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Title: The great oil octopus
Author: Anonymous
Release date: April 16, 2026 [eBook #78460]
Language: English
Original publication: London: T. Fisher Unwin, 1911
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*** START OF THE PROJECT GUTENBERG EBOOK THE GREAT OIL OCTOPUS ***
THE GREAT OIL OCTOPUS
THE
GREAT OIL OCTOPUS
BY
“TRUTH’S” INVESTIGATOR
T. FISHER UNWIN
LONDON: ADELPHI TERRACE
LEIPSIC: INSELSTRASSE 20
1911
(_All rights reserved._)
PREFACE
The appearance in _Truth_ of the articles which form the greater
portion of this volume has been followed by a wish expressed in many
quarters that they might be republished in a more permanent and
convenient form. The suggestion has been adopted. The articles have
been carefully revised, some additional matter has been inserted, and
it is hoped that they will form a useful contribution to contemporary
social and commercial history. The late Mr. Henry D. Lloyd and Miss
Ida M. Tarbell have each published exhaustive investigations of the
Standard Oil Trust’s proceedings in the United States, and further
information is available in the records of the Missouri litigation,
and--in regard to the flash-point scandal--in British Blue-books.
Hitherto, however, there has been lacking a complete conspectus of all
the many branches of this worldwide subject. One or other tentacle
of the Octopus has been described in detail, but in this volume an
attempt is made for the first time briefly to describe them all. It
has been necessary to exclude any reference to many other commercial
enterprises--such as “Amalgamated Coppers”--in which the heads of the
Oil Trust individually figure in order to concentrate attention on
that combination in the oil trade which first brought them together,
which set the example to so many imitators in America and Europe,
and exhibits most clearly their business methods and morals in two
hemispheres.
CONTENTS
CHAP. PAGE
I. THE MEN AND THE MONOPOLY 9
II. THE SECRET REBATE 25
III. THE RAILROADS AND THE PIPE LINES 43
IV. THE BIRTH OF THE TRUST 63
V. BRIBERY: THE ARCHBOLD LETTERS 75
VI. ARSON AND ESPIONAGE 89
VII. THE “BOGUS INDEPENDENTS” 105
VIII. THE STANDARD’S “INVENTIONS” 123
IX. THE TRUST IN AMERICA AND ASIA 137
X. RUSSIA, GALICIA, AND ROUMANIA 155
XI. THE TRUST IN GERMANY, SWEDEN, AND FRANCE 171
XII. THE TRUST’S “TIED HOUSES” IN ENGLAND 189
XIII. THE FLASH-POINT SCANDAL 207
XIV. THE ROCKEFELLERS AND THE HOME OFFICE 217
XV. THE LUBRICATING OIL TRADE 237
INDEX 251
THE MEN AND THE MONOPOLY
“The oil business belongs to us.”
JOHN D. ROCKEFELLER _to an independent refiner_.
THE GREAT OIL OCTOPUS
CHAPTER I
THE MEN AND THE MONOPOLY
There has lately arisen at Queen Anne’s Gate, on the site of a fine
Victorian mansion demolished to make room for it, a gigantic palace,
steel-framed in the up-to-date style, clad in Portland stone, towering
seven stories high above the neighbouring buildings, looking down
upon Buckingham Palace on the one side of the park, and standing on
pretty nearly equal terms with the Government Offices and the Houses
of Parliament on the other. I was interested to learn that it has been
erected for the accommodation of the Anglo-American Oil Company, which
is the English branch of the famous Standard Oil Trust of the United
States. There were even people who suggested that in view of the action
of the United States Government against the Standard Oil Trust, still
pending in the American Courts, and the influence of Mr. Roosevelt with
his “trust-busting” aspirations, it may possibly be in contemplation
to transfer the headquarters of the petroleum empire from the present
offices of the Standard Oil Trust in Broadway, New York, to Queen
Anne’s Gate, Westminster. As Constantine transferred the capital of
the Cæsars from Rome to Byzantium, so these seers picture Mr. John D.
Rockefeller removing his seat of government eastward from New York to
London.
Time alone can test the value of this prophecy. Sufficient unto the day
is the evil thereof. The new Aladdin’s Palace that has sprung up in
Birdcage Walk is an eloquent manifestation of the growing wealth and
influence of the Great Oil Octopus in this country. That is a cogent
reason why the public throughout the United Kingdom should understand
without loss of time what this Trust is, and what reason there is for
men to be afraid of it. Echoes reach us of the iniquities charged
against Mr. Rockefeller and his colleagues in America, they circulate
vaguely about the country but make little impression. On the other
hand, strenuous efforts to convey a contrary impression have been
made with considerable skill. The Trust includes in its scientific
organisation an efficient Press department, and fights with the pen as
well as with other weapons. I have therefore made it my business to
undertake an exhaustive investigation of the history of the Trust and
its operations, not in America alone, but in Europe and Asia. There
is no great secret about the subject. But the materials are scattered
and difficult of access. A good deal of new light has been thrown
upon the history of the concern and its ramifications in the United
Kingdom and other countries in the course of the great action of the
United States Government against the Trust in the State of Missouri,
referred to a moment ago. In the Standard Oil Trust we have exhibited
the highest perfection yet achieved by a ring of capitalists in the art
of exploiting a great industry. The machinery that has been created for
this purpose is a masterpiece of human ingenuity. The methods by which
it has been employed seem to express the last word in craft, subtlety,
and unscrupulousness, as employed for the purpose of amassing wealth.
The Trust is consequently quite a fascinating subject for inquiry and
reflection, apart from the direct interest which we every one of us
have in its operations.
The indictment against the Standard, put briefly, is that its
founder, Mr. John D. Rockefeller, organised in 1870 a combination of
American oil refiners, who then controlled less than 10 per cent. of
the refining business, and that he secured from the United States
railroads secret rebates on the carriage of their oil, and even larger
rebates on oil carried for their competitors. The result was that it
became the interest of the railroads to discourage the shipments of oil
by refiners outside the Trust. Armed with this weapon of the secret
rebate, the Standard Oil Trust was able to undersell its competitors
and to force them to sell out at heavy loss. In ten years it had
obtained by those methods the control of 90 per cent. of the American
oil refining business, and being almost the sole buyer, it was able
to dictate prices to the oil producers at the wells. It has since
maintained its monopoly by elaborate espionage of its competitors’
business, by running ostensibly “independent” oil companies to take
advantage of the anti-Trust feeling, and by obtaining up to the present
day unfair railway discriminations in place of the secret rebate. It
maintains an expensive staff of lobbyists at the Legislative Chambers
of many lands, and it has constantly adopted the methods of bribery
(direct and indirect) in dealing with politicians and publicists. It
has always aimed, not at fair business competition, but at absolute
monopoly.
The principal figures in this great combination deserve a passing
word of introduction. There is first its founder, its creator, Mr.
John D. Rockefeller, who was born on a farm in New York State in
1839. His father, who was of Scottish extraction, moved to Ohio, and
in 1855 John Davison Rockefeller went into the town of Cleveland to
earn his living as a junior clerk at four dollars a week. He was
clever, industrious, steady and frugal, and he went into the produce
commission business with a young Englishman named M. B. Clark. In
1862 he met another Englishman, Samuel Andrews, who was a mechanical
genius, and had devised improved processes in the infant oil-refining
industry. They joined forces; Andrews looked after the refining and
Rockefeller attended to the pushing of the business, the buying and
selling. The firm grew and extended at first by legitimate, and then by
illegitimate, methods, and now Mr. Rockefeller has convinced himself
in his retirement that he has been the agent of Providence, and that
his business career entitles him to moralise to Sunday schools and
Bible classes. “I hope you young men are all careful. I believe it
is a religious duty to get all the money you can; get it fairly,
religiously, and honestly--and give away all you can.” So spoke Mr.
Rockefeller to his son’s Bible class in New York on March 27, 1897,
and it gives a complete picture of his life. The combination of Jekyll
and Hyde is well brought out in Miss Ida M. Tarbell’s “History of
the Standard Oil Company,” the ablest investigation ever made of the
American activities of this combination. Miss Tarbell says:--
Mr. Rockefeller was “good.” There was no more faithful Baptist in
Cleveland than he. Every enterprise of that Church he had supported
liberally from his youth. He gave to its poor. He visited its sick.
He was simple and frugal in his habits. He never went to the theatre,
never drank wine. He gave much time to the training of his children,
seeking to develop in them his own habits of economy and charity. Yet
he was willing to strain every nerve to obtain for himself special
and unjust privileges from the railroads which were bound to ruin
every man in the oil business not sharing them with him. Religious
emotions and sentiments of charity, propriety, and self-denial seem
to have taken the place in him of notions of justice and regard for
the rights of others.
In a character sketch of Mr. Rockefeller which she contributed to
_McClure’s Magazine_ in January, 1905, Miss Tarbell tells this story:--
Even in his own Church men say, “He’s a good Baptist, but look out
how you trade with him.” “I have been in business with John D.
Rockefeller for thirty-five years,” one of the ablest and richest
and earliest of Mr. Rockefeller’s colleagues once told me in a moment
of forgetfulness, “and he would do me out of a dollar to-day; that
is,” he added, with a sudden reversion to the school of cant in which
he had been trained--“that is, if he could do it honestly.”
In this picture Mr. Wm. Rockefeller hardly counts. The next figure in
the gallery of oils is that of the late Mr. Henry H. Rogers, who died
a few months ago--the “Iron Man” of the Standard directorate. Writing
in Chapter III. of “Frenzied Finance” in _Everybody’s Magazine_ for
August, 1904, Mr. T. W. Lawson, who knew him well, thus described Mr.
Rogers:--
Whenever the bricks, cabbages, or aged eggs were being presented
to “Standard Oil,” always was Henry H. Rogers’s towering form and
defiant eye in the foreground where they flew thickest. Whenever
Labour howled its anathemas at “Standard Oil” and the Rockefellers
and other stout-hearted generals and captains of this band of merry
moneymakers would begin to discuss conciliation and retreat, it was
always Henry H. Rogers who fired at his associates his now famous
panacea for all opposition, “We’ll see Standard Oil in hell before we
will allow any body of men on earth to dictate how we shall conduct
our business.”
In another passage in “Frenzied Finance” Mr. Lawson wrote of him:--
Rogers is a marvellously able man, and one of the best fellows
living. He is considerate, kindly, generous, helpful, and everything
a man should be to his friends. But when it comes to business--his
kind of business--when he turns away from his better self and goes
aboard his private brig and hoists the Jolly Roger, God help you!...
He is a relentless, ravenous creature, as pitiless as a shark,
knowing no law of God or man in the execution of his purpose.
Now that Mr. Rogers is dead, the active figure in the Trust is Mr. John
Dustin Archbold, who was originally a bitter opponent of the Standard
and its rebates. Since he joined its circle Mr. Archbold has figured in
two sensational episodes. He was one of the defendants in the charge of
conspiring to blow up a rival refinery at Buffalo, and escaped through
the judge withdrawing his case from the jury. He was the writer of the
famous letters to politicians which Mr. Randolph Hearst disclosed in
the Presidential campaign of 1908.
Of the rest of these men it is necessary to say less. They were very
diverse in their character. One of them, Henry M. Flagler, was the
pioneer of the vast hotels which line the Florida coast and make it a
winter resort for rich Americans. William T. Wardwell, the treasurer
of the Standard Oil Company, was an ardent teetotaler, and more than
once ran as Prohibitionist candidate for the Presidency before his
connection with Standard Oil was so notorious. Many of them were Scotch
Presbyterians, but the late Mr. Daniel O’Day, the man who faced fierce
obloquy as the manager of the Standard’s pipe-line monopoly, was an
Irish Catholic, who died a year or two ago, leaving several millions
behind him. The younger generation is growing old now, and sons of both
John and William Rockefeller have entered the business, carrying on the
traditions of the greatest combine on earth.
We will now proceed to trace the ramifications of the vast organisation
which these men have built up and control all over the world. The full
list of the subsidiary companies is so long that it is impossible
and unnecessary to print all the names. But a selection of them will
indicate the vastness and variety of the Rockefeller interests. They
are taken from the Report of the United States Government Commissioner
of Corporations on the Petroleum Industry (Part I., Table 8, p. 84),
supplemented by one or two other unimpeachable sources of information.
The central company of this joint-stock octopus is now the Standard
Oil Company of New Jersey, which holds large blocks of stock in the
other companies. It has a capital of $100,000,000 of common stock
and $10,000,000 of preferred stock. Among its directors are John
D. Rockefeller, William Rockefeller, Henry M. Flagler, John Dustin
Archbold, Wesley H. Tilford, Frank Q. Barstow, Charles M. Pratt,
Edward T. Bedford, Walter Jennings, James A. Moffet, C. W. Harkness,
John D. Rockefeller, jun., Oliver H. Payne, and A. C. Bedford. This
Company controls nine companies which are principally engaged in
refining oils:--
Capital.
Dols.
Atlantic Refining Company, Pennsylvania 5,000,000
Solar Refining Company, Ohio 500,000
Standard Oil Company of California 25,000,000
Standard Oil Company of Kansas 1,000,000
Standard Oil Company of Indiana 1,000,000
Standard Oil Company of New York 15,000,000
Security Oil Company, Texas 3,000,000
Standard Oil Company of Ohio 3,500,000
Corsicana Refining Company partnership
Then comes a group of lubricating oil companies:--
Dols.
Vacuum Oil Company, N.Y. 2,500,000
Borne, Scrymser & Co., N.J. 200,000
Chesebrough Manufacturing Company, N.Y. 500,000
Galena Signal Oil Company, Penn. 10,000,000
Swan and Finch Company, N.Y. 1,000,000
It will surprise many readers on this side to find in this list the
name of the Chesebrough Company, which lights the London sky with the
magic word “Vaseline,” but for years that article has paid its tribute
to the Standard Oil Trust. This story was told by Mr. John D. Archbold
in evidence in the proceedings by the United States Government against
the Trust in the State of Missouri, where much evidence, to which we
shall hereafter have to refer, was taken. Mr. Archbold then stated
that the Standard Oil Trust acquired 2,549 shares in the Chesebrough
Manufacturing Company, which was a little more than a majority of the
stock. Mr. Chesebrough and the other minority stockholders continued to
carry on the business in the old name until the present day. Vaseline,
of course, is a product of petroleum. With regard to the Galena Signal
Oil Company, which manufactures railway lubricating and signal oils,
it is stated by the United States Commissioner of Corporations in his
Report (Part II. p. x.) that American Railway officials are compelled
to purchase the Galena products at higher prices than their competitors
ask, because of the influence of the Standard Oil interests as large
consignors, or their power in financial circles, exerted on the railway
boards. The Vacuum Oil Company, which also appears in this list, became
a Standard corporation as long ago as 1879, and it was the company
concerned in the sensational prosecution of several Standard Oil men
at Buffalo for the alleged conspiracy to blow up a rival refinery. Its
speciality is the compounding of lubricating oils.
The list of companies next includes three crude oil-producing companies
and thirteen pipe line companies. Next comes the Union Tank Line
Company, of New Jersey, capital $3,500,000, which owns and operates
railway tank cars. Sixteen natural gas companies follow, and then six
American Marketing companies, of which the Waters-Pierce Oil Company,
of Missouri, has had, perhaps, the most remarkable modern history. Next
we come to the following foreign marketing companies, the first two of
which are duly recorded in the files at Somerset House:--
Capital.
Anglo-American Oil Company (London) £1,000,000
Vacuum Oil Company, Ltd. (London) £55,000
American Petroleum Company (Holland) Fl.7,850,000
Amerikanische Petroleum Company (Germany) M.200,000
Deutsche-Amerikanische Company (Germany) M.30,000,000
Danish Petroleum Company Not stated
Konigsberger-Handels Company (Germany) M.2,300,000
Mannheim-Bremen Company (Germany) M.3,000,000
Korff Refinery Company (Bremen) M.1,500,000
Stettin-Amerikanische Company (Germany) Not stated
Roumanian-American Petroleum Company Lei.12,500,000
Société ci-devant H. Reith et Cie. (Belgium) Fr.1,650,000
Italian American Petroleum Company Not stated
Vacuum Oil Company (Austria) Kr.10,000,000
International Oil Company (Japan) Yen.12,000,000
Imperial Oil Company (Canada) Not stated
Colonial Oil Company (Africa and Australasia) $250,000
But even this long list does not complete the companies in this
combination. It does not include many businesses which have been
bought by the Standard and are now run as parts of one or other of the
companies given. For example, the Devoe Manufacturing Company, which
manufactures all the tin cases in which oil and petrol are shipped, is
now absorbed in the Standard Oil Company of New York. Then there is
the Oswego Manufacturing Company, manufacturers of wood packing-cases
and barrels; the American Wick Manufacturing Company, which made lamp
wicks; and Thompson, Bedford & Co., who had a large European trade in
lubricating oils before their absorption. In addition, there should
be added a number of Vacuum Oil companies which have been established
abroad, in Copenhagen, Genoa, Paris, Hamburg, Moscow, Stockholm,
Bombay, Kobe, and Cape Town.
THE SECRET REBATE
“Mr. Rockefeller is the victim of a money-passion which blinds him to
every other consideration in life, which is stronger than his sense
of justice, his humanity, his affections, his joy in life, which is
the one tyrannous insatiable force of his being.”
IDA M. TARBELL _in_ “_McClure’s Magazine_.”
CHAPTER II
THE SECRET REBATE
How has this vast combination been built up? There are those who will
tell you that it has been accomplished because John D. Rockefeller
was thrifty; there are others who are persuaded by the Standard’s
Press Bureau to believe that it is due to the Standard’s economies in
production and improvements in transport. Neither of these agreeable
theories can explain the mystery, because most of these improvements
were invented and first adopted by others, and Mr. Rockefeller’s
savings would not have enabled him to get control of 80 per cent. of
the American oil refining business in ten years. The truth is that the
secret rebate trick is the foundation of this great monopoly, and this
it is now proposed to prove from official sources.
The introduction of the secret railway rebate or discrimination may
or may not have been due to Mr. John D. Rockefeller’s inventive
genius--it is not absolutely proved to have been so--but the Report of
the United States Government Commissioner of Corporations (Mr. J. R.
Garfield) on the Transport of Petroleum, dated May 2, 1906, shows that
at any rate the Standard Oil Company made the practice so much its own
that it may fairly be regarded as its special system. On page 1 of the
report this is made perfectly clear:--
The general result of the investigation has been to disclose
the existence of numerous and flagrant discriminations by the
railroads in behalf of the Standard Oil Company and its affiliated
corporations. With comparatively few exceptions, mainly of other
large concerns in California, the Standard has been the sole
beneficiary of such discriminations. In almost every section of the
country that Company has been found to enjoy some unfair advantages
over its competitors, and some of these discriminations affect
enormous areas.
Not only has this resulted in great direct pecuniary advantage in
transportation cost to the Standard, but it has had the far more
important effect of _giving that Company practically unassailable
monopolistic control of the oil market_ throughout large sections of
the country.
Of course, it was just as iniquitous for an American railroad company,
with its Government charter, to discriminate in favour of a large
customer as it would be for an English one, or for a Government
Department, say the Post Office, to sell stamps to a favoured few
under their face value. The very secrecy with which the discrimination
was invariably surrounded both by the railroads that granted it and
the consignors who received it proves clearly that its illegality
and injustice were recognised on both sides. It was only gradually
that the matter of these secret rebates leaked out, about a couple of
years before Mr. Rockefeller consolidated all his refining interests
into the Standard Oil Company, of Cleveland, Ohio, where much of the
oil-refining business was then carried on. This was in June, 1870. The
capital of the new concern was $1,000,000, the parties interested in
it at that date being John D. Rockefeller, Henry M. Flagler, Samuel
Andrews, Stephen V. Harkness, and William Rockefeller. Before this time
Rockefeller’s striking success, which was at first attributed mainly
to his extraordinary capacity for bargaining and borrowing, had not
only attracted the attention of other Cleveland refiners, but raised
their suspicion. They argued that they bought crude oil pretty nearly
as cheaply as he, refined it as economically, and sold it at the same
price. Yet they could not make money at anything like the same rate.
There was only one explanation of it; he must be getting cheaper rates
of transport from the railroads.
The matter was tested, and found to be so. Mr. Alexander, of the
well-known refining firm of Alexander, Scofield & Co., Cleveland,
stated on oath before the Committee of Commerce of the United States
House of Representatives in April, 1872, that in 1868 or 1869 he went
to the Erie Railroad management and said: “You are giving others better
rates than you are us. We cannot compete if you do that.” The railroad
agent, Mr. Alexander further testified, did not attempt to deny the
allegation, but simply agreed to give Mr. Alexander a rebate also. This
was 15 cents (7½d.) a barrel on the regular published rate of 40
cents (1s. 8d.) on all oil brought to Cleveland from the wells. A crude
oil shipper, W. H. Doane, made a similar complaint, without mentioning
names; and the complaint was stopped by a 10 cents (5d.) reduction
per barrel. The method of granting these rebates was significant. The
full published rate was paid as usual by the shipper, then at the end
of each month, on forwarding vouchers for the amount of oil shipped,
he received in cash from the railroad company his 15 cents or 10
cents rebate per barrel, as the case might be. This, I take it, was a
precaution to conceal the granting of the rebate by keeping documentary
evidence on hand that each shipper had duly paid the same fixed rate.
Later on, in 1880, General J. H. Devereux, who had granted secret
rebates as vice-president of the Lake Shore Railroad in 1868, offered
a defence of his conduct by means of an affidavit which he made in the
case of the Standard Oil Company _v._ William C. Scofield et al. in
the Court of Common Pleas, Cuyahoga County, Ohio, November 13, 1880.
This affidavit states that “such rates and arrangements were made
by the Pennsylvania Railroad that it was publicly proclaimed in the
public print in Oil City, Titusville, and other places, that Cleveland
was to be wiped out as a refining centre as with a sponge;” that the
Cleveland refiners, some twenty-five in number, expressed their fears
to him that they would have to give up their business in Cleveland;
but that the Standard Oil Company made him a definite proposal to
guarantee the Lake Shore Railroad a consignment of sixty carloads a day
in return for a rebate of 10 cents on the 42 cents per barrel rate;
and that, as this proposal “offered to the railroad company a larger
measure of profit than would or could ensue from any business to be
carried under the old arrangements,” it was accepted by him. This was
a pretty open confession. One might be permitted to think that, as the
Lake Shore Railroad’s profit and immunity from competition was thus
secured, it would have been in a position to extend the reduced rate
to the other refiners also, and thus carry out its duty as a “common”
carrier. But it is obvious that it was the essence of its agreement
with the Standard Oil Company to give that firm an advantage over
its competitors. The cloven hoof is apparent in the excuse tacked on
at the end of the affidavit that “this arrangement was at all times
open to any and all parties who would secure or guarantee a like
amount of traffic.” It was certainly not open in the sense of being
published; it was only avowed by the affidavit in 1880, when the unjust
discrimination had worked long enough to set the Standard Oil Company
definitely ahead of all competition.
It is one of the Standard Oil Company’s most usual contentions that it
has reduced the price of illuminating oil to the consumer. Any one who
takes the trouble to study the matter from the beginning will see that
the Company’s primary object, on which it concentrated all its early
efforts, has always been _to raise the price for the consumer_. By 1870
the general competition among oilmen, together with the vast additional
supplies of oil discovered, had brought prices down enormously since
the time oil was first struck in 1859. Whereas Mr. Rockefeller had
received on an average 58¾ cents (2s. 5½d.) a gallon for the
oil he exported in 1865, the year he went into business, in 1870 he
received only 26⅜ cents (1s. 1¼d.). It was proved beyond doubt
by competent testimony during the Missouri suit of the United States
_v._ the Standard Oil Company of New Jersey that a wholesale price of
1 cent (½d.) a gallon allows an excellent margin of profit for an
oil refiner. But in 1870 everybody in the American oil trade simply
despised an “honest livelihood.” They were “out for the dollars,” to
use Mr. H. H. Rogers’s expressive indication of his own intentions
before the Industrial Commission in 1899. When Mr. J. J. Vandergrift,
one of the Standard Oil directors, was questioned under oath as to what
they meant to do, he replied, “Simply to hold up the price of oil--to
get all we can for it.” And Mr. Rogers declared to the Industrial
Commission in 1875 that “oil to yield a fair profit should be sold for
_25 cents_ per gallon!”
Prices being “ruinously low” from the oilman’s point of view, Mr.
Rockefeller and his friends came forward with a scheme, in January,
1872, for the purpose of holding them up. They had originated the
idea among themselves of the industrial “trust,” and the date is
consequently a momentous one in the world’s commercial history.
This, the first of all industrial trusts, was originally floated by
taking over the charter of an existing company, the South Improvement
Company, a name which had no earthly connection with that company’s
object, but was an excellent one for Mr. Rockefeller’s purpose, as
his object had to be strictly concealed in order to be workable. This
object, as may be gathered from the text of the contract secretly
signed by the Company and the railroads on January 18, 1872, was to
destroy the business of all others than itself who engaged at any
time in the refining trade. The railroads were to carry the South
Improvement Company’s products for such lower rates than those of
other firms as would inevitably cause the latter to come a financial
cropper. The consideration held out to the railroads for this service
was an all-round rise in freight rates of about 100 per cent. and the
abolition of competition among themselves by fixing the proportion of
oil freight each road was to get, or to be paid for whether it got it
or not. The discrimination in favour of the South Improvement Company
was to be effected by a secret return to it of from 25 to 50 per cent.
of _all the money paid to the roads for oil freight either by itself or
by any firm or company in the trade_. How this iniquitous idea could
ever have been developed, much less acted upon, it is difficult to
imagine from a bald recital of the facts. But the railroads, I find
from evidence before the Hepburn Committee in 1879, either believed,
or affected to believe, that the South Improvement Company represented
practically the whole oil trade, _was_ the oil trade in fact; other
firms were, or were to be regarded as, merely unrecognised, unqualified
practitioners, who carried on their avocation at their own risk and
peril, and whom society could not take into account in making its
arrangements.
Whatever the genesis of the idea, there could be no doubt as to its
efficacy in disposing of a trade rival when reduced to practice.
