GOULD’S VICTORY AND FINAL DEFEAT IN ERIE.
During these years of Erie conflicts, Gould not only fought his enemies
most bitterly, but hardly appreciated the usual feelings of men to be
true to their friends. Gould and Fisk now had practical control of
Erie. They saw the October election coming, and they were nervous.
But the crops were good and Erie’s traffic brought in good returns.
Englishmen had become strangely fascinated with the stock, and had
bought over 100,000 shares. On August 19th the stock had dropped to
44, and then to the astonishment of Wall street, the transfer books
were closed, preparatory to the annual election on October 13th. The
election went off well for Mr. Gould and his friends. Peter B. Sweeny
and William M. Tweed were among the new directors. Then, it is said Mr.
Gould began a system of locking up money. This culminated on October
27th, when members of the New York Stock Exchange waited on Mr. Gould,
who had obtained large loans on Erie. Mr. Gould told the committee
that $10,000,000 of convertible bonds had been issued, half of which
had been converted into stock and the rest would be. This was a new
issue. The money, he said, had been used to purchase the $5,000,000 of
Boston, Hartford and Erie. The committee was not satisfied. It wanted
to know if more stock would be issued. Gould replied: “In certain
contingencies,” meaning for his loans. The Secretary of the Exchange
afterward said that the stock of the corporation had been increased
from $34,265,300 on July 1, 1868, to $57,766,300 on October 24th, or by
235,000 shares within four months. These new issues forced Erie to 35.
There was over $12,000,000 in greenbacks locked up and all values were
depressed. The situation was so serious that Secretary McCulloch of the
treasury, a contractionist, was compelled to announce that if necessary
$50,000,000 additional currency would be forthcoming for the relief of
the community.
Their next achievement, after securing entire possession, was to corner
their old associate Daniel Drew. The latter, after a short retirement
from the street, returned to speculation and naturally drifted into
Erie, but this time from the outside. He was caught just as many times
he had caught others. And Gould repeated, only in a more aggravated
way, his trick of issuing new stock and flooding Wall street with it.
This new stock was issued by Gould and Fisk without even going through
the form of consultation with the other directors. Mr. Adams calls this
“the most extraordinary feat of financial legerdemain which history
has yet recorded.” Drew found that even he, old and experienced in all
the tricks of his trade, was no match for Gould. He appealed to the
courts for relief, but Mr. Gould fought him in the same way. Realizing
that he had no other avenue of escape, Drew actually called on Gould
and Fisk one night and appealed piteously to be permitted to get out
without loss, though his companions in loss might be squeezed to
Gould’s heart’s content. Gould and Fisk bowed their aged associate out
without satisfaction and smiled as they closed the door on the old man.
That was on a Sunday. Next day, in the name of August Belmont, Justice
Sutherland was asked to enjoin the issue of any more new Erie stock and
to appoint a receiver. Drew signed the affidavits, but, to his chagrin,
Gould was ahead of him by two hours. On the petition of one McIntosh,
a man in Gould’s employ, Justice Barnard restrained all suits and
appointed Gould the receiver of the railroad. Erie stock fell only to
48.
Justice Barnard allowed Mr. Gould to buy and cancel 200,000 shares of
Erie. This was intended to crush Daniel Drew, who had to have 70,000
shares to deliver in a few days. Gould’s purchases rushed the stock to
62, and then it turned out that thousands of shopkeepers and barbers,
tailors, and all sorts of people, had a share or ten shares of Erie
and wanted to realize on them. Gould could not meet the rush of shares
these people had to sell. He and Fisk fought like tigers, but they
could not stand the drain, and Drew settled his contracts at 57, losing
$1,500,000. Then Erie fell to 42. The Open Board of Brokers refused to
deal in Erie unless the stock was registered at a reputable banker’s.
Erie was knocked off the list and Gould organized a new Board of his
own, where trading in Erie went on as before.
Gould at this time actually posed as an anti-monopolist before
the public. All his extraordinary acts as president of the Erie
were defended on the ground that he was endeavoring to protect the
system against consolidation or affiliation with other trunk lines,
and there were some honorable persons who really put faith in this
statement. “Gould,” said Mr. Adams, “posed as a public benefactor, with
unspeakable effrontery.”
