Titan

by Ron Chernow

  There seems little doubt that Standard Oil seriously misplayed its cards with Roosevelt. In January 1907, the president tangled with one of his nemeses, Ohio senator Joseph B. Foraker, before a crowded dinner at the Gridiron Club in Washington. A stout ally of Standard Oil, Senator Foraker stiffly resisted measures to regulate business. With patent indignation, Roosevelt excoriated Foraker and the “malefactors of great wealth” behind him. As he pronounced the classic phrase, some reporters thought his gaze traveled to J. P. Morgan, whereas Morgan’s friends insisted that the president eyed Henry H. Rogers, then sitting next to Morgan. The latter were probably right, for Morgan and his client firms had handled relations better with the White House. If Roosevelt treated the Morgan interests (U.S. Steel, International Harvester, et al.) more leniently than he did Standard Oil, it was partly because they had submitted to guidance from the Bureau of Corporations and worked out informal arrangements to correct violations. In briefing his father on the antitrust case, Junior relayed rumors that U.S. Steel had pushed Frank Kellogg to target Standard Oil so as to deflect heat from itself. He also mentioned that several Standard Oil executives, including Charles M. Pratt and Edward T. Bedford, thought that U.S. Steel had wisely placated the government while Archbold had been foolishly antagonistic. Senior preferred to view Standard Oil as vengefully singled out for abuse and claimed that “other large corporations went scot free who were regarded by these ablest attorneys in the land as far more vulnerable than was the Standard Oil Company.”2

  By the summer of 1907, the political fight against Standard Oil had spread across a vast, bloody battlefield, with seven federal and six state suits (Texas, Minnesota, Missouri, Tennessee, Ohio, and Mississippi) in progress against the embattled trust. New legal skirmishes seemed to crop up weekly. That year, an Ohio grand jury brought in 939 indictments against Rockefeller and other Standard Oil officers; a bill was introduced in Tennessee to oust the trust on antitrust grounds; Missouri fined and expelled the Waters-Pierce Company; and so on and so forth.

  Approaching his sixty-eighth birthday, Rockefeller had never imagined that his twilight years would be so eventful. His fortune had failed to purchase him even a poor man’s mite of tranquillity. As nominal president of Standard Oil, he was in a bind, responsible for actions he had not approved. In a July 1907 letter that betrayed considerable anguish, Rockefeller again pleaded with Archbold to accept his resignation and release him from his torment. During the next two weeks, he repeatedly proffered his resignation, telling Archbold this would free him from several subpoenas. Though he owned 27.4 percent of Standard Oil stock—three times the amount held by Flagler, the next largest shareholder—Archbold turned him down flat, and Rockefeller bowed to his protégé’s wishes. But the decision did not sit well with him.

  One thing evident amid the spate of lawsuits was that railroad rebates had not faded as an issue, even though pipelines had governed the oil business for more than a generation. When rebates were again forbidden by the Elkins Act of 1903 and the Hepburn Act of 1906, the public naively assumed they had ended. Then the Interstate Commerce Commission reported in January 1907 that Standard Oil was still secretly accepting rebates, spying on competitors, setting up bogus subsidiaries, and engaging in predatory pricing—the same deadly sins patented by Rockefeller back in the 1870s. Roosevelt and his cabinet thirsted for a test case that would prove Standard Oil’s collusion with the railroads and dramatize the twin evils of abusive trusts and scheming railroads.

  The issue was duly highlighted in a 1907 case in Chicago in which Standard Oil of Indiana was accused of taking illegal rebates from the Chicago and Alton Railroad. The shipments in question had passed between Whiting, Indiana, and East Saint Louis, Illinois, after such rebates were outlawed by the Elkins Act. (Rockefeller, we recall, always insisted that Standard Oil took no rebates after they were banned in 1887.) The presiding figure in the Chicago courtroom was a gaunt, outspoken judge with premature white hair named Kenesaw Mountain Landis who, at forty-one, was newly appointed to the federal bench and later served as the first baseball commissioner.

