rebate being admitted, the only way in which it could be adjusted with a show of fairness was to grade it according to the size of the shipment.
Under these conditions of competition it was certain that the New York Central system must work if it was to keep its great oil freight, and the general freight agent of the Lake Shore road began to give the question special attention. This man was Peter H. Watson. Mr. Watson was an able patent lawyer who served under the strenuous Stanton as an Assistant-Secretary of War, and served well. After the war he had been made general freight agent of the Lake Shore and Michigan Southern Railroad, and later president of the branch of that road which ran into the Oil Regions. He had oil interests principally at Franklin, Pennsylvania, and was well known to all oil men. He was a business intimate of Mr. Rockefeller and a warm friend of Horace F. Clark, the son-inlaw of W. H. Vanderbilt, at that time president of the Lake Shore and Michigan Southern Railroad. As the Standard Oil Company was the largest shipper in Cleveland and had already received the special favour from the Lake Shore which General Devereux describes, it was natural that Mr. Watson should consult frequently with Mr. Rockefeller on the question of holding and increasing his oil freight. It was equally natural, too, that Mr. Rockefeller should use his influence with Mr. Watson to strengthen the theory so important to his rapid growth-the theory that the biggest shipper should have the best rate.
Two other towns shared Cleveland's fear of the rise of the Oil Regions as a refining centre, and they were Pittsburg and Philadelphia, and Mr. Rockefeller and Mr. Watson found in certain refiners of these places a strong sympathy with any plan which looked to holding the region in check. But while the menace in their geographical positions was the first ground of sympathy between these gentlemen, something more than
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local troubles occupied them. This was the condition of the refining business as a whole. It was unsatisfactory in many particulars. First, it was overdone. The great profits on refined oil and the growing demand for it had naturally caused a great number to rush into its manufacture. There was at this time a refining capacity of three barrels to every one produced. To be sure, few if any of these plants expected to run the year around. Then, as to-day, there were nearly always some stills in even the most prosperous works shut down. But after making a fair allowance for this fact there was still a much larger amount of refining actually done than the market demanded. The result was that the price of refined oil was steadily falling. Where Mr. Rockefeller had received on an average 58 3/4 cents a gallon for the oil he exported in 1865, the year he went into business, in 1870 he received but 26 3/8 cents. In 1865 he had a margin of forty-three cents, out of which to pay for transportation, manufacturing, barrelling and marketing and to make his profits. In 1870 he had but 17 1/8 cents with which to do all this. To be sure his expenses had fallen enormously between 1865 and 1870, but so had his profits. The multiplication of refiners with the intense competition threatened to cut them down still lower. Naturally Mr. Rockefeller and his friends looked with dismay on this lowering of profits through gaining competition.
Another anxiety of the American refiners was the condition of the export trade. Oil had risen to fourth place in the exports of the United States in the twelve years since its discovery, and every year larger quantities were consumed abroad, but it was crude oil, not refined, which the foreigners were beginning to demand; that is, they had found they could import crude, refine it at home, and sell it cheaper than they could buy American refined. France, to encourage her home refineries, had even put a tax on American refined.
In the fall of 1871, while Mr. Rockefeller and his friends
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THE RISE OF THE STANDARD OIL COMPANY
were occupied with all these questions, certain Pennsylvania refiners, it is not too certain who, brought to them a remarkable scheme, the gist of which was to bring together secretly a large enough body of refiners and shippers to persuade all the railroads handling oil to give to the company formed special rebates on its oil, and drawbacks on that of other people. If they could get such rates it was evident that those outside of their combination could not compete with them long and that they would become eventually the only refiners. They could then limit their output to actual demand, and so keep up prices. This done, they could easily persuade the railroads to transport no crude for exportation, so that the foreigners would be forced to buy American refined. They believed that the price of oil thus exported could easily be advanced fifty per cent. The control of the refining interests would also enable them to fix their own price on crude. As they would be the only buyers and sellers, the speculative character of the business would be done away with. In short, the scheme they worked out put the entire oil business in their hands. It looked as simple to put into operation as it was dazzling in its results. Mr. Flagler has sworn that neither he nor Mr. Rockefeller believed in this scheme.* But when they found that their friend Peter H. Watson, and various Philadelphia and Pittsburg parties who felt as they did about the oil business, believed in it, they went in and began at once to work up a company-secretly. It was evident that a scheme which aimed at concentrating in the hands of one company the business now operated by scores, and which proposed to effect this consolidation through a practice of the railroads which was contrary to the spirit of their charters, although freely indulged in, must be worked with fine discretion if it ever were to be effective.
