ROBBER BARONS
CHAPTER TENCAESAR BORGIA IN CALIFORNIA
THE development of the Great West during the ’70s and ’80s continued unabated. Its outward effect was one of extraordinary material progress, whose wonders were perpetually recited by the pioneers ; while obstacles or deficiencies in the total plan were dismissed with that brimming optimism which was not only native in Americans, but particularly prominent in the Westerner.
The Westerner had come from the East partly because he chafed under the restrictions of a well-organized society and partly because he had faith that, with an equal chance in a new country, he would be able to amass the wealth he had failed to win in the East. By the testimony of one historian of the region’s economy, R.E. Riegel,
each individual Westerner expected to become wealthy and famous ; each city expected to become the metropolis of the West ; and each state expected to become the industrial and artistic center of the nation. Before this spirit obstacles disappeared as if by magic. Some of them later reappeared with increased force and potency, but others were gone forever.
The rapid growth of the whole region, the swift industrialization by the use of large machines, enmeshed even the most hard-headed business men in the dream of future cities, farms and railroads, even of trade with the Far East.
Yet rapidity of development was but the result of the higher technical knowledge attained slowly in the East and in Europe. Hence the plan of exploitation which soon stamped its character upon the West was that of great machines quickly introduced where only yesterday the native Mexicans or Indians had been expropriated from the virgin land. The new railroad line of the Central Pacific across the Sierra Nevada, in 1865, represented the highest engineering knowledge of the period ; the tremendous tunneling of Sutro and Mackay in the Comstock Lode, in 1872, reflected the growing mechanization of deep mining for silver and gold. In Montana, Marcus Daly and William A. Clark sank their great copper mines, only a few years after the Indian campaigns of Custer and Miles had cleared the country. Thus, in the wild fastnesses of the Rockies, amid sheer barrenness, industries of giant size sprang up overnight.
The industrial plan of the Great West, in its tempo and dimensions, can only be likened to the operations of contemporary Russian engineers who build Manchesters and Pittsburghs overnight in their steppes. But in the absence of any social formulae other than that of individualism, the leaders who carried forward the exploitation of the last American frontier were chosen simply by themselves : at first as the survivors in a struggle of ruse and violence ; then by virtue of a stronger equipment in capital. Faced with such mighty arms in the hands of a few self-chosen leaders—who soon wielded machine technology and political influence in measure with their great capital—the crowd of pioneers who had flocked to the West quickly found themselves reduced to the condition of helpless subjects.
The adventures of the exploiters who seized the principal mineral deposits, forest lands, mountain passes and valley roads in the West seem far more magical than that of their fellows in the Eastern cities. Here were contests fought by strong men in the open rather than intrigues in stuffy board-rooms. There were well-nigh insuperable hazards to overcome, calamities of nature, the menace of rival expropriators. And here as elsewhere the railroad barons, Collis Huntington, Henry Villard and James Hill, who were busy organizing the regional traffic into giant systems, held the key to the whole economic situation and did reverence to no one.
Huntington and his partners, Stanford, Crocker and Hopkins, controlled by possession of the Central Pacific ; they were in the post of the king in the castle, the baron on the crag. Though their project should normally not have “paid,” their autocratic powers permitted them to charge as their toll the highest passenger and freight rates in the country. Moreover the opening of the Bonanza mines of Western Nevada gave them nourishment in traffic and helped to carry the heavy debts they had saddled on their railroad, such debts as similar enterprises collapsed under.
But once having begun such an adventure one dare not stand still. Huntington, the leader of the group, who carried the chief responsibilities of their affairs on his broad shoulders, knew a thousand cares and dangers. Repeatedly in his letters he gives way to doleful complaints : “This business . . . will kill me yet !” There were moments when he would have liked to sell out and decamp ; but none would then undertake his hazards, despite the great prize in sight. And when certain interests did come with offers, he instinctively, greedily raised his price.
The problems before the ring known as the Pacific Associates were manifold. They must hold and fortify their monopoly of the Pacific states. This meant seizing the water front at the ocean and river ports, as well as certain other existing railroad projects such as the California Central (which ran lengthwise through the state), and the badly constructed short line which plied between Sacramento and San Francisco. But though they had control of 85 per cent of the California roads, as Daggett relates in his history of the Southern Pacific, this was not enough. All possible rival encroachments must be forestalled by prompt if stealthy measures. The federal government, for instance, had made generous grants to the rival Western roads in order to stimulate the competition between them, as between dry-goods merchants in a village. For this purpose several charters had been issued to other interests which boded no good to the California quartet : a “Texas Pacific,” along the 32nd parallel, an “Atlantic Pacific” along the 35th, and a “Southern Pacific,” which had been in the hands of the ill-starred Frémont for a time—all these mere projects on paper, yet likely to reduce the monopoly of the Huntington ring over their domain.
