IV\N CROFT 
 
 RUSSELL 
 
 HAMPTONS 
 MAGAZINE 
 
Digitized by the Internet Archive 
 
 in 2007 with funding from 
 
 Microsoft Corporation 
 
 http://www.archive.org/details/collectionofsixaOOrussrich 
 
VOL. XXIV 
 
 MAY, 1910 
 
 NO. 5 
 
 HAMPTOr^'S MAGAZINE 
 
 Winning an Empire and the Cost 
 of the Winning 
 
 A HISTORY OF THE METHODS EMPLOYED BY THE SOUTHERN PACIFIC 
 RAILROAD SYSTEM IN MANUFACTURING MULTIMILLIONAIRES 
 
 By Charles Edward ^Russell 
 
 Author of "The Heart of the Kailrotui Problem," "Beating Men to Make Them Good," etc. 
 Illustrations by Clarence Rowe, George Varian, and C. F. Peters 
 
 As to the specific cause of the increased cost of 
 living, President Taft to-day frankly told various 
 of his callers that he was unable to account for it. — 
 News despatch from Washington, December 30, 1909. 
 
 JOHN MILLER came, a young man, from 
 Virginia to California, in 1870, and found 
 employment with the California Pacific Rail- 
 road as clerk and ticket agent at the South 
 Vallejo station. He was capable and indus- 
 trious; and capable railroad men were few 
 in California. 
 
 A year later, when some men in the rail- 
 road way at Sacramento wanted an efficient 
 accountant they learned of Miller, sent for 
 him, looked him over, and thought he would 
 do; so he went up to Sacramento and entered 
 upon his new job, which was better than his 
 old one had been. It was with the Contract 
 and Finance Company, of which a kindly old 
 man known as Uncle Mark Hopkins was the 
 president. The office was right over Hunt- 
 ington & Hopkins' hardware store in K 
 Street, and across the hall were the offices of 
 the Central Pacific Railroad, of which Uncle 
 Mark Hopkins was treasurer and a director. 
 
 Young Mr. Miller's task was to assist the 
 paymaster of the Contract and Finance Com- 
 pany, and to keep books — not the main books 
 of the concern, for these were always kept by 
 William E. Brown, the company's secretary, 
 but certain other books that he called aux- 
 iliary books. 
 
 To build and keep in repair the lines of the 
 Central Pacific and of railroads with other 
 names was the business of the Contract and 
 Finance Company, but the books that young 
 Mr. Miller kept did not contain a complete 
 
 record of these matters ; they related to minor 
 phases of the work in hand. 
 
 Young Mr. Miller was observant as well 
 as studious, and when, some months after he 
 entered the office, he observed Mr. Brown to 
 be employed diligently upon the main books 
 of the concern, the nature of this employ- 
 ment aroused young Mr. Miller's curiosity. 
 He took occasion when Mr. Brown was ab- 
 sent to examine the books that Mr. Brown 
 kept, and found them to contain matter of 
 much interest. 
 
 In fact, the more he examined them, the 
 more interested he became. They were 
 books that recorded the building and repair- 
 ing of railroad lines for the Central Pacific 
 — what the work actually cost and what had 
 been paid for it * — and might, therefore, be 
 deemed to be among the most juiceless and 
 unattractive volumes in the world ; but young 
 Mr. Miller found them remarkably diverting. 
 
 Finally, he became so much interested that, 
 like the careful student he was, he made from 
 day to day a series of abstracts and memo- 
 randa of the matter wherewith he was being 
 entertained, and these he took home, per- 
 haps for more deliberate enjoyment in quiet 
 hours. 
 
 MR. MILLER KEEPS HIS LITERARY TREASURES 
 SECRET 
 
 He did not let Mr. Brown nor anyone else 
 know of the literary treasures he had found, 
 but just read and made abstracts and copies 
 and put them away. 
 
 * Pacific Railroad Commission Report, testimony of Miller, 
 pp. 2881-82. 
 
 603 
 
604 
 
 Hampton's Magazine 
 
 I am not to suppose that he knew Charles 
 Reade's "Hard Cash," that he was familiar 
 with the character of Young Skinner therein, 
 nor that suspicion — evil sprite! — had been 
 aroused in his breast by Reade's somewhat 
 cruel jest about man as a cooking animal: 
 but unconsciously he came to enact rather 
 closely a vivid passage in a sensational novel, 
 the while he furnished a significant chapter 
 in railroad history. 
 
 Of a sudden, one day in September, 1873, 
 Mr. Brown entered the office and hailed 
 young Mr. Miller with glad tidings. 
 
 "The Contract and Finance Company has 
 elected you to the office of secretary," said 
 Mr. Brown. " I have resigned and am going 
 to Europe. And now here is a set of new 
 books for you to go to work with." 
 
 Young Mr. Miller was duly gratified. He 
 took possession of the nice new books and 
 observed that they had already been opened 
 in Mr. Brown's handwriting,* each account 
 starting with a balance apparently carried 
 over from the old books. 
 
 About noon he went forth, as was his habit, 
 to his midday repast, leaving Mr. Brown in 
 the office with the old books and with the 
 new. When, an hour later, he returned he 
 found Mr. Brown there and the new books 
 there, but the old books had disappeared, 
 nor did young Mr. Miller ever see them again. 
 
 So far as the world knows, only two other 
 persons had that pleasure. 
 
 Some time after Mr. Miller had departed 
 in search of luncheon, in came, for no par- 
 ticular purpose, young Mr. Yost. Mr. Yost 
 was private secretary to Mr. Leland Stan- 
 ford, who was President of the Central Pacific 
 and one of the owners of the Contract and 
 Finance Company. Mr. Yost saw the old 
 books. He saw them in the hands of Uncle 
 Mark Hopkins. And Uncle Mark, with his 
 coat off, was busily at work packing those 
 books into boxes and fastening the boxes with 
 screws. f 
 
 The next day Mr. Brown started for Eu- 
 rope. Thereafter all trace of the old books 
 was lost; also all trace of the books of Charles 
 Crocker and Company, the contracting firm 
 to which the Contract and Finance Com- 
 pany was the successor. 
 
 By some persons the loss was grievously 
 mourned, these being chiefly persons that had 
 certain lawsuits and needed the books for 
 
 * Pacific Railroad Commission Report, testimony of Miller, 
 pp. 2880-92. 
 i Ibid., testimony of D. Z. Yost, p. 2717. 
 
 evidence. But their grief availed them noth- 
 ing, even when it led them to cause the arrest 
 of the most eminent officers of the Central 
 Pacific and when, in a dirty, common police 
 court, these gentlemen were compelled to 
 declare their ignorance about the books that 
 never were found. According to a current 
 belief in California these books now repose 
 at the bottom of the River Seine, which is in 
 France; and that seems a very strange place 
 indeed — for books to repose in. 
 
 MR. MILLER IS ARRESTED ON CHARGES OF 
 EMBEZZLEMENT 
 
 For about a year young Mr. Miller dis- 
 charged the duties of secretary to the Con- 
 tract and Finance Company, being also made 
 secretary to the Western Development Com- 
 pany, another very nice company with much 
 the same owners and exactly the same pur- 
 poses. 
 
 Some suspicion then arose that his books 
 and accounts were not in the admirable and 
 apple-pie order to be expected of first-class 
 accountants and really nice companies, and 
 Mr. J. O'B. Gunn, auditor of the Central 
 Pacific, made a quiet observation of these 
 matters. On his oral* report, young Mr. 
 Miller was arrested and indicted, charged 
 with embezzlement. We are not to suppose 
 that he had been corrupted by evil example, 
 which is ever in wait for youth, but only that 
 he had grown careless, maybe, or something 
 of that kind. 
 
 He was not at once prosecuted, possibly 
 because of his youth or good looks. Instead, 
 certain negotiations began, lasting for a 
 month, in which young Mr. Miller was every 
 day in consultation with the highest officers 
 of the Central Pacific,! who were also, by a 
 curious coincidence, the highest officers of the 
 Contract and Finance Company and its sole 
 owners. 
 
 After a time, Mr. Miller's wife called upon 
 former Judge N. Greene Curtis (who had 
 once defended a man for the Central Pacific) 
 and engaged him as her husband's counsel. 
 To him Mr. Miller delivered all his memo- 
 randa and abstracts. 
 
 The trial of Mr. Miller took place in San 
 Francisco, whither meantime the offices of all 
 the companies here mentioned had been re- 
 moved. All the witnesses against him were 
 officers and employees of the Central Pacific.J 
 
 * Pacific Railroad Commission Report, testimony of Gunn, 
 
 P- 3003. 
 
 t Ibid., testimony of Miller, p. 2888. 
 tibid. 
 

 HOW THE WELLS-FARGO EXPRESS WENT THROUGH IN THE DAYS BEFORE 
 
 THE RAILROAD. 
 60s 
 
606 
 
 Hampton's Magazine 
 
 It appears that the prosecution was af- 
 flicted with a kind of languor, resulting per- 
 haps from the climate, which is known to 
 be at times enervating. Young Mr. Miller 
 was acquitted. From the courtroom former 
 Judge Curtis went straightway to his room 
 in the Cosmopolitan Hotel, took all the ab- 
 stracts and memoranda that Mr. Miller had 
 given to him, and put them into the grate, 
 where doubtless they were presently con- 
 sumed * in a cheerful blaze. 
 
 These abstracts and memoranda were of 
 the cost of the work done by the Contract 
 and Finance Company and the amounts re- 
 ceived therefor, f 
 
 Young Mr. Miller, thus happily cleared 
 from blame, disappeared from the public 
 view. The next heard of him was as a pros- 
 perous farmer and owner of a fine ranch in 
 the Sacramento Valley, and as a buyer of coal 
 lands. J As previously he had been an ac- 
 countant on a moderate salary, followed by 
 a year of idleness and (presumably) heavy 
 legal expenses, this affluence occasioned some 
 remark. Mr. Miller farmed on, neverthe- 
 less, and so, by a figure of speech, did the 
 Contract and Finance Company, the Western 
 Development Company and the Central Pa- 
 cific Company. 
 
 All this, it will be admitted, is of itself a 
 strange and entertaining little narrative. And 
 now to fit it into its true place in Southern 
 Pacific history, where, properly viewed, I am 
 sure you will greatly admire it. 
 
 CHARLES Crocker's contracting 
 
 TRANSACTIONS 
 
 The contracting firm of Charles Crocker 
 and Company was composed of Mr. Charles 
 Crocker and, according to his testimony, of 
 nobody else. Previously, he had been a dry 
 goods merchant in the Plaza at Sacramento 
 and then, in 1861, one of the organizers and 
 first directors of the Central Pacific. He was 
 the contractor that built for that road its first 
 few miles. The dual capacity of director 
 and contractor (by which, of course, a man 
 must as director vote contracts to himself 
 as contractor) seems to have aroused criti- 
 cism among, doubtless, the captious and un- 
 sympathetic, and the next few miles were 
 done by many contractors in small bits. 
 When undesirable persons had been frozen 
 from the enterprise, Mr. Crocker resigned 
 
 * Pacific Railroad Commission Report, testimony of Curtis, 
 
 P- 3033- 
 
 t Ibid., testimony of Miller, p. 2880 
 i Ibid., p. 2891. 
 
 from the directorate, where he was succeeded 
 by his brother, and took the contract for the 
 rest of the road from the thirty-first mile to 
 a point near the state boundary, or one hun- 
 dred and thirty-eight miles from Sacramento. 
 
 This contract disappeared with the books 
 that, in 1873, young Mr. Yost saw Mr. Hop- 
 kins pack into boxes. 
 
 So far as can now be ascertained, it must 
 have been of extremely loose terms. No 
 lump sum was named. Mr. Crocker, com- 
 posing the firm of Charles Crocker and Com- 
 pany, built the railroad, and the Central 
 Pacific Company paid his bills whatever 
 they were and without question. This seems 
 to have been the substance of the arrange- 
 ment. 
 
 As the firm composed of one man went 
 along it needed money, which was supplied 
 to it (or to him, as you prefer) by the Central 
 Pacific Railroad Company, consisting of him- 
 self and three others, from the proceeds of 
 bonds that had been granted by the govern- 
 ment. 
 
 He was supplied also with the bonds them- 
 selves, and with the company's stock. He 
 said afterwards that for the first eighteen 
 miles he received $250,000 in cash, $50,000 
 in stock, and $100,000 in bonds.* 
 
 It is interesting to note that for at least 
 eleven of these miles the Central Pacific 
 Company received from the government 
 $528,000, which was more than enough to 
 build the whole eighteen. 
 
 For some of the miles Charles Crocker and 
 Company secured as much as $300,000 or 
 even $400,ooof a mile. For excavating earth 
 they, he, or it, received from 40 cents to $1.50 
 a yard, and for excavating rock as much as 
 $10 a yard. I 
 
 In 1867, the one-man firm completed the 
 one hundred and thirty-eighth mile, and the 
 remainder of the work was transferred to the 
 Contract and Finance Company, of which 
 young Mr. Miller was subsequently the sec- 
 retary. 
 
 I said in my article last month that for a 
 very peculiar reason, Mr. Crocker did not re- 
 tain the stocks and bonds he received for his 
 work in constructing the railroad. The pe- 
 culiar reason was that he turned over all 
 
 * Pacific Railroad Commission Rejxirt, testimony of Charles 
 Crocker, p. 3640. 
 
 t Ibid., p. 3645. 
 
 t Ibid., p. 3649. 
 
 Question. If I should recall it to your mind, would you re- 
 member that the higher priced excavation was very much larger 
 in number of yards entered on your estimate from which you 
 received your payments, than the ordinary earth? 
 
 Answer. I do not remember about it. 
 

 Winning an Empire and the Cost of the Winnii 
 
 607 
 
 these securities, amounting to 
 more than $10,000,000,* to his 
 successor, the Contract and Fi- 
 nance Company, which immedi- 
 ately distributed them among its 
 stockholders. 
 
 And who were they? 
 
 Messrs. Leland Stanford, C, 
 P. Huntington, Mark Hopkins, 
 and Charles Crocker. 
 
 It is time we should take a look 
 at this extraordinary concern, for 
 ^ the part it played in the affairs of 
 our railroad, as well 
 its relations to 
 
 * Piicific Railroad Com- 
 mission Report, p. .^649. 
 
 MARK HOPKINS HIMSELF PACKED UP THE 
 
 OLD BOOKS OF THE CONTRACT AND 
 
 FINANCE COMPANY. THEY THEN 
 
 MYSTERIOUSLY DISAPPEARED. 
 
 public interests now, 
 
 are of vital importance. 
 
 The Central Pacific 
 
 Railroad Company was 
 
 organized under the 
 
 constitution and laws of 
 
 California, which forbid 
 
 the stock of a railroad 
 
 company to be issued 
 
 except for cash or its 
 
 equivalent. Not less than ten per cent must 
 
 be paid for when the railroad is organized 
 
 and the rest by installments — in cash or its 
 
 equivalent. 
 
 Also these laws forbid a railroad to issue 
 bonds in excess of its stock.* 
 
 As fast as the railroad was constructed it 
 was receiving $48,000 a mile from the gov- 
 ernment and lit was also authorized to issue 
 its own bonds for the like amount, but it 
 could not do this in excess of its stock issue. 
 Observe, therefore, that it was obliged to 
 
 * See Section 456 of the Civil Code. 
 
608 
 
 Hampton's Magazine 
 
 issue stock before it could issue its bonds, 
 and for the stock issued it was obliged to pay 
 in cash or its equivalent. 
 
 Now, bills of a contractor for work done 
 in constructing a railroad are to that railroad 
 clearly the equivalent of cash. 
 
 The company had started with $8,500,000 
 of capital stock. As the work went on this 
 was increased to $20,000,000 and finally 
 reached $100,000,000, issued from time to 
 time as required, until in 1873 the amount 
 had reached $62,608,800. 
 
 Naturally, the four gentlemen conducting 
 the enterprise desired to get possession of 
 that stock (which carried with it control of 
 the road) and to get it without paying for it. 
 One way to that desirable result was through 
 a contracting agency that would present bills 
 for its work (these bills being its equivalent 
 of cash), accept in payment thereof the stock 
 and bonds of the company, and subsequently 
 return these securities, less the actual expenses, 
 to the four gentlemen. The greater its bills 
 the more stock would thus be sent upon the 
 circuit. All that was needed for the perfec- 
 tion of this device was a good handy pretext 
 for the final distribution of the accumulated 
 securities among the four gentlemen. 
 
 A firm composed of one person could not 
 
 very well perform this function, but to a cor- 
 poration it was easy, because a corporation 
 can always distribute its assets among its 
 stockholders. If the Central Pacific stock 
 composed the assets of such a corporation 
 and the stockholders among whom they 
 were to be distributed were the four gentle- 
 men, how lovely that would be! 
 
 To suppose that these conclusions so obvi- 
 ous to you and me escaped the attention of 
 the four wise gentlemen of Sacramento were 
 to wrong their intellectual acumen; only, since 
 Uncle Mark Hopkins' exploits as a book pack-i 
 er, the details of their operations are obscure. 
 
 Still, you may care to note that in Decem- 
 ber, 1867, the Contract and Finance Com- 
 pany was organized with a capital of $5,000,- 
 000 — not one cent of which was ever paid 
 for — by three dummy organizers * who subse- 
 quently transferred their stock to Messrs. 
 Stanford, Huntington, Hopkins, and Crocker, 
 and that this company received Mr. Crocker's 
 $10,000,000 of securities and properly dis- 
 tributed them,-j- where they would do the 
 most good — to Messrs. Stanford, Huntington, 
 Hopkins, and Crocker. 
 
 * Pacific Railroad Commission Report, testimony of William 
 E. Brown, p. 2895. 
 t Ibid., testimony of Charles Crocker, Brown, and others. 
 
 INDIANS ATTACKING THE UNION PACIFIC— THE RAILROAD AT TIMES HIRED 
 EX-SOLDIERS FOR ITS DEFENSE. 
 
Winning an Empire and the Cost of the Winning 
 
 I 
 
 ^Kance Company pro- 
 ceeded with the construc- 
 tion work from the one 
 hundred and thirty- 
 eighth mile to the junc- 
 tion with the Union Pa- 
 Iific, fifty - three miles 
 rest of Ogden. 
 Of the extravagant ex- 
 enditures caused by the 
 insane race for mileage 
 with the Union Pacific 
 we have already spoken. 
 How much other unjusti- 
 fied expense appeared on 
 the books will never be 
 k nown. 
 
 ^ft When the Pacific Rail- 
 
 ^^bad Commission tried to 
 ascertain the facts, its ex- 
 pert engineer presented 
 to it a statement that the 
 entire line of the Central 
 Pacific from Sacramento 
 to five miles west of Og- 
 den, 690 miles, cost to 
 construct $32,589,117.93. 
 
 Adding the $2,130,000 paid to the Union 
 Pacific for the overlapped parts, this makes 
 the total construction cost $34,719,117.93, or 
 $50,317 a mile.* 
 
 How much of this, again, is real, nobody 
 knows, but if we accept it as veritable, there 
 was to offset it: 
 
 United States government bonds. . $27,500,000 
 Central Pacific bonds practically 
 
 guaranteed by the government... . 27,500,000 
 
 Land Grant f 30,000,000 
 
 Assistance voted by California 
 
 counties 1,000,000 
 
 609 
 
 LOUIS McLANE. MANAGER OF WELLS. 
 
 FARGO AND COMPANY. BY THREATS 
 
 OF COMPETITION THE BIG FOUR 
 
 SECURED ONE THIRD OF 
 
 ITS STOCK. 
 
 t $86,000,000 
 
 ess alleged cost of construction. . . . 34,719,147.93 
 And depreciation of currency J 7,000,000 
 
 road Company deliv- 
 ered to Charles Crocker 
 and Company and the 
 Contract and Finance 
 Company $62,000,000 * 
 of Central Pacific stock, 
 and this treasure trove 
 was divided as assets 
 among the stockholders 
 of the Contract and Fi- 
 nance Company. 
 And who were they? 
 Messrs. Stanford, 
 Huntington, Hopkins, 
 and Crocker, who were 
 also the chief owners of 
 the Central Pacific, who 
 never paid a cent for 
 their Contract and Fi- 
 nance stock, and who by 
 this device secured also 
 $62,000,000 of Central 
 Pacific stockwithoutpay- 
 ing a cent for that.f 
 
 On this stock so ob- 
 tained were declared in 
 the next seven years 
 dividends amounting to 
 $12,000,000 — all obtained from the con- 
 tributions of the public. 
 
 When these matters came many years after- 
 wards to be reviewed. Governor Stanford 
 tried to show that when the construction work 
 was done, the Contract and Finance Com- 
 pany owed a great deal of money — several 
 million dollars,^ in fact. 
 
 This statement led to a remarkable revela- 
 tion. WTien William E. Brown, former sec- 
 retar}' of the Contract and Finance Company, 
 was asked about the matter, he said that at 
 the end of the construction period the Con- 
 tract and Finance Company owed (presum- 
 
 ■ Balance $44,280,882 .07 
 
 In other words, they built the road for 
 about one half of the government sub- 
 sidy and pocketed the rest. 
 
 Other goodly profits pertained to these mat- 
 ters, and on top of all, the Central Pacific Rail- 
 
 * William E. Brown, Secretary of the Contract and Finance 
 Company, testified (see p. 28Q7 of the Pacific Railroad Com- 
 mission Report), that his company got $86.odo a mile for con- 
 struction. 
 
 t Before the Forty-Eighth Congress, Representative Barclay 
 Henley showed that the whole road could have been constructed 
 for its land grant alone. 
 
 t Pacific Railroad Commission Report, testimony of Stanford, 
 p. 2465. 
 
 * Up to 1873, when the last division of stock took place. The 
 progress of these operations may be seen readily from the follow- 
 ing table of the capital stock of the Central Pacific Railroad 
 Company: 
 
 Year Amount 
 
 1866 $8,580,600 
 
 1867 14,923,400 
 
 1868 24,670,000 
 
 1869 40,168,100 
 
 1870 51,079,200 
 
 1871 59,644.000 
 
 1872 59,644.000 
 
 1873 62,608.800 
 
 t Question. Then it was, substantially, that the builders of 
 the road under the contract should take all the bonds of what- 
 ever character there were, as you have stated, and the amount 
 of stock to authorize you to issue those bonds under your own 
 first mortgage? 
 
 Answer. Yes. sir. 
 
 Pacific Railroad Commission Report, testimony of Leland 
 Stanford, p. 2646. 
 
 X Ibid., Stanford's testimony, p. 2669. 
 
610 
 
 Hampton's Magazine 
 
 ably to Messrs. Stanford, Huntington, Hop- 
 kins, and Crocker) $1,636,000, against which 
 it held the notes of the Central Pacific Com- 
 pany for $6,000,000, and that in payment 
 of the $6,000,000 of notes the Central Pacific 
 (owned by the same men) delivered $7,- 
 000,000 of land grant bonds ; * so that in- 
 stead of being a debtor when it completed its 
 work, the Contract and Finance Company 
 was a peculiarly happy kind of a creditor. 
 
 EVERYTHING WENT TO THE BIG FOUR 
 
 And what became of those $7,000,000 of 
 bonds exchanged for $6,000,000 of notes held 
 against $1,636,000 of debt? 
 
 Why, all went by the assets route to the 
 pockets of the same wise and fortunate four, 
 Messrs. Stanford, Huntington, Hopkins, and 
 Crocker.f 
 
 Subsequently, all these assets with the $62,- 
 000,000 of stock obtained for nothing and all 
 the other perquisites, "melons," good things, 
 graft, "rake-offs," and clever deals, were 
 merged into one of the most valuable railroad 
 stocks in the world, on which to this day we 
 are paying the colossal interest charges. 
 
 But in estimating the immediate profits of 
 the Big Four we must not, to be sure, over- 
 look the fact that for a part of the time of 
 construction, currency was much depreciated 
 and its depreciation added heavily to the cost 
 of everything that was bought. But the real 
 building work was done after the end of the 
 war when currency was rising in value — and 
 the first mortgages were gold! 
 
 Moreover, to offset the loss on currency 
 were some items usually neglected in these 
 considerations. 
 
 Thus, the road was operated as fast as it 
 was built as part of a continental rail and 
 stage line, and from this operation there ac- 
 cumulated, by 1869, above all expense and 
 interest charges, close upon $3,000,000 of net 
 profits. 
 
 Also, to head off a rival line building east- 
 ward to Placerville, the wise and happy four 
 built a connecting wagon road from Dutch 
 Flat through the Carson Valley (charged to 
 Central Pacific construction account), and 
 
 * Pacific Railroad Commission Report, Brown's testimony, 
 p. 2682. 
 
 t "It is found that Messrs. Stanford, Huntington, Hopkins, and 
 Crocker received over $142,000,000 in cash and securities 
 through the Contract and Finance Company, Western Develop- 
 ment Company, and Pacitic Improvement Company, and divi- 
 dends of the Central Pacific. In addition to this sum of $142,- 
 000,000 they also made large profits in the operation of fifteen 
 or more companies which were directly or remotely sapping the 
 revenues of the Central Pacific Company." 
 
 Pacific Railroad Commission Report, p. 143. 
 
 this road gathered for them at trifling ex- 
 pense tolls estimated at $3,000,000 * — an 
 enterprise that had the further advantage of 
 ruining the rival railroad so that it fell by its 
 own collapse into the Central Pacific's pos- 
 session, f 
 
 OTHER FORTUNE-MAKING MACHINES OF THE 
 BIG FOUR 
 
 No sooner was the first transcontinental 
 railroad line opened, the gateway established, 
 and the toll taker at work, than the four thus 
 pleasantly endowed began to establish other 
 gates to take further toll. They had started 
 with next to nothing apiece, and now, after 
 nine years, they shared a stupendous fortune 
 that was, indeed, much more than wealth in 
 hand since it was an infallible and unceasing 
 machine for gathering more and still more 
 wealth. 
 
 As they constructed the Central Pacific, it 
 stopped at Sacramento, ninety miles east of 
 San Francisco, with which the Sacramento 
 River connected it, as did also the Western 
 Pacific, another and earlier railroad project, 
 liberally aided with government grants as an 
 incipient transcontinental route. The main 
 line of the Western Pacific really ended at 
 San Jose, fifty miles south of San Francisco, 
 but it had a branch to Oakland on San 
 Francisco Bay and opposite the city. 
 
 In 1867 the contractors that had under- 
 taken to build the Western Pacific became 
 "embarrassed," and the Contract and Fi- 
 nance Company completed the road and 
 took all of the stock, issued and unissued, all 
 the bonds and all of the land grants not 
 previously allotted to the first contractors, 
 delivering the whole to the Central Pacific, 
 composed of Messrs. Stanford, Huntington, 
 Hopkins, and Crocker. The land grants were 
 exceedingly rich and the possession of the 
 road thus cheaply secured carried the Central 
 Pacific from Sacramento to San Francisco 
 Bay and gave it an invaluable terminus. | 
 
 Another rival road, the California Pacific, 
 had been projected to build over the Beck- 
 with pass through the Sierras to an Eastern 
 
 * By Daniel \V. Strong, who was a Dutch Flat pioneer and one 
 of the original founders of the Central Pacific 
 
 t Bancroft's "History of California," p. 553. 
 
 t The true nature of this transaction is now not likely to be 
 disclosed, but the reason for the first contractors' troubles 
 seems to have aroused some speculation. In Robinson versus 
 the Central Pacific filed in San Francisco in 1876, very dam- 
 aging allegations are made concerning the matter, the sub- 
 stance thereof being that the Central Pacific unfairly obtained 
 $2,000,000 of Western Pacific bonds and about $3,000,000 of 
 other valuable properties. It is certain that the Western Pacific 
 cost the Central Pacific little and was an immen.sely profitable 
 acquisition. 
 
 1 
 
I 
 
 Winning an Empire and the Cost of the Winning 
 
 611 
 
 connection. In 1869 it was completing its 
 line from Vallejo to Sacramento by a shorter 
 and better route than the Western Pacific. 
 The Central Pacific tried hard to keep the 
 California Pacific from entering Sacramento, 
 and at one time a pitched battle between the 
 armed forces of the two companies was im- 
 minent; but while the contestants were wait- 
 ing for a court decision, the California Pacific 
 stole a march and got into the city.* This was 
 in 1870. 
 
 Being thus defeated, the Central Pacific 
 had recourse to strategy. In 187 1, it agreed 
 to buy the California Pacific for $1,579,000. 
 It had previously secured from it a contract 
 for the Contract and Finance Company to 
 -build and repair certain sections of line. 
 When this work was done, the Contract and 
 Finance Company presented a bill for $1,600,- 
 000, which neatly offset the purchase price f 
 and left a margin. Some bonds were used 
 as counters in this unique deal, but the sub- 
 stance of it was that the happy four got the 
 California Pacific practically for nothing. 
 
 LEASES ADD TO THE WEALTH OF THE FOUR 
 
 They now went through the formality of 
 leasing it to themselves for $550,000 a year, 
 afterwards increased to $600,000. The par 
 value of the stock was $12,000,000, having an 
 actual value of less than $3,000,000, secured 
 for practically nothing and charged up to the 
 public at $550,000 a year. 
 
 Twenty-four years later the sworn value of 
 this property was $1,404,935 and all that time 
 $550,000 to $600,000 on its account had been 
 extracted annually from the public by the 
 four of Sacramento. 
 
 In those years the road had paid in rentals 
 alone $13,600,000 — almost exacdy ten times 
 its value. For all of which the public has 
 paid. Moreover, this rental was charged to 
 operating expenses, the public was required 
 to make the road profitable above such ex- 
 penses, J and rates were and are based upon 
 the reasonableness of such profits ! 
 
 Subsidiary properties gathered in with the 
 California Pacific included the San Fran- 
 cisco and North Pacific, and the San Francisco 
 and Humboldt Bay Railroads, with a nominal 
 capital of $17,200,000; and having these 
 roads in its possession, the Central held San 
 Francisco, and indeed all California, in its 
 grip, and could charge what it pleased. 
 
 * Bancroft's " History of California," vol. vii. 
 f Ibid., p. 584. 
 
 t As to the general policy of these leases, see Pacific Railroad 
 Commission Report, p. 113. 
 
 This was always Mr. Huntington's idea, 
 to maintain at whatever cost an absolute 
 monopoly of the traffic; to allow the public 
 no chance of escape; and to control the state 
 through the control of the primal necessity 
 of transportation. For many years he de- 
 voted to this object more attention than to 
 all other objects together until he was ob- 
 sessed by it. 
 
 Now he looked out upon the field and .saw 
 that his supremacy might be threatened from 
 two directions. On the north, the Northern 
 Pacific was slowly advancing from St. Paul; 
 on the south, he was menaced afar by the 
 Texas Pacific and others. He determined to 
 fortify both approaches. 
 
 He saw that from the south, where the easy 
 routes were, he faced most danger. There- 
 fore, as soon as the Central Pacific was com- 
 pleted, he and his three friends organized the 
 Southern Pacific Railroad to build south- 
 ward and seize the southern gate of Cali- 
 fornia. 
 
 Here comes in once more our old friend, 
 the Contract and Finance Company. 
 
 The grand secret of making fortunes, Mr. 
 Huntington had discovered, was to manipu- 
 late evidences of debt. 
 
 If you could bond a railroad enterprise, 
 then do its work at extravagant or fictitious 
 prices, then take its bonds in payment and 
 
 "FROM THE COURTROOM JUDGE CURTIS 
 
 WENT STRAIGHTWAY TO HIS HOTEL AND 
 
 PUTTHE MEMORANDA IN THE GRATE." 
 
61Z 
 
 Hampton's Magazine 
 
 its stock as a bonus, you had the public in 
 debt to you and could always make the pub- 
 lic pay interest on that debt, to your own 
 great emolument. 
 
 That is what he meant when he said a few 
 years before his death, "I made my money by 
 going into debt" — a neat bit of word-play, 
 since the debt he went into was always debt on 
 which he contrived the public should pay the 
 interest to him. 
 
 To this end, the Contract and Finance 
 Company was a perfect instrument; it was, 
 in fact, even now at work in more than one 
 direction. 
 
 The Central Pacific owners had made with 
 themselves, as the Contract and Finance Com- 
 pany, a most remarkable contract by which 
 the Contract and Finance Company under- 
 took all the Central Pacific's repairs and 
 maintenance, charged lo per cent profit 
 thereon, and used the Central Pacific's tools, 
 shops, and plants in the work. 
 
 This, for a simple little piece of money- 
 making by-play, seems hard to be excelled. 
 
 Having the same owners, the Southern 
 Pacific now contracted with itself as the Con- 
 tract and Finance Company for the building 
 of the new line, and again the terms of ar- 
 rangement were most peculiar — and profit- 
 al)le. 
 
 For its immediate uses the Contract and 
 Finance Company received through its own- 
 ers cash, bonds, coupons, and other valuable 
 things from the Central Pacific's earnings and 
 treasury, and paid interest thereon, some- 
 times as much as 12 per cent a year.* It 
 repeatedly raided the Central Pacific's sink- 
 ing fund or other surpluses, obtaining once 
 $3,000,000 and once $5,000,000, although 
 these funds did not belong to the Central 
 Pacific but to the government and the people 
 of the United States. 
 
 With funds so secured much railroad line 
 was built. On lines so constructed bonds 
 were issued, and stock. Bonds and stock so 
 issued were delivered to the Contract and 
 Finance Company in payment of construc- 
 tion work done at abnormal prices. Finally, 
 as assets of this company, the bonds and 
 stock were distributed among its stockholders, 
 who were the four happy gentlemen of Sacra- 
 mento. 
 
 In other words, the earnings of the Central 
 Pacific, secured by charges upon the public, 
 built the Southern Pacific, and the Southern 
 
 ♦Pacific Railroad Commission Report, testimony of W E. 
 Brown, p. 2908. 
 
 Pacific bonds, stock and land grant were 
 '^velvet!"* 
 
 Not a cent of the stock got upon the mar- 
 ket; it all went as fast as the presses issued 
 it, into the coffers of the Sacramento four. 
 Beautiful! 
 
 WESTERN DEVELOPMENT SUCCEEDS THE CON- 
 TRACT AND FINANCE COMPANY 
 
 The Contract and Finance Company did 
 not long survive in these goodly matters. 
 In 1875, its four owners took the very un- 
 usual step of disincorporating it, which en- 
 abled its affairs to be wound up and its 
 books destroyed. 
 
 In its stead was organized the Western 
 Development Company — same ownership 
 (with the addition of David D. Colton) same 
 purposes,! and $5,000,000 of capital, of which 
 not a dollar was paid in. 
 
 It succeeded to the contracts of the Con- 
 tract and Finance Company, including the 
 Southern Pacific work. How well it fared on 
 its way through fertile fields we may judge 
 from the fact that on September 4, 1877, two 
 years after it started, it distributed among its 
 happy stockholders the following assets it 
 had accumulated in its peculiar ministra- 
 tions: 
 
 Southern Pacific slock $13,500,000 
 
 Southern Pacific bonds 6,300,000 
 
 Amador Branch bonds 675,000 
 
 Berkeley Branch bonds 100,000 
 
 Los Angeles Branch bonds i3)500 
 
 Amador Branch stock 674,000 
 
 Berkeley Branch stock 100,000 
 
 Total for this sitting $21,362,500 
 
 Fair — for a day's work! 
 
 The contract with the Contract and Fi- 
 nance Company, and later with the Western 
 Development Company, was to construct and 
 equip the whole line of railroad for $40,000 
 a mile in first mortgage bonds "and the bal- 
 ance in capital stock" — whatever that might 
 
 * Pacific Railroad Commission Report, pp. 2984, 2665, 2678, 
 and particularly the testimony of Stanford at p. 2665 and of 
 C. F. Crocker at p. 2999. 
 
 t By Commissioner Littler — Is it not true that the Western 
 Development Company is an instrument by which Messrs. 
 Stanford. Huntington, Crocker, and Hopkins performed work 
 and furnished materials to the Central Paci.fic Railroad Com- 
 pany and that they, as ofiRcers of the Central Pacific Railroad 
 Company, furnished the Western Development Company with 
 funds belonging to the Central Pacific Company and charged 
 a profit of 10 per cent on all work done and materials furnished, 
 which profit they appropriated to their own use? 
 
 AxswER. I do not call that a true statement. ... I do not 
 understand that thev used the Western Development Company 
 as officers of the Central Pacific but in their individual capacity. 
 
 — Pacific Railroad Commission Report, testimony of F. S. 
 Douty, p. 2695. Quoted here also as a specimen of the ideas 
 of business ethics that seemed to permeate this interesting 
 company. 
 
I 
 
 Winning an Empire and 
 
 the Cost of the Winning 613 
 
 mean, since the actual cost of construction 
 could not have exceeded $25,000 a mile * for 
 most of the distance. 
 
 For this the fat land grants from the fed- 
 eral government alone would have more than 
 sufficed, and the rich donations from local 
 sources were chiefly additions to the profits 
 of the four. The state of California gave 
 thirty acres of land at Mission Bay, San 
 Francisco, a very valuable endowment. The 
 city of San Francisco gave $1,000,000; other 
 cities, counties, and towns gave $1,002,000. 
 
 Congress, at Mr. Huntington's instigation, 
 had bestowed upon the enterprise half the 
 land in a strip forty miles wide along its entire 
 line, or 12,800 acres for everj' mile con- 
 structed. Much of this land was exceedingly 
 rich, but if it were worth no more than the 
 government's price to settlers, $2.50 an acre, 
 the whole would have been worth $29,824,000 ; 
 while at the excessive rate of $40,000 a mile, 
 the whole line from San Francisco to the 
 southeastern boundary of the state, including 
 the branches, would have cost to build only 
 $37,000,000. 
 
 This was an arrangement that constituted 
 a great triumph of Mr. Huntington's ability 
 in the lobby, but it was to have unlooked-for 
 and bloody consequences. 
 
 THE PACIFIC IMPRON EMENT COMPANY 
 
 The Western Development Company 
 lasted three years, when it followed the Con- 
 tract and Finance Company into the limbo 
 of things better forgotten, and was succeeded 
 by the Pacific Improvement Company, same 
 owners (except one) same purposes, same 
 capital, same absence of payments therefore. 
 This company, inheriting the contracts of 
 the Western Development Company, carried 
 the building of the Southern Pacific to the 
 state boundary at the Colorado River, and 
 thence across Arizona and New Mexico, 
 where had been organized by the same .own- 
 ers the Southern Pacific Railroad Company 
 of Arizona and the Southern Pacific Railroad 
 Company of New Mexico. 
 
 The Southern Pacific of Arizona had an 
 authorized capital of $20,000,000 (none of 
 which was paid in f) and bonds of $10,000,- 
 000. The Southern Pacific of New Mexico 
 had similarly a capital stock of $10,000,000 
 
 * In a region of no greater difficulties Receiver Farley, of the 
 St. Paul and Pacific, was at this time building and equipping a 
 railroad on Sio.ooo a mile. In 1877, Jay Gould told Mr. Hunt- 
 ington that he was building a branch of the Union Pacific at 
 $9,500 a mile. 
 
 t Pacific Railroad Commission Report, testimony of F. S. 
 Douty, p. 2708. 
 
 "CONGRESS, AT THE INSTIGATION OF MR. 
 
 HUNTINGTON. BESTOWED 12.800 ACRES 
 
 PER MILE ON THE RAILROAD." 
 
 (none of which was paid in) and bonds of 
 $5,000,000. 
 
 The Pacific Improvement Company built 
 for the Arizona road 384.17 miles, and for the 
 New Mexico road 107.25 miles. The con- 
 tract called for $25,000 a mile in bonds and 
 practically all the stock.* 
 
 When completed, the road was leased by 
 its owners to themselves as the Central Pacific, 
 on extravagant terms from which the Central 
 Pacific made great profits and drove its stock 
 toward par. 
 
 The Southern Pacific stock, secured for 
 nothing in this deal, is now worth 137! .f 
 
 The Pacific Improvement Company like- 
 wise seems to have done a prosperous trade 
 
 * Pacific Railroad Commission Report, testimony of F. S. 
 Douty, p. 2708. 
 
 t These leases worked both ways for their profit . " They 
 constructed 1,171 miles of adjunct lines at a cost of $27,216,- 
 931.01. On account of that construction, in addition to a 
 small cash payment, they issued bonds to themselves to the 
 amount of $.33,722,000. and stock to the amount of $49,005,800, 
 making a total issue of $82,727,800, of which $55,531,554 repre- 
 sented inflation. Then as directors of the Central Pacific tney 
 took leases of their own lines for the Central Pacific for $3,490,- 
 828.81 per annum, which was at the rate of nearly 13 per cent." 
 Pacific Railroad Commission Report, p. 143. 
 
614 
 
 Hampton's Magazine 
 
 in its line. At a meeting held April 1 1, 1882, 
 as shown by its minute book, it distributed 
 among its stockholders these securities that 
 it had gathered in its own sweet way: 
 
 Southern Pacific of Arizona stock $19,994,800 
 
 Southern Pacific of Arizona bonds 2,572,000 
 
 Southern Pacific of New Mexico stocks . 6,688,800 
 
 Southern Pacific of N ew Mexico bonds . 4,1 80,000 
 
 Monterey Railroad Company stock .... 284,000 
 
 Monterey Railroad Company bonds. . . . 248,000 
 
 Total at this sitting $33,967,600 
 
 I find also that, in 1894, it transferred to the 
 land department of the Central Pacific Rail- 
 road property worth something like $20,- 
 000,000, including more than 125,000 acres 
 of rich land and 125 town sites on the line 
 of the Southern Pacific of California. From 
 which I infer that in the midst of other and 
 exacting cares the thrifty owners had not 
 overlooked the profit that lies in knowing 
 where the stations are to be placed when you 
 lay out a railroad. 
 
 VARIED SOURCES OF WEALTH AND POWER 
 
 But to return to earlier history. While the 
 Southern Pacific was reaping bonds and 
 things as it moved eastward, Mr. Henry 
 Villard, in control of the Northern Pacific, 
 was rapidly pushing westward. His main 
 object was Portland, but men easily foresaw 
 that he would wish to build a branch south- 
 ward toward San Francisco. 
 
 The Central Pacific undertook to check- 
 mate him by building north a line called the 
 California and Oregon Railroad and by form- 
 ing an amalgamation called the Northern, 
 both constructed in the same way by the 
 Western Development Company or the Pa- 
 cific Improvement Company, on terms that 
 filled the coffers of the four gentlemen and 
 piled up capitalization and interest thereon. 
 
 I cannot do more than give some bare idea 
 of these operations by citing a few instances 
 from many, for to relate all the myriad 
 sources of profit would fill a great volume. 
 There was one piece of road 103 miles long 
 from Delta, California, to the state line, be- 
 longing nominally to the California and Ore- 
 gon branch of the Central Pacific's happy 
 family and constructed by the Pacific Im- 
 provement Company. On this the price 
 charged for construction was $4,500,000 in 
 bonds and 50,000 shares of stock, together 
 worth in the market $8,340,000. The actual 
 cost of construction was $3,505,609; the net 
 profit, representing also an unnecessary ad- 
 
 dition to the debt load that we must pay, was 
 $4,834,391. 
 
 To own a construction company, a railroad 
 company, and a good reliable printing press, 
 is better than to own a mint. Nothing can 
 limit your fortune but the extent of your 
 greed. 
 
 In the same manner, these gentlemen -or- 
 ganized the South Pacific Coast Railroad 
 Company, with a line eighty miles long, on 
 which the bonded indebtedness was $5,- 
 500,000 and the stock $6,000,000. The 
 bonds alone represented almost $70,000 a 
 mile. All of the bonds and all of the stock 
 were taken by the Pacific Improvement Com- 
 pany for building the road, and, in 1886, the 
 Pacific Improvement Company passed along 
 all of these securities to the Southern Pacific, 
 whose owners had gone through the formality 
 of leasing their own property to themselves 
 on an arrangement that left the rental and the 
 interest on the bonds and dividends on the 
 stock (if any dividends were paid) all to be 
 dug out of the road by means of freight and 
 passenger rates. 
 
 Similar processes were followed with the 
 Northern and with the Northern California. 
 The Northern was an accretion of ten smaller 
 roads, most of them with overlapping leases. 
 It managed to pile up a stock issue of $9,- 
 182,000, with bonds at the rate of $30,000 
 a mile for 386 miles, its total mileage. In the 
 end this conglomerate with all its leases was 
 leased to the Southern Pacific and its stock 
 exchanged for Southern Pacific stock in the 
 hands of the toll taker, and the whole thing 
 dumped on us — ^who pay. 
 
 Year after year, the interests of these men 
 spread in many directions. They went into 
 banking, politics, legislation, land-owning, 
 navigation, and newspapers and, with par- 
 ticularly unfortunate results to the public, 
 they went into street railroads. They in- 
 creased their investments and power and 
 turned the profits made from one greedy 
 enterprise into power to secure more greedy 
 enterprises and gain more profits and more 
 power. 
 
 Sometimes they used their power as a ban- 
 dit uses his pistol and sometimes as a confi- 
 dence man uses his skill, yet on calm review 
 it appears that at no time were they more 
 than the successful exponents of the legit- 
 imatized spirit of their age, nor doing aught 
 that was not sanctioned by the code of morals 
 the age had accepted. 
 
 Of their greater exploits we shall have toj 
 
I Winning an Empire and 
 
 ak at length hereafter, but for your re- 
 freshing, meanwhile, here is a little example 
 of the bandit or highwayman style of busi- 
 ness. 
 
 ^P SECURING THE WELLS-FARGO COMPANY 
 
 We go back first to the stagecoach days. 
 When John Butterfield's twenty-one day 
 stage from St. Louis via El Paso to San Fran- 
 cisco had been well established, the business 
 grew too great for an individual and a com- 
 pany took charge of it. The Civil War drove 
 the stages from the easy southern route to a 
 road across the center of the country, be- 
 ginning at Omaha. 
 
 With this change the company was reor- 
 ganized, and under its new name. Wells, 
 Fargo and Company, with Louis McLane of 
 New York as its manager, soon became an 
 institution in the West, operating a great e.x- 
 press and banking business as well as stage- 
 coaches. When the Central Pacific was com- 
 pleted, Wells, Fargo and Company entered 
 into an arrangement to carry on its express 
 operations over the railroad. 
 
