This revelation was made October 17, 1877, and an effort was made to secure the indictment of Messrs. Sage and Gould. It was a matter which at once attracted the widest interest. District Attorney Martine was asked to send the complaints before the Grand Jury, but pending any action on his part, Mr. Gould started on a trip abroad on his yacht Atalanta. Then followed probably the longest rest and only complete rest Jay Gould ever enjoyed from the time he took up and pushed through the abandoned survey of Ulster county in 1852.
He went first to Gibraltar, then to Marseilles, cruised along the Mediterranean, going to Egypt and Italy. While he was absent the legal war against him at home continued. His enemies in the Kansas Pacific still clamored for his indictment; the commissioners appointed by President Cleveland to investigate the affairs of the Pacific railroads made a thundering report against the management of those corporations, showing that they had received in aid from the government the sum of $447,000,000. Congressman Anderson offered a resolution in the House of Representatives recommending that suit be begun against Mr. Gould and others to enforce the Thurman act.
In March, 1888, the Grand Jury failed to indict, and on that very day Mr. Gould was complacently strolling about the streets of Algiers. Three weeks later Mr. Gould landed from his yacht at Jacksonville, Fla., and in a very short time he was at his desk looking after his great financial interests and manipulating the stock market.
On his return he attacked his prosecutors with a virulence which he had never displayed before, and filled the columns of the newspapers with interviews. In one of these he declared that the attack upon him was the result of a conspiracy and blackmail, and that the powers behind the criminal proceedings were “a newspaper” (meaning the Herald), “a cable company” (referring to the Mackey-Bennet Company), “and a woman.” The latter was understood to be the wife of an officer of one of Mr. Gould’s railroads who had brought suit for divorce. This bringing of a woman into the case created a great sensation. A few days later Gould made a bitter personal attack on James Gordon Bennet, of the Herald, calling in question his personal and social character, and reciting incidents unfit for publication. This was the first time in his life that Gould appeared to be thoroughly “rattled;” the first time that he let down the curtain of mystery with which he had so long covered himself, and the first time that he broke that silence which was his best weapon.
This is a good place to quote from Gould’s testimony before the Pacific Railroad Commission, as it gives an insight into his theory of railroad operations.
“I consider,” he said, “the past a good thing to judge a road by, but the future more. I have been all my life dealing in railroads; that is, since before I came of age. I always bought on the future; that’s how I made my money. The bonds on the first road I bought were down to ten cents. I built up the road and sold them for $125. That’s the reason I went into the Kansas Pacific and the Union Pacific. But I saw the Kansas Pacific was going to develop faster than the Union Pacific.”
Mr. Gould’s railroad operations were entirely too numerous to be followed in all their details, especially as enough has already been given to indicate the character of his enterprises. But no life of Mr. Gould would be complete without an account of his connection with Wabash. On this road, however, he simply repeated, though to a less degree, his tactics in Erie, and the result is a corporation almost hopelessly burdened with enormous obligations.
In the North American Review of February, 1888, will be found a full history of this unfortunate road. The writer says that “Mr. Gould remains the leading figure in the chapter of Wabash as he was of Erie.” There is, he says, a “relative disappearance of the special forms of judicial usurpation and misconduct which lent such a lurid aspect to Mr. Adams’ story, and in their place will be noted one sweeping judicial act followed by two or three supplementary acts which accomplished the designs of the actors with complete effectiveness.” Gould gained control of the road in 1879 and became president in 1881. The writer of the Review article sums up the history of Wabash as follows:
“The Wabash system arose from the absorption and consolidation of sixty-eight separate original corporations; when thus consolidated the system owned and controlled in 1883 about 4,814 miles of railroad in the six states of Ohio, Michigan, Indiana, Illinois, Missouri and Iowa; its capital stock was increased between 1877 and 1883 from $40,000,000 to $50,174,700; its funded or mortgaged debt was increased during the same period from $20,311,570.60 to $76,394,075; three quarterly ‘dividends’ were paid on the entire preferred stock in 1881—the year after the issue of the general mortgage in 1880—amounting to $1,036,529; within two years and a half after these ‘dividends’ the company made default on the interest of all its mortgaged debt; in May, 1884, the entire property was, on the application of the debtor company alone, secretly placed in the hands of Humphreys and Tutt, two of its former directors and officers, men without any special qualifications for railroad management, and who had been part of the directorate which had brought the system to bankruptcy; immediately after the appointment of Humphreys and Tutt, the Circuit Court of the eastern district of Missouri directed the issue of $2,300,000 of receiver’s obligations to ‘protect’ the indorsements of Wabash notes by Gould, Dillon, Sage and Humphreys; the same court, six days later, directed the further issue of $2,000,000 of receivers’ certificates—made a first lien on all the Wabash property—to pay so-called Wabash indebtedness, which by the terms of its lease to the Iron Mountain, which had been, in turn, leased to the Missouri Pacific, was the indebtedness of the Missouri Pacific; as the result of two years and a half of this receivership, there was paid out of the receivers’ earnings, on account of liabilities incurred prior to the receivership, $3,260,519.23, leaving $500,000 still due; as the grand result of the receivership of Humphreys and Tutt, interest has accrued to the amount of $4,390,000, all due and unpaid, and of receivers’ obligations, $3,200,000, a total during two years and a half of $7,590,000, with $290,000 of cash in hand. The property being sold to a purchasing committee, of which the chairman, Joy, was a former Wabash director, and another member, Ashley, was the secretary of the receivers, a demand was made of the prior mortgage bondholders to fund into new Wabash bonds their past due interest and to reduce the interest on their bonds for the future from 6 and 7 per cent. to 5 per cent. Upon application of prior mortgage bondholders the United States Circuit Court at Chicago removed Humphreys and Tutt for misconduct as receivers and appointed a new and separate receiver for the Wabash lines east of the Mississippi river.”
This removal was upon order of Judge Gresham, who has made such a high reputation as a judge who can be depended upon not to be easily influenced in favor of corporations. This order was called at the time “one of the bravest acts in the history of justice.” On rendering decision he spoke in terms of great severity of the managers and the Gould receivers, and appointed in place of the latter Judge Cooley, who was afterward made railroad commissioner by President Cleveland. In commenting on this decision, Gould defended himself by attacking Gresham, who he declared was suffering from a severe attack of “the presidential fever.”