Early in 1879 the hearing in the suits in equity brought by the commonwealth against the various transportation companies of which the producers had been complaining were begun. The witnesses subpœnaed failed at first to appear, and when on the stand they frequently refused to reply; but it soon became apparent to them that the state authorities were in earnest, and that they must "answer or go to Europe." By March, 1879, an important array of testimony had been brought out. Among the Standard men who had appeared had been John D. Archbold, William Frew, Charles Lockhart and J. J. Vandergrift. A score or more of producers also appeared. The most important witness from the railroad circles, and, indeed, the most important witness who appeared, was A. J. Cassatt. Mr. Cassatt's testimony was startling in its candour and its completeness, and substantiated in every particular what the oil men had been claiming: that the Pennsylvania Railroad had become the creature of the Standard Oil Company; that it was not only giving that company rates much lower than to any other organisation, but that it was using its facilities with a direct view of preventing any outside refiner or dealer in oil from carrying on an independent business. [72]

The same or similar conditions, not only in oil, but in other products, which led to these suits, led to investigations in other states. Toward the end of 1878 the Chamber of Commerce of New York City demanded from the Legislature of the state an investigation of the New York railroads. This investigation was carried on from the beginning of 1879. The revelations were amazing. Before the Hepburn Commission, as it was called from the name of the chairman, was through with its work there had appeared before it to give testimony in regard to the conduct of the Standard Oil Company and of the relation of the Erie and the Central roads to it, H. H. Rogers, J. D. Archbold, Jabez A. Bostwick and W. T. Sheide. A large number of independent oil men had also appeared. William H. Vanderbilt had been examined, and G. H. Blanchard, the freight agent of the Erie road, had given a full account of the relation of the Erie to the Standard, perhaps the most useful piece of testimony, after that of Mr. Cassatt, belonging to this period of the Standard's history. [73]

At the same time that the Pennsylvania suits were going on, and the Hepburn Commission was doing its work, the Legislature of Ohio instituted an investigation. It was commonly charged that this investigation was smothered, but it was not smothered until H. M. Flagler had appeared before it and given some most interesting facts concerning rebates. A number of gentlemen who were finding it hard to do oil business also appeared before the Ohio committee and told their stories. [74] By April, 1879, there had been brought out in these various investigations a mass of testimony sufficient in the judgment of certain of the producers to establish the truth of a charge which they had long been making, and that was that the Standard was simply a revival of the South Improvement Company. Now the verdict of the Congressional Committee had been that the South Improvement Company was a conspiracy. Therefore, said the producers, the Standard Oil Company is a conspiracy. Their hope had been, from the first, to obtain proof to establish this charge. Having this they believed they could obtain judgment from the courts against the officials of the company, and either break it up or put its members in the penitentiary. The more hotheaded of the producers believed that they now had this evidence.

If one will examine the testimony which had been given thus far in the course of the various examinations one will see that there was reason for their belief. In the first place, it had been established that all the stockholders of the South Improvement Company, excepting four, were now members of the Standard Oil Combination. Indeed, the only persons holding high positions in the new combination at this date who were not South Improvement Company men were, Charles Pratt, J. J. Vandergrift, H. H. Rogers and John D. Archbold.

The South Improvement Company had been a secret organisation. So was the new Standard alliance; that is, the most strenuous efforts had been made to keep it secret; for instance, the sale of the works of Lockhart, Warden and Pratt to the Standard was kept from the public. Indeed, it was a year after these sales before even the Erie Railroad knew that Mr. Rockefeller had any affiliations besides those with Pratt and Company, and it made its contracts with him on this assumption. When purchases of refineries were made it was the custom to continue the business under the name of the original concern; thus, when Mrs. B., of Cleveland, sold in 1878, as recounted in the last chapter, the persons selling were obliged to keep the sale secret even from the employees of the concern. "The understanding was with regard to the sale of the property to the Standard Oil Company," said the shipping clerk in his affidavit, "that it should not be known outside of their own parties, that it was to be kept a profound secret, and that the business was to be carried on as if the B—— Oil Company was still a competitor." The secret rites with which the contract was made in 1876 between Mr. Rockefeller and Scofield, Shurmer and Teagle have already been described.

To keep the relations of the various Standard concerns secret Mr. Rockefeller went so far, in 1880, as to make an affidavit like the following: "It is not true, as stated by Mr. Teagle in his affidavit, that the Standard Oil Company, directly or indirectly through its officers or agents, owns or controls the works of Warden, Frew and Company, Lockhart, Frew and Company, J. A. Bostwick and Company, C. Pratt and Company, Acme Refining Company, Imperial Refining Company, Camden Consolidated Company, and the Devoe Manufacturing Company; nor is it true that the Standard Oil Company, directly or indirectly through its officers or agents, owns or controls the refinery at Hunter's Point, New York. It is not true that the Standard Oil Company, directly or indirectly through its officers or agents, purchased or acquired the Empire Transportation Company, or furnished the money therefor; nor is it true that the Standard Oil Company inaugurated or began or induced any other person or corporation to inaugurate or begin a war upon the Pennsylvania Railroad Company or the Empire Transportation Company, as stated in the affidavit of Mr. Teagle." [75]

There may be a technical explanation of this affidavit, although the writer knows of none. There is certainly abundant testimony in existence that the works of Messrs. Pratt, Lockhart and Warden, at least, had been bought long before this affidavit was made, and paid for in Standard Oil Company stock, and that they were working in alliance with that company. It was shown in the last chapter that on October 17, 1877, the Standard Oil Company paid $2,500,000 in certified checks on the purchasing price of the plant of the Empire Transportation Company.

