Chapter VII: The “bogus Independents.”

The constant policy of the Standard throughout its whole career has been superabundantly proved to be to cut prices where there is competition, and where there is none to raise them to the utmost point that customers will go to. The Standard has found that this practice has always caused a deal of talk whenever it has been recognised, and the Standard hates talk. It has made a good try to keep the talk down by spreading the idea about that it is the Standard’s competitors who always begin the price-cutting, and, on finding it difficult to get this idea to go down with the public, it one fine day hit upon the expedient of putting “bogus independent” companies and pedlars in the field as stalking-horses to bear the odium of the price-cutting. Occasionally, especially in the case of the pedlars, who do a big business in America, it has involved a deal of stagey “business” of all sorts to keep this deception up, a fact that makes the perusal of the evidence on this matter very entertaining and at times even amusing reading. But a very serious purpose and a very serious effect ran through the whole proceedings for years, which was, in general, to throw dust in the eyes of the public as to the game consistently played by the Standard, namely, to kill competition and extract the highest possible amount out of the pockets of its customers. There are two British companies which were alleged by the United States Government counsel in the Missouri litigation to be Standard Oil tentacles. Their whole history is so characteristic of Standard Oil tactics that it merits close and immediate attention. They are the General Industrials Development Syndicate, Limited, registered at Somerset House in 1899, and the London Commercial Trading and Investment Company, Limited, registered in 1903. As these were two companies which Mr. J. D. Archbold, in the Missouri proceedings, swore he had never heard of, their history throws a valuable light on how the Standard does its business. Taking the General Industrials first, we are brought back to an American company, the Manhattan Oil Company, of Ohio, which was organised by Commodore E. C. Benedict and Mr. A. N. Brady, of New York, in 1890. They laid a pipe line from the Lima oil-fields to Chicago in order to supply crude oil to the People’s Gas Light and Coke Company of that city, in which they were interested, at a more reasonable rate than the Standard would supply it. The Manhattan Company also had a large number of tank cars and a refinery in Galatea, Ohio. Evidence was given before the Inter-State Commerce Commission that independent Cleveland refiners were met in the Lima oil field by this Manhattan Oil Company, which cut off their supplies by paying “premiums” to oil well-owners in certain districts to send it their oil. The Manhattan Company professed to be independent, but its proceedings induced the really independent refiner to suspect that it had become a Standard auxiliary.

When the United States Government started the proceedings in the Missouri courts a part of the truth came to light. Evidence was then given by Mr. A. N. Brady that in 1899 he sold the entire stock of the Manhattan Oil Company for $615,000 to an English company, this General Industrials Development Syndicate, Limited, which also took over a mortgage of $800,000. But Mr. Brady wanted to ensure that his gas plants in Chicago should have a supply of gas-oil, and he testified that part of the terms of his contract for the sale of the Manhattan stock to the English company was that the Standard Oil Company of Indiana (one of the branches of the Trust) should supply him with gas-oil.

It was sufficiently remarkable that this unknown English company should be able to secure a favourable contract for Brady’s gas-oil from the Standard, but still more remarkable incidents followed. Immediately after the purchase of the stock of the Manhattan that company’s refinery at Galatea, Ohio, was bought by the Solar Refining Company of Ohio (admittedly a Standard company); the Union Tank Line Company (another Standard company) bought all the Manhattan’s tank cars, and the Ohio Oil Company (a Standard tentacle which is in the oil-well business) bought the Manhattan Company’s wells. After this division of its property the Manhattan Oil Company continued as a pipe-line company, posing as an independent oil company and offering these “premiums.” Then came the delicate question as to who owned it! Here is an extract from Mr. Archbold’s cross-examination:--

_Q._ Do you know the General Industrials Development Syndicate,
Limited, of London?

_A._ I do not.

_Q._ Of London, England?

_A._ I do not.

_Q._ You know nothing about it?

_A._ I do not.

_Q._ Is it owned or controlled, directly or indirectly, by any
company of the Standard Oil combination?

_A._ Not to my knowledge.

_Q._ You would be apt to know it, wouldn’t you, if it was?

_A._ I think I would.