 The next year, however, 1870, the Wells- 
 Fargo people were dismayed to learn that 
 Messrs. Stanford, Huntington, Hopkins, and 
 Crocker, with Mr. Lloyd Tevis, had organ- 
 ized the Pacific Express Company and pur- 
 posed to compete for the express carrying 
 trade. Competition with the men that owned 
 the railroad and could do what they pleased 
 with rates was no competition at all, but 
 merely a game of stand and deliver. 
 
 The Pacific Express Company went no 
 further than to print some stationery' and 
 open an office, when Wells, Fargo and Com- 
 pany surrendered. For a gift of one third 
 of the capital stock of Wells, Fargo and Com- 
 pany, the Pacific Express Company agreed 
 to go out of business. 
 
 One third of the Wells-Fargo stock was 
 $3,333,333.33, thus acquired for the cost of a 
 bunch of stationery. This seems fairly good 
 business. 
 
 Afterwards the new stockholders put up 
 one third of $500,000 to develop the banking 
 end of the Wells-Fargo concern. Still later, 
 $1,250,000 of Wells-Fargo stock was issued 
 to the Central and Southern Pacific * (Stan- 
 ford, Huntington, Hopkins, and Crocker) in 
 return for a new traffic arrangement, and the 
 whole great business of the express company 
 passed into the hands of the railroad, where 
 
 ♦ PaciQc Railroad Commission Report, testimony of Lloyd 
 Tevis, p. 3123. 
 
 the Cost of the Winninof 
 
 015 
 
 it remained until the beginning of the present 
 year. 
 
 These I cite as examples of the great profits. 
 But the thrift of the fortunate gentlemen de- 
 spised not the day of small things, also. 
 
 They built for $40,000 a bridge over the 
 Colorado River and, owning it themselves, 
 they leased it to the Southern Pacific, which 
 they controlled, at $12,000 a year, which they 
 charged into the railroad's operating ex- 
 penses and made a basis for rates. 
 
 They bought the steamer Solano, worth 
 $100,000,* and, owning it themselves, they 
 leased it to the Northern Railroad, which 
 they controlled, at $90,000 a year, and they 
 charged the $90,000 into that railroad's oper- 
 ation expenses and made it likewise a basis 
 for rates. 
 
 Whenever they executed a neat bit of graft, 
 it was always charged either into capital or 
 into operating expenses or into both, and 
 wherever it was charged there it remains, and 
 as you will see in another article, we pay 
 for it. 
 
 THIRTY-FOUR MILLIONS IN DIVIDENDS 
 
 All this time at the old original Central 
 Pacific gateway the takings had been goodly 
 and incessant. As soon as the cars began to 
 run over the Sierra Nevada, the surplus earn- 
 ings began to accumulate. At first these 
 seem to have been used to build other lines, 
 but by September, 1873, the business was so 
 good that, in addition to the money slipped 
 over to side enterprises, there was plainly 
 enough for a dividend. From that time and 
 with the exceptions of 1878 and 1879, the 
 dividends ranged from 6 to 10 per cent a 
 year until 1884. 
 
 Then the dividends stopped. In that year, 
 1884, the stock was worth 80 and more, and 
 for the first time its owners parted with it. 
 They sold the bulk of their holdings to an 
 English syndicate under a remarkable ar- 
 rangement that left the original holders still 
 in control of the property. After that the 
 road ceased to be profitable. Only Central 
 Pacific stock was sold to the English. The 
 original holders retained their stock in the 
 Southern Pacific, which might now, of course, 
 be deemed to be a rival line to the Central 
 Pacific — from whose earnings it had been 
 built! t 
 
 After ten years had passed without divi- 
 
 * Sworn statement of A. N. Towne, General Manager of the 
 Southern Pacific. 
 
 t Congressional Record, 48th Cong., First Session, p. 4821. 
 
The Gree Gree Bush 
 
 By James B. Connolly 
 
 Autlior of "Out of Gloucester " ''The Wireless Night of Hat- Po Bay," etc. 
 Illustrations by Maynard Dixon 
 
 QUEER how a man kn(x:king around the 
 world gets here a hint, there a hint, of 
 a thing that has been puzzling him for years, 
 and at last, all of a sudden usually, finds he 
 has all the missing threads straight and un- 
 tangled in his palm. I have in mind the 
 case of Bowles. Bowles wasn't his right 
 name at all, but we'll call him that, for it was 
 under that name he enlisted in the navy, 
 where they still speak of him as the "Gree 
 Gree Man." But that enlistment occurred 
 later. 
 
 Bowles came of a family up our way that, 
 well, the newspaper men — I had a brother a 
 newspaper man — used often to sit down and 
 wonder if the Bowleses really did believe 
 themselves so much better than ordinary peo- 
 ple, or were they just trying to fool themselves, 
 too. There is probably not much going on 
 in a city that a dozen good police reporters 
 don't pretty near get to the bottom of — if 
 they're really interested. Bowles' people 
 were great hypocrites and Bowles, being 
 brought up to believe that he was better stuff 
 than other young fellows, naturally broke 
 when the strain came. 
 
 Before he was out of college he had done a 
 dozen things that another boy would have 
 been put away for. But one day he just had 
 to jump out, and in a hurry; and cut off from 
 leaving the city by train or steamer, he sailed 
 on a bark that was bound for the West Coast 
 of Africa, on one of a line of old hookers that 
 used to sail more or less regularly for the 
 West Coast, going out with a small holdful — 
 rum, striped cahco, brass wire, and so on, 
 missionaries sometimes — and coming back 
 with a big holdful of ivory, palm oil, pepper, 
 and things like that. A nice, quiet business 
 that used to pay about a thousand per cent 
 one time. Perhaps it does yet. And it was a 
 great relief to all the Bowleses when young 
 Bowles got away without getting caught, and 
 they didn't care how long he stayed away. 
 
 What I am about to say now of Bowles' 
 
 doings on the West Coast is the summing up 
 of what I learned at different times from a 
 dozen people — a couple of ship captains, a 
 bosun's mate in the navy, a dozen sailormen, I 
 stokers, and so on, who happened to be on the * 
 West Coast when Bowles was there. Out 
 there Bowles fell in with old Chief Thomson, 
 who used to run things pretty much to suit 
 himself over a country larger than many a 
 European nation controlled. 
 
 Thomson was a name the white traders I 
 gave him. It may have been that Bowles, * 
 though Kipp was the name he took out there, 
 possibly Bowles, coming of a hard-fibered 
 trading ancestry, showed the old fellow a 
 few new commercial tricks. He must have 
 been of some material use, for old Chief was 
 too shrewd and Bowles too cold-blooded for 
 anybody to suspect it was a matter of senti- 
 ment. So fat and wide that he had to swing 
 his legs sideways like a duck when he walked 
 — that was old Chief, but respected by all 
 the white people, even though he was as 
 complete an old villain as ever lived in some 
 ways, for he had force, and he was a man who 
 meant well by his own people; that is, after 
 he'd had his fill of eating, drinking, and 
 general pleasuring. 
 
 Old Chief was at the head of half a dozen 
 secret societies — at least half a dozen. Africa 
 is rotten with secret societies, worse than any 
 white country. Among white peoples, of 
 course, those who want political office or a 
 good grocery trade — that kind are the great 
 "joiners"; but down there it was the cere- 
 monies that attracted them as much as any- 
 thing. In places there they still practice some 
 of the things they used to do ages ago. It is 
 hard to make people believe this, although in 
 our own country the negroes still practice 
 voodooism, and in Jamaica and Hayti they 
 still practice Obeaism. One society, how- 
 ever, old Chief Thomson made little secret of 
 — Africa for the Africans was what it meant. 
 
 And by an African he meant a black, and 
 
 6i8 
 
I 
 
Scientific Corruption of Politics 
 
 MR. HUNTINGTON'S DEALINGS WITH MEMBERS OF CONGRESS IN FURTHERING 
 THE DESIRES OF THE SOUTHERN PACIFIC RAILROAD 
 
 By Charles Edward Russell 
 
 Author of "The Heart of the Railroad Problem," "Beating Men to Make Them Good," etc. 
 Portraits by S. G. Cahan 
 
 In the White House one Jay : 
 
 Mr. C. P. Huntington — Mr. President, when you called on me in New York for a sub- 
 scription for the campaign there did I not draw my check to you for $ 1 00,000 ? 
 
 The President of the United States — You did, Mr. Huntington. 
 
 Mr. Huntington — Then am I not entitled to the appointment I asked of you ? 
 
 The President of the United States — You are, Mr. Huntington, and you shall have it. 
 
 UNLUCKILY this dialogue is not a bit of 
 imagination nor an excerpt from fic- 
 tion, but part of an actual conversation. 
 I have no doubt many other similar con- 
 versations have occurred at the White House 
 and elsewhere. This is the only one I have 
 been able to verify. It is verified by the man 
 that heard it. 
 
 Suppose the appointment Mr. Huntington 
 desired to have been to a federal judgeship. 
 Suppose the man he chose for the place to 
 have been one of his attorneys and hench- 
 men. Suppose an issue between the people 
 and the railroad to come before this judge. 
 
 Toward which side would you expect the 
 judge to incline? 
 
 And then you are to understand that al- 
 though this instance of compulsive power 
 over the government of the nation seems very 
 startling and abnormal, it was of small mo- 
 ment compared with the total power to which 
 the railroad company attained. 
 
 Beginning in 1862, when Leland Stanford 
 was elected Governor of 
 California, the railroad 
 monopoly upon new lines 
 steadily developed what in 
 the end became incompa- 
 rably the greatest political 
 machine ever known. 
 
 We shall say far too 
 little if we merely say 
 that this machine domi- 
 nated the government of 
 
 As to the specific cause of the increased 
 cost of living President Taft to-day frankly 
 told various of his callers that he was unable 
 to account for it. — News dispatch from 
 Washington, December 30, ipog. 
 
 They increased the cost of living. . . 
 They charged all that the traffic would bear 
 and appropriated a share of the profits of 
 every industry by charging the greater part 
 of the difference between the actual cost of 
 production and the price of the article in 
 the market. — Pacific Railroad Commission 
 Report, p. 141. 
 
 843 
 
 California. It was the government and 
 all the branches thereof, not merely di- 
 recting but performing. 
 
 Discerning men that wished to have a bill 
 passed, a bill signed, an appointment made, 
 a plan adopted, wasted no time with the pup- 
 pets that nominally held oflBce. They went 
 directly to Mr. Stanford or Mr. Huntington 
 and asked for what they wanted. This was 
 the custom even when the thing wanted had 
 nothing to do with any railroad interest, 
 when it might be something philanthropic or 
 for the public good. 
 
 The real capitol of the state was moved from 
 Sacramento into the office of the Central Pa- 
 cific in San Francisco. There public policies 
 were shaped, public questions decided, public 
 appointments determined; not merely for the 
 state, but often for towns and counties and 
 occasionally, in a historic way, for the nation. 
 The political organization that achieved 
 these stupendous results in politics came to 
 be an overshadowing influence in social and 
 business affairs also. For 
 most young men that cher- 
 ished any ambition it held 
 the future in its grasp; it 
 could make or unmake. 
 
 If a young man wished to 
 distinguish himself in poli- 
 tics or in a public career, he 
 had no chance except by 
 close alliance with the rail- 
 road company ; if he sought 
 
844 
 
 Hampton's Magazine 
 
 any nomination, he must seek it through the 
 company's agents. 
 
 If he was a lawyer, the railroad company 
 could make him distinguished and successful, 
 or it could deprive him of clients and make 
 him a failure. If he wished to be a judge, 
 the railroad company chose the judges; he 
 must apply through the company. 
 
 If the young man was in business, the com- 
 pany could make him prosperous or it could 
 ruin him. 
 
 If he published or edited a newspaper or a 
 magazine, he could obtain subsidies from the 
 railroad company; or risk bankruptcy if he 
 had its ill-will. 
 
 The very position in society of his wife and 
 therefore her comfort and peace of mind, his 
 own standing in the community, the position 
 and to some extent the opportunities of his 
 children came to depend chiefly and some- 
 times wholly upon his attitude toward this 
 truly imperial power that had seized the 
 State of California.* 
 
 NEWSPAPERS AND CHURCHES SUBJECT TO 
 SOUTHERN PACIFIC INFLUENCE 
 
 This power controlled also most of the 
 channels of public opinion. Some newspa- 
 pers and magazines it owned outright and 
 published in its interest; hundreds of others 
 it controlled through subsidies, the secret 
 pay roll, advertising, and passes. Very well 
 known newspapers and famous editors were 
 regularly paid for their influence; one editor 
 was hired at $10,000 a year merely to write 
 and to publish eulogies of Mr. Stanford. 
 
 This power went into the church also and 
 into the schools. It secured the assistance of 
 clergymen, educators, and historians. 
 
 Many a clergyman with an annual pass in 
 his pocket went about speaking well of the 
 railroad and of the four men of Sacramento. 
 If the pass were insufiicient to get him, why, 
 there was always the liberal subscription to 
 the church charity. Church societies were 
 not forgotten, nor Sunday schools. One de- 
 nomination organized a league with branches 
 all about the state. Almost at once this 
 league was controlled by men favorable to 
 the railroad company. 
 
 No trick escaped the vigilance that steered 
 the machine and had no partisan preference 
 in politics, no denomination in religion, but, 
 
 * They exerted a terrorism over merchants and over communi- 
 ties, thus interfering with the lawful pursuits of the people. ' They 
 participated in election contests. By secret cuts and rapid 
 fluctuations they menaced business, paralyzed capital and re- 
 tarded investment and development. — Pacific Railroad Com- 
 mission Report, p. 141. 
 
 worked and plotted and mined without ceas- 
 ing to augment and maintain colossal Power. 
 
 All these and still other influences were 
 like strings attached to many puppets, and 
 all the strings led into the office of the railroad 
 company. With one pull upon the strings 
 the many puppets were set dancing. 
 
 A great part of their dancing was designed 
 to conceal the real movements of the com- 
 pany, to make deviltry appear plausible, or 
 to prevent the people at large from seeing 
 that popular government had been abolished. 
 
 After a time a condition resulted in which 
 the railroad company could not undertake an 
 act so injurious that great numbers of respect- 
 able men would not applaud and support it; 
 and the public became calloused to charges of 
 wholesale corruption that were opposed or 
 refuted from so many eminent sources. 
 
 After a time, too, there grew up a condition 
 in whichneither any laws norconstitutions, nor 
 any kind of public revolt nor public protest, 
 nor the nation, nor contracts, nor pledges, nor 
 guaranteed rights, nor any consideration of 
 morals, nor any other creature, seemed to avail 
 against this Power that year after year defied 
 every attempt to restrain it, until men lost 
 heart and settled into sullen submission un- 
 der a tyranny they could not throw off. 
 
 Periodically there had been angry revolt 
 when the people attempted to regain their 
 government ; anti-railroad conventions had 
 been held, good and honest men nominated 
 and elected to office. Every such rebellion 
 had ended in the same abject failure. 
 
 The good men elected to office found them- 
 selves utterly unable to combat a system so 
 vast and so marvelously buttressed. With the 
 best of intentions and the most resolute will 
 they were alwa^'s defeated and helpless. 
 
 The state courts had stood by the com- 
 pany; or if these courts, too, happened to be 
 captured temporarily by the people, then the 
 company (which was interstate) resorted to 
 the federal courts and thence invariably re- 
 turned triumphant, so that no essential con- 
 dition was changed. In a few months the 
 people relapsed into their lethargy and the 
 company regained the full measure of its 
 political ascendency. 
 
 It could do as it pleased, this company; 
 the state had created it, and now it had dis- 
 placed its creator. It could do as it pleased 
 and levy upon the people practically unlim- 
 ited tribute. It had the power to make trans- 
 portation rates and through these rates it 
 caused the people to pay for every cent ex- 
 
Scientific Corruption of Politics 
 
 845 
 
 pended by its political machine. Every sub- 
 sidy, every "legal expense," every dollar 
 paid for "explaining things," every charity 
 subscription, every hired legislative agent, 
 every county boss, every phase of the vast 
 organization, was 
 charged against 
 the people and 
 taken from them 
 in transportation 
 rates not once, but 
 many times. 
 
 The people paid 
 for their own un- 
 doing. 
 
 They paid for it 
 then, they pay for 
 it now, they will 
 continue to pay for 
 it more and more 
 in cash taken out 
 of their earnmgs 
 and expressed in 
 the increased cost 
 of living. 
 
 This great po- 
 litical machine was 
 much more ef- 
 ficient than Tam- 
 many's or any 
 other machine that 
 ever existed, be- 
 cause it was non- 
 partisan; it domi- 
 nated the Demo- 
 cratic organization 
 as easily as the Re- 
 publican. Politi- 
 cal manipulation it 
 reduced coldly to 
 the exact principles of science and business. 
 It made politics a matter of scientific corrup- 
 tion and perfect organization, and by these 
 means it secured astonishing results. 
 
 In every county in California the railroad 
 company maintained an expert political man- 
 ager whose employment was to see that the 
 right men (for the railroad company) were 
 chosen as convention delegates, the right kind 
 of candidates named and elected, and the 
 right things done by men in office. 
 
 Often this manager would be the Repub- 
 lican boss of a Republican county, or the 
 Democratic boss of a Democratic county. In 
 important or doubtful counties he would be 
 merely the railroad boss with whom the Re- 
 publican boss and the Democratic boss must 
 
 
 COLLIS POTTER HUNTINGTON IN HIS PRIME 
 1862 UNTIL 1896 UNDOUBTEDLY THE 
 GREATEST RAILROAD GENIUS 
 OF HIS TIMES. 
 
 deal for money, votes, and success. Under 
 him he had as many subordinates as he 
 needed to care perfectly for the wards and 
 rural districts, and through these assistants 
 he watched, reported, and forestalled any at- 
 tempt to defeat or 
 evade the system. 
 At the head of 
 this vast depart- 
 ment was always 
 a man of peculiar 
 gifts known for- 
 mally as the rail- 
 road company's 
 General Solicitor, 
 but by the cynical 
 part of the public 
 called by a name 
 far more expressive 
 if less euphonious. 
 He had a staff of 
 well - drilled and 
 able assistants; to 
 each of these a sub- 
 department was as- 
 signed. One looked 
 after the Nevada 
 legislature, one 
 cared for Utah, one 
 for Arizona, one 
 for New Mexico, 
 one for local poli- 
 tics in San Fran- 
 cisco. Each had 
 his own corps of 
 assistants and am- 
 ple funds to buy 
 such public of- 
 ficers as he might 
 need. 
 With such an organization, so supplied 
 with money, and so defended by respecta- 
 bility, the railroad company could select its 
 own United States senators, members of 
 Congress, County Supervisors, and every- 
 thing between. 
 
 The money cost, of course, was great; but 
 as the cost was saddled directly upon the 
 people, this was not a matter of importance 
 to the company. It was equipped with funds 
 to buy whatever was needed, and it had 
 very active support in ways and from men 
 that cost little or nothing. This at first seems 
 strange, but on reflection will be found to be 
 true and to represent a universal condition 
 in this country. The railroad company 
 took and still takes advantage of the follow- 
 
 FROM 
 
846 
 
 Hampton's Magazine 
 
 JOHN H. MITCHELL. SENATOR FROM OREGON 
 IN 1877. 
 
 ing elements that exist in every commu- 
 nity: 
 
 1. Men that can be fooled by party loyalty. 
 
 2. Men that are eager for political careers 
 and know there is no chance except by serv- 
 ing the money power. 
 
 3. Merchants that can be controlled 
 through their banks, or terrorized,* or brought 
 into line with rebates. 
 
 4. Men that believe the railroad company 
 and all great corporations to be part of "our 
 set" and feel a class-conscious satisfaction 
 in allying themselves against the riffrafiF and 
 the ignorant rabble " envious of us of the 
 better orders." 
 
 5. Men that are fooled by the purchased 
 press. 
 
 6. Men that can be had for a pass or two. 
 Beyond these remains the class that must 
 
 be secured with money, including bosses, 
 heelers, professional politicians, repeaters, 
 colonizers, floaters, lodging-house keepers, 
 the keepers of dives and disorderly houses 
 that cannot be controlled through the police, 
 the saloon keepers that cannot be controlled 
 through the breweries. 
 
 All of these were fully utilized by the 
 political department and secured for the rail- 
 
 * Pacific Railroad Commission Report, p. 141. 
 
 road company the control of the state legis- 
 lature. 
 
 THE POLITICIANS' SCALE OF PRICES 
 
 Expenses, of course, did not end when the 
 state officers were chosen. Many senators 
 and representatives worked on the basis of a 
 regular salary of $5,000 merely to kill all bills 
 that the company wished to have killed, but 
 with the proviso that for passing bills the 
 company wished to have passed there must 
 be extra compensation. 
 
 All United States senatorships were also 
 outside of the regular price, and charged as 
 extras. To elect a senator for the full term, 
 the regular price was $3,000 a vote; for terms 
 of four years or t%vo years, discounts were 
 made from this tariff. 
 
 Besides, there were local bosses to be 
 paid and their rates were sometimes un- 
 reasonable. Thus Abe Ruef, the convicted 
 boss of San Francisco, told Detective Burns 
 that William F. Herrin, the present po- 
 litical manager for the Southern Pacific, 
 paid him $14,000 for the control of the 
 San Francisco county delegation to the 
 Republican State Convention of 1906, which 
 was rather a high price; and on special 
 occasions the prices of senatorships and other 
 offices have been suddenly advanced in a 
 way that would be very annoying to the rail- 
 road company if it were not able to charge 
 the price to the public. 
 
 About all this let no one think there is 
 surmise or inference; least of all is there 
 any exaggeration. We are dealing with an 
 inside view of the situation furnished chiefly 
 by one that was long of the railroad's political 
 department, a high executive that for years 
 beheld and was a part of every movement in 
 the game. This man, James W. Rea, of 
 San Jose, personally honest in spite of his 
 employment, has made an explicit and de- 
 tailed statement concerning all of these con- 
 ditions.* The railroad company has had am- 
 ple opportunity to deny what Mr. Rea has 
 averred on his own knowledge and from his 
 own long experience, and the railroad com- 
 pany has not challenged one word of his 
 story. So, then, even if it were not sup- 
 ported in a thousand ways by ten thousand 
 facts and witnesses, fair-minded men would 
 say that here must be the plain, unpleasant 
 truth. 
 
 Yet all this time we are to bear in mind 
 that this monstrous and corrupt machine was 
 
 ♦San Frandsco Call, July 4, 1908. 
 
I 
 
 Scientific Corruption of Politics 
 
 847 
 
 not deliberately designed by the four men of 
 Sacramento nor at first desired by them, not- 
 withstanding the unequaled power that it 
 conferred. In truth it was at first forced 
 upon them by conditions and then grew be- 
 cause of other conditions and not because of 
 any man's depravity. Many causes com- 
 bined, as in human affairs many causes al- 
 ways do combine, to press them irresistibly 
 along the one course. 
 
 They were themselves the victims of con- 
 ditions. 
 
 There was, first, Stanford's natural apti- 
 tude for politics and political maneuvering, 
 and his election as the first Republican gov- 
 ernor of California ; but there were also many 
 other and greater influences. 
 
 From the beginning, the whole enterprise 
 was involved in politics because of the grants 
 and subsidies that were sought from cities, 
 counties, and the state. 
 
 Then, it needed much ^egislation for vari- 
 ous purposes, and it began to face many 
 harassing lawsuits growing out of its peculiar 
 and illegal tricks of management. The easy 
 way to get the laws it needed, to kill laws 
 that interfered with it, and to win the control 
 of the courts, was through political action. 
 As to the kind of action, there was always 
 the example of Mr. Huntington's brilliant 
 success with Congress. Men would hardly 
 be flesh and blood if they were not impressed 
 with that. 
 
 THE "big four's" TASTE IN STOCKS 
 
 Of the original supporters of Engineer 
 Judah's railroad project were four stockhold- 
 ers that had not been frightened out of the 
 enterprise by Mr. Huntington's threat of 
 "buy, sell, or the work stops." These were 
 Samuel Brannan, the two Lambards, of 
 Sacramento, and John R. Robinson. After 
 the completion of the road all men saw that 
 its business was enormous and its profits 
 must be great, but for some years there were 
 either no dividends or the dividends were 
 disproportionate to the earnings. Brannan, 
 the Lambards, and Robinson therefore 
 brought suits against Stanford, Huntington, 
 Hopkins, and Crocker for an accounting of 
 profits alleged to have been diverted. 
 
 These suits had a very peculiar history. 
 In all of them the allegations shown by the 
 bills of complaint were of most outrageous 
 fraud. Thus the bill in the Robinson case, 
 a digest of which I have before me, alleges 
 that neither Stanford, Huntington, Hopkins, 
 
 WILLIAM M. STEWART. SENATOR FROM 
 NEVADA IN 1877, 
 
 nor Crocker ever paid a cent for their stock ;* 
 that the only stock ever paid for was that held 
 by Robinson, the Lambards, Brannan, 
 and the counties of San Francisco, Placer, 
 and Sacramento; that these counties had 
 bought stock as subsidies and that Stanford, 
 Huntington, Hopkins, and Crocker subse- 
 quently repurchased this stock out of the 
 earnings of the road; that after these four 
 men had seized control of the road they never 
 held a stockholders' meeting, never paid for 
 their stock, and appropriated for their own 
 use $15,000,000 worth of real estate granted 
 to the road for terminals by the city of San 
 Francisco, the city of Sacramento, and the 
 State of Nevada. 
 
 The bill recites the huge gifts received 
 from the United States, from the State of 
 California and the various counties, and 
 then declares the actual cost of building f the 
 road to have been as follows: 
 
 * This allegation should be compared with the finding of the 
 minority report of the Pacific Railroad Commission, which at 
 page 9 charges Leland Stanford with swearing on September 18, 
 1871, that 854,283,190 of Central Pacific stock had been paid 
 in, whereas the paid in stock was only $760,000. This is desig- 
 nated in the report as one of the false statements under oath con- 
 tained in affidavits now on file in the Interior Department at 
 Washington. 
 
 t It is interesting to compare these statements with certain 
 testimony given before the Pacific Railroad Commission. For 
 instance, take the charge made for building from the eastern base 
 of the Sierras across the plains. This was, as above stated, at 
 the foothill rate, $32,000, although the act provided that on 
 ordinary or nearly level ground the rate should be only $16,000 
 
848 
 
 Hampton's Magazine 
 
 For the first i8 miles $11,500 a mile 
 
 For the next 150 miles less 
 
 than 42,000 a mile 
 
 For the remainder of the road 
 to the six hundred and nine- 
 tieth mile less than 21,000 a mile 
 
 On this the four men of Sacramento drew 
 from the federal government $16,000 a mile 
 for the first seven miles, $48,000 a mile for the 
 next 150 miles, and $32,000 a mile for the rest 
 of the distance. 
 
 If the road had been built at actual cost, 
 the entire charge for construction and equip- 
 ment would have been $19,212,960 as against 
 the $55,000,000 and more charged by the 
 Contract and Finance Company — v^^hich was 
 another name for Stanford, Huntington, Hop- 
 kins, and Crocker. 
 
 The bill also alleged that of the first mort- 
 gage bond issue of $27,500,000 these men had 
 seized $22,000,000 for themselves, and that 
 great sums of money that rightfully should 
 have been available for dividends had been 
 diverted and withheld. 
 
 In spite of the grave nature of these 
 charges against their personal honor, the 
 men implicated did not allow the cases to 
 come to trial where they could prove their 
 innocence.* On the contrary, they compro- 
 mised each suit by buying the stock held by 
 the complainant. For some of this stock 
 the price paid was $400 a share, for some 
 $500, and for some $1,700. 
 
 As the highest estimate of the real market 
 value of the stock was at this time about 60, 
 it will be seen that the gentlemen had luxuri- 
 ous taste in such things. 
 
 It appears also from certain testimony and 
 may be noted as of interest that the attorneys 
 that brought the suits, Alfred A. Cohen, De- 
 los Lake, and John B. Felton, subsequent- 
 ly passed into the employ of the railroad 
 company and remained there until they 
 died.f 
 
 These and many other significant incidents, 
 the growing unrest in the state, the bitter 
 complaints of shippers and merchants, the 
 
 a mile. At page 3662 of the testimony, Mr. CharleS Crocker 
 being on the stand, I find this: 
 
 Question — Is it not a fact that four fifths of the distance be- 
 tween Reno and Promontory Point [525 miles] consists of easy, 
 rolling land, where there was no special difficulty of construction? 
 
 Answer — Yes. 
 
 This means that for these 420 miles Messrs. Stanford, Hunt- 
 ington, Hopkins and Crocker charged the Government $13,440,- 
 000; whereas they should have charged but $6,720,000. The 
 charge to the Government more than sufficed to build these 420 
 miles and left $3,000,000 in the hands of the Big Four besides 
 the land grant, their own bonds at $32,000 a mile and all tlie 
 stock that they issued. 
 
 The equal of this operation has not been known in the history 
 of niilrond building. 
 
 * Pacific Railroad Commission Report, p. 2779. 
 
 t Ibid., pp. 2775, 2776, 2779, 2831, 3653- 
 
 feeling plainly expressed that the railroad 
 monopoly was a menace to the public, indi- 
 cated the necessity of controlling public func- 
 tions and building a political institution. In 
 plain terms, if the power of the government 
 were not seized the people were practically 
 certain to inflict vast injuries upon, or per- 
 haps destroy, the profits that these four saw 
 looming ahead of them. From one point of 
 view political control was a matter of self- 
 preservation; later, of course, it became a 
 matter of enormous advantage, but at first 
 it was only a necessity. 
 
 POLITICAL CONTROL A MATTER OF NECESSITY 
 
 If there had been nothing else, the relations 
 of these four men to the federal government 
 would have driven them inevitably into poli- 
 tics. The $27,500,000 of government bonds 
 issued in their behalf were a lien on their 
 property and they were obligated to pay the 
 annual interest. Their purpose was to de- 
 fault on these interest payments for the pres- 
 ent and eventually to evade the payment 
 of principal and interest. Their only chance 
 to succeed in any such scheme was to become 
 a great political power, and first of all to own 
 the State of California and wield it as a solid 
 block in Congress and in the national con- 
 ventions. 
 
 There was also to be considered the chance 
 of enormous profits that lay in getting from 
 Congress more rich grants from the public 
 domain for their various plans of railroad 
 extension, because in one such grant would 
 lie a return greater than the entire cost of 
 political control, including the expenses of 
 "explaining" many things to many public 
 men; and there must have been something 
 very alluring in the idea of defraying by pub- 
 lic grants the cost of heading off competition 
 and maintaining the traffic monopoly of the 
 West. 
 
 The wonderful career of Mr. Huntingtort 
 in Washington showed the way by which 
 these things could be done. He had laid the 
 cornerstone of the enterprise in political 
 manipulation and the illicit control of public 
 officers. Ikit for his achievements with Con- 
 gress there would have been no colossal for- 
 tunes for him and his associates, and without 
 the like achievements in Sacramento and 
 Washington no more millions could be added 
 to these fortunes even if still greater disasters 
 did not occur. 
 
 Governor Stanford at all times, Mr. Crock- 
 er much of the time, and Mr. Hopkins 
 
^K Scientific Corruption of Politics 849 
 
 some of the time, looked out for Sacramento, railroad and son of the original contractor, 
 
 I shall recite now some of the strange ex- some explanation of these and cognate mys- 
 
 penditures they made. In some cases these teries. I will give a specimen of Mr. Crocker's 
 
 were charged up to ''expense," in some to examination. He was asked: 
 
 "legal expenses"; in all cases they were with- "What was the nature of these payments?" 
 
 out explanation.* You are to understand To which he answered lucidly: "They 
 
 that I am quoting from an incomplete list, were general in their character." 
 
 coveringonly afew of theyears: On being pressed for a more specific defi- 
 
 i8-c nition he said that they were "expenses for 
 
 Dec. 31. Leland Stanford $171,781.89 various purposes." Being again pressed to 
 
 ^p Dec. 31. Leland Stanford 8,877.15 \yQ explicit he said* 
 
 18-6 omcers of the company] might consider ad- 
 
 Feb. 6. Western Development Com- vantageous to the company and which re- 
 
 pany 26,000 00 quired the expenditure of money." 
 
 Feb. 8. Leland Stanford 20,000 .00 
 
 Feb. 17. Leland Stanford 20,000.00 Question — Do you know, directly or indirectly, of 
 
 July 30 to Sept. 30, 1877. Leland the expenditure of any money on account of the 
 
 Stanford 83,418.09 Central Pacific Railroad Company for the purpose 
 
 Aug. 30. D. D. Colton ... 1,000.00 of influencing legislation? 
 
 Sept. 22. Western Development Mr. Cohen (attorney for company and the same 
 
 Company 50,000.00 Cohen that brought the Robinson suit). — I advise 
 
 Sept. 22. Western Development you not to answer that question. 
 
 Company 29,974. 13 Witness. — By advice of counsel I decline to an- 
 
 Nov. 2. D. D. Colton 7,500.00 swer that question.* 
 
 '^Sept. 7. Leland Stanford 50,000.00 As lo the inevitable results of such a sys- 
 
 Oct. 26. Mark Hopkins 5,000.00 tem, dealing on a vast scale in rottenness, I 
 
 Nov. I. Leland Stanford 83,418.00 will give a few incidents much more signifi- 
 
 Dec. 27. Leland Stanford 52,500.00 cant than any description could possibly be. 
 
 ' Feb. 14. Leland Stanford 10,000.00 ^^"""^ them the discerning will see clearly 
 
 June 7. Leland Stanford 13,000.00 enough what a bedraggled pohtical prosti- 
 
 June 28. Leland Stanford 111,431.25 tute California has become. 
 
 Sept. 3. Leland Stanford 12,000.00 Mr. Rea says that when Mr. Feljon was 
 
 SepS:27. Lelandltanford. ■..■.■.■.:: 3!;^:^ nominated for the United States Senate 
 
 Oct. 4. D. D. Colton 3,290.00 he was to fill an unexpired or short term. 
 
 Nov. 12. Leland Stanford 46,816.94 Sixty members of the legislature organized a 
 
 Nov. 12. Leland Stanford 18,168.71 Strikers' Union or Black Horse Brigade and 
 
 ' March 25. C. Crocker 26,452.60 demanded $i8o,ooo hi a lump sum for their 
 
 March 28. C. Crocker 3,100.00 votes. This, for a short term, was a strong 
 
 May I. C. Crocker 40,000.00 advance over market rates. 
 
 May 6. C. Crocker . ■■■-■■■ 40,000 .00 ^r. Rea protested vigorously. The strik- 
 
 Company^.^^^.'^". .. ^^^.°^™.^.".^ 40,745.25 ing legislators conferred, and then informed 
 
 July 23. Leland Stanford '500.00 Mr. Rea that they had determined to insist 
 
 Aug. 2. Leland Stanford 789 . 50 upon their terms and unless thev got $180,000 
 
 Sept. 27. Leland Stanford 38,15603 ^i^gy would proceed at once 'to elect one 
 
 When the Pacific Railroad Commission Johnson, an unknown farmer of the San 
 
 .sought to learn something about these ex- Joaquin Valley. 
 
 penditures Mr. Stanford, under oath, could This same James W. Rea, to whom we are 
 
 not remember about them or else took refuge indebted for this close inside view of the 
 
 in a refusal to answer, whereupon Justice machine at work, was at one time a state 
 
 Field and Judge Lorenzo Sawyer sustained railroad commissioner. In that capacity he 
 
 his refusal. made a ruling that, for reasons not necessary 
 
 to detail here, the Southern Pacific did not 
 THE MYSTERY OF MR. STANFORD'S SPENDING like. Officers of the railroad and other in- 
 Then the Commission tried to obtain from terests demanded that this ruling be reversed. 
 Charles F. Crocker, Vice-President of the Rea refused to reverse it. He was then 
 * See Pacific Railroad Commission Report, p. 2999. Mr. threatened with the venal press. He defied 
 
 Cohen, attorney for the railroad, here makes an admission about 
 
 these expenditures that can be construed to mean only the worst * Pacific Railroad Commission Report, testimony of C. F. 
 
 about them. Crocker, p. 2998. 
 
850 
 
 Hampton's Magazine 
 
 the venal press. At last he was summoned 
 before C. P. Huntington, who happened to be 
 then in San Francisco. Huntington asked him 
 to reverse his ruling. Once more Rea declined. 
 "Then," said Mr. Huntington, "I shall 
 have to give the word to impeach you in the 
 legislature and I hate very much to do it." 
 
 MR. REA IS NOT IMPEACHED 
 
 So within a few days the legislature be- 
 gan impeachment proceedings against Rea. 
 There was pending at the time a reassess- 
 ment bill that would be an advantage to the 
 railroad and for which many legislators had 
 been bribed to vote. When Rea was testify- 
 ing before the House in the impeachment 
 trial he ripped into this reassessment bill, 
 exposed its true nature, and denounced the 
 corruption that had been used in its behalf. 
 The next day the official records were muti- 
 lated so as to take from the stenographer's 
 report every reference he had made to the 
 reassessment bill. The public, therefore, 
 never knew that he had made a revelation 
 on this subject, and the House proceeded to 
 pass the impeachment bill. 
 
 Mr. Rea had, however, impressed certain 
 facts upon certain senators, and one of the 
 facts was that he knew perfectly well what 
 were the conditions in that body, which sen- 
 ators were getting $5,000 a year each as 
 "negatives" — that is to say, for merely kill- 
 
 JOHN B. GORDON, SENATOR FROM GEORGIA 
 IN 1877. 
 
 ing bills that the railroad desired to have 
 killed — and which of them had received more 
 for extra services. Some of these got the 
 idea that he intended to make a sweeping 
 and sensational expose of the whole business 
 of bribery. They came to him and opened ne- 
 gotiations that ended in the dropping of the 
 impeachment proceedings and the concealing 
 of disagreeable facts about eminent statesmen . * 
 
 People became so accustomed to such 
 stories that conditions were regarded as a 
 matter of course, and were talked of with a 
 certain naive candor inexpressibly startling 
 to visitors of a more Puritanical habit. 
 
 When, in 1885, Leland Stanford was elect- 
 ed to the United States Senate (an event that 
 was to have unexpected results) the state 
 laughed and discussed the price as it would 
 discuss the orange market. A few days after 
 the legislature's action the late Senator James 
 G. Fair was standing in front of the Palace 
 Hotel in San Francisco, meditatively gazing 
 into the street and chewing a toothpick. 
 
 A reporter approached, and, being old 
 friends, the two began to chat. "Senator," 
 said the reporter, "how much do you think 
 Stanford's election cost him?" 
 
 "Well," said Senator Fair, pausing evi- 
 dently to make some mental calculations,"! 
 can judge of that only by my own experience. 
 From what it cost me in Nevada I should say 
 it must have cost Stanford not less than a 
 million." 
 
 Under the blight of years of railroad domi- 
 nation the public conscience was slowly seared 
 and corruptionists grew bold while the public- 
 service corporations seemed to work together. 
 
 At the session of 1897 the San Francisco 
 Examiner unearthed a condition of legislative 
 corruption that would have appalled another 
 state. To complete the evidence some tele- 
 grams were needed that had been sent via the 
 Western Union. An investigating committee 
 subpoenaed these telegrams. The Western 
 Union undertook to rush them out of the state 
 over the Central Pacific. Just l)efore they could 
 cross the Nevada line the Examiner succeeded 
 in reaching a village constable with antique 
 courage. He held up the train, found the 
 ])ox containing the telegrams, and sent it 
 back to Sacramento under guard. 
 
 When it was opened it was found to con- 
 tain evidence that the i:ailroad company had 
 not changed its methods since the days when 
 Mr. Huntington "explained things." 
 
 * See Mr. Rca's full st-itement and examination in the San 
 Francisco Call, July 4, iyc8. 
 
 I 
 
Scientific Corruption of Politics 
 
 SjI 
 
 MR. HUNTINGTON'S WASHINGTON CAREER 
 
 We shall now, if you please, return to Air. 
 Huntington in Washington and see how he 
 fared in the underworld. It is really an ex- 
 traordinary story, for he went there a country 
 merchant without exi)erience in public af- 
 fairs, without acquaintance or influence, and 
 he managed to win from Congress first one 
 huge grab at the public resources and then 
 another, until he appeared the very Colossus 
 of lobbyists. In the history of Congress no 
 man has come before it with balder proposi- 
 tions of private gain nor maintained them 
 with anything like his success. 
 
 Yet about this we should be under no 
 misapprehension. Mr. Huntington was no 
 wonder-worker, no spellbinder, no wielder of 
 the magic of eloquence. He was a practical 
 man. We are not to believe that he entered 
 Washington an unlettered trader and by force 
 of argument swayed great statesmen to his 
 will. He led against Congress a band of 
 legislative experts, well supplied with money; 
 they did the rest. 
 
 From 1862 until 1896, he spent most of his 
 time in Washington and attended and nar- 
 rowly scrutinized every session of Congress. 
 In those thirty-four years he passed through 
 Congress a great many bills that he wanted 
 to have passed; he killed innumerable bills 
 that he wanted to have killed; he utterly 
 wrecked and ruined the almost life-long plans 
 of his one great competitor; he exercised in all 
 administrations and upon most departments a 
 sinister and imperial power; and on only two 
 occasions was he really defeated. 
 
 The history of parliamentary government 
 shows no fellow to this career. 
 
 I am going to let Mr. Huntington tell what 
 he will about it. 
 
 He had in his employ in 1862, and for 
 many years thereafter, one General Franchot, 
 quite well known in Washington; also one 
 
 ♦Pacific Railroad Commission Report.. 
 
 JOHN P. JONES, SENATOR FROM NEVADA IN 
 1877. 
 
 Beard, one Bliss, one Sherrill, and others. 
 Before the Pacific Railroad Commission in 
 1887, he was asked about the nature of 
 General Franchot's ministrations. 
 
 "He was," said Mr. Huntington, largely, 
 "a very honorable man whom I had known 
 since I was a boy, and he had my entire con- 
 fidence." 
 
 The Commission had discovered (from 
 other sources) that Franchot drew from Mr. 
 Huntington $30,000 or $40,000 every year 
 without vouchers, and Mr. Huntington was 
 asked to throw light on this strange fact. He 
 said: 
 
 "We had to get men to explain a thousand 
 things. A man who has not had the experi- 
 ence could hardly imagine the number of 
 people that you have to explain these mat- 
 ters to." * 
 
 Still, the Commission was not quite content 
 with this luminous answer and wanted to 
 know more. It appeared that in 1873, for 
 instance, General Franchot's work in Wash- 
 ington had cost $61,000, without any vouch- 
 ers. Mr. Huntington sounded still the pipe 
 of praise. 
 
 "He was," said he, "of the strictest integ- 
 
 * Pacific Railroad Commission Report, Testimony of Hunt- 
 ington, p 25. 
 
Southern Pacific Disbursements at Washington 
 (Without adequate Vouchers) for "Expenses" 
 
 1872 
 
 Jan. 13. R. Franchot.. $33.00 
 
 Jan. 18. B. Franchot.. 13,200.00 
 
 Mch. 11. C. P. Hunt- 
 ington 1,000.00 
 
 Mch. 15. R. Franchot. 1,000.00 
 
 Mch. 23. C. P. Hunt- 
 ington 500.00 
 
 Apr. 26. C. P. Hunt- 
 ington 500.00 
 
 May 11. C. P. Hunt- 
 ington 500.00 
 
 May 17. C. P. Hunt- 
 ington 1,000.00 
 
 May 17. R. Franchot. 5,000.00 
 
 June 5. R. Franchot. . 5,000.00 
 
 July 31. C. P. Hunt- 
 ington 500.00 
 
 Aug. 24. C. P. Hunt- 
 ington 500.00 
 
 Sept. 24. R. Franchot. 19,295..->0 
 
 Oct. 2. I. E. Gates. . . 5,000.00 
 
 Nov. 1. I. E. Gates. . . 500.00 
 
 Nov. 15. C. P. Hunt- 
 ington 1,000.00 
 
 Nov. 21. I. E. Gates. . 500.00 
 
 Nov. 29. I. E. Gates. . 4,000.00 
 
 Dec. 28. I. E. Gates . . 200.00 
 
 Dec 31. "Services in 
 
 1872" 13,233.33 
 
 Total $72,461.83 
 
 1874. 
 
 Jan. 13. R. Franchot. 
 
 Jan. 16. I. E. Gates.. . 
 
 Mch. 14. Fisk & Hatch 
 
 May 14. C. P. Hunt- 
 ington 
 
 June 15. Fisk & Hatch 
 
 June 22. C. P. Hunt- 
 ington 
 
 June 27. R. Franchot. 
 
 July 9. R. Franchot . . 
 
 July 10. I. E. Gates.. 
 
 July 11. I. E. Gates.. 
 
 Sept. 11. C. P. Hunt- 
 ington 
 
 Oct. 16. I. E. Gates... 
 
 Oct. 23. I. E. Gates... 
 
 Nov. Gen. Dwyer, U. 
 S. Commissioner. . . . 
 
 Dec. 2. "W. A. W.," 
 paid by C. P. Hunt- 
 ington 
 
 Dec. 29. C. P. Hunt- 
 ington 
 
 $500.00 
 
 200.00 
 
 12,139.94 
 
 500.00 
 1,910.00 
 
 20,000.00 
 
 3,700.00 
 
 150.00 
 
 200.00 
 
 200.00 
 
 5,000.00 
 281.00 
 200.00 
 
 1,000.00 
 
 4,863.48 
 2,000.00 
 
 Total $52,844.42 
 
 1876. 
 
