CHAPTER XI

THE RAILROAD COMMISSION OF 1880 TO 1883

Early Agitation Against Company

It is more difficult to describe the relations of the Central Pacific to the legislative bodies of California than it is to trace the history of the system in most other respects, because the details are less matters of public record. Some connection between the railroad and politics undoubtedly existed at an early date. Indeed, Stanford and Colton were politicians before they became railroad men, and the state and local aid which the railroad secured at the very beginning of its construction but confirmed an attitude favorable to continued relations between the corporation and the body politic which these gentlemen might have been expected to approve.

Before 1876, the only regulation which the associates had to encounter was that resulting from the general railroad law, which required a minimum subscription before a railroad corporation could commence business, established proportionate liability of stockholders, and reserved to the legislature the right to reduce rates when the net income of any company exceeded 20 per cent. These and other provisions of like tenor were little calculated to interfere with the profitable operations of a railroad business except perhaps that the proportionate liability established by the law to some extent discouraged participation in railroad enterprise. In 1874 and in 1876, maximum rates and fare enactments were discussed in the legislature but failed of passage. In 1876, nevertheless, the accumulated resentment of the California public over what it considered the grasping and monopolistic policy of a selfish corporation led to important additions to the law. This resentment had been growing for several years. The Sacramento reporter for the San Francisco Bulletin wrote, in March, 1868:

There is a strong prejudice existing here and daily growing stronger, against the Central Pacific Railroad Company. The members from Placer, Nevada, and El Dorado counties are all of them, I suppose, pledged to endeavor to obtain a reduction of the rates of freight and fare on the line. Petitions, apparently signed by nearly all the residents of the districts which use the road for the transportation of freight and travel, have poured in upon the legislature, asking a reduction of prices. It is said that traders who complain of the rates are discriminated against. A general feeling exists that, considering how liberally it has been dealt with by Congress and the State, the management of the business and affairs of the company is extremely illiberal....

In like vein the Stockton Independent said of the owners of the Central Pacific in 1871:

No set of men on the face of the globe were ever placed in a more enviable position, or in one where by the exercise of a reasonable foresight, they could have retained their popularity and the friendship of the people. It is now hardly two years since this work was completed, and how remarkable has been the change in public sentiment. Along the whole line of their main trunk road from San Francisco to Ogden, as well as along the various branch roads of this company, nothing is heard but one continuous murmur of complaint, and it is safe to assert that this shortsighted, illiberal, and suicidal policy of the company has so completely changed the sentiment of the people that there is not in a single town on any of their lines of road, either in this state or Nevada, one individual who approves of this course, nor one who will speak well of the company, unless it be one of their subsidized agents or strikers.

Beginnings of State Regulation

It is not necessary to dwell at this point on the reasons for the opinions voiced in these extracts from the press. The feeling of the general public, of which these extracts are the reflection, was doubtless due in part to anger at the methods employed by the Central Pacific in promoting subsidy legislation, in part to disappointment over the results of railroad construction, and in part to reaction against policies of the Central Pacific such as have been outlined in previous chapters. However this may be, the result was the passage of the so-called O’Connor bill in 1876, which erected a State Board of Transportation Commissioners, and defined and prohibited extortion and unjust discrimination. The commissioners were not only to enforce these prohibitions, but they were given extensive authority to secure information from the steam railroads of the state, and were charged with the duty of supervising all such railroads with reference to the security and accommodation of the public.[260]

It appears from the report of the commissioners appointed under the O’Connor Act that the railroads in California, and in particular the Central Pacific, refused to render the reports required by the legislature, and that the commission was unable to compel them to do so.[261] Two years later the commissioners were legislated out of office, and a single commissioner was appointed in their place, acting under a statute similar in most important respects to that administered by his predecessors.[262] Mr. Tuttle, the new commissioner, accumulated certain statistics during his two-year term of office, but otherwise did little to which the railroads could object.

The development of railroad regulation was thus temporarily arrested. Yet for several reasons the check to the progress of public control was not lasting. Feeling in the state was running high. The times were hard, both for reasons affecting the whole country, and because of circumstances peculiar to the Pacific Coast. The rainfall of the winter of 1876-77 was slight and, as happens in such cases, great loss of cattle on the ranges occurred, and the grain crop was seriously deficient. At the same time the yield of the Nevada silver mines declined—in fact the dividends of the important Consolidated Virginia mine stopped altogether in January, 1877, to the great disturbance of the stock market at San Francisco. Under these conditions unemployment and suffering were the experience of the working classes, while riots and later, political agitation also resulted. Even the radical labor leader, Dennis Kearney, in spite of his lack of character and self-restraint, or even of unusual mental ability, served as the temporary expression at this time of a real distress, and had some influence on the course of legislation.

Railroad Question in Constitutional Convention

So far as the railroads were concerned, the effect of the unrest throughout California and the activity of the Workingman’s party is seen in the railroad clauses of the Constitution of 1879, and of the Act of 1880, which carried them into effect. The call for a convention was issued by the same legislature which passed the railroad control bill of 1878.[263] Mr. Colton thought the call most unfortunate,[264] but there is no reason to suppose that the legislature had anything particularly radical in mind.

When the convention began its sessions, however, its membership was found to include a majority of persons determined to force thoroughgoing regulation upon the railroad system of the state, as well as a minority opposed to government control of any kind. Just how regulation should be made effective, it is true, few members of the first-named group knew. Some were opposed to corporations as a class, and thought that at least unlimited liability should be imposed on holders of corporate stock. Others were in favor of declaring railroads public highways, upon which all persons should be allowed to run cars and locomotives under such regulations as might be prescribed by law. Still others desired to set a maximum limit of 10 per cent to the return on investment in railroad property. The extreme position on the other side was taken by men like McFarland, of Sacramento, who maintained that the clamor about railroads and corporations was a mania evolved from the inner consciousness of members of the convention, as spiders spin their webs.

The discussion of railroad regulation by the Constitutional Convention of 1879 began on November 18 and ended on December 7. It was systematically conducted, participated in by men with a wide variety of views, and resulted in constructive conclusions of importance. More could scarcely be asked of a deliberative assembly. The main decisions reached were as given below.