As early as 1868, with their main line almost completed, the group secretly acquired the California charter of the Southern Pacific, then began large building operations in the region of Los Angeles, and actually transferred their main interests to the new company. All records of their earlier construction company, the “Contract & Finance Company,” were burned, and the offices were moved from San Francisco to Sacramento. A new holding company, the “Western Development Company,” was set up to conduct their business in the promising southern territory.
There were rumors afloat of these intricate proceedings, and of what they portended ; yet Stanford denied them publicly. But six months later, in September, 1868, the annual report of the Southern pacific was sent to the Secretary of the Interior with a letter signed in Huntington’s own hand. This brazen falsification was continued ; all relations between the various corporate units controlled were kept obscure. Twenty years later, Stanford would admit before the Pacific Railway Commission :
Well, the necessity of obtaining control of the Southern Pacific Railroad was based really upon the act of Congress providing for its construction. It became apparent that if that last was constructed entirely independent of the Central Pacific, it would become a dangerous rival, not only for the through business from the Atlantic, but . . . for the local business of California. It was of paramount importance that the road should be controlled by the friends of the Central Pacific.
It was necessary, in short, that the quartet defend all California from invaders, cover the rest of the state with their network of branch lines and feeders, and block all the transcontinental entrances to their territory with their own lines. With the Southern Pacific in their hands, they still had two other rivals to block ; on the one hand Thomas Scott, who held the Texas Pacific charter, and on the other the interests who acquired the right of way of the somewhat mythical “Atlantic & Pacific.” These contests would keep them busy enough later on ; but for the time being they occupied themselves with exploiting the southern part of their state.
Here, their agents in the field had given dazzling reports of the soil richness ; but population was almost nil. Huntington, Stanford and Crocker traveled the beautiful southern country in person, studying the ground. The few communities, Los Angeles, San Diego and Santa Anna, were mere villages, with a saloon to every fifty-five inhabitants.
Crocker later declared that “when the Southern Pacific was built through the southern San Joaquin Valley, the company could have started with a railroad train at Sumner, at the south of the valley, and come to Stockton, and with one engine and one train of cars hauled every living soul that lived in the valley out at one haul.” This was as late as 1876.
No traffic here yet, but there was need for haste, if only to forestall future opponents in the field. Quickly they laid down their tracks, levying upon communities as they went and acquiring huge sections of land as grants along the right of way. Against these acquisitions they issued $40,000 in bonds and an indiscriminate amount of stock for every mile of road they built, and passed these over as usual to themselves, that is, to the construction company of which they were the sole owners.1
But from Southern California, the quartet now sought egress toward the populous East as well as the ports of the Gulf of Mexico. Besides the pass in the northern part of the state used by their Central Pacific through Summit Valley, there were only two other routes known to them : at Yuma, Arizona, near the mouth of the Colorado River, and at The Needles, midway between Yuma and Summit Valley. But toward Yuma, that irrepressible railroader Thomas Scott was building his Texas Pacific as fast as he could make it go without tangible funds.
A collision between the two forces was inevitable. But the conflict between the hosts of Huntington and those of Scott (behind whom Gould maneuvered) was staged not only in the deserts and canyons of the Southwest, but also in the halls of Congress, where for years the statesmen tried their best to judge between the quarreling barons. While these two enemies remained locked in mortal combat, the fortunes of war were to be deeply affected by the intrusion of a third party in the shape of Boston financiers, who sought to drive a track of their own, the Atchison, Topeka & Santa Fe, between them. And when the Southern Pacific turned to beat off the flank attack of the Santa Fe, the Santa Fe would find itself suddenly engaged with still other intruders from other quarters. The railroad wars of the Southwest were an extraordinary mêlée, one of the strangest and most noisome since the days of Frederick Barbarossa in the twelfth century.
So throughout the known ages of history the strong captains have led their bands of followers to the seizure of the mountain passes, to be guarded for toll ever after, so long as force could hold them. Thus, in an Alpine pass—now traversed by a beautiful automobile road—between Italy and Germany, I have seen upon a height naturally controlling a narrow gorge, first the ruins of a Roman stronghold ; then, built many centuries later, a section of Gothic or feudal construction, dating perhaps a thousand years later ; and finally, surmounting it all, a Renaissance building of the fifteenth or sixteenth century with its toll gate. The barons had never let go their grip over this trade route.