 Jan. 4. N. T. Smith, 
 for amount paid H. 
 Brown $5,000.00 
 
 Jan. 24. C. P. Hunt- 
 ington 2,.500.00 
 
 Mch. 31. I.E.Gates.. 5,000.00 
 
 Apr. 1. C. P. Hunt- 
 ington 5,000.00 
 
 Apr. 6. C. P. Hunt- 
 ington 5,000.00 
 
 Apr. 19. "Attorney" 
 
 fee 5,000.00 
 
 May 4. Anna Fran- 
 chot 25,000.00 
 
 May 12. I. E. Gates . . 5,000.00 
 
 May 15. I. E. Gates. . 5,000.00 
 
 May 19. I.E.Gates.. 1,000.00 
 
 June 2. S. C. Pome- 
 
 roy 1,000.00 
 
 June 3. I. E. Gates. . . 5,000.00 
 
 June 19. I. E. Gates. . 10,000.00 
 
 June — . New York 
 newspapers. Tribune, 
 Times. World, and 
 Bulletin 3,381.45 
 
 July 19. C. H. Sher- 
 
 rill 3,000.00 
 
 July 26. I.E. Gates . . 10,000.00 
 
 July 12. S. L. H. Bar- 
 low $2,000.00 
 
 Aug. 18. R. B. Mit- 
 chell 1,500.00 
 
 Aug. 21. S. W. Kel- 
 logg 600.00 
 
 Sept. 12. Lyman Trum- 
 
 ball 10,000.00 
 
 Sept. — . R. Franchot. 15,698.92 
 Oct. 4. C. P. Himt- 
 
 ington 500.00 
 
 Oct. 5. C. P. Hunt- 
 ington 2.500.00 
 
 Oct. 14. C. P. Hunt- 
 ington 6,300.00 
 
 Oct. 17. I. E. Gates... 5,000.00 
 Oct. 21. I. E. Gates., . 5.000.00 
 Oct. 23. I. E. Gates.. . 1,000.00 
 Oct. 26. I. E. Gates.. . 700.00 
 Oct. 30. I. E. Gates.. . 1,000.00 
 Oct. 10. Legal Ex- 
 penses 2..500.00 
 
 Nov. 3. D. D. Colton. 8,000.00 
 Nov. 8. D. D. Colton. 8,000.00 
 Nov. 13. I.E.Gates.. 1,000.00 
 Nov. 14. I. E. Gates. . 1,000.00 
 Nov. 15. I. E. Gates. . 1,000.00 
 Nov. 16. C. P. Hunt- 
 ington 5,000.00 
 
 Dec. 1. I. E. Gates . . . 3.000.00 
 
 Dec. 7. I.E.Gates... 1,000.00 
 
 Total $1,78.180.37 
 
 1877. 
 
 Jan. 3. "Legal ex- 
 penses 
 
 Jan. 8. I. E. Gates.. . . 
 
 Jan. 15. "Legal ex- 
 penses" 
 
 Feb. 6. Western De- 
 velopment Company 
 
 Feb. 19. I. E. Gates. . 
 
 Feb. 26. C. P. Hunt- 
 ington 
 
 Mch. 9. I. E. Gates... 
 
 Mch. 12. Jas. H. 
 Storrs 
 
 Mch. 24. I. E. Gates.. 
 
 Mch. 29. I. E. Gates.. 
 
 Apr. 23. C. H. Sher- 
 rill 
 
 May 9. C. H. Sher- 
 rill 
 
 May 24. I. E. Gates. . 
 
 June 2. C. H. Sherrill. 
 
 June 4. C. H. Sherrill. 
 
 June 30. C. P. Hunt- 
 ington 
 
 July 2. I. E. Gates.... 
 
 Sept. 5. C. P. Hunt- 
 mgton 
 
 Sept. 7. "L^a ex- 
 penses" 
 
 Sept. 15. C. P. Hunt- 
 ington 
 
 Sept. 20. C. P. Hunt- 
 ington 
 
 Oct. 5. C. P. Hunt^ 
 ington 
 
 Oct. 15. C. P. Hunt- 
 ington 
 
 Oct. 24. C. P. Hunt- 
 ington 
 
 Oct. 26. H. Hopkins 
 order 
 
 Nov. 1. Leland Stan- 
 ford 
 
 Nov. 9. I. E. Gates. . . 
 
 Nov. 16. I. E. Gates. . 
 
 Dec. 8. I. E. Gates.. . 
 
 Dec. 18. I. E. Gates. . 
 
 Dec. 19. I. E. Gates.. 
 
 Dec. 26. C. P. Hunt- 
 ington 
 
 Dec. 28 Leland Stan- 
 ford 
 
 $10,000.00 
 5,000.00 
 
 5,000.00 
 
 26,000.00 
 10,000.00 
 
 5,000.00 
 2,000.00 
 
 1,125.35 
 
 500.00 
 
 5,000.00 
 
 15,000.00 
 
 300.00 
 5.000.0J 
 2,000.00 
 1.000.00 
 
 5,000.00 
 200.00 
 
 1,000.00 
 
 10,440.00 
 
 1,000.00 
 
 3,000.00 
 
 1,500.00 
 
 2,000.00 
 
 1 ,000.00 
 
 5.000.00 
 
 S3 418.08 
 5.000.00 
 5,000.00 
 2..500.00 
 5,000.00 
 1,000.00 
 
 2,000.00 
 
 52,500.00 
 
 Total $279,483.43 
 
 1878. 
 
 Jan. 11. C. P. Hunt- 
 ington $1,150.00 
 
 Jan. 28. I. E. Gates... 1,600.00 
 Feb. 14. L.Stanford.. 1,000,00 
 Feb. 20. C. P. Hunt- 
 ington 2,500.00 
 
 Mch. 18. C. P. Hunt- 
 ington 5,500.00 
 
 Mch. 19. C. P. Hunt- 
 ington 4,500.00 
 
 April 12. I.E.Gates.. 1,750.00 
 
 Apr. IS. I. E. Gates. . 200.00 
 May 4. J am e s H. 
 
 Storrs 1.000.00 
 
 May 20. I. E. Gates. . 5,000.00 
 
 May 25. I. E. Gates. . 2,500.00 
 
 May 27. I E. Gates. . 5,000.00 
 
 June 7. L. Stanford . . 13,000.00 
 
 June 22. I. E. Gates. . 2,000.00 
 
 June 25. I. E. Gates. . 500.00 
 
 June 28. L.Stanford.. 111,431.25 
 June 29. Joseph H. 
 
 Bell 38.600.00 
 
 June 29. C. P. Hunt- 
 ington 99.167.20 
 
 Aug. 2. A. J. Howell. . 200.00 
 Aug. 3. J a m e s A. 
 
 George 300.00 
 
 Aug. 15. C. P. Hunt- 
 ington 42.855.06 
 
 Aug. 15. New York 
 
 Items 1.166.66 
 
 Aug. 19. T. M. Nor- 
 wood 287.95 
 
 Aug. 29. John Boyd.. 200.00 
 Sept. 3. Leland Stan- 
 ford 12,000.00 
 
 Sept. 3. A. J. Howell 200.00 
 Sept. 3. J. A. George. 150.00 
 Sept. 4. T. M. Nor- 
 wood 1.000.00 
 
 Sept. 4. S. T. Gage... 3,000.00 
 Sept. 14. I.E.Gates.. 1,500.00 
 Sept. 14. O. M. Brad- 
 ford 75.00 
 
 Sept. 23. D.D. Colton. 1,200.00 
 
 Sept. 23. J. A. George. 150.00 
 
 Sept. 27. I. E. Gates . . 5,000.00 
 
 Sept. 27. J.G.Prentiss 60.00 
 
 Sept. 28. I. E. Gates. . 2,000.00 
 
 Oct. 1. D. D. Colton.. 3,460.00 
 
 Oct. 1 . John Boyd 200.00 
 
 Oct. 1. John Boyd 204.00 
 
 Oct. 1. J.A.Howell.. 200.00 
 Oct. 1. J.A.George... 250.00 
 Oct. 3. I.E.Gates.... 5,000.00 
 Oct. 4. D.D. Colton.. 3,290.00 
 Oct. 5. I. E. Gates.. . . 2,000.00 
 Oct. 7. I. E. Gates., . . 1,000.00 
 Oct. 7. J. E. Forney . . 300.00 
 Oct. 10. T.E.Gates.. 2,000.00 
 Oct. 19. I.E.Gates.. 6,000.00 
 Oct. 22. I.E.Gates.. 3.500.00 
 Oct. 24. C. P. Hunt- 
 ington 3.000.00 
 
 Oct. 26. I.E.Gates.. 10,000.00 
 Oct. 28. I.E.Gates.. 10,000.00 
 Nov. 2. John Boyd. . . 224.00 
 Nov. 2. T. M. Nor- 
 wood 1,083.98 
 
 Nov. 11. I.E.Gates.. 500.00 
 Nov. 13. I. E. Gates. . 1,500.00 
 Nov. 21. C. H. Sher- 
 rill 1,000.00 
 
 Nov. 21. O. M. Brad- 
 ford 75.00 
 
 Nov. 22. J. A. George. 100.00 
 Nov. 27. I. E. Gates. . 500.00 
 Nov. 27. T. M. Nor- 
 wood 500.00 
 
 Dec. 2. John Boyd.... 200.00 
 
 Dec. 5. I. E. Gates. . . 10,000.00 
 
 Dec. 9. I. E. Gates. . . 2,800.00 
 
 Dec. 17. I. E. Gates. . 10,500.00 
 Dec. 23. J o h n H . 
 
 P'lagg 100.00 
 
 Dec. 26. I. E. Gates . . 500.00 
 
 Total $447,630.10 
 
 * Tables from Pacific Railroad Commission RepMjrt. 
 
i 
 
 ^pty and as pure a man as ever lived; and 
 BIrhen he said to us, 'I want $10,000,' I knew 
 
 it was proper to let him have it and I let him 
 
 have it." * 
 
 Examination by Commissioner Anderson: 
 
 Question. — How could Mr. Franchot personally 
 earn $30,000 or $40,000 a year in explaining things 
 to members of Congress? 
 
 Answer. — He had to get help. He had lots of 
 attorneys to help him. 
 
 Q. — Whom did he have? 
 ^v A. — I never asked him. 
 ^B Q. — How do you know he had? 
 ^» A. — Because he told me so. He said, " For these 
 explanations I have to pay out a little here and a 
 little there and that aggregates a great deal." t 
 
 Q. — In addition to explaining with words do you 
 not suppose they explained with champagne and ex- 
 pensive dinners? 
 
 A. — Very likely. I never gave a dinner in Wash- 
 ington. 
 
 Q. — Was not a great deal of it spent in cigars 
 and champagne dinners? 
 
 A. — I think so. Not so much, but perhaps some 
 of it was to get some able man to sit down and ex- 
 plain in the broadest sense what we wanted to have 
 done. J 
 
 It appears that up to 1887, the total expen- 
 ditures of the Southern Pacific at Washington 
 (without adequate vouchers) were $5,497,- 
 538.§ The important point about these ex- 
 penditures is that they were, for the most part, 
 of money that really belonged to the people 
 of the United States because it was money 
 that should have been paid into the National 
 Treasury as interest on the road's indebted- 
 ness. To use public funds to induce public 
 servants to give away more public funds 
 seems an extraordinary achievement in the his- 
 tory of legislation, but one of which the South- 
 ern Pacific gentlemen were easily capable. 
 
 Mr. Huntington is Incautious 
 Subsequently Mr. Huntington, examined 
 under oath, was asked this question: 
 
 Q. — In regard to the range of discussion that was 
 to be permitted between the members of Congress 
 and the apostles that you sent to them, was that 
 generally confined to Mr. Franchot and Mr. Sher- 
 rill, or did you take a hand in that? 
 
 A. — Probably it was done more or less by General 
 Franchot, Mr. Sherrill, and myself. 
 
 Q. — .\s a matter of fact, did they from time to 
 time consult with you ? 
 
 A.— They did. 
 
 And then for the first and only time in 
 all these examinations Mr. Huntington was 
 shaken out of his wary self-possession and 
 ability to dodge and twist. 
 
 * Pacific Railroad Commission Report, Testimony of Hunt- 
 ington, p. 34. t Ibid., p. 38. t Ibid., p. 38. 
 3 Pacific Railroad Commission Report, p. 39. 
 
 Scientific Corruption of Politics 
 
 853 
 
 Q. — But what I want to get at particularly is that 
 no portion of these moneys was to be considered as 
 covered by the ordinary expenditures of a railroad 
 for purchases of property and materials. Those 
 would be specific vouchers. So that as to all the unex- 
 plained vouchers we may assume that they were for 
 moneys e.xpended for imparting information to Con- 
 gress, or to the Departments, or for some purpose of 
 that character? 
 
 A. — That I cannot say. Most of the money was 
 expended, no doubt, to prevent Congress and the 
 Departments from robbing us of our property.* 
 
 I put down all these things to complete 
 the study of an intensely interesting human 
 document. You observe, no doubt, how 
 agilely Mr. Huntington glides over the thin- 
 nest places and how honest he looks, how 
 plausible he makes his cause look. 
 
 So, then, we should have interest in 
 noting on page 852 some of Mr. Hun- 
 tington's unexplained vouchers, observing 
 first that "I. E, Gates" was a confidential 
 clerk in his employ and that here, as in the 
 former case, the list we present is not com- 
 plete. 
 
 Eleven years of expenditures for "explain- 
 ing" things in behalf of the Central Pacific 
 and Southern Pacific — being some of the 
 unexplained vouchers charged to "expenses" 
 upon which the officers of the company 
 refused to throw any light — make this show- 
 ing: 
 
 1870 $63,581.03 
 
 1871 13,498.72 
 
 1872 73,361.83 
 
 1873 7.348.46 
 
 1874 52,844-94 
 
 1875 197.311-54 
 
 1876 299,301.37 
 
 1877 279;573.44 
 
 1878 471,081.06 
 
 1879 244,298 . 08 
 
 1880 197,809.36 
 
 Total. .111,900,009.83 
 
 In the foregoing lists the most interesting 
 exhibits are those for 1877-78 when Hunt- 
 ington was defeating Tom Scott, and for the 
 years in which the legislature was in session 
 at Sacramento. In running over the lists of 
 unexplained expenditures one can usually de- 
 fine the legislative sessions by the crowded 
 entries. 
 
 In 1884, the sums drawn by Charles F. 
 Crocker without explanation, total $404,- 
 710, and in the early part of 1885, $55,000. 
 S. T. Gage, one of the railroad's legislative 
 agents, drew out $18,150 in 1884 and $119,- 
 341 in the first part of 1885 — about the 
 time that Leland Stanford was drawing 
 $40,066.95 for a similarly unexplained pur- 
 pose. 
 
 Here is the way some of these items look 
 in the records for part of one month: 
 
 * Pacific Railroad Commission Report, p. 37 it scq. 
 
854 
 
 Hampton's Magazine 
 
 March, 1885. 
 
 
 7- 
 
 S. T. Gage. 
 
 $2,500 
 
 10. 
 
 Charles F 
 
 
 
 Crocker.. . 
 
 5,000 
 
 12. 
 
 S. T. Gage. 
 
 3,000 
 
 16. 
 
 Charles F 
 
 
 
 Crocker. . . 
 
 29,000 
 
 17- 
 
 S. T. Gage. 
 
 4 1 ,000 
 
 18. 
 
 S. T. Gage. 
 
 3,000 
 
 19. 
 
 S. T. Gage. 
 
 9,000 
 
 20. S. T. Gage. $15,000 
 
 21. S. T. Gage. .21,000 
 23. Charles F. 
 
 Crocker.. . . 15,500 
 23. S.T.Gage for 
 H. H. Cum- 
 
 niings i)25o 
 
 23. S. T. Gage. . 8,500 
 
 Total S1S3.750 
 
 All without explanation. The legislature 
 was in session. It was the legislature that 
 about this time elected Leland Stanford to 
 the United States Senate to succeed J. T. 
 Farley, Democrat. 
 
 Huntington's Quarrel with Stanford 
 
 Mr. Huntington was not pleased with the 
 legi-slature's choice. For years heand Stanford 
 had been growing estranged. The reason is 
 generally understood in California ; but being 
 related to private life need not be gone into 
 here. Huntington had thought A. A. Sargent 
 should go back to the Senate and he took un- 
 usual ways to make known his resentment 
 w^hen Stanford took the place for himself.* 
 
 In 1 888 he suddenl\- gave out an interview 
 containing a statement that was construed to 
 mean that Stanford had paid $500,000 of the 
 railroad company's money for his election to 
 the Senate. This angered Stanford and an 
 open breach was imminent. It was patched 
 up in some way, the common report being that 
 Stanford had threatened Huntington with 
 counter revelations. 
 
 Subsequently Huntington revenged himself 
 by securing Stanford's removal as president 
 of the Central Pacific, which place he had 
 held continuously since the organization of 
 the company in i86i. 
 
 Very interesting disclosures might have 
 been made on both sides concerning other 
 uses of the company's money. Thus it ap- 
 pears now that one of the most famous edi- 
 tors of San Francisco was on the pay roll at 
 $10,000 a year, a famous Washington corre- 
 spondent for an immaculate New York news- 
 paper received $5,000 a year, and one reading 
 the lists is continually startled by the recur- 
 rence of names that are also the names of 
 senators and public ofl&cers very prominent 
 in their day. 
 
 All of these expenditures are unexplained 
 otherwise than as "expenses" or "legal ex- 
 penses." 
 
 But the final light as to Mr. Huntington's 
 
 * See Mr. Charles D wight Willard's interesting book, "The 
 Free Harbor Contest," p. S9- 
 
 methods in Washington and what he meant 
 by "explaining things" is contained in the 
 following remarkable correspondence:* 
 
 New York, November 6, 1874. 
 Friend Colton : As you now seem to be one of us 
 I shall number your letters, or rather mine to you, 
 as with those sent to my other associates in Cali- 
 fornia. ... I notice what you say of Hager and 
 Luttrell, and notwithstanding what T. says, I know 
 he can be persuaded to do what is right in relation 
 to the C. P. and S. P. but some political friend must 
 see him, and not a railroad man, for if any of our 
 men went to see him he would be sure to lie about 
 it and say that money was offered him, but some 
 friend must see him and give him solid reasons why 
 he should help his friends. Yours truly, C. P. 
 Huntington. 
 
 The congressional directories give the 
 names of John S. Hager, of San Francisco, a.s 
 a Senator from California in the Forty-third 
 Congress and John K. Luttrell, of Santa Rosa, 
 as a Representative in the Forty -fifth Congress. 
 
 New York, November 20, 1874. 
 
 Friend Colton: Herewith I send copy of bill that 
 Tom Scott proposes to put through Congress this 
 winter. Now I wish you would at once get as many 
 of the associates together as you can and let me 
 know what you then want. Scott sent me these 
 copies fixed as he wants them and asked me to help 
 him pass them through Congress, or if I would not do 
 it as he has fixed them, then he asked me to fix it so 
 that I will, or in a way that I will support it. 
 
 Now do attend to this at once and in the meantime 
 I will fix it here and then see how near we are to- 
 gether when yours gets here. Scott is prepared to pay 
 or promises to pay a large amount of money to pass 
 his bill, but I do not think he can pass it, although I 
 think that this coming session of Congress will be 
 composed of the hungriest set of men that ever got 
 
 together and the d only knows what thev will 
 
 do. . . . 
 
 Would it not be well for you to send some party 
 down to .\rizona to get a bill to build in the Terri- 
 torial legislature granting the right to build a R. R. 
 east from the Colorado River (leaving the river 
 near Fort Mojave), have the franchise free from 
 taxation on its property and so that the rates of 
 fare and freight cannot be interfered with until the 
 dividends of the common stock shall exceed ten per 
 cent ? I think that would be about as good as a 
 land grant. It would not do to have it known that - 
 we had any interest in it, for the reason that it would 
 cost us much more money to get such a bill through 
 if it was known that it was for us. And then Scott 
 would fight it if he thought we had anything to do 
 with it. If such a bill was passed, I think there could 
 at least be got from Congress a wide strip for right 
 of way, machine shops, etc. Yours truly, C. P. 
 Huntington. 
 
 New York, December i, 1874. 
 
 Friend Colton: Your letters of November 20th, 
 2 ist and 22d are received. . . . Has any of our peo- 
 ple endeavored to do anything with Low and Fris- 
 bie? They are both men that can be convinced. 
 ... I will see Luttrell when he comes over and 
 talk with him, and maybe he and we can work 
 
 * Evidence in Ellen M. Colton vs. Stanford, el al. 
 
Scientific Corruption of Politics 
 
 855 
 
 together, but if we can brush him out it would have 
 a good effect and then we could or at least try to 
 get some better timber to work with. . . . And in 
 this connection it would help us very much if we 
 could fix up California Pacific income and exten- 
 sions on the basis we talked of even if we had to 
 pay something to convince Low and Frisbic. Yours 
 truly, C. P. Huntington. 
 
 DEFEATING A "wiLD HOG" 
 
 New York, May i, 1875. 
 P'riend Colton: Yours of the 17th of April, No. 
 17, is received and contents carefully noted. . . . 
 1 notice what you say of Luttrell; he is a wild hog; 
 don't let him come back to Washington, but as the 
 House is to be largely Democratic, and if he was to 
 be defeated, likely it would be charged to us, hence 
 I should think it would be well to beat him with a 
 Democrat; but I would defeat him anyway and if he 
 got the nomination, put up another Democrat and run 
 against him, and in that way elect a Republican. 
 Beat him. Yours truly, C. P. Huntington. 
 
 New York, September 27, 1875. 
 Friend Colton: Yours of the i8th with inclosure 
 as stated is received. . . , Scott is making the strongest 
 possible efiort to pass his bill the coming session of 
 Congress. ... If we had a franchise to build a road 
 or two roads through Arizona (we contracting, but 
 having it in the name of another party), then have 
 some party in Washington to make a local fight and 
 asking for the guarantee of their bonds by the United 
 States, and if that could not be obtained, offering to 
 build the road without any, and it could be used 
 against Scott in such a way that I do not believe any 
 politician would dare vote for it. Can you have 
 Safford call the legislature together and grant such 
 charters as we want at a cost of say $25,000? If 
 we could get such a charter as I spoke to you of it 
 would be worth much money to us. . . . Yours truly, 
 C. P. Huntington. 
 
 Safford was Governor of Arizona. 
 
 New York, October iq, 1875. 
 Friend Colton: ... I have given Gilbert C. 
 Walker a letter to you. He is a member of the 
 Forty-fourth Congress, ex-Governor of Virginia, and 
 a slippery fellow, and I rather think in Scott's in- 
 terest, but not sure. I gave him a pass over C. 
 P. and got one for him on U. P. So do the best 
 you can with him but do not trust him much. 
 Yours truly, C. P. Huntington. 
 
 The Congressional Directory gives the 
 name of Gilbert C. Walker, of Richmond, 
 Virginia, as a member of the Forty-fourth 
 Congress. 
 
 New York, November 10, 1S75. 
 Friend Colton: . . . Dr. Gwin is also here. 
 I think the doctor can do us some good if he can 
 work under cover, but if he is to come to the surface 
 as our man I think it would be better that he should 
 not come, as he is very obnoxious to very many on 
 the Republican side of the House. ... I am, how- 
 ever, disposed to think that Gwin can do us some 
 good; but not as our agent but as an anti-subsidy 
 Democrat, and also as a Southern man with much 
 influence. . . . But Gwin must not be known as 
 our man. . . . Yours, etc., C. P. Huntington. 
 
 William M. Gwin, of San Francisco, appears 
 in the congressional directories as a Sena- 
 tor from California in the Thirty-sixth Con- 
 gress. 
 
 December 10, 1875. 
 
 Friend Colton: ... I had a talk with Bris- 
 tow. Secretary of the Treasury. He will be likely 
 to help us fix up our matters with the government 
 on a fair basis. Yours truly, C. P. Huntington. 
 
 Benjamin H. Bristow, of Kentucky, was 
 Secretary of the Treasury in the second ad- 
 ministration of Grant. 
 
 Here are extracts from other letters signed 
 "Yours truly, C. P. Huntington," and ad- 
 dressed "Friend Colton." 
 
 THE "dam interviewers" BOTHER HIM 
 
 New York, December 22, 1875. 
 ... I think the Doctor will return to California 
 in January. I have just returned from Washington. 
 The Doctor (Gwin) was unfortunate about the 
 R. R. committee; that is, there was not a man put 
 on the committee that was on his list, and I must 
 say I was deceived and he was often with Kerr and 
 K. was at his rooms and spent nearly one evening. 
 The committee is not necessarily a Texas Pacific, 
 but it is a commercial com. and I have not much 
 fear but that they can be convinced that ours 
 is the right bill for the country. If things could 
 have been left as we fixed them last winter there 
 would have been little difficulty in defeating Scott's 
 bill; but their only argument is it is controlled by 
 the Central. That does not amount to much be- 
 yond this: It allows members to vote for Scott's bill 
 for one reason, and give the other, that it was to 
 break up a great monopoly, etc. If these dam 
 interviewers would keep out of the way it would be 
 much easier traveling. 
 
 Michael C. Kerr, of Indiana, was Speaker 
 of the House. 
 
 Yours of December 30th and the ist inst., Nos. 120 
 and 121 received: also your telegram that William 
 B. Carr has had for his services $60,000 S. P. bonds; 
 then asking how much more I think his services are 
 worth for the future. That is a very difficult ques- 
 tion to answer as I do not know how many years 
 Mr. Carr has been in our employ or how far in the 
 future we should want him. In view of the many 
 things we now have before Congress, and also in 
 this sinking fund that we wish to establish, m which 
 we propose to put all the company's lands in Utah 
 and Nevada, it is very important that his friends in 
 Washington should be with us, and if that could 
 be brought about by paying Carr, saj*, $10,000 to 
 $20,000 per year, I think we could afford to do it, 
 but of course not until he had controlled his friends. 
 They could hurt us very much in this land matter; 
 although I would not propose to put the land in at 
 any more than it is worth, say $2.50 an acre. I 
 would like to have you get a written proposition 
 from Carr in which he would agree to control his 
 friends for a fixed sum, then send it to me. . . . 
 
 William B. Carr was an influential poli- 
 tician in San Francisco. 
 
856 
 
 Hampton's Magazine 
 
 .^^'"^ 
 
 JAMES W. REA, WHO EXPOSED THE WORK- 
 INGS OF THE RAILROAD IN THE CALI- 
 FORNIA LEGISLATURE. 
 
 New York, January 17, 1876. 
 ... I have received several letters and tele- 
 grams from Washington to-day, all calling me there, 
 as Scott will certainly pass his Texas Pacific bill 
 if I do not come over and I shall go over to-night, 
 but I think he could not pass his bill if I should 
 help him; but of course I cannot know this for cer- 
 tain, and just what effort to make against him is 
 what troubles me. It costs money to fix things so 
 that I would know that his bill would not pass. I 
 believe with $200,000 I can pass our bill, but I take 
 it that it is not worth this much to us. 
 
 New York, January 29, 1876. 
 . . . Then on our side we have Sargent, Booth, 
 Jones, Cole, and Gorham in the Senate to help us. 
 . . Scott is working mostly among the commer- 
 cial men. He switched Senator Spencer of Ala- 
 bama, and Walker of Virginia, this week, but you 
 know they can be switched back with proper argu- 
 ments when they are wanted; but Scott is asking 
 for so m.uch that he can promise largely to pay when 
 he wins, and you know I keep on high ground. All 
 the members in the House from California are doing 
 first rate except Piper, and he is a damned hog; 
 anyway you can fix him. I wish you would write a 
 letter to Luttrell saying that I say he is doing first 
 rate, and is very able, etc., and send me a copy. 
 
 According to the congressional directories 
 Aaron A. Sargent and Newton Booth were 
 Senators from Cahfornia. John P. Jones 
 was a Senator from Nevada. CorneHus Cole 
 had been a Senator from California in the 
 Forty-third Congress. George C. Gorham 
 was Secretary of the Senate. The name 
 
 " George C. Gorham " appears in the Hunt- 
 ington accounts. George E. Spencer was a 
 Senator from Alabama in the Forty-fifth 
 Congress. Gilbert C. Walker was a Repre- 
 sentative from Virginia. William A. Piper 
 was a Representative from California. He 
 was of radical views. By this time it would 
 seem that Luttrell had been convinced. 
 
 roscoe conkling as one of " our best 
 friends" 
 
 New York, April 27, 1876. 
 . . . Scott has several parties here that I think 
 do nothing else except write articles against the 
 Central Pacific and its managers, then get them 
 published in such papers as he can get to publish 
 them at small cost, then sends the papers every- 
 where, and there is no doubt but that he has done 
 much to turn public sentiment against us. If it 
 was known that the C. P. did not control the S. P. 
 I think we could beat him all the time, although he 
 has alx>ut the same advantages over us in Wash- 
 ington that we have over him in Sac. [Sacramento]. 
 If he wants some committeeman away he gets some 
 fellow (his next friend) to ask him to take a ride 
 to New York or anywhere else, of course on a free 
 pass, and away they go together. Then Scott has 
 always been very lil^eral in such matters. Scott got 
 a large number of that drunken, worthless dog 
 Piper's speeches printed and sent them broadcast 
 over the country. He has flooded Texas with them. 
 The Sac. Record-Union hurts us very much by 
 abusing our best friends. There was a no. [num- 
 ber] of that paper came over some little time since 
 that abused Conkling, Stewart and some other of 
 our friends, with Bristow's name up for president. 
 ... If I owned the paper I would control it or 
 bum it. . . . 
 
 Roscoe Conkling was a Senator from New 
 York. His name occurs in the Huntington 
 accounts. William M. Stewart was a Sen- 
 ator from Nevada. Bristow was a prominent 
 candidate for the Presidency; at the time this 
 letter was written he was Secretary of the 
 Treasury. The Sacramento Record-Union 
 was at that time called a railroad organ. 
 
 New York, May 2, 1876. 
 Herewith I send copy of telegraphic dispatch that 
 came over yesterday. Who is this Webster? Is it 
 not possible to control the agent of the Associated 
 Press in San Francisco? The matters that hurt 
 the C. P. and S. P. most here are the dispatches 
 that come from S. F. (San Francisco). Scott has a 
 wonderful power over the press, which I suppose he 
 has got by giving them free passes for many years 
 over his roads. . . . 
 
 New York, May 12, 1876. 
 ... I sent Hopkins an article yesterday cut 
 from the Commercial Advertiser; * to-day I met one 
 of the editors, Norcutt; he told me Scott paid for 
 having it published; that he would not have let it 
 gone into the papers if it had been left to him, 
 etc. . . . 
 
 * This newspaper has passed into new hands since the date of 
 this letter. 
 
I ...... 
 
 ^V .... I hope Luttrell will be sent back to Con- 
 egress. It would be a misfortune if he were not. 
 Wigginton has not always been right, but he is a 
 good fellow and is growing every day. Page is 
 always right, and it would be a misfortune to Cal. 
 not to have him in Congress. Piper is a damned 
 hog and should not come back. It is shame enough 
 for a great commercial city like S. F. to send a 
 scavenger like him to Congress once. . . . 
 
 tNEW York, June 12, 1876. 
 .... I notice what you say of Wigginton, Lut- 
 ell, and Piper. The latter should be defeated at 
 almost any cost. 
 
 Peter D. Wigginton, of Merced, and Hor- 
 ace F. Page, of Placerville, were Representa- 
 tives from California in the Forty-fifth Con- 
 
 ^cress. 
 
 ^B June 24, 1876. 
 
 ^V Parrott (Gorham) is, or was, writing a brief on 
 fares and freight to influence, I was told, one of the 
 Judges of the Supreme Court. They are sure to 
 do their worst but my better judgment tells me that 
 we cannot afford to take the scamps into camp. 
 
 ^^ New York, March 7, 1877. 
 
 ^^f .... I notice you are looking after the state 
 railroad commissioners. I think it is time. ... I 
 stayed on in Washington two days to fix up R. R. 
 Committee in the Senate. Scott was there working 
 for the same thing, but I beat him for once, certain, 
 as the committee is just as we want it, which is a 
 very important thing for us. . . . 
 
 March 14, 1877. 
 .... After the Senate R. R. Committee was 
 made up Scott went to Washington in a special train, 
 and got one of our men of! and one of his on, but 
 they did not give him the com. Gordon, of Georgia, 
 was taken off, and Bogy, of Missouri, put on. 
 
 John B. Gordon, of Atlanta, was a Senator 
 from Georgia; Lewis V. Bogy of St. Louis 
 was a Senator from Missouri in the Forty- 
 fifth Congress. 
 
 I gave to-day a letter to Senator Conover of 
 Florida. He is a good fellow enough and our 
 friend after he is convinced we are right. 
 
 Simon P. Conover was a Senator from 
 Florida in the Forty-fifth Congress. 
 
 MILLION AND A HALF PROFITS IN TWO 
 MONTHS ! 
 
 New York, March 24, 1877. 
 . . . You write: "Our receipts are not enough 
 to meet payrolls and imperative demands here." I 
 have no knowledge of what the receipts have been 
 this month, but for January and February, this 
 year, on all our roads, they were nearly three millions 
 of dollars, which was nearly $400,000 more than in 
 the same months of 1876, and one half must have 
 been profits. 
 
 April 3, 1877. 
 .... We should be very careful to get a U. S. 
 Senator from Cal. that will be disposed to use us 
 fairly and then have the power to help us. Sargent, 
 I think will be friendly, and there is no man in 
 the Senate that can push a measure further than 
 he. . . . 
 
 Scientific Corruption of Politics 
 
 857 
 
 STEPHEN J. FIELD. OF CALIFORNIA, JUS- 
 TICE IN THE UNITED STATES SU- 
 PREME COURT FROM 1863 TO 1897. 
 
 Aaron A, Sargent was a Senator from 
 California in the Forty-fifth Congress. 
 
 New York, April 20, 1877. 
 
 I wrote Crocker on the 12th inst. in relation to 
 Jones' Los Angeles road. A few days after I saw 
 Jones I met Gould. He told me Keene had bought 
 it [meaning the railroad at Los Angeles owned by 
 Senator Jones, of Nevada]. Of course, I said I was 
 glad to hear it, as we did not want the road at any 
 price; that I made Jones an offer for it because we 
 wanted him to help us with our (C. P. and U. P.) 
 sinking fund bill in Congress, and was very glad it 
 had got (the railroad) out of the way, and that I 
 saw nothing now to prevent friendly relations be- 
 tween Jones and ourselves, &c. 
 
 On the Sunday following A. A. Selover came to 
 my house and said he came from Gould and Keene 
 and that in the panic or break in Panama a few days 
 before Jones would have been broken if G. and K. 
 had not come in to help him out, and to do it they 
 had to take Jones' railroad, &c., and he asked 
 me, after some beating alx)ut, if we wanted the road 
 at $480,000. I told him that we did not want it at 
 all but that we would take it so as to work in har- 
 mony with Jones, and that I had made him an offer 
 as I wrote Crocker, and my impression was our 
 people would do that now, but I was quite sure we 
 would rather G. and K. would keep the road, if 
 by that Jones could be made our friend, &c. 
 What do you all think of this? I am rather disposed 
 to think G. and K. have not bought the road but 
 hold it as collateral. 
 
 New York, May 7, 1877. 
 
 .... I notice what you say of Conover, the 
 Florida Senator. He is a clever fellow but don't 
 go any money on him. . . . The $70,000 that I let 
 Jones have are tied up for ten years. I think we 
 can make more than the interest on the amount paid 
 for Jones' road out of our other roads by not run- 
 ning the Jones road at all; and Jones is very good- 
 
858 
 
 Hampton's Magazine 
 
 naturcd now and we need his help in Congress very 
 much; and I have no doubt we shall have it. We 
 must have friends in Congress from the West coast, 
 as it is very important, I think, that we kill the open 
 highway, and get a fair sinking fund bill by which 
 we can get time beyond the maturity of the bonds 
 that the government loaned us to pay the indebted- 
 ness; and I think if any Republican is elected in 
 Sargent's place, he (Sargent) is worth to us, if he 
 comes back as our friend, as much as any six new 
 men, and he should be returned. 
 
 INGALLS A "good FELLOW " 
 
 New York, May 15, 1877. 
 
 Yours of the 7th inst. is received. I am glad you 
 are paying some attention to General Taylor and 
 Mr. Kasson. Taylor can do us much good in the 
 South. I think, by the way, he would like to get 
 some position with us in Cal. Mr. Kasson has 
 always been our friend in Congress and as he is 
 a very able man, has been able to do us much good 
 
 and he has never * us one dollar. I think 
 
 I have written you before about Senator Conover. 
 He may want to borrow some money, but we are 
 so short this summer I do not see how we can let 
 him have any in Cal. 
 
 I have just given Senator Ingalls, of Kansas, a 
 letter to you. He is a good fellow and can do us 
 much good. . . . Senator Morton is coming over; 
 also his brother-in-law, Burbank. They are good 
 fellows, but B. means business; not here but in W. 
 
 Scott is working everywhere for his open highway, 
 but I think we can beat him ; but it will cost money. 
 
 The Congressional Directory gives the 
 name of Oliver P. Morton as a Senator 
 from Indiana. 
 
 June I, 1877. 
 
 .... There has been quite a number of Senators 
 and M. C. in the office here in the last few days; they 
 all say Scott is making his greatest effort on his Texas 
 and Pacific (open highway) and most of them think 
 he will pass it; this man Hayes, most people say, 
 is for it to conciliate the South; he may be, but I 
 hardly believe he is; but I have no doubt he is for 
 many things he should not be for. . . . 
 
 The reference is to President Hayes. 
 
 New York, September 10, 1877. 
 
 Friend Colton: ... As to Colonel Hyde writ- 
 ing a report about the harbor of San Diego. I 
 would Hke such a report as he could write, and if 
 he would write one to suit for $250 I would give it, 
 and if he would not we shall have to go without 
 it. . . . 
 
 New York, October 5, 1877. 
 
 Yours, No. 15, is received. I notice your remarks 
 on our matter in Cal. I have no doubt there is 
 many things to annoy you. The dispatches about 
 crossing the Colorado come over very well. I t ink 
 Gould has had as much to do with stopping us on 
 the bridge as Scott has, although I have had no 
 reason for so thinking up to this morning (see clip 
 
 ♦See Pacific Railroad Commission Report, p. 3851. In the 
 ori<?inal the word left blank here is said to look like " cost." Some 
 authorities agreed to accept it as "lost," which although it 
 seems to make no sense had doubtless a more dulcet sound in 
 some ears. John A. Kasson, of Des Moines, was a Representative 
 from Iowa and later United States Minister to Austria. John J. 
 Ingalls, of Atchison, was a Senator from Kans;is. 
 
 " ScientiGe Corruption of Politics 
 
 from Tribune), except Jim Wilson, of Iowa, is their 
 man, and has much influence with McCrary. 
 
 Sec. of War was in Washington when the first 
 order went out to stop work on the bridge, and Gould 
 came in twice, and Dillon once, to tell me that the 
 Sec. of the Interior had his war paint on and was to 
 attack us in his message, etc., etc. I thought at the 
 time they were tr}'ing to cover up something, and 
 rather supposed it was to check us on S. P. . . . 
 
 George W. McCrary, of Iowa, was Secretary 
 of War in the administration of Hayes. Carl 
 Schurz was Secretary of the Interior in the 
 same administration. The bridge was at a 
 government reservation, McCrary and Schurz 
 stopped it. James Wilson, of Traer, was a 
 Representative from Iowa in the Forty-fourth 
 Congress. According to " Who's Who," the 
 home of James Wilson, at present Secretary of 
 Agriculture, is at Traer, Tama County, Iowa, 
 and he was in Congress from 1873 to 1877 
 and from 1883 to 1885. 
 
 New York, October 20, 1877. 
 
 .... I think Safford had better be in Washing- 
 ton at the commencement of the regular session, to 
 get Congress to confirm the Acts of Arizona. 
 
 I saw Axtell, Governor of New Mexico, and he 
 said he thought if we would send to him such a bill 
 as we wanted to have passed into a law, he could 
 get it passed with vet}' little or no money; when if 
 we sent a man there they would stick him for large 
 amounts. . . . 
 
 October 30, 1877. 
 
 .... The committees are made up for the Forty- 
 fifth Congress. I think the R. R. Com. is right, but 
 the Com. on Territories I do not like. A different 
 one was promised me. ... I think there never 
 was so many strikers in Washington before. 
 
 " JIM " KEENE ALSO READY TO PAY MONEY 
 
 November g, 1877. 
 .... I do not think we can get any legislation 
 this session for extension of land grants or for chang- 
 ing line of road unless we pay more for it than it is 
 worth. . . . Some parties are making great effort 
 to pass a bill through Congress that will compel the 
 U. P. and C. P. to pay large sums into a sinking 
 fund, and I have some fears that such a bill may 
 pass. Jim Keene and others of Jay Gould's ene- 
 mies are in it and will pay money to pass. 
 
 New York, November 15, 1877. 
 .... If we are not hurt this session it will be 
 because we pay much money to prevent it, and you 
 know how hard it is to get it to pay for such pur- 
 poses. ... I think Congress will try very hard to 
 pass some kind of bill to make us commence paying 
 on what we owe the government. . . . Every year 
 the fight grows more and more expensive. . . . 
 
 New York, November 22, 1S77. 
 .... Matters never looked worse in Washing- 
 ton than they do at this time. It seems as though 
 all the strikers in the world were there. I send with 
 this copy of one of their letters I received yesterday, 
 all of the same tenor. The one I send is from ex- 
 Senator Pomeroy. 
 " will be continued on page 879. 
 
Scientific Corruption of Politics 
 
 879 
 
 Scientific Corruption of Politics 
 
 Continued from pafie 858 
 
 The inclosure is a letter of advice from 
 *onieroy to Huntington, outlining a scheme 
 ^y which Congress could be controlled for 
 le railroad, and closing with fulsome ex- 
 pressions. For Pomeroy, see Mark Twain's 
 'Gilded Age"; also Mr. Huntington's ac- 
 counts for 1876. Pomeroy had been a Sen- 
 ator from Kansas in the Forty-third Con- 
 fess . 
 
 November 24, 1877. 
 . I notice what you write of the Santa Mon- 
 ica road. I am satisfied with that trade and when 
 you write pay Jones no part of the $25,000, because 
 there is an unsettled account of, say, $6,000. I think 
 you forget his position. I have paid him the $25,- 
 000 as he told me he needed it very much. Jones 
 can do us much good and says he will. 
 
 ■ December 5, 1877. 
 
 r . . . I have just received telegram from Wash- 
 ington that Matthews and Windom have been put 
 on Senate R. R. Com. in place of Howe and 
 Ferrj'. This looks as though the Texas and P. 
 had control of the Senate as far as appointing corns, 
 are concerned. I am not happy to-day. 
 
 Stanley Mathews, of Cincinnati, was a Sen- 
 ator from Ohio; William Windom, of Wi- 
 nona, was a Senator from Minnesota; Timo- 
 thy O. Howe, of Green Bay, was a Senator 
 from Wisconsin ; Thomas W. Ferry, of Grand 
 Haven, was a Senator from Michigan. 
 
 WHEN MONEY WAS USED VERY FREELY 
 
 December 17, 1877. 
 . . . The Texas and P. Company have been 
 fighting us for years, but have had but little 
 money, but have used passes and promises largely; 
 but the latter, as they say, is about played out, and 
 some little time ago they joined teams as I am told, 
 with the North[em] P[acific]. They had a little 
 money to use as they had no mortgage or floating 
 debt as I am told. They have made a little money 
 on this end of their road and I think are using it. 
 Jay Gould went to Washington about two weeks 
 since and I know saw Mitchell, Senator from Ore- 
 gon, since which time money has been used very 
 freely in Washington and some parties have been 
 hard at work for the T. & P. — N. P., that never 
 work except for ready cash, and Senator Mitchell 
 is not for us as he was, although he says he is, but I 
 know he is not. Gould has large amounts of cash 
 and he pays it without stint to carry his points. . . . 
 
 John H. Mitchell, of Portland, \yasa Sena- 
 tor from Oregon. 
 
 January 12, 1878. 
 
 . . . Matters do not look well in Washington, 
 but I think we shall not be much hurt, although the 
 boys are very hungrj' and it will cdst considerably 
 to be saved. 
 
 January 22, 1878. 
 ... The World * again published to-day that 
 the C. P. and S. P. [Central Pacific and Southern 
 Pacific] owe fourteen millions floating debt, and it 
 hurts us very much, and I don't see how we can 
 carry our floating debt here unless this debt can in 
 some way be transferred; that is the larger portion 
 of it. The World is controlled by Tom Scott. A 
 few months ago I could have had it in our interest, 
 by paying its losses, or in other words, paying the 
 bills that they (the World) could not pay, which 
 would be from $2,000 to $5,000 a month. I did not 
 think it wise to do it. . . . 
 
 February 23, 1878. 
 . . . The Sub. Com. of the R. R. Com. of the 
 House have agreed to report Scott's T. and P. bills 
 through to San Diego and I am disposed to think 
 the full Com. will report it to the House. It can be 
 stopped but I doubt whether it would be worth the 
 cost. ... Scott no doubt will promise all the, say, 
 $40,000,000, that the act would give him. . . . 
 
 (Letter of March 4, 1878, suggested that army 
 officers be let in on the Oakland water front job.) 
 
 New York, May 3, 1878. 
 . . . The Texas and Pacific folks are working 
 hard on their bill, and say they are sure to pass it, 
 but I do not believe it. They offered one M. C. 
 one thousand dollars cash down, five thousand 
 when the bill passed, and ten thousand of the bonds 
 when they got them, if he would vote for the bill. 
 
 New York, June 30, 1878. 
 I think your letter to McFarland was good. . . . 
 I think in all the world's history never before was 
 such a wild set of demagogues honored with the 
 name of Congress. We have been hurt some but 
 some of the worst bills have been defeated but we 
 cannot stand many such Congresses. 
 
 New York, September 30, 1878. 
 ... I think you are right about Field not sit- 
 ting in the Gallatin suit. . . . 
 
 Albert Gallatin had been a member of the 
 firm of Huntington & Hopkins at Sacra- 
 mento. He brought suit to prevent the 
 Central Pacific from setting aside its sinking 
 fund. Justice Stephen J. Field was of the 
 Supreme Court of the United States. For 
 many years he was actively supported in 
 some quarters for the Democratic nomina- 
 tion for the Presidency. 'The California 
 State Democratic convention of 1884, held 
 at Stockton, considered charges against Jus- 
 tice Field based upon his decisions in cases 
 wherein the Southern Pacific Railroad was 
 interested. As a result of these charges the 
 
 * This newspaper has undergone changes of editorial manage- 
 ment and ownership since the date of this letter. 
 
8.^ 
 
 880 Hampton's Magazine 
 
 convention formally read Justice Field out scribed in Mr. Franklin Hichborne's book 
 
 of the Democratic party. on that subject.* This is the iilfluence that 
 
 I have used the past tense in describing is determining to-day who shall be governor, 
 
 the political degradation of this State of Cali- who shall fill every office below him, who 
 
 fornia, but I might as well have written it in shall be judges. 
 
 the present. Forms have changed somewhat Finally, this is the influence, concealed and 
 
 and methods; the essence of the situation sinister, that stopped the graft prosecution 
 
 remains the same. in San Francisco; that enabled Ruef, Cal- 
 
 Still, the huge political machine works on houn, and Schmitz to escape; that defeated 
 
 corrupting and corrupting. Still, the railroad Francis J. Heney at the polls; and morally 
 
 boss operates in every county, and still the head this is the influence responsible for the hand 
 
 spider sits in his office and spins his evil webs. that tried to assassinate him. 
 
