Chapter IV: The Birth of the Trust

The arrangements which have now been described were the foundation on which the Standard Oil Trust was built. Some time in the summer of 1874, when he had become sure that the so-called “equalisation” scheme would be worked in his favour by the railroads and leading pipe lines simultaneously, Mr. Rockefeller conferred at Saratoga with two of his old friends of the South Improvement Company--W. G. Warden, of Philadelphia, and Charles Lockhart, of Pittsburg--both big refiners, and agreed with them to form an oil refiners’ Trust, which was to work with absolute secrecy, and gradually acquire control of all the refineries in America. The instrument by which this large order was to be put through was, of course, the secret rebate and the new “equalisation,” or, less euphemistically, discrimination. Secrecy was to be maintained by each firm as it came in carrying on business ostensibly as before under its old style and title, staff, and management, but its actual business was to be directed solely by the central board of the Trust, presided over by Mr. Rockefeller, which would control all operations of buying, transport, and selling. The refineries had to become the absolute property, however, of the Standard Oil Company, their late proprietors taking stock of that Company in exchange. We know this from an account of the Saratoga meeting given at a later period by Charles Lockhart, of Pittsburg, to Miss Ida M. Tarbell.

In March, 1875, something leaked out as to the constitution of the Trust, which was then spoken of as the Central Association. It gradually roped in most of the refining firms in America, the process being effected by one sensational collapse after another under the influence of the discrimination and the rebate. An exception was the huge refinery of Charles Pratt and Co., of New York, of which the famous H. H. Rogers was one of the most considerable assets. This firm sold itself more or less voluntarily to the Standard Oil for stock at 265. The absorption of the “Creek” refineries, _i.e._, those in the Oil Regions, was conducted by the scarcely less famous J. D. Archbold, who appeared in Titusville as the representative of a Standard Oil offshoot, since known to fame as the Acme Oil Company. Between 1875 and 1879 Mr. Archbold won his spurs in the Standard by buying out, dismantling, or shutting down nearly every refinery on the “Creek.” The history of this collapse makes pitiful reading, and I need not enter into it beyond giving a specimen or two extracted from contemporary records.

In 1888 Mr. A. H. Tack, a partner of the Citizens’ Oil Refining Company of Pittsburg, after explaining on oath before the House Committee on Manufactures how his splendidly organised business gradually became non-paying under the Standard Oil influence, added:--

In 1874 I went to see Rockefeller if we could make arrangements with
him by which we could run a portion of our works. It was a very brief
interview. He said there was no hope for us all. He remarked this--I
cannot give the exact quotation--“There is no hope for us,” and
probably he said, “There is no hope for any of us”; but he says, “The
weakest must go first.” And we went!

The case of Scofield, Shurmer and Teagle, a Cleveland refinery, is evidence of the demoralisation of the times. At first the firm showed fight, and in 1876 brought a suit against the Lake Shore and Michigan Southern and the New York Central and Hudson River railroads for “unlawful and unjust discrimination, partialities, and preferences made and practised ... in favour of the Standard Oil Company, enabling the said Standard Oil Company to obtain, to a great extent, the monopoly of the oil and naphtha trade of Cleveland.” But Mr. Rockefeller persuaded them to drop their suit and obtain bigger profits than they were making by becoming his fellow-conspirators. They signed a contract, consequently, with him for ten years, the firm putting in a plant worth $73,000 and its entire time, and Mr. Rockefeller putting in $10,000--and his railway discriminations! The firm was guaranteed $35,000 a year net profit--about 50 per cent. on capital; profits over $35,000 went to Mr. Rockefeller up to $70,000--about 100 per cent.; any further profits were to be divided.

