II
The facts concerning the founding and development of the fortune of the late J. H. Osterman, as developed by C. B. Cummings, quondam secretary to Mr. Osterman, special investigator for E. X. Bush, of counsel for the minority stockholders of the C. C. and Q. L., in their suit to compel the resale of the road to the original holders and the return of certain moneys alleged to have been illegally abstracted by J. H. Osterman and Frank O. Parm, of Parm-Baggott and Company, and by him set forth in his reminiscences of Mr. Bush and the Osterman-Parm-C. C. & Q. L. imbroglio.
1. The details of the Osterman-De Malquit matter were, as near as I have been able to gather, or recall, since I was Mr. Osterman’s secretary until that time, as follows: De Malquit was one of the many curb brokers in New York dabbling in rubber and other things at the time Osterman returned from Honduras and executed his very dubious coup. The afternoon before De Malquit killed himself—and this fact was long held against Mr. Osterman in connection with his sudden rise—he had come to Osterman’s office in Broad Street, and there, amid rosewood and mahogany and an unnecessary show of luxury which Osterman appeared to relish even at that time, had pleaded for time in which to meet a demand for one hundred thousand dollars due for ten thousand shares of Calamita Rubber, which Osterman then entirely controlled and for which he was demanding the par or face value. And this in spite of the fact that it had been selling on “curb” only the day before for seven and one-fourth and seven and three-fourths. De Malquit was one of those curb brokers whom Osterman, upon coming to New York and launching Calamita (which was built on nothing more solid than air), had deliberately plotted to trap in this way. Unwitting of Osterman’s scheme, he had sold ten thousand shares of Calamita on margin at the above low price without troubling to have the same in his safe, as Osterman well knew. That was what Osterman had been counting on and it had pleased him to see De Malquit, along with many others just at that moment, in the very same difficult position. For up to that day Calamita, like many another of its kind, had been a wildcat stock. Only “wash sales” were traded in by brokers in order to entrap the unwary from the outside. They traded in it without ever buying any of it. It had to fluctuate so that the outsider might be induced to buy, and that was why it was traded in. But when it did fluctuate and the lamb approached, he was sold any quantity he wished, the same being entered upon their books as having been sold or bought on his order. When a quotation sufficiently low to wipe out the margin exacted had been engineered among friends, the lamb was notified that he must either post more money to cover the decline or retire. In quite all cases the lamb retired, leaving the broker with a neat profit.
This was the very situation upon which Osterman had been counting to net him the fortune which it eventually did, and overnight at that. Unknown to the brokers, he had long employed agents whose business it was to permit themselves to be fleeced for small sums in order that these several brokers, growing more and more careless and finding this stock to be easy and a money-maker, should sell enough of it without actually having it in their safes to permit him to pounce upon them unexpectedly and make them pay up. And so they did. The promoters of the stock seeming indifferent or unable to manage their affairs, these fake sales became larger and larger, a thousand and finally a ten thousand share margin sale being not uncommon. When the stage was set the trap was sprung. Overnight, as it were, all those who at Osterman’s order had bought the stock on margin (and by then some hundreds of thousands of dollars’ worth had been disposed of) decided that they would not lose their margins but would follow up their cash with more and take the stock itself, holding it as an investment. It then became the duty of these brokers to deliver the stock within twenty-four hours or take the consequences—say, a petition in bankruptcy or a term in jail. Naturally there was a scrambling about to find any loose blocks of the stock. But these had been carefully garnered into the safe of Mr. Osterman, who was the sole owner of the stock, and they were compelled to hurry eventually to him. Here they were met by the genial eye of the cat that is expecting the mouse. They wanted Calamita, did they? Well, they could have it, all they wanted ... at par or a little more. Did that seem harsh, seeing that it had been selling only the day before for seven and three-fourths or seven-eighths? Sorry. That was the best he could do. They could take it at that price or leave it.
Naturally there was a panic among those who were short. The trick was obvious, but so was the law. Those who could, pocketed their losses without undue complaint and departed; some who could not, and were financially unimportant, decamped, leaving Osterman’s agents to collect as best they might. Only one, Mr. De Malquit, finding himself faced by complications which he could not meet, took his own life. He had unfortunately let himself in for much more money than had the others and at a time when he could least stand the strain.
The day De Malquit came to see Osterman, he was behind his desk expecting many, and because, as I afterwards learned from Mr. Osterman himself, Mr. De Malquit had been so wary, making agreements at first, which made it hard to trap him, Osterman saw him as one of those who had made it most difficult for him to win, and therefore deserving to be sheared the closest. “One hundred per share, take it or leave it,” was his only comment in reply to Mr. De Malquit’s statement that he found himself in a bit of a hole and would like to explain how a little time would see him through.
“But, Mr. Osterman,” I recall De Malquit replying, “I haven’t so much now, and I can’t get it. These shares were being quoted at seven and three-fourths only yesterday. Can’t you let me off easier than that, or give me a few months in which to pay? If I could have six months or a year—I have some other matters that are pressing me even more than this. They will have to come first, but I might pull through if I had a little time.”
“One hundred, on the nail. That’s the best I can do,” Osterman replied, for I was in the room at the time. And then signaled me to open the door for him.
But at that Mr. De Malquit turned and bent on him a very troubled look, which, however, did not move Mr. Osterman any. “Mr. Osterman,” he said, “I am not here to waste either your time or mine. I am in a corner, and I am desperate. Unless you can let me have some of this stock at a reasonable price I am done for. That will bring too much trouble to those who are near and dear to me for me to care to live any longer. I am too old to begin over again. Let me have some of it now. To-morrow will be too late. Perhaps it won’t make any difference to you, but I won’t be here to pay anybody. I have a wife who has been an invalid for two years. I have a young son and daughter in school. Unless I can go on—” He turned, paused, swallowed, and then moistened his lips.
