Ohio Natural Gas Wars, pt. 2

Here are two more chapter froms Henry Demarest Lloyd’s Wealth Against Commonwealth (1894), dealing with the struggles of Toledo against the natural-gas and oil trusts. I’ll post the last two chapters from this section tomorrow.

Wealth Against Commonwealth
Henry Demarest Lloyd (1847-1903)

Towns, like men, stamp themselves with marked traits. Toledo had an individuality which showed itself from the start. Its leading men clubbed together and borrowed money as early as 1832 to build one of the first railroads constructed west of the Alleghenies—the Erie and Kalamazoo, to connect Toledo and Adrian. When, in 1845, the steamboats on the lakes formed a combination, and discriminated against Toledo, the city through its council refused to submit, and appropriated $10,000 to get an independent boat to Buffalo. The city appropriated its credit and revenues to other important and costly enterprises, including four railroads, to keep it clear of the cruel mercies of private ownership of the highways. In 1889 it expended $200,000 to secure direct railway connections with the Pennsylvania and the Baltimore and Ohio railways for competition in rates with the Lake Shore Railroad.

As it had been authorized to do so by the State, the City Council of Toledo, April 29,1889, ordered gas bonds to the amount of $75,000 sold, that work on the city pipe line might begin. Before proceeding with the enterprise confided to them, the natural-gas trustees gave the private companies an opportunity to save themselves from the competition of the city. They asked them in writing if they would agree to furnish gas cheaply for a term of years, or if they would sell their entire plant to the city? They did this, as they expressed it, as ” an honorable effort . . . to obtain cheaper gas without unnecessary expenditure, and without injury to established rights.” After a delay of nearly a month a reply was received, refusing to enter into negotiations either for a reduction of charges or for the sale of the private plants to the city. The trustees then asked for a personal interview, but this was refused. Then when the city began preparations to sell its bonds, a cannonade was opened on it in the courts, the money-market, the gas-fields, the city government, the press, among the citizens, and everywhere. Injunctions were applied for in three courts, unsuccessfully in all instances. No injunction was ever granted in these or any other of the many suits brought for the purpose of enjoining the sale of the bonds. Courts will usually grant temporary injunctions awaiting a hearing on the merits when complainants will enter into ample bonds and indemnify defendants. But the parties instigating this litigation would not put up the necessary bonds. They thus could smirch the bonds without incurring any personal liability in so doing.

An expensive array of lawyers was sent before the United States courts to prevent the issue of the bonds on the ground that they were illegal, and the law under which they were issued unconstitutional. The principle involved had been frequently discussed and always upheld both by the Supreme Court of Ohio and the Supreme Court of the United States.[1]

“Does not your argument appear to be in conflict with the views of the Supreme Court of Ohio and the Supreme Court of the United States?” the judge asked. The counsel for the gas companies responded in substance: “If so, then so much the worse for the views of those courts.”

As it was through the suffrage that the people of Toledo were able to do this, the attack was widened from an attack on the enterprise to one upon the sovereignty of the citizens which made it possible.” Everybody votes in Ohio—in fact, too many people,” said the lawyer who applied for an injunction against Toledo. If he had his way, he declared, there would be fewer voters, and he stigmatized the arguments of Toledo as those of John Most, the communist.

“Unquestionably,” decided Judge Jackson, “the Legislature may authorize a city to furnish light, or facilities for transportation, or water to its citizens, with or without cost, as the Legislature or city may determine. . . Since the decision in Sharpless vs. Philadelphia it is no longer an open question whether municipalities may engage in enterprises such as the one contemplated by the act in question in this case. The act of January 22,1889, authorizing the city of Toledo to issue bonds for natural-gas purposes, is clearly within the general scope of legislative power, is for a public use and purpose, and is not in contravention of any of the provisions of the constitution. The court being of the opinion that the legislation is valid, it follows, of course, that the injunction applied for must be refused.”[2] When the news of Judge Jackson’s decision was telegraphed to Toledo nothing less than the booming of cannon could express the joy of the citizens. They sent this message to the just judge: “One hundred guns were fired to-night by the citizens of Toledo in honor of your righteous decision to-day.” Judge Jackson again upheld the bonds at Toledo, January 14, 1890, when he again dismissed the case against the city “for want of equity, at cost of complainants.”

The favorable decision by Judge Jackson, although an appeal was taken, made it possible for the city to sell the $75,000 bonds which had been issued by order of the Council. The bonds brought par, interest, and over $2000 premium. With the money thus procured the city’s Board of Natural Gas Trustees began operations. Their opponents had spread far and loud among the voters before the election—among those who would be likely to buy the bonds, everywhere it would hurt—the assertion that all the territory that was good had been bought up by them, and the city’s trustees would not be able to get any. One of the companies had no less than 140,000 acres of gas lands in its possession or under contract, at a cost in rentals and royalties of $100,000 a year.[3] But the city trustees, even with the small sum at their command, were able to secure at the very beginning wells with a capacity more than four times as great as the private companies had had when the latter began the investment of a million or more to lay their pipe lines to Toledo.[4] Together with this supply the city trustees got 650 acres about 35 miles from Toledo of as choice gas territory as there was in Ohio, almost all of it undrilled, and they had offers amounting to 5000 acres more within piping distance from the city. The city’s trustees made their purchases with success, and received the laudations of their constituents for having got lands and wells at better prices than the private companies.

August 26, 1889, after a decision in the United States courts that there was no ground on which to object to the issue of the bonds, the City Council voted the issue of the remaining $675,000.