The enormous dimensions of the profits contemplated in this case--and no doubt afterwards reaped--would presumably have excited suspicion very quickly among Scofield, Shurmer and Teagle’s acquaintances who had seen them in their struggling days had not Mr. Rockefeller been an adept in joining secrecy to fraud as the basis of his operations. To quote Miss Tarbell (i. p. 66):--

According to the testimony of one of the firm given a few years later
on the witness-stand in Cleveland the contract was signed at night
at Mr. Rockefeller’s house on Euclid Avenue in Cleveland, where he
told the gentlemen that they must not even tell their wives about the
new arrangement, that if they made money they must conceal it--they
were not to drive fast horses, “put on style,” or do anything to
let people suspect there were unusual profits in oil refining. That
would invite competition. They were told that all accounts were to be
kept secret. Fictitious names were to be used in corresponding, and
a special box at the post-office was employed for these fictitious
characters. In fact, smugglers and housebreakers never surrounded
their operations with more mystery.

“Smuggling,” “housebreaking,” “burglary” are all terms that have been used to designate Mr. Rockefeller’s methods, though much has been made of his mild demeanour and gentle persuasiveness in dealing with his rivals. To my mind his persuasiveness is on a par with that of the bold highwayman sung of in the “Pickwick Papers”:--

But Dick put a couple of balls in his nob
And perwailed on him to stop.

The Standard Oil Trust has been repeatedly and publicly charged in America with using in the pursuits of its ends or the defence of its interests such weapons as perjury, bribery, open violence, and arson. They concern, of course, individual members of the combination rather than the whole combination, and we begin with that part of the case which concerns Mr. J. D. Rockefeller personally.

In 1888 the mystery surrounding the ramifications of the Standard ring caused the Senate of New York State to order an “Investigation Relative to Trusts,” and before the Commission entrusted with this investigation Mr. Rockefeller appeared and was questioned as to the _initium malorum_--the South Improvement Company. I quote from the official report of this investigation:--

_Q._ There was such a company?

_A._ I have heard of such a company.

_Q._ Were you not in it?

_A._ I was not.

As pointed out in my former articles, Mr. J. D. Rockefeller was a director with 180 shares in the concern, and the fact is now absolutely beyond dispute. The statement above was made on February 28th, and on April 30th following Mr. Rockefeller appeared before a Committee of the House of Representatives at Washington, and the following colloquy took place:--

_Q._ I want the names particularly of gentlemen who either now or
in the past have been interested with you gentlemen who were in the
South Improvement Company?

_A._ I think they were O. T. Waring, W. P. Logan, John Logan, W.
G. Warden, O. H. Payne, H. M. Flagler, William Rockefeller, J. A.
Bostwick, and--_myself_.

A direct contradiction of his own words within the space of two months! Again, questioned as to railway rates by the New York Senate Committee, Mr. Rockefeller was asked if there had been any arrangements by which the Trust or the companies controlled by it got transportation at any cheaper rates than were allowed to the general public, and his answer was:--

No, we have had no better rates than our neighbours. But, if I may
be allowed, we have found repeated instances where other parties had
secured lower rates than we had.

The Committee, however, was not satisfied, and returned to the charge later on in the day, and Mr. Rockefeller, after much wriggling and evasion, practically admitted the contrary:--

_Q._ Has not some company or companies embraced within this Trust
enjoyed from railroads more favourable freight rates than those rates
accorded to refineries not in the Trust?

_A._ I do not recall anything of that kind.

_Q._ You have heard of such things?

_A._ I have heard much in the papers about it.

_Q._ Was there not such an allegation as that in the litigation
or controversy recently disposed of by the Interstate Commerce
Commission, Mr. Rice’s suit; was not there a charge in Mr. Rice’s
petition that companies embraced within your Trust enjoyed from
railroad companies more favourable freight rates?

_A._ I think Mr. Rice made such a claim. Yes, sir.

_Q._ Did not the Commission find the claim true?

_A._ I think the return of the Commission is a matter of record. I
could not give it.

_Q._ You don’t know it; you haven’t seen that they did so find?

