ON THE EVE OF THE GREAT GOLDFIELD SMASH
It was early in November, 1906. Indian Summer held Goldfield in its
soft embrace. Nature wore that golden livery which one always
associates with the idea of abundance. The mines of the district were
being gutted of their treasures at the rate of $1,000,000 a month.
Under the high pressure of the short-term leasing system new high
records of production were being made. The population was 15,000. Bank
deposits totaled $15,000,000. Real estate on Main Street commanded
$1,000 a front foot. The streets were full of people. Every one had
money.
In years gone by men had died of thirst on that very spot. Three years
before there were no mines and the population numbered only a
corporal's guard. The transformation was complete. Within three years
the dreams of the lusty trail-blazers, who had braved the perils of the
desert to locate the district, had become a towering reality. The camp,
which two years before was dubbed by financial writers of the press as
a "raw prospect" and a "haven for wildcatters and gamblers," had
developed bonanza proportions. The early boast of Goldfield's press
bureau, that Goldfield would prove to be the greatest gold camp in the
United States, was an accomplished fact.
Listed Goldfield mining issues showed an enhancement in the markets of
nearly $150,000,000. Stocks of neighboring camps had increased in
market value $50,000,000 more. The camp rode complacently on the crest
of the big boom, than which history chronicles no greater since the
famous old days of Mackay, Fair, Flood and O'Brien on the Comstock.
There was no premonition that a climax must be reached in climbing
values at some period, and that a collapse might be near.
Goldfield Consolidated shares were selling on the exchanges at above
par, $10, or at a market valuation of more than $36,000,000 for the
issued capitalization of the company. You could have bought all of the
properties of this company for less than $150,000 when the camp was
first located. A score of leases were operating the Consolidated's
properties. The leases were soon to expire. Much market capital was
made of the fact that the company would presently "come into its own."
More than 175 stocks of Goldfield and near-by camps were listed on the
exchanges and curbs. All of these were selling at sensational prices
and enjoyed a swimming market. The successful merging by Wingfield and
Nixon of the principal producing properties of Goldfield at a
$36,000,000 valuation, more than four times the value of the known
ore-reserves, stimulated the whole list.
Columbia Mountain, promoted by the mergerers of Goldfield Consolidated,
but excluded from the merger because not contiguous to the other
integrals and because it had no ore, had been ballooned to $1.35 per
share on a million-share capitalization, and stood firm in the market
regardless of the fact that it was still only an unpromising
"prospect." The issued stock of a dozen other companies in control of
the promoters of the merger was selling at an aggregate value of many
millions more. The most despised "pup" in this particular group was
Milltown, of not even prospective value; yet it easily commanded a
per-share price that gave the "property" a market valuation of
$400,000.
Silver Pick, capitalized for 1,000,000 shares of the par value of $1
each, had scored an uninterrupted advance from 15 to $2.65 a share
without a pound of ore being found on the property. The market price
did not waver.
Kewanas, another million-share company, was in big demand at $2.25 per
share, a valuation of $2,250,000 for the property and an advance of
2,250 per cent. over the promotion price. Kewanas's gain was also made
despite the fact that mine developments had failed to open up pay ore
in commercial quantities. Eight months earlier the entire acreage had
been offered to me for $35,000 and I had refused to buy.
Goldfield Daisy, promoted by Frank Horton, a faro dealer in George
Wingfield's Tonopah gambling joint, had been ballooned from 15 cents to
$6 a share on a capitalization of 1,500,000 shares. It had never earned
a dollar for stockholders, but was actually selling in the open market
at a valuation of $9,000,000. The price showed no sign of weakening.
Combination Fraction, owning a few acres of ground, which was promoted
at 20 cents a share on a capitalization of 1,000,000 shares, had risen
rapidly, because of ore discoveries and contiguity to the Mohawk, to
$8.50 a share. Stockholders gave no sign of a tendency to unload.
Great Bend, situated in the Diamondfield section of the Goldfield
district, four miles from the productive zone, had been carried up from
10 cents a share to $2.50 without a mine being opened up, establishing
a market valuation for the property of $2,500,000.
These are but a few of the more striking instances of price
appreciations. All of these stocks, excepting Goldfield Consolidated,
are now selling for a few pennies per share each, the average not being
so much as ten cents. There were over a hundred other Goldfield stocks
that also enjoyed spectacular market careers, on which it is now
impossible to get any quotation at all.
THE RISE OF WINGFIELD AND NIXON
ANY one in Goldfield who was willing to admit that stocks were selling
too high at the time was decried as a "knocker." You could borrow
freely on all listed Goldfield stocks at John S. Cook & Company's bank,
owned by the promoters of the Goldfield Consolidated, and the men of
the camp for that reason felt that there must be concrete value behind
nearly all of them. Brokers in Eastern cities reported that few of
their customers were willing to take profits even at the prices to
which stocks had been skyrocketed. Most mining-stock brokers of the
cities had "knocked" the stocks of the camp in the early days before
the advance. At this stage, when prices had reached undreamed-of
levels, the brokers did not advise their customers that values had been
worked up far beyond intrinsic worth. Indeed, they actually waxed
enthusiastic in their recommendations to buy. Every one was a bull.
Sessions of the Goldfield Stock Exchange reflected the extent of the
craze. Outside of the exchange the stridulous, whooping, screeching,
detonating voices of the brokers that kept carrying the market up at
each session could be heard half a block away. Later, did you find your
way into the crowded board-room, the half-crazed manner in which
note-books, arms, fists, index fingers, hats and heads tossed and
swayed approached in frenzy a scene of violence to which madness might
at once be the consummation and the curse.
George Wingfield and his partner, George S. Nixon, were the heroes of
the hour. Less than five years before, Mr. Wingfield had come into
Tonopah with a stake of $150, supplied by Mr. Nixon, whose home was in
Winnemucca, Nevada. Mr. Wingfield had formerly been an impecunious
cowboy gambler. Born in the backwoods of Arkansas, and later of Oregon,
he hailed from Golconda, Nevada. Mr. Nixon, at the time he staked Mr.
