two men in whom she had most con-
fidence, Wilson and Tevis, having thus as-
sured her that no other way could be found
from the sorry situation, she was almost per-
suaded to surrender. On the morning of
August 27, 1879, sne still hesitating, word
was sent to her that Mr. Huntington was
about to return to New York, that he would
leave that afternoon at 3 o'clock,f and unless
she signed the settlement before that time
the Big Four would make no terms with her.
Thus menaced, she brought herself to sign
an instrument by which she accepted the
terms demanded, and surrendered all her
securities. The 200 Southern Pacific bonds
were delivered to Wells, Fargo & Co., who
refused to give her any receipt for them.
She also executed a release for $304,060.33
which the Western Development Company
had owed to her husband.
On their part the Big Four canceled the
note for $1,000,000 held by them against
General Colton, and agreed to keep secret
the charges of embezzlement.
MRS. COLTON SUSPECTS FRAUD
Mrs. Colton knew very little about busi-
ness, but she was intelligent, and she felt
intuitively that there had been fraud J in
these transactions although she knew not
wherein it lay. One day, some months after
she had been impoverished in this masterly
* Colton versus Stanford et al., testimony, p. 2812.
t Ibid., pp. 2523-7.
I Pacific Railroad Commission Report, p. 3116.
* Colton versus Stanford et al., testimony, p. 2820.
t As a matter of fact, Mr. Huntinston did not leave San Fran-
cisco that afternoon nor until September 8th, twelve days later.
t QUESTION. You signed this paper and yet you say you
rebelled against it?
ANSWER. Because I saw no justice in it.
Q. What was the injustice?
A. Robbery.
Q. A robbery? How was it robbery?
A. It simply had arrived at the point that it was my money
or my life.
Q. Isn't that a rather strong way of putting it?
A. I think not. I was in the condition of a man attacked
by a highwayman upon the roadside.
Colton versus Stanford et al., cross examination of Mrs. Ellen
M. Colton, to be found in the record, p. 2816.
Speaking of Widows and Orphans
83
fashion, she was reading a newspaper and
icr eyes fell upon an inventory of the estate
)f Mark Hopkins, recently deceased. She
loticed in the list many securities of the
and she had surrendered, and that the value
these given in the list was very much
reater than the prices at which the same
jcurities had been estimated in her enforced
jttlement.
This set her to thinking and the more she
reviewed her experience the clearer grew her
:onviction that she had been wronged. She
abandoned Mr. Wilson as her counselor and
sought other advice. Her new attorney, Mr.
G. Frank Smith, set on foot an investigation
and obtained therefrom results that greatly
astonished him.
For example, the schedule of the insolvent
Western Development Company that Wilson
said he obtained from the Big Four or their
agents asserted an indebtedness by the com-
pany of $11,910,030.44 as follows:*
To Charles Crocker $2,219,541 .73
" Leland Stanford 1,763,734.85
" Mark Hopkins 4,087,692.10
" C. P. Huntington 3,519,701.43
" D. D. Colton 319,360.33
This and no more. No mention was made
of the fact that these five men were the sole
owners of the company; that
not one of them had ever paid
in one cent for his stock; that
they then owed the company
$5,000,000, nor that the com-
pany's alleged indebtedness
represented only the securities
and moneys that had been ad-
vanced in their names from
the Central Pacific and other
funds for its devious and
crooked operations, and for
which they knew they would
shortly be repaid about five-
fold, f
Mr. Smith was further informed that in the
list of assets in this amazing schedule were
most glaring omissions. Thus no mention
whatever was made of these items that should
have been included : *
$462,000 due from the Northern Railroad and sub-
sequently paid in bonds.
$748,000 due from the Northern Railroad in other
items and a little later paid in bonds.
$7,340.32 due for California Pacilic stock.
$92,640 due from the San Pablo & Tulare Railroad.
$3,753 from the Pacific Improvement Company.
$5,766.15 interest due on Northern Railroad
bonds.
$36,437.03 interest due on San Pablo & Tulare
bonds.
$4,986.07 interest due on San Francisco, Oakland
& Alameda bonds.
The schedule also set down as a worthless
asset $832,800 due from the Los Angeles &
San Diego Railroad: Mr. Smith was assured
Some of it, like the six coaches sent, I know are for the S. P.
(Southern Pacific), but just whether they are to be charged to
the S. P. or the Western Development Co. I do not know."
In other letters he complains of the enormous floating debt
of the Central Pacific that this system was piling up. "Our
liabilities (Central Pacific) are getting very large here for a
company with such large receipts and with no apparent outlay
except interest on bonded debt and operating expenses." In
his letter of March 24, 1877. he figures the profits of the Central
Pacific at $750,000 a month. These were being used to pay
for the building of the Southern Pacific, rendering both stock
and bonds of that road "velvet" for the fortunate projectors.
* These and many others are to be found in the testimony,
pp. 2623-31.
* Colton versus Stanford ct al., defend-
ants' exhibit E.
t The exact nature of these operations
has been sufficiently described in a fore-
going article, but I may remind the reader
here that, according to the testimony be-
fore the Pacific Railroad Commission, the
Southern Pacific was built out of the di-
verted earnings and sinking fund of the
Central Pacific. The Southern Pacific
was on through business a parallel line
that had the same owners and owed the
government nothing. The money that
built it should have gone to pay the Cen-
tral Pacific', debt to the national treasury.
Curious collateral testimony about all this
exists in the Colton letters of Mr. Hunt-
ington. In the letter of May 8, 1875, Mr.
Huntington says: "All the material I buy
here is paid for by the Central Pacific.
A FEW DAYS MR. CROCKER AGAIN CALLED ON MRS,
COLTON, BUT HIS LIPS FOUND NO MORE WORDS
OF CONDOLENCE FOR THE WIDOW.
84
Hampton's Magazine
that within a year this debt was paid in good
bonds and stocks. Another debt of $45,-
640.53 carried in the schedule as a worthless
asset had already been paid in gold. The
Los Angeles & Independence Railroad was
put down as worth $100,000 when $300,000
appeared to have been paid for it, and since
its purchase it bad returned $114,318 in divi-
dends. The Colorado Steam Navigation Com-
pany was entered as an asset of $150,000,
whereas in the last three years previous to
the making of the schedule this company had
paid $110,000 in dividends. On the other
hand, in the liabilities, an item of indebted-
ness entered at $298,208.35, should have
been $269,415.73, and there were other ap-
parent inaccuracies that might be thought
very surprising in a statement emanating
from a business enterprise of such magnitude
and standing.
According to the information gathered by
Mr. Smith, many other goodly items were
missing from the assets, such as Iowa county
bonds, Sioux City & Pacific bonds and the
like, and no mention was made of such pos-
sessions as the contract to extend the San
Pablo & Tulare road forty-six miles at $25,-
ooo a mile in bonds and $40,000 a mile in
stock (actual cost of construction less than
$20,000 a mile),* nor of other contracts and
items.
A SPEEDY REORGANIZATION OF THE WESTERN
DEVELOPMENT COMPANY
It appeared further that none of the other
beneficiaries of the Western Development
Company's dividend had returned any of
his stocks and bonds, but on the contrary,
twenty-two days after General Colton's
death, these men had wound up the Western
Development Company (which they con-
trolled) and organized in its place the Pacific
Improvement Company, of which they alone
were owners. They then transferred to the
new company all of the Western Develop-
ment Company's possessions and contracts,
by which device they froze out all the Colton
interests. From the operations of the Pacific
Improvement Company they derived by the
end of 1882, $20,000,000 which they had
divided among themselves, although if Gen-
eral Colton had lived he would certainly have
had a share.
Furthermore, the investigation seemed to
* Most of this ama/inK revelation of the inside history of the
concern seems to have been obtained from a discharged em-
ployee. As it was never seriously controverted I am obliged to
suppose it to be correct.
show that the charge of "embezzlement" was
absurd and the claim of debt almost as
tenuous.
The total debt alleged against Colton was
made up of $666,000, his share of the "insolv-
ent" Western Development Company debt;
$160,000 he had "embezzled"; $125,000 due
to the companies he had managed; and the
$1,000,000 note secured by collateral.
But it appeared that there had been paid
on the $1,000,000 the sum of $250,000, so
that the debt was $750,000 instead of $1,000,-
ooo. The embezzlement charge when sifted
down had no more excuse than this, that Col-
ton had drawn from the company money with-
out returning vouchers.* But it appeared that
all of the partners had done this; indeed, the
whole concern, when the light was thrown
upon it, looked like a riot of perquisites,
"melons," "benefits," and other good things
of the kind. Mark Hopkins had drawn from
the Southern Pacific on September 30, 1871,
$151,560.59 and no accounting was made of
this sum until 1880, two years after his
death. Mr. Huntington when in New York
drew from the Western Development appar-
ently at his will and never returned any
voucher. In three years he had drawn $400,-
ooo. Governor Stanford took out $45,638.84
without explanation. Mr. Crocker, without
warrant or apparent authority, took from
the treasury 500 Southern Pacific bonds to
buy the Oakland water front. It seemed a
fair contention that if Colton was an em-
bezzler, these men were embezzlers no less.f
As for Colton's share of the alleged indebt-
edness of the alleged insolvent Western De-
velopment Company, it appeared from the
information that there was no true indebted-
ness and the company was not insolvent at all
but fat with rich assets that never had been
divided.J From its organization to Colton ? s
death it had shared among its stockholders
$21,000,000. At Colton's death it had on
hand, as the investigation revealed, $22,810,-
500.43 subject to claims, real and imaginary,
of $ii,3i6,497- 2 2.
In payment of these debts that did not
exist, there seemed to have been taken from
* There was an allegation that he had desposited for the
company $228,618.47 in silver and then obtained credit for his
own benefit on a pretense that the deposit was in gold. This
was never established, but even if it were true it was not signifi-
cant, because such seemed to be the custom. The Central
Pacific had done the same thing with $2,000.000 of silver.
Colton versus Stanford et al., testimony, p. 2741.
t Colton vrsus Stanford et al., testimony, pp. 2638-30.
i It may be interesting to note that as brought out in the
trial the " Nob Hill " palaces of Stanford, Hopkins, and Crocker
were built out of the Western Development Company. Col-
ton versus Stanford et al., testimony, p. 8877.
FOR MRS. COLTON, THE NET RESULT OF HER SUIT. WAS A HEAVY BILL OF COSTS MR.
HUNTINGTON" HAD CRUSHED THE WIDOW OF HIS OLD FRIEND.
Mrs. Colton securities at much less than
their real value. Her Southern Pacific bonds,
for instance, were scheduled in her settlement
at 60, while in March of the same year they
had sold at 100, and at the time of the settle-
ment were traded in by the Big Four at 94.
The Rocky Mountain stock they appraised
from her at $16.24 a share must have been
worth about par.* And so on.
MRS. COLTON APPEALS VAINLY TO LELAND
STANFORD
Upon the discovery of these and many other
allegations of a like nature, Mr. Smith ad-
vised Airs. Colton to bring suit at once for
the annulling of her contract and the return
of her securities. Mrs. Colton still clung to
a belief in the sincerity of one of the men
that had professed so much affection for her
husband. With the large, bland, unctuous
sentiments of Leland Stanford she was un-
able to reconcile the idea of despoiling the
defenseless, and she wished an appeal to be
made to his sense of justice.
Mr. Smith had other views. For some
time he had been attentively considering the
sense of justice possessed by these men and
had acquired of it a very low estimate. He
* Pacific Railroad Commission Report, testimony of Leland
Stanford, p. 2938.
told Mrs. Colton that an appeal to any of
them was quite useless. Nevertheless, she
insisted, and on March n, 1882, he wrote
to Leland Stanford outlining Mrs. Colton's
story, her confidence in the goodness and
justice of her old friend, and her plea that
she be not utterly plundered. Mr. Smith
closed with this comment:
"Knowing how repugnant uncontested
settlements are to your associates, I have
acted in the premises contrary to my own
belief of any possible advantage that can
accrue to her from this or any other amicable
overtures on her part." *
To this letter no answer was returned.
The fact did not astonish Mr. Smith and, one
may think, need not have astonished Mrs.
Colton. Later she recalled an incident that,
upon a more suspicious nature, might have
acted to prevent the writing of such a letter.
General Colton's office had been in the rail-
road company's building and in a safe in
that office were still kept all of the securities
belonging to the estate. According to her
subsequent testimony,! Governor Stanford
came into this office one day and found there
Mr. Green, who had been Colton's secretary.
The safe was open.
* Colton versus Stanford el al., testimony, pp. 2607-8.
t Ibid., p. 2905.
86
Hampton's Magazine
Governor Stanford remarked to Mr.
Green that he was very anxious about
the security of the property in that safe.
He said that the art of safe-blowing had
been so developed that a safe-blower
could open such a safe even in a building
where there were watchmen. He thought
General Colton's property should be re-
moved to a safer place, and suggested that
such a place would be the vault of the rail-
road company. Mr. Green reported this
conversation to the Widow Colton. She tes-
tified that she acted at once upon Governor
Stanford's suggestion; but the safer place to
which she transferred the property was not
the railroad company's vault, but a box in a
safety deposit company's care.
On May 21, 1882, Mrs. Colton's suit was
filed in San Francisco. The answer of the
defendants* was a general denialof the bill of
complaint, a definite assertion of Colton's
embezzlements and defalcations, an astound-
ing reiteration of the insolvency of the West-
ern Development Company, and a plea that
the statements made to Mrs. Colton were
made in good faith and on credible informa-
tion.
The defendants demurred to some points
in the plaintiff's bill, and Judge Hunt
promptly overruled the demurrer. Where-
upon counsel for Stanford et al. secured the
removal of the case to the Sonoma County
Court at Santa Rosa. It came to trial in
November, 1883, before Judge Jackson Tem-
ple, a jury being waived.
Judge Temple was afterwards a member of
the California Supreme Court.
After the usual manner of things dis-
agreeable to the railroad company, the
fifteen volumes of testimony taken in the
case have mysteriously vanished from
the court records at Santa Rosa, but I
succeeded in finding copies at Sacra-
mento and can unreservedly commend
their perusal to anyone that cares to
* They did not mention their real defense, which, though
inadmissible as a plea in a court of justice, was not without
merit, at least from their point of view. It was this: Messrs.
Stanford, Huntington, Hopkins, and Crocker had desired to
avail themselves of General Colton's superior cunning and
cleverness. The securities they bestowed upon him were merely
the wages for his services. When they were deprived of his
services they did not purpose to continue the wages. For the
most part the securities represented no investment. They were
merely manufactured by the Big Four at their convenience and
for their profit. All were liens upon the enterprise and carried
substantial interest, and the Big Four could see no reason why
property manufactured in this way should be enjoyed by Gen-
eral Colton's estate after they had ceased to derive anything
from General Colton's wits.
The substance of this argument was frankly stated by Mr.
Crocker to Mr. Wilson and will be found in the testimony,
Ellen M. Colton versus Leland Stanford et al., at p. 2841.
know the true manner in which the rail-
roads of the United States have been
conducted or how far (under present
conditions) men will go for the sake of
money and the power that abides in
money. In these respects I know of no
other volumes of equally impressive in-
struction. Whoever reads them will face
the primitive human passions made so
naked and real before him that he will
seem to himself to have dipped backward
into the jungle.
JUDGE TEMPLE DECIDES AGAINST MRS.
COLTON
On October 8, 1885, Judge Temple filed
his opinion. It cleared General Colton's
name from the embezzlement charge, but
held on almost all other points for the de-
fendants, in some instances adopting the very
language of their answer. The chief ground
of the decision seemed to be that Mrs. Col-
ton's contract was sound in law, made by
her in full knowledge of its terms and basis,
and contracts must be upheld (Miles versus
McDermott, 31 Cal. 273; Woods versus Car-
penter, ii Otto 143; Le Roi versus Mulliken
and Moore versus Moore, 56 Cal. 90, if I
have the citations right). Also that she was
not so much prostrated by her husband's
death that she was unable to exercise per-
fectly all her mental faculties, that she had
very able counsel, and by them she was fully
informed as to the situation and her rights.
In the subsequently filed "Findings of
Fact and Conclusions of Law," Judge Tem-
ple considered seventy-seven points, and on
seventy-two of them found for the defend-
ants.
The case was appealed December 15, 1886,
and in January, 1890, the Supreme Court
handed down a decision sustaining Judge
Temple.
For Mrs. Colton, therefore, the net result
of her suit was a heavy bill of costs that she
must pay.
Mr. Huntington had won. He had de-
feated and crushed the widow of his old
friend, and the securities that were the prizes
of the long conflict rested in the coffers of the
Four of Sacramento. But Mr. Huntington
had his own costs to pay. For it was in this
case that the Colton letters, printed in a
previous article, were produced, and the
real nature of his Washington operations
proved to the world. From this time on
those letters were hung about his neck.
Speaking of Widows and Orphans
87:
II
THE MAY DAY AT BREWER'S FARM
THE LONG CONTEST BETWEEN THE SETTLERS
AND THE COMPANY
For many years now this colossal institu-
tion had been the virtual ruler of the state,
setting up this officer and pulling down that,
filling places in the government with obedient
henchmen, controlling the parties and select-
ing their candidates, holding the avenues to
distinction .and even to success, choosing
judges and commissioners, nominating jurors,
and with equal facil-
ity influencing legis-
lators and witnesses.*
Men or even com-
munities that con-
spicuously opposed
the machine were
made to suffer. As
the railroad built ex-
tensions of its lines
it levied tribute upon
towns thus brought
within its reach and
sometimes inflicted
very serious injury
upon those that re-
fused to make grants
of land or of money.
For some such of-
fense the city of Stock-
ton was a long time
on the company's
black list and hin-
dered in its growth.
Long before, Silvey-
ville had been practi-
cally annihilated, the
new town of Dixon
being built, in a spirit
of revenge, three and a half miles away.
Bakersfield having once incurred the com-
pany's displeasure, the town of Kern, three
miles off, was developed to crush Bakersfield.
OAKLAND FIGHTS RAILROAD FOR ITS STREETS
AND PIERS
It would be easy to multiply the instances
that to all except Californians must seem im-
probable fiction. The city of Oakland, now
one of the fairest and most prosperous in
California, was once obliged to fight for its
* Allegations of very flagrant witness-bribing were made in
San Francisco, April, 1896, in the case of Louis Schmidt, who
confessed he had been bribed by agents of the railroad to testify
falsely in the damage suit of Mary Quill.
MRS. D. D. COLTON, WHO, AFTER HER HUS-
BAND'S DEATH, WAS STRIPPED OF HER
WEALTH BY HER HUSBAND'S BUSI-
NESS PARTNERS, THE " BIG FOUR."
mere existence against the railroad company
as against a public enemy. Some very ex-
traordinary scenes were witnessed in that
contest. A visitor . would have thpught a
civil war was raging. The company fenced
off public streets by night and the citizens
tore down the fences by day; the com-
pany drove piles across the water-front
slips and the citizens fought to remove
them; the company tried to strangle the
town by strangling its ferry service and the
citizens underwent strange privations to
maintain a semblance of their rights.
The power and su-
premacy of this com-
pany were not limited
to state nor to mu-
nicipal affairs. Mer-
chants or shippers
that supported any
plan to secure relief
through competition
found their shipments
delayed and their ri-
vals helped with re-
bates. Lawyers that
unduly pressed ob-
noxious suits found
their practice vanish-
ing. Some men were
ruined for their op-
position; some were
made rich for their
assistance. No one
need wonder that to
.oppose the railroad
came to be regarded
as fraught with great-
er danger than the
average man could
afford to face.
This brings me to
the incident that best illustrates the truly
autocratic power that these men grasped and
the wanton spiri in which they used it.
One of the triumphs of Mr. Huntington's
me hod of "explaining" things to members of
Congress (at a cost of millions of dollars
added to the company's capitalization) was
a bill passed in 1866 granting to the railroad
company in alternate sections 12,800 acres
of public land for every mile it should build
from San Francisco to a point at the south-
eastern corner of the state; or half the land
in a strip forty miles wide along its right of
way. The line was laid out and the rail-
road's lands designated. Subsequently it
88
Hampton's Magazine
somewhat changed its route and therefore the
land to which it was entitled under the act.
At that time, and for years afterwards, only
a small part of the line had been constructed
and there grew up a question whether the
railroad were really entitled to certain parts
of the land it claimed in Fresno, Tulare, and
some other counties. The rulings of four
Secretaries of the Interior, an Attorney-Gen-
eral,* and a Commissioner of the Federal
Land Office, supported the view that the
railroad company had no right to this prop-
erty, but the company continued to claim the
land and to sell it.
THE TERMS OFFERED IN THE RAILROAD'S
CIRCULAR
Meantime many settlers had come into
the Fresno-Tulare region.f Some had se-
cured their titles from the government be-
fore the railroad's route was changed. These
now found their farms to embrace sections
claimed by the company. Many others com-
ing after the final determination of the line,
had taken railroad lands at the company's
invitation and under terms set forth by the
company's circulars. These speedily had
troubles of another sort.
The company's circulars, signed by its
officers, setting forth the attractions of the
Fresno-Tulare region and offering unusual
inducements to settlers, had been widely
scattered over the Middle West. They dealt
in an apparent spirit of frankness and truth,
describing the lands as of an excellent soil
but dry a fault easily remedied by irriga-
tion, when the soil would be found to be of
surpassing fertility. Terms would be re-
markably easy. Here are paragraphs from
one of the circulars :
On page 6 The company invites settlers to go
upon their lands before patents are issued or the
road is completed, and intends in such cases to sell
to them in preference to any other applicant and
at a price based upon the value of the land with-
out the improvements put upon them by the set-
tlers.
On page 7 If the settlers desire to buy, the com-
pany gives them the first privilege of purchase at
a fixed price, which in every case shall only be the
value of the land without regard to improvements.
On page 9 The lands are not uniform in price
but are offered at various figures from $2.50 up-
* The dates of these decisions were as follows:
Secretary Browning, July 14, 1868.
Secretary Cox, November 2, and November n, 1860.
Secretary Delano, May 9, 1873, and February 26, 1874.
Secretary Schurz, August 2, 1878.
Attorney-General Devens, July 16, 1878.
Commissioner Drummond, January 28, 1874.
t About 240 miles southeast of San Francisco.
ward per acre; usually land covered with tall tim-
ber is held at $5 per acre and that with pine at $10.
Most is for sale at $2.50 to $5.
In ascertaining the value, any improvement that
a settler or other persons may have on the lands will
not be taken into consideration; neither will the
price be increased in consequence thereof. Settlers
are thus assured that in addition to being accorded
the first privilege of purchase they will be protected
in their improvements.*
In response to these liberal offers, many
farmers came from Missouri and Illinois and
took up land. They found the country a
sandy waste and worthless until, by uniting
their efforts and capital, they had constructed
an irrigation system, whereupon the soil be-
came exceedingly fertile.f
Meanwhile, although they made repeated
applications, they were unable to get their
titles from the railroad company. The rea-
son why they could not get their titles was
because the company had not taken out its
patents, and the reason why it had not taken
out its patents was because so long as it had
no patents on its lands it could not be taxed
for them. This was the simple little plan it
uniformly pursued and thereby deprived the
counties and the State of California of mil-
lions of dollars .J
But in 1877 the company began to take out
its patents, and soon afterwards to demand
payment of the settlers.