Suppose a competitor consigns as much freight as yourself, with a 50
per cent. rebate to you and a 50 per cent. drawback paid to you as an
involuntary bounty by the competitor, you can regard a 100 per cent.
rise in freight rates with equanimity, for it leaves your expenditure
under this head exactly what it was before, to say nothing of the
bounty, while your competitor pays exactly twice as much as he used to
do. While in this position he can be reduced to a state of hopeless
impotence by price-cutting, which can be effected at relatively small
expense. On the supposition that the competitor’s consignments bulk
larger than yours, the bounty received from them becomes larger, till a
point is arrived at when your own shipments cost you nothing at all,
and you are in the enviable position not only of carrying on business
without working expenses, but of being paid handsomely by your rivals
for doing so. Something like this _reductio ad absurdum_ in trading
must have been actually approached in the case now under consideration,
for as a matter of fact the South Improvement Company did not control
one-tenth of the refining business of the United States when its
contract was signed by and with the railroads on January 18, 1872.
Mr. W. G. Warden, of Philadelphia, secretary of the South Improvement
Company, admitted to the Congressional Investigating Committee which
sat in March and April following that the aggregate refining business
of the United States amounted to from 45,000 to 50,000 barrels daily
capacity, while the stockholders of the South Improvement Company when
formed owned a combined capacity of not over 4,600 barrels--less than
one-tenth. This they increased, as we shall see, _in three months
time_, to a capacity of one-fifth.
The stockholders in the South Improvement Company held shares as
follows:--
Wm. Frew, W. P. Logan, and J. P. Logan, of Philadelphia, 10 shares
each; Chas. Lockhart and Richard S. Waring, of Pittsburg, 10
shares each; W. G. Warden, of Philadelphia, and O. F. Waring, of
Pittsburg, 475 shares each; Peter H. Watson, of Ashtabula, Ohio,
100 shares; H. M. Flagler, O. H. Payne, John D. Rockefeller and Wm.
Rockefeller, of Cleveland, and J. A. Bostwick, of New York, 180
shares each; total, 2,000 shares of $100 dollars each, of which the
Standard Oil interests held 900. The contract was signed on behalf
of the Company by P. H. Watson, president, and on behalf of the
railroads as follows: Pennsylvania, J. Edgar Thompson, president; New
York Central, Wm. H. Vanderbilt, vice-president; Erie, Jay Gould,
president; Atlantic and Great Western, General Geo. B. McClellan.
How completely the railroads were got to play the game of Mr.
Rockefeller and his friends is made still more evident by two other
clauses of the contract. The first is Section 8 of Art. 2, by which the
railroads contracted to send each day to the South Improvement Company
manifests on waybills of all petroleum shipped over the roads, which
manifests
shall state the name of the consignor, the place of shipment, the
kind and actual quantity of the article shipped, the name of the
consignee, and the place of destination, with the rate and gross
amount of freight and charges.
This, of course, gave the South Improvement Company a full knowledge of
everybody else’s business--just what Mr. Rockefeller strove after from
beginning to end of his career--and also ensured the due payment of the
drawbacks by the roads. The other provision I refer to was contained
in Art. 4, whereby each railroad was bound to co-operate
_as far as it legally might_ to maintain the business of the South
Improvement Company against loss or injury by competition, to the
end that it may keep up a remunerative and so a full and regular
business, and to that end shall lower or raise the gross rates of
transportation over its railroads and connections, as far as it
legally may, for such times and to such extent as may be necessary
to overcome such competition, the rebates and drawbacks to be varied
_pari passu_ with the gross rates.
This makes it clear that Art. 3, providing that
rebates hereintofore provided may be made to any other party who
shall furnish an equal amount of transportation and who shall possess
and use works, means, and facilities for carrying on and promoting
the petroleum trade equal to those possessed and used by the South
Improvement Company,
is a mere blind. The South Improvement Company was to be maintained at
all costs and against all comers by whatever juggling with the rates
should become necessary for the purpose.
It was admitted by members of the South Improvement Company, who
appeared before the Investigating Committee appointed by Congress in
March, 1872, that the discrimination would have turned over to the
Company fully $6,000,000 (£1,200,000) annually on the carrying trade,
while the railroads expected to make about $1,500,000 (£300,000)
more than on the previously existing rates. The Company would thus
make four times as good a bargain as the railroads. It is difficult
to see how shrewd business men like the railroad directors could be
led into a bargain in which they were so obviously bested. Another
point the railroad directors had to consider in the interest of their
shareholders was this. The avowed object of the South Improvement
Company was to restrict the output of refined oil in order to raise its
price. The interest of the railroads was obviously that the prices of
oil should be kept low, so that the refiners would be compelled to ship
the largest possible quantity. The interests of the shippers and of the
railroads which received the shipments were thus diametrically opposed.
The former wanted smaller consignments at higher prices, and the
latter larger consignments at no matter what price. How the railroad
officials could be induced to sign a contract binding them to help in
the diminution of their own freights it is difficult to see.
Mr. Frank Rockefeller, brother of John D. Rockefeller, testified before
a Congressional Committee on July 7, 1876, that it was his impression
at the time that the rebates went into a pool and were divided up
between the Standard Oil Company and the railroad officials. He
mentioned four of the latter by name, and two of them instantly sent
a denial to the Press. Mr. Frank Rockefeller’s evidence--omitting
the portion in which he mentions names--is reproduced in the late
Mr. George Rice’s well-known pamphlet on the Standard Oil Railway
Discriminations (p. 25), as follows:--
By the Chairman:
_Q._ What do you mean by the pool--a pool amongst the railroads or
amongst the oil men?
_A._ I don’t give this as a positive fact, but as I understand
the arrangement, the New York Central, the Erie, the Atlantic and
Great Western, the Pennsylvania Railroad, the Cleveland, Columbus
and Cincinnati, and the Baltimore and Ohio roads have a pool--are
combined for the purpose of shipping oil, and oil only--and in this
pool the Baltimore and Ohio gets a certain number of barrels to go
over its road, the Lake Shore so many to go over its road, and the
Pennsylvania Company so many to go over its road, from different
points in the country, and on the oil that is shipped over these
roads by the pool and the Standard Oil Company there is a rebate or a
drawback from the shipment of so much, which is put into this pool,
over whichever road the oil may go, and that rebate is divided up
between the Standard Oil Company and the railroad officials.
_Q._ The railroad officials, do you say?
_A._ So I understand it. I don’t say that of my own knowledge.
_Q._ Then it does not go to the railroads themselves?
_A._ No, sir.
_Q._ But to the railroad officials?
_A._ To the railroad officials.
There the matter was left by the Committee of Congress, and there it
must be left perforce. If the allegation is true, it would explain how
the railroad directors could be induced to sign such a bad bargain
for the railroads, and if false, it can presumably be refuted by an
exhibition of the railroad accounts.
THE RAILROADS AND THE PIPE LINES
“A dollar in those days (1871) looked as large as a cart wheel.”
JOHN D. ROCKEFELLER _in_ “_Random Reminiscences_.”
CHAPTER III
THE RAILROADS AND THE PIPE LINES
The contract between the railroads and the South Improvement Company
was signed, and armed with this deadly weapon, Mr. Rockefeller went
round to all the rival refineries in Cleveland and explained to their
respective proprietors, gently but firmly, that they were as good as
dead men in the oil trade, and that the only way they could avoid
utter ruin was to turn over their refineries to the South Improvement
Company either for stock or cash at the latter’s valuation. It seems
scarcely credible, but it is an historical fact that no less than
twenty out of these five-and-twenty Cleveland refiners--who, by the
way, were approached one by one and under pledge of secrecy--as soon
as they learnt that they were thus morally dead, proceeded at once to
order their coffins. That is, they sold up as requested. The Cleveland
refiners fell at Mr. Rockefeller’s feet through sheer fright, and thus
in less than three months’ time the Standard Oil group absorbed twenty
other refineries and increased its capacity from 1,500 barrels a day to
10,000 barrels--from one-tenth to one-fifth the total capacity of the
United States.
Of course, the murder was soon out, and the Oil Regions, which
were interested in oil wells as distinct from refining, which was
the Standard’s business, were aflame with indignation. A Petroleum
Producers’ Union was formed in opposition. Mass meetings were held and
Congress was petitioned. The Pennsylvania Legislature repealed the
charter of the South Improvement Company, and on March 25th the peccant
railroads signed a contract with the Petroleum Producers’ Union, of
which the first and chief clause provided--
That all arrangements for the transportation of oil after this date
shall be upon a basis of perfect equality to all shippers, producers,
and refiners, and that no rebates, drawbacks, or other arrangements
of any character shall be made or allowed that will give any party
the slightest difference in rates or discrimination of any character
whatever.
On April 4th General McClellan (Atlantic and Great Western), Horace
F. Clark (Lake Shore and Michigan Southern), Thomas A. Scott
(Pennsylvania), and W. H. Vanderbilt (New York Central) all sent
emphatic messages to the Petroleum Producers’ Union declaring that
their roads had no understanding of any nature in regard to freights
with the _Standard Oil Company_. On April 8th John D. Rockefeller
telegraphed to the Petroleum Producers’ Union: “In answer to your
telegram, this Company holds no contract with the railroad companies
or any of them or with the South Improvement Company.” Yet we now know
from a contract thoughtlessly exhibited by H. M. Flagler seven years
later to a Commission of the Ohio State Legislature--a contract between
his Company and the railroads--that a rate had been fixed “From April
1st until the middle of November, 1872, about seven months, $1.25.” Now
the corresponding rate openly published and recorded in the contract
between the roads and the Petroleum Producers’ Union just quoted, which
was signed March 25th, was $1.50. A rebate of 16⅔ per cent.! Mr.
Rockefeller had it all the time, in spite of his own assertions and
those of the railroad officials to the contrary.
Mr. Rockefeller has committed very few indiscretions in his lifetime,
but he did achieve one at this early date in his career. He talked
under the smart of his rebuff, and so did others of his colleagues in
the late South Improvement Company. He was reported in the _Oil City
Derrick_ to have said to a prominent man of Oil City that the South
Improvement Company could work under the charter of the Standard Oil
Company, and to have added that in less than two months his auditor
would be glad to join him. One of his colleagues simply said: “The
business _now_ will be done by the Standard Oil Company.... We mean to
show the world that the South Improvement Company was organised for
business, and means business, in spite of opposition.” This went the
round of the American Press a few days after the repeal of the charter,
and since then to the present day the indiscreetly uttered threat has
been stealthily fulfilled to the letter. The South Improvement Company
was formally dissolved in order to calm the popular indignation, but
the same men continued to operate through the Standard Oil Company of
Cleveland, and, as we have seen, to receive similar rebates, which
enabled them to build up the Standard Oil Trust. On May 3, 1910--to
bring the matter well down to date by a concrete instance--the United
States Court of Appeal confirmed a decree of the Circuit Court of the
Western District of New York State fining the Standard Oil Company
$20,000 (£4,000) “for accepting concessions from the published rate
of the Pennsylvania, New York Central, and Rutland Railroads in
violation of Inter-State Commercial Law.” But the fine, of course, is
an ineffective flea-bite, and is only worth quoting to show that the
iniquitous conspiracy of injustice and robbery entered into by the
railroads and the Standard Oil Trust in 1872 still continues to baffle
justice in America and to outrage the moral sense of the civilised
world.
A noteworthy development of the conspiracy between the Standard Oil
Company and the railroads was what became known as Standard control
of the railroad “terminal facilities.” By terminal facilities is
understood the unloading, storing, and handling of oil at the railroad
termini, chiefly in the vicinity of New York harbour. The railroads
handed over the entire control and management of their oil yards and
wharves to this one favoured oil company, authorising it to collect
the oil-yard charges from its rivals, and to handle its rivals’ oil
consignments according to its own goodwill and pleasure. Fancy one of
our British railway companies putting all its railway sidings in London
under the control of a single firm of Newcastle coal merchants, and
allowing this firm to load or unload, forward or delay the consignment
of rival firms according to its own convenience or good pleasure! Fancy
the outcry that would be raised against this privileged firm when
it became known that the only check upon its dealing unjustly with
its rivals was that, whatever charges it elected to make for loading,
unloading, and storage at the railway company’s sidings, such charges
were to be uniform in all cases! This last proviso was a mere mockery.
The only authority appointed to see that no advantage was given to
one competitor over another was the arch-competitor--the Standard Oil
Company. The companies entering into this special conspiracy were the
Erie, the New York Central and Hudson River, the Baltimore and Ohio,
and the Pennsylvania railroads at the Atlantic seaboard. I have before
me as I write copies of the contracts made by all these railroads,
excepting the Pennsylvania, with the Standard Oil Company, and they
make astounding reading.
This matter of the “terminal facilities” very naturally received
attention in the United States Government prosecution of the Standard
Oil Company of New Jersey, in the State of Missouri, when the Court
found that the Company was identical with the Standard Oil Trust, which
had previously been ordered by the Court to be dissolved as an illegal
conspiracy in restraint of trade. The effect of the decision has been
suspended by an appeal to the Supreme Court of the United States, which
would have been decided last spring had it not been for the death of
Judge Brewer, the presiding judge. The appeal is expected to be decided
under his tardily appointed successor, Judge Hughes, this spring or
early summer. In the meantime, the finding of the Missouri Circuit
Court, before which the case was argued, is that of “Guilty.” When Mr.
Rockefeller had, with the greatest difficulty, been haled before this
court and asked to explain these contracts on oath, all he could urge
in his favour was that “the Standard interests were handling very large
quantities of oil, and were the _natural parties_ to have control of
the warehousing, receiving, and shipping of oil.” Cross-examination
could extract very little from him. He could not even say when the
Standard Oil interests got possession of the terminals nor how long
they retained them. He admitted that the Standard levied terminal
charges on the oil of independents, but did not know the amount. He
relapsed, in short, into that painfully afflicting condition of amnesia
which seems to be constitutional with Standard Oil officials when
subjected to the rude shock of public examination.
But, luckily, the written letter of the contracts is now to hand to
supplement this lamentable want of memory. Take, for instance, that
with the Erie Company dated April 17, 1874, in Section 7 of which the
Standard agrees to pay 5 cents a barrel to the Erie Railroad for the
use of its yards, and further agrees “to make the charges uniform
to all parties who use the yards or for whom services are performed
therein, and always as low as any other oil yard, affording proper
facilities for the transfer, storage, preparation, and shipment of
the oil at any terminus of any railway or other line competing with
the Erie Railway at or adjacent to the port of New York.” There is
something like humour in the phrase “as low as any other oil yard.”
Every “other oil yard” was similarly controlled by the Standard. One
of its directors, Mr. Jabez A. Bostwick, stated on oath before the
Hepburn Committee on October 16, 1879, that the Standard at that
time controlled the terminals of the Erie and the New York Central
railroads, and that the New York Central had no other oil terminals at
New York Harbour except those controlled by the Standard. At the time
he was testifying he had charge of the New York Central yards, and
declined to answer as to his relation with the Standard Oil Company
in that connection. The usual atmosphere of mystery! It is dissipated,
however, at the present date, for we have now the text of the contract
between the New York Central and the Standard before us, signed January
1, 1876, and referring to a previous contract of July 22, 1875.
One more point and I have done with the “terminal facilities.” Section
8 of the Erie contract provides that the Standard Oil Company shall
assume the collection of freights and charges on all oil received at
the yard and render accounts weekly. “This provision,” observes the
“Brief for the United States,” given to the Attorney-General in the
Missouri case, “gave the Standard Company the power to collect the
Erie’s freight charges for transportation of competitors’ oil, thereby
giving the Standard the great advantage of knowledge of all competitive
shipments and of the rates of freight, and enabling it to compel those
parties to pay the full rate, while the Standard could obtain any
rate it might arrange for with the railroad companies, and it will be
shown that the Standard had rebates from all of them.” In the light of
all this, what becomes of the Standard Oil claim to superior business
acumen and cleverness? Under the conditions shown, a mere schoolboy
could outstrip and ruin the most seasoned merchant in the race for
commercial success. The claim to superior business methods is an
absolutely unfounded one, and might as well be urged by a burglar who
can make a fortune in a night; but, then, his avocation is not usually
referred to as “business.”
By this time the pumping of crude oil from the wells through pipe
lines had commenced, first for short distances to collecting points
on the railroads, but later for long distances, largely superseding
the railroads. The Standard’s pipe lines, called the United Pipe
Lines, were under the management of the late Mr. Daniel O’Day, the
big Irishman mentioned in the first chapter. At first the railroads
and Standard pipe lines worked together to harass and delay the
“independent” shipper and refiner. Here is evidence of how the Standard
Oil Company’s secret agreements with the railroads made it the interest
of the latter to decrease the shipments of independent oil by refusing
to furnish adequate cars and by delaying delivery. In 1878 Mr. W. H.
Nicholson, the representative of Mr. Ohlen, a New York shipper of
petroleum, appeared before an investigation ordered by the Secretary of
Internal Affairs of the State of Pennsylvania and gave evidence upon
oath that he began to have a difficulty in getting cars in May of that
year. One day, he stated, Mr. Ohlen telegraphed to the officials of
the Erie road to know if he could get 100 cars to run east. The reply
came back, “Yes.” About noon Mr. Nicholson saw Mr. O’Day, the manager
of the United Pipe Lines (Standard Oil property), in which his oil was
stored, and told him he was waiting to have his cars loaded. Mr. O’Day
at once said he could not load the cars. “But I have an order from
the Erie officials giving me the cars,” Mr. Nicholson objected. “That
makes no difference,” O’Day replied; “I cannot load cars except upon
an order from Pratt.” Nor would he do it. The cars were not loaded for
Mr. Nicholson, though at the time he had 10,000 barrels of oil in the
United Pipe Lines and an order for 100 cars from the officials of the
Erie in his hand. “Pratt,” of course, was the late Mr. Charles Pratt,
whose refinery was at this time merged in the Standard combine, and
whose name is memorialised in this country by the well-known “Pratt’s
motor spirit.”
High-handed proceedings of this sort by the Pennsylvania Railroad
gradually created such a hubbub that the State of Pennsylvania
instituted a suit against it. This is the evidence given by Mr. B. B.
Campbell, President of the Producers’ Union, on the occasion:--
“I never heard of a scarcity of cars until the early part of June,
1878. I came to Parker (a town in Pennsylvania) about five o’clock
in the evening, and found the citizens in a state of terrible
excitement. The Pipe Lines would not run oil unless it was sold;
the only shippers we had in Parker of any account, viz., the agents
of the Standard Oil Company, would not buy oil, stating that they
could not get cars; hundreds of wells were stopped to their great
injury; thousands more, whose owners were afraid to stop them
for fear of damage by salt water, were pumping the oil on the
ground.... On Saturday morning I spoke very plainly to Mr. Shinn
(Vice-President of the Allegheny Valley Railroad Company, controlled
by the Pennsylvania), telling him that the idea of a scarcity of cars
on daily shipments of less than 30,000 barrels a day was such an
absurd, barefaced pretence that he could not expect men of ordinary
intelligence to accept it, as the preceding fall (_anglice_, autumn),
when business required, the railroads could carry day after day from
50,000 to 60,000 barrels of oil.... I requested him to be the vehicle
of communicating to the Pennsylvania Railroad officials my views on
the subject, telling him that I was convinced that, unless immediate
relief was furnished and cars afforded, there would be an outbreak
in the Oil Regions.... On the next Monday I returned to Parker.
After passing Redbank, where the low-grade road, the connecting-link
between the Valley Road and the Philadelphia and Erie Road, meets the
Valley Road--between that point and Parker--the express train was
delayed for over half an hour in passing through _hundreds of empty
oil cars_!”
In August, 1872, Mr. Rockefeller, as the result of much plotting and
planning, succeeded in persuading about four-fifths of the refining
interest in the United States to go into a National Refiners’
Association, with himself as president, the object being to checkmate
the Petroleum Producers’ Union, which had just exposed the South
Improvement Company. This refiners’ association was to operate on what
was known as the “Pittsburg Plan”--so called from the place where the
scheme was first organised--according to which all the refineries were
subject to a central board. They were to refine only such an amount as
the board allowed, not to undersell prices fixed by the board, and to
leave their buying of crude oil and the arrangements for transportation
entirely in the hands of the board. In the aggregate they would thus
form a company, presided over by one central board; their participation
in this company would be expressed in terms of stock, and each
stockholder would receive dividends whether his plant operated or
not. It was, in short, the germ of a “Trust,” with Mr. Rockefeller as
trustee. The refiners had put their heads into the lion’s mouth with a
vengeance.
The Petroleum Producers’ Union was up in arms at once to protect the
price of crude, and made an heroic effort to do so by restricting
output. They also set up a producers’ selling agency to cut out the
Refiners’ Association by refusing to sell it oil except at their
own price. They were no match in generalship, however, for Mr.
Rockefeller, especially when aided, as he was, by the hand of Nature.
Nature was unkind enough to send the producers “gushers” with floods
of oil when they wanted it least, and they found restriction of output
practically impossible. At the same time most of the producers were
badly in want of ready cash, and the Refiners’ Association had the
longer purse.
At the psychological moment Mr. Rockefeller struck the judicious blow
of offering to throw in his lot with the producers and buy crude only
from the Producers’ Selling Agency (and that at $4.75 a barrel, a
clear dollar over the then current market price), if the producers
on their part would undertake to maintain the price and sell to no
one outside the Refiners’ Association. The coup succeeded, and, half
tempted, half constrained by cash necessities, the producers were
ill-advised enough to trust their enemy and sign what was known as “The
Treaty of Titusville” on the lines proposed. They at once received
an order from Mr. Rockefeller for 200,000 barrels of crude at $3.25,
not quite as good a price as that first mentioned, but which, under
the circumstances, they were glad to accept. The “treaty” was signed
on December 19, 1872. The producers had shipped about 50,000 of the
barrels ordered by Mr. Rockefeller, when, on January 14, 1873, they
were suddenly electrified to hear that that gentleman _refused to take
any more of the contract oil_!
When taken to task Mr. Rockefeller urged in his defence the pitiful
plea that the producers had not kept their part of the contract by
limiting the supply of oil. It was true that the Producers’ Union was
pledged by its own internal organisation to limit the supply of crude,
but no such stipulation appeared in the contract signed by it with
the Refiners’ Association. It was its own domestic arrangement. Had
the matter been taken to court it is difficult to see how an alleged
verbal understanding could have prevailed against a written contract.
But no such step was taken. The Producers’ Union collapsed in utter
demoralisation and never made another united effort for the next five
years. The Refiners’ Association also found itself unable to keep up
the internal discipline it had imposed upon itself. It dissolved in
June, 1873, and Mr. Rockefeller was left sole master of the situation.
He had outgeneralled everybody.
In 1874 the Erie, Central, and Pennsylvania Railroads entered into a
combination with certain of the pipe lines, to the effect that equal
rates should be charged by both the railroads and the pipe lines in
the combination. The railroads were to starve out the independent
pipe lines by refusing them the advantages given to the United Pipe
Lines. Both railway freights and pipage rates were to be raised
simultaneously, and on such a schedule that henceforth the cost of
transport would be equal to all refiners, on crude and refined, from
all points! This combination was announced curtly by a private circular
sent out by James H. Rutter, freight agent of the New York Central,
containing the paragraph:
You will observe that under this system the rate is even and fair
to all parties, preventing one locality taking advantage of its
neighbour by reason of some alleged or real facility it may possess.
Oil refiners and shippers have asked the roads from time to time to
make all rates even, and they would be satisfied. This scheme does
it, and we trust will work satisfactorily to all.
The refiners and shippers referred to as complacently as if they formed
the bulk of the refining and shipping interest were, of course, Mr.
Rockefeller and his friends, assumed for the nonce, as in the case of
the South Improvement Company, to be “the trade.”
This astounding circular, commonly referred to in American Trust
history as the Rutter circular, introduces us to the second species
of unjust discrimination enjoyed by Mr. Rockefeller, and perhaps--of
late years, at any rate--with an even more disastrous effect than
that of the secret rebate--namely, the “discriminatory rate.” In some
cases the discriminatory rate was secret, in others published. The
Rutter circular projected the idea into a sort of quasi-publicity as an
ostensibly fair one. The brief for the Government in the pending appeal
by the Standard Oil Company of New Jersey against the Missouri judgment
characterises these discriminatory rates as follows:--
The testimony in this case will show that in the open published
rates, as well as in secret and unfiled rates, there was radical
discrimination against the independent shipping points and in
favour of the Standard shipping points.... It is impossible that
without connivance with the Standard Oil Company the railroads of
this country should have uniformly made a system of rates whereby
with scarcely an exception the independent shipping points were
discriminated against in favour of the Standard shipping points....
It is a well-known fact that this group of defendants is the most
influential in financial circles in the United States. This influence
has undoubtedly been used to obtain these preferential rates, because
it could not be possible that it merely happened in the ordinary
course of business that practically every Standard shipping point
would be favoured with advantageous rates as against competitors.
This contention has, of course, been already sustained by the finding
of the Missouri Circuit Court, as it is sustained by the common sense
of any one who takes the trouble to go through the schedules of rate
charges made by the railroads recently brought to light. The Standard
Oil Company’s main refinery is at Whiting, in Indiana, a trifle to the
south-east of Chicago. To take a few instances, the rate from Whiting
to Chattanooga, a distance of 849 miles, by the route actually used on
the road, was fixed by the railroad at 25.9 cents per hundred gallons,
while the rate from Pittsburg--an independent refining centre--to
Chattanooga, a distance of only 651 miles, was as much as 47 cents
per hundred. In other words, the Standard Oil Company paid 21 cents a
hundred less for shipping 200 miles further. This difference amounts to
over 1¼ cents per gallon, which is in itself a large profit on oil.
The discrimination against Cleveland and Toledo--two other independent
shipping centres--on shipments to Chattanooga was equally great. Again,
take the destination of Birmingham, in the State of Alabama. The open
rate from Pittsburg, a distance of 794 miles, was 51.5 cents; from
Whiting, a distance of 820 miles, it was 29.5 cents, a difference of 22
cents. Similarly there was an equal discrimination against Cleveland
and Toledo on shipments to Birmingham. And so on to the end of the
chapter of conspiracy all over the States.