  Eager to levy an eye-popping fine against the trust, Landis asked its attorneys for figures on its capitalization and earnings between 1903 and 1905. The Standard lawyers, Landis knew, were in a tight spot: If they furnished the true figures, they might invite a punitive fine; if they withheld them, they would look guilty. On June 26, 1907, the federal district attorney tried to pry loose from Standard counsel John S. Miller a list of employees privy to those numbers. “I’ll see you in hell first” was Miller’s cordial reply. This riposte backfired: Landis assigned U.S. marshals to subpoena several Standard Oil officials, including Rockefeller. Flouting the judge’s request, Rockefeller again fled and stayed with Alta and Parmalee in Pittsfield, Massachusetts. He instructed the bedridden Cettie, by now a battle-hardened veteran, to keep quiet about his whereabouts and send him mail only under the Prentice name. For several days, as the press guessed at Rockefeller’s whereabouts, Landis’s process server tried to track the titan through the New England countryside.

  When Teddy Roosevelt and his attorney general heard that Landis wanted to haul Rockefeller into court, they were greatly dismayed, for if Rockefeller testified in the Chicago case, he might win an “immunity bath” from possible criminal prosecution in the more important federal antitrust suit. They sent an emissary to Chicago to plead with Landis. “I’d like to oblige Mr. Roosevelt,” he said. “I’d do anything in reason to oblige him. But Rockefeller is making a monkey out of my process server, and I’m going to bring him before this court to vindicate its dignity.” 3 Rockefeller must have discovered the legal advantages of testimony, because he suddenly contacted Judge Landis from Pittsfield and voluntarily accepted a subpoena from a deputy marshal.

  On July 5, 1907, arriving by private railroad car, John and William Rockefeller and Henry Flagler conferred with lawyers at the spacious new offices of Standard Oil of Indiana in Chicago. Instead of cooperating with Landis, Rockefeller counseled defiance and opposed revealing the balance sheets. “But, Mr. Rockefeller, times have changed,” Flagler said. “The old maxim, silence is golden, doesn’t work so well.” “Well,” Rockefeller drawled, “it did when I was at the helm.”4 Though he had agreed to travel to Chicago, Rockefeller hesitated to appear in court, and when he canvassed the lawyers present, they seemed to side with him. Then he sounded out the youngest lawyer, Robert W. Stewart, who said, “Mr. Rockefeller, in view of the opinion rendered by the distinguished legal talent present, I hesitate to express an opinion.” “Young man,” Rockefeller said, “I’m paying you to give me your opinion.” Summoning up his courage, Stewart said, “Mr. Rockefeller, you are no different from any other citizen before the law, and if I were you, I would appear.”5 For all his tough talk, Rockefeller was smart enough to abide by the young man’s advice.

  On the sultry morning of July 6, 1907, John and William Rockefeller arrived at the federal building and found streets teeming with hundreds of spectators. When Rockefeller was spotted in a straw hat, grasping a slender cane, somebody shouted, “Here he comes!” The crowd surged forward in such close ranks that it took a squad of twenty club-wielding detectives to clear a path. Rockefeller grinned when a street urchin called out, “There’s a man who got his picture in the paper.”6 Some zealous onlookers tore buttons from Rockefeller’s coat. By the time the Rockefeller brothers reached the sixth-floor courtroom, a red-faced William, sweating profusely, muttered, “An outrage! I never heard of such treatment.” 7 By contrast, John D. exhibited his usual cool demeanor before an unruly mob. When he entered the sweltering courtroom, with electric fans slicing overhead, he even imitated a reporter trying to take notes in the crush of people. Once the doors were closed, the hum of spectators outside was still so loud that policemen had to clear the corridor.

  After the marshal brought down his gavel, Rockefeller began fifteen minutes of unforgettable testimony. A virtuoso of evasive testimony, he was the tranquil eye of the storm. A
s one reporter noted, “Mr. Rockefeller was the coolest looking man in the room. Every motion he made was slow and dignified. His step was slow. His replies to the questions of the court were even slower.”8 Judge Landis, itching to interrogate Rockefeller, had not reckoned on his incomparable mastery of prevarication and selective memory loss. Once again, in the halls of justice, Rockefeller turned himself into a confused old dotard. The most modest question seemed to pose insurmountable challenges to his mind.

