Great Fortunes from Railroads Part 8

By means of this systematic corruption the steams.h.i.+p owners received many millions of dollars of Government funds. This was all virtually plunder; the returns from the "postages" far more than paid them for the transportation of mails. And what became of these millions in loot? Part went in profits to the owners, and another part was used as private capital by them to build more and newer s.h.i.+ps constantly.

Practically none of Vanderbilt's s.h.i.+ps cost him a cent; the Government funds paid for their building. In fact, a careful tracing of the history of all of the subsidized steams.h.i.+p companies proves that this plunder from the Government was very considerably more than enough to build and equip their entire lines.

One of the subsidized steams.h.i.+p lines was that of E. K. Collins & Co., a line running from New York to Liverpool. Collins debauched the postal officials and Congress so effectively that in 1847 he obtained an appropriation of $387,000 a year, and subsequently an additional appropriation of $475,000 for five years. Together with the "postages," these amounts made a total mail subsidy for that one line alone during the latter years of the contract of about a million dollars a year. The act of Congress did not, however, specify that the contract was to run for ten years. The postal officials, by what Senator Toombs termed "a fraudulent construction," declared that it did run for ten years from 1850, and made payments accordingly. The bill before Congress in the closing days of the session of 1858, was the usual annual authorization of the payment of this appropriation, as well as other mail-steamer appropriations.

VANDERBILT'S HUGE LOOT.

In the course of this debate some remarkable facts came out as to how the Government was being steadily plundered, and why it was that the postal system was already burdened with a deficit of $5,000,000.

While the appropriation bill was being solemnly discussed with patriotic exclamations, lobbyists of the various steams.h.i.+p companies busied themselves with influencing or purchasing votes within the very halls of Congress.

Almost the entire Senate was occupied for days with advocating this or that side as if they were paid attorneys pleading for the interests of either Collins or Vanderbilt. Apparently a bitter conflict was raging between these two millionaires. Vanderbilt's subsidized European lines ran to Southampton, Havre and Bremen; Collins' to Liverpool. There were indications that for years a secret understanding had been in force between Collins and Vanderbilt by which they divided the mail subsidy funds. Ostensibly, however, in order to give no sign of collusion, they went through the public appearance of warring upon each other. By this stratagem they were able to ward off criticism of monopoly, and each get a larger appropriation than if it were known that they were in league. But it was characteristic of business methods that while in collusion, Vanderbilt and Collins constantly sought to wreck the other.

One Senator after another arose with perfervid effusion of either Collins or Vanderbilt. The Collins supporters gave out the most suave arguments why the Collins line should be heavily subsidized, and why Collins should be permitted to change his European port to Southampton. Vanderbilt's retainers fought this move, which they declared would wipe out of existence the enterprise of a great and patriotic capitalist.

It was at this point that Senator Toombs, who represented neither side, cut in with a series of charges which dismayed the whole lobby for the time being. He denounced both Collins and Vanderbilt as plunderers, and then, in so many words, specifically accused Vanderbilt of having blackmailed millions of dollars. "I am trying,"

said Senator Toombs, to protect the Government against collusion, not against conflict. I do not know but that these parties have colluded now. I have not the least doubt that all these people understand one another. I am struggling against collusion. If they have colluded, why should Vanderbilt run to Southampton for the postage when Collins can get three hundred and eighty-seven thousand dollars for running to the same place? Why may not Collins, then, sell his s.h.i.+ps, sit down in New York, and say to Vanderbilt, 'I will give you two hundred and thirty thousand dollars and pocket one hundred and fifty-seven thousand dollars a year.' That is the plain, naked case. The Senator from Vermont says the Postmaster General will protect us. It is my duty, in the first place, to prevent collusion, and prevent the country from being plundered; to protect it by law as well as I can.'

