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Titan

Page 63

by Ron Chernow


  Rockefeller’s retirement began to assume the inexorable nature of a Greek tragedy: Just as he sought to extricate himself from the trust, its legal troubles deepened. Conditioned by a long history of Standard Oil mendacity, both press and public mocked his so-called retirement as a tawdry ruse to evade testimony. It defied the common conception of villainy to think that such a man could simply walk away from his creation.

  To expedite the case, Monnett had a master commissioner interrogate witnesses in New York. On October 11, 1898, Rockefeller was summoned to testify at the New Amsterdam Hotel, the prosecution hoping to prod him into an admission that he had stalled in liquidating the trust. Through more than five hours of questioning, Rockefeller, as imperturbable as ever, spoke in such a low voice that people strained to hear him, and he conceded so little that the next day’s World ran the headline, “Rockefeller Imitates a Clam.” 1 Standard lawyers spent much more time objecting to questions than Rockefeller did in answering them. Once again, he presented the past as a dense fog that he could scarcely penetrate. As the World dryly observed, “The virtue of forgetting, which is one of the most valuable virtues that a monopolist can have under cross-examination, is possessed by Mr. Rockefeller in its highest degree.”2

  Rockefeller, as always, refused to believe that anybody could have a legitimate objection to Standard Oil. Once again, he fell back on his all-purpose explanation that the suits filed against him were just extortion rackets posing as public service. Later on, he said that Monnett’s motive was to “blackmail the Standard Oil Company” and that he was a “comrade in schemes with George Rice.”3 Rockefeller suppressed signs of irritation at the hearing, yet he seemed edgier than on earlier occasions. Reporters noted telltale nervous habits that called into question his surface composure—the way he kept shifting his weight, crossing and recrossing his legs, rubbing his nape, blowing out his cheeks, and biting his mustache.

  At the end of his testimony, Rockefeller, discernibly relieved, did something very unusual for him: He bounded straight over to George Rice, extended his hand, and tried to engage him in conversation. He suddenly grew very chatty, as two newspapers reported:

  “How are you, Mr. Rice? We are getting to be old men now, eh? Don’t you wish you had taken my advice years ago?”

  “Perhaps it would have been better for me if I had,” said Rice, glaring at him. “You have ruined my business, as you said you would.”

  “Pshaw! Pshaw!” replied Rockefeller, moving away.

  “You did, you ruined me,” persisted Rice, chasing him. (Rice, a well-to-do businessman, perhaps overstated his case.)

  “Pshaw! Pshaw!” said Rockefeller, donning his silk hat. “I would rather have given ten—”

  “It’s no use your saying ‘pshaw,’ ” Rice interrupted. “You know damned well you did.”4

  Rockefeller flashed a funereal smile, then disappeared from the room. It was one of the few times in his mysterious career that he ever confronted one of his nemeses. If Rockefeller’s style was to slip away from attacks, the Monnett investigation displayed the two-fisted style of his successor, John D. Archbold. On the stand, Archbold accused Rice of trying to extort $500,000 from Standard Oil for his refinery, and at the lunch recess, according to one newspaper, he marched up to Rice, jabbed a finger in his face, and said, “You are nothing but wind and weight.” “And you,” retorted Rice, “are nothing but money stolen from the people.” 5 The impetuous Archbold behaved as if public opinion were of no importance. He did not see that the day of reckoning for Standard Oil was fast approaching and that he would soon need all the friends he could get. In a preview of his brawling, arrogant style with authorities, Archbold got into a heated shouting match with a man named Flagg, one of Monnett’s assistants:

  Ida Minerva Tarbell, seated before her rolltop desk at McClure’s Magazine in 1898. (Courtesy of the Drake Well Museum)

  “You keep still or I’ll expose you right here,” Archbold shouted at him.

  “You couldn’t if you tried,” said Flagg. “I’m not afraid of your millions.”

  “Shut up or I will show you up,” cried Archbold.

  “Is any one low lived compared with a Standard Oil magnate?”

  “You know what you are.”

  “You are a coward and a liar,” shouted Flagg.

