Volume 2, prepared and edited by James A. Finch,

by direction of the Attorney-General (Washington: Government Printing Office, 1907)._

COMBINATIONS: Investigation by the Commissioner of Corporations.

On the 7th of March, 1904, the House of Representatives adopted a resolution requesting the Secretary of Commerce and Labor to "investigate the causes of the low prices of beef cattle in the United States since July 1st, 1903, and the unusually large margins between the prices of beef cattle and the selling prices of fresh beef, and whether the said conditions have resulted in whole or in part from any contract, combination, in the form of trust or otherwise, or conspiracy, in restraint of commerce among the several States and Territories or with foreign countries; also, whether said prices have been controlled in whole or in part by any corporation, joint stock company, or corporate combination engaged in commerce among the several States or with foreign nations; and, if so, to investigate the organization, capitalization, profits, conduct and management of the business of such corporations, companies, and corporate combinations, and to make early report of his findings according to law."

In compliance with this resolution, the Commissioner of Corporations, Mr. James R. Garfield, went to Chicago in April and began the requested investigation, which was prosecuted throughout most of the ensuing year. "The inquiries of the Bureau of Corporations were naturally concerned chiefly with the six great concerns which, by the injunction of 1902, were grouped together, and which were popularly considered as the Beef Trust. The ‘Big Six,’ in the approximate order of their magnitude as indicated by the number of animals slaughtered, are: Swift & Company, with seven large plants; Armour & Company, and the Armour Packing Company, which have the same stockholders, and which together operate five packing-houses; the National Packing Company, with eight comparatively large plants and two or three minor ones; Morris & Company, operating three plants; the Cudahy Packing Company, with three plants in the middle West and a minor one at Los Angeles; and the Schwarzschild & Sulzberger Company, operating three plants. Nearly all of the important packing-houses of these six companies are situated in the eight great live-stock markets,—Chicago, Kansas City, South Omaha, East St. Louis, South St. Joseph, Fort Worth, South St. Paul, and Sioux City."

As for the National Packing Company, it grew, apparently, out of an abortive scheme for the consolidation of the other five concerns which was rumored in 1902. "Shortly prior to the formation of this company the Armour interests had acquired control of the G. H. Hammond Company and the Omaha Packing Company, the Swifts had secured the Anglo-American Provision Company and the Fowler Packing Association, and the Morris family had become dominant in the United Dressed Beef Company of New York. The National Packing Company, organized in 1903, took over the control of the various corporations thus previously acquired by the three packing interests named, and has since absorbed two or three other smaller concerns. The directorate of the National Company consists almost wholly of representatives of the Armour, Swift, and Morris companies. Aside from this community of interest, the bureau finds that there is no important inter-ownership of securities among the six leading packing companies."

"The ‘Big Six’ are by no means the only slaughterers of cattle in the United States. They, with a few minor affiliated concerns, killed 5,521,697 cattle in 1903, while, from the best available data, the Bureau of Corporations computes the total slaughter of the country at about 12,500,000. But the proportion of 45 per cent. thus indicated by no means measures the full economic significance of the six great packers. Their importance lies in the fact that they are the only concerns which do an extensive business in shipping dressed beef. … The ‘Big-Six’ kill about 98 percent, of the cattle slaughtered at the eight leading Western markets above named."

_Edward Dana Durand, The Beef Industry and the Government Investigation (American Review of Reviews, April, 1905)._

Early in March, 1905, just before the adjournment of Congress, his report of it, in part, was transmitted by the President to Congress. The following summary of important facts set forth in the extended report was published in _The Outlook_ of the following week:

