Great Fortunes from Railroads Part 22

GOULD'S TRADING CLa.s.s SUPPORT

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

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

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

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

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

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

As for the small stockholders of the Erie railroad, Gould easily pacified them by holding out the bait of a larger dividend than they had been getting under the former regime. This he managed by the common and fraudulent expedient of issuing bonds, and paying dividends out of proceeds. So long as the profits of these small stockholders were slightly better than they had been getting before, they were complacently satisfied to let Gould continue his frauds.

This acquiescence in theft has been one of the most p.r.o.nounced characteristics of the capitalistic investors, both large and small.

Numberless instances have shown that they raise no objections to plundering management provided that under it their money returns are increased.

The end of Gould's looting of the Erie railroad was now in sight.

However the small stockholders might a.s.sent, the large English stockholders, some of whom had invidious schemes of their own in the way of which Gould stood, were determined to gain control themselves.

GOULD'S DIRECTORS BRIBED TO RESIGN.

They made no further attempt to resort to the law. A fund of $300,000 was sent over by them to their American agents with which to bribe a number of Gould's directors to resign. As Gould had used these directors as catspaws, they were aggrieved because he had kept all of the loot himself. If he had even partly divided, their sentiments would have been quite different. The $300,000 bribery fund was distributed among them, and they carried out their part of the bargain by resigning. [Footnote: a.s.sembly Doc.u.ment No. 98, 1873: xii and xiii. The English stockholders took no chances on this occasion.

The committee reported that not until the directors had resigned did they "receive their price." ] The a.s.sembly Investigating Committee of 1873 referred carelessly to the English stockholders as being "impatient at the law's delay" and therefore taking matters into their own hands. If a poor man or a trade union had become "impatient at the law's delay" and sought an illegal remedy, the judiciary would have quickly p.r.o.nounced condign punishment and voided the whole proceeding. The boasted "majesty of law" was a majesty to which the underdogs only were expected to look up to in fear and trepidation.

When the English stockholders elected their own board Gould obtained an injunction from the courts. This writ was absolutely disregarded, and the anti-Gould faction on March 11, 1872, seized possession of the offices and books of the company by physical force. Did the courts punish these men for criminal contempt? No effort was made to.

Many a worker or labor union leader had been sent to jail (and has been since), for "contempt of court," but the courts evidently have been willing enough to stomach all of the contempt profusely shown for them by the puissant rich. The propertyless owned nothing, not to speak of a judge, but the capitalists owned whole strings of judges, and those whom they did not own or corrupt were generally influenced to their side by a.s.sociation or environment. "All of this," reported the a.s.sembly Investigating Committee of 1873, speaking of the means employed to overthrow Gould, "has been done without authority of law." But no law was invoked by the officials to make the partic.i.p.ants account for their illegal acts.

THE LEGISLATURE BRIBED AGAIN.

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

To complete their control they bribed the New York Legislature to repeal the Cla.s.sification Act. As has been shown, the Legislature of 1872 was considered a "reform" body, and it also has been brought out how Vanderbilt bribed it to give him invaluable public franchises and large grants of public money. In fact, other railroad magnates as well as he systematically bribed; and it is clear that they contributed jointly a pool of money both to buy laws and to prevent the pa.s.sage of objectionable acts. "It appears conclusive," reported the a.s.sembly Investigating Committee of 1873, "that a large amount-- reported by one witness at $100,000--was appropriated for legislative purposes by the railroad interest in 1872, and that this [$30,000]

was Erie's proportion." [Footnote: Ibid., xvii.] One of the lobbyists, James D. Barber, "a ruling spirit in the Republican party," admitted receiving $50,000 from the Vanderbilts. [Footnote: Ibid., 633.] While uniting to suppress bills feared by them all, each of the magnates bribed to foil the others' purposes.

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

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

That sum, considering the falling prices of commodities after the panic of 1873, and comparable with current standards of cost and living, was equivalent to perhaps double the amount at present.

Various approximations of his thefts were made. After a minute examination of the Erie railroad's books, Augustus Stein, an expert accountant, testified before the "Hepburn Committee" (the New York a.s.sembly Investigating Committee of 1879) that Gould had himself pocketed twelve or thirteen million dollars. [Footnote: Q.--Do you think you could remember the aggregate amount of wrong-doing on the part of Mr. Gould that you have discovered?

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

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

Had it not been for his intense greed and his const.i.tutional inability to remain true to his confederates, Gould might have been allowed to retain the proceeds of his thefts. His treachery to one of them, Henry N. Smith, who had been his partner in the brokerage firm of Smith, Gould and Martin, resulted in trouble. Gould cornered the stock of the Chicago and Northwestern Railroad; to put it more plainly, he bought up the outstanding available supply of shares, and then ran the price up from 75 to 250. Smith was one of a number of Wall Street men badly mulcted in this operation, as Gould intended.

Seeking revenge, Smith gave over the firm's books, which were in his possession, to General Barlow, counsel for the Erie Railroad's protesting stockholders. [Footnote: Railroad Investigation, etc., v:531] Evidence of great thefts was quickly discovered, and an action was started to compel Gould to disgorge about $12,000,000. A criminal proceeding was also brought, and Gould was arrested and placed under heavy bonds.

AN EXTRAORDINARY "RESt.i.tUTION."

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

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

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

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

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

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

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

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

THE SECOND STAGE OF THE GOULD FORTUNE

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

CHAPTER XI

THE GOULD FORTUNE BOUNDS FORWARD

The "gold conspiracy" as plotted and consummated by Gould was in its day denounced as one of the most disgraceful events in American history. To adjudge it so was a typical exaggeration and perversion of a society caring only about what was pa.s.sing in its upper spheres.

The spectacular nature of this episode, and the ruin it wrought in the ranks of the money dealers and of the traders, caused its importance to be grossly misrepresented and overdrawn.

THE ABUSE OF GOULD OVERDONE

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

But this unending havoc, taking place silently in the routine departments of industry, and in obscure alleyways, called forth little or no notice. What if they did suffer and perish? Society covered their wrongs and injustices and mortal throes with an inhibitive silence, for it was expected that they, being lowly, should not complain, obtrude grievances, or in any way make unpleasant demonstrations. Yet, if the prominent of society were disgruntled, or if a few capitalists were caught in the snare of ruin which they had laid for others, they at once bestirred themselves and made the whole nation ring with their outcries and lamentations.

Their merest whispers became thunderous reverberations. The press, the pulpit, legislative chambers and the courts became their strident voices, and in all the influential avenues for directing public opinion ready advocates sprang forth to champion their plaints, and concentrate attention upon them. So it was in the "gold conspiracy."

GOULD EMBARKS ON HIS CONSPIRACY