In the field, the gargantuan Crocker directed the soldiers of the Pacific Associates, while the many-handed Huntington hied him to Washington, there before the tribunes of the people to defend his Western empire.
2
Huntington, with his large, deeply lined face, his long nose and black beard, might have sat for Holbein as a great vassal of the Renaissance period, or some militant prince of the Church. Passionate, vindictive and yet supremely forehanded, he pursued his ends now with bluntness and now with infinite guile, and by many paths. His mission was elaborate and delicate, required several years’ time, but was discharged on the whole with fair success.
The capital was full of railroad barons, who having allowed a decent time to elapse since the Crédit Mobilier scandals, fully two years, belabored the President and the Congress for federal bounties of all sorts. Failing of this—they could never understand why such a friendly policy should be gradually abandoned—they lay in watch to see that no bones were thrown to the other dogs.
In the miraculously preserved private correspondence of Huntington for the four years between 1874 and 1878, we have an intimate record of the ebb and flow of the railroad war. There was Scott, who possessed a charter and a right of way, wanting badly government cash, and a guarantee of bonds, such as the Union Pacific had won, in order to continue his own march to the sea. Huntington, now fairly strong in funds, wanted the charter or the right of way across the territories and Indian Reservations in his path of 1,000 miles—the things in which Scott was rich.
One would think they might have clasped hands and united to exploit the great region together. Was there not room for both of them to “grow up with the country”? But Huntington, stubborn and unforgiving, believed he controlled all the approaches ; while Scott felt absolutely certain of a strategic advantage in the sympathy of the federal government at Washington. In other words, as Huntington wrote it down in private, “Scott has about the same advantage over us in Washington as we would have over him in Sacramento.”
On the whole neither Huntington nor Scott were helped by Congress at this time, in spite of a great program of “junketing parties,” donations of railroad passes, and cash payments by both sides, as well as promises of all sorts to lawmakers, whom Huntington characterized simply as “the hungriest set of men that ever got together.” During a long harassing sojourn in Washington, Huntington, at any rate, prevented “harm” from being done. In a negative sense, he succeeded in stopping or postponing indefinitely the “investigations” for which some embittered factions—styled by him “communists”—clamored ; and second, in the matter of interest due on the government’s first mortgage of $21,000,000, Huntington won a long respite of twenty years and never returned the full sum.
The Huntington letters, which are not lacking in incisive literary qualities, speak of “fixing” committees, “convincing” public servants, “switching Senators” or “persuading” the most exalted cabinet members. They tell how he manipulated the mind of the Secretary of War ; or how he caused a President to cease “being cross” and “to laugh heartily.” Profound documents these, yielding us the richest instruction in the diplomacy and statecraft of the time.
The duelists strike at the weak places in each other’s armor. Scott points to the connection between the “new” Southern Pacific and the Central Pacific monopoly. To aid Huntington would be to aid monopoly. Huntington on the other hand, in hearings before the “Railway Congressmen,” promises that, given a charter, he will actually build the road, whereas Scott, he intimates, is insolvent. California, he says, wants a connection with New Orleans in a hurry. As to his affiliations with existing parallel roads, he protests that he has severed all such interests—which he did legally. (In a secret message to his comrades he urges now that “the S.P. should be disconnected from the Central Pacific as much as it well can be.”) But at Scott’s instance (a retaliating stroke) Congress resolves in 1876 to investigate the Southern Pacific’s rights to certain lands in California, its route having been unlawfully changed from that designated on the original blue-prints. Yet nothing comes of this. Huntington reports in June, 1876 :
There is a terrible fight kept up on us in Washington. But while they may bite us, they will not eat its up.
But the “T & P folks” are always “working hard at their bill.” It was of Scott, veteran trafficker in franchises and corrupter of public officers, that Wendell Phillips said : “The members of twenty legislatures rustled like dry leaves in a winter’s wind, as he trailed his garments across the country.” The wily Scott returns to the attack ever and anon. Now Huntington reports him offering the blue sky—“all the money—say $40,000,000—that the Act would give him ! ”
Huntington works hard at his lobbying, not only in Washington, but in Virginia, New York, Kentucky, as well as in the Western commonwealths of California, Nevada and Arizona. Sometimes he complains that he and his agents must work twenty-four hours a day. He cries out under the great tension : “I am fearful this damnation Congress will kill me.” It costs so much money “to fix things,” he wails. $200,000 to $500,000 each session, and there is no end !