Regarding the California mails, Senator Toombs reminded the Senate of the granting eleven years before of enormous mail subsidies to the two steams.h.i.+p lines running to California--the Pacific Mail Steams.h.i.+p Company and the United States Mail Steams.h.i.+p Company, otherwise called the Harris and the Sloo lines. He declared that Vanderbilt, threatening them with both compet.i.tion and a public agitation such as would uncover the fraud, had forced them to pay him gigantic sums in return for his silence and inactivity. Responsible capitalists, Senator Toombs said, had offered to carry the mails to California for $550,000. "Everybody knows," he said, "that it can be done for half the money we pay now. Why, then, should we continue to waste the public money?" Senator Toombs went on:

You give nine hundred thousand dollars a year to carry the mails to California; and Vanderbilt compels the contractors to give him $56,000 a month to keep quiet. This is the effect of your subventions. Under your Sloo and Harris contracts you pay about $900,000 a year (since 1847); and Vanderbilt, by his superior skill and energy, compelled them for a long time, to disgorge $40,000 a month, and now $56,000 a month. ... They pay lobbymen, they pay agencies, they go to law, because everybody is to have something; and I know this Sloo contract has been in chancery in New York for years.

[Footnote: The case referred to by Senator Toombs was doubtless that of Sloo et al. vs. Law et al. (Case No. 12,957, Federal Cases, xxii: 355-364.)

In this case, argued before Judge Ingersoll in the United States Circuit Court, at New York City, on May 16, 1856, many interesting and characteristic facts came out both in the argument and in the Court decision.

From the decision (which went into the intricacies of the case at great length) it appeared that although Albert G. Sloo had formed the United States Mail Steams.h.i.+p Company, the incorporators were George Law, Marshall O. Roberts, Prosper M. Wetmore and Edwin Crosswell.

Sloo a.s.signed his contract to them. Law was the first president, and was succeeded by Roberts. A trust fund was formed. Law fraudulently (so the decision read) took out $700,000 of stock, and also fraudulently appropriated large sums of money belonging to the trust fund. This was the same Law who, in 1851 (probably with a part of this plunder) bribed the New York Board of Aldermen, with money, to give him franchises for the Second and Ninth Avenue surface railway lines. Roberts appropriated $600,000 of the United States Mail Steams.h.i.+p Company's stock. The huge swindles upon the Government carried on by Roberts during the Civil War are described in later chapters in this work. Wetmore was a notorious lobbyist. By fraud, Law and Roberts thus managed to own the bulk of the capital stock of the United States Mail Steams.h.i.+p Company. The mail contract that it had with the Government was to yield $2,900,000 in ten years.

Vanderbilt stepped in to plunder these plunderers. During the time that Vanderbilt competed with that company, the price of a single steerage pa.s.sage from California to New York was $35. After he had sold the company the steams.h.i.+p "North Star" for $400,000, and had blackmailed it into paying heavily for his silence and non- compet.i.tion, the price of steerage pa.s.sage was put up to $125 (p.

364).

The cause of the suit was a quarrel among the trustees over the division of the plunder. One of the trustees refused to permit another access to the books. Judge Ingersoll issued an injunction restraining the defendant trustees from withholding such books and papers.] The result of this system is that here comes a man--as old Vanderbilt seems to be--I never saw him, but his operations have excited my admiration--and he runs right at them and says disgorge this plunder. He is the kingfish that is robbing these small plunderers that come about the Capitol. He does not come here for that purpose; but he says, 'Fork over $56,000 a month of this money to me, that I may lie in port with my s.h.i.+ps,' and they do it.

[Footnote: The Congressional Globe, 1857-58, iii: 2843-2844.

The acts by which the establishment of the various subsidized ocean lines were authorized by Congress, specified that the steamers were to be fit for s.h.i.+ps of war in case of necessity, and that these steamers were to be accepted by the Navy Department before they could draw subsidies. This part of the debate in the United States Senate shows the methods used in forcing their acceptance on the Government:

Mr. Collamer.--The Collins line was set up by special contract?

