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UNDER THE LEGISLATIVE PROBE.

LAYING ERIE BARE.

Insinuations and Charges Against the Management Inquired into as Long Ago as 1841-Not Proven, Exoneration Follows-The Search for the Truth in the Days of Daniel Drew that Kept the New York Legislature Busy-Bribery and Corruption Charged in the Legislature of 1868-How the Action of a Senator Who Had Helped Investigate Erie Led to an Investigation of Himself―The Committee Scores Erie, but the Legislature Changes Its Mind and Passes the Erie Bill-After the Classification Bill in 1870, 1871, and 1872Seeking Truth About the Watson Dividend of 1873-Erie Secrets Come to Light-The Hepburn Investigation of 1879 Throws Light on Various Things.

1841.

There having been for months rumors afloat that Erie affairs were being conducted after questionable methods (“Second Administration of Eleazar Lord," page 50), the matter was brought to the attention of the New York Legislature, and on February 4, 1841, was referred to the Committee on Railroads, composed of Erastus D. Culver, of Washington County; Jonathan Aiken, of Dutchess County ; William C. Pierpont, of New York; Seth C. Hawley, of Erie, and Reuben Howe, of Montgomery County. The matters to be investigated were whether the Company had made contracts or purchases of material at larger prices than the work could have been agreed upon in consideration of the contractors subscribing to the stock; whether the stock had had any market value during the past year; whether any cash payment had been made in stock on general call; whether the interest on State stocks was paid with money obtained by selling the stock; whether the Company had sold the State stock loaned to it at less than its par value; and whether the Company had in any way evaded the fair intent of the law requiring it to expend at certain proportion of its own money before being entitled to the credit of the State.

The Committee made its report May 8th, exonerating the officers of the Company from the charges and insinuations that brought about the investigation. The report made 165 printed pages, and included many tables and long statements from the various officers. The report was not satisfactory to the opponents of the railroad, and Assemblyman Arphaxad Loomis, of Herkimer County, moved that it be recommitted to the committee, with instructions to bring in a bill to prohibit the further issuing of stocks to the Company until the further order of the Legislature. Assemblyman Andrew G. Chatfield, of Steuben County, moved that the matter be referred to a select committee for further action. The matter was finally settled May 24th, by the appointment of a select committee of three, on the following resolution offered by Mr. Chatfield :

Resolved, That the report of the Standing Committee on Railroads upon the petitions praying for further aid to the New York and Erie Railroad Company, together with the remonstrances against the same, and the petitions for the speedy construction of the New York and Erie Railroad by the State, communicated to this House on the 22d of May instant, be referred to a Select Committee of three members, to be appointed by ballot, who shall have power to send for persons and papers, with instructions to inquire into the management of said Company and its officers; to sit during the recess of the Legislature, at such times and places within this State as they shall deem proper, and to report to the next Legislature.

The select committee of the Assemby thus appointed consisted of Andrew G. Chatfield, of Steuben County, chairman; George G. Graham, of Ulster; and William B. Maclay, of New York.

The first meeting of the committee was at the office of the Company in New York City, July 29, 1841, where it examined the books and took the testimony of the officers and agents of the Company. September 23d, the committee met at Goshen, N. Y., where it was in session until October Ist, the first meeting day being the day the railroad was opened between Piermont and Goshen.

October 2d, the committee met at Piermont, and returned to Goshen, October 4th, where it prosecuted its investigation until October 7th, when it adjourned to meet at Monticello, N. Y., October 11th, remained there two days, and met at Bethel, Sullivan County, N. Y., October 13th. It was in session there one day, and adjourned to meet at Binghamton, October 18th. On the 20th it adjourned to Owego, where the investigation occupied nine days, the chief subject being the difficulty over the location of the route through Owego and the place where the depot was to be. From Owego the committee went to Elmira, where it met on the 29th, and continued in session until November 2d. It adjourned from Elmira to Corning, where its session began November 4th and ended on the 6th, resuming at Addison, N. Y., on the 8th. From Addison the committee visited Rathbonsville on the 9th; Hornellsville on the 10th and 11th Phillipsburg, Allegany County, the 13th; Cuba and Olean the 15th: Randolph the 17th; Dunkirk the 19th and From Dunkirk the committee adjourned to New York,

20th.

where it met on December 13th and remained in session until December 30th.