Defeated in the public debate which preceded the decision of Toledo to supply itself; defeated at the State Capitol; defeated at the polls of Toledo time and again—every time; defeated in the Common Council; defeated in the gas-fields; defeated in the courts of their own choosing, the opponents of the city, thorough as only the very good or the very bad can be, refused to submit. When the two corporations, in 1886, were seeking the franchise indispensable for doing business m Toledo, they said to the Board of Aldermen: “We ask no exclusive privilege. . . . We cannot have too many gas companies.” They also said: “If the city desires to furnish its own gas, there is nothing in this ordinance to hinder it. We are ready and willing at any time to enter into competition with the city or any other company.” They said, on the same occasion, in answer to apprehensions which had been expressed about the danger of putting the fuel supply of the city into the hands of a monopoly: “You can go before the Legislature and obtain the right to issue bonds for furnishing yourselves with gas.” It was by these assurances the companies induced the Common Council to grant them gratuitously the very valuable franchises they were seeking.

The right of the people to compete was not left to these assurances. It was specifically and formally asserted in the ordinance of July 5,1887, fixing rates. This was the ordinance to procure which the gas company suspended its operations in mid-course, and declared it would not continue unless the prices which it wanted were made. The ordinance was, in fact, prepared by the company. It said: “Provided that nothing herein contained shall be construed as granting to existing companies any exclusive rights or privileges, or prevent any other company from furnishing natural gas to the citizens of said city.” But the same learned counsel who, in behalf of the companies, had assured the city that “there was nothing in this ordinance to hinder it,” went before the United States Court and pleaded that ordinance as good reason for the intervention of the Federal Government to prevent the city from going on with its enterprise.

The only morning paper—an able advocate of the city pipe line—suddenly changed owners and opinions. Among its new directors were two of the lawyers of the trust opposing the city, a director in one of its companies, and, besides them, the manager, a contract editor from Pennsylvania. His sole conspicuity there had been won in turning against the people of the oil regions a paper which had been their staunchest defender. This Toledo daily, in its espousal of the cause of the city, had been firing hot shot like this against the oil combination: “It wants a monopoly of the natural-gas business. This is what it is driving at.” Under its new management it roared like a sucking dove, thus: “It is fashionable with demagogues and men who are not capable of appreciating the worth of brains in business to howl against it”—the oil combination—”as a grasping, grinding monopoly.” Just after the people had decided in favor of the pipe line, and only a few days before it changed owners, it had said: “All manner of influences were brought to bear to defeat this proposition. . . . All the plausible falsehoods that could be invented, and all the money that could be used, were industriously employed, but the people saw the situation in its true light, and the majority voted right.” It now made the defeat of the city’s pipe line the chief aim of its endeavors. In this work “no rule or principle recognized in decent journalism was respected.”

In all the history of Toledo no interest on its bonds had ever been defaulted or delayed; no principal ever unpaid at maturity. The city was prosperous, its growth steady; its debt growing less year by year in proportion to its population and wealth. Its bonds ranked among the choicest investments, and commanded a premium in the money-market.[5] But the credit and fair fame of the city were now overwhelmed with wholesale vituperation by this paper, and others elsewhere under similar control. Articles were carefully prepared for this purpose by skilled writers. These were then copied from one newspaper to another. By some arrangement insertion was obtained for them in financial journals in New York and in London, and in other foreign capitals. The Toledo organ declared that Toledo was an unsafe place for the investment of capital in any form. Its public affairs were said to be run by a set of “demagogues and speculators,” whose administration was “piratical mob rule.” The city pipe line was a “monstrous job,” and the men who favored it were “a gang of throttlers and ravenous wolves.” They were “blatant demagogues, who made great pretence of advancing the city’s interest, but whose real aim is to enrich themselves at public expense.” The bonds, which had been issued in due form by special authority of the Legislature, ratified by a vote of more than three-fifths of the citizens, and declared to be valid by the United States Court, were described as “chromos,” “worthless rags,” “bad medicine,” “disfigured securities,” “like rotten eggs, highly odorous goods,” “but few persons at most can be found ignorant enough to buy them.”

The Mayor, City Auditor, Board of Natural Gas Trustees, united with a citizens’ committee of the Board of Trade in a plan to promote the sale of the bonds direct to the people of Toledo through a financial institution of the highest standing. This action the paper described as “a scheme for gulling simples,” “a blind pool,” “an unpatented financial deadfall”; compared it with “gambling, pool-playing, and lottery selling.” These grave charges were widely circulated throughout the country. Bankers and capitalists in other cities who received them had no means of knowing that they were not what they pretended to be—the honest if uncouth utterances of an independent press chastising the follies of its own constituency. Newspapers which supported the city’s project were assailed as ruthlessly as the community and citizens. The Blade was constantly referred to as “The Bladder.” Another journal was given a nickname too vulgar to be printed here. One of the most prominent journals of Ohio was punished by the following paragraph, which is a fair sample of the literary style of monopoly: “That aged, acidulous addlepate, the monkey-eyed, monkey-browed monogram of sarcasm, and spider-shanked, pigeon-witted public scold, Majah Bilgewater Bickham, and his backbiting, black-mailing, patent-medicine directory, the Journal.”