THE SETTLERS OF FRESNO-TULARE PROTEST
Then the settlers learned to their amaze-
ment that the land was not to be paid for at
$2.50 an acre but at from $25 to $40 an acre,
and that all the improvements they had made
were counted in the price. Even the irriga-
tion ditch that they had constructed at their
own expense and with their own labor be-
came a great factor in the increase. The land
was not to be offered to them first ; it was to be
thrown on the market for any purchaser.
When the settlers found that the company
really intended thus to violate its agreement
they protested, showing the circulars and the
promises therein. They offered to pay the
* These circulars were subsequently confirmed by letters from
agents of the railroad company to individual settlers.
tThey constructed two inadequate ditches before they got
one that carried enough water. It was some miles long and was
dug chiefly by the voluntary labor of the settlers, most of whom
were extremely poor and lived in destitution until the water be-
gan to flow around their lands. Many of the settlers, while they
worked on the ditch, lived upon corn meal ground in hand
coffee mills and upon fish that they caught. None of them
understood irrigation and they were obliged to learn by experi-
ence. There is extant a very pathetic letter from a woman
of education and refinement, Mrs. Mary E. Chambers, a sister
of one of these men, giving a vivid account of the hardships the
settlers endured in these years.
t For explicit testimony on this point, see Pacific Railroad
Commission Report, p. 146.
Speaking of Widows and Orphans
89
ompany at the stipulated prices, but all pro-
ests, offers, and arguments were alike
vithout avail; and the company preparing
o press its claims, many of the threatened
armers formed a Settlers' League to defend
)\- united action what they believed to be
heir rights. Four times they had petitioned
'ongress (without result, of course), and now
hey resorted to the law. A test case was
ried in the Federal Court and on December
:5, 1879, Judge Lorenzo Sawyer (who after-
vards held Leland Stanford to be immune
rom disagreeable questions) rendered a de-
rision upholding the railroad company in all
Its contentions. From this decision the per-
plexed settlers prepared to appeal to the
L'nited States Supreme Court.
Meantime, the railroad company had be-
am to sell the settlers' lands and four or five
nen moved into the region and built houses
mder the railroad company's warrant. In
June, 1879, a band of men came b - v m S ht to
he place of Perry C. Phillips, a purchaser
rom the railroad, removed the inmates and
ill the contents to a place of safety , and burned
the house to the ground.* After this the
ompany found great difficulty in selling any
af the lands.
WRITS OF EJECTMENT ISSUED
What went on in the minds of the railroad
managers is only to be surmised, but from
,ubsequent events the conclusion seems rea-
.onable that after so
many years of auto-
cratic rule they were
greatly nettled by this
active and so far suc-
cessful opposition. The
settlers believed that,
following the usual cus-
tom, both sides should
now halt to await the
Supreme Court's deci-
sion. As to this the
railroad company had
another opinion. Ignor-
ing the pending litiga-
tion, it sharked up from
the north two hardy
men to whom it prom-
ised land without charge
if they would succeed
in breaking the settlers'
position. One of these men, Walter J. Crow,
was reputed to be among the best rifle and
revolver shots in the state, and the settlers
thought they knew the purpose for which he
was employed. The antecedents of the other,
M. D. Hartt, are not so well known.
Hartt and Crow went into the region, and
soon after, with the other men that had pur-
chased land from the railroad, they exhibited
this notice, which they said they had received:
TULARE COUNTY, April 24, 1880.
You are hereby ordered to leave the county.
B-Y ORDER OF THE LEAGUE.
The Settlers' League did not send out these
notices and had no knowledge of them. At
the same time reports were sent abroad that
bands of armed and masked men were riding
up and down the district making threats and
committing outrages, although the residents
were not aware of such matters.
Next, the railroad company went into the
Federal Court, secured writs of ejectment,
placed them in the hands of A. W. Poole,
United States Marshal of the district, and
demanded that he serve them at once, re-
move the settlers, and put Hartt and Crow
in possession.
The marshal, of course, was obliged to com-
ply, and on Monday, May 10, 1880, he went
to Hanford, Tulare County,* the trading town
that had grown up near the settlers' lands.
Major T. J. McQuiddy, president and
leader of the Settlers'
League, upon which he
had always urged mod-
eration and patience,
learned that night of
the marshal's arrival
and understood well
enough his errand. With
the secretary of the
league Major McQuiddy
drew up the following
address :
To
STATES
* It is denied that the Settlers'
League had any connection with
this affair.
THE UNITED
MARSHAL
SIR: We understand that
you hold writs of ejectment
issued against settlers of
Tulare and Fresno counties,
for the purpose of putting
the S. P. R.R. Co. in pos-
session of our lands, upon
which we entered in good
faith and have by our
own patient industry trans-
JUDGE JACKSON TEMPLE. WHO DECIDED
MRS. COLTOX'S SUIT AGAIN ? ST HER.
* It is now in Rings County.
90
Hampton's Magazine
formed from a desert into valuable and productive
homes.
We are aware that the United States District
Court has decided that our lands belong to said
Railroad under patent issued by the United States
Government.
We hereby notify you that \ve have had no chance
to present our equity in the case nor shall we be able
to do so as quickly as our opponents can complete
their process for a so-called legal ejectment, and we
have therefore determined that we will not leave
our homes unless forced to do so by a superior force.
In other words, it will require an army of 1,000 good
soldiers against the local force that we can rally for
self-defense, and we further expect the moral sup-
port of the good, law-abiding citizens of the United
States sufficient to resist all force that can be brought
to bear to perpetuate such an outrage.
Three cases have been appealed to the United
States Supreme Court and we are determined to sub-
mit to no ejectment until said cases are decided.
We present the following facts:
First These lands were never granted to the
Southern Pacific Railroad Company.
Second We have certain equities that must be
respected and shall be respected.
Third The patents they hold to our lands were
acquired by misrepresentation and fraud, and we,
as American citizens, cannot and will not respect
them without investigation by our government.
Fourth The Southern Pacific Railroad Company
have not complied with their contract both with our
people and with our government, and therefore for
these several reasons we are in duty bound to ask
you to desist. By AUTHOKITY OF THE LEAGUE.
Early the next morning before this could
be delivered to him, the marshal hired a
buggy and accompanied by W. H. Clark, the
railroaders' grader or appraiser of lands,
he drove three miles northeast to the near-
est of the farms covered by the writs of
ejectment the farm of W. B. Braden, a
member of the League.
In another buggy close behind came
Hartt and Crow, heavily armed with re-
volvers, rifles, and shotguns, the shotguns
being loaded with small bullets or slugs in-
stead of shot.
It happened that on this day the League
was having a picnic some miles away;
whether this fact influenced the action of the
railroad company and its traveling batteries
I do not know. Braden was at the picnic:
no one was in the little cottage. The mar-
shal entered, carried out all the household
goods, piled them in the road, and formally
declared Hartt to be in possession of the
premises.*
This was about nine o'clock in the morning.
The marshal and Clark, closely followed by
* Four loaded cartridges were left on Braden's doorstep, prob-
ably as an indication of what would be the result of any re-
sistance on his part.
Hartt and Crow, drove to the next place, the
farm of one Brewer, over the border of Fresno .
County, and about three and a half miles
from Braden's. They encountered on the
road a settler named J. H. Storer, an old
friend of Marshal Poole's, and Poole reined
in for a time while the two talked. Storer
said the settlers hoped for a compromise with
the railroad company and he would try toj
arrange one.
When they drove on, Clark, the grader,]
reproved the marshal for talking with
Storer because Storer was the partner of
Brewer, whom they had come to dis-
possess.
About ten o'clock they arrived at Brewer's!
place. He was harrowing in his field. Both
buggies drove into the yard, past the house,
and about two hundred yards west into the
field. At this moment there appeared about
fifteen of the settlers in a group, some mount-
ed, some on foot, advancing toward them.
The settlers carried no visible arms; among
them all were only five small pocket pistols.
Marshal Poole descended from his buggy and
went forward, saluting them courteously.
The foremost of the settlers addressed him
quietly, asking the marshal not to serve any.
writs until the case then pending in the
Supreme Court should be decided. He also
handed to the marshal the address that
Major McQuiddy had drawn up.
Marshal Poole read the document and
said his duty was to serve the writs then and
there. The settlers replied without vehe-
mence that they would not allow him to serve
them.
They now closed about the marshal and
demanded that he give up his revolver and
surrender to them, whereupon he would be
conducted in safety to a station whence he
could leave the county. He said he would
yield to force and go away but he would not
give up his revolver, although he promised not
to use it. Two of the settlers, Archibald
McGregor and John E. Henderson, were then
told off to guard the marshal and Clark to :
the railroad station at Kingsburg.
THE CRACK RIFLE AND REVOLVER SHOT J
KILLS FIVE
All this Hartt and Crow watched narrowly
from the other buggy about seventy-five feet
away. As the conference with the marshal
ended, Hartt reached down and seized a'
rifle.
"Let's shoot," said he.
Speaking of Widows and Orphans
91
Without shifting his watchful gaze from
the group of settlers, Crow put a hand upon
his companion's arm.
"Not yet," said he, "it isn't time."
James Harris, from the group about the
narshal, rode up to Hartt and Crow and cried:
"Give up your arms!"
He was within a few feet of the buggy.
Crow laid his hands upon a shotgun before
him. He raised it deliberately; he fired it
into Harris' face.
Henderson spun around at the sound and
(shipped from his pocket a small caliber re-
volver. He caught a glimpse of Harris falling
Torn his horse. Then he rode forward with
lis revolver, trying to fire it at Crow. The
lammer clicked on the cartridge but the arm
/vas not discharged. Hartt started to descend
rom the buggy. As he leaned over the
vheel Henderson's revolver worked at last
md the bullet struck Hartt in the abdomen.*
\t the same instant Crow, from his raised
un, shot Henderson dead.
Crow leaped to the ground with a revolver
n one hand and carrying other weapons,
le was firing rapidly into the group of sel-
lers. Iver Kneutson was shot dead before
ic could draw his revolver. Daniel Kelly
ell from his horse with three bullets through
lis body. Archibald McGregor, who was
irmed with only a penknife, was shot twice
hrough the breast. As he ran screaming
oward a pool of water, Crow at one hundred
ind seventy paces shot him in the back. He
ell over and lay still. Crow fired his shot-
gun and Edward Haymaker, also unarmed,
ell, struck in the head.
All this happened, as it seemed, in an in-
stant. A stupefaction had fallen upon the
pectators; they could but stand and stare,
f . M. Patterson awoke first. He bounded for-
vard crying, "This has gone far enough! It
must stop ! " One or two ineffectual shots were
fired. As they rang out, Major McQuiddy,
vho all the morning had been trying to over-
ake the marshal, hurried upon the scene
and took charge of the disorganized settlers.
Crow still stood there, weapons in hand,
menacing the crowd. McQuiddy spoke
rapidly to the marshal, protesting against
any further action. As the two advanced,
row suddenlv doubled forward and dodged
* Hartt stated before his death that he had been sitting in the
>uggy with his feet on the dashboard and was in that position
vhen he was shot. The autopsy disproved this assertion for
he bullet entered at the upper boundary of the abdomen and
raversed the whole abdominal cavity downward, showing that
le had been shot from a pistol held above and almost parallel
with his body.
past the corner of the barn toward a field of
standing wheat.
"Don't let that man escape!" shouted
McQuiddy, and as Crow disappeared into
the tall grain someone just who is not likely
ever to be known followed upon his trail.
McQuiddy now turned to the wounded and
ordered all to be carried to Brewer's house
while messengers rode for surgeons. The
bodies of Harris, Henderson, and Kneutson
were placed upon the porch; they were dead.
Within the house Kelly, McGregor, and
Hartt were moaning and twitching with
agony. Two doctors were brought from the
village and found that all .were mortally
hurt except Haymaker.*
This made six persons done to death that
morning on the Southern Pacific's corruptly
obtained and wrongly held grant from the
public domain.
Very soon there was another. Crow,
dodging through the wheat, was making for
the house of one Haas, his brother-in-law, and
likewise an opponent of the settlers. As he
ran he came to the irrigation ditch and turned
off along its course; a ditch tender working
below saw him running. At a mile and a half
from Brewer's there was a bridge where the
road crossed the ditch. Major McQuiddy
had sent men on horseback to try to catch
Crow. These were watching for him at the
bridge. Haas and his hired man drove up
from the other direction in a wagon contain-
ing six guns and a supply of ammunition.
"Where's Crow?" asked Haas, seeing the
group by the bridge.
At that instant a cry arose, for Crow broke
into sight along the ditch. He stopped,
dodged back, and whipped up his rifle, aim-
ing it at George Hackett. Before he could
fire, a shot rang behind him. He swayed,
turned a little and pitched over upon his face
dead. He had been shot through the chest.
FALSE REPORTS OF INSURRECTION
The instant that the news of that morn-
ing's work reached Hanford, the railroad
company announced that its telegraph office
there had been closed and the operator driven
away by the League, and that owing to the
armed insurrection - in progress all trains,
passenger and freight, had been annulled.
At Goshen, the other near-by station, no tele-
grams were received except for the railroad
company.
* McGregor and Kelly died before morning and Hartt on the
i2th.
92
Hampton's
Magazine
By these means the company secured
control of the news and the first reports
described a bloody and unprovoked attack
by desperadoes on the authority of the United
States. In San Francisco five eminent rail-
road officers, including Charles Crocker and
W. W. Stow, at that time the political
manager for California, hastened to news-
paper offices and explained the innocence of
the company and the depravity of the ruffians
that had defied the Federal authority.
Later the effect of these communications
was somewhat marred by the appearance in
San Francisco of Walter Leach, the Hanford
telegraph operator, and his statement that
he had been removed and his office closed,
not by the League, but by the railroad com-
pany.
The sheriff also sent word that there was
no disturbance and no reason why trains
should not run. Furthermore, independent
reporters, notably one for the Visalia Delta,
got to the scene and sent out unvarnished
reports. Yet it is not to be denied that a
certain impression was created by the rail-
road company's tainted news, that this im-
pression still persists, and that to this day
the affair is far from clear in many minds
to which it should be no mystery.
The funeral of the slaughtered settlers on
the 1 2th was very impressive. All business
and work were suspended in the region and
in a procession of vehicles more than two
miles long, a thousand farmers followed the
hearses to the cemetery. McGregor and
Kelly were single, but Harris and Henderson
had each a wife and a child, and Kneutson
left a wife and nine children. All of these
were presently evicted from their homes.
There was no further disturbance. The
farmers were disheartened by the deaths of
their comrades and by the obviously resist-
less power of the railroad, against which no
rights, no law, no protest, and no appeal could
prevail. On May 26th, five of them went to
San Francisco to make what terms they could
with this supreme power. As soon as they
alighted in the city, they were arrested and
thrown into jail charged with conspiracy and
resisting a Federal officer. Not one of them
had been anywhere near the massacre.
Subsequently they were released, but other
arrests were made, many indictments found,
and John J. Doyle, W. H. Patterson, Purcell
Prior, William B. Braden, and Courtney
Talbot were tried before Judge Lorenzo
Sawyer, who practically ordered the jury to
convict. The jury refused to convict of con
spiracy but found the prisoners guilty of re
sisting the marshal. They were sentenced
to five months' imprisonment each and were
sent to jail.
THE RAILROAD COMPANY GETS THE
DISPUTED LAND
As for the land, the railroad company wo
that handsomely, for after the terrible wor
of that May day the appeals of the three tes
cases were allowed to go by default and
Judge Sawyer's decision stood, dispossessing
the settlers. Years afterwards practically the
same issue was raised again in another
county of the state, and, being carried to the
Supreme Court, the court ruled against the
railroad and upheld the principle for which
the settlers had contended,* so that their
position would seem to have been as legally
sound as it was morally just.
But the land for which they had con-
tended was none the less lost to them and
became a part of that total on which you
and I have the pleasure of paying interest
charges, for it was all swept into the capi-
talization. Other additions thereto occa-
sioned by this episode were not great : some-
thing for legal expenses, something for
newspaper articles, something for political
dirty-work men, and a few other similar items.
That was all, because the funerals of the
farmers killed were paid for by friends and
neighbors and cost the company literally
nothing. No doubt these necessary expenses
would have been borne by the orphaned and
dispossessed families of the deceased if the
railroad company had left them anything to
pay with.
This is the battle of Mussel Slough, to,
which you may have heard some reference.
It is all over now; the Southern Pacific is
triumphant. But for years the settlers of
Tulare County held memorial services on
each anniversary of that bloody day at Brew-
er's Farm. They remembered, though the
rest of the world and the railroad company
speedily forgot, f
* Southern Pacific Company versus Groeck, 74 Fed. 385, 183
U. S. 6go. In the case of Boyd versus Brinckin, decided by the
California Supreme Court a few months after the massacre the
same principle was involved and was upheld by the unanimous
decision of the court, Chief Justice Sharpstein writing the opinion.
t The authorities for this article are the statements of sur-
vivors of the massacre; the statements of eyewitnesses pub-
lished at the time; the accounts printed by the San Francisco
Chronicle, Alta California, Bulletin, Call, and Examiner, and
particularly the detailed reports in the Visalia Delta; the rare
pamphlet entitled " The Struggle of the Mussel Slough Settlers " ;
testimony given at the trials; and the account printed in the Atlas
of Kings County.
The Remedy of the Law
By Charles Edward Russell
Author of "Speaking of Widows and Orphans," " 77ie Millionaire J//7/,"" etc.
Portraits by S. G. Cahan
EDITORIAL NOTE. A few weeks ago the country got excited over the announcement
that the railroads were going to raise their transportation rates. President Taft, by getting out
an injunction, stopped this move for a short time. Congress, the country was assured, was going
to fix things all right by passing a bill.
What good will proposed legal action do?
For answer, we recommend you to read Mr. Russell's series of railroad articles. Especially
read the following analysis of the Southern Pacific Railroad and its relations with the people of
California and other states. Between the lines, too, you will leam much about what is causing
the ever-increasing cost of living, and why concentration of wealth in the pockets of a few men
is constantly increasing.
As to the specific cause of the increased cost of
living, President Taft to-day frankly told various
of his callers that he was unable to account for it.
News dispatch from Washington, December 30, 1909.
IN the grip of the great power of the Southern
Pacific Railroad, the people of California
learned that they had small advantage from
those wonderful gifts of nature wherewith their
state ran over. One resource after another
was discovered and developed, gave forth its
promise of prosperity, and was incorporated
into the money-making machine of the railroad.
. monopoly, or asphyxiated by its high rates.
The richness of the land was for the rail-
road company and not for the producers.
Orange growers found that while they could
raise the best and cheapest of all oranges and
in unequaled abundance, the freight charges
absorbed the profits of their toil.
California wines attained a just celebrity;
but if they were to be shipped by rail, the
freight rates barred them from general use
and defeated the wine grow r ers.
Wonderful crops of deciduous fruits,
peaches, plums, apples, cherries, and pears,
sometimes rotted on the trees; no man could
afford to ship them to market.
This rich adobe soil, surpassingly fertile,
was found to produce such wheat as never
before had been seen; stalks six feet high,
with large, firm berries, a prodigious yield;
but when vast areas had been sown in wheat,
the farmers discovered that at the freight
rates exacted by the railroad monopoly no
profit lay in wheat growing. All the world
was eager for California wheat; vessels came
from Liverpool around Cape Horn to get it,
and for the carriage of a few miles from the
farms to the seaport the railroad charged so
much that nothing remained to the farmer.
Here lay the world's vineyard, orchard,
and granary; what Swinburne calls God's
three chief gifts to man, his "bread and oil
and wine," showered upon it in overmeasure,
and the railroad monopoly took the tilth of
all for its own coffers. This great state, seven
hundred and seventy miles long and about
two hundred and fifty miles wide, timbered,
watered with so much gold that ven now
over eighteen million dollars' worth is taken
yearly from its soil; with silver, platinum,
petroleum, and other mineral wealth; with
fertile soil, with the advantage of a singu-
larly delectable climate; with so much variety
of products seems to have been endowed
with every good thing that nature knows,
and beyond any other region of earth. One
might think that all the natural forces had
intelligently combined to see how much they
could do here for man and his life; and, to
crown their work, had attracted a population
of the best fiber the American race had pro-
duced.
CALIFORNIA'S POPULATION is CHOKED OFF
And yet the population of this splendid
state in 1906, thirty-one years after the com-
pleting of the trans-continental railroad, was
217
/
218
Hampton's Magazine
only 1,485,053. This is the showing of its
growth by the United States census:
1850 92,597
1860 379.994
1870 .'. 560,247
1880 864,694
1890 1,208,130
1900 1,485,053
From 1890 to 1900 only 277,000 increase.
Is not that significant?
COMPARATIVE AREAS AND POPULATIONS
Area in Square
Miles
Population
California
158360
I,48"5,O I 53
France
207,054
38, 961. 04 <5
Germany
208,830
63,886,000
Japan
147,655
40.732 jQ5 2
Italy ....
110,550
Belgium
11,373
7,074,010
Massachusetts . .
8,315
2, 80^,"? 4.6
New Jersey ....
7,815
1,883,660
Illinois
4,821,550
The true garden spot of the world and
after forty years of railroad domination it has
about two million inhabitants in an area
greater than Ohio, Illinois, Indiana, Massa-
chusetts, and New Jersey together; at least
forty per cent larger than Italy with less
than one twentieth of Italy's population ! So
that to this day, after the traveler has appre-
hended something (A the unmatched re-
sources of the country, the greatest of all its
wonders is the sparseness of its population.
The same lawless power that perverted
the government and seized the courts has
throttled California's development and de-
prived its people of the products of their
industry. Men have sown, and this power,
cunningly adjusting its rates for that purpose,
has year after year taken the harvest.
RAILROAD CONTROL OF BOTH PARTIES
You say: For this abnormal condition
there must have been a remedy. This nation
of ours is ruled by law and majorities. It
must have been possible to subdue or to
regulate this railroad. The fault must have
been with the people.
No no fault with the people. The peo-
ple were all right. The fault lay in the sys-
tem. The choice offered to the people was
between nominal rule by the Republican
party and nominal rule by the Democratic
party. When they wearied of railroad
tyranny under the name of a Republican
administration, they revolted and introduced
railroad tyranny under the name of a Demo-
cratic administration. . The monopoly con-
trolled the Democratic administration as
easily as it had controlled the Republican.
It was a power too great to be withstood and
made great by the money of the community
that it now oppressed.
But how about the law? How about the
blessed thing called regulation? How about
the government supervision of corporations?
That is the very thing I want most to tell
you about. Come, now, you that think you
can deal with this problem by regulation.
Come and have a good look at this exhibit.
It will not give you cheer but it ought to
furnish unlimited instruction.