The committee made its report to the Legislature, January 18, 1842. The report was exhaustive, and occupied, with the testimony, exhibits, reports of engineers, etc., 699 pages of Vol. III. of Senate Documents for 1842. The committee employed James Seymour, a prominent civil engineer, to pass over the entire route of the railroad and report on its affairs. His report made thirty printed pages.

The committee's report not only exonerated the management on all the allegations, but commended it for the manner in which it had prosecuted the work, as follows: "The result of this investigation not only exonerates the Company, its officers, and its agents from everything like a charge of fraud or mismanagement or attempt to evade the law, but it proves, on the contrary, that they are justly entitled to the confidence which the Legislature has heretofore reposed in them. Instead of being liable to censure, the Company is entitled to approbation."

1868.

While the contest between Daniel Drew and Cornelius Vanderbilt for possession of the Erie Railway (“ Administration of John S. Eldridge," pages 148-160) was at its height, the New York Legislature took cognizance of it. A bill seeking to legalize the action of the Erie Directory in overissuing stock was introduced in the Assembly, and it was defeated March 31st, by an overwhelming vote. Pending

further action on the bill, the Senate had taken hand in Erie affairs on another line of procedure.

March 5th, Senator James F. Pierce, of the Second District, offered the following preamble and resolution in the Senate:

WHEREAS, Grave charges have been made in the newspapers and before the Supreme Court, in reference to the management of the Erie Railway Company, and that the general management of the said Company is controlled by persons who systematically make use of their positions to depreciate and destroy the value of the stock of said Company, and that the Directors of such Company have issued a larger amount of the stock of such Company than such Company is entitled to issue by law, therefore

Resolved, That a committee of three Senators be appointed to examine into the condition of such Company and into the said charges, with power to send for persons and papers, said investigation to be conducted without expense to the State.

On motion of Senator Henry W. Genet, of New York, the following addition was made to Senator Pierce's resolution :

Resolved, That said committee be directed to report the testimony taken, and the result of their deliberation, within twenty days from the adoption of this resolution.

The preamble and resolutions were agreed to.

March 6th, on motion of Senator Abner C. Mattoon, the number of the committee was increased from three to five, and such a committee was appointed as follows:

James F. Pierce, of the Second District; John J. Bradley, of the Seventh District; Abner C. Mattoon, of the Twentyfirst District; Orlow W. Chapman, of the Twenty-fourth District; Wolcott J. Humphrey, of the Thirtieth District.

The committee met at 62 Broadway, New York, March 10, 1868, and at the Delavan House, Albany, March 13th, 19th, 24th, 25th. The witnesses examined were Horatio N. Otis, Secretary of the Company; J. C. Bancroft Davis, of the Erie Directory; David Groesbeck, Daniel Drew's broker; Gen. A. S. Diven, Vice-President of the Company; Henry R. Pierson, of the Erie Directory; William G. Edwards, cashier of Bloodgood & Co., of Wall Street; James M. Cross, a contractor of Newark, N. J. Jay Gould, James Fisk, Jr., Homer Ramsdell, Daniel Drew, John S. Eldridge, President of the Erie Henry Thompson, Dudley S. Gregory, John S. Hilton, William Belden, of Fisk & Belden; Henry M. Smith, of Smith, Gould, Martin & Co., were subpoenaed as witnesses, but failed to appear, nor could they be found by the Sergeant-at-Arms of the Senate. Copies from the minutes of the Board of Directors bearing on the matter to be investigated, copies of contracts with Daniel Drew, of the lease of the Buffalo, Bradford and Pittsburg Railroad, the agreement with the Boston, Hartford and Erie Railroad Company to guarantee the bonds of that company, and of the proceedings that led up to that agreement, and the statement of President Eldridge justifying the matter that had led to the investigation, were also part of the testimony.

