defendants United States Steel Corporation and others.

Action brought under the Sherman antitrust law of 1890 online

. (page 25 of 30)
Online Librarydefendants United States Steel Corporation and othersAction brought under the Sherman antitrust law of 1890 → online text (page 25 of 30)
Font size
QR-code for this ebook

and the extent to which that firm would be relieved by the
carrying out of the transaction.

Mr. Dickinson: This is excepted to because it does not
call for what the instrument showed, but a conclusion of the
witness, and as to what his judgment was, reached from the
facts shown, and the facts themselves not being testified to.

A. I do recall. I know it did. I may not be able to give
you specific figures. Of course I knew them then, and I knew
them accurately. We were not interested in any other ques-
tion except the question whether or not the purchase of these
securities would relieve the financial situation. Of course,
my mind was directed to those figures by the report as to
this condition, and so were the rest of the members of our
committee. We kept our finance committee in the library all
the time, or practically all the time, so we could meet when-
ever occasion required. It was a very critical time, and we did
not have a minute to waste. We all understood that.


Mb. Dickinson : I move to strike out all the answer as not
responsive to the question, being volunteered by the witness,,
and not called for.

Me,. Lindabuky : I will accept the answer as an answer to
my question without repeating the question.

By Mr. Lindabuey:

Q. What time did you and Mr. Frick arrive in Washington
and see the President on Monday morning?

A. May I state that Sunday night, immediately after we
had all decided to conclude this purchase and sale, and it was
agreed that the President should be visited, I called up the
President's secretary, I believe at his residence, and asked
for an appointment with the President on the following morn-
ing. I told him some of us desired to consult the President
on a matter we considered very important and connected with
the panic, and he said he would ascertain and let me know.
An appointment was finally made, as I remember, for ten
o'clock the next morning. Mr. Frick and I left on a special,
I think, about one o'clock Monday morning. I would not
undertake to be accurate as to the hour. We arrived in Wash-
ington early in the morning, probably about seven o'clock,
and about half -past eight o 'clock I suggested to Mr. Frick we
might possibly be able to see the President before ten o'clock.
Time, as I have said, was very important, and I knew from
Mr. Morgan, from him and from the other bankers — I had
talked with them — ^that they were very anxious to know as
soon as they p'ossibly could, what our conclusion would be;
so we went to the President's ofHce, and found Mr. Loeb, and
got immediate access to his office, and asked him if we could
see the President immediately. He replied that we could not;
that the President was not in the habit of receiving anyone
before ten o'clock; that he had made the appointment as early
as he could. He said he knew the President just then was at
breakfast, as I remember. I told him we considered time very
important, and asked him if as a special favor he would go
and see the President and tell him that Mr. Frick and I were
in his office, and were desirous of seeing him as early as pos-
sible, and believed it was necessary for us to see him at once.
Mr. Loeb went to see the President, and the President came


back with Mm, and we were in the President's toom very soon
after nine o 'clock.

Q. Was anybody with the President at the beginning of
the interview?

A. No one except Mr. Loeb and Mr. Frick and myself.

Q. Was anyone sent for by the President?

A. Yes.

Q. Who?

A. He sent for Mr. Boot, then Secretary of State, finally;
he mentioned Mr. Bonaparte, but Mr. Bonaparte, as I re-
call, was not in the city. Mr. Bonaparte was Attorney Gen-

Q. Did he send for Mr. Boot early in the interview?

A. He did.

Q. Mr. Boot then was in the Cabinet, was he not?

A. He was ; he was Secretary of State.

Q. And how soon did Mr. Boot arrive?

A. He came over immediately.

Q. Now you may tell what took place at or before Mr.,
Boot's arrival; if anything important took place before Mr.
Boot's arrival, state it, of course, and the whole interview; I
mean in so far as it bore on the question that took you there.

A. All that took place, as I recall, took place in the pres-
ence of Mr. Boot, or, if we had talked about the matter before
he arrived, it was repeated.

Q. Then proceed in your own way, and give us the inter-

A. We stated to the President

Mr. Dickinson: Would you mind saying who; you
say we?

A. I did the talking.

Mr. Dickinson : I suppose you want that, Mr. Lindabury,
don't you?

Mr. Lindabury: No objection.