"The report as sent to Congress deals with the prices of cattle and dressed beef, the margins between such prices, and the organization, conduct, and profits of the corporations engaged in the beef-packing business. In some respects the conclusions presented are distinctly favorable to the packers; in others, quite as unfavorable. It appears that the profits of the six great companies whose operations were covered by the investigation were very much smaller during the years 1902 and 1903 than the public had been led to suppose,—that, in fact, for a part of that period the business was conducted at an actual loss. {121} The percentage of profit on the gross Volume of business during the years 1902-1904 was comparatively low. That realized by Swift & Company is placed at two per cent. This, however, we repeat, is the percentage on total sales, which is a very different thing from profit on the investment. It is a well-known fact that the actual capitalization of the packing companies is very much less than the annual Volume of business. From statements made by the six companies to the Bureau of Corporations it appears that their gross business is not less than $700,000,000 per year, while their nominal capitalization is only $88,000,000, exclusive of $5,000,000 bonds of Swift & Company. On the other hand, it is practically impossible, as the report shows, to determine accurately just what proportion of the total investment represents plants and properties concerned with the beef industry exclusively. Still, it is obvious that Swift & Company’s net profit of two per cent. on their sales would amount to very much more than two per cent, on their investment. The report makes an approximate estimate of twelve per cent.

"On one other count the report is favorable to the companies. It declares that they are apparently not overcapitalized. This conclusion, it is true, is robbed of some of its exculpatory force when the private-car system is taken into consideration. It is shown that the companies’ profits on refrigerator cars, derived from mileage paid by the railroads, has ranged from 14 to 22 per cent. The report gives clear and definite information as to the trust’s field of operations. It shows that the six companies slaughtered in 1903 only about 45 per cent. of all the cattle killed in that year, but that these companies slaughter nearly 98 per cent. of all the cattle killed in the leading Western packing centers, and that they control a large percentage of the trade in beef in many large cities—75 per cent. in New York, 85 per cent. in Boston, 95 per cent. in Providence, and in a number of other important cities from 50 to 90 per cent. In all these centers of population the consumer is now paying more for meats than ever before, while the cattle-grower on the Western plains is receiving less for his beeves. These two facts are doubtless capable of explanation, but the published results of the investigation ordered by Congress throw little light on the matter."

COMBINATIONS: Case of the United States v. Armour & Company et al.

Soon after the publication of the report of the Bureau of Corporations a special Federal Grand Jury at Chicago began the investigation of charges brought by the Attorney-General of the United States against five of the corporations engaged in the meat-packing business and seventeen of their officials. An indictment was returned by the Grand Jury on the 1st of July, 1905, charging, in a number of counts, persistent violation of the injunction laid on these corporations and their officials by Judge Grosscup with affirmation by the Supreme Court, and continued combination in restraint of trade,—by requiring their purchasing agents to refrain from bidding in good faith against one another; by agreements that fixed the prices of beef; by restricting sales to maintain prices, etc. On the trial of the indictment, which was begun on the 29th of January and concluded on the 21st of March, 1906, the defendants claimed immunity, under that clause of the Fifth Amendment to the Constitution of the United States which reads:

"Nor shall any person be compelled in any criminal case to be a witness against himself."

Their claim for immunity under this constitutional prescription was founded on the fact that "upon the lawful requirement of the Commissioner of Corporations" they "had furnished evidence, documentary and otherwise, of and concerning the matters charged in the indictment"; and that a section of the Act creating the Department of Commerce and Labor provides that persons testifying or producing evidence before the Commissioner shall be entitled to the immunities conferred by the Act in relation to testimony before the Interstate Commerce Commission of February 11, 1893. Judge Humphrey, of the United States District Court, before whom the case was tried, sustained the plea in his charge to the jury, so far as concerned the individual defendants, saying: "Under the law of this case, the immunity pleas filed by the defendants will be sustained as to the individual defendants, the natural persons, and denied as to the corporations, the artificial persons, and your verdict will be in favor of the defendants as to the individuals, and in favor of the Government as to the corporations."

COMBINATIONS: Fines for accepting rebates.