Law? There was nothing but law; and
constitutions; and provisions; and orders;
and amendments;- and fresh statutes; and
then more law ; all aimed and shaped to regu-
late, restrict, and control this monster, and
the monster never gave a hoot for all of them.
Every step of its progress had been marked
by the violation of some law or some article
of the holy constitution, and it strode calmly
and cheerfully over all, never minding in the
least.
* For instance: There was an article in the
Constitution of the State of California that
expressly forbade a certain kind of lease be-
tween railroad companies. So the monopoly
made something like a dozen leases of that
variety. There was a section of the penal
code that forbade an interchange of stock
between railroad companies. So the monop-
oly proceeded to interchange the stock of its
subsidiary railroad companies. There was
an article in the state constitution pro-
viding that the state railroad commissioners
should have the power to fix passenger and
freight rates. And when on one famous
occasion these commissioners undertook to
exercise this power, the monopoly brushed
the commissioners out of its way and con-
tinued to make its own rates in its old fashion
on its old basis. And what was that basis?
All the traffic would bear.
Some of these incidents should be told in
detail.
i. Thus Section 20 of Article XII of the
Constitution of California contains this pro-
vision :
And whenever a railroad corporation shall for the
purpose of competing with any other common car-
rier lower its rates for transportation of passengera
or freight from one point to another, such railroad
The Remedy of the Law
219
rate shall not be again raised or increased from such
standard without the consent of the governmental
authority in which shall be vested the power to regu-
late fares and freights.
CALIFORNIA MERCHANTS START A RAILROAD
For many years the oppressed and de-
frauded merchants of San Francisco held to
the belief that the one sure remedy for their
troubles was in competition. If they could
only get another railroad, competition would
compel the Southern - Central - Pacific oli-
garchy to reduce
rates and practice
decency. Many
times their hopes
of competition had
been raised from
many sources, but
always to be disap-
pointed. The new
line was seized, con-
trolled, or absorbed
by the oligarchy, or
headed off if it was
approaching from
the East. At last the
merchants formed
their own company
and built their own
line from San Fran-
cisco Bay down the
rich San Joaquin
Valley, 200 miles
and more.
At once the new
line made rates
much lower than
the Southern Pa-
cific's tariff, and
the Southern Pa-
cific was obliged
to meet the reduc-
tions. Beautiful
proof of the virtue
of competition as a cure-all ! But the Atchison,
Topeka & Santa Fe which had acquired
the old Atlantic & Pacific (a land grant rail-
road across Colorado and New Mexico),
extended its line westward and secured an
entrance to California offered the grandest
promise of perfect competition. If the Santa
Fe could be brought to San Francisco there
would be a competing outlet to the Atlantic.
So the merchants sold their San Joaquin
Valley line to the Santa Fe, and amidst
great rejoicing the Santa Fe entered San
Francisco early in 1900.
BARCLAY HENLEY, WHOSE EFFORTS TO FORCE
CONGRESS TO RECLAIM THE SOUTHERN PA-
CIFIC'S FORFEITED LAND GRANT WERE.
DEFEATED IN THE SENATE.
Immediately, the Santa Fe and the South-
ern Pacific restored the rates in the San
Joaquin Valley generally to the basis that had
prevailed before the merchants' road was
built, and the people of San Francisco dis-
covered too late that the addition of a new
line to their facilities made no difference in
their situation, for the simple reason that the
Southern Pacific owned $17,000,000 of stock
in the Santa Fe and the two roads had a close
traffic and trackage arrangement. Two roads
with but a single
thought; two tariffs
that gouged as one.
Among the pas-
senger rates that
had been reduced
by the merchants'
road's competition
was the passenger
rate from San Fran-
cisco to Fresno.
This had been
$5.90; it was cut to
$3-75- When the
merchants' road
was sold, the old rate
of $5.90 to Fresno
was restored. This
was in March, 1900.
Mr. E. B. Edson
brought suit to test
under the constitu-
tion the legality of
the restored rate,
and the State Board
of Railroad Com-
missioners joined
him. In the Su-
perior Court Judge
George H. Bahrs
gave judgment for
Edson and the com-
missioners. The
Southern Pacific appealed, and on May 23,
1901, the Supreme Court reversed Judge
Bahrs and remanded the case for a new trial.*
On the retrial in the lower court in
July, 1904, Judge Frank H. Kerrigan de-
cided in favor of the railroad company,
holding that the rate had never been re-
duced.
The ground for this decision is worth not-
ing. It seems that when the Southern Pacific
reduced the rate to Fresno to $3.75, it issued
a new form of ticket good only for the day
* Edson et al. versus Southern Pacific Company, 133 Cal., 35.
Hampton's Magazine
of issue. The old style of ticket, price $5.90,
and good for six months, it still kept on sale.
Nobody ever wanted or bought the old style
of ticket at $5.90, but it could be bought if
desired. Hence, in Judge Kerrigan's opin-
ion, there had been no reduction of rates.
A JUDGE CRITICISES THE CONSTITUTION
Edson and the commissioners now ap-
pealed. Chief Justice Beatty wrote the de-
cision of the Supreme Court, which entirely
upheld the railroad company, and affirmed
the validity of the $5.90 charge not because
the rate had not been lowered, but because
it "had not been lowered for the purpose of
competition within the proper construction
of the constitution." Judge McFarland, an
associate judge of the Supreme Court and
previously a Southern Pacific attorney, con-
curred with Chief Justice Beatty, but added
an even stronger opinion of his own, in
which he fiercely attacked Section 20 of
Article XII of the constitution, speaking of it
as containing " a drastic and ruinous penalty."
One might think that on such grounds any
law anywhere could be upset at any time.
Incidentally, it may be interesting to note
that Judge Bahrs was retired to private life
at the end of his term and Judge Kerrigan
was elevated to the Appellate Court.
JUDGE GEORGE H. BAHRS, WHO GAVE JUDG-
MENT AGAINST THE RAILROAD IN
THE FRESNO RATE CASE.
a. Among the choice presents the four
gentlemen of Sacramento gathered from the
United States was a land grant for building
a railroad from Roseville, eighteen miles
north of Sacramento, to Portland, Oregon.
This grant was of every alternate twenty
square miles (ten on each side of the track)
conditioned upon the building of the road
the entire distance. The Congenial Four
built only as far as Redding, 152 miles, but
they took possession of the land grant for
the entire projected line of the road.
It was immensely valuable land, compris-
ing some of the best timber on the continent.
In 1882, the time limit for completing the
road had long expired so that, except for the
line from Sacramento to Redding, the grant
was forfeited. To reclaim it an act of Con-
gress was necessary. Every attempt to pass
such an act and to return to the public the
land justly belonging thereto was defeated.
The four gentlemen had no more right to -the
land than they had to the Washington monu-
ment, but they held it nevertheless, and
reaped millions from it.
THE UNITKI) STATKS SKNATK COMES TO Till:
SOUTHERN PACIFIC'S ASSISTANCE
In the election of 1882, Mr. Barclay Hen-
ley, a young attorney of Santa Rosa, who had
studied the land grant question, was nomi-
nated for Congress on a platform demanding
that the forfeited land grants should be re-
turned to the public domain. On this issue
he was elected and promptly introduced bills *
for the reclamation of the forfeited grants of
the Roseville-Portland line, for the reclama-
tion of the forfeited land grants of the North-
ern Pacific colossal grabs that have some-
how escaped the attention they deserve and
some other bills having similar objects. The
Congenial Four bitterly fought the bill that
sought to make them disgorge, bringing down
Judge Dillon and General Roger A. Pryor
from New York to argue in their behalf before
the Public Lands Committee of the House,
and filling the lobbies with their hired men.
But Mr. Henley had absorbed the whole
subject and he made of it so clean and mas-
terly an exposition that he carried the House
with him. After a time, the only active op-
position he encountered was from -the late
Thomas B. Reed, of Maine, then Speaker of
the House. When the vote came all the hills
* For the particularly interesting debate on the first of those
bills, see Congressional AV. ,-rJ, b'orty eighth Congress. First
;. pp. 4814-2.1. The rJeas made in Ix-half of the railroad
are a revelation to anyone that will dig them out.
The Remedy of the Law
221
were passed by large majorities. They went
next to the Senate. There they were promptly
buried, nor could any argument or appeal ercr
resnrreit them. The four congenial gentle-
men remained in possession of the land to
which tlu-y were not entitled, and it is to-day
relict led in tin- < apitali/ation of the Southern
Pacific Railroad that the public pays ex-
orbitant freight and passenger rates to
support.
This must be a cheerful thought to all
of us. First we are cheated of millions
upon millions of acres of our lands, rich
in those natural resources we are now
so anxious to conserve; next we pay
freight rates on the value of the land that
has been stolen from us; then as the
value of this land increases with the in-
crease of population, it becomes addi-
tional capital on which to base additional
rates to lay additional burdens upon the
ultimate consumers, 85 per cent of
whom are poor or very poor. The finite
mind seems incapable of a grander
concept.
1K11 NDS HELP THE RAILROAD TO GRAB
FIFTY MILLION ACRES OF LAND
3. But the land grab story has still a sequel
not less delectable. It shows how even the
best of movements for the public benefit may
easily be twisted into further advantage for
the fortunate and further burdens for the
people at the bottom.
About fifteen years ago the need of
conservation began to be forced, very
tardily, upon our attention by the obvious
fact that we should shortly be without
timber as without public lands. Congress,
therefore, set apart regions as inalienable
forest reserves for the nation. An honest
man in the Senate, looking over the proj-
ect, saw that while its main features were
admirable, it contained one defect easily
remedied. It did not provide for the cases
of men that had settled upon the land seques-
tered for public purposes. That is to say,
in the middle of a reserve a settler might be
tilling a farm, and by the establishing of a
forest reserve about him might find himself
utterly cut off from communication with the
rest of the world, whereby his farm would be
made valueless.
This senator, therefore, introduced a meas-
ure providing that any dwellers on the land
taken for forest reserves should have the right
to exchange their farms for an equal amount
JUDGE FRANK H. KERRIGAN, WHO DECIDED
IN THE RAILROAD'S FAVOR ON RETRIAL
OF THE FRESNO CASE.
of public land elsewhere. This just and
reasonable amendment fell into the hands of
an eminent friend of the Interests in the
Senate and another in the House. They
changed the words ''dwellers on" to "holders
of" and, at the last minute before the end of
the session, it was rushed through the Senate,
giving no chance for amendment.
The railroad companies immediately took
advantage of this provision. They gave up
fifty millions of acres of worthless barrens in
Nevada and Arizona where nothing ever grew,
or ever would grow, but cactus or sage brush,
and received in exchange choice timber lands
in Oregon, Northern California, and Wash-
ington, nor could any protest or outcry avail
to check this monstrous fraud.
Only by a narrow margin did they fail of
getting those invaluable coal deposits in
Alaska that are now the subject of a national
controversy. They had planned to grab all
such lands but found they were stopped
by the fact that the homestead law did not
extend to Alaska. Their newspapers in all
parts of the country then began to demand
amendment of the law so that Alaska
should be thrown open to homestead entry.
When the agitation had proceeded long
222
Hampton's Magazine
CHIEF JUSTICE BEATTY, OF THE CALIFORNIA
SUPREME COURT, WHO UPHELD THE RAIL-
ROAD IN THE FRESNO CASE.
enough, a bill to this effect was introduced
in Congress and slated for immediate pas-
sage. One man, Judge Joseph H. Call, of
Los Angeles, well known as an opponent of
corporation knavery, discovered what was
afoot and hastily warned a group of honest
Congressmen. By these the bill was so
amended as to exclude the railroads from the
benefit of the extension.
Meantime, those choicest timber lands in
California, Oregon, and Washington, before
referred to, had been obligingly withheld
from entry. When the railroad company
found that it was beaten off from Alaska,
the timber tract was as opportunely restored
to entry and the railroad companies filed for
and grabbed it all about 50,000,000 acres.
I suggest that the next Conservation Con-
ference in this country devote itself to this
little fact.
THE VALUE OF REGULATION
4. But to return to the experiences of
California. And here I come upon the main
story I desire to tell because it illustrates so
sweetly just how much effect rate regulation,
supervision, Hepburn bills, strenuous gentle-
men, and the like agencies, can have upon
railroad companies when the railroad com-
panies do not care to observe such trifles.
Also something else. It illustrates and
shows us precisely how and to what ex-
tent you and I and all of us pay for these
fortunes; pay for them once when they
are made and then the interest on that,
and the interest on that, many times
over until the dollar we paid forty years
ago for Mr. Huntington's " explana-
tions " to Congressmen has become two
dollars that we pay year after year; until
all the wealth that was stolen, niched,
and conveyed from any one of these en-
terprises in the palmy days of its looting
is the basis of a bill annually presented
to us and for which we must dig up the
money.
If the looting were done when it was done
and we were rid of it thereafter, the case
could not be so bad. But every dollar of
loot in any railroad enterprise, all the bribe
money and ''legal expenses," the jobs in the
construction accounts and the swindle in the
interlacing leases, become, all of them, just
so many additions to the capital account on
which interest must be paid through the rates
that come home to us all.
With this little preface, necessary to make
clear the true meaning of the characters and
incidents we shall introduce, we are now
ready for our story.
THE PEOPLE APPOINT A POWERFUL RAILROAD
COMMISSION
About thirty years ago this idea of curing
evils by regulating them laid strong hold
upon the people of California, and in the
brave new constitution of 1879, to which we
have before referred, they determined to deal
once and for all with the railroad monopoly
question. So in Section 20 of Article XII,
they gave to the Board of Railroad Commis-
sioners every conceivable power "to establish
rates of charge for the transportation of pas-
sengers and freight by railroad and other
transportation companies," to supervise and
control such companies, and to enforce its
will upon them. For failure to obey the
commissioners' rulings severe penalties were
provided, the companies to pay heavy fines
and their officers to be punished with fine
and imprisonment. The section concludes
with this explicit statement:
In all controversies, civil and criminal, the rates
of fares and freight established by said commission
shall be deemed conclusively just and reasonable.
The Remedy of the Law
223
The force of regulation could no farther
go. Even the so-called Roosevelt policies
have not approached this achievement.
Some years afterwards, the state legislature,
finding that for some reason blessed regula-
tion did not produce the expected good things,
tried to strengthen the commission's hands
with the majesty of statutes, enacting that
whenever the commission determined upon
a rate it should file the new tariff schedule
with the railroad company affected, and that
twenty days thereafter the new rate should
go into effect and become the law of the land.
Although it possessed these uneqUaled and
ample powers, the commission never did a,
blessed thing but make reports and draw its
several salaries; it was armed with thunder-
bolts and used only goose quills. Mr. Hunt-
ington wrote once to General Colton: "I
notice you are looking after the state railroad
commissioners. I think it is time." * Whether
this "looking after" had any relation to the
prevailing inertia, the reader can surmise as
well as I.
But it appears that in 1894 there was one
of the periodical revolts against the Southern
Pacific which had so long been the consti-
tuted authority and government of the state,
and this treasonable and unruly spirit, seiz-
ing upon the Democratic party, found ex-
pression in the following resolution, which
the Democratic State Convention of that year
embodied in its party platform:
Resolved, That the charges for the transporta-
tion of freights in California by the Southern Pa-
cific Company of Kentucky t and its leased lines
should be subjected to an average reduction of not
less than twenty-five per cent, and we pledge our
nominees for Railroad Commissioner to make this
reduction.
You must recall the marvelous and perfect
political organization of the Central Pacific
before you can apprehend the force of the
revolt that produced this resolution. The
truth is the grain growers were threatened
with ruin. Some of them were supporting
the burden of heavy mortgages. From their
abundant crops the railroad was niching
most of the profits. They were, therefore,
in the mood of men not to be trifled with.
No doubt the passage of that resolution
was a treasonable act that the railroad's
political department could easily have pre-
vented. A few years before it would have
* Letter of March 7, 1877. See HAMPTON'S MAGAZINE for
June, 1910, p. 857.
t The various consolidations of the Central Pacific, Southern
Pacific, and a score of other lines had been merged into a com-
pany bearing this name incorporated in Kentucky, March 17,
JUSTICE McKEXXA, NOW OF THE UNITED
STATES SUPREME COURT. WHO HEARD
THE FAMOUS GRAIN RATE CASE.
done so, but it had learned that regulative
kiws and constitutional provisions were really
ineffective, and besides, there was the mem-
ory of that bloody May day at Brewer's
Farm. The country had made so much fuss
about the killing of a few farmers; "The
Massacre at Mussel Slough" it was uni-
versally called, and the Southern Pacific
the murderer of those men. It was not nice
for professed philanthropists and art connois-
seurs. Even the subsidized editors always
gagged a little about Mussel Slough.
Evidently there was a point of endurance
beyond which men could not be driven with
entire safety to the drivers. Wisdom and ex-
perience indicated that no harm could come
from such a resolution nor from a campaign
conducted on these lines; it was only a useful
and desirable vent for public clamor that
otherwise might have worse results.
So the convention nominated its candidates
on this platform, and the party went into the
campaign with at last the similitude of an
issue to fight for. The state that year was
in one of its moods for a change from the
machine that had a Republican name to the
machine that had a Democratic name, and
Hampton's Magazine
two of the three Democratic candidates for
railroad commissioner were elected, consti-
tuting a majority of the Board.
THE PEOPLE'S COMMISSION TRIES TO REDUCE
FREIGHT RATES
In August, 1895, seven months after tak-
ing office, the commissioners reached (one
would think with sufficient deliberation) the
important matter of freight rates, and on
September i2th and i3th adopted two reso-
lutions, the first declaring a reduction in
grain rates of not twenty-five but eight per
cent, and the other expressing an opinion
that all rates should be reduced, and at some
time the commissioners would get to work
and reduce them perhaps when the robins
should nest again.
To this lame and impotent conclusion came
the revolt of the grain growers and the valorous
resolve of the Democratic State Convention.
But you should wait a little; the best is
yet to come. This is a very famous case and
tested to the utmost the whole power of the
regulative theory. If there ever were in the
United States railroad rates that ought to be
reduced, they were the grain rates in Cali-
fornia; and if there ever could be anywhere
a force able by law and constitution to reduce
such rates, it was the California Board of Rail-
road Commissioners.
Whatever rates that Board might decide
upon (said the constitution of the state)
should be valid and "in all controversies,
civil or criminal, the rates of fares and
freights established by said commission shall
be deemed conclusively just and reasonable."
Note what happened.
THE REDUCTION IS ENJOINED
The railroad company went straightway
before Judge Joseph McKenna, then of the
United States Circuit Court, now of the
United States Supreme Court, and on Octo-
ber 1 4th obtained a temporary injunction
restraining the commission from carrying out
or enforcing the reduction it had declared.*
Of course. The United States Circuit
Court takes precedence over authorities con-
stituted by the state.
Soon after, the case came up again on a
motion to continue the injunction and the
issue was joined. There was a grand array
of counsel W. F. Herrin, successor of "Bill"
* The title is the Southern Pacific Company versus The Board
of Railroad Commissioners of the State of California. Number
of the case, 12,127.
Stowe as chief solicitor and political manager
for the Southern Pacific, former Judge John
Garber, E. A. Pillsbury, and others for the
distressed railroad company; Attorney-Gen-
eral Fitzgerald, former Judge R. Y. Hayne,
and others for the commissioners. The case
lasted for more than a year.
THE RAILROAD PLEADS POVERTY AND
CONFISCATION!
The plea of the company was that it was
too poor to afford any reduction of rates and
that the action of the commissioners, unless
prevented by the court, would so injure the
company and decrease its revenues that it
would amount to the confiscation of property
expressly prohibited by the Constitution of
the United States of America.
Please note this. You see now we are
coming down to fundamentals. Rates could
not be reduced because under existing condi-
tions the Constitution of the United States
practically forbade them to be reduced.
To show the extreme poverty of the com-
pany were adduced many figures.
First, there was the capitalization of the
company and of its constituent companies,
with their bonded debt. Then there was a
computation showing that for the last eight-
een months the whole company (which in-
cluded lines in Oregon, Arizona, New Mexi-
co, and elsewhere) had been operated at a
loss on this capitalization. Then there was
a list of certain constituent lines of the South-
ern Pacific, to wit: the Oregon & California,
the Central Pacific, the California Pacific, the
Northern Railway, the Northern California
Railway, the South Pacific Coast Railway,
and the Southern Pacific of California; after
which the bill of the company avers as follows:
Fifth, that none of said corporations, other than
the said California Pacific Railroad Company and
the said Northern Railway Company, have for more
than one year last past received or been entitled to
receive any profit or net income whatsoever above
their actual expenses or any compensation for the
use of their equipment out of the funds payable to
them by your orator under the terms of said leases
or otherwise, nor have any of said corporations paid,
or been able to pay, any dividends to their stock-
holders.
This is dull legal verbiage, but I want to
put it all in because it is necessary if we are
to determine about the legal control of these
corporations.
"Under the terms of said leases," says Mr.
Word Spinner of the company's plea.
What leases?
The Remedy of the Law
225
Why, the leases of the constituent com-
panies one to another. Each of these con-
stituent companies was made up of many
other smaller companies, each leased in turn
to a larger company, until there was a grand
collection of leases.
Thus the California Pacific mentioned in
this plea was a constituent company leased to
the Southern Pacific, and the California Pa-
cific was itself an aggregation of smaller roads
covered with leases. First, there was the old
Marysville & Benicia, organized under the
act of 1851, which was leased to the San
Francisco & Marysville of 1857, which was
leased to the Sacramento & San Francisco,
which was leased to the old California Pacific,
which was leased to some other road which
was leased to the present California Pacific.
The commissioners agreed that most of
these leases were clearly illegal and invalid,
and that the whole Southern Pacific con-
glomerate was an outlaw and pirate.
Section 20, Article XII, of the Constitution
of California declares that no railroad com-
pany, nor other carrier, shall combine nor
make any contract with any other company
"by which combination or contract the earn-
ings of the one doing the carrying are to be
shared by the other not doing the carrying."
Which was, of course, precisely the situa-
tion created by most of these leases.
Law? Well, as I said before, there is no
end of law. Law on all sides of us steadily
violated by this corporation. Nothing but
law. As, for instance, section 560 of the penal
code of California reads as follows:
Every director of any stock corporation who con-
curs in any vote or act of the directors of such cor-
poration, or any of them, by which it is intended
either (And then follows a list of prohibited acts
ending with this) :
Fifth: To receive from any other stock corpora-
tion, in exchange for the shares, notes, bonds, or
other evidences of debt of their own corporation,
shares of the capital stock of such corporation or
notes, bonds or othjer evidences of debt issued by
such corporation, is guilty of a misdemeanor.
And before a committee of Congress in
1894, testifying, Mr. Huntington, President
of the Southern Pacific, explicitly admitted
that the Southern Pacific Railway of Cali-
fornia, of which he was also President, had
done this identical thing thus forbidden by
the statute, although the law that he thus
calmly admitted he had violated had never
been enforced upon him.*
* The Southern Pacific Company versus The Board of Railroad
Commissioners. Argument of former Judge Hayne, p. 214.