  “You are a stinking liar,” Archbold shot back. 6

  What prompted this vehement exchange was the burning of company records at a Standard Oil facility in Cleveland. Monnett had charged Standard of Ohio with surreptitiously paying dividends to holders of trust certificates after 1892, which Rockefeller and other officials denied. To resolve the matter, the state supreme court ordered Standard of Ohio to produce its books in December 1898. Two weeks later, reports filtered out that sixteen boxes of books had been incinerated by Standard employees. Amid a national furor, Standard attorneys denied that the boxes contained the ledgers in question—“from time to time,” said Standard Oil’s attorney, Virgil Kline, the company destroyed “useless material which accumulates in its business”—but he refused to produce the pertinent ledgers.7 Monnett thought the books were torched to shield Rockefeller. As he told Henry Demarest Lloyd, “I am of the opinion that the books were burned at least in part. . . . They were obliged to either let the books contradict Mr. Rockefeller . . . or else take a defiant stand and conceal the books from the court.” 8

  Among other damning accusations, Standard Oil was said to have hired the Malcolm Jennings Advertising Agency to promote its products in Ohio and Indiana newspapers in exchange for favorable news items. The most sensational charge trumpeted by Monnett involved an alleged attempt by Standard Oil to bribe him into dropping the case, much as had been alleged with David K. Watson. Monnett said that a nameless emissary had come to his Columbus office with an offer of $400,000. The money was to be left in a safety-deposit box in New York, with Monnett given the key. Standard attorneys hotly disputed this, demanding the name of their putative agent. When Monnett would not identify him, citing fears of reprisals, it cast doubt on the story. In a later statement, he named Feargus Charles Haskell and Frank Rockefeller as the culprits. Rockefeller’s papers, unfortunately, shed no light on the situation.

  Before Monnett could inflict lasting damage upon Standard Oil, he became persona non grata in many sections of his own Republican Party. He especially incurred the wrath of U.S. senator Joseph B. Foraker of Ohio, who was on the Standard Oil payroll. (In 1900 alone, Archbold disbursed $44,500 in lobbying fees to the senator.) At a Washington meeting, Foraker gave Monnett a brief but unforgettable education in Ohio political realities. As Monnett re-created the discussion:

  I at first discussed the impropriety and danger of [Foraker’s] representing these trusts, criminal and civil violators of his own State, as long as he as well as myself should be interested in the welfare of the people of Ohio. He told me that he never allowed his law practice to interfere with politics or his politics with law practice, and added that he was a judge of ethics of our profession. He then took up the cause of action against these companies and reminded me of the great power financially and politically of the Standard Oil crowd. After talking a short time, he asked me to have the proceedings delayed in order to accommodate him. I firmly declined to concede any time whatever and told him so. He recalled the great power of the Oil Trust to anyone opposed to it.9

  True to Foraker’s warning, Monnett failed to win the Republican renomination for attorney general in 1899; disillusioned, he joined the Democratic Party two years later.

  Even though the Ohio suit fizzled, it alerted the trust to the need for a permanent corporate structure that could weather legal challenges. Ever since 1892, Standard Oil had sustained a precarious arrangement in which seventeen leading shareholders, many of them the liquidating trustees, held a majority of the stock of twenty constituent companies. These oil-industry veterans were now graying—Archbold, in his early fifties, was among the youngest—and since they alone bound the Standard Oil units toget
her, they feared that if they died, their heirs might squabble, sell the shares, or otherwise threaten the trust’s cohesion. It was time for a less-shaky corporate framework.

  The trust had long struggled with the legal straitjacket that prevented companies from holding stock in out-of-state corporations. In 1898, heeding the clamor against the trusts, Congress created the U.S. Industrial Commission to study the American economy. Testifying before that body a year later, Rockefeller bemoaned this legal anachronism. “Our Federal form of government, making every corporation created by a State foreign to every other State, renders it necessary for persons doing business through corporate agency to organize corporations in some or many of the different States in which their business is located.”10 To rectify the problem, Rockefeller endorsed a federal incorporation law, even if a measure of government regulation came with it.