* See Appendix, Number 4. Testimony of Henry M. Flagler on the South Improvement Company.
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The first thing was to get a charter-quietly. At a meeting held in Philadelphia late in the fall of 1871 a friend of one of the gentlemen interested mentioned to him that a certain estate then in liquidation had a charter for sale which gave its owners the right to carry on any kind of business in any country and in any way; that it could be bought for what it would cost to get a charter under the general laws of the state, and that it would be a favour to the heirs to buy it. The opportunity was promptly taken. The name of the charter bought was the " Southern ( usually written South ) Improvement Company." For a beginning it was as good a name as another, since it said nothing.
With this charter in hand Mr. Rockefeller and Mr. Watson and their associates began to seek converts. In order that their great scheme might not be injured by premature public discussion they asked of each person whom they approached a pledge of secrecy. Two forms of the pledges required before anything was revealed were published later. The first of these, which appeared in the New York Tribune, read as follows:
I, A. B., do faithfully promise upon my honour and faith as a gentleman that I will keep secret all transactions which I may have with the corporation known as the South Improvement Company; that, should I fail to complete any bargains with the said company, all the preliminary conversations shall be kept strictly private; and, finally, that I will not disclose the price for which I dispose of my product, or any other facts which may in any way bring to light the internal workings or organisation of the company. All this I do freely promise. Signed ........................ Witnessed by...................
A second, published in a history of the "Southern Improvement Company," ran:
The undersigned pledge their solemn words of honour that they will not communicate to any one without permission of Z (name of director of Southern Improvement Company) any information that he may convey to them, or any of them, in relation to the Southern Improvement Company. . .......................... Witness..........................
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That the promoters met with encouragement is evident from the fact that, when the corporators came together on January 2, 1872, in Philadelphia, for the first time under their charter, and transferred the company to the stockholders, they claimed to represent in one way or another a large part of the refining interest of the country. At this meeting 1,100 shares of the stock of the company, which was divided into 2,000 $100 shares, were subscribed for, and twenty per cent. Of their value was paid in. Just who took stock at this meeting the writer has not been able to discover. At the same time a discussion came up as to what refiners were to be allowed to go into the new company. Each of the men represented had friends whom he wanted taken care of, and after considerable c discussion it was decided to take in every refinery they could get hold of. This decision was largely due to the railroad men. Mr. Watson had seen them as soon as the plans for the company were formed, and they had all agreed that if they gave the rebates and drawbacks all refineries then existing must be taken in upon the same level. That is, while the incorporators had intended to kill off all but themselves and their friends, the railroads refused to go into a scheme which was going to put anybody out of business-the plan if they went into it must cover the refining trade as it stood. It was enough that it could prevent any one in the future going into the business.
Very soon after this meeting of January 2 the rest of the stock of the South Improvement Company was taken. The complete list of stockholders, with their holdings, was as follows:
William Frew, Philadelphia 1O shares
W. P. Logan, Philadelphia 1O "
John P. Logan, Philadelphia 1O "
Charles~Lockhart, Pittsburg 1O "
Richard S. Waring, Pittsburg 1O "
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THE HISTORY OF THE STANDARD OIL COMPANY
W. G. Warden, Philadelphia
475 shares
O. F. Waring, Pittsburg 475 "
P. H. Watson, Ashtabula, Ohio 100 "
H. M. Flagler, Cleveland 180 "
O. H. Payne, Cleveland
180 "
William Rockefeller, Cleveland 180 "
J. A. Bostwick, New York 180 "
John D. Rockefeller, Cleveland 180 "
2000 Shares
Mr. Watson was elected president and W. G. Warden of Philadelphia secretary of the new association. It will be noticed that the largest individual holdings in the company were those of W. G. Warden and O. F. Waring, each of whom had 475 shares. The company most heavily interested in the South Improvement Company was the Standard Oil of Cleveland, J. D. Rockefeller, William Rockefeller and H. M. Flagler, all stockholders of that company, each having 180 shares-540 in the company. O. H. Payne and J. A. Bostwick, who soon after became stockholders in the Standard Oil Company, also had each 180 shares, giving Mr. Rockefeller and his associates 900 shares in all.
