GOULD’S ASSAULT UPON ERIE.
The most thrilling, the most discreditable portion of Gould’s career,
is contained in the ten years following the close of the war of the
rebellion. The blackest pages in the history of American railways
comprise the chapter relating to the Erie and the most shameful efforts
to wreck the fortunes of a thousand men for the aggrandizement of
the fortunes of a few, were made in connection with the schemes that
resulted in “Black Friday.”
Nothing in the Credit Mobilier and the history of the rise of the
Pacific railroads equals in downright violation of sacred trusts,
in absolute plunder of vast properties, and in wholesale bribery
and corruption, the record of Erie. Even Mr. Gould, in his sworn
autobiography in that celebrated investigation before the committee on
labor and education, while careful to give minute details about other
periods of his history, significantly preserved an entire silence as
to Erie and “Black Friday”--two incidents in his career which nothing
but an effort to conceal could explain his silence regarding. That
this is no exaggeration of language, an examination of the facts will
show. There is no intention to speak maliciously of Gould. Beside an
open grave, charity and forgetfulness stand guard on either side. But
the lesson of Gould’s career would be lost, if even at this time the
facts were not plainly and openly told. To say that Gould ruthlessly
plundered the Erie railway is to speak the plain truth.
Fortunately the record of Erie, notwithstanding Mr. Gould’s silence,
can be told from authoritative testimony. In his famous “Chapter of
Erie,” published in the North American Review, in 1869, Charles Francis
Adams gives a thrilling account of Erie from the time Daniel Drew
engaged in his famous war with Commodore Vanderbilt, to the time when
that unfortunate road was in complete control of Jay Gould and James
Fisk, Jr. Mr. Adams’ history stopped short in the middle of the story,
but the record of Erie, from 1869 till Mr. Gould was driven from power
in 1872, is given in the report of the legislative inquiry in 1873, and
of the Hepburn investigation of 1879.
It is a curious fact that years after writing this “chapter” Mr. Adams,
having become president of the Union Pacific, sat in the same Board of
Directors with Gould, but only for a comparatively brief period, and
Mr. Adams never repudiated or recalled his early history of Gould in
Erie. It is a striking illustration, however, of the power of millions
that Gould should live to sit in the same board with the representative
of the aristocratic Adams family, which furnished two Presidents to the
United States; that after an effort to involve the administration of
President Grant in the disgrace of Black Friday, he should, in after
years, be joined with him in business enterprises; that after having
been publicly branded as an unscrupulous gambler in a Congressional
report written by James A. Garfield, he should be sought for to render
aid to secure Garfield’s election as president, and that, though not
seeking to join the social circles in which the Astors are leaders,
he was able to induce John Jacob Astor to sit with him in the Western
Union Board of Directors.
Twenty years ago, after Mr. Adams wrote his “Chapter of Erie,” he
was himself president of the Union Pacific, and it must have given
Mr. Gould the keenest satisfaction to have been the occasion of
his retirement from that position. The railway was in a bad way
financially--had a big floating debt--and Mr. Gould and his friends
stepped in, gained control of the property the second time, retired
Mr. Adams from the presidency and secured an adjustment of the
floating debt. It was suggested to Mr. Gould at this time that he
might write a “Chapter of Union Pacific” covering the history of the
Adams administration. But whatever there may have been lacking in
administrative vigor in Mr. Adams’ presidency, he retired without any
blot on the family escutcheon.
When Gould entered Wall street Erie was one of the most active stocks
on the list of the Stock Exchange. It was natural that he should
drift into its speculation, and his connection with the Cleveland
and Pittsburg led him naturally into Erie. His old acquaintances
were surprised to hear one day that he had become a director and a
controlling spirit of this great road. This was in 1867.
But now let us quote a little plain language from Charles Francis Adams
in order to get into the atmosphere of Erie at this time:
“Yet freebooters are not extinct,” he wrote. “They have only
transferred their operations to the land, and have conducted them in
more or less accordance with the forms of law, until at last so great a
proficiency have they attained that the commerce of the world is more
equally but far more heavily taxed in their behalf than would ever have
entered into their wildest hopes, while outside the law they simply
make all comers stand and deliver. * * * Gambling is a business now,
where formerly it was a disreputable excitement. Cheating at cards
was always disgraceful. Transactions of a similar character under the
euphemistic names of ‘operating,’ ‘cornering’ and the like are not so
regarded. * * * No better illustration of the fantastic disguises which
the worst and most familiar evils of history assume as they meet us in
the actual movement of our own day could be afforded than was seen in
the events attending what are known as the Erie wars of the year 1868.”
