CHAPTER XVIII.

THE WISCONSIN REVELATIONS.

In 1903, as stated in a previous chapter, Governor La Follette began an

investigation of the railroads in Wisconsin, in relation to illegal

deductions from the gross earnings returned by them as a basis for

taxation. The investigation covered the period from 1897 to 1903, and it

was found that $10,500,000 of illegal tax deductions had been made in

that time, about $7,000,000 of which was in the form of unlawful rebates

and discriminations. Every railroad of any importance in the State had

paid rebates every year in large amounts both on passenger traffic and

freight business. Here is a table of the rebates paid in violation of

the Interstate Commerce Act and the Elkins Law by the leading railways

in Wisconsin, so far as brought to light by the investigation:[179]

ILLEGAL REBATES PAID TO SHIPPERS IN WISCONSIN, 1897–1903.

FREIGHT. PASSENGER.

Chicago, Milwaukee & St. Paul $1,346,237. $170,968.

Chicago & Northwestern 3,023,810. 614,361.

Chicago, St. Paul, Minneapolis & Omaha 515,323. 64,559.

Wisconsin Central 244,492. 82,475.

“Soo Line” 464,041. 39,807.

Burlington 366,105.

Other Railroads 158,677. 489.

——————————— —————————

$6,118,689. $972,661.

These figures represent only part of the rebates really paid, and do not

touch in any way the vast amount of favoritism which does not take the

rebate form nor appear in any cash item.

Part of the Wisconsin rebates were paid on State business, but far the

larger part was on interstate traffic. The Elkins Law, instead of

putting an end to the payment of rebates, as so many railroad men have

declared, had no effect whatever, apparently, on the volume of rebates

paid. Here is the monthly record of rebates paid in 1903 by one of the

principal railroads operating in Wisconsin:

January, 1903 $37,000

February 57,000

March 47,000

April 36,000

May 25,000

June 13,000

July 101,000

August 32,000

September 46,000

October 9,000

November 666

December 2,032

The Elkins Act went into effect February 19, 1903; yet the rebates in

February and March were larger than in January; and the rebates for July

were nearly three times the January figure. It is clear, however, that

when the light of publicity was turned on by the investigation, which

began September 29, 1903, the rebate payments that could be checked up

on the books dropped from $46,000 in September to $9,000 in October,

$666 in November, and $2,032 in December. Instead of paying cash rebates

the railroads began to issue a great many “midnight tariffs,” that is,

rate schedules printed on purpose to give favored shippers advantages

over others and then revoked or superseded as soon as the purpose has

been accomplished, so that the midnight tariff has, in a different way,

done exactly what is done by the payment of the cash rebate.

The impotency of the Elkins Law is still further shown by the fact that

the total rebates paid by the railroads in 1903 were greater than the

rebates of 1902. The Northwestern road, for example, jumped from

$212,075 rebates in 1902, before the Elkins Law, to $410,476 in 1903,

mostly after the Elkins Act took effect.

We have seen in Chapter III how President Mosher of the Northern Grain

Company fought La Follette’s railroad reforms because of his deep

sympathy with, and appreciation of, the rights of railroads that were

paying his company $30,000 a year in secret rebates. Another man who

bitterly opposed La Follette, denouncing him as “an inciter,” a

demagogue, etc., was an officer of one of the refrigerator companies

that carries beer for a big Milwaukee brewery. At the very time this

official condemned La Follette, his company was receiving from one to

three thousand dollars a month in rebates from a single one of the

Wisconsin railways, in addition to the mileage profits on the cars. No

wonder the brewers and their allies opposed all progressive railroad

legislation when they were getting $73,240 a year in mileage rentals,

and many thousands more in secret rebates or commissions from the

Chicago, Milwaukee, and St. Paul alone. These men were strongly of

opinion that there was law enough already.

An investigation in Minnesota a little before that of Wisconsin showed

precisely the same sort of facts, namely, enormous amounts in rebates

were paid by the Great Northern, the Northern Pacific, and other

Minnesota railroads. But in the Minnesota cases, to forestall further

agitation and publicity, most of the railroads paid the additional taxes

demanded by the State.

The railroads do not by any means confine their rebate operations to the

States in which their lines are located. The case of the Camden Iron

Works, recently before the Interstate Commerce Commission, shows that a

railroad will reach half across the continent with a rebate in its hand

to grasp important shipments. In this case the Northern Pacific gave R.

D. Wood & Co. of Philadelphia, the owners of the Iron Works, a rebate of

5 cents a hundred on 1,500 tons of iron pipe. The Great Northern, the

Canadian Pacific, the Delaware & Hudson, and other roads had agents on

the spot trying to get the business away from the Pennsylvania, which

would naturally have taken the shipment, but the 5 cent rebate carried

the day and the iron went via the B. & O., the Great Lakes, and the

Northern Pacific. The rebate was paid by a check for $1,500, and no one

but the traffic managers knew of the transaction, which would probably

never have come out except for the complaint of a traffic agent on the

Pennsylvania, who had offered a rebate of 1 cent a hundred but did not

get the business and was therefore blamed by his superiors.

The heart of the railroad problem The history of railway discrimination in the United States, the chief efforts at control and the remedies proposed, with hints from other countries · 第 18 / 31 章