 This is the influence that brought to naught 
 
 the work of the reformers in the last Ses- „'"Story of theSe^ion of the California Legblature," by 
 
 1 • 11 J Franklin Hichborne, San Francisco; ipog. It is really a most 
 
 SlOn of the legislature, as graphically de- meritorious work and ought to be widely noted. 
 
 Nora 
 
 By Arthur Stringer 
 
 Why is it, now, me Nora 
 Will niver shpake av Hugh? 
 
 Will niver pass a joke wid him 
 The way she used to do? 
 
 Toime was that gurl'd blather 
 Av Hughie, noon and night! 
 
 Now iv'ry toime he swings the gate 
 Her face goes starin' white! 
 
 I've spied no row nor ruction; 
 
 They meet as friend wid friend; 
 And still, I'm toldt, he walks with her 
 
 Beyont the boreen's end. 
 
 I've done me best by Nora; 
 
 That gurl's as thrue as day, 
 Wid all her big and wishtful eyes, 
 
 Wid all her bashful way' 
 
 But white before me turf-fire 
 
 She sits widout a word. 
 This gurl av mine who used to sing 
 
 As mad as any bird! 
 
 Faith, since she lost her mother, 
 
 I've left that colleen free 
 To come and go — but toimes there are 
 
 When men are slow to see! 
 
 For wanst I spied her rockin' 
 
 And sobbin' here, alone — 
 Now, can there he some throuble up 
 
 Her mother might 've known? 
 
 \ 
 
peaking of Widows and Orphans 
 
 By Charles Edward Russell 
 
 Author of "The Heart of the Railroad Problem" ''Beating Men to Make Them Good,'' etc. 
 Illustrations by Clarence Rowe and C. F. Peters 
 
 Editorial Note. — Here is perhaps the most vivid and dramatic chapter of Mr. Russell's 
 series on the Central Pacific Millionaire Mill. The story told on the witness stand by the 
 widow of Mr. Huntington's "Friend Colton," and the story of the settlers that lost their lives in 
 their contest with the railroad power will be found of extraordinary interest and significance. 
 
 THE STRANGE EXPERIENCES OF 
 MRS. COLTON 
 
 As to the specific cause of the increased cost of 
 
 living, President Taft to-day frankly told various 
 
 of his callers that he was unable to account for it. 
 
 — News Despatch from Washington, December 30, 
 
 11909. 
 
 I 
 
 ON October 8, 1878, General David D. 
 Colton was brought to his home in San 
 Francisco suffering from a perilous wound 
 that he had received either in some mysterious 
 accident or from somebody's dagger. 
 
 Mrs. Colton was then in New York. She 
 was telegraphed for and hastened homeward 
 in special trains, but could not reach San 
 Francisco until October 14th, five days after 
 her husband's death. 
 
 General Colton was in several ways re- 
 markable, but chiefly as the only man that 
 Collis P. Huntington seemed to like or in 
 whom he placed the least confidence. For 
 two of his partners Huntington entertained un- 
 disguised contempt, and for the third (one may 
 say) a kind of tolerance; but he seemed really 
 drawn toward Colton — in his long career 
 almost the solitary instance of human weak- 
 ness and one that cost him dear. 
 
 In earlier days in California, Colton had 
 been a rather picturesque figure. He was 
 once the sheriff of Siskiyou County and in 
 that capacity had bravely withstood and 
 quelled a mob. In San Francisco he prac- 
 ticed law, did some work for the multifarious 
 and usually shady enterprises of the Southern 
 Pacific, organized the form of its plunder 
 that was called the Rocky Mountain Coal and 
 
 Iron Company, and by his superior clever- 
 ness won Huntington's reluctant regard. 
 
 Before long he was admitted to the partner- 
 ship; not, of course, to all of the good things 
 nor to many of them, but to choice bits that 
 made him a millionaire. Thus when the West- 
 ern Development Company was organized, he 
 received a one-ninth share of that precious con- 
 cern; and he was president of and held much 
 stock in the Rocky Mountain Coal and Iron, 
 which was then selling to the Central Pacific 
 at $8 a ton coal that ^as worth $4 or less. 
 
 WHEN THE WIDOW RELIED ON THE OLD 
 FRIENDS 
 
 General Colton 's will left everything to 
 Mrs. Colton, who was appointed sole execu- 
 trix. She had known almost nothing about 
 his business and she was greatly prostrated 
 by his sudden death ; but with confidence she 
 relied upon his late associates, who had been 
 his and her dear friends. As she wrote to 
 Mr. Huntington in the early days of her 
 affliction, ''I know that you and Mr. Crocker 
 will advise and take care of the wife of David 
 D. Colton." Particularly to her near neigh- 
 bor, Charles Crocker, she looked for gui- 
 dance, because the families had been very 
 intimate. When Mr. and Mrs. Crocker went 
 to Europe, Mrs. Colton took the two oldest 
 Crocker boys into her household as if they 
 were her own children.* 
 
 When General Colton died — or was killed 
 — Mr. Crocker was on his way home from 
 abroad. He spent a few days in New York 
 and conf erred there with Mr. Huntington. 
 
 * Colton versus Stanford el al., testimony, pp. 2485-90. 
 
 79 
 
80 
 
 Hampton's Magazine 
 
 On the night of his arrival in San Francisco, 
 Mrs. Colton saw with great rehef his carriage 
 drive up to his door, and at once sent him a 
 note asking him to come to see her. He ex- 
 cused himself for that night, but visited her 
 the next morning and wept as he dwelt upon 
 General Colton's splendid qualities, and his 
 own and Mrs. Colton's great loss, by which 
 he seemed to be greatly affected. 
 
 Meanwhile, Mr. Charles E. Green, Gen- 
 eral Colton's secretary, had prepared for Mrs. 
 Colton an inventory of the estate. It showed 
 possession of the following securities: * 
 
 .^08 shares Rocky Mountain Coal and Iron stock. 
 10,000 shares Occidental and Oriental Steamship 
 
 Company stock. 
 20,000 shares Central Pacific Railroad Company 
 
 stock. 
 34,000 shares Southern Pacific stock. 
 5,555§ shares , Western Development Company 
 slock. 
 749 shares Amador Branch Railroad stock. 
 Ill shares Berkeley branch Railroad stock. 
 2,640 shares California Pacific stock. 
 556 shares Colorado Steam Navigation stock. 
 650 First Mortgage Southern Pacific bonds, 
 
 $1,000 each. 
 100 First Mortgage Southern Pacific bonds, $500 
 each. 
 75 First Mortgage Amador Branch bonds. 
 II First Mortgage Berkeley Branch txinds. 
 3 Los Angeles County Bridge bonds. 
 
 In a few days Mr, Crocker called again, 
 and, as Mrs. Colton said afterwards, she was 
 impressed with a great change in his manner. 
 Apparently he had mastered his grief for his 
 dead friend and his lips found no more words 
 of condolence for the widow. On the con- 
 trary, he was stern and severe.f He said 
 austerely that General Colton had left his 
 affairs much confused; that he was in debt 
 to his associates and to the companies with 
 which he had been connected; that many of 
 the securities in his estate had been obtained 
 by means of a dividend of the Western 
 Development Company; J that this dividend 
 had been improperly declared by General 
 Colton without warrant, and that all persons 
 sharing in that dividend would be obliged to 
 return the securities received from it. 
 
 "We are going to return our dividends," 
 he concluded, "and as you have got to return 
 yours you had better do so to-day — before 
 night. Will you?" § 
 
 * Many of these securities can be traced by reference to the 
 Pacific Railroad Commission Report, testimony of Doughty, p. 
 3256. 
 
 t Colton versus Stanford el al., testimony, pp. 2485-90. 
 
 i I take this to be the dividend of September 4. 1877, de- 
 scribed in a previous article. More than a year seems to have 
 elapsed before the discovery that the securities must be returned 
 — and by the way, they never were returned. 
 
 § Colton versus Stanford el al., testimony, p. 2792. 
 
 Mrs, Colton, being much taken aback, 
 said she would seek advice and decide what J 
 to do, Mr, Crocker went on that GeneralJ 
 Colton, a short time before his death, hac 
 subscribed for 30,000 shares of a new issiK 
 of Southern Pacific stock. This stock, Mr 
 Crocker said, would be heavily assessed tq 
 build the road.* Of course, he said, she 
 would not wish to pay the assessments anc 
 she had better cancel the subscription ai 
 once. She made haste to say that she cer- 
 tainly would, and he went his Way.f 
 
 A few days later he returned and his man- 
 ner was still more forbidding. He said (ac- 
 cording to Mrs. Colton) that the Western 
 Development Company was insolvent, heav- 
 ily in debt, and must have the return o: 
 all the securities included in that impropei 
 dividend to which he had before referred 
 that General Colton owed his late associates 
 $1,000,000, for which he had deposited a 
 collateral 20,000 shares of Central Pacific 
 and 20,000 shares of Southern Pacific stock," 
 but that the value of the collateral would not 
 cover the face of the note; that the 408 shares 
 of Rocky Mountain Coal and Iron in Gen- 
 eral Colton's effects really belonged to hi.s 
 four associates, being held in trust for them; 
 and finally, that General Colton proved to be 
 greatly in debt to all the companies. He de- 
 manded a settlement of all these claims and 
 told her if she wished she could have them 
 verified by her personal counsel. 
 
 CHARGES AND COUNTER CHARGES 
 
 Now, Mrs. Colton's personal counsel was, 
 of course, her husband's personal counsel, 
 who was Mr. Samuel M, Wilson, whom Mr. 
 Crocker had highly recommended. Mr, 
 Wilson was also one of the Central Pacific's 
 regular and trusted attorneys and, according 
 to subsequent testimony, in receipt of a salary 
 of $12,000 a year from the railroad com- 
 pany. § Mrs, Colton had already sought 
 this gentleman's advice. She told Mr. 
 Crocker she would be guided by Mr. Wilson. 
 
 Mr, Crocker's manner on this visit was so 
 
 * It is singular, but I can find no indication anywhere that 
 this stock was ever assessed, and certiinly there was not the 
 •lightest reason why it should be. As for the building of tho 
 road, that, as we have previously seen, was provi led out of. 
 the earnings and sinking fund (( the Cenlnil P;:c fir and out of 
 the Western Development and Pacific Improvement Companies. 
 
 t Colton versus Stanford et al., testimony, p. 2797. 
 
 t In 1877 Central Pacific paid 8 per cent dividends. Neither 
 Central Pacific nor Southern Pacific was on the market, both 
 being closely held by Mr. Stanford and his friends. An 8 per 
 cent stock ought to be worth at least 80, at which price Gen- 
 eral Colton's Central Pacific collateral would be worth $1,600.- 
 000 without considering the Southern Pacific stock, which is 
 now worth 137. 
 
 § Colton V rsus Stanford et al., testimony, p. 6626. 
 
8i 
 
82 
 
 Hampton's Magazine 
 
 disagreeable and the widow was now so thor- 
 oughly alarmed that when he sent word of 
 his next call she thought it well to have some 
 women friends about her, and thus avoided 
 the discussion of business. Mr. Crocker did 
 not come again and she never spoke with him 
 thereafter. 
 
 Mr. Wilson was now presumably investi- 
 gating General Colton's affairs. After a 
 time, he informed Mrs. Colton that the situa- 
 tion was far worse than Mr. Crocker had 
 pictured it. General Colton was not only 
 heavily in debt to the companies he repre- 
 sented, but his associates charged him with 
 repeated acts of embezzlement. They had 
 told Wilson (he said) that all the securities 
 in the estate would not suffice to pay the 
 General's debts; that they held enough 
 claims to take from Mrs. Colton * everything 
 she had, including her home; and they 
 threatened, in a manner "stem and severe 
 and determined and implacable," that unless 
 she made a settlement and surrendered her 
 stocks and bonds they would make public 
 her husband's criminal acts and blacken his 
 name and memory. 
 
 Mr. Wilson was good enough to say that 
 he did not believe these charges, but the rail- 
 road company had all the books and records 
 and, therefore, to prove General Colton's in- 
 nocence would be impossible. t Hence the 
 best plan was to make terms with the asso- 
 ciates. Mrs. Colton was greatly distressed. 
 
 Her misery was somewhat lightened when 
 Mr. Wilson suggested that she employ a 
 mediator, who, because of his ability and 
 experience, was likely to secure some con- 
 cession. The helping hand thus in her dark 
 hours extended to the widow was the hand 
 of Mr. Lloyd Tevis, who, Mr. Wilson said, 
 would be just the man. Mr. Tevis is not 
 unknown in these annals, having been the 
 originator of the ingenious plan whereby 
 the Big Four got possession of Wells, Fargo 
 & Co., J — of which branch of the Big Four's 
 activities he was now the president. 
 
 Mr. Tevis made what he called an investi- 
 gation and reported (according to Mrs. Col- 
 ton) that General Colton's debt was of great 
 magnitude and the Western Development 
 Company was insolvent, but Messrs. Stan- 
 fordj Huntington, and Crocker had been in- 
 duced to make a concession to the widow 
 of their old friend. She must deliver to 
 
 them all the securities that were in contro- 
 versy, but 200 of the Southern Pacific bonds 
 might be deposited with Wells, Fargo & Co., 
 and from these she might for ten years draw 
 the interest. 
 
 In other words, they granted her a pension 
 for ten years. 
 
 Of the rest of the fortune they made a 
 thorough job.' They even insisted that 50 
 shares of Southern Pacific that General Col- 
 ton had given to his daughter as a wedding 
 present should be returned to them * and that 
 Mrs. Colton should surrender uncut interest 
 coupons amounting to $6,000. 
 
 The two men in whom she had most con- 
 fidence, Wilson and Tevis, having thus as- 
 sured her that no other way could be found 
 from the sorry situation, she was almost per- 
 suaded to surrender. On the morning of 
 August 27, 1879, she still hesitating, word 
 was sent to her that Mr. Huntington was 
 about to return to New York, that he would 
 leave that afternoon at 3 o'clock,f and unless 
 she signed the settlement before that time 
 the Big Four would make no terms with her. 
 Thus menaced, she brought herself to sign 
 an instrument by which she accepted thj 
 terms demanded, and surrendered all her 
 securities. The 200 Southern Pacific bonds 
 were delivered to Wells, Fargo & Co., who 
 refused to give her any receipt for them. 
 She also executed a release for $304,060.33 
 which the Western Development Company 
 had owed to her husband. 
 
 On their part the Big Four canceled the 
 note for $1,000,000 held by them against 
 General Colton, and agreed to keep secret 
 the charges of embezzlement. 
 
 MRS. COLTON SUSPECTS FRAUD 
 
 Mrs. Colton knew very little about busi- 
 ness, but she was intelligent, and she felt 
 intuitively that there had been fraud J in 
 these transactions although she knew not 
 wherein it lay. One day, some months after 
 she had been impoverished in this masterly 
 
 * Colton versus Stanford et al., testimony, p. 2812. 
 
 t Ibid., pp. 2523-7. 
 
 t Pacific Railroad Commissioa Report, p. 3116. 
 
 * Colton v^sus Stanford et al.. testimony, p. 2820. 
 
 t As a matter of fact, Mr. Huntington did not leave San Fran- 
 cisco that afternoon nor until September 8th, twelve days later. 
 
 t QnESTiON. You signed this paper and yet you say you 
 rebelled against it? 
 
 Answer. Because I saw no justice in it. 
 
 Q. What was the injustice? 
 
 A. Robbery. 
 
 Q. A robbery? How was it robbery? 
 
 A. It simply had arrived at the point that it was my money 
 or my life. 
 
 Q. Isn't that a rather strong way of putting it? 
 
 A. I think not. I was in the condition of a man attacked 
 by a highwayman upon the roadside. 
 
 Colton versus Stanford et al., cross examination of Mrs. Ellen 
 M. Colton, to be found in the record, p. 2816. 
 
Speaking of Widows and Orphans 
 
 83- 
 
 fashion, she was reading a newspaper and 
 ler eyes fell upon an inventory of the estate 
 )f Mark Hopkins, recently deceased. She 
 loticed in the list many securities of the 
 :ind she had surrendered, and that the value 
 3f these given in the list was very much 
 reater than the prices at which the same 
 jcurities had been estimated in her enforced 
 settlement. 
 
 This set her to thinking and the more she 
 reviewed her experience the clearer grew her 
 conviction that she had been wronged. She 
 abandoned Mr. Wilson as her counselor and 
 sought other advice. Her new attorney, Mr. 
 G. Frank Smith, set on foot an investigation 
 and obtained therefrom results that greatly 
 astonished him. 
 
 For example, the schedule of the insolvent 
 Western Development Company that Wilson 
 said he obtained from the Big Four or their 
 agents asserted an indebtedness by the com- 
 pany of $11,910,030.44 as follows:* 
 
 To Charles Crocker $2,219,541.73 
 
 " Leiand Stanford 1,763,734.85 
 
 " Mark Hopkins .... 4,087,692 . 10 
 
 " C.P.Huntington 3,519,701.43 
 
 " D. D. Colton. . . 3191360.33 
 
 This and no more. No mention was made 
 of the fact that these five men were the sole 
 owners of the company; that 
 not one of them had ever paid 
 in one cent for his stock; that 
 they then owed the company 
 $5,000,000, nor that the com- 
 pany's alleged indebtedness 
 represented only the securities 
 and moneys that had been ad- 
 vanced in their names from 
 the Central Pacific and other 
 funds for its devious and 
 crooked operations, and for 
 which they knew they would 
 shortly be repaid about five- 
 fold, f 
 
 Mr. Smith v\as further informed that in the 
 list of assets in this amazing schedule were 
 most glaring omissions. Thus no mention 
 whatever was made of these items that should 
 have been included : * 
 
 $462,000 due from the Northern Railroad and sub- 
 sequently paid in bonds. 
 
 $748,000 due from the Northern Railroad in other 
 items and a little later paid in bonds. 
 
 $7,340.32 due for California Pacitic stock. 
 
 $92,640 due from the San Pablo & Tulare Railroad. 
 
 $3,753 from the Pacific Improvement Company. 
 
 $5,766.15 interest due on Northern Railroad 
 bonds. 
 
 $36,437.03 interest due on San Pablo & Tulare 
 bonds. 
 
 $4,986.07 interest due on San Francisco, Oakland 
 & Alameda bonds. 
 
 The schedule also set down as a worthless 
 asset $832,800 due from the Los Angeles & 
 San Diego Railroad: Mr. Smith was assured 
 
 Some of it, like the six coaches sent, I know are for the S. P. 
 (Southern Pacific), but just whether they are to be charged to 
 the S. P. or the Western Development Co. I do not know." 
 In other letters he complains of the enormous floating debt 
 of the Central Pacific that this system was piling up. "Our 
 liabilities (Central Pacific) are getting very large here for a 
 company with such large receipts and with no apparent outlay 
 except interest on bonded debt and operating expenses." In 
 his letter of March 24, 1877. he figures the profits of the Central 
 Pacific at $750,000 a month. Tnese were bein^ used to pay 
 for the building of the Southern Pacific, rendenng both stock 
 and bonds of that road "velvet" for the fortunate projectors. 
 
 * These and many others are to be found in the testimony, 
 pp. 2623-ji. 
 
 * Colton versus Stanford et al., defend- 
 ants' exhibit E. 
 
 t The exact nature of these operations 
 has been sufficiently described in a fore- 
 going article, but I may remind the reader 
 here that, according to the testimony be- 
 fore the Pacific Railroad Commission, the 
 Southern Pacific was built out of the di- 
 verted earnings and sinking fund of the 
 Central Pacific. The Southern Pacific 
 was on through business a parallel line 
 that had the same owners and owed the 
 government nothing. The money that 
 built it should have gone to pay the Cen- 
 tral Pacific'^ debt to the national treasury. 
 Curious collateral testimony about all this 
 exists in the Colton letters of Mr. Hunt- 
 ington. In the letter of May 8, 1875, Mr. 
 Huntington says: "All the material I buy 
 here is paid for by the Central Pacific. 
 
 A FEW DAYS MR. CROCKER AGAIN CALLED ON MRS. 
 COLTON, BUT HIS LIPS FOUND NO MORE WORDS •'■ 
 OF CONDOLENCE FOR THE WIDOW. 
 
84 
 
 Hampton's Magazine 
 
 that within a year this debt was paid in good 
 bonds and stocks. Another debt of $45,- 
 640.53 carried in the schedule as a worthless 
 asset had already been paid in gold. The 
 Los Angeles & Independence Railroad was 
 put down as worth $100,000 when $300,000 
 appeared to have been paid for it, and since 
 its purchase it had returned $114,318 in divi- 
 dends. The Colorado Steam Navigation Com- 
 pany was entered as an asset of $150,000, 
 whereas in the last three years previous to 
 the making of the schedule this company had 
 paid $iio,coo in dividends. On the other 
 hand, in the liabilities, an item of indebted- 
 ness entered at $298,208.35, should have 
 been $269,415.73, and there were other ap- 
 parent inaccuracies that might be thought 
 very surprising in a statement emanating 
 from a business enterprise of such magnitude 
 and standing. 
 
 According to the information gathered by 
 Mr. Smith, many other goodly items were 
 missing from the assets, such as Iowa county 
 bonds, Sioux City & Pacific bonds and the 
 like, and no mention was made of such pos- 
 sessions as the contract to extend the San 
 Pablo & Tulare road forty-six miles at $25,- 
 000 a mile in bonds and $40,000 a mile in 
 stock (actual cost of construction less than 
 $20,000 a mile),* nor of other contracts and 
 items. 
 
 A SPEEDY REORGANIZATION OF THE WESTERN 
 DEVELOPMENT COMPANY 
 
 It appeared further that none of the other 
 beneficiaries of the Western Development 
 Company's dividend had returned any of 
 his stocks and bonds, but on the contrary, 
 twenty-two days after General Colton's 
 death, these men had wound up the Western 
 Development Company (which they con- 
 trolled) and organized in its place the Pacific 
 Improvement Company, of which they alone 
 were owners. They then transferred to the 
 new company all of the Western Develop- 
 ment Company's possessions and contracts, 
 by which device they froze out all the Colton 
 interests. From the operations of the Pacific 
 Improvement Company they derived by the 
 end of 1882, $20,000,000 which they had 
 divided among themselves, although if Gen- 
 eral Colton had lived he would certainly have 
 had a share. 
 
 Furthermore, the investigation seemed to 
 
 * Most of this amazing revelation of the inside history of the 
 concern seems to have been obtained from a discharged em- 
 ployee. As it was never seriously controverted I am obliged to 
 supp>ose it to be correct. 
 
 show that the charge of "embezzlement" was 
 absurd and the claim of debt almost as 
 tenuous. 
 
 The total debt alleged against Colton was 
 made up of $666,000, his share of the "insolv- 
 ent" Western Development Company debt; 
 $160,000 he had "embezzled"; $125,000 due 
 to the companies he had managed; and the 
 $1,000,000 note secured by collateral. 
 
 But it appeared that there had been paid 
 on the $1,000,000 the sum of $250,000, so 
 that the debt was $750,000 instead of $1,000,- 
 000. The embezzlement charge when sifted 
 down had no more excuse than this, that Col- 
 ton had drawn from the company money with- 
 out returning vouchers.* But it appeared that 
 all of the partners had done this; indeed, the 
 whole concern, when the light was thrown 
 upon it, looked like a riot of perquisites, 
 "melons," "benefits," and other good things 
 of the kind. Mark Hopkins had drawn from 
 the Southern Pacific on September 30, 1871, 
 $151,560.59 and no accounting was made of 
 this sum until 1880, two years after his 
 death. Mr. Huntington when in New York 
 drew from the Western Development appar- 
 ently at his will and never returned any 
 voucher. In three years he had drawn $400,- 
 000. Governor Stanford took out $45,638.84 
 without explanation. Mr. Crocker, without 
 warrant or apparent authority, took from 
 the treasury 500 Southern Pacific bonds to 
 buy the Oakland water front. It seemed a 
 fair contention that if Colton was an em- 
 bezzler, these men were embezzlers no less.f 
 
 As for Colton's share of the alleged indebt- 
 edness of the alleged insolvent Western De- 
 velopment Company, it appeared from the 
 information that there was no true indebted- 
 ness and the company was not insolvent at all 
 but fat with rich assets that never had been 
 divided.! From its organization to Colton's 
 death it had shared among its stockholders 
 $21,000,000. At Colton's death it had on 
 hand, as the investigation revealed, $22,810,- 
 500.43 subject to claims, real and imaginary, 
 of $11,316,497-22. 
 
 In payment of these debts that did not 
 exist, there seemed to have been taken from 
 
 ♦There was an allegation that he had desposited for the 
 company $228,618.47 in silver and then obtained credit for his 
 own benefit on a pretense that the deposit was in gold. This 
 was never established, but even if it were true it was not signifi- 
 cant, because such seemed to be the custom. The Central 
 Pacific had done the same thing with $2,000,000 of silver. 
 Colton versus Stanford et al., testimony, p. 2741- 
 
 t Colton V rsus Stanford et al., testimony, pp. 2638-30. 
 
 t It may be interesting to note that as brought out in the 
 trial the "Nob Hill" palaces of Stanford, Hopkins, and Crocker 
 were built out of the Western Development Company. Col- 
 ton versus Stanford el al., testimony, p. 8877. 
 
I 
 
 FOR MRS. COLTON, THE NET RESULT OF HER SUIT. WAS A HEAVY BILL OF COSTS— MR. 
 HUNTINGTON HAD CRUSHED THE WIDOW OF HIS OLD FRIEND. 
 
 Mrs. Colton securities at much less than 
 their real value. Her Southern Pacific bonds, 
 for instance, were scheduled in her settlement 
 at 60, while in March of the same year they 
 had sold at 100, and at the time of the settle- 
 ment were traded in by the Big Four at 94. 
 The Rocky Mountain stock they appraised 
 from her at $16.24 a- share must have been 
 worth about par.* And so on. 
 
 MRS. COLTON APPEALS VAINLY TO LELAND 
 STANFORD 
 
 Upon the discovery of these and many other 
 allegations of a like nature, Mr. Smith ad- 
 vised Mrs. Colton to bring suit at once for 
 the annulling of her contract and the return 
 of her securities. Mrs. Colton still clung to 
 a belief in the sincerity of one of the men 
 that had professed so much affection for her 
 husband. With the large, bland, unctuous 
 sentiments of Leland Stanford she was un- 
 able to reconcile the idea of despoiling the 
 defenseless, and she wished an appeal to be 
 made to his sense of justice. 
 
 Mr. Smith had other \'iews. For some 
 time he had been attentively considering the 
 sense of justice possessed by these men and 
 had acquired of it a very low estimate. He 
 
 ♦Pacific Railroad Commission Report, testimony of Leland 
 Stanford, p. 2938. 
 
 told Mrs. Colton that an appeal to any of 
 them was quite useless. Nevertheless, she 
 insisted, and on March ii, 1882, he wrote 
 to Leland Stanford outlining Mrs. Colton's 
 story, her confidence in the goodness and 
 justice of her old friend, and her plea that 
 she be not utterly plundered. Mr. Smith 
 closed with this comment: 
 
 "Knowing how repugnant uncontested 
 settlements are to your associates, I have 
 acted in the premises contrary to my own 
 belief of any possible advantage that can 
 accrue to her from this or any other amicable 
 overtures on her part." * 
 
 To this letter no answer was returned. 
 The fact did not astonish Mr. Smith and, one 
 may think, need not have astonished Mrs. 
 Colton. Later she recalled an incident that, 
 upon a more suspicious nature, might have 
 acted to prevent the writing of such a letter. 
 General Colton's office had been in the rail- 
 road company's building and in a safe in 
 that office were still kept all of the securities 
 belonging to the estate. According to her 
 subsequent testimony,f Governor Stanford 
 came into this office one day and found there 
 Mr. Green, who had been Colton's secretary. 
 The safe was open. 
 
 * Colton versus Stanford el al., testimony, pp. 2607-8. 
 + Ibid., p. 2905. 
 
86 
 
 Hampton's Magazine 
 
 Governor Stanford remarked to Mr. 
 Green that he was very anxious about 
 the security of the property in that safe. 
 He said that the art of safe-blowing had 
 been so developed that a safe-blower 
 could open such a safe even in a building 
 where there were watchmen. He thought 
 General Colton's property should be re- 
 moved to a safer place, and suggested that 
 such a place would be the vault of the rail- 
 road company. Mr. Green reported this 
 conversation to the Widow Colton. She tes- 
 tified that she acted at once upon Governor 
 Stanford's suggestion; but the safer place to 
 which she transferred the property was not 
 the railroad company's vault, but a box in a 
 safety deposit company's care. 
 
 On May 21, 1882, Mrs. Colton's suit was 
 filed in San Francisco. The answer of the 
 defendants* was a general denialof the bill of 
 complaint, a definite assertion of Colton's 
 embezzlements and defalcations, an astound- 
 ing reiteration of the insolvency of the West- 
 ern Development Company, and a plea that 
 the statements made to Mrs. Colton were 
 made in good faith and on credible informa- 
 tion. 
 
 The defendants demurred to some points 
 in the plaintiff's bill, and Judge Hunt 
 promptly overruled the demurrer. Where- 
 upon counsel for Stanford et al. secured the 
 removal of the case to the Sonoma County 
 Court at Santa Rosa. It came to trial in 
 November, 1883, before Judge Jackson Tem- 
 ple, a jury being waived. 
 
 Judge Temple was afterwards a member of 
 the California Supreme Court. 
 
 After the usual manner of things dis- 
 agreeable to the railroad company, the 
 fifteen volumes of testimony taken in the 
 case have mysteriously vanished from 
 the court records at Santa Rosa, but I 
 succeeded in finding copies at Sacra- 
 mento and can unreservedly commend 
 their perusal to anyone that cares to 
 
 * They did not mention their real defense, which, though 
 inadmissible as a plea in a court of justice, was not without 
 merit, at least from their point of view. It was this: Messrs. 
 Stanford, Huntington. Hopkins, and Crocker had desired to 
 avail themselves of General Colton's superior cunning and 
 cleverness. The_ securities they bestowed upon him were merely 
 the wages for his services. When they were deprived of his 
 services they did not purpose to continue the wages. For the 
 most pa.tt the securities represented no investment. They were 
 merely manufactured by the Big Four at their convenience and 
 for their profit. All were liens upon the enterprise and carried 
 substantial interest, and the Big Four could see no reason why 
 property manufactured in this way should be enjoyed by Gen- 
 eral Colton's estate after they had ceased to derive anything 
 from General Colton's wits. 
 
 The substance of this argument was frankly stated by Mr. 
 Crocker to Mr. Wilson and will be found in the testimony, 
 Ellen M. Colton versus Leland Stanford et al., at p. 2841. 
 
 know the true manner in which the rail- 
 roads of the United States have been 
 conducted or how far (under present 
 conditions) men will go for the sake of 
 money and the power that abides in 
 money. In these respects I know of no 
 other volumes of equally impressive in- 
 struction. Whoever reads them will face 
 the primitive human passions made so 
 naked and real before him that he will 
 seem to himself to have dipped backward 
 into the jungle. 
 
 JUDGE TEMPLE DECIDES AGAINST MRS. 
 COLTON 
 
 On October 8, 1885, Judge Temple filed 
 his opinion. It cleared General Colton's 
 name from the embezzlement charge, but 
 held on almost all other points for the de- 
 fendants, in some instances adopting the very 
 language of their answer. The chief ground 
 of the decision seemed to be that Mrs. Col- 
 ton's contract was sound in law, made by 
 her in full knowledge of its terms and basis, 
 and contracts must be upheld (Miles versus 
 McDermott, 31 Cal. 273; Woods versus Car- 
 penter, II Otto 143; Le Roi versus MuUiken 
 and Moore versus Moore, 56 Cal. 90, if I 
 have the citations right). Also that she was 
 not so much prostrated by her husband's 
 death that she was unable to exercise per- 
 fectly all her mental faculties, that she had 
 very able counsel, and by them she was fully 
 informed as to the situation and her rights. 
 
 In the subsequently filed "Findings of 
 Fact and Conclusions of Law," Judge Tem- 
 ple considered seventy-seven points, and on 
 seventy-two of them found for the defend- 
 ants. 
 
 The case was appealed December 15, 1886, 
 and in January, 1890, the Supreme Court 
 handed down a decision sustaining Judge 
 Temple. 
 
 For Mrs. Colton, therefore, the net result 
 of her suit was a heavy bill of costs that she 
 must pay. 
 
 Mr. Huntington had won. He had de- 
 feated and crushed the widow of his old 
 friend, and the securities that were the prizes 
 of the long conflict rested in the coffers of the 
 Four of Sacramento. But Mr. Huntington 
 had his own costs to pay. For it was in this 
 case that the Colton letters, printed in a 
 previous article, were produced, and the 
 real nature of his Washington operations 
 proved to the world. From this time on 
 those letters were hung about his neck. 
 
Speaking of Widows and Orphans 
 
 87: 
 
 II 
 
 THE MAY DAY AT BREWER'S FARM 
 
 THE LONG CONTEST BETWEEN THE SETTLERS 
 AND THE COMPANY 
 
 For many years now this colossal institu- 
 tion had been the virtual ruler of the state, 
 setting up this officer and pulling down that, 
 filling places in the government with obedient 
 henchmen, controlling the parties and select- 
 ing their candidates, holding the avenues to 
 distinction and even to success, choosing 
 judges and commissioners, nominating jurors, 
 and with equal facil- 
 ity influencing legis- 
 lators and witnesses.* 
 Men or even com- 
 munities that con- 
 spicuously opposed 
 the machine were 
 made to suffer. As 
 the railroad built ex- 
 tensions of its lines 
 it levied tribute upon 
 towns thus brought 
 within its reach and 
 sometimes inflicted 
 very serious injury 
 upon those that re- 
 fused to make grants 
 of land or of money. 
 
 For some such of- 
 fense the city of Stock- 
 ton was a long time 
 on the company's 
 black list and hin- 
 dered in its growth. 
 Long before, Silvey- 
 ville had been practi- 
 cally annihilated, the 
 new town of Dixon 
 being built, in a spirit 
 
 of revenge, three and a half miles away. 
 Bakersfield having once incurred the com- 
 pany's displeasure, the town of Kern, three 
 miles off, was developed to crush Bakersfield. 
 
 OAKLAND FIGHTS RAILROAD FOR ITS STREETS 
 AND PIERS 
 
 It would be easy to multiply the instances 
 that to all except Californians must seem im- 
 probable fiction. The city of Oakland, now 
 one of the fairest and most prosperous in 
 California, was once obliged to fight for its 
 
 * Allegations of very flagrant witness-bribing were made in 
 San Francisco, April, i8g6, in the case of Louis Schmidt, who 
 confessed he had been bribed by agents of the railroad to testify 
 falsely in the damage suit of Mary Quill. 
 
 MRS. D. D. COLTON, WHO. AFTER HER HUS- 
 BANDS DEATH, WAS STRIPPED OF HER 
 WEALTH BY HER HUSBANDS BUSI- 
 NESS PARTNERS, THE " BIG FOUR." 
 
 mere existence against the railroad company 
 as against a public enemy. Some ver}- ex- 
 traordinary scenes were witnessed in that 
 contest. A visitor - would have thpught a 
 civil war was raging. The company fenced 
 off public streets by night and the citizens 
 tore down the fences by day; the com- 
 pany drove piles across the water-front 
 slips and the citizens fought to remove 
 them; the company tried to strangle the 
 town by strangling its ferry service and the 
 titizens underwent strange privations to 
 maintain a semblance of their rights. 
 
 The power and su- 
 premacy of this com- 
 pany were not limited 
 to state nor to mu- 
 nicipal affairs. Mer- 
 chants or shippers 
 that supported any 
 plan to secure relief 
 through competition 
 found their shipments 
 delayed and their ri- 
 vals helped with re- 
 bates. Lawyers that 
 unduly pressed ob- 
 noxious suits found 
 their practice vanish- 
 ing. Some men were 
 ruined for their op- 
 position; some were 
 made rich for their 
 assistance. No one 
 need wonder that to 
 .oppose the railroad 
 came to be regarded 
 as fraught with great- 
 er danger than the 
 average man could 
 afford to face. 
 
 This brings me to 
 the incident that best illu.strates the truly 
 autocratic power that these men grasped and 
 the wanton spiri in which they used it. 
 
 One of the triumphs of Mr. Huntington's 
 me hod of " ex]>laining " things to members of 
 Congress (at a cost of millions of dollars 
 added to the company's capitalization) was 
 a bill j^assed in 1866 granting to the railroad 
 company in alternate sections 12,800 acres 
 of public land for every mile it should build 
 from San Francisco to a point at the south- 
 eastern corner of the .state; or half the land 
 in a strip forty miles wide along its right of 
 way. The line was laid out and the rail- 
 road's lands designated. Sub.sequently it 
 
88 
 
 Hampton's Magazine 
 
 somewhat changed its route and therefore the 
 land to which it was entitled under the act. 
 
 At that time, and for years afterwards, only 
 a small part of the line had been constructed 
 and there grew up a question whether the 
 railroad were really entitled to certain parts 
 of the land it claimed in Fresno, Tulare, and 
 some other counties. The rulings of four 
 Secretaries of the Interior, an Attorney-Gen- 
 eral,* and a Commissioner of the Federal 
 Land Office, supported the view that the 
 railroad company had no right to this prop- 
 erty, but the company continued to claim the 
 land and to sell it. 
 
 THE TERMS OFFERED IN THE RAILROAD'S 
 CIRCULAR 
 
 Meantime many settlers had come into 
 the Fresno-Tulare region. f Some had se- 
 cured their titles from the government be- 
 fore the railroad's route was changed. These 
 now found their farms to embrace sections 
 claimed by the company. Many others com- 
 ing after the final determination of the line, 
 had taken railroad lands at the company's 
 invitation and under terms set forth by the 
 company's circulars. These speedily had 
 troubles of another sort. 
 
 The company's circulars, signed by its 
 officers, setting forth the attractions of the 
 Fresno-Tulare region and ofifering unusual 
 inducements to settlers, had been widely 
 scattered over the Middle West. They dealt 
 in an apparent spirit of frankness and truth, 
 describing the lands as of an excellent soil 
 but dry — a fault easily remedied by irriga- 
 tion, when the soil would be found to be of 
 surpassing fertility. Terms would be re- 
 markably easy. Here are paragraphs from 
 one of the circulars : 
 
 On page 6 — The company invites settlers to go 
 upon their lands before patents are issued or the 
 road is completed, and intends in such cases to sell 
 to them in preference to any other applicant and 
 at a price based upon the value of the land with- 
 out the improvements put upon them by the set- 
 tlers. 
 
 On page 7 — If the settlers desire to buy, the com- 
 pany gives them the first privilege of purchase at 
 a fixed price, which in every case shall only be the 
 value of the land without regard to improvements. 
 
 On page g — The lands are not uniform in price 
 but are offered at various figures from $2.50 up- 
 
 * The dates of these decisions were as follows: 
 Secretary Browning, July 14, 1868. 
 Secretary Cox, November 2, and November n, 1869. 
 Secretary Delano, May 9, 1873, and February 26, 1874. 
 Secretary Schurz, August 2, 1878. 
 Attorney-General Devens, July r6, 1878. 
 Commissioner Drummond, January 28, 1874. 
 
 t About 240 miles southeast of San Francisco. 
 
 ward per acre; usually land covered with tall tim- 
 ber is held at $5 per acre and that with pine at $10. 
 Most is for sale at $2.50 to $5. 
 
 In ascertaining the value, any improvement that 
 a settler or other persons may have on the lands will 
 not be taken into consideration; neither will the 
 price be increased in consequence thereof. Settlers 
 are thus assured that in addition to being accorded 
 the first privilege of purchase they will be protected 
 in their improvements.* 
 
 In response to these liberal offers, many 
 farmers came from Missouri and Illinois and 
 took up land. They found the country a 
 sandy waste and worthless until, by uniting 
 their efforts and capital, they had constructed 
 an irrigation system, whereupon the soil be- 
 came exceedingly fertile.f 
 
 Meanwhile, although they made repeated 
 applications, they were unable to get their 
 titles from the railroad company. The rea- 
 son why they could not get their titles was 
 because the company had not taken out its 
 patents, and the reason why it had not taken 
 out its patents was because so long as it had 
 no patents on its lands it could not be taxed 
 for them. This was the simple little plan it 
 uniformly pursued and thereby deprived the 
 counties and the State of California of mil- 
 lions of dollars. J 
 
 But in 1877 the company began to take out 
 its patents, and soon afterwards to demand 
 payment of the settlers, 
 
 THE SETTLERS OF FRESNO-TULARE PROTEST 
 
 Then the settlers learned to their amaze- 
 ment that the land was not to be paid for at 
 $2.50 an acre but at from $25 to $40 an acre, 
 and that all the improvements they had made ■ 
 were counted in the price. Even the irriga- j 
 tion ditch that they had constructed at their ^ 
 own expense and with their own labor be- 
 came a great factor in the increase. The land 
 was not to be offered to them first; it was to be 
 thrown on the market for any purchaser. 
 
 When the settlers found that the company 
 really intended thus to violate its agreement 
 they protested, showing the circulars and the 
 promises therein. They offered to pay the 
 
 * These circulars were subsequently confirmed by letters from 
 agents of the railroad company to individual settlers. 
 
 tThey constructed two inadequate ditches before they got 
 one that carried enough water. It was some miles longand was 
 dug chiefly by the voluntary labor of the settlers, most of whom 
 were extremely poor and lived in destitution until the water be- 
 gan to flow around their lands. Many of the settlers, while they 
 worked on the ditch, lived upon corn meal groupd in hand 
 coffee mills and upon fish that they caught. None of them 
 understood irrigation and they were obliged to learn by experi- 
 ence. There is extant a very pathetic letter from a woman 
 of education and refinement, Mrs. Mary E. Chambers, a sister 
 of one of these men, giving a vivid account of the hardships the 
 settlers endured in these years. 
 
 t For explicit testimony on this point, see Pacific Railroad 
 Commission Report, p. 146. 
 
speaking of Widows and Orphans 
 
 89 
 
 zompany at the stipulated prices, but all pro- 
 tests, oflfers, and arguments were alike 
 .vithout avail; and the company preparing 
 to press its claims, many of the threatened 
 farmers formed a Settlers' League to defend 
 by united action what they believed to be 
 their rights. Four times they had petitioned 
 Congress (without result, of course), and now 
 thev resorted to the law. A test case was 
 tried in the Federal Court and on December 
 15, 1879, Judge Lorenzo Sawyer (who after- 
 ivards held Leland Stanford to be immune 
 from disagreeable questions) rendered a de- 
 zision upholding the railroad company in all 
 its contentions. From this decision the per- 
 plexed settlers prepared to appeal to the 
 L'nited States Supreme Court. 
 
 Meantime, the railroad company had be- 
 ^un to sell the settlers' lands and four or five 
 men moved into the region and built houses 
 under the railroad company's warrant. In 
 June, 1879, a band of men came by night to 
 the place of Perry C. Phillips, a purchaser 
 from the railroad, removed the inmates and 
 all the contents to a place of safety, and burned 
 the house to the ground.* After this the 
 company found great difficulty in selling any 
 af the lands. 
 
 WRITS OF EJECTMENT ISSUED 
 
 What went on in the minds of the railroad 
 managers is only to be surmised, but from 
 subsequent events the conclusion seems rea- 
 sonable that after so 
 many years of auto- 
 cratic rule they were 
 greatly nettled by this 
 active and so far suc- 
 cessful opposition. The 
 settlers believed that, 
 following the usual cus- 
 tom, both sides should 
 now halt to await the 
 Supreme Court's deci- 
 sion. As to this the 
 railroad company had 
 another opinion. Ignor- 
 ing the pending litiga- 
 tion, it sharked up from 
 the north two hardy 
 men to whom it prom- 
 ised land without charge 
 if they would succeed 
 in breaking the settlers' 
 
 position. One of these men, Walter J. Crow, 
 was reputed to be among the best rifle and 
 revolver shots in the state, and the settlers 
 thought they knew the purpose for which he 
 was employed. The antecedents of the other, 
 M. D. Hartt, are not so well known. 
 
 Hartt and Crow went into the region, and 
 soon after, with the other men that had pur- 
 chased land from the railroad, they exhibited 
 this notice, which they said they had received: 
 
 Tulare County, April 24, 1880. 
 You are hereby ordered to leave the county. 
 
 By Order of the League. 
 
 The Settlers' League did not send out the.se 
 notices and had no knowledge of them. At 
 the same time reports were sent abroad that 
 bands of armed and masked men were riding 
 up and down the district making threats and 
 committing outrages, although the residents 
 were not aware of such matters. 
 
 Next, the railroad company went into the 
 Federal Court, secured writs of ejectment, 
 placed them in the hands of A. W. Poole, 
 United States Marshal of the district, and 
 demanded that he serve them at once, re- 
 move the settlers, and put Hartt and Crow 
 in possession. 
 
 The marshal, of course, was obliged to com- 
 ply, and on Monday, May 10, 1880, he went 
 to Hanford, Tulare County,* the trading town 
 that had grown up near the settlers' lands. 
 Major T. J. McQuiddy, president and 
 leader of the Settlers' 
 League, upon which he 
 had always urged mod- 
 eration and patience, 
 learned that night of 
 the marshal's arrival 
 and understood well 
 enough his errand. With 
 the secretar>' of the 
 league Major McQuiddy 
 drew up the following 
 address : 
 
 To 
 
 States 
 
 * It is denied that the Settlers' 
 League had any connection with 
 this afiair. 
 
 THE United 
 Marshal — 
 Sir: We understand that 
 you hold writs of ejectment 
 issued against settlers of 
 Tulare and Fresno counties, 
 for the purpose of putting 
 the S. P. R.R. Co. in pos- 
 session of our lands, upon 
 which we entered in good 
 faith and have by our 
 own patient industry trans- 
 
 JUDGE JACKSON TEMPLE. WHO DECIDED 
 MRS. COLTOX'S SUIT AGAIN'ST HER. 
 
 * It is now in Rings County. 
 
90 
 
 Hampton's Magazine 
 
 formed from a desert into valuable and productive 
 homes. 
 
 We are aware that the United States District 
 Court has decided that our lands belong to said 
 Railroad under patent issued by the United States 
 Government. 
 
