Meet You in Hell

by Les Standiford

  Here was Frick, he muttered, the traitor, the man who had recently tried to sell them out and who had reneged on a promise to provide fuel at an agreed-upon price, once more attempting to profit immensely at the expense of his partners.

  Carnegie expressed none of this directly to Frick, of course. Rather, he continued to maintain the pretense that all was well between them. Shortly after he returned to New York City, he dashed off a series of notes to Frick suggesting that their disputes were petty: “Very foolish when it’s only business with nothing personal in it. Isn’t it?” He urged Frick to set down in writing the terms of their agreement on coke prices, and concluded with an almost laughable observation: “We’ve never had friction before—it annoys me more than dollars.”

  When Frick did not respond to such blandishments, Carnegie wrote again, this time urging that Frick not only recognize the $1.35 agreement but acknowledge how generous it really was, and how beneficial it would be in the long run to HCF Coke. “We all have our ‘crazy bones,’ ” Carnegie allowed, “but now all’s over and you have a mighty good bargain and a big profit. . . . I believe all back things are also settled—so now all’s well.”

  By this time, however, Frick had learned of Carnegie’s backstabbing comments following the early-November board meeting, and was seething at the apparent hypocrisy. When no reply was forthcoming from Pittsburgh, Carnegie proposed yet another means of resolving the dispute: perhaps Frick would agree to a formal merger of HCF Coke with Carnegie Steel, a move that would allow Carnegie to set coke prices internally with no interference.

  Frick replied through clenched teeth that he might be willing to permit a merger—provided that the newly formed company would be capitalized at no less than $150 million. Though the figure was low in comparison to what he believed the new entity would be worth, and would have netted Frick just a little more than half of an outright sale of Carnegie Steel for $250 million, Carnegie would have none of it. There would be no such revaluation of their holdings, he insisted.

  Once again, matters had stalled between the two. But Frick was not about to let things rest. At a late-November board meeting, he read into the minutes a rebuke of Carnegie. “The value of our coke properties for over a year has been, at every opportunity, deprecated by Mr. Carnegie and Mr. Lauder,” Frick declared, “and I submit that it is not unreasonable that I have considerable feeling on this subject.”

  Frick went on to say that Carnegie had threatened to buy his own coke lands and run HCF Coke out of business, and further suggested that Carnegie was less than a man for not voicing objections over the land acquisition to his face. He demanded that Carnegie apologize personally, and closed, “I have stood a great many insults from Mr. Carnegie in the past, but I will submit to no further insults in the future.”

  If Carnegie had entertained the slightest hopes of patching things up, Frick’s latest invective dashed them completely. While he had no intention of responding to Frick’s request for an apology, he had much to say to Lauder, Phipps, and Schwab. To each he offered the opinion that Frick was losing his health and his mind. He was finished with his attempts to appease the man: “It is a clear case of ‘Incompatibility of Temper,’ always sufficient cause for divorce,” he wrote to Lauder and Phipps.

  It was Carnegie’s intention to abolish the office of chairman once and for all at the first board meeting in December, though he advised Schwab that it would be far preferable for Frick to withdraw and avert a public spectacle. Carnegie’s hope was that Schwab would lay it all out for Frick and persuade the man to resign.

  Schwab had something of a dilemma on his hands. He had seen apparently irreparable ruptures between Carnegie and Frick patched up before. And, despite all his nettlesome actions, Frick continued to hold influence with a number of the partners, including Phipps. What if Schwab attempted to intervene, then found himself trumped by Frick? Look what had become of poor John Leishman.

  Following a meeting with Carnegie in New York, Schwab hit upon a plan he was comfortable with. He wrote a lengthy letter to his old patron and mentor, in which he warned Frick of Carnegie’s intentions to abolish Frick’s position at the next board meeting. Whatever their personal feeling, lamented Schwab, the junior partners and even Schwab himself would have no choice but to obey Carnegie’s wishes. “I beg of you for myself and for all the Junior Partners, to avoid putting us in this awkward position,” he wrote, in closing.