Why do we have laws if they can thus be
set aside at one man's will?
But about these leases of the subordinate
roads. The Southern Pacific argued that it
could not afford to reduce the grain rate be-
cause all its roads except only two, the Cali-
fornia Pacific and the Northern, it was oper-
ating at a loss, and that the small profits on
these were needed for repairs and betterments.
Then please observe.
A. All of these roads were owned by the
same persons, who were also the owners of
the Southern Pacific, so that when they made
one of these leases they leased their own
property to themselves.
B. The rental so paid by one road to
another became a part of the operating ex-
penses of the larger road.
C. These rentals were repeated several
times and were usually at excessive rates.
D. The final road that embodied all the
small roads had to make enough to pay all
the rentals (to its own owners, of course)
and a profit besides and when this profit was
two and a half per cent the point was raised
that it was a profit too small to justify any
reduction in rates.*
The process may be illustrated thus. Let
us suppose one of these roads to be composed
of four subordinate roads successively leased.
The first is one hundred miles long. It is
leased for one hundred thousand dollars a
year to the second company, which builds
fifty miles and leases itself and the first road
to a third company for two hundred thousand
dollars a year. The third company adds
fifty miles and leases itself and its constitu-
ents to a fourth company for four hundred
thousand dollars a year. All these leases are,
in reality, held by the same persons. It is
evident that, in the end, they have two hun-
dred miles of track on which the leases they
hold are an exorbitant charge upon the oper-
ation of the road to be paid to themselves. f
In other words, the lease is simply a sub-
terfuge to conceal profits that the public
must furnish.
* " They own the California Pacific ; they lease it to themselves
at $600.000 a year ; then they add the $600,000 to operating
expenses and show a deficit of $54,000 a year." Judge Hayne's
argument, p. 577.
t The California Pacific with a total value of $1,404,935 was
leased for $600,000 a year. The annual rentals of some of the
other lines was almost as much as the whole value of the prop-
erty leased and there was a fiction', accepted by many persons
that should have known better, that above these monstrous
rentals there must still be profit else the road was operated at a
loss.
226
Hampton's Magazine
As to the railroad's poverty again, it
averred in its bill of complaint, sworn to
October n, 1895, that for the year ending
December 31, 1894, the income account of
all its lines in California was as follows:
Gross earnings $20,783,157.04
Interest 183,759.12
Rentals . 26,572.23
Total receipts $20,993,488.39
From which was to be deducted
Operating expenses, renewals, im-
provements, et cetera . $13,320,417.52
Taxes 659,002 . 10
Rentals, et cetera 792,471 .21
Interest on bonds 5,472,190.24
Sinking fund payments 135,000.00
Payments to the United States for
Central Pacific 179,910.27
Surplus on lines in California . $434,497 . 05
This small sum, it was declared, was re-
quired for improvements so that the lines
were really operated without a profit.
Reports made by these companies to the
State Railroad Commission have a somewhat
different look. The form of statement re-
quired by the state commission sets forth
the total income from all sources, and the
total deductions of all kinds, and the remain-
der is called the net income. According to
these statements, the business of the Southern
Pacific lines for the year ending June 30,
1894, showed the following results:
Lines in California Net Incomes
Southern Pacific $2,289,832 .65
California Pacific. . . 250,549.50
Northern Railway 400,058 . 19
South Pacific Coast. Leased No operations
Northern California. Leased No operations
Total $2,940,440 . 34
Central Pacific in and out of the state $1,377,720.80
Total Net Income $4,318,161.14
How this coheres with the railroad com-
pany's statement in its bill I do not under-
take to say. As to the matter of dividends,
of which the company averred there had been
none, the commissioners swore that on the
Central Pacific dividends had been paid in
1894 and 1895 and had been kept secret.*
To prove its poverty, the company filed a
schedule of the total indebtedness and the
interest thereon; also of the capital stock of
each company; and averred that the actual
value of the roads exceeded the amount of
the stocks and bonds.
THE WATER IN SIX CALIFORNIA RAILROADS
$233,796,530
Some extremely interesting developments
resulted. The law of California requires as-
sessments to be made on the full cash value
of property. On June 6, 1895, four months
before the beginning of this suit, Mr. A. N.
Towne, General Manager of all the Southern
Pacific lines, filed with the State Board of
Equalization (the highest taxing body) sworn
statements in which he declared the full cash
value of all the franchises, railways, roadbeds,
rails, and rolling stock of each of the South-
ern Pacific lines in California. This covered
all of the company's property except such as
was assessed by the various county assessors.
By adding the amounts sworn to by Mr.
Towne, and the amounts in the statements
to the county assessors, the actual cash value
of all the property of all the companies (on
their own statements), including their state
franchises and all else, was easily ascertained.
This, put by the side of the company's state-
WILLIAM F. HERRIN, CHIEF SOLICITOR AND
POLITICAL MANAGER FOR THE SOUTH-
ERN PACIFIC RAILROAD.
* These were the dividends promised to Sir Rivers Wilson
after he had investigated the Central Pacific in behalf of the
unfortunate English stockholders, as related in a previous
article. See HAMPTON'S MAGAZINE, May, 1910, p. 616.
227
ments in the bill, made a startling showing.
I think we had better exhibit it all together
as thus:
In that chain of cause and effect there was
not a flaw.
Five per cent on the $19,357,458 of ficti-
RAILROAD VALUES AS THEY ARE AND AS THEY ARE PRETENDED
RAILROAD LINE
Total Debt
(Company's
Showing)
Annual
Interest
Thereon
Capital Stock
(Company's
Showing)
Total
Capitalization
(Company's
Showing)
Actual Cash
Value Shown
from the Sworn
Statement
Amount of
Water by this
Showing
Southern Pacific of
California
$43,652,400
$2,454,984
$68,402,000
$H2,o:;4,4OO
$16,119.232
$gc.q-zt;,i68
South Pacific Coast
Railway
tJ,?OO,OOO
220,000
6,OOO,OOO
11,500,000
1,079,592
10,420,408
Northern California.
Northern Railway.. .
California Pacific. . . .
Central Pacific
1,074,000
9,907,000
6,825,500
?s, 428,000
53,700
546,9"
322,125
i,oo8,o=;4
1,280,000
12,896,000
I2,OOO,OOO
67,275,500
2,354,000
22,803,000
18,825,500
102,703,500
175,000
3,445,542
1,404,935
14,219,569
2,179,000
I9,357>458
17,420,565
88,481,9?!
On all this huge volume of water the pub-
lic was required to pay the rates that fur-
nished the interest, and the company could not
afford to make a reduction of eight per cent in
the grain rates that were throttling the farmer.
ALL THE FARMERS ASKED WAS $IOO,OOO
ANNUAL RATE REDUCTION
How much of actual annual reduction in
income would be produced by this reduction?
How much would the company lose if it
allowed the new schedule to go into effect?
At the most $100,000 a year.
Let's look into that.
One hundred thousand dollars a year. At
five per cent, the annual interest on the water
on the capitalization of only one line, the
South Pacific Coast, would be more than
five times this amount. The annual interest
on the water in the capitalization of the Cali-
fornia Pacific alone would pay" the grain rate
reduction more than six times. It was to
support this fictitious capitalization that
the grain rates must be kept up and the
farmers must pay and the bread eaters
must pay and all the world must pay this
gross and swollen capitalization, $10,000,-
ooo in one line, and $80,000,000 in an-
other, and $19,000,000 in another, all
demanding interest on the bonds and
dividends on the stocks.
And these bonds and stocks created for the
profit of the owners of the road, neatly con-
cealed by the leases and other devices, and
representing in the main nothing but the
greed of the owners and the fraud of their
methods. This was why the freight rates
were high, the farmers were poor, and the
cost of living increased.
tious capitalization in the Northern Railway is
$967,872.90; five per cent on the actual value
of the Northern Railway is $172,277.10. Un-
der the existing conditions, the Northern
Railway must earn $968,000 a year; if it were
capitalized for its real value, it need earn only
8173,000, and it could reduce its grain rates
and all other rates much more than eight per
cent and still make its five per cent. What the
people of California and the people elsewhere
were paying for was not a reasonable profit
on an investment, but an unreasonable profit
on a scheme of fraud; and as a matter of fact
the only confiscation involved in the proposed
JUDGE JOSEPH H. CALL, WHO HELPED TO SAVE
ALASKA FROM THE EXPLOITING RAILROADS.
228
Hampton's Magazine
reduction was the confiscation of a piece of
the apparatus of a gigantic shell game.
PLEASE READ CAREFULLY THIS ANALYSIS OF
SOME OF THE "WATER"
Take some of this capitalization on which
the railroad company demanded "a reason-
able profit," and see its substance.
Into that capitalization was charged, for
instance, the $2,840,000* that the Central
Pacific paid to the Union Pacific for the over-
lapping lines when the two roads were en-
gaged in their insane race for mileage.
Twenty-five years had passed since that
strange exhibition of frenzied competition.
On this $2,840,000 at six per cent for twenty-
five years the interest would be $4,260,000,
making with the principal, $7,ioo,ooo.f On
this again the annual interest is $426,000,
and the commission asked for only $100,000
a year reduction in freight rates.
In those early days of the Central Pacific,
there was spent at Washington and Sacra-
mento $6,532,329 for corruption disguised as
"legal expenses," and this went into the capi-
talization on which the farmers must pay
and the bread eaters must pay and all the
world must pay. At six per cent interest
for twenty-five years this would amount to
$9,7.98,493.50. If that sum were applied to
reducing the debt of the company, the annual
saving in interest would be $587,909.61 and
the commission asked for only $100,000
from the railroad, t
Again: Before the Pacific Railroad Com-
mission^ E. H. Miller, Jr., secretary of the
company, gave a tabulation showing that
from 1873 to 1884 (when the road was sold
to the unfortunate English investors and the
profits were suppressed) the dividends paid
on Central Pacific stock amounted to $34,-
308,055. The net earnings of the road
from its completion to December 31, 1886,
amounted to $59,276,387.54. In the first
seven years ending with 1876, the owners
had received $18,000,000 in dividends be-
sides the enormous outside profits in bonds,
land grants, construction graft, other graft,
expense accounts, and leases.
* Pacific Railroad Commission Report, p. 3039.
t Mr. W. F. Herrin, chief counsel for the railroad, said in his
argument at p. 112: "The money expended by these people
legitimately and honestly for the speedy construction of this
road cannot be ignored. There is no equity on the part of the
S_tate of California to insist on striking out and eliminating a
single dollar that was actually expended in the construction of
the road. It was a legitimate investment."
} Mr. Herrin in his argument (p. 139) declared that the
operation of the roads would be discontinued if the reduction
were enforced.
See report, p. 2547.
If from 1870 to 1876 they had been con-
tent to take one third of the net income for
their emoluments, each of them would have
received $222,000 a year for each of those
years; and if they had applied the remaining
two thirds of the net earnings to the reducing
of the company's debt, they would have can-
celed $12,000,000 of that debt.
On $12,000,000 for twenty years the in-
terest at six per cent is $14,400,000, which
would be the saving effected by 1896. The
annual saving in interest charge would be
$720,000 if for the first seven years of its ex-
istence the owners of the road had been con-
tent with $222,000 a year each from the net
profits of its operations. A careful man can
always sustain life on $222,000 a year. And
then $720,000 a year of saved interest
charges! All the farmers asked was that
$100,000 a year should be dropped from the
incalculable loot.
Instead of being content with $222,000 a
year for seven years, the Congenial Four of
Sacramento grabbed off in that time and
divided $18,000,000 of profits (from the
road's operation alone), and then made of
their monstrous profits and of the debt they
would not pay a basis for charging extor-
tionate rates, and next, in court, a basis for
defending those rates.
It seems hard to go in imagination beyond
this triumph of impudence.
Or to take another illustration: If down
to 1884 the owners had been content to di-
vide among themselves yearly one third of
the net profits and to apply the rest to pay
the road's just debts, they would by that time
have shared $11,436,018 from the road's
operations alo"ne and would have saved for
the road to 1884, $22,877,037. By the time
the grain rate suit was brought this would be
$39,339,901, on which the annual interest
would have been $2,360,394. And all the
farmers asked was that $100,000 a year should
be taken from the load that they bore.
And again: From the testimony taken be-
fore the Pacific Railroad Commission it ap-
peared that the $62,000,000 of issued capital
stock of the Central Pacific Railroad Com-
pany was divided among the four gentlemen
as a free gift, and the four gentlemen paid not
a cent of it, and that this $62,000,000 was
part of the capitalization on which interest
must be paid by means of charges levied upon
the public.*
* See pages 2646, 2670, and 2377, testimony of Leland Stan-
ford and Edward H. Miller, Jr.
The Remedy of the Law
229
* Pacific Railroad Commission Report, p. 3662.
t Ibid., p. 2682, testimony of \V. E. Brown.
+ Judge Hayne's argument, p. 509.
Pacific Railroad Commission Report, p. 3227, testimony
of Lewis M. Clements.
\\IMd. Testimony of C. P. Huntington, p. 32; testimony of
Leland Stanford, p. 2665. In the present case, Judge Hayne's
argument at p. 512.
after year through charges levied upon the
public.
And it appeared that when suits were
brought that threatened in a painful way the
reputations of the gentlemen involved in
these operations and they bought back at
400 and 500 and 1 700 the stock they quoted
at 80, these expenditures also went into the
capitalization. And when the directors of
the company hired writers, newspapers, and
magazines to praise them and their work, or
to favor legislation in behalf of the Central
Pacific, these expenditures also went into the
capitalization.
And it appeared that the real purpose of
the Contract and Finance Company and the
Western Development Company, and the
Pacific Improvement Company, and all the
other aliases and disguises of these gentlemen
was to effect exactly this result, to transform
the expenditure into a fixed charge upon
the public that should endure for the profit
of the four gentlemen; and that all these
charges could be paid only in transportation
rates; and that because of all these accumu-
lated charges and piled-up accretions of
fraud, the grain rates must be exacted and
the farmers must pay and the bread eaters
must pay and all the world must pay.
And it appeared that there was no end to
these charges. That whenever the great
power that gripped and held in its fist the
State of California, extended in any way its
operations or acquired additional lines or
bought a steamship or built a branch or
spent money for legislation or made an im-
provement or paid a rebate or made an
illegal lease or straightened its corkscrew
track, it piled up more capitalization, which
meant more interest and dividends to be met,
which meant more charges to be paid by the
public.
SEQUEL OF THE BRAVE ATTEMPT TO CURE
BY BLESSED REGULATION
And it appeared that when the Central
Pacific defrauded the nation by building a
crooked road, the public paid charges on the
crookedness; and when these crooked places
were made straight, the public paid charges
for making them straight. Whatever the
railroad company did produced more capi-
talization, and all the capitalization produced
interest and dividends to be met, and all the
interest and dividends meant charges levied
upon the public. And at the other end of
this infallible mill stood the owners issuing
230
Hampton's Magazine
the excessive securities, and adding the pro-
ceeds to their huge hoards.
Many of these matters were set forth with
great force and skill by the attorneys for
the railroad commission. The railroad com-
pany, by its learned counsel, excepted to cer-
tain features of the commissioners' answer,
and by order of the court they were stricken
out. One of the excised sections contained
some of the extraordinary revelations of the
tax statement before referred to. In another
place, Paragraph IX of the commissioners'
answer, occurs this significant passage:
That it is notoriously true that for many years
last past the complainant has expended large sums
of money in the employment of politicians and others
to improperly influence various branches of the
Federal and State Government and to obtain for
themselves [itself] advantages to which it was not
entitled; and to induce action on the part of various
branches of the public service for the sake of its own
private advancement and for that of its officers, and
that a large part of the sums claimed by it as operat-
ing expenses are for such unlawful expenditures.
From this the court ordered to be stricken
out the words that "it is notoriously true."
Judge McKenna's decision was filed No-
vember 30, 1896. In his accompanying
opinion he confined himself chiefly to the
constitutional aspects of the case and to
precedent and previous decisions. He found
that for the year 1894 the Pacific System of
the Southern Pacific had been operated at a
loss of $276,262.70, that the company could
not afford to make the reduction of rates
ordered by the commissioners, and that the
reduction would be such confiscation of
property as was prohibited by the Constitu-
tion of the United States. The clause of the
California Constitution upholding rates to be
promulgated by the commissioners he de-
clared to be null and void* for similar reasons,
and he therefore continued the injunction
and knocked out the proposed reduction.
In this view Judge McKenna was in exact
accord with the decisions of the Supreme
and other courts, for the fact seems to be
that under the Constitution and the system
of business that we have adopted, no other
decision is possible. Capital is capital; capi-
tal is entitled to just and reasonable profits;
courts cannot inquire minutely as to the
methods by which capitalization is piled up;
and once having saddled ourselves with this
burden, we must continue to bear it so long
as the securities exist.
It only remains to say that in 1898 a new
Board of Railroad Commissioners was elect-
ed, that on April 24, 1899, this new board,
rescinded the grain reduction resolution en-
joined by Judge McKenna, arid on May i9th
the railroad company graciously consented
that the case be dismissed. Which ended the
last attempt of the grain growers to utilize
Regulation's artful aid in their behalf. They
submitted to their fate, and after a time most
of the wheat fields were put to other purposes.
But if we really desire to learn just why the
cost of living has increased so heavily upon
us, and just why it threatens to become, be-
fore long, an insupportable condition, our
investigation need go no further than this.
The history of the Southern Pacific is not.
very different from the history of other rail-
roads in the United States.
Who pays the vast interest charges
on the nine billion dollars of fictitious
capitalization that these railroads have
piled up?
*The Southern PaciSc Company versus The Board of Rail-
road Commissioners. Judge McKenna's decision, p. 2.
THE HARBOR OF LOS ANGELES AT SAN PEDRO. SECURED AFTER AN EIGHT
YEARS' FIGHT AGAINST THE SOUTHERN PACIFIC.
The Railroad Machine as It
Works Now
By Charles Edward Russell
Author of "The Heart of the Railroad Problem," "Beating Men to Make Them Good," etc.
Portraits by S. G. Cahan
EDITORIAL NOTE. To every man who buys a pound of steak, a pair of shoes, a bag of
flour, the increased cost of living is daily a more vital problem. " If you want to solve a problem in
mathematics you have to know what is called one of the factors. Well, one of the factors in the
increased cost of living is railroad rates. And we have come to understand that railroad rates
are too often excessive. In the following article Mr. Russell clearly states how and why this
is so in the case of the Southern Pacific Railroad, and that the case of the Southern Pacific
Railroad is, in some degree, the case of every railroad in the country.
As to the specific cause of the increased cost of
living, President Taft to-day frankly told various
of his callers that he was unable to account for it.
News dispatch from Washington, December 30, 1909.
THE railroads of to-day ought not to
be judged by the past."
So say the railroad attorneys, presidents,
and champions, sitting pleasantly at meat.
So dutifully echoes that part of the period-
ical press owned or controlled in the rail-
road interest.
I doubt not all of us would be glad to
accept and to follow the injunction if only
we could; but to separate the railroad of
to-day from its past is like separating the
living tree from its root.
The railroad company of to-day is an ac-
cretion of railroad companies of the past;
the railroad management of to-day is an
inheritance from the railroad management
of the past; the railroad capitalization of
to-day has been built upon years of devious
364
Chantecler
363
THE PHEASANT HEN (furiously, tearing
down the cobweb with a brush of her wing):
Be still, hateful Spider! Oh, may he perish
for having disdained me!
THE WOODPECKER (who from his win-
dow has been watching CHANTECLER'S de-
parture, suddenly, frightened] : The poacher
has seen him!
THE OWLS (in the trees] : The Cock is in
danger!
THE WOODPECKER (leaning out to see
better]: He breaks his gun in two!
PATOU (alarmed]: To load it! Is that
murderous fool in sheepskin gaiters going
to fire upon a rooster?
THE PHEASANT HEN (spreading her wings
to rise] : Not if he sees a pheasant !
PATOU (springing before her]: What are
you doing?
THE PHEASANT HEN: Following my call-
ing! [She Hies toward the danger.
THE WOODPECKER (seeing that in her
upward swing she must touch the spring of
the forgotten snare] : Look out for the snare !
(Too late. The net falls.]
THE PHEASANT HEN (utters a cry of
despair]: Ah!
PATOU: She is caught!
THE PHEASANT HEN (struggling in the
net] : He is lost !
PATOU (wildly): She is He is
[All THE RABBITS have thrust out their
heads to see.
THE PHEASANT HEN (crying in an ardent
prayer]: Daybreak, protect him!
THE OWLS (rocking themselves gleefully
among-the branches]: The gunbarrel shines,
shines
THE PHEASANT HEN: Dawn, touch the
cartridge with your dewy wing. Trip the
foot of the hunter in a tangle of grass! He
is your Cock! He drove off the darkness
and the shadow of the Hawk! And he is
going to die. Nightingale, you say some-
thing! Speak!
THE NIGHTINGALE (in a supplicating sob] :
He fought for a friend of mine, the Rose!
THE PHEASANT HEN: Let him live! And
I will dwell in the farmyard" beside the
plowshare and the hoe! And relinquishing
for his sake all that in my pride I made
a burden and torment to him, I will own,
O Sun, that when you made his shadow you
marked out my place in the world! [Day-
light grows. On all sides rustles and mur-
murs.
THE WOODPECKER (singing]: The air is
blue!
A CROW (cawing as he Hies past]: Day-
light grows!
THE PHEASANT HEN: The forest is astir!
ALL THE BIRDS (waking among the trees] :
Good morning! Good morning! Good
morning! Good morning! Good morning!
THE PHEASANT HEN: Everyone sings!
A JAY (darting past like a streak of blue
lightning] : Ha, ha !
THE WOODPECKER: The jay shakes with
Homeric laughter.
THE PHEASANT HEN (crying in the midst
of the music of the morning]: Let him live!
THE JAY (again darting past]: Ha, ha!
A CUCKOO (in the distance]: Cuckoo!
THE PHEASANT HEN: I abdicate!
PATOU (lifting his eyes heavenward]: She
abdicates!
THE PHEASANT HEN: Forgive, O Light,
to whom I dared dispute him! Dazzle the
eye taking aim, and be victory awarded,
Sunbeams
THE JAY and the CUCKOO (far away]:
Ha! Cuckoo!
THE PHEASANT HEN: to your powder
of gold (A shot. She gives a sharp cry,
ending in a dying voice] over man's black
powder! (Silence.]
CHANTECLER'S VOICE (very far away]:
Cock-a-doodle-doo !
ALL (in a glad cry] : Saved !
THE RABBITS (capering gayly out of their
burrows]: Let us turn somersaults among |
the thyme!
A VOICE (fresh and solemn, among the trees) :
O God of birds!
THE RABBITS (stopping short in their
antics, stand abruptly still, soberly): The
morning prayer!
THE WOODPECKER (crying to THE PHEAS-
ANT HEN) : They are coming to examine the
trap.
THE PHEASANT HEN (closes her eyes in
resignation] : So be it !
