Chapter 9

FURTHER ASPECTS OF THE VANDERBILT FORTUNE

The juggling of railroads and the virtual seizure of coal mines were by no means the only accomplishments of the Vanderbilt family in the years under consideration. Colorless as was the third generation, undistinguished by any marked characteristic, extremely commonplace in its conventions, it yet proved itself a worthy successor of Commodore Vanderbilt. The lessons he had taught of how to appropriate wealth were duly followed by his descendants, and all of the ancestral methods were closely adhered to by the third generation. Whatever might be its pretensions to a certain integrity and to a profound respectability, there was really no difference between its methods and those of the Commodore. Times had changed; that was all. What had once been regarded as outright theft and piracy were now cloaked under high-sounding phrases as "corporate extension" and "high finance" and other catchwords calculated to lull public suspicion and resentment. A refinement of phraseology had set in; and it served its purpose.

Concomitantly, while executing the transactions already described, the Vanderbilts of the third generation put through many others, both large and small, which were converted into further heaps of wealth. An enumeration of all of these diverse frauds would necessitate a tiresome presentation. A few examples will suffice.

The small frauds were but lesser in relation to the larger. At this period of the economic development of the country, when immense thefts were being consummated, a fraud had to rise to the dignity of at least fifty million dollars to be regarded a large one. The law, it is true, proscribed any theft involving more than $25 as grand larceny, but it was law applying to the poor only, and operative on them exclusively. The inordinately rich were beyond all law, seeing that they could either manufacture it, or its interpretation, at will. Among the conspicuous, audacious capitalists the fraud of a few paltry millions shrank to the modesty of a small, cursory, off-hand operation. Yet, in the aggregate, these petty frauds constituted great results, and for that reason were valued accordingly.

AN $8,000,000 AREA CONFISCATED.

Such a slight fraud was, for instance, the Vanderbilts' confiscation of an entire section of New York City. In 1887 they decided that they had urgent and particular need for railroad yard purposes of a sweep of streets from Sixtieth street to Seventy-second street along the Hudson River Railroad division. What if this property had been bought, laid out and graded by the city at considerable expense? The Vanderbilts resolved to have it and get it for nothing. Under special forms of law dictated by them they thereupon took it. The method was absurdly easy.

Ever compliant to their interests, and composed as usual of men retained by them or responsive to their influences, the Legislature of 1887 passed an act compelling the city authorities to close up the required area of streets. Then the city officials, fully as accommodating, turned the property over to the exclusive, and practically perpetual, use of the New York Central and Hudson River Railroad. With the profusest expressions of regard for the public interests, the railroad officials did not in the slightest demur at signing an agreement with the municipal authorities. In this paper they pledged themselves to cooperate with the city in conferring upon the Board of Street Openings the right to reopen any of the streets at any time. This agreement was but a decoy for immediate popular effect. No such reopening ordinance was ever passed; the streets remained closed to the public which, theoretically at least, was left with the title. In fact, the memorandum of the agreement strangely disappeared from the Corporation Counsel's office, and did not turn up until twenty years later, when it was accidentally and most mysteriously discovered in the Lenox Library. Whence came it to this curious repository? The query remains unanswered.

For seventeen and a half acres of this confiscated land, comprising about three hundred and fifty city lots, now valued at a round $8,000,000, the New York Central and Hudson River Railroad has not paid a cent in rental or taxes since the act of 1887 was passed. On the island of Manhattan alone 70,000 poor families are every year evicted for inability to pay rent--a continuous and horribly tragic event well worth comparing with the preposterous facility with which the great possessing classes everywhere either buy or defy law, and confiscate when it suits them. So cunningly drafted was the act of 1887 that while New York City was obliged to give the exclusive use of this large stretch of property to the company, yet the title to the property--the empty name--remained vested in the city. This being so, a corporation counsel complaisantly decided that the railroad company could not be taxed so long as the city owned the title. [Footnote: Minutes of the New York City Board of Estimate and Apportionment--Financial and Franchise Matters, 1907:1071-1085. "It will thus be seen," reported Harry P. Nichols, Engineer-in-Charge of the Franchise Bureau, "that the railroad is at present, and has been for twenty years, occupying more than three hundred city lots, or something less than twenty acres, without compensation to the city."]