The same Federal Grand Jury at Chicago which returned the indictments dealt within the case mentioned above brought another indictment against four men in the employ of one of the meat-packing companies, who were accused of unlawfully combining and agreeing to solicit rebates for their corporation from the Michigan Central, the Chicago, Rock Island and Pacific, the Grand Trunk Western, the Lehigh Valley, the Boston and Maine, and the Mobile and Ohio railroads. It was charged that the defendants conspired with one another in presenting to the railroad companies pretended claims for damages which were in fact claims for rebates. They were brought for trial before Judge Humphrey in September, 1905, and pleaded guilty. The Judge then pronounced sentence on them as follows:

"Punishment for this offense as fixed by Congress has a wide range, giving the Court unusual latitude, ranging from a nominal fine without imprisonment to a heavy fine and two years’ imprisonment, all in the discretion of the Court. I am disposed to consider this case with reasonable moderation. The sentence of the Court in the case of the defendant Weil will be a fine of $10,000 and costs, and commitment to the county jail until the fine is paid, and in the cases of Todd, Skipworth, and Cusey a fine of $5,000 and costs, with the same provision in regard to payment."

COMBINATIONS: A. D. 1904-1909. The Standard Oil Company. Federal Government investigation of its methods of business. Criminal prosecutions for violation of the law against rebates. The $29,000,000 fine and its annulment. Acquittal of the Company.

After a dozen years or more of slight oil production in Kansas, that state became quite suddenly, in 1904, one of the important sources of petroleum supply. The Standard Oil Company had taken care to be prepared for whatever development might occur, and had organized its operations in this western field under the name of the Prairie Oil and Gas Company, of Kansas. {122} Its refineries were ready to furnish a market to the Kansas producers of crude oil, and they had no other. Independent enterprises in oil refining were made quite impossible, and the Prairie Oil and Gas Company was complete master of the situation. The Kansas oil producers were soon writhing under its dictation of prices and rules of dealing, as the Pennsylvanians had been years before, and the Kansas Legislature came promptly to their rescue. In the winter of 1904-1905 it passed five vigorous acts; authorizing the establishment of a State oil refinery; making pipe lines common carriers within the State; placing them under the jurisdiction of the State board of railroad commissioners; fixing maximum rates for the transportation of oil by freight or pipe line; and, finally, prohibiting discrimination between localities in the sale of any commodities. Furthermore, the anti-trust laws of the State were brought into action against the Standard Oil Company and the railroads accused of giving it special rates and privileges.

At the same time, the Kansas situation was brought to the attention of Congress and the Federal Executive. On motion of a Kansas representative, the lower House of Congress, in February, adopted a resolution calling on the President for an investigation of the methods of business pursued by the Standard Oil Company. The desired investigation was conducted in the following year by Commissioner Garfield, the head of the Bureau of Corporations, and his report was communicated to Congress on the 5th of May, 1906, with an accompanying special message, by the President. Nothing of the detail of facts in the report can be given here; but the conclusions drawn from them by the Commissioner were summed up by him, as follows:

"Upon the request of its attorney, all the essential facts discovered by this Bureau were presented to the company at the close of the investigation, and an exhaustive statement relating thereto was made by its chief traffic officer. There was no denial of the facts found, but explanations of particular situations were offered, and it was urged that the facts did not show any violation by the Standard of the letter or spirit of the interstate-commerce law. A most careful review of the facts and the explanations leads to the following conclusions:

"The Standard Oil Company has habitually received from the railroads, and is now receiving, secret rates and other unjust and illegal discriminations.

"During 1904 the Standard saved about three-quarters of a million dollars through the secret rates discovered by the Bureau of Corporations, and of course there may be other secret rates which the Bureau has not discovered. This amount represents the difference between the open rates and the rates actually paid. Many of these discriminations were clearly in violation of the interstate-commerce law, and others, whether technically illegal or not, had the same effect upon competitors. On some State business secret rates were applied by means of rebates.

"These discriminations have been so long continued, so secret, so ingeniously applied to new conditions of trade, and so large in amount as to make it certain that they were due to concerted action by the Standard and the railroads.

