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Hearings Before a Sub-Committee of the

Committee on Naval Affairs, United

States Senate, Under Senate

Resolution 291.



STATEMENT OF

FAIRFAX HARRISON

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ON BEHALF OF

SOUTHERN RAILWAY COMPANY



JULY 27, 1914



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SOUTHERN RAILWAY COMPANY.

OFFICE OF THE PRESIDENT.

WASHINGTON, D. C, July 28, 1914.

Sir:

As the management of Southern Railway Company relies largely
for its success in meeting its problems and fulfilling the expectations of
the public upon the justification by public opinion in the South of the
ideals and the purposes which actuate what it does, I have deemed that
our reply to certain charges brought against us by Mr. Benjamin L.
Dulaney, of Bristol, Va., which have been widely disseminated in the
public press, might be of interest to you.

Accordingly, I send you herewith a transcript of Senator Tillman's
resolution under which the Senate Committee on Naval Affairs has re-
cently been considering those charges, and of so much of the evidence as
contains my defense of Southern Railway Company.

I venture to hope that you may find time to read these papers.
Faithfully yours,

FAIRFAX HARRISON,

President.



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***





! * *

I* *



63o CONGRESS,

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2o SESSION.



IN THE SENATE OF THE UNITED STATES.
MARCH 10, 1914.

Mr. TILLMAN submitted the following resolution; which was referred
to the Committee en Naval Affairs.

APRIL 28, 1914.

Reported by Mr. TILLMAN, with an amendment, and referred to the
Committee to Audit and Control the Contingent Expenses of the
Senate.

MAY 8, 1914.

Reported by Mr. WILLIAMS, with amendments, considered, amended, and

agreed to.



RESOLUTION.

Whereas in view of the early completion of the Isthmian Canal and of
its importance to the United States Navy and the national defense
generally, and to the development of trade with Central and South
American countries, the establishment of adequate coal-supplying
facilities south of Cape Hatteras is deemed imperative; and

Whereas the usefulness and efficiency of any harbor as a coaling station
must depend upon the facilities (first) of the coal producers for
reaching it and (second) of the coal carriers in the matter of assem-
bling the product at said port, including coal docks and other facili-
ties for loading and handling, which should be accessible to all
shippers and carriers alike on the same terms and conditions ; and

Whereas it appears from numerous complaints now before the Inter-
state Commerce Commission, as well as from other sources, that the
power and influence of the so-called Coal Trust is being persistently

718981



used through the management of the railroads reaching South At-
lantic ports to prevent the free movement of coal not belonging to
said Coal Trust, and it is alleged that practically all of such roads
are actually dominated by the same financial interests that control
the great coal combines finding outlet chiefly through New York
Harbor, Philadelphia, and the Chesapeake Bay ports: Now, there-
fore, be it

Resolved, that the Committee on Naval Affairs be, and it is hereby,
authorized and instructed to investigate the natural and strategic advan-
tages for naval purposes of ports south of Hatteras as compared with
Norfolk and other Chesapeake Bay ports as a permanent point for coal
distribution, and included and embraced in the scope of said investigation
the said committee is further authorized and instructed to investigate
into the character and proximity of the coal supply, and the rates obtain-
able on coal from the coal fields near by; and the committee is further
instructed to ascertain as far as it is practicable

First. What quantity of bituminous coal is consumed or used at
Charleston, Savannah, Brunswick, Fernandina, and Jacksonville, and in
their vicinities, and what proportion of this coal is supplied from mines
located on the Pennsylvania Railroad system, including the Baltimore
and Ohio, Norfolk and Western, and Chesapeake and Ohio, and what
proportion is supplied by mines on the Southern Railway.

Second. Whether the United States Navy, including the naval sta-
tions, now pays a higher freight rate for coal supply at any or all
Atlantic seaports than is charged to commercial ships for bunkerage or
for coastwise distribution; and whether all coal for naval supply, at the
Atlantic seaports, is not supplied by the so-called Coal Trust; that is,
by the mines that have a common ownership or control with the coal
carriers; and whether present conditions prevent competitive bidding
for the United States Navy coal supply, or any part thereof, by inde-
pendent coal operators.