New Regulative Commission

The first conclusion of the Constitutional Convention was that the regulation of railroads in California should be entrusted to an elective commission, holding office for four years, and vested with the power to establish and publish rates, to examine the books and records of transportation companies, and to prescribe a uniform system of accounts. Heavy penalties, including fine and imprisonment, were provided for failure to obey the orders the commissioners might make.

The principal objection made to the establishment of a commission was that its power would be excessive. It was pointed out that the commission would combine legislative, judicial, and executive functions, and that its members could lower rates and increase railroad expenses at will. Mr. Wilson, of San Francisco, declared:

Here, then, will stand in our government a constitutional triumvirate as great in many respects as that of Rome in the olden time. They may raise and lower the rates of freight and fare to suit their powers, and thus they can play with the value of the stock in the market, and determine the value of the bonds and mortgages on the road.... They will be sole judges of what are abuses.... They will determine complaints on their own notions of right and wrong, and however erroneous or malicious their acts, there will be no remedy or appeal.

Reference was made to the English Railway Commission of 1873 and to the Massachusetts Commission of 1869, and the Wisconsin experiment of 1874 was held up as something to avoid. The reply to this kind of objection was that the power to control rates must be lodged somewhere, and that the legislature was inexpert, slow to act, and subject to corrupt influences.

Other Constitutional Provisions

The second decision of the convention was that a general prohibition of discrimination should be placed in the fundamental law. The clauses finally adopted provided that no discrimination in charges or facilities for transportation should be made by any railroad or other transportation company between places or persons, or in the facilities for the transportation of the same classes of freight or passengers within the state, or coming from or going to any other state. In addition to this general prohibition, it was enacted that persons and property transported over any railroad, or by any other transportation company or individual, should be delivered at any station at charges not exceeding the charges for the transportation of persons and property of the same class, in the same direction, to any more distant station. This amounted to a stringent prohibition of greater charges for shorter than for longer hauls. Speakers opposed to the discriminative clauses insisted that only unjust discrimination, not all discrimination, should be prohibited, and pointed out that the proposed law was unconstitutional in that it applied to commerce between the states. Neither objection was sufficient to persuade the convention that the proposals should not be approved.

Besides the fundamental clauses relating to a commission and those prohibiting and defining discrimination, the Constitutional Convention of 1879 forbade railroads to grant passes to persons holding any office of honor, trust, or profit in the state; forbade them also to agree to divide earnings with owners of vessels entering or leaving the state, or, under certain conditions, with other common carriers; granted to all railroads the right to connect with, intersect, or cross other railroads; and provided that no officer or employee of any railroad or canal company should be interested in the furnishing of material or supplies to such company. One apparently important clause declared that a railroad which should lower its rates of fare or freight for the purpose of competing with any other common carrier, should not again raise these rates without the consent of the governmental authority in which should be vested the power to regulate fares and freights.

Act of 1880

Special emphasis should be placed upon the constitutional provisions adopted in 1879 because they created the framework upon which railroad regulation in California was to hang for thirty years. For a full understanding of the system the act of the legislature approved April 15, 1880, should also be consulted. This act defined certain terms used in the law. It also fixed the salary of the commissioners at $4,000 each, provided a mechanism for enforcement of the commissioners’ orders through the courts, placed the office of the board in the city of San Francisco, and required rates established by the commission to be posted in all offices, station houses, warehouses, and landing offices to or from which the rates applied. Finally, it granted to the commission, in general terms, all the necessary means and the authority to adopt any suitable procedure to make effective the powers conferred by the Constitution.[265]

Harvey S. Brown, attorney for the Stanford interests, once said that the Constitution of the state of California was conceived in communistic malice, was framed by unpardonable ignorance, adopted in frenzied madness, and was valuable only as a beacon to other states and peoples to avoid its principles and results.[266]

The document certainly compelled the associates to consider the best method of defence against a political attack which threatened to sterilize the monopoly control which they were slowly establishing over the railroad system of the state. From their point of view the danger was like any other—one to be met by skilful strategy, displayed in a new field, but resembling in impelling motive and essential character their action in adjusting rates and in dominating the terminal situation on San Francisco Bay.

Personnel of First Commission

According to the Constitution, one railroad commissioner was to be elected from each of three districts into which the state was to be divided. Elections were held in 1880, and J. S. Cone, C. J. Beerstecher, and George B. Stoneman were returned. Cone was a ranch owner, business man, and capitalist at Red Bluff, with an income of $50,000 a year, and property worth perhaps $200,000. He had been on friendly terms with Stanford before he became commissioner, and had known most of the prominent railroad officials of the state for twenty-five years. By association and point of view he represented the interests of large business in the state. Stoneman was a politician of the better type, later governor of the state, a Democrat, and believed to be a defender of the public interest.[267]

The third member of the commission was C. J. Beerstecher, a San Francisco lawyer with a miscellaneous practice amounting to perhaps $50 a month. Judge Lawler, of the Superior Court of San Francisco, who knew Beerstecher well, says that he came to San Francisco, with nothing but a gripsack, and built up a small practice, mainly divorce suits, among the poorer classes in the city. For some time Beerstecher used Lawler’s office, living in rooms in the same building, for which he paid $15 a month; Lawler befriended him, and a man named Steinman advanced him money for electioneering expenses. In return for this, apparently, Steinman was later made bailiff to the railroad commission. That is to say, Beerstecher was poor, with no reputation to lose, and in circumstances in which his good-will had value.

One would scarcely expect effective regulation of a commission composed of a wealthy farmer, a cheap lawyer, and a man who looked to a career in the public service. Nor was such regulation in fact secured. Stoneman once told Judge Reagan, of Texas, that when the California commissioners were elected, he, Stoneman, was elected because it was understood that he represented the popular interests; another gentleman (J. S. Cone) was elected because it was understood that he represented the feeling of the corporations, and a third (Beerstecher) was a sand-lot man. He added that, having the sand-lot man with him to take care of the interests of the people, he thought he was all right, but in a short time the sand-lot man sold out and did not amount to anything.[268] Cone also considered Beerstecher a reliable pro-railroad man. There is no direct evidence that Beerstecher accepted railroad money, but the probabilities are strong. Before discussing this point, however, the activities of the new commission may be briefly described.

