THEIR PRESENT WEALTH TRACED TO FRAUD.
From these persistent frauds came, to a large extent, the great collective and individual wealth of the members of this firm, and of their successors. It was also by reason of these frauds that Phelps, Dodge and Company were easily able to outdo competitors. Only recently, let it be added, they formed themselves into a corporation with a capital of $50,000,000. With the palpably great revenues from their continuous frauds, they were in an advantageous position to buy up many forms of property. Beginning in 1880 the mining of copper, they obtained hold of many very rich mining properties; their copper mines yield at present (1909) about 100,000,000 pounds a year. Phelps, Dodge and Company also own extensive coal mines and lines of railroads in the southwest Territories of the United States. Ten thousand employees are directly engaged in their copper and coal mines and smaller works, and on the 1,000 miles of railroad directly owned and operated by them.
So greatly were the members of the firm enriched by their frauds that when D. Willis James, one of the partners sued by the Government for fraudulent undervaluations, died on September 13, 1907, he left an estate of not less than $26,967,448. John F. Farrel, the appraiser, so reported in his report filed on March 28, 1908, in the transfer tax department of the Surrogate's department, New York City. But as the transfer tax has been, and is, continuously evaded by ingenious anticipatory devices, the estate, it is probable, reached much more.
James owned (accepting the appraiser's specific report at a time when panic prices prevailed) tens of millions of dollars worth of stock in railroad, mining, manufacturing and other industries. He owned, for instance, $2,750,000 worth of shares in the Phelps-Dodge Copper Queen Mining Company; $1,419,510 in the Old Dominion Company, and millions more in other mining companies. His holdings in the Great Northern Railway, the history of which is one endless chain of fraud, amounted to millions of dollars—$3,840,000 of preferred stock; $3,924,000 of common stock; $1,715,000 of stock in the Great Northern iron ore properties; $1,405,000 of Great Northern Railway shares in the form of subscription receipts, and so on. He was a large holder of stock in the Northern Pacific Railway, the development of which, as we shall see, has been one of incessant frauds. His interest in the "good will" of Phelps, Dodge and Company was appraised at $180,000; his interest in the same firm at $945,786; his cash on deposit with that firm at $475,000. [Footnote: At his death he was eulogistically described as "the merchant philanthropist." On the day after the appraiser's report was filed, the New York "Times," issue of March 29, 1908, said: "Mr. James was a senior member of the firm of Phelps, Dodge & Co., of 99 John Street. His interest in educational and philanthropic work was very deep, and by his will he left bequests amounting to $1,195,000 to various charitable and religious institutions. The residue of the estate, amounting to $24,482,653, is left in equal shares to his widow and their son." On the same day that the appraiser's report was filed a large gathering of unemployed attempted to hold a meeting in Union Square to plead for the starting of public work, but were brutally clubbed, ridden down and dispersed by the police.]
In the defrauding of the United States Government however, Phelps, Dodge and Company were doing no uncommon thing. The whole importing trade was incessantly and cohesively thriving upon this form of fraud. In his annual report for 1874, Henry C. Johnson, United States Commissioner of Customs, estimated that tourists returning from Europe yearly smuggled in as personal effects 257,810 trunks filled with dutiable goods valued at the enormous sum of $128,905,000. "It is well known," he added, "that much of this baggage is in reality intended to be put upon the market as merchandise, and that still other portions are brought over for third parties who have remained at home. Most of those engaged in this form of importation are people of wealth"… [Footnote: Executive Documents, Forty-third Congress, Second Session, 1874, No. 2: 225.] Similar and additional facts were brought out in great abundance by a United States Senate committee appointed, in 1886, to investigate customs frauds in New York. After holding many sessions this committee declared that it had found "conclusive evidence that the undervaluation of certain kinds of imported merchandise is persistently practiced to an alarming extent at the port of New York." [Footnote: U.S. Senate Report, No. 1990, Forty-ninth Congress, Second Session, Senate Reports, iii, 1886-87.] At all other ports the customs frauds were notorious.
The frauds of the whiskey distillers in cheating the Government out of the internal revenue tax were so enormous as to call forth several Congressional investigations; [Footnote: Reports of Committees, Fortieth Congress, Third Session, 1869-70. Report No. 3, etc.] the millions of dollars thus defrauded were used as private capital in extending the distilleries; virtually all of the fortunes in the present Whiskey Trust are derived in great part from these frauds. The banks likewise cheated the Government out of large sums in their evasion of the stamp tax. "This stamp tax," reported the Comptroller of Currency in 1874, "is to a considerable extent evaded by banks and more frequently by depositors, by drawing post notes, or bills of exchange at one day's sight, instead of on demand, and by substituting receipts for checks." [Footnote: Executive Document, No. 2, 1874:140.]