THE BIRTH OF THE TRUST
“The American Beauty rose can be produced in its splendour and
fragrance only by sacrificing the early buds which grow up around it.”
J. D. ROCKEFELLER, Jun.,
_to the students of Brown University_.
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_.”
CHAPTER V
BRIBERY: THE ARCHBOLD LETTERS
The Standard Oil people have undoubtedly practised bribery throughout
a long series of years and on the most comprehensive scale, and that
not merely to avert a temporary danger or get themselves out of an
unexpected scrape, but as a matter of ordinary business routine.
They bribed high and low, in season and out of season. How real the
evil is was revealed in a dramatic manner in the famous Standard
Oil letters which Mr. Randolph Hearst read during the American
Presidential campaign of 1908. The genuineness of these letters was
never questioned, although the persons implicated made some feeble
attempts to put a less invidious explanation upon them. It was stated
that one of the Standard Oil Company’s letter-books had been stolen,
and the _Times_ editorially remarked that there had been “nothing
approaching the disclosures in sensational rapidity of action in the
history of the American Presidential elections.” The principal figure
in these epistles of corruption is Mr. J. D. Archbold. The first letter
was addressed to Mr. J. B. Foraker, Senator for Ohio, and one of the
leading members of the Republican party. It was as follows:--
26, BROADWAY, NEW YORK,
_March 9, 1900_.
MY DEAR SENATOR,--I have your favour of last night with inclosure,
which latter, with letter from Mr. Elliott commenting on same, I
beg to send you herewith. Perhaps it would be better to make a
demonstration against the whole Bill, but certainly the ninth clause,
to which Mr. Elliott refers, should be stricken out, and the same is
true of House Bill No. 500, also introduced by Mr. Price, in relation
to foreign corporations, in which the same objectionable clause
occurs. Am glad to hear that you think that the situation is fairly
well in hand.
Very truly yours,
JNO. D. ARCHBOLD.
Hon. J. B. Foraker, Washington, D.C.
[The Mr. Elliott referred to was M. F. Elliott, general counsel for
the Standard Oil Company.]
Here are some more letters of this series:--
26, BROADWAY, NEW YORK,
_March 26, 1900_.
Hon. J. B. Foraker, 1500, Sixteenth Street, Washington, D.C.
DEAR SENATOR,--In accordance with our understanding, now beg to
enclose you certificate of deposit to your favour for $15,000. Kindly
acknowledge receipt and oblige.
Yours very truly,
JNO. D. ARCHBOLD.
26, BROADWAY, NEW YORK,
_April 17, 1900_.
MY DEAR SENATOR,--I enclose you certificate of deposit to your favour
of $14,500. We are really at a loss in the matter, but I send this,
and will be glad to have a very frank talk with you when opportunity
offers, if you so desire. I need scarcely again express our great
gratification over the favourable outcome of affairs.
Very truly yours,
JNO. D. ARCHBOLD.
Hon. J. B. Foraker, 1500, Sixteenth Street, Washington, D.C.
_January 27, 1902._
MY DEAR SENATOR,--Responding to your favour of the 25th, it gives me
pleasure to hand you herewith certificate of deposit for $50,000 in
accordance with our understanding. Your letter states the conditions
correctly, and I trust the transaction will be successfully
consummated.
Very truly yours,
JOHN D. ARCHBOLD.
Hon. J. B. Foraker, Washington, D.C.
26, BROADWAY,
_February 25, 1902_.
MY DEAR SENATOR,--I venture to write you a word regarding the Bill
introduced by Senator Jones, of Arkansas, known as “S. 649,” intended
to amend the Act to protect trade and commerce against unlawful
restraints and monopolies, introduced by him December 4th. It really
seems as though this Bill was very unnecessarily severe and even
vicious.
Is it not much better to test the application of the Sherman Act
before resorting to a measure of this kind? I hope you will feel so
about it, and I will be greatly pleased to have a word from you on
the subject. The Bill, I believe, is still in committee.
With kind regards, I am, very truly yours,
JOHN D. ARCHBOLD.
Hon. J. B. Foraker, Washington, D.C.
Senator Foraker, when these letters were published, explained that
the 50,000 dollars was sent to him in order to carry out the purchase
of an Ohio newspaper, and that when the deal fell through he returned
the money. The American public received this explanation coldly, and
the Republican party managers forced Mr. Foraker to retire from the
campaign in order to try and get rid of so embarrassing an association.
It will be noted that while these large sums were being sent to the
Senator he was being asked to oppose anti-trust legislation in the
interests of the Standard.
But even the Bench itself was not secure from the influence of Mr.
Archbold. “Th’ Supreem Court is full of Standard Ile,” says Mr. Dooley,
the American humorist, and two other letters addressed by Mr. Archbold
to Senator Foraker show how that consummation has been reached:--
26, BROADWAY,
_December 18, 1902_.
MY DEAR SENATOR,--You, of course, know of Judge Burket’s candidacy
for re-election to the Supreme Court Bench of Ohio. We understand
that his re-election to the position would be in the line of usage
as followed in such cases in Ohio, and we feel very strongly that
his eminent qualifications and great integrity entitle him to this
further recognition.
We most earnestly hope that you agree with this view, and will favour
and aid his re-election. Mr. Rogers joins me most heartily in this
expression to you.
With kind regards, I am, very sincerely yours,
JOHN D. ARCHBOLD.
26, BROADWAY,
_March 20, 1903_.
MY DEAR SENATOR,--We are surprised beyond measure to learn that
Smith W. Bennett, brother-in-law of F. S. Monnett, recently
Attorney-General of Ohio, is in the race for the Attorney-Generalship
of Ohio on the Republican ticket.
Bennett was associated with Monnett in the case against us in Ohio,
and I would like to tell you something of our experiences and
impressions of the man gained in that case. If you know him at all, I
am sure you will agree that his candidacy ought not to be seriously
considered from any point of view.
I would esteem it a favour to have a line from you on the subject.
JNO. D. ARCHBOLD.
Mr. F. S. Monnett, whose brother-in-law is attacked here, was one
of the public officials whom the Standard Oil Trust failed to
bribe--a most inconvenient record in Mr. Archbold’s eyes. He was
Attorney-General for the State of Ohio, and his activity in enforcing
the anti-Trust law of that State against the Standard earned him this
denunciation. Mr. Monnett described his personal experiences in the
matter to a representative of the Press in July, 1899, when on a visit
to London:--
It happened in this way: Mr. Chas. B. Squires is a well-known
business man in Cleveland, president of the Manhattan Insurance
Company, and in no way connected with the Standard. Owing to my
fighting the Insurance Trust in Ohio I saw a good deal of him. One
day a man called on Squires, saying that he represented Frank
Rockefeller (brother of J. D.) and Charles V. Haskell, both Standard
Oil men. This man asked Squires whether the Attorney-General could
be “reached.” Squires replied (according to his story to me) that if
anybody could “reach” him he could. This representative mentioned
the Trust names, and showed Squires a telegram stating that he had
authority to “reach” the Attorney-General, and that there would be
a liberal reward for him if things were dickered. The man offered
Squires $100,000. Squires said that would amount to nothing at all;
that he would not attempt such a job for less than $500,000. Finally
he was authorised to offer $400,000 (£80,000) to the Attorney-General
if he would let the case stand adjourned over his term of office
[this was the prosecution of the Standard by the State of Ohio as an
illegal Trust], and $100,000 was for Squires and the go-between. I
was at Washington, and got a telegram from Squires, “Do nothing till
I see you.” When I did see him he made this proposition.... This is
not the first case of the kind during this litigation, for one of my
predecessors, Mr. Watson, was offered $100,000 in much the same way.
It is, moreover, quite in accordance with the general policy of the
Trust.
In fact, in that year--1899--the Annual Report of Mr. Monnett to the
Governor of the State of Ohio contains detailed charges of _six_
deliberate attempts to bribe Mr. David K. Watson, his predecessor in
office, to withdraw suits entered against the Standard Oil Company of
Ohio. Mr. Watson, however, was not to be bribed; neither was he to
be intimidated, though Senator Marcus A. Hanna, the personal friend
and financier of President McKinley, and one of the most influential
Republican politicians in America, wrote to him stating that he had
always considered him “in the line of political promotion,” and then
went on to intimate that unless the suit against the Standard was
withdrawn Watson would be the object of vengeance by the Corporation
and its friends for ever after. As if to clinch his threat and
argument, Hanna wrote, “_You have been in politics long enough to know
that no man in public office owes the public anything._” This last
phrase remained a potent weapon in the hands of Mr. Hanna’s enemies
till the day of his death.
But the Hearst letters show that Judge Burket was not the only judicial
candidate Mr. Archbold favoured. The following letters were written by
him to the Hon. W. A. Stone, Governor of Pennsylvania:--
26, BROADWAY,
_December 5, 1902_.
MY DEAR GOVERNOR,--I am sure you will pardon any seeming presumption
on my part in writing you on a subject in which, both personally and
on behalf of my Company, I am greatly interested. It is to urge the
appointment, if at all consistent, of Judge Morrison, of McKeen, to
the Supreme Court Bench, vice Mitchell, deceased. Judge Morrison’s
character for ability and integrity needs no word at my hands, but
aside from these great considerations his familiarity with all that
pertains to the great industries of oil and gas in the important
relation they bear to the interests of the Western part of the State
make him especially desirable as a member of the Court from that
section.
Hoping that it may prove possible for you to favourably consider
Judge Morrison’s appointment.
I am, with very high regard, sincerely yours,
JNO. D. ARCHBOLD.
Hon. Wm. A. Stone, Harrisburg, Pa.
26, BROADWAY,
_September 5, 1900_.
Hon. Wm. A. Stone, Harrisburg, Pa.
MY DEAR GOVERNOR,--Will you permit me to say that if it seems
consistent for you to appoint Judge John Henderson, of Meadville,
Pa., to the vacancy on the Supreme Bench caused by the death of Judge
Green, it will be a matter of intense personal satisfaction to me.
I am sure I need not occupy your time with any argument as to Judge
Henderson’s fitness, either as to character or legal qualification.
With high regard, I am, very truly yours,
JNO. D. ARCHBOLD.
Both Judge Morrison and Judge Henderson were appointed to the Supreme
Court of Pennsylvania, and the former’s familiarity with “oil and gas”
no doubt proved acceptable to Mr. Archbold. We shall see hereafter that
Mr. Archbold himself and other Standard Oil magnates had good reason to
appreciate in the famous Buffalo refinery prosecution the advantage of
having on the Bench a judge who was familiar with “oil and gas.”
These strange letters did not disdain other rising members of the Bar.
Here is a telegram and three letters addressed to the Hon. J. P. Elkin,
Attorney-General of Pennsylvania--the officer whose duty it is to act
as public prosecutor in his State in enforcing anti-Trust legislation.
Mr. Elkin’s merits have since raised him also to the Bench of the
Supreme Court of Pennsylvania:--
Telegram.
_March 15, 1900._
Hon. John P. Elkin, Indiana, Pa.
Telegram received. Will do as requested.
JNO. D. ARCHBOLD.
26, BROADWAY,
_March 15, 1900_.
Hon. John P. Elkin, Indiana, Pa.
Personal.
MY DEAR GENERAL,--In accordance with your telegraphic request of
to-day, I beg to enclose you certificate of deposit to your favour
for $5,000, in fulfilment of our understandings.
Very truly yours,
JNO. D. ARCHBOLD.
26, BROADWAY,
_February 5, 1900_.
MY DEAR GENERAL,--In accordance with the request in your telegram
of to-day, I now beg to enclose you certificate of deposit to your
favour for $10,000, kind acknowledgment of which will oblige.
Yours very truly,
JNO. D. ARCHBOLD.
To Hon. John P. Elkin, Indiana, Pa.
26, BROADWAY,
_May 9, 1901_.
MY DEAR GENERAL,--I enclose copy of a measure pending--I am not sure
whether in the House or Senate--being an Act to amend an existing
Statute, as stated. For reasons which seem to us potent, we would
greatly like to have this proposed amendment killed. Won’t you kindly
tell me about it and advise me what you think the chances are?
Very truly yours,
JNO. D. ARCHBOLD.
To the Hon. John P. Elkin, Attorney-General,
Harrisburg, Pa.
This is the sort of campaign the Standard Oil Trust has been carrying
on in American Legislatures. How would the British people like it to be
extended to the House of Commons?
Of course, in such a campaign of corruption the Press is not
overlooked. Here are three interesting letters which show how public
opinion may be manufactured by that process:--
26, BROADWAY,
_October 10, 1902_.
Mr. H. H. Edmonds, Baltimore, Md.
DEAR SIR,--Responding to your favour of the 9th, it gives me pleasure
to enclose you herewith certificate of deposit to your favour for
$3,000, covering a year’s subscription to the _Manufacturers’
Record_.--Truly yours,
JNO. D. ARCHBOLD.
26, BROADWAY,
_January 17, 1899_.
Hon. W. A. Magee, _Pittsburg Times_, Pittsburg, Pa.
DEAR SIR,--As per understanding, herewith enclosed find certificate
of deposit to your order for $1,250, the receipt of which kindly
acknowledge.--Truly yours,
JNO. D. ARCHBOLD.
26, BROADWAY,
_December 18, 1901_.
Mr. Thomas P. Grasty, care of Buck & Pratt, Room 1,203, 27, William
Street, City.
DEAR MR. GRASTY,--I have your favour of yesterday, and beg to return
you herewith the telegram from Mr. Edmonds to you. We are willing to
continue the subscription of $5,000 to the _Southern Farm Magazine_
for another year, payments to be made the same as they have been this
year. We do not doubt but that the influence of your publications
throughout the South is of the most helpful character.
With good wishes, I am, very truly yours,
JNO. D. ARCHBOLD.
These sums are called “subscriptions,” but their real character appears
from the case of the _Southern Farm Magazine_, the price of which is
50 cents a year. Mr. Archbold was therefore “subscribing” for 10,000
years! We have only to remember that the anti-Trust feeling is very
strong in Texas and the other Southern States to realise why the
Standard Oil Trust was extending its patronage to the remote posterity
of Mr. Thomas P. Grasty, that publicist of such a “helpful” character.
ARSON AND ESPIONAGE
“The Oil Trust is evangelical at one end and explosive at the other.”
HENRY D. LLOYD _in_ “_Wealth against Commonwealth_.”
CHAPTER VI
ARSON AND ESPIONAGE
It will be necessary to return to the subject of bribery when we
come to the marketing business of the Trust. We will now pass to a
few examples of the resort to open violence for the attainment of
the Trust’s ends. The Tidewater Pipe Line was started by Lombard,
Ayres & Co., New York refiners, and others, on the publication of the
Rutter circular; and Mr. Rockefeller offered at first to buy them
out--pipes, refineries, and all--but refused finally to give the price
of $15,000,000 they asked. The Standard’s next move was the purchase of
a certain minority of the shares in the Tidewater Company. On January
17, 1883, the Standard stockholders held a hugger-mugger meeting at
the Tidewater office in Titusville, without notifying the stockholders
generally, voted the turning over of the control to Standard Oil
interests, and took possession of the office in the name of that
Company. The president of the Tidewater, however, who had been absent
in New York, met this attempt by another equally determined. He carried
the office by surprise, barricaded it, and kept forcible possession
till a suit could be brought to declare the meeting void, which
was legally accomplished. Previously to this all sorts of material
obstacles had been put in the way of the Tidewater pipe getting to the
sea; the railroads constantly opposed the Company’s obtaining a right
of way, and mysterious individuals--obviously representing Standard
interests--constantly cropped up along the proposed route, acquiring
exclusive rights over strips of land running at right angles to the
proposed right of way, some of these tiny ribbons of land being forty
miles long. Finally, the Tidewater Pipe Line became a Standard Oil
tentacle.
In the case of the United States Pipe Line--organised by the
independent oil producers and not to be confused with the United Pipe
Lines, which were always a Rockefeller organisation--it has been
clearly shown that the Standard Oil Company’s representatives have
resorted to similar means of obstruction. Physical force was used on
several occasions, a notable instance being that of the crossing of the
Delaware River at Hancock under the Erie Railroad bridge in 1893. Erie
interests as such were in no wise affected by the crossing, and the
president of the Erie road, after a conference with Mr. Emery, manager
of the United States Pipe Line, had informed him that there would be
no objection to going under the bridge, and even sent his own engineer
to Hancock to make arrangements for the exact location of the pipe.
When the connection from both sides of the river was about to be made,
however, the railroad company ran up two engines and “wrecking cars,”
with about seventy-five men, and placed inflammable material over the
ends of the pipe lines, so that on any attempt to connect they would
be so heated that connection would become impossible. The spot was
beleaguered by the hostile forces of the railroad and the pipe line
company for three months, when the latter abandoned the route and set
its pipes seventy miles back to a place called Athens, Pa. The case for
the United States Government in the Missouri prosecution says:--
The obstruction came in part directly from the agents of the Standard
Oil Company and partly from the railroads, but there is every reason
to believe that the railroads were acting in the interests of the
Standard Oil Company, as their own interests would scarcely be
injured by the pipe line, and as they had (so far as the evidence
shows) never opposed the construction of pipe lines by the Standard
Oil Company.
I select another case from the year 1895, when the United States
Pipe Line was getting in through the State of New Jersey to New York
harbour. The account of it may be best given in the words of the United
States Attorney-General’s brief in the Missouri case:--
When the Delaware, Lackawanna, and Western Railroad was reached at
Washington, N.J., serious opposition was again encountered. The
pipe line company bought the fee simple title to land at a point
where there was a culvert in the railroad and placed a pipe through
this culvert, and put a force of men in charge. The next day two
locomotives, a wrecker, and 150 men attempted by force to eject
the employees of the pipe line from their position and to tear up
the pipes. A hand-to-hand fight ensued, and finally an agreement
was reached by which the matter was taken into Court. Mr. Emery
testifies that some of the same men who opposed the passage of the
pipe under the tracks of the Erie Railroad at Hancock, N.Y., some two
years before, were also among the representatives of the Delaware,
Lackawanna, and Western Railroad in the trouble at Washington, N.J.
After a delay of six months the lower Court decided in favour of the
right of the pipe line to cross the tracks.
In 1879 the owners of the Vacuum Oil Works, of Rochester, N.Y., Messrs.
H. B. and C. M. Everest, father and son, made over a three-fourths
interest in their concern, which manufactured a patent lubricating
oil, to the Standard Oil Company, the Everests remaining managers on a
salary, and also being co-directors along with Messrs. H. H. Rogers,
J. D. Archbold, and Ambrose McGregor, of the Standard Oil Trust, of
which the Vacuum Oil Company was now run as a subsidiary. The following
year three of the employees, Wilson, Matthews, and Miller, having got
some money together, thought that they would like to start refining on
their own account, and did so, setting up the Buffalo Lubricating Oil
Company in the town of Buffalo. C. M. Everest warned them he would do
all in his power to injure their concern. He tried especially, by an
offer of $20,000, to get Miller, who was the most practical refiner
of the three, to break his contract with his two new partners, and on
June 7, 1881, H. B. Everest took Miller to the office of his lawyer,
Mr. Geo. Truesdale, in order to come to an arrangement with him. Mr.
Truesdale afterwards testified as follows in regard to this interview
(Proceedings in Relation to Trusts, House of Representatives, 1888,
Report No. 3,112, p. 864):--
I told him (Miller) that I did not know the exact terms of his
contract, but if he had entered into a contract and violated it
I presumed there would be a liability for damages as well as a
liability for the debts of the Buffalo party. Mr. Miller and Everest
both talked on the subject, and Mr. Everest says, “I think there are
other ways for Miller to get out of it.” I told him I saw no way
except either to back out or to sell out; no other honourable way.
Mr. Everest says, substantially, I think, in these words: “Suppose
he should arrange the machinery so it would bust up, or smash up,
what would the consequences be?”--something to that effect. “Well,”
I says, “in my opinion, if it is negligently, carelessly done, not
purposely done, he would be only civilly liable for damages caused
by his negligence; but if it was wilfully done, there would be a
further criminal liability for malicious injury to the property of
the parties--the company.” Mr. Everest said he thought there wouldn’t
be anything only civil liability, and said that would--he referred
to the fact that I had been police justice, had some experience in
criminal law--and he said that he would like to have me look up the
law carefully on that point, and that they would see me again.
Shortly afterwards Miller blew up a still in the Buffalo works twice
over by overheating, but did no further damage beyond spoiling the
175 barrels of oil contained in the still. He absconded, was kept
in idleness, or semi-idleness, by the Vacuum Company at a salary of
$1,500 a year, and the latter company proceeded to harass the Buffalo
Lubricating Oil Company out of existence by taking one vexatious
action after another against it on the ground of infringement of
patents. These were all decided in favour of the Buffalo Company by
the Courts except in one case, for a purely technical infringement
it was condemned to pay 6 cents (3d.) damages. Finally, the Buffalo
Company turned on its adversary and took an action against the Vacuum
Oil Company directors, H. H. Rogers, J. D. Archbold, A. McGregor, and
the two Everests for criminal conspiracy, instituting at the same time
civil suits for damages. The trial, at which Mr. J. D. Rockefeller
and all the forces of the Standard Oil were mustered, aided by the
most eminent counsel in the States, came off at Buffalo on May 2,
1886, and Messrs. Rogers, Archbold, and McGregor escaped owing to
the judge withdrawing the case from the jury, because, although they
were directors of the Vacuum Oil Company, it could not be proved that
they had advised Miller to cause an explosion. The two Everests were
condemned. By various means the Standard contrived to stay execution of
the sentence until May, 1888, two years later; the statute provided a
penalty of one year’s imprisonment or $250 fine, or both. Great efforts
were made to obtain a mitigation of the sentence. A petition signed
by forty “leading citizens” of Rochester was handed in to the judge,
praying him, on account of the “untarnished fidelity and integrity”
of the convicted men, to make the penalty as light as the Court was
authorised by law to fix. In the result the two Everests were each
fined $250 for the criminal offence, and the Vacuum Oil Company settled
the civil suits for $85,000 (£17,000). This is the case on which the
late Mr. Henry D. Lloyd (whose work, “Wealth against Commonwealth,”
was the first to expose the Standard’s misdeeds), based the caustic
comment: “The Standard Oil Trust is evangelical at one end and
explosive at the other.”
It was remarked in a previous chapter that the unfair advantages
conceded to Mr. Rockefeller by the conspiring railroads afford a
sufficient answer to the Standard Oil Trust’s contention that the
secret of its success lies in its superior business ability. But there
is no need to deny a high level of business ability to Mr. Rockefeller
and his associates. The Standard Oil people have always enjoyed this
legitimate advantage of knowing exactly what they intend doing.
Granting, however, that the Standard people are the keenest of business
men, it is equally certain that they have pushed their keenness to the
point where it has become mere unscrupulous cunning and chicanery. This
is conspicuously shown in the history of the Trust in its character of
salesmen.
Every local agent for the sale of Standard oil is required to furnish
reports to the statistical department of the Standard Oil Trust at
26, Broadway, New York, of all the transactions entered into by every
dealer in his district. His business, in short, is to know everybody
else’s business and to report it. This is done by filling up printed
forms showing in parallel columns against every retailer’s name in the
district, be he shopkeeper or pedlar, the description and brand of
goods he buys and sells, how the goods have been transported, their
price, and the name and address of the wholesale dealer who supplied
them. The agent is stimulated in every way by reproof and reward to
obtain the most intimate and apparently trifling details bearing upon
the above points, and, as is well known in the United States, is
generally converted by the system into a mere spy, who will not stick
at bribery or any other dirty trick so long as he can give his chiefs
the desired information. The United States Government agents found
that the Standard’s “statistical department” was presided over by a
man named Christian Dredger--a name which, allied to the occupation,
certainly reminds one of “the man with the muck-rake.” The knowledge
that a local grocer or pedlar is buying elsewhere than from the
Standard is no sooner received by mail or telegraph at the statistical
department than a Standard agent is told off to swoop down upon the
“irregular trader,” and either by threats of underselling and ruining
his business in case he persists to offer the “independent” oil, or
by promising him a secret rebate on published prices, secures his
submission. If the agent can persuade the retailer to countermand his
order from the independent, so much the better.
These accusations are proved beyond question by extant collections of
hundreds of letters and numerous telegrams received by independent
retailers, and by a superabundance of sworn testimony from all parts
of the States. Just to show how the thing works, here is a typical
letter received by a retailer who has been caught ordering oil from an
independent, and has been “persuaded” to countermand the order:--
DES MOINES, IOWA,
_January 14, 1891_.
John Fowler, Hampton, Iowa.
DEAR SIR,--Our Marshallstown manager, Mr. Ruth, has explained the
circumstances regarding the purchase and subsequent countermand of
a car of oil from our competitors. He desires to have us express
to you our promise that we will stand all expense, provided there
should be any trouble growing out of the countermand of this car. We
cheerfully promise to do this; we have the best legal advice which
can be obtained in Iowa bearing on the points in this case. An order
can be countermanded either before or after the goods have been
shipped, and, in fact, can be countermanded even if the goods have
already arrived and are at the depôt [_anglice_, railway station].
A firm is absolutely obliged to accept a countermand. The fact that
the order has been signed does not make any difference. We want you
to absolutely refuse under any circumstances to accept the car of
oil. We are standing back of you in this matter, and will protect you
in every way, and would kindly ask you to keep this letter strictly
confidential.
Yours truly,
E. P. PRATT.
Another typical example of Standard methods is revealed in the
following letter addressed to the Independent Oil Company, of
Mansfield, Ohio, by one of its customers:--
TIFFIN, OHIO,
_January 24, 1898_.
DEAR SIRS,--I am sorry to say that a Standard Oil man from your city
followed that oil car and oil to my place, and told me that he would
not let me make a dollar on that oil, and was dogging me around for
two days to buy that oil, and made all kinds of threats, and talked
to my people of the house while I was out, and persuaded me to sell,
and I was in a stew what I should do, but I yielded, and I have been
very sorry for it since. I thought I would hate to see the bottom
knocked out of the prices, but that is why I did it--the only reason.
