California Rich

by Birmingham, Stephen;

  Needless to say, the benefits from this project which would be felt at the Los Angeles end would be offset by severe disadvantages to the two counties whose water would be sucked up to supply Los Angeles. The reactions to the plan in rural Inyo and Mono were violent as farmers saw what would happen: their green oasis turned into a desert simply to create the opposite effect in a city several hundred miles away. But the priorities of California’s cities over farming communities were now becoming established, and Mulholland’s scheme was approved by the legislature. This did not mean that building the aqueduct would be easy. Throughout the ten years it took to construct it, crews were attacked and beaten and kidnapped by masked vigilantes from the Owens River valley towns. Head gates were captured and dynamited, and sections of the canal were repeatedly sabotaged and bombed. When the aqueduct opened in 1913, huge crowds turned out to see the man-made cascade of Owens River water sluicing down into the San Fernando Valley on its way to Los Angeles.

  There would be less cheering, however, for Mulholland’s next project, which was to build a dam and reservoir at the head of the Santa Clara River valley, just north of the city. The purpose of this was to provide a year’s reserve supply of water for Los Angeles. Placed well below the San Andreas Fault line, this reservoir could quickly be tapped in case supplies from the aqueduct were disrupted by earthquakes. By now William Mulholland was being hailed as southern California’s “Wizard of Water,” and his plans were quickly approved. In 1924 construction of the St. Francis Dam began. Early on, several engineers warned Mulholland that a vein of schist running through the sandstone at the damsite made the site an unreliable foundation. But Mulholland dismissed the warnings and announced that he had complete confidence in the project. The dam was completed in the late fall of 1927 and the new reservoir began to fill. It had not filled far before water began to seep through the dam’s base. Mulholland dismissed the leak as inconsequential, and the reservoir continued to fill until a high-water mark of 1832 feet was reached, when Mulholland ordered that storage be stopped.

  In the early spring of 1928 a second leak in the St. Francis Dam was reported. Once again Mulholland assured the city that the dam was sound. On March 12 the dam keeper of the St. Francis anxiously telephoned Mulholland to report that a third leak had appeared and he did not like the looks of things at all. Mulholland hurried up to the dam and inspected it personally. And again he declared that the St. Francis Dam was secure.

  It was a warm and hazy evening—already the plentiful new water supply had begun to work subtle changes on the city’s climate, turning the dry air moist—and citizens of Los Angeles and neighboring Ventura County were sitting on their porches listening to their radios, comforted to hear the Wizard of Water’s assurances, making nervous jokes about the big leaky dam not far away. Just before midnight the lights of the city flickered as the voltage dropped. Then to the north there was a distant rumble, like summer thunder, and many people assumed that the lights were dimming because of an electrical storm. The rumble grew, and the next thought was earthquake—and the ground was indeed now trembling. A wall of water as high as a ten-story building came plunging into the valley, sweeping up in its wake houses, automobiles, trees, livestock, people. Some were lucky and managed to make it to high ground. Others were not. Meanwhile fruit orchards were uprooted, citrus groves flattened. Huge sections of the dam—some weighing ten thousand tons—descended like bits of cork on the lip of the wave and shattered entire towns. When it was over, three towns—Castaic Junction, Santa Paula, and Fillmore—were wiped from the face of the earth, and much of Ventura County lay under a blanket of mud.

  Considering the scope of the disaster, it seems incredible that more people were not killed. The county coroner counted 420 bodies.

  Los Angeles was now ready to lynch its Wizard of Water, and might indeed have done so if, in the general disarray of everything, it had had the slightest idea of where to find him. Signs declaring “Murder Mulholland!” appeared on the walls of public buildings, and, overnight, William Mulholland became one of the most hated men in southern California, even though his aqueduct had been a pivotal factor in the growth and prosperity of Los Angeles.

  Several explanations can be offered for what were Mulholland’s obviously gross miscalculations in the building of the St. Francis Dam. He may have begun to believe in his own Wizard of Water myth and to think of himself as infallible. He also was a pioneer, and pioneers have often been known to make mistakes. It should be remembered too that Mulholland had had absolutely no formal engineering training and was completely self-taught in his field. But California had by now a long history of placing great faith in self-taught men, and some of its most stunning success stories had involved the ill-trained and self-educated men who had made it to the top through a combination of unscrupulousness, stamina, and luck. Fortunes had been made in California by men foolish enough to believe that they were lucky, and by 1928, William Mulholland’s luck had just run out. By 1928 too Mulholland was seventy-three years old, and perhaps, past his prime, he had lost his touch.