  To start things off, Judge Landis asked, “Mr. Rockefeller, what is the business of the so-called Standard Oil Company of New Jersey?” “I believe, your Honor . . .” Rockefeller began, then appeared to lose his way. He paused, fiddled with his cane, crossed his legs, then made a second stab at an answer. “I believe, your Honor . . .” Here again, his mind wandered as Judge Landis tapped his spectacles on his desk in frustration. Finally, Rockefeller concentrated his faculties and replied, “I believe, your Honor, they operate an oil refinery in New Jersey.”9 To all questions, Rockefeller responded in this same slow, disconnected style, making his testimony worthless. In exchange, Landis had to give Rockefeller the one thing he dearly wanted: immunity from criminal prosecution. This testimony was not only a fiasco for the judge but a public-relations victory for Rockefeller. How, people wondered, could this sweet, bumbling old man have been the evil wizard of the trust? His testimony even received plaudits from the press. As he told Archbold afterward, “My experience at Chicago and with the newspaper people generally of late has been very satisfactory.”10

  A month later, Judge Landis took his revenge. On the morning of August 3, 1907, as more than a thousand people sought entrance to his courtroom, Landis read aloud his decision in the Standard Oil case. (Possibly in anticipation, Rockefeller had just announced a $32 million gift to the General Education Board.) Once again, with difficulty, the marshals shut the great doors to keep out waves of spectators. Pale and edgy, Judge Landis called Standard Oil no better than a common thief and castigated its lawyers for their “studied insolence.”11 As spectators guffawed at these insults, the bailiffs repeatedly had to rap for order. Then, Landis delivered his bombshell: a fine against Standard Oil of Indiana that dwarfed any other in American corporate history up until that time: $29.24 million ($457 million in 1996 dollars). This was the maximum penalty: $20,000 for each of 1,462 carloads of oil cited in the indictment. Reporters struggled to convey the magnitude of this fine. That money could build five battleships; fill 177 flatcars with silver dollars; employ 48,730 city-street workers each year. It amounted to slightly more than half the money coined annually by the federal government. Since it represented nearly 30 percent of Standard Oil’s $100 million capitalization, Rockefeller’s theoretical share of the fine worked out to $8,011,760. Asked about the penalty, Mark Twain said it reminded him of the bride’s words the next morning: “I expected it but didn’t suppose it would be so big.” 12

  Rockefeller used the record fine to put on a characteristic show of aplomb. He was in the middle of a golf foursome in Cleveland when a messenger came sprinting across the fairway, clutching a yellow envelope. Taking it and handing the boy a dime, Rockefeller read the verdict without even a twitch. Finally, he put the message in his pocket and said to his golf partners, “Well, shall we go on gentlemen?”13 Then he hit an excellent drive of about 160 yards down the fairway. At first, nobody dared to ask the question on their minds, but then one person screwed up his courage: “How much is it?” “Twenty-nine million, two hundred and forty thousand, the maximum penalty, I believe,” Rockefeller answered coolly. Then he gestured toward the tee and said, “It is your honor. Will you gentlemen drive?”14 By all reports, Rockefeller was in superb form that day and completed nine holes in fifty-three shots, his best score ever. The next day, in relating the incident, one Cleveland paper said: “Not by Change of Countenance or Movement Did the Standard’s Founder Betray the Fact That He Might Have Been Annoyed or Angered by the Sentence Handed Down in Chicago.”15

  Of course, Rockefeller’s poker face concealed deep rage. The Landis fine supported the thesis that the Standard Oil empire was based on unethical, even illegal, rebates, not on the business acumen of its founders. Before the day was over, Rockefeller issued a statement upbraiding the court: “A great injustice has been done the company. It was from ignorance on how the great business was founded. For all these years no one has known and no one seems to have cared how it came into existence.”16 Descrying Teddy Roosevelt’s influence, Gates told Rockefeller that he had lost his admiration for the man and hoped that “this amazing and reckless robbery and plunder under the forms of law, may awake the business interests of the country and thoughtful men, to the perils into which we have drifted.” 17

