Business, Politics and Religion in Utah Utah and Her Railroads By C. G. PATTERSON "We have learned by sad experience that it is the nature and disposition of almost all men, as soon as they get a little authority, as they suppose, they immediately begin to exercise un¬ righteous dominion."—Doctrine and Covenants. PRICE TEN CENTS. * COPYRIGHT 1916 BY C. G. PATTERSON FOREWORD. In a land of such magnificent distances as is the United States railroads are the only medium through which resources can be adequately and effectively de¬ veloped. The railroads of the country, therefore, hold the key to the prosperity of the people. As the power for good in any agency or medium, when rightly directed or controlled, is balanced by an equal power for evil when the same agency or medium is wrongfully directed or uncontrolled we may expect to find the railroads of the nation as often playing the role of oppressor as of bene¬ factor among the people. And as railroad corporations are the result of the thought and effort of scheming, am¬ bitious brains and were called into being more often to gratify the lust for power inherent in man than to bless humanity in general we may expect to find re¬ flected through them all the characteristics, degrees and grades of graft, cunning, trickery, bribery, misrepresent¬ ation, intimidation and fraud as has been practiced by those who have fought for power in all ages of the world. When we reflect that it has been only about, eighty- five years since the first railroad was built in the United States and consider that in this short period lines have been extended into almost every hamlet in the nation, un¬ til today there is more than enough miles of railroad in this country to girdle the globe eight times, we will be¬ gin to understand something of the marvelous develop¬ ment of our land and will be led to comprehend some¬ thing concerning the opportunities and temptations to¬ ward graft and power that confronted our railroad build¬ ers as they fought and conspired against or combined with each other in their efforts to control territory and stifle competition. In some of our states the railroads, through their hirelings, have brazenly usurped the functions of govern¬ ment and have allowed to be written only such laws as were advantageous to them. In other states the railroad power has not been strong enough to openly enter the political arena but has succeeded in protecting itself by canning and trickery, thus fooling the people and obtain¬ ing such legislation as was favorable or avoiding the en¬ actment of such laws as they considered against their in¬ terests. The railroad situation in Utah has very generally escaped attention on the part of her citizens. There is no other state in the union where the railroad situation 2 has not aroused more attention than it has in Utah and there is probably not another state in the union where the people have more just cause to complain of the rail¬ roads than they do here in Utah. Why this is so will, at first thought, probably puzzle the reader but a little research into railroad history in the state will reveal the influence that has held the people in leash during past years. At the risk of being branded heterodox by some but in the hope that what I point out will result in the gen¬ eral good of the community I take the liberty to present a little railroad history. I do this, not as an enemy of the railroads (for we can't do without them and must treat them fairly) but as a friend of the people and as one uho believes it dangerous to delegate power to any man or set of men without placing such restrictions on them as will enable the people to keep informed as to the man¬ ner in which the power so delegated is used. Without this safeguard the universal experience of mankind is that these delegated powers have been abused to the hurt and damage of the people. As to whether or not the people of Utah have cause to complain over railroad conditions in the state I leave these pages to answer. C. G. PATTERSON. Salt Lake City, Utah, August 5th, 1916. UTAH AND HER RAILROADS. In order to clearly understand this question it will be necessary to go back to the construction of the Central Pacific, (1865 to 1869) the first railroad to enter the ter¬ ritory and a link in the various lines of track which spanned the country from ocean to ocean. For twenty- two years, (1847 to 1869) the people of Utah had strug¬ gled in the wilderness for existence. They had not lived in the sense that we use that term today. They had merely anchored themselves to the soil as a means of keeping soul and body together while they hoped, prayed and waited for the radroad to come. When the enter¬ prise was undertaken there was no more loyal nor joyous oeople toward it than were the handful of Mormons in Utah. By hundreds did they flock to the construction camps to labor and when the task was