Third. The mileage from mine groups located on the Southern Rail-
way in Virginia, Kentucky, Tennessee, Georgia, and Alabama to Wil-
mington, Charleston, Savannah, Brunswick, Fernandina, and Jackson-
ville; and the mileage to these same ports, the way the coal is moved
from the mines on the Pennsylvania Railroad system and on the Balti-
more and Ohio, Norfolk and Western, and Chesapeake and Ohio rail-
roads and all connecting lines in West Virginia; and in all cases show
the freight rates on coals to the cities named, both by rail and rail and
water ; and where two or more carriers participate, ascertain the propor-
tion of the rate (or service charge) each receives; and also compare
these rates with those at seaport towns and cities from Norfolk to New
York for local use, for tidewater shipment, and for naval use.

Fourth. Why the Southern Railway has built no wharves or made no
provision for handling tidewater coal at any of the South Atlantic ports,
and whether the riparian rights and water frontage of South Atlantic
harbors is not now being bought up by the parties in the interest of the
Coal Trust, while the Southern Railway is taking no active steps to build
for itself an independent outlet.



Fifth. Whether trustees for the stockholders and members of the
board of directors of the Southern Railway are financially interested in
coal-mining industries on the Pennsylvania Railroad system, the Balti-
more and Ohio, the Norfolk and Western, or the Chesapeake and Ohio,
and to what extent; and whether they, or any of them, are financially
interested in any coal-mining industries tributary to any of said rail-
ways. And if found to be interested, ascertain whether such mines have
been allowed preference or advantages not allowed to all other shippers
(shown by cases already decided by the Interstate Commerce Commis-
sion or State commissions). And in all coal-mining operations tributary
to the Southern Railway in which any director of the Southern Rail-
way or director of any railroad controlled by it, or allied with the
Southern Railway, is financially interested, ascertain the division of
through rates with other railroads, and in all cases where a coal opera-
tion tributary to the Southern Railway controls a local railroad, or when
such local railroad is controlled in common with a coal operation, for
assembling and distributing its own coal, ascertain just what proportion
of rates it receives, if any, from the carriers, or what compensation other
than a division of the rates it may receive.

Sixth. Whether the rate making for the Southern Railway, or other
southern carriers of coal, is dominated by the Pennsylvania Railroad or
Norfolk and Western; or whether the freight rates of the Southern
Railway and any of the other southern coal carriers are made and fixed
and maintained by the traffic men of the Southern Railway and other
southern carriers; or whether the Pennsylvania Railroad, the Norfolk
and Western Railway, the Baltimore and Ohio, and Chesapeake and
Ohio, exercise any influence either through a rate-making or traffic
association or otherwise, in the matter of making the rates for the South-
ern Railway and other southern carriers.

Seventh. Whether or not there is any discrimination now existing
in favor of any one port on the Atlantic seaboard as against another
port, and, if so, in what does such discrimination consist; and whether
or not any coal trust or combination of railroads and coal companies
control the coal tonnage to any port or ports; and, if so, how; and
whether or not the coal supply of West Virginia, Virginia, Pennsyl-
vania, Tennessee, and Kentucky flows naturally and without unnecessary
obstruction to their respective natural ports upon the Atlantic seaboard;
and whether or not there is any discrimination in rates against any coal
operators.

Eighth. The coal rates to thirty or more representative cities on
the Southern Railway in Virginia, North Carolina, South Carolina,
Georgia, and Florida, and compare these rates with the rates enjoyed
by the cities of relative importance and location, with regard to mines,
in Pennsylvania, Ohio, Indiana, and Michigan on the Pennsylvania Rail-
road system, including the cities whose rates are compared in the letter
read into the Congressional Record by Senator Tillman on April eighth.

Ninth. What actual ownership each director of the Southern Rail-
way Company has in that company, and what ownership, if any, is held
in it by the individuals composing the trustees for the stockholders.



Said Committee on Naval Affairs is authorized to sit during the
sessions of the Senate and during any recess of Congress, and its hear-
ings shall be open to the public, and it is authorized and empowered to
employ coal experts, railroad rate experts, and to employ a stenographer
at a price not to exceed $1 per printed page. Said committee shall have
power to compel witnesses to testify, to send for persons and papers,
to administer oaths to witnesses, and do anything necessary to arrive at
all the facts.

The expenses incident to the investigation herein authorized shall
not exceed $5,000, and shall be paid out of the contingent fund of the
Senate upon vouchers signed by the chairman of the Committee on Naval
Affairs and approved by the Committee to Audit and Control the Con-
tingent Expenses of the Senate. The said Committee on Naval Affairs
may, in its discretion, conduct this investigation by a subcommittee
of not less than five members, to be appointed by the chairman, and shall
make its report as soon as possible.