An old journalist and honorable citizen who wrote over his initials, “C. W.,” a series of able and dignified letters in the Blade, which had a great influence in the formation of public opinion in favor of the pipe line, was assailed with “brutal falsifier,” “hoary old reprobate,” “senile old liar.” Caricatures were published depicting the buyers of the bonds as ”simple greens.” When the County Court of Lucas County, following the United States Court, sustained the bonds on their merits, and did so on every point in question, because, as the judge stated, “the equities of the case are with the defendants,” the organ falsely stated that judgment for the city was given “because the merits of the case are involved in a higher court.” When a capitalist of New York, who had been an investor in the bonds of Toledo and a taxpayer there for twenty-five years—one of the streets of the city was named for him—bought $10,000 of the city pipe-line bonds, the paper attacked him by name in an article headed “Bunco Game,” charging him with being a party to a bunco game in connection with “public till-tappers” for “roping Toledo citizens into buying doubtful securities.” When the Sinking Fund Commissioners of Toledo very properly invested some of the city’s money in the gas bonds, they were held up by name as “public till-tappers,” “menials” of a “hungry horde” of “boodle politicians,” accomplices of “plunderers of the public treasury,” unable to withstand “the brutal threats and snaky entreaties of the corrupt gas ring.” For one of the associate editors the position of Deputy State Inspector of Oil was obtained—an appointment which cost the Governor who made it many votes in the next election, and did much to defeat him. Such an appointment might give a versatile employee the chance to do double duty: as editor to brand as bad good men who could not be bought, and as inspector to brand as good bad oil for sale.[6]

One of the means taken to defeat the pipe line was the publication of very discouraging accounts of the “failure” at Indianapolis, where the citizens had refused to give a natural-gas company belonging to the oil trust the franchise it demanded, and, forming an anti-monopoly trust, had undertaken to supply themselves. Some “influence” prevented the Common Council of Toledo from sending a committee to Indianapolis to investigate. A public-spirited citizen, prominent and successful in business, came forward, and at his own expense secured a full and accurate account of the experience of Indianapolis for the city. This proved that the people were getting their fuel gas at less than one-half what Toledo was paying. The contest against giving the Indianapolis franchise to a corporation of the trust had been a sharp one. Its success was due to the middle classes and the working-men, who stood together for freedom, incorruptible by all the powerful influences employed. “We will burn soft coal all our lives,” one of their leaders told the Toledo committee,” rather than put ourselves in the power of such men.”

In Indiana the Legislature meets only once in two years, and when this issue arose had adjourned, and would not meet again for a year. The people, not being able to get authority for a municipal gas pipe line, went to work by voluntary cooperation. Every voting precinct in the city was organized and canvassed for the capital needed. The shares were $25 each, and they were bought up so rapidly that the entire amount—$550,000—was subscribed in sixteen days by 4700 persons, without a cent of cost to the city. When subscriptions to the amount of $550,000 had been raised, $600,000 more was borrowed on certificates of indebtedness.

Gas lands were bought and 200 miles of pipe lines laid, all at a cost of about $l,200,000. The income in one year, during a part of which the system was still under construction, was $349,347. In the first year of complete operations the Indianapolis people’s trust paid off $90,000 of the principal. The income for the year ending October 31, 1892, was $483,258.21, and the bonded debt has been paid. The stock, since January 1, 1893, has been paying dividends at the rate of 8 per cent. a year.

A prominent citizen of Indianapolis, one of the State judges, told the Toledo papers, in an interview: “The private companies had their gas laid to the city and along the streets several months in advance of the Citizens’ Trust, but it did them little good. Everybody said: ‘I will wait for the Consumers’ Trust.’ ‘Yes, but we will furnish you gas just as cheap,’ said the Indianapolis company; ‘why not take it of us?’ To this the citizens replied: ‘To take gas of you means cheap gas to-day, but high gas to-morrow.’ And wait for the gas they all did.” The charge to manufacturers was 2 cents a thousand feet, as against 8 cents, at that time charged at Toledo. There were 12,000 private consumers. Cooking-stoves in Indianapolis were about $12 a year, against $19.50 in Toledo. One of the representatives of the private company declared at a public meeting at Indianapolis that its charges were made such as to give a full return of all the invested capital in three years, as that was the probable life of the supply. A year after the inauguration of the Indianapolis movement a committee of the citizens at Dayton, who had risen against the extortionate prices charged them, investigated the condition of affairs at Indianapolis. They reported that Indianapolis had paid $200,000 on its bonded debt, and was getting ready to pay as much more. The Consumers’ Trust supplied between 10,000 and 11,000 consumers, and spent $1,000,000 less than the Dayton private company spent to supply 3000 fewer consumers. The annual charge at Dayton was $54.80; at Indianapolis only $26.80—less than half.

When facts like these were brought out, to the demolition of the fictions circulated in Toledo, the answer was characteristic. The “organ” could not deny the statements, but it fell upon the citizen through whose generosity the information had been got for the people, and assailed his private character in articles which, one of the daily papers declared, editorially, “would almost, if not quite, justify him in shooting their author on sight.”

This newspaper charged the city natural-gas trustees with being “rotten to the core,” and with every variation of phrase possible to its exuberant rhetoric sounded the changes upon their official career as a “big steal,” “fostered by deception, falsehood, and skull-duggery.” It sought to intimidate the Legislature and the courts when they failed to enact or construe laws against the people. It said: “Law-makers, judges, and others may feel the force of this element when the proper time comes and political preferment is sought.”