The Witness: (Continuing) I did the talking. Mr. Fricl?
sat by my side. I stated to the President that we had been
offered a majority of the stock of the Tennessee Coal & Iron
Company ; that I did not believe, from our standpoint, that it
was a good business proposition; at least we would not buy



the stbck if we were considering only our own pecuniary in-
terest ; that this stock was in the hands of an important busi-
ness firm in New York City who had pledged all, or a large
portion 'of the stock as collateral for loans at a bank, or some
of the banks; that it was represented to us a purchase of
these securities in the hands of this firm by us for cash or its
equivalent was absolutely necessary to save the firm from
failure, and that many of the leading bankers in New York
City who had been assembled at Mr. Morgan's library for
some time had stated to Mr. Frick and myself and others that
the purchase of these securities was necessary to relieve the
situation, the financial situation, and that it was their opinion
unless this purchase was made, and made very promptly, in
their opinion there might, and Would be, very serious results ;
that the situation here was very critical and growing worse,
and the bankers believed if we made this purchase the situ-
ation would be relieved, and conditions would begin to im-
prove. Of course, there was considerable conversation. In
fact, we were there until ten o'clock, although I telephoned to
New York just before ten.

Mr. Eo'ot asked a good many questions. The President
asked a good many questions. Mr. Eoot said to the Presi-
dent: "You have no right to consent to this sale 'or pur-
chase ; you have no legal right. What your attitude may be, I
should think, is a question of policy," and I believe Mr. Root
expressed an opinion as to what he thought would be a good
policy, although I may be mistaken as to that. That is my
best recollection. The President talked about the panic,
talked about the situation here, and mentioned the fact that
he had talked with Mr. Cortelyou and others about it, and
was generally advised in regard to the panic, and finally said
that he would not be disposed to make any objection to this
sale and purchase. He then called in a stenographer and dic-
tated all or the most, at least, of a letter to the Attorney Gen-
eral, I think it was, on the subject.

(^'. It is charged in the petition in this cause that you and
Mr. Frick failed to fully disclose all the facts to the President
in regard to the Tennessee stock, its ownership, and the
am'ount of money estimated as necessary to relieve Moore &
S'chley. What do you say to that charge ?


A. I say it is not true.

Q. It is also said: "Nor was it true that said Schley had
among his assets a majority or anything approximating it."

That is, of the Tennessee Coal & Iron stock. Did you ever
represent that Schley, as an individual, had?

A. I did not.

Q. Was it untrue that Moore & Schley had the same, as
you were informed and then understood?

A. No. It is not conceivable that either Mr.Frick or I would
misrepresent any fact to the President of the United States.

Q. Did you withhold any material fact bearing on the situ-
ation aljout which you visited him, as you understood it?

A. No.

Q. Did you misrepresent to him any fact regarding the
situation, whether material or immaterial?

A. Certainly not.

Q. After the statements by the President that you have
given us, it was, I suppose, that you telephoned?

A. It was. I knew, because I was informed, how critical
the situation was, and how necessary it was to have the ear-
liest information of the conclusion which Mr. Frick and I
would reach, I having stated that I would not vote in favor
of this purchase mthout knowing the attitude of the Presi-
dent of the United States. Some few minutes before ten
o'clock I asked the Secretary of the President to get into com-
munication with the firm of J. Pierpont Morgan & Company
by long distance telephone, and keep the wire open until I
could telephone ; and so soon as I ascertained the attitude 'of
the President, before he had finished dictating his letter to
Mr. Bonaparte, I telephoned J. Pierpont Morgan & Company
the substance of what was the attitude of the President of
the Uniled States, and that Mr. Prick and I would vote in
favor of the purchase of the stock.

Q. Without going into any detail whatever, I will ask you,
you and Mr. Frick returned and the purchase was carried out
upon the terms tentatively agreed up'on the day before ?

A. Yes. I think, although I am not certain, that a meet-
ing of the finance eomanittee was held pretty soon after we
returned, although the subject matter, I believe, had been
referred to me, with power, by the finance committee. Mr.