In these wars Gould was an active spirit; and if Mr. Adams had written
in 1873 instead of 1869 he would have made his language still stronger.
Before his entrance into Erie Gould had become acquainted with James
Fisk, Jr., and the former, with that unerring judgment of men which
was always one of the elements of his success, soon perceived in Fisk
the qualities which supplied his own deficiencies. Fisk was the son
of a Vermont peddler and followed the calling himself for some time,
and in it learned the great art of driving a hard and shrewd bargain.
Wholly uneducated, his natural ability in the line of making money
was very great. Gould was timid and shrank from publicity. Fisk was
bold and loved notoriety. Gould had many refinements of mind and was
of a domestic nature. Fisk was coarse, sensual and fond of display.
He became the colonel of a militia regiment, and with great delight
used to put on his uniform and ride in front of his command. He used
to create a sensation by riding in a carriage with six horses in
questionable female company. He considered it one of the choisest
prerogatives of his position of vice-president and comptroller of Erie
to direct the theater that adjoined the railway offices in the Grand
Opera House. While Gould did not have the inclination or courage to do
these things he did not hesitate to use Fisk in every available way
and to hide his own personality behind that of his partner. In those
days Fisk seemed to play the more prominent part, and Gould, in public
estimation, was a secondary character. When anything was done it was
Fisk that bore the brunt of popular criticism and indignation. Yet the
facts as they are now known show that Gould’s was the master mind; Fisk
was simply his right arm. “With Gould to plan and Fisk to act,” said
Gen. Francis Barlow, in 1872, “they were a strong team.”
At the time Gould and Fisk entered into Erie, Daniel Drew was the
master of that great trunk line. Drew was one of the most extraordinary
characters in Wall street history. Both pious and unscrupulous, he
founded a theological seminary and wrecked a railroad with equal
fervor. He was a director and treasurer of Erie, and used these
positions simply for speculative purposes. He was known in his day as
“the great speculative director.” His biggest piece of “financiering”
was to get himself apparently cornered in Erie stock, and then to
appear in the street with a block of stock which had been converted
from bonds issued with an obscure provision entitling the holders
to convert them into stock. Gould later on repeated this trick with
success, both in Erie and Jersey Central.
Soon after Gould and Fisk entered Erie, Drew became engaged in his
celebrated contest with Commodore Vanderbilt, and in this contest he
had their able assistance. The first and great Vanderbilt was cast in a
larger mould than Drew. The latter was simply a speculator. Vanderbilt
was a creator of property. He was the first of the line of railroad
kings. Laying the foundations of his great wealth in the steamboat and
steamship business, he soon drifted into railroad operations, clearly
seeing that in the development in the great inland commerce of America
there were larger and quicker profits to be obtained than in the export
trade.
Vanderbilt had obtained control of the Harlem and Hudson River roads;
he now aimed at the ownership of Erie. Space will not permit the
telling of the story of this famous contest. It can be found in detail
in Mr. Adams’ interesting chapter. It is a story of extraordinary
stock operations, of millions lost and won; of securities issued by
the bushel and with little or no regard for law or equity; of large
and intricate litigation; of judges bought, legislators bribed, of
directors defying injunctions and fleeing to another state to escape
arrest. Vanderbilt, having been defeated in other efforts to get his
fingers on the Erie road, resolved, if possible, to buy a controlling
interest, and his brokers were set at work on this difficult job.
Drew resolved to let Vanderbilt have as much stock as he wanted, but
entered into a bargain with Gould and Fisk by which the railroad king
should be defeated by issuing and marketing an unlimited number of new
securities. So Drew sold and Vanderbilt bought. The latter, having in
remembrance Drew’s famous convertible stock trick, resorted to the
courts to prevent him from issuing any more stock. Injunctions were
issued enjoining Drew and all the directors of the road from issuing
any stock. Counter-injunctions were obtained by the Drew-Gould party.
One judge would issue an order commanding certain things to be done
which another judge simultaneously commanded should not be done. Judges
in New York, Brooklyn, Albany and Binghamton issued contradictory
injunctions. Such a legal pandemonium has never been seen before or
since. The courts ran riot and law became another name for plunder. In
this scene--the blackest in the history of American jurisprudence--the
notorious Judge Barnard loomed up conspicuously, and a little later
Judge Cardoza, shrewd, learned, crafty and venal--the modern Lord
Bacon--appeared on the scene. At first Barnard was Vanderbilt’s judge.
