by Ron Chernow
Some of Rockefeller’s critics weren’t content to expose him but wanted to put this pious churchgoer and Sunday-school superintendent behind bars. The producers were still seething from the immediate-shipment controversy and Standard Oil’s refusal to store their surplus oil. One upshot was that on April 29, 1879, a grand jury in Clarion County, Pennsylvania, indicted nine Standard Oil officials—including Rockefeller, Flagler, O’Day, and Archbold—and charged them with conspiracy to monopolize the oil business, extort railroad rebates, and manipulate prices to cripple rivals. Those who resided in Pennsylvania, such as Warden, Lockhart, and Vandergrift, were arrested and released on bail while those, such as Rockefeller, who lived outside the state were able to evade prosecution. Reformers who stalked the Standard knew they had to get Rockefeller or Flagler on the stand, for many top executives were kept in the dark about the organization’s intricate inner workings. When Captain Jacob J. Vandergrift testified at an Ohio hearing that spring, for instance, Flagler was able to reassure Rockefeller: “If it is a question of railroad freights, and discrimination in them, my judgment is [Vandergrift] knows nothing, or if knowing will not be compelled to answer.” 39
In spring 1879, Rockefeller began a thirty-year career as a fugitive from justice, learning to stay nimbly ahead of the law. For all his scoffing about the Clarion County indictments—“This case will never be brought to trial”—he took no chances.40 Afraid of being extradited from New York, Rockefeller asked Chauncey Depew, the attorney for the New York Central, to approach New York governor Lucius Robinson, who agreed to deny any such requests from Pennsylvania. At the same time, Rockefeller had A. J. Cassatt approach Pennsylvania governor Henry M. Hoyt with a request that he cease further efforts to haul him into court. To make sure that the Pennsylvania Railroad didn’t double-cross him, Rockefeller boosted production at his Philadelphia refineries serviced by the railroad—a generous bonus that could be canceled at any moment for misbehavior. Meticulous in such maneuvers, Rockefeller made sure to leave no fingerprints and told Captain Vandergrift that it was “of utmost importance that nobody knows of [Standard Oil’s] thought of doing something about [the suit] outside the [Clarion] County.”41
From the outset, Standard Oil defendants saw an advantage in the Clarion County affair, which enabled them to refuse to testify at many civil proceedings by claiming it might harm them in the criminal case. Nevertheless, Rockefeller feared that the Clarion suit might set a precedent and adopted a combative approach. “We are disposed to fight the thing and not be subject to this blackmailing process always,” he insisted.42
At bottom, Rockefeller must have been genuinely alarmed by the impending criminal prosecution, for he decided to placate the producers and cut a political deal. On the day before Christmas 1879, Standard Oil rescinded the immediate-shipment policy and agreed to meet with producers at the Fifth Avenue Hotel in New York. In a historic agreement, Standard Oil renounced—or seemed to renounce—the use of secret rebates and drawbacks and consented to publicly posted freight rates; its United Pipe Lines would no longer discriminate among shippers and would transport all oil within reasonable limits. In return, the criminal and civil cases against Standard Oil in Pennsylvania were scuttled. In time, it emerged that Standard’s pledge to repudiate rebates was largely a rhetorical flourish to settle the cases.
Aware that Standard Oil’s fate was now being thrashed out in the political arena, Rockefeller reversed a long-standing prejudice and took shares in two Cleveland newspapers, investing $5,000 in the Herald and $10,000 in the Leader, explaining to Colonel Oliver Payne that since “Mr. Flagler felt perhaps we had given too little heed to influences of this kind, I decided best to do it.”43 While Rockefeller’s official policy remained one of obdurate silence, he now had more avenues of press access than he admitted. Payne, meanwhile, believed that Standard Oil should move from bribing politicians to controlling them directly, telling Rockefeller, apropos of the Ohio legislature, “I wish to say that I have got through with sentiment in politics. . . . We must see hereafter that there is one man in the Legislature from this County that has brains, influence and is our man. ”44 Rockefeller told Payne to do “all that is necessary.”45
Around this time, Rockefeller recruited to the Standard legal staff Roger Sherman, who had masterminded the producers’ case against him. For years a champion of Oil Creek, Sherman had fought valiantly to imprison Rockefeller. Now Rockefeller was wily enough to offer him a job, and Sherman was naive enough—or original enough—to accept it. Always proud of his persuasive powers, Rockefeller took special pleasure in wooing opponents whom he had learned to appreciate by tracking their ploys against him. When a lawyer named Virgil Kline won two lawsuits against him in the 1880s, Rockefeller invited him to his office. “Mr. Kline,” he said, “you have given us a good licking. Now I would like to have you come and work for me.” 46 Kline agreed and became a long-standing member of the Standard Oil legal staff.