  Though he intended to mail the letter to Frick, Schwab’s sense of decency and long-standing obligation to the man who had brought him into the business demanded something better. And so it was that he rode out to Clayton on the eve of the December board meeting and told Frick at the door that he carried a letter that he wished very much for him to read.

  It seems likely that Frick had some premonition of what was coming, but his response was hardly less than if he’d been blindsided. Schwab recalled that as he sat in the quiet drawing room, watching Frick read through his painstakingly composed letter, he had seldom seen a person so consumed by fury. Moments later, Schwab was fleeing out the door, with Frick’s angry imprecations cutting the chill December air in his wake.

  For all his attempts at diplomacy, it was Schwab who’d had to bear the brunt of Frick’s temper. To the board itself, Frick’s written response was uncharacteristically mild. When that body convened on the fifth of December, they read simply this:

  Gentlemen:

  I beg to present my resignation as a member of your Board.

  Yours very truly,

  H. C. Frick

  Never had a coup d’état gone more smoothly—or so it must have seemed. With the troublesome Frick out of the way at last and the able Schwab maintaining a firm hand on the controls, Carnegie could envision only smooth sailing. But then, so did the passengers on the Titanic.

  26

  DEVIL IN THE DETAILS

  THERE WERE MATTERS TO BE ATTENDED TO in the wake of Frick’s ouster, of course. The question of coke prices to Carnegie Steel had not been settled, and, despite his resignation from the chairmanship at Carnegie, Frick remained the chairman of the board at HCF Coke.

  Carnegie and Schwab had put a contingency plan into effect, however. At the board meeting of HCF Coke in early January of 1900, Carnegie saw to it that a new membership was elected, one that reflected his and his loyalists’ controlling interest in the company. The five new Carnegie men on the seven-member board of HCF Coke got quickly down to business, abolishing the office of chairman and leaving the company in control of its president, Thomas Lynch.

  The new board rammed through another motion that recognized the existence of the disputed verbal agreement between Carnegie and Frick and demanded that Frick sign off.

  “I would like this agreement executed,” Carnegie supporter A. M. Moreland said.

  “I want some time to look into it,” Frick countered.

  “I would like it executed now,” Moreland said. “The board has authorized you to sign it.”

  “It is now three o’clock,” Frick said. “Can’t you give me until four o’clock to sign it?”

  Moreland was unfazed. “Can’t you decide now as well as at four o’clock? We want it executed now.”

  It was the end, and Frick knew it. “The President will execute the contract as directed by the board,” he said finally. “But under protest as a stockholder.”

  Frick, though still a member of the board, could do nothing. Deposed for a second time through the machinations of Carnegie—and now dropped from the very company he had founded—he simply walked out of the meeting in silent protest.

  It was not the final indignity. On the following day, Wednesday, January 10, Frick was reading a letter from a Carnegie Steel stockholder in his office in the Carnegie Building in downtown Pittsburgh, when there was a knock at his door. Mr. Carnegie was there to see him, an assistant announced. Would it be convenient for Mr. Frick to grant an audience?

  Frick allowed that it was convenient enough, and Carnegie made his w
ay into those chambers where, eight years ago, an assassin had burst in with his weapon blazing. No pistol was in Carnegie’s hand on this day. He carried an instrument far more lethal.

  As Charles Schwab sat in his office next door, ear pressed to the wall, Frick stared inquiringly at Carnegie. In his typically patronizing manner, Carnegie first offered smiling assurances that he and Frick were still partners in an amazingly profitable enterprise. To ensure the continuing profitability of that venture, Carnegie continued, Frick must surely recognize that a threatened coke embargo should never take place. They should simply agree that there had been an agreement: coke at $1.35 a ton. Frick had already admitted as much to their mutual associates, had he not? Time to set aside their petty differences, Carnegie said, and get back to the business of minting money. Or words to that effect.

