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CHAPTER XVII.

ADMINISTRATION OF JOHN A. DIX-MARCH TO JULY, 1872.

McHenry, Barlow, and the Atlantic and Great Western Railroad Company the Power Behind the Throne - The Erie's Floating Debt $5,000,000, and No Money in the Treasury - Barlow Appeals to Bischoffscheim for Aid and Gets It - The Extraordinary Contract with the London Bankers to Place the $30,000,000 Loan Peter II. Watson, ex-Assistant Secretary of War, Succeeds General Dix.

It was many weeks after the so-called Sickles coup had brought into existence the "Reform " management of Erie that Wall Street was willing to accept it as anything more than the result of a collusive scheme to which even Jay Gould himself was a party. Time and circumstances entirely disproved this suspected collusion of Gould with the revolution. There was no room for any doubt, however, as to the tangible presence of a powerful Atlantic and Great Western element in the atmosphere surrounding the new order of things in Erie. The controlling influence of the management was James McHenry, in connection with Bischoffscheim & Goldschmidt, the London bankers, and representatives of the English Shareholders' Association. His ambition was to effect a combination of the interests of the Erie Railway Company with those of the Atlantic and Great Western Railroad Company, the vicissitudes of which latter had led him into serious financial entanglement. By such a combination he hoped to use the Erie as a means of relieving himself of his burden of Atlantic and Great Western responsibilities, by passing it over to the broader shoulders of the Company he had seized from Jay Gould, although those shoulders were already so overladen with other burdens that this one would have been as the last straw that broke the patient camel's back. The Atlantic and Great Western influence had a powerful representative in S. L. M. Barlow, of the new Erie Directory. He was counsel to the Atlantic and Great Western, as well as to the Erie. General McClellan, of the Directory, was President of the Atlantic and Great Western Railroad Company. General Dix had been elected President of the Erie

Railway Company for the prestige of his name, and as an earnest of the lofty intentions that were to move the new management in restoring and rehabilitating Erie. He had been but a short time President, though, when he manifested a disposition incompatible with that of a figurehead, and insisted that he had some ideas of his own as to the future of the Company. This caused friction in the Board. Early in the term of the new administration rumor began to busy itself with coming changes in the management. management. It declared that General Dix was to be removed and General McClellan made President in his place. At all events, it proclaimed with firmness, "Dix must go.'

September 1, 1870, the Gould management had authorized an issue of $30,000,000 in consolidated bonds, to bear interest at 7 per cent., payable in gold, and to mature in forty years. These bonds were intended for the conversion and extinguishment of the then existing mortgage bonds and other debts of the Company. Of this loan $18,000,000 were deposited with the Farmers' Loan and Trust Company to take up the outstanding old bonds, and, by an arrangement with J. S. Morgan & Co., of London, $5,000,000 were deposited with that house to take up the old English or sterling loan. None of these bonds had been placed. On May 8, 1872, two months after the Dix management came in, Bischoffscheim & Goldschmidt were appointed sole financial agents of the Erie Railway Company in Europe, and a contract was made with them by the Company under which they were to place the $30,000,000 loan. By the terms of this contract the

dated bonds. Following is the official showing of
the Company's condition:

Floating Debt of the Erie Railway Company, March 11,
1872, as reported by the Treasurer, Justin D. White :

Bills payable, maturing at an average of over
$700,000 per month.
Loans, viz.:

Willard, Martin & Co....
O. H. P. Archer..
W. J. O'Beirne.
W. J. O'Beirne..
Daniel Drew.
Edwin Eldridge.
Marine Bank..
Pennsylvania Coal Company..
Tenth National Bank...
Union Steamboat Company.
Duncan, Sherman & Co......

Company bound itself to pay these bankers a commission of 1 per cent. on the total amount of the semiannual interest upon such bonds as they might countersign and issue; a commission of one-half of I per cent. on the principal of such bonds; a commission of 21⁄2 per cent. on the nominal amount of the loan to the full extent issued to the public and paid for, or exchanged for bonds of previous issue, and a further commission of one-quarter of I per cent., in the same manner and times, as brokerage. The agents were also authorized to deduct from the money they might receive for the sale of bonds the amount that might be due them from the Company, principal and interest, for advances made by them. In addition to this, the Company agreed to pay such of the liens and commissions as the Farmers' Loan and Trust Company or the firm of J. S. Morgan & Co. of London might have against it, the former company having $18,000,000 and the latter $5,000,000 of the bonds in custody. This was the issue of bonds of which Jay Gould had purchased $3,000,000 at 60 while he was President of the Company. After the Dix management came into power, S. L. M. Barlow took preliminary measures to recover these bonds from Gould by legal proceedings, on the ground that he had purchased them, owing to his official connection with the Company, at a figure Jefferson Railroad Bonds... below their market value. Discovering, on investigating the matter, that the contention would not stand, as the price paid for the bonds by Gould was as high as could have been obtained from any other purchaser at the time, and that his being President of the Company was no bar to his holding securities. of the Company if properly obtained, the proceedings were discontinued.