April 1st two reports were submitted to the Senate, a majority report signed by Senators Pierce, Bradley, and Mattoon, and a minority report signed by Senators Chapman and Humphrey. The majority report scored the methods of Gould, Fisk, Drew, Eldridge, and the others of the existing Erie management in their manipulating of the Erie stock and its over-issue, declared that they were acting in violation of law and morals, and denounced their acts in scathing terms. "Justice demands," said the report, "that these agents should be removed, but as the courts have ample power over them, the committee have not deemed it necessary to introduce a bill for the purpose. The committee, however, believe that some legislation is necessary to prevent similar practices in future, and they accordingly ask the adoption of the following resolution :

Resolved, That the frauds and abuses developed by the investigation of the management of the present directors and officers of the Erie Railway Company, demand that increased penalties for such offences shall be imposed for the protection of stockholders and the community, and that the special committee conducting such investigation be, and they hereby are, instructed to report a bill, making it a felonious offence for any director or officer to fraudulently issue stock of the Company in which he holds such trust, or to convert to his own use or purposes the proceeds of stock or bonds, or to fraudulently take or carry away to another State, or with like intent to keep and retain therein, to evade legal process in this State, the moneys or effects of such Company.

The minority report, which would have been the majority report but for the fact that Senator Mattoon withdrew his

consent from it at the eleventh hour and signed the Pierce and Bradley report, simply declared that the charges against the management had not been established, and that it had done no act that it had not the legal right to do. Leave was given Senator Chapman to report to the Senate the bill submitted with the minority report, and the bill reported was entitled "An Act in relation to the Erie, New York Central, Hudson River, and Harlem Railway Companies." It was referred to the Committee of the Whole.

The sensation that these two reports made was increased by an editorial paragraph in the New York Tribune, written by Horace Greeley himself, as follows:

Can Senator Folger really mean to scout investigation as needless? Does he not know that quite a number of his fellow Senators have sold their votes in the Drew-Vanderbilt quarrel, some of them more than once? Can he not lay his hand at once on the Senator who is currently reported to have sold his vote and influence first to one side for $15,000, and then to the other for $20,000, insisting that he must have $1,000 extra for his son? Is he not morally certain that more than $100,000 have been paid to influence corruptly the action of Senators in the premises?

There could be only one Senator to whom this charge could apply, but before he had taken any public notice of it, Senator Matthew Hale, on April 8th, offered a preamble and resolutions, which, after warm debate, were amended and presented in the following form on April 10th:

WHEREAS, It has been charged that large sums of money have been improperly and corruptly expended by or on behalf of persons interested in the passage or defeat of certain measures relating to the Erie Railway Company, in order to influence or attempt to influence legislative action in supporting or opposing such measures; and, whereas, reports are current that said parties, or some of them, have been or are now attempting to influence Senators by corrupt and unlawful means; and, whereas, such reports, whether true or false, tend to bring this body and the whole Legislature into discredit and public contempt; therefore,

Resolved, That this body ought, in justice to its own reputation, and in order that corruption and bribery, if they exist, may be exposed and punished, and that calumny and slander, if such charges and reports are false, may be refuted and silenced, to investigate as to the truth or falsehood of such charges and reports.

Resolved, further, That a committee of three be appointed by the President, with power to send for persons and papers, to inquire and ascertain whether any party or parties interested in supporting or opposing any measures relating to the Erie Railway Company, had, either in person or by agent, directly or indirectly, paid or offered to pay any member or members of the Senate, during the present session, any money or other valuable thing to influence his or their vote or action, in Senate or committee.

Senator John O'Donnell, of the Eighteenth District, who championed the Erie interests in this affair, moved to amend by striking out the word "Erie" wherever it occurred, and inserting in lieu thereof the words "railroad companies,” and the motion prevailed by a vote of 17 to 13.

April 11th, the preamble and resolutions were adopted by a unanimous vote. Senators Matthew Hale, of the Sixteenth

A. Edwards, of the First, were appointed the special committee to conduct the investigation.

May 1st, Senator Hale submitted the following to the

Senate :

To the Honorable the Senate :

Your Committee, appointed pursuant to resolution adopted April 10, 1868, to inquire as to the use of money, etc., to influence the action of Senators upon measures relating to railways, respectfully report:

That they had commenced such investigations and diligently prosecuted the same, so far as time and their other necessary duties would permit, but have been unable to accomplish the same. This failure to accomplish the work entrusted to your Committee results in a great measure from inability to obtain the attendance of some witnesses deemed material in such investigation. Some of those witnesses, your Committee have reason to believe, have left the State temporarily, or concealed themselves within it, for the purpose of avoiding the service of process to compel such attendance, thinking that the approaching adjournment will terminate the powers of your Committee.