Lindabury, it just occurs to me that during these negotiations
with Mr. Ledyard, participated in to some extent by Mr.
Schley, at my request, Mr. Topping, the president of the Ten-
nessee Coal & Iron, was sent for in order to ascertain various
facts from him in regard to the company, and I asked our
comptroller, and perhaps the treasurer, to examine the books
of the Tennessee Coal & Iron Company, more or less to try
and verify statements that had been made in regard to the
property, and I remember holding one meeting some time
during the day or night, I do not know what night it was, at
my apartment, when some of the Tennessee Coal & Iron
people were there. We were going through these matters.
In other words, from the beginning, we were doing everything
we could to ascertain all the facts in regard to the company
because, 'of course, while the relief of the financial situation
was the thing, the only thing that moved us, yet so far as we
could, we were endeavoring to protect the stockholders of the
United States Steel Corporation, in the hope that eventually,
at least, there would be no loss to the stockholders, that they
would get out of it whole. That is volunteered.

Q, I am very glad you did that. Mr. G-ayley has testified
that you consulted with him also with regard to the ores of
the Tennessee Coal & Iron Company.

A. Yes.

Q. Perhaps he said the whole property, but I remember
the ores.

A. Well, I wanted to know particularly a little more about
the analysis of the ores, and what it would cost to smelt them,
and so forth, and how they laid.

Q. Do you recall consulting him?

A. Yes, I do.

Mb. Dickikson : I would like to ask, I have no right to ask
it, but it may avoid some question in the future, whether these
interviews with Mr. Topping were before or after you went
to Washington.

The Witness: I can not answer definitely; I can not be
sure exactly, but about that time, I should think. It might
have been Saturday, and it might have been Monday night.

Mb. Lindabury: Of course I do not mean to inform the


witness, but I think Mr. Topping covered it, but maybe he did
not give the date. He testified about it, as I recall.

The Witness : It was before we closed up.

Mb. Lindabuey: My recollection is not certain, but I am
quite sure he alluded to it.

By Me. Lindabuey :

Q. Judge, I have finished on this subject, but if you have
anything else with regard to it you wish to state, please
state it.

A. I do not think of anything at this time.

Q. When was your attention first called to the existence
of agreements between steel or iron manufacturers affecting
prices or output or percentages of output, whether in the
form 'of pools or otherwise?

A. You mean when did I first hear about them?

Q. That is right.

A. I heard something about them certainly as early as the
fall of 1897, when I was more or less connected with an effort
to get together under one ownership some of the wire Com-
panies of the country. I knew by hearsay that there were, or
had been, so-called pools in existence prior to that time. I
knew that Senator Hoar, who was active, at least, in the prep-
aration of the Sherman Law, was attorney for some of the
wire companies, and had given them a written opinion on the
subject of what agreements they could enter into without vio-
lating that law.

Mr. Dickinson : I object to that as irrelevant, incompetent
and immaterial.

The Witness: (Continuing) And I knew he had given that
written opinion to various wire companies, including the
Washburn & Moen Company and the Boebling Company and
some other wire companies, that they had a right to enter
into these arrangements for the maintenance of prices, and
so forth, without violating the Sherman Law.

Me. Dickinson : Let me enter an objection there. This is
objected to because it undertakes to give a conclusion of what
Senator Hoar advised, without producing his opinion or show-
ing knowledge of the contents, and then because it shows his
approval of certain arrangements, and does not show what
+>ir>ao nrrn np-ements were.


Mr. Lindabuby : We cannot prove the whole case at once.
Mb. Dickinson : No. I thought I would give you a chance
to prove that.

Me. Lindabtjey : That is what I am going to try to do now.

By Me. Lindabuby :

Q. You saw a copy of this opinion, Judge 1

A. Yes, I did.

Q. Do you say it was passed around or among or given to
various of the steel manufacturers?

A. It was.

Q. And do you know whether or not these gentlemen were
operating pools or agreements at this time you speak of on
the lines of that opinion?

Me. Dickinson: I object to this, because it is not shown
what the opinion was, its loss is not accounted for, and any
evidence in regard to its contents or questions in regard to it
are secondary and incompetent.