Another of what may be called--for purposes of distinction--the numerous small frauds at this time, was that foisting upon New York City the cost of replacing the New York Central's masonry viaduct approaches with a fine steel elevated system. This fraud cost the public treasury about $1,200,000, quite a sizable sum, it will be admitted, but one nevertheless of pitiful proportions in comparison with previous and later transactions of the Vanderbilt family.

We have seen how, in 1872, Commodore Vanderbilt put through the Legislature an act forcing New York City to pay $4,000,000 for improving the railroad's roadway on Park avenue. His grandsons now repeated his method. In 1892 the United States Government was engaged in dredging a ship canal through the Harlem River. The Secretary of War, having jurisdiction of all navigable waters, issued a mandate to the New York Central to raise its bridge to a given height, so as to permit the passing under of large vessels.

To comply with this order it was necessary to raise the track structure both north and south of the Harlem River. Had an ordinary citizen, upon receiving an order from the authorities to make improvements or alterations in his property, attempted to compel the city to pay all or any part of the cost, he would have been laughed at or summarily dealt with. The Vanderbilts were not ordinary property holders. Having the power to order legislatures to do their bidding, they now proceeded to imitate their grandfather, and compel the city to pay the greater portion of the cost of supplying them with a splendid steel elevated structure.

PUBLIC TAXATION TO SUPPLY PRIVATE CAPITAL.

The Legislature of 1892 was thoroughly responsive. This was a Legislature which was not merely corrupt, but brazenly and frankly so, as was proved by the scandalous openness with which various spoliative measures were rushed through.

An act was passed compelling New York City to pay one-half of the cost of the projected elevated approaches up to the sum of $1,600,000. New York City was thus forced to pay $800,000 for constructing that portion south of the Harlem River. If, so the law read on, the cost exceeded the estimate of $800,000, then the New York Central was to pay the difference. Additional provision was made for the compelling of New York City to pay for the building of the section north of the Harlem River. But who did the work of contracting and building, and who determined what the cost was? The railroad company itself. It charged what it pleased for material and work, and had complete control of the disbursing of the appropriations. The city's supervising commissions had, perforce, to accept its arbitrary demands, and lacked all power to question, or even scrutinize, its reports of expenditures. Apart from the New York Central's officials, no one to-day knows what the actual cost has been, except as stated by the company.

South of the Harlem River this report cost has been $800,000, north of the Harlem River $400,000. At practically no expense to themselves, the Vanderbilts obtained a massive four-track elevated structure, running for miles over the city streets. The people of the city of New York were forced to bear a compulsory taxation of $1,200,000 without getting the slightest equivalent for it. The Vanderbilts own these elevated approaches absolutely; not a cent's worth of claim or title have the people in them. Together with the $4,000,000 of public money extorted by Commodore Vanderbilt in 1872, this sum of $1,200,000 makes a total amount of $5,200,000 plucked from the public treasury under form of law to make improvements in which the people who have footed the bill have not a moiety of ownership. [Footnote: The facts as to the expenses incurred under the act of 1892 were stated to the author by Ernest Harvier, a member of the Change of Grade Commission representing New York City in supervising the work.] The Vanderbilts have capitalized these terminal approaches as though they had been built with private money. [Footnote: The New York Central has long compelled the New York, New Haven and Hartford Railroad to pay seven cents toll for every passenger transported south of Woodlawn, and also one-third of the maintenance cost, including interest, of the terminal. In reporting an effort of the New York, New Haven and Hartford Railroad to have these terms modified, the New York "Times" stated in its financial columns, issue of December 25, 1908: "As matters now stand the New Haven, without its consent, is forced to bear one-third of the charge arising from _the increased capital invested in the Central's terminal"_]

At this point a significant note may be made in passing. While these and other huge frauds were going on, Cornelius Vanderbilt was conspicuously presenting himself as a most ardent "reformer" in politics. He was, for instance, a distinguished member of the Committee of Seventy, organized in 1894, to combat and overthrow Tammany corruption! Such, as we have repeatedly observed, is the quality of the men who compose the bourgeois reform movements. For the most part great rogues, they win applause and respectability by virtuously denouncing petty, vulgar political corruption which they themselves often instigate, and thus they divert attention from their own extensive rascality.

