The Erie’s unaudited annual report, issued in January 1870 for the fiscal year ending September 1869, listed the highlights of the railroad’s first twelve months under Gould management. Gross revenues were up 16.3 percent to $16,721,500, and operating expenses declined 4.4 percent. However, once interest on bonds was paid, the Erie had nothing left over for dividends on the 780,000 odd shares of stock outstanding. Unmentioned in the report were the lingering (and largely unsalvageable) infrastructure dilemmas that still afflicted the physically antiquated Erie. The railroad, as Jay noted in a confidential memorandum, had far more problems to contend with than just its broad gauge. High-maintenance wooden bridges (not to mention old and degrading iron tracks) needed to be replaced by steel equivalents. The line also required durable sleepers and costly improvements to numerous grades. The Erie’s dilapidated equipment made accidents, many of them deadly, a common occurrence. On top of all this, the Erie possessed only a single set of tracks throughout its course, whereas Vanderbilt’s New York Central boasted four and the Pennsylvania a minimum of two, allowing trains to run unimpeded in opposite directions.
These were facts the strategically minded Gould fully understood. Given the physical futility of the railroad, Gould could take it seriously only as a speculative device: a financial shell, an item ripe for manipulation. Bond revenues raised for improvement of the line, though officially spent on the Erie, almost always wound up devoted to the financial betterment of Gould and his cabal. For example, when Gould and Fisk privately purchased the Opera House for $850,000, their down payment of $300,000 came directly from Erie coffers as prepayment of the exorbitant rent to be charged in future. In this way Gould and Fisk spent not a penny out of their own pockets but nevertheless wound up with controlling interest in a major New York address. Similarly, when President Gould decided to expand the Erie’s land holdings in Jersey City, it was from real estate speculator Gould that the railroad wound up purchasing waterfront acreage.4 The proceeds from numerous other bond offerings vanished in similar schemes. Amid all this, as the Erie’s securities sank and her debts mounted, shareholders–especially the many British investors who held a clear majority (450,000) of the Erie’s outstanding securities, and who recognized and were outraged by Gould’s shirking of his fiduciary responsibilities–grew increasingly restless.
Boss Tweed made sure that a representative of the British shareholders–one Joseph L. Burt–received absolutely no satisfaction when, in early 1870, he visited Albany to ask for revocation of Gould’s Classification Act. At the same time, down in Manhattan, Judge Barnard fended off Burt’s attempts to take the bulk of the British shares out of “street-name” and register them with the New York Stock Exchange under two specially designated British owners–Robert A. Heath and Henry L. Raphael. This move, had it gone forward, would have allowed Heath and Raphael to vote the British shares in the next round of Erie elections and thereby control those elections. Barnard instead placed the British shares in the hands of a receiver and enjoined Burt from any further attempts to register them. So long as Gould controlled the courts and–through Tammany–the Legislature, it seemed the Erie citadel would remain unassailable. But a clock was ticking.
That April, once he’d seen what he could expect from the New York judiciary, Burt went to the federal courts for relief. At first, Fisk and Gould seem not to have realized the threat posed by the federal suit. “Contrary to expectation,” said a newspaper account, “no difficulty was experienced in serving the Erie officials with notice of the [federal] suit instituted by Burt’s bondholders. Learning that the papers were ready, Fisk dispatched a member of his legal staff to the United States Marshal’s office for the purpose of escorting the deputy to the Erie stronghold. Fisk and Gould received the bearer of Burt’s challenge to legal combat with the utmost humor and courtesy, and, the ceremony of serving over, [Fisk] entertained the deputy marshal at lunch.” Later that day, Fisk told the press, “If these Britishers prefer that their share of the earnings of the road shall be eaten up in lawsuits instead of being distributed in dividends, I can’t help it.”5
During the same interview, Fisk made a recruiting pitch for his latest pet project: the Ninth Regiment of the New York Militia. Fisk, the financial angel of the outfit, had recently been commissioned a colonel. Writing that May, a Herald reporter commented that when Fisk wore his uniform, tailored by Brooks Brothers at a cost of $2,000, he “looked for all the world like a pleased school boy let out of school to play soldier.”6 Henceforth, Fisk insisted on being called “Colonel” by all, even Josie. He also purchased new uniforms for every man in the Ninth and offered cash bonuses to those Erie employees who agreed to sign up. After a flashy dress parade down Fifth Avenue at the end of the month, the men of the Ninth made a right turn and marched across Twenty-third Street as far as Eighth Avenue. There, at the Grand Opera House in Castle Erie, they attended a special performance of Fisk’s latest theatrical extravaganza, The Twelve Temptations, produced at a cost of $75,000.