Indifference of Commissioners

The evidence shows that from the very first the three members of the California commission devoted but a small portion of their time to the work of regulation. Mr. Beerstecher was accustomed to visit his office twice a day, spending perhaps an hour there each time. This was while Beerstecher was a resident of San Francisco. In the latter part of his term he lived in the Napa Valley and probably spent even less time on his official duties. Nor did Beerstecher compare unfavorably with his fellow appointees in application to his work. Governor Stoneman devoted five or six days a month to affairs of the commission; Mr. Cone about the same. Of 127 meetings held by the board between May 3, 1880, and January 8, 1883, Cone was present at 99, Stoneham at 80, and Beerstecher at 109.[269]

It seems beyond belief that a new commission, established to initiate public control of a great industry, should have approached the problem in this indifferent way. The undertaking called for the fullest exercise of the powers of all the commission’s members; but it was approached as a casual task to be accomplished in the spare hours of busy men.

As a natural result of their attitude with respect to the importance and urgency of railroad regulation, the commissioners failed to make effective the most primary requirements of the law. Instead of preparing new rates except as hereinafter stated, the commission established the existing rates of the companies operating in the state. Instead of prescribing a system of keeping accounts, the existing system was adopted. Mr. Stoneman once tried to investigate the railroad books, but said they were all Greek to him, and he had no authority to employ an expert. Beerstecher testified that the commission asked certain questions, but that he did not, as an individual commissioner, consider that it was his business to go prying around into the business of the railroad companies.[270]

Some slight attention was paid to the posting of rates, but the only inspection seems to have been by the bailiff of the commission. Doubtless the original cause for the failure of the commission in the respects mentioned was lack of money; but it was for the members to formulate boldly their ideas of what should be done, and to educate public opinion as to its necessity, making use meanwhile of all the authority which they could wield. It was gross negligence and indifference to rest content while the law stood unenforced.

Adoption of First Rate Schedule

The largest task eventually undertaken by the commission was the formulation of rate schedules for passengers and freight. During the spring and summer of 1880, the commissioners traveled through the state taking testimony and hearing complaints. In the winter and spring of 1880-81, they attempted to formulate results. It appears that in May, 1880, Stoneman introduced a resolution to the effect that maximum rates in California should not exceed five cents per ton per mile for distances 100 miles and over, and six cents per ton per mile for distances under 100 miles, and that maximum fares should not exceed four cents and five cents per mile within the same limitations. This was defeated by a vote of two to one. Nothing was done between this time and February, 1881, when the board unanimously adopted a schedule of passenger fares with maxima varying from five cents to three cents per mile.[271]

At the same time that the passenger schedule was introduced Mr. Cone submitted a freight tariff, which was also adopted. This schedule cut rates mainly on agricultural products originating in the northern part of the state. Stoneman objected to it—but later said that he did not prepare an alternative schedule because he knew it would not be adopted. He did, however, call the attention of the board to the fact that southern California was being discriminated against.[272] Beerstecher had no part in the preparation of the new rates, but made no opposition to them.

Delay in Enforcement

Armed with the new passenger and freight schedules, Mr. Cone went over to the Southern Pacific offices and left the figures with Mr. Towne, general manager, for comment. The railroad people at once objected. They said they were building the Southern Pacific and selling bonds to raise the money. The proposed reductions would injure their credit and could not be accepted. Cone was anxious to avoid litigation and to get quick action.[273] Moreover, Stanford wished to get away and go to Europe, and Cone did not like to keep him. As Cone said in another connection, Stanford was pretty winning in his ways. The result was that the railroad agreed not to contest the new freight rates and Cone consented not to press the reduction in passenger rates, at least not until October, 1881. There is no evidence that Cone possessed authority from the commission to negotiate with the Central Pacific, but he seems to have acted in confidence that Beerstecher would support him in action favorable to the railroad and Stoneman in action of contrary tenor.

i220

As a matter of fact the board did not take further action in regulation of passenger fares until August, 1882, a year and a half after the question had first been raised. By this time Cone had become convinced, so he says, that Stanford would concede no further reduction in railroad charges. On the 15th of August, Stoneman accordingly reintroduced his original passenger schedule, but slightly changed. The matter was laid over for a month, and in September, at a meeting at which only Cone and Stoneman were present, a substitute resolution was adopted, setting a maximum fare of four cents per mile. Stoneman thought the maximum should be three cents, but Cone would not consent. The new maxima were suspended in October “until further order of the board” in order to give the railroad companies an opportunity to be heard. Before the commission came together again, however, Stoneman had resigned. This left Beerstecher and Cone—with two as a quorum. It is eloquent of Beerstecher’s attitude that he attended no meeting of the board after November 22, 1882, and that on that day his action in respect to passenger rates was to move to postpone consideration.

In two years and seven months the only reductions in rates and fares secured by the Railroad Commission were certain cuts in the rates on products of agriculture conceded to the farmer member of the commission by his railroad friends. The commission formulated no principles and worked out no effective procedure. Even its reports to the legislature had little value. The first two were prepared by Mr. Beerstecher, the third by Mr. Tuttle, former railroad commissioner but no longer in any official way connected with regulation work. When the commission was not unanimous in its decisions, the division usually was that of Cone and Beerstecher against Stoneman—a fact which leads us back to the question of the nature of the influence which the Stanford group was able to exert.

Bribery Committed

The charge is made that the Central Pacific bought and paid for Beerstecher’s services while a member of the Railroad Commission, and that Cone was so influenced by his personal and business relations with the managers of the Central Pacific as to be unable to view their activities in the critical and impartial way which his position demanded. The evidence in the case is purely circumstantial, but seems to be convincing. So far as the former is concerned we have the admitted fact that Beerstecher was richer at the end of his term of office than at the beginning by at least $12,000 and probably by a good deal more. As he put it, he thought he saved his entire salary of $4,000 a year as commissioner, during these years. Beerstecher asserted incidentally that his legal practice while a member of the Railroad Board amounted to from $1,200 to $1,500 a year—although the records of the Superior Court of San Francisco, before which Beerstecher practiced, show that this was highly unlikely,[274] and the testimony of the bailiff to the commission is directly to the contrary. $12,000 may be regarded as adequate compensation for a man of Beerstecher’s type.[275]