There was more fighting in the courts over Erie. Justice Sutherland
vacated Barnard’s order making Gould receiver, and Noah Davis was made
receiver. Barnard stayed Sutherland, and Sutherland granted a motion
to show cause why Barnard’s stay should not be vacated. Gould and Fisk
sued August Belmont for $1,000,000 damages, and Frank Work and Richard
Schell for $429,250, paid to them at the time of the settlement with
Vanderbilt. Gould and Fisk even went to the United States District
Court, and on a petition of one of Gould’s clerks, Henry D. Whelpley,
a stockholder, Judge Blatchford appointed Gould receiver, and directed
the Erie company to place $8,000,000 in his hands to protect the rights
of the plaintiff, Whelpley, who protested that he had been injured by
certain issues of stock.
The marvelous business acumen displayed by the manipulators of these
properties was aided by the blind zeal of certain foreign investors
for American securities then as prevalent as now. The wonderful
financial operations of the Drew and Gould regimes in Erie could not
have been possible but for the extraordinary fascination which the
stock possessed for English capitalists. While Americans looked with
more than suspicion on the Erie securities, England was possessed of
an irresistible craze to get as many of them as possible. English
capitalists would not take the United States bond even when selling
below par, but they bought with avidity every share of Erie they could
get hold of. At last, however, the eyes of the English stockholders
were opened to the true condition of affairs, and under the lead of
James McHenry they organized to get the control of the property. At
this time Gen. Daniel E. Sickles, one of the heroes of Gettysburg, was
Minister to Spain. He was engaged to lead the anti-Gould forces against
the Erie strongholds. He did his work well, and it is said was paid a
very big fee for his labors. He obtained a leave of absence from Madrid
and returned home to conduct the operations in person on the ground.
This was the last of the Erie wars.
It should be recorded at this time, however, that the famous
partnership of Gould and Fisk had been dissolved by death. Fisk, late
in 1871, had been shot by Edward F. Stokes, and after a few days had
died from the wound. He and Stokes had at one time been friends but had
quarreled over business matters and about a woman--the beautiful, but
notorious Josie Mansfield--and the quarrel led to the murder. It will
surprise no one who has read this history thus far that in the course
of the Erie litigations a Supreme Court judge once held court and
issued orders from Josie Mansfield’s apartments. Stokes was tried three
times. Once the jury disagreed. Once he was convicted of murder in
the first degree and sentenced to be hanged by Judge Noah Davis. This
verdict being overruled by the Court of Appeals, he was tried again
and convicted of manslaughter in the third degree. After serving a few
years in Auburn prison Mr. Stokes returned to New York, where he soon
became a prosperous business man, intimate for a long time with John A.
Mackay, the California millionaire, and president of a telegraph system
competing with Gould’s Western Union.
Before his death the belief is that Gould and Fisk had substantially
parted company. The New York _World_ of that day gives an account of
an interview between Gould and Fisk, in which the former asked Fisk
for his resignation as vice-president and comptroller of Erie. Fisk is
represented as saying to a friend who was about to leave for Europe:
“I would like you to do me a favor. If you find in Europe a mean man
who can do a meaner thing to his best friend or tell a bigger lie than
Jay Gould, I want you to telegraph me at once.” After Fisk’s death,
however, Gould acted handsomely by his widow. Whatever else may be said
of Fisk, he was certainly a more popular man than Gould, and after the
former’s death Gould did not long remain at the head of Erie. “The
feeling against Gould,” said Gen. Barlow, at the time of the anti-Gould
revolution, “grew in great part since Fisk’s death. Fisk was always
popular with the people of the road and in the office. Had he been
alive we should have had more trouble, or perhaps the move would never
have been made.”
Besides Barlow, Gen. Sickles had other efficient aid, and the
anti-Gould movement was strengthened by such names as Gen. John A. Dix,
who in the same year was elected governor of New York, Gen. George B.
McClellan and William R. Travers.
In March, 1872, the blow was struck. A man named Archer had been
elected vice-president in place of Fisk, and with his aid the
revolution was accomplished. Gould had made him vice-president with
the view of conciliating the opposition. Nine members of the Board of
Directors had been won over to the opposition. These wrote to Gould,
asking him to call a meeting of the board. As Gould did not respond,
Vice-President Archer called the meeting. The revolutionists assembled
at Barlow’s house and prepared to carry the Grand Opera House by storm.
Gould had this barricaded by his men, with instructions to permit no
one to pass in. But the revolutionists succeeded in passing the picket
line and passed in, and Mr. Archer called the meeting to order. Then
ensued an extraordinary scene which lasted all night. Gould ordered the
“conspirators,” as he called them, to leave the building. They refused.
