THE STANFORD SKELETON
I have referred to the dissatisfaction of Grand Duke Timothy Hopkins at
the coming into power of a progressive government in California. This
event was especially embarrassing to the Stanford trustees, because of a
family skeleton which for many years they had been hiding in their
academic closet. You understand that these high-up masters of finance
have an elaborate system for plundering the railroads and public utility
companies which they control. They have holding companies and investment
companies and subsidiary concerns of various sorts, whereby they skim
off the cream of the profits, without interference by public
commissions. Nobody but a few insiders today can form any idea where the
profits of an American railroad or public utility corporation are going,
or what should be the income from any particular investment. And now,
here are these same smooth gentlemen administering the investments of a
university; what more natural than that it should occur to them to
handle these funds in the same manner?
Apparently old Senator Stanford foresaw this, for his trust deed
provided that the Governor of the state should receive a complete report
each year upon the financial affairs of the trust. But the Governor of
the state never received that complete report. For many years the
faculty of Stanford, who were living on short rations, could get no
statement whatever; the trustees allowed the university the lump sum of
eight hundred thousand dollars a year, and no explanations. Finally,
about 1908, after some years of agitation, a statement was prepared and
circulated at a board meeting. It was the first financial statement
which President Jordan had ever seen, and he badly wanted a copy of it,
so he “swiped” it—at least so he told a member of the faculty, who told
me. He called a meeting of the full professors, to whom he gave certain
figures purporting to be the income of the university trust as
communicated to him, but one of the professors who had made a detailed
study of the court schedule of Mrs. Stanford’s estate pointed out that
the interest on the bonds there scheduled amounted to more than the
purported total submitted by President Jordan—this not counting other
sources of income. And Trustee Crothers, in a letter to me, admits that
during the period he held the Pacific Improvement stock in trust the
income from this one item amounted to two million dollars in thirty-one
months, which is just about eight hundred thousand dollars a year! After
that nothing more appears to have been heard or seen of this financial
statement.
These facts are known to many who are interested in the university; they
were known to Thorstein Veblen, who was a professor in Stanford for
three years. In 1918 Veblen published a book entitled, “The Higher
Learning in America,” in which he referred briefly to this scandal. But
his sense of politeness toward the university caused him to withhold its
name—which got him into trouble with Professor Brander Matthews. If I
tell you this story, it will lead us off the trail of Stanford for a
page or two; but it will teach us about the prestige of universities and
how it is maintained, and we shall thus be better able to understand the
Stanford skeleton, and how it has been kept hidden all these years.
I am told by a person high up in Columbia University that it was
Nicholas Murray Butler, sitting in his high watch-tower and keeping
guard over his empire of education, who first saw this dangerous book of
Veblen’s, and turned it over to his henchman, Brander Matthews, to be
“slated.” Matthews wrote what was supposed to be a book review, but was
really an assassination, and the New York “Times,” which exists to
perform these little services for the plutocracy, gave it prominence.
Matthews found one trivial grammatical error in Veblen’s book, and
another printer’s error which could be laid to Veblen; on this basis he
accused of illiteracy the most brilliant economic satirist in the world!
Because of Veblen’s politeness in failing to name Stanford, Brander
Matthews described him as “a creature who creeps up stealthily with a
stiletto to deal a stab in the back.” Says Matthews: “On page 67 and on
page 70 Mr. Veblen seems to suggest that there are boards of trustees
whose members make a personal profit out of the funds entrusted to them;
the insinuation is hedged about with weazel words—i. e., ‘instances of
the kind are not wholly unknown, though _presumably_ (!) exceptional.’”
To appreciate this extreme piety of Professor Brander Matthews, you
would have to see him, as I have, dangling a cigarette from his lower
lip as he lectures to his students, and causing these prematurely wise
young men to chuckle at his worldly wit. For Brander is a club man and
cynic, one of the very shrewdest, and he knows what butters parsnips. If
in the bosom of the Century Club he and his friend, Nicholas Miraculous,
were to hear a story about a member of a school board getting advance
information and buying up real estate, or about a college trustee
handling the investment of trust funds in such a way as to make “honest
graft” out of it, the two of them would tip each other a wink. But when
they are talking for publication—when they set out to assassinate a
dangerous radical—the two cronies take on an air of innocent
trustfulness which has not been met with in the world since Moses
Primrose came home from the fair with his gross of green spectacles with
silver rims and shagreen cases!
For my part I don’t want to take any chance of being called “a creature
who creeps up stealthily with a stiletto to deal a stab in the back!”
Whatever my old friend Professor Matthews may say about me when he comes
to assassinate this book in the New York “Times,” let him at least put
me under his other classification—that more respectable person “who
comes straight at us with a bowie knife in his hand.” Before I finish
this volume I shall give Professor Matthews several cases of university
and college trustees misusing funds; in a succeeding volume, I shall
show him school board members getting commissions from book companies,
and buying up land to sell to the public for school sites. If Professor
Matthews will obtain a copy of a printed report made in 1908 to Mayor
Taylor of San Francisco by a graft investigating committee, he will find
it proven that one of the regents of the University of California
invested university funds in a “French Restaurant” building on the
corner of Geary and Mason streets, constructed by him with a view to its
use as a house of assignation. And if that seems too far off for
Professor Matthews, let him investigate the properties in New York City
on which his own university holds its mortgages, and he will find that
one of them at least was being used as a disorderly house last spring!