Your Committee are of the opinion that a report of the testimony taken in the present incomplete stage of the investigation would do injustice to some parties referred to by witnesses, and would perhaps defeat the object of the investigation. They are, therefore, compelled to recommend the adoption of the accompanying resolution.

The resolution was one authorizing this Committee to sit during the recess of the Legislature, with the same powers and effect as during the session, and to report at the next regular session of the Legislature. It was carried by a vote of 24 to 1, Senator Genet voting in the negative.

The action of Senator Hale on April 8th toward the appointment of the special committee of investigation was prompted by occurrences in the Assembly on Wednesday, April 1st. Immediately after the vote accepting the report of the Railroad Committee averse to the bill legalizing the acts of the Directors of the Erie Railway Company, Assemblyman Elijah M. K. Glenn, of Wayne County, rose to a question of privilege and offered the following:

ASSEMBLY CHAMBER, April 1, 1868.

To the Hon. the Speaker of the Assembly:

I, E. M. K. Glenn, a member of this House, from my seat in this House do charge as follows:

Ist. I charge that the report on the Erie Railroad bill was bought. 2d. I charge that a portion of the vote on this floor, in adopting the said report, was bought.

3d. I charge that members of this House were engaged in buying their fellow members.

Mr. Glenn moved by resolution that the Speaker appoint a committee of five to investigate the charges.

The Speaker appointed Augustus G. S. Allis, of Onondaga County; James R. Button, of Cattaraugus County; James D. Lasher, of Oswego County; Lewis P. Dayton, of Erie County, and Alexander Frear, of New York, as the committee.

Mr. Glenn asked for and was granted leave of absence for a week. On his return, he presented a communication to the Assembly, April 9th, in which he formally charged AsDistrict; Richard Crowley, of the Twenty-ninth, and Lewis semblyman Frear, in conjunction with Mark M. Lewis, of

Albany, with having offered him $500, on March 27th, to influence his vote on the Erie bill, and asked that Mr. Frear be relieved from serving on the investigating committee.

Mr. Frear offered his resignation as one of the committee, but the matter was referred to the committee itself to investigate, and report whether any action on it was necessary. The committee took immediate action, and April 10th reported that "the evidence does not furnish any justification for the charges made by Mr. Glenn against Mr. Frear, and we have unanimously come to the conclusion that the testimony exonerates him from this charge," and that his request to be excused from serving on the committee be denied.

The report was unanimously agreed to by the Assembly, and Mr. Frear addressed the House. In the course of his remarks he said:

I became satisfied, on investigating the facts, that the acts of the confederated Erie Directors-trustees as they were-constituted a highhanded fraud upon the rights of stockholders, and a violation of the common principles of honesty, which, if committed by men of humbler means and station, would have subjected them undoubtedly to punishment at the criminal bar; and I stood, if I may be allowed to say, prominently among eighty-two members of this House against the audacious attempt of these stock-jobbing conspirators to secure the sanction of legislative aid to such palpable frauds and atrocious violations of trust. It is a painful thing to recognize from the testimony that the immediate prompter of this accusation is an old man, who seems to have outlived everything but his malignity. The member from Wayne stands without any justification, except the infirmities of mind and body. ... Under other circumstances it might have been due to the dignity of this House that the member from Wayne should have been subjected to the judgment of his fellow members for an offence which nothing but his weakness palliates. As it is, I leave his case and mine in your hands, and to the consideration of an intelligent community.

Assemblyman Lawrence D. Kiernan, of New York, moved, inasmuch as the charges against Mr. Frear had not been established, and had evidently been made wantonly, that Mr. Glenn be brought before the bar of the House and publicly censured. The resolution was carried, but, on motion of Mr. Frear, all action in the matter was postponed until the final report of the investigating committee had been made.

April 11th Mr. Glenn tendered his resignation as Member of Assembly, and the record makes no further mention of the

matter.