Later, when Vanderbilt had no further use for him, he became Gould’s
judge. His other master was Tweed.
In the meantime, regardless of injunctions, Drew and his aides calmly
proceeded to carry out their carefully matured plans to issue new
stock. It was agreed that fifty thousand shares of new stock should
be delivered to the Wall street firms of which Gould and Fisk were
members. Without going into the details of the intrigue, it is
sufficient to say that it was, at least for the time being, successful.
When the fifty thousand shares were thrown on the market the price of
Erie fell from eighty-three to seventy-one. Vanderbilt found that he
had bought at high figures a lot of Erie stock, but that he was no
nearer control than ever. Drew raked in about seven million dollars
of Vanderbilt’s money, and Gould and Fisk shared in the profits. Then
orders were issued to arrest the Drew directors for contempt of court.
Receiving intelligence of this, they hastily packed up their papers
and securities, and thrusting them into their pockets and valises,
they beat a hasty retreat to Jersey City. Over six million dollars in
securities were carried in one coach. Among this precious company,
of course, were Gould and Fisk. In Jersey they were safe from the
operation of New York law. They calmly proceeded to have the Erie
incorporated as a New Jersey institution, at the same time laboring to
get the New York legislature to pass a bill to legalize the issue of
fifty thousand shares of stock, a transaction which some one at that
time likened to an attempt “to legalize counterfeit money.” It was
not conscientious scruples which caused the legislature to hesitate
to pass this bill; it was simply a question of cash. Vanderbilt was
still in the fight to protect his interests, and it was a question of
who had the biggest purse. Meanwhile, Peter B. Sweeny--the brains of
the Tweed ring--had been made, temporarily, receiver of the road, and
though he never actually did anything in that position, Judge Barnard
ordered that he be paid one hundred and fifty thousand dollars for his
services. Poor Erie had to foot the bill.
The Erie people needed a first-class representative at Albany to
watch their interests before the legislature. Gould was selected as
the fittest man to act in the capacity of a lobbyist. First giving
out that he was going to Ohio, Gould quietly slipped up to Albany,
with five hundred thousand dollars of Erie cash in his pocket. Here
in a day or two he was arrested, but released on five hundred dollars
bail to appear in a New York court on Saturday. He appeared on that
day, but his attorneys secured a postponement, and he was allowed to
return to Albany in charge of an undersheriff. Arriving in Albany Mr.
Gould was conveniently taken sick, and unable to return to New York
to attend the court proceedings, though he drove to the capitol in a
snowstorm. The officer reported him to the court as a “runaway,” but
the matter was afterward settled, and, in the language of Mr. Adams,
he “assiduously cultivated a thorough understanding between himself
and the legislature.” In this he was materially aided by the cash with
which his pockets were so liberally filled. Corruption ran high. One
senator was recorded to have accepted seventy-five thousand dollars
from one side and one hundred thousand dollars from the other. One man
was paid five thousand dollars by Gould “just,” as Mr. Gould remarked,
“to smooth him over.” The corruption at this session was investigated
by a legislative committee in 1869. Gould was a witness, but he
endeavored to conceal the facts as much as possible. In the famous Erie
investigation of 1873, however, Mr. Gould testified as follows:
“I was first elected President of the Erie railroad in 1868, and I was
President in 1869, 1870 and 1871. I do not remember whether I approved
payment to William M. Tweed of money for legal services while he was
Senator. I do not know whether he is a lawyer. He was a director
of Erie and a member of its executive committee. I would not have
allowed pecuniary transactions with Mr. Tweed to be put in the shape
of legal services if my attention had been called to them. The name of
William M. Tweed is in my handwriting. The words in my handwriting
are: ‘William M. Tweed, legal disbursements as per order, J. G.,
$35,000, April 25, 1871.’ The approval of voucher, April 5, 1869. He
was Senator in 1869, also in 1871 and 1872. The ‘legal account, was
of an india-rubber character. I gave large amounts in 1869, 1870,
1871 and 1872 in the senatorial and assembly districts. It was what
they said would be necessary to carry the day in addition to the
amount forwarded by the committee, and contributed more or less to all
the districts along the line of the road. We had to look after four
states--New York, New Jersey, Pennsylvania and Ohio. It was the custom
when men received nominations to come to me for contributions, and I
made them and considered them good paying investments for the company.