It was money in pocket that facts like those of the experience of Indianapolis, Detroit, and other places should not be made known. Even ideas must not be allowed to reach the public mind. Professor Henry a. Adams, the well-known political economist, lectured in Toledo during this contest, in a University Extension Course, on “Public Commissions Considered as the Conservative Solution of the Monopoly Problem.” The “organ” gave a synopsis of the lecturer’s views, which is printed herewith in parallel columns, with a synopsis of what Mr. Adams really said, as revised by himself:

The lecturer made reference to Toledo as an unfavorable place to discuss the matter of municipal control of quasi-public business and competition of municipalities with private corporations. But he deprecated anything in that line. He did not mention particular instances, but broadly condemned the policy pursued by this city in matters of this kind, and his remarks had a visible effect on his audience. He considered municipal control of business enterprises the worst form of monopoly, as they began by having the unfair advantage of the lawmaking power, and the tendency to corruption was greater than when individual enterprises were asking privileges. The audience was much pleased with the lecturer.
Professor Adams thought the solution of the monopoly problem must be found either in public control or in public ownership. He advocated public control, and held that the State and Federal railroad commissions should have a fair trial, that their hands should be strengthened by further and adequate legislation. He entertained the hope that this control and regulation would ultimately protect the interests of the public in a satisfactory manner. He was willing to admit, however, if this effort to secure the needed public control by the aid of commissions and legislation should fail, then public ownership was the only remaining solution. He held that in local monopolies it may still be wise to try the experiment of public control by aid of commissions. He said, however, that if anything should be owned and controlled by and for the people it would be street-railroads, gas and water works. He admonished his audience not to be misled by the argument that municipal ownership would be dangerous because of undue political influence, for the local monopolies under private ownership were already in politics, and in a most dangerous manner. He observed facetiously that he hesitated to discuss the question of municipal control or ownership before a Toledo audience.

From the control of the markets to the control of the minds of a people—this is the line of march.

So direct, persistent, and bold were the charges of corruptions rung day after day by this journal against all the officials concerned in the city gas enterprise that some people began to believe there must be truth in them. But when the community at last turned upon its maligners, and the grand jury brought indictments against the active manager of the paper and his chief assistant for criminal libel upon the city’s natural-gas trustees, the whole structure of their falsehood went down at a breath. They had no defence whatever. They made no attempt to justify their libels or even explain them. Their only defence was a series of motions to get the indicted editor cleared as not being responsible for what had appeared in the paper. Counsel labored over the contention that the accused was none of the things which the language of the law holds for libel. He was neither the “proprietor,” “publisher,” “editor,” “printer,” “author,” nor a person “who uttered, gave, sold, or lent” a copy of the newspaper, but only the “manager.” The employees gave testimony which would have been ludicrous but for the contempt it showed for court and community. The journalist who was the “managing editor” of the paper under the indicted chief editor was asked:

“Who was the head of the paper when you entered upon your duties as managing editor?”
“I do not know.”
“Who hired you as managing editor?”
“I really can’t say that I was hired at all.”
“Who employed you to come to Toledo?” The witness had been an employee in Pennsylvania of the editor on trial, and had followed the latter to Toledo to take the place of managing editor. “Nobody employed me.”

The son of the indicted editor had also followed his father to Toledo, and was employed on his paper. Asked for what purpose he came, he said: “I had no purpose in coming.”

The gentleman who had charge of the counting-room was asked who fixed his salary.
“I regulate my own.”

The advertising manager declared:
“I have no knowledge who is my superior.”

The accused had to let the case go to the jury without a spark of proof of the accusations which had filled the paper every day for months. He had no evidence to offer either that the charges were true, or that he believed them to be true. He stood self-confessed as having for years printed daily gross libels on citizens, officials, and community, as part of the tactics of a few outside men to prevent a free city from doing with its own means in its own affairs that which an overwhelming public opinion, and the legislative, executive, and judicial authorities, and its present antagonists themselves, had all sustained its right to do. The agent of this wrong was found guilty, and sentenced to imprisonment in the county jail, with heavy costs and fine; like the unhappy agents at Buffalo—”made cheap” for others.[7] But sentence was suspended pending hearing of the motion for a new trial. This did not come up for a year. The court could find no error in the proceedings of the trial court, and could not sustain any of the objections made. But it found a point which even the lawyers had not hit on, and strained this far enough to grant the new trial. Then the convicted editor went before another judge—not the one who had tried him—pleaded guilty, and was fined, and so saved from jail.

One of the last scenes in this Waterloo was the abandonment of the newspaper with which the corruption and intimidation of public opinion had been attempted. Failure was confessed by the sale of the paper, and it was bought by a journalist who had been especially prominent in the defence of the city, and against whom on that account a bitter warfare had been waged by the daily which now passed into his possession. The Sunday Journal of Toledo, in commenting on the surrender, declared that the course of the organ had been one of the strongest factors of the success of the people. “In every possible way it slandered and outraged the city, where of necessity it looked for support. There could be but one result. Scores who had opposed the pipe line became its most ardent advocates purely in the general defence.”

[1] State, ex rel., vs. City of Toledo, 48th Ohio State Reports,p. 112.
[2] Federal Court Reporter, vol. xxxix., pp. 651-54.
[3] Report of the Northwestern Ohio Natural Gas Company, January 7, 1889.
[4] Toledo and Its Natural Gas Bonds, pp. 36-37.
[5] City of Toledo and Its Natural Gas Bonds, p. 3.
[6] See ch. xxix.
[7] See ch. xx.

WHEN Judge Jackson refused to enjoin the city from issuing its bonds an appeal was taken. The court and the lawyers of the city were promised that it would be carried up without delay. Months passed, and no use was made of the privilege of filing new pleadings and taking new testimony—that is, no use but to make the suits the basis for libels on Toledo and its bonds.

Time ran on until the day was at hand for opening bids for the bonds. That was to be Wednesday. Then the counsel for the opposition notified the city that on Monday they would begin the taking of depositions. This was not then or afterwards done, but on the strength of the notification news despatches were sent over the country that the proceedings against the legality of the Toledo bonds were being “pressed.” In consequence of this and other maneuvers, when Wednesday came there were no bids. A hasty rally of some public-spirited capitalists at home, learning of the emergency, made up a subscription of $300,000. The names of the citizens who made this patriotic subscription were printed in the daily paper under the heading of “The Honor Roll.”