While none of the other members of the Standard Oil Company examined in 1879 was quite so sweeping in his denials, all of them evaded direct answers. The reason they gave for this evasion was that the investigations were an interference with their rights as private citizens, and that the government had no business to inquire into their methods. Consequently when asked questions they refused to answer "by advice of counsel." Ultimately the gentlemen did answer a great many questions. But taking the testimony all in all through these years it certainly is a mild characterisation to say that it totally lacks in frankness. The testimony of the Standard officials before the Hepburn Commission was so evasive that the committee in making its report spoke bitterly of the company as "a mysterious organisation whose business and transactions are of such a character that its members decline giving a history or description of it lest this testimony be used to convict them of a crime." The producers certainly were right in claiming that secrecy was a characteristic of the Standard as it had been of the South Improvement Company.

The new Standard Combination, like the South Improvement Company, aimed at controlling the entire refining interest. "The coal oil business belongs to us," Mr. Rockefeller once told a recalcitrant refiner. His associates were saying the same on all sides; "the object of the Standard Oil Company is to secure the entire refining business of the world," a member of the concern told B. F. Nye, an Ohio producer. [76]

The method the Standard depended upon to secure this control was the same as the method of the South Improvement Company — special privileges in transportation. We have seen how intelligently and persistently Mr. Rockefeller worked to secure these special privileges until, in 1877, he had made with all the trunk lines contracts which in every particular paralleled the contracts which in January, 1872, Messrs. Scott, Gould, Vanderbilt and McClellan made with the South Improvement Company. He now had a rebate on every barrel of oil he shipped, and this was given with the understanding that the railroad should allow no rebate to any other shipper unless that shipper could guarantee and furnish a quantity of oil for shipment which would, after deduction of his commission, realise to the road the same amount of profit realised from the Standard trade. He also had a drawback on every barrel his rivals shipped. No clause in the South Improvement Company's contract with railroads had given more offence to the oil world than that which called for a drawback to the company on the oil shipped by outsiders. It will be remembered that the beneficiaries of this contract were to receive drawbacks of $1.06 a barrel on all crude oil that outside parties shipped from the Oil Regions to New York, and a proportionate drawback on that shipped from other points. The rebate system was considered illegal and unjust, but men were more or less accustomed to it. The drawback on other people's shipment was a new device, and it threw the Oil Region into a frenzy of rage. It did not seem possible that the Standard would attempt to revive this practice again, and yet when it had got its hand strongly on the four trunk lines it made a demand for the drawback. It has already been recounted how, on February 15, 1878, four months after the Pennsylvania succumbed to the Standard's demand, Mr. O'Day wrote to Mr. Cassatt: "I here repeat what I once stated to you, and which I wish you to receive and treat as strictly confidential, that we have been for many months receiving from the New York Central and Erie Railroads certain sums of money, in no instance less than twenty cents per barrel on every barrel of crude oil carried by each of these roads. . . . Co-operating as we are doing with the Standard Oil Company and the trunk lines in every effort to secure for the railroads paying rates of freight on the oil they carry, I am constrained to say to you that in justice to the interests I represent we should receive from your company at least twenty cents on each barrel of crude oil you transport." And Mr. Cassatt after seeing the freight bills showing that both the Central and Erie allowed a drawback gave orders that the Pennsylvania pay one of 22-1/2 cents. When Mr. Cassatt was under examination in 1874 the examiner remarked:

"I understand, Mr. Cassatt, that this 22-1/2 cents paid to the American Transfer Company is not restricted to all oil that passed through their lines."

"No, sir; it is paid on all oil received and transferred by us."

Among the interesting documents presented at this inquiry was a statement of the crude oil shipments over the Pennsylvania road for February and March, 1878. [77] They footed up to a total of 343,767-1/2 barrels. On this amount a discount of twenty cents a barrel was allowed to the Standard Oil Company through its agent, the American Transfer Company. Among other independents who shipped this oil was H. C. Ohlen. In all, Mr. Ohlen shipped 29,876 barrels, and on this the Standard Oil Company received twenty cents a barrel! That is, after Mr. Ohlen had paid for his oil, paid for having it carried by the pipe-line to the railroad, and paid the railroad the full rate of freight without the commission the Standard received, the Pennsylvania was obliged to turn over to the Standard Oil Company twenty cents of the amount he had paid on each barrel!

The examiner tried very hard to find out if there was a legitimate reason why such an allowance should have been made to the American Transfer Company on oil it did not handle. "We pay that," Mr. Cassatt said, "as a commission to them to aid in securing us our share of trade." "We pay it," said the comptroller, "for procuring oil to go over the lines in which the Pennsylvania Railroad Company is interested as against the New York lines and the New York Central."

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