The oil was all right. I now see the mistake, and that is of getting
a carload. Two carloads coming in here inside of a week is more than
the other company will stand....
Yours truly,
H. A. EIRICK.
Chess, Carley & Co., the Standard marketing agents at Louisville,
Kentucky, are big offenders in this respect. The late Mr. George Rice,
of Marietta, Ohio, a well-known independent, offered a grocer named
Armstrong, in Clarksville, Tennessee, his oil at a lower price than
Chess, Carley & Co. would sell to him at. Armstrong mentioned the offer
to the latter, and “was scared almost out of his boots,” wrote Rice’s
agent.
Carley told him, continues the agent, “he would break him up if he
bought oil of any one else; that the Standard Company had authorised
him to spend $10,000 to break up any concern that bought oil from any
one else; that he (Carley) would put all his drummers in the field to
hunt up Armstrong’s customers, and sell his customers groceries at 5
per cent. below Armstrong’s prices, and turn all Armstrong’s trade
over to Moore, Bremaker & Co., and settle with Moore, Bremaker & Co.
for their losses in helping to break Armstrong up, every thirty days.”
The Waters-Pierce Oil Company, the Standard’s Texas and Mexico branch,
are equally bad, and their methods are denounced by their customers in
similar language to that already quoted. The retailers speak of their
threats, their “cutting to kill”; they complain that the Standard
agents “nose” about their premises, ask impudent questions, and
generally make trade disgusting and humiliating.
The system naturally results in bribing employees, not only of the
railroads, but of the independents themselves in order to gain
information. The bribes seem to have been generally small in amount,
but to have yielded wonderful results. For instance, in 1893, a negro
boy who was induced by the Atlantic Refining Company of Philadelphia
(Standard Oil subsidiary), to supply regular details of the business
of the Lewis Emery Oil Company, his employers, was only paid $90 (£18)
for supplying information as to the firm’s daily shipments for about
six months and also for smuggling his company’s price-book to the
Standard managers to be copied out! Most of the old legends about a man
“selling his soul to the devil” make Mephistopheles do something very
substantial as his part of the bargain. But the Standard Oil Trust is
capable of giving his Satanic Majesty many wrinkles in “labour-saving”
methods, and breaks down the moral sense of the rising generation
on much more economic principles. E. M. Wilhoit, Standard agent at
Topeka, Kansas, from 1891 to 1898, testified in the Missouri trial that
his agency was allowed $8 (£1 12s. 6d.) a month for paying railroad
employees for information of competitive shipments, Mr. E. P. Pratt,
the manager of the Kansas City branch of the Consolidated Tank Line
Company, forwarding this $8 from Kansas City by his personal cheque.
Mr. G. W. Mayer, who succeeded Pratt, reduced this amount to $6 (25s.)
a month. The cheques came in blank envelopes without any letter, and
the instructions as to what should be done with the money were given
verbally. The clerks of five different railways were called upon once
a week for this information, which was generally written on a small
slip of paper and handed to the drayman who took oil to the railroad.
I select this case almost at random as a typical one from an ocean of
similar evidence. From the tempter’s point of view it certainly seems a
very cheap line of damnation.
THE “BOGUS INDEPENDENTS”
“The very rich are just like all the rest of us; and if they get
pleasure from the possession of money it comes from their ability to
do things which give satisfaction to some one besides themselves.”
JOHN D. ROCKEFELLER _in_ “_Random Reminiscences_.”
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.
CHAPTER VIII
THE STANDARD’S “INVENTIONS”
The Standard achieved other ends by its system of creating bogus
competitors, besides avoiding public odium. It was enabled by their
operation to carry on a competitive warfare cheaply. The “bogus
independents” bought oil from the genuine independents, and proceeded
to retail it at the wholesale price. As the genuine independents then
came down a peg or two in their retail price to meet this competition,
and lowered their _wholesale_ price correspondingly, the bogus concerns
bought more at the new wholesale level, and then retailed it at that,
and so _ad infinitum_--or, rather, _ad infimum_--till the bottom
was reached, without their losing a cent in the process. Meantime
the Standard virtuously kept its prices up to its own customers in
that particular district, and protested against the ruin that was
being brought upon the trade by underselling. Thus the function of
the “bogus independent,” whether company or pedlar, was not to make
money for the Standard, but to kill off its competitors. It was an
instrument of assassination pure and simple. And just as a particularly
diabolical murderer arranges the time and manner of his victim’s death,
so that it shall seem to be self-inflicted, so the Standard arranged
by the working of these bogus concerns that the genuinely independent
firms outside its own charmed circle should seem to the public to be
perishing as the result of their own “cut-throat competition.” It was a
subtle game, and played with devilish cunning and persistency for many
years before it was definitely shown up in its true light. And it was
helped by the fact that many of the bogus concerns worked in this way
had once been genuinely independent concerns which the Standard had
secretly bought up.
Charles E. Farrell testified as a Government witness at the Missouri
trial--and no attempt was made to rebut his evidence--that he had been
a tank-wagon driver for the Standard Oil Company until events took
place as follows: About March, 1899, he was approached at his home
at night by the Standard’s agent at Troy, N.Y., who told him that
McMillan, the Standard’s manager at Albany, had some important work
for him to do which must be kept entirely secret even from Farrell’s
own family. At his instance Farrell met McMillan and Mason, the
Standard manager at Binghamton, N.Y., who told him that the Standard
had competition at Oneonta, N.Y., from the Tiona Oil Company, which had
got the bulk of the trade, and that they wanted to get it back, and
for that purpose to set the storekeepers fighting with one another.
He was directed to go to the Tiona Oil Company at Binghamton, N.Y.,
and buy twenty-five barrels of oil, and have it shipped to Worcester,
as the Tiona would not sell him oil to sell at Oneonta, where it was
already doing business. He was then to reship it from Worcester to
Oneonta, where he was to peddle it about, putting the sign “Tiona
Oil” on his wagon, at 8 cents (4d.) a gallon, the same price he had
to pay the Tiona for it at Binghamton. Strict secrecy was enjoined as
to whom he was working for. Farrell carried out the manœuvre till the
merchants cut against one another down to 2 cents a gallon retail, and
one even put out a sign: “Free oil; come and get your cans filled.”
Later Farrell could not succeed in getting any more Tiona oil; then the
Standard supplied him with its own oil, cautioning him not to sell too
much of it, but only to bell the low price about. Farrell was suspected
at last by the Tiona people of being sent by the Standard, but, acting
on instructions, denied it through thick and thin.
This nefarious game went on for six months, during which time Farrell
carried on his correspondence with Mason at Binghamton by addressing
the letters to a man named George Craven at a certain post-office box
in Albany, and Craven forwarded them to Mason. Most of the letters sent
by Mason in reply were on plain paper and unsigned, but not all. In one
which is signed, and which was exhibited in court, Mason says:--
I have your various letters.... Our salesman who visits Oneonta knows
nothing whatever of who you are, nor does any one except those you
saw in our office, and under no circumstances whatever do we want
any one to get the slightest hint that we are in any way concerned
in this matter. The Tiona people are denying that they have anything
to do with it, and claiming that we started you there. Of course, we
are denying this, and you must be very cautious, and not allow any
one to try to pump you.... You are doing first-rate and carrying out
the plan excellently, and very much to my satisfaction.... As soon as
you have read this, set a match to it and burn it up.... Don’t tear
it up, for some person might get hold of the pieces of paper and put
them together, but if you burn it with a match, then it is out of the
way wholly....
A further advance in Farrell’s commercial education and moral
edification took place six months after the Oneonta episode. The poor
fellow, selected no doubt for his blind fidelity, was told by his
employer at Albany, McMillan, that a man called Starks at Troy, who
had formerly been buying oil from the Standard, was then buying from
Dauchy, an independent wholesale dealer, and that he must buy oil from
Dauchy too, and cart it round after Starks’s wagon and sell it at the
wholesale price of 8 cents. In this way Farrell got about half of
Starks’s trade away from him, when the latter repented of his ways and
recommenced buying from the Standard. On the prodigal’s return Farrell
was called off. I select a peddling case of this sort to justify my
assertion that no low trick is too dirty or mean for the Standard’s
agents; to use a Transatlantic expression, they would take its candy
from a two-year-old kid.
The idea of the “bogus independent” worked as a system is a most
ingenious one, and could hardly have been invented by minds of any
ordinary calibre. Here, however, the inventive genius of the Trust
seems to end. It has been argued on behalf of the Trust that its
commercial success has been in part due to the various new technical
processes and other improvements which it has introduced--to the
benefit alike of the trade and the consumer. For this theory there
is no visible foundation, though it constitutes the staple material
of the ordinary Standard Oil apologist. Long articles have appeared
in American and English magazines, illustrated by pictures of the
Standard’s wonderful processes, and filled with majestic figures of
the pipe lines, and tank steamers, and tank cars that it owns. The
impression is adroitly left that the Rockefellers found a world of
crude oil and made their millions by showing ignorant and backward
competitors how to turn it into kerosene, lubricants, vaseline, and
petroleum wax. The truth about this imaginative literature is gradually
leaking out.
Pipe lines for oil transport are described as if they were a Standard
invention. As a fact, as early as 1862 a company was incorporated
in Pennsylvania for carrying oil in pipes or tubes from any point
on Oil Creek to its mouth or to any station on the Philadelphia and
Erie Railroad--the first record we have of the idea, which thus
suggested itself within a reasonably short time after oil was first
struck--namely, in 1859. Now, as we have seen, Mr. Rockefeller
only went into the oil trade as his sole business in 1865, though
he put money into it as early as 1862. Three short pipe lines were
working in 1863 (Tarbell, vol. i. p. 17), and they were first made an
undoubted success by a man named Samuel van Syckel, who completely
revolutionised the oil business in 1864, the year before Mr.
Rockefeller definitely took to it, by first pumping oil from the wells
to the railroad through a 2-inch pipe at the rate of eighty barrels an
hour.
The tank car has also been claimed as a Standard invention. Wooden
oil tanks were first built (Tarbell, vol. i. p. 12) by a young Iowa
school teacher almost immediately after oil was first struck, and
they continued to be built by him for about ten years, when, finding
that iron tanks were bound to supersede him, he retired from that
business. Wooden and iron tanks, whether stationary or set on cars,
were consequently a very natural development to meet the necessities of
the oil-carrying trade, and, as far as I can make out, were probably
running in 1869. Tank ships were an English invention, and their
adoption for the Suez Canal was strongly opposed by the Standard in
1891.
Lubricating oil, also claimed as a Standard invention, is due to Mr.
Joshua Merrill, a chemist, of the Downer Works. In 1869 he discovered
a process for deodorising petroleum, and thus rendering it fit for
lubricating purposes. He patented his process, and by it increased the
sale of the Downer Works’ lubricating oil by several hundred per cent.
in a single year (Tarbell, vol. i. p. 22).
A whole batch of these shadowy claims was disposed of once and for
all by Mr. J. D. Archbold’s admissions under cross-examination in
the Missouri case. Here is the official record of evidence on these
points:--
_Q._ The Standard Oil Company did not discover the process at all,
did it?
_A._ Oh, no.
_Q._ The process of making paraffin wax was in existence as early as
thirty years ago, wasn’t it?
_A._ Oh, it has been in existence a long time from the coal shales.
_Q._ Now, in the matter of a great many of these by-products, the
independent refineries, so called, have done the same as you have,
haven’t they?
_A._ Oh, they have, undoubtedly.
_Q._ Take many of those that you testified to the other day--for
instance, cylinder oil. The earliest manufacturers of cylinder oil
were at Binghamton, N. Y., were they not--a Mr. Brill?
_A._ There was a very early concern there--a small concern.
_Q._ And he is still in business, isn’t he, in Philadelphia?
_A._ I don’t know.
_Q._ Leonard and Ellis were very early manufacturers of cylinder oil;
isn’t that true?
_A._ They were--yes.
_Q._ Then lubricating oil--it was made from the petroleum stock
before 1870, wasn’t it?
_A._ It was to an extent--yes.
_Q._ Spindle oil, I think, is one thing you testified about the
other day. Wasn’t that first introduced by the Downer Manufacturing
Company, of Boston?
_A._ I think it likely. I do not know definitely. It probably was.
_Q._ Wool oil--wasn’t that sold or manufactured by Paine, Ablett &
Co., long before the Standard Oil Company combination or interests
got hold of it?
_A._ It may have been. I could not say.
_Q._ Was not vaseline made as early as 1860 by chemists in
Cincinnati, Ohio, from petroleum products?
_A._ If it was I never heard of it. I did not know of it.
Such being the Standard Oil people’s methods of dealing with their
neighbours, how have their neighbours dealt with them? The plain answer
to this is that their neighbours have simply “howled for their blood”
for the past thirty-nine years, since the time, in fact, when the
beginnings of the great conspiracy came to light in the detection of
the South Improvement Company scheme in 1872. Since then the Standard
Oil concern has had to face one public prosecution after another and
to witness a long series of hostile demonstrations on the part of the
public and of public inquiries directed by the Legislature that would
have shamed any concern capable of ordinary decent feeling out of
existence long ago. In 1879 the Standard Oil Trust was indicted for
fraudulent conspiracy in Pennsylvania at the suit of the Petroleum
Producers’ Union, who were thick-headed and weak-kneed enough to
accept a settlement out of court. In 1887 the Standard Oil Company
of Ohio was prosecuted by the State Attorney-General--Mr. David K.
Watson--for belonging to the Standard Oil Trust, an illegal combination
in restraint of trade, and in 1892 judgment was rendered prohibiting
it from being a party to any such Trust agreement. Ostensibly the
liquidation of the Standard Oil Trust followed; in reality it pursued
the even tenor of its way. In 1898 the Standard Oil Company of Ohio
was again prosecuted by the State Attorney-General, this time Mr.
Frank S. Monnett, for failing to obey the 1892 judgment, and the suit,
or series of suits, was prolonged by every device on the part of the
Standard till his term of office came to an end in January, 1900. His
successor, John M. Sheets, suppressed the suits, but matters had been
made so hot for the Standard Oil Trust that it took advantage of the
lax company law existing in the State of New Jersey to change its style
and title (including all its subsidiaries) into that of the Standard
Oil Company of New Jersey. As such it carries on its old conspiracy
against public law and the common weal just as before. In 1907 it was
again prosecuted in the person of one of its subsidiaries, the Standard
Oil Company of Indiana, for the same old charges of unjust and illegal
railway discriminations, and condemned on August 3, 1907, to pay a fine
of $29,240,000 (£5,848,000). This fine was set aside on appeal on the
ground that it had been assessed on the capital of the Standard Oil
Company of New Jersey instead of on that of the Standard Oil Company of
Indiana. On November 15, 1906, the prosecution, already more than once
referred to, of the Standard Oil Company of New Jersey by the United
States Government was commenced in the Eastern Judicial District of
Missouri Circuit Court. The Company was convicted of conspiracy; it
appealed, and the appeal was fixed for hearing in the Supreme Court
of the United States during the October term of 1909. It was further
postponed, however by the death of Judge Brewer, of the Supreme Court,
and is now expected to be decided in a few weeks.
THE TRUST IN AMERICA AND ASIA
“I know of nothing more despicable and pathetic than a man who
devotes all the waking hours of the day to making money for money’s
sake.”
JOHN D. ROCKEFELLER _in_ “_Random Reminiscences_.”
CHAPTER IX
THE TRUST IN AMERICA AND ASIA
Hitherto we have been dealing with the history of the Standard Oil
Trust on its native heath, the United States of America. It is now time
to pass in brief review some of its operations in foreign countries.
It appears in many lands, this Protean conspirator, and always in some
new guise. Here it is the pioneer and prophet of native oil; there
it is the importer of vast floods of foreign oil. Itself protected
by a heavy tariff in the United States, it poses in other lands as
the chief of the apostles of free trade. It demands alike freedom to
enter foreign oil-fields as a prospector and foreign oil markets as a
retailer. In one country it is the advocate of high prices; in another
it is the ruthless undercutter of its competitors. Always preferring
secrecy to daylight, its underground agitations embrace the Press,
the politicians, and the public. It is not always easy at first to
discover who is behind a Standard oil agitation, but I shall give a few
clues which may assist the student of oleaginous origins.
Turning first to Mexico, we find that the Standard’s operations there
have been conducted under the name of the Waters-Pierce Oil Company
of Missouri, which is now after many years of falsehood admitted
to be a tentacle of the Trust. The history of the re-entry of the
Waters-Pierce Company to the State of Texas is a good example of the
Standard’s methods. There sits in the United States Senate one Joseph
Bailey, a Democrat of the deepest dye. A lawyer, an orator, one of
those pure-souled patriots who denounce in public the trusts and
monopolies, Senator Bailey was exactly the man the Standard wanted.
The full facts are given by Miss Ida M. Tarbell in an article in the
_American Magazine_ for January, 1908. The Texas Legislature passed
a sweeping anti-Trust law; under it the Waters-Pierce Company was
prosecuted from court to court until finally in March, 1900, the United
States Supreme Court sustained the decisions of the Texas courts, and
the Company was ordered to close up its business and get out. At this
point Senator (then Congressman) Bailey appeared, and for a fee of
$3,300 (charged on the Company’s books to “profit and loss”) succeeded
in obtaining from the Democratic Attorney-General of Texas two months’
grace. The Waters-Pierce Company finally transferred itself to a new
Company of the same name, which took over the entire business of the
original company, and Mr. Henry Clay Pierce, the manager, applied for a
charter for the new one. He swore that it was in no way connected with
the Standard Oil Trust, and that he owned 3,996 out of 4,000 shares.
Largely through the influence of Congressman Bailey the new charter was
granted. Four weeks later Bailey, who was always regarded as a poor
man, was able to buy the splendid Grape Vine Ranch at Dallas, Texas, of
6,000 acres--a singular coincidence, to say the least.
The new Waters-Pierce Oil Company went on trading until in the Missouri
proceedings in 1906 Mr. Henry Clay Pierce, the managing director, was
at last forced on to the witness-stand. He there admitted that he
only owned 1,250 shares of the new Waters-Pierce Company, and that
the Standard owned 2,750. He admitted quite frankly that in order to
evade the anti-Trust law of the State of Texas the Standard’s 2,750
shares stood on the books in his name from May, 1900, to September,
1904. During this period the dividends were sent to Mr. Bayne, of the
Seaboard National Bank of New York--a gentleman whose name my readers
will recall as appearing in connection with the Standard’s carefully
concealed ownership of the Security Oil Company of Texas. In June,
1904, Mr. H. C. Pierce was asked to transfer these 2,750 shares to Mr.
Van Buren, who happens, oddly enough, to be the son-in-law of Mr. J. D.
Archbold, whose name has appeared so often in previous chapters.
During all this time that the Waters-Pierce Oil Company was posing
as an “independent” business it was carrying on a very large and
profitable trade in the adjoining Republic of Mexico. Although there
are large natural deposits of petroleum in Mexico, the Waters-Pierce
Company preferred to import crude oil from Texas and Oklahoma, refine
it in Mexico, and sell it at a price which returned a profit of 600
per cent. on the invested capital. But the Mexican Government desired
to develop the natural resources of the Republic, and as they were
quite tired of the high prices of the Standard, which had a monopoly,
they granted large oil concessions to the Pearson interests, which are
headed by Lord Cowdray. The Pearson firm had executed large railway,
waterworks, and harbour contracts for the Mexican Government, and
they developed the petroleum resources of Mexico so rapidly that the
Standard, which was hampered by a duty of $4½ a barrel on all the
crude oil they imported, soon began to feel the pinch.
Then ensued the rate-war which lasted so many months in Mexico, but
which is reported to be now compromised. The Waters-Pierce Company
built a refinery in Mexico, and spent large sums in buying Mexican oil
lands. They cut prices so heavily that they sold oil under cost, but
the natural advantages of the Pearson interests were so great as to
render them impregnable, and the Eagle Oil Company was successfully
launched on the London market by Lord Cowdray’s firm to carry out
extensive developments on the oil-bearing lands they own. During the
bitter contest there was plenty of evidence of the existence of the
Standard’s Press bureau, the head of which gets the liberal salary
of $12,500 a year. Articles appeared in London financial newspapers
predicting the imminent ruin of the Pearson interests, and obviously
intended to stop the English investor from backing their flotations.
According to a statement recently published in the United States,
a more subtle campaign seems to have been carried out against
President Diaz, who favours the Pearson interests. Many officials
of the Government, including a son of President Diaz, have become
shareholders of the Pearson local oil company, being naturally desirous
of developing their national resources and of fighting this American
monopoly. Now under the title of “Barbarous Mexico,” an ostensibly
humanitarian campaign was opened in newspapers and magazines of the
United States of America against the alleged harsh treatment of the
Yaqui Indians by the Mexican Government. In the _Cosmopolitan Magazine_
of March, 1910, it was categorically asserted by Mr. Alfred H. Lewis,
one of the foremost American magazine writers, that this campaign had
been inspired by the Oil Trust. They were determined to be revenged on
President Diaz, and therefore they induced a number of well-meaning
Americans--who haven’t time to put down the public lynching of
negroes in the United States--to plead the cause of the unfortunate
semi-enslaved Yaqui Indians. I cannot prove this charge, but Mr. Lewis
says it is believed by Americans resident in Texas and Mexico. From
the nature of the case this allegation is difficult to substantiate,
but for the present purpose it is a sufficiently significant fact
that a writer of Mr. Lewis’s reputation should believe that such a
Machiavellian scheme is possible. That the Standard will stick at
nothing appears from the fact that when Lord Cowdray visited New York
in June, 1910, he was shadowed by their detectives. The Standard Oil
Trust issued a formal denial of this charge, but Lord Cowdray repeated
it and reaffirmed it in the _Daily Mail_.
Turning next to Canada, we find that the British flag has been no
protection against the Standard’s invasion. Here, too, railway
discrimination was the principal weapon employed, and this was aided by
the legislation which the Standard obtained at Ottawa permitting them
to ship their oil along the international waterways and the Canadian
canals in bulk steamers to Canadian ports, where it was easy to
transfer it to tank cars. In 1898 the late Mr. Henry D. Lloyd, author
of “Wealth Against Commonwealth,” wrote as follows to the present
writer with regard to these discriminations:--
My information came direct from the attorney of one of the principal
Canadian refiners. This refiner carried on his business with my book
at his elbow, and he told his attorney that precisely the things that
I had exposed in that book were there and then being done to him.
The discrimination was managed by some manipulation of the rates
with regard to shipments in barrels. The Oil Trust had barrelling
works of its own at certain points, from which it received rates at
discriminations that killed the profits of the home refiners who
did not have these central stations. The refiner I speak of was
prosperous, liked the business, and would have continued in it but
for this railroad discrimination. He made every possible effort by
appeals to the railroad people in Canada to remedy the wrong, but
found them as determined to favour the American Trust as railroads in
the United States.
Finally the Standard clinched the matter by purchasing a Canadian
refinery, which it runs as the Imperial Oil Company, a nice patriotic
sort of name which no doubt appeals to the Canadian public. With this
refinery and the railroad discriminations they are as powerful in
Canada as they are in the United States.
When one turns to the Far East it is surprising to discover that the
Standard has not had things all its own way. It does a huge business
in China and Manchuria in case-oil, but it has there had to fight,
first, Russian oil shipped in bulk, and, when that fell off, the
competition of the Dutch East Indies. Several of these islands are
very rich in petroleum, and, in my opinion, its failure to secure a
footing there was the Standard’s first great defeat. The story is told
with commendable bluntness and candour by Mr. Robinson, British Consul
at Amsterdam, in his annual report for the year 1897 (Foreign Office
Consular Reports, No. 2,054). He says:--
At present a very important question has been raised by the attempt
of the well-known American monopolist undertaking, the Standard
Oil Company, to acquire a footing in the Dutch East Indies by the
purchase of the shares of the Moeara Enim Company, an important
concession in Sumatra. An extraordinary general meeting of the latter
company was to have been held in the last days of February for the
purpose of ratifying the agreement with the Standard Oil Company, but
the Dutch Government has interfered by the categorical declaration
that no concession will be granted to a company under the control of
the American monster monopoly, and the meeting has naturally been
postponed. It remains to be seen whether the financial power of the
Standard Oil Company can be effectively resisted by such steps, but
the Government seems quite determined to use all possible means to
this end, and the course which it has adopted will certainly be a
popular one, threatened as Netherland India is by an “imperium in
imperio” of this description. The agitation against the Standard
Oil Company’s monopoly, in so far as this inflicts on this country
all the dangers and disasters caused by an exclusive supply of
low-flashing oil, is a constantly increasing one.
The result was that the Moeara Enim Company were unable to sell, and
the Standard has never been able to get into the Dutch Indies. Worse
still, the Moeara Enim and two other Dutch petroleum companies were
absorbed by the Royal Dutch Petroleum Company, and this in its turn
became in 1907 allied with the Shell Transport and Trading Company of
London, of which Sir Marcus Samuel is the head.
Briefly, the present position is that two new companies have been
created, in which the Royal Dutch and the Shell Company hold all the
shares. The Bataafsche Petroleum Maatschappij is a Dutch company with
a capital of 80,000,000 florins, which carries on all the pumping
and refining operations of the combine in the Far East, while a new
English company, the Anglo-Saxon Petroleum Company, with a capital
of £4,000,000, owns all the petroleum fields in which they operate,
and also the very large fleet of tank steamers formerly owned by the
Shell Company, in which their products are carried. They send into
London alone 80,000 tons of petroleum spirit annually through the
Asiatic Petroleum Company, their marketing agents. Last year the same
combination sent 10,000,000 gallons of this motor spirit into the
United States, supplying firms who were competitors of the Standard
Oil Trust. In 1909 the Royal Dutch-Shell combine took over the
business of many of their agents. For this purpose the Shell Company
provided additional capital amounting to £440,000, the Royal Dutch
put up £660,000, and the Asiatic Petroleum Company £200,000, making
an additional outlay of £1,300,000 for one branch of their business.
A large Roumanian oil company, the Astra, has been secured, and the
Shanghai-Langkat Company, which operates refineries in Borneo, has also
been bought out since the amalgamation of 1907. That amalgamation
has apparently been profitable to those engaged in it, for the Shell
Company’s dividend, which had been only 5 per cent. per annum between
1903 and 1906, rose to 15 per cent. in 1907, 20 per cent. in 1908, and
22½ per cent. in 1909.