Mr. Toombs.--Yes, by special contract, and that was the way with the Sloo contract and the Harris contract. They were to build s.h.i.+ps fit for war purposes. I know when the Collins vessels were built; I was a member of the Committee on Ways and Means of the other House, and I remember that the men at the head of our bureau of yards and docks said that they were not worth a sixpence for war purposes; that a single broadside would blow them to pieces; that they could not stand the fire of their own guns; but newspapers in the cities that were subsidized commenced firing on the Secretary of the Navy, and he succ.u.mbed and took the s.h.i.+ps. That was the way they got here.

Senator Collamer, referring to the subsidy legislation, said: "As long as the Congress of the United States makes contracts, declare who they shall be with, and how much they shall pay for them, they can never escape the generally prevailing public suspicion that there is fraud and deceit and corruption in those contracts."]

Thus, it is seen, Vanderbilt derived millions of dollars by this process of commercial blackmail. Without his having to risk a cent, or run the chance of losing a single s.h.i.+p, there was turned over to him a sum so large every year that many of the most opulent merchants could not claim the equal of it after a lifetime of feverish trade.

It was purely as a means of blackmailing coercion that he started a steams.h.i.+p line to California to compete with the Harris and the Sloo interests. For his consent to quit running his s.h.i.+ps and to give them a complete and una.s.sailed monopoly he first extorted $480,000 a year of the postal subsidy, and then raised it to $612,000.

The matter came up in the House, June 12, 1858. Representative Davis, of Mississippi, made the same charges. He read this statement and inquired if it were true:

These companies, in order to prevent all compet.i.tion to their line, and to enable them, as they do, to charge pa.s.sengers double fare, have actually paid Vanderbilt $30,000 per month, and the United States Mail Steams.h.i.+p Company, carrying the mail between New York and Aspinwall, an additional sum of $10,000 per month, making $40,000 per month to Vanderbilt since May, 1856, which they continued to do. This $480,000 are paid to Vanderbilt per annum simply to give these two companies the entire monopoly of their lines--which sum, and much more, is charged over to pa.s.sengers and freight.

Representative Davis repeatedly pressed for a definite reply as to the truth of the statement. The advocates of the bill answered with evasions and equivocations. [Footnote: The Congressional Globe, part iii, 1857-58:3029. The Was.h.i.+ngton correspondent of the New York "Times" telegraphed (issue of June 2, 1858) that the mail subsidy bill was pa.s.sed by the House "Without twenty members knowing its details."]

BLACKMAIL CHARGES TRUE.

The mail steamer appropriation bill, as finally pa.s.sed by Congress, allowed large subsidies to all of the steams.h.i.+p interests. The pretended warfare among them had served its purpose; all got what they sought in subsidy funds. While the bill allowed the Postmaster- General to change Collins' European terminus to Southampton, that official, so it was proved subsequently, was Vanderbilt's plastic tool.

But what became of the charges against Vanderbilt? Were they true or calumniatory? For two years Congress made no effort to ascertain this. In 1860, however, charges of corruption in the postal system and other Government departments were so numerously made, that the House of Representatives on March 5, 1860, decided, as a matter of policy, to appoint an investigatng committee. This committee, called the "Covode Committee," after the name of its chairman, probed into the allegations of Vanderbilt's blackmailing transactions. The charges made in 1858 by Senator Toombs and Representative Davies were fully substatiated.

Ellwood Fisher, a trustee of the United States Mail Steams.h.i.+p Company, testified on May 2 that during the greater part of the time he was trustee, Vanderbilt was paid $10,000 a month by the United States Mail Steams.h.i.+p company, and that the Pacific Mail Steams.h.i.+p Company paid him $30,000 a month at the same time and for the same purpose. The agreement was that if compet.i.tion appeared payment was to cease. In all, $480,000 a year was paid during this time. On June 5, 1860, Fisher again testified: "During the period of about four years and a half that I was one of the trustees, the earnings of the line were very large, but the greater part of the money was wrongfully appropriated to Vanderbilt for blackmail, and to others on various pretexts." [Footnote: House Reports, Thirty-sixth Congress, First Session 1859-60 v:785-86 and 829. "Hence it was held,"