Wingfield and until his election as a United States Senator in 1904,
was known as the "State Agent" of the Southern Pacific Company for
Nevada, having succeeded on the job the notorious "Black" Wallace, who
for many years handled the "yellow-dog" fund for the Huntington régime
when franchises were hard to get and legislatures had to be bought. Mr.
Nixon was also president of a bank in Winnemucca, which was a way
station on the Southern Pacific Railroad.
Mr. Wingfield had signalized his money-getting prowess by running Mr.
Nixon's $150 into $1,000,000 as principal owner of the Tonopah Club,
the biggest gambling house in Tonopah, and later "parleying" the money
for himself and partner into ownership of control of the merged
$36,000,000 Goldfield Consolidated, which was their corporate creation.
Mr. Wingfield was said to be behind the market. He was looked upon as
boss of the mining partnership, and Mr. Nixon as a circumstance. Mr.
Wingfield was a conspicuous figure at nearly all the sessions of the
Goldfield Stock Exchange, of which he was a member. In the early
evenings, when informal sessions were held on the curb, he could also
be seen in the thick of the tumult. He was on the job at all hours.
At that time Mr. Wingfield was about thirty years old. Of stinted,
meager frame, his was the extreme pallor that denoted ill health, years
of hardship, or vicious habits. His eyes were watery, his look
vacillating. Uncouth, cold of manner, and taciturn of disposition, he
was the last man whom an observer would readily imagine to be the
possessor of abilities of a superior order. In and around the camp he
was noted for secretiveness. He was rated a cool, calculating, selfish,
surething gambler-man-of-affairs--the kind who uses the backstairs,
never trusts anybody, is willing to wait a long time to accomplish a
set purpose, keeps his mouth closed, and does not allow trifling
scruples to stand in the way of final encompassment. Among stud-poker
players who patronized gaming tables in Tonopah, Goldfield and
Bullfrog, he was famed for a half-cunning expression of countenance
which deceived his opponents into believing he was bluffing when he
wasn't. In card games he was usually a consistent winner.
His partner, George S. Nixon, looked the part of the dapper little
Winnemucca bank manager and confidential State Agent of the Southern
Pacific that he was before becoming Senator. He was considerably below
middle weight, and above middle girth at that part of his anatomy which
a political enemy once described as seat of his thoughts and the
tabernacle of his aspirations. His steel-gray eyes were absolutely
without expression. Newly-rich, his money and his Southern Pacific
connections had gained him a toga, but he did not carry himself like a
man upon whom the honors had been thrust. Around Goldfield he strutted
with the pride and gravity of a Spanish grandee.
The pair were in control of the mine, bank and market situation.
Brokers, bank men and officers of mining companies waited upon them and
did their bidding. At night, in the Montezuma Club, where leading
citizens were wont to congregate, Mr. Wingfield would on occasion
ostentatiously offer to wager that Goldfield Consolidated "would sell
at $15 before $9," etc. Men with money who had flocked to the camp from
every direction listened in rapt attention. At a later hour they
secretly wired the news to their friends in the East. Next morning the
market would reflect more public buying and still higher prices.
Goldfield itself was blindly following the lead of the twain. It was
indeed easier for these men to mark prices up than to put them down.
THE WINNINGS OF A TENDERFOOT
What about me? Where did I stand and what was my position at this
conjuncture? Did I have foresight? Did I realize that stocks were
selling at much higher prices than were warranted by intrinsic worth
and speculative value? Was not the fact that the mergerers and waterers
of Goldfield Consolidated were in command of the mine, market and bank
situation sufficient to make me suspect that possibly the cards might
be stacked and that maybe cards were being dealt from the bottom of the
deck? Was I, in fact, wise to the exact situation and did I realize a
smash was bound to ensue? 'Tis a pity hindsight were not foresight, for
only in that event could I laurel-wreath myself.
I had been on the ground for more than two years. In reality I was
still a tenderfoot. My experiences had been unique--all on the
constructive side. I had mastered the first rudiments of the game, but
only the first. Intrinsic value didn't figure as the only item in my
conception of the worth of a Goldfield mining issue. The millionaires
of the camp were not miners by profession and their judgment of the
value of any mining property would not have influenced a Guggenheim, a
Ryan or a Rothschild to extend so much as $4 on the development of any
piece of likely mineral ground. Goldfield was a poor man's camp. And it
was making good despite the croakings of school-trained engineers who
had turned the district down in the early days, as they did Tonopah.
At this period I was living frugally. I never touched a card. I worked
at my desk on an average of sixteen hours a day, including Sunday, and
I never relaxed. Although I had arrived in the camp broke, had I been
offered $2,000,000 for my half interest in the L. M. Sullivan Trust
Company I think I should have refused it.
I liked my job. The leaven of my environment appealed directly to my
perceptions. I was saturated with the traditions of Western "mining
luck" and also with the optimism of my sturdy neighbors. These men had
stood their ground in the early period of the camp's days of "trial and
tribulation." They had triumphed like their forebears on the Comstock,
just as did the hardy pioneers of Leadville and Cripple Creek and as
their brethren of Tonopah did. Their influence over me was unbounded. I
relished the work, anyhow. As a matter of fact, I had little use for
money except for the purposes of business. _And never a suggestion
came to me that it was time for a "clean up."_
The L. M. Sullivan Trust Company, of which I was vice-president and
general manager, was doing remarkably well. The stocks of the mining
companies that were organized and promoted by the trust company were
listed on the San Francisco Stock Exchange and New York Curb and showed
a market appreciation of $3,000,000 above the promotion prices. Indian
Camp, promoted at 25 cents, was selling freely at $1.30. Jumping Jack,
for which subscriptions were originally accepted at 25 cents, was in
hot demand at 62 cents. Stray Dog, sold to the public originally at 45
cents, was active around 85 cents. Lou Dillon, put out less than a
month before at 25 cents, had worked its way up to 64 cents. Silver
Pick Extension, which was oversubscribed at 25 cents and commanded 35
cents two hours after we announced that subscriptions were closed, was
selling on the exchanges and curbs of the country at 49 cents. Eagle's
Nest Fairview, which original subscribers got into at 35 cents, was
very much wanted at 65 cents. Fairview Hailstone, floated at 25 cents,
was in constant demand at 40 cents.
Governor John Sparks was now president of all of these companies.