Gerke Transaction

Cone’s case is not quite so simple. It seems unlikely that a man of his standing should have consciously accepted a bribe. There is, however, direct evidence of a reliable character that Cone was given unusual consideration by the railroad in connection with the purchase of certain lands in the northern part of the state, and Cone himself admitted that while he was commissioner he had bought some lands from a man named Gerke and had resold them within two or three months to the treasurer of the Southern Pacific at a profit of $100,000.[276]

What happened in the first of these two instances was this: It seems that there was a tract of about 34,000 acres of the Oregon grant of the Central Pacific lying east of Cone’s ranch—rough, chapparal land, graded at from 50 cents to $2.50 an acre. Cone was running about 20,000 sheep at the time, and was using the land without paying for it, as certain other individuals were also doing. Among these other persons was a man named Wilson, who was not only a small sheep owner, but an actual settler as well. Wilson originally applied to purchase from 5,000 to 7,000 acres of the tract, and was quoted the first graded price, $1.25 to $2.50 an acre. At this quotation he took some land that had water on it, but in general could not afford to buy. Later the land was regraded, and Redding, the Central Pacific land agent, told Wilson that the regrade price was 50 cents. A few months after, in June, 1881, Wilson applied to purchase, although he believed that the application was unimportant, since as a settler he was entitled to second grade. He had the land fenced by this time.

Meanwhile, on the 21st of April, 1880, Cone had negotiated with the Central Pacific for a tract of 34,097.45 acres, including the land in which Wilson was interested. He did not offer to purchase, but asked to have the lands that were free reserved for him, that he might ascertain the bounds of his range. In fact, when the statement of the cost of the lands was made out for him he refused to take them at the graded price, and abruptly left the Central Pacific land office, exhibiting considerable ill feeling. This was the situation when Wilson applied. Properly considered, Wilson seems to have been entitled to purchase at the new price. His application was subsequent to Cone’s conference with the Central Pacific land commissioner, but Cone had then refused to pay the price asked, which left the lands open. The Central Pacific, however, through Mr. Redding, its agent, refused to sell. Mr. Redding later said:

When Mr. Wilson demanded a right to purchase a portion of these lands because Mr. Cone had bargained for them and then refused to take them, I told Mr. Wilson the circumstances and said to him that Mr. Cone had refused under so great an exhibition of temper that it was my duty to wait until Mr. Cone became more calm. I also added that the new Constitution and the people had given Mr. Cone and his associates powers that were more extensive than those of the Czar of Russia; that he and his associates could virtually confiscate the property of the stockholders of the railroad company, and that I could not afford to add to a quarrel which by any possibility might be construed into an excuse for unjust action.

The result was that Wilson hunted up Cone and tried to get a relinquishment. Cone offered to let Wilson have the land at the graded price—the first graded price, as Wilson understood it. This offer was naturally refused, and Cone subsequently bought the whole tract for $29,199.67. Although the facts are somewhat complicated, it seems clear that Mr. Cone received special treatment, due to his position as railroad commissioner.

Of the Gerke transaction, Cone testified:

I would say that the ranch was held under a deed of trust, and parties were foreclosing it, and at the time I bought it it would have been sold under a deed of trust in fourteen days, and the party came to me and asked what I would pay for it and I didn’t dream they intended to sell it because I didn’t know the condition the land was in, and they insisted on my making an offer that day for it. I made an offer and it was accepted.

Mr. Storke: What was your profit on that transaction?

A. I think in the neighborhood of one hundred thousand dollars, and the worst trade I ever made when I sold it.

Finding of Legislative Committee

Dealings of this kind were improper, to say the least, and calculated to interfere with the impartial discharge of a commissioner’s duties. On the whole subject a committee of the California legislature reported as follows:

As to the second subject of inquiry, whether the Commissioners, or either of them, during their term of office, may have made any extraordinary acquisition of property ... your committee report that in their opinion Commissioner Stoneman did not make any extraordinary acquisition of property; that Commissioner Cone made a large acquisition to his wealth, which was already great when he was elected Railroad Commissioner, and your committee believe that such acquisition of wealth was largely due to extraordinary and unusual facilities afforded by the railroad officers; and that Commissioner Cone, in the purchase of thirty-four thousand acres of land for twenty-nine thousand dollars, was made a privileged purchaser, and received from the railroad company facilities in this regard denied to other applicants for portions of the tract; and further, that the transaction by which the Gerke farm was purchased by Commissioner Cone in April, 1881, and sold in September of the same year to Nicholas Smith, the Treasurer of the Southern Pacific Railroad Company, at a profit of one hundred thousand dollars, gives rise to the suspicion that more was contemplated in the purchase and sale than appears on the face of the transaction. As to Commissioner Beerstecher, your committee find that by general report, and in the opinion of his associates, he was without means at the time of his election, and his sudden acquisition of wealth while Commissioner was without adequate explanation....

As to the fourth subject of inquiry, your committee report that Commissioners Cone and Beerstecher knew of and permitted both systematic and casual discrimination in charges and facilities for transportation between persons and places by railroad corporations in this State, and that through their conduct in permitting and upholding the same, Commissioner Stoneman was unable to accomplish a redress of such discriminations while Commissioner. Further, under this fourth subject of inquiry, your committee find that Commissioner Cone sacrificed the best interests of the State through personal friendship for Governor Stanford, and in return therefor received favors from him; and that Commissioner Beerstecher’s conduct admits of no other explanation than that he was bribed, and that in the opinion of this committee Commissioners Cone and Beerstecher acted in the interests of the railroad corporations rather than of the people.

This finding of the legislative committee is justified by the facts elicited in their investigation.

---

CHAPTER XII

THE SOUTHERN PACIFIC AND POLITICS

Appeals to Public

We may now consider in a more general fashion the political methods of the Southern Pacific group during the first thirty years of their railroad history. We have seen that they not only relied upon the talents of their legal staff in taking advantage of defects in the law, but that in two cases—the case of the railroad commission of 1880, and that of the subsidy in San Francisco in 1863—they probably resorted to the direct use of money to accomplish their ends. Yet a whole state cannot be bought, though individuals may be, and it would do injustice to the breadth of view of the associates to suppose that they limited themselves to any such crude device. Indeed, the frequency with which money bribes were offered probably diminished as time went on.