It was from these various divisions of the capitalist class that the most caustic and virtuous tirades against Gould came. The boards of trade and chambers of commerce were largely made up of men who, while assuming the most vaniloquent pretensions, were themselves malodorous with fraud. To read the resolutions passed by them, and to observe retrospectively the supreme airs of respectability and integrity they individually took on, one would conclude that they were all men of whitest, most irreproachable character. But the official reports contradict their pretensions at every turn; and they are all seen in their nakedness as perjurers, cheats and frauds, far more sinister in their mask than Gould in his carelessly open career of theft and corruption. Many of the descendants of that sordid aggregation live to-day in the luxury of inherited cumulative wealth, and boast of a certain "pride of ancestry" and "refinement of social position;" it is they from whom the sneers at the "lower classes" come; and they it is who take unto themselves the ordaining of laws and of customs and definitions of morality. [Footnote: It is worthy of note that several of the descendants of the Phelps-Dodge-Stokes families are men and women of the highest character and most radical principles. J. G. Phelps Stokes, for instance, joined the Socialist party to work for the overthrow of the very system on which the wealth of his family is founded. A man more devoted to his principles, more keenly alive to the injustices and oppressions of the prevailing system, more conscientious in adhering to his views, and more upright in both public and private dealings, it would be harder to find than J. G. Phelps Stokes. He is one of the very few distinguished exceptions among his class.]
From the very foundation of the United States Government, not to mention what happened before that time, the custom-house frauds have been continuous up to the very present, without any intermission. The recent suits brought by the Government against the Sugar Trust for gigantic frauds in cheating in the importation of sugar, were only an indication of the increasing frauds. The Sugar Trust was compelled to disgorge about $2,000,000, but this sum, it was admitted, was only a part of the enormous total out of which it had defrauded the Government. The further great custom-house scandals and court proceedings in 1908 and 1909 showed that the bribery of custom-house weighers and inspectors had long been in operation, and that the whole importing class, as a class, was profiting heavily by this bribery and fraud. While the trials of importers were going on in the United States Circuit Court at New York, despatches from Washington announced, on October 22, 1909, that the Treasury Department estimated that the same kind of frauds as had been uncovered at New York, had flourished for decades, although in a somewhat lesser degree, at Boston, Philadelphia, Norfolk, New Orleans, San Francisco and at other ports.
"It is probable," stated these subdued despatches, "that these systematic filchings from the Government's receipts cover a period of more than fifty years, and that in this, the minor officials of the New York Custom House have been the greatest offenders, although their nefarious profits have been small in comparison with the illegitimate gains of their employers, the great importers. These are the views of responsible officials of the Treasury Department." These despatches stated the truth very mildly. The frauds have been going on for more than a century, and the Government has been cheated out of a total of hundreds upon hundreds of millions of dollars, perhaps billions.
And the thieving importers of these times comprise the respectable and highly virtuous chambers of commerce and boards of trade, as was the case in Gould's day. They are ever foremost in pompously denouncing the very political corruption which they themselves cause and want and profit from; they are the fine fellows who come together in their solemn conclaves and resolve this and resolve that against "law-defying labor unions," or in favor of "a reform in our body politic," etc., etc. A glorious crew they are of excellent, most devout church members and charity dispensers; sleek, self-sufficient men who sit on Grand Juries and Trial Juries, and condemn the petty thieves to conviction carrying long terms of imprisonment. Viewing commercial society, one is tempted to conclude that the worthiest members of society, as a whole, are to be found within the prisons; yes, indeed, the time may not be far away, when the stigma of the convict may be considered a real badge of ancestral honor.
But the comparison of Gould and the trading classes is by no means complete without adding anew a contrast between how the propertied plunderers as a class were immune from criminal prosecution, and the persecution to which the working class was subjected.
Although all sections of the commercial and financial class were cheating, swindling and defrauding with almost negligible molestation from Government, the workers could not even plead for the right to work without drawing down upon themselves the full punitive animosity of governing powers whose every move was one of deference to the interests of property. Apart from the salient fact that the prisons throughout the United States were crowded with poor criminals, while the machinery of the criminal courts was never seriously invoked against the commercial and financial classes, the police and other public functionaries would not even allow the workers to meet peacefully for the petitioning of redress. Organized expressions of discontent are ever objectionable to the ruling class, not so much for what is said, as for the movements and reconstructions they may lead to—a fact which the police authorities, inspired from above, have always well understood.