But at the height of his labors, Senator Hoar (Massachusetts) sounds the alarm of another Crédit Mobilier before the Senate and the public. Persons in the employ of a Pacific railway, he declares, were in Washington during the passage of a bill favorable to the railway’s interests, and at an ensuing meeting of the directors, authority was given to expend $167,000 for “special legal expenses.” A government director, present at the board meeting, testifies that he left the room when this matter came up because he did not want to know what these expenses were for. By this exposure, the Congress is stampeded ; the buyers of franchises and statesmen make a sullen retreat. But Huntington turns to new tactics.
In the interim the engineering gangs of the Southern Pacific had proceeded as far as the California state line to Yuma, Arizona, blocking one of the two available entrances to California. For the further progress of the line they decided to abandon temporarily the issue of a federal franchise and obtain separate charters from the states or territories they traversed, Arizona, Nevada and New Mexico. Huntington had urged this course some time before, in 1875, to his lieutenant, David Colton :
If we had a franchise to build a road or two roads through Arizona (we controlling, but having it in the name of another party) . . . it could be used against Scott. Cannot you have Stafford [governor of Arizona] call the legislature together and grant such charters as we want at a cost of say $25,000 ? If We could get such a charter as I spoke to you of, it would be worth much money to us.
These state charters were easily obtained. But now the remaining obstacle was the existence of a government Indian reservation at Yuma. Authority from the War Department must be had for building a bridge across the Colorado, and tracks. The Texas Pacific saw the advantage of the possession of this strategic point, Riegel recounts, and in 1876, though the end of its main line was still 1,200 miles distant in Texas, it applied for permission to break ground at Yuma. General McDowell, in authority on the ground, granted his permission at first, then in an afterthought revoked it, to wait for War Department orders. Huntington bestirred himself, as he related, to get the Secretary of War “out of an ugly idea”—of authorizing Scott’s passage—“in about twenty minutes.” Then while the Secretary of War hesitated, the California quartet had the brilliant notion of taking the law into their own hands and rushing tracks across the Indian reservation that barred their way through Arizona. This was done with a great burst of speed, Crocker throwing a permanent bridge across the Colorado River under the noses of the federal soldiers, whose commanders by some means were led unofficially to ignore the restraining order they had received. Thus the California ring at one blow had a fait accompli to display. The people of the region, intensely excited by the prospects of landbooming and town-site jobbing in the wake of the longed-for train service, were up in arms, and ready to fire at the government troops if they intervened. It was probably at this moment, when nobody knew what precedent to follow, that Huntington by putting the President “in a good humor” obtained an executive order authorizing his construction, on October 9, 1877.
The Southern Pacific now laid its tracks at great speed across the southern tier of Arizona and New Mexico, toward Texas. Scott was beaten. Gould, now a dominant voice in the Texas & Pacific, came forward with terms of peace. The two roads made a juncture at El Paso in 1882, establishing the country’s second transcontinental trade route.
At this very moment there was turmoil, comic, fierce and incessant, elsewhere in the Rocky Mountain states. Two smaller railroads fought for the middle passage through Colorado and New Mexico to the Pacific. One, the Denver & Rio Grande, had been started by the citizens of Denver as an act of self-defense, to head off Jay Gould. The other was the Atchison, Topeka & Santa Fe led by the Bostonians Nickerson and T. Jefferson Coolidge. Both aimed for Santa Fe, a rich trading area ever since the seventeenth century under Spanish rule. The one good entry into New Mexico was the Raton Pass, and because of the mining boom at the time (1878) both lines rushed engineering crews to take possession and start work. The Santa Fe got there first ; then fought off the Rio Grande to the West, in the engagement known as the “Canon War” which took place at a wild pass near Canon City, the only entrance to Leadville, Colorado. The local citizens armed themselves and fought on both sides ; most of them aiding the Santa Fe.
Here were new and terrible anxieties for Huntington and for Gould. The Santa Fe now occupying a very good line of approach to the sea was a menace to the Southern Pacific and the Union Pacific both. In the fury and confusion of railroad war, construction on all these roads was done with incredible carelessness ; a great part of the Santa Fe trackage and roadbed, for instance, had to be completely remade within fifteen years.