Gould at this time had the benefit of the legal advice of David Dudley
Field and Thomas G. Shearman. Mr. Field was long one of the leaders of
the New York bar. One of his brothers sat on the Supreme Court bench
of the United States, and the other, Cyrus W. Field, was the father of
the Atlantic cable, and soon one of the closest of Gould’s business
associates. Mr. Shearman, who afterward became famous in the defense
of Henry Ward Beecher, had before this time published an article on
the corruption of the New York judiciary, which attracted widespread
attention, but he was now counsel to a man who owned two or three
Supreme Court judges and a few months later publicly admitted the
distribution of a corruption fund.
Space will not permit the telling of all the incidents of that night.
Shearman appeared with forty policemen and ordered the revolutionists
to leave, but they shut themselves up in their rooms and refused to
do so. Gould obtained from Judge Ingraham a temporary injunction to
restrain Archer and the other directors from acting, but they calmly
proceeded to elect new officers and directors. Field and Shearman
declared that Gould’s legal position was absolutely perfect, but
notwithstanding this he was finally obliged to give in. The opposition
elected Gen Dix as president and Gen. McClellan as one of the directors.
The _World_ of March 11, 1872, thus describes this memorable night:
“The scene at the Grand Opera House was one to be remembered. Gould
and Eldridge, with their counsel, in one room and the newly chosen
directors in another, the doors of both rooms barred, opening to no one
but an avowed friend, each fearful of orders of arrests being served on
them, every spare room in the offices filled with blue-coated officers
of the peace, sitting in all the chairs and on all the tables and lying
on the floors, and an intense sense of subdued excitement pervading the
heavy air of the place.
The only communication between the two hostile parties was by means of
Peter B. Sweeney, who acted as go-between.
Finding that he was defeated, Gould then resorted to one of those
acts of audacity with which at different periods in his career he
has surprised the public. In a public letter he offered to leave all
the questions in dispute to arbitration by Horace Greeley. Thus he
attempted to place himself in favorable light before the public. But
it should not be supposed that Greeley was in any sense a friend of
Gould. On the contrary, the _Tribune_ of that day shows how severely he
criticised Gould.
The battle lasted one night and then Gould surrendered. He remained
as a director for a time, but his power was gone and Erie passed out
of his hands forever. The property has never fully recovered from the
condition into which it was thrown by the Drew-Gould regime. Though one
of the most important systems in the country and enjoying an immense
business, it is crippled with its enormous stock and bond liabilities,
and not until 1891 did it pay a dividend. For many years it remained
in the hands of a receiver.
The testimony of J. W. Guppy before the Hepburn Committee, already
referred to, gives some interesting details of Gould’s management of
the Erie. Among the roads which Erie leased were the Chemung railroad
and the Canandaigua and Elmira. These leases were very profitable
to Erie, but Gould, as an individual, after quietly purchasing a
majority of their capital stocks, as president of Erie refused to pay
the rentals, thus abrogating the leases. Then he sold the roads to
the Northern Central of Pennsylvania at a big profit. Gould and Fisk
organized a number of auxiliary companies whose plant was usually paid
for by Erie, but whose stock went into the pockets of Gould, Fisk and
their associates. Among these companies was the National Stock Yard
Company. The land was purchased and the improvements made by Erie,
but the stock was divided as so much spoils, 800 shares finding their
way into the pockets of Judge Barnard. The Erie Emigrant Company, the
Jefferson Railroad Company, the Blackford Company and the Greenwood
Coal Company were the names of some of the companies practically
saddled upon Erie, but whose stock was issued to Gould and Fisk without
consideration.
August Stein, who made an examination into the records, told the
Hepburn Committee that the amount of Gould’s wrong-doing in Erie was
about $12,000,000. By this was meant the amount which he wrongfully
appropriated.
Mr. Gould’s smartness was never made more apparent than in his manner
of pretending to restore the money which he had misappropriated. He had
to make restitution of this stolen money--“stolen” is the word used
by the Hepburn Committee. After he had left Erie, the new management
sought to ascertain how large was the plunder carried away by Gould.
This information could be obtained with complete accuracy only from
Morosini, the auditor of the company, and he refused to make up the
accounts, leaving Erie to join his fortunes with those of Gould.
Morosini now became inseparable from Gould and a notable figure in
Wall street. He was a tall, athletic Italian, shrewd and faithful, an
ideal private secretary. He had served with Garibaldi in the wars for
Italian liberty, and was proud of his service under the great Italian
patriot. He had been a sailor, too, and had a wide experience with
the world, which, while not making him overscrupulous in his methods,
made him invaluable to a man like Gould. When the firm of W. E. Connor
& Co., of which Gould was a special partner, was founded, Morosini
became partner, and when the firm dissolved, and Morosini retired from
business, Gould said that his private secretary was worth $2,000,000 or
$3,000,000.