Consideration of the general policies of Mr. Stanford and of Mr. Huntington seems to show that they met the public demand for regulation of rates and fares in no less than five distinct ways.

The first method consisted of appeals to the general public through testimony before legislative committees, communications to the newspapers, letters to private organizations which interested themselves in the government control of corporations, and other similar devices. By these various means Stanford, at least, spread his philosophy of industry widely abroad. He took the general position that agitation upon the subject of railroads was due to misapprehension of the facts. Most alleged abuses were imaginary, but the Central Pacific stood ready to correct any that were shown to exist.[277] Railroad fares and freights were cheaper in California than anywhere else in the world, all things considered.[278] In case further reduction were desired, the true policy was to place as few burdens upon the railroads as possible, to encourage in this way new construction, and to rely on competition for the desired result. The interests of the railroad and of the public were the same.[279] Monopolies in the United States were possible only to the extent that they were beneficent. There was properly no right of control in the state. The Granger decisions of the Supreme Court of the United States were a flagrant violation of the principles of free government. If the people wanted to exercise control over a railroad they must do as the state does when it exercises the right of eminent domain; that is to say, they must pay to the individual owners the full value of whatever was taken for public use. Anything else was confiscation. Moreover, at best, regulation could not be complete, because it could not ever compel the shipper to ship equally over all lines, and because, while commerce was world-wide, American governments could regulate but one link in the chain. In California, regulation was peculiarly inexpedient so long as the railway system of the state was incomplete.[280]

Huntington’s Views

Mr. Huntington shared Mr. Stanford’s views, or at least approved the conclusion to which they led, but does not seem to have courted the same publicity in respect to the matter. Interviews he distrusted. “I notice,” he wrote in 1875, “that some correspondent of a San Diego paper has been interviewing Mr. Crocker. It is very difficult for any one to be interviewed by an infernal newspaper without getting hurt; and Mr. Crocker is not the most unlikely to get hurt of all the men I know.”

Yet in spite of this attitude towards the newspaper reporter, Huntington had a keen appreciation of the importance of shaping public opinion, and was familiar with the ordinary devices used for the purpose, including the manipulation of the press. He was concerned over the attitude of the Sacramento Record Union. “If I owned the paper,” he said, “I would control it or burn it.”[281] “I wish you would have it sent over the wires as often as you can that the Southern Pacific is being rapidly built,” he wrote Colton from New York in 1877.[282] Again, “Yours of November 28 with Northern Pacific clips is received. Many of the articles are very good. It is much better that all such articles with petitions be sent direct to members of the Senate and House, we keeping in the background as much as possible.”[283]

In November, 1875, Huntington wrote Colton that:

Gwynn left for the South yesterday. I think he can do us considerable good if he sticks for his hard money and anti-subsidy schemes; but if it was understood by the public that he was here in our interest, it would no doubt hurt us. When he left I told him he must not write to me, but when he wanted I should know his whereabouts, etc., to write to R. T. Colburn of Elizabeth, New Jersey.[284]

Influential Individuals Favored

A second method employed by the associates in their efforts to oppose public regulation of corporate affairs was that of paying personal attention to men who possessed or were believed to possess influence. In its simplest form this involved the employment at liberal salaries of the ablest legal talent which could be found. The policy was, however, pushed much further than the statement made would indicate. Huntington’s letters to his associates in the West were full of suggestions as to what should be done and of commendations for, or criticism of, what had been accomplished.

In April, 1875, Huntington wrote Colton that he had given Dr. Linderman, director of the United States Mint, a letter of introduction to him, Colton, at San Francisco. This was because the location of a new building for the Mint might be of importance to the Central Pacific.[285] In October of the same year Huntington gave a pass to a certain congressman and ex-governor, but warned Colton that the man was a slippery fellow and should not be trusted too much.[286] Crocker wrote to Colton in February, 1875:

I fully appreciate your position there and need of ... a Senator of the United States. We tried to get him off sooner the best we knew. I think he did not want to go, and I fear when he gets there he will not be earnest in our interest as formerly. Stanford thinks I am mistaken and I hope I am.[287]

A letter dated July 26, 1876, shows that Huntington was trying to get up a party of twenty-five southern members of Congress to visit California over the Southern Pacific. He wanted none but the best men—that is, men who would “go for the right as they understand it, and not as Tom Scott[288] or somebody else understands it,” but he was willing to pay the expenses of the trip for such men.[289] In order to help persuade representative men to make this trip, Huntington telegraphed Colton to have some of the prominent men in San Francisco wire Senator Gordon, of Georgia, urging that the visit should be made.[290] “I noticed you are looking after the State Railroad Commission,” Huntington adds in another letter to the same address, “I think it is time.”[291] Again:

I am sorry to learn that the receipts are so very poor south of San Francisco, but it is a good time to take the State Railroad Commissioners over the roads. I am glad to notice that you are looking after the Commissioners. I think it very important.[292]

Still again, in May, 1877, Huntington wrote:

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 California. 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 lost us one dollar. I think I have written you before about Senator.... 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 California.[293]

Letters like these cover only one period and refer to the activity of only three out of the five associates, but there is sufficient outside evidence of a general nature to indicate that this policy was systematically followed by the Stanford group.

Lobbying in Washington and Sacramento

In addition to the attempt in a general way to gain the good-will of the public or of influential members of it, the Central Pacific was regularly represented at Washington and Sacramento when legislation was pending. Huntington, as has been said, took care of the company’s affairs in Washington. He had offices in New York and Boston also, and divided his time between the three places while Congress was in session—four days in Washington, two in New York, and one in Boston.[294] Stanford attended to matters in Sacramento, either in person or through representatives such as William Carr or Stephen T. Gage. The latter was also for many years the company’s agent in Nevada. Both Huntington and Stanford, of course, were assisted by a corps of lawyers and political aides-de-camp, some of whom were very highly paid. General Franchot, for instance, Huntington’s chief assistant, received at one time a salary of $20,000 a year, besides a liberal expense account. Much criticism has been directed at the activity of Central Pacific agents in the lobbies at Washington and Sacramento, but a large portion of it was probably legitimate.