It has frequently been stated that the South Improvement Company represented the bulk of the oil-refining interests in the country. The incorporators of the company in approaching the railroads assured them that this was so. As a matter of fact, however, the thirteen gentlemen above named, who were the only ones ever holding stock in the concern, did not control over one-tenth of the refining business of the United States in 1872- That business in the aggregate amounted to a daily capacity of about 45,000 barrels-from 45,000 to 50,000, Mr. Warden put it-and the stockholders of the South Im
* List of stockholders given by W. G. Warden, secretary of the South Improvement Company, to a Congressional Investigating Committee which examined Mr. Warden and Mr. Watson in March and
April, 1872.
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provement Company owned a combined capacity of not over 4,600 barrels. In assuring the railroads that they controlled the business, they were dealing with their hopes rather than with facts.
The organisation complete, there remained contracts to be made with the railroads. Three systems were to be interested: The Central, which, by its connection with the Lake Shore and Michigan Southern, ran directly into the Oil Regions; the Erie, allied with the Atlantic and Great Western, with a short line likewise tapping the heart of the region; and the Pennsylvania, with the connections known as the Allegheny Valley and Oil Creek Railroad. The persons to be won over were: W. H. Vanderbilt, of the Central; H. F. Clark, president of the Lake Shore and Michigan Southern; Jay Gould, of the Erie; General G. B. McClellan, president of the Atlantic and Great Western; and Tom Scott, of the Pennsylvania. There seems to have been little difficulty in persuading any of these persons to go into the scheme after they had been assured by the leaders that all of the refiners were to be taken in. This was a verbal condition, however, not found in the contracts they signed. This important fact Mr. Warden himself made clear when three months later he was on the witness stand before a committee of Congress appointed to look into the great scheme. "We had considerable discussion with the railroads," Mr. Warden said, "in regard to the matter of rebate on their charges for freight; they did not want to give us a rebate unless it was with the understanding that all the refineries should be brought into the arrangement and placed upon the same level."
Q. You say you made propositions to railroad companies, which they agreed to accept upon the
condition that you could include all the refineries ?
A. No, sir; I did not say that; I said that was the understanding when we discussed this matter with
them; it was no proposition on our part; they discussed it, not in the form of a proposition that the
refineries should be all taken in, but it was the
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intention and resolution of the company from the first that that should be the result; we never had
any other purpose in the matter.
Q. In case you could take the refineries all in, the railroads proposed to give you a rebate upon their
freight charges ?
A. No, sir; it was not put in that form; we were to put the refineries all in upon the same terms; it
was the understanding with the railroad companies that we were to have a rebate; there was no
rebate given in consideration of our putting the companies all in, but we told them we would do it;
the contract with the railroad companies was with us.
A. Yes, sir.
"I do not think we ever took that question up," answered Mr. Warden.
A second objection to making a contract with the company came from Mr. Scott of the Pennsylvania road and Mr. Potts of the Empire Transportation Company. The substance of this objection was that the plan took no account of the oil producer-the man to whom the world owed the business. Mr. Scott was strong in his assertion that they could never succeed unless they took care of the producers. Mr. Warden objected strongly to forming a combination with them. "The interests of the producers were in one sense antagonistic to ours: one as the seller and the other as the buyer. We held in argument that the producers were abundantly able to take care of their own branch of the business if they took care of the quantity produced." So strongly did Mr. Scott argue, however, that finally the members of the South Improvement Company yielded, and a draft of an agreement, to be proposed to the producers, was drawn up in lead-pencil; it was
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To view the pictures of Thomas A. Scott, William H. Vanderbilt, Jay Gould and Commodore Cornelius Vanderbilt follow the appropriate links.
THOMAS A. SCOTT
WILLIAM H. VANDERBILT
JAY GOULD
CORNELIUS VANDERBILT
THE RISE OF THE STANDARD OIL COMPANY
never presented. It seems to have been used principally to quiet Mr. Scott.
The work of persuasion went on swiftly. By the 18th of January the president of the Pennsylvania road, J. Edgar Thompson, had put his signature to the contract, and soon after Mr. Vanderbilt and Mr. Clark signed for the Central system, and Jay Gould and General McClellan for the Erie. The contracts to which these gentlemen put their names fixed gross rates of freight from all common points, as the leading shipping points within the Oil Regions were called, to all the great refining and shipping centres-New York, Philadelphia, Baltimore, Pittsburg and Cleveland. For example, the open rate on crude to New York was put at $2.56. On this price the South Improvement Company was allowed a rebate of $1.06 for its shipments; but it got not only this rebate, it was given in cash a like amount on each barrel of crude shipped by parties outside the combination.