  Frick pursed his lips thoughtfully, nodding as Carnegie sat back, his arms folded. And what did wee Andy propose if Frick did not choose to send off coke to his mills at break-the-bank prices, he wondered.

  Carnegie drew a copy of a document from his coat pocket. He might have smiled—or did he wear the same expression as Alexander Berkman as he fixed the sights of his pistol between the eyes of Henry Clay Frick?

  As he handed over the document, Carnegie explained that on January 8, the day before the meeting at which Frick had been deposed from his own company, there had been a special session of the Carnegie board of managers. They’d had just one piece of business, and here, said Carnegie, was its result.

  What Frick read was as unmistakable as it was infuriating. As Frick had proven to be an obstruction to the continued and efficient operation of their mighty leviathan of steel, the document stated, the board had no choice but to invoke the provisions of the Iron Clad Agreement. Frick’s interest in the company must forthwith be surrendered, his compensation fixed at book value and not a penny more. Frick would receive about $1.5 million for stock that was worth at least ten times as much.

  Next door, Schwab might not have been able to make out the exact words the two men traded next, but he understood that the air had become plenty “thick.”

  Frick was on his feet by now, his chair tipping backward with a crash. “For years I have been convinced there is not an honest bone in your body,” he shouted at Carnegie. “Now I know that you are a god damned thief.”

  He crumpled up the document and tossed it aside. “We’ll have a judge and jury of Allegheny County decide what you are to pay me,” he added. He spun around his desk, advancing on Carnegie with his fists raised.

  Carnegie’s description of what ensued next—apparently recollected, as Wordsworth was fond of saying, “in tranquillity”—seems somewhat understated: “He became wilder and I was forced to leave.”

  Other accounts suggest a slightly more frenzied scenario: Startled workers stared as a frightened Carnegie burst out of Frick’s office, his face pale. On his heels rushed an enraged Frick, who chased him down the hallway to his office, where Carnegie barely managed to duck inside and slam the door behind him.

  Whatever the precise choreography and its attendant imprecations, it was the last meeting between Andrew Carnegie and Henry Clay Frick.

  LATER THAT DAY, FRICK ENTERED THE OFFICES of his old associate John Walker, who had been a partner in the coke concern since the early days of the association between Frick and Carnegie. With Walker, Frick was uncharacteristically sheepish, allowing that he had lost his temper earlier that day. Walker thought for a moment, then replied, “Well, I always knew you had one to lose.”

  Their talk turned to the substance of Carnegie’s visit and his threats to enforce the terms of the contract as well as the Iron Clad Agreement. Although Walker had come over from the Carnegie camp and was no fan of Frick’s personal style, he agreed that Carnegie’s threats were unjust in the extreme. That Walker had been an employee of Frick Coke for more than a decade, with a position of his own to protect, likely had some influence on his perspective.

  Well aware that Carnegie would lose no time in moving forward, Frick and Walker quickly mapped out a strategy of their own. After a meeting with Frick’s Pittsburgh attorney, D. T. Watson, the man who had drawn up the original Iron Clad Agreement, the two decided to contact Philadelphia attorney John A. Johnson, the most noted trial lawyer of his day. Frick assured Walker he would write Johnson that very afternoon, but Walker shook his head. Johnson outshone even Clarence Darrow; what if Carnegie should get to him first?

  Frick nodded and picked up the telephone. It was fortunate that he did. The next day Carnegie showed up personally at Johnson’s office, only to discover that the noted lawyer had already agreed to represent Frick.

  Losing the race for Johnson must have galled Carnegie, but he would not let that deter him. On January 15, Francis Lovejoy appeared at Frick’s office to hand over a petition signed by thirty-two of the thirty-six Carnegie Steel partners, requesting that Frick immediately relinquish his interest in the company at book value. A glum Lovejoy was one of the four partners who refused to be pressured by Carnegie into signing the petition; the others on Frick’s side were Phipps, Henry Curry, and A. R. Whitney. While none of them counted Frick among their personal favorites, all agreed that Carnegie’s aims were dishonorable.