Now the awkward part of this chain of events so far as the Standard
is concerned is that the whole petroleum world has been turned upside
down by the motor engine. In 1897 Mr. Paul Babcock, director of the
Standard, told the Select Committee on Petroleum that they had in New
York tanks full of naphtha which they could not sell. Mr. Bergheim, a
well-known Galician oil producer, told a City meeting the other day
that he could recall the day when his firm gave the naphtha to any one
who would take it away. Then the Standard with its control of the tank
installations and the selling agencies for reaching the consumer of
illuminating oil (or kerosene) was the master of the world. Now the
consumption of kerosene is threatened by electricity among the rich
and slot-gas meters among the poor, and it is the despised naphtha (or
benzine) which is in demand. Motor-cars, motor-cycles, motor-omnibuses,
motor-lorries, aeroplanes, all these engines are demanding petrol,
and it is the good fortune of the Shell combine that its crude oil
provides a larger percentage of benzine than the Standard’s American.
While huge quantities of benzine, for which there is an increasing
demand, are being sent to Europe by the Shell combine, the Standard
is left with its monopoly of kerosene, for which the demand is
decreasing. At the same time, the Sumatra and Borneo crude produces a
very profitable percentage of petroleum wax, for which there is also
an increasing demand, and there is a big market for the residue all
over the Far East as fuel oil. This is the real secret of the recent
“oil war,” which has broken out chiefly because the Standard finds
its supremacy challenged by wealthy and vigorous competitors, and is
trying to use its vast accumulated profits in a “rate-cutting” war. The
latest news in this connection was the intelligence that the Standard
is attempting to repair its initial failure of thirteen years ago by
obtaining petroliferous areas in Java and Sumatra. It proposes to do
this through the medium of the Holland-American Petroleum Company of
Amsterdam, which being nominally a Dutch company can legally acquire
this property. Whether the Dutch Government which took so strong a
stand against the Standard’s invasion in 1897 will consent to be fooled
by such an obvious device as this remains to be seen. But the fact
that the scheme has been initiated indicates the desperate straits to
which the Standard is reduced for benzine.
This is not the first time the Standard has come into collision with
the Shell. In September, 1904, the _New York Herald_ published an
interview with Mr. W. H. Libby, the foreign marketing agent of the
Standard in New York. This was a long “puff” of the Standard, and
contained the allegations that in the “rate-cutting” which had then
been going on the Shell Company had been reduced to serious financial
straits, and were selling oil falsely branded. As these allegations
were entirely false, the Shell Company brought an action against the
_New York Herald_ in the English Courts for libel, which ended in 1905
in a complete victory for the victims of Standard Oil calumny. Mr. J.
Eldon Bankes, K.C. (now Mr. Justice Bankes) stated on behalf of the
defendants that they had made inquiries into the matter and found that
the statements could not be substantiated, and therefore withdrew,
apologised, and paid the plaintiff’s costs as between solicitor and
client. As we proceed we shall find other points at which the Standard
and the Shell have collided, but the vital factor in the present oil
situation is the Sumatran benzine, which the Rockefellers failed to
secure in 1897.
Passing to India, the Standard had to fight for years with the Russian
oil exported in bulk through the Suez Canal, and is now pressed hard
by the Burma Oil Company, an undertaking mainly under Scotch control,
which has until recently had a monopoly of the Burma oil output. As
there is a tariff on American oil in India from which Burmese oil
is exempt, it was obviously to the interest of the Standard--which
thoroughly believes in tariffs at home--to get behind that obstacle
by being able to refine Burma oil and vend it in India. There is
another reason, and that is the large percentage of petroleum wax
which the Burma crude contains. There is a large and increasing demand
all over the world for wax, which is used for candles, chewing-gum,
the water-proofing of fabrics without rubber, and for many other
commercial purposes. In its desire to get a footing in this promising
field the Standard Oil Trust applied to the Indian Government for
an oil-prospecting licence in Burma, and was much grieved when the
Indian Government refused it. We come across that same Mr. W. H. Libby
flitting about India. In November, 1902, the Calcutta correspondent of
the _Financial News_ reports that this gentleman was trying to induce
the Bengal Chamber of Commerce to support his little scheme against the
Indian Government. The correspondent gives us a pretty picture of Mr.
Libby’s virtuous protestations:--
The representative of the Standard Oil Company seems to wish the
Bengal Chamber of Commerce to believe that the motives of his
Company were not wholly mercenary--that, on the other hand, they
were philanthropic, inasmuch as he says that “it was the intention
of the Standard Oil Company to encourage as many Burmese natives
as possible to enter the producing business, by aiding them in the
employment of modern machinery and modern methods, by providing them
with an immediate cash market for their crude oil, and by loans,
if necessary, at very moderate rates of interest, to the end that
production might be stimulated and an important industry created. The
Standard hoped to derive its own profits by economies in refining,
by materially improving the quality and value of the manufactured
products, and by distributing the said products in India and other
Oriental markets, where aggressive efforts might largely increase
existing consumption.”
We know, of course, that the Standard has always been willing to
encourage other people to undertake the risks of oil-well sinking,
but the idea of stimulating this speculative business for the benefit
of the natives of a semi-barbarous country is novel as well as
captivating. When Mr. Libby’s campaign failed in India he came to
London, and his claims were pressed on the India Office by the United
States Ambassador in London, the Hon. Joseph Choate. As the Ambassador
had often appeared for the Standard when at the American Bar, and as
he had himself once stated that he was a shareholder in the Trust, we
may be sure that his advocacy of the Standard’s schemes in Burma did
not lack either zeal or ability. But it failed, and the Trust cannot
get into Burma. The imports of all classes of oils from Burma into
Madras Presidency during 1909–10 amounted to £317,868, as compared with
£212,982 in 1908–9. In the same period the imports of American oils
decreased from £241,128 to £189,362.
RUSSIA, GALICIA, AND ROUMANIA
“One of our greatest helpers has been the State Department in
Washington. Our ambassadors and ministers and consuls have aided to
push our way into new markets to the utmost corners of the world.”
JOHN D. ROCKEFELLER _in_ “_Random Reminiscences_.”
CHAPTER X
RUSSIA, GALICIA, AND ROUMANIA
Passing next to Russia, there is no doubt that in the past this was
a far more dangerous competitor of the Standard than it now is. The
Baku output was at first so tremendous that it seriously disarranged
the Standard’s calculations, and when first Russian shipowners and
afterwards Sir Marcus Samuel proposed in 1891 to ship Russian oil in
bulk in tank steamers to the Far East, a perfect panic seized the
Standard. Immediately one of those bogus agitations, in which it
excels, broke out with great virulence. Not only was the shipping
community thrilled by the supposed dangers to other vessels of
conveying oil in bulk through the Suez Canal, but the British nation
was once more warned of the dark and malevolent designs of Russia
against “our highway to India.” Nothing could be more amusing than
this waving of the Union Jack over the designs of the Standard Oil
Trust, but we shall see the same “patriotic” imposture reappear in
the flash-point agitation a few years later. The Standard was at this
time supplying its Far Eastern markets with “case-oil,” packed in tin
cans, which was, of course, a more expensive method of transit than
the large tanks of the bulk-oil steamers, and the agitation against
the new scheme was carried to the Foreign Office. The story is told
(without unduly emphasising the Standard’s share in it) in Mr. J. D.
Henry’s well-known work, “Thirty-five Years of Oil Transport” (Chaps
V. and VI.). Messrs. Russell and Arnholz, solicitors, wrote to the
Foreign Office, urging the Government to use their influence through
the British directors of the Suez Canal Company to prevent the transit
of bulk oil. Lord Salisbury asked them for whom they were acting, and
received this very significant reply:--
In view of the opposing commercial interests engaged, and the fact
that the true promoters of bulk transit have not yet declared
themselves, we respectfully submit that without pleading the
privilege of our profession it would be imprudent on our part to
permit our clients to disclose their names.
In the reply which the British directors of the Suez Canal Company
forwarded to Lord Salisbury, this coyness on the part of the Standard
was thus commented on:--
They decline to give your lordship any clue for the present as to
the names of their clients, but an expression in their letter of
November 10th, which describes the passage of petroleum in bulk
as a disturbance of the regular and safe case trade, leads to the
inference that they are pleading the cause of parties engaged in
sending petroleum through the canal packed in cases, and whose
interests they appear to think may be damaged by facilities being
given for the more economical conveyance of petroleum by these tank
ships.
The Foreign Office then informed Messrs. Russell and Arnholz that
Her Majesty’s Government could not take action in the direction
they desired without full information as to what British interest
they represented in the matter. As the Foreign Office thus declined
to become a Rockefeller catspaw, somebody organised a memorial by
merchants and tinplate manufacturers in Wales, where the Standard still
buys most of the material for its cans, and another by shipowners who
at that time were being chartered to carry case-oil to the East for
the Standard. Finally, Sir Frederick Abel and Mr. (now Sir) Boverton
Redwood prepared a report for those British shipowners who were hostile
to the bulk carriage of oil through the Canal. Sir Frederick Abel was
a chemist who constantly gave evidence on behalf of the Standard Oil
Trust when it needed an expert, and Mr. Boverton Redwood had been
from 1870 till just before this period (1889) the salaried chemist
of the Petroleum Association, a trade body whose members vended the
Rockefeller oils. Mr. Redwood was subsequently for a considerable
period regularly employed to test oil cargoes on behalf of the
Anglo-American Oil Company, and he gave evidence against raising the
flash-point of lamp oil before the Petroleum Committee of 1896. His
presence on the scene is sufficient to satisfy anybody in the oil trade
as to what was the real origin of this benevolent agitation against
tank steamers. While this gentleman was still in Egypt Sir Marcus
Samuel artfully published in the _Times_ an extract from a paper Mr.
Redwood read to the Institution of Civil Engineers, in which he said:--
The tank storage of kerosene oil has undoubtedly a great advantage
over barrel or case storage in the event of fire.
Mr. Redwood was thus rather neatly cornered, for he had to admit in his
report that this statement was still true. So he had to lay the chief
stress on the danger of burning oil escaping on to the water--which the
experience of nearly twenty years has proved to be a very trifling
risk. The directors of the Suez Canal Company took a very accurate
measure of this report when they replied:--
Without entering into the question whether the work of Sir F. Abel
and Mr. Boverton Redwood is not merely a criticism of our regulations
_bearing too exclusively the impression of the anxiety of parties
interested in the present mode of transporting petroleum to the
East_, we, &c.
After this the agitation fizzled out, and the transport of oil in
bulk still continues. The subject was referred to at the Institution
of Civil Engineers in February, 1894, when Mr. (now Sir) Fortescue
Flannery invited Mr. Boverton Redwood to state how his prophecies on
the carriage of bulk oil through the Canal had been fulfilled. Mr.
Redwood replied thus (_Proceedings Inst. C.E._, vol. cxvi. p. 250):--
He could only say that if, _as appeared to be the case_, the
transport of petroleum through the canal had been going on with
entire absence of anything approaching to an accident, he was very
glad to hear it. He did not know, however, that that was to be taken
as absolute proof that no risk existed. Time alone, and a longer time
than had as yet elapsed, would demonstrate that.
Nearly twenty years have now elapsed; the Standard Oil Trust itself has
tank steamers which convey oil through the Canal, and Mr. Henry in his
work shows that between 1892 and 1906 2,000,000 tons of oil were thus
transported.
* * * * *
With the collapse of its artfully engineered agitation on this subject
the Standard next turned its energies to diplomacy. It devoted great
arts to Ludwig and Manuel Nobel, the millionaires who had grown rich
out of the “gushers” of Baku, and cherished dreams of becoming the
Rockefellers of Russia. The Standard’s emissaries played on their
vanity and induced the Nobels to form the Russian Refiners’ Union,
which 80 per cent. of the trade had entered in 1894. The idea was
that the Russian export output should be limited to an amount agreed
with the Standard, and that Nobel Brothers were to be the sole agents
in Europe. Each refiner was to send out a certain quantity of oil
according to the capacity of his refinery. At the same time there were
certain distributing firms in Europe which had been dealing chiefly in
Russian oils, and as Nobel Brothers did not require them, the good,
kind Standard agreed to buy them up. It is in this way that the Italian
Petroleum Company, the Bremen-American Company, and Reith & Co. of
Antwerp (all mentioned in my list of foreign marketing companies)
came under the control of the Standard. At the same time they acquired
the Kerosene Company, which had a great storage installation close to
the Anglo-American plant at Purfleet. The Trust continued to run these
businesses in their old names, and it was some time before the truth
began to leak out. Production in Baku was at that time so tremendous
that before the three years during which the union was to last had
expired, the Russian refiners were quite tired of it. Then the pleasing
result was realised that, with the exception of Nobels, none of them
had any selling organisation in Europe, and that the Standard had so
perfected its control of the kerosene trade that people who wanted
Russian oil could only get American. The first firm to take action were
the Paris Rothschilds, who are the owners of the Caspian and Black Sea
Company at Baku, and next to the Nobels the largest refiners in Russia.
They established in 1898 in this country at vast expense a new selling
organisation called the Anglo-Caucasian Oil Company, afterwards merged
in the Consolidated Petroleum Company, and a vigorous contest took
place for their share of the English kerosene trade.
The Russian oil trade has always been a commercial switchback. At
the time just mentioned the Rothschilds and Nobels were exporting
largely to Europe, and the Mantascheffs were sending large quantities
of Russian oil to the Far East. Then came the Baku riots of 1905,
when murder and incendiarism stalked through the oil-fields and the
production fell off tremendously. It was a stroke of luck for the
Standard, for it crippled their (at that time) strongest rival. Since
that day the exports of petroleum from Baku have not been large, most
of the reduced output being consumed in Russia, where oil fuel is used
far more extensively than it is here. Then early last year came the
Maikop “boom,” a vast number of French and English companies being
floated to work oil on the borders of the Black Sea. The majority of
them will never produce a barrel of oil, but the good properties will
soon be pumping oil, and their product is bound to have its effect on
the European market. Hence no doubt the Standard’s second reason for
embarking on the recent oil war--the desire to stifle these infant
companies at their birth, when they are still subject to the diseases
of inexperience, experimental work, and bad management.
Passing next to Austria, we find the Standard operating in the Galician
oil-field, the production of which has risen from 214,800 tons in 1895
to 1,734,235 tons in 1908. The story is told in the Foreign Office
Report on Austria-Hungary for 1908 (No. 4,355 Consular Reports). There
was an enormous production in 1908, but the State railways could not
use the raw oil in its locomotives until the benzine was extracted.
This is our Consul’s narrative (p. 15):--
The Producers’ Association, however, had not the capital to build the
necessary works for this process or the new reservoirs required, and
at this stage the Standard Oil Company of America saw an opportunity
to extend its influence in Austria. The American company entered into
negotiations with the association and offered to erect the factory
for extracting the benzine, and further to build the new reservoirs
and lease them to the producers, who would, in return, have to supply
raw oil to the Standard Oil Company’s representatives in Austria at
a special price. An arrangement on these lines, which would have
given the American Combine a predominating influence in the Austrian
oil industry, was on the point of being signed when the Austrian
Government intervened in June, 1909, to prevent it by undertaking to
carry out the necessary works itself on much easier terms for the
producers....
By this arrangement the Standard Oil Company has been entirely
excluded from the business of supplying the State railways with
oil; but the Austrian Government has gone further in its desire
to protect the Austrian oil industry from the competition of the
American Trust, which is represented here by an affiliated company
[_i.e._, the Vacuum Oil Company, of Austria, a branch of the Vacuum
Oil Company, of Rochester, N.Y.], and has introduced a Bill in
the Reichsrat containing various provisions aimed directly at the
Standard Oil Company. Thus a concession will in future be necessary
for carrying on the business of storing, handling, and refining
raw oil, and the provincial authorities are able to refuse this at
their discretion. Further, the distribution of petroleum by means
of tank carts is only to be allowed by permission of the Ministry of
Commerce. The tank carts were recently introduced into Austria by the
representatives of the American Trust, but met with great opposition
on the part of the trade because they rendered the middleman
superfluous, and there is little doubt that the Ministry will not
give the permission required.
The _Times_ Vienna correspondent on September 14, 1910, reported
further developments of this war against the Standard. It appears
that there is also operating in Galicia a certain Limanova Petroleum
Company, which, though registered as an Austrian company, has about
£500,000 of French capital invested in it. It has been working “in some
sort of unconfessed relationship with the Vacuum Oil Company,” and the
_Times_ correspondent tells us how the Rockefellers have been forced to
swallow their favourite medicine. He writes:--
The object of the Standard Oil and its affiliated companies in
Austria (as in other countries) is to obtain control of the Galician
oil-fields, which are worked chiefly by a large number of Austrian
producers and refiners organised in a loose ring or trust. The
tactics of selling oil at or below cost price currently employed by
the Standard Oil Company to kill its competitors or to bring them to
their knees appear to have been employed both by the Vacuum and the
Limanova Companies.
Some months ago the Austrian Government intervened to protect the
Austrian producers and refiners, and applied to the Limanova Company
in particular methods of administrative chicanery and railway
discrimination strikingly similar to those which made the name of the
Standard Oil Company a byword in the United States. The tactics of
the Austrian authorities are as indefensible, or as defensible, as
are those of the Standard Oil Company.
The Standard did not enjoy railroad discriminations applied to itself,
and it not only made unavailing representations to the Austrian
Government through the United States Minister at Vienna, but, acting
through the French shareholders in the Limanova Company, they induced
the French Minister to remonstrate with Austria.
These representations having produced little effect, the French
Government is now stated to be about to adopt measures of
retaliation, and to impose a prohibitive tariff upon Austrian
petroleum imported into France.
In order to help the Standard Oil Trust to crush out the Galician
oil industry, the French consumer was to pay more for the petroleum
products, ozokerit, &c., that he buys from Austria. But this scheme has
failed, for on November 9, 1910, it was announced in the _Neue Freie
Press_ (quoted here by the _Financial Times_) that the Limanova Company
had surrendered. It has agreed to give up all business transactions
with the Vacuum Company, not to sell directly or indirectly to them
either crude oil or the products of petroleum, and not to make use of
the selling agency of the Vacuum Oil Company for the sale of its own
products. It has further agreed not to undersell the other Galician
refiners, and the Austrian Government has therefore cancelled the
discriminations referred to which it employed against the Limanova
Company. Deserted thus by its French ally, the Vacuum Company has to
rely on itself, and it is announced that the United States Government
has sent a special envoy to Vienna to discuss with the American
Ambassador, among other things, the differences between the Austrian
Government and the Vacuum Oil Company. It looks as though the Austrian
Government is going to win in its struggle with this unscrupulous
monopoly, and that the Vacuum Oil Company will have to climb down.
In the neighbouring country of Roumania the Standard has waged a bitter
war for the control of the oil industry. The output of oil in Roumania
has been increasing very largely--it trebled in quantity between 1895
and 1900 and as it has a high flash-point the Standard wanted to get
control of the field in order to supply its Italian and Mediterranean
market. When its agents appeared first on the scene, Roumania had one
large refining company--the Steana Romana--which dealt with about
two-thirds of the native crude oil. The wells were all, or nearly
all, in the hands of small proprietors who were unable to sink them
deep enough, and whose ability to market their oil was hampered by
the high railway rates and deficiency of tank cars. The Standard came
forward with a proposal to build a pipe line from the fields to its
proposed refinery, but fortunately for Roumania its statesmen had heard
of the Standard’s American record, and they refused to allow it to
thus obtain entire control of the national output. It was allowed to
build a refinery, and it bought certain oil-wells from the owners, but
the pipe-line project was decisively ruled out. Strange conversions
went on at Bucharest when the Standard’s lobbyists put in their fine
work. Politicians and newspapers which had opposed the Standard were
converted from the error of their ways in the manner with which Mr.
Archbold has made us familiar, but the Standard was unable to secure
any special privileges. By this time the Deutsche Bank, which controls
the Steana Romana, had taken an active interest in the matter, and
formed some sort of alliance through the European Petroleum Union with
the Shell-Royal-Dutch combine, and the Rothschilds, the Mantascheffs,
and Gukasoffs of Baku. The terms of this alliance are unknown, but
very keen rivalry has been going on in the Roumanian oil-field, and
only last year the Shell-Royal-Dutch party purchased a large Roumanian
oil company, the Astra, which is now valued at £1,200,000. In the
spring of 1907 the Standard came to a “selling arrangement” with
the European Petroleum Union, and this was followed by a similar
arrangement with the Asiatic Petroleum Company, whose capital is
equally held by the Shell Company, the Royal Dutch, and the Paris
Rothschilds. Just how far the European Petroleum Union is involved
in the “rate-war” which has broken out between its twin the Asiatic
and the Standard is unknown, but as the Deutsche Bank is largely
interested in Galician oil-fields where such a bitter fight has been
going on with the Standard for some months, it is probable that the
whole combination must ultimately be involved if the “oil war” lasts
much longer. Sir M. Samuel has stated that the Bataafsche Petroleum
Maatschappij and the Anglo-Saxon Petroleum Company, Ltd., distributed
in dividends in 1909 £1,500,000, and that the profits for 1910 will not
be lower, so that apparently that contest has not seriously affected
the Shell-Royal-Dutch combine.
THE TRUST IN GERMANY, SWEDEN, AND FRANCE
“We are always short of men to do the things we want to do--young men
who are honest and therefore loyal, men to whom work is a pleasure;
above all, men who have no price but our price. To such men we can
afford to give the only things they have not got--power and money.”
H. H. ROGERS _to T. W. Lawson in_ “_Frenzied Finance_.”
CHAPTER XI
THE TRUST IN GERMANY, SWEDEN, AND FRANCE
In Germany the Standard was artful enough to strengthen its position
by acquiring existing oil companies and retaining certain prominent
German oil merchants as shareholders, thus breaking to some extent the
force of the natural outcry against itself as an alien corporation.
In the case of its English companies, very few shares are held by
anybody resident in England, and even these are mostly Americans, but
in Germany they are more cautious. There has been a great controversy
as to the adoption of tank railway wagons and tank installations on the
Prussian State railways. It is obvious that these methods will cheapen
the transit of oil, but it is also obvious that they will play into the
hands of the Standard, which with its vast capital is able to establish
extensive installations of this kind, and to prevent its smaller
competitors from reaching the market.
Public opinion is the more suspicious of these gentlemen because of
the remarkable revelations made last year with reference to their
branch--not included in the list given in Chapter I.--which is called
the German Vacuum Oil Company. The disclosure in question is so
thoroughly in keeping with what is already known of the doings of
the Standard in other parts of the world that it fully bears out the
opinion already expressed, that the great octopus is always one and the
same in its methods irrespective of time and country. It goes all the
lengths it is permitted to go. It has gone, as will be seen, pretty far
in Germany, though the State railway system renders rebates impossible
there, and as Germany is so close to our own doors the lesson is one we
may well take home to ourselves.
In the early autumn of 1909 Mr. F. Hildebrandt, the editor of the
_Hamburger Fremdenblatt_, whose attention had been called to the
doings of the German Vacuum Oil Company, and who had been led to
investigate the matter, published a vigorous attack on that Company in
his columns. We of course know that the Vacuum Oil Company, Ltd., is
in England merely a tentacle fixed on the body of John Bull through
which suction is applied from 26, Broadway, New York. But the Hamburg
Chamber of Commerce were in blissful ignorance until quite recently
that the German Vacuum Oil Company was only the particular limb of
the monster that had settled down on Germany. It reported not so long
ago to the Friedrichsort Torpedo Works at Kiel that the Vacuum was
a German company, though it might have learnt differently if it had
taken the trouble to look into the Handelregister, or German public
registry of commercial companies. There it would have found among the
names of the chief shareholders Messrs. J. D. Archbold, C. M. Pratt,
and C. M. Everest, the well-known Standard men who were registered as
the original directors of the Vacuum Oil Company of Rochester, N.Y, the
Company whose connection with the Buffalo arson prosecution has been
explained in Chapter VI. Their connection with the Vacuum Oil Company,
Ltd., of London will be explained in a later chapter. Two other
shareholders of the German Vacuum Oil Company, J. C. Moffet and C. E.
Bedford, also belong to the Standard.
The main allegation put forward in the _Fremdenblatt_ by Mr.
Hildebrandt was that the German Vacuum Oil Company was selling
precisely the same quality of lubricating oil under various fancy
names and at different prices, according to differently imagined
utilities to its German customers, and securing preference being
given to its goods by bribing engineers and foremen right and left to
advise their employers in their favour. The simple change of a label
seemed to have such a marvellous effect on the intrinsic quality of
the Vacuum lubricator that in some cases it justified a rise of 25
per cent. in price, and even higher. The “Etna” brand of lubricating
oil, for instance, was a poor thing that sold at 41 marks per 100
kilos for ordinary smearings, but when an important firm gave an order
for a superior article such as the “Gas Engine E” or “Viscolite” oil
they received the same old “Etna” oil duly labelled “Gas Engine E” or
“Viscolite” at the correspondingly superior price of 56 marks and 62
marks respectively. Acting on this denunciation, the Public Prosecutor
intervened, ordered an inquiry, and summoned Mr. Hildebrandt to
produce his evidence, but not before Dr. Oscar Ruperti, a director of
the Vacuum in Hamburg, had taken a personal action for libel against
Mr. Hildebrandt, who in his turn had taken an action against Mr. E.
L. Quarles, the American manager of the Vacuum in Hamburg, and Dr.
Pölchau, who was both legal counsel and brother-in-law to Dr. Ruperti.
These personal actions appear to be still pending, but the action
instituted by the Public Prosecutor was carried as far as a judgment,
of which the following is a translation:--
Record Number: F. IV., 360/10.
JUDGMENT.
On the motion of the Public Prosecutor, the accused, Edward Louis
Quarles, is discharged with reference to the accusation of fraudulent
practice, on the ground of insufficient proof. The costs of the
action are charged to the State.
GROUNDS.