Only by extraordinary maneuvers could the market for such securities offered by such a community have been thus killed in a time of great general and local prosperity, and extraordinary they were. What they were was formally and authoritatively ascertained by an investigation made by a committee appointed at a mass-meeting[1] of the citizens of Toledo called by the mayor, the Hon. J. K. Hamilton. The call ran:

“For the first time in the history of Toledo, its general bonds, secured by the faith and property of the city, and bearing a fair rate of interest, have been offered, and only such of them sold as were taken at home by popular subscription. It is deemed desirable that under such circumstances the citizens of Toledo should meet together and determine what further steps should be taken to carry out the will of the people as expressed by 62 per cent. of the voters of the city.

“It is believed that with proper effort a large additional popular subscription may be obtained, and thus notice given to the world that notwithstanding all opposition the citizens of Toledo have confidence in and will maintain the credit of this fair city, and that a great enterprise undertaken by its people will not be defeated by the machinations of private opposing interests, no matter how powerful and unscrupulous.”

The meeting appointed a committee of three—David Robinson, Jr., Frank J. Scott, and Albert E. Macomber—”to prepare and circulate throughout the financial circles of the country a pamphlet which shall set forth the case of the city of Toledo in its struggle against those who by anonymous circulars and other dishonorable ways have attempted to prevent the sale of the Toledo natural-gas bonds.” This committee put the facts before the public in a very able pamphlet, “The City of Toledo and Its Natural Gas Bonds.” In an official statement asked for by this committee the city natural-gas trustees say: “Skilled writers were employed to furnish articles for Eastern financial journals, to cast discredit on the bonds on the very grounds that had been set aside by Judge Jackson’s decision. Not content with this open warfare, anonymous circulars were sent to leading investment agencies in the United States, warning them to beware of these bonds, as they were under the cloud of doubtful constitutionality and an impending lawsuit. When the day arrived for bidding for the bonds no bids were made. Agents of investors were present, who came to bid, but by some unknown and powerful influence they were induced not to put in their bids. The writers are not aware that any similar mode of striking at the credit of a whole community was ever before resorted to in this country. It is an insult and a wrong not only to this city, against which it is aimed, but to people of independence everywhere in the United States who have a common interest in the maintenance of the rights of all.”[2]

Press despatches impugning the validity of the bonds and misrepresenting the facts were sent all over the country. The anonymous circulars referred to were mailed to all the leading banks, investment agencies, capitalists, and newspapers. The New York Mail and Express said: “It would be decidedly interesting to know who is responsible for the . . . methods by which it was thought to prevent the city from undertaking the enterprise. A number of volunteer attorneys and correspondents deluged bankers and newspapers with letters warning them against the bonds which the city proposes to issue, on the ground that it had no right to issue them. The Mail and Express received several communications of this kind.”

“Not only the financial centres of this country,” say the city’s natural-gas trustees in their official report for 1890, “but those of Europe were invaded with these circulars.”[3] The circular was headed “Caveat Emptor.” It contained twenty-four questions, and every one of the answers, except those which referred to matters of record and routine, like the date, amount, name, etc., of the bonds, was incorrect. What hurt the people of Toledo most, as it was most base and baseless, was its attack on their hitherto unquestioned credit and financial honor. Asking the question, “How does the credit of the city stand?” the circular answered: “Refunding has been going on ever since 1883. The bonded debt was greater at the beginning of 1889 than of 1888; bonds bearing interest at 8 per cent. will become due in three or four years. The mayor, in his last annual message, admits the inability of the city to pay much of these except the refunding.” “Willing to wound, and yet afraid to strike,” the authors of this attempt to pull down an entire city managed, by the interweaving of such phrases as “ever since 1883,” “bonded debt greater,” “inability of the city to pay,” to create by insinuation the feeling of financial distrust for which their greatest industry and ingenuity had been able to find not a particle of foundation. No modern municipality is asked or expected or desired “to pay much except the refunding.” Capitalists would greatly prefer that even the refunding should not be carried on, but that the debt should run along at the original high rates of interest, which they regretfully see dwindling away. The circular failed to state that the city was borrowing money at 4 per cent. to pay off debts bearing 8 per cent. The insinuations of the circular could have been used of “the credit” of the United States, New York, Paris, London, Chicago, with the same appropriateness—with this exception, that Toledo’s municipal financial credit was relatively to its resources on a sounder and more conservative basis than these much more highly financed cities. The circular did not state that the proportions of debt to population had been decreasing for many years past.[4]

“Toledo has not two years’ supply of gas,” the circular said, “in all the territory acquired.” The State Geologist, in his annual report for 1890, said that Toledo would have no gas to supply its pipe lines or citizens in 1891. In 1892 the city pipe line supplied gas to the value of $168,954.46. Three years have passed, Toledo wells still flow, and new ones are being found continually. “Whatever may have been his object,” say the city gas trustees, “in volunteering such a statement, we know that so far in 1891 it is untrue, and that such positive declarations, based upon hypothetical conditions, are utterly unworthy of scientific pretensions.”[5] The State Geologist also took part in his annual report in the debate between municipal control and private enterprise, siding altogether with the latter.

The quantity of gas land owned by the city was put by the circular at 300 to 500 acres. The city had 650 acres. The circular declared the life of an ordinary well to be one to three years. There is no such limit. Referring to the quantity of gas land the city had, the circular asked and answered:

“Cannot other territory be acquired?
“Not in Northwestern Ohio, and not nearer than the gas fields of Indiana.”