  In the St. Francis Dam catastrophe the possibility of sabotage cannot be ruled out—Mulholland had had to deal with the problem of sabotage before—but it seems unlikely. To his credit, Mulholland never tried to shift the blame for the disaster to saboteurs. He shouldered it himself, which caused Los Angeles at least partially to forgive him. At the Los Angeles coroner’s inquest that followed he said, “Don’t blame anybody else; you just fasten it on me. If there was an error of human judgment, I was the human.” But 1928 nevertheless was the year of William Mulholland’s retirement as Chief Engineer and General Manager of the Los Angeles Department of Water and Power.

  Other upheavals had been taking place in southern California. By 1908, Lyman Stewart’s Union Oil Company, whose 1884 production had amounted to only 2661 barrels, was producing almost 5,500,000 barrels a year, but the growing company was having problems. Most of these centered on its abstemious founder and president, Mr. Stewart. For several years Mr. Rockefeller’s Standard Oil had been attempting to swallow up Union, and though some of his directors favored the merger, Mr. Stewart resisted—once replying to Standard that he would “consider” their offer if Standard would contract to buy 40,000,000 barrels of crude oil from Union. This condition seemed so outrageous that Standard abruptly terminated all negotiations. To help him keep Standard Oil at bay, Mr. Stewart invited the other great oil tycoon of the day, Edward Doheny, to sit on Union’s board of directors—a move Stewart would later regret—and Doheny accepted. “We all want the benefit of Mr. Doheny’s counsel,” Lyman Stewart explained.

  Doheny and Stewart first crossed swords over the matter of Mr. Stewart’s salary. Though Stewart now controlled a multimillion-dollar company, he took pride in the fact that he accepted only a nominal wage for doing so. For years he had paid himself only five dollars a day, which was less than his oil drillers got. In 1903 he had asked his board to give him a raise—to three thousand dollars a year—so that he “wouldn’t have to keep a daily expense account.” Doheny considered the request ridiculous and an embarrassment to the company. He therefore proposed that the president’s salary be increased to at least $1,000 a month, whereupon Stewart adamantly refused the increase.

  Lyman Stewart, in fact, was becoming peculiar, and no one knew it better than his son, Will, with whom the senior Stewart increasingly disagreed—an upshot more often than not of the old man’s religious fervor. In 1908, to meet certain financial requirements of his company, Lyman Stewart underwrote $375,000 worth of stock that was being sold on the market. The issue was oversubscribed, and so Stewart bought none of the stock for himself. But under the terms of the subscription Stewart was entitled to an underwriter’s commission of 2½ percent. This commission also he refused to accept, directing his treasurer to turn the money over to “a fund for the purpose of promoting temperance and morality among the men through the advancement of their general welfare.”

  He had begun promotin
g the Scriptures as enthusiastically as he had once searched for oil, and his religious crusade was getting mixed up with his business. In 1909 he appointed a man named Robert Watchorn to the strategic position of treasurer of Union Oil. Watchorn had been a commissioner of immigration and had had no experience in either finance or oil. When asked to explain this curious appointment Mr. Stewart said, “Mr. Watchorn is a very popular man. Every time he appears at a Presbyterian Convention he is greeted with a Chautauqua salute.”* Stewart’s board of directors accepted their president’s choice of a treasurer, but with heavy misgivings. To many, Mr. Watchorn seemed completely incompetent.