THE VOICE IN THE TREES:
God, by whose grace we wake to this new day
PATOU (before leaving]: Hush! Drop the
curtain! Men folk are coming! (Off.]
[All the woodland creatures hide. THE
PHEASANT HEN, left alone, and held down by
the snare, with spread wings and panting
breast, awaits the approach of the giant.
CURTAIN.
The Railroad Machine as It Works Now
365
policy; the railroad rates of to-day reflect
forty years of scheming and looting.
If the railroad companies would cease to
operate their political departments in the
manner of 1878 and 1884; if they would
cease to build fictitious capital on the ficti-
tious capital of previous years; if they could
avoid as a basis of rates the necessity of
getting interest and dividends on this fic-
titious capital, we could possibly afford to
forget the past and its records.
We must look back to the past because
we are paying for the past. Three times
a day the past comes to our tables and col-
lects its toll.
The manner of this collection we shall
now, if you please, proceed to see, and also
to see how utterly futile and absurd are,
and must be, all attempts to deal with the
American railroad problem by doctoring
symptoms with legal remedies, even when
these are most justly grounded and ably
enforced.
You remember, no doubt, the $27,500,000
of subsidy bonds that the United States
Government issued and bestowed upon
Messrs. Stanford, Huntington, Hopkins, and
Crocker, to facilitate the building of the
Central Pacific.
These bonds were to fall due thirty years
after the completion of the road.
The road was completed in 1869-70.
The bonds became due in 1900.
Originally, the government stipulated that
the railroad company should pay the semi-
annual interest on these bonds, and the
principal when due.
The company refused to pay the semi-
annual interest and got from the Supreme
Court a decision that it need not pay this
interest until it paid the principal. This
obliged the United States to advance the
semiannual interest from the treasury,
which amount was charged against the com-
pany.
In 1887 the Pacific Railroad Commission
was appointed to investigate the condition
of the company and discover what use it
had made of its resources and income, a
reasonable inquiry in view of its repeated
statements that it was too poor to pay the
interest it owed, and would be too poor to
pay the principal.
After listening to much astounding testi-
mony of a nature extremely damaging to
the company, the commission made two
reports. The majority dealt lightly with
the offenses that had been revealed. Gov-
ernor Pattison, the minority member, re-
turned a stinging indictment of Messrs.
Stanford, Huntington, Hopkins, and Crock-
er, and urged the government to forfeit
the company's charter for fraud and dis^-
honesty.
Nothing was done on either report.
AMBROSE BIERCE DEFEATS HUNTINGTON
In 1896, the time for payment being close
at hand, the debt to the government was
apparently more than $60,000,000, and the
company's attorneys and representatives
made no secret of its intention to default
on this debt.
Public sentiment demanded that some
arrangement should be made. Mr. Hunt-
ington was still hovering about Congress
with his agents and lobbyists.* He pre-
pared a bill that provided for the refunding
of the debt into bonds bearing two per cent
interest and payable a period estimated at
eighty years from date.
This bill was slated for passage by the
Republican machine to which Mr. Hunt-
ington had always contributed liberally.
Everybody knew that the bill was to be
jammed through and Mr. Huntington was
greatly pleased with the prospect.
He had reason to be pleased. The bill
settled all differences with the government,
and put off the day of payment so far that
it probably would never come.
Mr. Huntington's pleasure was of short
life. It was presently upset by two men.
At the request of Mr. William Randolph
Hearst, Mr. Ambrose Bierce went to Wash-
ington, and every day for one year he wrote
an article exposing the rotten features of
Mr. Huntington's bill.
These articles were extraordinary exam-
ples of invective and bitter sarcasm. They
were addressed to the dishonest nature of
the bill and to the real reasons why the
machine had slated it for passage. When
Mr. Bierce began his campaign, few persons
imagined that the bill could be stopped.
After a time the skill and steady persist-
ence of the attack began to draw wide
* The Washington correspondence of the Chicago Evening
Post, April 22, 1896, contains this passage:
" The most pitiable and at the same time the most disgusting
spectacle that now offends the national capital is the Huntington
lobby. The list of paid lobbyists and attorneys now numbers
twenty-eight, and their brazen attempts to influence Congress to
pass the Pacific Railroad Refunding Bill have become the dis-
grace of the session."
366
Hampton's Magazine
\ V
AMBROSE BIERCE. INSTRUMENTAL IN DE-
FEATING THE SOUTHERN PACIFIC
REFUNDING BILL.
attention. With six months of incessant
firing, Mr. Bierce had the railroad forces
frightened and wavering; and before the end
of the year, he had them whipped. The
bill was withdrawn and killed, and in 1898
Congress adopted an amendment to the
general deficiency bill, providing for the
collection of the Pacific Railroad subsidy,
debts, principal, and interest.
This may be held to be as wonderful a
victory as was ever achieved by one man's
pen, and, also, one of the most remarkable
tributes to the power of persistent pub-
licity. What it meant for California may
be judged from the fact that when news was
received of the death of Mr. Huntington's
bill, the governor proclaimed a public holi-
day, and in the name of the state sent a
telegram of thanks to Mr. Hearst.
But it was a victory destined to have far
more memorable results than these. At
once the railroad company abandoned all
hope of cheating the government, and re-
sorted to a vast and difficult feat of finan-
ciering that it might provide for the pay-
ment of the accumulated debt. For months
the eyes of the financial world were fixed
wonderingly upon this slack wire adven-
ture, which was regarded in some quarters
as fraught with peril, in others as "a clever
and ingenious contrivance," and on all sides
as a new chapter in high finance.
The substance of it was this:
HOW THE AMERICAN PEOPLE PAID THE
CENTRAL PACIFIC'S DEBT
The amount due to the government,
less deductions, was $58,800,000. For this
the company gave twenty notes of equal
amounts, payable semiannually over a pe-
riod of ten years, bearing interest at three
per cent and secured by an equal amount
of bonds.
This meant, of course, an increase of cap-
ital. The accrued interest, $30,700,000,
had been due to the government. Instead
of paying it to the government, the Big Four
had wrongfully paid the money to them-
selves in dividends. They now funded the
accumulated debt for us to pay.
There was next prepared a new issue of
Southern Pacific stock and a new issue of
four per cent collateral bonds. Next an as-
sessment of $2 a share was ordered on the
old Central Pacific common.
But to offset this assessment, the new
collateral bonds were presented free to
the stockholders to the amount of $16,-
819,000.
Then the stockholders received, share for
share, $67,275,500 of the new Southern Pa-
cific stock on which six-per-cent dividends
were to be paid a fine, dividend-paying
stock exchange for a stock that for years had
been inert and unprofitable.
Next a new Central Pacific Railway Com-
pany was organized in Utah to succeed the
old, and the original part of the Millionaire
Mill passed from public view forever.
The $16,819,000 of collateral bonds and
the $67,275,500 of new stock made $84,094,-
500 of securities which must be provided for
from the earnings. Nominally, the total in-
crease in the capitalization was $47,579,-
ooo, being the capitalized interest on the
government debt and the collateral bonds;
but the total paper capitalization was now
$i 14,794,500, and all of it became interest or
dividend bearing, whereas much of it had
previously been of small value.
A total of $114,794,500, on which interest
must be paid.
We are paying it.
The Railroad Machine as It Works Now
367
Thus:
Annual dividends on the stock, 6
per cent $4,036,530
Collateral bonds, $16,819,000 at 4
per cent 672,760
Capitalized interest on government
subsidy 1,200,000
Total annual charge on us ... $5,909,290
We have been paying this for eleven
irs. So far we have paid upon this ac-
count $65,002,190.
Then this is the way our account stands
to date :
Debt of the railroad to the gov-
ernment $58,800,000
We have paid because of the re-
funding of that debt 65,002,190
We are out so far $6,202,190
In thirty years we shall have paid close
upon $180,000,000, which is three times the
amount of the debt, and shall then be losers
to the amount of $120,000,000.
It would have been enormously cheap-
er to give Mr. Huntington a cancellation
of the debt.
Cheaper in freight rates, cheaper,
therefore, in the daily living expenses
of the people.
But since this debt and the annual
charges that we must pay on it are directly
and solely the results of the operations (be-
fore described) of Messrs. Stanford, Hunt-
ington, Hopkins, and Crocker, and of noth-
ing else, kindly observe the impudence of the
men that urge us to forget railroad history.
We might very well answer that we will
forget railroad history when the railroads
cease to make us pay for that history.
But the floating of the gigantic refund-
ing scheme had another result besides the
levying of additional tribute upon us. Mr.
Stanford was dead, Mr. Hopkins was dead,
Mr. Crocker was dead. Mr. Huntington,
who had been steering and directing the
new operations, died (before they were com-
pleted) in August, 1900.
Some confusion followed in the public
mind, with many stories of sales, purchases,
and reorganizations. When this mist cleared
away, men saw that the Great Millionaire
Mill had passed into a new ownership.
"ANDARD OIL AND E. H. HARRIMAN COME
INTO CONTROL
For years the many properties of the
'ginal Big Four of Sacramento had
.en undergoing consolidation. For all the
E. H. HARRIMAN, WHO ASSUMED CONTROL OF
THE SOUTHERN PACIFIC ON HUNT-
INGTON'S DEATH.
millions upon millions of fictitious stock
issued and gathered to themselves as they
had gone along, for all the fictitious capi-
talization in all the long list of subsidiary
lines and branches, being company within
company until the human mind wearied
and failed to follow the ramifications for
all this there had been issued stock in the
Southern Pacific Company, of Kentucky,
the final consolidated concern.
Great blocks of this were now acquired
from the heirs of the Big Four and through
the exigencies of the refunding operations,
and when the mist cleared away there ap-
peared as the real owners of the old Central
Pacific, the Southern Pacific, the unknow-
able convolutions thereof, the Pacific Mail,
the Morgan steamships, the Union Pacific,
the whole bewildering aggregation with all
its load of fictitious capital, buttressed with
lordly gifts from the public domain, rich
with spoils, incomparably the grandest
source of riches ever known in human his-
tory of the whole, incalculable thing, the
real owners appeared as the colossal Stand-
ard Oil interests, with the late E. H. Har-
riman as their representative.
In the end it was the Standard Oil group
that had financed the "clever and ingen-
ious" refunding deal and had thereby seized
368
Hampton's Magazine
the control of the Mill, and it is to the
Standard Oil group that we pay our $5,-
900,000 of annual tribute to that deal, and
all the other tribute on all the other deals
back to the days of the Contract and Fi-
nance Company, John Miller, and the books
at the bottom of the river Seine.
Is not that sweet?
Yes, we should love to forget the past if
the past would only let us. But when, on
$200,000,000 of fictitious stock created by
the Contract and Finance Company and
its successors, we furnish such dividends
that the price of that stock goes up to 137,
the manner in which we are to win forget-
fulness of the past ought to be very care-
fully explained to us.
So much for the business side of forget-
ting. Suppose we turn now to the political
side and see how that looks.
We found that, in the old days, this com-
pany was wont to maintain a great and
elaborate political machine covering every
corner of the state and working with per-
fect precision to fill all offices with persons
chosen by the company. We found that
this machine cost much money and the cost
thereof was and is assessed upon us, who
continue year after year to pay.
Always to pay.
We found that the company divided the
state into districts, each with its boss ; and
the districts into counties, each with its
boss; and that the county bosses reported
to the district bosses, who reported to the
chief boss, who was the company's chief
counsel and attorney in San Francisco.
Then come down to these days of ours,
if you will. Who is Mr. Walter F. Parker?
He is the Southern Pacific leader for the
southern district of California. And who
report to him? The county bosses in that
district. And to whom does Mr. Parker
report? To William F. Herrin, chief coun-
sel of the Southern Pacific at San Francisco.
Same old frame work, evidently.
How does the thing work to-day?
Like this:
In California the governor's term of
office is four years.
A new governor was to be elected in
1906. Mr. James N. Gillett was then a
member of Congress for California. Five
months before the election, Mr. E. H. Har-
riman gave a dinner in Washington to men
influential in politics and business. At that
dinner Mr. Gillett was chosen to be the
next governor of California, Mr. Harriman
announcing in a few, well- chosen words Gil-
lett's selection by the railroad company.
To ratify this choice, the State Repub-
lican Convention was called at Santa Cruz.
All the railroad bosses from great to small
had received the necessary word about Mr.
Harriman's action, and proceeded at once
to secure Gillett delegations from the coun-
ties. In Los Angeles County, which sent
a large delegation, Mr. Walter Parker him-
self directed operations. He sat on an
upper floor of the building in which the
county convention was held, and a staff
of messengers ran continually between his
desk and his leaders on the floor. Not a
move was made without his word; the dele-
gates were marionettes; he sat above them
and pulled the strings.
ABE RUEF RECEIVES $I4,OOO FOR VOTES
Likewise in San Francisco, which had a
large delegation, Mr. Herrin took personal
charge and operated with no less success,
although upon a basis more primitive. Ac-
cording to a confession of Mr. Abe Ruef,
the convicted boodler of San Francisco,
Mr. Herrin paid him $14,000 for the con-
trol of the delegation.
Simple, neat, effective.
Of late years California has been growing
more and more restless under the iron sway
of the Southern Pacific. Even with the
active cooperation of Mr. Ruef, former
Mayor Schmitz, and their gang, Mr. Harri-
man did not find it perfectly easy to nomi-
nate the man he had chosen. Many
persons, including some long inured to con-
ditions, resented that Washington banquet
performance. They felt that it marked the
limit of railroad arrogance on one side, and
of the state's subjugation on the other, and
they did not like it.
Hence the Southern Pacific managers at
Santa Cruz were put to rather unusual
methods to fulfill Mr. Harriman's wishes.
That is to say, they auctioned the other
offices for Gillett support.
In this way. If a man had ambition to
be a judge, and they knew he was all right
and sound on the railroad's supremacy,
they said to him:
"How many votes for Gillett can you
swing? "
Perhaps the ambitious one replied that
he could swing fifteen. They reported this
to his rival, started a competitive bidding,
370
Hampton's
Magazine
and the man that undertook to deliver the
greatest number of Gillett votes got the
place on the ticket.
Thus do we vindicate the purity of our
institutions and the grandeur of represen-
tative government.
Mr. Gillett was nominated. I have here*
a little picture of a happy family group,
being in fact a little dinner party at Santa
Cruz just after the nomination. These
gentlemen have been dining, and with
pleasure we may note that they seem to
have been dining well. Gentlemen of a
happy aspect, well dressed, contented, and
congenial, no doubt; a pleasant occasion.
SIGNIFICANT GATHERING BEFORE GILLETT'S
NOMINATION
That handsome gentleman in the center
with his hand affectionately on the shoulder
of the gentleman seated before him, is Mr.
Gillett, now Governor of California, and
nominated to that high place by Mr. Har-
riman, as aforesaid. The gentleman in
front of him upon whom he leans so trust-
ingly, is Mr. Abe Ruef, sometime boss and
boodler of San Francisco, now convicted of
the dirtiest of political crimes and out on
bail. Yes, that is Mr. Ruef; Mr. Gillett's
hand is on Mr. Ruef's shoulder.
At Mr. Gillett's left stands Mr. Walter
F. Parker, to whom several times, and, we
must fear, rather unpleasantly, we have
alluded in these chronicles. Mr. Parker is
a gentleman of the most distinguished con-
sideration. When Mr. Frank Flint, at
present United States Senator from Cali-
fornia, was publicly congratulated upon his
election, he said, with touching simplicity:
"I owe it all to Walter Parker."
Still farther to Mr. Gillett's left stands
Judge F. H. Kerrigan, quite at ease, with
his hands in his pockets. When Judge
Kerrigan was a judge of the Superior Court,
he decided the crucial Fresno rate case in
the way related in HAMPTON'S for August.
He is now a judge of the Appellate Court,
having found promotion. Judge Bahrs, w T ho
decided the case the other way, found no
promotion, but retired to private life.
Just back of Judge Kerrigan's left shoul-
der is Congressman Knowland.
Next to Mr. Ruef and Mr. Gillett at
their right is Mr. George Hatton, a friend
of Mr. Parker and of the Southern Pacific.
Next to him is Judge McKinley, and at
* See page 369.
the end is Judge Henshaw, of the Supreme
Court.
Thus we may see the judiciary, states-
manship, commerce, transportation, black-
mail and boodle, all pleasantly commingled
and meeting on equal terms under the genial
auspices of the Southern Pacific Railroad.
Nothing is lacking to the picture except in
the background the figure of Collis Potter
Huntington in an attitude of benediction.
Mr. Gillett's name was, in the cant phrase,
"submitted to the voters" of California,
who nominally elected him governor. As
a matter of fact, there was not much choice.
The railroad company played the usual
tricks, stimulated the partisan frenzy, be-
fogged the issue, subsidized editors, flooded
the state with its hired newspapers, made
unthinking people believe that somehow
the security of the country depended upon
Gillett's election, created the impression
that by voting for Gillett a man was "sup-
porting thePresident, "did some other things
not necessary to specify here and won.
Not by much margin, incidentally. The
number of people it can fool with this kind
of rot is steadily diminishing.
From this chapter of history we may
learn how foolish a noise we make when we
talk about any new basis of judgment for
one railroad, at least. This railroad is do-
ing in politics exactly the things that it did
forty-eight years ago and forty years ago
and twenty years ago and ten years ago
and all times between.
Observant persons in California do not
need to be told this any more than they need
to be told their own names. They know it.
But elsewhere has grown up among us a
strange kind of sentimental softness in re-
gard to railroad rascality, and a willingness
to accept the gold bricks of repentance and
reform whenever they are offered by a rail-
road president with a smug face and an in-
durated conscience. These little incidents
may show how much credence belongs to
such protestations when you hear them
urged in behalf of the Southern Pacific.
In California every fight to purify condi-
tions, to reform a municipality, to stop
graft, to proceed in honesty and decency,
is a fight against the Southern Pacific, and
that is as true of the heroic struggles of Air.
Heney, in San Francisco, as of those good
citizens and good Americans that after
years of striving have secured a memorable
victory for righteousness in Los Angeles.
The Railroad Machine as It Works Now
371
I ought to tell the Los Angeles story in
full, and to my sorrow I can but refer to it.
Here is a great story of an American com-
munity surely working its way from sub-
jugation to freedom, and what else on earth
can be so attractive to write about?
But to give you a glimpse of it: In Los
Angeles the fight centered at first around
the control of the harbor, and was fought
in the open, without disguise, the citizens
on one side and the Southern Pacific on
the other. Later came on a long struggle
against the familiar forces of municipal
corruption, in which the Southern Pacific
fought in secret on the side of evil. It owned
the street-railroad system and was interested
in other public-service enterprises. The
street-railroad system was, of course, against
good government. It is against good gov-
ernment everywhere because its monstrous
privileges are derived from bad government.
Naturally, on the same side were the dives,
the bawdy houses, the boodlers, and the
Highest Circles of Society. They always
fight together. We shall come later to this
contest. First let us tell about the harbor.
Los Angeles lies a little back from the
coast. Its natural harbor is San Pedro,
familiar to all readers of Dana's immortal
"Two Years." San Pedro is south of the
city. The Southern Pacific owned the har-
bor of Santa Monica, fifteen miles north of
San Pedro and from the city lying about west.
Neither harbor was (as it lay) in any
condition to accommodate a large deep-sea
traffic; both needed breakwaters and other
improvements. Readers of Dana will re-
call his vivid descriptions of the perils of
his San Pedro, the roadstead open to the
terrible southeasters, the sudden rising of
the gale, and the swift flight of the vessel
to sea 'until the storm should pass. This
had not much changed in 1871 when Con-
gress appropriated money to improve the
harbor. The work went on for several
years, and as the improvements were made
the commerce of the port increased. Then
Los Angeles entered upon its period of rapid
growth, and the need of a commodious and
safe harbor was apparent.
The people of Los. Angeles wished this to
be at San Pedro. At first the railroad com-
pany seemed not to care. Then its officers
-bought real estate at Santa Monica * and,
in 1890, Mr. Huntington declared that Los
"The Free Harbor Contest," by Charles Dwight Willard,
p. 80.
Angeles must have its harbor at Santa
Monica, or not at all.
There began "now a contest that lasted
eight years. Los Angeles appeared regu-
larly before Congress asking for an appro-
priation for San Pedro; Mr. Huntington,
through his lobbyists and Congressmen, as
regularly defeated the project. All that
was needed at San Pedro now was a break-
water that could be built at no great ex-
pense. Mr. Huntington in variably knocked
out the breakwater.
HUNTINGTON BECOMES PROFANE ABOUT SAN
PEDRO
Meantime army engineers had examined
both harbors and reported convincingly in
favor of San Pedro and against Santa Mon-
ica. Mr. Huntington was stronger than
the engineers. In the face of their report,
he had a bill introduced and favorably con-
sidered to appropriate $3,000,000 for his
Santa Monica scheme. He could not quite
get this passed, but he could always defeat
San Pedro.
In 1894 he came to Los Angeles, strode
into the rooms of the Chamber of Com-
merce, and requested a conference. Mem-
bers were summoned by telephone. When
they arrived he told them they were mak-
ing "a big mistake" to support San Pedro,
that it was not to his advantage to have
San Pedro selected, and, anyway, they could
never get Congress to give money for their
scheme. These announcements seemed to
make little impression on his hearers. Mr.
Huntington said:
"Well, I don't know for sure that I can
get this money for Santa Monica; I think
I can. But " bringing down his fist with
an explosive slam, "I know damned well
that you shall never get a cent for that other
place." *
The voice of ultimate government, you
see. He knew. Not less interesting than
the decree of this ruler is the fact that his
listeners agreed not to let it be known to
the populace. It might "increase the grow-
ing bitterness." When you are fighting for
your life against a power like this, there
must be no bitterness on your side.
The issue came soon after before the Sen-
ate Commerce Committee. Mr. Hunting-
ton was there, demanding $4,000,000 for his
Santa Monica. The Los Angeles people
asked for a small sum for San Pedro.
* " The Free Harbor Contest," p. 107.
372
Hampton's Magazine
The St. Louis Globe-Democrat's Washing-
ton correspondence of those days contains
this paragraph:
The harbor contest at Los Angeles waxes warmer.
C. P. Huntington was seen going the rounds of the
hotels to-day and, although it was Sunday, he made
no halt in buttonholing senators. Four days ago
there was a decided majority in the Commerce
Committee in favor of following the wishes of the
two senators from California,* but since the arrival
of Mr. Huntington at the capital it is now a matter
of great doubt where the majority will be found.
There is serious speculation in the minds of many
people as to the means Mr. Huntington may have
used to bring about this change.
Possibly the speculation would have
gained additional zest from a perusal of Mr.
.Huntington's letters to "Friend Colton." f
Mr. John P. Jones was a member of the
Senate Commerce Committee and an ar-
dent champion of Santa Monica. I believe
we have previously encountered the name
of John P. Jones. J
THE DECISION POSTPONED, BINGER HERMANN
TAKES IT UP
The committee voted to postpone a de-
cision about the two bills until it could go
to Los Angeles and inspect both harbors.