The preliminary inquiry was opened against the accused on his
appearing suspect at Hamburg and elsewhere--
1. Of having in the years 1906–08, in conspiracy with the merchant
E. O. Wader, now absent, defrauded the State Electrical Works at
Kiel of 2,826 marks 5 pfennigs by delivering to the works, instead
of the brand “Vacuoline,” which was ordered, at the price of 75
marks per 100 kilos, the description “Fusoline,” which only cost 44
marks per 100 kilos, under the brand of “Vacuoline.”
2. Of having, since the year 1905, defrauded numerous customers
of the German Vacuum Oil Company by representing in the Company’s
price-list that the descriptions of oil “Gas Engine E and F” and
“Gas Engine I and Heavy” are a more valuable article than the
descriptions “Etna” and “Fusoline,” quoted in the price-list at
44 marks per 100 kilos, whereas the two latter descriptions are
identical with the two former respectively.
As to the charge of fraudulent conspiracy to the detriment of the
Kiel Electrical Works, it has not been proved that the accused
Quarles bears the responsibility of changing the cheaper brand
“Fusoline” into the dearer brand “Vacuoline.” The order to effect
this change in the branding was given at a time when the accused
Quarles had not as yet a seat upon the board of the German Vacuum
Oil Company, and had nothing to do with the Hamburg branch. At the
end of 1906 or the beginning of 1907 the accused had, of course,
learnt of the changes being made in the brandings from the then
manager of the Hamburg branch, Earnshaw. But at that time also the
accused had nothing to do with the Hamburg branch office, and was not
called upon to prevent what was in his view an incorrect rebranding.
Also, he had nothing to do himself with the changing of the brand.
It has not been proved that after the accused had taken a seat upon
the board of the German Vacuum Oil Company that the rebranding of
“Fusoline” as “Vacuoline” was still carried out with the knowledge
and consent of the accused.
As to the rebranding of the cheaper descriptions of oil “Etna” and
“Fusoline” as “Gas Engine E and F” and “Gas Engine I and Heavy”
respectively, the preliminary inquiry has tended to show that “Gas
Engine I and Heavy” consist of different components to the other
brands, and are consequently not identical with them.
The brands “Etna” and “Gas Engine E” are, of course, identical,
as is “Fusoline” and “Gas Engine F.” But a fraudulent method of
trading could only be found to exist in the different branding if
it were established that these like descriptions were delivered
under different brandings and different prices to one and the same
customer. It has not been possible to establish that. The accused
also cannot rebut the allegation that he gave it as his opinion that
the differentiation in prices was justified by the different way in
which the two oils were used, the higher running expenses for “Gas
Engine E and F,” and greater risk encountered by the users of these
two brands.
Hamburg, May 30, 1910.
The Landgericht, Second Criminal Chamber,
(_Signed_) GOSLICH, LOHMEYER, SICK.
For the correctness of the copy:
Hamburg, July 9, 1910.
The Chancery of Public Prosecution,
(_Signed_) Voss, Chancery Clerk.
It will be seen at once that the judgment exculpates Mr. Quarles
personally, but obviously inculpates the German Vacuum Oil Company, by
assuming that the practices alleged had taken place, though there was
not evidence to connect Mr. Quarles with them.
Mr. Hildebrandt makes great capital, in a pamphlet he has published,
out of the regular Standard Oil practice of bribery, with which the
German public seems to have been quite unfamiliar, but in which their
education must now have been pretty well completed, to judge from
the mass of evidence adduced in the Hildebrandt book. Some of it is
entertaining enough and edifying enough for British consumption,
particularly as it relates to a cousin-German of one of our own
Standard Oil subsidiaries. Here is the text of an affidavit made by
Mr. Hans Schnell, who had formerly been a representative of the German
Vacuum Oil Company:--
I, the undersigned, hereby declare and am ready to testify on oath
that from September 15, 1906, to March 31, 1908, I was in the employ
of the German Vacuum Oil Company of Hamburg, as representative for
the Dresden branch, and later for Lower Silesia, on a fixed salary of
200 marks a month and also confidential expenditure and commission.
This commission I had for the most part to pay over to machine-men,
partly in cash, partly in goods, in order to bring off new business,
and in some cases to maintain business relations heretofore
existing. I was told by Mr. Naerger, the correspondent for Breslau,
in the branch office in that city of the German Vacuum Oil Company
of Hamburg, the names of the firms whose machine-men were to receive
bribes from me. Also Mr. A. S. Mié, of Dresden, director of the
Vacuum Oil Company, told me in a way that could not be misunderstood
that I was to expend these commissions in this way, and that if I had
paid over no bribes in money or goods to the machine-men of the firms
I had to call on I would have had scarcely any new orders, and would
have lost the old business connection.
Dresden, November 4, 1909.
(_Signed_) HANS SCHNELL.
The above signature of Mr. Hans Schnell, Wilhelmruh, near Berlin,
merchant, was done in my presence, and I hereby officially certify
that it is genuine.
Dresden, November 5, 1909.
(_Signed_) HORST VON MUELLER-BERNECK,
Royal Saxon Notary, Dresden.
In further illustration of Mr. Mié’s efforts, Herr F. Hildebrandt
publishes a photographed bill of expenses incurred by that gentleman in
establishing and keeping up the German Vacuum Oil Company’s business
connections, and no doubt incidentally of establishing a reputation for
himself among engineers and machine-men generally of being a thoroughly
jolly fellow. This document will, perhaps, help us to understand why so
many working engineers select the Vacuum oils, when no chemical test
known to science will indicate any superiority. Its translation is as
follows:--
M.
Evening with Mr. Pampel and Obersteiger Hohner 42
Evening with Mr. Mié 28
[NOTE.--We had invited these gentlemen, and threw
about a good deal of money in order to
accomplish something. Besides the M. 28
entered here I added M. 48 out of my own
pocket, which I have had entered in my
own account.--(_Signed_) MIÉ.]
Cash, Mr. Müller, foreman 100
Cash, Mr. Plaintz, engineer, of Gustav Toelle 50
Foreman of S. Wolle 5
Cigars for foreman Müller 12.50
Cigars for foreman Hortenbach 6.25
Carriage and beer--call on Hortenbach 10.30
Wine, dinner, cigars, &c., with Hortenbach 35.20
Cash, Mr. Hortenbach 20.00
------
Total M. 309.25
Mr. Hortenbach seems to have taken a good deal of lubricating.
Apparently his machinery remained immovable under the influence of
wine, dinner, and cigars, and it became necessary to put twenty marks
in the slot in order to make him work.
How Mr. Hildebrandt got hold of this bill, or petty-cash ticket,
he does not say, but he evidently takes a sinister view of the
junketing disclosed, and regards the money spent upon it as so much
“Schmiergeld,” to use the appropriate word employed by Mr. Schnell
in his affidavit. The only English translation for “Schmiergeld” is
“bribe”--no doubt a very frigid and colourless word. “Smearing-money”
would be more descriptive and picturesque as well as literal, though
for absolute neatness of expression joined to pregnancy of meaning the
Italian circumlocution for the ugly word “bribe” of “oglio di palma,”
or palm-oil, beats the German. “Lubricating oil” seems an apt English
equivalent.
* * * * *
Mr. Hildebrandt also publishes a letter on this subject from one of the
Vacuum Oil Company representatives, which seems to have attracted some
attention in Kiel:--
KIEL, _November 12, 1903_.
The German Vacuum Oil Company, Hamburg.
I beg to acknowledge receipt of yours of the 10th of this month, the
contents of which I note. With reference to my expenditure as your
representative, I gave the Flensburg Shipbuilding Company last month
alone some 190 marks for gratuities and introductions to the three
foremen. Then I gave 50 marks to the head man at the Kiel Electrical
Works. As to the smaller expenses incurred as your representative, I
cannot remember them now, but they will be found in my memoranda of
extra expenses.
Yours truly,
HUGO COHR.
The Vacuum Oil people have always liked to be on good terms with the
engineer, the actual mechanic who has to see to the application of the
lubricating oils to the machinery, and whose opinion on their merits
is naturally deferred to by his employers. Mr. Heinrich Gremmler, a
director of the German Vacuum Oil Company, and manager of the Berlin
branch, wrote, under date June 20, 1908, by way of instruction to one
of his agents, in one of the letters photographed by Mr. Hildebrandt:
“Try and get at what you want through the foremen--that is, by indirect
means. There is no need at all for me to tell you on what spot you may
put your hand upon success.” Mr. Hildebrandt took all this up in a very
unkind spirit towards the German Vacuum Oil Company, and spoke of it as
bribery, whereupon Mr. Gremmler called upon him, he says, and denied
indignantly that the Company practised bribery. In fact, the Company
published a document in its defence against this charge signed by Dr.
Ruperti, one of its directors, in which, while it did not go so far as
to state that it never practised bribery, it declared, at any rate,
that “it was incorrect to say that the German Vacuum Oil Company had
introduced the gross practice of bribery into German trade as a system,
and that it had succeeded by means of bribes in obtaining permanently
higher prices for its oils.” The studious moderation of this defence
strikes me as remarkable. The Company, however, also took occasion to
state that it never put any employee into its selling business except
on a contract containing this passage:--
You pledge yourself in dealing with the employees of our customers
most carefully to abstain from any transaction that has even the
appearance of corrupt influence. Any action contrary to this
regulation is a special reason for instant dismissal.
But Mr. Hildebrandt unkindly suggests that this is only another way of
saying “Don’t nail his ears to the pump.” He also says that after the
publication of the Hugo Cohr letter in Kiel, the Vacuum Oil Company was
struck from the list of those invited to tender for the supply of oils
to the municipality. The British public and the proprietors of British
engineering works must form their own judgment in the matter, but they
will at any rate see that, for one reason or another, the Vacuum Oil
people have conceived a deep affection for the German working man.
These revelations are the more interesting because there are similar
stories from other countries where the Vacuum methods have been
introduced. The _Morgenblad_, of Stockholm (quoted in the English
shipping organ _Fairplay_ of July 22, 1909), gives an account of the
methods of the Vacuum Oil Company, of Sweden, another of the Everest
group. The Stockholm newspaper states that the Civil Commission
appointed to inquire into the buying of naval stores has in its
possession several letters from the Vacuum Oil Company of Sweden to
engineers in the Swedish Navy. These letters contain advice to enable
the engineers to prove to their superior officers, who possess less
knowledge of the subject, that other lubricating oils are inferior to
those vended by the Vacuum Company. One letter runs: “It is very easy
to do this by only tightening the nuts a little, and the bearings will
soon become hot.”
The sensation created by the publication of these letters caused the
Chancery of Justice, the highest judicial authority in Sweden, to order
the Chief of the Criminal Police in Stockholm (Mr. Lars Stendahl), who
is also an officer of the Municipal Treasury, to hold a general inquiry
with plenipotentiary authority as to the summoning of witnesses. This
was on May 18, 1909, and on June 5th following the King of Sweden
confirmed this Commission, and added two other Commissioners, Messrs.
J. Th. Akerström and Fr. S. Eriksson. In the beginning of September,
1909, Mr. Stendahl’s report was issued, which proves by an abundance
of sensational and at times amusing evidence that the so-called Swedish
Vacuum Oil Company is identical with that of Rochester, U.S.A., that it
has evaded Swedish taxation, fraudulently rebranded cheaper as dearer
oils, and by a very curiously concealed system of bribery induced
engineers of the Royal Navy to diminish the effectiveness of their
service.
In the result the Company lost all its Government contracts, but
escaped further proceedings, as Swedish commercial law in its previous
innocence of the “real smart” methods now introduced to backward old
Europe by the Standard Oil apostles, had utterly failed to provide
penalties to meet the case. From Norway, in September, came the news
that the last independent refinery had been acquired by the Standard,
that much public indignation had been aroused among the hardy Norsemen,
and that steps were being taken with the support of the Government to
build at once an independent refinery.
In France, where there is a heavy duty on refined petroleum, the
Standard has established a refinery, which has given it a monopoly of
the benzine trade. The latest news last September was that the French
Government has been induced to reduce the import duty on Dutch East
Indian benzine from £1 to 10s., and this has enabled the Royal Dutch
combine to start a refinery in France for the purpose of competing
with the Standard. As I have explained, the Sumatran and Borneo crude
provides a higher percentage of benzine than the Standard’s American
crude, and there is no doubt this move will prove a very awkward one
for the latter.
THE TRUST’S “TIED HOUSES” IN ENGLAND
“According as you put something into the Church or the Sunday-school
work the greater will be your dividends of salvation.”
JOHN D. ROCKEFELLER _in a Sunday-school address_.
CHAPTER XII
THE TRUST’S “TIED HOUSES” IN ENGLAND
I have reserved until the end of my survey the examination of the
Standard Oil Trust’s operations in Great Britain, because, as they have
not been investigated so closely here as they have been by various
Legislative Committees in the United States, there is less official
testimony to proceed upon. Many of the Trust’s intrigues and agitations
here can only be understood by remembering what has been proved by
direct testimony to have taken place in similar circumstances in the
United States. In this way our preceding examination of the secret
rebate, the bribery, the underselling, and all the other machinery of
the Trust in its native home, will help us to understand a few things
which are still obscure here.
During the time when the Trust was growing up in America, the British
consumer and the British oil-dealer were alike blissfully unconscious
of what was in store for them. For the first English news of the
Trust we must turn to the evidence provided by Mr. (now Sir) Boverton
Redwood, the distinguished chemist, whose subsequent appearances at
so many public inquiries as a Standard Oil witness have been fitly
rewarded by his selection as Petroleum Adviser to the Home Office!
This takes us back to the years 1877–8, when Mr. Boverton Redwood
was the Secretary of the Petroleum Association, and visited America
at their request to induce the American refiners to adopt the Abel
(closed) tester in standardising their oil, and also to complain of
certain impurities which were appearing in their consignments. With
regard to the first, Mr. Redwood’s report to his association shows that
he conducted experiments with the Petroleum Committee of the New York
Produce Exchange which satisfied them with the Abel tester, and we
read that Mr. Paul Babcock took great interest in these experiments.
Mr. Babcock was then a director of the Devoe Manufacturing Company,
about this time bought by the Trust, and twenty years later he and
Mr. Boverton Redwood met in London, both giving evidence before the
Commons’ Petroleum Committee against raising the flash-point of
kerosene. Mr. Redwood met in 1877 a number of other persons whose
names will be familiar to readers of my narrative. He, for example,
visited the refinery of Messrs. Charles Pratt & Co., through the
kindness of Mr. H. H. Rogers, and when he left New York he carried
letters of introduction from Mr. Wm. Rockefeller, Vice-President
of the Standard Oil Company, to Colonel Payne, its Treasurer, in
Cleveland, Ohio. Indeed, Mr. Redwood’s tour seems to have been in the
main a Standard Oil excursion, for in Philadelphia he visited Messrs.
Warden and Frew (who were in the Trust), at Pittsburg he saw Mr.
Charles Lockhart, of Lockhart and Frew (another Trust firm), and then
at Cleveland he was taken over the Standard Oil works by Mr. Samuel
Andrews (John D. Rockefeller’s first partner). When he returned Mr.
Redwood was the bearer of a letter from Mr. Wm. Rockefeller, dated
December 19, 1877, couched in the best Standard Oil vein:--
It is our desire to furnish at all times refined oil that will
be acceptable to the trade of all countries. It is our wish and
intention that our products shall always reach the highest excellence.
Whatever their wish might be, the prospect of making more money proved
too strong for these philanthropists, and complaints continued from
the English traders as to the bad quality of the oil sent here. In
1879 and again in 1884 Mr. F. W. Lockwood, a saponaceous Standard
Oil expert, was sent here to gammon the Petroleum Association with
some cock-and-bull story. The second visit is referred to by Mr.
Boverton Redwood in a report to the Petroleum Association, published
in the _Grocer_ of May 3, 1884. In it he explained that Mr. Lockwood
attributed the complaints about the oil to the use of damp-clogged
or hard lamp-wicks. This great discovery was too much even for Mr.
Redwood, who has never been a harsh critic of the Standard Oil Trust
methods. He thus reported:--
In conclusion, I desire to record as strongly as possible my
individual opinion that in their own interest the American refiners
should forthwith institute such arrangements as will ensure
the future maintenance of a satisfactory standard of quality.
Considerable injury to the petroleum trade results from the
distribution of such oil as is the subject of this report, consumers
in many cases relinquishing the use of petroleum oil in favour of
some other sort of light. Moreover, the American refiners should
bear in mind that even now they have not a monopoly of the supply of
mineral burning oil in this country, and they will find it necessary
to pay much greater attention than heretofore to the quality of the
oil they manufacture.
As an impartial testimony to the then quality of the Standard’s
illuminating oils and the wonderful processes of manufacture which
their Press Bureau now tells us they invented, I should give that
document a high place. But to do them justice, the American refiners
were not above taking a hint from other manufacturers. A gentleman
with long experience in the oil trade once told me how Mr. H. H.
Rogers about this time came to England. Up in the North there was a
manufacturer of lubricating oils who had by his own ingenuity and skill
developed some excellent ideas. He used to blend American oils, and Mr.
Rogers asked one of the importers who dealt in their goods to introduce
him. They went over the works together, and the proud owner showed them
all his special processes and his little inventions and blends. Rogers
was a practical refiner, he kept his eyes open, and after he returned
to America the Standard’s first lubricating oil branch, the Thompson
and Bedford Company, of New York, began to export here some of the
specialities which the North countryman had made. As brain-pickers the
Standard men have no equal.
The first appearance of the Standard in this country was rather sudden.
There came here an American gentleman named Frank E. Bliss, who had
been connected with the business of Charles Pratt & Co. Nobody knew
what his London business was, but one day there appeared in the
_Financial News_ the brief record of the registration at Somerset House
on April 27, 1888, of the Anglo-American Oil Company, Limited. It had
a capital of £500,000 in £20 shares. The first list of signatories
contained several clerks and agents, but it also bore the name of
Frank E. Bliss, and that told those who were in the trade what was
coming. The first list of directors subsequently filed at Somerset
House included such sound, reliable Standard Oil names as H. H. Rogers,
J. D. Archbold, W. H. Libby, J. G. Gregory, and Wesley H. Tilford,
all of 26, Broadway, New York, and Frank E. Bliss, of London. The
precise significance of the word “Anglo” in its title becomes clearer
when it is stated that the articles of association provided that the
directors’ meetings should be held in London, but that if a majority
of the directors so decided they might be held in New York or any
other part of the United States of America. As there was only one
director resident in England, it is not hard to guess where most of
the directors’ meetings took place. This also helps us to appreciate
the amount of truth in Mr. J. D. Archbold’s Missouri evidence that he
did not know why the Anglo-American Oil Company made loans amounting
to £500,000 to its managing director, Mr. James A. Macdonald. Mr.
Archbold was a director of the “Anglo” from the outset until somewhere
between July, 1907, and July, 1908. In 1893 its capital was increased
to £520,000, and at this time Mr. John D. Rockefeller’s name first
appears on the share list as the owner of 6,867 shares out of a total
of 26,000. In July, 1899, the share list of the Anglo-American Oil
Company contained the names set out below. As will be seen, many of
them have appeared in the course of my story, and the list contains a
great deal of “American” and very little “Anglo.” Where no address is
given below, the return at Somerset House has “26, Broadway, New York,”
which is the central address of the Standard:--
AMERICAN SHAREHOLDERS.
Shares.
H. M. Flagler and J. D. Archbold 10,239
John D. Rockefeller 6,867
C. W. Harkness, 611, Fifth Avenue, N.Y. 1,542
Mrs. Mary Pratt, Chas. M. Pratt, and Fred B. Pratt 1,336
Oliver H. Payne, 2, West Fifty-seventh Street, N.Y. 1,068
H. M. Flagler (separately) 748
H. H. Rogers 503
Laman V. Harkness, Greenwich, Conn. 349
W. L. Harkness, 10, West Forty-third Street, N.Y. 347
Wm. Rockefeller 347
Chas. Lockhart, Pittsburg 320
John D. Archbold 213
W. Everitt Macy 199
Mrs. Esther Jennings, 48, Park Avenue, N.Y. 146
Miss A. B. Jennings, 48, Park Avenue, N.Y. 63
Oliver Jennings 63
Walter Jennings 64
Mrs. Mary B. Jennings, Fairfield, Conn. 53
Mrs. Elmira D. Brewster 53
George S. Brewster 53
F. F. Brewster, Newhaven, Conn. 53
R. Stanton Brewster 53
J. M. Constable, draper 82
H. Melville Hanna, Cleveland, Ohio 80
Wesley H. Tilford 80
C. F. Heye 98
J. S. Kennedy 80
Ed. T. Bedford 66
Ambrose M. McGregor 53
Louis H. Severance 142
C. M. Chapin 26
H. C. Folger, jun. 26
W. H. Macy, jun. 13
W. T. Wardwell (treasurer of the Standard Oil Trust) 21
Daniel O’Day, banker, N.Y. 47
Hugh J. Jewett, Morristown, New Jersey 32
J. H. Alexander, Elizabeth, New Jersey 18
Mrs. Emma B. Auchinloss, 17, West Forty-ninth Street, N.Y. 63
L. S. Thompson, Redbank, New Jersey 29
W. P. Thompson, Redbank, New Jersey 34
Mrs. Mary E. Thompson 37
Mrs. Eliz. T. Preston, 1,228, Wood Avenue, Colorado Springs 26
Mrs. Helen James 63
Mrs. Salome Jones, Boston, Mass. 29
Joseph Seep, banker, Oil City, Penn. 26
C. F. Akerman 1
A. J. Pouch 1
T. C. Bushnell 1
Livingston Roe 1
LONDON SHAREHOLDERS.
Frank E. Bliss 1
James Macdonald 1
J. H. Usmar 1
W. A. Hawkins 1
There have been various changes in the share list, and on June 30,
1910, the following were the principal shareholders:--
Shares.
Standard Oil Company of New Jersey 49,993
Trustees Standard Oil Trust 1
Frederick D. Asche 1
J. H. Usmar, 22, Billiter Street, E.C., merchant 1
Francis Edward Powell, 22, Billiter Street, merchant 1
Thomas H. Hawkins, secretary, 22, Billiter Street 1
James Hamilton, 22, Billiter Street, merchant 1
William E. Bemis, 26, Broadway, New York 1
------
50,000
The capital of the Company was at that date £1,000,000 in £20 shares.
It is worthy of notice that in 1907–8, at a period when Mr. Roosevelt
and his party were out after the Trusts, Mr. Archbold, Mr. Rogers, and
nearly all the American directors of the Anglo-American resigned. In
June last the directors were Mr. J. H. Usmar, Mr. Thomas H. Hawkins,
Mr. F. E. Powell, Mr. William P. McKendrick, of 22, Billiter Street,
E.C. (the London address of the Anglo-American Oil Company, until
it moved last autumn to St. James’s Park), and Mr. F. D. Asche, of
26, Broadway, New York. Mr. Fred D. Asche is a clerk in the export
department of the Standard in New York. Thus, while in 1889 there were
five directors resident in New York and one in London, in 1910 there
were four directors resident in London and one in New York--a somewhat
significant reversal of the ratio. Mr. Jas. A. Macdonald, the gentleman
already mentioned, ceased to be managing director in 1906, when his one
share was transferred to the Standard Oil Company of New Jersey.
The advent of the Anglo-American Oil Company was the beginning of
troubled times in the English petroleum trade. Mr. Rockefeller’s motto,
“Pay nobody a profit,” was put into force, and the Trust began to buy
out or to starve out the various groups of middlemen who had hitherto
been vending their oils to the English consumer. Some evidence on that
point was given to the Select Committee on Petroleum in 1897 by Mr. W.
J. Leonard, of Carless, Capel and Leonard, Pharos Oil Works, Hackney
Wick. Mr. Leonard stated that London was then the only “free market”
for other oil than Standard, since, although there were independent
dealers in Liverpool, they had for several years a “selling agreement”
with the Anglo-American Oil Company. Then came these answers:--
The Chairman: I want to know what there is to prevent you importing
oil into Liverpool in competition with the Anglo-American Oil Company?
_A._ If we did this of course the Anglo-American Oil Company would
at once put down their price, _so that we should have to sell
at a ruinous loss, and we cannot afford to compete with them; I
mean, we are all afraid of them_. If we sent oil to Liverpool the
Anglo-American price, instead of being nearly ¾d. a gallon more
than the price in London, would probably be something like ¾d. a
gallon less than the price in London. That would be the immediate
effect.
_Q._ Yes, but is there not a regular importation, and an increasing
importation, of Russian oil?
_A._ No, it is not an increasing importation; it is not, certainly.
Of course the Anglo-American Company are getting the whole business
practically (Report and Evidence, 1897, Q. 4,834).
This is how an “independent” oil merchant talked of the colossal power
of the Standard Oil Trust at that date, and their influence extended
even to the smallest transactions. When a great proportion of oil was
still imported in barrels, at least one London firm did a very good
business buying up the empty oil barrels from the hawkers and small
dealers, who used to collect them at the consumer’s premises. The
barrels were well made, and the Standard gladly bought the empties to
use again. But it found somebody else was making a living. This would
never do. At once the Standard began to offer small inducements to
the hawkers, and the barrels went to them direct, so that the small
factor’s business was killed.
Very interesting evidence was given by Mr. W. T. Rigby, Secretary of
the Liverpool Oil Dealers’ Association, who was called in support of
the Standard’s opposition to the raising of the flash-point. He said
the members of his association objected to the Anglo-American Company
supplying so small a quantity as five gallons to small shops which had
formerly been supplied by the small wholesaler. He went on:--
In the first instance, when the Anglo-American put their tanks on the
ground they gave us their word that no less a quantity than twenty
gallons would be delivered, but when they found that the retail
dealers of Liverpool would not embrace the new system of tank-wagon
delivery, but preferred to take it in the old style of barrels, they,
in the words of their Liverpool manager, were forced to administer
a stab in our backs--this is, go really behind us and secure that
trade which legitimately belonged to the Liverpool chandler doing a
small wholesale business, and that is why they [his association] are
objecting to the delivery of anything less than ten gallons of oil
(Report and Evidence, 1897, Q. 6,052).