Things worked out differently for Roger Sherman, who realized after a strangely inactive year on the payroll that Rockefeller had given him a five-year contract expressly to neutralize him. When he tried to wriggle free of the contract, he was able only to strike a compromise that allowed him to resume his general practice in western Pennsylvania while remaining on retainer to Standard Oil. When he later returned to the crusade against Rockefeller, the independents were too disenchanted by his flirtation with Standard to deal with him. True to his wishes, Rockefeller had tarnished Sherman, separating him from his onetime admirers.
Ever since his boyhood as the son of the town pariah, Rockefeller had evinced more than a trace of paranoia. Now, embattled in courts and legislative chambers, he was convinced that evildoers were plotting against him and complained to one colleague about “this iniquitous proceeding of getting the United States out with a drag-net for the Standard Oil Co.”47 As chief instigator of his misery, he cited George Rice, an independent refiner, who would pursue him with the tenacity of a harpy for decades.
Rockefeller’s movements in 1879 were governed largely by the need to duck subpoenas. In July, the New York State Assembly held hearings, chaired by Alonzo Barton Hepburn, to probe clandestine relations between the railroads and various industries. While the panel examined flour millers, meatpackers, and salt makers, it zeroed in on Standard Oil as the most notorious beneficiary of back-scratching with the railroads. That summer, Rockefeller stayed at Forest Hill, safely beyond the committee’s reach.
As was true of many exposés of Rockefeller, the Hepburn hearings fueled public indignation against him while it also inadvertently enhanced his mystique as an invulnerable genius. The committee trotted out William H. Vanderbilt, who paid resounding tribute to the disciplined craft of the Standard Oil executives. “Long ago I said if the thing kept on the oil people would own the roads. . . . These men are smarter than I am a great deal. They are very enterprising and smart men. I never came into contact with any class of men so smart and able as they are in their business.”48
John D. Archbold’s testimony previewed the manner—flippant, arrogant, glib, and high-handed—in which he disposed of future legal challenges to Standard Oil’s authority. Asked about his functions as a director, Archbold retorted, “I am a clamorer for dividends. That is the only function I have in connection with the Standard Oil Company.”49 He blatantly perjured himself when he said that Standard didn’t control Acme Oil Company. When chairman Hepburn asked him to return for further questioning the next day, Archbold dismissed the committee, instead of the other way around. “I have given today to the matter,” he told them. “It will be impossible for me to be with you again.”50 For the most part, Standard officers dodged questions with the ritual evasion, “I refuse to answer on the advice of counsel.”51
When the Hepburn report was issued, it lent credence to what might otherwise have seemed fantastic conjecture, documenting a pattern of pervasive railroad favoritism toward large shippers. The New York Central alone enforced six thousand secr
et contracts, while the Erie’s business was equally honeycombed with privileged arrangements. The committee assailed Standard Oil as “a mysterious organization whose business and transactions are of such a character that its members decline giving a history or description of it lest this testimony be used to convict them of a crime.”52
For years, refiners had debated whether railroads were unregulated enterprises, free to strike what bargains they pleased, or common carriers, committed to treat all alike. The Hepburn report buttressed the latter view, saying that railroad bias toward Standard Oil was “the most shameless perversion of the duties of a common carrier to private ends . . . in the history of the world.”53 To remedy this, the New York legislature set up a railroad commission to regulate rates in a fair, uniform manner. The Hepburn report, however, was both belated and insufficient in hobbling Rockefeller’s triumphant march, for by this time he had parlayed his secret railroad contracts into preeminence in oil. More important, his firm had now advanced far beyond the railroads to more efficient pipelines. In fact, a cynic might argue that the advent of the Hepburn hearings was incontestable proof that the railroads no longer mattered.