This was untrue, for the gas trustees had already been offered, as stated, several thousands of acres of the best gas lands in addition to those they had bought. But the authors of the circular did their best to make it true. The city’s natural-gas trustees say in their report for 1890: “As soon as the trustees were prepared to negotiate for gas wells and gas territory, the field swarmed with emissaries and agents of the Northwestern Ohio Natural Gas Company to compete with the trustees. In order to prove what had been previously stated, ‘that Toledo could procure no gas territory,’ no means were left untried; agents of that company even fraudulently represented themselves to the owners of gas property that they were connected with the gas trustees and working in their interest, and in some instances introducing themselves as the president of this board. Prices went up 1000 per cent. in some instances rather than let it fall into the hands of the trustees. A conspicuous officer of that company, as an excuse for paying an enormous sum of money for a gas well, is reported as saying, ‘We did not want the gas well, but we had to buy it in order to keep Toledo from getting hold of it.'”[6]

Referring to the private companies, “Are the people of the city already supplied with natural gas for public and private use?” the circular asked. “They are,” it answered, and goes on: “Why does the city want to go into the natural-gas business, then?” “To boom the lands of real-estate speculators.” This is a charge affecting the Legislature and Executive and State courts of Ohio, the courts of the United States, the people of Toledo, and all the members of their city government. Burke confessed that he did not know how to draw up an indictment against a whole people. That art has been acquired since his day.

“Are these bonds of unquestionable validity?” this catechism of libel upon a community queries.
“By no means. Prominent taxpayers have suits pending attacking the constitutionality of the act under which they are issued.”
“Have these cases,” the last question ran, “ever been tried on their merits?”
“They have not.”

They had been tried so far that the United States and State courts had refused on every ground urged to interfere with their issue and sale, declaring the legislation authorizing them to be valid. They had never been tried any further in the United States courts for a very good—or bad—reason. The “prominent taxpayers,” after their defeat before Judge Jackson, took every possible means to prevent the case from reaching a final adjudication. The invariable rule of the United States Supreme Court has been to treat as final and conclusive the decisions of State courts as to such domestic issues. During the hundred years of its existence not a case can be found in which that court has overruled the fixed and received construction given to a State law by the courts of that State.[7] The only hope for the suit of the “prominent taxpayers ” was, therefore, that the Supreme Court of the United States would for their special profit reverse the practice to which it had consistently adhered since the establishment of the government. What they really thought of their prospect of success in that effort they confessed when their case, no longer delayable, was upon the point of being reached.

They who had been so “anxious to get to the case as soon as possible” refrained from printing the record, a condition precedent to putting the case on the docket of the United States Supreme Court. The city wanted the decision, and in order that the case might not be dismissed for this failure to print the record, and a decision upon the merits be thus prevented, the city’s gas trustees advanced the money—$1100—to the court printer for printing the record. Pushed thus against their will to trial, when the day came on which they most rise to state their case the opponents of Toledo folded their tents and stole silently away. On the motion of their attorney the case was dismissed, against the protest of the city. They paid all the costs, including the money advanced by the city for printing the record. To their defeat all along the line they did not want to add a formal decision against them from the Supreme Court, which was inevitable. And they ran away to fight another day.

Another purpose of these suits was confessed only a few weeks after this circular was issued. The existence of the suits was used to try to frighten the city’s natural-gas trustees into accepting a “compromise.” The compromise was that they should abandon the enterprise, sell out pipes and lands for a fraction of their worth, get their gas from the private company at higher rates, and put the city in its power for all time to come. “It will be three or four years before your case is through the Supreme Court,” its representative told the natural-gas trustees, in urging them to accept. “You can’t sell your bonds,” he continued; “you have no money.” The “compromise” was refused, but the city’s pipe line had been delayed so long that the profits of the company for another twelvemonth were secure.

The demonstration against the bonds in the United States Circuit Court had been followed by similar suits in the State courts. Here again the city was successful. It was upheld on every controverted ground—in the enabling act, in the vote of the people, in the appointment of the trustees by the governor, and in the issue of the city bonds. Appeal was taken here, as in the United States courts, and, as there, for delay, not for decision. To checkmate further use of this lawsuit to smother the law and cripple the city, the friends of the pipe line began a suit against the authorities to force an immediate decision from the Ohio Supreme Court as to the legality of the bonds. It was certainly, as was said in the press, “a curious state of things when the defendant is compelled to bring suit against himself because the plaintiff refuses to allow trial in his own case.”

These litigations, the circulars, the press, were only part of the campaign. One of the committees of the Common Council was brought under control, and induced to throw technical difficulties in the way of the sale of the bonds, which caused months of delay.[8] Effort was made to get the Governor to appoint natural gas trustees hostile to the city, but failed. It was attempted, also without success, to get the Legislature to prevent the sale of the bonds at private sale. During all this controversy the city was most fortunate in receiving the needful authority from the State Legislature. This was due mainly to a faithful and able representative of Toledo in that body, the Hon. C. P. Griffin. He was offered every promise of political preferment and other allurements to betray his constituents, but he always remained faithful. Without his support the efforts of the city would have failed. His services amid great temptations deserve the grateful remembrance of the public.