"The Standard Oil Company is receiving unjust discriminations in open rates.

"The published rates from the leading Standard shipping points are relatively much lower than rates from the shipping points of its competitors. The advantage to the Standard over its competitors from such open discriminations is enormous, probably as important as that obtained through the secret rates.

"If an unfair discrimination be obtained by one shipper through a device which in itself is seemingly not prohibited by law, that fact shows that the law is defective and should be strengthened; it does not show that the discrimination is proper or just.

"The following are a few of the most important discriminations and the methods by which they were obtained:

"(1) For about ten years the New England territory has been in control of the Standard Oil Company by reason of the refusal of the New York, New Haven and Hartford road and of the Boston and Maine road, on all but a few divisions, to pro-rate—i. e., to join in through rates—on oil shipped from west of the Hudson River, and by means of the adjustment of published rates. …

"(2) The Standard Oil Company has been able to absolutely control for many years the sale of oil in the northeastern part of New York and in a portion of Vermont by means of secret rates from its refineries at Olean and Rochester. …

"The saving to the Standard during 1904 by the secret rate from Olean to Rochester alone was $115,000. This and other less important rates from Olean were unknown to the independent refiners, and were not published on the ground that they were wholly State rates; yet in fact they were used for oil consigned to points beyond the State boundary of New York. Furthermore, all shipments from Olean on these secret rates were blind-billed—_i. e._, the rates were not shown on the waybills.

"(3) The Standard Oil Company has maintained absolute control of almost the whole section of the country south of the Ohio River and east of the Mississippi by means of secret rates and open discriminations in rates from Whiting, Indiana. …

"(4) The Standard Oil Company has for at least ten years shipped oil from Whiting to East St. Louis, Illinois, at a rate of 6 or 6¼ cents on three of the five railroads running between those places, while the only duly published rate on all roads has been 18 cents during all that period! This discrimination saved the Standard about $240,000 in 1904. …

"Whiting is located in Indiana, about two miles from the Illinois line. East St. Louis is in Illinois, just across the river from St. Louis. The secret low rates were given by the Chicago, Burlington and Quincy, Chicago and Alton, and Chicago and Eastern Illinois railroads. They were not published, on the ground that they were State rates. …

"(5) In the Kansas-Territory field there were some unfair open rates. …

"(6) In California direct rebates, as well as discriminations by the use of secret rates, have been given on oil. …

"(7) Open published rates from Whiting into a large part of the United States have given the Standard Oil Company an unfair advantage of from 1 to 20 cents per hundred pounds.

{123}

"This discrimination seriously limits independent refiners in some markets, and shuts them out completely from other markets. It is accomplished by the use of commodity rates—that is, rates which apply only to petroleum and its products—and by refusal to pro-rate."

_Report of the Commissioner of Corporations on the Transportation of Petroleum, May 2, 1906, Letter of Submittal, pages xxi-xxv. (59th Congress, 1st Session House Document. number 812)._

Consequent on the information secured by this investigation, criminal proceedings against the Standard Oil Company in its various State organizations were instituted in 1906-1907. The number and character of the indictments found in these cases are set forth in tabular form, in an article on "The Oil Trust and the Government," by Francis Walker, published in the _Political Science Quarterly_, March, 1908. The following statement of them is summarized from that table:

In the Northern District of Illinois, August 27, 1906, against the Standard Oil Co. of Indiana, 1903 and 134 indictments on shipments over the Chicago and Alton Railway, from Whiting, Indiana, to East St. Louis, Illinois, and from Chappell, Illinois, to St. Louis, Missouri.

In same District, same date, against same Company, 2124 and 220 indictments on shipments over the Chicago, Burlington and Quincy Railway, from Whiting to East St. Louis and St. Louis.

In same District, same date, against same Company, 1318 and 597 indictments on shipments over the Chicago and Eastern Illinois and the Evansville and Terre Haute railways, from Whiting to Evansville.

