CHAPTER IX

ADDITIONAL LIGHT ON THE JUDICIOUS MIXTURE OF POLITICS AND BUSINESS THAT IS ESSENTIAL TO THE BEST PLAYING OF THE GAME

BAD as all this was, worse remained behind. On the 12th of March the New York World managed to secure, in some surreptitious way, a copy of the Kilburn report (so carefully suppressed at Albany), and published it, practically in full. The whole country gasped at the official confirmation it contained of the worst charges made by Kling or hinted by the newspapers. There seemed no longer a chance to doubt that the official investigation had been muzzled because of "the prominence of the persons involved," who now stood forth in a white light, painfully conspicuous. They were:

Elihu Root, then Secretary of War, now Secretary of State, a director in the State Trust Company, long the personal and confidential adviser of Mr. Whitney and Mr. Ryan.

John W. Griggs, then Attorney-General of the

United States.

Thomas F. Ryan.
William C. Whitney.

P. A. B. Widener.

R. A. C. Smith.

Anthony N. Brady.

It appeared that of the $14,829,116.55 of other people's money confidingly deposited with this trust company, $5,133,270.48 had been swept into improper or utterly illegal loans for the benefit of the gentlemen whose ability, energy, and foresight had created something from nothing.

Among these loans were the following:

It appeared further that the loan to the office boy Shea had been negotiated by Elihu Root, director of the company, member of the executive committee, and its personal and confidential adviser, and that it had been kept off the directors' minute books.

"Beyond all question," said the report, "this loan was illegal, because excessive, and because, in part, it was made directly to directors of the company."

Illegal! Well, is it possible to conceive of anything more illegal? For how reads the law upon this subject?

"No loan shall be made by any such corporation [trust company] directly or indirectly to any director or officer thereof."-General Banking Act, section 156. Passed in 1892.

And further:

"Every director of a moneyed corporation who wilfully does any act as such director which is expressly forbidden by law, or wilfully omits to perform any duty imposed upon him as such director by law, is guilty of a misdemeanor, if no other punishment is prescribed therefor by law."-Penal Code, section 603.

It appeared further from the report that the collaterals securing the Sheehan loan were "not currently quoted," and that Mr. Kilburn could not estimate their value, which was, of course, a polite way of saying that they were rubbish. It appeared further that this loan was in reality made in the interest of what, for a guess? Why, our old friend the United Gas Improvement Company of

Philadelphia, the corporation that afterward became so popular that the people gathered to hang some of its advocates. The United Gas Improvement Company got that loan and was to repay it, presumably out of the money gathered in such questionable ways in Philadelphia. But the United Gas Improvement Company was the syndicate, and the syndicate (and Mr. Root) composed the directorate of the State Trust Company. So that when we have traveled the circle of ability, energy, and foresight we have nothing but the directors (in violation of the law) lending their depositors' money to themselves.

It appeared further that the loan of $285,000 to Anthony N. Brady was without security of any kind, and that Mr. Brady, who was and is the autocrat of that popular and favorite institution, the Brooklyn Rapid Transit, was the close associate of the syndicate in many of its operations.

And it appeared further that the loan of $500,ooo to the Metropolitan Traction Company was without security of any kind, and that the Metropolitan Traction Company was the syndicate.

All this was only the beginning of the story. Examination of the collateral reported as securing some of the loans showed remarkable things. Thus,

in the case of the loan of $435,470.48 to Louis F. Payn (who was perfectly well known to be of small means), the collateral had at the most a nominal value of only $350,000, so that $85,000 of the loan was not even nominally secured. Most of the collateral that was deposited consisted of the socalled securities of corporations like the New York & North Shore Railroad, which, astonishing as it may seem, were the doubtful and obscure properties of the syndicate itself.

Hence, it was to be assumed that none of the securities deposited had ever been owned by Mr. Payn, and that the whole transaction was merely a blind to cover something else, some other operation, very likely with other people's money. Nor is even this all. Besides these alleged securities, which were to the loan exactly what a Raines Law sandwich is to a Sunday drink, there was a check for $100,000 made by the Metropolitan Street Railway Company to the order of Louis F. Payn, and marked "construction account." But Mr. Payn, who is merely a professional politician, never had anything to do with any "construction" work for the Metropolitan and never could have had. Moreover, it is perfectly well known that the "construction account" is among railroad companies a com