The witnesses examined by the investigating committee were Mr. Glenn, who appeared at the morning session, but declined to answer a subpoena to attend in the afternoon. His testimony was rambling, and established nothing; Mark M. Lewis, of Albany, an optician and lobbyist; Assemblyman Frear, who denied absolutely the charges of Mr. Glenn; Assemblyman Henry Ray, of Ontario County; Assemblyman Luke Ranney, of Onondaga County, and Assemblyman Augustus A. Brush, of Dutchess County.

April 1st Mr. Chapman, from the Senate Committee on Railroads, reported a bill entitled, "An Act in relation to the Erie, New York Central, Hudson River, and Harlem Railway Companies," which was referred to the Committee of the

Whole. April 11th it was made the special order for Tuesday, April 14th, and to be continued the special order thereafter until disposed of. This was an act legalizing the over-issue of Erie stock and the other transactions of the management that had led to the investigation.

April 17th Walcott J. Humphrey, of the Thirtieth District, reported from the Committee of the Whole in favor of the passage of the bill, and the report was agreed to, and April 18th the bill was passed on a vote of 17 to 12. Among those who voted for the Erie bill was Senator Mattoon, who had deserted the minority of the Investigating Committee and signed the caustic anti-Erie report of the majority.

April 21st, in the Assembly, on motion of William C. Bentley, of Otsego County, the bill went to the Committee of the Whole, and the same day it was reported favorably and passed, the negative votes being W. S. Andrews, of Kings; James Irving, of New York; Alembert Pond, of Saratoga County; Alpheus Prince, of Erie County; Robert Stewart, of Madison County.

Among those voting for the Erie bill in the Assembly was Frear, who had shown such righteous indignation over the mere fact that the Erie should have come to the Legislature and asked for aid.

The Hale Investigating Committee held meetings as follows:

1868. At the Capitol, Albany, April 18th, 20th, 22d, 23d, 29th, 30th; May 28th, 29th, 30th; June 2d, 9th, 12th, when it adjourned subject to call of chairman. The next meetings were December 15th, 16th, 17th, 22d, at Albany.

1869. At Congress Hall, Albany, January 4th, 25th; February 16th, 22d.

The following were the principal witnesses examined by the committee:

John B. Dutcher, Abram Van Vechten (lobbyist), Hugh J. Hastings, Jay Gould, Cornelius Vanderbilt, Jr., Charles C. Clark (Treasurer of the Hudson River Railroad Company), Thomas G. Alvord, Dyer D. S. Brown (editor of the Rochester Democrat), Horace Greeley, Thomas C. Fields (ex-Senator), Senator Abner C. Mattoon, Ashbel N. Cole, Julien T. Williams, M.D. (ex-Assemblyman), Senator O. W. Chapman, John Van Valkenburg (lobbyist), Senator Abiah W. Palmer, John Flavel Mines (newspaper correspondent), Louis F. Payne (lobbyist and harbor-master).

May 5th, Senator Edwards resigned from the Hale Investigating Committee, and Senator Asher P. Nichols, of the Twenty-first District, was appointed in his place.

In the course of the investigation it was brought out that during the interesting legislation on the Erie bill there had been in the employ of the Erie, Hamilton Harris, Lyman Tremain, and Peter Cagger, of Albany, and John Ganson, of Buffalo, as counsel, and Hugh J. Hastings, Julien T. Williams, Dyer D. S. Brown, as lobby agents. The Vanderbilt lobbyists were Abram Van Vechten, John B. Dutcher, and John Van Valkenburg. George Bliss, Jr., acted as counsel in opposition to the bill. Gen. A. S. Diven, Vice-Presi

dent of the Erie, had general charge of legislation in the derbilt) had not aided either party, and that he (Gould) interest of Erie.

Jay Gould in his testimony said that the Company had about fifty lawyers employed during the procuring of the legislation on the Erie bill, and that between $25,000 and $50,000 had been used by the Company at Albany. He had told all persons who had come to him and said they could influence votes that the bill must be passed on its merits, and that if it did not pass he would go home without it.