Mb. Lindabtjey: In answer to that I will state to counsel
that I will produce the opinion, so we won't be troubled about

A. I do not know of my own knowledge. I heard they were>

By Me. Lindabtjey :

Q. You are familiar with the opinion, are you not?

A. I have been.

Q. You have been?

A. Yes.

Q. Do you happen to know whether or not

A. (Interposing) I say that because you must not ask
me to state what the opinion is exactly.

Q. No, I do not mean to. I only want to know from you
whether or not these trade agreements fixing prices and out-
put and so forth were of the kind covered by that opinion?

Me. Dickinson: This is objected to as the witness has
not shown what the agreements are that he knew about, or
what their terms were, or how they were operated under.

Me. Lindabtjey: I will withdraw the question.

By Me. Lindabtjey:

Q. Let us see whether or not these gentlemen to whom you

BliBEET H. GABY. 4869

have referred were following the opinion of Senator Hoar hy
what they did. In the first place, Senator Hoar was a lawyer,
wasn't he?

A. He was a lawyer, one of the great lawyers of the
country, of course.

Q. Not merely a Senator of the United States but a law-
yer preeminent among lawyers was he not?

A. He was a great lawyer, and I believe really prepared
the Sherman Law, although I understand Senator Edmunds
to some extent disputes that proposition; you can tell better
than I.

Q. Please look at this paper, yellow with age, which I
show you, and state whether or not that is a copy of the
opinion that you have alluded to?

A. Yes, sir.

Q. Where does this come from?

A. It came from the files of the Washburn-Moen Com-

Q. One of the concerns that you alluded to a while ago?

A. Yes.

Q. You may state anything further that you know in re-
gard to it.

Mb. Dickinson : I think I had better put in an objection.
This is objected to because there is no limitation at all as to
what is hearsay and what is known to the witness, and as
incompetent and improper in form.

A. In the summer and fall and winter of 1897 I was more
or less interested in various wire companies as previously
stated, including the Washburn-Moen Company and a num-
ber of others, and at that time was brought in pretty close
contact with these companies and their business and their
books and so forth. I do not think, at least I have no informa-
tion leading me to suppose there were any wire pools, so-
called, at that time, although there might have been with-
out my knowledge, but this question of pools was more or
less referred to in conversations from time to time with
different men, and some time a good deal later than that,
when the subject of pools became in this country a more im-
portant question as it seems to me, when the public senti-


ment seemed to be changing, and after it had been changed,
particularly after I knew the attitude of the President of the
United States and other leading men in regard to those ar-
rangements, I endeavored to get the opinion of Senator Hoar
to find out exactly what he had said, and I wanted that to
exhibit it to anyone who might be interested in the subject,
and particularly to our lawyers. The original opinion was
given to and in the hands of the Eoeblings, but I found they
had lost that opinion, at least mislaid it, or were unable to
produce it, and then I endeavored to get a copy of it, and
finally found these copies in the files of the Washburn-Moen
■Company, and this is the original copy that they had and
which has been in their files, and which they finally found
amongst their old files after a long search.

That is as far as my actual knowledge in regard to the
original opinion goes.

Q. To what extent the wire people relied on that opinion
in what they did in those days, you do not personally know,
I suppose?

A. Except I heard a good many say they supposed that
opinion could be depended on. Of course they all believed
that was the law.

Mb. Lindabury : I offer in evidence the Washburn & Moen
copy of the opinion. You have a copy of what I had. Judge

Me. Dickinson : That is objected to as irrelevant and in-

(The paper referred to was thereupon marked "Defend-
ants' Exhibit (Gary) No. 57, June 2, 1913," and will be found
in the volume of exhibits.)

Mr. Colton: What is the date of that?

Mr. Bolling : August 22, 1891.

Mb. Lindabury : Just after the Sherman Act was passed.

By Mr. Lindabury:

Q. Judge, were there trade agreements, I will call them
for short, during the period between 1897 and April, 1901,
among the iron and steel people?

A. You cover too long a period there for me, Mr. Linda-


bury. I heard of pools more or less. Up to the time of the
organization of the Federal Steel Company of course I was
not actively connected with the business, and I did not know
much about them. It was hearsay. Following the organiza-
tion of the Federal Steel Company, however, I knew of one
arrangement in regard to rails; and, with your permission,
I want to state fully and frankly exactly what was done in
regard to that, because I do not believe it has ever been fully
stated, and I think it is only fair to all interests that it should
be stated exactly as it was.