Some of the devices of “private enterprise” were childish enough. “A Business Men’s Protest” was published, which proved under the microscope to have been largely signed by men whose names could not be found in the directory. A similarly formidable-looking remonstrance against the pipeline bill was sent to the Legislature. It had 1426 names; of these 464 could not be found in the directory, and over 300 of the 962 remaining names signed the petition for the city’s bill. Many of them avowed that when they had signed the “Remonstrance” it had a heading in favor of the pipe line, which must have been changed afterwards. As part of the tactics of misinformation, a report was published—in January, 1890—claiming to give the business of both the private companies; but the members of the Council Committee on Gas, when afterwards examining the books for the gas company, found that it gave the receipts of only one company. A paper was prepared by a citizens’ meeting for circulation among the manufacturers to ascertain how much they would contribute towards the city pipe line; but when reported back to the meeting it had become, in some mysterious way, a paper asking the manufacturers how much they would advance to quite a different scheme, the effect of which would be to sell out the city pipe line or convert it into a manufacturers’ line.

These were the infantile methods of men who could not see the ludicrousness of the position they put themselves in by such efforts to keep a business which they were constantly declaring to be hazardous and unprofitable.

Detectives appear in almost every scene of our story, and are as common in its plot as in any extravagant melodrama of the Bowery thirty years ago. To counteract the anonymous circulars the City Council sent a committee headed by Mayor Hamilton—the “War Mayor,” one of the ablest lawyers of the city, upright and loyal at all times to Toledo—to visit the Eastern money-markets. The committee, in their official report, state that they were assured by responsible dealers in municipal securities in New York and Boston that they would bid for the entire amount to be sold. “We regret, however, to have to report that the powerful and influential parties who have on all occasions and in every way sought to obstruct and defeat the enterprise for which the proceeds of these bonds were to be used, in some way succeeded in inducing those who intended to purchase to withhold their bids—in fact, no matter how guarded our movements, we believe that every person or firm with whom we had interviews was reported to the agents of the Standard Oil Company, for in every instance where from our interviews we had encouragement that the bonds would be bid for, within a short time more or less influential agents of opponents interviewed these parties and succeeded in changing their minds.”

What a picture of “high finance,” of the “beneficent interplay of the forces of supply and demand,” of the “marvellous perfection” with which capital moves under “natural laws” to carry its fertilizing influences where they are most needed! The officials of this free city compelled to sneak around in the open money-market under cover with “guarded movements,” seeking buyers for its bonds as if they were stolen goods! About them a cloud of spies and detectives reporting every movement as if it were a crime to the little handful of trust millionaires in their grand building on Broadway! “They have entered the Bank!” “They have just left —’s office!” After each report the leash is slipped of a waiting sleuth, who flies away to run down the quarry.

The gas trustees made public a letter and telegram they received from a prominent New York bank:

“NEW YORK, November 27, 1889.
“DEAR SIR,—A gentleman named” (naming a man who signs the certificates of the Standard Oil Trust as treasurer),[9]

The telegram sent on Friday is as follows: “introduced by the card of Mr.—” (one of the richest men in New York not otherwise known as connected with the trust), “called on us to-day and stated that understanding that our firm was on the point of bidding on the Toledo bonds, etc., he would caution against the purchase, as they were not legal. Mr. — represented himself as coming from —” (one of the companies of the oil combination), “and referred us to their lawyer for further information. Now as this may hurt the sale of the bonds we want to be cautious, and on Friday will make further inquiries, and will wire you accordingly. We may not care to hand in our bids on this account.”

“NEW YORK November 30th.
“Fearing sale of bonds has been injured, will not bid at present.”

“That tells the story,” said one of the trustees, “in a nutshell.”

A local bank bid for $500,000 of the bonds, but did not sustain its bid. A reputable citizen, an ex-mayor, wrote for publication in one of the leading journals that he had been informed by a well-known banker there was reason to believe a banking firm which, in 1892, defaulted on its bid for bonds, had been indemnified by the opposition for the $5000 it thereby forfeited to the city, and for the profits it would have made from the sale of the bonds. With the city line crippled the gas company would pocket the profits on the sale of a million dollars’ worth of gas a year. Five thousand dollars, or several times that, was a small insurance to pay for such a gain.

This was the game of hide-and-seek played in Wall Street by detectives and financial stilettos against “simple greens,” who thought supply and demand still rule values. This was the reality which the officials of Toledo found behind the outward aspect of its magnificent buildings, the benevolent millionaires who look out through their plate-glass, the grandiloquent generalizations of professors about “the money-market.”

The city was brought to the humiliation of seeing its officials meet in public session at an appointed hour to open bids it had invited from all the money centres for its bonds, only to have the news flashed all over the country that not a bid from abroad had been made. This opposition cost the city in one way and another not less than $1,000,000, according to the estimate of the city’s natural-gas trustees. The feeling of the people was expressed in the following language in a circular sent out with the pamphlet report of the committee appointed in mass-meeting to make a statement of Toledo’s case to the public:

“We have seen the modern aggregation of corporations—trusts—suppress other corporations in the same line of business. But this Toledo contest is believed to be the first instance where private corporations—creatures of the State—have assumed to exercise monarchical powers over a portion of the State—one of its leading municipalities; to dictate the policy of its people; to seek to control the legislation as to the laws that should be enacted for such portion of the State; to bribe and intimidate the votes of such city at the polls; to attempt to subsidize the press by the most liberal expenditure of money; to at last purchase, out and out, a heretofore leading paper of the city, place its own managers and attorneys as directors, import one of its long-trained men as editor, and turn this paper into an engine of attack upon the city, an attack upon the city’s honor and credit, characterized by the most unscrupulous misrepresentation and a perfect abandonment of all the amenities of civilized warfare.”