In same District, same date, against same Company, 103 indictments, on shipments over the Chicago and Eastern Illinois and the Evansville and Terre Haute railways from Whiting, via Grand Junction, Tennessee, to various points in the South.

In the Eastern Division of the Western District of Tennessee, October 16, 1906, against the Standard Oil Company of Indiana, 1524 indictments, on shipments over the Illinois Central and Southern railways, from Evansville, via Grand Junction, to various points.

In the Eastern District of Missouri, November 18, 1906, against the Waters-Pierce Oil Company, 76 indictments, on shipments over the St. Louis, Iron Mountain and Southern Railway, to various points.

In the Western District of Louisiana, January 28, 1907, against the Waters-Pierce Oil Company, 32 indictments, on shipments over the St. Louis, Iron Mountain. and S. Railway, to various points.

In the Western District of New York, August 10, 1907, against the Vacuum Oil Company, 23 indictments, on shipments from Olean to Vermont.

In the Western District of New York, August 24, 1906, against the Standard Oil Company of New York, 23 and 123 indictments, on shipments from Olean to Vermont.

In same District, August 9, 1907, against same Company, 188 and 40 indictments, on shipments from Olean, New York, to Burlington, Vermont, over New York Central and Rutland and Vermont Central railways.

In same District, same date, against the Vacuum Oil Company, 188 and 40 indictments on shipments from Olean to Burlington and to Rutland and Burlington.

In same District, September 6, 1907, against the Standard Oil Company of New York, 54 indictments, on shipments from Olean and Rochester to points in Vermont.

The most notable of these criminal prosecutions has been the one described first in the list above. The opening chapter of its history is sketched as follows by Mr. Walker, in the article already referred to:

"The only important case which, up to December, 1907, had come to trial, was the indictment against the Standard Oil Company of Indiana for accepting a secret rate on shipments over the Chicago and Alton Railway, from Whiting, Indiana, to East St. Louis, Illinois, and from Chappell, Illinois, to St. Louis, Missouri. The published rate on this traffic was eighteen cents per hundred pounds (as far as East St. Louis, a bridge toll of one and a half cents being added on shipments to St. Louis); while the rate paid by the Standard Oil Company of Indiana, during the period of about three years covered by the indictment and for many years before, was only six cents per hundred pounds. On this rate, the Standard had transported, as charged in the indictment, 1903 carloads of oil, each carload being made the subject of a distinct count and separate proof. The trial of this case began in Chicago, on March 4, 1907.

"The defence not only exhausted every device of technical objection and obstruction but also attacked the constitutionality of the ‘Elkins’ law forbidding rate discrimination, alleging the right of the railroads and shippers to make private contract rates, an impudent assertion which the court justly characterized as an ‘abhorrent heresy.’ The question of guilt in the matter of technical proof depended to a large extent on the requirements of the law that carriers must file rates, and the argument of the prosecution was that shippers must be charged with the knowledge as to whether such rates were lawfully filed or not. The defendant pretended ignorance of the fact that the six-cent rate had not been filed by the Alton and alleged that it was an unreasonable requirement to charge it with such knowledge. On this point the court said in rendering judgment:

"‘The honest man who tenders a commodity for transportation by a railway company will not be fraudulently misled by that company into allowing it to haul his property for less than the law authorizes it to collect. For the carrier thus to deceive the shipper would be to deliberately incriminate itself, to its own pecuniary detriment, which it may safely be trusted not to do. The only man liable to get into trouble is he who, being in control of the routing of large Volumes of traffic, conceives a scheme for the evasion of the law, and connives with railway officials in its execution.’