The day the Erie was turned over to the Dix management, Justin D. White, then Treasurer of the Company, reported officially to the Board that the Company was, in round numbers, $5,000,000 in arrears, with no money in the treasury. Of this sum, it was claimed, over $2,000,000 were demand claims held by friends of the old Board, and money to pay them had to be raised forthwith to save the Company from bankruptcy, and the only security available was $3,336,000 of the $30,000,000 consoli

Unpaid Labor for January.
Unpaid Labor for February.
Supplies

Line Vouchers..

Miscellaneous Vouchers..

Total

$1,846,000 00

.$619,674 56

50,000 00

300,000 00

125,000 00

300,000 00

125,000 00

70,000 00

105,000 00

190,000 00

100,000 00

100,000 00 2,084,674 56

$3,930,674 56

80,000 00

550,000 00

285,000 00

100,000 00

30,000 00

$4,975,674 56

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Whether or not the list of personal creditors in this statement showed that they were" friends of the old Board''must be a matter of opinion. At any rate, it is reasonable to suppose they wanted their money. The value of the consolidated mortgage bonds, as a means of meeting these claims, was attested by the fact that they could not be hypothecated in New York for more than fifty cents on the dollar. Barlow cabled Bischoffscheim a statement of the desperate situation the Company was face to face with, and asked for a credit of $2,000,000 on the security of $3,500,000 of the consolidated mortgage bonds. Bischoffscheim responded by cabling the desired credit, and the difficulty was tided over for a short time. Then a similar crisis confronted the Company, and Bischoffscheim was asked for another loan of $2,000,000, which he cabled to the rescue of the Company.

It was for this service, which the Erie management (or rather Mr. Barlow) declared that no other house in the world would have taken the risk of doing, that the contract for placing the consolidated bonds was made with Bischoffscheim & Goldschmidt on such extremely liberal terms. The correctness of this Barlow opinion was called into serious question by others, and it became the subject of unpleasant official query a few months later.

Under the act of the New York Legislature repealing the Classification Act, which was signed by Governor John T. Hoffman April 20, 1872, an election for a new Board of Erie Directors must be held July 10, 1872. A great deal depended on the result of that election. Heath and Raphael and the American Committee of Erie stockholders held about threeeighths of the capital stock, and Bischoffscheim & Goldschmidt controlled another three-eighths. The remainder was held in Wall Street. A fierce struggle to gain possession of a majority of the outstanding two-eighths of the stock, to insure control of the coming election, began between the rival interests, and Erie once more became the all-exciting feature of the Street. This met with the pleasant approval of the bull element in Wall Street, for the scramble of the English schemers for stock had the effect of putting the price of Erie steadily higher. The indi

vidual interests and future prospects of neither of the rival prime movers in this struggle were enhanced by this situation in Wall Street at that time, and the result was that on April 8th, Heath and Raphael, of the London Protective Association, drew out of the fight and surrendered their holding of Erie stock to Bischoffscheim & Goldschmidt. This practically destroyed all hope the opponents of the plan of reorganization and future management of the Company and road had of gaining ascendency in the Company, and substituting their ideas of the proper way Erie affairs should be conducted. It also resulted in a significant victory for Jay Gould.

April 4, 1872, John Swan, representing the Heath and Raphael interests, had instituted proceedings, through Attorney-General Francis C. Barlow, against Jay Gould and Frederick A. Lane to recover such sums of money as they might have obtained by alleged irregular methods during their management of the Erie Railway Company. General Dix, as President of the Company, was made a party to this litigation as a matter of form. May 13th following, on motion of John Swan, this suit was discontinued by the Hon. William L. Learned, Judge of the New York Supreme Court, on payment to such defendants as had appeared the costs and disbursements in the proceedings. Jay Gould had appeared, but Lane had not. The reason assigned by Swan to the Attorney-General for discontinuing the proceeding was that his clients had made such arrangements with other stockholders as to insure proper protection of their interests in Erie, and consequently did not desire any further aid of the people of the State in the action.