HEARING BEFORE A SUB-COMMITTEE OF THE SENATE:
COMMITTEE ON NAVAL AFFAIRS.

WASHINGTON, D. C, Monday, July 20, 1914.

The Committee met at 10 o'clock a.m.

Present: Senators Nathan L. Bryan (Chairman), William Alden
Smith and Miles Poindexter.

The Chairman : This meeting is called to consider Senate Resolution
number 291, introduced by Senator Tillman, of South Carolina, and
the sub-committee will proceed with the hearing, taking up first the con-
sideration of the charges made in the resolution.

Senator Tillman, do you desire to make a statement?

Senator Tillman: Mr. Chairman, I feel that I ought to make an
explanation of how that resolution came to be introduced. Mr. B. L.
Dulaney, who will be the first witness, came to see me some time last
winter and in talking over the coal situation I found him the best in-
formed man I had ever met on that subject. Mr. Dulaney opened up
what I conceive to be so important a factor in the price of coal, in our
State especially, as well as in the whole South Atlantic Coast, that 1
believed it my duty to try to find out if the conditions could not be
remedied. After consulting with some of my colleagues on the Naval
Committee, you among others, I introduced this resolution which the
Senate passed. Mr. Dulaney is, in a way, the prosecutor in this case
and Mr. Fairfax Harrison, President of the Southern Railway, by his
letter to me, showing the attitude of the Southern Railway in this case,
is the defendant. Both of these gentlemen, I presume, will testify before
the hearing is over. I thought it due Mr. Dulaney that the people should
understand who started the investigation and that he ought to get most
credit for whatever it brought to light.

The Chairman : At this stage of the proceeding we will have copied
into the record the letter from Mr. Dulaney to Senator Tillman and the
letter to Senator Tillman from Mr. Harrison, President of the Southern
Railway Company.

The letter from Mr. Dulaney to Senator Tillman is in the words
and figures following:

"March 25, 1914.
Senator B. R. Tillman,

Washington, D. C.

Dear Sir: The most important question to the industrial world
is transportation. By the control of the transportation of this coun-
try one can build up or break down any section regardless of its nat-
ural advantages. It is well known that the transportation of this
country is controlled by a small group of financiers, mainly in New
York. But while they control the transportation of the whole country,
their ownership of industrial enterprises is limited to certain parts
of the country, as, for example, the coal industry of Pennsylvania
and some other sections ; and hence the flagrant abuses in the prac-



8

tices of rate making to favor their own coal and to destroy the
independent coal mines.

* In the matter of coal freight rates, I think the most abused
States in the Union are North Carolina, South Carolina, Georgia,
Florida and a portion of Virginia. The industrial progress of these
States has been in spite of the high cost of fuel transportation
and it ought to be clear to every one of intelligence that general
manufacturing can not prosper until transportation conditions have
been corrected. By an examination of the rate sheets, open to all,
it will be seen that the average manufacturer located on the Penn-
sylvania System, for example, pays from 30 to 60 per cent less
freight on fuel than is paid by the average manufacturer on the
Southern Railway that is, for haulage for equal distance. For
example :

Compare rates to Columbus, Ohio, with rates to Columbia, S. C, :

Miles. Rates.

To Columbus from Pocahontas 334 $1.15

To Columbia from Appalachia 318 2.25

Compare rates to Toledo, Ohio, with rates to Savannah, Ga. :

Miles. Rates.

To Toledo from Pocahontas 456 $1.45

To Savannah from Appalachia 471 2.10

Compare rates to Cincinnati, Ohio, with rates to Lynchburg, Va. :

Miles. Rates.

To Cincinnati from Pocahontas 340 $1.10

To Lynchburg from Pocahontas 169 1.50

Compare rates to Cleveland, Ohio, with rates to Charleston,
S. C:

Miles. Rates.

To Cleveland from Pocahontas 472 $1.35

To Charleston, S. C., from Appalachia 447 2.05

Compare rates to Dayton, Ohio, with rates to Winston-Salem,
N. C:

Miles. Rates.

To Dayton from Pocahontas 364 $1.35

To Winston-Salem from Pocahontas 239 2.10

Compare rates to Indianapolis, Ind., with rates to Augusta, Ga. :

Miles. Rates.