This put the matter over for two years, or
until 1896.
Meanwhile, the people of Los Angeles had
formed a Free Harbor League to fight for
San Pedro. The long delay wore out the
enthusiasm. In 1896 somebody suggested
that probably Mr. Huntington was no less
tired of fighting. A friend undertook to
sound him and returned with the statement
that Mr. Huntington willingly agreed to a
cessation of hostilities for the rest of that
session of Congress, neither side to make
a move.
The next thing the people of Los Angeles
knew Mr. Binger Hermann, then a Repre-
sentative from Oregon, and a member of the
House Commerce Committee, and since
with other claims to fame, had put into the
River and Harbor bill two items, one of
$392,000 for work on the inner harbor of
San Pedro, and one of $3,098,000 to com-
plete Santa Monica.
* One of these, Stephen M. White, a Democrat, was a Los
Angeles man and i champion of San Pedro.
t See "The Scientific Corruption of Politics," HAMPTON'S
MAGAZINE, June, 1910.
t About this time the New York World took the trouble to
find out who owned Santa Monica. It discovered that the
property adjoining the exclusive water front owned by the
Southern Pacific was divided in eight holdings. Of this, John
P. Jones and A. B. de Baker held three. All the rest of the land
was in the name of Frank H. Davis, representing C. P. Hunt-
ington.
At this the people of Los Angeles arose
in wrath, and in the clamor of their protest
the committee knocked out both items.
By "the people of Los Angeles" I mean,
and have meant, the majority. As soon
as the railroad company announced its
choice of Santa Monica, there had sprung
up at once two factions in the city, the same
factions that ever since have continued to
struggle for its possession. On one side
were the railroad's attorneys, friends, and
admirers, and, of course, the wealthy and
respectable element, all lined up with Mr.
Huntington for Santa Monica. On the
other, the masses of the people, the labor
unions, merchants without social aspira-
tions, and others of that order, fought for
San Pedro.
Santa Monica had the advantage in the
influence of its supporters; San Pedro had
the numbers.
Mass meetings were held by each side
and resolutions passed, the San Pedro peo-
ple meeting out of doors and the Santa
Monicans in Illinois Hall. Both parties
circulated petitions to Congress. Presently,
the cause of Mr. Huntington, his friends,
lackeys, and social peers, was deeply hurt by
the discovery that the names on their pe-
tition were largely fraudulent. Thereafter,
San Pedro had all the advantage.
The issue came April 16, 1896, before the
Senate Committee on Commerce, when
delegations representing both sides were
heard.* Mr. Huntington had a majority
of the Committee. Nine f voted to re-
store to the River and Harbor bill the $3,-
098,000 appropriation for Santa Monica;
six opposed it.
When the bill reached the Senate floor,
Senator White forced through an amend-
ment that a board of five engineers should
determine whether the $3,098,000 should
be expended at Santa Monica or at San
Pedro. In conference, Mr. Binger Her-
mann bitterly fought this provision, which
was hung up for many days, but Congress-
man James G. Maguire, of San Francisco,
threatened that unless the item were al-
lowed to stand, he would expose on the floor
of the House the whole Huntington game,
and the thing went through.
* Among the champions of Santa Monica on this occasion
was former Senator Cornelius Cole, whose name we encoun-
tered in the Colton letters..
t Frye, of Maine; Gorman, of Maryland; Elkins, of West Vir-
ginia; Jones, of Nevada; Quay, of Pennsylvania; Murphy, of New
York; McMillan, of Michigan; McBride, of Oregon; Squire, of
Washington.
The Railroad Machine as It Works Now
373
Great rejoicing in Los Angeles.
The board of five engineers decided in
favor of San Pedro.
More rejoicing in Los Angeles.
But here came strange developments.
I
ALGER IGNORES THE SENATE AND THE
ATTORNEY-GENERAL
The matter now rested in the hands of
General Russell A. Alger, Secretary of
War.
General Alger was an old friend and busi-
ness associate of Mr. Huntington, who had
given heavily to the Re-
publican campaign
fund.
General Alger's first
achievement was to hold
up the appropriation
nine months, so that
the Board of Engineers
could not begin its work.
The Board's report
was made in March,
1897, and work should
have been begun four
months later. Month
after month went by,
but the War Depart-
ment did nothing about
San Pedro. Los Ange-
les people bitterly com-
plained. They repeat-
edly called General
Alger's attention to the
delay, and had in return
bland, empty promises
of immediate action.
They began to under-
stand that the real in-
tention was to stop the
work until the matter
could be thrown back into Congress, and
Santa Monica be substituted.
Former Congressman McLachlan, of Los
Angeles, protested once more to Alger, and
received the startling information that the
Board's report was defective and must be
carefully studied before action could be
taken.
Another month went by with no sign of
action. Mr. McLachlan again called Gen-
eral Alger's attention to the delay. This
time General Alger lost his temper, declined
to answer any questions, and declared that
he would advertise for bids when he got
ready.
JAMES X. GILLETT, GOVERNOR OF CALI-
FORNIA.
Senator White now introduced a resolu-
tion, calling upon the Secretary of War for
information about the delayed work at San
Pedro. General Alger furnished in reply
several reasons, all denounced as flimsy or
baseless, and the Senate responded in a curt
resolution directing the Secretary of War to
begin work at once.
This resolution the Secretary of War
calmly ignored.
Los Angeles people, after a time, called
his attention to it.
He remarked blithely that it meant noth-
ing to him because it
had not been passed by
the House.
Then some kind
friends took him aside
and told him that if he
persisted in that view,
the Senate, when it re-
assembled, would at-
tend to his case in a
way that would sur-
prise him. General Al-
ger intimated that he
did not care.
By this time people
in Los Angeles were
deeply stirred. They
united in a petition to
President McKinley , re-
citing the facts. He re-
ferred it to Attorney-
General McKenna. Mr.
McKenna rendered an
opinion that there was
no legal reason why
work should not begin
at once at San Pedro.
General Alger let the
opinion lie a month
on his desk without deigning to notice it.
The Free Harbor League and the people
of all Southern California, seeing how Mr.
Huntington had outwitted them, and that
he had every prospect of defeating them at
last, began a desperate campaign against
Alger, trying chiefly to induce the President
to force his Secretary of War to act or to
force him out.
After three months of this Alger was
driven to the point of saying that he could
not begin the work because there was no
direct appropriation, and he must wait until
Congress should vote again.
The people pointed out that even if this
374
Hampton's
Magazine
were true, he could advertise for bids and
make a start.
General Alger said he had no money to
advertise with.
All the Los Angeles and San Francisco
papers telegraphed offers to print the ad-
vertisements for nothing, and the Los
Angeles Chamber of Commerce guaranteed
that it would pay all advertising bills.
General Alger said this would not be
dignified and got up some question that he
said must be referred to the Judge- Advocate
General.
The Judge-Advocate General promptly
decided that the question was without sub-
stance and that, anyway, there was $50,-
ooo available for advertising.
Meantime Mr. McKenna had ceased to
be Attorney-General, being succeeded by
Mr. Griggs. General Alger now referred to
Mr. Griggs the identical question that pre-
viously had been referred to and decided
by Mr. McKenna.
At this the whole State of California broke
into fierce and bitter complaint. It was
directed at President McKinley, and at last
it evoked from him a positive order that the
Secretary of War should begin work.
He had wasted two years and one month.
The contract was now let, the breakwater
constructed, and the harbor completed.
Its true value to Los Angeles is not yet
obtainable, because the Southern Pacific
barricades it with some of the most extortion-
ate rates known on this or any other conti-
nent. But the inevitable result of the rail-
road company's policy will be a municipal
railroad to the harbor and the beginning of
Los Angeles as a great seaport.
Such are the latter-day operations of the
Southern Pacific in national affairs. And
here is a sample of its record in regard to
municipalities.
JAMMING A SOUTHERN-PACIFIC ORDINANCE
THROUGH THE CITY COUNCIL
By 1905 most of the valuable franchises
in Los Angeles had been seized by the allied
interests of which the Southern Pacific was
the chief and commander. One was left
being the chance to build a railroad along
the river bank in the city limits.
On March 26, 1906, the mayor was out
of town, and one Summerland, president
of the City Council, was acting mayor. The
Council was in regular weekly session. At
4.30 P.M., when all routine business had
been disposed of and most of the spectators
had departed, an ordinance was introduced,
granting to one E. W. Gilmore "and his
assigns," a franchise for a railroad on the
west bank of the river from the south city
limits to Aleso Street, a distance of about'
three miles.
This was put on passage at once. Mr.
Charles D. Willard, representing the Mu-
nicipal League, perceived what was on foot
and vehemently protested. He went upon
the floor of the Council and appealed to an
honest alderman to vote against the grab.
A representative of the city attorney's
office joined him in strenuous objection.
Nevertheless, the ordinance was jammed
through.
Outside waited a carriage to take a mes-
senger with the ordinance to Summerland 's
house, where he was prepared to sign it.
But first the signature of the city clerk was
necessary. An underling dashed down-
stairs to the city clerk's office, put the
ordinance under City Clerk Lelande's nose,
and asked him to sign it, giving the impres-
sion that it was merely routine legislation.
Lelande demurred, looked over the docu-
ment, and refused to sign. Without his
signature Summerland could do nothing,
and the ordinance was hung up.
The next day the discovery was made
that because of a technical irregularity in
the passing of the ordinance, it must needs
be passed again, and a special meeting of
the Council was called for the next day,
Wednesday, March 28th, when the iniquity
went through by a vote of 6 to i.
CITY CLERK LELANDE 'S ASTOUNDING
AFFIDAVIT
What happened next will be found re-
lated in the following affidavit, which cov-
ers the whole story:
STATE OF CALIFORNIA, |
County of Los Angeles. ) ss "
H. J. Lelande, being duly sworn, deposes and
says:
The facts in relation to the attempted passage
of what was become generally known as the Gil-
more river bed franchise are as follows:
Late in the afternoon, about 6.30 P.M., of the date
when this franchise was first presented to the Coun-
cil, Mr. Wilde, my chief deputy, came into my pri-
vate office and placed this franchise on my desk
before me, stating that " the boys upstairs were fn
a hurry fo this," and asked me to sign it. This
franchise consisted of several typewritten pages.
Mr. Wilde turned it over to the last page, which
contained the space for the signature of the mayor
and myself, and asked me to sign it, as " the boys
I
The Railroad Machine as It Works Now
375
were upstairs waiting for it," and I asked what it
was. Mr. Wilde replied, "A franchise for a spur
track." I told Mr. Wilde that I would sign it in a
few minutes as I was busily engaged writing a letter.
Mr. Wilde left my private office, and shortly after
his departure W. R. Hervey came into my private
office and asked if I had signed the ordinance that
Mr. Wilde brought in, and I stated that I had not;
and he said that Mr. Gilmore was going away that
evening and would like to have me sign it at once,
as they wished to have it published in the morning.
After Mr. Hervey had made this statement I looked
at the document for the first time, and then informed
Mr. Hervey that I would wait and allow this to go
through in the usual manner as I did not see any
necessity for haste, or words to that effect. Mr.
Hervey urged me as a personal favor to him and to
Mr. Gilmore to sign it at once, and I again informed
him that I saw no necessity to hurry this matter,
and he stated that he would see that I signed it and
left the office, apparently angry.
Very shortly after Mr. Hervey left the office, Mr.
Gilmore came in and said that he was going to leave
town that night and wanted to get this fixed up
and published in the morning, and pleaded with me
to sign it at once. I made the same reply to Mr.
Gilmore that I made to Mr. Hervey, that "I would
allow the ordinance to take its usual course." After
I had made this statement, Mr. Gilmore continued
to plead with me to sign the ordinance, which I re-
fused to do.
Just before I started for home I was called up on
the telephone and informed that Mr. Summerland
was waiting upstairs for me to bring that ordinance.
I answered "All right," but had no intention of
bringing it up. I took my hat and left fcr home.
And shortly after I had finished my dinner, Mr. Gil-
more called at my residence and again pleaded with
me to sign the ordinance that night, and again said
that this was a matter of great importance to him
and he was desirous of having the matter completed
before he left the city, and offered me his political
influence if I would sign it. He made the state-
ment that I would never regret signing it.
Then, shortly after the departure of Mr. Gilmore
from my residence, I came back to the office and
Mr. W. F. Parker called me up by 'phone that night
and wanted to know if I was going to be at my
office for a few minutes. I stated that I was, and
he said he was coming over. Shortly after receiv-
ing the message, Mr. Parker came to my office and
asked to see the ordinance, which I allowed him
to do, and he made the statement that he didn't
know whom it was for, and that he was glad I
hadn't signed it, and asked me not to sign it until
he had found out more about it. I told him that
I had not intended to sign it until the following
day, anyway.
The minute clerk had prepared his minutes, show-
ing that the council had adopted the ordinance by
a vote of six to one, Summerland being acting mayor
in McAleer's absence, and Mr. Smith being absent.
My attention was called to the fact that Council-
man Houghton first voted " No " and finally changed
his vote to " Yes," other business having been trans-
acted in the interim, and at the time that Council-
man Houghton changed his vote to " Yes" the chair-
man then announced that the ordinance had been
adopted; so when the members of the Council found
that we had, on Tuesday, recorded the ordinance
as having been lost they met again on the next day,
Wednesday, and passed the ordinance by a vote of
six to one. I will furnish an exact copy of the
minutes showing the above statement to be correct.
About three o'clock on Wednesday, the day the
ordinance was passed, Mr. Parker called me up by
'phone and asked me if I would step down to his
office. I informed him that I was quite busy and
would prefer having him come to my office in the
city clerk's office. He said he thought it was best
for him not to come there, but would meet me
at the Hotel Alexandria buffet. I replied that I
would meet him there after five o'clock. I left
the office about five o'clock and went to the Alex-
andria buffet and there met Mr. Parker in one of
the little cushion places there. He opened the con-
versation and said, "I suppose you know what I
want to see you about?" I answered that "I be-
lieve I do," or words to that effect.
One of the first questions asked me by Parker
was "HOW MUCH WILL YOU TAKE TO SIGN THAT
ORDINANCE RIGHT AWAY?" or words to that effect.
I remember this distinctly because I was surprised
that he would make such a statement. After which
he said, "I CAN GET YOU A THOUSAND DOLLARS IF
YOU SIGN THAT ORDINANCE TO-DAY AND TAKE IT TO
SUMMERLAND."
My answer was that "I did not want any of that
kind of money."
He also made the statement that MONEY WAS
BEING SPENT AND I MIGHT AS WELL GET SOME OF
IT. He said that my power was not executive, that
my duty was simply ministerial, and that I might
as well get the money and sign it and get it out of
my hands as quickly as possible. I said that I was
going to hold it until Mayor McAleer came back.
He said that it didn't make any difference to him,
that I was overlooking a chance to get some of the
money, or words to that effect; whereupon I re-
turned to the office.
At the time Parker and I had the conversation
in the Alexandria buffet he told me that he had
found out that this was for Mr. Huntington. He
made this last statement as to his having found out
that it was for the Huntington interests in connec-
tion with his statement that money was being used.
Various other people called me up, some before this
conversation with Mr. Parker, and some after, but
no officials, and urged me to sign it and get it out
of my hands quick, or words to that effect.
I went back to my office and stayed there until
about 6.30 o'clock. In the mean time I had several
calls, and I went home and stayed at home until
about 8.15 o'clock, when I left home to keep from
being further disturbed. Wednesday, about four
o'clock, Charley McKeag was the man that sent a
telegram at my request to McAleer, who was then
out of the city, to return as quickly as possible.
I kept the ordinance in my safe until Mayor
McAleer returned.
After McAleer's return, then, to get it to the
mayor, I, of course, certified it, so that he might
sign it or veto it. No previous legal notice of any
kind was given to the public of the intention to
pass this ordinance, and no competitive bids were
asked for.
(Seal) (Signed) H. J. LELANDE.
Subscribed and sworn to before me this 22d day
of November, 1909.
(Signed) GEO. S. WELCH,
Notary Public in and for the County of Los Ange-
les, State of California.
37G
Hampton's Magazine
That is the way the thing is done now.
For all of it at all times we must pay.
To what extent we have already paid
may be gathered from a table with which
we may well conclude our reflections on this
edifying subject. It does not show the
total production of the Great Millionaire
Mill; probably no human mind could trace,
formulate, and accurately state what that
production has been. It shows only a part
of the wealth that, without return of any
kind, we have freely bestowed upon this
unparalleled institution:
On his return, Mayor Me Aleer vetoed the
ordinance in a message so virulent that one
of the aldermen moved that the ''insult be
returned with the rest of it, unread."
The intention was to pass the ordinance
over his veto, but the people of Los Ange-
les, whose wrath had been rising from the
first news of the steal, were now in a state
of dangerous excitement. Among the^most
orderly and law-abiding of people, they had
been wrought out of their usual self-com-
mand by the audacity of the franchise
grabbers, and if the councilmen had per-
sisted in defying public opinion, some re- CENTRAL PACIFIC
markable scenes might have followed. But ' Government land grant, mini-
the aldermen took fright and abandoned the mum $30,000.000
ordinance. Unearned dividends on stock... 34,000,000
Such is "the modern method of the South- Capitalized interest on subsidy
~ .,, . ... bonds 30.700.000
ern Pacific in politics. Common stock (representing no
And here is its modern method in busi- investment) 67,275,500
ness. Bonus on bonds 16,81^.000
The great steamers Mongolia and Man- ~ _
churia, of the Pacific Mail, in every way SoUTHERN PACIFIC _
magnificent specimens of marine architec- Governrae nt land grant, mini-
ture, were built at Newport News for the mum $40,000,000
Atlantic Transport Line, under the belief Donations by California councils i.oo;?.ooo
that Congress would pass the ship subsidy. Mission Bay, donated by the
When this hope failed, the two steamers
, , , F ~ ' c , , T . time 9.500,000
were sold to the Oregon Short Line, a pos- Capital stock (representing no
session of the Southern Pacific Railroad investment) \ 160,000,000
system. Dividends thereon 30,400,000
That is to say, they were bought with the
r , , ft' ou . T- T -4. $240,902,000
money of the Oregon Short Line. In point SoUTHERN PACIFIC COMPANY OF KEN .
of fact (according to the sworn testimony TUCKY
of a high officer of the company) , their pur- Government land grant acquired
chase stood in the name of Mr. E. H. Harri- with Morgan purchase $13,000,000
man, by whom they were leased to the Surplus capitalized (see report
Pacific Mail, and who collected from the ^cquired under earty leases
Pacific Mail their rental, which was $30,000
a month for each steamer. $189.081,022
In other words, Mr. Harriman, repre-
senting the Standard Oil Company, con-
trolled the Oregon Short Line and also Of this colossal sum only an inconsider-
controlled the Pacific Mail. He used his able fraction can be held to represent any
control of the Oregon Short Line to buy the kind of investment, and the greater part is
steamers with the Oregon Short Line's to this day drawing interest and dividends
money (in his name), and then used his from the consuming public,
control of the Pacific Mail to lease the Reflected in the cost of living,
property thus secured for his own bene-
i * mission, at San Francisco, January 29, 30, and 31, 1907. This
!** whole edifying story of the Harriman performance is described
in the testimony of R. P. Schwerin at pp. 113, 115, 156. 158, etc.
* See " In the Matter of the Consolidation and Combination of At the New York hearing there were introduced the minutes of
Carriers. Relations between Such Carriers and Community of the meeting of the Oregon Short Line's Executive Committee of
Interest therein," etc. Before the Interstate Commerce Com- March 26, 1003, at which this deal was ratified.
,
The Paying of the Bill
By Charles Edward Russell
Author of "The Heart of the Railroad Problem," "Beating Men to Make Them Good," etc.
Portraits by S. G. Cahan
EDITORIAL NOTE. A few weeks ago the antirailroad candidate for Governor of Cali-
fornia, Hiram Johnson, was nominated in the primaries of the state by an overwhelming majority.
What part Mr. Russell's articles have played may be judged by the following telegram from the
editor of the San Francisco Bulletin : " Russell's articles in your magazine served a great purpose
and helped immensely to dethrone railroad domination of California. Revolution wins Governor,
two Congressmen, probably United States Senator, and Legislature. We owe a great deal to
you. Fremont Older."
As to the specific cause of the increased cost of
living, President Taft to-day frankly told various
of his callers that he was unable to account for it.
News dispatch from Washington, December 30, 1009.
They increased the cost of living. . . . They
charged all that the traffic would bear, and appro-
priated a share of the profits of every industry by
charging the greater part of the difference between
the actual cost of production and the price of the
article in the market. Pacific Railroad Commission
Report, p. 141.
AND now for us, the people, who pay
for all this gigantic fortune building,
for fraudulent contract and political ma-
chine, watered stock and dishonest lease;
who paid for all yesterday and pay for it
to-day and will pay for it to-morrow, many
times over.
Where do we come in?
In 1887, Governor Pattison, at the close of
the long, patient, judicial inquiry by the
Pacific Railroad Commission of which he
was chairman, delivered his opinion that
the inflated part of the Central Pacific's
capital amounted to a tax of $3,000,000 a
year * upon the shippers of the country.
We have seen the means by which the
inflation was achieved, the multifold tricks,
swindles, and fraudulent devices. This is
what such things cost us in 1887 above
any fair compensation for any service per-
formed.
In the eighteen years from the completing
of the Central Pacific to the Commission's
report in 1887, the four men of Sacramento
* Pacific Railroad Commission, Minority Report, p. 146.
had taken from tie shippers of the country
on this account alone $54,000,000 through
the forms of illegitimate toll referred to by
Governor Pattison, and above any fair com-
pensation for any service performed.
In this total, the work of the Contract and
Finance Company as a producer of fictitious
capital has some place. But we are to re-
member that, aside from this and from all
other sources of sudden wealth in Governor
Pattison's calculations, there was ever the
staggering accretion of a thousand other
operations and a thousand extravagances
and excesses of power. To the one item of in-
terest-bearing capital that Governor Patti-
son had in mind we must add many indus-
trious efforts under the names of the
Western Development Company, the Pacific
Improvement Company, the coal and iron
companies, the bridge companies, street rail-
road companies, and countless other, aliases
and masks behind which these men rode the
highways. All these left behind their pro-
portionate share of burden on the public.
So did the interwoven leases, the money
paid to prevent disclosure, the money spent
to defeat Mrs. Colton, the money spent in
dealing with the settlers of Mussel Slough,
the money spent to bribe legislatures and
to subsidize editors, the money spent to
maintain the vast political machine in
California, and the money spent to defend
the illegal land grants.
All this stupendous sum was piled up,
aside from Governor Pattison's total. Every
507
508
Hampton's Magazine
year the interest on it was being paid by the
shippers, and Governor Pattison estimated
that the small part of this tribute due to the
brigandage of the old Central Pacific and
the Contract and Finance Company was
$3,000,000 a year paid by the shippers.
The shippers, of course, merely passed it
along, with interest, to the consumers. You
and me.