Correspondence from Washington

Certainly the watch which the associates kept on legislation was very close. Huntington’s own activities in 1875, 1876, 1877, and 1878 are vividly described in the letters which he wrote Colton during these years, and some few of these deserve to be reproduced if only for the picture they suggest of the man who wrote them. In March, 1875, Huntington wrote:

I notice a bill passed the House some few days since, called up by Williams of Michigan. I forget its title, but it called for reports, etc., etc., from the Pacific roads. Of course it was something ugly or it would not have passed.[295]

This was mere routine. By June, 1876, however, the legislative work had increased. Mr. Huntington told Colton:

There is a terrible fight kept up on us in Washington. But while they may bite us, they will not eat us up. Sherrell telegraphed me to come to Washington in great haste, as Lawrence was to pass his bill at once; so I went over and got the committee to recall it from the House back to the committee, so the demagogue from Ohio cannot trouble us before the 6th of July. In the meantime we will be working on our land proposition in the Senate. Just what we can do I cannot say, but I shall surely keep trying.[296]

The following month he added:

I returned from Washington last night. Our matters look better there, but we are not out of danger. It has been so very hot here for the last few weeks that it has come near using me up. You know I do not spare myself when I have anything to do.[297]

In August, 1876, Huntington wrote Colton:

I have thought I could stand anything, but I am fearful this damnation Congress will kill me. Senator Edmunds told another Senator yesterday that he would pass his Pacific Railroad Sinking Fund Bill before Congress adjourned, but I think he will not, and I have some hope Congress will adjourn by the time this reaches you.[298]

And in March, 1877, he was able to say:

The committee with which Huntington was so content was changed somewhat later, much to his disgust.[300]

It was not until the first part of 1878, however, that his letters show him again hard at work. In January, 1878, Huntington wrote to Colton:

I notice what you write of the communists in the California Legislature, and am very sorry to know it, but the feeling in Congress is not much better, and yet, somehow, I do not think we shall be much hurt, although Scott is working hard and developing more strength than I supposed he had. He had the Railroad Committee of the House. I think we have it now.[301]

The following month he said:

I returned from Washington last night, and I am as near used up as I ever was in my life before. I am spending my last winter at Washington. As I feel today, I would not agree to spend another there for all the property we all have. Our matters are looking fair in Washington, Scott is very bitter in the discussion. He used some business compliments and all such stuff, and I am compelled to play him; but it is very distasteful to me.[302]

This letter is followed in the record by a series of others of the same tenor, which will be presented without comment.

Skilled Wire-Pulling

There is no need to comment in any detail upon these letters. Their occasional indication of discouragement doubtless meant nothing more than that Huntington sometimes grew tired and hot and angry with the opposition which he encountered. A characteristic of the man was that he never really gave up. The Thurman bill referred to will be described in another connection.

Scott was a railroad man, at one time president of the Pennsylvania Railroad, who was seeking to persuade Congress to subsidize a transcontinental railway by the southern route. The land proposition was a scheme of the associates to induce the federal legislature to buy back a portion of the Central Pacific land grant at the government price. As a whole, the letters so far quoted show that Huntington was a persistent and energetic lobbyist, although the record of Congressional legislation shows that he was far from uniformly successful.

i238

On the whole, the railroad managers pulled wires with a skill which rapidly increased with experience. Sometimes the company was made to appear prominently, and sometimes it was kept in the background when legislation was desired. Huntington found that some members of Congress were disinclined to talk to him concerning Southern Pacific matters. In such cases he had recourse to third parties—perhaps a constituent of the member in question, perhaps a friend. The same methods were employed in dealing with state legislation. In 1875 the Southern Pacific desired a franchise permitting it to build through Arizona. Huntington wrote Colton that he thought this would cost less if other interests than the associates stood at the front while the franchises were being obtained, but that after the charters were obtained it should be known that they were controlled by the Southern Pacific.[308] He said:

I am inclined to believe that if you could get the right man on that line in Arizona to work with the few papers they have there, to agitate the question in the territory, asking that some arrangement be made with the S. P., at the same time offer the S. P. a charter in the territory that would free the road from taxation, and one that would not allow for any interference with rates until ten per cent interest was declared on the common stock, I believe the Legislature could be called together by the people for $5,000 and such a charter granted. Then we would take the chances of having such a charter made good by Congress or the State when it became one.[309]

At one time Huntington even suggested that the Southern Pacific might bear the expense of an extra session of the Arizona legislature in order to hasten consideration of legislation favorable to the company.[310] The desired legislation was eventually obtained, but not until February, 1887.

Unethical Dealings

Did or did not the Huntington group, including Stanford at Sacramento and Reno, and Huntington at Washington, employ improper means in their endeavor to influence votes? This is another question upon the answer to which much depends. That passes were issued to members of the legislature, members of Congress, and judges of courts, and that gentlemen of these types were entertained at dinner in Sacramento was generally known. We have Mr. Gage’s statement, at least, that no more than this took place in Nevada. He told the United States Pacific Railway Commission of 1887, that his expenditures in that state over a period of eight years had amounted to $2,000, and added:

... and I would like to produce to you the files of the newspapers in order to show the existence of the misapprehensions that existed among the good people of Nevada, as indicated by their press, concerning my relations with the legislature of Nevada, session after session for the sixteen years. I remarked yesterday that it was one of the greatest sources of regret that I had, the imputations which were cast on my character, and which I feel I have not deserved, and which I feel I may not live long enough to outgrow. One of these is that I have spent money in the Nevada legislature for the Central Pacific like water; and those things were constantly asserted, and I believe frequently believed by a good many good people in the State, but they were not true. As I asserted to you yesterday, I have kept an accurate account of the expenses for the first eight years that I was attending the sessions of the Nevada legislature, which included my personal expenses during that time, and they figure up $2,000, or a fraction under it, as it was. Now, if any one thinks that $2,000, or less, could corrupt a legislature for eight years, including the personal expenses of myself, he must invoice members of the Nevada legislature at a very low price, and “buy them by the string.”[311]

Mr. Gage would not say, however, when asked pointblank, whether or not he had paid any money or made any provisions of advantage or reward to any member of the legislature of California or Nevada.[312] Nor would Mr. Stanford say more in reply to the inquiries of the United States Pacific Railway Commission than that the company would not include in any settlement with the United States, vouchers to which objections were made.[313]