 We hereby notify you that we have had no chance 
 to present our equity in the case nor shall we be able 
 to do so as quickly as our opponents can complete 
 their process for a so-called legal ejectment, and we 
 have therefore determined that we will not leave 
 our homes unless forced to do so by a superior force. 
 In other words, it will require an army of i,ooo good 
 soldiers against the local force that we can rally for 
 self-defense, and we further expect the moral sup- 
 port of the good, law-abiding citizens of the United 
 States sufficient to resist all force that can be brought 
 to bear to perpetuate such an outrage. 
 
 Three cases have been appealed to the United 
 States Supreme Court and we are determined to sub- 
 mit to no ejectment until said cases are decided. 
 
 We present the following facts: 
 
 First — These lands were never granted to the 
 Southern Pacific Railroad Company. 
 
 Second — We have certain equities that must be 
 respected and shall be respected. 
 
 Third — The patents they hold to our lands were 
 acquired by misrepresentation and fraud, and we, 
 as American citizens, cannot and will not respect 
 them without investigation by our government. 
 
 Fourth — The Southern Pacific Railroad Company 
 have not complied with their contract both with our 
 people and with our government, and therefore for 
 these several reasons we are in duty bound to ask 
 you to desist. ^^ Authority of the League. 
 
 Early the next morning before this could 
 be delivered to him, the marshal hired a 
 buggy and accompanied by W. H. Clark, the 
 railroaders' grader or appraiser of lands, 
 he drove three miles northeast to the near- 
 est of the farms covered by the writs of 
 ejectment — the farm of W. B. Braden, a 
 member of the League. 
 
 In another buggy close behind came 
 Hartt and Crow, heavily armed with re- 
 volvers, rifles, and shotguns, the shotguns 
 being loaded with small bullets or slugs in- 
 stead of shot. 
 
 It happened that on this day the League 
 was having a picnic some miles away; 
 whether this fact influenced the action of the 
 railroad company and its traveling batteries 
 I do not know. Braden was at the picnic: 
 no one was in the little cottage. The mar- 
 shal entered, carried out all the household 
 goods, piled them in the road, and formally 
 declared Hartt to be in possession of the 
 premises.* 
 
 This was about nine o'clock in the morning. 
 The marshal and Clark, closely followed by 
 
 * Four loaded cartridges were left on Braden's doorstep, prob- 
 ably as an indication of what would be the result of any re- 
 iistance on his part. 
 
 Hartt and Crow, drove to the next place, the 
 farm of one Brewer, over the border of Fresno 
 County, and about three and a half miles 
 from Braden's. They encountered on the 
 road a settler named J. H. Storer, an old 
 friend of Marshal Poole's, and Poole reined 
 in for a time while the two talked. Storer 
 said the settlers hoped for a compromise with 
 the railroad company and he would try to 
 arrange one. 
 
 When they drove on, Clark, the grader, 
 reproved the marshal for talking with 
 Storer because Storer was the partner of 
 Brewer, whom they had come to dis- 
 possess. 
 
 About ten o'clock they arrived at Brewer's 
 place. He was harrowing in his field. Both 
 buggies drove into the yard, past the house, 
 and about two hundred yards west into the 
 field. At this moment there appeared about 
 fifteen of the settlers in a group, some mount- 
 ed, some on foot, advancing toward them. 
 The settlers carried no visible arms; among 
 them all were only five small pocket pistols. 
 Marshal Poole descended from his buggy and 
 went forward, saluting them courteously. 
 The foremost of the settlers addressed him 
 quietly, asking the marshal not to serve any 
 writs until the case then pending in the 
 Supreme Court should be decided. He also 
 handed to the marshal the address that 
 Major McQuiddy had drawn up. 
 
 Marshal Poole read the document and 
 said his duty was to serve the writs then and 
 there. The settlers replied without vehe- 
 mence that they would not allow him to serve 
 them. 
 
 They now closed about the marshal and 
 demanded that he give up his revolver and 
 surrender to them, whereupon he would be 
 conducted in safety to a station whence he 
 could leave the county. He said he would 
 yield to force and go away but he would not 
 give up his revolver, although he promised not 
 to use it. Two of the settlers, Archibald 
 McGregor and John E. Henderson, were then 
 told off to guard the marshal and Clark to 
 the railroad station at Kingsburg. 
 
 THE CRACK RIFLE AND REVOLVER SHOT 
 KILLS FIVE 
 
 All this Hartt and Crow watched narrowly 
 from the other buggy about seventy-five feet 
 away. As the conference with the marshal 
 ended, Hartt reached down and seized a 
 rifle. 
 
 "Let's shoot," said he. 
 
B Without shifting his watchful gaze from 
 group of settlers, Crow put a hand upon 
 bis companion's arm. 
 
 "Not yet," said he, "it isn't time." 
 
 James Harris, from the group about the 
 narshal, rode up to Hartt and Crow and cried: 
 
 "Give up your arms!" 
 
 He was within a few feet of the buggy. 
 Crow laid his hands upon a shotgun before 
 him. He raised it deliberately; he fired it 
 into Harris' face. 
 
 , Henderson spun around at the sound and 
 ivhipped from his pocket a small caliber re- 
 ,^olver. He caught a glimpse of Harris falling 
 trom his horse. Then he rode forward with 
 lis revolver, trying to fire it at Crow. The 
 lammer clicked on the cartridge but the arm 
 jva,s not discharged. Hartt started to descend 
 irom the buggy. As he leaned over the 
 «rheel Henderson's revolver worked at last 
 md the bullet struck Hartt in the abdomen.* 
 \t the same instant Crow, from his raised 
 jun, shot Henderson dead. 
 
 Crow leaped to the ground with a revolver 
 n one hand and carrying other weapons. 
 He was firing rapidly into the group of set- 
 :lers. Iver Kneutson was shot dead before 
 le could draw his revolver. Daniel Kelly 
 "ell from his horse with three bullets through 
 lis body. Archibald McGregor, who was 
 irmed with only a penknife, was shot twice 
 through the breast. As he ran screaming 
 toward a pool of water. Crow at one hundred 
 ind seventy paces shot him in the back. He 
 fell over and lay still. Crow fired his shot- 
 ^n and Edward Haymaker, also unarmed, 
 fell, struck in the head. 
 
 All this happened, as it seemed, in an in- 
 stant. A stupefaction had fallen upon the 
 spectators; they could but stand and stare. 
 J. M. Patterson awoke first. He bounded for- 
 ward cr}'ing, "This has gone far enough ! It 
 must stop ! " One or two ineffectual shots were 
 fired. As they rang out, Major McQuiddy, 
 who all the morning had been trying to over- 
 take the marshal, hurried upon the scene 
 and took charge of the disorganized settlers. 
 
 Crow still stood there, weapons in hand, 
 menacing the crowd. McQuiddy spoke 
 rapidly to the marshal, protesting against 
 any further action. As the two advanced. 
 Crow suddenlv doubled forward and dodged 
 
 Speaking of Widows and Orphans 
 
 91 
 
 * Hartt stated before his death that he had been sitting in the 
 buggy with his feet on the dashboard and was in that position 
 when he was shot. The autopsy disproved this assertion for 
 the bullet entered at the upper boundary of the abdomen and 
 traversed the whole abdominal cavity downward, showing that 
 he had been shot from a pistol held above and almost paraUei 
 with his body. 
 
 past the comer of the bam toward a field of 
 standing wheat. 
 
 "Don't let that man escape!" shouted 
 McQuiddy, and as Crow disappeared into 
 the tall grain someone — just who is not likely 
 ever to be known — followed upon his trail. 
 
 McQuiddy now turned to the wounded and 
 ordered all to be carried to Brewer's house 
 while messengers rode for surgeons. The 
 bodies of Harris, Henderson, and Kneutson 
 were placed upon the porch; they were dead. 
 Within the house Kelly, McGregor, and 
 Hartt were moaning and twitching with 
 agony. Two doctors were brought from the 
 village and found that all .were mortally 
 hurt except Haymaker.* 
 
 This made six persons done to death that 
 morning — on the Southern Pacific's corruptly 
 obtained and wrongly held grant from the 
 public domain. 
 
 Very soon there was another. Crow, 
 dodging through the wheat, was making for 
 the house of one Haas, his brother-in-law, and 
 likewise an opponent of the settlers. As he 
 ran he came to the irrigation ditch and turned 
 off along its course; a ditch tender working 
 below saw him nmning. At a mile and a half 
 from Brewer's there was a bridge where the 
 road crossed the ditch. Major McQuiddy 
 had sent men on horseback to try to catch 
 Crow, These were watching for him at the 
 bridge. Haas and his hired man drove up 
 from the other direction in a wagon contain- 
 ing six guns and a supply of ammunition. 
 
 "Where's Crow?" asked Haas, seeing the 
 group by the bridge. 
 
 At that instant a cry arose, for Crow broke 
 into sight along the ditch. He stopped, 
 dodged back, and whipped up his rifle, aim- 
 ing it at George Hackett. Before he could 
 fire, a shot rang behind him. He swayed, 
 tumed a little and pitched over upon his face 
 — dead. He had been shot through the chest. 
 
 FALSE REPORTS OF INSURRECTION 
 The instant that the news of that morn- 
 ing's work reached Hanford, the railroad 
 company announced that its telegraph office 
 there had been closed and the operator driven 
 away by the League, and that owing to the 
 armed insurrection ■ in progress all trains, 
 passenger and freight, had been annulled. 
 At Goshen, the other near-by station, no tele- 
 grams were received except for the railroad 
 company. 
 
 ♦ McGregor and Kelly died before morning and Hartt on the 
 i2th. 
 
92 
 
 Hampton's Magazine 
 
 By these means the company secured 
 control of the news and the first reports 
 described a bloody and unprovoked attack 
 by desperadoes on the authority of the United 
 States. In San Francisco five eminent rail- 
 road officers, including Charles Crocker and 
 W. W. Stow, at that time the political 
 manager for California, hastened to news- 
 paper offices and explained the innocence of 
 the company and the depravity of the ruffians 
 that had defied the Federal authority. 
 
 Later the effect of these communications 
 was somewhat marred by the appearance in 
 San Francisco of Walter Leach, the Hanford 
 telegraph operator, and his statement that 
 he had been removed and his office closed, 
 not by the League, but by the railroad com- 
 pany. 
 
 The sheriff also sent word that there was 
 no disturbance and no reason why trains 
 should not run. Furthermore, independent 
 reporters, notably one for the Visalia Delta, 
 got to the scene and sent out unvarnished 
 reports. Yet it is not to be denied that a 
 certain impression was created by the rail- 
 road company's tainted news, that this im- 
 pression still persists, and that to this day 
 the affair is far from clear in many minds 
 to which it should be no mystery. 
 
 The funeral of the slaughtered settlers on 
 the 1 2th was very impressive. All business 
 and work were suspended in the region and 
 in a procession of vehicles more than two 
 miles long, a thousand farmers followed the 
 hearses to the cemetery. McGregor and 
 Kelly were single, but Harris and Henderson 
 had each a wife and a child, and Kneutson 
 left a wife and nine children. All of these 
 were presently evicted from their homes. 
 
 There was no further disturbance. The 
 farmers were disheartened by the deaths of 
 their comrades and by the obviously resist- 
 less power of the railroad, against which no 
 rights, no law, no protest, and no appeal could 
 prevail. On May 26th, five of them went to 
 San Francisco to make what terms they could 
 with this supreme power. As soon as they 
 alighted in the city, they were arrested and 
 thrown into jail charged with conspiracy and 
 resisting a Federal officer. Not one of them 
 had been anywhere near the massacre. 
 
 Subsequently they were released, but other 
 arrests were made, many indictments found, 
 and John J. Doyle, W. H. Patterson, Purcell 
 Prior, William B. Braden, and Courtney 
 Talbot were tried before Judge Lorenzo 
 Sawyer, who practically ordered the jury to 
 
 convict. The jury refused to convict of con] 
 spiracy but found the prisoners guilty of re-j 
 sisting the marshal. They were sentenced 
 to five months' imprisonment each and were 
 sent to jail. 
 
 THE RAILROAD COMPANY GETS THE 
 DISPUTED LAND 
 
 As for the land, the railroad company woi 
 that handsomely, for after the terrible wort 
 of that May day the appeals of the three test 
 cases were allowed to go by default and 
 Judge Sawyer's decision stood, dispossessing 
 the settlers. Years afterwards practically the 
 same issue was raised again in another 
 county of the state, and, being carried to the 
 Supreme Court, the court ruled against the 
 railroad and upheld the principle for which 
 the settlers had contended,* so that their 
 position would seem to have been as legally 
 sound as it was morally just. 
 
 But the land for which they had con- 
 tended was none the less lost to them and 
 became a part of that total on which you 
 and I have the pleasure of paying interest 
 charges, for it was all swept into the capi- 
 talization. Other additions thereto occa- 
 sioned by this episode were not great: some- 
 thing for legal expenses, something for 
 newspaper articles, something for political 
 dirty-work men, and a few other similar items. 
 That was all, because the funerals of the 
 farmers killed were paid for by friends and 
 neighbors and cost the company literally 
 nothing. No doubt these necessary expenses 
 would have been borne by the orphaned and 
 dispossessed families of the deceased if the 
 railroad company had left them anything to 
 pay with. 
 
 This is the battle of Mussel Slough, to 
 which you may have heard some reference. 
 It is all over now; the Southern Pacific is 
 triumphant. But for years the settlers of 
 Tulare County held memorial services on 
 each anniversary of that bloody day at Brew- 
 er's Farm. They remembered, though the 
 rest of the world and the railroad company 
 speedily forgot, f 
 
 * Southern Pacific Company versus Groeck, 74 Fed. 385, 183 
 U. S. 690. In the case of Boyd versus Brinckin, decided by the 
 Cahfornia Supreme Court a few months after the massacre the 
 same principle was involved and was upheld by the unanimous 
 decision of the court, Chief Justice Sharpstein writing the opinion. 
 
 t The authorities for this article are the statements of sur- 
 vivors of the massacre; the statements of eyewitnesses pub- 
 lished at the time; the accounts printed by the San Francisco 
 Chronicle, Alta California, Bulletin, Call, and Examiner, and 
 particularly the detailed reports in the Visalia Delta; the rare 
 pamphlet entitled " The Struggle of the Mussel Slough Settlers " ; 
 testimony given at the trials; and the account printed in the Atlas 
 of Kings County. 
 
I 
 
 I 
 
 The Remedy of the Law 
 
 By Charles Edward Russell 
 
 AntJior of '^Speaking of Widmi's ami Orphans,'''' " 77ie .Millionaire Mill^'' etc. 
 Portraits by S, G. Cahan 
 
 Editorial Note. — A few weeks ago the country got excited over the announcement 
 that the railroads were going to raise their transportation rates. President Taft, by getting out 
 an injunction, stopped this move for a short time. Congress, the country was assured, was going 
 to fix things all right by passing a bill. 
 
 What good will proposed legal action do? 
 
 For answer, we recommend you to read Mr. Russell's series of railroad articles. Especially 
 read the following analysis of the Southern Pacific Railroad and its relations with the people of 
 California and other states. Between the lines, too, you will learn much about what is causing 
 the ever-increasing cost of living, and why concentration of wealth in the pockets of a few men 
 is constantly increasing. 
 
 As to the specific cause of the increased cost of 
 living, President Taft to-day frankly told various 
 of his callers that he was unable to account for it. — 
 N ews dispatch from Washington, December 30, 1909. 
 
 IN the grip of the great powfsr of the Southern 
 Pacific Railroad, the people of California 
 learned that they had small advantage from 
 those wonderful gifts of nature wherewith their 
 state ran over. One resource after another 
 was discovered and developed, gave forth its 
 promise of prosperity, and was incorporated 
 into the money-making machine of the railroad 
 . monopoly, or asphyxiated by its high rates. 
 
 The richness of the land was for the rail- 
 road company and not for the producers. 
 
 Orange growers found that while they could 
 raise the best and cheapest of all oranges and 
 in unequaled abundance, the freight charges 
 absorbed the profits of their toil. 
 
 California wines attained a just celebrity; 
 but if they were to be shipped by rail, the 
 freight rates barred them from general use 
 and defeated the wine growers. 
 
 Wonderful crops of deciduous fruits, 
 peaches, plums, apples, cherries, and pears, 
 sometimes rotted on the trees; no man could 
 afford to ship them to market. 
 
 This rich adobe soil, surpassingly fertile, 
 was found to produce such wheat as never 
 before had been seen; stalks six feet high, 
 with large, firm berries, a prodigious }-ield; 
 but when vast areas had been sown in wheat, 
 the farmers discovered that at the freight 
 rates exacted by the railroad monopoly no 
 
 profit lay in wheat growing. All the world 
 was eager for California wheat; vessels came 
 from Liverpool around Cape Horn to get it, 
 and for the carriage of a few miles from the 
 farms to the seaport the railroad charged so 
 much that nothing remained to the farmer. 
 
 Here lay the world's vineyard, orchard, 
 and granary; what Swinburne calls God's 
 three chief gifts to man, his "bread and oil 
 and wine," showered upon it in overmeasure, 
 and the railroad monopoly took the tilth of 
 all for its own coffers. This great state, seven 
 hundred and seventy miles long and about 
 two hundred and fifty miles wide, timbered, 
 watered — with so much gold that €ven now 
 over eighteen million dollars' worth is taken 
 yearly from its soil; with silver, platinum, 
 petroleum, and other mineral wealth; with 
 fertile soil, with the advantage of a singu- 
 larly delectable climate; with so much variety 
 of products — seems to have been endowed 
 with every good thing that nature knows, 
 and beyond any other region of earth. One 
 might think that all the natural forces had 
 intelligently combined to see how much they 
 could do here for man and his life; and, to 
 crown their work, had attracted a population 
 of the best fiber the American race had pro- 
 duced. 
 
 CALIFORNIA'S POPULATION IS CHOKED OFF 
 
 And yet the population of this splendid 
 state in 1906, thirty-one years after the com- 
 pleting of the trans-continental railroad, was 
 
 217 
 
 / 
 
218 
 
 Hampton's Magazine 
 
 only 1,485,053. This is the showing of its 
 growth by the United States census: 
 
 1850 92,597 
 
 i860 379,994 
 
 1870 560,247 
 
 1880 864,694 
 
 1890 1,208,130 
 
 1900 1,485,053 
 
 From 1890 to 1900 only 277,000 increase. 
 Is not that significant? 
 
 Comparative Areas and Populations 
 
 California 
 
 France 
 
 Germany 
 
 Japan 
 
 Italy 
 
 Belgium 
 
 Massachusetts 
 New Jersey . . . 
 Illinois 
 
 Area in Square 
 Miles 
 
 158,360 
 207,054 
 208,830 
 
 147,655 
 110,550 
 
 11,373 
 8,31s 
 7,815 
 
 56,650 
 
 Population 
 
 1,485,053 
 38,961,945 
 63,886,000 
 49,732,952 
 
 32,475,253 
 7,074,910 
 2,805,346 
 1,883,669 
 4,821,550 
 
 The true garden spot of the world and 
 after forty years of railroad domination it has 
 about two million inhabitants in an area 
 greater than Ohio, Illinois, Indiana, Massa- 
 chusetts, and New Jersey together; at least 
 forty per cent larger than Italy with less 
 than one twentieth of Italy's population ! So 
 that to this day, after the traveler has appre- 
 hended something of the unmatched re- 
 sources of the country, the greatest of all its 
 wonders is the sparseness of its population. 
 
 The same lawless power that perverted 
 the government and seized the courts has 
 throttled California's development and de- 
 prived its people of the products of their 
 industry. Men have sown, and this power, 
 cunningly adjusting its rates for that purpose, 
 has year after year taken the harvest. 
 
 RAILROAD CONTROL OF BOTH PARTIES 
 
 You say: For this abnormal condition 
 there must have been a remedy. This nation 
 of ours is ruled by law and majorities. It 
 must have been possible to subdue or to 
 regulate this railroad. The fault must have 
 been with the people. 
 
 No — no fault with the people. The peo- 
 ple were all right. The fault lay in the sys- 
 tem. The choice oflFered to the people was 
 between nominal rule by the Republican 
 party and nominal rule by the Democratic 
 party. When they wearied of railroad 
 tyranny under the name of a Republican 
 
 administration, they revolted and introduced 
 railroad tyranny under the name of a Demo- 
 cratic administration. , The monopoly con- 
 trolled the Democratic administration as 
 easily as it had controlled the Republican. 
 It was a power too great to be withstood and 
 made great by the money of the community 
 that it now oppressed. 
 
 But how about the law? How about the 
 blessed thing called regulation? How about 
 the government supervision of corporations? 
 
 That is the very thing I want most to tell 
 you about. Come, now, you that think you 
 can deal with this problem by regulation. 
 Come and have a good look at this exhibit. 
 It will not give you cheer but it ought to 
 furnish unlimited instruction. 
 
 Law? There was nothing but law; and 
 constitutions; and provisions; and orders; 
 and amendments;- and fresh statutes; and 
 then more law; all aimed and shaped to regu- 
 late, restrict, and control this monster, and 
 the monster never gave a hoot for all of them. 
 Every step of its progress had been marked 
 by the violation 01 some law or some article 
 of the holy constitution, and it strode calmly 
 and cheerfully over all, never minding in the 
 least. 
 
 * For instance: There was an article in the 
 Constitution of the State of California that 
 expressly forbade a certain kind of lease be- 
 tween railroad companies. So the monopoly 
 made something like a dozen leases of that 
 variety. There was a section of the penal 
 code that forbade an interchange of stock 
 between railroad companies. So the monop- 
 oly proceeded to interchange the stock of its 
 subsidiary railroad companies. There was 
 an article in the state constitution pro- 
 viding that the state railroad commissioners 
 should have the power to fix passenger and 
 freight rates. And when on one famous 
 occasion these commissioners undertook to 
 exercise this power, the monopoly brushed 
 the commissioners out of its way and con- 
 tinued to make its own rates in its old fashion 
 on its old basis. And what was that basis? 
 All the traffic would bear. 
 
 Some of these incidents should be told in 
 detail. 
 
 I. Thus Section 20 of Article XII of the 
 Constitution of California contains this pro- 
 vision: 
 
 And whenever a railroad corporation shall for the 
 purpose of competing with any other common car- 
 rier lower its rates for transportation of passengers 
 or freight from one point to another, such railroad 
 
The Remedy of the Law 
 
 219 
 
 ite shall not be again raised or increased from such 
 "standard without the consent of the governmental 
 authority in which shall be vested the power to regu- 
 late fares and freights. 
 
 CALIFORNIA MERCHANTS START A RAILROAD 
 
 For many years the oppressed and de- 
 frauded merchants of San Francisco held to 
 the behef that the one sure remedy for their 
 troubles was in competition. If they could 
 only get another railroad, competition would 
 compel the Southern - Central - Pacific oli- 
 garchy to reduce 
 rates and practice 
 decency. Many 
 times their hopes 
 of competition had 
 been raised from 
 many sources, but 
 always to be disap- 
 pointed. The new 
 line was seized, con- 
 trolled, or absorbed 
 by the oligarchy, or 
 headed off if it was 
 approaching from 
 the East. At last the 
 merchants formed 
 their own company 
 and built their own 
 line from San Fran- 
 cisco Bay down the 
 rich San Joaquin 
 Valley, 200 miles 
 and more. 
 
 At once the new 
 line made rates 
 much lower than 
 the Southern Pa- 
 cific's tariff, and 
 the Southern Pa- 
 cific was obliged 
 to meet the reduc- 
 tions. Beautiful 
 proof of the virtue 
 
 of competition as a cure-all ! But the Atchison, 
 Topeka & Santa Fe — which had acquired 
 the old Atlantic & Pacific (a land grant rail- 
 road across Colorado and New Mexico), 
 extended its line westward and secured an 
 entrance to California — offered the grandest 
 promise of perfect competition. If the Santa 
 Fe could be brought to San Francisco there 
 would be a competing outlet to the Atlantic. 
 So the merchants sold their San Joaquin 
 Valley line to the Santa Fe, and amidst 
 great rejoicing the Santa Fe entered San 
 Francisco early in 1900. 
 
 BARCLAY HENLEY, WHOSE EFFORTS TO FORCE 
 CONGRESS TO RECLAIM THE SOUTHERN PA- 
 CIFIC'S FORFEITED LAND GRANT WERE. 
 DEFEATED IN THE SENATE. 
 
 Immediately, the Santa Fe and the South- 
 em Pacific restored the rates in the San 
 Joaquin Valley generally to the basis that had 
 prevailed before the merchants' road was 
 built, and the people of San Francisco dis- 
 covered too late that the addition of a new 
 line to their facilities made no difference in 
 their situation, for the simple reason that the 
 Southern Pacific owned $17,000,000 of stock 
 in the Santa Fe and the two roads had a close 
 traffic and trackage arrangement. Two roads 
 with but a single 
 thought; two tariffs 
 that gouged as one. 
 Among the pas- 
 senger rates that 
 had been reduced 
 by the merchants' 
 road's competition 
 was the passenger 
 rate from San Fran- 
 cisco to Fresno. 
 This had been 
 $5.90; it was cut to 
 $3.75. When the 
 merchants' road 
 was sold, the old rate 
 of $5.90 to Fresno 
 was restored. This 
 was in March, 1900. 
 Mr. E. B. Edson 
 brought suit to test 
 under the constitu- 
 tion the legality of 
 the restored rate, 
 and the State Board 
 of Railroad Com- 
 missioners joined 
 him. In the Su- 
 perior Court Judge 
 George H. Bahrs 
 gave judgment for 
 Edson and the com- 
 missioners. The 
 Southern Pacific appealed, and on May 23, 
 1 901, the Supreme Court reversed Judge 
 Bahrs and remanded the case for a new trial.* 
 On the retrial in the lower court in 
 July, 1904, Judge Frank H. Kerrigan de- 
 cided in favor of the railroad company, 
 holding that the rate had never been re- 
 duced. 
 
 The ground for this decision is worth not- 
 ing. It seems that when the Southern Pacific 
 reduced the rate to Fresno to $3.75, it issued 
 a new fo rm of ticket good only for the day 
 
 * Edson et al. versus Southern Pacific Company, 133 Cal., 25. 
 
320 
 
 Hampton's Magazine 
 
 i 
 
 of issue. The old style of ticket, price $5.90, 
 and good for six months, it still kept on sale. 
 Nobody ever wanted or bought the old style 
 of ticket at $5.90, but it could be bought if 
 desired. Hence, in Judge Kerrigan's opin- 
 ion, there had been no reduction of rates. 
 
 A JUDGE CRITICISES THE CONSTITUTION 
 
 Edson and the commissioners now ap- 
 pealed. Chief Justice Beatty wrote the de- 
 cision of the Supreme Court, which entirely 
 upheld the railroad company, and affirmed 
 the validity of the $5.90 charge — not because 
 the rate had not been lowered, but because 
 it "had not been lowered for the purpose of 
 competition within the proper construction 
 of the constitution." Judge McFarland, an 
 associate judge of the Supreme Court and 
 previously a Southern Pacific attorney, con- 
 curred with Chief Justice Beatty, but added 
 an even stronger opinion of his own, in 
 which he fiercely attacked Section 20 of 
 Article XII of the constitution, speaking of it 
 as containing *' a drastic and ruinous penalty." 
 
 One might think that on such grounds any 
 law anywhere could be upset at any time. 
 
 Incidentally, it may be interesting to note 
 that Judge Bahrs was retired to private life 
 at the end of his term and Judge Kerrigan 
 was elevated to the Appellate Court. 
 
 JUDGE GEORGE H. BAHRS. WHO GAVE JUDG- 
 MENT AGAINST THE RAILROAD IN 
 THE FRESNO RATE CASE. 
 
 2. Among the choice presents the four 
 gentlemen of Sacramento gathered from the 
 United States was a land grant for building 
 a railroad from Roseville, eighteen miles 
 north of Sacramento, to Portland, Oregon. 
 This grant was of every alternate twenty 
 square miles (ten on each side of the track) 
 conditioned u[)on the building of the road 
 the entire distance. The Congenial Four 
 built only as far as Redding, 152 miles, but 
 they took possession of the land grant for 
 the entire projected line of the road. 
 
 It was immensely valuable land, compris- 
 ing some of the best timber on the continent. 
 In 1882, the time limit for completing the 
 road had long expired so that, except for the 
 line from Sacramento to Redding, the grant 
 was forfeited. To reclaim it an act of Con- 
 gress was necessary. Every attempt to pass 
 such an act and to return to the public the 
 land justly belonging thereto was defeated. 
 The four gentlemen had no more right to4:he 
 land than they iiad to the Washington monu- 
 ment, but they held it nevertheless, and 
 reaped millions from it. 
 
 THE UNITED ST.\TES SKNATK COMES TO THE 
 SOUTHERN pacific's ASSISTANCE 
 
 In the election of 1882, Mr. Barclay Hen- 
 ley, a young attorney of Santa Rosa, who had 
 studied the land grant (juestion, was nomi- 
 nated for Congress on a platform demanding 
 that the forfeited land grants should be re- 
 turned to the public domain. On this issue 
 he was elected and promptly introduced bills * 
 for the reclamation of the forfeited grants of 
 the Roseville-Portland line, for the reclama- 
 tion of the forfeited land grants of the North- 
 ern Pacific — colossal grabs that have some- 
 how escaped the attention they deserve — and 
 some other bills having similar objects. The 
 Congenial Four bitterly fought the bill that 
 sought to make them disgorge, bringing down 
 Judge Dillon and General Roger A. Pryor 
 from New York to argue in their behalf before 
 the Public Lands Committee of the House, 
 and filling the lobbies with their hired men. 
 
 But Mr. Henley had absorbed the whole 
 subject and he made of it so clean and mas- 
 terly an exposition that he carried the House 
 with him. After a time, the only active op- 
 position he encountered was from the late 
 Thomas B. Reed, of Maine, then Speaker of 
 the House. When the vote came all the bills 
 
 • For d» p»rt»cul*riy interesting debate on the first of these 
 bills, see C«mgressitmal Record, Forty-eighth ConKress, _ First 
 Session, pp. 4814-^1, The pleas made in behalf of the niilroad 
 are a remation to anyone tnat will dig them out. 
 
The Remedy of the Law 
 
 221 
 
 I 
 
 were passed by large majorities. They went 
 next to the Senate, llierc tJiey were promptly 
 buried, nor could any ari;unteut or appeal ever 
 resurrect them. The four congenial gentle- 
 men remained in possession of the land to 
 which they were not entitled, and it is to-day 
 reflected in the capitalization of the Southern 
 Pacific Railroad that the public pays ex- 
 orbitant freight and passenger rates to 
 sui)p{)rt. 
 
 This must be a cheerful thought to all 
 of us. First we are cheated of millions 
 upon millions of acres of our lands, rich 
 in those natural resources we are now 
 so anxious to conserve; next we pay 
 freight rates on the value of the land that 
 has been stolen from us; then as the 
 value of this land increases with the in- 
 crease of population, it becomes addi- 
 tional capital on which to base additional 
 rates to lay additional burdens upon the 
 ultimate consumers, 85 per cent of 
 whom are poor or very poor. The finite 
 mind seems incapable of a grander 
 concept. 
 
 FRIENDS HELP THE RAILROAD TO GRAB 
 FIFTY MILLION ACRES OF LAND 
 
 3. But the land grab story has still a sequel 
 not less delectable. It shows how even the 
 best of movements for the public benefit may 
 easily be twisted into further advantage for 
 the fortunate and further burdens for the 
 people at the bottom. 
 
 About fifteen years ago the need of 
 conservation began to be forced, very 
 tardily, upon our attention by the obvious 
 fact that we should shortly be without 
 timber as without public lands. Congress, 
 therefore, set apart regions as inalienable 
 forest reserves for the nation. An honest 
 man in the Senate, looking over the proj- 
 ect, saw that while its main features were 
 admirable, it contained one defect easily 
 remedied. It did not j)rovide for the cases 
 of men that had settled upon the land seques- 
 tered for ])ublic ])urposes. That is to say, 
 in the middle of a reserve a settler might be 
 tilling a farm, and l)y the establishing of a 
 forest reserve about him might find himself 
 utterly cut olT from communication with the 
 rest of the world, whereby his farm would be 
 made valueless. 
 
 This senator, therefore, introduced a meas- 
 ure providing that any dwellers on the land 
 taken for forest reserves should have the right 
 to exchange their farms for an equal amount 
 
 
 JUDGE FRANK H. KERRIGAN. WHO t)ECIDED 
 
 IN THE RAILROADS FAVOR ON RETRIAL 
 
 OF THE FRESNO CASE. 
 
 of public land elsewhere. This just and 
 reasonable amendment fell into the hands of 
 an eminent friend of the Interests in the 
 Senate and another in the House. They 
 changed the words "dwellers on" to "holders 
 of" and, at the last minute before the end of 
 the session, it was rushed through the Senate, 
 giving no chance for amendment. 
 
 The railroad companies immediately took 
 advantage of this provision. They gave up 
 fifty millions of acres of worthless barrens in 
 Nevada and Arizona where nothing ever grew, 
 or ever would grow, but cactus or sage brush, 
 and received in exchange choice timber lands 
 in Oregon, Northern California, and Wash- 
 ington, nor could any protest or outcry avail 
 to check this monstrous fraud. 
 
 Only by a narrow margin did they fail of 
 getting those invalualile coal deposits in 
 Alaska that are now the subject of a national 
 controversy. They had planned to grab all 
 such lands but found they were stopped 
 by the fact that the homestead law did not 
 extend to Alaska. Their newspapers in all 
 parts of the country then began to demand 
 amendment of the law so that Alaska 
 should be thrown open to homestead entry. 
 When the agitation had proceeded long 
 
;822 
 
 Hampton's Magazine 
 
 ^^et^ 
 
 CHIEF JUSTICE BEATTY, OF THE CALIFORNIA 
 SUPREME COURT, WHO UPHELD THE RAIL- 
 ROAD IN THE FRESNO CASE. 
 
 enough, a bill to this effect was introduced 
 in Congress and slated for immediate pas- 
 sage. One man, Judge Joseph H. Call, of 
 Los Angeles, well known as an opponent of 
 corporation knavery, discovered what was 
 afoot and hastily warned a group of honest 
 Congressmen. By these the bill was so 
 amended as to exclude the railroads from the 
 benefit of the extension. 
 
 Meantime, those choicest timber lands in 
 California, Oregon, and Washington, before 
 referred to, had been obligingly withheld 
 from entry. When the railroad company 
 found that it was beaten off from Alaska, 
 the timber tract was as opportunely restored 
 to entry and the railroad companies filed for 
 and grabbed it all— about 50,000,000 acres. 
 I suggest that the next Conservation Con- 
 ference in this country devote itself to this 
 little fact. 
 
 THE VALUE OF REGULATION 
 
 4. But to return to the experiences of 
 California. And here I come upon the main 
 story I desire to tell because it illustrates so 
 sweetly just how much effect rate regulation, 
 supervision, Hepburn bills, strenuous gentle- 
 men, and the like agencies, can have upon 
 
 railroad companies when the railroad com- 
 panies do not care to observe such trifles. 
 
 Also something else. It illustrates and 
 shows us precisely how and to what ex- 
 tent you and I and all of us pay for these 
 fortunes; pay for them once when they 
 are made and then the interest on that, 
 and the interest on that, many times 
 over until the dollar we paid forty years 
 ago for Mr. Huntington's " explana- 
 tions " to Congressmen has become two 
 dollars that we pay year after year ; until 
 all the wealth that was stolen, filched, 
 and conveyed from any one of these en- 
 terprises in the palmy days of its looting 
 is the basis of a bill annually presented 
 to us and for which we must dig up the 
 money. 
 
 If the looting were done when it was done 
 and we were rid of it thereafter, the case 
 could not be so bad. But every dollar of 
 loot in any railroad enterprise, all the bribe 
 money and ''legal expenses," the jobs in the 
 construction accounts and the swindle in the 
 interlacing leases, become, all of them, just 
 so many additions to the capital account on 
 which interest must be paid through the rates 
 that come home to us all. 
 
 With this little preface, necessary to make 
 clear the true meaning of the characters and 
 incidents we shall introduce, we are now 
 ready for our story. 
 
 THE PEOPLE APPOINT A POWERFUL RAILROAD 
 COMMISSION 
 
 About thirty years ago this idea of curing 
 evils by regulating them laid strong hold 
 upon the people of California, and in the 
 brave new constitution of 1879, to which we 
 have before referred, they determined to deal 
 once and for all with the railroad monopoly 
 question. So in Section 20 of Article XII, 
 they gave to the Board of Railroad Commis- 
 sioners every conceivable power ''to establish 
 rates of charge for the transportation of pas- 
 sengers and freight by railroad and other 
 transportation companies," to supervise and 
 control such companies, and to enforce its 
 will upon them. For failure to obey the 
 commissioners' rulings severe penalties were 
 provided, the companies to pay heavy fines 
 and their officers to be punished with fine 
 and imprisonment. The section concludes 
 with this explicit statement: 
 
 In all controversies, civil and criminal, the rates 
 of fares and freight established by said commission 
 shall be deemed conclusively just and reasonable. 
 
The Remedy of the Law 
 
 223 
 
 The force of regulation could no farther 
 go. Even the so-called Roosevelt policies 
 have not approached this achievement. 
 
 Some years afterwards, the state legislature, 
 finding that for some reason blessed regula- 
 tion did not produce the expected good things, 
 tried to strengthen the commission's hands 
 with the majesty of statutes, enacting that 
 whenever the commission determined upon 
 a rate it should file the new tariff schedule 
 with the railroad company affected, and that 
 twenty days thereafter the new rate should 
 go into effect and become the law of the land. 
 
 Although it possessed these uneqUaled and 
 ample powers, the commission never did a, 
 blessed thing but make reports and draw its 
 several salaries; it was armed with thunder- 
 bolts and used only goose quills. Mr. Hunt- 
 ington wrote once to General Colton: "I 
 notice you are looking after the state railroad 
 commissioners. I think it is time."* Whether 
 this "looking after" had any relation to the 
 prevailing inertia, the reader can surmise as 
 well as I. 
 
 But it appears that in 1894 there was one 
 of the periodical revolts against the Southern 
 Pacific which had so long been the consti- 
 tuted authority and government of the state, 
 and this treasonable and unruly spirit, seiz- 
 ing upon the Democratic party, found ex- 
 pression in the following resolution, which 
 the Democratic State Convention of that year 
 embodied in its party platform: 
 
 Resolved, That the charges for the transporta- 
 tion of freights in California by the Southern Pa- 
 cific Company of Kentucky f and its leased lines 
 should be subjected to an average reduction of not 
 less than twenty-five per cent, and we pledge our 
 nonninees for Railroad Commissioner to make this 
 reduction. 
 
 You must recall the marvelous and perfect 
 political organization of the Central Pacific 
 before you can apprehend the force of the 
 revolt that produced this resolution. The 
 truth is the grain growers were threatened 
 with ruin. Some of them were supporting 
 the burden of heavy mortgages. From their 
 abundant crops the railroad was filching 
 most of the profits. They were, therefore, 
 in the mood of men not to be trifled with. 
 
 No doubt the passage of that resolution 
 was a treasonable act that the railroad's 
 political department could easily have pre- 
 vented. A few years before it would have 
 
 ♦Letter of March 7, 1877. See Hampton's Magazine for 
 June, 1910, p. 857. 
 
 t The various consolidations cf the Central Pacific, Southern 
 Pacific, and a score of other lines had been merRed into a com- 
 pany bearing this name incorporated in Kentucky, March 17, 
 1884. 
 
 JUSTICE McKENXA, NOW OF THE UNITED 
 
 STATES SUPREME COURT. WHO HEARD 
 
 THE FAMOUS GRAIN RATE CASE. 
 
 done so, but it had learned that regulative 
 laws and constitutional provisions were really 
 ineffective, and besides, there was the mem- 
 ory of that bloody May day at Brewer's 
 Farm. The country had made so much fuss 
 about the killing of a few farmers; "The 
 Massacre at Mussel Slough" it was uni- 
 versally called, and the Southern Pacific 
 the murderer of those men. It was not nice 
 for professed philanthropists and art connois- 
 seurs. Even the subsidized editors always 
 gagged a little about Mussel Slough. 
 
 Evidently there was a point of endurance 
 beyond which men could not be driven with 
 entire safety to the drivers. Wisdom and ex- 
 perience indicated that no harm could come 
 from such a resolution nor from a campaign 
 conducted on these lines; it was only a useful 
 and desirable vent for public clamor that 
 otherwise might have worse results. 
 
 So the convention nominated its candidates 
 on this platform, and the party went into the 
 campaign with at last the similitude of an 
 issue to fight for. The state that year was 
 in one of its moods for a change from the 
 machine that had a Republican name to the 
 machine that had a Democratic name, and 
 
224 
 
 Hampton's Magazine 
 
 two of the three Democratic candidates for 
 railroad commissioner were elected, consti- 
 tuting a majority of the Board. 
 
 THE people's commission TRIES TO REDUCE 
 FREIGHT RATES 
 
 In August, 1895, seven months after tak- 
 ing office, the commissioners reached (one 
 would think with sufficient deliberation) the 
 important matter of freight rates, and on 
 September 12th and 13th adopted two reso- 
 lutions, the first declaring a reduction in 
 grain rates of not twenty-five but eight per 
 cent, and the other expressing an opinion 
 that all rates should be reduced, and at some 
 time the commissioners would get to work 
 and reduce them — perhaps when the robins 
 should nest again. 
 
 To this lame and impotent conclusion came 
 the revolt of the grain growers and the valorous 
 resolve of the Democratic State Convention. 
 
 But you should wait a little; the best is 
 yet to come. This is a very famous case and 
 tested to the utmost the whole power of the 
 regulative theory. If there ever were in the 
 United States railroad rates that ought to be 
 reduced, they were the grain rates in Cali- 
 fornia; and if there ever could be anywhere 
 a force able by law and constitution to reduce 
 such rates, it was the California Board of Rail- 
 road Commissioners. 
 
 Whatever rates that Board might decide 
 upon (said the constitution of the state) 
 should be valid and "in all controversies, 
 civil or criminal, the rates of fares and 
 freights established by said commission shall 
 be deemed conclusively just and reasonable." 
 
 Note what happened. 
 
 THE REDUCTION IS ENJOINED 
 
 The railroad company went straightway 
 before Judge Joseph McKenna, then of the 
 United States Circuit Court, now of the 
 United States Supreme Court, and on Octo- 
 ber 14th obtained a temporary injunction 
 restraining the commission from carrying out 
 or enforcing the reduction it had declared.* 
 
 Of course. The United States Circuit 
 Court takes precedence over authorities con- 
 stituted by the state. 
 
 Soon after, the case came up again on a 
 motion to continue the injunction and the 
 issue was joined. There was a grand array 
 of counsel — W. F. Herrin, successor of " Bill" 
 
 * The title is the Southern Padfic Company versus The Board 
 of Railroad Commissioners of the State of California. Number 
 of the case, 12,127. 
 
 Stowe as chief solicitor and political manager 
 for the Southern Pacific, former Judge John 
 Garber, E. A. Pillsbury, and others for the 
 distressed railroad company; Attorney-Gen- 
 eral Fitzgerald, former Judge R. Y. Hayne, 
 and others for the commissioners. The case 
 lasted for more than a year. 
 
 the railroad pleads poverty and 
 confiscation! 
 
 The plea of the company was that it was 
 too poor to afiford any reduction of rates and 
 that the action of the commissioners, unless 
 prevented by the court, would so injure the 
 company and decrease its revenues that it 
 would amount to the confiscation of property 
 expressly prohibited by the Constitution of 
 the United States of America. 
 
 Please note this. You see now we are 
 coming down to fundamentals. Rates could 
 not be reduced because under existing condi- 
 tions the Constitution of the United States 
 practically forbade them to be reduced. 
 
 To show the extreme poverty of the com- 
 pany were adduced many figures. 
 
 First, there was the capitalization of the 
 company and of its constituent companies, 
 with their bonded debt. Then there was a 
 computation showing that for the last eight- 
 een months the whole company (which in- 
 cluded lines in Oregon, Arizona, New Mexi- 
 co, and elsewhere) had been operated at a 
 loss — on this capitalization. Then there was 
 a list of certain constituent lines of the South- 
 ern Pacific, to wit: the Oregon & California, 
 the Central Pacific, the California Pacific, the 
 Northern Railway, the Northern California 
 Railway, the South Pacific Coast Railway, 
 and the Southern Pacific of California; after 
 which the bill of the company avers as follows: 
 
 Fijth, that none of said corporations, other than 
 the said CaUfornia Pacific Railroad Company and 
 the said Northern Railway Company, have for more 
 than one year last past received or been entitled to 
 receive any profit or net income whatsoever above 
 their actual expenses or any compensation for the 
 use of their equipment out of the funds payable to 
 them by your orator under the terms of said leases 
 or otherwise, nor have any of said corporations paid, 
 or been able to pay, any dividends to their stock- 
 holders. 
 
 This is dull legal verbiage, but I want to 
 put it all in because it is necessary if we are 
 to determine about the legal control of these 
 corporations. 
 
 " Under the terms of said leases, " says Mr. 
 Word Spinner of the company's plea. 
 
 What leases? 
 
The Remedy of the Law 
 
 225 
 
 Why, the leases of the constituent com- 
 panies one to another. Each of these con- 
 stituent companies was made up of many 
 other smaller companies, each leased in turn 
 to a larger company, until there was a grand 
 collection of leases. 
 
 Thus the California Pacific mentioned in 
 this plea was a constituent company leased to 
 the Southern Pacific, and the California Pa- 
 cific was itself an aggregation of smaller roads 
 covered with leases. First, there was the old 
 Marysville & Benicia, organized under the 
 act of 1 85 1, which was leased to the San 
 Francisco & Marysville of 1857, which was 
 leased to the Sacramento & San Francisco, 
 which was leased to the old California Pacific, 
 which was leased to some other road which 
 was leased to the present California Pacific. 
 
 The commissioners agreed that most of 
 these leases were clearly illegal and invalid, 
 and that the whole Southern Pacific con- 
 glomerate was an outlaw and pirate. 
 
 Section 20, Article XII, of the Constitution 
 of California declares that no railroad com- 
 pany, nor other carrier, shall combine nor 
 make any contract with any other company 
 "by which combination or contract the earn- 
 ings of the one doing the carrying are to be 
 shared by the other not doing the carrying." 
 