So there is where we came in twenty-three
years ago: to the tune of $3,000,000 a year
cast into only a part of the Millionaire Mill.
Even then, and even for that small part,
the tribute was beyond any justification and
wholly arbitrary.
If the railroad had been built with a fair
degree of honesty and had been so managed,
or if it had represented only legitimate in-
vestment, it could have paid from the begin-
ning 6 per cent, interest, discharged all its
obligations to the government, and saved in
eighteen years $54,000,000 to shippers over
the Central Pacific alone.
At the same time, the Four of Sacramento
would have owned 2,495 niiles of railroad
absolutely free from debt and every cent of
their investment would have been repaid to
them.
WHAT A RAILROAD TAX OF $3,OOO,OOO
MEANS TO YOU AND ME
This is not a surmise but a simple mathe-
matical demonstration. If the enterprise
had been fairly honest, the stockholders
would have realized by 1887 for every dollar
of their stock $1.07 in dividends, $1.11 from
the land sales, and would have had $4 worth
of interest in the property; so that in
eighteen years each dollar would have
yielded $6.18 by the methods of approxi-
mate honesty.
To the householders of America there
would have been saved $54,000,000 of dis-
honest tolls plus interest and profits thereon.
Those $54,000,000 were the exact measure
of the difference to us between honest and
dishonest methods. The profit of dis-
honest methods for eighteen years was
$54,000,000; on the Central Pacific alone.
Twenty-three years have passed since
Governor Pattison reached this conclusion.
If the traffic had remained as it was in
1887, and there had been no other tribute
exactions, we should have paid so far $120,-
000,000 in excessive charges because of
crooked accounts and fraudulent contracts;
on the Central Pacific alone.
The traffic has greatly increased; the
operations have been repeated, extended,
improved, and multiplied; more watered
stocks and baseless bonds have been prodi-
gally heaped upon the property, with more
corruption, more bills for purchased legisla-
tion, more expenses of the California politi-
cal machine, more payments to Abe Ruef
and his kind, more expenses incurred by the
W. F. Herrins and their staffs of poli-
ticians, more deals, more dishonest leases,
more hired editors, more crooked bosses.
For all these we are paying year after
year, just as we pay for the original Con-
tract and Finance Company crookedness.
So that if Governor Pattison could come
back now and repeat his inquiry, he would
find the annual charge that in 1887 was
$3,000,000 for the Central Pacific alone is
now become for the Southern Pacific
system a charge many times that sum.
If the American householder, puzzling
over the 60 per cent, increase of his living
expenses in fifteen years, wants a solution
of his problem, let him for a time con-
template these facts. Let him also remem-
ber that they are merely typical of the gen-
eral railroad condition and need only to be
multiplied into the number of "systems" to
furnish much of the stupendous sum repre-
sented in the augmented cost of living. For
in ten years the railroad capitalization of
this country, now eighteen and one half
billion dollars, has increased seven billion
dollars being in effect a National debt,
the interest of which is levied upon us as
tribute.
How do we pay this tribute?
Let us see. On January i, 1909, the
transcontinental railroad lines increased the
freight rates 18 per cent, on east-bound traf-
fic and a little more on west-bound traffic.
Conservative authorities in California
estimated that this increase of rates
meant an increase of $10,000,000 a year
in the living expenses of the people of
California.
California has probably 400,000 families.
This means an average increase of $25 a
family.
Accomplished by merely one increase of
rates.
By reason of this same increase of rates
the market value of Southern Pacific secur-
ities rose nearly $100,000,000. By reason
of this increase of market values the estate
of the late E. H. Harriman, at first appraised
The Paying of the Bill
509
at $149,000,000, was found on examination
to be worth $220,000,000.
Twenty-five dollars taken yearly from
each family in California; $71,000,000 piled
upon the private fortune at the other end.
From the householder to the vault of the
railroad magnate a million pumps pumping
dollars.
What do you get for this tax laid three
times a day upon the living of your house-
hold? It is your money, the railroad com-
pany takes it from you and adds it to the
great fortunes. What do you get?
Let us look into that next.
Whoever will consider carefully and im-
partially the subject of freight rates in
America will be drawn to the conclusion
that the so-called science or system of
making these rates consists merely of dis-
cerning how much can be extracted from
any community without inciting it to
resistance, and from any branch of traffic
without destroying it. Simply this and
nothing more.
HOW RAILROAD RATES ARE REALLY PIXED
Now, you will not believe this until I
prove it to you because you have long been
accustomed to hear foolish chatter about
the enormous difficulties of rate making and
because, naturally, you have assumed that
in making rates there is considered the cost
of the service, the amount of investment and
the interest thereon, with taxes, insurance,
and other expenses, and what would con-
stitute a just and reasonable profit.
I think it would be difficult to instance any
railroad rate in America made on any such
basis.
In America, railroad rates are made under
the pressure of an inexorable necessity cre-
ated by fictitious capitalization and fraud-
ulent expenditures. The necessity is to
wring from every transaction the last ob-
tainable cent. Justice has and can have
no place in the consideration. What the
traffic will bear is the one standard and that
means, plainly translated, what the shipper
can be forced to pay.
At first thought this sounds unfair and
partisan. It is neither. It is only a cold
statement of facts. It seems unfair be-
cause we like to think there is reason in all
things. About other things I do not pre-
tend to say, but about rate making I know
there is no reason other than the reason I
have mentioned. The next time you read
any profound observations by one railroad
lackey or another on the intricate and
wonderful science of rate making and the
awe with which we should regard it, you
might recall some plain facts I shall now
give you. They may help to a just esti-
mate of the railroad lackey and also cheer
your expense account with some delicious
humor of a certain kind.
Here we go then, taking things at random
and merely as samples.
SOME ILLUMINATING RAILROAD ARITHMETIC
versus YOUR POC&ETBOOK
On a carload of coffee, San Francisco to
New York, 3,240 miles, the freight rate is
$180. From San Francisco to Phoenix,
Arizona, a distance of 900 miles and over
the same line, the freight rate for the same
car is $240.
From Pacific Coast points (San Fran-
cisco, Los Angeles, et cetera) to Phoenix,
Arizona, the freight rate on sugar is $i .a
hundred pounds in car load lots. From the
same points to Memphis, Tennessee, about
1,200 miles farther, the freight rate on
sugar is 60 cents a hundred pounds. From
San Francisco to Cheyenne, Wyoming, 1,270
miles, the rate is 55 cents.
California produces most excellent raisins,
but the people of the Eastern states cannot
generally avail themselves of this abundant
product because the freight rate to the At-
lantic Coast is $1.10 a hundred pounds.
Yet asphaltum is hauled from the Pacific to
the Atlantic Coast for only 55 cents a hun-
dred pounds. The raisin traffic will bear
$1.10 and the asphaltum traffic will bear
only one half of that.
Cotton goes from Dallas, Texas, to China,
7,500 miles, by way of Seattle for $1.35 a
hundred pounds. Of the 7,500 miles in this
haul 2,500 are by rail. For hauling the same
cotton from Dallas to New Orleans, 567
miles, the rate is 60 cents a hundred pounds
or nearly one half the cost of the 7,500
mile haul to China, 2,500 of which is by
rail.
A CHINAMAN DECIDES WE ARE CRAZY
Not long ago an American captain was in
Hankow, China, loading pig iron for Los
Angeles. The Chinese merchant with whom
he dealt was both intelligent and curious.
He wanted to know what was the cost of
carrying iron so far. The captain said the
freight rate was $6 a ton.
510
Hampton's Magazine
ROBERT E. PATTISON, FORMER GOVERNOR OF
PENNSYLVANIA, AND HEAD OF THE PA-
CIFIC RAILWAY COMMISSION.
"How much of that does the steamer
get?" asked the merchant.
" Four dollars a ton. "
"Then the iron must travel a long dis-
tance by railroad," said the merchant.
"No," said the captain, "a very short
distance only twenty-two miles from San
Pedro harbor to Los Angeles. "
"Show it to me on your map," said the
merchant, exuding incredulity.
The map was produced and the merchant
studied it carefully, following with his finger
the steamer's route from Hankow down the
river 700 miles to the ocean, then across
5,000 miles of ocean to San Pedro. With
this he compared the almost imperceptible
distance from San Pedro to Los Angeles.
His conclusion was that the captain was
lying; the thing was manifestly impossible.
Waybills and receipts made no impression
upon him. Either the captain was a mon-
strous and malicious liar, or the American
people were crazy. Politeness and prob-
ability forbade him to accuse an entire na-
tion of lunacy; hence the fault lay with the
captain.
But the captain was not lying; he was
telling the truth. The traffic between Los
Angeles and San Pedro, its harbor, is indis-
pensable; therefore it can bear a great deal.
You can ship some kinds of freight from an
American port to a European port and back
for the cost of moving the same freight from
a ship in San Pedro harbor to Los Angeles,
twenty-two miles. The freight rate on iron
from San Pedro to Los Angeles is $2 a ton;
on other commodities it ranges from $2.20
to $3 a ton. In addition, there is a wharfage
charge of 50 cents a ton. Well I told
you.
You see, the traffic will bear these
charges: hence they are levied. There is no
other reason for them nor for any other
charges that the Southern Pacific makes
anywhere. It gouges and grabs what it can
because it needs every obtainable cent to
pay the interest and dividends on the se-
curities piled up by the Contract and Fi-
nance Company and all the other historic
devices the nature of which I have explained
in the foregoing chapters. The Los An-
geles merchants must have their freight
from San Pedro. There is no other way to
obtain it. Hence the traffic will bear these
charges, which are promptly passed to the
people.
How long the people will bear them I do
not pretend to say.
San Pedro is the harbor of Los Angeles
and within the city limits. San Diego is
126 miles from Los Angeles. The -rates
from Los Angeles to San Diego are about
the same as the rates from one end of Los
An~cles to the other. The San Diego traf-
fic will not bear quite so much as the Los
Angeles traffic.
FREIGHT RATE FOR 15,975 MILES, $4;
RATE FOR 22 MILES, $3.50
On some kinds of freight, and including
wharfage, the rate is $3.50 a ton from a ship
in San Pedro harbor twenty-two miles
across Los Angeles, and it is $7.50 a ton from
Antwerp to San Pedro 16,000 miles or
thereabouts.
The present railroad freight rates from
Sacramento, California, to Reno, Nevada,
are higher than the freight rates in the old
days of mining, before the railroad was
built, w T hen all freight must be dragged over
the mountains by mule and ox teams.* This,
I suppose, is one of the "benefits" conferred
by the Big Four upon the country.
You can ship certain kinds of freight from
'Before the Interstate Commerce Commission. Traffic
Bureau of the Merchants Exchange versus Southern Pacific
Company et al. Docket No. 2839. Brief for complaint, pp.
100-18.
The Paying of the Bill
511
Liverpool to San Francisco by way of New
Orleans for no more than you must pay on
the same freight if your shipment originates
at New Orleans instead of Liverpool.*
Does not all this seem strange?
Yet the Southern Pacific, it must be con-
fessed, has no monopoly of such mon-
strosities.
At the mines in West Virginia soft coal is
worth $i a ton. When it has been trans-
ported to the city of Washington, 400 miles,
it sells for $3.50 a ton. At Scranton, Penn-
sylvania, a car is loaded with anthracite
coal worth less than $2 a ton. The next
morning it is in New York and worth $6
a ton. Apparently the cost of transporting
coal 100 miles is greater than the cost of
mining it.
In California, coal is now so dear that for
the poor it must seem like a luxury; and yet
there are in the mountains in Colorado,
New Mexico, and Utah, and in the North
Pacific states, great coal deposits that might
afford a cheap supply if reasonable freight
rates could be had. As they cannot, coal
is regularly brought to San Francisco from
Australia.
THE RAILROADS HAVE NOT REFORMED
Every person that consumes anything
contributes to the freight rates, and every-
where these rates are made in this arbitrary
and extortionate manner. The natural
course of trade is continually being dis-
torted, blockaded, and bedeviled to give
more profits to the railroads, to provide
them with longer hauls, or a chance for
bigger rates. Communities are not allowed
to trade where they can find the best terms,
but only where they will yield the best
pickings for the railroads. A town forty
miles from St. Paul and 400 miles from
Chicago was compelled to go to Chicago for
its supplies because the railroads made the
rates from Chicago to that town, 400 miles,
equal to or less than the rates from St. Paul
to that to.wn, 40 miles.
There is an impression adroitly spread by
railroad press agents and railroad news-
papers that all these conditions have passed
away and the railroads have reformed their
practices. As a matter of fact, there has
been no essential change.
The unjust rates continue year in and
year out to collect our tolls.
* See 162 U. S., 197-
CHARLES M. HAYS, WHO RESIGNED FROM THE
PRESIDENCY OF THE SOUTHERN PACIFIC BE-
CAUSE ITS FREIGHT RATES WERE UNJUST.
Some of the least defensible of these ex-
tortions are practiced in California and help
materially to gather the means for the divi-
dends and interest on the securities we have
been considering.
For example, I call attention to extracts
from the Southern Pacific's freight tariffs
showing rates from San Francisco and from
Los Angeles. If you are unfamiliar with
railroad rates I may be allowed to explain
that the practice is to charge less for freight
in car load lots than for freight in smaller
quantities. This occasions the division into
rates for car load and rates for less than
car load. (See table on the following page.)
WHY HAYS RESIGNED THE PRESIDENCY OF
THE SOUTHERN PACIFIC
I will now recite for your entertainment
a little chapter of history showing that
these abuses are not only flagrant and in-
tolerable but firmly rooted.
C. P. Huntington died in 1900.
At that time, one of the American railroad
executives most talked about for sagacity,
energy, skill, knowledge, and results was
Mr. Charles M. Hays.
512
Hampton's Magazine
From
To
Miles
Less Than Car Load
Car Load
ISt
Class
Rate
per 100
Pounds
zd
Class
Rate
per loo
Pounds
3d
Class
Rate
per too
Pounds
4th
Class
Rate
per too
Pounds
5th
Class
Rate
per
Ton
Class A
Rate
per
Ton
Class B
Rate
per
Ton
Class C
Rate
per
Ton
Los Angeles
San Francisco
Goshen ... .
241
241
$0.79
63
$0.76
58
$0.71
54
$0.67
51
$10.80
8-30
$11. 60
7.65
$7-90
5-20
$6.90
4-55
< <
Los Angeles
San Francisco
Exeter
< <
241
247
.80
.67
77
.62
73
58
.69
55
II . 20
8.90
1 1. 60
8.2 S
7.90
5.65
6.60
4.80
Los Angeles
San Francisco
Tulare
231
240
.76
.69
7i
.64
.67
59
.64
55
IO. 2O
9. 10
1 1. 60
8.40
7.85
5-70
6.60
5-oo
< i
Los Angeles
San Francisco
Porterville. . . .
224
264
.76
73
7 2
.68
.68
.64
65
.61
10.40
9.90
II .60
9-25
7-75
6.00
6.60
5-20
Los Angeles
San Francisco
Oil City
i
179
315
.80
.90
.76
.84
7i
.78
.67
73
10. 60
. 11.80
I0.8o
10-95
6-95
7-75
6.30
6.70
Los Angeles
San Francisco
Bakersfield.. . .
<
1 68
303
7i
83
.68
-77
.64
.72
.61
.68
9.60
IT. OO
IO.OO
10.15
6.15
6-75
5-50
5-90
Los Angeles
San Francisco
Olig. . .
218
353
-83
.86
79
79
75
74
.72
.70
II .40
II .40
13.30
10.55
7-55
7.00
6.90
6.05
< <
Los Angeles
San Francisco
McKittrick . . .
216
35i
.76
85
.70
.78
.66
73
63
.69
10.00
II .20
13-30
10.35
6-75
7.00
6. 10
6.05
Los Angeles
San Francisco
Fresno
276
iQS
.80
55
77
5i
73
47
.69
44
II .20
7-20
II .60
6.70
8.00
4.60
7.00
4-05
1 1
Los Angeles
San Francisco
Visalia . .
249
248
79
.66
.76
.61
7i
57
.67
54
IO.8O
8.70
II. 60
8.05
7.90
5-45
6.60
4.80
a
Los Angeles
San Francisco
Coalinga
290
269
.86
.80
78
73
74
.69
71
.66
II.4O
10.70
14.80
10.05
8.00
6. 20
7.00
5-45
< <
Los Angeles
San Francisco
Hanford
248
233
79
63
.76
08
7i
54
.67
5i
10.80
8.30
II .60
7.65
7.90
5-20
6.90
4-55
SOME OF THE CURIOSITIES OF THE CALIFORNIA FREIGHT RATES THE HIGHEST IN
THE COUNTRY.
Mr. Hays was selected to take the place
of Mr. Huntington as head of the great
Southern Pacific system. He remained less
than a year when, to the amazement of the
railroad world, he suddenly resigned.
Everybody knew there must have been
some trouble and all railroad men knew that
the trouble was not with Mr. Hays. Al-
most at once he was snapped up by the
Grand Trunk, of which vast and extending
system he is still the chief commander.
Mr. Hays never publicly explained his dis-
satisfaction, but according to close friends
of his he began, soon after he took the
Southern Pacific, to examine the freight
tariffs by which this company gathers the
interest on all these securities. Mr. Hays is
known to be a just man. It seemed clear
to him that the rates were indefensible and
ought to be adjusted. He undertook to ad-
just them. The power behind the railroad
that, being greater than all law and all
government, had for many years thriven
upon these extortions, objected to the
changes Mr. Hays desired. Mr. Hays in-
sisted; the Power insisted. Finding that
the Power was supreme and that he could
not do justice, Mr. Hays resigned.
How do you like this little story?
I need not inquire of certain newspaper
valets and hired men of the Southern Pa-
cific. I know they will not like it at all be-
cause at once they will see that it is true and
extremely distasteful to their employers.
Their natural impulse will be to deny it, a
course to which they are cordially invited.
The Paying of the Bill
513
For all these things the railroad company
has usually its excuse not always, but
usually.
From Oakland to Lompoc, about 314
miles, the Southern Pacific within the last
two years gave to one lumber company a
rate of $4 a thousand and to another a rate
of $7.50. When one of the railroad's of-
ficers was on the witness stand before the
Interstate Commerce Commission, he was
asked why the $4 rate was made. He re-
plied airily that it was to meet "water
competition." This is a favorite excuse
with the railroad companies. With wonder-
ful effrontery they offer it for rates to points
a thousand miles from any water route. So
in this case the young man said "water
competition" as if the words were a finality.
Then the commission suddenly exhibited
the rate of $7.50 to the other company and
for once a railroad company was silenced.
Apparently it could think of no way to
twist, duck, or dodge out of the dilemma,
nor even to insult, bulldoze, or browbeat the
commission; a situation rare in the com-
mission's experience.
When Manager H. A. Jones of the South-
ern Pacific came to the stand in Los Angeles,
January, 1909, he was much more frank.
At San Francisco and Los Angeles and, I
believe, at other junction points, the South-
ern Pacific exacts a switching charge (so-
called) of $2.50 a car. There is no sense in
this charge. It represents no service
performed nor anything else except an
arbitrary exaction. Mr. Jones was asked
why his company levied this charge. He
answered promptly and truthfully that it
levied the charge "because it could get the
money."
When the "water competition" bogey
will not serve, the company can usually
allege something about the peculiarity of
the haul or of the business. One of these
allegations can stand for all and is, more-
over, a lovely example on its own account.
Thus:
Some of the glaring inequalities set forth
in the table on the opposite page are de-
fended (by the railroad's champions) on the
ground that there is a long ascent north of
Los Angeles; therefore the rate from Los
"FREIGHT
JJ3JY F&ANCJSCO
HOW THE SOUTHERN PACIFIC RAILROAD, BY ITS OWNERSHIP OF THE PACIFIC MAIL S.S. COM-
PANY, CONTROLS THE FREIGHT RATE BY WATER FROM NEW YORK TO SAN FRANCISCO.
514
Hampton's Magazine
ISIDOR JACOBS, WHO IS URGING A GOVERN-
MENT STEAMSHIP LINE FROM SAN
FRANCISCO TO PANAMA.
Angeles to Goshen should be higher than the
rate from San Francisco to Goshen, although
the distance is the same. This is as good as
any other defense for the railroad; and how
good this is you may learn from the fact
that 75 per cent, of the goods shipped from San
Francisco to Goshen have already been hauled
up that hill north of Los Angeles without the
least increase in rates therefor. That is be-
cause they have been shipped from the
Eastern states over that route. And yet
the charge for the 241 miles from San
Francisco to Goshen is about 18 per cent,
less than the charge for the 241 miles from
Los Angeles to Goshen because of that hill!
The hill is a great matter when you ship
goods from Los Angeles to Goshen. It is
nothing when you ship goods from New
Orleans to Goshen by way of Los Angeles.
Is it really necessary to be perfectly absurd
that we may defend our sacred corporations?
Of course, the shippers, as a rule, do not
care very much. Why should they? It is
none of their affair; the charge merely be-
comes a part of the price to the consumer,
and so long as that price is not great enough
to interfere with trade, the shipper need not
bother about it. Changes in rates may
cause actual losses to merchants, but high
rates bear only upon the consumer. And
th.2 consumer? Oh, well, he never knows.
The charge is concealed in the prices
of his beefsteak and potatoes, and
while these mount steadily upon him
he blames the farmer or the packer.
Therefore, on with the game! It can
be played without limit.
First the stock issued gratuitously to the
fortunate insiders; then the freight rate
made to secure dividends on this stock ; then
more stock; then more rates. All passed
along to the consumer and he never objects,
bless his heart, but pays his bills like a
little man.
THE RAILROAD GOBBLES THE TARIFF PROFIT
ON LEMONS
The California producer has not been so
well tamed. He has been protesting forty
years because the railroad company, apply-
ing its favorite formula in a way we must
now consider, has steadily absorbed all his
profits.
Take oranges and lemons. In the cele-
brated orange rate case which dragged
along six years, Mr. Joseph H. Call, of Los
Angeles, showed that under the prevailing
freight rate the average profit left to orange
growers was 13 cents a box, without any
allowance for decay or damage,* while the
railroad company took 90 cents a box for
freight. That was what the orange traffic
would bear.
At the end of the six years' fight through
the Interstate Commerce Commission and
the courts there was secured a final judg-
ment reducing the charge from $1.25 to
$1.15 a hundred weight. This meant a sav-
ing to the orange growers of $1,000,000 a
year in freight rates. The ground of the
decision was that $1.15 was a fair rate.
This seems to raise the questions:
(1) How about the years in which the
company was collecting an unfair rate?
(2) Who is to recompense us for that im-
position?
As to what lemons would bear, the rail-
road company slightly erred. Some years
before, it had conceived the idea that the
lemon traffic would bear an increase of 15
cents a box in the freight rate and had
accordingly, and for no other reason, an-
nounced the increase. The lemon growers
protested vehemently and, of course, in vain;
such protests are usually in vain. All the
profit of lemon growing was swept away
* Senate Committee on Interstate Commerce, Proceedings
of May 17, 1905.