At the advance of the terrible Yankees heading the Santa Fe, Huntington and his comrades rushed to bar the way. The one remaining breach in the natural barrier of California was at The Needles, midway in the Sierras, where a passage across the Colorado Canyon could be made. Once more the Southern Pacific rushed its line to occupy the pass, crossing the Mojave Desert. A third branch of the Huntington lines now traversed the Colorado River at The Needles and successfully blocked the approach of the Santa Fe to California, for the time being.
The new adversaries had the authority of an old federal charter for the “Atlantic & Pacific,” and Huntington, in alliance with Gould, who was equally alarmed by the intruders, used clever means to acquire a holding company which was known to have shares in the so-called Atlantic & Pacific. Soon they turned up with control of the enemy’s charter ! The Southern Pacific, in which all the interests of the California quartet had been centered, now held a complete monopoly of every route across California. The only existing rival was far to the North, where Villard completed the building of the Northern Pacific to Puget Sound.
While enjoying a complete land monopoly, the Pacific Associates were never free from the fear of competition by the sea. Therefore Huntington bought steamships after 1873 and organized the Occidental & Oriental S.S. Co. in order to continue their carrying business to the Far East over their own line and to “knock out” the Pacific Mail. But other railroad chiefs resented the capture of the ocean-carrying trade by Huntington. War in this field was threatened until Huntington, on behalf of the Associates, and Gould, on behalf of the Pacific Mail, reached an accord by which the latter long-established steamship line agreed to make Panama the terminus of its transpacific route and to make of San Francisco merely a port of call. As a result of this pact, reached shortly before 1880, for which both the Union Pacific and the Huntington railroads paid Pacific Mail an annual blackmail fee mounting into millions, the railroads gained from the elimination of the steamships, and carried goods across the continent at such terms as they saw fit.
“For more than forty years,” concludes Stuart Daggett, “the Southern Pacific interests sought with varying success to modify the intensity of water competition by agreements with or purchase of competing lines.” Communities in their general territory which had some access to competing railways or ships—and they were few—were tolerably well off. But the rest were left to the mercies of the California quartet, who in general charged average tariffs of 2.04 cents per ton mile as late as 1885 ; who raised or lowered individual items on their tariff at will ; who favored or discouraged certain towns in accordance with their interest in the situation ; or gave rebates to certain industries, such as the Standard Oil’s distributing agency, or their own Rocky Mountain Coal & Iron Company of Colorado. Daggett, in his very temperate history of the Southern Pacific, concludes after long study that their rates on long- as well as short-haul business were always higher than in the East, because of the completeness of their monopoly. Thus, he holds, the very development of the state, of its resources, its circulation of goods and services, was retarded.
Repeatedly the distressed burghers of San Francisco and other Pacific communities tried to break through the economic bands that held them down. On one occasion a group of hardware merchants calculated that it would be cheaper to have a cargo of nails shipped from New York to Antwerp, across the Atlantic, discharged and reshipped on a British vessel around Cape Horn to Redondo, California, than to use the direct rail connections of the “Octopus.” But this was a desperate measure, involving the equivalent of a complete circumference of the earth’s surface and taking almost half a year. Wherever they turned the pioneers found themselves encircled by a Huntington, a Gould, a Villard, a Hill. In the early ’90s the Californians attempted a new sally, building a new railway down the San Joaquin Valley from San Francisco across the Mojave Desert, to join with an “outside” road. The local patriots were stirred up to generous stock subscriptions. But of course among them werequietly introduced the friends of Huntington and Stanford, especially the rich Western sugar refiner, Spreckels. When the road was completed, it was surrendered, after curious negotiations, as the California terminus of that other giant railroad monopoly, the Santa Fe, which was now acting in perfect collusion with the Southern Pacific.
Economically encircled, the people of the Pacific Coast were also ruled through a political dictatorship directed with brilliant technique. Huntington bought the newspapers to “control or burn” them, as he said. About the offices of the Southern Pacific in Sacramento a horde of political heelers hovered. Huntington once complained pathetically in a newspaper interview in 1890 :
I have seen the ante-rooms down here in this building full of men trying to learn or get something out of politics. Why should they come here ? This is no place for them. But then they were not to blame. The tip went forth that political work was being done at Fourth and Townsend Streets and they merely followed the tip. . . . Things have got to such a state that if a man wants to be a constable he thinks he has first got to come to Fourth and Townsend Streets to get permissioin.
The petty political job-seekers in their naïveté had gone to the railroad headquarters, believing simply that the state capitol was really located there.
