Apparently old Senator Stanford foresaw this, for his trust deed provided that the Governor of the state should receive a complete report each year upon the financial affairs of the trust. But the Governor of the state never received that complete report. For many years the faculty of Stanford, who were living on short rations, could get no statement whatever; the trustees allowed the university the lump sum of eight hundred thousand dollars a year, and no explanations. Finally, about 1908, after some years of agitation, a statement was prepared and circulated at a board meeting. It was the first financial statement which President Jordan had ever seen, and he badly wanted a copy of it, so he “swiped” it—at least so he told a member of the faculty, who told me. He called a meeting of the full professors, to whom he gave certain figures purporting to be the income of the university trust as communicated to him, but one of the professors who had made a detailed study of the court schedule of Mrs. Stanford’s estate pointed out that the interest on the bonds there scheduled amounted to more than the purported total submitted by President Jordan—this not counting other sources of income. And Trustee Crothers, in a letter to me, admits that during the period he held the Pacific Improvement stock in trust the income from this one item amounted to two million dollars in thirty-one months, which is just about eight hundred thousand dollars a year! After that nothing more appears to have been heard or seen of this financial statement.
These facts are known to many who are interested in the university; they were known to Thorstein Veblen, who was a professor in Stanford for three years. In 1918 Veblen published a book entitled, “The Higher Learning in America,” in which he referred briefly to this scandal. But his sense of politeness toward the university caused him to withhold its name—which got him into trouble with Professor Brander Matthews. If I tell you this story, it will lead us off the trail of Stanford for a page or two; but it will teach us about the prestige of universities and how it is maintained, and we shall thus be better able to understand the Stanford skeleton, and how it has been kept hidden all these years.
I am told by a person high up in Columbia University that it was Nicholas Murray Butler, sitting in his high watch-tower and keeping guard over his empire of education, who first saw this dangerous book of Veblen’s, and turned it over to his henchman, Brander Matthews, to be “slated.” Matthews wrote what was supposed to be a book review, but was really an assassination, and the New York “Times,” which exists to perform these little services for the plutocracy, gave it prominence. Matthews found one trivial grammatical error in Veblen’s book, and another printer’s error which could be laid to Veblen; on this basis he accused of illiteracy the most brilliant economic satirist in the world! Because of Veblen’s politeness in failing to name Stanford, Brander Matthews described him as “a creature who creeps up stealthily with a stiletto to deal a stab in the back.” Says Matthews: “On page 67 and on page 70 Mr. Veblen seems to suggest that there are boards of trustees whose members make a personal profit out of the funds entrusted to them; the insinuation is hedged about with weazel words—i. e., ‘instances of the kind are not wholly unknown, though presumably (!) exceptional.’”
To appreciate this extreme piety of Professor Brander Matthews, you would have to see him, as I have, dangling a cigarette from his lower lip as he lectures to his students, and causing these prematurely wise young men to chuckle at his worldly wit. For Brander is a club man and cynic, one of the very shrewdest, and he knows what butters parsnips. If in the bosom of the Century Club he and his friend, Nicholas Miraculous, were to hear a story about a member of a school board getting advance information and buying up real estate, or about a college trustee handling the investment of trust funds in such a way as to make “honest graft” out of it, the two of them would tip each other a wink. But when they are talking for publication—when they set out to assassinate a dangerous radical—the two cronies take on an air of innocent trustfulness which has not been met with in the world since Moses Primrose came home from the fair with his gross of green spectacles with silver rims and shagreen cases!
For my part I don’t want to take any chance of being called “a creature who creeps up stealthily with a stiletto to deal a stab in the back!” Whatever my old friend Professor Matthews may say about me when he comes to assassinate this book in the New York “Times,” let him at least put me under his other classification—that more respectable person “who comes straight at us with a bowie knife in his hand.” Before I finish this volume I shall give Professor Matthews several cases of university and college trustees misusing funds; in a succeeding volume, I shall show him school board members getting commissions from book companies, and buying up land to sell to the public for school sites. If Professor Matthews will obtain a copy of a printed report made in 1908 to Mayor Taylor of San Francisco by a graft investigating committee, he will find it proven that one of the regents of the University of California invested university funds in a “French Restaurant” building on the corner of Geary and Mason streets, constructed by him with a view to its use as a house of assignation. And if that seems too far off for Professor Matthews, let him investigate the properties in New York City on which his own university holds its mortgages, and he will find that one of them at least was being used as a disorderly house last spring! Or let him run up to Rochester, where the university is moving out to a magnificent new site, furnished by Mr. Eastman, the kodak king, and all around that site he will find that members of the board of trustees and their relatives and friends have been making money buying up real estate on advance information. Or let him visit the Connecticut College for Women, at New London, and hear the story of Frederick Sykes, the recent president, who discovered that the trustees were stealing the funds of the college, even to the coal, and tried to interfere with them and was fired from his job! One of the trustees was a high school principal, and the board furnished him an automobile to go out and collect funds. He never got any funds, but continued to use the car, and when the scandal was exposed, it was explained that he had arranged to have the price of the car returned to the college in his will. The grand duke who ran this board of trustees was a multi-millionaire, who had set them a bad example by living a dissolute life. He wanted an inn-keeper’s wife, and paid the inn-keeper forty thousand dollars to get a divorce from her; then the grand duke married the lady, and got an honorary degree from his college!