_Q._ Do you know the firm of Budd, Johnson and Jecks, London,
solicitors?

_A._ I don’t know them.

_Q._ Did you ever hear of them?

_A._ I may have heard of them in connection with this inquiry.

_Q._ Do you know Mr. Maxwell?

_A._ I do not.

_Q._ Connected with the firm. Mr. Maxwell or Mr. Herbert Johnson?

_A._ I do not know either of them.

_Q._ Did you ever hear of them?

_A._ I may, in connection with this firm. I don’t even recall the
names now.

Mr. Kellogg, counsel for the United States Government, pointed out that the New York books of the Anglo-American Oil Company Ltd., of London, showed that the Company between 1899 and 1906 loaned over £540,000 to Mr. James McDonald, who was then its managing director, and he suggested that it was to provide the money to enable the General Industrials Development Syndicate to buy the Manhattan and yet conceal that the Standard were the purchasers. Mr. Archbold was in his best _non mi ricordo_ vein. Although he was a director of the Anglo-American Oil Company up to 1907 he could not tell for what purpose that large sum of money was lent to Mr. McDonald by the Company. Neither the auditor nor the comptroller of the Standard Oil Company in New York could tell why their London branch did this, and Mr. Archbold did not even know whether the loan had been repaid! He was still more pointedly questioned about the matter:--

_Q._ Isn’t it a fact, Mr. Archbold, that the Standard Oil Company, or
some of its companies, indirectly owns the Industrials Development
Syndicate, Limited, and organised it?

_A._ Not to my knowledge.

_Q._ You keep pretty close track of companies starting business in
competition with you in this country, don’t you?

_A._ We do.

_Q._ You seem to be able to produce a list here of every concern
engaged in the oil business in the country, didn’t you?

_A._ As nearly as we can keep track of it; yes.

_Q._ Is this General Industrials Development Syndicate, Limited,
engaged in the oil business anywhere else?

_A._ I do not know.

_Q._ You never investigated it?

_A._ I never heard of their being in any place else. They may. I
never have heard of it.

_Q._ And yet it bought the Manhattan Company and then caused the
Manhattan to sell you the refineries, the producing wells, the cars,
and continued doing business with you, and you never looked into the
Development Company.... You never investigated to find out who the
English company was?

_A._ No, not beyond that.

The last question of counsel is a sufficient commentary in itself on Mr. Archbold’s pretended ignorance of the General Industrials Development Syndicate, but further light will be thrown presently upon the relations of this London company with the Standard group. In the meantime, it will be convenient to consider, at the same time, the second of these English companies, the London Commercial Trading and Investment Company. Evidence was given in the Missouri prosecution by Mr. H. Bayne, the son of a well-known New York banker, that all the stock of the Security Oil Company of Texas, another professedly independent concern, had been acquired by this London company. Texas has a very rigid anti-Trust law, and therefore there was an additional reason for caution in allowing the real purchasers to become known. Mr. Archbold was as discreet as ever. Mr. Kellogg put it to him that cheques drawn by the Anglo-American Oil Company to the order of the National Provincial Bank of England in London were by that bank turned over to the Bank of England, and that cheques were then drawn on that bank to solicitors to pay for the Security Oil Company’s stock. Now, although Mr. Archbold had been for many years a director of the Anglo-American Oil Company, he could neither confirm nor deny this remarkable story. He had never heard of such a transaction, and when asked whether the Standard directly or indirectly owned or controlled the London Commercial Trading Company he could only reply, “Not to my knowledge.”