Q. You are alluding to rails alone, now?

A. I am alluding to rails alone.

Q. Very well; proceed. Judge, and make your statement
with regard to rails.

A. After the Federal Steel was organized, it commenced
doing business on November 1, 1898. Mr. John W. Gates was
the president of the Illinois Steel Company, a subsidiary com-
pany, until the 1st of January, 1899. Between those dates a
meeting of the rail makers was called, and some or all of
them met at the Waldorf-Astoria. As a result, the Empire
Eail Company, if that is the name, was formed, and failed,
as has been stated in the testimony. Immediately following
that, Mr. H. H. Porter told me that Mr. H. C. Frick had sug-
gested that we meet at Mr. Carnegie's house to talk over the
situation. We met there, and after some discussion I drew
a paper which I should think covered about half a page of
foolscap. That paper was placed in my desk, and I supposed
was there, until some time since this suit was commenced;
I think very much after this suit was commenced ; until two
or three months ago I supposed it was in my desk, which I
keep locked, and to which no one else has access, so far as I
know. Who had been in that desk by stealth, I do not know.
If any one has that paper I think they ought to produce it.
I cannot find it, I am sorry to say, but I know very well the
substance of it. The paper was signed by Mr. Andrew Car-
negie, Mr. H. C. Frick, Mr. EC. H. Porter and myself. It
provided in substance that we four would recommend to the
Illinois Steel Company and the Carnegie Steel Company that
they divide, to the extent of fifty per cent each, the total
standard rail tonnage secured by the two companies.


That was the substance of the paper. There was only one
copy made of that, as I remember. I mean there was only
one paper, no copies were made, as I remember, and I kept
that paper.

Soon after that the President of the Colorado Fuel Com-
pany came to see me, and in conversation ascertained that
this paper had been drawn and signed by the four persons
named, and he asked the privilege of joining in that paper,
and after some discussion between him and me it was ar-
ranged that he might sign the paper by stating that he would
recommend to his company that the standard rail business
of his company should have an interest in the division of the
total rails sold by the companies to the extent of some certain
percent, I have forgotten what. Soon after that the presi-
dent of the Cambria Steel Company told me he had learned
of this arrangement, and asked to make the same arrange-
ment with respect to the Cambria Steel Company, on the same
basis of percentage, which I have forgotten. I think the fol-
lowing Spring the president of the Lackawanna Steel Com-
pany made the same endorsement on the paper, as to. a cer-
tain percentage, and sometime afterwards, I should think a
year afterwards, but I might be mistaken in regard to that,
the Pennsylvania Steel Company did the same. That resulted
in an agreement by the presidents of these respective com-
panies to recommend to their respective companies that the
total standard rail tonnage of all the companies should be
divided amongst these different companies in these certain
percentages. Following the arrangement, not knowing ex-
actly what the date is, the different companies appointed rep-
resentatives to meet in committee occasionally, to go into the
tonnages which were booked by the respective companies, for
the purpose of ascertaining so far as they could whether any
of the companies were securing more than their percentages,
and if so, to transfer from one to another enough rail ton-
nage to balance. I should think that about the time the
Pennsylvania Steel Company became connected with this
business — though again being unable to give the exact date
with accuracy — the president of the Colorado F'uel Company
presented at a meeting of these respective presidents which
had been called a formal agreement which provided in sub-


stance for the division of tonnage and various other things
that I do not now remember, and asked to have it signed by
the different presidents. As soon as I read it I declined for
our company to sign it, stating that —

Mr. Dickinson : I object to what he stated.

The Witnessi: (Continuing). I gave as the reason for not
signing it that I did not feel certain that the agreement was
legal and proper, and anyhow, so far as our company was
concerned, we would not sign it, and it was not signed by any-
body, and what became of it I do not know; but it was not
executed, I do not think it was ever printed, and anyhow I
do not know anything about it since that time, and have never
known anything about it since that time. It was not signed.

Up to the time of the formation of the United States Steel
Corporation, I should think, and perhaps later, there was a
disposition and effort on the part of the manufacturers of

Online Librarydefendants United States Steel Corporation and othersAction brought under the Sherman antitrust law of 1890 → online text (page 25 of 30)