The Paying- of the Bill
515
in that 15 cents of rate increase; the pro-
ducers were now growing lemons at an
actual loss. When this fact had been dem-
onstrated, the growers began to cut down
their trees and turn the land to other crops.
This practical proof that their calcula-
tions had been wrong and the lemon traffic
would not, after all, bear the additional
tribute they sought to extort was all the
railroad managers needed. They wanted
the profits of lemon growing but they could
understand that if there were no lemons there
would be no profits, so they rescinded the
increase, went back to the old rate, and in-
duced the growers to replant their orchards.
So Akbar remitted the tribute levied upon
a conquered province when he found that
the people had been stripped to their skins.
From this time until November 15, 1909,
the lemon rate was $i a box, California to
Eastern points.
Aside from freight rates, the only serious
trouble about the lemon business in Cali-
fornia is the limit of the demand. Cali-
fornia lemons are of unusual excellence; but
after all, the lemon in its pristine state and
undiluted remains more a fruit of utility
than of desire; few persons, we may believe,
devour lemons for delight therein. So far
as the California lemon could be delivered
at all in America it superseded, on merit,
all others; but because of the freight rates
it seldom had a chance east of the Alle-
ghenies. The center of its distribution was
Des Moines, Iowa, and the Atlantic states
continued to get their lemons from the
Mediterranean.
Of the annual American consumption of
12,000 car loads of lemons, California fur-
nished only about 4,800 car loads, although
quite able to furnish all.
The Californians long agitated for an in-
crease in the import duty on lemons, that
the handicap of their freight rates might be
equalized and the California lemon have a
chance on the Atlantic seaboard. At last
their desires were gratified. The new tariff
of August 5, 1909, raised the duty on lemons
50 per cent.
The lemon growers rejoiced and were ex-
ceeding glad. Their joy lasted two months.
In October, the Southern Pacific announced
that on November i5th it would raise the
lemon rate 1 5 cents a box, or f rom $i to $i . 1 5 .*
* Before the Interstate Commerce Commission. Arlington
Heights Fruit Exchange et al. versus Southern Pacific Com-
pany ct al. Petition, p. 17.
G. W. LUCE, GENERAL FREIGHT AGENT OF
THE SOUTHERN PACIFIC RAILROAD.
This, you will understand, is the mini-
mum. On some hauls the rate was raised
to $1.25, $1.35, and $1.40.
Faithful to its good, old, and only princi-
ple in rate making, the Southern Pacific had
grabbed the additional profit for itself. The
lemon traffic would now bear the 1 5 cents it
would not bear before, and the railroad
needed that 15 cents to pay dividends on
fictitious stock.
J. H. CALL FIGHTS THE SOUTHERN PACIFIC
This time the lemon growers combined
against the extortion and brought into the
case the Mr. Joseph H. Call of whom I have
before spoken. I am bound to think him
a remarkable man, although my inclining
toward such distinctions is small. Much of
his life has been spent in fighting railroad
corporations, apparently on conviction and
principle and not for the harlotry of the
professional advocate. He fought the
Southern Pacific to a standstill in that
settler's case (Southern Pacific versus Otto
Groeck) referred to in the July issue of this
magazine,* and it was he that showed
that in the Mussel Slough massacre the rail-
*See " Speaking of Widows and Orphans," HAMPTON'S MAG-
AZINE, July, 1910.
516
Hampton's Magazine
road company had no more legal than
moral right. As special counsel for the
government he recovered more than four
million acres of grabbed land from the
Southern Pacific.*
Mr. Call took up the case of the lemon
growers and got in the United States Circuit
Court an injunction restraining the railroad
from collecting the increased rate. When
it became evident that he would secure in-
junctions all along the line, the railroad
company desisted for the time being and
agreed to hold the new rate in abeyance
until the issue should be determined by the
higher courts.
Apparently the counsel for the lemon
growers was just in time. Since he got his
injunction, the Supreme Court has decided
in a similar case that railroads must be sued
in the state where they are incorporated.
If that ruling had applied here, the injunc-
tions would have been dissolved and the
suits begun anewf in Kentucky, where
(with great foresight) the Southern Pacific
is incorporated and where it has no trackage
and does no business.
THE HUGE MACHINERY OF LAW IN THE
INTERSTATE COMMERCE COMMISSION
Meantime, Mr. Call brought the case be-
fore the Interstate Commerce Commission.
That sounds easy: in reality it was a stu-
pendous task. Every company that han-
dles any part of any lemon shipment must
be served with a summons. The original
petition in the case contained six pages of
the names of companies necessarily sued as
codefendants, about 400 in all, many of
them railroads long since absorbed in the
great combinations.! An amended petition
filed a few weeks later contained the names
of sixty-three additional and microscopic
concerns that previously had been over-
looked.
Every one of these it was necessary to
serve, for to sue railroad companies in this
country is no holiday performance, be as-
sured. You can sue men in five minutes,
but to sue a railroad company may take five
years. When at last all had been served,
the Interstate Commerce Commission took
up the case and on June n, 1910, decided
that the lemon rate should be $i. The
See 146 U. S., 570-619, and 168 U. S., r-66, and 189 U. S.,
447-
t See 215 U. S., 501.
J Before the Interstate Commerce Commission. Arlington
Heights Fruit Exchange et al. versus Southern Pacific Com-
pany et al. Petition, pp. 3-9.
railroads were expected to appeal from this
decision, whereupon the contest would have
been transferred to the courts to last
there for years and years. Instead of ap-
pealing, the railroads, probably because of
the very unusual public interest in the case,
agreed to allow the rate to remain at $i.
This was something of a novelty in the
experience of the sorely tried American ship-
per. Ordinarily, the case would have been
heard by the commission, which would have
entered an order against the railroads com-
manding them to "cease and desist" from
charging the $1.15 rate, so that if the rail-
roads were to reduce the rate to $1.14^
they would be complying with the commis-
sion's order.
But the railroads would not give even so
much heed to the order. They would take
the matter into the Federal Courts and
about four years later the complaining
lemon growers would learn whether they
were to keep their profits or continue to
hand them to the railroad company.
You think this is pessimistic, unfair, or
prejudiced, but it merely states the prevail-
ing conditions. Most of the Interstate
Commerce cases take longer. "Cincinnati
and Texas Railroad versus Interstate Com-
merce Commission" took six years; "Texas
Railway versus same," seven years; "In-
terstate Commerce Commission versus Ala-
bama Railway," five years; "Interstate
Commerce Commission versus Chicago Rail-
way, " eight years; "Missouri Pacific versus
United States," ten years,* by which time
everybody connected with the original suit
had died or forgotten all about it and the
court threw it out on that ground.
THE RAILROADS GET THE FAT OF THE TARIFF
Much wondering attention was called to
the lemon tariff grab, as if it were something
quite new. As a matter of fact, the only
strange thing about it is that anybody
should think it strange. It is in line with
accepted railroad policy everywhere.
The real beneficiaries of the great Ameri-
can protective tariff are not so much the
manufacturers or producers as the railroad
companies.
The railroad companies adjust their rates
to just below the point where the foreign
article (plus the tariff) can be laid down in
any given territory.
* Before the Senate Committee on Interstate Commerce
bearing on the Regulation of Railway Rates, pp. 1-2.
The Paying of the Bill
517
They do not wish to see the American
producer crushed, but all the money he
makes they purpose to take for dividends
and interest on securities a la Contract and
Finance Company.
I submit the following convincing illus-
trations made up from Mr. Call's figures.
The basis is the transcontinental railroad
rates between Pacific and Atlantic or Lake
ports compared with freight rates from
abroad.
Commodity
Average or
Approximate
Tariff Duty
-ItJ ~
^2 111
3 ^^
Railroad
Terminal
Rates*
Bituminous Coal
Ton
$0.67
I .60
8.00
4.00
IO.OO
20.00
40.00
40.00
Ton Ton
$6.OO $6.67
6 . oo 7 . 60
6.00 14.00
6.00 10.00
6.00 16.00
3.00 23.00
6 . oo 46 . oo
6 . oo 46 . oo
Ton
$6 3ot
7-Oot
12 .OO
IO.OO
16.00^
-3
40.00
60.00
Portland Cement
Steel Ingots
Pig Iron
Structural Iron
Oranges
Cotton Goods. . . .
Low Grade Dry Goods .
Evidently, here the railroad rate is so
made that it is a shade under the tariff duty
plus the freight rate from abroad. By this
adjustment, the importation of the foreign
article is not encouraged, but the railroad
company gets the greater part of the
difference in price between the foreign and
domestic article. In other words, it gets the
real benefit of the tariff on these commod-
ities. ||
We tax all else to feed the manufacturer,
and fatten the manufacturer to feed the rail-
road company.
THE "REFRIGERATOR CAR" HELPS STEAL
FROM YOUR POCKETBOOK
But to return to our lemons, the growers
of that ungracious fruit have still another
grievance.
To understand it well one must know
about the peculiar functions of the Ameri-
can refrigerator car and I am not sure that
I can explain that in a few hundred words,
but I will try.
* "Terminal rates" are rates from one point with water tran-
sit to another, as from Chicago to Seattle.
t From Colorado and Utah to Los Angeles and San Francisco.
I From the factories in Kansas to Pacific Coast points.
In car load lots.
II Remarkable though unintentional confirmation of this fact
may be found in Before the Interstate Commerce Commission:
Enterprise Manufacturing Company et al. versus Georgia Rail-
road Company et al. and China and Japan Trading Company
versus Georgia Railroad Company. No. 981 and 994. See p. 73
letter of J. O. Stubbs to Howard Ayres.
The transporting of perishable commodi-
ties in refrigerator cars is now a great in-
dustry and very important to all of us be-
cause these cars bring us a large part of our
daily food. Most of these cars are owned
by the Beef Trust but are used for fruit and
vegetables as well as for meat. The Beef
Trust compels the railroads to pay for haul-
ing its cars (a mere disguise for a rebate)
and, in addition, gouges the consumer
through an onerous charge for ice.
Before 1906, the Beef Trust had contracts
with the Southern Pacific by which the
Southern Pacific, after it had well plucked
the fruit grower, turned him over to the
Beef Trust, which in a workmanlike manner
finished the trimming. When these con-
tracts expired, gentlemen that controlled
the Southern Pacific could see no reason
why the Beef Trust should have this good
thing when they needed the money them-
selves, so they chased the Trust out of the
game, organized a refrigerator car line of
their own, collected the goodly icing charges
and turned them into the treasury, whence
they presently emerged as additional divi-
dends on more watered stock.
Xow, it was once thought necessary that
lemons, oranges, and the like fruits moving
east from California must be iced all the
way. Which was good for the refrigerator
car lines. Eventually the growers found
that by a system of precooling the fruit, it
would go through without icing and arrive
in perfect condition. So on such shipments
they placarded the cars with this notice:
"Do not re-ice in transit."
That was where the additional grievance
came in. The notice never made the least
difference to the railroad company. It did
not re-ice the car, but it charged for re-icing
just the same $30 a car.* On something
like 40,000 cars of citrus fruit a year. Good
graft.
Others besides fruit growers had griev-
ances. In 1896, the Southern Pacific charges
on wool had become so exorbitant that wool
growers were threatened with ruin and were
driven back to primitive conditions. Some
of them abandoned railroad transportation
* Before the Interstate Commerce Commission. Arlington
Heights Fruit Exchange el al. versus Southern Pacific Com-
pany et al. Petition of complaints, pp. 15-16. The graft in-
volved here .is not much greater than that involved in all these
king charges, which are everywhere unjust.
518
Hampton's Magazine
and hauled their wool in wagons 200 miles
to a market, finding that extraordinary re-
version to mediaeval methods cheaper than '
to pay the railroad rates. To these and to
the lemon growers that cut down their or-
chards the blessings of the railroad and its
"benefits conferred" must have seemed
grimly farcical.
Meantime the cities, like San Francisco
and Los Angeles, groaned, and so far as they
dared, they protested.
Every approach by land was held by the
Southern Pacific. Many times the people
of San Francisco encouraged new lines of
railroad that promised competition, and the
city and county granted subsidies to such
enterprises, only to see the new projects fall,
one after another, into the hands of the
monopoly.
But there was always the open road of
the sea. Monopolies can seize the land;
no one can compass the sea. Whenever
years of effort to establish competition or
get relief by land had ended in failure, the
San Franciscans would turn to the sea.
HOW THE RAILROAD FIGHTS COMPETITION
BY WATER
They found no more relief there than they
had found on the land or in competition.
Two conditions stood in their way. Their
business was with the Eastern states.
Therefore it was domestic commerce. The
Federal law restricted domestic commerce
to American ships. There were few Ameri-
can ships.
The normal, easy, and cheap transit for
their goods was from New York down the
Atlantic coast to the Isthmus of Panama,
across the Isthmus by the Panama Rail-
road, and then up the Pacific to San Fran-
cisco.
From New York to the Isthmus they
could ship easily. From the Isthmus to
San Francisco the only steamships were
those of the Pacific Mail, and the Pacific
Mail was owned by the Southern Pacific.
To prevent the use of the water route and
to compel shipments by rail, the Pacific
Mail made a prohibitive rate between the
Isthmus and San Francisco.*
The merchants of San Francisco endured
this condition for years. To end it, some
of them organized an independent line of
vessels to the Isthmus. Competition.
* The chief business of the Pacific Mail to the south was be-
tween San Francisco and the west coast ports of South America.
The Southern Pacific made an arrange-
ment with the Panama Railroad whereby
for a payment of $75,000 a month * the
railroad agreed to let the merchants' freight
lie on the wharves instead of carrying it
across the Isthmus. In a short time the
wharves were piled high with goods the
railroad made no effort to move.
The merchants surrendered before this
impossible condition, the independent line
was abandoned, and the situation drifted
back to the undisputed control of the
Southern Pacific. Its subsidy to the Pana-
ma railroad for helping to throttle Cali-
fornia was alone sufficient to pay a fair divi-
dend on the Panama's capital.f
Substantially, to the merchants, this is
the situation to-day.
But, you say, this is very strange. The
Panama Railroad and the connecting steam-
ship line on the Atlantic are now owned and
operated by]the United States Government.
Surely the government will not enter into
an open alliance for plunder with the South-
ern Pacific.
No, but there is something else at work.
The Southern Pacific continues to oper-
ate the Pacific Mail, and continues to make
prohibitive rates. To-day the total freight
rate from San Francisco to New York via
Panama is $8 a ton. Of this, the United
States Government, for the railroad haul
across the Isthmus and the water haul to
New York, receives $2.40; the Southern
Pacific, for the shorter water haul, San
Francisco to the Isthmus, receives $5.60.
To meet this condition the obvious rem-
edy is for the government to operate steam-
ships on the Pacific as it does on the Atlan-
tic. Now see:
RAILROAD SECRETLY CONDEMNED, BUT
OPENLY ADULATED, BY MERCHANTS
In San Francisco, Isidor Jacobs, a civic
reformer noted for his courage, has been
for seventeen years fighting railroad extor-
tion. He organized the old Traffic Asso-
ciation of California, which brought forth
the San Joaquin Valley Railroad (gob-
bled by the Santa Fe) and the ill-fated in-
dependent line to the Isthmus. For two
or three years he has been laboring for a
government line on the Pacific. Largely
at his instigation, the government sent
* Report of J. L. Bristow, Special Panama Railroad Commis-
sioner, to the Senate Committee on Interoceanic Canals, 1008,
P- 13-
t Commissioner Bristow s Report, p. 13.
The Paying of the Bill
519
J. L. Bristow as a special commissioner to
investigate conditions pertaining to such a
line.
At San Francisco, a public meeting was
held under the auspices of the Chamber of
Commerce, which, with the two other mer-
cantile associations of San Francisco, is
dominated by the Southern Pacific. Some
hundreds of merchants were present. Only
Mr. Jacobs spoke for the government line.
Other speakers praised with fulsome ex-
pressions the Pacific Mail service and man-
agement, and opposed a government enter-
prise.
Mr. Jacobs suggested that Mr. Bristow
should invite the merchants to come to him
privately at his hotel and express their
opinions. Mr. Bristow adopted this sug-
gestion, and in the next two days about two-
score of San Francisco's free and indepen-
dent American citizens crept like criminals
into Mr. Bristow's apartments and after
exacting a pledge of secrecy told him that
the Pacific Mail service was abominable
and extortionate and a government line
would be a boon. Many of these were gen-
tlemen that at the meeting had expressed
exactly the opposite views.*
"I inquired privately as to the reasons
for the inconsistent attitude of these gen-
tlemen," says Mr. Bristow. He seems to
have found out. "It was further added
that the tremendous power in transporta-
tion matters which this combination of
steamship and railway management held
over the fortunes of San Francisco shippers
would tend to make them timid in express-
ing in public any views that would be dis-
pleasing to either company." f
"Tend to make them timid!" Between
the tyranny of a corporation in the twen-
tieth century and the tyranny of a satrap
in the first will some one kindly point out
the difference? Some one of the Glorious
Spirit of Optimism preferred, but anyone
will do.
San Francisco never got its govern-
ment line and the Pacific Mail continues
o blockade the Isthmus route. The
southern Pacific influence stopped this
<s it has stopped every other relief for
jrty years. It is a pathetic spectacle.
Vith the open-handed Calif ornian gener-
osity San Francisco has given money, lands,
ind terminals. In return she has had
* Mr. Bristow's Report, p. 4.
Ibid., pp. 4-5.
chiefly kicks and scientific and multiplied
extortion. I think you can hardly find in
the world the fellow to that story.*
To epitomize it, one should look first at
the magnificent Mission Bay property free-
ly bestowed upon the railroad, and then
turn to contemplate the fact that at the
great Portola celebration in San Francisco,
October, 1909, the Southern Pacific was the
only institution that made money from the
crowds and the only institution that refused
to contribute a dollar to the expenses of the
celebration.
THE SOUTHERN PACIFIC DISOBEYS THE
HEPBURN ACT
Observe next how much your laws avail
to restrain this corporation.
The Hepburn railroad rate regulation act
was passed by Congress in 1906. It was the
nation's third and most strenuous attempt
to end railroad abuses.
Four months after it became a law, all
men in San Francisco that follow these
matters knew the Southern Pacific was pay-
ing no more heed to the new than it had
paid to the old law and was daily granting
the forbidden rebate.
Complaint was made to the Interstate
Commerce Commission, and one year later,
in October, 1907, Commissioner Lane came
to San Francisco and began a hearing.
At once it was evident that the govern-
ment's secret service agents and inspectors
had caught the railroad red-handed. Amaz-
ing details were laid bare. It appeared that
rebates abounded for favored shippers in
almost every line of commerce. To record
these illegal transactions the Southern
Pacific maintained a set of secret books,
twenty in number, called the "A" books,f
kept in a separate room by a Mrs. Cum-
mins and a Miss Lena Amundsen. To
these books no one had access except the
head manipulator of rebates, and in them
were set down thousands of instances of
these forbidden advantages to shippers
disguised mostly, please mark, as alleged
claims for damaged goods or overcharges
under the sanction of the General Freight
Agent of the Southern Pacific. J
* As to conditions to-day, see report of the Senate Committee
on Federal Relations, California Legislature, to be found in the
Senate Journal for March 23, 1909, p. 27.
t Before the Interstate Commerce Commission. In the Mat-
ter of Rates^ Practices, Accounts and Revenues of Carriers, at
San Francisco, October 2, 3, 4, 1907. Testimony of J. M.
Brewer, pp. 6, 7, and elsewhere.
} Ibid., p. 7.
520
Hampton's Magazine
Documentary evidence of these rebates
was submitted and by the curious may now
be found in the appendix to the testimony.
When the scandal had been laid bare the
Southern Pacific, quite unabashed, played
its trump card and retired serenely.
It offered Mr. G. W. Luce, General
Freight Agent, as a witness, with the state-
ment that he could explain these rebates if
he were sworn.
Commissioner Lane was not to be so
trapped. He recognized that the swearing
of Luce as a witness would be an " immun-
ity bath" for him and all his transactions.
Therefore, the commissioner declined to let
Mr. Luce be sworn, but said he might make
any statement he cared to make. The
Southern Pacific attorney would not let Mr.
Luce say anything except under oath.* And
thus the matter ended. The Southern Pa-
cific management said, with much pretense
of righteous indignation, that it could ex-
plain everything if it were only allowed, but
it was not allowed which is an excellent
line of talk for gabies and the commission,
of course, was deprived of the advantage
of questioning Mr. Luce.
This was in 1907. Some optimists may
think that these lawless practices having
been thus indubitably revealed, the South-
ern Pacific (in the beautiful phrase of regu-
lation) "ceased and desisted" from them
and joined the other railroads in protesta-
tions of reform. To any such persons I
commend a reading of the decision of the
California Board of Railroad Commission-
ers, filed January 12, 1909, from which it
appears that one year after the revelations
before Commissioner Lane the same com-
pany was dealing in the same line of rebates
at the old stand.f
* Before the Interstate Commerce Commission. In the Mat-
ter of Rates, Practices, Accounts and Revenues of Carriers, at
San Francisco, October 2, 3, 4, 1907, pp. 116, 117.
1 Before the Board of Railroad Commissioners of the State
of California, No. 102. In the Matter of Alleged Discrimina-
tions by the Southern Pacific. Pages 17 and 18 will be found
particularly interesting.
This incident, so characteristic, so per-
fectly typical of the whole enterprise from
its inception, may well close our little his-
tory.
With the concentrated bitterness that
the people of California feel for the South-
ern Pacific, we have had nothing to do here.
Purposely, I have refrained from mention-
ing the terms in which most Californians
usually refer to the railroad, and have like-
wise omitted great store of material and
incidents of which the import was malig-
nant or personal or tending to place upon
individuals responsibility for a general con-
dition for which no man should be blamed.
But I do believe it to be a fair conclusion
that the whole system upon which this
company has been operated from its first
stock subscription to this day is largely
fraudulent, utterly wrong, and gravely in-
jurious to the people of California and to
the rest of the country.
I do believe it to be clear that every dol-
lar taken unfairly or dishonestly or by clever
scheming out of this property has been re-
paid many times from the living expenses
of the people.
I do believe it certain that all this repre-
sents a situation not much longer to be en-
dured if the nation is to survive and be
free.
The highways are the people's. Let
us return them to the people from whom
they have been taken chiefly by chican-
ery, bribery, and fraud.
For all these and all the other intol-
erable and growing evils of our trans-
portation system, for the increased
cost of living demonstrably produced
by the overissue of railroad securities,
for the menace in the rapid increase of
these overissues, and for the corruption
that these influences always work in
our public affairs, there is no other
remedy.
Let us begin to apply it now.
EDITORIAL NOTE. The foregoing article was written before the new Interstate Com-
merce Law, enacted by the last session of Congress, went into effect. At the time this number
of HAMPTON'S goes to press it is too early to judge of the effect of the new law upon the rate
situation described in the foregoing pages, but it seems probable that while the law, if enforced,
may operate to change some details, the principle behind the rate-making will remain intact.
5 31