It is time, in considering this painful case of “loss of memory,” to turn to the records of these two companies in the Registry of Joint Stock Companies at Somerset House. They present singular features of resemblance; in fact, save for the disparity in age, they might be twins. Both companies have as solicitors and large original shareholders the members of the firm of Budd, Johnson and Jecks, of 24, Austin Friars, E.C., whose names Mr. Archbold was unable to recall. Both companies have the same offices--27, Walbrook; the same secretary--Mr. J. Morgan Richards Francis; and the same auditor. Both companies have adopted the idea of issuing share warrants to bearer for the whole of their capital, by which device they avoid returning any subsequent list of shareholders to Somerset House. Both companies hit upon the idea of having but one director, and both were fortunate enough to select for that onerous task the same gentleman--Mr. Horace Maxwell Johnson, barrister-at-law, of Hickwells, Chailey, Sussex. But these strange coincidences do not end here. The first list of shareholders in each case contains some remarkable resemblances. In the case of the General Industrials Development Syndicate it was as follows:--

Shares.
Henry Hassall, 32, Dartmouth Park Road 1
E. G. Flower, Elm Villa, Elm Road, Sidcup 1
Robert Cave, 26, Beversbrook Road, Tufnell Park 1
Sydney Lowenthal, 59, Sidney Street, South Kensington 1
Francis Glover Sharpe, 16, Foyle Road, Westcombe Park 1
Ernest Luff Smith, 73, Ramsden Road, Balham 1
Horace Maxwell Johnson, 1, Dr. Johnson’s Buildings, barrister 1
John Wreford Budd, ⎫
Murray Johnson, ⎬ all of 24, Austin Friars,
Herbert Walter Johnson ⎪ solicitors, jointly 399,993
Arthur Statham Jecks ⎭
-------
400,000

Turning to the London Commercial Trading Company, we find the following names:--

Shares.
Henry Hassall, 5, Florence Road, Finsbury Park 1
E. G. Flower, 279, High Road, Lee 1
Robert Cave, 26, Beversbrook Park, Tufnell Park 1
F. G. Sharpe, 27, Walbrook 1
E. Luff Smith, 73, Ramsden Road, Balham 1
John Rayner, 8, Woodside Villas, Ewell Road, Surbiton 1
G. Dudley Colclough, 47, Inverness Terrace 1
John Wreford Budd, ⎫
Murray Johnson, ⎬ of 24, Austin Friars, jointly, 722,502
Herbert Walter Johnson ⎪
Arthur Statham Jecks ⎭
-------
722,509

(On February 23, 1904, 2,493 more shares were allotted to Messrs.
Budd, Johnson and Jecks, making up the total capital of £725,000.)

It must be understood, of course, that the appearance of the names of English lawyers in these lists neither conveys any reflection of any kind upon them nor identifies them in any way with the operations of the Standard Oil Trust in the United States or elsewhere. Messrs. Budd, Johnson and Jecks are a well-known and highly respected firm; and it must be assumed that they only appear in these transactions between the companies in their professional capacity.

We find, therefore, that out of the original shareholders in the General Industrials, nine appeared in the list of the London Commercial four years afterwards. A tenth, Mr. Horace Maxwell Johnson, the managing director, appeared on October 2, 1903 (Mr. E. G. Flower’s share was transferred to him). In both cases almost the entire assets of the Company are represented in the balance-sheet by shares of foreign companies. In the case of the General Industrials, out of its £100,526 assets £94,613 represented such shares, while in the case of the London Commercial this item represents £718,685 out of total assets of £734,979.

There is only one difference in the history of these companies. While the London Commercial has increased its original capital of £110,000 to £725,000, the General Industrials has reduced its capital. It consisted at first of 400,000 £1 shares, but in June, 1901, the capital was reduced to £230,000 by the repayment of 8s. 6d. on each share. On December 13, 1905, the capital was further reduced to £120,000 by the repayment of a further 5s. 6d. on each share, and on August 10, 1906, this was further reduced to £100,000 by refunding a further 1s. per share. This world is full of strange coincidences, but it is distinctly worth noting that the capital of the Manhattan Oil Company showed a synchronous tendency to fall. From an exhibit put in by Mr. Kellogg in the Missouri case it appeared that the capital of the Manhattan Oil Company was reduced from $2,000,000 (£400,000) to $500,000 (£100,000) on May 23, 1902, and to $150,000 (£30,000) on October 23, 1905.

Mr. Brady testified that when Mr. Herbert Johnson, of London, came to him in New York he said the General Industrials were “in the oil business, but wished to purchase a going company, with wells, and land, and cars, and pipe lines.”

_Q._ And refineries?

_A._ Refineries.