But Mr. Osterman was not inclined to believe any broker or to be worked by sentiment. “Sorry. One hundred is the best I can do.”
At that De Malquit struck his hands together, a resounding smack, and then went out, turning upon Osterman a last despairing glance. That same night De Malquit killed himself, a thing which Osterman had assumed he would not do—or so he said, and I resigned. The man had really been in earnest. And, to make matters worse, only three months later De Malquit’s wife killed herself, taking poison in the small apartment to which she had been forced to remove once the breadwinner of the family was gone. According to the pictures and descriptions published in the newspapers at the time she was, as De Malquit had said, an invalid, practically bedridden. Also, according to the newspapers, De Malquit had in more successful days been charitably inclined, having contributed liberally to the support of an orphan asylum, the Gratiot Home for Orphans, the exterior appearance of which Osterman was familiar with. This fact was published in all of the papers and was said to have impressed Osterman, who was said always to have had a friendly leaning toward orphans. I have since heard that only his very sudden death three years ago prevented his signing a will which contained a proviso leaving the bulk of his great fortune to a holding company instructed to look after orphans. Whether this is truth or romance I do not know.
2. The case of Henry Greasadick, another of Mr. Osterman’s competitors, was similar. Mr. Greasadick has been described to me as a very coarse and rough man, without any education of any kind, but one who understood oil prospecting and refining, and who was finally, though rather unfortunately for himself, the cause of the development by Osterman of the immensely valuable Arroya Verde field. It is not likely that Greasadick would ever have made the fortune from this field that Osterman and his confrères were destined to reap. However, it is equally true that he was most shabbily treated in the matter, far more so than was De Malquit in regard to his very questionable holdings and sales. The details of the Arroya Verde field and Greasadick are as follows: Greasadick has been described to me as a big, blustery, dusty soul, uncouth in manners and speech, but one who was a sound and able prospector. And Osterman, it appears, having laid the foundation of his fortune by treating De Malquit and others as he had, had come west, first to the lumber properties of Washington and Oregon, where he bought immense tracts; and later, to the oil lands of California and Mexico, in which state and country he acquired very important and eventually (under him) productive holdings. Now it chanced that in his wanderings through southern California and Arizona he came across Greasadick, who had recently chanced upon a virgin oil field which, although having very little capital himself, he was secretly attempting to develop. In fact, Greasadick had no money when he discovered this oil field and was borrowing from L. T. Drewberry, of the K. B. & B., and one or two others on the strength of his prospects. It also appears that Drewberry it was who first called the attention of Osterman to Greasadick and his find and later plotted with him to oust Greasadick. Osterman was at that time one of three or four men who were interested in developing the K. B. & B. into a paying property by extending it into Arizona.
At any rate, Greasadick’s holdings were one hundred miles from any main line road, and there was very little water, only a thin trickle that came down through a cut. True, the K. B. & B. was about to build a spur to Larston in order to aid him, but Larston, once the line was built to it, was fourteen miles away and left Greasadick with the problem of piping or hauling his oil to that point. Once he heard of it Osterman saw at a glance that by a little deft manœuvring it could be made very difficult for Greasadick to do anything with his property except sell, and this manœuvring he proceeded to do. By buying the land above Greasadick’s, which was a mountain slope, and then because of a thin wall of clay and shale dividing the Arroya Verde, in which lay Greasadick’s land, from the Arroya Blanco, which was unwatered and worthless, being able to knock the same through, he was able to divert the little water upon which Greasadick then depended to do his work. Only it was all disguised as a landslide—an act of God—and a very expensive one for Greasadick to remedy. As for the proposed spur to Larston—well, that was easy to delay indefinitely. There was Drewberry, principal stockholder of the K. B. & B., who joined with Osterman in this adroit scheme. Finally, there was the simple device of buying in the mortgage given by Greasadick to Drewberry and others and waiting until such time as he was hard-pressed to force him to sell out. This was done through Whitley, Osterman’s efficient assistant, who in turn employed another to act for him. Throughout, Osterman saw to it that he personally did not appear.
Of course Greasadick, when he discovered what the plot was, roared and charged like a bull. Indeed before he was eventually defeated he became very threatening and dangerous, attempting once even to kill Drewberry. Yet he was finally vanquished and his holdings swept away. With no money to make a new start and seeing others prosper where he had failed for want of a little capital, he fell into a heavy gloom and finally died there in Larston in the bar that had been erected after the K. B. & B. spur had been completed. Through all of this Mr. Osterman appears to have been utterly indifferent to the fate of the man he was undermining. He cared so little what became of him afterwards that he actually admitted, or remarked to Whitley, who remained one of his slaves to the end, that one could scarcely hope to build a large fortune without indulging in a few such tricks.
3. Lastly, there was the matter of the C. C. and Q. L. Railroad, the major portion of the stock of which he and Frank O. Parm, of the Parm-Baggott chain of stores, had managed to get hold of by the simple process of buying a few shares and then bringing stockholders’ suits under one and another name in order to embarrass President Doremus and his directors, and frighten investors so they would let go of the stock. And this stock, of course, was picked up by Osterman and Parm, until at last these two became the real power behind the road and caused it to be thrown into the hands of a receiver and then sold to themselves. That was two years before ever Michael Doremus, the first president of the road, resigned. When he did he issued a statement saying that he was being hounded by malign financial influences and that the road was as sound as ever it had been, which was true. Only it could not fight all of these suits and the persistent rumors of mismanagement that were afoot. As a matter of fact, Mr. Doremus died only a year after resigning, declaring at that time that a just God ruled and that time would justify himself. But Mr. Osterman and Mr. Parm secured the road, and finally incorporated it with the P. B. & C. as is well known.