On the whole, there is a good deal of evidence that the owners of the Central Pacific went further in influencing legislation than any strict system of ethics would allow. Huntington once stated his own position as follows:

If you have to pay money to have the right thing done, it is only just and fair to do it.... If a man has the power to do great evil and won’t do right unless he is bribed to do it, I think the time spent will be gained when it is a man’s duty to go up and bribe the judge. A man that will cry out against them himself will also do these things himself. If there was none for it, I would not hesitate.[314]

Further Evidence

More important than the record of such general expressions of opinion are the affidavits filed in the San Francisco subsidy litigation described in an earlier chapter. Nor is anyone likely to read the letters of Mr. Huntington to Mr. Colton in the late seventies without becoming convinced that the possibility of purchasing votes was constantly before Huntington’s mind. Huntington wrote Colton at one time that the (Southern Pacific) company could not get legislation unless it paid more than it was worth.[315] In another communication he said: “If we pass the Sinking Fund Bill and beat Scott and the Union Pacific, it will hurt us not less than half flora”;[316] and in still another we find the cheery comment: “Matters do not look well in Washington, but I think we shall not be much hurt, although the boys are very hungry and it will cost considerably to be saved.”[317]

In November, 1877, Huntington wrote Colton:

You have no idea how I am annoyed by this Washington business, and I must and will give it up after this session. 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 purposes; and I do not see my way clear to get through here and pay the January interest with other bills payable to January 1st, with less than $2,000,000, and possibly not for that.... I think Congress will try very hard to pass some kind of a bill to make us commence paying on what we owe the Government. I am striving very hard to get a bill in such a shape that we can accept it, as this Washington business will kill me yet if I have to continue the fight from year to year, and then every year the fight grows more and more expensive; and rather than let it continue as it is from year to year, as it is, I would rather they take the road and be done with it.[318]

In one case where the salary to be paid a certain individual was under consideration, Huntington wrote Colton frankly that it was important that the man’s friends in Washington should be on the railroad’s side, and that if this could be brought about a salary of $10,000 to $20,000 a year would be worth while. Huntington wanted the man to make a proposition in writing, however, that he would control his friends for a fixed sum.[319] When asked about the meaning of his correspondence, Huntington denied that these expressions had any vicious significance. He said he kept on high ground,[320] and even objected to the free use of liquor and cigars.[321] Specifically, he gave instructions to his people never to use money in any immoral or illegal sense. “Buying votes in a legislature was bad policy,” said he, and his position in these matters received the formal support of Stanford. But such assertions are entitled to less weight than Huntington’s less guarded phrases.

Heavy General and Legal Expenses

There is no question that the control exercised by the Central Pacific management over the legal and miscellaneous expenses of the company was informal to the last degree. Huntington had a great deal of money to spend and he turned it over to trusted agents without too many questions. He would pay $5,000 or $10,000 at a time to General Franchot, for instance, without inquiring where it went or how it was paid.[322] Checks were made out in all cases to I. E. Gates, Mr. Huntington’s assistant in New York, and were indorsed by him either to payee or in blank.[323] Vouchers covering such items were made out simply to “Expense,” or to “Legal expense.”[324] In many cases expenditures authorized by Stanford, Crocker, or Huntington were represented by no vouchers at all,[325] the filing of vouchers being subsequently waived at stockholders’ meetings.

All in all, the general and legal expenses of the Central Pacific between the years 1875 and 1885 averaged over $500,000 annually. The only reply to the government inquiry as to what this money had been paid out for was Stanford’s statement already quoted that vouchers to which there were objections would not be included in any settlement with the United States, but that the moneys would be treated as still in the treasury.[326] This was plainly an evasion of the point at issue.

Company in Politics

Still another question is how far the headquarters of the Central Pacific in the various capitals were used as agencies for the election of legislators and other persons who owed their position to railroad influence. It is the unhesitating popular judgment that the railroad at an early date “entered politics.” In a long letter dated August 26, 1873, Eugene Casserly asserted that the Central Pacific aimed to be and was a third party in the politics of the state, holding the balance of power between the Democratic and the Republican parties, and controlling or seeking to control at will each or both of them. “This third party,” continued Mr. Casserly, “has the usual attributes of a political party, the same apparatus and appliances. It has its leaders, its managers, its editors, its orators, its adherents. It selects these from both parties, but mostly from the party in the majority. Whether they call themselves Republicans or Democrats, and however they divide or contend on party issues, they move as one man in the cause of the railroad against the people. To that cause they give their first allegiance.”

Bassett Polemic

This statement of Mr. Casserly calls to mind another charge or series of charges made by a man named J. M. Bassett in the years following 1892. Mr. Bassett was one of the early pioneers. He came to California in 1851, and was at various times miner, printer, newspaper man, railroad employee, and member of the Oakland city council. At one time he was Leland Stanford’s secretary. After Mr. Stanford had been forced out of the presidency of the Southern Pacific, Bassett began to publish a series of open letters to Collis P. Huntington, and continued them weekly, with occasional intervals, for several years. The sustained vivacity and pungency of this polemic, and the systematic virulence with which Bassett reviewed and criticized the Huntington policies make the series a noteworthy journalistic achievement. Mr. Bassett denounced Mr. Huntington for the overcapitalization of the Southern Pacific system, for its failure to pay taxes, for its carelessness of the lives of its employees and of the public, for its attempt to evade repayment of the debt which it owed to the United States government, and for the general mismanagement which, he asserted, had taken place under Huntington’s control. With respect to the interference of the Southern Pacific in politics, Bassett wrote to Huntington in 1895:

What chief executive of the State, before the present incumbent, has there been who did not owe his nomination and election to the Southern Pacific Company and in acknowledgment of his debt hasten to obey its slightest command? Has there ever been a Board of Railroad Commissioners before last November in which you did not own at least two members? Have you not named every Harbor Commissioner appointed during the past twelve years?