To Indianapolis from Pocahontas 449 $1.65

To Augusta from Appalachia 401 2.20

Compare rates to Detroit, Mich., with rates to Charlotte, N. C. :

Miles. Rates.

To Detroit from Pocahontas 505 $1.60

To Charlotte from Appalachia 305 2.25



Where there are two or more routes the short mileage is used.

The evident purpose of these high rates, especially to the coast
towns and cities, is not to raise revenue for the Southern Railway,
but to prohibit the movement of coal by it from the mines on its own
rails to tidewater, for if the independent coal shippers had access to
tidewater with proper coal-loading facilities there would be compe-
tition with the Coal Trust from Florida to Maine as well as in the
export business; and, moreover, the coast towns and cities from
Charleston to Tampa are forced to buy much of their coal from the
Coal Trust from mines a thousand miles away, and thus several
millions of dollars are annually sent away, and the Southern Rail-
way is robbed of its natural rights to haul the coal and is thus used
by its directors to obstruct development in the territory that sup-
ports and protects it. These things are wrong, and such practices in
rate making are unfair and without justification from any point of
view. The Southern Railway is a splendid property, and if it were
run in its own interest and for the development and benefit of the
territory in which it is located there is no just reason why every
seaport from Jacksonville to Norfolk should not have as low tide-
water rates as are now enjoyed in the domain of the Coal Trust at
the seaports from Norfolk to New York, for it has its own rails
reaching directly from the coal mines in Virginia, Kentucky, Ten-
nessee, and Alabama directly to Norfolk, Charleston, Brunswick, and
Jacksonville.

I believe that it is a conservative estimate to say that the mines
from Virginia to Alabama reached directly by the Southern Railway
could furnish now at the rate of 10,000,000 tons per annum for tide-
water business, and this tonnage could be increased at an enormous
annual rate if the operators were only certain of their position. This
would increase the gross revenues of the Southern Railway by
$14,000,000, assuming that the tidewater rate of $1.40 would be put in,
and when you add to the freight item the value of the coal itself, at
a low estimate, the amount would be $25,000,000 annually that would
remain in the territory served by the Southern Railway, and this
total should increase annually for many years to come if the
Southern Railway has a square deal. The average distance from
mines on the Southern Railway to tidewater is practically the same
as from the mines on the Norfolk & Western Railway and the Chesa-
peake & Ohio Railroad to tidewater, and the two latter roads have
grown rich and powerful by the movement of coal at rates low
enough to assure the movement of coal, and there is simply no
good reason why the Southern Railway should not do likewise, but
this road, as is well known, is controlled by the same financiers who
control the big coal interests known as the Coal Trust, and some of
them were identified with the recent scandal in connection with the
New York, New Haven & Hartford Railroad, and it is claimed
that they control practically every railroad in the South.

I allege with emphasis that, in addition to the wrongs above
recited against, the southern country, not only the Southern Railway,



10

but the Norfolk & Western Railway as well are being used to de-
stroy private interests, specifically some of the independent coal
properties in the territory, and I believe that an honest investigation
will prove this statement beyond the shadow of a doubt. For many
years I have been engaged in development work in that territory
and have had a good deal of experience in dealing with some of
these financiers who control the Southern Railway. Some of their
valuable properties are those which I developed and which they
obtained by methods that I think should put to shame an ordinary
train robber or a bandit. I am now responsible for an investment
of probably $5,000,000 in what is known as the Black Mountain coal
field, which is literally held up and refused an outlet for its product,
though reached directly by the Southern Railway, the Louisville &
Nashville Railroad, and is within a few miles of the Norfolk &
Western Railway. The investment and the development in this field
were induced largely by the promises made by the Southern Railway
to give an outlet at Charleston, and though the Southern has had its
line completed from the coal mines to Charleston for 10 years, no
outlet has been provided.

I believe a thorough investigation by a Senate committee will
show that the Southern Railway has been the dumping ground for
the sale of other railroads at unreasonable profits by the friends or
business associates of some of the directors. I have personal knowl-
edge of the sale of the Virginia and Southwestern Railway by Henry
K. McHarg at practically six times what it cost him or his company,
when the Southern Railway could, just as well have bought it directly
and saved the five millions. I believe that an investigation will show
that such transactions, amounting to probably $50,000,000 or more,
have taken place since the control by the present financiers.

