Wealth against commonwealth

by Henry Demarest Lloyd

Suit was now brought by the Attorney-General of the State to recover this tax, as was his duty, and then the company began to stir itself. To assist him in procuring and interpreting evidence the Attorney-General, who knew nothing of the oil business, obtained the services of a man who knew more about it than any one else in Pennsylvania. This person was a practical oil man. He was one of the leaders of the producers and refiners' association, which in the exciting times of 1872, when law and order in Pennsylvania stood on the edge of a crater, compelled the railroads to abandon the South Improvement scheme, "in name," and to give in writing the pledge that "all arrangements for the transportation of oil after this date shall be upon the basis of perfect equality to all," though he could not find a way to make them keep the pledge. He was prominent six years later in the uprising of the people when they found that all these promises were being broken, and all their rights on the highways being violated. It was largely through his influence that the producers determined to proceed against the oil combination as a criminal conspiracy, and procured the indictment of its principals in Clarion County, Pennsylvania, on charges of crime.[318] "When," as was said before the Pennsylvania Legislative Committee of 1883, "the doors of the penitentiary were gaping wide to receive them; when a true bill had been found before the Grand Jury; when, if they ever were in jeopardy before to-day, they were in jeopardy."

He was chairman of the Committee on Transportation of the Oil Producers' Association, and was one of the "legal committee" of five who represented the producers in having the "anti-discrimination suits" brought and pushed against the Pennsylvania Railroad by the State in 1879. By these suits the discriminations and favoritisms, which, though known, it had till then been impossible to prove, were forced into the light as facts, and the evidence was furnished without which the indictments just referred to could not have been found. When the accused, frightened at last, succeeded in getting the aroused producers to agree not to push the criminal trial, in consideration of a solemn pledge that all secrecy and favoritism in transportation should be given up, he withdrew from the negotiations and would not sign the compromise. He had assisted the Congressional Committees of Commerce at Washington in 1872 and 1876 in their ill-starred investigations, and had been active in the effort to get another investigation begun in 1880. He had also been one of the principal witnesses before the New York Legislative investigation of 1879. For eighteen years he had been on this quest. With him the Attorney-General now arranged to get the evidence on which the State could support its claim for taxes.

The members of the great corporation saw that they must act. In out-going Auditor-General Schell they had met the first officer of the people who was as determined to make them pay as they were not to pay. The policy of silence and nullification was abandoned. One of the members of the trust came in person to the State capital to see the Attorney-General. He made an unexpected overture. He volunteered to furnish the State with a full disclosure of the facts it needed to prove its claim.

"I confess," said the Deputy Attorney-General, "that I little knew in what direction to cross-examine him."[319] He therefore sent for the expert who had been employed by the Attorney-General. The "trustee" protested against his presence; but the Deputy Attorney-General said that he had been employed by the State, and it would be necessary that he should take part. The representative of the trust, moved, as he afterwards testified, by the patriotic consideration that "the regular cumbersome way of taking oral testimony ... would result in great labor and expense to the State, and would be an obstruction and labor to us that could be avoided," made a suggestion that the State go to the trial of the case upon a statement of facts of their business which he and his associates would make. This offer to become a volunteer witness was agreed to, and the delinquent corporation and the State went into court with an "agreement as to facts." The Attorney-General reserved for the State the right to add to these facts, but did not at any time during the proceedings do so.

His expert shrewdly foresaw that another defeat for the people was to be the result of this policy. "I objected very strenuously," he says. "It was my pet scheme to examine them orally in court or by commission, and I gave it up very reluctantly. I told the Attorney-General I could not believe those gentlemen were in earnest, that I knew I could ask a string of questions of any one of them which if answered would have given the case away to the State."[320] But the Attorney-General, the same who as counsel for the people, in 1879, against the members of the same corporation, led his clients to defeat, overruled him. The old campaigner saw the mistake of 1880 about to be repeated, and an agreement with the offenders substituted for trial and for the defeat of them he believed would follow. He determined to prevent the consummation of this second catastrophe. He sent his counsel to New York to the headquarters of the oil combination with a notice that he would not adhere to the bargain made by the Attorney-General at Harrisburg with reference to "the agreement of facts." "I propose to attack," was the message he sent.[321] He was to have received compensation from the State. He believed that this gave him an interest in the matter sufficient to gain a footing in the courts for action by himself independently of the Attorney-General. In pursuance of this idea, when the case came up for trial, he appeared with his private counsel ready to take part in the proceedings if permitted.

The notice of attack was received "with surprise," but was met with a characteristic move. "I raised the question with him"—the counsel—"as to what possible motive" his client "had in the matter," the "trustee" testifies, "and as to whether it would not be better for him to desist from it; whether it would not be possible for us, if he was needing business, to find some position in which he could legitimately earn a living."[322] The lawyer replied that he had no right to treat on any such basis, and withdrew from all connection with the case. But this was the opening of a negotiation which through another lawyer "resulted," as the expert of the State afterwards confessed, "in peace between us." He had given notice that he meant to attack, and the "negotiation" which followed "was whether anybody would give me as much as there was in my contract with the State if I would not attack."[323]

Meanwhile the Attorney-General marched gayly to another defeat of his client—the people—going into court with no other ammunition than the facts furnished by the men he was suing. He did not put his expert, nor the Auditor-General, nor his assistant, nor the men on whose information and affidavits the estimate had been made of taxes due, nor any one else on the stand. He was "perfectly satisfied," he says, "that these facts were true," and that the company were "in good faith doing exactly what they undertook to do—namely, to furnish me with all the information that was necessary to establish the Commonwealth case."[324]

His method was as singular with the argument as with the testimony. He insisted, in opposition to the opinion of Auditor-General Schell, that such a corporation must pay taxes on all its capital stock, whether it represented property in the State or out of it. The court decided against him. It held that it was taxable "only on so much of its capital stock as was represented by the business and property of the company within the State." As to what the amount of this property and business within the State was the court took the facts furnished by the delinquent itself, as they were the only ones presented to it by the Attorney-General. The amount originally charged for taxes by Auditor-General Schell, who had forced the fighting, was $3,145,541.64. The Attorney-General, on his mistaken theory of the law and on the facts volunteered by those he was suing, had "split the difference" and sued for only $796,642.20. The court cut this down to $33,270.59, and on appeal this was still further reduced to $22,660.10.[325]

This decision was not final or conclusive as to either the State or the company, both of whom afterwards sued out writs of error. The expert, who had been pushed to one side, at once determined to take what steps he could to reopen the case and mend the fortunes of the State. The moment the decision was announced he telegraphed the Attorney-General again for another conference, and was told to come to Philadelphia. He told the Attorney-General that he thought "the hope of the State to get the largest amount of money was to get a rehearing and let us have an oral examination." But the "satisfied" Attorney-General refused to do anything but carry the same argument and the same agreement of facts up to the Supreme Court. He refused to move for a new trial, and not only told his expert so, but told the "trustee" so. The trustee, by one of those coincidences which prove how much better it is to be born lucky than rich, happened to have come at the same time to stay in the same hotel with the Attorney-General.

It was in vain that the expert pointed out omissions of property and facts which he thought "had not been clearly shown in the agreement as to facts," and afterwards other matters he had discovered. After the defeat of the State he prepared an affidavit containing additional facts. He employed an attorney in the preparation of this affidavit and a petition to the court to have the case reopened. His purpose was "to get another chance at this trial."