With this much of preliminary, we return to Stanford, to see just what this super-plutocratic board of trustees has done. To begin with, let me explain that the holding concern devised by the “Big Four” plunderers of the Central-Southern Pacific, for the purpose of skimming off the cream of the profits, was known as the Pacific Improvement Company. The affairs of this concern have been kept a dark secret; the holdings of Stanford in Pacific Improvement stock were not made over to the Stanford trust by Mrs. Stanford, but were placed in the hands of Judge Crothers, a trustee, and by him turned over to the Stanford trust after Mrs. Stanford died. In the last annual report of the treasurer of the university, I find the value of this holding listed at one hundred dollars for twenty-five hundred shares, with “dividends from earnings” for the year of $2,482.44, and “liquidation dividends” of two hundred and seventy-five thousand dollars. That is a pretty good earning capacity for a hundred dollars’ worth of stock, you must admit! You see how the big insiders operate—no one knows what this stock is really worth. In his letter to me Trustee Crothers admits that “there were a number of reasons why Mrs. Stanford did not wish the whole world, nor even all of the trustees of the university to know the terms ... of the Pacific Improvement trust.” No probate courts, or inheritance tax appraisers, or other unfriendly investigators were ever to have a chance to stick their noses into Pacific Improvement!
Next, these super-plutocratic trustees turned over to Stanford University the sum of eight hundred thousand dollars a year, without explanation, and this sum of money was deposited in the Union Trust Company of San Francisco without interest. Let Professor Brander Matthews inquire around among his banker friends in New York, and find out how much they would be willing to pay him in the way of interest on a deposit account, amounting at its maximum to eight hundred thousand dollars a year! I am informed that when Mr. Anderson came into the board, representing the Morgan interests in the Standard Oil Bank of California, he pointed out that that arrangement was not a profitable one for the university. Also, I am told by a Stanford professor, in whose rigid integrity I have many reasons for trusting, that he once heard one of these trustees state angrily that the board had that afternoon made a loan of five hundred thousand dollars to one of their own members, at a ridiculously low rate of interest on the real estate security offered. Afterwards the trustee who had borrowed this money got into trouble, and no one knows how much money the university lost. In the last president’s report I find a “capital decrease” recorded of $17,320 on Sacramento Northern Railway bonds. I also find an item, “Stock not recorded on books, when acquired in 1919 at Northern Electric Company reorganization.” This is only one sample—nobody knows how many other items are “not recorded on books!”
There are other matters of record which can be verified by anyone. These trustees are the high-up members of the California plutocracy, the shrewdest business men the state possesses; they work diligently for their own financial interests, and have vastly increased their personal fortunes during the last thirty years. But what have they done for Stanford? They have made failures of the most important business transactions they have managed for the university. The president of the board of trustees is one of the richest ranchers in California, and there are on the board officials and directors of several of the state’s colossal land companies; how comes it that men like Mr. Newhall and Mr. Nickel have never been able to tell Stanford how to make a success of its big ranches? The Palo Alto, Vina and Gridley ranches all failed, and the last two were finally sold at sacrifice prices. There were something like a hundred thousand acres, sold for about four million dollars, which is forty dollars an acre. The Gridley ranch was sold at a price so low that every piece of it was almost immediately saleable at an advance about forty per cent, without further subdivision; a great part of this land is now being held for two hundred and seventy-five dollars an acre.
And these same first-class business men have carried on elaborate building programs at the peak of high prices; they have leased a wonderful building site for a long term of years, with the privilege of buying at any time during the life of the lease, at a price set at the beginning of the lease! They have killed Stanford as a democratic institution, and brought it close to the rocks of bankruptcy, by starting a medical school in San Francisco, against the judgment of the best experts, and allowing the expenses of that school to swallow up the funds of Stanford. That they had doubt as to the success of the medical school was shown by their resolution in 1908, to the effect that this school should never be allowed to take more than twenty-five thousand dollars a year out of Stanford’s funds. But in the last president’s report I find the medical school with a minus balance of a hundred and nineteen thousand dollars—and this does not include the expenses of the instruction at Palo Alto, comprising the first four or five years of the course. For instance, the biological group alone shows a deficit of a hundred and thirty thousand dollars!
So much for the handling of the Stanford trust. If I had a life-time in which to study universities, I should like to see what care has been taken with the funds of the University of the United Gas Improvement Company of Philadelphia, and with those of the University of the Steel Trust, at Pittsburgh, and with those of the University of Heaven, at Syracuse, and with those of the Mining-Camp University at Denver. I should like to settle down in New York and make a thorough financial study of the University of the House of Morgan, and tell Professor Moses Primrose the names of all those trustees and professors who got advance news of the moving of the university to Morningside Heights; I should like to raise a fund and have a search made of the title records, and give him a list of the various lots and parcels of land which now belong to Barnard College, and figure up the total of the fortunes cleared by the insiders who purchased the old insane asylum which stood on that site! But maybe Professor Moses Primrose would call that “honest graft!”