You could have sold big blocks of the Sullivan stocks at these
profit-making prices on any of the mining exchanges and curb markets of
the country without reducing the price a cent, so constant was the
public demand and so broad was the market. With the exception of
Bullfrog Rush, for which the Sullivan Trust Company had refunded the
money to subscribers when the mine under development proved to be a
"lemon," every promotion of the trust company showed investors a
handsome stock-market profit. In the aggregate the promotion price of
the seven Sullivan mining companies figured $2,000,000 for the entire
capitalization. The market price of these was now $5,000,000, or an
average gain of 150 per cent.
It was a record to be proud of, and I _was_ proud of it, not alone
because I was vice-president and general manager of the trust company,
but also because a firm of expert accountants, recommended by the
American National Bank of San Francisco to examine the books of the
trust company, had reported that our assets were $3,000,000 in excess
of liabilities, all of which had been gathered in about ten months'
time. About $1,000,000 of this represented promotion profits. The
remainder was earned by the appreciation in price of mining securities
carried or accumulated through the boom.
It was the common boast of the camp that George Wingfield had
"parleyed" or "pyramided" $1,000,000 which represented the profits of
his gambling place in Tonopah, into ownership of control along with his
partner Nixon, of the $36,000,000 Goldfield Consolidated. As heretofore
related, I had experienced a lot of hard luck in missing by a hair's
breadth, ownership of the Hayes-Monnette lease on the Mohawk and the
Nevada Hills mine, which would have increased our profits $8,000,000
more, but I felicitated myself that I had done very well by pyramiding
$2,500 into a half interest in a flourishing $3,000,000 trust company.
I was vain enough to believe that my achievement was as unique as that
of Mr. Wingfield, because he had had the influence of a United States
Senator and the money deposited in a chain of newly established banks
in Goldfield, Tonopah and other points to aid him in his operations.
Against this I had not only been compelled to rely on my own resources,
but was actually required to combat the work of black-mailers who from
time to time attempted to levy tribute. On my failure to "come through"
(I never did) they rarely hesitated to take a malevolent smash in print
at the Sullivan Trust Company, because in years gone by its active head
happened to have had a very youthful Past, even though they knew that
Past was no longer his and he had passed it like milestones on the way.
I AM LANDED HIGH AND DRY
The Nevada State election took place in November. The Democratic
ticket, headed by "Honest" John Sparks for Governor and Denver S.
Dickerson for Lieutenant-Governor, was victorious. The Republican
ticket, headed by J. F. Mitchell, a mining promoter and engineer,
backed by United States Senator Nixon, the Republican political boss,
suffered humiliating defeat.
Denver S. Dickerson was the candidate of the labor unions. During a
former labor war in Cripple Creek Mr. Dickerson had been confined in
the "bull-pen" when the Government intervened to quell the labor riots
there. Goldfield miners to a man very naturally voted for him. Governor
Sparks had accepted the renomination at the urgent request of the L. M.
Sullivan Trust Company, and his victory, as well as the complexion of
the ticket, was credited largely to the activities in politics of the
trust company.
The trust company, while not a banking institution in the sense that it
accepted deposits of cash from citizens of the town, having confined
its operations to the financing of mining enterprises, loomed large on
the political and business horizon because of its increasing financial
and political power. The trust company carried all of its moneys in
banks that were not affiliated with the Wingfield-Nixon confederacy and
worked at cross-purposes with it in this particular, too.
The Wingfield-Nixon crowd had pyramided a gambling house in Tonopah and
a little one-horse bank in Winnemucca into ownership of control of the
$36,000,000 Goldfield Consolidated; into ownership of John S. Cook &
Company's bank in Goldfield, which was credited with deposits
aggregating $8,000,000; into a new bank in Tonopah, known as the
Tonopah Banking Corporation, and into a newly formed bank in Reno,
called the Nixon National. In politics it had succeeded in seating Mr.
Nixon in the United States Senate, placing at his command the Federal
patronage which goes with that exalted office.
The confederacy was reaching out.
In Goldfield it had overcome such strong banking opposition as the Nye
& Ormsby County Bank and the State Bank & Trust Company, both of which
were in business before John S. Cook & Company were dreamed of. It had
accomplished this by loaning large sums of money to Goldfield brokers
and other citizens on mining stocks of the camp at a time when this
class of securities was not so readily accepted by the other banks as
good collateral. In Tonopah the newly-established Nixon bank, known as
the Tonopah Banking Corporation, was making gradual headway against
both the Nye & Ormsby and the State Bank & Trust Company, which still
carried about 75 per cent. of the business of that camp. In Reno the
Nixon National found it hard to compete with such old institutions as
the Bank of Nevada, the Washoe County Bank and the Farmers & Merchants
National, but rumors were already in the air that the Nixon bank was
soon to buy out and consolidate with the powerful Bank of Nevada.
In Goldfield the power of the confederacy was strongest in all lines
except politics. There it already had its grasp on the throat of the
mining and financial business of the camp, and through the out-of-town
draft collection department of its bank held its finger on the pulse of
the mining-share markets. Its sore spot was politics.
Wingfield and Nixon's market operations were clouded in mystery. No one
knew exactly where they stood. Brokers in Goldfield and San Francisco,
who had compared notes, were convinced that the two had unloaded many
millions of shares of the smaller companies not included in the merger,
and had raked in not less than $10,000,000 during the boom as the
result of this selling. The disposal of huge blocks of stock by
Wingfield and Nixon, however, was not interpreted as meaning that
stocks were selling too high. The general idea prevailed that the
proceeds were used to enable the confederacy to finance its stock
purchases in the integral companies that were turned over in the making
of the merger and to finance its new chain of banks.
About the middle of November the market for Goldfield securities took a
turn for the bad. Prices gave indication of having reached a stopping
place. Goldfield promoters began to complain that they were compelled
to lend strong support to the market because of selling from many
quarters that could not be explained. There was much market pressure.
In a few days the market became unsteady, then soft, then wobbly again.
In camp Wingfield and Nixon were reported still bullish.
The securities of the Sullivan Trust Company were under attack in all
markets. Salt Lake and San Francisco were reported to be spilling
stock. Great blocks were being thrown over.