But some of the wholesalers, especially where in the provinces they had
built up a good business which it would be difficult for the Standard
to capture, were allowed to remain as “tied houses” in the trade.
Some evidence was with difficulty extracted by the Lord Advocate and
Mr. M‘Killop, M.P., at the same committee from Mr. Geo. Base, a large
“independent” oil dealer of Norwich, who had come up to give evidence
in support of the Standard’s views against raising the flash-point:--
Mr. M‘Killop, M.P.: Have you any freedom to use any class of oil you
like?--We prefer American oil. In fact, we have dealt in nothing else.
Have you a general freedom to use Russian oil, for example, if you
choose?--We don’t like Russian oil.
Are you bound to any particular dealer? Are you bound to use American
oil?--_Yes, that is so._ That is largely because of choice.
You are under contract?--Yes.
You are not allowed to sell any other?--Yes, that is so.
Mr. Ure, M.P.: What do you mean by contract?--I mean I have an
arrangement at present in distributing American oil.
Do you mean that you have a binding agreement with the Standard Oil
Company to sell nothing but their oil for a specified period?--No,
not for a specified period.
For an indefinite period?--There is no period specified whatever.
Do you mean that you have a signed agreement to this effect, “signed,
sealed, and delivered”?--If it is a binding agreement, it does not
matter whether it is signed or not.
Is that a common type of agreement with the American Company and its
customers?--I don’t know.
Does it specify any price?--No.
Does it preclude you from dealing in the oil of any other
company?--_Well, yes, it does to a certain extent._
What happens supposing you have oil from any other company?--That
I can hardly say, but I am perfectly at liberty to determine the
agreement at any time I choose.
Do you mean that breach of the agreement would not entail a claim for
damages?--No.
Then what “consideration” do you get for entering into such
agreement?--The consideration is the larger volume of business.
But you can without an agreement deal in it?--Yes.
Why? You go into this agreement, and can give me no reasons for it.
Is it in writing?--In print.
So that a great number of people enter into the same kind of
agreement, apparently?--No, I think not. Of course, I have no
personal knowledge (Report and Evidence, 1897, Q. 3,475 _et seq._).
We have only to read the evidence of Mr. Leonard and Mr. Rigby, and the
American evidence already given, to understand why these “tied houses”
exist.
In one portion of the United Kingdom the Standard has never been
able to obtain complete control. Scotland is the earliest home of
the mineral oil industry, and patriotism and caution alike induced
the Scottish users of burning oils to prefer the high-flash oil
which the Scottish oil companies refine to the dangerous low-flash
petroleum imported by the Standard. Although the cheapness of the
latter’s product has made considerable inroads on the former’s trade
in kerosene the Standard has never been able to kill it, and it has
of late made various proposals to the Scottish companies to take over
their whole output of kerosene and to distribute it by the tank system.
The Scottish oil companies (who do a barrel-oil trade) are unwilling
to supply the Standard with all their output, for they know that the
Standard would by the tank distribution system kill the middlemen. Then
when it had made itself the sole channel by which kerosene could reach
the scattered Scotch consumers, it might decline to buy any more Scotch
oil and simply force its own oil on the purchaser. The Standard people
are now attempting to push their own oils by the tank distribution
system on Scotland, but are meeting with strong opposition.
But the strength of the Scottish companies is not patriotic so much
as economic. They refine their oil from the shale, a soft, greasy,
slate-like stone. Now so long as kerosene was the only thing the
refiner troubled about, the Americans had the advantage because Nature
had done half the work of distillation for them in her own laboratory,
and instead of mining a stone, they got petroleum as a liquid. But
the bottom is falling out of the kerosene trade, as I have already
explained, and the Scottish companies are recouping themselves on
their by-products. At the time of writing burning oils (kerosene)
and lubricants are lower than they have ever been, and it is certain
that no profit is being made out of them in Scotland. But the Scotch
shale in distillation yields sulphate of ammonia, which is in good
demand as a fertiliser, and is not obtainable from either American or
Russian crude. Naphtha is also selling at a fairly good price owing to
the development of the motor industry--in fact, the Standard has been
buying large quantities of it from certain Scotch companies. In the
past the Scotch refiners have been greatly assisted by the considerable
percentage of paraffin wax which their crude yields, but in the last
three or four years they have lost some of this advantage owing to
the increased output of paraffin wax in Galicia. The Boryslav and
Tustanovitch fields in that country produce an oil which yields from 1
to 7 per cent. of paraffin wax, and the production of paraffin wax has
shot up very suddenly--which is no doubt one reason why the Standard
has been fighting so hard in Galicia. The net result is that the Scotch
companies have a hard struggle to maintain themselves against the
Standard monopolist tactics, but that on the whole they hold their own.
THE FLASH-POINT SCANDAL
“The flash-point of 73 deg. was badly founded, because it is the
flash-point of a substance which is being burned at temperatures
commonly above 73 deg., and, therefore, you are dealing in every lamp
so used with an oil beneath your flame which is in a condition of
danger.”
PROFESSOR ATTFIELD, F.R.S.,
_Select Committee on Petroleum, 1896 Report_.
CHAPTER XIII
THE FLASH-POINT SCANDAL
It is now time to devote a little attention to one of the Standard’s
great triumphs in this country--the staving off until this present day
of the legislative raising of the flash-point of petroleum. I desire
to make this explanation short and simple. The flash-point is the
temperature at which an oil will give off vapour, which, mixed with
air, is explosive. In other words, it is the point at which a flame
brought close to its surface will cause it to explode--the explosion
being, of course, small in a 2-in. deep test-cup, but serious when
a lamp or a barrel is in question. The test depends on the presence
of vapour. It is obvious, therefore, that any test-cup which allows
the vapour to escape before the flame can be applied is useless. The
advocates of safe oil have always demanded a test-cup which would
retain the vapour, and the petroleum traders in Europe and America
have always pushed some kind of cup which would allow as much as
possible of the vapour to escape.
The story of the juggle with the flash-point begins in 1868, before
the Standard Oil Trust was born, and for its initial stage it is only
fair to admit that it can have no responsibility. The Fire Protection
Committee of 1867 recommended that the flash-point should be 110 deg.
Fahr. The Petroleum Association--which was then an independent body of
importers of American oil--asked for a flash-point of 100 deg., and the
Home Secretary called in the “three chemists”--Dr. Lethaby, Professor
Attfield, and Professor (afterwards Sir Frederick) Abel--to advise as
to the flash-point and the method of determining it.
The three chemists recommended that 100 deg. should be conceded
provided it was ascertained by a test-cup which they recommended. That
tester, called “the three chemists’ cup,” gave results which it is now
admitted were identical, within 3 deg. of those shown by the present
Abel tester. What followed is succinctly narrated by Mr. Ure, K.C.,
M.P. (now the Lord Advocate), in his draft report presented to the
Petroleum Committee (1898 Report, p. xxxvi):--
The Report [of the three chemists] was accepted by the Home Office
and the standard and test were embodied in the Notices of Motion and
Orders of the Day for the 8th of June, 1868. A week later it will
be found from the Notices of Motion and Orders of the Day that the
test prescribed by the three chemists, and accepted by the Government
on the 8th of June, had undergone a very material change. In the
interval the Petroleum Association approached the Government and
requested that the three chemists’ test be modified. The Government
remitted to Sir Frederick Abel to consider the question thus raised.
He was comparatively new to the subject of flash-point investigation.
Dr. Lethaby and Dr. Attfield had for years devoted special
attention to it. Both were in London at the time, and available for
consultation. Neither was consulted or even apprised of the proposed
change.
Sir Frederick Abel was enjoined by the Government not to give way on
any point affecting the efficiency of the test. He did give way; and
in the result a test was prescribed which he himself subsequently
described as “untrustworthy,” “open to manipulation,” and “not of
such a nature as uniformly to ensure reliable and satisfactory
results.” _Why Dr. Lethaby and Dr. Attfield were not consulted has
not been explained to your Committee._ It is certain that if they had
been consulted, the change could never have been made. Whenever it
came to his knowledge Dr. Attfield at once informed the Government
that the test was far less stringent than that prescribed by the
three chemists, that it would be a fertile source of disputes, and
that the public would not be protected.
That 100 deg. flash-point, with the inaccurate tester of the Petroleum
Association, went into the Act of 1868, and the mischief was done. But
the most extraordinary and audacious chapter in this strange story
took place ten years later when the disputes and blunders which Dr.
Attfield had foretold had occurred. Sir Frederick Abel then devised the
Abel (close) tester, which is an efficient one; but he showed that an
oil flashed in that tester at a point 27 deg. lower than that at which
it flashed in the Petroleum Association cup legalised in 1867.
In 1879 the new Act legalised Sir Frederick Abel’s tester and then
fixed the flash-point at what was called the “equivalent” of the old
100 deg.--in other words, it reduced the flash-point by 27 deg., the
amount of the inaccuracy of the old tester. The effect, of course, was
to perpetuate the blunder of the 1867 Act in another way. It is as
though a man, finding that his watch lost 27 minutes in a day, bought a
new and accurate timekeeper and then purposely put it back 27 minutes.
The history of this bureaucratic juggle was effectively summarised by
Mr. Ure in the House of Commons, March 15, 1899:--
In 1862 there was a correct flash-point (100 deg.) fixed, and no
tester for ascertaining it.
In 1868 there was a correct flash-point (100 deg.) and an incorrect
tester for ascertaining it.
In 1879 there was a correct means (the Abel tester) of finding out an
incorrect flash-point (73 deg.).
Now we demand a correct flash-point (100 deg.) and a correct means of
finding it out.
To this day all petroleum which flashes at 73 deg. Fahr. in the Abel
tester is subject to no restrictions of any kind, and lamp accidents
and oil fires have carried off hundreds of lives since 1879. Lord
Kelvin, surely a high authority, said to the Select Committee in 1906:--
It seems to me that the logical outcome of Sir Frederick Abel’s work
ought to have been to declare that the 100 deg. test in force in the
1871 Act must be fulfilled by a proper close test. I cannot think how
Sir Frederick Abel dropped from 100 deg. to 73 deg.
Professor Silvanus P. Thompson, in his “Life of Lord Kelvin” (vol. ii.
p. 962), tells us:--
Lord Kelvin felt strongly on this question. In 1868 an open test-cup
was legalised which in practice proved to be erroneous to an average
extent of 27 degrees. In other words, oil which was actually giving
off explosive vapour at 73 Fahr. did not flash in this open cup
until it reached 100 deg. The number of fires due to paraffin lamps
increased owing to the introduction of cheap low-flash oils. In spite
of this, in 1879, when a new and more efficient test was adopted, the
flash-point was by a scandalous manœuvre reduced to 73 deg.
It is interesting to recall that in the experiments which Sir
Frederick Abel made during the period when the Abel tester and the
difference between its results and those of the 1868 tester were under
investigation, he was assisted by Mr. Boverton Redwood, the chemist of
the Petroleum Association. But the delicate operation of substituting a
lower flash-point when the tester was made more accurate seems to have
been carried out mainly by the assistance of the then Chief Inspector
of Explosives, the late Colonel V. Majendie, a soldier and a gentleman,
who was no match for the adroit and suave agents of the petroleum
trade. It was perhaps not unfitting that the administration of the laws
relating to Mr. Rockefeller’s low-flash petroleum should have been
placed under the Explosives Department of the Home Office, but it had
this disadvantage, that Colonel Majendie, well acquainted with military
explosives, knew nothing about petroleum. He once declared at the
Imperial Institute in my hearing that he had learned all he knew about
petroleum from Mr. Redwood. How completely he was guided by his mentor
in this matter appears from a memorandum of July 18, 1878, in which he
gives his reasons for supporting the reduction of the flash-point from
100 deg. to 73 deg. In it he wrote:--
The figure is one to which the Petroleum Association, _the body
really interested_, are prepared to assent, and although the Scottish
Mineral Oil Association desire a higher flashing-point, it is really
a matter in which they have very little concern, except in so far as
the adoption of a higher flashing-point will tend to injure their
trade rivals (the Petroleum Association). I think, therefore, that
as the matter cannot be usefully carried further, the Abel test of 73
deg. Fahr. flashing-point should be accepted.
Mr. Redwood was at this period the paid secretary of the Petroleum
Association, and had returned only six months before from his American
trip. Sir Vivian Majendie seems never to have been able to consider
the public; in his view it was all a trade squabble between the rival
oil traders. I ought to explain here, by the way, that the Scottish
refiners have always kept their oil up to a flash-point of 100 (Abel),
their reason being that they desired to maintain a perfectly safe
standard. They have always complained of the invasion of this 73 deg.
American petroleum, not on ordinary commercial grounds, but because
they held that its dangerous and explosive character was prejudicing
the public mind against all classes of burning oils, and neutralising
their own efforts to give the public confidence in them.
THE ROCKEFELLERS AND THE HOME OFFICE
“You have been in politics long enough to know that no man in public
office owes the public anything.”
SENATOR MARK HANNA _to the Ohio Attorney-General_.
CHAPTER XIV
THE ROCKEFELLERS AND THE HOME OFFICE
Naturally the juggle by which the low flash-point was thus stereotyped
in the Act of 1879 had its effects. The number of petroleum accidents
began to increase, and so Sir. V. Majendie was sent to visit 242 places
in England and the Continent and then to America. In both these series
of visits he was accompanied by Mr. Boverton Redwood, Secretary of the
Petroleum Association, “who was good enough to accompany me and render
me great assistance,” as Sir Vivian put it. I have no means of knowing
whether Mr. Redwood was able to obtain the same letters of introduction
from Mr. Wm. Rockefeller which he had secured in 1877, but I do know
that there was one subject the pair did _not_ inquire into. It appears
in Colonel Majendie’s examination before the Select Committee on
Petroleum by Captain Hope (Report and Evidence, 1894, Q. 206–212):--
_Q._ Are you aware that in Scotland, where Scotch oil has been mostly
in use, there have hitherto been very few fires or lamp accidents?
_A._ No, I have no statistics of lamp accidents. I have only a
general knowledge derived from newspapers and from those who have
given to the subject a larger study.
_Q._ When you were making your inquiries in America did you go into
the question of the frequency of lamp accidents?
_A._ _Not lamp accidents, I think, at all._
While this surprising omission was occurring lamp accidents continued
to go up. In London they rose from 45 in 1873 to 271 in 1890. In that
year the twin brethren, Sir. F. Abel and Mr. Redwood, were directed
by the Home Office to make an inquiry into the subject, and they
discovered that it was all due to bad lamps. This ingenious theory
set every one--Press, coroners, County Council, Home Office--in full
cry after a lovely red-herring, and diverted attention for several
years from the Standard’s explosive oil. When Mr. Lockwood came over
in 1877 it was the bad wicks; now, in 1890, it was the bad lamps.
The objections to attempting to secure immunity from petroleum lamp
accidents by any lamp law are these:--
1. Nobody has yet guaranteed any absolutely safe lamp.
2. Nobody can guarantee that a safe lamp will remain safe in wear,
or can compel its owners to buy a new one when it is in bad repair.
3. In both Scotland and America, where petroleum is produced and
refined, the remedy has been sought, not in a lamp law, but in
raising the flash-point.
While the British officials were chasing the lamp-law will o’ th’ wisp
Mr. Rockefeller was sending over here petroleum oil which could not
be sold in most of the States of the Union, and the number of lamp
accidents here was still rising. In London they rose from 271 in 1890
to 473 in 1895. By this time an inquiry could not be avoided; the
Select Committee to which I have referred began to sit, and between
1894 and 1898 to take evidence and report.
The evidence before that Committee in support of the Standard Oil
Trust’s contention was extensive and peculiar. There was Sir Frederick
Abel, who admitted to the Committee that as chemist to the War Office
he had recommended the adoption of 100 deg. or 105 deg. oil for use
in barrack-rooms. Yet he was prepared to maintain that 73 deg. was
sufficiently high for a lamp in a crowded tenement house, where
obviously the chances of accident are far greater than in the strictly
regulated and disciplined barrack-room. Then there was Mr. Boverton
Redwood, and he too declared that the flash-point of 73 deg. was
sufficiently high for public safety. The most remarkable thing about
his evidence was the damaging admissions he was compelled to make,
which gave away his whole case. Here are two:--
In my opinion a considerable proportion of the lamp accidents which
occur would not happen if only oil of 120 deg. or even 100 deg. Abel
test were used (Q. 1,824, 1896 Blue Book).
Undoubtedly in a sense the higher the flashing-point the safer the
oil, and from that point of view oil of 100 deg. flashing-point must
be safer than oil of 73 deg. flashing-point (Q. 1,893).
Another very entertaining Standard Oil witness was Professor C. F.
Chandler, of New York, who explained that he had been coming to Europe
for a holiday, and was asked by the Standard Oil Trust to give evidence
against raising the flash-point. He gave that evidence, and was
confronted with this passage in a report he made to the New York State
Board of Health in 1871:--
There is a strong inducement to turn the heavier portions of the
naphtha into the kerosene tank so as to get for it the price of
kerosene. It is therefore the cupidity of the refiner that leads him
to run as much benzine as possible into the kerosene, regardless of
the frightful consequences of the frequent explosions.
As this was exactly what the Standard was doing, this was rather
awkward for the Professor, but he cynically explained that it was “a
reckless statement” made when he was a “reformer.” He admitted that he
had never withdrawn it publicly until that very date in 1896, but he
went on to swallow it whole.
But the prize witness on that side was Mr. Paul Babcock, whom we saw
in 1877, and who as one of the American directors of the Trust came to
tell the Select Committee that the 73 deg. oil--the brands known to
the trade as “Tea Rose” and “Royal Daylight”--were as safe as the 105
deg. oil--the brand known as “White Rose.” Thereupon Mr. Ure, M.P.,
produced a little folding card just then issued by the Anglo-American
Oil Company, Limited, a copy of which lies before me as I write. On the
front page of this little Rockefeller tract--which, I grieve to say, is
not now in circulation, so that mine has become a “rare edition”--there
are two big orange-coloured barrels, and the words “White Rose American
Lamp Oil.” Inside there is an artless panegyric on “White Rose,” of
which we are told:--
Its fire test is so high as to make it the safest petroleum lamp oil
in the world. Explosion is guarded against and families can burn
White Rose Oil with the same assurance of safety as they can gas ...
a really safe and reliable illuminant, &c.
Of course, all this clearly proved that the Anglo-American Oil Company,
whatever it might say at Westminster, did not believe in Billiter
Street that 73 deg. oil was as safe as “White Rose.” But Mr. Paul
Babcock was a cool hand. He turned the card over carefully, and then
remarked that it was “merely advertising bunkum,” and that it was
issued by the Anglo-American Oil Company, “_who no doubt bought the oil
of us_.” This was fairly cool in view of the fact that the Standard
owns all the shares in the Anglo-American, but it is even cooler when
we examine the orange-coloured barrel in the picture. The barrel bears
at its head a label, “Kings County Oil Works, Sone and Fleming Mfg.
Co., Limited, New York.” Now Mr. Paul Babcock was himself general
manager to that very Sone and Fleming Company, in addition to being a
director of the Standard, which, since 1877, had controlled it. That
incident is a fair specimen of the Standard’s evidence at this inquiry.
On the other side evidence was given by Lord Kelvin (the greatest
scientific man of his day), Sir Henry Roscoe, Professor Ramsay,
Professor Attfield, Dr. Stevenson Macadam, Professor D. Mendeleef (who
represented the Russian Government and the Russian petroleum industry),
and Dr. Hermann Kast (of Karlsruhe), all denouncing the 73 deg.
flash-point and advocating its being raised. Sir Henry Roscoe said:--
I think that Americans send over so much mixed oil of the character
of this “Tea Rose” oil _only because our flash-point is so low_.
Lord Kelvin told the Select Committee:--
I am clearly of opinion that in order to avoid accidents the
flash-point must be raised, and that no construction of lamp will
meet the difficulty.
The Select Committee at last reported in favour of raising the
flash-point, and an agitation started by the _Star_ newspaper in
support of this course received the adhesion of a large number of
newspapers, coroners, and of the London County Council. At the same
time the Standard Oil Trust started its own characteristic agitations.
Petition forms were sent to every oil retailer with requests to obtain
signatures in opposition to raising the flash-point. And according to
the statement of Mr. Jasper Tully, M.P., in the House, some of these
men in Ireland were threatened that they would get no more oil if this
was not done. The result was that M.P.s were bombarded with petitions
from their constituencies, and Standard Oil agents filled the lobbies.
A well-known Standard Oil “expert” contributed anonymously a long
article to the _Times_, in which it was represented that the safe-oil
agitation was due to a desire to secure “protection” for the Scottish
trade. It is amusing to recall that one of the strongest supporters of
this theory was the Right Hon. Jesse Collings, who in four short years
was to become an ardent convert to the theory of “Protection,” not only
for Scotch oil, but for everything else.
While the Standard was playing up to free-trade opinion in this way,
it was working the “patriotic” dodge in a very nicely got-up anonymous
pamphlet sent to every M.P. In this it was shown that the effect
of raising the flash-point would be to stop our cousins across the
Atlantic from sending us oil, and to play into the hands of Russia,
which had always been hostile to us. The old Russian bogey was still
alive in the days before the Russo-Japanese War, and this waving of the
Union Jack no doubt affected some soft-headed M.P.s.
There is a characteristic story which relates that somebody, on hearing
that the site had been acquired for the new palace now completed in
Queen Anne’s Gate, rang up one of the heads of the “Anglo” on the
telephone. “You are making a mistake,” said he; “you ought to be near
the City.” “Oh! the City doesn’t matter,” replied the Standard voice on
the telephone; “what we want to be near is the House of Commons.” There
the policy of the Standard Oil Trust is crystallised in a sentence. The
Trust is the most gigantic lobbyist in the world. No other association
of private capitalists maintains such an espionage system; no other
body of that kind has its lobbyists at so many centres of government.
In most of the American State Legislatures the Standard Oil lobbyist is
as well known as the Speaker. At Washington, at Ottawa, in the House
of Commons, in Berlin, in Bucharest, to name but a few capitals, you
will find the representatives of the Rockefellers. Their proceedings
and those of the rivals who sought to checkmate them elicited a severe
rebuke from that cautious journal the _Spectator_ on the occasion of
the debate upon the Flash-point Bill. Writing on March 25, 1899, my
contemporary observed:--
The decision as to the proper flash-point for mineral oils really
involved a possible monopoly of the supply of safe oils, a monopoly
worth many millions, and the signs of excited personal and pecuniary
interest in the lobbies were noticed by many observant members of
Parliament.
It declared that the practice of “lobbying” tended to “grow into a
peculiarly subtle and dangerous form of corruption”:--
It has so grown both in America and France, and it may grow here.
What with the tendency to create monopolies, the incessant variations
of the tariff in some great States, and the masses of capital at
the disposal of individuals or companies, the profits and losses
consequent on a new law may amount to millions, and among the owners
or expectants of those millions there may be some of the most
unscrupulous of mankind. They have paid secret commissions all their
lives, especially for “information,” and they do not see why they
should not pay them to induce hostile legislators not to vote against
them.
The end of this combined attack was that when the Flash-point Bill came
up for second reading in March, 1899, it was rejected, on the pledge of
Mr. Collings, then representing the Home Office, that the Government
would deal with the whole subject of the storage of petroleum and of
lamp accidents. Since that date nothing has been done, and although all
the members of the Liberal Cabinet who were in the House of Commons
in 1899 voted for the Flash-point Bill, they have never found time
or courage to tackle the Standard Oil monopoly in explosive oil. As
Lord Kelvin’s biographer, Professor Silvanus P. Thompson, says in the
chapter already quoted: “The scandal of the free sale of dangerous
low-flash oil continues.”
No doubt Ministers have been hampered by the obstruction of the Home
Office bureaucracy. Before even the Select Committee had reported, the
late Dr. Dupre, chemical adviser to the Home Office, said at Sutton (in
November, 1897):--
If people thought they would get legislation on the subject to raise
the flash-point they would be very much mistaken, for legislation
would not so upset the trade. What was wanted was education and
better lamps.
We have seen how Colonel Majendie was constantly sitting at the feet of
Mr. Boverton Redwood on this question, and his influence was steadily
against the flash-point being raised. His successor, the late Captain
Thomson, followed the same tradition, and actually published with Mr.
Redwood a “Handbook on Petroleum.” This volume, which is ostensibly
a guide to local petroleum inspectors in carrying out their duties,
branches off into a defence of the 73 deg. flash-point, and contains
all the old Standard Oil tags. One of its points is that more people
are killed by falling downstairs than by lamp accidents--I only cite
that absurdity to show the boldness which the Home Office staff have
shown in their determination to obstruct the recommendation of the
Petroleum Committee. The final climax has been the appointment of Sir
Boverton Redwood as Home Office Adviser on Petroleum. Nobody questions
for an instant the great scientific abilities of Sir Boverton Redwood,
or his thorough acquaintance with the petroleum industry, but he has
taken too long and too active a part in opposing the raising of the
flash-point for his advice to be a safe guide on the question. It would
be exactly like appointing Mr. Pretyman to advise the Inland Revenue on
the drafting and circulating of Form IV.
The Home Office has made another attempt to divert public attention
from the flash-point of kerosene by appointing a departmental committee
to consider the storage and transit of petroleum spirit, which body has
just published its report and evidence. The fact is, of course, that
this is a difficult and complicated subject, affecting large numbers
of small oil and spirit dealers, on which it will be almost impossible
to come to an agreement. The raising of the flash-point of kerosene is
a simple, clear issue, which can be done by a Bill of one clause, and
the only people who will really be affected by it will be the Standard
Oil Trust. At the same time the Oil Trust, with its vast capital, does
not greatly object to restrictions on the storage and transit of either
oil or spirit, because these mean capital expenditure which it can
easily defray, and they will at the same time hamper all its smaller
competitors. Now in a time of congestion of Parliamentary business,
when it is admittedly difficult to drive even a wheelbarrow through the
House, the Home Office bureaucracy deliberately selects the long and
complicated subject for its activity, and ignores the simple one. Why?