explained Fisher, in speaking of his fellow trustees, "that he [Vanderbilt] was interested in preventing compet.i.tion, and the terror of his name and capital would be effectual upon others who might be disposed to establish steams.h.i.+p lines" (p. 786).] William H. Davidge, president of the Pacific Mail Steams.h.i.+p Company, admitted that the company had long paid blackmail money to Vanderbilt. "The arrangement," he said, "was based upon there being no compet.i.tion, and the sum was regulated by that fact." [Footnote: Ibid., 795-796.

The testimony of Fischer, Davidge and other officials of the steams.h.i.+p lines covers many pages of the investigating committee's report. Only a few of the most vital parts have been quoted here.]

Horace F. Clark, Vanderbilt's son-in-law, one of the trustees of the United States Mail Steams.h.i.+p Company, likewise admitted the transaction. [Footnote: Ibid., 824.

But Roberts and his a.s.sociate trustees succeeded in making the Government recoup them, to a considerable extent, for the amount out of which Vanderbilt blackmailed them. They did it in this way:

A claim was trumped up by them that the Government owed a large sum, approximating about two million dollars, to the United States Mail Steams.h.i.+p Company for services in carrying mail in addition to those called for under the Sloo contract. In 1859 they began lobbying in Congress to have this claim recognized. The scheme was considered so brazen that Congress refused. Year after year, for eleven years, they tried to get Congress to pa.s.s an act for their benefit. Finally, on July 14, 1870, at a time when bribery was rampant in Congress, they succeeded. An act was pa.s.sed directing the Court of Claims to investigate and determine the merits of the claim.] It is quite useless [Footnote: The Court of Claims threw the case out of court.

Judge Drake, in delivering the opinion of the court, said that the act was to be so construed "as to prevent the entrapping of the Government by fixing upon it liability where the intention of the legislature [Congress] was only to authorize an investigation of the question of liability" (Marshall O. Roberts et al., Trustees, vs. the United States, Court of Claims Reports, vi: 84-90). On appeal, however, the Supreme Court of the United States held that the act of Congress in referring the case to the Court of Claims was in effect _a ratification of the claim_. (Court of Claims Reports, xi: 198-126.) Thus this bold robbery was fully validated.] to ask whether Vanderbilt was criminally prosecuted or civilly sued by the Government. Not only was he unmolested, but two years later, as we shall see, he carried on another huge swindle upon the Government under peculiarly heinous conditions.

This continuous robbery of the public treasury explains how Vanderbilt was able to get hold of millions of dollars at a time when millionaires were scarce. Vanderbilt is said to have boasted in 1853 that he had eleven million dollars invested at twenty-five per cent.

A very large portion of this came directly from his bold system of commercial blackmail. [Footnote: Undoubtedly so, but the precise proportion it is impossible to ascertain.] The mail subsidies were the real foundation of his fortune. Many newspaper editorials and articles of the time mention this fact. Only a few of the important underlying facts of the character of his methods when he was in the steamboat and steams.h.i.+p business can be gleaned from the records. But these few give a clear enough insight. With a part of the proceeds of his plan of piracy, he carried on a subtle system of corruption by which he and the other steamer owners were able time after time not only to continue their control of Congress and the postal authorities, but to defeat postal reform measures. For fifteen years Vanderbilt and his a.s.sociates succeeded in stifling every bill introduced in Congress for the reduction of the postage on mail.

HE QUITS STEAMs.h.i.+PS.

The Civil War with its commerce-preying privateers was an unpropitious time for American mercantile vessels. Vanderbilt now began his career as a railroad owner.