  As for the coke contract, Carnegie had called a meeting of the newly constituted board of Frick Coke for January 24, where a motion was quickly proposed and adopted: the new board agreed that the company would supply coke to Carnegie Steel at the price of $1.35 per ton for the next five years, retroactive to January 1, 1899. With current coke prices hovering around $3.50 a ton, the agreement would result in an annual loss to the coke company of approximately $4 million. The retroactive pricing alone would cost Frick Coke nearly $600,000 for shipments already delivered and billed.

  Frick, meanwhile, had Phipps poring over the fine print of that storied Iron Clad Agreement. Since it was Phipps’s brainchild in the first place, he was the logical person to discover its faults. And, soon enough, he found them.

  Language in the agreement, originally drafted in 1887 and revised in 1892 and 1897, seemed to exclude certain partners from its terms. If a partner owned or had earned his shares outright, with no debt outstanding to the company, then he was exempt from the buyout clause, Phipps maintained. Phipps had also discovered that none of the partners had ever signed the 1892 version of the agreement, which might invalidate the document altogether from that date forward.

  At a February board meeting, Frick lodged a formal protest, objecting that HCF Coke was being forced to sell its product for $1.35 a ton when the January market price had risen to $3.50. “These communications are simply a preliminary statement to an action at law,” was board member A. M. Moreland’s terse response. “It might as well come.”

  And come it did. On March 12, Frick filed suit, charging, among other things, that Carnegie had unjustly attempted to force him out of the company and acquire his holdings at a sum far below their value.

  Most distressing to Carnegie was the fact that the details of the company’s business affairs were laid out in the accompanying brief. If the suit actually went forward, the public would, for the first time, learn details of the immense profits being generated by Carnegie’s enterprise.

  Furthermore, Frick’s attempt to force a revaluation of the company was bad enough, but if documents held by Frick were widely publicized—revealing that Carnegie had refused to renew the option for the Moore brothers’ purchase unless the value of the property was raised to a more rightful (by Carnegie’s own reckoning) $500 million—it would forever hamstring efforts to manipulate the value of his holdings and buy out troublesome partners for a song.

  To Carnegie, that such information concerning the inner workings of the company should be made public was an affront, an embarrassment, and, most important, a disadvantage to doing business. Other prominent entrepreneurs wrote to urge him to find a way to put this airing of dirty laundry and privileged information to a speedy end.

  From Washi
ngton, George Westinghouse sent a letter calling it “a calamity by reason of the fact that the private affairs of your company will undoubtedly be made public. . . . I may add that Mr. Frick has recently spoken to me in such terms that I feel there must be a way to adjust matters between you and him.”

  And, once again, Carnegie found himself under pressure from Republican Party leaders desperate to avoid another scandal that might sway the upcoming presidential election, as the Homestead Strike had done in 1892. William McKinley, who had been elected over William Jennings Bryan in 1896, was locked in another tight race with the Populist Party candidate for the 1900 election, and McKinley supporters were fearful that the feud between Carnegie and Frick would provide ammunition for Bryan’s fervent attacks upon Big Business.

  Ohio senator Mark Hanna, a wealthy ore and coal broker and shipper, urged Carnegie to settle with Frick out of court, immediately.

  The “Great Egoist” Carnegie had dismissed similar pleas from party bosses eight years before, but this time he saw the writing on the wall. If he were to prove in court, for instance, that the value of Carnegie Steel was just a fraction of what Frick claimed, how on earth would he attract a buyer willing to pay what he privately knew the company was worth? On the other hand, Frick stood to lose, too. His suit demanded that, in the event that Carnegie was unwilling to value his interests fairly, the company was to be liquidated immediately and the interests of all partners settled by the proceeds. So he would be forcing a fire sale that might gain him little more than if he were forced out under the Iron Clad Agreement.

  In the end, and for once, reason prevailed between the two men, and a Solomonic compromise was laid out: Carnegie Steel, to be valued at $250 million, and Henry Frick Coke, to be valued at $70 million, would be merged.