Have you not hitherto chosen San Francisco’s Police Commissions and do you not now exercise a dictatorial power over the city’s police, especially the Harbor Police? Were not the Judges of the two United States Courts in San Francisco appointed at the instance of Leland Stanford? How many Superior Courts are there in the State in which a citizen may bring an action against you in full confidence that he will be fairly and impartially dealt with? Doubtless there are such but the difficulty is to find them. Before the recent elections how long did you control the government of San Francisco? Have you not dictated the government of Oakland for the past twenty-five years? Until last election had you not continuous control of Alameda County’s government?...[327]

When one desires to test the accuracy of accusations like those of Casserly and of Bassett, one has first to remember that they are in accord with the substantially uncontradicted declarations of men of all degrees of prominence in California over a period of fifty years. Political campaigns have been waged on the question of the railroad versus the people. Not only newspapers like the Sacramento Union and the San Francisco Examiner, but men like John T. Doyle, at one time state railroad commissioner, General Howard, a leading member of the Constitutional Convention of 1879, and H. H. Haight, at one time governor of the state of California, have asserted that railroad influence was a real and important factor in the politics of California. While neither a corporation nor an individual can properly be convicted on the strength of current report, the presence of so much smoke, over so long a period, is fair evidence of some fire.

Documentary Evidence

Direct testimony relating to the political activity of the Huntington group comes from Mr. Huntington himself in two ways. In the first place there have been published certain letters which passed between Huntington and his associate, Mr. Colton, in the years 1875 to 1878. These documents have been referred to in other connections. They came out in the course of court proceedings, and have the weight of confidential communications, not intended for publication. Extracts from these letters will presently be given. Besides this, certain statements were given by Huntington to the press in 1890 which bear directly upon the point at issue. These statements were intended to discredit Stanford, but in the course of the heated controversy to which they gave rise they were not denied by Stanford nor withdrawn by their author.

On May 1, 1875, Huntington wrote Colton:

I noticed what you say of Piper; 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.[328]

Asked to whom the letter referred, Huntington later said that if he remembered the person, and he thought he did, he was a man whose views ran contrary to all human interests.[329]

A letter in June, 1876, reads as follows:

I hope ... will be sent back to Congress. I think it would be a misfortune if he was not.... has not always been right, but he is a good fellow and is growing every day.... 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 San Francisco to send a scavenger like him to Congress once....[330]

Again, in November, 1876, Huntington wrote Colton:

I hope ... is elected and ... defeated, as it was generally understood here that our hand was over one and under the other....[331]

A still later letter relates to the pending election of a senator from California. Huntington said:

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 ..., I think, will be friendly, and there is no man in the Senate that can push a measure further than he can.[332]

Controversy between Associates

The correspondence which has just been cited is not offered in order to discredit Mr. Huntington, or for any reason except to show that it was Huntington’s belief in the years 1875, 1876, and 1877 that the influence of the Central Pacific should be used to advance the political interests of persons favorably inclined toward his railroad system and to discourage those in opposition. The personal controversy which took place between Stanford and Huntington in 1890 brought out some additional evidence of the same sort. This dispute arose ostensibly because of the election of Stanford in 1883-84 as senator from California in place of A. A. Sargent, one of Huntington’s friends. In reality it was probably only the final outcome of a growing tension between the two men, due to dissatisfaction on Huntington’s part with the small amount of time which Stanford devoted to railroad affairs, and perhaps to jealousy of the prominence which Stanford enjoyed in public estimation.[333]

However this may be, Stanford resigned the presidency of the Southern Pacific Company at the annual meeting of the stockholders on April 9, 1890, and Huntington was elected in his place. In his address to the board of directors of the company, Huntington used the following words:

Gentlemen, for the honor that you have done me in electing me President of the Southern Pacific Company ... I promise you that I will be as true to the interest of the company in the future as I have been in the past. I can promise you nothing more, for at all times my personal interest has been second to that of the company. It shall be so in the future, and in no case will I use this great corporation to advance my personal ambition at the expense of its owners, or put my hands into the treasury to defeat the people’s choice, and thereby put myself into positions that should be filled by others; but to the best of my ability will I work for the interest of the shareholders of the company and the people, whom it should serve.[334]

This statement attracted attention, and Huntingdon was asked to explain. In an interview with a reporter of the San Francisco Examiner he said further:

Such statements naturally led to an open breach between Huntingdon and Stanford.[336]

The point at issue was not, however, whether it was proper for the Southern Pacific to defend itself against political attack. On this there is every reason to suppose that all parties were agreed. It was rather whether the company should be used as an instrument to advance the personal interests of individuals. In the same connection the question arose whether railroad men should act together in political matters not connected with railroad affairs. Huntington, who had little interest in general politics, thought they should not. It is probable enough that Stanford or some of his subordinates had, on the other hand, used their influence as railroad men for personal and party ends.

Unscrupulousness of Associates

One rises from the study of the political activities of the owners of the Central Pacific with a feeling of indignation at the selfishness of these men, their indifference to all save considerations of private gain, and their readiness to use any and all methods which would advance their financial interests. The associates met the proposal of government regulation as a threat to rob them of their property and resisted it as they would have opposed any other attack. They never conceded that any question of public interest was involved which it was necessary for them to respect. They frankly defended the use of money as a method of persuading men to do what was right—which inevitably meant, of course, what in their judgment was right. They fell out among themselves, not because any one of them questioned the philosophy which inspired their opposition to public control, but because one of them was suspected of using power, developed in the course of the defense of railroad interests, to advance personal ambitions which ran counter to the views of his associates. These things should be plainly stated and their force clearly understood.

It is the writer’s opinion, however, that the amount of money spent by the Central Pacific in the purchase of legislative or other votes has probably been overestimated in the public mind. Direct bribery is a clumsy weapon and one difficult to conceal if practiced on any considerable scale. It was probably also unnecessary to a corporation such as the Central Pacific with other favors to bestow. Members of Congress might, indeed, be employed by the railroad when legislation was pending. Huntington maintained that this was legitimate,[337] and Gage once admitted that the company had to employ everybody who could pull a pound. The practice was more easily defensible than bribery, and could be applied to a better class of men. Other men might be reached through patronage, still others through discrimination in rates or through preferences. The suggestion that unfavorable legislation would hinder construction was potent with legislators from districts which still lacked rail connection. Yet Huntington once said of a man who was opposing him and whom he thought he could bribe, that his better judgment told him the associates could not afford to take the scamp into camp,[338] and this probably represented the situation at most times. Whether this worked for the eventual salvation of the Huntington group, is for the moralist to say.

---