Louis F. Payne was introduced to him, he said, by a letter from J. C. Bancroft Davis, who recommended him, and, on Payne's representation of what he had done for the Erie in the legislation of the past winter, and what he could do still, Gould gave him $5,000. One thing that Payne declared he could do was to influence the vote of Senator Abiah W. Palmer, of Dutchess County (in Payne's district), a disposition of himself which Senator Palmer, under oath, declared Payne could not make, and, indeed, would not have dared to attempt. The day after Gould had paid Payne the $5,000 he received a letter from headquarters at New York, telling him that they "had sent up this man, who represented that he could do great things," and the letter said at the bottom, "Pay him nothing. He has been compensated." Gould learned that Erie Director Henry Thompson had already paid Payne $5,oco, "and," said he, "I saw I had been swindled. He told me he was making $25,000 or $30,000 a year, and being up here had injured him to that. amount. He wanted more than that ($5,000), but I told him $5,000 was more than I could earn in a year." After Gould discovered that he had duplicated Payne's pay, he said he met him at the Delavan House and told Payne that he (Payne) had obtained the money unfairly, and demanded that he return the $5,000. "He (Payne) said he would be damned if he would."

Then

Payne in his testimony declared that the amount was for his personal services, and that he had been sent for by Director Thompson of the Erie, and solicited to go to Albany to assist in the passage of the Erie bill, but he refused to do so until he was paid for his past services. Thompson paid the amount. Payne said he was unable to say to the committee of just what service he was to be to the Company. February 16, 1869, Thomas Murphy, ex-Senator, and subsequently Collector of the Port of New York under President Grant, in telling what he knew about Erie affairs as regarded legislation, swore that one evening, at a meeting at the Union League Club in New York, the object of which was to raise money to aid the Republican party in the campaign of 1868, it was stated that the Erie Railway Company had contributed $100,000 to the Democratic party. Senator Murphy was deputed by the Republican State Committee to call on Gould and see if he would not help that party, too. William Belden, James Fisk's partner, accompanied him. He first saw Fisk. He told Fisk the Republican party had saved the Erie in 1868, and asked for $100,000. Fisk said he must see Gould, who soon came in. Gould informed Senator Murphy that Vanderbilt had told him that he (Van

intended to pursue the same policy. Murphy insisted, and then Gould said he had already given something to the Republican party-$20,000 to Governor Fenton, through Hamilton Harris. Subsequently Director Henry Thompson told Senator Murphy that he was present when the $20,000, in two checks of $10,000 each, was paid to Harris, who said that the Erie bill would be signed within two or three hours from that time; and it was.

This implication that Governor Fenton had been bribed to sign the Erie bill was another sensation in the affair. Jay Gould, on February 22d, appeared voluntarily before the committee and denied all of Murphy's story about the payment of $20,000 to Harris for Governor Fenton. James Fisk, Jr., corroborated him, and Hamilton Harris swore that he never received $20,000 or any other amount from Jay Gould for Governor Fenton. That settled the Fenton incident.

Erie Director Henry Thompson told the committee, February 16th, that Luther Caldwell, of Elmira, who was connected with the press of the State, represented that he could render great service to the Erie legislation thereby, and Thompson gave him over $60,000 to be used in such service for the Erie bill. Subsequently Thompson gave Jay Gould an order on Caldwell to repay the money to him at Albany. In regard to this, Gould testified that Thompson had given him a sealed envelope addressed to Caldwell, without stating what it contained. Gould left it at the Delavan House for Caldwell, and never heard any more about it. This was the order for the money Thompson had given Caldwell, and that was the last the money was ever heard of by the Erie managers, except that it was refunded to Thompson from the Erie treasury, thus doubling the cost of the transaction to the Company.

After the defeat of the Erie bill in the Assembly, March 31, 1868, Gould said the Company had concluded to abandon legislation, but Senator Mattoon came to Jersey City with the report signed by Senators Chapman and Humphrey, and his statement was that it was to be the majority report, and that it would be no more than an act of justice to the committee that some representative of the Erie should go to Albany and explain away the popular prejudice against the Company and the bill it asked for. "That was one thing that induced me to come up," said Gould. "It was Saturday before the report was made. I got the report printed for him. He said I ought to come up. I came up. I met him two or three times. He seemed to be friendly to us. I was perfectly astounded when I heard he had signed the other report. He explained to me that he had not read the other report at the time he saw me, and reading that report had changed his mind." ("Administration of John S. Eldridge," pages 152-155.)

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Senator Mattoon denied all the charges against him. He denied Gould's story of the report, and said he had never had a copy of it in his possession. He went to Jersey City at the request of Daniel Drew simply to give the Erie

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