"The jury returned a verdict of guilty on 1462 counts, on April 14, 1907: a considerable number of counts, namely 441, were thrown out on technical grounds. In the matter of penalty, the Standard’s counsel argued (1) that there were only three offences shown, namely, one for each year in which the rate was in force; (2) that there were only 36 offences shown, namely, one for each monthly settlement of freight charges; and (3) that each train load constituted a separate offence. The court held, however, that the unlawful rate was made on a carload basis, and that each carload unlawfully transported constituted a distinct offence. {124} In considering the amount of the fine to be levied, the court demanded information from the officials of the Standard Oil Company regarding the net earnings and dividends of the chief holding company of the trust—the Standard Oil Company of New Jersey. Their attendance and testimony were obtained only by writ of subpoena; and it was admitted that the net profits during the years 1903 to 1905 (when these rebates existed) amounted to $81,336,994, $61,570,110, and $57,459,356 respectively.

"In view of the fact that the counsel of the defendant openly maintained the right of the railways and shippers to make private contracts for rates, the court declared that it was ‘unable to indulge the presumption that in this case the defendant was convicted of its virgin offence.’ The defendant also claimed that, as there were no other shippers of oil over the Chicago and Alton Railway, no one was injured by the secret rate. On this matter the court said:

"‘It is novel, indeed, for a convicted defendant to urge the complete triumph of a dishonest course as a reason why such a course should go unpunished.

"‘Of course, there was no other shipper of oil, nor could there be, so long as, by secret arrangement, the property of the Standard Oil Company was hauled by railway common carriers for one-third of what anybody else would have to pay.’

"Moved by these considerations, the court adjudged, on August 3, 1907, that the defendant should pay the maximum penalty and fined the Standard Oil Company $20,000 for each offence, that is, for each of the 1462 counts in the indictment upon which conviction was obtained. The total fine, therefore, amounted to $29,240,000."

_Francis Walker, The Oil Trust and the Government (Political Science Quarterly, March, 1908)._

On a writ of error the case went now to the United States Circuit Court of Appeals for the Seventh Circuit, where it was argued at the April session, 1908, and the opinion, by Judge Peter S. Grosscup, Circuit Judge, delivered on the 22d of the following July. In this opinion the District Court was held to have erred in deciding that each single carload of oil was to be dealt with as a separate offence, and that it reasoned erroneously in determining the fine imposed. On this latter point Judge Grosscup said:

"Did the court, in the fine imposed, abuse its discretion? The defendant indicted, tried, and convicted, was the Standard Oil Company, a corporation in Indiana. The capital stock of this corporation is one million dollars. There is nothing in the record, in the way of evidence, either before conviction, or after conviction and before sentence, that shows that the assets of this corporation were in excess of one million dollars. There is nothing in the record, either before conviction, or after conviction and before sentence, that shows that the defendant, before the court, had ever before been guilty of an offence of this character. It may, therefore, be safely assumed, that but for the relation of the defendant before the court to another corporation, not before the court—a relation to be presently stated—the court would have measured out punishment on the basis of the facts just stated.

"That under such circumstances the punishment would have been the maximum punishment, does not seem possible; for the maximum sentence, put into execution against the defendant before the court, would wipe out, many times, and for its first offence, all the property of the defendant. …

"Briefly stated, the reason of the trial court for imposing this sentence was because, after conviction and before sentence, it was brought out, on an examination of some of the officers and stockholders of the Standard Oil Company of New Jersey, that the capital stock of the Standard Oil Company of Indiana, the defendants before the court, was principally owned by the New Jersey corporation, a corporation not before the court—the trial court adding (upon no evidence however to be found in the record, and upon no information specially referred to) that in concessions of the character for which the defendant before the court had been indicted, tried, and convicted, the New Jersey corporation was not a ‘virgin’ offender.

"Is a sentence such as this, based on reasoning such as that, sound? Passing over the fact that no word of evidence or other information supporting the trial court’s comment is to be found in the record, would the comment, if duly proven, justify a sentence such as this—one that otherwise would not have been imposed? Can a court, without abuse of judicial discretion, wipe out all the property of the defendant before the court, and all the assets to which its creditors look, in an effort to reach and punish a party that is not before the court—a party that has not been convicted, has not been tried, has not been indicted even? Can an American judge, without abuse of judicial discretion, condemn any one who has not had his day in court?