  Together, Messrs. Stewart and Watchorn plunged the Union Oil Company into a period of heady high finance and frenzied borrowing, not only for the company itself but for the various religious institutions and endeavors that Mr. Stewart was funding. Money was needed now not just to expand oil-exploration programs but also to found the Bible Institute of Los Angeles, to recruit and support Christian missionaries in China, and to “provide a Bible for every Chinaman.” By 1910, Stewart had persuaded his stockholders to approve a bonded indebtedness of $20,000,000 for the Union Oil Company, and California banks were beginning to view the Union situation with alarm. The Crocker Bank had turned Watchorn down when he had approached them for money, and A. P. Giannini—who distrusted oil companies to begin with—had refused to meet with either of the two zealots. Watchorn then turned to New York banks and Wall Street, where, ironically, he found the Jewish investment-banking firm of Hallgarten & Company willing to help finance the spread of the Christian doctrine throughout the world. Hallgarten agreed to underwrite a $5,000,000 bond issue for Union Oil, but its price was high. Hallgarten demanded that Union agree not to sell more than $1,500,000 worth of new stock during the next thirty years without Hallgarten’s consent. Mr. Watchorn signed this agreement.

  The problem of Watchorn and his adventures in the money markets was now aggravated by the fact that Lyman Stewart was suddenly taken gravely ill. His life hung in the balance; he was not expected to live. This had the effect of giving Watchorn much more freedom to manipulate Union Oil’s affairs than he might have had if Stewart had been up and about. By 1913 things were in a terrible tangle. The cost of supplying Bibles to the Chinese had risen to the point where George H. Burr & Company of New York, to which the company owed $1,500,000, was pressing for payment and threatening to throw Union Oil into receivership if its obligations were not met immediately. Another note, for a million dollars, was due in May, and still another, also for a million, was due in August, when a fourth note for $700,000 would fall due as well. These were merely the Union Oil Company’s obligations. In addition, Mr. Stewart’s precious Bible Institute had overspent its budget in proselytizing and Bible distribution and was a million dollars in debt itself.

  Typically, the company’s pious treasurer put the needs of the Bible Institute ahead of those of the company. Mr. Watchorn approached Mr. Stewart on his sickbed and presented him with a blank piece of paper which he asked Stewart to sign. Watchorn would, he assured Stewart, fill in the necessary details later. What Watchorn filled in above Stewart’s signature was a bizarre document tantamount to an option giving the bearer the right to buy all the Stewart family holdings for $150 a share. Watchorn then sold the option, for $1,000,000, to another oil man, Eugene de Salba, of the General Petroleum Company, and the proceeds, in the form of various checks and stock certificates, were turned over to the Bible Institute.

  When Will Stewart discovered what his father had done he was appalled. So were the other members of Union’s board. Not only had a million dollars slipped from the hands of the company into the hands of God but the entire future of the company was at stake. Should Mr. De Salba be able to obtain the financing to exercise his option—the option gave him a year in which to do so—the company would be his.

  Also appalled, when he came to his senses, was Lyman Stewart. He had been delirious when he signed Watchorn’s blank sheet and had had no idea of the stipulations Watchorn would later write in. Everyone had assumed that Stewart was at death’s door, but, far from it, he was back on his feet and perkier than before. Angrily, he confronted Watchorn and informed him that his career with Union Oil was over.

  But Lyman Stewart’s troubles were not. There was an anxious year to face while the company waited to see whether Mr. De Salba would be able to exercise Watchorn’s option. (As it turned out, De Salba would not.) In the meantime there was a more pressing and present problem. The $1,500,000 note to George H. Burr & Company was now due; Union Oil was without the funds to pay it, and the New York firm had dispatched an agent, John H. Garrigues, to collect it. Garrigues was not at all a bankerly Wall Street type. He believed, he said, in occult powers, and saw himself as a kind of Moses figure who had been sent west to “save” California and to accomplish four other things in the process: acquire control of the lumber industry of the Pacific Coast, acquire control of the oil industry, dominate and control California finance, and change and direct West Coast politics. It was a large order, but Garrigues flamboyantly announced, “Nothing can prevent me from accomplishing my purpose, not even Standard Oil, and you can get on my band wagon and ride through to the goal, or you can get in the road and get run over!”

  Lyman Stewart decided to get on the Garrigues bandwagon, particularly as Garrigues offered a palliative of sorts. He could, he said, get Union Oil an additional $1,100,000 from Burr & Company, but on two conditions: that he be made the new treasurer of Union Oil, at $25,000 a year, and that he be given a free hand in the company’s finances. Stewart agreed, explaining to his board that Garrigues offered the company “insurance—as cheap insurance as we could get.”

