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.