The open rate from Cleveland to New York was two dollars, and fifty cents of this was turned over to the South Improvement Company, which at the same time received a rebate enabling it to ship for $1.50. Again, an independent refiner in Cleveland paid eighty cents a barrel to get his crude from the Oil Regions to his works, and the railroad sent forty cents of this money to the South Improvement Company. At the same time it cost the Cleveland refiner in the combination but forty cents to get his crude oil. Like drawbacks and rebates were given for all points-Pittsburg, Philadelphia, Boston and Baltimore.
An interesting provision in the contracts was that full waybills of all petroleum shipped over the roads should each day be sent to the South Improvement Company. This, of course, gave them knowledge of just who was doing business outside of their company-of how much business he was doing, and witch whom he was doing it. Not only were they to have full
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THE HISTORY OF THE STANDARD OIL COMPANY
knowledge of the business of all shippers-they were to have access to all books of the railroads.
The parties to the contracts agreed that if anybody appeared in the business offering an equal amount of transportation, and having equal facilities for doing business with the South Improvement Company, the railroads might give them equal advantages in drawbacks and rebates, but to make such a miscarriage of the scheme doubly improbable each railroad was bound to co-operate as "far as it legally might to maintain the business of the South Improvement Company against injury by competition, and lower or raise the gross rates of transportation for such times and to such extent as might be necessary to overcome the competition. The rebates and drawbacks to be varied pari passu with the gross rates." *
The reason given by the railroads in the contract for granting these extraordinary privileges was that the "magnitude and extent of the business and operations" purposed to be carried on by the South Improvement Company would greatly promote the interest of the railroads and make it desirable for them to encourage their undertaking. The evident advantages received by the railroad were a regular amount of freight,- the Pennsylvania was to have forty-five per cent. of the Eastbound shipments, the Erie and Central each 27 1/2 per cent., while West-bound freight was to be divided equally between them-fixed rates, and freedom from the system of cutting which they had all found so harassing and disastrous. That is, the South Improvement Company, which was to include the entire refining capacity of the company, was to act as the evener of the oil business.
It was on the second of January, l872, that the organisation
* Article Fourth: Contract between the South Improvement Company and the Pennsylvania
Railroad Company, January 18, 1872.
See Appendix, Number 5. Contract between the South Improvement Company and the
Pennsylvania Railroad Company. Dated January 18, 1872.
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of the South Improvement Company was completed. The day before the Standard Oil Company of Cleveland increased its capital from $1,000,000 to $2,500,000, "all the stockholders of the company being present and voting therefor." * These stockholders were greater by five than in 1870, the names of O. B. Jennings, Benjamin Brewster, Truman P. Handy, Amasa Stone, and Stillman Witt having been added. The last three were officers and stockholders in one or more of the railroads centring in Cleveland. Three weeks after this increase of capital Mr. Rockefeller had the charter and contracts of the South Improvement Company in hand, and was ready to see what they would do in helping him carry out his idea of wholesale combination in Cleveland. There were at that time some twenty-six refineries in the town-some of them very large plants. All of them were feeling more or less the discouraging effects of the last three or four years of railroad discriminations in favour of the Standard Oil Company. To the owners of these refineries Mr. Rockefeller now went one by one, and explained the South Improvement Company. "You see," he told them, "this scheme is bound to work. It means an absolute control by us of the oil business. There is no chance for anyone outside. But we are going to give everybody a chance to come in. You are to turn over your refinery to my appraisers, and I will give you Standard Oil Company stock or cash, as you prefer, for the value we put upon it. I advise you to take the stock. It will be for your good." Certain refiners objected. They did not want to sell. They did want to keep and manage their business. Mr. Rockefeller was regretful, but firm. It was useless to resist, he told the hesitating; they would certainly be crushed if they did not accept his offer, and he pointed out in detail, and with gentleness, how beneficent the scheme really was-preventing the creek
* See Appendix, Number 6. Standard Oil Company's application for increase of capital stock to $2,500,000 in 1872.
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THE HISTORY OF THE STANDARD OIL COMPANY
refiners from destroying Cleveland, ending competition, keeping up the price of refined oil, and eliminating speculation. Really a wonderful contrivance for the good of the oil business.
That such was Mr. Rockefeller's argument is proved by abundant testimony from different individuals who succumbed to the pressure. Mr. Rockefeller's own brother, Frank Rockefeller, gave most definite evidence on this point in 1876 when he and others were trying to interest Congress in a law regulating interstate commerce.