 Which was, of course, precisely the situa- 
 I tion created by most of these leases. 
 
 Law? Well, as I said before, there is no 
 end of law. Law on all sides of us steadily 
 violated by this corporation. Nothing but 
 law. As, for instance, section 560 of the penal 
 code of California reads as follows: 
 
 Every director of any stock corporation who con- 
 curs in any vote or act of the directors of such cor- 
 poration, or any of them, by which it is intended 
 either — (And then follows a list of prohibited acts 
 ending with this) : 
 
 Fifth: To receive from any other stock corpora- 
 tion, in exchange for the shares, notes, bonds, or 
 other evidences of debt of their own corporation, 
 shares of the capital stock of such corporation or 
 notes, bonds or othjer evidences of debt issued by 
 such corporation, is guilty of a misdemeanor. 
 
 And before a committee of Congress in 
 1894, testifying, Mr. Huntington, President 
 of the Southern Pacific, explicitly admitted 
 that the Southern Pacific Railway of Cali- 
 fornia, of which he was also President, had 
 done this identical thing thus forbidden by 
 the statute, although the law that he thus 
 calmly admitted he had violated had never 
 been enforced upon him.* 
 
 * The Southern Pacific Company versus The Board of Railroad 
 Commissioners. Argument of former Judge Hayne, p. 214. 
 
 Why do we have laws if they can thus be 
 set aside at one man's will? 
 
 But about these leases of the subordinate 
 roads. The Southern Pacific argued that it 
 could not afford to reduce the grain rate be- 
 cause all its roads except only two, the Cali- 
 fornia Pacific and the Northern, it was oper- 
 ating at a loss, and that the small profits on 
 these were needed for repairs and betterments. 
 
 Then please observe. 
 
 A. All of these roads were owned by the 
 same persons, who were also the owners of 
 the Southern Pacific, so that when they made 
 one of these leases they leased their own 
 property to themselves. 
 
 B. The rental so paid by one road to 
 another became a part of the operating ex- 
 penses of the larger road. 
 
 C. These rentals were repeated several 
 times and were usually at excessive rates. 
 
 D. The final road that embodied all the 
 small roads had to make enough to pay all 
 the rentals (to its own owners, of course) 
 and a profit besides and when this profit was 
 two and a half per cent the point was raised 
 that it was a profit too small to justify any 
 reduction in rates.* 
 
 HOW THE LEASING SYSTEM WORKS 
 
 The process may be illustrated thus. Let 
 us suppose one of these roads to be composed 
 of four subordinate roads successively leased. 
 The first is one hundred miles long. It is 
 leased for one hundred thousand dollars a 
 year to the second company, which builds 
 fifty miles and leases itself and the first road 
 to a third company for two hundred thousand 
 dollars a year. The third company adds 
 fifty miles and leases itself and its constitu- 
 ents to a fourth company for four hundred 
 thousand dollars a year. All these leases are, 
 in reality, held by the same persons. It is 
 evident that, in the end, they have two hun- 
 dred miles of track on which the leases they 
 hold are an exorbitant charge upon the oper- 
 ation of the road — to be paid to themselves.f 
 
 In other words, the lease is simply a sub- 
 terfuge to conceal profits that the public 
 must furnish. 
 
 * ' ' They own the California Pacific ; thev lease it to themselves 
 at $600,000 a year ; then they add the $600,000 to operating 
 expensesand showadeficit of $54,000 a year." Judge Hayne's 
 argument, p. 577. 
 
 t The California Pacific with a total value of $1,404,935 was 
 leased for $600,000 a year. The annual rentals of some of the 
 other lines was almost as much as the whole value of the prop- 
 erty leased and there was a fiction; accepted by many persons 
 that should have known better, tliat above these monstrous 
 rentals there must still be profit else the road was operated at a 
 loss. 
 
226 
 
 Hampton's Magazine 
 
 As to the railroad's poverty again, it 
 averred in its bill of complaint, sworn to 
 October ii, 1895, that for the year ending 
 December 31, 1894, the income account of 
 all its lines in California was as follows: 
 
 Gross earnings $20,783,157.04 
 
 Interest 183,759. 12 
 
 Rentals ... 26,572 . 23 
 
 Total receipts. $20,993,488.39 
 
 From which was to be deducted 
 
 Operating expenses, renewals, im- 
 provements, et cetera . . $13,320,417.52 
 
 Taxes 659,002 . 10 
 
 Rentals, et cetera 792,471 .21 
 
 Interest on bonds 5,472,190.24 
 
 Sinking fund payments 135,000.00 
 
 Payments to the United States for 
 
 Central Pacific 179,910.27 
 
 Surplus on lines in California . $434,497 . 05 
 
 This small sum, it was declared, was re- 
 quired for improvements so that the lines 
 were really operated without a profit. 
 
 Reports made by these companies to the 
 State Railroad Commission have a somewhat 
 different look. The form of statement re- 
 quired by the state commission sets forth 
 the total income from all sources, and the 
 
 total deductions of all kinds, and the remain- 
 der is called the net income. According to 
 these statements, the business of the Southern 
 Pacific lines for the year ending June 30, 
 1894, showed the following results: 
 
 Lines in Calijornia Net Incomes 
 
 Southern Pacific $2,289,832.65 
 
 California Pacific. . . 250,549.50 
 
 Northern Railway 400,058 . 19 
 
 South Pacific Coast. Leased No operations 
 
 Northern California. Leased No operations 
 
 Total $2,940,440 . 34 
 
 Central Pacific in and out of the state $1,377,720.80 
 
 Total Net Income $4,318,161.14 
 
 How this coheres with the railroad com- 
 pany's statement in its bill I do not under- 
 take to say. As to the matter of dividends, 
 of which the company averred there had been 
 none, the commissioners swore that on the 
 Central Pacific dividends had been paid in 
 1894 and 1895 and had been kept secret.* 
 
 To prove its poverty, the company filed a 
 schedule of the total indebtedness and the 
 interest thereon; also of the capital stock of 
 each company; and averred that the actual 
 value of the roads exceeded the amount of 
 the stocks and bonds. 
 
 THE WATER IN SIX CALIFORNI.A. RAILROADS 
 $233,796,530 
 
 Some extremely interesting developments 
 resulted. The law of California requires as- 
 sessments to be made on the full cash value 
 of property. On June 6, 1895, four months 
 before the beginning of this suit, Mr. A. N. 
 Towne, General Manager of all the Southern 
 Pacific lines, filed with the State Board of 
 Equalization (the highest taxing body) sworn 
 statements in which he declared the full cash 
 value of all the franchises, railways, roadbeds, 
 rails, and rolling stock of each of the South- 
 ern Pacific lines in California. This covered 
 all of the company's property except such as 
 was assessed by the various county assessors. 
 By adding the amounts sworn to by Mr. 
 Towne, and the amounts in the statements 
 to the county assessors, the actual cash value 
 of all the property of all the companies (on 
 their own statements), including their state 
 franchises and all else, was easily ascertained. 
 This, put by the side of the company's state- 
 
 WILLIAM F. HERRIN, CHIEF SOLICITOR AND 
 POLITICAL MANAGER FOR THE SOUTH- 
 ERN PACIFIC RAILROAD. 
 
 * These were the dividends promised to Sir Rivers Wilson 
 after he had investigated the Central Pacific in behalf of the 
 unfortunate English stockholders, as related in a previous 
 article. See Hampton's Mag.wine, May, 1910, p. 616. 
 
 I 
 
The Remedy of the Law 
 
 227 
 
 merits in the bill, made a startling showing. In that chain of cause and effect there was 
 
 I think we had better exhibit it all together not a flaw. 
 
 as thus: Five per cent on the $19,357,458 of ficti- 
 
 RAILROAD VALUES AS THEY ARE AND AS THEY ARE PRETENDED 
 
 Railroad Line 
 
 I 
 
 Southern Pacific of 
 
 California 
 
 South Pacific Coast 
 
 Railway 
 
 Northern California. 
 Northern Railway. . . 
 
 alifornia Pacific. . . . 
 
 entral Pacific 
 
 Total Debt 
 
 (Company's 
 
 Showing) 
 
 $43,652,400 
 
 5,500,000 
 1,074,000 
 9,907,000 
 6,825,500 
 35,428,000 
 
 Annual 
 Interest 
 Thereon 
 
 $2,454,984 
 
 220,000 
 
 53,700 
 
 546,940 
 
 322,125 
 
 1,908,054 
 
 Capital Stock 
 
 (Company's 
 
 Showing) 
 
 $68,402,000 
 
 6,000,000 
 
 1,280,000 
 
 12,896,000 
 
 12,000,000 
 
 67-275,500 
 
 Total 
 
 Capitalization 
 
 (Company's 
 
 Showing) 
 
 >I 12,054,400 
 
 11,500,000 
 
 2,354,000 
 
 22,803,000 
 
 18,825,500 
 
 102,703,500 
 
 Actual Cash 
 
 Value Shown 
 
 from the Sworn 
 
 Statement 
 
 Amount of 
 
 Water by this 
 
 Showing 
 
 $16,119,232 
 
 1,079,592 
 
 175,000 
 
 3,445,542 
 
 1,404,935 
 14,219,569 
 
 595,935,168 
 
 10,420,408 
 2,179,000 
 19,357,458 
 17,420,565 
 88,483,931, 
 
 On all this huge volume of water the pub- 
 ^c was required to pay the rates that fur- 
 
 lished the interest, and the company could not 
 afford to make a reduction of eight per cent in 
 
 le grain rates that were throttling the farmer. 
 
 LL THE FARMERS ASKED WAS $100,000 
 ANNUAL RATE REDUCTION 
 
 How much of actual annual reduction in 
 income would be produced by this reduction? 
 How much would the company lose if it 
 allowed the new schedule to go into effect? 
 
 At the most — $100,000 a year. 
 
 Let's look into that. 
 
 One hundred thousand dollars a year. At 
 five per cent, the annual interest on the water 
 on the capitalization of only one line, the 
 South Pacific Coast, would be more than 
 five times this amount. The annual interest 
 on the water in the capitalization of the Cali- 
 fornia Pacific alone would pay' the grain rate 
 reduction more than six times. It was to 
 support this fictitious capitalization that 
 the grain rates must be kept up and the 
 farmers must pay and the bread eaters 
 must pay and all the world must pay this 
 gross and swollen capitalization, $10,000,- 
 000 in one line, and $80,000,000 in an- 
 other, and $19,000,000 in another, all 
 demanding interest on the bonds and 
 dividends on the stocks. 
 
 And these bonds and stocks created for the 
 profit of the owners of the road, neatly con- 
 cealed by the leases and other devices, and 
 representing in the main nothing but the 
 greed of the owners and the fraud of their 
 methods. This was why the freight rates 
 were high, the farmers were poor, and the 
 cost of living increased. 
 
 tious capitalization in the Northern Railway is 
 $967,872.90; five per cent on the actual value 
 of the Northern Railway is $172,277,10. Un- 
 der the existing conditions, the Northern 
 Railway must earn $968,000 a year; if it were 
 capitalized for its real value, it need earn only 
 $173,000, and it could reduce its grain rates 
 and all other rates much more than eight per 
 cent and still make its five per cent. What the 
 people of California and the people elsewhere 
 were paying for was not a reasonable profit 
 on an investment, but an unreasonable profit 
 on a scheme of fraud; and as a matter of fact 
 the only confiscation involved in the proposed 
 
 JUDGE JOSEPH H. CALL, WHO HELPED TO SAVE 
 ALASKA FROM THE EXPLOITING RAILROADS. 
 
228 
 
 Hampton's Magazine 
 
 reduction was the confiscation of a piece of 
 the apparatus of a gigantic shell game. 
 
 PLEASE READ CAREFULLY THIS ANALYSIS OF 
 SOME OF THE " WATER" 
 
 Take some of this capitalization on which 
 the railroad company demanded "a reason- 
 able profit," and see its substance. 
 
 Into that capitalization was charged, for 
 instance, the $2,840,000* that the Central 
 Pacific paid to the Union Pacific for the over- 
 lapping lines when the two roads were en- 
 gaged in their insane race for mileage. 
 Twenty-five years had passed since that 
 strange exhibition of frenzied competition. 
 On this $2,840,000 at six per cent for twenty- 
 five years the interest would be $4,260,000, 
 making with the principal, $7,ioo,ooo.f On 
 this again the annual interest is $426,000, 
 and the commission asked for only $100,000 
 a year reduction in freight rates. 
 
 In those early days of the Central Pacific, 
 there was spent at Washington and Sacra- 
 mento $6,532,329 for corruption disguised as 
 "legal expenses," and this went into the capi- 
 talization on which the farmers must pay 
 and the bread eaters must pay and all the 
 world must pay. At six per cent interest 
 for twenty-five years this would amount to 
 $9,7.98,493.50. If that sum were applied to 
 reducing the debt of the company, the annual 
 saving in interest would be $587,909.61 — and 
 the commission asked for only $100,000 
 from the railroad, t 
 
 Again: Before the Pacific Railroad Com- 
 mission,! E. H. Miller, Jr., secretary of the 
 company, gave a tabulation showing that 
 from 1873 to 1884 (when the road was sold 
 to the unfortunate English investors and the 
 profits were suppressed) the dividends paid 
 on Central Pacific stock amounted to $34,- 
 308,055. The net earnings of the road 
 from its completion to December 31, 1886, 
 amounted to $59,276,387.54. In the first 
 seven years ending with 1876, the owners 
 had received $18,000,000 in dividends be- 
 sides the enormous outside profits in bonds, 
 land grants, construction graft, other graft, 
 expense accounts, and leases. 
 
 * Pacific Railroad Commission Report, p. 3039. 
 
 t Mr. W. F. Herrin, chief counsel for the railroad, said in his 
 argument at p. 112: "The money expended by these people 
 legitimately and honestly for the speedy construction of this 
 road cannot be ignored. There is no equity on the jjart of the 
 State of California to insist on striking out and eliminating a 
 single dollar that was actually expended in the construction of 
 the road. It was a legitimate investment." 
 
 i Mr. Herrin in his argument (p. i3g) declared that the 
 operation of the roads would be discontinued if the reduction 
 were enforced. 
 
 § See report, p. 2547. 
 
 If from 1870 to 1876 they had been con- 
 tent to take one third of the net income for 
 their emoluments, each of them would have 
 received $222,000 a year for each of those 
 years; and if they had applied the remaining 
 two thirds of the net earnings to the reducing 
 of the company's debt, they would have can- 
 celed $12,000,000 of that debt. 
 
 On $12,000,000 for twenty years the in- 
 terest at six per cent is $14,400,000, which 
 would be the .saving effected by 1896. The 
 annual saving in interest charge would be 
 $720,000 if for the first seven years of its ex- 
 istence the owners of the road had been con- 
 tent with $222,000 a year each from the net 
 profits of its operations. A careful man can 
 always sustain life on $222,000 a year. And 
 then — $720,000 a year of saved interest 
 charges! All the farmers asked was that 
 $100,000 a year should be dropped from the 
 incalculable loot. 
 
 Instead of being content with $222,000 a 
 year for seven years, the Congenial Four of 
 Sacramento grabbed off in that time and 
 divided $18,000,000 of profits (from the 
 road's operation alone), and then made of 
 their monstrous profits and of the debt they 
 would not pay a basis for charging extor- 
 tionate rates, and next, in court, a basis for 
 defending those rates. 
 
 It seems hard to go in imagination beyond 
 this triumph of impudence. 
 
 Or to take another illustration: If down 
 to 1884 the owners had been content to di- 
 vide among themselves yearly one third of 
 the net profits and to apply the rest to pay 
 the road's just debts, they would by that time 
 have shared $11,436,018 from the road's 
 operations aMne and would have saved for 
 the road to 1884, $22,877,037. By the time 
 the grain rate suit was brought this would be 
 $39,339,901, on which the annual interest 
 would have been $2,360,394. And all the 
 farmers asked was that $100,000 a year should 
 be taken from the load that they bore. 
 
 And again: From the testimony taken be- 
 fore the Pacific Railroad Commission it ap- 
 peared that the $62,000,000 of issued capital 
 stock of the Central Pacific Railroad Com- 
 pany was divided among the four gentlemen 
 as a free gift, and the four gentlemen paid not 
 a cent of it, and that this $62,000,000 was 
 part of the capitalization on which interest 
 must be paid by means of charges levied upon 
 the public* 
 
 * See pages 2646, 2670, and 2377, testimony of Leland Stan- 
 ford and Edward H. Miller, Jr. 
 
I 
 
 The Remedy of the Law 
 
 229 
 
 And it appeared that all the bonds fraudu- 
 lently taken from the government at the 
 mountain rate, $48,000* a mile, when the ac- 
 tual construction was on level ground, all 
 these were in the account and must be paid 
 for by charges levied upon the public. 
 
 And it appeared that all the bonds fraudu- 
 lently taken from the government at the foot- 
 hill rate, $32,000* a mile, when the actual con- 
 struction was on level ground, all these were 
 in the account and must be paid for by 
 charges levied upon the public. 
 
 And it appeared that all the money fraudu- 
 lently taken by the Contract and Finance 
 Company (owned by the same owners) on 
 excessive and extravagant charges for con- 
 struction and repairs — all that was in the 
 b capitalization and must be paid for year after 
 irear by charges levied upon the public. 
 And it appeared that the manipulation by 
 which at the end of the construction period f 
 the Central Pacific owed the Contract and 
 Finance $3,500,000 and took for that debt 
 the Central Pacific's notes for $5,700,000, 
 and subsequently received in payment for 
 these notes $7,000,000 of land grant bonds, 
 that all this graft also was in the capitaliza- 
 tion and must be paid for by charges levied 
 upon the public. t 
 
 And it appeared that the grafting contract § 
 by which the Contract and Finance under- 
 took to make repairs on the Central Pacific 
 and furnish its suppHes and thereby raked 
 off $2,000,000 a year of extra profits — that all 
 this was in the capitalization and must be 
 paid for year after year by charges levied 
 upon the public. 
 
 And it appeared that all the graft secured 
 under the aliases of the Western Develop- 
 ment Company and the Pacific Improvement 
 Company, all the excessive bond issues, 
 fraudulent construction charges, and mag- 
 nified costs, all these were included in the 
 capitalization and must be paid for year after 
 year by charges levied upon the public. 
 
 And it appeared that when the Western 
 Development Company and the Pacific 
 Improvement Company raided the sinking 
 fund of the Central Pacific Company,! that 
 here were items of cost that went into the 
 capitalization and must be paid for year 
 
 * Pacific Railroad Commission Report, p. 3662. 
 
 '\ Ibid., p. 2682, testimony of W. E. Brown. 
 
 i Judge Hayne's argument, p. 509. 
 
 § Pacific Railroad Commission Report, p. 3227, testimony 
 of Lewis M. Clements. 
 
 Wllnd. Testimony of C. P. Huntington, p. 32; testimony of 
 Leland Stanford, p. 2665. In the present case. Judge Hayne's 
 argument at p. 512. 
 
 after year through charges levied upon the 
 public. 
 
 And it appeared that when suits were 
 brought that threatened in a painful way the 
 reputations of the gentlemen involved in 
 these operations and they bought back at 
 400 and 500 and 1 700 the stock they quoted 
 at 80, these expenditures also went into the 
 capitalization. And when the directors of 
 the company hired writers, newspapers, and 
 magazines to praise them and their work, or 
 to favor legislation in behalf of the Central 
 Pacific, these expenditures also went into the 
 capitalization. 
 
 And it appeared that the real purj^ose of 
 the Contract and Finance Company and the 
 Western Development Company, and the 
 Pacific Improvement Company, and all the 
 other aliases and disguises of these gentlemen 
 was to effect exactly this result, to transform 
 the expenditure into a fixed charge upon 
 the public that should endure for the profit 
 of the four gentlemen; and that all these 
 charges could be paid only in transportation 
 rates; and that because of all these accumu- 
 lated charges and piled-up accretions of 
 fraud, the grain rates must be exacted and 
 the farmers must pay and the bread eaters 
 must pay and all the world must pay. 
 
 And it appeared that there was no end to 
 these charges. That whenever the great 
 power that gripped and held in its fist the 
 State of California, extended in any way its 
 operations or acquired additional lines or 
 bought a .steamship or built a branch or 
 spent money for legislation or made an im- 
 jjrovement or paid a rebate or made an 
 illegal lease or straightened its corkscrew 
 track, it piled up more capitaHzation, which 
 meant more interest and dividends to be met, 
 which meant more charges to be paid by the 
 public. 
 
 SEQUEL OF THE BRAVE ATTEMPT TO CURE 
 BY BLESSED REGULATION 
 
 And it appeared that when the Central 
 Pacific defrauded the nation by building a 
 crooked road, the public paid charges on the 
 crookedness; and when these crooked places 
 were made straight, the public paid charges 
 for making them straight. Whatever the 
 railroad company did produced more capi- 
 talization, and all the capitalization produced 
 interest and dividends to be met, and all the 
 interest and dividends meant charges levied 
 upon the public. And at the other end of 
 this infallible mill stood the owners issuing 
 
230 
 
 Hampton's Magazine 
 
 the excessive securities, and adding the pro- 
 ceeds to their huge hoards. 
 
 Many of these matters were set forth with 
 great force and skill by the attorneys for 
 the railroad commission. The railroad com- 
 pany, by its learned counsel, excepted to cer- 
 tain features of the commissioners' answer, 
 and by order of the court they were stricken 
 out. One of the excised sections contained 
 some of the extraordinary revelations of the 
 tax statement before referred to. In another 
 place, Paragraph IX of the commissioners' 
 answer, occurs this significant passage: 
 
 That it is notoriously true that for many years 
 last past the complainant has expended large sums 
 of money in the employment of politicians and others 
 to improperly influence various branches of the 
 Federal and State Government and to obtain for 
 themselves [itself] advantages to which it was not 
 entitled; and to induce action on the part of various 
 branches of the public service for the sake of its own 
 private advancement and for that of its officers, and 
 that a large part of the sums claimed by it as operat- 
 ing expenses are for such unlawful expenditures. 
 
 From this the court ordered to be stricken 
 out the words that "it is notoriously true." 
 
 Judge McKenna's decision was filed No- 
 vember 30, 1896. In his accompanying 
 opinion he confined himself chiefly to the 
 constitutional aspects of the case and to 
 precedent and previous decisions. He found 
 that for the year 1894 the Pacific System of 
 the Southern Pacific had been operated at a 
 loss of $276,262.70, that the company could 
 not afford to make the reduction of rates 
 ordered by the commissioners, and that the 
 reduction would be such confiscation of 
 property as was prohibited by the Constitu- 
 tion of the United States. The clause of the 
 California Constitution upholding rates to be 
 promulgated by the commissioners he de- 
 
 clared to be null and void* for similar reasons, 
 and he therefore continued the injunction 
 and knocked out the proposed reduction. 
 
 In this view Judge McKenna was in exact 
 accord with the decisions of the Supreme 
 and other courts, for the fact seems to be 
 that under the Constitution and the system 
 of business that we have adopted, no other 
 decision is possible. Capital is capital; capi- 
 tal is entitled to just and reasonable profits; 
 courts cannot inquire minutely as to the 
 methods by which capitalization is piled up; 
 and once having saddled ourselves with this 
 burden, we must continue to bear it so long 
 as the securities exist. 
 
 It only remains to say that in 1898 a new 
 Board of Railroad Commissioners was elect- 
 ed, that on April 24, 1899, this new board 
 rescinded the grain reduction resolution en- 
 joined by Judge McKenna, and on May 19th 
 the railroad company graciously consented 
 that the case be dismissed. Which ended the 
 last attempt of the grain growers to utilize 
 Regulation's artful aid in their behalf. They 
 submitted to their fate, and after a time most 
 of the wheat fields were put to other purposes. 
 
 But if we really desire to learn just why the 
 cost of living has increased so heavily upon 
 us, and just why it threatens to become, be- 
 fore long, an insupportable condition, our 
 investigation need go no further than this. 
 
 The history of the Southern Pacific is not. 
 very different from the history of other rail- 
 roads in the United States. 
 
 Who pays the vast interest charges 
 on the nine billion dollars of fictitious 
 capitalization that these railroads have 
 piled up? 
 
 *The Southern Pacific Company versus The Board of Rail- 
 road Commissioners. Judge McKenna's decision, p. 2. 
 
THE HARBOR OF LOS ANGELES AT SAN PEDRO, SECURED AFTER AN EIGHT 
 YEARS' FIGHT AGAINST THE SOUTHERN PACIFIC. 
 
 The Railroad Machine as It 
 
 Works Now 
 
 By Charles Edward Russell 
 
 Author of ''The Heart of the Railroad Problem,'' ''Beating Men to Make Them Good," etc. 
 
 Portraits by S. G. Cahan 
 
 Editorial Note. — To every man who buys a pound of steak, a pair of shoes, a bag of 
 flour, the increased cost of living is daily a more vital problem. ' If you w^ant to solve a problem in 
 mathematics you have to know what is called one of the factors. Well, one of the factors in the 
 increased cost of living is railroad rates. And we have come to understand that railroad rates 
 are too often excessive. In the follovsnng article Mr. Russell clearly states how and why this 
 is so in the case of the Southern Pacific Railroad, and that the case of the Southem Pacific 
 Railroad is, in some degree, the case of every railroad in the country. 
 
 As to the specific cause of the increased cost of 
 living, President Taft to-day frankly told various 
 of his callers that he was unable to account for it. — 
 News dispatch from Washington, December 30, 1909. 
 
 "HTHE railroads of to-day ought not to 
 
 1 be judged by the past." 
 
 So say the railroad attorneys, presidents, 
 and champions, sitting pleasantly at meat. 
 So dutifully echoes that part of the period- 
 ical press owned or controlled in the rail- 
 road interest. 
 
 I doubt not all of us would be glad to 
 accept and to follow the injunction if only 
 we could; but to separate the railroad of 
 to-day from its past is like separating the 
 living tree from its root. 
 
 The railroad company of to-day is an ac- 
 cretion of railroad companies of the past; 
 the railroad management of to-day is an 
 inheritance from the railroad management 
 • of the past; the railroad capitalization of 
 to-day has been built upon years of devious 
 364 
 
Chantecler 
 
 363 
 
 The Pheasant Hen {furiously, tearing 
 down the cobweb with a brush of her wing) : 
 Be still, hateful Spider! — Oh, may he perish 
 for having disdained me! 
 
 The Woodpecker (who from his win- 
 dow has been watching Chantecler's de- 
 parture, suddenly, frightened) : The poacher 
 has seen him! 
 
 The Owls {in the frees) : The Cock is in 
 danger! 
 
 The Woodpecker {leaning out to see 
 better): He breaks his gun in two! 
 
 Patou {alarmed): To load it! Is that 
 murderous fool in sheepskin gaiters going 
 to fire upon a rooster? 
 
 The Pheasant Hen {spreading her wings 
 to rise) : Not if he sees a pheasant ! 
 
 Patou {springing before her): What are 
 you doing? 
 
 The Pheasant Hen: Following my call- 
 ing! [She flies toward the danger. 
 
 The Woodpecker {seeing that in her 
 upward swing she must touch the spring of 
 the forgotten snare) : Look out for the snare ! 
 {Too late. The net falls.) 
 
 The Pheasant Hen {utters a cry of 
 despair): Ah! 
 
 Patou: She is caught! 
 
 The Pheasant Hen {struggling in the 
 net) : He is lost ! 
 
 Patou {wildly): She is — He is 
 
 [All The Rabbits have thrust out their 
 heads to see. 
 
 The Pheasant Hen {crying in an ardent 
 prayer): Daybreak, protect him! 
 
 The Owls {rocking themselves gleefully 
 among-the branches): The gunbarrel shines, 
 shines 
 
 The Pheasant Hen: Dawn, touch the 
 cartridge with your dewy wing. Trip the 
 foot of the hunter in a tangle of grass! He 
 is your Cock! He drove off the darkness 
 and the shadow of the Hawk! And he is 
 going to die. Nightingale, you say some- 
 thing ! Speak ! 
 
 The Nightingale {in a supplicating sob) : 
 He fought for a friend of mine, the Rose! 
 
 The Pheasant Hen: Let him live! And 
 I will dwell in the farmyard" beside the 
 plowshare and the hoe! And relinquishing 
 for his sake all that in my pride I made 
 a burden and torment to him, I will own, 
 O Sun, that when you made his shadow you 
 marked out my place in the world! [Day- 
 light grows. On all sides rustles and mur- 
 murs. 
 
 The Woodpecker {singing): The air is 
 blue! 
 
 A Crow {cawing as he flies past): Day- 
 light grows! 
 
 The Pheasant Hen: The forest is astir! 
 
 All the Birds {waking among the trees) : 
 Good morning! Good morning! Good 
 morning! Good morning! Good morning! 
 
 The Pheasant Hen: Everyone sings! 
 
 A Jay {darting past like a streak of blue 
 lightning) : Ha, ha ! 
 
 The Woodpecker: The jay shakes with 
 Homeric laughter. 
 
 The Pheasant Hen {crying in the midst 
 of the music of the morning): Let him live! 
 
 The Jay {again darting past): Ha, ha! 
 
 A Cuckoo {in the distance): Cuckoo! 
 
 The Pheasant Hen: I abdicate! 
 
 Patou {lifting his eyes heavenward): She 
 abdicates! 
 
 The Pheasant Hen: Forgive, O Light, 
 to whom I dared dispute him! Dazzle the 
 eye taking aim, and be victory awarded, 
 Sunbeams 
 
 The Jay and the Cuckoo {far away): 
 Ha! Cuckoo! 
 
 The Pheasant Hen: — to your powder 
 of gold — {A shot. She gives a sharp cry, 
 ending in a dying voice) — over man's black 
 powder! {Silence.) 
 
 Chantecler's Voice {very far away): 
 Cock-a-doodle-doo ! 
 
 All {in a glad cry) : Saved ! 
 
 The Rabbits {capering gayly out of their 
 burrows): Let us turn somersaults among 
 the thyme! 
 
 A Voice {fresh and solemn, among the trees): 
 O God of birds! 
 
 The Rabbits {stopping short in their 
 antics, stand abruptly still, soberly): The 
 morning prayer! 
 
 The Woodpecker {crying to The Pheas- 
 ant Hen) : They are coming to examine the 
 trap. 
 
 The Pheasant Hen {closes her eyes in 
 resignation) : So be it ! 
 
 The Voice in the Trees: 
 
 God, by whose grace we wake to this new day 
 
 Patou {before leaving) : Hush ! Drop the 
 curtain! Men folk are coming! {Off.) 
 
 [All the woodland creatures hide. The 
 Pheasant Hen, left alone, and held down by 
 the snare, with spread wings and panting 
 breast, awaits the approach of the giant. 
 
 Curtain. 
 
The Railroad Machine as It Works Now 
 
 365 
 
 policy; the railroad rates of to-day reflect 
 forty years of scheming and looting. 
 
 If the railroad companies would cease to 
 operate their political departments in the 
 ! manner of 1878 and 1884; if they would 
 cease to build fictitious capital on the ficti- 
 itious capital of previous years; if they could 
 avoid as a basis of rates the necessity of 
 ; getting interest and dividends on this fic- 
 titious capital, we could possibly afford to 
 forget the past and its records. 
 
 We must look back to the past because 
 [we are paying for the past. Three times 
 a day the past comes to our tables and col- 
 : lects its toll. 
 
 The manner of this collection we shall 
 : now, if you please, proceed to see, and also 
 to see how utterly futile and absurd are, 
 and must be, all attempts to deal with the 
 American railroad problem by doctoring 
 symptoms with legal remedies, even when 
 these are most justly grounded and ably 
 ; enforced. 
 
 You remember, no doubt, the $27,500,000 
 'of subsidy bonds that the United States 
 Government issued and bestowed upon 
 Messrs. Stanford, Huntington, Hopkins, and 
 Crocker, to facilitate the building of the 
 Central Pacific. 
 
 These bonds were to fall due thirty years 
 after the completion of the road. 
 
 The road was completed in 1869-70. 
 The bonds became due in 1900. 
 
 Originally, the government stipulated that 
 the railroad company should pay the semi- 
 annual interest on these bonds, and the 
 principal when due. 
 
 The company refused to pay the semi- 
 annual interest and got from the Supreme 
 Court a decision that it need not pay this 
 interest until it paid the principal. This 
 obliged the United States to advance the 
 semiannual interest from the treasury, 
 which amount was charged against the com- 
 pany. 
 
 In 1887 the Pacific Railroad Commission 
 was appointed to investigate the condition 
 of the company and discover what use it 
 had made of its resources and income, a 
 reasonable inquiry in view of its repeated 
 statements that it was too poor to pay the 
 interest it owed, and would be too poor to 
 pay the principal. 
 
 After listening to much astounding testi- 
 mony of a nature extremely damaging to 
 the company, the commission made two 
 reports. The majority dealt lightly with 
 
 the offenses that had been revealed. Gov- 
 ernor Pattison, the minority member, re- 
 turned a stinging indictment of Messrs. 
 Stanford, Huntington, Hopkins, and Crock- 
 er, and urged the government to forfeit 
 the company's charter for fraud and dis- 
 honesty. 
 
 Nothing was done on either report. 
 
 AMBROSE BIERCE DEFEATS HUNTINGTON 
 
 In 1896, the time for payment being close 
 at hand, the debt to the government was 
 apparently more than $60,000,000, and the 
 company's attorneys and representatives 
 made no secret of its intention to default 
 on this debt. 
 
 PubUc sentiment demanded that some 
 arrangement should be made. Mr. Hunt- 
 ington was still hovering about Congress 
 with his agents and lobbyists.* He pre- 
 pared a bill that provided for the refunding 
 of the debt into bonds bearing two per cent 
 interest and payable a period estimated at 
 eighty years from date. 
 
 This bill was slated for passage by the 
 Republican machine to which Mr. Hunt- 
 ington had always contributed liberally. 
 
 Everybody knew that the bill was to be 
 jammed through and Mr. Huntington was 
 greatly pleased with the prospect. 
 
 He had reason to be pleased. The bill 
 settled all differences with the government, 
 and put off the day of payment so far that 
 it probably would never come. 
 
 Mr. Huntington's pleasure was of short 
 life. It was presently upset by two men. 
 
 At the request of Mr. William Randolph 
 Hearst, Mr. Ambrose Bierce went to Wash- 
 ington, and every day for one year he wrote 
 an article exposing the rotten features of 
 Mr. Huntington's bill. 
 
 These articles were extraordinary exam- 
 ples of invective and bitter sarcasm. They 
 were addressed to the dishonest nature of 
 the bill and to the real reasons why the 
 machine had slated it for passage. When 
 Mr. Bierce began his campaign, few persons 
 imagined that the bill could be stopped. 
 After a time the skill and steady persist- 
 ence of the attack began to draw wide 
 
 • The Washington correspondence of the Chicago Evening 
 Post, April 22, 1896, contains this passage: 
 
 " The most pitiable and at the same time the most disgusting 
 spectacle that now offends the national capital is the Huntington 
 lobby. The list of paid lobb3nsts and attorneys now numbers 
 twenty-eight, and their brazen attempts to influence Congress to 
 pass the Pacific Railroad Refunding Bill have become the dis- 
 grace of the session." 
 
366 
 
 Hampton's Magazine 
 
 AMBROSE BIERCE. INSTRUMENTAL IN DE- 
 FEATING THE SOUTHERN PACIFIC 
 REFUNDING BILL. 
 
 attention. With six months of incessant 
 firing, Mr. Bierce had the railroad forces 
 frightened and wavering; and before the end 
 of the year, he had them whipped. The 
 bill was withdrawn and killed, and in 1898 
 Congress adopted an amendment to the 
 general deficiency bill, providing for the 
 collection of the Pacific Railroad subsidy, 
 debts, principal, and interest. 
 
 This may be held to be as wonderful a 
 victory as was ever achieved by one man's 
 pen, and, also, one of the most remarkable 
 tributes to the power of persistent pub- 
 licity. What it meant for California may 
 be judged from the fact that when news was 
 received of the death of Mr. Huntington's 
 bill, the governor proclaimed a public holi- 
 day, and in the name of the state sent a 
 telegram of thanks to Mr. Hearst. 
 
 But it was a victory destined to have far 
 more memorable results than these. At 
 once the railroad company abandoned all 
 hope of cheating the government, and re- 
 sorted to a vast and difficult feat of finan- 
 ciering that it might provide for the pay- 
 ment of the accumulated debt. For months 
 the eyes of the financial world were fixed 
 
 wonderingly upon this slack wire adven- 
 ture, which was regarded in some quarters 
 as fraught with peril, in others as "a clever 
 and ingenious contrivance," and on all sides 
 as a new chapter in high finance. 
 The substance of it was this: 
 
 HOW THE AMERICAN PEOPLE PAID THE 
 CENTRAL pacific's DEBT 
 
 The amount due to the government, 
 less deductions, was $58,800,000. For this 
 the company gave twenty notes of equal 
 amounts, payable semiannually over a pe- 
 riod of ten years, bearing interest at three 
 per cent and secured by an equal amount 
 of bonds. 
 
 This meant, of course, an increase of cap- 
 ital. The accrued interest, $30,700,000, 
 had been due to the government. Instead 
 of paying it to the government, the Big Four 
 had wrongfully paid the money to them- 
 selves in dividends. They now funded the 
 accumulated debt for us to pay. 
 
 There was next prepared a new issue of 
 Southern Pacific stock and a new issue of 
 four per cent collateral bonds. Next an as- 
 sessment of $2 a share was ordered on the 
 old Central Pacific common. 
 
 But to offset this assessment, the new 
 collateral bonds were presented free to 
 the stockholders to the amount of $16,- 
 819,000. 
 
 Then the stockholders received, share for 
 share, $67,275,500 of the new Southern Pa- 
 cific stock on which six-per-cent dividends 
 were to be paid — a fine, dividend-paying 
 stock exchange for a stock that for years had 
 been inert and unprofitable. 
 
 Next a new Central Pacific Railway Com- 
 pany was organized in Utah to succeed the 
 old, and the original part of the Millionaire 
 Mill passed from pubUc view forever. 
 
 The $16,819,000 of collateral bonds and 
 the $67,275,500 of new stock made $84,094,- 
 500 of securities which must be provided for 
 from the earnings. Nominally, the total in- 
 crease in the capitahzation was $47,579,- 
 000, being the capitaHzed interest on the 
 government debt and the collateral bonds; 
 but the total paper capitalization was now 
 $1 14,794,500, and all of it became interest or 
 dividend bearing, whereas much of it had 
 previously been of small value. 
 
 A total of $114,794,500, on which interest 
 must be paid. 
 
 We are paying it. 
 
The Railroad Machine as It Works Now 
 
 367 
 
 Thus: 
 
 Annual dividends on the stock, 6 
 
 per cent $4,036,530 
 
 Collateral bonds, $16,819,000 at 4 
 
 I per cent 672,760 
 Capitalized interest on government 
 subsidy 1,200,000 
 Total annual charge on us. . . $5,909,290 
 iWe have been paying this for eleven 
 5ars. So far we have paid upon this ac- 
 count $65,002,190. 
 
 Then this is the way our account stands 
 to date : 
 
 Debt of the railroad to the gov- 
 ernment $58,800,000 
 
 I We have paid because of the re- 
 funding of that debt 65,002,190 
 [ We are out so far $6,202,190 
 In thirty years we shall have paid close 
 >on $180,000,000, which is three times the 
 amount of the debt, and shall then be losers 
 to the amount of $120,000,000. 
 
 It would have been enormously cheap- 
 er to give Mr. Huntington a cancellation 
 of the debt. 
 
 Cheaper in freight rates, cheaper, 
 therefore, in the daily living expenses 
 of the people. 
 
 But since this debt and the annual 
 charges that we must pay on it are directly 
 and solely the results of the operations (be- 
 fore described) of Messrs. Stanford, Hunt- 
 ington, Hopkins, and Crocker, and of noth- 
 ing else, kindly observe the impudence of the 
 men that urge us to forget railroad history. 
 
 We might very well answer that we will 
 forget railroad history when the railroads 
 cease to make us pay for that history. 
 
 But the floating of the gigantic refund- 
 ing scheme had another result besides the 
 levying of additional tribute upon us. Mr. 
 Stanford was dead, Mr. Hopkins was dead, 
 Mr. Crocker was dead. Mr. Huntington, 
 who had been steering and directing the 
 new operations, died (before they were com- 
 pleted) in August, 1900. 
 
 Some confusion followed in the public 
 mind, with many stories of sales, purchases, 
 and reorganizations. When this mist cleared 
 away, men saw that the Great Millionaire 
 Mill had passed into a new ownership. 
 
 ^ANDARD OIL AND E. H. HARRIMAN COME 
 INTO CONTROL 
 
 For years the many properties of the 
 'ginal Big Four of Sacramento had 
 .en undergoing consolidation. For all the 
 
 E. H. HARRIMAN, WHO ASSUMED CONTROL OF 
 THE SOUTHERN PACIFIC ON HUNT- 
 INGTON'S DEATH. 
 
 millions upon millions of fictitious stock 
 issued and gathered to themselves as they 
 had gone along, for all the fictitious capi- 
 talization in all the long list of subsidiary 
 lines and branches, being company within 
 company until the human mind wearied 
 and failed to follow the ramifications — for 
 all this there had been issued stock in the 
 Southern Pacific Company, of Kentucky, 
 the final consolidated concern. 
 
 Great blocks of this were now acquired 
 from the heirs of the Big Four and through 
 the exigencies of the refunding operations, 
 and when the mist cleared away there ap- 
 peared as the real owners of the old Central 
 Pacific, the Southern Pacific, the unknow- 
 able convolutions thereof, the Pacific Mail, 
 the Morgan steamships, the Union Pacific, 
 the whole bewildering aggregation with all 
 its load of fictitious capital, buttressed with 
 lordly gifts from the public domain, rich 
 with spoils, incomparably the grandest 
 source of riches ever known in human his- 
 tory — of the whole, incalculable thing, the 
 real owners appeared as the colossal Stand- 
 ard Oil interests, with the late E. H. Har- 
 riman as their representative. 
 
 In the end it was the Standard Oil group 
 that had financed the "clever and ingen- 
 ious" refunding deal and had thereby seized 
 
368 
 
 Hampton's Magazine 
 
 the control of the Mill, and it is to the 
 Standard Oil group that we pay our $5,- 
 900,000 of annual tribute to that deal, and 
 all the other tribute on all the other deals 
 back to the days of the Contract and Fi- 
 nance Company, John Miller, and the books 
 at the bottom of the river Seine. 
 
 Is not that sweet? 
 
 Yes, we should love to forget the past if 
 the past would only let us. But when, on 
 $200,000,000 of fictitious stock created by 
 the Contract and Finance Company and 
 its successors, we furnish such dividends 
 that the price of that stock goes up to 137, 
 the manner in which we are to win forget- 
 fulness of the past ought to be very care- 
 fully explained to us. 
 
 So much for the business side of forget- 
 ting. Suppose we turn now to the political 
 side and see how that looks. 
 
 We found that, in the old days, this com- 
 pany was wont to maintain a great and 
 elaborate political machine covering every 
 corner of the state and working with per- 
 fect precision to fill all offices with persons 
 chosen by the company. We found that 
 this machine cost much money and the cost 
 thereof was and is assessed upon us, who 
 continue year after year to pay. 
 
 Always to pay. 
 
 We found that the company divided the 
 state into districts, each with its boss; and 
 the districts into counties, each with its 
 boss; and that the county bosses reported 
 to the district bosses, who reported to the 
 chief boss, who was the company's chief 
 counsel and attorney in San Francisco. 
 
 Then come down to these days of ours, 
 if you will. Who is Mr. Walter F. Parker? 
 He is the Southern Pacific leader for the 
 southern district of California. And who 
 report to him? The county bosses in that 
 district. And to whom does Mr. Parker 
 report? To William F. Herrin, chief coun- 
 sel of the Southern Pacific at San Francisco. 
 
 Same old frame work, evidently. 
 
 How does the thing work to-day? 
 
 Like this: 
 
 In California the governor's term of 
 office is four years. 
 
 A new governor was to be elected in 
 1906. Mr. James N. Gillett was then a 
 member of Congress for California. Five 
 months before the election, Mr. E. H. Har- 
 riman gave a dinner in Washington to men 
 influential in politics and business. At that 
 dinner Mr. Gillett was chosen to be the 
 
 next governor of California, Mr. Harriman 
 announcing in a few, well-chosen words Gil- 
 lett's selection by the railroad company. 
 
 To ratify this choice, the State Repub- 
 lican Convention was called at Santa Cruz. 
 All the railroad bosses from great to small 
 had received the necessary word about Mr. 
 Harriman 's action, and proceeded at once 
 to secure Gillett delegations from the coun- 
 ties. In Los Angeles County, which sent 
 a large delegation, Mr. Walter Parker him- 
 self directed operations. He sat on an 
 upper floor of the building in which the 
 county convention was held, and a staff 
 of messengers ran continually between his 
 desk and his leaders on the floor. Not a 
 move was made without his word; the dele- 
 gates were marionettes; he sat above them 
 and pulled the strings. 
 
 ABE RUEF RECEIVES $I4,000 FOR VOTES 
 
 Likewise in San Francisco, which had a 
 large delegation, Mr. Herrin took personal 
 charge and operated with no less success, 
 although upon a basis more primitive. Ac- 
 cording to a confession of Mr. Abe Ruef, 
 the convicted boodler of San Francisco, 
 Mr. Herrin paid him $14,000 for the con- 
 trol of the delegation. 
 
 Simple, neat, effective. 
 
 Of late years California has been growing 
 more and more restless under the iron sway 
 of the Southern Pacific. Even with the 
 active cooperation of Mr. Ruef, former 
 Mayor Schmitz, and their gang, Mr. Harri- 
 man did not find it perfectly easy to nomi- 
 nate the man he had chosen. Many 
 persons, including some long inured to con- 
 ditions, resented that Washington banquet 
 performance. They felt that it marked the 
 limit of railroad arrogance on one side, and 
 of the state's subjugation on the other, and 
 they did not like it. 
 
 Hence the Southern Pacific managers at 
 Santa Cruz were put to rather unusual 
 methods to fulfill Mr. Harriman's wishes. 
 
 That is to say, they auctioned the other 
 offices for Gillett support. 
 
 In this way. If a man had ambition to 
 be a judge, and they knew he was all right 
 and sound on the railroad's supremacy, 
 they said to him: 
 
 "How many votes for Gillett can you 
 swing?" 
 