  In the meantime, Standard Oil was aided by recent amendments to the New Jersey incorporation law. In June 1899, undergoing yet another change in form, Standard Oil became a full-fledged holding company under New Jersey law with the legal parent, Standard Oil of New Jersey, controlling stock in nineteen large and twenty-two small companies. Though he owned more than one-fourth of the shares, Rockefeller wanted to stay retired and avoid operational responsibility. Loath for him to relinquish his titular leadership amid legal troubles, his colleagues insisted that he remain honorary president. “I declined to have any official position in the Standard Oil Company of New Jersey in 1899,” Rockefeller later told Harold McCormick, “and urged my brother [William] to take this position, but as he declined and all the others were very urgent, I was called the President, and have been since, although the position is and has all the time been entirely nominal.” 11 Unbeknownst to the general public, Rockefeller never attended a meeting or drew a salary, and Archbold, the new vice president, ran the organization.

  In many respects, Standard Oil attained its peak influence in the 1890s. It now marketed 84 percent of all petroleum products sold in America and pumped a third of its crude oil—the highest percentage it ever reached. After years of harrowing prophecies that the industry might vanish, the business outlook had never looked brighter, despite the growing use of electricity. Sales boomed in everything from oil stoves to parlor lamps to varnish, soaking up oil supplies and driving up prices. In 1903, the British navy outfitted some battleships to use fuel oil instead of coal, attracting the notice of the U.S. Navy. Paraffin wax had become a vital insulator in the burgeoning telephone and electrical industries. Most momentous of all, the automobile promised to consume that vile, useless by-product, gasoline, and Standard Oil cultivated the new carmakers. When Henry Ford rolled out his first vehicle, Charlie Ross, a Standard Oil salesman, stood by with a can of the trust’s Atlantic Red Oil. The number of registered automobiles in America leaped from eight hundred in 1898 to eight thousand in 1900. When the Wright brothers took off from Kitty Hawk in 1903, their flight was powered by gasoline brought to the beach by Standard Oil salesmen. These new petroleum applications more than offset the dwindling kerosene business.

  Though it had some scrappy competition at home from Pure Oil, Standard Oil’s monopoly seemed secure in the 1890s. But developments at home and abroad soon imperiled its power even before Teddy Roosevelt’s trustbusters entered the scene. In the late 1890s, Russia temporarily surpassed the United States to become the world’s largest crude-oil producer, capturing 35 percent of the world market. The trust’s global monopoly was sharply eroding on other fronts: The new Burmah Oil sold oil actively in Indian markets, Royal Dutch expanded its drilling in Sumatra, and Shell Transport and Trading stepped up its East Asian activities. In October 1901, Sir Marcus Samuel of Shell held secret talks at 26 Broadway. Archbold reported to Rockefeller, “This company [Shell] represents by all means the most important distributing Agency for Refined Oil throughout the World, outside of our own interests. He is here undoubtedly to take up with us the question of some sort of an alliance, preferable on his part of the sale to us of a large interest in their Company.” 12 Two months later, afraid of ceding too much power to Archbold, Samuel signed an agreement instead with Henri Deterding of Royal Dutch, creating a major new alliance along with the French Rothschilds. Archbold responded to this new threat with unrelenting price wars.

  The home situation had grown no less treacherous. In 1900, the Waters-Pierce Company, Standard Oil’s rogue marketing subsidiary, was ousted from Texas for violating the state’s antitrust law. It had cornered 90 percent of the oil market, winning universal infamy for its cutthroat sales practices. This legal setback mattered greatly, for it evicted the trust from the state on the eve of a revolution. In 1901, drillers in Beaumont, Texas, made a major find in a dreary mound called Spindletop, which spouted oil with such explosive force that it spewed tens of thousands of barrels into the air for days before it was capped. The Texas oil boom, which spawned five hundred new companies during its first year alone, redrew the industry map. By 1905, Texas accounted for more than a quarter of the crude oil being pumped in America. Popular antagonism toward Standard Oil in Texas prevented the trust from moving aggressively to exterminate these new competitors, though the trust did have several refining affiliates there. When the Mellons, who had financed Spindletop, offered to sell it to Standard Oil, they were bluntly informed by one director, “We’re out. After the way Mr. Rockefeller has been treated by the state of Texas, he’ll never put another dime in Texas.”13 Standard had to sit back and suffer the emergence of a host of competing producers, including Gulf Oil and the Texas Company, later called Texaco.