"We had in Cleveland at one time about thirty establishments, but the South Improvement Company was formed, and the Cleveland companies were told that if they didn't sell their property to them it would be valueless, that there was a combination of railroad and oil men, that they would buy all they could, and that all they didn't buy would be totally valueless, because they would be unable to compete with the South Improvement Company, and the result was that out of thirty there were only four or five that didn't sell."
"From whom was that information received?" asked the examiner.
"From the officers of the Standard Oil Company. They made no bones about it at all. They said: 'If you don't sell your property to us it will be valueless, because we have got advantages with the railroads."
"Have you heard those gentlemen say what you have stated?" Frank Rockefeller was asked.
"I have heard Rockefeller and Flagler say so," he answered.
W. H. Doane, whose evidence on the first rebates granted to the Cleveland trade we have already quoted, told the Congressional committee which a few months after Mr. Rockefeller's great coup tried to find out what had happened in
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Cleveland: "The refineries are all bought up by the Standard Oil works; they were forced to sell; the railroads had put up the rates and it scared them. Men came to me and told me they could not continue their business; they became frightened and disposed of their property." Mr. Doane's own business, that of a crude oil shipper, was entirely ruined, all of his customers but one having sold.
To this same committee Mr. Alexander, of Alexander, Scofield and Company, gave his reason for selling:
"There was a pressure brought to bear upon my mind, and upon almost all citizens of Cleveland engaged in the oil business, to the effect that unless we went into the South Improvement Company we were virtually killed as refiners; that if we did not sell out we should be crushed out. My partner, Mr. Hewitt, had some negotiations with parties connected with the South Improvement Company, and they gave us to understand, at least my partner so represented to me, that we should be crushed out if we did not go into that arrangement. He wanted me to see the parties myself; but I said to him that I would not have any dealings with certain parties who were in that company for any purpose, and I never did. We sold at a sacrifice, and we were obliged to. There was only one buyer in the market, and we had to sell on their terms or be crushed out, as it was represented to us. It was stated that they had a contract with railroads by which they could run us into the ground if they pleased. After learning what the arrangements were I felt as if, rather than fight such a monopoly, I would withdraw from the business, even at a sacrifice. I think we received about forty or forty-five cents on the dollar on the valuation which we placed upon our refinery. We had spent over $50,000 on our works during the past year, which was nearly all that we received. We had paid out $60,000 or $70,000 before that; we considered our works at their cash value worth seventy-five per cent. of their cost. According to our valuation our establishment was worth $150,000, and we sold it for about $65,000, which was about forty or forty-five per cent. of its value. We sold to one of the members, as I suppose, of the South Improvement Company, Mr. Rockefeller; he is a director in that company; it was sold in name to the Standard Oil Company, of Cleveland, but the arrangements were, as I understand it, that they were to put it into the South Improvement Company. I am stating what my partner told me; he did all the business; his statement was that all these works were to be merged into the South Improvement Company. I never talked with any members of the South Improvement Company myself on the subject; I declined to have anything to do with them."
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THE HIS1ORY OF THE STANDARD OIL COMPANY
Mr. Hewitt, the partner who Mr. Alexander says carried on the negotiations for the sale of the business, appeared before an investigating committee of the New York State Senate in 1879 and gave his recollections of what happened. According to his story the entire oil trade in Cleveland became paralysed when it became known that the South Improvement Company had "grappled the entire transportation of oil from the West to the seaboard." Mr. Hewitt went to see the freight agents of the various roads; he called on W. H. Vanderbilt, but from no one did he get any encouragement. Then he saw Peter H. Watson of the Lake Shore Railroad, the president of the company which was frightening the trade. "Watson was non-committal," said Mr. Hewitt. "I got no satisfaction except, 'You better sell-you better get clear- better sell out-no help for it."' After a little time Mr. Hewitt concluded with his partners that there was indeed "no help for it," and he went to see Mr. Rockefeller, who offered him fifty cents on the dollar on the constructive account. The offer was accepted. There was nothing else to do, the firm seems to have concluded. When they came to transfer the property Mr. Rockefeller urged Mr. Hewitt to take stock in the new concern. "He told me," said Mr. Hewitt, "that it would be sufficient to take care of my family for all time, what I represented there, and asking for a reason, he made this expression, I remember: "I have ways of making money that you know nothing of."