 Perhaps the ambitious one replied that 
 he could swing fifteen. They reported this 
 to his rival, started a competitive bidding, 
 
370 
 
 Hampton's Magazine 
 
 and the man that undertook to dehver the 
 greatest number of Gillett votes got the 
 place on the ticket. 
 
 Thus do we vindicate the purity of our 
 institutions and the grandeur of represen- 
 tative government. 
 
 Mr. Gillett was nominated. I have here* 
 a little picture of a happy family group, 
 being in fact a little dinner party at Santa 
 Cruz just after the nomination. These 
 gentlemen have been dining, and with 
 pleasure we may note that they seem to 
 have been dining well. Gentlemen of a 
 happy aspect, well dressed, contented, and 
 congenial, no doubt; a pleasant occasion. 
 
 SIGNIFICANT GATHERING BEFORE GILLETT's 
 NOMINATION 
 
 That handsome gentleman in the center 
 with his hand affectionately on the shoulder 
 of the gentleman seated before him, is Mr. 
 Gillett, now Governor of California, and 
 nominated to that high place by Mr. Har- 
 riman, as aforesaid. The gentleman in 
 front of him upon whom he leans so trust- 
 ingly, is Mr. Abe Ruef, sometime boss and 
 boodler of San Francisco, now convicted of 
 the dirtiest of political crimes and out on 
 bail. Yes, that is Mr. Ruef; Mr. Gillett's 
 hand is on Mr. Ruef's shoulder. 
 
 At Mr. Gillett's left stands Mr. Walter 
 F. Parker, to whom several times, and, we 
 must fear, rather unpleasantly, we have 
 alluded in these chronicles. Mr. Parker is 
 a gentleman of the most distinguished con- 
 sideration. When Mr. Frank Flint, at 
 present United States Senator from Cali- 
 fornia, was pubHcly congratulated upon his 
 election, he said, with touching simplicity: 
 "I owe it all to Walter Parker." 
 
 Still farther to Mr. Gillett's left stands 
 Judge F. H. Kerrigan, quite at ease, with 
 his hands in his pockets. When Judge 
 Kerrigan was a judge of the Superior Court, 
 he decided the crucial Fresno rate case in 
 the way related in Hampton's for August. 
 He is now a judge of the Appellate Court, 
 having found promotion. Judge Bahrs, who 
 decided the case the other way, found no 
 promotion, but retired to private life. 
 
 Just back of Judge Kerrigan's left shoul- 
 der is Congressman Knowland. 
 
 Next to Mr. Ruef and Mr. Gillett at 
 their right is Mr. George Hatton, a friend 
 of Mr. Parker and of the Southern Pacific. 
 Next to him is Judge McKinley, and at 
 
 * See page 369. 
 
 the end is Judge Henshaw, of the Supreme 
 Court. 
 
 Thus we may see the judiciary, states- 
 manship, commerce, transportation, black- 
 mail and boodle, all pleasantly commingled 
 and meeting on equal terms under the genial 
 auspices of the Southern Pacific Railroad. 
 Nothing is lacking to the picture except in 
 the background the figure of Collis Potter 
 Huntington in an attitude of benediction. 
 
 Mr. Gillett's name was, in the cant phrase, 
 "submitted to the voters" of California, 
 who nominally elected him governor. As 
 a matter of fact, there was not much choice. 
 The railroad company played the usual 
 tricks, stimulated the partisan frenzy, be- 
 fogged the issue, subsidized editors, flooded 
 the state with its hired newspapers, made 
 unthinking people believe that somehow 
 the security of the country depended upon 
 Gillett's election, created the impression 
 that by voting for Gillett a man was "sup- 
 porting the President, "did some other things 
 not necessary to specify here — and won. 
 
 Not by much margin, incidentally. The 
 number of people it can fool with this kind 
 of rot is steadily diminishing. 
 
 From this chapter of history we may 
 learn how foolish a noise we make when we 
 talk about any new basis of judgment for 
 one railroad, at least. This railroad is do- 
 ing in politics exactly the things that it did 
 forty-eight years ago and forty years ago 
 and twenty years ago and ten years ago 
 and all times between. 
 
 Observant persons in California do not 
 need to be told this any more than they need 
 to be told their own names. They know it. 
 
 But elsewhere has grown up among us a 
 strange kind of sentimental softness in re- 
 gard to railroad rascality, and a willingness 
 to accept the gold bricks of repentance and 
 reform whenever they are offered by a rail- 
 road president with a smug face and an in- 
 durated conscience. These little incidents 
 may show how much credence belongs to 
 such protestations when you hear them 
 urged in behalf of the Southern Pacific. 
 
 In California every fight to purify condi- 
 tions, to reform a municipahty, to stop 
 graft, to proceed in honesty and decency, 
 is a fight against the Southern Pacific, and 
 that is as true of the heroic struggles of Mr. 
 Heney, in San Francisco, as of those good- 
 citizens and good Americans that after 
 years of strivhig have secured a memorable 
 victory for righteousness in Los Angeles. 
 
The Railroad Machine as It Works Now 
 
 full, and to my sorrow I can but refer to it. 
 Here is a great story of an American com- 
 munity surely working its way from sub- 
 jugation to freedom, and what else on earth 
 can be so attractive to write about? 
 
 But to give you a ghmpse of it: In Los 
 Angeles the fight centered at first around 
 the control of the harbor, and was fought 
 in the open, without disguise, the citizens 
 on one side and the Southern Pacific on 
 the other. Later came on a long struggle 
 against the familiar forces of municipal 
 corruption, in which the Southern Pacific 
 fought in secret on the side of evil. It owned 
 the street-railroad system and was interested 
 in other pubHc-service enterprises. The 
 street-railroad system was, of course, against 
 good government. It is against good gov- 
 ernment everywhere because its monstrous 
 privileges are derived from bad government. 
 Naturally, on the same side were the dives, 
 the bawdy houses, the boodlers, and the 
 Highest Circles of Society. They always 
 fight together. We shall come later to this 
 contest. First let us tell about the harbor. 
 
 Los Angeles lies a little back from the 
 coast. Its natural harbor is San Pedro, 
 familiar to all readers of Dana's immortal 
 "Two Years." San Pedro is south of the 
 city. The Southern Pacific owned the har- 
 bor of Santa Monica, fifteen miles north of 
 San Pedro and from the city lying about west. 
 
 Neither harbor was (as it lay) in any 
 condition to accommodate a large deep-sea 
 traffic; both needed breakwaters and other 
 improvements. Readers of Dana will re- 
 call his vivid descriptions of the perils of 
 his San Pedro, the roadstead open to the 
 terrible southeasters, the sudden rising of 
 the gale, and the swift flight of the vessel 
 to sea until the storm should pass. This 
 had not much changed in 1871 when Con- 
 gress appropriated money to improve the 
 harbor. The work went on for several 
 years, and as the improvements were made 
 the commerce of the port increased. Then 
 Los Angeles entered upon its period of rapid 
 growth, and the need of a commodious and 
 safe harbor was apparent. 
 
 The people of Los. Angeles wished this to 
 be at San Pedro. At first the railroad com- 
 pany seemed not to care. Then its officers 
 bought real estate at Santa Monica * and, 
 in 1890, Mr. Huntington declared that Los 
 
 • "The Free Harbor Contest," by Charles Dwight Willard, 
 p. 80. 
 
 371 
 
 Angeles must have its harbor at Santa 
 Monica, or not at all. 
 
 There began now a contest that lasted 
 eight years. Los Angeles appeared regu- 
 larly before Congress asking for an appro- 
 priation for San Pedro; Mr. Huntington, 
 through his lobbyists and Congressmen, as 
 regularly defeated the project. All that 
 was needed at San Pedro now was a break- 
 water that could be built at no great ex- 
 pense. Mr. Huntington invariably knocked 
 out the breakwater. 
 
 HUNTINGTON BECOMES PROFANE ABOUT SAN 
 PEDRO 
 
 Meantime army engineers had examined 
 both harbors and reported convincingly in 
 favor of San Pedro and against Santa Mon- 
 ica, Mr. Huntington was stronger than 
 the engineers. In the face of their report, 
 he had a bill introduced and favorably con- 
 sidered to appropriate $3,000,000 for his 
 Santa Monica scheme. He could not quite 
 get this passed, but he could always defeat 
 San Pedro. 
 
 In 1894 he came to Los Angeles, strode 
 into the rooms of the Chamber of Com- 
 merce, and requested a conference. Mem- 
 bers were summoned by telephone. When 
 they arrived he told them they were mak- 
 ing "a big mistake" to support San Pedro, 
 that it was not to his advantage to have 
 San Pedro selected, and, anyway, they could 
 never get Congress to give money for their 
 scheme. These announcements seemed to 
 make little impression on his hearers. Mr. 
 Huntington said: 
 
 "Well, I don't know for sure that I can 
 get this money for Santa Monica; I think 
 I can. But — " bringing down his fist with 
 an explosive slam, "I know damned well 
 that you shall never get a cent for that other 
 place." * 
 
 The voice of ultimate government, you 
 see. He knew. Not less interesting than 
 the decree of this ruler is the fact that his 
 listeners agreed not to let it be known to 
 the populace. It might "increase the grow- 
 ing bitterness." When you are fighting for 
 your life against a power like this, there 
 must be no bitterness on your side. 
 
 The issue came soon after before the Sen- 
 ate Commerce Committee. Mr. Hunting- 
 ton was there, demanding $4,000,000 for his 
 Santa Monica. The Los Angeles people 
 asked for a small sum for San Pedro. 
 
 * " The Free Harbor Contest," p. 107. 
 
372 
 
 Hampton's Magazine 
 
 The St. Louis Globe-Democrat^ s Washing- 
 ton correspondence of those days contains 
 this paragraph: 
 
 The harbor contest at Los Angeles waxes warmer. 
 C. P. Huntington was seen going the rounds of the 
 hotels to-day and, although it was Sunday, he made 
 no halt in buttonholing senators. Four days ago 
 there was a decided majority in the Commerce 
 Committee in favor of following the wishes of the 
 two senators from California,* but since the arrival 
 of Mr. Huntington at the capital it is now a matter 
 of great doubt where the majority will be found. 
 There is serious speculation in the minds of many 
 people as to the means Mr. Huntington may have 
 used to bring about this change. 
 
 Possibly the speculation would have 
 gained additional zest from a perusal of Mr. 
 .Huntington's letters to "Friend Colton." f 
 
 Mr. John P. Jones was a member of the 
 Senate Commerce Committee and an ar- 
 dent champion of Santa Monica. I believe 
 we have previously encountered the name 
 of John P. Jones. J 
 
 THE DECISION POSTPONED, BINGER HERMANN 
 TAKES IT UP 
 
 The committee voted to postpone a de- 
 cision about the two bills until it could go 
 to Los Angeles and inspect both harbors. 
 This put the matter over for two years, or 
 until 1896. 
 
 Meanwhile, the people of Los Angeles had 
 formed a Free Harbor League to fight for 
 San Pedro. The long delay wore out the 
 enthusiasm. In i8g6 somebody suggested 
 that probably Mr. Huntington was no less 
 tired of fighting. A friend undertook to 
 sound him and returned with the statement 
 that Mr. Huntington willingly agreed to a 
 cessation of hostilities for the rest of that 
 session of Congress, neither side to make 
 a move. 
 
 The next thing the people of Los Angeles 
 knew Mr. Binger Hermann, then a Repre- 
 sentative from Oregon, and a member of the 
 House Commerce Committee, and since 
 with other claims to fame, had put into the 
 River and Harbor bill two items, one of 
 $392,000 for work on the inner harbor of 
 San Pedro, and one of $3,098,000 to com- 
 plete Santa Monica. 
 
 * One of these, Stephen M. White, a Democrat, was a Los 
 Angeles man and 3 champion of San Pedro. 
 
 t See "The Scientific Corruption of Politics," Hampton's 
 Magazine, June. 1910. 
 
 + About this time the New York World took the trouble to 
 find out who owned Santa Monica. It discovered that the 
 property adjoining the exclusive water front owned by the 
 Southern Pacific was divided in eight holdings. Of this, John 
 P. Jones and A. B. de Baker held three. All the rest of the land 
 was in the name of Frank H. Davis, representing C. P. Hunt- 
 ington. 
 
 At this the people of Los Angeles arose 
 in wrath, and in the clamor of their protest 
 the committee knocked out both items. 
 
 By "the people of Los Angeles" I mean, 
 and have meant, the majority. As soon 
 as the railroad company announced its 
 choice of Santa Monica, there had sprung 
 up at once two factions in the city, the same 
 factions that ever since have continued to 
 struggle for its possession. On one side 
 were the railroad's attorneys, friends, and 
 admirers, and, of course, the wealthy and 
 respectable element, all lined up with Mr. 
 Huntington for Santa Monica. On the 
 other, the masses of the people, the labor 
 unions, merchants without social aspira- 
 tions, and others of that order, fought for 
 San Pedro. 
 
 Santa Monica had the advantage in the 
 influence of its supporters; San Pedro had 
 the numbers. 
 
 Mass meetings were held by each side 
 and resolutions passed, the San Pedro peo- 
 ple meeting out of doors and the Santa 
 Monicans in Illinois Hall. Both parties 
 circulated petitions to Congress. Presently, 
 the cause of Mr. Huntington, his friends, 
 lackeys, and social peers, was deeply hurt by 
 the discovery that the names on their pe- 
 tition were largely fraudulent. Thereafter, 
 San Pedro had all the advantage. 
 
 The issue came April i6, 1896, before the 
 Senate Committee on Commerce, when 
 delegations representing both sides were 
 heard.* Mr. Huntington had a majority 
 of the Committee. Nine f voted to re- 
 store to the River and Harbor bill the $3,- 
 098,000 appropriation for Santa Monica; 
 six opposed it. 
 
 When the bill reached the Senate floor, 
 Senator White forced through an amend- 
 ment that a board of five engineers should 
 determine whether the $3,098,000 should 
 be expended at Santa Monica or at San 
 Pedro. In conference, Mr. Binger Her- 
 mann bitterly fought this provision, which 
 was hung up for many days, but Congress- 
 man James G. Maguire, of San Francisco, 
 threatened that unless the item were al- 
 lowed to stand, he would expose on the floor 
 of the House the whole Huntington game, 
 and the thing went through, 
 
 * Among the champions of Santa Monica on this occasion 
 was former Senator Cornelius Cole, whose name we encoun- 
 tered in the Colton letters. 
 
 t Frye, of Maine; Gorman, of Maryland; Elkins, of West \'ir- 
 ginia; Jones, of Nevada; Quay, of Pennsylvania; Murphy, of New 
 York; McMillan, of Michigan; McBride, of Oregon; Squire, of 
 Washington. 
 
TLe Railroad Machine as It Works Now 
 
 373 
 
 Great rejoicing in Los Angeles. 
 The board of five engineers decided in 
 favor of San Pedro. 
 
 More rejoicing in Los Angeles. 
 
 But here came strange developments. 
 
 I 
 
 ALGER IGNORES THE SENATE AND THE 
 ATTORNEY-GENERAL 
 
 The matter now rested in the hands of 
 General Russell A. Alger, Secretary of 
 War. 
 
 General Alger was an old friend and busi- 
 ness associate of Mr. Huntington, who had 
 given heavily to the Re- 
 publican campaign 
 fund. 
 
 General Alger's first 
 achievement was to hold 
 up the appropriation 
 nine months, so that 
 the Board of Engineers 
 could not begin its work. 
 
 The Board's report 
 was made in March, 
 1897, and work should 
 have been begun four 
 months later. Month 
 after month went by, 
 but the War Depart- 
 ment did nothiiig about 
 San Pedro. Los Ange- 
 les people bitterly com- 
 plained. They repeat- 
 edly called General 
 Alger's attention to the 
 delay, and had in return 
 bland, empty promises 
 of immediate action. 
 They began to under- 
 stand that the real in- 
 tention was to stop the 
 work until the matter 
 could be thrown back into Congress, and 
 Santa Monica be substituted. 
 
 Former Congressman McLachlan, of Los 
 Angeles, protested once more to Alger, and 
 received the startling information that the 
 Board's report was defective and must be 
 carefully studied before action could be 
 taken. 
 
 Another month went by with no sign of 
 action. Mr. McLachlan again called Gen- 
 eral Alger's attention to the delay. This 
 time General Alger lost his temper, declined 
 to answer any questions, and declared that 
 he would advertise for bids when he got 
 ready. 
 
 JAMES N. GILLETT, GOVERNOR OF CALI- 
 FORNIA. 
 
 Senator White now introduced a resolu- 
 tion, calling upon the Secretary of War for 
 information about the delayed work at San 
 Pedro. General Alger furnished in reply 
 several reasons, all denounced as flimsy or 
 baseless, and the Senate responded in a curt 
 resolution directing the Secretary of War to 
 begin work at once. 
 
 This resolution the Secretary of War 
 calmly ignored. 
 
 Los Angeles people, after a time, called 
 his attention to it. 
 
 He remarked blithely that it meant noth- 
 ing to him because it 
 had not been passed by 
 the House. 
 
 Then some kind 
 friends took him aside 
 and told him that if he 
 persisted in that view, 
 the Senate, when it re- 
 assembled, would at- 
 tend to his case in a 
 way that would sur- 
 prise him. General Al- 
 ger intimated that he 
 did not care. 
 
 By this time people 
 in Los Angeles were 
 deeply stirred. They 
 united in a petition to 
 President McKinley, re- 
 citing the facts. He re- 
 ferred it to Attorney- 
 General McKenna. Mr. 
 McKenna rendered an 
 opinion that there was 
 no legal reason why 
 work should not begin 
 at once at San Pedro. 
 General Alger let the 
 opinion lie a month 
 on his desk without deigning to notice it. 
 The Free Harbor League and the people 
 of all Southern California, seeing how Mr. 
 Huntington had outwitted them, and that 
 he had every prospect of defeating them at 
 last, began a desperate campaign against 
 Alger, trying chiefly to induce the President 
 to force his Secretary of War to act or to 
 force him out. 
 
 After three months of this Alger was 
 driven to the point of saying that he could 
 not begin the work because there was no 
 direct appropriation, and he must wait until 
 Congress should vote again. 
 The people pointed out that even if this 
 
374 
 
 Hampton's Magazine 
 
 were true, he could advertise for bids and 
 make a start. 
 
 General Alger said he had no money to 
 advertise with. 
 
 All the Los Angeles and San Francisco 
 papers telegraphed offers to print the ad- 
 vertisements for nothing, and the Los 
 Angeles Chamber of Commerce guaranteed 
 that it would pay all advertising bills. 
 
 General Alger said this would not be 
 dignified and got up some question that he 
 said must be referred to the Judge- Advocate 
 General. 
 
 The Judge-Advocate General promptly 
 decided that the question was without sub- 
 stance and that, anyway, there was $50,- 
 000 available for advertising. 
 
 Meantime Mr. McKenna had ceased to 
 be Attorney-General, being succeeded by 
 Mr. Griggs. General Alger now referred to 
 Mr. Griggs the identical question that pre- 
 viously had been referred to and decided 
 by Mr. McKenna. 
 
 At this the whole State of California broke 
 into fierce and bitter complaint. It was 
 directed at President McKinley, and at last 
 it evoked from him a positive order that the 
 Secretary of War should begin work. 
 
 He had wasted two years and one month. 
 
 The contract was now let, the breakwater 
 constructed, and the harbor completed. 
 
 Its true value to Los Angeles is not yet 
 obtainable, because the Southern Pacific 
 barricades it with some of the most extortion- 
 ate rates known on this or any other conti- 
 nent. But the inevitable result of the rail- 
 road company's policy will be a municipal 
 railroad to the harbor and the beginning of 
 Los Angeles as a great seaport. 
 ' Such are the latter-day operations of the 
 Southern Pacific in national affairs. And 
 here is a sample of its record in regard to 
 municipalities. 
 
 JAMMING A SOUTHERN-PACIFIC ORDINANCE 
 THROUGH THE CITY COUNCIL 
 
 By 1905 most of the valuable franchises 
 in Los Angeles had been seized by the allied 
 interests of which the Southern Pacific was 
 the chief and commander. One was left 
 being the chance to build a railroad along 
 the river bank in the city limits. 
 
 On March 26, 1906, the mayor was out 
 of town, and one Summerland, president 
 of the City Council, was acting mayor. The 
 Council was in regular weekly session. At 
 4.30 P.M., when all routine business had 
 
 been disposed of and most of the spectator; 
 had departed, an ordinance was introduced 
 granting to one E. W. Gilmore "and hia 
 assigns," a franchise for a railroad on the 
 west bank of the river from the south city 
 limits to Aleso Street, a distance of about 
 three miles. 
 
 This was put on passage at once. Mr. 
 Charles D. Willard, representing the Mu- 
 nicipal League, perceived what was on foot 
 and vehemently protested. He went upon 
 the floor of the Council and appealed to an 
 honest alderman to vote against the grab. 
 A representative of the city attorney's 
 office joined him in strenuous objection. 
 Nevertheless, the ordinance was jammed 
 through. 
 
 Outside waited a carriage to take a mes- 
 senger with the ordinance to Summerland 's 
 house, where he was prepared to sign it 
 But first the signature of the city clerk was 
 necessary. An underling dashed down- 
 stairs to the city clerk's oflice, put the 
 ordinance under City Clerk Lelande's nose, 
 and asked him to sign it, giving the impres- 
 sion that it was merely routine legislation. 
 
 Lelande demurred, looked over the docu- 
 ment, and refused to sign. Without his 
 signature Summerland could do nothing, 
 and the ordinance was hung up. 
 
 The next day the discovery was made 
 that because of a technical irregularity in 
 the passing of the ordinance, it must needs 
 be passed again, and a special meeting of 
 the Council was called for the next day, 
 Wednesday, March 28th, when the iniquity 
 went through by a vote of 6 to i. 
 
 CITY CLERK LELANDE 'S ASTOUNDING 
 AFFIDAVIT 
 
 What happened next will be found re- 
 lated in the following affidavit, which cov- 
 ers the whole story: 
 
 State of California, | 
 
 County of Los Angeles. ) ^^" 
 
 H. J. Lelande, being duly sworn, deposes and 
 says: 
 
 The facts in relation to the attempted passage 
 of what was become generally known as the Gil- 
 more riv^er bed franchise are as follows: 
 
 Late in the afternoon, about 6.30 p.m.. of the date 
 when this franchise was first presented to the Coun- 
 cil, Mr. Wilde, my chief deputy, came into my pri- 
 vate office and placed this franchise on my desk 
 before me, stating that " the boj's upstairs were fn 
 a hurry fo this," and asked me to sign it. This 
 franchise consisted of several typewritten pages. 
 Mr. Wilde turned it over to the last page, which 
 contained the space for the signature of the mayor 
 and myself, and asked me to sign it, as " the boys 
 
I 
 
 The Railroad Machine as It Works Now 
 
 375 
 
 were upstairs waiting for it," and I asked what it 
 was. Mr. Wilde replied, "A franchise for a spur 
 track." I told Mr. Wilde that I would sign it in a 
 few minutes as I was busily engaged writing a letter. 
 
 Mr. Wilde left my private office, and shortly after 
 his departure W. R. Hervey came into my private 
 office and asked if I had signed the ordinance that 
 Mr. Wilde brought in, and I stated that I had not; 
 and he said that Mr. Gilmore was going away that 
 evening and would like to have me sign it at once, 
 as they wished to have it published in the morning. 
 After Mr. Hervey had made this statement I looked 
 at the document for the first time, and then informed 
 Mr. Hervey that I would wait and allow this to go 
 through in the usual manner as I did not see any 
 necessity for haste, or words to that efifect. Mr. 
 Hervey urged me as a personal favor to him and to 
 Mr. Gilmore to sign it at once, and I again informed 
 him that I saw no necessity to hurry this matter, 
 and he stated that he would see that I signed it and 
 left the office, apparently angry. 
 
 Very shortly after Mr. Hervey left the office, Mr. 
 Gilmore came in and said that he was going to leave 
 town that night and wanted to get this fixed up 
 and pubHshed in the morning, and pleaded with me 
 to sign it at once. I made the same reply to Mr. 
 Gilmore that I made to Mr. Hervej-, that " I would 
 allow the ordinance to take its usual course." After 
 I had made this statement, Mr. Gilmore continued 
 to plead with me to sign the ordinance, which I re- 
 fused to do. 
 
 Just before I started for home I was called up on 
 the telephone and informed that Mr. Summerland 
 was waiting upstairs for me to bring that ordinance. 
 I answered "All right," but had no intention of 
 bringing it up. I took my hat and left for home. 
 And shortly after I had finished my dinner, Mr. Gil- 
 more called at my residence and again pleaded with 
 me to sign the ordinance that night, and again said 
 that this was a matter of great importance to him 
 and he was desirous of having the matter completed 
 before he left the city, and ofiFered me his political 
 influence if I would sign it. He made the state- 
 ment that I would never regret signing it. 
 
 Then, shortly after the departure of Mr. Gilmore 
 from my residence, I came back to the office and 
 Mr. W. F. Parker called me up by 'phone that night 
 and wanted to know if I was going to be at my 
 office for a few minutes. I stated that I was, and 
 he said he was coming over. Shortly after receiv- 
 ing the message, Mr. Parker came to my office and 
 asked to see the ordinance, which I allowed him 
 to do, and he made the statement that he didn't 
 know whom it was for, and that he was glad I 
 hadn't signed it, and asked me not to sign it imtil 
 he had found out more about it. I told him that 
 I had not intended to sign it until the following 
 day, anyway. 
 
 The minute clerk had prepared his minutes, show- 
 ing that the council had adopted the ordinance by 
 a vote of six to one, Summerland being acting mayor 
 in McAleer's absence, and Mr. Smith being absent. 
 My attention was called to the fact that Council- 
 naan Houghton first voted " No " and finally changed 
 his vote to " Yes," other business having been trans- 
 acted in the interim, and at the time that Council- 
 man Houghton changed his vote to " Yes" the chair- 
 man then announced that the ordinance had been 
 adopted; so when the members of the Council found 
 that we had, on Tuesday, recorded the ordinance 
 as having been lost they met again on the next day, 
 
 Wednesday, and passed the ordinance by a vote of 
 six to one. I will furnish an exact copy of the 
 minutes showing the above statement to be correct. 
 
 About three o'clock on Wednesday, the day the 
 ordinance was passed, Mr. Parker called me up by 
 'phone and asked me if I would step down to his 
 office. I informed him that I was quite busy and 
 would prefer having him come to my office in the 
 city clerk's office. He said he thought it was best 
 for him not to come there, but would meet me 
 at the Hotel Alexandria buffet. I replied that I 
 would meet him there after five o'clock. I left 
 the office about five o'clock and went to the Alex- 
 andria buffet and there met Mr. Parker in one of 
 the little cushion places there. He opened the con- 
 versation and said, "I suppose you know what I 
 want to see you about?" I answered that "I be- 
 lieve I do," or words to that effect. 
 
 One of the first questions asked me by Parker 
 
 was "How MUCH WILL YOU TAKE TO SIGN THAT 
 
 ORDINANCE RIGHT AWAY? " or words to that cffcct. 
 I remember this distinctly because I was surprised 
 that he would make such a statement. After which 
 he said, "I can get you a thousand dollars if 
 
 YOU SIGN that ordinance TO-DAY AND TAKE IT TO 
 SUMMERLAND." 
 
 My answer was that "I did not want any of that 
 kind of money." 
 
 He also made the statement that money was 
 
 BEING SPENT AND I IHGHT AS WELL GET SOME OF 
 
 IT. He said that my p>ower was not executive, that 
 my duty was simply ministerial, and that I might 
 as well get the money and sign it and get it out of 
 my hands as quickly as possible. I said that I was 
 going to hold it until Mayor McAleer came back. 
 He said that it didn't make any difference to him, 
 that I was overlooking a chance to get some of the 
 money, or words to that effect; whereupon I re- 
 turned to the office. 
 
 At the time Parker and I had the conversation 
 in the Alexandria buffet he told me that he had 
 found out that this was for Mr. Huntington. He 
 made this last statement as to his having found out 
 that it was for the Huntington interests in connec- 
 tion with his statement that money was being used. 
 Various other people called me up, some before this 
 conversation with Mr. Parker, and some after, but 
 no officials, and urged me to sign it and get it out 
 of my hands quick, or words to that effect. 
 
 I went back to my office and stayed there until 
 about 6.30 o'clock. In the mean time I had several 
 calls, and I went home and stayed at home until 
 about 8.15 o'clock, when I left home to keep from 
 being further disturbed. Wednesday, about four 
 o'clock, Charley McKeag was the man that sent a 
 telegram at my request to McAleer, who was then 
 out of the city, to return as quickly as possible. 
 I kept the ordinance in my safe until Mayor 
 McAleer returned. 
 
 After McAleer's return, then, to get it to the 
 mayor, I, of course, certified it, so that he might 
 sign it or veto it. No previous legal notice of any 
 kind was given to the public of the intention to 
 pass this ordinance, and no competitive bids were 
 asked for. 
 
 (Seal) (Signed) H. J. Lelande. 
 
 Subscribed and sworn to before me this 2 2d day 
 of November, 1909. 
 
 (Signed) Geo. S. Welch, 
 Notary Public in and for the County of Los Ange- 
 les, State of California. 
 
376 
 
 Hampton's Magazine 
 
 On his return, Mayor McAIeer vetoed the 
 ordinance in a message so virulent that one 
 of the aldermen moved that the "insult be 
 returned with the rest of it, unread." 
 
 The intention was to pass the ordinance 
 over his veto, but the people of Los Ange- 
 les, whose wrath had been rising from the 
 first news of the steal, were now in a state 
 of dangerous excitement. Among the^ost 
 orderly and laAt-abiding of people, they had 
 been wrought out of their usual self-com- 
 mand by the audacity of the franchise 
 grabbers, and if the councilmen had per- 
 sisted in defying public opinion, some re- 
 markable scenes might have followed. But 
 the aldermen took fright and abandoned the 
 ordinance. 
 
 Such is the modern method of the South- 
 ern Pacific in politics. 
 
 And here is its modern method in busi- 
 ness. 
 
 The great steamers Mongolia and Man- 
 churia, of the Pacific Mail, in every way 
 magnificent specimens of marine architec- 
 ture, were built at Newport News for the 
 Atlantic Transport Line, under the belief 
 that Congress would pass the ship subsidy. 
 
 When this hope failed, the two steamers 
 were sold to the Oregon Short Line, a pos- 
 session of the Southern Pacific Railroad 
 system. 
 
 That is to say, they were bought with the 
 money of the Oregon Short Line. In point 
 of fact (according to the sworn testimony 
 of a high ofiicer of the company) , their pur- 
 chase stood in the name of Mr. E. H. Harri- 
 man, by whom they were leased to the 
 Pacific Mail, and who collected from the 
 Pacific Mail their rental, which was $30,000 
 a month for each steamer. 
 
 In other words, Mr. Harriman, repre- 
 senting the Standard Oil Company, con- 
 trolled the Oregon Short Line and also 
 controlled the Pacific Mail. He used his 
 control of the Oregon Short Line to buy the 
 steamers with the Oregon Short Line's 
 money (in his name), and then used his 
 control of the Pacific Mail to lease the 
 property thus secured for his own bene- 
 fit.* 
 
 That is the way the thing is done now 
 For all of it at all times we must pay. 
 To what extent we have already paid' 
 may be gathered from a table with which 
 we may well conclude our reflections on this 
 edifying subject. It does not show the 
 total production of the Great Millionaire - 
 Mill; probably no human mind could trace,! 
 formulate, and accurately state what that 
 production has been. It shows only a part 
 of the wealth that, without return of any 
 kind, we have freely bestowed upon this 
 unparalleled institution: 
 
 Central Pacific — 
 
 Government land grant, mini- 
 mum $30,000,000 
 
 Unearned dividends on stock... 34,000,000 
 
 Capitalized interest on subsidy 
 
 bonds 30.700,000 
 
 Common stock (representing no 
 
 investment) 67,275,500 
 
 Bonus on bonds i6,8i^,coo 
 
 $178,794,500 
 Southern P.\cific — 
 
 Government land grant, mini- 
 mum $40,000,000 
 
 Donations by California councils 1,002,000 
 
 Mission Bay, donated by the 
 state, estimated value at the 
 time 9,500,000 
 
 Capital stock (representing no 
 
 investment) 160,000,000 
 
 Dividends thereon 30.400,000 
 
 $240,902,000 
 Southern Pacific Company of Ken- 
 tucky — 
 Government land grant acquired 
 
 with Morgan purchase $13,000,000 
 
 Surplus capitalized (see report 
 
 1903) 100,081,022 
 
 Stock acquired under early leases 76,000,000 
 
 $189,081,022 
 
 * See " In the Matter of the Consolidation and Combination of 
 Carriers. Relations between Such Carriers and Community of 
 Interest therein," etc. Before the Interstate Commerce Com- 
 
 Grand Total $608,777,522 
 
 Of this colossal sum only an inconsider- 
 able fraction can be held to represent any 
 kind of investment, and the greater part is 
 to this day drawing interest and dividends 
 from the consuming public. 
 
 Reflected in the cost of living. 
 
 mission, at San Francisco, January 29, 30, and 31, 1907. This 
 whole edifying story of the Harriman performance is described 
 in the testimony of R. P. Schwerin at pp. 113, iis. is6. 158, etc. 
 At the New York hearing there were introduced the minutes of 
 the meeting of the Oregon Short Line's Executive Committee of 
 March 26, 1903, at which this deal was ratified. 
 

The Paying of the Bill 
 
 By Charles Edward Russell 
 
 Author of ''The Heart of the Railroad Problem,'' "Beating Men to Make Them Good," etc. 
 
 Portraits by S. G. Cahan 
 
 Editorial Note. — A few weeks ago the antirailroad candidate for Governor of Cali- 
 fornia, Hiram Johnson, was nominated in the primaries of the state by an overwhelming majority. 
 What part Mr. Russell's articles have played may be judged by the following telegram from the 
 editor of the San Francisco Bulletin : " Russell's articles in your inagazine served a great purpose 
 and helped immensely to dethrone railroad domination of California. Revolution wins Governor, 
 two Congressmen, probably United States Senator, and Legislature. We owe a great deal to 
 you. Fremont Older." 
 
 As to the specific cause of the increased cost of 
 living, President Taft to-day frankly told various 
 of his callers that he was unable to account for it. — 
 News dispatch from Washington, December 30, loog. 
 
 They increased the cost of living. . . . They 
 charged all that the traffic would bear, and appro- 
 priated a share of the profits of every industry by 
 charging the greater part of the difference between 
 the actual cost of production and the price of the 
 article in the market. — Pacific Railroad Commission 
 Report, p. 141- 
 
 AND now for us, the people, who pay 
 for all this gigantic fortune building, 
 for fraudulent contract and political ma- 
 chine, watered stock and dishonest lease; 
 who paid for all yesterday and pay for it 
 to-day and will pay for it to-morrow, many 
 times over. 
 
 Where do we come in? 
 
 In 1887, Governor Pattison, at the close of 
 the long, patient, judicial inquiry by the 
 Pacific Railroad Commission of which he 
 was chairman, delivered his opinion that 
 the inflated part of the Central Pacific's 
 capital amounted to a tax of $3,000,000 a 
 year * upon the shippers of the country. 
 
 We have seen the means by which the 
 inflation was achieved, the multifold tricks, 
 swindles, and fraudulent devices. This is 
 what such things cost us in 1887 — above 
 any fair compensation for any service per- 
 formed. 
 
 In the eighteen years from the completing 
 of the Central Pacific to the Commission's 
 report in 1887, the four men of Sacramento 
 
 * Pacific Railroad Commission, Minority Report, p. 146. 
 
 had taken from ti^e shippers of the country 
 on this account alone $54,000,000 — through 
 the forms of illegitimate toll referred to by 
 Governor Pattison, and above any fair com- 
 pensation for any service performed. 
 
 In this total, the work of the Contract and 
 Finance Company as a producer of fictitious 
 capital has some place. But we are to re- 
 member that, aside from this and from all 
 other sources of sudden wealth in Governor 
 Pattison's calculations, there was ever the 
 staggering accretion of a thousand other 
 operations and a thousand extravagances 
 and excesses of power. To the one item of in- 
 terest-bearing capital that Governor Patti- 
 son had in mind we must add many indus- 
 trious efforts under the names of the 
 Western Development Company, the Pacific 
 Improvement Company, the coal and iron 
 companies, the bridge companies, street rail- 
 road companies, and countless other: aliases 
 and masks behind which these men rode the 
 highways. All these left behind their pro- 
 portionate share of burden on the public. 
 
 So did the interwoven leases, the money 
 paid to prevent disclosure, the money spent 
 to defeat Mrs. Colton, the money spent in 
 dealing with the settlers of Mussel Slough, 
 the money spent to bribe legislatures and 
 to subsidize editors, the money spent to 
 maintain the vast political machine in 
 California, and the money spent to defend 
 the illegal land grants. 
 
 All this stupendous sum was piled up, 
 aside from Governor Pattison's total. Every 
 
 507 
 
508 
 
 Hampton's Magazine 
 
 year the interest on it was being paid by the 
 shippers, and Governor Pattison estimated 
 that the small part of this tribute due to the 
 brigandage of the old Central Pacific and 
 the Contract and Finance Company was 
 $3,000,000 a year — paid by the shippers. 
 
 The shippers, of course, merely passed it 
 along, with interest, to the consumers. You 
 and me. 
 
 So there is where we came in twenty-three 
 years ago: to the tune of $3,000,000 a year 
 cast into only a part of the Millionaire Mill. 
 
 Even then, and even for that small part, 
 the tribute was beyond any justification and 
 wholly arbitrary. 
 
 If the railroad had been built with a fair 
 degree of honesty and had been so managed, 
 or if it had represented only legitimate in- 
 vestment, it could have paid from the begin- 
 ning 6 per cent, interest, discharged all its 
 obligations to the government, and saved in 
 eighteen years $54,000,000 to shippers over 
 the Central Pacific alone. 
 
 At the same time, the Four of Sacramento 
 would have owned 2,495 miles of railroad 
 absolutely free from debt and every cent of 
 their investment would have been repaid to 
 them. 
 
 WHAT A RAILROAD TAX OF $3,000,000 
 MEANS TO YOU AND ME 
 
 This is not a surmise but a simple mathe- 
 matical demonstration. If the enterprise 
 had been fairly honest, the stockholders 
 would have realized by 1887 for every dollar 
 of their stock $1.07 in dividends, $1.11 from 
 the land sales, and would have had $4 worth 
 of interest in the property; so that in 
 eighteen years each dollar would have 
 yielded $6.18 — by the methods of approxi- 
 mate honesty. 
 
 To the householders of America there 
 would have been saved $54,000,000 of dis- 
 honest tolls plus interest and profits thereon. 
 
 Those $54,000,000 were the exact measure 
 of the difference to us between honest and 
 dishonest methods. The profit of dis- 
 honest methods for eighteen years was 
 $54,000,000; on the Central Pacific alone. 
 
 Twenty-three years have passed since 
 Governor Pattison reached this conclusion. 
 
 If the trafiic had remained as it was in 
 1887, and there had been no other tribute 
 exactions, we should have paid so far $120,- 
 000,000 in excessive charges because of 
 crooked accounts and fraudulent contracts; 
 on the Central Pacific alone. 
 
 The traffic has greatly increased; the 
 operations have been repeated, extended, 
 improved, and multiplied; more watered 
 stocks and baseless bonds have been prodi- 
 gally heaped upon the property, with more 
 corruption, more bills for purchased legisla- 
 tion, more expenses of the California politi- 
 cal machine, more payments to Abe Ruef 
 and his kind, more expenses incurred by the 
 W. F. Herrins and their staffs of poli- 
 ticians, more deals, more dishonest leases, 
 more hired editors, more crooked bosses. 
 
 For all these we are paying year after 
 year, just as we pay for the original Con- 
 tract and Finance Company crookedness. 
 
 So that if Governor Pattison could come 
 back now and repeat his inquiry, he would 
 find the annual charge that in 1887 was 
 $3,000,000 for the Central Pacific alone is 
 now become for the Southern Pacific 
 system a charge many times that sum. 
 
 If the American householder, puzzling 
 over the 60 per cent, increase of his hving 
 expenses in fifteen years, wants a solution 
 of his problem, let him for a time con- 
 template these facts. Let him also remem- 
 ber that they are merely typical of the gen- 
 eral railroad condition and need only to be 
 multiplied into the number of "systems" to 
 furnish much of the stupendous sum repre- 
 sented in the augmented cost of Uving. For 
 in ten years the railroad capitalization of 
 this country, now eighteen and one half 
 billion dollars, has increased seven billion 
 dollars — being in effect a National debt, 
 the interest of which is le\ded upon us as 
 tribute. 
 
 How do we pay this tribute? 
 
 Let us see. On January i, 1909, the 
 transcontinental railroad lines increased the 
 freight rates 18 per cent, on east-bound traf- 
 fic and a little more on west-bound traffic. 
 
 Conservative authorities in California 
 estimated that this increase of rates 
 meant an increase of $10,000,000 a year 
 in the living expenses of the people of 
 California. 
 
 California has probably 400,000 families. 
 This means an average increase of $25 a 
 family. 
 
 Accomplished by merely one increase of 
 rates. 
 
 By reason of this same increase of rates 
 the market value of Southern Pacific secur- 
 ities rose nearly $100,000,000. By reason 
 of this increase of market values the estate 
 of the late E. H. Harriman, at first appraised 
 
The Paying of the Bill 
 
 509 
 
 * at $149,000,000, was found on examination 
 to be worth $220,000,000. 
 
 Twenty-five dollars taken yearly from 
 each family in California; $71,000,000 piled 
 upon the private fortune at the other end. 
 From the householder to the vault of the 
 railroad magnate a million pumps pumping 
 dollars. 
 
 What do you get for this tax laid three 
 times a day upon the Hving of your house- 
 hold? It is your money, the railroad com- 
 pany takes it from you and adds it to the 
 great fortunes. What do you get? 
 
 Let us look into that next. 
 
 Whoever will consider carefully and im- 
 partially the subject of freight rates in 
 America will be drawn to the conclusion 
 that the so-called science or system of 
 making these rates consists merely of dis- 
 cerning how much can be extracted from 
 any community without inciting it to 
 resistance, and from any branch of traffic 
 without destroying it. Simply this and 
 nothing more. 
 
 HOW RAILROAD RATES ARE REALLY FIXED 
 
 Now, you will not believe this until I 
 prove it to you because you have long been 
 accustomed to hear foolish chatter about 
 the enormous difficulties of rate making and 
 because, naturally, you have assumed that 
 in making rates there is considered the cost 
 of the service, the amount of investment and 
 the interest thereon, with taxes, insurance, 
 and other expenses, and what would con- 
 stitute a just and reasonable profit. 
 
 I think it would be difficult to instance any 
 railroad rate in America made on any such 
 basis. 
 
 In America, railroad rates are made under 
 the pressure of an inexorable necessity cre- 
 ated by fictitious capitalization and fraud- 
 ulent expenditures. The necessity is to 
 wring from every transaction the last ob- 
 tainable cent. Justice has and can have 
 no place in the consideration. What the 
 traffic will bear is the one standard and that 
 means, plainly translated, what the shipper 
 can he forced to pay. 
 
 At first thought this sounds unfair and 
 partisan. It is neither. It is only a cold 
 statement of facts. It seems unfair be- 
 cause we like to think there is reason in all 
 things. About other things I do not pre- 
 tend to say, but about rate making I know 
 there is no reason other than the reason I 
 have mentioned. The next time you read 
 
 any profound observations by one railroad 
 lackey or another on the intricate and 
 wonderful science of rate making and the 
 awe with which we should regard it, you 
 might recall some plain facts I shall now 
 give you. They may help to a just esti- 
 mate of the railroad lackey and also cheer 
 your expense account with some delicious 
 humor — of a certain kind. 
 
 Here we go then, taking things at random 
 and merely as samples. 
 
 SOME ILLUMINATING RAILROAD ARITHMETIC 
 
 versus your poc^etbook 
 
 On a carload of coffee, San Francisco to 
 New York, 3,240 miles, the freight rate is 
 $180. From San Francisco to Phoenix, 
 Arizona, a distance of 900 miles and over 
 the same line, the freight rate for the same 
 car is $240. 
 
 From Pacific Coast points (San Fran- 
 cisco, Los Angeles, et cetera) to Phoenix, 
 Arizona, the freight rate on sugar is $1 a 
 hundred pounds in car load lots. From the 
 same points to Memphis, Tennessee, about 
 1,200 miles farther, the freight rate on 
 sugar is 60 cents a hundred pounds. From 
 San Francisco to Cheyenne, Wyoming, 1,270 
 miles, the rate is 55 cents. 
 
 California produces most excellent raisins, 
 but the people of the Eastern states cannot 
 generally avail themselves of this abundant 
 product because the freight rate to the At- 
 lantic Coast is $1.10 a hundred pounds. 
 Yet asphaltum is hauled from the Pacific to 
 the Atlantic Coast for only 55 cents a hun- 
 dred pounds. The raisin traffic will bear 
 $1.10 and the asphaltum traffic will bear 
 only one half of that. 
 
 Cotton goes from Dallas, Texas, to China, 
 7,500 miles, by way of Seattle for $1.35 a 
 hundred pounds. Of the 7,500 miles in this 
 haul 2,500 are by rail. For hauling the same 
 cotton from Dallas to New Orleans, 567 
 miles, the rate is 60 cents a hundred pounds 
 — or nearly one half the cost of the 7,500 
 mile haul to China, 2,500 of which is by 
 rail. 
 
 A CHINAMAN DECIDES WE ARE CRAZY 
 
 Not long ago an American captain was in 
 Hankow, China, loading pig iron for Los 
 Angeles. The Chinese merchant with whom 
 he dealt was both intelligent and curious. 
 He wanted to know what was the cost of 
 carrying iron so far. The captain said the 
 freight rate was $6 a ton. 
 
510 
 
 Hampton's Magazine 
 
 ROBERT E. PATTISON, FORMER GOVERNOR OF 
 PENNSYLVANIA, AND HEAD OF THE PA- 
 CIFIC RAILWAY COMMISSION. 
 
 "How much of that does the steamer 
 get?" asked the merchant. 
 
 " Four dollars a ton. " 
 
 "Then the iron must travel a long dis- 
 tance by railroad," said the merchant. 
 