  Garrigues’ first move as treasurer was to suspend all Union Oil Company dividends indefinitely, a decision that infuriated the company’s stockholders. Lyman Stewart was forced to write a letter to Union stockholders explaining that despite the fact that “the volume of the company’s business has doubled in the last four years … growing by leaps and bounds year after year from 10 million dollars gross sales … to 20 million dollars on a capital of 32 million dollars … the entire outstanding indebtedness … of the Union Oil Company of California … totals $12,653,000.” This indebtedness, Stewart continued somewhat glibly, had “been brought about chiefly by too much prosperity.”*

  Then, in 1914, more bad news came from New York. Hallgarten & Company reported that it could not carry out the terms of its original agreement and the final million dollars of its underwriting operation would not be forthcoming. By reneging on its part of the bargain, Hallgarten of course released Union Oil from the crippling promise it had made to let Hallgarten supervise its stock-selling operations for thirty years. But the need for cash was now desperate, and at this point Will Stewart took matters into his own hands. He rounded up a syndicate of financiers in Los Angeles who agreed to lend the company the million dollars it had counted on from Hallgarten, but on one condition: Lyman Stewart must step aside as president. “We feel,” said John Jardine, the head of the new syndicate, “that on account of the option which Lyman Stewart had given Watchorn, the investing public had to a certain extent lost confidence in the Union Oil Company.” This was putting it very politely. On April 14, 1914, Lyman Stewart submitted his resignation. It was immediately accepted by the board, and Will Stewart was elected president. His father was pushed upstairs and given the honorary title of Chairman of the Board. Thus, for lack of a million dollars, Lyman Stewart lost control of his thirty million-dollar company.

  He was understandably bitter, and the rift between father and son widened. Lyman Stewart complained that his son was “too conservative,” and Will Stewart replied that he wouldn’t be so conservative if his father hadn’t driven the company into debt by trying to buy up all the oil land in California and simultaneously give away Bibles to the entire population of China. Will Stewart had more urgent problems on his hands than his aging father. He had now to deal with the obstreperous
Garrigues and his grandiose schemes and to regain the financial control of the company that his father had granted to the easterner. He also had a rebel in his midst in the person of Ed Doheny, one of his own directors, who now wanted to take over the company as part of a grand plan to combine a group of independent California companies and form the Pan American Oil and Transportation Company. Doheny’s ambition was to create a company big enough to compete on equal terms with the Big Two of the oil world—Standard Oil and Royal Dutch Shell.

  But Lyman Stewart was not at all ready to be put out to pasture. He had been recently widowed, and in August 1916 he married his young secretary, Lulu Crowell. Lulu had been one of Stewart’s evangelical assistants. The bridegroom was seventy-six years old. The break between father and son was now complete.

  The Associated Oil Company, one of Union Oil’s chief rivals, had in the meantime acquired a new stockholder. He was James Irvine, Jr., who was already consolidating one of the great fortunes of California.

  Irvine’s father, also James, had, like Lyman Stewart, descended from Scotch-Irish Presbyterian stock (there is a town of Irvine in Scotland), had emigrated from Belfast in 1846 at age nineteen, and in 1849, like so many others, had joined the gold stampede to California—aboard the Humboldt, by way of the Isthmus of Panama. One of his traveling companions on the Humboldt was Collis P. Huntington, also young and seeking his fortune.

  For a while the first Irvine had worked as a miner, but he soon became disillusioned with gold as an avenue to wealth and joined a relative in San Francisco who had a prosperous grocery business. With what money he could save, Irvine began investing in San Francisco real estate, and soon he too was prospering modestly. But his fortunes took their most dramatic turn when he made the acquaintance of three former New Englanders, the brothers Benjamin and Thomas Flint and their cousin, Llewellyn Bixby. Having made some money in gold, the Flints and Bixby had acquired some ranch land in Monterey County, which they had decided would be ideal for raising sheep. Accordingly they had gone to Iowa to purchase a flock and in 1853, had returned with a herd of nearly two thousand sheep, eleven yoke of oxen, two cows, four horses, two wagons, and the cumbersome camping equipment needed to cross more than half the continent—plains, rivers, the Rocky Mountains and the Sierras. Daunting as this shepherding project was, the three young men had made it back to California without a mishap, though the journey had taken them eight months. Their feat impressed James Irvine. Clearly these were tough men. So was he.