In a republican district I was a strong republican; in a democratic
district I was a democrat, and in a doubtful district I was doubtful.
In politics I was an Erie railroad man all the time. We had friends on
both sides--friends in a business way. The amounts contributed for the
elections were large, but I could not give any definite estimate. No
names occur to me at the moment. I am a poor hand to remember names. I
had relations in several states. I did not keep separate what I paid
out in New Jersey from what I paid out in New York. We had the same
ground to go over there, and there has been so much of it--it has been
so extensive--that I have no details now to refresh my mind. You might
as well go back and ask me how many cars of freight were moved on a
particular day.”
This confession so charmingly frank relates to payments before
elections, but there is every reason to believe that the payments were
continued after election.
The state of things unearthed by this investigation was officially
described in the report of the legislative committee as follows:
“It is further in evidence that it has been the custom of the managers
of the Erie railway, from year to year in the past, to spend large sums
to control elections and to influence legislation. In the year 1868
more than one million ($1,000,000) was disbursed from the treasury for
‘extra and legal services.’
“Mr. Gould; when last on the stand, and examined in relation to
various vouchers shown him, admitted the payment during the three
years prior to 1872 of large sums to Barber, Tweed and others, and
to influence legislation or elections; these amounts were charged
in the ‘India-rubber account.’ The memory of this witness was very
defective as to details, and he could only remember large transactions,
but could distinctly recall that he had been in the habit of sending
money into the numerous districts all over the state, either to
control nominations or elections for Senators and members of Assembly.
Considered that, as a rule, such investments paid better than to
wait till the men got to Albany, and added the significant remark,
when asked a question, that it would be as impossible to specify
the numerous instances as it would to recall to mind the numerous
freight-cars sent over the Erie road from day to day.”
The report of the committee concludes as follows:
“It is not reasonable to suppose that the Erie railway has been alone
in the corrupt use of money for the purposes named; but the sudden
revolution in the direction of this company has laid bare a chapter
in the secret history of railroad management such as has not been
permitted before. It exposes the reckless and prodigal use of money,
wrung from the people, to purchase the election of the people’s
representatives and to bribe them when in office. According to Mr.
Gould, his operations extended into four different states. It was his
custom to contribute money to influence both nominations and elections.”
Mr. Adams did not have this report before him when he wrote his
“chapter.” His record closes in 1868, soon after Mr. Gould had been
elected president of the road. This had been brought about in the
following manner: While Gould was engaged in “fixing” the legislature,
and the courts were filled with Erie suits, the various parties in
interest got together and effected a compromise. Vanderbilt got rid
of the useless stock he had bought at high figures. Drew pocketed his
profits and returned from exile in Jersey. The Boston, Hartford and
Erie crowd which had figured in these transactions, having got all
they could out of Erie for the benefit of their own bankrupt road,
withdrew. All litigation was stopped and injunctions revoked. Bills
were rushed through the legislature favorable to both Vanderbilt and
Erie. Drew resigned from the road; Vanderbilt relinquished his ambition
for control, and the property was turned over to Gould and Fisk. Drew
may have thought that by this time the poor old road was a squeezed
lemon, but if so he was mistaken, for Gould and Sage found that the
property had not yet been worked for all that was in it. What their
administration cost the road is very plainly set forth in the testimony
given before the Hepburn Committee of 1879, by J. W. Guppy, assistant
general superintendent under Gould, and for many years connected with
the road into whose service he first entered as a telegraph operator.
When Gould was ousted from the control in March, 1872, the total stock
was $86,536,910, the funded debt $26,395,000 and the floating debt
$2,517,301, a total of $115,449,211, an increase during the time of
Gould’s identification with the road of $64,383,268. Yet Mr. Guppy
testified that not a dollar of this vast sum was represented by any
additions to the road.
At the time that the Gould-Fisk ring was sucking the life-blood of
Erie, the Tweed-Sweeny ring was plundering the city of New York. The
two were really one. From Mr. Gould’s testimony just quoted and from
other facts here presented, it will be seen how closely allied they
were. Tweed was one of the executive committee of the Erie and was
paid large sums for so-called “legal” services. This was a great day
for the spoilsmen. It was a long feast of corruption. Dishonesty walked
openly in the streets, bribery influenced elections and controlled
legislatures, and plundering was a fine art. Great as was Tweed at this
time, his prosperity was soon to end in flight, capture, imprisonment,
disgrace and death, but Gould survived the exposure and lived to enjoy
his wealth and power.