I gave support in a jiffy.
There was no surcease.
_Within ten days I was forced to throw all of a million dollars
behind the market to hold it._
This didn't faze me. I was getting stock certificates for the money,
and I believed they were worth the price.
But I was puzzled to determine what it was all about.
THE BEGINNING OF THE RAID
Soon it was reported to me that Senator Nixon was advising people at
all points who held Sullivan stocks, or knew of anybody who held them,
to unload. From San Francisco came word that a clique of brokers was
operating for the decline.
On the following Monday the market on the San Francisco Stock Exchange
opened strong and buoyant, and it looked for a moment as if the selling
movement had collapsed. I felt relieved.
My 'phone bell rang. A stock broker of Tonopah called me on the long
distance.
"Offer you 10,000 Lou Dillon at 48," he said. "Do you want them?"
Lou Dillon was a Sullivan stock that had been promoted at 25; 48 was
now a point under the market, however.
"We'll take 'em," I said. "What's the matter?"
"Rumored up here that your books are under inspection by the
Post-office Department. You have had five new men on your books for the
past few weeks, and some one has spread a story here that Nixon has
sicked the Government on to you."
I denied it, of course. The five men in question were the experts who
had been sent up from San Francisco by the firm of accountants
recommended to us by the American National Bank, and they were there at
our own behest. The story was a raw canard.
Throughout the day the Sullivan Trust Company was called upon to stand
behind the San Francisco market and take in nearly all of the big
blocks of Sullivan stocks owned in the camps of Tonopah and Manhattan.
Before our denials could reach the sellers the damage had been done.
And it took $250,000 a day for four days to hold the market against
this fresh onslaught.
Color had been lent to the wild rumors about a Postal investigation by
the fact that an attack had been made on me in the columns of the
_Denver Mining Record_ a year before. Rumor said the dose was going to
be repeated. In the early days of the camp, when I was at the head of
the Goldfield-Tonopah Advertising Agency, I had represented the
_Denver Mining Record_ in Goldfield. As its agent I had secured
advertising contracts for it which netted my agency in the
neighborhood of $10,000 a year in commissions. The owners of the
newspaper conceived the idea that I was making too much money on a
commission basis and sent Wing B. Allen, formerly of Salt Lake, to the
scene to take my place. Mr. Allen worked for smaller pay. He wanted me
to divide my commission on standing business, and I refused. The
publishers took Mr. Allen's part. As a result I withdrew all the
advertising from the columns of the _Denver Mining Record_ for which
my agency had been responsible, and the _Denver Mining Record_ was
never able to regain the lost ground.
A short time before the raid on our stocks began Mr. Allen had been
arrested in Goldfield on a warrant sworn out by L. M. Sullivan, tried
before Judge Bell on the charge of extortion and bound over to the
Grand Jury. At the hearing before Judge Bell the Sullivan Trust Company
submitted evidence that Mr. Allen had threatened, if we did not give
his paper a slice of the promotion advertising of the Sullivan Trust
Company, that the _Denver Mining Record_ would commence to attack
me personally in its columns, and, because of my early Past, would do
the trust company serious damage.
At the hearing despatches were submitted which were filed at the
Goldfield office of the Western Union Telegraph Company by Mr. Allen,
in which he had informed his paper that it had better proceed with the
attack, because neither Mr. Sullivan nor myself gave indication of
yielding. At the hearing, under oath and in a crowded courtroom, I
openly denounced Mr. Allen and his newspaper as blackmailers of the
very vilest type, and so did Mr. Sullivan. Judge Bell, on the
submission by the Western Union of Mr. Allen's despatches to his paper,
promptly held him for the Grand Jury.
On the advice of former Governor Thomas, of Colorado, to whom the
Sullivan Trust Company paid a retainer as counsel, and who later
became chief counsel for the Goldfield Consolidated, I employed
Christopher C. Clay of Denver to commence suit against the owners of
the _Denver Mining Record_. As a result I secured from them a
settlement by which they agreed not to mention my name again in their
paper. I was harassed at the time, or I would not have compromised.
The stuff printed by the _Denver Mining Record_, which has been
rehashed by every blackmailer who ever attempted to levy on me, was
about two-tenths true and eight-tenths false. It was a literal copy of
an anonymous publication put out by a set of blackmailers who had
tried to circulate it years before in New York when I was head of the
Maxim & Gay Company. I had spent thousands of dollars to run down the
authorship then, but without avail. The lawyers had succeeded in
seizing thousands of copies of the publication, and had made an
arrest, but they failed to prove authorship of the screed and
ownership of the paper, and the culprits therefore were not punished.
In Denver when Mr. Clay applied for criminal warrants, he was asked
first to furnish proof of authorship, which was impossible for us, the
articles having been unsigned.
SOME PERTINENT PERSONALITIES
The same stuff has recently appeared without signature in a Goldfield
paper which originally came into possession of George Wingfield through
foreclosure proceedings, and in a Reno evening paper which is
controlled by Senator Nixon, who owns a large slice of the paper's
mortgage. It has also appeared in other papers "friendly" to Wingfield
and Nixon. Tens of thousands of copies of the Goldfield publication
containing the anonymous libel have been sent broadcast.
Other newspapers have reproduced the libelous stuff, some innocently
and some for sordid reasons, but of this more later. My career is
fraught with instances of recourse by enemies to blackmail and
attempted blackmail. If I should undertake to tabulate the cases where
men and interests, ranging from impecunious newspaper reporters to
financial-newspaper publishers and mining-stock brokers and market
operators who, from the background, publish market letters or furnish
the capital for mining publications, have attempted to levy tribute or
to club me into submission by the use of so vile a weapon, I should be
compelled to write a big book on the subject.
And right here I should like to place myself on record to the effect
that seemingly the principal shortcoming that has marked my
mining-financial career has been that I had a youthful Past--a Past
which during the last decade has never been taken into serious
consideration by men who have held close business relations with me,
but which, of course, is a thorn in the sides of men and interests
whose bidding I have failed to obey.