As its title suggested, The Twelve Temptations included a dozen chorus girls dressed, according to one reviewer, “in styles that modesty does not tolerate in good society.”7 The show’s elaborate set incorporated a waterfall and several dangerous sulfur magnesium “balls of fire.” When juggled by the dancers, the balls cast off showers of dangerous cinders and sparks. (More than one seminude performer wound up singed.) Meanwhile, the chorus line alternated every night between a row of blonds and a row of brunettes. And the show was a smash. Where poor old Mr. Pike had failed to lure New Yorkers to the West Side for high opera and Shakespeare, Fisk attracted them in droves with his Temptations and similar spectaculars. “Spectacles are proverbially fit for old eyes,” wrote the editor of New York’s satirical weekly Punchinello. “Probably that is the reason why the spectacle of The Twelve Temptations is so dear to the aged eyes of the gray-haired old gentlemen who occupy the front seats at the Grand Opera House. . . . Though the dullest of dramas, it is so brightened by brilliant legs that it dazzles every beholder.”8
Gould did not attend a single performance of The Twelve Temptations or any other Fisk-produced extravaganza. By the spring of 1870 both he and his in-laws had vacated the old Miller mansion near Union Square and moved up to larger homes on fashionable Fifth Avenue, the Gould residence being a townhouse at 578 Fifth Avenue, midway between Fifth’s intersections with West Forty-seventh and West Forty-eighth Streets.9 Although Jay created an elaborate library for himself on the first floor of his house, he made his home office for late-night work sessions in an unlovely corner of the basement. Up on the roof, he rigged a simple greenhouse for his flowers: roses, hyacinths, and most especially orchids, with which he’d recently become fascinated. Carpenters built him a small potting shed next to the greenhouse. Here, in addition to his gardening tools, he also kept an ancient trunk (a relic of the old home at Roxbury), packed with botanical reference books. And with this arrangement he was satisfied. “I have the disadvantage,” Gould told a reporter at about this time, “of not being sociable. Wall Street men are fond of company and sport. A man makes $100,000 there and immediately buys a yacht, begins to drive fast horses, and becomes a sport generally. My tastes lie in a different direction. When business hours are over I go home and spend the remainder of the day with my wife, my children and books of my library. Every man has natural inclinations of his own. Mine are domestic. They are not calculated to make me particularly popular on Wall Street, and I cannot help that.”10
Actually, not being sociable came in handy for a man who was not generally welcome in polite society. Jay’s lingering newspaper notoriety from Black Friday, combined with his much-publicized contemporary shenanigans manipulating Erie securities at the expense and distress of foreign shareholders, made him a social pariah. Already one of the most despised men in the United States, Gould was well advised to take his pleasures within his family circle. It was a happy coincidence that this was where he’d prefer to be anyway. But even Jay’s devotion to f
amily created negative publicity. Newspapers quoted the opinion shared by many rough-and-tumble Wall Street speculators that Gould was a snob willing to spend time with them only when money was to be made. Reporters, themselves no strangers to the after-hours conviviality of Wall Street, tended to take the same view. More than one journalist made a point of contrasting the curt, private Gould with the openhearted and riotously popular Fisk. While one of them was cast in the public role of sinister scoundrel, the other delighted in the part of charming, irrepressible bad boy. In the end, Jay’s domestic instincts contributed greatly to the public impression that he had no friends, and consequently no loyalties to anyone other than his kin. The closest Gould came to a nightlife was when he sometimes strolled down to the Fifth Avenue Hotel after dinner, there to observe the after-hours trading and methodically chat with the stock brokers who frequented the establishment’s bar and lobby. His conversation was almost always on financial point and without humor, his questions focused and his antenna up for any useful bit of news as he wandered among the traders.
Acquaintances grew used to seeing him linger at the hotel for under an hour every night, only long enough to take the pulse of the market. In turn, they noted no change in Gould’s taciturn habits during the summer of 1870, when Ellie and the children went to the beach at Long Branch, New Jersey, for a solid eight weeks. Throughout Jay’s long spell of bachelorhood, he still made his evenings early ones. He routinely eschewed the prospect of nymph-filled nights on the town with Fisk, and he made a beeline for Long Branch every weekend. Crew members recalled him sternly clutching his briefcase as he strolled the decks of the Fisk-and-Gould-owned steamer Plymouth Rock plowing between Manhattan and the Jersey coast every Friday afternoon and Sunday evening.