It is instructive to note that during the years that have elapsed since
the Flash-point Bill was rejected in 1899, half the Standard’s argument
against raising the flash-point has been killed by itself. It asserted
that it could not take out that proportion of naphtha which made its
73 deg. oil so explosive and dangerous without adding to the cost to
the consumer. Since then there has arisen the demand for benzine or
petrol for the motor industry, and the Standard finds that it _can_
take out that naphtha. Accordingly a friend of mine who has studied
this subject as a chemist tells me that whereas the “Tea Rose” oil used
to have a flash-point nearly down to the legal minimum of 73 deg.,
samples recently tested have a flash-point of 78 deg. or 79 deg. The
Trust have made their oil to that extent safer to suit themselves, and
it is notable that side by side with this the number of petroleum lamp
accidents has been falling. What is now wanted is that they shall be
forced by Parliament to make it safer still. As Lord Kelvin said to
the Select Committee in 1896:--
The principle of safety is that oil should never in a lamp reach the
temperature of the close test flash-point. I advise the Committee to
fix a flash-point which shall be higher than oil is likely to reach
under ordinary conditions of ordinary use.
One of the achievements of the Home Office during the controversy was
the cooking of a list of legal flash-points in American States by
which it was sought to discredit the statement that this country is a
dumping-ground for American low-flash oils that the Rockefellers cannot
sell at home. Although Mr. Jesse Collings has denied that statement
in the House of Commons it is perfectly true. A conclusive proof of
its truth is furnished by that interview with Mr. W. H. Libby, the
Standard’s foreign marketing agent (to which I referred in a former
chapter) appearing in the _New York Herald_ of September 3, 1905. After
describing in Mr. Libby’s words their struggles with Russia for the
European oil market, the interviewer goes on thus:--
It is an open secret among people familiar with the oil business
that the great and important reason for the Standard’s activity in
Europe is largely due to the fact that the European tests on oil are
not as stringent as they are in the United States. In this country
(U.S.A.) the first run of oil, or what is known as the flash-test at
a high rate, _is the only oil that is allowed to be marketed_. The
second run of oil contains much more inflammable ingredients, and
when tested with the flash will explode at a much lower temperature.
_It is this oil that finds a market abroad, and the laws there do
not demand the higher test of the product._ To get rid of its second
run the Standard naturally has to look to other markets than the
domestic, and that is why it is so anxious to extend its operations
in Europe and Asia, as otherwise the oil would be a drug on its hands.
The case against the Standard and its liquid death could not be more
concisely put than in the foregoing passage, and so far as they are
concerned I leave the case there. But with regard to the British
officials, it should here be mentioned that the length to which they
have gone in defence of the 73 deg. flash-point was most conspicuously
demonstrated in India. When the flash-point of 73 deg. was legalised
there difficulties arose with Burma petroleum which, owing to its large
proportion of petroleum wax, became solid or viscid at 60 deg. The
Indian authorities wrote home for advice in this awkward situation,
and Sir Frederick Abel was invited to solve the riddle. Sir Frederick
Abel actually recommended the Indian Government to melt the samples,
then refrigerate them down below 73 deg., and then gradually heat them
up again to 73 deg. to test them! Here is the exact language of his
letter:--
For the above reasons the application of the legal flashing test as
prescribed by the Act to the examination of petroleum samples which
are solid or viscid at a temperature about 60 deg. Fahr. _must give
entirely fallacious results_.
Then he goes on to suggest a “modification” of the system of testing,
of which the material portion is as follows:--
The oil-cup is then to be placed in a refrigerator, or plunged up
to the projecting collar in water maintained at a sufficiently low
temperature until both thermometers indicate the temperature at which
the testing of petroleum is directed in the Act to be commenced. The
oil-cup is then to be removed, wiped dry, placed in the water-bath,
and the testing effected in the manner prescribed in the Act (Select
Committee’s Report, 1896, Appendix, p. 747).
Of course, to the mind of any one but an official, it would be
clear that when oil in a barrel or a tank was itself normally at a
temperature of between 80 deg. or 90 deg., it was a farce to allow it
to enter the country on the theory that it would not give off explosive
vapour below 73 deg. Fahr. But to admit that would have been too
awkward for the whole flash-point camarilla, and Sir Frederick Abel, in
the _Journal of the Society of Chemical Industry_, a few years before
the safe-oil agitation started, stated that oil which in New York was
exported as 73 deg. oil was found in India to have a flash-point of 66
deg., and advised that in order to take the flash-point in India it
should be cooled down to 56 deg. Fahr., before the testing was started.
Yet the Standard Oil agents in India successfully opposed any raising
of the flash-point, and Sir Frederick Abel, in the letter quoted in the
1896 Blue Book, stated that public safety did not require it.
Another Standard Oil agitation which was run here by the Anglo-American
was in February, 1900, when the railway companies issued an amended
consignment note for benzine, petrol, and all varieties of motor
spirit, by which the consignor was required to indemnify the railway
company against all claims for injury to person or property arising
out of the “inflammable character” of the goods. The Anglo-American
Oil Company first threatened that it would abandon the importation of
petroleum spirit altogether, but as that “bluff” did not succeed it
issued a circular to owners of motor-cars and users of petroleum spirit
signed by Mr. Frank E. Bliss, director. It contained this instructive
passage:--
There is more likelihood of our protest being heeded if it be
supported by similar protests from all users of petroleum spirit. We
ask, therefore, your co-operation in our endeavour to induce the
railway companies to revert to their old form of consignment note,
and we shall be glad if you will address a letter of protest to your
local goods agent of the railway-company over whose line you have
been accustomed to receive your traffic.
That is the way these spontaneous agitations are got up.
Of late years the Anglo-American’s public activities have been chiefly
concerned with its attempt to get the Thames Conservancy, and then
the Port of London Authority, to sanction the bringing of petroleum
spirit up the river in tank barges instead of landing it at Purfleet.
The Thames Conservancy, whose meetings are open to the Press, steadily
refused, but the Port of London Authority sits in secret, and it would
not be surprising if one day the Standard’s constant efforts succeeded
in this most dangerous project. “Petroleum spirit,” legally, consists
of petroleum which flashes below 73 deg. Fahr. In fact, some of its
products will flash at zero, but all of it is far more dangerous than
the petroleum lamp-oil, which flashes at 73 deg. or above.
THE LUBRICATING OIL TRADE
“Does Mr. Rockefeller know that modesty, benevolence, and piety are
the tricks which deceive the most people the longest time?”
IDA M. TARBELL _in_ “_McClure’s Magazine_.”
CHAPTER XV
THE LUBRICATING OIL TRADE
It is time now to turn to the Standard’s other English branch, the
Vacuum Oil Company, Limited, which posed at first as an American
company entirely independent and unconnected with the Standard. It was
registered at Somerset House as a limited liability company, with a
capital of £55,000, on May 13, 1901. Its object was to take over the
business of its parent, the Vacuum Oil Company of Rochester, N.Y.,
U.S.A., and it purchased all the assets of that company in the United
Kingdom for £29,947. Up to October, 1905, its five directors were as
follows--
John Dustin Archbold, 26, Broadway, N.Y.
Charles Millard Pratt, 26, Broadway, N.Y.
Charles Marvin Everest, Rochester, N.Y.
Howard B. Case, Norfolk Street, Strand.
Henry Forster Grierson, Farnborough, Hants.
Charles M. Pratt is a son of the late Mr. Charles Pratt, who founded
the refinery already referred to in connection with Mr. H. H. Rogers.
C. M. Everest has been mentioned in the Buffalo explosion prosecution,
in which he was convicted. In 1908 the Company adopted new articles
providing that the number of shareholders must never exceed fifty, and
binding the directors to refuse to register any transfer of shares
which will have the effect of increasing the shareholders beyond that
number. The directors are also empowered to refuse to register any
transfer of shares without giving their reasons. The following were the
shareholders on November, 30, 1909:--
Shares.
Vacuum Oil Company of Rochester, N.Y. 50,000
Charles Marvin Everest, Rochester, N.Y. 2,000
Howard B. Case, managing director 50
Henry Forster Grierson, Farnborough 10
Louis Chas. Panizzardi, Paris, merchant 50
Edward Prizer, 29, Broadway, N.Y. 2,790
Ernest Michaelson, Copenhagen, merchant 50
Everett Oscar Wader, 29, Broadway, N.Y. 50
------
Total 55,000
Mr. Archbold and Mr. Pratt have left the board of directors, which
included in November, 1909, Messrs. Everest, Case, Grierson, Prizer,
Panizzardi, Michaelson, and Mr. George Percy Whaley, of 29, Broadway,
New York. (Probably 29, Broadway is a copyist’s blunder for 26, the
Standard’s home.)
One complaint which the English trade makes against the Vacuum Oil
Company is this: through the Anglo-American Oil Company the Standard
sells large quantities of refined oils to British manufacturers,
compounders, or blenders of lubricants. At the same time, through
the Vacuum Oil Company, it goes to the customers of these firms and
offers to undersell them, saying that it can supply the oils direct.
A great deal of correspondence appeared in the _Oil and Colourman’s
Journal_ on this subject in 1905. For example, one correspondent told
this story of his experience with the Standard. He was dealing in
illuminating oil, getting all his supplies from the Anglo-American
Oil Company. In 1898 his trade was 60,000 gallons per annum, then the
“Anglo” sent tank wagons to his customers, and in 1905 it was less
than 15,000 gallons. He was persuaded then to devote his attention to
motor-car spirit. After he had spent a considerable sum on bricks,
concrete, iron doors, &c., for storage purposes, the Anglo-American
began delivering broadcast motor spirit to cycle agents. This merchant,
when he saw his kerosene trade vanishing, put up plant for blending,
filtering, and refining for the lubricating oil trade. Then he found
the Vacuum Oil Company underselling him with his own customers. Of
course, it was quite obvious that if the Vacuum Oil Company could by
these tactics secure the whole trade of the British lubricating oil
blenders, the price of lubricants would go up as suddenly as the price
of kerosene always did when the Standard had killed competition. This
fact was pointed out in the trade Press, and I understand that the
Vacuum’s great campaign in 1905 has not destroyed the British makers of
lubricants.
A gentleman connected with the lubricating trade wrote me the other
day of the latest methods of these people. The Standard ships large
quantities of oils for lubricating to the Anglo-American by the
ordinary steamship lines. In a very attractive little booklet which
I have before me, entitled “The Light that Fails Not,” issued by the
Anglo-American Oil Company in 1902, it is stated that their import of
lubricating oil in a year was 462,000 barrels. This is now larger, and
is a valuable freight, and so the Vacuum people go to the principal
steamship lines, and say, “We give you this freight; you must let
us lubricate your boats in return.” The result is that the freight
which the English maker of lubricants pays on what he buys from the
“Anglo” is used to secure business for his trade rivals, who are
undercutting him with owners of engines. This may be the American idea
of “business,” but it will take a great deal of acclimatising here, and
the Vacuum is not growing in popularity.
But the Vacuum does not always undersell. Complaint is made that in
some of the large tramway undertakings, especially municipal ones, no
other lubricant but the Vacuum oils can get accepted, although other
oils of equally good lubricating quality can be and are produced by
British firms at lower prices than the Vacuum obtains. The reason for
this phenomenon is simply that the engineers in charge of the plants
refuse to use any other than Vacuum oils. Of course they must be able
to supply a plausible reason for this to their superiors, and such an
explanation is provided in the “Official Circular” of the Tramways and
Light Railways Association for April and May, 1905. This “Circular”
reports a paper read at a meeting of the Association on April 28, 1905,
by Mr. William E. Parish, jun., chief technical expert of the Vacuum
Oil Company, on “Friction as Affected by Lubrication.” The keynote of
Mr. Parish’s paper may probably be found in these lines:--
It is possible to exactly duplicate a fine lubricating oil on the
basis of chemical tests with an improperly manufactured article. The
results from the use of both oils, _while the chemical readings show
they are exactly the same_, are widely different when applied to
actual work.
Translated into plain English this means that the lubricants supplied
by the Vacuum’s competitors (manufactured out of the Standard Oil
Trust’s own oils) are by every recognised chemical test as good as
theirs, but yet that it is right and proper that the engineer who
actually uses the lubricants on the machinery should prefer the Vacuum
oils--a very satisfactory doctrine for both the Vacuum Company and the
engineer!
Further on in his paper Mr. Parish was good enough to give various
tables and experiments relating to what he called
A full efficiency test of a textile mill where an effort is being
made to reduce the total horse-power by means of applying lubricants
more suited to the work than the oils in use.
That means, in plain English, by applying Vacuum oils, whose chemical
readings are exactly the same as those of their competitors, and whose
virtues can only be discovered by the engineer. In the debate on the
paper I notice that Mr. W. Scott Taggart, while congratulating Mr.
Parish on his paper, let fall this very valuable observation:--
I must say there is only one thing that spoils these tests for a
society like this or any other society of a scientific character,
and it is that these tests are all made by a person or an engineer
responsible to the oil company making them. I think they would be of
much greater value if carried out by some unprejudiced engineer.
In replying afterwards on this important point, Mr. Parish urged that
comparative testing was very difficult, and that
Engineers for work of this kind absolutely cannot exist outside the
large oil companies, where they have practically all the world to
operate in, and the unpublished knowledge of many experienced men in
this particular line of work to draw upon.
Whether this reply is scientifically sufficient I do not know, but it
is obvious that it is not likely to satisfy the competitors of the
Vacuum Oil Company, who regard all these novel scientific merits, which
cannot be distinguished by any recognised chemical tests, as so much
clever “advertising bunkum”--to use Mr. Paul Babcock’s language about
the Anglo-American Oil Company’s orange-barrel advertisement. But it
can hardly be doubted that tramway and other engineers find such papers
as that read by Mr. Parish, jun., before their technical association
a very useful argument in justifying their exclusive use of Vacuum
lubricants.
Before I leave this subject I may note that _Fairplay_, the well-known
shipping journal, has drawn attention to another aspect of this
question, and that is how the Inland Revenue collects income-tax
from this combination. As the Vacuum Company is a branch of the
Standard it can buy its oils at a high price and sell them at cost,
so that its books would show no profit assessable to income-tax. That
profit, of course, would have really vanished into the balance-sheet
of the Standard Oil Company of New Jersey. The same applies to the
Anglo-American Oil Company, which, according to the evidence in the
Missouri case, sells oil here on commission. The lower the commission
the “Anglo” accepts from the Standard Oil Company of New Jersey, the
lower its profits on its balance-sheet, and the less income-tax. But I
advise Mr. Lloyd George to look after the “richest Baptist on earth.” I
fear that he is not paying his proper share towards the expenses of the
country where he makes so many millions.
Such, then, is the evidence, summarised of course, which has
accumulated in all parts of the world against the Standard Oil Trust.
In the examination of this evidence, which has now been completed, I
claim to have established the following propositions:--
1. That the Standard Oil group have always aimed, not at fair
competition, but at absolute monopoly.
2. That they secretly obtained from the United States railroads rebates
on the carriage of their own oil, and even larger rebates on all the
oil carried for their competitors--thus rendering it to the interest
of the railroads to decrease the shipments of “independent” oil, by
refusing to furnish adequate cars, and by delaying delivery.
3. That by means of these rebates they were able to undersell their
competitors, and either to ruin them or force them to sell out at heavy
loss.
4. That, whereas in 1870 they controlled nearly 10 per cent. of the
American oil refining business, by means of these rebates they had
secured in 1880 control of 90 per cent.
5. That when the petroleum well owners constructed pipe lines to pump
their oil to the seaboard refineries, the Standard used vexatious
litigation, and even open violence, to obstruct the work, and when it
was completed bought up a majority of the stock.
6. That although they were legally “common carriers,” the Standard
constantly refused to pipe oil for other refiners, and thus forced the
well owners to sell their crude oil to them at their own price, as in
practice the Standard had become the only buyer.
7. That an elaborate system of espionage has been established by which
information is corruptly obtained from employees as to shipment of
independent refiners’ oil; and that the oil dealer who receives such
oil is then undersold by Standard agents.
8. That in districts where the feeling against the malpractices of the
Trust is strong, the Trust runs “bogus independent” oil companies and
“anti-Trust” oil shops, and uses them to undersell the oil dealers who
really attempt to sell non-Trust oil.
9. That although the rebates are not paid on all the railroads now,
there existed as late as 1907--and probably still exist--widespread
railroad discriminations giving the Standard advantages over other
refiners.
10. That although the Standard constantly claims credit for improving
the processes of manufacture and transport, most of the important
inventions of the industry were invented by others. The main thing the
Trust invented was the secret rebate.
11. That in regard to the Standard’s claim to have reduced the price of
illuminating oil to the consumer, the Hepburn Congressional Committee
found that it had only done so when fresh supplies of petroleum had
come on the world’s markets, or in order to kill competition.
12. That Mr. Rockefeller and his associates have frequently made on
oath before Congressional Committees and in judicial proceedings false
statements about the Trust.
13. That the Standard Oil group has systematically adopted the methods
of bribery (direct and indirect) in dealing with politicians and
newspapers.
14. That in Great Britain it has successfully obtained official support
for the maintenance of a dangerously low flash-point of illuminating
oil, which enables it to dump here “export oil” that it is not allowed
to sell in the majority of the American States.
15. That the Trust has been successfully prosecuted in the courts
of its native land, and that in every country that it enters it is
the enemy of legitimate commerce. It either ruins the dealers in its
commodities, or reduces them to the position of “tied houses.”
In fine, the Standard Oil Trust is the most unscrupulous, as well as
the most ambitious and successful, combination of capitalists that
the world has yet seen. The men it has ruined, the businesses it has
wrecked, the little children it has roasted in its oil-fires--all these
constitute a hideous record of death and destruction which not all
the long prayers and the huge alms of John D. Rockefeller should ever
induce the world to forget.
Index
Abel, Sir F., 159, 210, 220, 233
Acme Oil Company, 67
American Wick Company, 23
Ammonia in Scotch shales, 206
Andrews, Samuel, 15, 29, 193
Anglo-American Oil Company, Ltd., 11, 22, 111, 196, 241
” Caucasian Oil Company, Ltd., 163
” Saxon Petroleum Company, 148, 170
Archbold, John D., 18, 19, 67, 78, 94, 97, 110, 175, 196, 239
Asiatic Petroleum Company, 148, 170
Atlantic Refining Company (Standard), 102
Attfield, Professor, 208, 210, 224
Babcock, Paul, 149, 192, 223
Bailey, Senator, and the Trust in Texas, 140
Baku Refiners’ Union, 163
“Barbarous Mexico” (its inspiration), 144
Base, Geo. (on Standard agreements), 203
Bataafsche Petroleum Maatschappij, 148, 170
Bayne, H. (and Security Oil Company), 113
Benzine, its influence on “the oil war,” 149
Bliss, Frank E., 195
Bostwick, J. A., 37, 52
Brady, A. N. (Manhattan Oil Company), 109
Bribery charges, 77, 181
Buffalo Refinery explosion, 97
Burma petroleum, 152, 233
Chandler, Professor C. F. (of New York), 222
Chesebrough Manufacturing Company (Vaseline), 21
Choate, Hon. Joseph, 154
Collings, Right Hon. Jesse, 226, 228, 232
Consolidated Petroleum Company, Ltd., 163
Cowdray, Lord (shadowed in New York), 145
Cuthbert, John H. (alleged Standard Oil agent), 118
Devereux, General J. H., on rebates, 31
Devoe Manufacturing Company, 23, 192
Diaz, President of Mexico, and the Trust, 144
Dupre, Dr. (the late), 229
Dutch Government excludes the Standard, 147
Eagle Oil Company (of Mexico), 14
Elkin, P. J. (Attorney-General of Pennsylvania), and the Archbold
letters, 84
Erie Railroad rebates, &c., 37, 40, 50, 53, 55, 59
Everest, C. M., 94, 97, 175, 239
Flagler, Henry M., 18, 29, 74, 197
Flash-point scandal in Great Britain, 209
” in India, 233
Foraker, Senator, J. B., 78
Galena-Signal Oil Company and American railways, 21
Galicia, discriminations against the Standard, 166
Garfield, J. R. (United States Commissioner of Corporations), 28
General Industrials Development Syndicate (of London), 108 _et seq._
German Vacuum Oil Company, 170 _et seq._
Gould, Jay (the late), 37
Hamburg Court’s decision on “re-branding,” 177
Hanna, Senator M. (the late), 83
Hearst, W. R., and the Archbold letters, 18, 77
Hepburn Committee (U.S.A.), 35, 56, 72
Home Office and the flash-point, 229
Inventions, the Standard’s claims to them, 129
Kelvin, Lord (the late), 213
Lake Shore Railroad, 31, 46
Lawson, T. W., on H. H. Rogers, 17
Leonard, W. J. (Standard tactics in England), 200
Lethaby, Dr. (the late), 210
Libby, W. H. (Standard lobbyist), 151, 152, 232
Limanova Petroleum Company, 166
Lloyd, Henry D. (the late), 5, 97
Lockhart, Charles, 65, 193
Lockwood, F. W. (Standard Oil agent), on wicks, 194
London Commercial Trading and Investment Company, Ltd., 113 _et seq._
Macdonald, Jas. H., 111, 199
Maikop field, the new, 164
Majendie, Sir V. (the late), 214, 219
Manhattan Oil Company, 108 _et seq._
Mantascheffs of Baku, the, 164, 169
Mendeleef, the late Professor, 224
Merrill, Joshua (lubricating oil pioneer), 131
Missouri, proceedings against the Trust, 135
Moeara Enim Company and the Dutch Government, 147
Monnett, F. S. (Attorney-General of Ohio), 81, 134
Newspapers, Trust subscriptions to, 86
New York Central Railroad, 37, 40, 48, 52, 60
Nobels of Baku, the, 162
O’Day, Daniel, 19, 54, 198
“Oil War,” the, 147
“Orange Barrel,” the, 223
Oswego Manufacturing Company, 23
Parish, W. E. (of the Vacuum Oil Company, Ltd.), 243
Payne, Oliver H., 20, 193
Pearson firm (Mexico), 142
Pennsylvania Railroad and rebates, 31, 37, 56, 59
Petroleum Association (of London), 160, 210, 214
” Committee (recommendation on flash-point), 225
” Producers’ Union, the, 46, 133
” wax, 152, 206
Pierce, Henry Clay, 141
“Pittsburg Plan,” the, 57
Port of London Authority and Standard intrigues, 236
Pratt, Charles, 66
” Charles M., 20, 175, 239
“Protection,” the cry of, 226
Railways, English, and petrol agitation, 235
“Re-branding” lubricants in Germany, 176
Redwood, Sir Boverton, 160, 192, 220, 221, 229
Refiners’ Association, the, 57, 59
Rice, George, 71
Rigby, W. T. (Liverpool retailer’s experience), 202
Rockefeller, Frank, 39
” John D., 15, 29, 33, 47, 51, 58, 67, 71, 197
” John D., jun., 20
” William, 19, 29, 37, 193
Rogers, H. H., 17, 33, 94, 97, 172, 195
Romano-American Petroleum Company, 22, 169
Roscoe, Sir Henry, 225
Rothschilds, the Paris, 163, 170
Royal Dutch Petroleum Combine, 147, 170
“Rutter circular,” 60
Samuel, Sir Marcus, 147, 157, 170
Scottish oil refiners and the flash-point, 215
Security Oil Company of Texas, 20, 113
Shell Transport and Trading Company, 147, 151, 170
Solar Refining Company (Ohio), 20, 110
Sone & Fleming Company, New York, 224
South Improvement Company, 34, 36, 46, 48
_Spectator_, the, on “lobbying,” 227
Standard Oil Company, of New Jersey, 19, 50, 135, 199
” ” of New York, 48
” ” of Indiana, 134
” ” of Ohio, 20, 29, 134
_Star_ newspaper and the flash-point, 225
Steana Romana, the, 169
Stone, Hon. W. A. (Governor of Pennsylvania), 83
Suez Canal Company and the bulk oil agitation, 158
Swedish naval engineers and Trust lubricants, 185
Tank steamers and the Suez Canal, 158
” wagons and retailers, 127, 166, 202, 205
Tarbell, Miss Ida M., 5, 16
Thompson, Professor Silvanus P. (and Lord Kelvin), 213
Thomson, Captain J. H. (the late), 229
“Three chemists’ cup,” the, 210
Tidewater pipe lines, 91, 120
Tramway engineers and Standard lubricants, 248
Union Tank Line Company, New Jersey, 22, 110
United Pipe lines, 54, 60
” States Pipe Line, 92
Ure, Alexander, K.C., M.P., 210, 212
Vacuum Oil Company, of Rochester, 20, 21, 94
” ” Ltd., 239 _et seq._
” ” of Vienna, 165
Van Buren (Mr. Archbold’s son-in-law), 142
Vanderbilt, William H., 37, 46
Vandergrift, J. J., 33
Van Syckel, Samuel (pipe line pioneer), 131
Warden, W. G. (South Improvement Company), 36, 65
” Frew & Co., 74, 193
Wardwell, William T. (the late), 18, 198
Waters-Pierce Oil Company (Mexico), 140
Watson, D. K., Attorney-General of Ohio, 82, 134
” P. H., President South Improvement Company, 37
The Gresham Press,
UNWIN BROTHERS, LIMITED,
WOKING AND LONDON.
Transcriber’s Note
Some inconsistencies in spelling, hyphenation, and punctuation have
been retained.
This file uses _underscores_ to indicate italic text. Small capitals
changed to all capitals.
p. 7: changed location of quotation marks for Chapters VII, VIII
entries to match the chapter titles
p. 72: changed “Insterstate” to “Interstate” (the Interstate Commerce
Commission)
p. 112: changed “o” to “of” (pretty close track of companies)
p. 115: changed shares total from “722,507” to “722,509”, correcting a
math error.
p. 129: changed “Stark’s” to “Starks’s” for consistency (cart it round
after Starks’s wagon)
p. 144: changed “monoply” to “monopoly” (fighting this American
monopoly)
p. 165: changed “Campany” to “Company” (the Vacuum Oil Company, of
Rochester)
p. 178: changed “Engine F” to “Engine I” (“Gas Engine I and Heavy”
respectively)
p. 200: changed “varies” to “various” (the various groups of middlemen)
p. 224: changed “bankum” to “bunkum” (“merely advertising bunkum,”)
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