I defy any man to cite a single instance where I was guilty of
crookedness in a mining transaction or a business transaction of any
kind in my entire career as a promoter. I have been fearless--too much
so. I have been a rabid enthusiast. I have tried to build. I have given
quarter, but have never taken any. I have been honest. Were I really
dishonest, I could have prevented every publication of an attack of
consequence on me by lending myself in advance to the base purposes of
my traducers, and I would have millions now for having compromised with
them. It is heaven's own truth that in nine cases out of ten, when I
have been attacked in print, the motive of the attacking party has been
base and the facts have been so distorted or misrepresented that the
fabric was a lie. Nor has the cruelty of the operation stayed any one's
hand.
At the very moment in Goldfield when I knew that the _Denver Mining
Record_ would not assault the Sullivan Trust Company again because of
the settlement of the libel suit by my lawyers out of court, fresh
rumors were spread that the _Denver Mining Record_ was getting ready
for another attack and that tens of thousands of copies of that
newspaper were to be circulated. But you can't stop a rumor by the
declaration of the truth, and the Sullivan Trust Company decided that
it would be unwise to make a denial in print, for by so doing it would
communicate to all stockholders the news that the Sullivan stocks were
actually under attack and thus cause more "frightened selling."
Sight drafts from brokers in New York, Chicago, Salt Lake and San
Francisco, drawn on the Sullivan Trust Company, with large bundles of
Sullivan stocks attached, were pouring into our office through the
local banks for presentation. John S. Cook & Company made a specialty
of this department of banking, and most of the drafts on us were
cleared through the Wingfield-Nixon bank. It was reported to me that
Senator Nixon was openly discussing the enormous volume of stocks
coming in on us and was questioning our ability to stem the tide. As a
strategic measure, the Sullivan Trust Company decided to "cross" sales
on the San Francisco Stock Exchange so that it might ship out of the
camp, through the banks, large blocks of stock with draft attached
against San Francisco brokers and thus convey to the minds of local
bankers that we were selling large blocks of stock as well as buying
them. The volume of the "cross" trades caused some talk in San
Francisco, and was magnified by brokers operating for the decline.
THE TIME WHEN MONEY TALKS
Some of our brokers in San Francisco now demanded an independent bank
guaranty that the drafts on us would be honored. We asked for a line of
credit at the State Bank & Trust Company. It was promptly given. As
fast as the brokers asked for a guaranty, the State Bank & Trust
Company telegraphed them formally that it would honor our paper to the
extent of $20,000 or $30,000 in every case. To protect the bank and in
order to be able to borrow a large sum of money, should we need it in
the event of another selling movement starting in, we deposited stocks
of a market value of $1,500,000 with the State Bank & Trust Company,
which signed a paper that this collateral was to stand against loans
for any amount which the State Bank & Trust Company might make to us on
open account.
A few days later we borrowed from the bank $300,000 in cash, and it was
agreed that should we need $300,000 more on the same collateral, it
would be promptly placed at our disposal. We did not yet need the
money, but I realized the desirability of assembling cash in an
exigency such as that. Nor was this an unusual proceeding. There was a
time during the Manhattan boom when the overdraft of the Sullivan Trust
Company in the Nye & Ormsby County Bank was $695,000. The bank held
against this overdraft Sullivan stocks at the promotion price. Nearly
all of these stocks at that early period were as yet unlisted.
The idea of withdrawing support and letting the market go to smash did
not occur to me at all. As already stated, I believed the stocks were
worth the money. But that was not the chief reason for my stubborn
market position. I took great pride in the fact that every listed stock
of the Sullivan Trust Company showed a big profit to stockholders. I
considered the greatest asset of the trust company to be, not its
money, but its prestige, and I entertained big ideas as to a future I
had mapped out for the corporation. I did not suspect that an organized
campaign was on to destroy us and that the dominant interests of the
camp were reaching out for everything in sight. Nor did I have any use
for money for hoarding purposes. The only thing that seriously nettled
me was the fact that the Sullivan Trust Company had been compelled to
turn borrower.
Before the first selling movement started in, our assets were
$3,000,000 more than our liabilities. But this $3,000,000 was not all
cash. In fact, it was represented in part by stocks which we had
purchased in the market with the idea that they were good stocks to own
and would show the trust company a big profit, as they had. We could
have cleaned up $3,000,000 in cash, but we had not done so. Now, within
a month, all of our available cash had been put into fresh lines of our
own securities, we had been compelled to sell other lines out, and the
corporation was a borrower. I was stubborn--too stubborn for a man who
boasted of so little experience in such a big game. It was a pet belief
of mine that obstacles create character. I was in the heat of a battle
and fighting my way against tremendous odds. I rather liked the
sensation.
Another dominant trait which, deep down, has in recent years been the
keynote of my actions is the fact that my philosophy teaches me that
you can't down the truth, that a lie can't live, and that _justice will
be finally done_. Had I always put the accent on the "finally" and
mixed with my philosophy a little "dope" to the effect that while
justice is always _finally_ triumphant, injustice is often victorious
_for a while_, I might have fared better.
In a previous chapter I stated that "Wall Street deals for suckers" and
that "thinkers who think they know, but don't" are the suckers for
which Wall Street casts its net. I also stated that Wall Street
promoters realized that "a little knowledge is a dangerous thing" and
that this "little knowledge" leads astray this particular kind of
sucker. In "falling" in Goldfield for the philosophy that "justice is
always triumphant in the end," by swallowing it whole, and in making no
allowance for the fact that justice is sometimes tardy, even though it
does prevail in the end, I here decorate myself with a medal as a
top-notcher in the _sucker_ class--in the academic sense--which I
have described, and which is the usual sense in which I use the term
"sucker."
Again the selling ceased, and it looked as if the Sullivan Trust
Company would be compelled to wait only for a general turn in the
market to relieve itself of money-pressure by disposing of some of the
large blocks of stock it had accumulated during the periods of heavy
liquidation.
CLOUDS IN THE WESTERN SKY
A new black cloud showed itself on the horizon. A labor war was
threatened in Goldfield. It was very apparent, from the conduct of
George Wingfield, that he was baiting the miners, and it appeared to be
the general opinion of the people of Goldfield that he was trying to
precipitate trouble. The miners had asked for higher wages. The
Sullivan Trust Company, which was operating seven properties with a
monthly pay-roll of $50,000, was the first to express a willingness to
grant the terms. Wingfield and Nixon refused. The miners asked for
arbitration. It was refused. The mines were then shut down for a few
days and the terms of the leases were extended.