When he boarded the vessel on Friday, 19 August, Gould found himself surrounded by six hundred members of Fisk’s militia regiment, all of them headed out to Long Branch for their annual summer bivouac. Decades later, George Gould would recall joining his unsoldierly father on a visit to the Ninth at “Camp Jay Gould,” where George, at age six, was permitted to fire a rifle into the waves of the ocean. “As they are to feed at the hotels,” the Herald’s correspondent observed of Fisk’s pampered regiment, “they bring no rations with them, encumbering their knapsacks, but fill them with white pantaloons, white gloves, and other dilettante adornments of holiday soldiers.”11 The pious Ellie Gould applauded Fisk for marching his men off to services on Sunday, although the Herald’s man commented that it was the first sermon Fisk had heard in nine years. “He was greatly moved by the unusual sensation and shed tears. It was better than a play to him.”12
Part of the reason behind Fisk’s sudden need for summer soldiering was the disintegration of his love life back in Manhattan. Shortly before departing for Long Branch with his men, he had received cold treatment from Josie. Thereafter, while Fisk “trained” at Long Branch, Josie entertained a new lover: thirty-nine-year-old Edward S. Stokes, known as Ned. Handsome and married, the socially prominent Stokes served as general manager of the Brooklyn Oil Refinery Company, a firm owned by his widowed mother. According to a contemporary who knew him well, Stokes “had one great fault. . . . His blood was hot, and being of a nervous, sanguine temperament he was liable at any moment to break out when he deemed himself imposed upon or outraged. He had always been sensitive to an insult and quick to resent an injury.”13 A year earlier, when–due to Stokes’s own tempestuousness, irrationality, and theft of corporate funds–Brooklyn Oil began to show signs of failing, Stokes had induced Fisk, then his friend, to join the company’s board and make a large investment. Later, Fisk ensured favorable Erie Railroad rates for the transport of Stokes’s oil between Pennsylvania and New York; and he gave Stokes a de facto monopoly on all of the Erie’s sizable oil and kerosene purchases. In return, Stokes stole Fisk’s woman. “Miss Mansfield,” wrote Fisk biographer R. W. McAlpine, “while she had no real love or passion for Fisk, had received him as her lover, for his money. But Stokes she really loved; or if love be too exalted a word to use in connection with a woman so worldly and designing, it is safe to say that she entertained for Stokes an ardent passion.”14
Fisk, of course, had routinely conducted a score of affairs with a passing host of actresses and dancers. But Josie always remained the one great constant in his romantic life. As well, all of New York knew of Fisk’s indiscreet arrangement with Mansfield, so his sudden banishment from the mansion he’d paid for caused great embarrassment. Josie, for her part, did not appear to understand the concept that when a man kept a woman, he usually expected a fair measure of exclusivity in return. “I was always supplied with silks, wines, food and everything that I could desire,” she would later say, “but he would never allow me any freedom.”15 When Fisk returned to Manhattan early in September, he confronted Mansfield and rejected her blunt proposal that in return for his ongoing support she might continue to share herself with Fisk on occasion, while still also seeing Stokes. “It won’t do, Josie,” he is reported to have said. “You can’t run two engines on one track in contrary directions at the same time.”16
The British shares were still tied up in October 1870, when three more Gould-friendly Erie directors (among them Gould’s brother-in-law Daniel Miller, Jr.) achieved reelection by large margins. At the same meeting, the Erie board voted to ratify all actions, rules, and programs enacted by management since August 1869. Not long after, as the British suit slowly progressed through the federal courts, Gould took a stab at shoring up the railroad’s troubled finances with an issue of consolidated mortgage bonds meant to replace the anarchic mess of the company’s previous debt issues. But this time the notorious Scarlet Woman of Wall Street, showing age and infirmities that no amount of rouge could conceal, found it impossible to seduce customers. Gould alone took $3 million at 60. On through the year 1871, the Erie continued to flounder. Never much good as a railroad, it now became increasingly useless as a tool for speculation.