" That, to our mind, is strange doctrine in Anglo-Saxon jurisprudence. …

"The judgment of the District Court is reversed and the case remanded with instructions to grant a new trial, and proceed further in accordance with this opinion."

The Government failed in attempts to secure a rehearing before the Appellate Court, as well as in an application for the reviewing of the case by the Supreme Court.

On the new trial to which the case was remanded Judge Landis, whose judgment had been set aside, declined to sit, and Judge A. B. Anderson, of Indianapolis, was called to Chicago to occupy his bench. The trial was opened on the 23d of February, 1909. On the 2d of March Judge Anderson sustained the motion of the defence that the government must proceed on the theory that there were thirty-six alleged offences—that is, that each settlement on which an alleged rebate was paid instead of each carload, constituted a separate offence. This made it impossible to claim a penalty beyond $720,000, being at the rate of $20,000 for each offence. But even that was put out of the question by the ultimate decision of the Judge, that the law, as laid down by the United States Court of Appeals, required him to direct the jury to find the Standard Oil Company not guilty on the charge of accepting rebates from the Chicago and Alton Railroad. This instruction he gave on the 10th of March, thus bringing the case to an end.

{125}

The outcome in this case was said to mean that all but two of the pending indictments against the Standard Oil Company of Indiana, as recapitulated above, are void and would be abandoned by the Government. The two cases not affected are cases involving the shipment of 1915 carloads of oil from Whiting, Indiana, to Evansville, Indiana, via Dolton Junction, over the Chicago and Eastern Illinois Railroad.

On the 15th of March, five days after the acquittal of the Company in Illinois, a fine of $20,000 was imposed upon it by the United States District Court of the Western District of New York, on one of the indictments founded on shipments from Rochester and Olean to points in Vermont. Previously, the New York Central Railroad had paid a heavy fine for granting rebates on those shipments.

Numerous State prosecutions, under State laws in Missouri, Texas, Minnesota, Ohio, and elsewhere, had been assailing the monopolistic corporation simultaneously with the proceedings of the General Government against it, and some of them with greater seriousness of effect than the Federal prosecutors had accomplished. The more important of these were in Texas, against the subsidiary Waters-Pierce Oil Company of Missouri, and in Missouri, against that Company in association with the Standard of Indiana, and with another of the same Trust family. The Texas suit, after making its slow way through the State courts and to the United States Supreme Court, came to its conclusion early in 1909, with the result of a fine of $1,623,500, and the exclusion of the Company from business in the State. The suit in Missouri, as decided at about the same time by the Supreme Court of the State, resulted in an order for the dissolution of the Waters-Pierce Company and for the perpetual exclusion of the other companies, chartered elsewhere, from operations within the State. The outcome of this vindication of the law of the State is understood to have been an arrangement under which the business of the Waters-Pierce Company is taken over by a new company, the stock of which is held by trustees approved by the Supreme Court of the State and acting as officers of the Court.

COMBINATIONS: A. D. 1905-1906. The Tobacco Trust Case of Hale v. Henkel. Denial by the Supreme Court of the claim of corporations to be exempt from the production of books and papers before a Grand Jury.

A proceeding begun by the Government of the United States, in the spring of 1905, to ascertain the lawfulness or unlawfulness of the methods of business pursued by the so-called Tobacco Trust, was embarrassed by the refusal of a witness to give evidence for which he was summoned before the grand jury of the Circuit Court of the United States for the Southern District of New York. The case pending was between the United States and the American Tobacco Company and MacAndrews & Forbes Company. The witness, Hale, was secretary and treasurer of the MacAndrews & Forbes Company. He refused to answer any questions that were put to him concerning the business of that company, or to produce any of the books, accounts, contracts, correspondence, etc., that were demanded, being advised by counsel that he was under no legal obligation to do so, and that the evidence given or produced by him might tend to incriminate himself. He was held to be in contempt of Court and was committed to the custody of the United States Marshal. Being then, on a writ of _habeas corpus_, brought before another judge of the same Court, after a hearing, the writ was discharged and he was remanded to custody (June 18, 1905). An appeal to the Supreme Court followed, which was argued in the early days of January, 1906, and decided on the 12th of March following.