The growing agitation over railway reform hardened Rockefeller’s determination to bring the Tidewater pipeline to bay, and he began to harass his competitor with a bewildering array of challenges. He tried to throttle the pipeline’s access to crude oil and explored the purchase of several New York refineries before they could become Tidewater clients. At one point, he reduced rates on Standard Oil pipelines while the railroads dropped prices to such risible levels that one freight agent said that they scarcely covered the wheel grease. This relentless price war forced Tidewater to operate at half capacity.
It turned out that Rockefeller’s adversary, Byron Benson, was no more enamored of free markets than Rockefeller was and had created the pipeline to join in the feast. In March 1880, Daniel O’Day chanced to meet Benson on a train traveling from Oil City to Bradford and was shocked by his rival’s words. As O’Day reported to Rockefeller, “[Benson] told me that he wanted to ‘let the bars down,’ as he expressed it, for any overtures that might be made to his company, with a view of an adjustment of the pipe line questions. He said that he felt that the time had about come when the companies should work together with a view of preventing other companies from engaging in the business.”54 Benson’s solution suited Rockefeller just fine: Tidewater, instead of cutting rates to compete with the railroads, would collude with them to raise rates. Thus, within a year of its completion, the pipeline that was supposed to emancipate independents from Standard Oil bondage was drawn into a railroad pool supervised by John D. Rockefeller. In 1882, when Byron Benson decided to borrow two million dollars to expand Tidewater, it prompted vigorous opposition from a group of minority shareholders. Exploiting this dissension, parties friendly to Standard Oil bought the minority stake, enabling Rockefeller to strike a bargain with Tidewater the following year. Under this pact, Standard Oil divided the pipeline business in Pennsylvania, taking 88.5 percent of the trade and leaving just 11.5 percent to Tidewater.
It was now abundantly clear to Rockefeller that the railroads represented a fading order. For a long time, he had resisted an irreversible shift to pipes for fear of antagonizing the railroads, but this concern had lost its force. When Standard Oil constructed four pipelines from western Pennsylvania to Cleveland, New York, Philadelphia, and Buffalo, he pressured the railroads to grant it right-of-way concessions, even though the pipelines signaled their doom.
When Standard Oil subdued Tidewater, it again demoralized the independents and suggested that all opposition to the behemoth was a foolish, chimerical dream. While a band of intrepid reformers continued to joust with Standard Oil in courthouses and legislatures, most producers now surrendered hope of any improvement in their plight. They knew they would either have to quit the business or swallow their pride and make peace with the oil giant. With the passing of Tidewater’s complete independence, they could no longer ship oil from Pennsylvania without paying tribute to the all-powerful Mr. Rockefeller.
Harriet E. Giles (left) and Sophia B. Packard, the founders of Spelman Seminary, later Spelman College, who recruited Rockefeller as the school’s major donor in the early 1880s. (Courtesy of the Spelman College Archives)
CHAPTER 13
Seat of Empire
When John D. Rockefeller turned forty on July 8, 1879, he was already numbered among America’s twenty richest men, yet he was likely the most obscure of the pantheon. While this resulted largely from his aversion to publicity, it also stemmed from his residing in Cleveland. As one chronicler said of the town, “Its rich folk were not scandalous or showy; its politics had not the violent quality essential to American fame.”1 In other words, it was an ideal place for a reclusive magnate. Throughout his career, Rockefeller pooh-poohed “exaggerated” press estimates of his wealth, yet they often understated his true worth. In the late 1870s, one newspaper pegged his wealth at more than $5 million, when his Standard Oil stock alone was by then worth $18 million, or $265 million in 1996 dollars. By comparison, when America’s richest citizen, Commodore Vanderbilt, died in 1877, he left an estate valued at nearly $100 million.
Photos of Rockefeller from this period show two contrasting faces. In his serious mode, his expression seemed grim and unsmiling, with tremendous force in his gaze but no softness or joy. Yet when photographed in leisure hours in the sanctuary of Forest Hill, he looked trim and whimsical, surprisingly boyish for such a powerful man. Gone were the old side-whiskers, but he still had a full red mustache and sandy brown hair. In a period when moguls prided themselves on their embonpoint, Rockefeller was as lean as a grey-hound. And at a time when top hats and watch chains were de rigueur for any self-respecting plutocrat, Rockefeller generally conformed to the requisite style, but his family constantly had to remind him to buy a new suit when his current one got too shiny.