While the Erie wound down, Gould found himself embroiled in a dangerous confrontation with his onetime ally James McHenry. Gould and McHenry had joined forces in 1868 to help salvage McHenry’s troubled Atlantic & Great Western Railway (A&GW)–a combination of three broad-gauge short lines connecting Jamestown, New York; Meadville, Pennsylvania; and Franklin Mills, Ohio, via a hub in Cleveland. Leasing the line to the Erie, McHenry and Gould innovated a profitable interchange route for oil moving between Cleveland and the eastern seaboard. However, a subsequent disagreement between the two men caused Gould to unilaterally (and quite illegally) change the terms of the lease in the Erie’s favor. During the ensuing court battle, Gould was–as of February 1870–able to control the A&GW on his own terms while McHenry struggled to reorganize the firm and stave off a foreclosure action. Not until October 1871 did McHenry finally regain control.
What he wound up with, however, was of little value without the Erie interchange, and a new lease on favorable terms seemed impossible so long as Gould remained in charge of the larger railroad. Thus, near the end of 1871, McHenry sought to ally himself with the Erie’s British investors, their shared goal being to knock Gould off his throne. McHenry likewise teamed up with New York’s new reform-Republican attorney general, Francis Channing Barlow, elected November 1871. Though he’d been born and raised in New York, the thirty-seven-year-old Barlow boasted roots in several prominent Boston families. He was also a war hero. After serving with distinction during the battles of Antietam and Chancellorsville, Barlow had been temporarily paralyzed by a rifle shot at Gettysburg while defending a hill subsequently known as Barlow’s Knoll.17 At the time he joined forces with McHenry, Barlow–who’d previously served as U.S. marshal for the Southern District of New York–had already been of help with Burt’s federal petition against Gould. He also stood poised, in his new role as attorney general, to collaborate with Samuel Tilden in the state’s prosecution of Tweed on charges of corruption.
It was perhaps through Barlow that McHenry’s “Erie Protective Comm
ittee” secured the services of another Gettysburg veteran, General Daniel E. Sickles. Born in 1819, the ne’er-do-well Sickles was a graduate of the University of the City of New York Law School. His prewar career included stints as a Tammany-entrenched corporate counsel for the City of New York, secretary to the U.S. legation in London, New York State senator, and Democratic U.S. representative from New York. Sickles’s two-term career in Congress had been marred by scandal in 1859 when he shot and killed his wife’s lover, Philip Barton Key, son to Francis Scott Key, composer of “The Star-Spangled Banner.” Sickles’s subsequent acquittal involved the nation’s first successful plea of temporary insanity, this orchestrated by defense attorney Edwin M. Stanton, later attorney general and secretary of war under Lincoln. During the war, Sickles served in the Peninsula Campaign and fought at Sharpsburg and Chancellorsville before moving on to Gettysburg, where his willful insubordination led to the virtual destruction of the Union’s Third Corps. Nevertheless, after losing a leg to a Confederate cannon ball, Sickles wound up with the Medal of Honor. Retiring from the army in 1869, Sickles renounced Tammany, became a Republican, and eventually received Grant’s appointment as U.S. minister to Spain. Once in Madrid, the hard-drinking and incessantly unfaithful Sickles quickly gained the nickname “Yankee king of Spain” because of his extraordinarily close relationship with that country’s sultry former queen, Isabella II.
Early in November 1871, upon receipt of a $100,000 offer from McHenry, Sickles took a hiatus from his diplomatic duties and returned to New York to help orchestrate Gould’s downfall. One month later, he instituted a second suit against the Erie, paralleling Burt’s, and assaulted Albany in an attempt to overturn the Classification Act. At the same time, McHenry’s committee distributed a broadside informing Erie shareholders of its intention “to break up the whole combination of the Erie ring, without respect to persons.”18 Reading the broadside and realizing the forces arrayed against him, Gould could not have failed to understand how precarious his situation had become. Not only were Erie shareholders in open rebellion, but Gould’s support system of cronies also stood in turmoil. Just a few weeks earlier, the Republican reform movement in Manhattan and elsewhere had dealt Tammany a number of conclusive defeats at the polls, leaving reform elements in control of the state legislature. Soon Tweed–recently the target of a New York Times exposé and almost daily baiting by Thomas Nast’s satirical cartoons in Harper’s Weekly–would be arrested for fraud, resign from the Erie board, and lose his august post as grand sachem of Tammany. As for Fisk, his unseemly dilemma with Josie Mansfield and Ned Stokes had captured the attention of every newspaper in New York. The negative publicity further threatened Gould’s control over the Erie.
Dark Genius of Wall Street Page 22