A way was opened, however, by which the new Erie management gained some
proof of Gould’s wrong-doing. Gould, in company with Horace F. Clark,
had engineered a corner in Northwestern stock, one of the most famous
and successful corners in Wall street history. In after years, Gould
gave a unique account of this corner to a legislative committee which
was investigating corners. “I was interested,” said Mr. Gould, with
that charming frankness which he sometimes assumed, “in the Chicago
& Northwestern corner. The stock was selling at seventy to eighty. I
considered it very cheap,” so he bought. He soon had bought a great
deal more than there really was to deliver, and the shorts were
cornered. The price went up to $250. “I was induced,” said Mr. Gould,
with most exquisite humor, “to part with some at that price.”
Among the shorts caught in this famous corner was Henry N. Smith, who
only a short time before had been Gould’s partner in the firm of Smith,
Gould & Martin, and who had supported Gould in his great conspiracy
to corner gold. Smith is another noted Wall street character, whose
life is linked in that of Gould. He was something of an “exquisite,”
and had the reputation of wearing corsets, but he was for many years
remarkably successful in Wall street. After renewing his relations with
Gould he became chiefly distinguished as one of the bear leaders, and
was thus continually in antagonism with Gould. Woerlshoffer, Cammack
and Smith were a trio that once nearly drove Gould to the wall, but
the latter lived to see one dead, the second his associate in certain
speculations, and the third involved in irretrievable bankruptcy.
It was not in the Northwest corner that Smith was ruined, but in it he
lost a very large sum, which found its way into Gould’s pockets. Smith
was not slow in getting his revenge. The books of the late firm of
Smith, Gould & Martin were in his possession, and he handed them over
to Mr. Barlow, of the Erie, who quickly discovered in them the evidence
on which to obtain an order of arrest for Gould and to establish a
suit for the recovery of $12,803,059, the proceeds of bonds converted
into stock to the extent of 407,347 shares, which were sold by Mr.
Gould’s firm and the proceeds transferred to his pocket. That was the
charge, and Gould was arrested and placed under very heavy bonds, which
he furnished. Here Mr. Gould’s genius displayed itself. He actually
entered into a big speculation based on his restitution of this
plunder. Gen. Dix, it should be recorded, remained as president of Erie
for only a few months, and was succeeded by President Watson, a man who
owed his position mainly to Horace F. Clark, who, as has been seen, was
in intimate business relations with Gould. Clark undertook to arrange a
compromise between Watson and Gould, and all three evidently united to
“rig” the stock market by the operation. One day it was reported that
Gould intended to restore his plunder, and the price of Erie advanced
with a bound. A day or two later a denial of the report would come,
and down would go the price. This was repeated two or three times and
Gould, of course, bought at the low figures and sold at the top, and
the profits must have been big. Finally the restitution, so-called, was
announced with a flourish of trumpets. On the face of the agreement
Gould made over to Erie an immense amount of property and all suits
were withdrawn and Gould released from all criminal responsibility. A
clause in the agreement said that in making this transfer of property
Gould expressly stipulated that it should not be considered as an
admission of wrong-doing. The Opera House and adjoining buildings and
other real estate, with the exception of Gould’s Fifth avenue mansion,
were made over to the Erie, and, in addition, a mass of stocks of
the par value of about $6,000,000. As a matter of fact most of these
stocks were worthless. J. G. Guppy told the Hepburn Committee that he
would not give $200,000 for the entire lot. Among the securities were
$1,000,000 of United States Express stock to be issued, and which Gould
guaranteed to be issued, but which, as a matter of fact, never was.
When Hugh J. Jewett became receiver of Erie he discovered the utter
sham of this alleged restitution. He told the Hepburn Committee: “Mr.
Watson had made a settlement with Mr. Gould, in which he received in
liquidation of this account, or such portion of it as he supposed he
could recover, certain assets. When I came here I sought to realize on
these assets. I found many of them totally worthless, and some which
were of value were encumbered by existing liens.”
By the closing of these transactions Mr. Gould was entirely freed
from all connection with Erie and was enabled to seek new fields for
cultivation. It had been a few years before, during the Erie troubles,
that Gould and his coadjutors originated the scheme for cornering gold,
which consummated on the day which is now remembered as “Black Friday,”
the other most disgraceful of the conspiracies of his life.