If Rockefeller generally enjoyed excellent health, there were early warning symptoms of the toll taken by the excruciating pressures of Standard Oil. In 1878, he wrote to Eliza, “I am eating celery which I understand to be very good for nervous difficulty.”2 Colleagues plied him with advice to take more vacations and spend more time away from business, even though Rockefeller later said he was almost semiretired at this point. He tried to spend as many afternoons as possible at Forest Hill in “the bracing air of Lake Erie.”3 He displayed a strong interest in herbal medicines and other folk remedies, advising one associate that he could dispense more easily with tobacco if he had an orange peel before breakfast every day. Big Bill’s interest in medicine, conventional and otherwise, began to surface in his son and became more pronounced with time.
Now that Rockefeller headed almost all of America’s oil refineries and pipelines, the press belatedly awakened to his existence, acknowledging him as a new deity in the industrial firmament. In November 1878, he sat for his first full-length newspaper profile in the New York Sun. The article disclosed the scope of an ambition that Rockefeller took pains to deny: “The people of Cleveland say that it is his ambition to become the richest man in Ohio and one of the ten richest men in the United States. . . . He is in a fair way of being able to count on his fingers the men in the country who are richer than he is.”4 This first sketch, which portrayed him as quiet, reserved, and methodical, was shot through with ambivalence. Of Rockefeller’s business ability, the reporter rhapsodized: “Business men in Cleveland, in the oil regions and in New York who know him or know of him, regard him as one of the great commercial intellects of the country.” 5 Yet the article concluded that his Olympian success arose from a strange, unsavory bargain with the railroads—a pact that people surmised but could never quite prove. Within a year, the Hepburn hearings began to document what had long been mooted about Rockefeller’s dealings with the railroads, and by the early 1880s he had moved a considerable distance from his former anonymity to something closer to universal notoriety.
In late 1883, R
ockefeller’s life assumed a marginally higher profile when he moved to New York. Eighteen eighty-four would prove to be a pivotal year for the country, marked by bank failures and panics and the demise of General Grant’s brokerage firm, Grant and Ward. The Democratic reformer Grover Cleveland triumphed in the presidential election over the corrupt Republican candidate, James G. Blaine, installing a Democrat in the White House for the first time in many years.
Rockefeller had long felt the gravitational pull of New York, with its lively export trade in kerosene, and routinely spent part of each winter there. Haunted by his father’s wanderings, he was loath to abandon Cettie and the children, and for two winters in the mid-1870s he lodged them at the Windsor Hotel on Fifth Avenue, where Jay Gould often plotted his corporate raids. From 1877 to 1884, Rockefeller and his family stayed at the Buckingham Hotel, a residential hotel on Fifth Avenue on the present site of the Saks department store. They had a large suite of rooms in the shadow of Saint Patrick’s Cathedral, whose huge stained-glass windows loomed up dreamily outside their windows at night. (One of Junior’s early memories was of being reprimanded sharply by his mother for failing to thank a hotel waiter for bringing him food.) After Harvey Spelman’s death in 1881, Grandmother Spelman and Aunt Lute took a suite on the same floor and shared meals with them. From late spring through early fall, the entourage returned to Forest Hill, where Rockefeller stayed in touch with the New York office by sophisticated telegraphy.
Business now dictated Rockefeller’s move to the East Coast. In an age of long-distance pipelines, huge volumes of crude oil were flowing to seaboard refineries where they fed a flourishing export traffic, relegating Cleveland and other inland centers to an inferior status. Responding to the export boom, Standard Oil established sprawling refineries in Brooklyn, Bayonne, Philadelphia, and Baltimore. A latent tension now strained relations between the Cleveland headquarters and its burgeoning New York branch. One day, Benjamin Brewster, a Standard director, told Rockefeller that a two-headed calf belonged only in the circus and that the combine needed a single head. “You can’t have one head in Cleveland and another in New York,” he told Rockefeller. “And therefore either you have got to quit Cleveland and come on here or we have got to pack up and leave New York and go out to Cleveland.” 6