finished it was found that some 600 miles of grading could be credited to them under the leadership of Pres. Brigham Young. But the railroad business was then new and methods of finance were crude. After passing through various difficulties the Central Pacific was finally forced into the hands of a receiver and eventually passed into the con¬ trol of others than its promoters. Its history is only a duplication of the history of all the early lines constructed but the building and operation of these lines developed a class of men who were capable of reorganizing and erect¬ ing upon the old a new system that would endure and 3 pour wealth by hundreds of millions into the land. But these reorganizers had in mind a policy of public ex¬ ploitation to the end that they might mortgage the re¬ sources of the land and thus at once grasp, for their own use, the wealth the railroad business was capable of yielding. To accomplish their objects the very first step to be taken was to find a home for the corporations that were necessary with which to mange and control the rail¬ road properties to be taken over. This period of railroad reconstruction was the golden period of trust and mon¬ opoly formation in the nation. It was the era of high finance. Most of the states in the union early awoke to the danger of centralized wealth which the schemes of the ambitious financiers foreshadowed and passed corpora¬ tion laws more or less stringent in character with which to curb the gamblers in their gigantic deals. They (the states) showed that they wanted no business wild cat¬ ting. This was true of all the states except Maine and New Jersey and of these two New Jersey openly bid the wild catters come and shelter within her borders, and to New Jersey did the trust makers flock by hundreds and by thousands. But an astute crowd of men who were working to consolidate and control certain links in the chain of rail¬ roads spanning the continent, among them the old Cen¬ tral Pacific, discerned in the state of Utah a safer place in which to domicile their company than New Jersey afforded. They foresaw the time when public sentiment would compel the state of New Jersey to change her policy as to corporations and with equal discernment did they comprehend that there was a power in Utah which could and would protect them when all other states would refuse them refuge. So they came to Utah to incorpor¬ ate the Union Pacific Railroad Company. It is interesting to note the change in the incorpora¬ tion laws of the state at this time. The statutes of 1896 provided for the formation of private corporations, but required at least one-third of the incorporators to be icsidents of the state; ten per cent of the capital to be paid in at time of incorporating; required all officers to qualify by GIVING BOND that they would not do nor consent to the doing of any matter or thing relating to the corporation with intent to defraud any stockholder, creditor or the public ; placed a limitation on the amount of capital stock ; provided that wilful failure to make proper entries or the making of false or ficititious entries in the books of the corporation should be forgery and that any person entrusted with the property of the cor¬ poration who should fraudulently misapply, carry away, secrete, conceal or convert to his own use such property that he, his counsellors aiders and abettors should be guilty of embezzlement. These were stringent regula¬ tions but were undoubtedly wholesome and necessary and they applied to railroad as well as to other corpora¬ tions. At the regular session of the legislature of 1897 we find a law enacted to provide for the formation of rail¬ road corporations in which every single one of the re¬ strictions of the law of 1896 was wiped out thus making it possible for any body of men who could scrape to¬ gether sufficient money to pay filing fees to form a rail- 4 road corporation clothing them with the broadest powers. It is significant to note that this was the very first meas¬ ure passed by this legislature. It was railroaded through both houses and approved by the governor Jan. 22nd, 1897, a very few days after the legislature convened and without time being given for deliberation and discussion. It was evidently a cut and dried measure, backed by an exceedingly strong and potent influence. In the light of two years' experience the broad pow¬ ers granted in the act of 1897 proved to be unsatisfactory to the financial jugglers who had chosen Utah as the home of their company and when the legislature again met in 1899 there, was an amendment to the law of 1897 waiting for them. This amendment broadened the act of 1897 by providing as follows, "Any Railroad Corpora¬ tion organized under the laws of this state that shall have heretofore increased or shall hereafter increase the amount of its capital stock specified in its original or amended