  So while reformers noisily denounced the omnipotence of Standard Oil, its monopoly was swiftly crumbling at home and overseas. With additional oil strikes in California, Indian Territory (later Oklahoma), Kansas, and Illinois in the early 1900s, the industry became too vast and far-flung for even Standard Oil to control. It might not be too much of an exaggeration to say that the antitrust cases brought against the trust in the early 1900s were not just belated but were fast becoming superfluous.

  After a young anarchist assassinated William McKinley in Buffalo in September 1901, the country was swept by widespread trepidation that the shooting had formed part of a broader conspiracy. In Chicago, a traveling salesman captivated reporters with tales of a conversation that he had overheard at a local train depot where J. P. Morgan and John D. Rockefeller were mentioned as potential assassination targets. A heavily armed contingent of guards ringed Rockefeller’s residence and he remained incommunicado.

  As it turned out, the gravest threat to the titan’s welfare emanated not from shadowy, gun-toting subversives but from the new White House occupant, forty-three-year-old Theodore Roosevelt. So long as McKinley was in the White House, Rockefeller had implicit faith that his business interests would be safeguarded. “America is truly to be congratulated upon Mr. McKinley’s election,” he had written in November 1900. “With financial interests on a sound basis, the next four years ought to accomplish much for the general welfare of the American people.”14 In Roosevelt, however, whom he credited as the “shrewdest of politicians,” Rockefeller knew he had a formidable rival.15

  In a political world degraded by corrupt bosses and ward heelers, Teddy Roosevelt was that rara avis: a cultivated, well-to-do man. Descended from Dutch settlers who had emigrated to New Amsterdam before 1648 and later made a fortune in Manhattan real estate, Roosevelt, like many of his social peers, was scandalized by the sordid ethics of the new industrial class. As a New York state assemblyman in 1883, this aristocratic renegade reviled Jay Gould and his ilk as members of “the wealthy criminal class,” the first of many such rhetorical blasts.16 In 1886, Rockefeller contributed one thousand dollars to Roosevelt’s unsuccessful mayoral campaign only because he feared even more the single-tax policy espoused by one of his opponents, Henry George. Running for New York governor in 1898, Roosevelt accepted contributions from Henry Flagler and a number of Wall Street executives, whom he promptly double-crossed by enacting
a tax on corporate franchises and supporting factory regulation. A militant preacher against class divisions, he warned that politicians ignored popular discontent about the trusts at their peril. If they stuck to laissez-faire neglect, he predicted, “then the multitudes will follow the crank who advocates an absurd policy, but who does advocate something.”17 A dyspeptic Henry Flagler spluttered: “I have no command of the English language that enables me to express my feelings regarding Mr. Roosevelt.”18 New York businessmen were so eager to get rid of Roosevelt that they eased him out of the governorship and into the vice presidential slot on the McKinley ticket in 1900. Roosevelt always believed that Standard Oil had formed part of the effort to export him from state politics.

  By 1901, virtually all American industrialists were converts to the doctrine of cooperation preached by Rockefeller and feared Teddy Roosevelt’s reputation as a trustbuster, even if that anxiety was somewhat overblown. Like Rockefeller, the new president favored industrial consolidation to exploit economies of scale. Scoffing at calls by William Jennings Bryan and Robert La Follette to dismantle the trusts, he contended that any such course would thwart the economy’s natural tendency. “Much of the legislation not only proposed but enacted against trusts is not one whit more intelligent than the medieval bull against the comet, and has not been one particle more effective.”19 Roosevelt distinguished between bad trusts, which gouged consumers, and good trusts, which offered fair prices and good service. Instead of indiscriminate trust-busting, he concentrated on the worst offenders, and he singled out Standard Oil as emblematic of the abusive trusts.

 

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