 "No," said the captain, "a very short 
 distance — only twenty-two miles from San 
 Pedro harbor to Los Angeles. " 
 
 "Show it to me on your map," said the 
 merchant, exuding incredulity. 
 
 The map was produced and the merchant 
 studied it carefully, following with his finger 
 the steamer's route from Hankow down the 
 river 700 miles to the ocean, then across 
 5,000 miles of ocean to San Pedro. With 
 this he compared the almost imperceptible 
 distance from San Pedro to Los Angeles. 
 His conclusion was that the captain was 
 lying; the thing was manifestly impossible. 
 Waybills and receipts made no impression 
 upon him. Either the captain was a mon- 
 strous and malicious liar, or the American 
 people were crazy. Politeness and prob- 
 ability forbade him to accuse an entire na- 
 tion of lunacy; hence the fault lay with the 
 captain. 
 
 But the captain was not lying; he was 
 telling the truth. The traffic between Los 
 Angeles and San Pedro, its harbor, is indis- 
 pensable; therefore it can bear a great deal. 
 
 You can ship some kinds of freight from an 
 American port to a European port and back 
 for the cost of moving the same freight from 
 a ship in San Pedro harbor to Los Angeles, 
 twenty-two miles. The freight rate on iron 
 from San Pedro to Los Angeles is $2 a ton ; 
 on other commodities it ranges from $2.20 
 to $3 a ton. In addition, there is a wharfage 
 charge of 50 cents a ton. Well — I told 
 you. 
 
 You see, the traffic will bear these 
 charges: hence they are levied. There is no 
 other reason for them nor for any other 
 charges that the Southern Pacific makes 
 anywhere. It gouges and grabs what it can 
 because it needs every obtainable cent to 
 pay the interest and dividends on the se- 
 curities piled up by the Contract and Fi- 
 nance Company and all the other historic 
 devices the nature of which I have explained 
 in the foregoing chapters. The Los An- 
 geles merchants must have their freight 
 from San Pedro. There is no other way to 
 obtain it. Hence the traffic will bear these 
 charges, which are promptly passed to the 
 people. 
 
 How long the people will bear them I do 
 not pretend to say. 
 
 San Pedro is the harbor of Los Angeles 
 and within the city limits. San Diego is 
 126 miles from Los Angeles. The rates 
 from Los Angeles to San Diego are about 
 the same as the rates from one end of Los 
 Angeles to the other. The San Diego traf- 
 fic will not bear quite so much as the Los 
 Angeles traffic. 
 
 FREIGHT RATE FOR 15,975 MILES, $4; 
 RATE FOR 2 2 MILES, $3.50 
 
 On some kinds of freight, and including 
 wharfage, the rate is $3.50 a ton from a ship 
 in San Pedro harbor twenty-two miles 
 across Los Angeles, and it is $7.50 a ton from 
 Antwerp to San Pedro — 16,000 miles or 
 thereabouts. 
 
 The present railroad freight rates from 
 Sacramento, California, to Reno, Nevada, 
 are higher than the freight rates in the old 
 days of mining, before the railroad was 
 built, when all freight must be dragged over 
 the mountains by mule and ox teams.* This, 
 I suppose, is one of the "benefits" conferred 
 by the Big Four upon the country. 
 
 You can ship certain kinds of freight from 
 
 •Before the Interstate Commerce Commission. Traffic 
 Bureau of the Merchants Exchange versus Southern Pacific 
 Company et al. Docket No. 2839. Brief for complaint, pp. 
 
The Paying of the Bill 
 
 511 
 
 Liverpool to San Francisco by way of New 
 Orleans for no more than you must pay on 
 the same freight if your shipment originates 
 at New Orleans instead of Liverpool.* 
 
 Does not all this seem strange? 
 
 Yet the Southern Pacific, it must be con- 
 fessed, has no monopoly of such mon- 
 strosities. 
 
 At the mines in West Virginia soft coal is 
 worth $1 a ton. When it has been trans- 
 ported to the city of Washington, 400 miles, 
 it sells for $3.50 a ton. At Scranton, Penn- 
 sylvania, a car is loaded with anthracite 
 coal worth less than $2 a ton. The next 
 morning it is in New York and worth $6 
 a ton. Apparently the cost of transporting 
 coal 100 miles is greater than the cost of 
 mining it. 
 
 In California, coal is now so dear that for 
 the poor it must seem like a luxury; and yet 
 there are in the mountains in Colorado, 
 New Mexico, and Utah, and in the North 
 Pacific states, great coal deposits that might 
 afford a cheap supply if reasonable freight 
 rates could be had. As they cannot, coal 
 is regularly brought to San Francisco from 
 Australia. 
 
 THE RAILROADS HAVE NOT REFORMED 
 
 Every person that consumes anything 
 contributes to the freight rates, and every- 
 where these rates are made in this arbitrary 
 and extortionate manner. The natural 
 course of trade is continually being dis- 
 torted, blockaded, and bedeviled to give 
 more profits to the railroads, to provide 
 them with longer hauls, or a chance for 
 bigger rates. Communities are not allowed 
 to trade where they can find the best terms, 
 but only where they will yield the best 
 pickings for the railroads. A town forty 
 miles from St. Paul and 400 miles from 
 Chicago was compelled to go to Chicago for 
 its supplies because the railroads made the 
 rates from Chicago to that town, 400 miles, 
 equal to or less than the rates from St. Paul 
 to that to.wn, 40 miles. 
 
 There is an impression adroitly spread by 
 railroad press agents and railroad news- 
 papers that all these conditions have passed 
 away and the railroads have reformed their 
 practices. As a matter of fact, there has 
 been no essential change. 
 
 The unjust rates continue year in and 
 year out to collect our tolls. 
 
 * See 162 U. S.. 197. 
 
 CHARLES M. HAYS, WHO RESIGNED FROM THE 
 PRESIDENCY OF THE SOUTHERN PACIFIC BE- 
 CAUSE ITS FREIGHT RATES WERE UNJUST. 
 
 Some of the least defensible of these ex- 
 tortions are practiced in California and help 
 materially to gather the means for the divi- 
 dends and interest on the securities we have 
 been considering. 
 
 For example, I call attention to extracts 
 from the Southern Pacific's freight tariffs 
 showing rates from San Francisco and from 
 Los Angeles. If you are unfamiliar with 
 railroad rates I may be allowed to explain 
 that the practice is to charge less for freight 
 in car load lots than for freight in smaller 
 quantities. This occasions the division into 
 rates for car load and rates for less than 
 car load. (See table on the following page.) 
 
 WHY HAYS RESIGNED THE PRESIDENCY OF 
 THE SOUTHERN PACIFIC 
 
 I will now recite for your entertainment 
 a little chapter of history showing that 
 these abuses are not only flagrant and in- 
 tolerable but firmly rooted. 
 
 C. P. Huntington died in 1900. 
 
 At that time, one of the American railroad 
 executives most talked about for sagacity, 
 energy, skill, knowledge, and results was 
 Mr. Charles M. Hays. 
 
613 
 
 Hampton's Magazine 
 
 
 To 
 
 Miles 
 
 Less Than Car Load 
 
 Car Load 
 
 From 
 
 I St 
 
 Class 
 
 Rate 
 
 per 100 
 
 Pounds 
 
 2d 
 
 Class 
 
 Rate 
 
 per 100 
 
 Pounds 
 
 3d 
 
 Class 
 
 Rate 
 
 per 100 
 
 Pounds 
 
 4th 
 
 Class 
 
 Rate 
 per 100 
 Pounds 
 
 Sth 
 Class 
 Rate 
 
 Ton 
 
 Class A 
 Rate 
 
 Ton 
 
 Class B 
 Rate 
 
 per 
 Ton 
 
 Class C 
 Rate 
 
 per 
 Ton 
 
 Los Angeles 
 San Francisco 
 
 Goshen. ...... 
 
 1 1 
 
 241 
 241 
 
 $0 
 
 79 
 63 
 
 $0 
 
 76 
 58 
 
 $0 
 
 71 
 54 
 
 $0 
 
 67 
 51 
 
 $10.80 
 8.30 
 
 $11.60 
 7.65 
 
 «7 
 
 s 
 
 90 
 20 
 
 $6.90 
 455 
 
 Los Angeles 
 San Francisco 
 
 Exeter 
 
 < 1 
 
 241 
 247 
 
 
 80 
 67 
 
 
 77 
 62 
 
 
 73 
 58 
 
 
 69 
 
 55 
 
 11.20 
 8.90 
 
 11.60 
 
 8.25 
 
 7 
 5 
 
 90 
 
 65 
 
 6.60 
 4.80 
 
 Los Angeles 
 San Francisco 
 
 Tulare 
 
 < i 
 
 231 
 240 
 
 
 76 
 69 
 
 
 71 
 64 
 
 
 67 
 59 
 
 
 64 
 55 
 
 10.20 
 9.10 
 
 11.60 
 8.40 
 
 7 
 5 
 
 85 
 70 
 
 6.60 
 S-oo 
 
 Los Angeles 
 San Francisco 
 
 Porterville. . . . 
 
 224 
 264 
 
 76 
 73 
 
 
 72 
 68 
 
 
 68 
 64 
 
 
 65 
 61 
 
 10.40 
 9.90 
 
 11.60 
 925 
 
 7 
 6 
 
 75 
 00 
 
 6.60 
 5.20 
 
 Los Angeles 
 San Francisco 
 
 Oil City 
 
 179 
 315 
 
 80 
 90 
 
 
 76 
 84 
 
 
 71 
 78 
 
 
 67 
 73 
 
 10.60 
 .11.80 
 
 10.80 
 10.95 
 
 6 
 
 7 
 
 95 
 
 75 
 
 6.30 
 6.70 
 
 Los Angeles 
 San Francisco 
 
 Bakersfield.. . . 
 
 1 1 
 
 168 
 303 
 
 
 71 
 83 
 
 
 68 
 
 77 
 
 
 64 
 
 72 
 
 
 61 
 68 
 
 9.60 
 11.00 
 
 10.00 
 10.15 
 
 6 
 6 
 
 15 
 
 75 
 
 550 
 5-90 
 
 Los Angeles 
 San Francisco 
 
 Olig 
 
 218 
 353 
 
 
 83 
 86 
 
 
 79 
 79 
 
 
 75 
 74 
 
 
 72 
 70 
 
 11.40 
 11.40 
 
 13.30 
 10.5s 
 
 7 
 7 
 
 55 
 00 
 
 6.90 
 6.05 
 
 
 
 Los Angeles 
 San Francisco 
 
 McKittrick... 
 
 216 
 351 
 
 
 76 
 
 85 
 
 
 70 
 78 
 
 
 66 
 
 73 
 
 
 63 
 69 
 
 10.00 
 11.20 
 
 13 30 
 10.35 
 
 6 
 
 7 
 
 75 
 00 
 
 6.10 
 6.05 
 
 Los Angeles 
 San Francisco 
 
 Fresno . . . . 
 
 276 
 
 195 
 
 
 80 
 55 
 
 
 77 
 51 
 
 
 73 
 47 
 
 
 69 
 44 
 
 11.20 
 7.20 
 
 11.60 
 6.70 
 
 8 
 4 
 
 00 
 60 
 
 7.00 
 4-05 
 
 Los Angeles 
 San Francisco 
 
 Visalia 
 
 249 
 248 
 
 
 79 
 66 
 
 
 76 
 61 
 
 
 71 
 57 
 
 
 67 
 
 54 
 
 10.80 
 8.70 
 
 11.60 
 
 8.05 
 
 7 
 5 
 
 90 
 
 45 
 
 6.60 
 4.80 
 
 Los Angeles 
 San Francisco 
 
 Coalinga 
 
 < ( 
 
 290 
 269 
 
 
 86 
 80 
 
 
 78 
 73 
 
 
 74 
 69 
 
 
 71 
 66 
 
 11.40 
 10.70 
 
 14.80 
 10.05 
 
 8 
 6 
 
 00 
 20 
 
 7.00 
 
 5-45 
 
 Los Angeles 
 San Francisco 
 
 Hanford 
 
 248 
 233 
 
 
 79 i 
 
 63; 
 
 76 
 58 
 
 
 71 
 54 
 
 67 
 51 
 
 10.80 
 8.30 
 
 11.60 
 7.65 
 
 7 
 5 
 
 90 
 20 
 
 6.90 
 4-55 
 
 SOME OF THE CURIOSITIES OF THE CALIFORNIA FREIGHT RATES- 
 
 THE COUNTRY. 
 
 -THE HIGHEST IN 
 
 Mr. Hays was selected to take the place 
 of Mr. Huntington as head of the great 
 Southern Pacific system. He remained less 
 than a year when, to the amazement of the 
 railroad world, he suddenly resigned. 
 
 Everybody knew there must have been 
 some trouble and all railroad men knew that 
 the trouble was not with Mr. Hays. Al- 
 most at once he was snapped up by the 
 Grand Trunk, of which vast and extending 
 system he is still the chief commander. 
 
 Mr. Hays never publicly explained his dis- 
 satisfaction, but according to close friends 
 of his he began, soon after he took the 
 Southern Pacific, to examine the freight 
 tariffs by which this company gathers the 
 interest on all these securities. Mr. Hays is 
 known to be a just man. It seemed clear 
 
 to him that the rates were indefensible and 
 ought to be adjusted. He undertook to ad- 
 just them. The power behind the railroad 
 that, being greater than all law and all 
 government, had for many years thriven 
 upon these extortions, objected to the 
 changes Mr. Hays desired. Mr. Hays in- 
 sisted; the Power insisted. Finding that 
 the Power was supreme and that he could 
 not do justice, Mr. Hays resigned. 
 
 How do you like this little story? 
 
 I need not inquire of certain newspaper 
 valets and hired men of the Southern Pa- 
 cific. I know they will not like it at all be- 
 cause at once they will see that it is true and 
 extremely distasteful to their employers. 
 Their natural impulse will be to deny it, a 
 course to which they are cordially invited. 
 
The Paying of the Bill 
 
 513 
 
 For all these things the railroad company 
 has usually its excuse — not always, but 
 usually. 
 
 From Oakland to Lompoc, about 314 
 miles, the Southern Pacific within the last 
 two years gave to one lumber company a 
 rate of $4 a thousand and to another a rate 
 of $7.50. When one of the railroad's of- 
 ficers was on the witness stand before the 
 Interstate Commerce Commission, he was 
 asked why the $4 rate was made. He re- 
 plied airily that it was to meet "water 
 competition." This is a favorite excuse 
 with the railroad companies. With wonder- 
 ful effrontery they offer it for rates to points 
 a thousand miles from any water route. So 
 in this case the young man said "water 
 competition" as if the words were a finality. 
 
 Then the commission suddenly exhibited 
 the rate of $7.50 to the other company and 
 for once a railroad company was silenced. 
 Apparently it could think of no way to 
 twist, duck, or dodge out of the dilemma, 
 nor even to insult, bulldoze, or browbeat the 
 commission; a situation rare in the com- 
 mission's experience. 
 
 When Manager H. A. Jones of the South- 
 ern Pacific came to the stand in Los Angeles, 
 January, 1909, he was much more frank. 
 At San Francisco and Los Angeles and, I 
 believe, at other junction points, the South- 
 ern Pacific exacts a switching charge (so- 
 called) of $2.50 a car. There is no sense in 
 this charge. It represents no service 
 performed nor anything else except an 
 arbitrary exaction. Mr. Jones was asked 
 why his company levied this charge. He 
 answered promptly and truthfully that it 
 levied the charge "because it could get the 
 money." 
 
 When the "water competition" bogey 
 will not serve, the company can usually 
 allege something about the peculiarity of 
 the haul or of the business. One of these 
 allegations can stand for all and is, more- 
 over, a lovely example on its own account. 
 Thus: 
 
 Some of the glaring inequalities set forth 
 in the table on the opposite page are de- 
 fended (by the railroad's champions) on the 
 ground that there is a long ascent north of 
 Los Angeles; therefore the rate from Los 
 
 HOW THE SOUTHERN PACIFIC R.\ILROAD, BY ITS OWNERSHIP OF THE PACIFIC MAIL S.S. COM- 
 PANY, CONTROLS THE FREIGHT RATE BY WATER FROM NEW YORK TO SAN FRANCISCO. 
 
514 
 
 Hampton's Magazine 
 
 ISIDOR JACOBS, WHO IS URGING A GOVERN- 
 MENT STEAMSHIP LINE FROM SAN 
 FRANCISCO TO PANAMA. 
 
 Angeles to Goshen should be higher than the 
 rate from San Francisco to Goshen, although 
 the distance is the same. This is as good as 
 any other defense for the railroad; and how 
 good this is you may learn from the fact 
 that y^ per cent, of the goods shipped from San 
 Francisco to Goshen have already been hauled 
 up that hill north of Los Angeles without the 
 least increase in rates therefor. That is be- 
 cause they have been shipped from the 
 Eastern states over that route. And yet 
 the charge for the 241 miles from San 
 Francisco to Goshen is about 18 per cent, 
 less than the charge for the 241 miles from 
 Los Angeles to Goshen — because of that hill! 
 
 The hill is a great matter when you ship 
 goods from Los Angeles to Goshen. It is 
 nothing when you ship goods from New 
 Orleans to Goshen by way of Los Angeles. 
 
 Is it really necessary to be perfectly absurd 
 that we may defend our sacred corporations? 
 
 Of course, the shippers, as a rule, do not 
 care very much. Why should they? It is 
 none of their affair; the charge merely be- 
 comes a part of the price to the consumer, 
 and so long as that price is not great enough 
 to interfere with trade, the shipper need not 
 bother about it. Changes in rates may 
 cause actual losses to merchants, but high 
 rates bear only upon the consumer. And 
 th3 consumer? Oh, well, he never knows. 
 
 The charge is concealed in the prices 
 of his beefsteak and potatoes, and 
 while these mount steadily upon him 
 he blames the farmer or the packer. 
 Therefore, on with the game! It can 
 be played without limit. 
 
 First the stock issued gratuitously to the 
 fortunate insiders; then the freight rate 
 made to secure dividends on this stock ; then 
 more stock; then more rates. All passed 
 along to the consumer and he never objects, 
 bless his heart, but pays his bills like a 
 little man. 
 
 THE RAILROAD GOBBLES THE TARIFF PROFIT 
 ON LEMONS 
 
 The California producer has not been so 
 well tamed. He has been protesting forty 
 years because the railroad company, apply- 
 ing its favorite formula in a way we must 
 now consider, has steadily absorbed all his 
 profits. 
 
 Take oranges and lemons. In the cele- 
 brated orange rate case which dragged 
 along six years, Mr. Joseph H. Call, of L03 
 Angeles, showed that under the prevailing 
 freight rate the average profit left to orange 
 growers was 13 cents a box, without any 
 allowance for decay or damage,* while the 
 railroad company took 90 cents a box for 
 freight. That was what the orange traffic 
 would bear. 
 
 At the end of the six years' fight through 
 the Interstate Commerce Commission and 
 the courts there was secured a final judg- 
 ment reducing the charge from $1.25 to 
 $1.15 a hundred weight. This meant a sav- 
 ing to the orange growers of $1,000,000 a 
 year in freight rates. The ground of the 
 decision was that $1.15 was a fair rate. 
 This seems to raise the questions: 
 
 (i) How about the years in which the 
 company was collecting an unfair rate? 
 
 (2) Who is to recompense us for that im- 
 position? 
 
 As to what lemons would bear, the rail- 
 road company slightly erred. Some years 
 before, it had conceived the idea that the 
 lemon traffic would bear an increase of 15 
 cents a box in the freight rate and had 
 accordingly, and for no other reason, an- 
 nounced the increase. The lemon growers 
 protested vehemently and, of course, in vain; 
 such protests are usually in vain. All the 
 profit of lemon growing was swept away 
 
 * Senate Committee on Interstate Commerce, Proceedings 
 of May 17, 1905. 
 

 The Paying- of the Bill 
 
 515 
 
 in that 15 cents of rate increase; the pro- 
 ducers were now growing lemons at an 
 actual loss. When this fact had been dem- 
 onstrated, the growers began to cut down 
 their trees and turn the land to other crops. 
 
 This practical proof that their calcula- 
 tions had been wrong and the lemon traffic 
 would not, after all, bear the additional 
 tribute they sought to extort was all the 
 railroad managers needed. They wanted 
 the profits of lemon growing but they could 
 understand that if there were no lemons there 
 would be no profits, so they rescinded the 
 increase, went back to the old rate, and in- 
 duced the growers to replant their orchards. 
 
 So Akbar remitted the tribute levied upon 
 a conquered province when he found that 
 the people had been stripped to their skins. 
 
 From this time until November 15, 1909, 
 the lemon rate was $1 a box, California to 
 Eastern points. 
 
 Aside from freight rates, the only serious 
 trouble about the lemon business in Cali- 
 fornia is the limit of the demand. Cali- 
 fornia lemons are of unusual excellence; but 
 after all, the lemon in its pristine state and 
 undiluted remains more a fruit of utility 
 than of desire; few persons, we may believe, 
 devour lemons for delight therein. So far 
 as the California lemon could be delivered 
 at all in America it superseded, on merit, 
 all others; but because of the freight rates 
 it seldom had a chance east of t-he Alle- 
 ghenies. The center of its distribution was 
 Des Moines, Iowa, and the Atlantic states 
 continued to get their lemons from the 
 Mediterranean. 
 
 Of the annual American consumption of 
 12,000 car loads of lemons, California fur- 
 nished only about 4,800 car loads, although 
 quite able to furnish all. 
 
 The Californians long agitated for an in- 
 crease in the import duty on lemons, that 
 the handicap of their freight rates might be 
 equalized and the California lemon have a 
 chance on the Atlantic seaboard. At last 
 their desires were gratified. The new tariff 
 of August 5, 1909, raised the duty on lemons 
 50 per cent. 
 
 The lemon growers rejoiced and were ex- 
 ceeding glad. Their joy lasted two months. 
 In October, the Southern Pacific announced 
 that on November 15th it would raise the 
 lemonratei5centsabox,orfrom$i to$i.i5.* 
 
 G. W. LUCE, GE.\ERAL FREIGHT AGENT OF 
 THE SOUTHERN PACIFIC RAILROAD. 
 
 This, you will understand, is the mini- 
 mum. On some hauls the rate was raised 
 to $1.25, $1.35, and $1.40. 
 
 Faithful to its good, old, and only princi- 
 ple in rate making, the Southern Pacific had 
 grabbed the additional profit for itself. The 
 lemon traffic would now bear the 1 5 cents it 
 would not bear before, and the railroad 
 needed that 15 cents to pay dividends on 
 fictitious stock. 
 
 J. H. CALL FIGHTS THE SOUTHERN PACIFIC 
 
 This time the lemon growers combined 
 against the extortion and brought into the 
 case the Mr. Joseph H. Call of whom I have 
 before spoken. I am bound to think him 
 a remarkable man, although my inclining 
 toward such distinctions is small. Much of 
 his life has been spent in fighting railroad 
 corporations, apparently on conviction and 
 principle and not for the harlotry of the 
 professional advocate. He fought the 
 Southern Pacific to a standstill in that 
 settler's case (Southern Pacific versus Otto 
 Groeck) referred to in the July issue of this 
 magazine,* and it was he that showed 
 that in the Mussel Slough massacre the rail- 
 
 * Before the Interstate Commerce Commission. Arlington 
 Heights Fruit Exchange et al. versus Southern Pacific Com- 
 pany cl al. Petition, p. 17. 
 
 * See " Speaking of Widows and Orphans," Hampton's Mag- 
 azine, July, iQio. 
 
516 
 
 Hampton's Magazine 
 
 road company had no more legal than 
 moral right. As special counsel for the 
 government he recovered more than four 
 million acres of grabbed land from the 
 Southern Pacific* 
 
 Mr. Call took up the case of the lemon 
 growers and got in the United States Circuit 
 Court an injimction restraining the railroad 
 from collecting the increased rate. When 
 it became evident that he would secure in- 
 junctions all along the line, the railroad 
 company desisted for the time being and 
 agreed to hold the new rate in abeyance 
 until the issue should be determined by the 
 higher courts. 
 
 Apparently the counsel for the lemon 
 growers was just in time. Since he got his 
 injunction, the Supreme Court has decided 
 in a similar case that railroads must be sued 
 in the state where they are incorporated. 
 If that ruling had applied here, the injunc- 
 tions would have been dissolved and the 
 suits begun anewf in Kentucky, where 
 (with great foresight) the Southern Pacific 
 is incorporated and where it has no trackage 
 and does no business. 
 
 THE HUGE MACHINERY OF LAW IN THE 
 INTERSTATE COMMERCE COMMISSION 
 
 Meantime, Mr. Call brought the case be- 
 fore the Interstate Commerce Commission. 
 That sounds easy: in reality it was a stu- 
 pendous task. Every company that han- 
 dles any part of any lemon shipment must 
 be served with a summons. The original 
 petition in the case contained six pages of 
 the names of companies necessarily sued as 
 codefendants, about 400 in all, many of 
 them railroads long since absorbed in the 
 great combinations.! An amended petition 
 filed a few weeks later contained the names 
 of sixty-three additional and microscopic 
 concerns that previously had been over- 
 looked. 
 
 Every one of these it was necessary to 
 serve, for to sue railroad companies in this 
 country is no holiday performance, be as- 
 sured. You can sue men in five minutes, 
 but to sue a railroad company may take five 
 years. When at last all had been served, 
 the Interstate Commerce Commission took 
 up the case and on June 11, 1910, decided 
 that the lemon rate should be $1. The 
 
 •See 146 U. S., 570-619, and 168 U. S., 1-66, and 189 U. S., 
 447- 
 
 t See 215 U. S., SOI. 
 
 t Before the Interstate Commerce Commission. Arlington 
 Heights Fruit Exchange et al. versus Southern Pacific Com- 
 pany et al. Petition, pp. 3-9. 
 
 railroads were expected to appeal from this 
 decision, whereupon the contest would have 
 been transferred to the courts — to last 
 there for years and years. Instead of ap- 
 pealing, the railroads, probably because of 
 the very unusual public interest in the case, 
 agreed to allow the rate to remain at $i. 
 
 This was something of a novelty in the 
 experience of the sorely tried American ship- 
 per. Ordinarily, the case would have been 
 heard by the commission, which would have 
 entered an order against the railroads com- 
 manding them to "cease and desist" from 
 charging the $1.15 rate, so that if the rail- 
 roads were to reduce the rate to $1,143^ 
 they would be complying with the commis- 
 sion's order. 
 
 But the railroads would not give even so 
 much heed to the order. They would take 
 the matter into the Federal Courts and 
 about four years later the complaining 
 lemon growers would learn whether they 
 were to keep their profits or continue to 
 hand them to the railroad company. 
 
 You think this is pessimistic, unfair, or 
 prejudiced, but it merely states the prevail- 
 ing conditions. Most of the Interstate 
 Commerce cases take longer. "Cincinnati 
 and Texas Railroad versus Interstate Com- 
 merce Commission" took six years; "Texas 
 Railway versus same," seven years; "In- 
 terstate Commerce Commission versus Ala- 
 bama Railway," five years; "Interstate 
 Commerce Commission versus Chicago Rail- 
 way," eight years; "Missouri Pacific versus 
 United States," ten years,* by which time 
 everybody connected with the original suit 
 had died or forgotten all about it and the 
 court threw it out on that ground. 
 
 THE RAILROADS GET THE FAT OF THE TARIFF 
 
 Much wondering attention was called to 
 the lemon tariff' grab, as if it were something 
 quite new. As a matter of fact, the only 
 strange thing about it is that anybody 
 should think it strange. It is in Hne with 
 accepted railroad policy everywhere. 
 
 The real beneficiaries of the great Ameri- 
 can protective tariff are not so much the 
 manufacturers or producers as the railroad 
 companies. 
 
 The railroad companies adjust their rates 
 to just below the point where the foreign 
 article (plus the tariff) can be laid down in 
 any given territory. 
 
 * Before the Senate Committee on Interstate Commerce 
 bearing on the Regulation of Railway Rates, pp. 1-2. 
 
The Paying of the Bill 
 
 517 
 
 They do not wish to see the American 
 producer crushed, but all the money he 
 makes they purpose to take for dividends 
 and interest on securities a la Contract and 
 Finance Company. 
 
 I submit the following convincing illus- 
 trations made up from Mr. Call's figures. 
 The basis is the transcontinental railroad 
 rates between Pacific and Atlantic or Lake 
 ports compared with freight rates from 
 abroad. 
 
 Commoility 
 
 Bituminous Coal 
 
 Portland Cement 
 
 Steel Ingots 
 
 Pig Iron 
 
 Structural Iron 
 
 Oranges 
 
 Cotton Goods 
 
 Low Grade Dry Goods 
 
 O Hi -a 
 2 Ola 
 
 Ton 
 
 $0.67 
 
 1 .60 
 
 8.00 
 
 4.00 
 
 10.00 
 
 20.00 
 
 40.00 
 
 40.00 
 
 
 Ton Ton 
 $6.00 $6.67 
 6 . 00 7 . 60 
 6.00 14.00 
 6.00 10.00 
 6.00 16.00 
 3 . 00 23 . 00 
 6 . 00 46 . 00 
 6 . 00 46 . 00 
 
 
 Ton 
 
 $6 3ot 
 7.00I: 
 12.00 
 10.00 
 1 6 . 00)^ 
 23.00 
 40.00 
 60.00 
 
 Evidently, here the railroad rate is so 
 made that it is a shade under the tariff duty 
 plus the freight rale from abroad. By this 
 adjustment, the importation of the foreign 
 article is not encouraged, but the railroad 
 company gets the greater part of the 
 difference in price between the foreign and 
 domestic article. In other words, it gets the 
 real benefit of the tariff on these commod- 
 ities. || 
 
 We tax all else to feed the manufacturer, 
 and fatten the manufacturer to feed the rail- 
 road company. 
 
 THE "refrigerator CAR " HELPS STEAL 
 FROM YOUR POCKETBOOK 
 
 But to return to our lemons, the growers 
 of that ungracious fruit have still another 
 grievance. 
 
 To understand it well one must know 
 about the peculiar functions of the Ameri- 
 can refrigerator car and I am not sure that 
 I can explain that in a few hundred words, 
 but I will try. 
 
 * "Terminal rates" arc rates from one point with water tran- 
 sit to another, as from Chicago to Seattle. 
 
 t From Colorado and Utah to Los Angeles and San Francisco. 
 X From the factories in Kansas to Pacific Coast points. 
 
 I In car load lots. 
 
 II Remarkable though unintentional confirmation of this fact 
 may be found in Before the Interstate Commerce Commission: 
 Enterprise Manufacturing Company et al. versus Georgia Rail- 
 road Company e<_ai. and China and Japan Trading Company 
 versus Georgia Railroad Company. No. 981 and 994. See p. 73 
 letter of J. O. Stubbs to Howard Ayres. 
 
 The transporting of perishable commodi- 
 ties in refrigerator cars is now a great in- 
 dustry and very important to all of us be- 
 cause these cars bring us a large part of our 
 daily food. Most of these cars are owned 
 by the Beef Trust but are used for fruit and 
 vegetables as well as for meat. The Beef 
 Trust compels the railroads to pay for haul- 
 ing its cars (a mere disguise for a rebate) 
 and, in addition, gouges the consumer 
 through an onerous charge for ice. 
 
 Before 1906, the Beef Trust had contracts 
 with the Southern Pacific by which the 
 Southern Pacific, after it had well plucked 
 the fruit grower, turned him over to the 
 Beef Trust, which in a workmanlike manner 
 finished the trimming. When these con- 
 tracts expired, gentlemen that controlled 
 the Southern Pacific could see no reason 
 why the Beef Trust should have this good 
 thing when they needed the money them- 
 selves, so they chased the Trust out of the 
 game, organized a refrigerator car line of 
 their own, collected the goodly icing charges 
 and turned them into the treasury, whence 
 they presently emerged as additional divi- 
 dends on more watered stock. 
 
 Now, it was once thought necessary that 
 lemons, oranges, and the like fruits moving 
 east from California must be iced all the 
 way. Which was good for the refrigerator 
 car lines. Eventually the growers found 
 that by a system of precooling the fruit, it 
 would go through without icing and arrive 
 in perfect condition. So on such shipments 
 they placarded the cars with this notice: 
 
 "Do not re-ice in transit." 
 
 That was where the additional grievance 
 came in. The notice never made the least 
 difference to the railroad company. It did 
 not re-ice the car, but it charged for re-icing 
 just the same — $30 a car.* On something 
 like 40,000 cars of citrus fruit a year. Good 
 graft. 
 
 Others besides fruit growers had griev- 
 ances. In 1896, the Southern Pacific charges 
 on wool had become so exorbitant that wool 
 growers were threatened with ruin and were 
 driven back to primitive conditions. Some 
 of them abandoned railroad transportation 
 
 * Before the Interstate Commerce Commission. Arlington 
 Heights Fruit Exchange el al. versus Southern Pacific Com- 
 pany el al. Petition of complaints, pp. 15-16. The graft in- 
 volved here .is not much greater than that involved in all these 
 icing charges, which are everywhere unjust. 
 
518 
 
 Hampton's Magazine 
 
 and hauled their wool in wagons 200 miles 
 to a market, finding that extraordinary re- 
 version to mediaeval methods cheaper than ' 
 to pay the railroad rates. To these and to 
 the lemon growers that cut down their or- 
 chards the blessings of the railroad and its 
 "benefits conferred" must have seemed 
 grimly farcical. 
 
 Meantime the cities, like San Francisco 
 and Los Angeles, groaned, and so far as they 
 dared, they protested. 
 
 Every approach by land was held by the 
 Southern Pacific. Many times the people 
 of San Francisco encouraged new lines of 
 railroad that promised competition, and the 
 city and county granted subsidies to such 
 enterprises, only to see the new projects fall, 
 one after another, into the hands of the 
 monopoly. 
 
 But there was always the open road of 
 the sea. Monopolies can seize the land; 
 no one can compass the sea. Whenever 
 years of eflFort to establish competition or 
 get relief by land had ended in failure, the 
 San Franciscans would turn to the sea. 
 
 HOW THE RAILROAD FIGHTS COMPETITION 
 BY WATER 
 
 They found no more relief there than they 
 had found on the land or in competition. 
 
 Two conditions stood in their way. Their 
 business was with the Eastern states. 
 Therefore it was domestic commerce. The 
 Federal law restricted domestic commerce 
 to American ships. There were few Ameri- 
 can ships. 
 
 The normal, easy, and cheap transit for 
 their goods was from New York down the 
 Atlantic coast to the Isthmus of Panama, 
 across the Isthmus by the Panama Rail- 
 road, and then up the Pacific to San Fran- 
 cisco. 
 
 From New York to the Isthmus they 
 could ship easily. From the Isthmus to 
 San Francisco the only steamships were 
 those of the Pacific Mail, and the Pacific 
 Mail was owned by the Southern Pacific. 
 
 To prevent the use of the water route and 
 to compel shipments by rail, the Pacific 
 Mail made a prohibitive rate between the 
 Isthmus and San Francisco.* 
 
 The merchants of San Francisco endured 
 this condition for years. To end it, some 
 of them organized an independent line of 
 vessels to the Isthmus. Competition. 
 
 • The chief business of the Pacific Mail to the south was be- 
 tween San Francisco and the west coast ports of South America. 
 
 The Southern Pacific made an arrange- 
 ment with the Panama Railroad whereby 
 for a payment of $75,000 a month * the 
 railroad agreed to let the merchants' freight 
 lie on the wharves instead of carrying it 
 across the Isthmus. In a short time the 
 wharves were piled high with goods the 
 railroad made no effort to move. 
 
 The merchants surrendered before this 
 impossible condition, the independent line 
 was abandoned, and the situation drifted 
 back to the undisputed control of the 
 Southern Pacific. Its subsidy to the Pana- 
 ma railroad for helping to throttle Cali- 
 fornia was alone sufficient to pay a fair divi- 
 dend on the Panama's capital. f 
 
 Substantially, to the merchants, this is 
 the situation to-day. 
 
 But, you say, this is very strange. The 
 Panama Railroad and the connecting steam- 
 ship line on the Atlantic are now owned and 
 operated by]the United States Government. 
 Surely the government will not enter into 
 an open alliance for plunder with the South- 
 em Pacific. 
 
 No, but there is something else at work. 
 
 The Southern Pacific continues to oper- 
 ate the Pacific Mail, and continues to make 
 prohibitive rates. To-day the total freight 
 rate from San Francisco to New York via 
 Panama is $8 a ton. Of this, the United 
 States Government, for the railroad haul 
 across the Isthmus and the water haul to 
 New York, receives $2.40; the Southern 
 Pacific, for the shorter water haul, San 
 Francisco to the Isthmus, receives $5.60. 
 
 To meet this condition the obvious rem- 
 edy is for the government to operate steam- 
 ships on the Pacific as it does on the Atlan- 
 tic. Now see: 
 
 RAILROAD SECRETLY CONDEMNED, BUT 
 OPENLY ADULATED, BY MERCHANTS 
 
 In San Francisco, Isidor Jacobs, a civic 
 reformer noted for his courage, has been 
 for seventeen years fighting railroad extor- 
 tion. He organized the old Traffic Asso- 
 ciation of California, which brought forth 
 the San Joaquin Valley Railroad (gob- 
 bled by the Santa Fe) and the ill-fated in- 
 dependent line to the Isthmus. For two 
 or three years he has been laboring for a 
 government line on the Pacific. Largely 
 at his instigation, the government sent 
 
 * Report of J. L. Bristow, Special Panama Railroad Commis- 
 sioner, to the Senate Committee on Interoceanic Canals, 1908, 
 
 t Commissioner Bnstow s Report, p. 13. 
 
The Paying of the Bill 
 
 519 
 
 J. L. Bristow as a special commissioner to 
 investigate conditions pertaining to such a 
 line. 
 
 At San Francisco, a public meeting was 
 held under the auspices of the Chamber of 
 Commerce, which, with the two other mer- 
 cantile associations of San Francisco, is 
 dominated by the Southern Pacific. Some 
 hundreds of merchants were present. Only 
 Mr. Jacobs spoke for the government line. 
 Other speakers praised with fulsome ex- 
 pressions the Pacific Mail service and man- 
 agement, and opposed a government enter- 
 prise. 
 
 Mr. Jacobs suggested that Mr. Bristow 
 should invite the merchants to come to him 
 privately at his hotel and express their 
 opinions. Mr. Bristow adopted this sug- 
 gestion, and in the next two days about two- 
 score of San Francisco's free and indepen- 
 dent American citizens crept Hke criminals 
 into Mr. Bristow's apartments and after 
 exacting a pledge of secrecy told him that 
 the Pacific Mail service was abominable 
 and extortionate and a government line 
 would be a boon. Many of these were gen- 
 tlemen that at the meeting had expressed 
 exactly the opposite views.* 
 
 "I inquired privately as to the reasons 
 for the inconsistent attitude of these gen- 
 tlemen," says Mr. Bristow. He seems to 
 have found out. "It was further added 
 that the tremendous power in transporta- 
 tion matters which this combination of 
 steamship and railway management held 
 over the fortunes of San Francisco shippers 
 would tend to make them timid in express- 
 ing in public any views that would be dis- 
 pleasing to either company." f 
 
 "Tend to make them timid!" Between 
 the tyranny of a corporation in the twen- 
 tieth century and the tyranny of a satrap 
 in the first will some one kindly point out 
 the difference? Some one of the Glorious 
 Spirit of Optimism preferred, but anyone 
 will do. 
 
 San Francisco never got its govern- 
 ment line and the Pacific Mail continues 
 o blockade the Isthmus route. The 
 jouthern Pacific influence stopped this 
 <s it has stopped every other relief for 
 jrty years. It is a pathetic spectacle. 
 With the open-handed Californian gener- 
 cisity San Francisco has given money, lands, 
 \nd terminals. In return she has had 
 
 chiefly kicks and scientific and multiplied 
 extortion. I think you can hardly find in 
 the world the fellow to that story.* 
 
 To epitomize it, one should look first at 
 the magnificent Mission Bay property free- 
 ly bestowed upon the railroad, and then 
 turn to contemplate the fact that at the 
 great Portola celebration in San Francisco, 
 October, 1909, the Southern Pacific was the 
 only institution that made money from the 
 crowds and the only institution that refused 
 to contribute a dollar to the expenses of the 
 celebration. 
 
 THE SOUTHERN PACIFIC DISOBEYS THE 
 HEPBURN ACT 
 
 • Observe next how much your laws avail 
 to restrain this corporation. 
 
 The Hepburn railroad rate regulation act 
 was passed by Congress in 1906. It was the 
 nation's third and most strenuous attempt 
 to end railroad abuses. 
 
 Four months after it became a law, all 
 men in San Francisco that follow these 
 matters knew the Southern Pacific was pay- 
 ing no more heed to the new than it had 
 paid to the old law and was daily granting 
 the forbidden rebate. 
 
 Complaint was made to the Interstate 
 Commerce Commission, and one year later, 
 in October, 1907, Commissioner Lane came 
 to San Francisco and began a hearing. 
 
 At once it was evident that the govern- 
 ment's secret service agents and inspectors 
 had caught the railroad red-handed. Amaz- 
 ing details were laid bare. It appeared that 
 rebates abounded for favored shippers in 
 almost every line of commerce. To record 
 these illegal transactions the Southern 
 Pacific maintained a set of secret books, 
 twenty in number, called the "A" books,t 
 kept in a separate room by a Mrs. Cum- 
 mins and a Miss Lena Amundsen. To 
 these books no one had access except the 
 head manipulator of rebates, and in them 
 were set down thousands of instances of 
 these forbidden advantages to shippers — 
 disguised mostly, please mark, as alleged 
 claims for damaged goods or overcharges — 
 under the sanction of the General Freight 
 Agent of the Southern Pacific! 
 
 * Mr. Bristow's Report, p. 4. 
 
 Ibid., pp. 4-5. 
 
 • As to conditions to-day, see report of the Senate Committee 
 on Federal Relations, California Legislature, to be found in the 
 Senate Journal for March 23, 1909, p. 27. 
 
 t Before the Interstate Commerce Commission. In the Mat- 
 ter of Rates_, Practices, Accounts and Revenues of Carriers, at 
 San Francisco, October 2, 3, 4, 1907. Testimony of J. M. 
 Brewer, pp. 6, 7, and elsewhere. 
 
 t Ibid., p. 7. 
 
520 
 
 Hampton's Magazine 
 
 Documentary evidence of these rebates 
 was submitted and by the curious may now 
 be found in the appendix to the testimony. 
 
 When the scandal had been laid bare the 
 Southern Pacific, quite unabashed, played 
 its trump card and retired serenely. 
 
 It offered Mr. G. W. Luce, General 
 Freight Agent, as a witness, with the state- 
 ment that he could explain these rebates if 
 he were sworn. 
 
 Commissioner Lane was not to be so 
 trapped. He recognized that the swearing 
 of Luce as a witness would be an " immun- 
 ity bath" for him and all his transactions. 
 Therefore, the commissioner declined to let 
 Mr. Luce be sworn, but said he might make 
 any statement he cared to make. The 
 Southern Pacific attorney would not let Mr. 
 Luce say anything except under oath.* And 
 thus the matter ended. The Southern Pa- 
 cific management said, with much pretense 
 of righteous indignation, that it could ex- 
 plain everything if it were only allowed, but 
 it was not allowed — which is an excellent 
 line of talk for gabies — and the commission, 
 of course, was deprived of the advantage 
 of questioning Mr. Luce. 
 
 This was in 1907. Some optimists may 
 think that these lawless practices having 
 been thus indubitably revealed, the South- 
 ern Pacific (in the beautiful phrase of regu- 
 lation) "ceased and desisted" from them 
 and joined the other railroads in protesta- 
 tions of reform. To any such persons I 
 commend a reading of the decision of the 
 California Board of Railroad Commission- 
 ers, filed January 12, 1909, from which it 
 appears that one year after the revelations 
 before Commissioner Lane the same com- 
 pany was dealing in the same line of rebates 
 at the old stand. f 
 
 * Before the Interstate Commerce Commission. In the Mat- 
 ter of Rates, Practices, Accounts and Revenues of Carriers, at 
 San Francisco, October 2, 3, 4, 1907, pp. 116, 117. 
 
 f Before the Board of Railroad Commissioners of the State 
 of California, No. 102. In the Matter of Alleged Discrimina- 
 tions by the Southern Pacific. Pages 17 and 18 will be found 
 particularly interesting. 
 
 This incident, so characteristic, so per- 
 fectly typical of the whole enterprise from 
 its inception, may well close our little his- 
 tory. 
 
 With the concentrated bitterness that 
 the people of California feel for the South- 
 ern Pacific, we have had nothing to do here. 
 Purposely, I have refrained from mention- 
 ing the terms in which most Californians 
 usually refer to the railroad, and have like- 
 wise omitted great store of material and 
 incidents of which the import was malig- 
 nant or personal or tending to place upon 
 individuals responsibility for a general con- 
 dition for which no man should be blamed. 
 
 But I do believe it to be a fair conclusion 
 that the whole system upon which this 
 company has been operated from its first 
 stock subscription to this day is largely 
 fraudulent, utterly wrong, and gravely in- 
 jurious to the people of California and to 
 the rest of the country. 
 
 I do believe it to be clear that every dol- 
 lar taken unfairly or dishonestly or by clever 
 scheming out of this property has been re- 
 paid many times from the living expenses 
 of the people. 
 
 I do believe it certain that all this repre- 
 sents a situation not much longer to be en- 
 dured if the nation is to survive and be 
 free. 
 
 The highways are the people's. Let 
 us return them to the people from whom 
 they have been taken chiefly by chican- 
 ery, bribery, and fraud. 
 
 For all these and all the other intol- 
 erable and growing evils of our trans- 
 portation system, for the increased 
 cost of living demonstrably produced 
 by the overissue of railroad securities, 
 for the menace in the rapid increase of 
 these overissues, and for the corruption 
 that these influences always work in 
 our public affairs, there is no other 
 remedy. 
 
 Let us begin to apply it now. 
 
 Editorial Note. — The foregoing article was written before the new Interstate Com- 
 merce Law, enacted by the last session of Congress, went into effect. At the time this number 
 of HAMPTON'S goes to press it is too early to judge of the effect of the new law upon the rate 
 situation described in the foregoing pages, but it seems probable that while the law, if enforced, 
 may operate to change some details, the principle behind the rate-making will remain intact. 
 
 5 31 o--r