  At one point during that famous golf game of August 3, 1907, Rockefeller had remarked, “Judge Landis will be dead a long time before this fine is paid,” and his prediction proved accurate.18 He seldom spoke so harshly in public. Many observers saw the Landis fine as more of a political statement and a publicity stunt than sound jurisprudence. In July 1908, a federal appeals court not only revoked the fine but severely reprimanded Landis for considering each carload of oil as a separate offense. Judge Peter S. Grosscup, calling Landis’s act an “abuse of judicial discretion,” ordered a retrial, in which Standard Oil was subsequently found not guilty. 19 Teddy Roosevelt was hopping mad at the appeals court. While he had thought the Landis fine excessive, he had thought the trial itself fair. The day after the fine was thrown out, Roosevelt announced that the government would again prosecute Standard Oil for accepting rebates, since “there is absolutely no question as to the guilt of the defendant nor of the exceptionally grave character of the offense.” Dismayed, he said with a touch of bombast that the decision had “hurt the cause of civilization.” 20

  By the early fall of 1907, many Wall Street soothsayers were predicting a savage downturn in financial markets in response to the Landis fine and the antitrust suits. “It must be that these persecutions against business interests will not always continue,” Senior warned his son in late August. “If so, we must be prepared for very disastrous results to our commercial fabric. I think we better increase our reserves of money with our income.” 21 In the week after the Landis fine, Standard Oil shares skidded from 500 to 421, leading a stock-market slump.

  For reform-minded critics, the ensuing panic originated with the misbehavior of the business fraternity itself. For several years, the stock market had coasted on a tide of easy money, low interest rates, and manic speculation in copper, mining, and railroad shares. In this euphoric mood, stock promoters had flogged unsound companies, and investors had gorged themselves on watered stock. Among the most flagrant speculators were trust companies that exploited legal loopholes to speculate heavily in the stock market while also lending excessively against securities as collateral. Roosevelt inveighed against “an era of over-confidence and speculation” that would lead to a severe purgative reaction. 22

  As money tightened that September, Rockefeller deposited in several New York banks bonds that could be pledged as security for government loans—a rescue operation for which he reaped a handsome 2 percent commission. As panic overtook Wall Street in late October 1907, throngs of petrified depositors lined up in front of banks to empty their accounts, and J. P. Morgan rushed back to New York from an Episcopal convention in Richmond. On October 22, after his aides examined the books of the Knickerbocker Trust, Morgan decided that it was hopelessly insolvent and had to be shut. That night, in an extraordinary pledge of faith in a private citizen, Treasury Secretary George Cortelyou met with Morgan in a Manhattan hotel and placed at his disposal twenty-five million dollars in government funds to stem the panic. While Morgan was the impresario of the salvage operation, Rockefeller provided more private money than anybody else.

  When Gates got wind of the Knickerbocker’s collapse, he telephoned Rockefeller at Pocantico in the early morning and said a public statement from him might restore confidence. Rockefeller
stood there in his bathrobe, mulling over the matter, then decided to call Melville E. Stone, general manager of the Associated Press. He told Stone, for quotation, that the country’s credit was sound and that, if necessary, he would give half of all he possessed to maintain America’s credit. It was an unprecedented statement: A single citizen had promised to bail out Wall Street. The next morning, as these sedative words were reprinted across America, reporters spilled onto the golf course at Pocantico. When asked if he would really give half his securities to stop the panic, Rockefeller replied, “Yes, and I have cords of them, gentlemen, cords of them.”23 It was a rare case of Rockefeller boasting about his wealth, but it was clearly meant to lift public morale. Because Rockefeller deposited ten million dollars there, National City Bank had the deepest gold reserves and cash resources of any bank during the panic. “They always come to Uncle John when there is trouble,” Rockefeller noted with pride.24 When J. P. Morgan decided to save the shaky Trust Company of America on October 23, he received three million dollars in rescue funds from George F. Baker of First National Bank and James Stillman of National City Bank, the latter drawing on Rockefeller money.