The stockholders in the South Improvement Company held shares as follows :— Wm. Frew, W. P. Logan, and J. P. Logan, of Philadelphia, 10 shares each ; Chas. Lockhart and Richard S. Waring, of Pittsburg, 10 shares each ; W. G. Warden, of Philadelphia, and 0. F. Waring, of Pittsburg, 475 shares each ; Peter H. Watson, of Ashtabula, Ohio, 100 shares ; H. M. Flagler, 0. H. Payne, John D. Rockefeller and Wm. Rockefeller, of Cleveland, and J. A. Bostwick, of New York, 180 shares each ; total, 2,000 shares of $100 dollars each, of which the Standard Oil interests held 900. The contract was signed on behalf of the Company by P. H. Watson, president, and on behalf of the railroads as follows : Pennsylvania, J. Edgar Thompson, president ; New York Central, Wm. H. Vanderbilt, vice-president ; Erie, Jay Gould, president ; Atlantic and Great Western, General Geo. B. McClellan.
How completely the railroads were got to play the game of Mr. Rockefeller and his friends is made still more evident by two other clauses of the contract. The first is Section 8 of Art. 2, by which the railroads contracted to send each day to the South Improvement Company mani fests on waybills of all petroleum shipped over the roads, which manifests shall state the name of the consignor, the place of shipment, the kind and actual quantity of the article shipped, the name of the consignee, and the place of destination, with the rate and gross amount of freight and charges.
This, of course, gave the South Improvement Company a full knowledge of everybody else's business—just what Mr. Rockefeller strove after from beginning to end of his career—and also ensured the due payment of the drawbacks by the roads. The other provision I refer to was contained in Art. 4, whereby each railroad was bound to co-operate as far as it legally might to maintain the business of the South Improvement Company against loss or injury by competition, to the end that it may keep up a remunerative and so a full and regular business, and to that end shall lower or raise the gross rates of transportation over its railroads and connections, as far as it legally may, for such times and to such extent as may be necessary to overcome such competition, the rebates and drawbacks to be varied pari pas= with the gross rates.
This makes it clear that Art. 3, providing that rebates hereintofore provided may be made to any other party who shall furnish an equal amount of transportation and who shall possess and use works, means, and facilities for carrying on and promoting the petroleum trade equal to those possessed and used by the South Improvement Company, is a mere blind. The South Improvement Com pany was to be maintained at all costs and against all comers by whatever juggling with the rates should become necessary for the purpose.
It was admitted by members of the South Improvement Company, who appeared before the Investigating Committee appointed by Con gress in March, 1872, that the discrimination would have turned over to the Company fully $6,000,000 (£1,200,000) annually on the carrying trade, while the railroads expected to make about $1,500,000 (£300,000) more than on the previously existing rates. The Company would
thus make four times as good a bargain as the railroads. It is difficult to see how shrewd business men like the railroad directors could be led into a bargain in which they were so obviously bested. Another point the railroad directors had to consider in the interest of their shareholders was this. The avowed object of the South Improvement Company was to restrict the output of refined oil in order to raise its price. The interest of the railroads was obviously that the prices of oil should be kept low, so that the refiners would be com pelled to ship the largest possible quantity. The interests of the shippers and of the railroads which received the shipments were thus dia metrically opposed. The former wanted smaller consignments at higher prices, and the latter larger consignments at no matter what price. How the railroad officials could be induced to sign a contract binding them to help in the diminution of their own freights it is difficult to see.
Mr. Frank Rockefeller, brother of John D. Rockefeller, testified before a Congressional Committee on July 7, 1876, that it was his impression at the time that the rebates went into a pool and were divided up between the Standard Oil Company and the railroad officials. He mentioned four of the latter by name, and two of them instantly sent a denial to the Press. Mr. Frank Rockefeller's evidence—omitting the portion in which he mentions names—is repro duced in the late Mr. George Rice's well-known pamphlet on the Standard Oil Railway Dis criminations (p. 25), as follows :— By the Chairman : Q. What do you mean by the pool—a pool amongst the rail roads or amongst the oil men 2 A. I don't give this as a positive fact, but as I understand the arrangement, the New York Central, the Erie, the Atlantic and Great Western, the Pennsylvania Railroad, the Cleveland, Columbus and Cincinnati, and the Baltimore and Ohio roads have a pool—are combined for the purpose of shipping oil, and oil only—and in this pool the Baltimore and Ohio gets a certain number of barrels to go over its road, the Lake Shore so many to go over its road, and the Pennsylvania Company so many to go over its road, from different points in the country, and on the oil that is shipped over these roads by the pool and the Standard Oil Company there is a rebate or a draw back from the shipment of so much, which is put into this pool, over whichever road the oil may go, and that rebate is divided up between the Standard Oil Company and the rail road officials.
Q. The railroad officials, do you say 2 A. So I understand it. I don't say that of my own know ledge.
Q. Then it does not go to the railroads themselves 2 A. No, sir.
Q. But to the railroad officials 2 A. To the railroad officials.
There the matter was left by the Committee of Congress, and there it must be left perforce. If the allegation is true, it would explain how the railroad directors could be induced to sign such a bad bargain for the railroads, and if false, it can presumably be refuted by an exhibition of the railroad accounts.