_A._ It is a matter of record.

_Q._ Haven’t you read that the Interstate Commerce Commission did
find that charge to be true?

_A._ No, sir; I don’t think I could say that. I read that they made a
decision, but I am really unable to say what that decision was.

_Q._ You did not feel interested enough in the litigation to see what
the decision was?

_A._ I felt an interest in the litigation. I don’t mean to say I did
not feel an interest in it.

_Q._ Do you mean to say that you don’t know what the decision was?

_A._ I don’t say that. I know that the Interstate Commerce Commission
had made a decision. The decision is quite a comprehensive one, but
it is questionable whether it could be said that that decision in all
its features results as I understand you to claim.

_Q._ You don’t so understand it? Will you say, as a matter of fact,
that it is not so?

_A._ I stated in my testimony this morning that I had known of
instances where companies altogether outside of the Trust had enjoyed
more favourable freights than companies in this Trust, and I am not
able to state that there may not have been arrangements for freight
on the part of companies within this Trust as favourable as, or more
favourable than, other freight arrangements; but, in reply to that,
nothing peculiar in respect to the companies in this association. I
suppose they make the best freight arrangements they can.

A commission, known, from the name of its chairman, as the Hepburn Commission, was appointed by Congress in 1879 to investigate the New York railroads, and a number of Standard Oil officials, notably Messrs. H. H. Rogers, J. D. Archbold, Jabez A. Bostwick, and W. T. Sheide, were summoned before it. Though not so sweeping in their denials as Mr. Rockefeller, all of them avoided the truth. Their testimony, in fact, was so evasive that the Hepburn Commission, in making its report, characterised the Company as “a mysterious organisation whose business and transactions are of such a character that its members decline giving a history or description of it lest this testimony be used to convict them of a crime.” The reason that the witnesses themselves gave for their evasion was--as might be expected--a different one from that assigned by the Commission. They stated that the investigations were an interference with their rights as private citizens, and that the Government had no business to inquire into their methods. This is a very interesting plea, for it throws a light on the general spirit of insubordination to all law and order consistently evinced by the Standard Oil Trust throughout its whole career whenever law and order were found to be in opposition to its progress. This constant opposition to the public authority, whether manifested by open contempt of Court when under examination, or by secret bribery to avert or compass legislation, or by secret acts known to be contrary to law, has been such as to merit for the Standard Oil conspirators the appellation of the anarchists of commercial life. Opposition to the law, denial of the law, refusal to be subject to the law, and attempted corruption of the officers of the law, indelibly marks their business policy.

Direct lying, however, was employed on occasion when Standard witnesses were under the necessity of answering questions categorically. Henry M. Flagler, for instance, swore in 1880 in the Court of Common Pleas (Standard Oil Company _v._ W. C. Scofield _et al._) that the Standard Oil Company neither owned, operated, nor controlled refineries elsewhere than at Cleveland, Ohio, and Bayonne, N.J., whereas before the Investigation Relative to Trusts, New York Senate, 1888, he testified that in 1874 the Standard Oil Company _purchased_ the refineries of Lockhart, Frew & Co., of Pittsburg; Warden, Frew & Co., of Philadelphia; and Chas. Pratt & Co., of New York. Mr. Rockefeller also swore falsely in the Scofield case in 1880, in the same sense as Mr. Henry M. Flagler. The purchase and consequent control of the Pittsburg, Philadelphia, and New York refineries mentioned was absolutely secret at the time, and seemingly not likely to be found out.

BRIBERY: THE ARCHBOLD LETTERS

“Solid as a prison, towering as a steeple, its cold and forbidding
façade seems to rebuke the heedless levity of the passing crowd,
and frown on the frivolity of the stray sunbeams which in the late
afternoon play around its impassive cornices. The building is No. 26,
Broadway, New York City, home of the Standard Oil.”

T. W. LAWSON _in_ “_Frenzied Finance_.”