Heavy selling in all Goldfield stocks took place during the shut-down.
Rumors could now be heard on every side that Wingfield and Nixon were
dumping overboard big blocks of stock. Could it be possible that they
themselves were scuttling the ship that had given them such glorious
passage?
Again the Sullivan Trust Company was called upon to stand behind the
market.
Soon a cry of distress was heard in the camp from investors and stock
brokers who had overloaded themselves with securities and who were in
debt to the banks to the extent of millions, with stock of the camp put
up as collateral. Inquiry revealed the fact that all Goldfield and
Tonopah banks were overloaded. This condition had been brought about by
the liberal terms which had been granted by the Wingfield-Nixon banks
during the "ballooning" of Goldfield Consolidated, when the
confederacy, according to common belief, was unloading millions of
dollars' worth of stocks in the small companies and was using the
proceeds to finance their purchase of the stock of several of the
integrals that formed the big merger.
I began to get next to myself and to "smell a rat." I had never had so
much as an argument with either Mr. Wingfield or Mr. Nixon, had never
been engaged in any business transactions with them, and the campaign
against the trust company, which I felt sure had been conceived at the
outset in the interests of the Republican political machine, I now
suspected was part of a general scheme to get hold of anything and
everything that was valuable in the camp. By smashing the Sullivan
Trust Company they could hurt the Democratic party of the State, with
which we were affiliated, and for which it was currently believed we
were supplying the sinews of war. By smashing us they might also
cripple the bank with which we were doing business, and which in both
Goldfield and Tonopah, particularly Tonopah, was a formidable
competitor of their banking interests. And thus they might also
facilitate a decline in the market which would shake out of their
holdings borrowers at their banks.
I figured it out this way: Wingfield and Nixon knew that we had
foolishly attempted to support the market for our stocks, that other
promoters in Goldfield had done likewise, and that investors and
brokers in Goldfield had borrowed heavily from all of the banks. John
S. Cook & Company were calling for more collateral from their
customers, and real estate was being added to the pledges of mining
securities. What more easy, even though diabolical, than to "bear" the
market, shake out the stockholders in various important mines of the
camp, take their stocks away from them by foreclosure, and get
possession again, at bankrupt-sale prices, of the millions of dollars'
worth of securities which they had unloaded during the boom?
If this was the scheme of Wingfield and Nixon, what transpired could
not have been patterned more perfectly.
Mr. Wingfield walked the streets day and night, armed to the teeth, and
openly dared any of the miners to "get him." He threatened another
shut-down, a reduction of wages, the installation of change-rooms at
the mines and other dire things, all seemingly calculated to rouse the
ire of the mine-workers.
The miners fell for the bait, became belligerent and nasty and did
things with which the community was not in sympathy. Day by day the
situation became more critical.
During one of the shut-downs which ensued, Senator Nixon revealed his
hand by convening a meeting of the executive committees of the two
Goldfield stock exchanges. He insisted that the exchanges close,
arguing that the prices of stocks should be allowed to recede in
sympathy with the labor troubles. No thought was his for the men of the
camp who were committed to the long side of the market at boom prices
and who had worked day and night to create the boom which had thrown
into the laps of Wingfield and Nixon riches far beyond the dreams of
avarice. The brokers refused to close the exchanges.
Goldfielders were slow to grasp the real import of what was
transpiring. Things were very much unsettled. Optimism would rule
to-day on apparently inspired rumors that the differences between the
mine owners and the miners were about to be patched up. The next day
gloom would pervade the camp because of the unfavorable action by the
union on the peace plans. Nightly conferences were held. It was
impossible to get an accurate line on the situation. Crowds gathered
about Miners' Union Hall, where the meetings were held, and everyone
sought something tangible on which to base his market operations. The
officers of the union were in and out of the market, taking advantage
of their official positions to anticipate every favorable or
unfavorable development.
It was a critically sensitive market situation. The drift, however, was
unmistakably downward. Values began to melt like snow in a Spring thaw.
Through it all the Sullivan Trust Company stood valiantly behind its
securities in all markets where they were traded in--to the limit. I
was bull-headed. I had never before been through a mining-camp boom of
such proportions, and I failed to recognize that a reaction must ensue,
whether it was forced by Wingfield and Nixon or not. Tens of thousands
of shares of Sullivan stocks were thrown at our brokers on the San
Francisco Stock Exchange and New York Curb from day to day, and we took
them all in, refusing to allow the market to yield to the pressure.
FROM CREDIT TO CRASH
To convey an idea as to the standing of the L. M. Sullivan Trust
Company during this crucial period, I cite an instance. Logan & Bryan,
members of the New York Stock Exchange, Chicago Stock Exchange, Chicago
Board of Trade, New Orleans Cotton Exchange and all other important
exchanges, who conduct a leased-wire system from coast to coast at a
cost of $300,000 per annum, and who have over 100 correspondents in
nearly as many cities, all of high standing as stock brokers, made a
tentative offer to the Sullivan Trust Company early in December to
connect their wire system with our office in Goldfield and to give us
the exclusive wire connection for Nevada at an annual rental of
$100,000. This offer would not have been made if the credit of the
Sullivan Trust Company had not been maintained at high notch, or if I,
personally, had not convinced men of substance that I was strictly on
the level, "Past" or no "Past."
Ben Bryan, the active member of this firm, was in Goldfield at the
time. He asked as to our finances. There was present Cashier J. L.
Lindsey of the State Bank & Trust Company.
"How much would your bank loan the Sullivan Trust Company on its
unindorsed paper and at a moment's notice?" I asked Mr. Lindsey.
"A quarter of a million or more," answered Mr. Lindsey.
This apparently satisfied Mr. Bryan.
Our rating in Bradstreet's and Dun's was "AA1." A private statement
issued by Bradstreet was to the effect that while our rating was only
$1,000,000 and we claimed a capital and surplus of only $1,000,000 at
the time the rating was given, it was believed in Goldfield that we
were worth much more, and that we had actually understated our
resources because we considered it bad policy to divulge the great
profits in the promotion business.