articles of association MAY RECEIVE SUB¬ SCRIPTIONS FOR SUCH INCREASE OF STOCK ON SUCH TERMS AS THE BOARD OF DIRECTORS OR A MAJORITY OF THE STOCKHOLDERS SHALL AUTHORIZE, PAYABLE IN SHARES OF THE CAPITAL STOCK OF ANY OTHER RAIL¬ ROAD CORPORATION OF THIS OR ANY OTHER STATE whose railroad shall be connected with or con¬ stitute a branch or extension or auxiliary line of the rail¬ road of the corporation issuing such stock but shall not be parallel or competitive therewith * * * anq such stock so issued shall for all purposes be deemed fully paid and non-assessable." THIS ACT WAS THE VERY FIRST MEASURE RUSHED THROUGH THIS LEGISLATURE. It was approved Jan. 17th, 1899. That it was prepared by a railroad attorney and pushed through by some influence other than that originating in the legislature no sane man will doubt. It will be readily seen that the passage of this measure would enable the railroad jugglers to ac¬ quire connecting lines by the simple expedient of in¬ creasing their capital stock and issuing the same in pay¬ ment of the lines taken over. Again two years' experience under the foregoing law disclosed grounds that hampered the jugglers in their operations and when the legislature of 1901 met there was another amendment to the railroad law waiting for them. So insistent were the powers behind this measure that it was approved Jan. 18th, 1901, AND WAS THE SECOND MEASURE PASSED BY THE BODY, the bill for contingent expenses being the first, but both these bills were signed the same day. This amendment further broadened the powers already granted by permitting a railroad corporation to acquire the capital stock, bonds or other obligations or to guarantee the stocks, bonds, etc. of connecting or branch lines and provided that the connection need not be by actual union of tracks but might be by ferry, bridge or line of railroad leased, op¬ erated or otherwise controlled by either of said corpor¬ ations. It also provided for the consolidation of rail¬ road companies by merger. But broad as the act was it did not fully satisfy the powers that were working so another amendment was drawn conferring upon the board of directors of a railroad company the power to execute 5 trust deeds, mortgages, etc. upon the property, franchises, incomes and profits of the corporation and for fear the jugglers had exceeded their powers in their past opera¬ tions under the preceding measures and to prevent any possibility of their being called to account this second amendment (at this legislature), closed with these words, "That all acts done! and performed as under said chapter be and the same are hereby confirmed with the like effect as if the said chapter, as so amended had been in full force on and at all times' since Jan. 22nd, 1897." THIS AMENDMENT WAS THE THIRD MEASURE PASSED BY THIS SESSION OF THE LEGISLA¬ TURE, MAKING A TOTAL OF THREE SUCCES¬ SIVE LEGISLATURES TO PASS RAILROAD BILLS BEFORE CONSIDERING ANY OTHER LEGISLATION. By this time the reader is ready to inquire if the rail¬ road jugglers had not gotten pretty nearly all they wanted. The answer is that they had all the granted powers they thought necessary up to this time except the power of eminent domain. This was given them by the legislature of 1903. But in the period from 1903 to 1905 the gamblers learned that preferred stock and income cer¬ tificates would be a good public bait so they came to the legislature of 1905 and secured the passage of a measure permitting them to issue this class of securities (approved March 3rd, 1905) and also secured the passage of another act permitting the issuance of trust deeds or mortgages upon the rolling stock, machinery and personal property of the corporation, approved March 17th, 1905. In the interim from 1905 to 1907 the aspirations and ambitions of these wildcatters moved forward at a greatly accelerated rate. Like the ferocious tiger of the jungle which entering the sheep fold and tasting the blood of one victim falls upon the remainder of the flock with re¬ doubled fury did this body of spoilers assail the legisla¬ ture of 1907. Their operations during the previous two years had revealed certain limitations in the law that must be overcome. So the best legal talent in the nation was engaged to draft a measure that would permit an in¬ crease in the scope of their activities and overcome all difficulties which the past ten years of inflation, consoli¬ dation and scheming had shown were likely to arise. The measure drawn and passed covers a little more than seven pages of the session laws of 1907. The title reads in part as follows: "An Act to Codify and Revise certain laws of This State providing for the Formation and Powers of Railroad Corporations and defining certain rights and powers of such corporations including the power * * * * to operate Steamships, Sailing Vessels and Boats of every description." In addition to amplifying