_Q._ Now if he wished to purchase a going business, why did they sell
their wells and tank cars and refineries?

Mr. Milburn (Standard Oil counsel): Does Mr. Brady know that?

_Q._ Do you know?

_A._ No, I do not know that they did.

One other remarkable feature about this General Industrials Company may be mentioned. Mr. Brady produced at this trial the following cable that he received:--

August 31, 1899, London. To A. N. Brady, 54, Wall Street,
N.Y.--Syndicate accepts options. John H. Cuthbert, its agent,
will call on you to arrange details and payment. He has full
authority.--JOHNSON.

This was signed by Mr. Herbert W. Johnson, the London solicitor, who, with the assistance of several other solicitors, a barrister, and an accountant, was going into the oil business on this large scale. But, to use a once-famous American political phrase, Mr. John H. Cuthbert was “the nigger in the wood-pile.” It is his presence that finally “gives away” the carefully hidden origin of the General Industrials. When Mr. J. D. Archbold was first questioned about Mr. Cuthbert he was as forgetful as ever:--

Who was Mr. Cuthbert? Do you know him?

_A._ I knew a Mr. Cuthbert.

_Q._ In 1899 he was in the employ of the Standard Oil Company, wasn’t
he--John H. Cuthbert?

_A._ I do not recall that he was.

_Q._ He had been in your employ, hadn’t he, in some of your companies?

_A._ I do not recall that he had been.

_Q._ Do you know him?

_A._ I did know him.

_Q._ Where was his place of business?

_A._ My recollection would be that he was employed with the Tide
Water Oil Company.

_Q._ Didn’t he use to be employed by one of the Standard Oil
companies?

_A._ He may have been earlier, away back. I do not remember
distinctly. I am inclined to think that he was--in the earlier
years--employed by one of our companies.

After the luncheon adjournment on the same day, however, Mr. Archbold’s memory somewhat improved:--

_Q._ Isn’t it a fact that Mr. John H. Cuthbert was the Standard’s
representative in the Tide Water Company as director?

_A._ He went there not specially as our representative, but left our
employ and went to them, because I imagine they offered him greater
inducement in the way of salary. I know of no other reason.

_Q._ Is it not a matter of fact that he solely represented the
Standard Oil Company as a director in the Tide Water Company?

_A._ I think he was there as a servant of the business.

The truth about Mr. John H. Cuthbert’s position in relation to the Standard Oil Trust is clearly shown by the following extract from the Report of the United States Commissioner of Corporations on the Petroleum Industry (Part I. page 54):--

About the same time (1881) Standard interests succeeded in acquiring
a minority interest in the Tide Water Company’s stock. This move,
coupled with the continual hostility of the railroads, led to a
virtual surrender of the Tide Water interests, and an agreement was
reached in 1883 by which they substantially became, and have since
remained, _a part of the Standard Oil system_.

To sum up the history of this General Industrials Development Syndicate, we have an American oil company sold to a London company with no list of shareholders, with a managing director who is a barrister, after an examination and valuation of the property by a Standard Oil employee. We find as one of the terms of the deal that the Standard Oil Company--who, according to Mr. Archbold, had no interest in this transaction--should guarantee a supply of crude oil at a low rate for ten years to the vendors’ Chicago gas company. Then we find all the assets of the Manhattan Company transferred to various Standard Oil companies, except the pipe lines, and these pipe lines used for the purpose of collecting oil for Standard companies, and paying premiums to producers to prevent them supplying oil to independent refineries which the Standard desires to kill. All this, taken with the evasive and obviously untruthful answers of Mr. Archbold, can lead to but one conclusion as to the real origin of the General Industrials. When the facts are considered with regard to the parallel case of the London Commercial Trading Company, that conclusion is strengthened still more.

THE STANDARD’S “INVENTIONS”

“From controlling the production and sale of oils, it was but a
natural progression to rise to the control of legislatures, judges,
and the executives of the State and Federal Governments. Members,
or servants, of this modern industrial _Camorra_ have been Cabinet
ministers of the Supreme Administration in Washington. They have had
Presidents of the Republic at their beck and call.”

_Investors’ Review_, 1897.