By December 15 the condition of the Sullivan Trust Company had become
about as follows:
Our $3,000,000 surplus had been reduced to $2,000,000 and all of this
$2,000,000, plus the loss, was represented by our own bought-back
stocks. We had no money, except about $50,000, remaining of the
$300,000 borrowed from the State Bank & Trust Company. We were
committed in excess of this $50,000 to brokers for stocks in transit,
but by the "crossing" process we were able to maintain a chain that
kept intact our reduced cash balance. We figured that a fresh loan of
$300,000, additional to the $300,000 already obtained from the State
Bank & Trust Company, would enable us to take up all of our paper and
to discontinue the "cross" trades. We promptly arranged for the loan,
which Cashier Lindsey of the State Bank & Trust Company informed us
would be immediately credited to our account whenever we required the
money. Interest charges were at the rate of 1 per cent. a month in the
camp at that time, and for that reason I did not ask that we be at once
credited with the amount. I sent over to the State Bank & Trust Company
another big batch of stocks, to be held as collateral against the
promised loan, and got a receipt for it stating that it was accepted as
collateral on our "open loan" account.
The market in Sullivan stocks had now steadied itself and it appeared
that it would be impossible for any further selling of consequence to
take place. We had bought back in the open market fully 50 per cent. of
all the stocks promoted by the trust company. Distribution of the
stocks of our early promotions had originally taken place in such a
broad way that it now appeared as if selling must necessarily become
scattered. We felt somewhat crippled, but in no danger, and were "still
in the ring."
DOWN WITH THE SULLIVAN TRUST COMPANY
By this time I was "all in" physically. I had a cyst, of fifteen
years' growth, on the back of my head. It had become infected. I was
threatened with blood-poisoning. I suffered much pain. I had been on
the desert for nearly three years, without leaving it for a day. My
associates insisted that I go to Los Angeles immediately for treatment
and a rest. Believing that the trust company was secure, I made
preparations to go. Before leaving I busied myself with the
preparation of a dozen full-page reading-matter advertisements on
Sullivan properties, which the Salt Lake _Tribune_ and Salt Lake
_Herald_ had contracted to publish in their New Year's Day editions.
These are an annual feature of those newspapers. I decided to "make"
Salt Lake on my return trip from Los Angeles and be there on New
Year's Day with our mailing-list, to superintend the mailing of the
papers to all stockholders in Sullivan properties. On account of the
great value which we attached to the mailing-list, I would not trust
anybody but myself with the job. I spent Christmas in Los Angeles and
arrived in Salt Lake on New Year's Day, ready for work.
I was busy in the Salt Lake _Herald_ office next day when affable
Peter Grant, a partner of Mr. Sullivan, with whom Mr. Sullivan had at
the outset divided his interest in the Sullivan Trust Company, walked
in. I asked Mr. Grant, who had remained at the helm with Mr. Sullivan
while I was away from Goldfield, about business. He assured me that the
loan from the State Bank & Trust Company would not only be forthcoming,
as needed, but that Cashier Lindsey had informed him that we could have
$500,000 instead of $300,000 additional, if we actually had to have it,
and that the bank would back us to the extent of a million in all, if
necessary.
On calling next morning at the office of James A. Pollock & Company,
our Salt Lake correspondents, I was astounded to learn that rumors had
been telegraphed to them from San Francisco that our paper was being
held up in Goldfield.
"That's nonsense!" said Mr. Grant. "Why, Lindsey has given me his word,
and there can't be a question about it."
"Maybe he has 'laid down' on us," I said, "and that would be ----!"
"Nonsense!" said Mr. Grant. "I'll telegraph him that in addition to
honoring our Goldfield paper with the money we have borrowed from him,
he must wire $150,000 to our credit in San Francisco, and you and I can
jump on the train to-day and go to San Francisco and support the market
right on the ground. If those rumors have spread around San Francisco a
lot of short-selling will take place and the market will need support."
I agreed.
So confident were Mr. Grant, James A. Pollock & Company, and I that
everything was right with us that we gave and they accepted a big
supporting order to be used on the San Francisco Stock Exchange during
the succeeding day while Mr. Grant and I should be on the train to the
Coast city.
We arrived in San Francisco late at night. A number of brokers met us
and conveyed the news that the State Bank & Trust Company had "laid
down" on us. In the meantime despatches to us from the cashier of the
Sullivan Trust Company had piled up at the hotel. He explained the
situation, which was this:
All the trains carrying drafts in the mail to Goldfield had been
stalled by snowstorms two days before New Year's. The next day was
Sunday. Monday was New Year's Day, a legal holiday. Thus five days'
mail had accumulated, and on Tuesday the delayed drafts were presented,
all in a bunch.
L. M. Sullivan, president of the trust company, who was supposed to be
on deck at Goldfield, was in Tonopah, where he was reported to be in
imminent danger of arrest on the charge that during a New Year's brawl
he had nearly brained a chauffeur with a butt-end of a revolver.
The bank people became alarmed.
In requisitioning the $300,000 we had stated that we would call for it
piecemeal, as had been our custom in the past. The five days' mail had
piled up drafts totaling nearly the entire amount. I was absent from
Goldfield. Mr. Grant was away, and so was Mr. Sullivan. Employees were
running the business. Cashier Lindsey concluded that we were
"overboard." On top of it all, Donald Mackenzie, the heaviest depositor
of the State Bank & Trust Company, had that very morning drawn out a
large sum, said to aggregate $400,000, and had it transferred to San
Francisco. Our wires from Goldfield stated he had been frightened by
rumors that the Sullivan Trust Company was in trouble and that the
State Bank & Trust Company would be involved.
That settled it. The enterprise that I had built up from such a meager
beginning into a $3,000,000 trust company crumbled in a heap and left
us stranded on the financial shoals of an over-boomed mining camp.
SOME HINDSIGHT THAT CAME TOO LATE
I attribute the destruction of the Sullivan Trust Company to six
factors, namely, (1) politics; (2) blackmail; (3) lack of wide
distribution of our later promotions, we having sold most of these
stocks in large blocks during the exciting boom days through brokers to
speculators instead of disposing of them in small lots direct to
investors; (4) my lack of knowledge of markets and inexperience in
market manipulation; (5) my own stubborn pride and optimism, and (6)
the failure of the State Bank & Trust Company to keep its pledge of
assistance.