I believe that a thorough investigation will show that the ab-
normally high local rates throughout the Southern territory are
due in a large measure to the need of revenues to meet such pur-
chases and to the inflation of capital and bond issues caused thereby.

I believe that an investigation will show the existence of a
secret rate-making association, and that all important freight rates
in the territory in question are dominated by the Pennsylvania Rail-
road greatly to the detriment of all the other railroads involved and
unfair to the country they traverse.

I believe that an investigation properly conducted will show that
the men who control the Southern Railway have practically no in-
vestment either in the Southern Railway or in the territory served
t>y it, except in a small portion of Virginia and Alabama.

In the matter of handling the several bond issues of the rail-
way and the short loans these men, as is well known, have been on
"both sides of the transaction. I believe that this investigation should
be made in the interest of the security holders, as well as in the
interest of the railroad itself, and particularly in the interest of the
territory which the railroad serves.

In conclusion, let me say that these conditions have taken shape
and grown from bad to worse under the very eyes of the Interstate



11

Commerce Commission, and hence I suppose that body is powerless
to give relief, and therefore I earnestly urge you not to favor a
reference of the Tillman resolution to the Interstate Commerce
Commission.

Very truly yours,

B. L. DULANEY."

The letter addressed to Senator Tillman by Fairfax Harrison,
President of the Southern Railway Company, is in the words and figures
as follows:

"SOUTHERN RAILWAY Co.,

Office of the President,
1300 Pennsylvania Avenue, Washington, D. C,

April 16, 1914.
The Hon. Benjamin R. Tillman,

United States Senate, Washington, D. C.
Dear Sir : My attention has been called to a letter written to you
by Mr. B. L. Dulaney, under date of March 25, 1914, and published
in the Congressional Record of April 8, 1914.

This letter contains serious charges against the management of
this company. They have been made on the floor of the Senate
and have become a part of its record.

If they are true, the management of this company ought to be
exposed.

If they are false, their author ought to be exposed.
I ask, on behalf of the Southern Railway Co., an opportunity
to refute them, and, to that end, that a speedy and thorough inves-
tigation be ordered and the results given as wide publicity as the
charges.

Faithfully yours,

FAIRFAX HARRISON, President."



12

MONDAY, JULY 27, 1914.

SUBCOMMITTEE ON NAVAL AFFAIRS,

UNITED STATES SENATE,

Washington, D. C.

The subcommittee met, pursuant to adjournment, at 10 o'clock
a. m.

Present: Senators Nathan P. Bryan (chairman) and William E.
Chilton.

Present, also: Senator Tillman.

TESTIMONY OF MR. FAIRFAX HARRISON, PRESIDENT,
SOUTHERN RAILWAY CO., WASHINGTON, D. C.

(The witness was duly sworn by the chairman.)

Mr. Thorn: Mr. Harrison, are you president of the Southern Rail-
way Co.?

Mr. Harrison: I am.

Mr. Thorn : How long have you held that position?

Mr. Harrison: Since December 1, 1913.

Mr. Thorn: Please tell the committee your previous relationship
with the company, your knowledge of its history, and its development,
and its policies.

Mr. Harrison: I have been in the service of the Southern Railway
Co. for 18 years. I entered the service' in May, 1896, as a junior officer
of the law department, having to do with the routine matters of the law
department. Mr. Samuel Spencer was then president of the company,
as he had been since its organization in 1894, and he from time to time
gave me work to do in immediate relation with him.

It was during the period of the expansion of the system, when Mr.
Spencer was making the map of the Southern and buying a great many
railroads. I came into closer and closer relation with Mr. Spencer in
that work in carrying out his policies. In 1903 he made me assistant to
the president, to work immediately with him and with Mr. Finley, who
was then second vice-president, in charge of the property.

On Mr. Spencer's death in 1906, Mr. Finley made me one of the
vice-presidents of the company and put me in charge of its finances
because of my relation with the finances with Mr. Spencer. I continued
as a vice-president in responsible charge of the finances of the company
until 1910, when I was elected president of the Chicago, Indianapolis
& Louisville Railway Co., with headquarters in Chicago.

I had meanwhile been elected director of the Southern Railway


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Online LibraryFairfax HarrisonHearing before a subcommittee of the Committee on Naval Affairs, United States Senate, under Senate resolution 291 → online text (page 1 of 6)