A few of the refiners contested before surrendering. Among these was Robert Hanna, an uncle of Mark Hanna, of the firm of Hanna, Baslington and Company. Mr. Hanna had been refining since July, 1869. According to his own sworn statement he had made money, fully sixty per cent. on his investment the first year, and after that thirty per cent. Some time in February, 1872 the Standard Oil Company asked an interview with
him and his associates. They wanted to buy
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THE RISE OF THE STANDARD OIL COMPANY
his works, they said. "But we don't want to sell," objected Mr. Hanna. "You can never make any more money, in my judgment," said Mr. Rockefeller. "You can't compete with the Standard. We have all the large refineries now. If you refuse to sell, it will end in your being crushed." Hanna and Baslington were not satisfied. They went to see Mr. Watson, president of the South Improvement Company and an officer of the Lake Shore, and General Devereux, manager of the Lake Shore road. They were told that the Standard had special rates; that it was useless to try to compete with them. General Devereux explained to the gentlemen that the privileges granted the Standard were the legitimate and necessary advantage of the larger shipper over the smaller, land that if Hanna, Baslington and Company could give the road as large a quantity of oil as the Standard did, with the same regularity, they could have the same rate. General Devereux says they "recognised the propriety" of his excuse. They certainly recognised its authority. They say that they were satisfied they could no longer get rates to and from Cleveland which would enable them to live, and "reluctantly" sold out. It must have been reluctantly, for they had paid $70,000 for their works, and had made thirty per cent. a year on an average on their investment, and the Standard appraiser allowed them $40,000. "Truly and really less than one-half of what they were absolutely worth, with a fair and honest competition in the lines of transportation," said Mr. Hanna, eight years later, in an affidavit.*
Under the combined threat and persuasion of the Standard, armed with the South Improvement Company scheme, almost the entire independent oil interest of Cleveland collapsed in three months' time. Of the twenty-six refineries, at least twenty-one sold out. From a capacity of probably not over 1,500 barrels of crude a day, the Standard Oil Company rose
* See Appendix, Number 7. Affidavits of George O. Baslington.
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in three months' time to one of 10,000 barrels. By this manoeuvre it became master of over one-fifth of the refining capacity of the United States.* Its next individual competitor was Sone and Fleming, of New York, whose capacity was 1,700 barrels. The Standard had a greater capacity than the entire Oil Creek Regions, greater than the combined New York refiners. The transaction by which it acquired this power was so stealthy that not even the best informed newspaper men of Cleveland knew what went on. It had all been accomplished in accordance with one of Mr. Rockefeller's chief business principles-"Silence is golden."
While Mr. Rockefeller was working out the "good of the oil business" in Cleveland, his associates were busy at other points. Charles Lockhart in Pittsburg and W. G. Warden in Philadelphia were particularly active, though neither of them accomplished any such sweeping benefaction as Mr. Rockefeller had. It was now evident what the stockholders of the South Improvement Company meant when they assured the railroads that all the refiners were to go into the scheme, that, as Mr. Warden said, they "never had any other purpose in the matter!" A little more time and the great scheme would be an accomplished fact. And then there fell in its path two of
*In 1872 the refining capacity of the United States was as follows, according to Henry's "Early and Later History of Petroleum":
Oil Regions 9,231
New York .
9,760
Cleveland 12,732
Pittsburg 6,090
Philadelphia
2,061
Baltimore 1,098
Boston 3,500
Erie 1,168
Other Points
901
Total 46,571
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those never-to-be-foreseen human elements which so often block great manoeuvres. The first was born of a man's anger. The man had learned of the scheme. He wanted to go into it, but the directors were suspicious of him. He had been concerned in speculative enterprises and in dealings with the Erie road which had injured these directors in other ways. They didn't want him to have any of the advantages of their great enterprise. When convinced that he could not share in the deal, he took his revenge by telling people in the Oil Regions what was going on. At first the Oil Regions refused to believe, but in a few days another slip born of human weakness came in to prove the rumour true. The schedule of rates agreed upon by the South Improvement Company and the railroads had been sent to the freight agent of the Lake Shore Railroad, but no order had been given to put them in force. The freight agent had a son on his death-bed. Distracted by his sorrow, he left his office in charge of subordinates, but neglected to tell them that the new schedules on his desk were a secret compact, whose effectiveness depended upon their being held until all was complete. On February 26, the subordinates, ignorant of the nature of the rates, put them into effect. The independent oil men heard with amazement that freight rates had been put up nearly 100 per cent. They needed no other proof of the truth of the rumours of conspiracy which were circulating. It now remained to be seen whether the Oil Regions would submit to the South Improvement Company as Cleveland had to the Standard Oil Company.
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