Or let him run up to Rochester, where the university is moving out to a
magnificent new site, furnished by Mr. Eastman, the kodak king, and all
around that site he will find that members of the board of trustees and
their relatives and friends have been making money buying up real estate
on advance information. Or let him visit the Connecticut College for
Women, at New London, and hear the story of Frederick Sykes, the recent
president, who discovered that the trustees were stealing the funds of
the college, even to the coal, and tried to interfere with them and was
fired from his job! One of the trustees was a high school principal, and
the board furnished him an automobile to go out and collect funds. He
never got any funds, but continued to use the car, and when the scandal
was exposed, it was explained that he had arranged to have the price of
the car returned to the college in his will. The grand duke who ran this
board of trustees was a multi-millionaire, who had set them a bad
example by living a dissolute life. He wanted an inn-keeper’s wife, and
paid the inn-keeper forty thousand dollars to get a divorce from her;
then the grand duke married the lady, and got an honorary degree from
his college!
With this much of preliminary, we return to Stanford, to see just what
this super-plutocratic board of trustees has done. To begin with, let me
explain that the holding concern devised by the “Big Four” plunderers of
the Central-Southern Pacific, for the purpose of skimming off the cream
of the profits, was known as the Pacific Improvement Company. The
affairs of this concern have been kept a dark secret; the holdings of
Stanford in Pacific Improvement stock were not made over to the Stanford
trust by Mrs. Stanford, but were placed in the hands of Judge Crothers,
a trustee, and by him turned over to the Stanford trust after Mrs.
Stanford died. In the last annual report of the treasurer of the
university, I find the value of this holding listed at one hundred
dollars for twenty-five hundred shares, with “dividends from earnings”
for the year of $2,482.44, and “liquidation dividends” of two hundred
and seventy-five thousand dollars. That is a pretty good earning
capacity for a hundred dollars’ worth of stock, you must admit! You see
how the big insiders operate—no one knows what this stock is really
worth. In his letter to me Trustee Crothers admits that “there were a
number of reasons why Mrs. Stanford did not wish the whole world, nor
even all of the trustees of the university to know the terms ... of the
Pacific Improvement trust.” No probate courts, or inheritance tax
appraisers, or other unfriendly investigators were ever to have a chance
to stick their noses into Pacific Improvement!
Next, these super-plutocratic trustees turned over to Stanford
University the sum of eight hundred thousand dollars a year, without
explanation, and this sum of money was deposited in the Union Trust
Company of San Francisco without interest. Let Professor Brander
Matthews inquire around among his banker friends in New York, and find
out how much they would be willing to pay him in the way of interest on
a deposit account, amounting at its maximum to eight hundred thousand
dollars a year! I am informed that when Mr. Anderson came into the
board, representing the Morgan interests in the Standard Oil Bank of
California, he pointed out that that arrangement was not a profitable
one for the university. Also, I am told by a Stanford professor, in
whose rigid integrity I have many reasons for trusting, that he once
heard one of these trustees state angrily that the board had that
afternoon made a loan of five hundred thousand dollars to one of their
own members, at a ridiculously low rate of interest on the real estate
security offered. Afterwards the trustee who had borrowed this money got
into trouble, and no one knows how much money the university lost. In
the last president’s report I find a “capital decrease” recorded of
$17,320 on Sacramento Northern Railway bonds. I also find an item,
“Stock not recorded on books, when acquired in 1919 at Northern Electric
Company reorganization.” This is only one sample—nobody knows how many
other items are “not recorded on books!”
There are other matters of record which can be verified by anyone. These
trustees are the high-up members of the California plutocracy, the
shrewdest business men the state possesses; they work diligently for
their own financial interests, and have vastly increased their personal
fortunes during the last thirty years. But what have they done for
Stanford? They have made failures of the most important business
transactions they have managed for the university. The president of the
board of trustees is one of the richest ranchers in California, and
there are on the board officials and directors of several of the state’s
colossal land companies; how comes it that men like Mr. Newhall and Mr.
Nickel have never been able to tell Stanford how to make a success of
its big ranches? The Palo Alto, Vina and Gridley ranches all failed, and
the last two were finally sold at sacrifice prices. There were something
like a hundred thousand acres, sold for about four million dollars,
which is forty dollars an acre. The Gridley ranch was sold at a price so
low that every piece of it was almost immediately saleable at an advance
about forty per cent, without further subdivision; a great part of this
land is now being held for two hundred and seventy-five dollars an acre.
And these same first-class business men have carried on elaborate
building programs at the peak of high prices; they have leased a
wonderful building site for a long term of years, with the privilege of
buying at any time during the life of the lease, at a price set at the
beginning of the lease! They have killed Stanford as a democratic
institution, and brought it close to the rocks of bankruptcy, by
starting a medical school in San Francisco, against the judgment of the
best experts, and allowing the expenses of that school to swallow up the
funds of Stanford. That they had doubt as to the success of the medical
school was shown by their resolution in 1908, to the effect that this
school should never be allowed to take more than twenty-five thousand
dollars a year out of Stanford’s funds. But in the last president’s
report I find the medical school with a minus balance of a hundred and
nineteen thousand dollars—and this does not include the expenses of the
instruction at Palo Alto, comprising the first four or five years of the
course. For instance, the biological group alone shows a deficit of a
hundred and thirty thousand dollars!
So much for the handling of the Stanford trust. If I had a life-time in
which to study universities, I should like to see what care has been
taken with the funds of the University of the United Gas Improvement
Company of Philadelphia, and with those of the University of the Steel
Trust, at Pittsburgh, and with those of the University of Heaven, at
Syracuse, and with those of the Mining-Camp University at Denver. I
should like to settle down in New York and make a thorough financial
study of the University of the House of Morgan, and tell Professor Moses
Primrose the names of all those trustees and professors who got advance
news of the moving of the university to Morningside Heights; I should
like to raise a fund and have a search made of the title records, and
give him a list of the various lots and parcels of land which now belong
to Barnard College, and figure up the total of the fortunes cleared by
the insiders who purchased the old insane asylum which stood on that
site! But maybe Professor Moses Primrose would call that “honest graft!”