He was at this time sixty-nine years old, a tall, robust, vigorous man with a stern face of remarkable vulgar strength. The illiteracy of his youth survived; he could not write the simplest words correctly, and his speech was a brusque medley of slang, jargon, dialect and profanity. It was said of him that he could swear more forcibly, variously and frequently than any other man of his generation. Like the Astors, he was cynical, distrustful, secretive and parsimonious. He kept his plans entirely to himself. In his business dealings he was never known to have shown the slightest mercy; he demanded the last cent due. His close-fistedness was such a pa.s.sion that for many years he refused to subst.i.tute new carpets for the scandalous ones covering the floors of his house No. 10 Was.h.i.+ngton place. He never read anything except the newspapers, which he skimmed at breakfast. To his children he was unsympathetic and inflexibly harsh; Croffut admits that they feared him. The only relaxations he allowed himself were fast driving and playing whist.

This, in short is a picture of the man who in the next few years used his stolen millions to sweep into his owners.h.i.+p great railroad systems. Croffut a.s.serts that in 1861 he was worth $20,000,000; other writers say that his wealth did not exceed $10,000,000. He knew nothing of railroads, not even the first technical or supervising rudiments. Upon one thing he depended and that alone: the brute force of money with its auxiliaries, cunning, bribery and fraud.

CHAPTER IV

THE ONRUSH OF THE VANDERBILT FORTUNE

With the outbreak of the Civil War, and the scouring of the seas by privateers, American s.h.i.+p owners found themselves with an a.s.sortment of superfluous vessels on their hands. Forced to withdraw from marine commerce, they looked about for two openings. One was how to dispose of their vessels, the other the seeking of a new and safe method of making millions.

Most of their vessels were of such scandalous construction that foreign capitalists would not buy them at any price. Hastily built in the brief period of ninety days, wholly with a view to immediate profit and with but a perfunctory regard for efficiency, many of these steamers were in a dangerous condition. That they survived voyages was perhaps due more to luck than anything else; year after year, vessel after vessel similarly built and owned had gone down to the bottom of the ocean. Collins had lost many of his s.h.i.+ps; so had other steams.h.i.+p companies. The chronicles of sea travel were a long, grewsome succession of tragedies; every little while accounts would come in of s.h.i.+ps sunk or mysteriously missing. Thousands of immigrants, inhumanly crowded in the enclosures of the steerage, were swept to death without even a fighting chance for life. Cabin pa.s.sengers fared better; they were given the opportunity of taking to the life-boats in cases where there was sufficient warning, time and room. At best, sea travel is a hazard; the finest of s.h.i.+ps are liable to meet with disaster. But over much of this sacrifice of life hung grim, ugly charges of mismanagement and corruption, of insufficient crews and incompetent officers; of defective machinery and rotting timber; of lack of proper inspection and safeguards.

THE ANSWER FOUND.

The steamboat and steams.h.i.+p owners were not long lost in perplexity.

Since they could no longer use their s.h.i.+ps or make profit on ocean routes why not palm off their vessels upon the Government? A highly favorable time it was; the Government, under the imperative necessity of at once raising and transporting a huge army, needed vessels badly. As for the other question momentarily agitating the capitalists as to what new line of activity they could subst.i.tute for their own extinguished business, Vanderbilt soon showed how railroads could be made to yield a far greater fortune than commerce.

The t.i.tanic conflict opening between the North and the South found the Federal Government wholly unprepared. True, in granting the mail subsidies which established the ocean steams.h.i.+p companies, and which actually furnished the capital for many of them, Congress had inserted some fine provisions that these subsidized s.h.i.+ps should be so built as to be "war steamers of the first cla.s.s," available in time of war. But these provisions were mere vapor. Just as the Harris and the Sloo lines had obtained annual mail subsidy payments of $900,000 and had caused Government officials to accept their inferior vessels, so the Collins line had done the same. The report of a board of naval experts submitted to the Committee of Ways and Means of the House of Representatives had showed that the Collins steamers had not been built according to contract; that they would crumble to pieces under the fire of their own batteries, and that a single hostile gun would blow them to splinters. Yet they had been accepted by the Navy Department.