A MULTITUDE OF ACQUISITIONS

Why tempt exhaustion by lingering upon a multitude of other frauds which went to increase the wealth and possessions of the Vanderbilt family? One after another--often several simultaneously--they were put through, sometimes surreptitiously, again with overt effrontery. Legislative measures in New York and many other States were drafted with such skill that sly provisions allowing the greatest frauds were concealed in the enactments; and the first knowledge that the plundered public frequently had of them was after they had already been accomplished. These frauds comprised corrupt laws that gave, in circumstances of notorious scandal, tracts of land in the Adirondack Mountains to railroad companies now included in the Vanderbilt system. They embraced laws, and still more laws, exempting this or that stock or property from taxation, and laws making presents of valuable franchises and allowing further consolidations. Laws were enacted in New York State the effects of which were to destroy the Erie Canal (which has cost the people of New York State $100,000,000) as a competitor of the New York Central Railroad. All of these and many other measures will be skimmed over by a simple reference, and attention focussed on a particularly large and notable transaction by which William K. Vanderbilt in 1898 added about $59,000,000 to his fortune at one superb swoop.

The Vanderbilt ownership of various railroad systems has been of an intricate, roundabout nature. A group of railroads, the majority of the stock of which was actually owned by the Vanderbilt family, were nominally put under the ownership of different, and apparently distinct, railroad companies. This devious arrangement was intended to conceal the real ownership, and to have a plausible claim in counteracting the charge that many railroads were concentrated in one ownership, and were combined in monopoly in restraint of trade. The plan ran thus: The Vanderbilts owned the New York Central and Hudson River Railroad. In turn this railroad, as a corporation, owned the greater part of the $50,000,000 stock of the Lake Shore Railroad. The Lake Shore, in turn, owned the control, or a chief share of the control, of other railroads, and thus on.

In 1897, William K. Vanderbilt began clandestinely campaigning to combine the New York Central and the Lake Shore under one definite, centralized management. This plan was one in strict harmony with the trend of the times, and it had the undoubted advantage of promising to save large sums in managing expenses. But this anticipated retrenchment was not the main incentive. A dazzling opportunity was presented of checking in an immense amount in loot. The grandson again followed his eminent grandfather's teachings; his plan was nothing more than a repetition of what the old Commodore had done in his consolidations.

During the summer and fall of 1897 the market gymnastics of Lake Shore stock were cleverly manipulated. By the declaration of a seven per cent. dividend the market price of the stock was run up from 115 to about 200. The object of this manipulation was to have a justification for issuing $100,000,000 in three and one-half per cent. New York Central bonds to buy $50,000,000 of Lake Shore seven per cent. capital stock. By his personal manipulation, William K. Vanderbilt at the same time ballooned the price of New York Central stock.

The purpose was kept a secret until shortly before the plan was consummated on February 4, 1898. On that day William K. Vanderbilt and his subservient directors of the New York Central gathered their corpulent and corporate persons about one table and voted to buy the Lake Shore stock. With due formalities they then adjourned, and moving over to another table, declared themselves in meeting as directors of the Lake Shore Railroad, and solemnly voted to accept the offer.

Presently, however, an awkward and slightly annoying defect was discovered. It turned out that the Stock Corporation law of New York State specifically prohibited the bonded indebtedness of any corporation being more than the value of the capital stock. This discovery was not disconcerting; the obstacle could be easily overcome with some well-distributed generosity. A bill was quickly drawn up to remedy the situation, and hurried to the Legislature then in session at Albany. The Assembly balked and ostentatiously refused to pass it. But after the lapse of a short time the Assembly saw a great new light, and rushed it through on March 3, on which same day it passed the Senate. It was at this precise time that a certain noted lobbyist at Albany somehow showed up, it was alleged, with a fund of $500,000, and members of the Assembly and Senate suddenly revealed evidences of being unusually flush with money. [Footnote: The author is so informed by an official who represented New York City's legal interests at this session and successive Legislative sessions, and who was thoroughly conversant with every move. See