The Toledo public felt no doubt as to who were attacking it under the convenient anonymity of the two gas corporations. At a public conference, January 16, 1889, between the presidents of the private natural-gas companies and the people assembled in mass-meeting, the representative of the former said the only condition on which the members of the oil trust had been induced to interest themselves in natural gas in Northwestern Ohio was that of absolute and unqualified control of the entire business through a majority of the stock of all the gas companies to be organized.

“The trust is interested in companies engaged in supplying natural gas?” the president of the oil trust was asked by the New York Legislature about this time.
“To a limited extent, yes.”
“Have they a majority interest in any of these companies?”
“I think they have.”[10]

This was identically the arrangement by which the nine trustees owned as their private property the control of the oil business. At several later conferences with the city’s trustees and the Common Council the gas companies were represented by one of the principal members of the oil combination, the ingenious gentleman who had managed the negotiations with the railroads by which, under the alias of the American Transfer Company, the trust claimed and got a rebate of 20 to 35 cents a barrel,[11] not only on all oil it shipped, but on all shipped by its competitors. He was also its representative in the similar arrangement by which the Cleveland and Marietta Railroad agreed to carry its oil for 10 cents a barrel, to charge Rice 35 cents, and to pay it 25 out of every 35 cents Rice paid.[12] He had acted in the same interest throughout the gas field as well as in oil, and his pathway could be traced through one independent company after another, whose wrecks, like those in oil, are milestones.

July 27,1889, in an item originating in New York, in the Tribune, a friendly paper, and given an extensive circulation by news despatches sent to the leading papers in other cities, it was said that the representatives of the oil trust “in this city say emphatically that they will attack in the courts the right of the city to issue them”—the bonds.

At the great meeting of the citizens, October 19,1889, to organize a popular subscription to take the bonds killed in the money-market, the resolutions named the oil combination as the power responsible for the attacks on the city, and appealed to the people to observe that it, “no longer content with destroying individuals and associations which stand in the way of its moneyed interests, now rises to grapple with and destroy the rights of cities and states; we therefore ask all liberty-loving men to make common cause with us in the defence of the community against the aggression of colossal power.”

The aldermen and the Common Council of Toledo unanimously adopted resolutions, September 15, 1890, requesting the State and Federal courts to give decisions as promptly as possible in the suits pending against the validity of the natural-gas bonds. These bodies in their official utterance declared that the oil combination, “through its officers and agents in the city of Toledo and at many other points in the United States, has circulated false and malicious statements about the bonds of the city of Toledo issued for natural-gas purposes.” The natural-gas trustees of the city say in their report for 1890: “These injunctions and circulars, although fathered in the first instance by non-resident taxpayers, and in the second by irresponsible or anonymous parties, were traced directly to the oil trust, a trust having a large number of corporations within its control, among which is the Northwestern Ohio Natural Gas Company, and to whom the city of Toledo may reasonably attribute a loss of more than a million of dollars already. What further financial embarrassment it may suffer in the future cannot be measured by the depravity and moral turpitude which its seeds have sown in our midst.”[13]

When the warfare against Toledo became a scandal ringing throughout the country and beyond, the organ of the trust in Toledo attempted to make it appear that the oil trust was not the party in interest. But there was open confession on the record. Its connection and its control were admitted by two representatives in conference with a committee appointed by the mayor at their request to discuss the situation.[14] They described the circumstances under which the members of the oil trust had gone into the project of the Toledo line and the project of the natural-gas business. One of the two stated that he came into it as its “more direct representative.” The pipe line of the private gas company was built, he went on to say, by one of the principal corporations in the oil trust. At the same interview it was admitted that the oil trust owned 60 per cent. of the natural-gas company’s stock.

The people of Toledo did not surrender to this success of their enemies in the money-market. The bonds which calumny and espionage prevented them from selling at wholesale to the great capitalists of New York and Boston they took themselves at retail. The legislature having given authority for such sales, a committee of one hundred had been appointed by the citizens’ meeting, October 19, 1889, to canvass all the wards of the city for subscriptions to the gas bonds. “Gas Bond Pledges” were circulated, to which people subscribed according to their ability, in amounts ranging from $2 to $5000. The employees at the Wabash Railway’ car shops sent in a list signed by fifty names for a total of $1102, an average of $22 each. The labor of two hundred men for a week without pay was offered the gas trustees as an earnest of the good-will of the people. Piece by piece the city’s pipe line was pushed through. At a critical moment a shrewd and patriotic contractor saved the enterprise by building a large part of the line, and taking for his pay the bonds the banks would not take. In June, 1890, the public were gratified by the announcement that their trustees had secured the means “for the construction of three miles more,” making eight miles in all, or nearly one-fourth the entire line. In August a contract was made for five miles more, and so the work went on, step after step.

[1] October 19, 1889.
[2] City of Toledo and Its Natural Gas Bonds, pp. 6-7.
[3] Annual Report of the Natural Gas Trustees, 1890, p. 9
[4] City of Toledo and Its Natural Gas Bonds, p. 3.
[5] Toledo Natural Gas Trustees’ Report, 1890, p. 7.
[6] Annual Report of the Natural Gas Trustees, 1890, p. 8.
[7] “Constitutional History as Seen in the Development of American Law.” Lecture by D. H. Chamberlain. G. P. Putnam’s Sons, New York.
[8] Report of the Toledo Natural Gas Trustees, 1890, pp. 8-9.
[9] Trusts, New York Senate, 1888, p. 659.
[10] ‘Testimony, Trusts, New York Senate, 1888, p. 428.
[11] See p. 99.
[12] See p. 206.
[13] Annual Report of Natural Gas Trustees, 1890.
[14] Toledo Blade, February 7 and 27, 1889.

About Shawn P. Wilbur 2703 Articles
Independent scholar, translator and archivist.