The decision of the Court, rendered by Justice Brown, was on two issues which it found to be presented in the case: The first involving "the immunity of the witness from oral examination; the second the legality of his action in refusing to produce the documents called for by the _subpœna duces tecum_." The witness justified his refusal to answer questions, "1st upon the ground that there was no specific ‘charge’ pending before the grand jury against any particular person; 2d that the answers would tend to criminate him." On the first point the Court found it "entirely clear that under the practice in this country, at least, the examination of witnesses need not be preceded by a presentment or indictment formally drawn up, but that the grand jury may proceed, either upon their own knowledge or upon the examination of witnesses, to inquire for themselves whether a crime cognizable by the Court has been committed." As to the plea of an apprehended self-incrimination, the Court held that the witness was protected by the act which provides that no person shall be prosecuted on account of anything concerning which he may testify or produce evidence. But it was further insisted that while the immunity statute may protect individual witnesses it would not protect the corporation of which the appellant was the agent and representative. "This is true," says the Court, "but the answer is that it was not designed to do so. The right of a person under the Fifth Amendment to refuse to incriminate himself is purely a personal privilege of the witness. It was never intended to permit him to plead the fact that some third person might be incriminated by his testimony, even though he were the agent of such person."

On the second issue in the case, the substance of the decision is in the following passages from it:

"Having already held that, by reason of the immunity act of 1903, the witness could not avail himself of the Fifth Amendment, it follows that he cannot set up that Amendment as against the production of the books and papers, since in respect to these he would also be protected by the immunity act. … We are of the opinion that there is a clear distinction in this particular between an individual and a corporation, and that the latter has no right to refuse to submit its books and papers for an examination at the suit of the State. … The individual may stand upon his constitutional rights as a citizen. He is entitled to carry on his private business in his own way. … Among his rights are a refusal to incriminate himself, and the immunity of himself and his property from arrest or seizure except under a warrant of the law. … Upon the other hand, the corporation is a creature of the State. It is presumed to be incorporated for the benefit of the public. … Its rights to act as a corporation are only preserved to it so long as it obeys the laws of its creation. There is a reserved right in the Legislature to investigate its contracts and to find out whether it has exceeded its powers. … The defense amounts to this: That an officer of a corporation, which is charged with a criminal violation of the statute, may plead the criminality of such corporation as a refusal to produce its books. {126} To state this proposition is to answer it. While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation, vested with special privileges and franchises, may refuse to show its hand when charged with an abuse of such privileges."

Taking note of the fact that the franchises of the corporation in this case were derived from one of the States, the Court proceeds to say:

"Such franchises, so far as they involve questions of inter-State commerce, must also be exercised in subordination to the power of Congress to regulate such commerce, and in respect to this the General Government may also assert a sovereign authority to ascertain whether such franchises have been exercised in a lawful manner, with due regard to its own laws. … The powers of the General Government in this particular, in vindication of its own laws, are the same as if the corporation had been created by an act of Congress."

Justices Harlan and McKenna dissented from some of the views set forth in the opinion of the majority, as declared by Justice Brown, but concurred in the final judgment, which affirmed the order of the Circuit Court, remanding the prisoner to the custody of the Marshal. Justice Brewer and the Chief Justice dissented from the conclusions relative to corporations, and from the judgment, holding that "the order of the Circuit Court should be reversed and the case remanded with instructions to discharge the petitioner, leaving the grand jury to initiate new proceedings not subject to the objections to this."

_Federal Anti-Trust Decisions, 1900-1906, prepared and edited by James A. Finch by direction of the Attorney-General,