As the time approached for the election it became an open secret that the Dix management was not the one that the new masters of Erie desired, and that the influences at work were not to the liking of General Dix. A section of the act repealing the Classification Act prohibited any officer or director of any other railroad company from holding a place in the Erie Direction. This prohibition stood in the way of a purpose the English controllers of the situation had in view, which was the placing of Cornelius Vanderbilt at the head of the Erie Railway Com

pany as the successor of General Dix. They made an effort to have the objectionable section of the act repealed almost before the ink with which Governor Hoffman had signed the bill was dry. They failed in this, and sought elsewhere for a new President for Erie. General McClellan, who, being President of the Atlantic and Great Western Railroad Company, had resigned from the Erie Board, was suggested, but he seemed to prefer the place he had. The then President of the Chicago and Alton Railroad Company, T. B. Blackstone, was importuned to take the place, but he declined. Then the perennial Gen. A. S. Diven, of Elmira, was mentioned prominently, but no agreement could be reached that warranted his call to the place. As a matter to be of pleasing recollection to General Dix, James McHenry and Gilson Holman, of the Bischoffscheim & Goldschmidt combination, and S. L. M. Barlow, their leading representative in the Erie Board, requested him, by a pressing communication, to remain at the head of the Company. He replied to them that his private affairs were such that it would be impossible for him to remain.

No one seemed to care to be President of the Erie Railway Company at that time. As late as July 8th, two days before the date fixed for the election, no future President was yet in sight. At a meeting of the leaders in Erie, held on the evening of that day, the name of Peter H. Watson was suggested. The suggestion came from Commodore Vanderbilt. Mr. Watson had been Assistant Secretary of War under Secretary Stanton during the Civil War, and since then had had no little experience in the affairs of railroads. It was agreed that he would make a satisfactory President of the Erie Railway Company. He was communicated with on the subject, and consented to take the place.

One of the resolutions passed by the Board of Directors July 8, 1872, the last meeting of the Dix Board, was the following:

Resolved, That the Treasurer be authorized to pay $30,000 as this company's proportion of the legal expenses of the New York Central Company at Albany, last winter, to prevent legislation affecting prejudicially the interests of this company.

The resolution was adopted unanimously, and was referred to the Executive Committee. That Com

mittee held it for further action, and it subsequently came forward to plague the Watson administration, although it had had nothing to do with any of that administration's affairs, and, in fact, belonged to the transactions of the Gould régime.

The 10th of July, 1872, was an exciting and stirring day at and about Erie headquarters in the Grand Opera House. It was almost a counterpart of one of the characteristic Gould and Fisk days. Detectives, policemen, and deputy sheriffs were there by the dozen, but "Tommy" Lynch and his merry men were not among them. The rumor had gone abroad that the opposition to the new order of things in Erie was determined to make trouble of some kind at the election, and hundreds of people with recollections of entertainment they had been provided with on previous occasions of this sort at the corner of Eighth Avenue and Twenty-third Street, were there in force on that hot July day, to enjoy this expected later exhibition. But they were disappointed. pointed. The proceedings inside the Opera House were peaceful and smooth. Not one opposing voice was raised in protest against them.

At the meeting of the Board held previous to the election, resolutions of thanks to General Dix, General Diven, and others in the Board; to James McHenry for the part he took in overthrowing Jay Gould and his management; to Bischoffscheim & Goldschmidt for coming to the aid of the new management, and placing much needed funds at its disposal at a critical time; and to Edward T. Green, Gilson Holman, and W. Wetmore Cryder, American representatives of Erie in Europe, were passed, but none to Gen. Daniel E. Sickles for his part in the anti-Gould movement. Henry G. Stebbins resigned from the Board. At the ensuing election the following Board of Directors was chosen: Peter H. Watson, Gen. A. S. Diven, W. R. Travers, William Butler Duncan, Charles Day, S. L. M. Barlow, Gen. John A. Dix, J. V. L. Pruyn, Henry L. Lansing, Homer Ramsdell, William W. Shippen, E. D. Morgan, Frederick Schuchardt, S. D. Babcock, John J. Cisco, George Talbott Olyphant, John Taylor Johnston.

The new Board organized by electing Peter H.

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