and extending the powers granted in all the previous acts this law gave the railroads dominion over the seas and rivers of the earth, empowered them to acquire street railway systems in cities and to own and control concerns engaged in the manufacture of railroad equipment. The act was ap¬ proved March 14th, 1907, and was the culmination of the enactment into law of the ideas of one of the most extrav¬ agant and predacious set of transportation monopolists that have ever lived upon the globe. Having now hastily glanced at the stage and the set¬ tings upon which one of the great economic dramas (it 6 could be well named a tragedy) was to be played let us turn our attention to the plot and the players and attempt to find the reason why Utah was selected to be the abode of this uncrupulous corporation. Incidentally we shall also see how the people of Utah are being made to pay for their lack of foresight and for their innocent trust tc avaricious power. About the first of July, 1897, the corporation known as the Union Pacific Railroad was born in Utah. Its birth certificate reads in part as follows, "Know all men by these presents, that we, the undersigned, * * * do hereby certify and declare that we have, under and in pursuance of an act of the Legislature of the State of Utah, * * * approved Jan. 22nd, 1897, etc." This paper went on to state that the name of the corporation should be the Union Pacific Railroad Company, that its capital stock should be $136,000,000. It bore date of June 23rd, 1897 and was signed by four men from Omaha, Neb., two from Salt Lake City, two from Boston, Mass. and seven from New York City. The two signers from Salt Lake City were Geo. Q. Cannon and LeGrande Young. In the latter part of October, 1898, there was a meet¬ ing of financial giants engaged in the trust forming busi¬ ness in which directors for the Union Pacific railroad were chosen for the following year. Among those so chosen appear the names of Geo. J. Gould, O. H. Kahn, Jacob H. Schiff, James Stillman, E. H. Harriman and Geo. Q. Cannon. The body of directors so chosen decided that the country could absorb another issue of stock so they increased the same by adding $27,460,100, making the total outstanding stock of the company $163,460,100. The same directors were continued in office during the following year and on October 9th, of that year, hav¬ ing determined that they could foist a few more millions in stock onto the public they issued an additional $32,- 178,700, raising the total stock capitalization of the com¬ pany to $196,178,700. Practically the same body of men were continued as directors during the year 1900, only one change of interest being noted, viz. the entrance of James Hazen Hyde, of Equitable Life Insurance Co. fame, into the body. There was no increase in the capital this year. In 1901 the directors of this company, in commemor¬ ation of their generous treatment by the legislature, filed on March 23rd, (forty-seven days after their last grant of power was passed) an amendment adding a round ONE HUNDRED MILLION DOLLARS to their capi¬ tal stock, bringing up their total stock issue to $296,178,- 700. The years 1902-3 and 4 saw no further increase in the capital stock of the company but there was no change in its policies. The same mercenary, avaricious men stood at the helm and eagerly bided the time when they could again cast in the net and capture the spoils. In 1902 H. H. Rogers of Standard Oil fame entered the di¬ rectorate and in 1904 Wm. G. Rockefeller was received into the fold. In 1903, Geo. Q. Cannon having died, Jo¬ seph F. Smith was placed on the board to take his place. This latter change is of no particular importance to the people of Utah nor to the company as the influence of the two men was identical in the state. However, during the years mentioned there was a battle royal going on 7 among the looters. E. H. Harriman was scrapping for personal control of the concern. In 1905 Harriman was victorious in his efforts to gain control and to celebrate his victory he added another ROUND HUNDRED MILLION DOLLARS to its capital stock bringing up the total stock issues to $396,178,700. The year 1907 found the board of directors of the U. P. R. R. Co. comprised of the following men, to-wit : Oliver Ames, David Willcox, P. A. Valentine, James Stillman, H. H. Rogers, Wm. G. Rockefeller, Chas. A. Peabody, R. S. Lovett, Marvin Hughitt, E. H. Harriman, R. W. Goelet, H. C. Frick, A. J. Earling, Wm. D'. Cornish and Jos. F. Smith and on June 15th this crowd of financial buccaneers POURED ANOTHER ISSUE OF A HUN¬ DRED MILLION DOLLARS INTO THE CAPITAL STOCK OF THE COMPANY. This brought up the total capital stock to the snug sum of $496,178,700. On the top of this bonds, income certificates, etc. were issued to the amount of approximately $164,000,000 thus mak¬ ing the capital stock and funded debt of this Utah be¬ gotten corporation total the colossal sum of $660,000,000 and placing the Union Pacific high above any other rail¬ road system in the United States in mileage cost and sad¬ dling an obligation upon the people of the nation that will require the work of several generations to wipe out. The exact amount of water represented in the fore¬ going figures will perhaps never be known but we can form a just estimate by comparing the Union Pacific with another railroad system of equal mileage and traversing the same character of country. Fortunately such a sys¬ tem exists in the Great Northern. Both these systems have identical mileage and both traverse practically the same character of country. Comparison of the capital stock and funded debt of the two systems show that the Union Pacific has soaked up TWO HUNDRED AND SEVENTY-FIVE MILLION DOLLARS MORE than the Great Northern. Just what does this $275,000,000 of graft mean to the people of Utah? It means that where James J. Hill, a true empire builder used one dollar in constructing and perfecting his 7,000 miles of track the sum of ONE DOL¬ LAR AND SEVENTY-ONE CENTS was used in the organizations of the U. P. with its 7,000 miles of track. It means that where the Great Northern must charge one dollar for freight or passenger tariff in order to secure a reasonable return on the money invested the U. P. must charge a dollar and seventy-one cents. It means that where a merchant would pay a freight bill of $100 for goods shipped over the Great Northern he would be com¬ pelled to pay the U. P. $171 for the same service if the rates were calculated on the basis of giving adequate re¬ turns on the money invested. It means that the Utah farmer or stockman must pay 71 per cent MORE for ship¬ ping his grain, cattle or other produce to an outside mar¬ ket than the farmer on the Great Nrothern must pay for the same service if the rates were based on a reasonable return on the money invested. IT MEANS THAT WHERE THE GREAT NORTHERN CAN AFFORD TO PAY A DOLLAR IN WAGES TO THE MEN WHO DO ITS WORK THE UNION PACIFIC CAN AFFORD TO PAY ONLY TWENTY-NINE CENTS. It means that if the people of Utah were alone left to pay 8 interest at 4 per cent on this $275,000,000 of water in the Union Pacific railroad that every man, woman and child in the state would be compelled to hand over a little more than $27.50 each and every year to the grafters. It means that in the territory served by the Great Northern the country will develop rapidly because the people will use for improvements the money saved from excessive freight charges while in the territory served by the Union Pacific the earnings of the people will go into the estates of the predacious gang of stock gamblers who were smart enough to entrench themselves behind the spiritual lead¬ ers in Utah while engaged in their game of looting. It was while considering these phases of this unscrupulous graft that Theodore Roosevelt labeled E. H. Harriman an undesirable citizen. Today those who begin to realize the magnitude of the fraud and reflect upon its far reach¬ ing consequences not only join Roosevelt in his condem¬ nation of Harriman but are ready to acclaim his associates as equally undesirable. What a sickening spectacle this must be to the hon¬ est men and women of Utah as they open their eyes to their gross betrayal. How it must shake their faith in the infallibility of their spiritual leadership. How rudely it must awaken them to the spirit of graft as it exists in high places. How grieved they must feel when they behold their idol shattered and the cruel truth is forced home to them that the taint of predatory wealth and selfishness is the common heritage of the race : that the highest spirit¬ ual pretensions and most sacred confidence of an honest, truth-loving, industrious people does not constitute armor sufficient with which to resist it. Any sane person must know that Pres. Joseph F. Smith has not been chosen and kept on the board of di¬ rectors of the U. P. R. R. because of his astute railroad knowledge. Whoever heard him pose as a railroad ex¬ pert? What can he add in the line of railroad or financial experience to the astute men with which he is associated in his capacity of director? What is the purpose of having him on the board? Answering these questions directly and in unvarnished English I answer unhesitatingly that the role he is expected to play is to keep the people paci¬ fied under the yoke he has helped to fasten upon them. The subtle influence he can wield belongs to the rail¬ roads. THEY OWN HIM. The price they have paid for him may come to light some day but for the present we are left to guess and surmise as to that. I now wish to remind the reader that there are only three states in the Union which do not exercise regu¬ latory powers over the railroads within their borders, viz. Wyoming, Rhode Island and Utah. Rhode Island, ^