In many polemics and pamphlets of the ’80s and ’90s, certain of the pioneers who were less reconciled to their station described publicly the form of control exercised by the “Octopus” of California. Up to 1895 no governor of the state was nominated except at the wish of the Southern Pacific. The police commissioners of San Francisco, the harbor police, and the judges of two federal courts in San Francisco were appointed at the instance of Leland Stanford ; while Congressmen and Senators from the region were sometimes members of the railroad group directly, Stanford himself going to Washington as a California Senator in 1887.
When California had, in accordance with a custom growing up at the time, established a Railroad Commission of three members in 1881, Stanford and Huntington saw to it that at least two of the members were appointed by themselves. In the committee of 1881, Stoneman, the independent one among the three, reported that when the commissioners were elected, he, “it was understood, represented the popular interest ; another gentleman [S.J. Cone] . . . the feeling of the corporations, and a third was a ‘sand-lot’ man.” With the sand-lot man (one who joined in the current mob demonstrations against Chinese or Japanese immigrants), he thought he had a majority for the people. “But in a short time the sand-lot man sold out and did not amount to anything.”
Using to the full their immense power over the whole Pacific Slope, the Associates rounded out an “empire” with its steamships, its affiliated railroads, its coal and iron mines, its great landholdings, and its army of political retainers, over all of which they ruled unchallenged. In 1884 Huntington, who had completed the Chesapeake & Ohio Railroad in the East, actually proposed that the whole Southern Pacific system be “consolidated,” from San Francisco to Newport News, though it would have been impolitic to do so. To a friend he boasted that he could travel over his own lines from Yokohama to New York. His alliances with the mighty industrial groups of the East were firmly cemented after 1890, with Gould, with Carnegie, from whom he bought his steel, and with the Standard Oil, whose petroleum he carried westward at favoring rates.
Working together with remarkably little dissension (save toward the end of their association) the quartet directed their affairs with firmness and unsurpassed craftiness. Such opposition as they met with in various quarters from time to time, the importunities of outsiders who sought to learn their secrets or blackmail them, brought them together in a close working union, an effect which we see repeated elsewhere in the other great industrial rings of the time. Their henchmen too were filled with this intense esprit de corps. And one, General David Colton, who became a minor partner in the ’70s, entrusted with extremely confidential work, wrote in 1878 to Huntington :
I have learned one thing, we have got no true friends outside of us five. We cannot depend on a human soul outside of ourselves, and hence we must all be good-natured, stick together and keep our own counsels2.
There were great trials and great risks in such huge undertakings. The Associates were often overextended ; and Huntington must often besiege the “German” bankers in New York for cash. But year by year as millions of people of the Great West paid toll to the quartet who controlled the price of their lands, who raised tariffs upon their crops with deadly effect in good season, the crushing debts of the system were fully redeemed ; Hopkins and Crocker who died earlier left some twenty millions to their heirs ; Stanford bequeathed thirty millions to found Stanford University in memory of his son ; while Huntington’s fortune was variously estimated at between fifty and ninety millions. Huntington and Stanford owned enormous vineyards in California—100,000 acres—and in the East constructed palaces after their own fancy ; Huntington’s home being the vast and melancholy pile which long stood at Fifth Avenue and Fifty-seventh Street, New York, as a Gothic monument to the new peerage of America. So extensive were Huntington’s interests that at his death in 1900 only the Standard Oil family, acting through the ambitious Harriman, possessed the resources to buy them over from his widow.
1 Several years later when the Southern Pacific was first offered to Jay Gould, at its reputed cost, he declared the price high at half the capitalization they had fixed per mile of track.
2 The terms of General David Colton’s participations in the Pacific Associates’ enterprises were hard. He signed, as a bond, a demand note for $1,000,000 and received securities having a very restricted market at the time. He could also be put out entirely at the order of his partners, after two years’ notice, and of course made bankrupt. Finally in managing the Western Development Company for them, Colton found his chance to get relief from his obligations by a little financiering. He suddenly declared a “melon” or dividend distribution of $13,500,000 surplus profits in railroad stocks and bonds, which would give him a large share. Huntington and Crocker were furious when they learned of these proceedings and threatened to ruin Colton, who then repudiated his actions.
At his death, soon afterward, they discovered manipulations (of this “true friend”) scarcely distinguishable from embezzlement, and a long and bitterly fought suit against his heirs in connection with the promissory note of $1,000,000 followed.
Providentially Mrs. Colton had kept the letters of Huntington—which were supposed to be destroyed as received—and these were revealed at the trial, and were also used in the evidence taken by the Pacific Railway Commission of 1887.