It is conceded in Nevada by all honest men that, without exception, all
of the properties promoted by the L. M. Sullivan Trust Company had
merit, and that money was lavishly provided for mine development as
long as the trust company was in existence. The properties were
selected with great care. They were very much higher in quality than
the average. Those at Manhattan are yielding treasure to this very day,
and may make good yet in a handsome way from a mining standpoint. Those
at Fairview bid fair to duplicate the performance. Had I kept out of
politics, been a good market general, and taken cognizance of the fact
that the law of supply and demand is as inexorable in mining-stock
markets as in every other line of human endeavor, I could have saved
myself and associates from financial ruin.
It would have been the better part of valor to have emulated Bob
Acres--back up and "live to fight another day." Instead, I attempted
the impossible in my endeavor to stem the tide of liquidation, and
exhausted our resources to the last dollar in buying back the Sullivan
stocks at advanced figures over the promotion prices. I didn't know
then, as I know now, that the accepted practice of the successful
market operators is to go with the crowd--to help along an advance when
the public is buying, and, with equal facility, to further a decline
when everybody wants to sell. It was my first experience, and, like so
many beginners, I was overconfident, lacking in judgment, and fatally
ignorant of the finer points of the game.
The complete collapse of the financial structure I had labored so hard
to construct came as an overwhelming blow to the camp and marked the
beginning of the end of the great Goldfield mining-stock craze.
Our enemies had overshot the mark. Public confidence was irreparably
shattered by the smash of the trust company, and it would have been
better for Goldfield and Nevada had Wingfield and Nixon possessed
sufficient foresight to go to our rescue instead of facilitating our
destruction. Money that had poured into the camp without cessation
month after month for mine development started to flow the other way.
Less than a year later, when Wall Street's financial cataclysm put a
quietus on market activities of every sort, the great fortunes of
Wingfield and Nixon themselves hung in the balance, and had it not been
for a quick transaction by which the United States Mint at San
Francisco forwarded by express to Reno and Goldfield $500,000 in gold,
the failure of Wingfield and Nixon and their chain of banks might have
happened as a fitting climax to the scheme of aggrandizement which they
had fostered.
It was rumored at the time that this money had either been obtained
from the Government as a deposit for the Nixon National Bank in Reno or
was obtained at great sacrifice from Wall Street bankers, and that only
by virtue of Mr. Nixon's position as Chairman of the Committee on
National Banks of the United States Senate was he able to get the
Sub-Treasury in New York to instruct the Mint at San Francisco to
supply the gold at this crucial period when fiat money was current in
the East. Whether it was a Government deposit or not, Senator Nixon got
it--and he needed it.
Even to this day Wingfield and Nixon are engaged in an effort to shift
the responsibility to me for the destruction of the great mining camp
of Goldfield, which to-day marks the graveyard of a million blighted
hopes.
On the eve of the Wall Street panic of 1907, every bank in Goldfield
and Tonopah that had existed through the mining boom with the exception
of those of Wingfield and Nixon, went to the wall, and every Goldfield
broker, with one or two exceptions, went broke. The business interests
of the camp suffered the same experience. Wingfield and Nixon succeeded
in annexing the remnants of the Goldfield banking business, along with
the control of nearly all of the Goldfield properties for which they
had been seemingly gunning. Wingfield and Nixon are, in fact, to-day in
control of the political as well as the banking and precious-metal
mining industry of the State. They have triumphed, but Goldfield,
except for the big mine and one or two others of little consequence
which they do not own, has been throttled and is dying the death. Had
Wingfield and Nixon played a broad gauged game, the camp would
undoubtedly still be on the map and, instead of having only two or
three mines, might now boast of thirty.
As quickly as possible I convened a meeting of the creditors of the
Sullivan Trust Company, all of whom happened to be either Western
brokers or banks. The market had gone to smash and our liabilities were
$1,200,000. The assets, calculated at the low market price of the
securities that was reached after the embarrassment was publicly
announced, were still in excess of the liabilities. The creditors
agreed in jig time that if we would turn over all of the securities
they would accept 80 per cent. of the net proceeds as full payment of
our obligation and return the other 20 per cent. to the trust company.
Thomas B. Rickey, president of the State Bank & Trust Company, was
appointed manager of the pool, and was also elected president of the
Sullivan Trust Company, which exists in moribund state to this day. Mr.
Rickey had even a higher opinion of the value of the securities than we
had, and he refused to sell any of them at the prices which then
prevailed. He held on. During the bankers' panic of 1907 the State Bank
& Trust Company failed for about $3,000,000. The Sullivan mines were
compelled to shut down. Mr. Rickey still held on. Manhattan, the mining
camp, struck the toboggan. The boom in Goldfield securities collapsed
at the same moment. The Sullivan stocks shriveled, like the rest of the
list, to almost nothing.
As far as I can learn, neither the bank or broker-creditors nor any of
the members of the Sullivan Trust Company have ever received a dollar
as a result of the settlement. Had the securities been disposed of
immediately after the embarrassment, the trust company would have paid
dollar for dollar. Those of the public who did not sell their holdings
in the Sullivan companies when we were supporting the market to the
extent of more than $3,000,000, lost most of their investment. Those
who did sell--most of them--made money. The market value of these
securities, at the height of the boom, was in excess of $5,000,000. The
price paid for them by the public, as already stated, was in the
neighborhood of $2,000,000.
After settling with the creditors of the Sullivan Trust Company on the
basis just outlined, I departed from Goldfield as broke as when I
arrived there three years before. The only money I or my partners had
drawn from the business during the life of the trust company was about
$5,000, just sufficient to pay living expenses. My expenses to New
York, where I went to have my head operated on--are you
surprised?--were supplied by the proceeds of the sale of my seat on one
of the Goldfield stock exchanges, from which I netted $400. I landed
back in the big city with $200 in my pocket, the exact sum with which I
had left town three years before.
My reward for three years of untiring work on the desert was a big fund
of Experience. Believe me, I thought it would hold me for a while! But
it didn't.