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THE BALLINGER-PINCHOT CONTROVERSY.
Elihu Root and other constitutional lawyers took the view that Congress would not be required by this amendment to levy on such bonds, and would not be likely to do so; moreover, that the courts, following long precedent, would in all probability forbid such taxation.
The affirmative vote of 36 States is necessary for adoption, and, up to December of 1912, 34 States had voted in the affirmative, 4 had refused to ratify and the others had taken no action or only partial action.
But interest in the tariff as well as in other public measures was for a time diverted by a deplorable controversy that arose over conservation policies. This grew out of an attack made upon Secretary Ballinger regarding his relations to certain alleged fraudulent claims for mineral properties in Alaska. After the gold discoveries, this terra incognita was populated by thousands of fortune. hunters, towns of considerable importance sprung up, and a more efficient system of administration was organized. The occupancy of the gold fields directed attention toward other mineral products, in search of which Alaska had been thoroughly explored, with the resultant discovery that it was as rich in other natural resources as in the more precious metals. Copper, coal, iron and other mineral deposits were found in abundance, and the interests" quietly began to absorb enormous tracts through the operations of the land-grant laws. As
each applicant under the homestead law could obtain only 160 acres, and, under the law supervising mineral lands, could purchase only a certain maximum amount, it was the policy of unscrupulous men to obtain vastly more land than the law allowed by dummy entries and fraudulent claims.
The most active of these exploiters were alleged to be the Guggenheims who already had virtual control of the copper industry of Colorado. The charges against Secretary Ballinger were made public by a special agent of the Federal government, Lewis R. Glavis, who asserted that certain socalled " Cunningham claims" were fraudulent, and were in reality a part of an organized effort of the Guggenheims to obtain control of the most valuable mineral deposits of Alaska. Mr. Glavis alleged that not only was the Secretary of the Interior aware of the nature of these claims through knowledge gained by him when commissioner of the land office, but that he had been instrumental in furthering them. Glavis submitted his charges to Attorney-General Wickersham and, as a result, was deposed from his position by order of the President, who made a statement to the effect that he had full knowledge of Mr. Ballinger's acts and had utmost confidence in his integrity. This action was soon followed by a summary dismissal of Gifford Pinchot, Chief Forester, who, in a letter to Senator Dolliver, had rather broadly intimated that the President was somewhat mistaken as
to his facts. As a result of the charges of Mr. Glavis, a joint committee was appointed by Congress to look into the affair. After a protracted investigation lasting more than a year, a report was rendered by this joint committee through its chairman, Senator Nelson, fully exonerating Secretary Ballinger, thus settling the" Ballinger-Pinchot controversy" and establishing the principle that public lands are not to be subjected to private exploitation. Another excellent result of the acrimonious dispute was to establish upon a firmer basis than ever a wise and equitable policy of "conservation." The opponents of Mr. Ballinger, it should be remarked, were evidently actuated by over-zealous anxiety for the public welfare rather than by the extreme and harsh methods that President Taft dedenounced as the weapons of the "unscrupulous conspiracy."
On March 7 Mr. Ballinger resigned his office as Secretary of the Interior, with health impaired but no longer "under fire," and Walter L. Fisher of Illinois, was appointed his successor. Later in the year the new Secretary ordered the Cunningham claims cancelled, thus releasing the Alaska mineral lands which these claims had sought to control.
Aside from the corporation tax levy, which, however, was not primarily an anti-trust measure, though it was destined to have an important bearing on trust questions because of its publicity features, the first important
movement of the Administration in opposition to the trusts was the prosecution of the American Sugar Refining Company. There were two distinct lines of government procedure. One was to recover damages in a suit brought by the Pennsylvania Sugar Refining Company for the closing of its plant by the larger concern. Settlement was made out of court, but the government used this settlement as a basis of an indictment for fraud in violation of the criminal clause of the Sherman Law. The statute of limitations was invoked by the defendants and upheld by the United States Circuit Court, an appeal from which was immediately carried by the Government to the Supreme Court. Another class of cases against the "Sugar Trust" grew out of frauds in the weighing of imported sugar and also in paying duties on lower grades of sugar than those that were actually imported. In September, large sums were paid to the Government by two companies in the Trust as preliminary installments or settlement in full of all back shortages of duties on sugar.
Other policies became prominent. A special message of President Taft on January 7, 1910, made further regulation of railroads and certain modifications of existing anti-trust laws the leading order of business for the first regular session of the SixtyFirst Congress - a message that has been pronounced worthy of "the highest place in his achievements as lawyer and statesman.”
THE MANN-ELKINS ACT AND THE COMMERCE COURT. 283
The views of the President with regard to railroad regulations were largely met in the Mann-Elkins bill, finally passed after a long and notable debate on June 18, 1910. It supplements the Hepburn Act of 1906 in greatly enlarging the powers of the Federal Government over railways, and makes it much more difficult than heretofore for the railroads to conceal rebating from the Interstate Commerce Commission. Among other powers the Commission was granted the right to suspend new tariffs for ten months, if necessary, while hearings were being held; and this provision was invoked when, shortly before the passage of the Mann-Elkins Act, several Western roads increased their freight rates between all points, to take effect July 1. These tariffs were therefore suspended, and on February 24, 1911, the decision was handed down refusing rate advances on eastern and western roads, but granting most of the increases asked by southwestern roads."
The creation of the Commerce Court was one of the principal advances made by the Mann-Elkins Act,
and one which the President had consistently striven for from the first.t
* Another important instance when this extension clause was put into operation was near the end of the administration, the Interstate Commerce Commission on August 31, 1912, extending until December 31, 1912, proposed increases in freight rates from eastern points to Pacific coast points.
The members of the Commerce Court were Martin A. Knapp, formerly chairman of the VOL. X 19
This court was designed to review cases on which appeal should be made from the decisions of the Interstate Commerce Commission, in lieu of having them passed upon, as formerly, by the United States Circuit Courts. This was not only in the interests of greater expedition but, it was hoped, of a more searching and painstaking adjudication than the busier courts could make. Up to the close of 1911 the Commerce Court had rendered decisions in 27 appeals from rulings, usually in favor of the railroads against the shippers, and in only three cases sustaining the original orders of the Commission. A distinct hostility against the court gradually grew up, and in 1912 only the utmost exertions. on the part of President Taft saved it from being wiped out of existence by Congress. Other troubles culminated in 1912, when the House of Representatives presented to the Senate articles of impeachment against one of the judges of the court, Robert W. Archbald, for alleged business transactions with railroad companies at times when the railroads were litigants before the Commerce Court and the Interstate Commerce Commission.
In accordance with another section of the Mann-Elkins Act the President, in 1910, appointed the Railroad Securities Commission to decide whether
Interstate Commerce Commission, John E. Carland, Robert W. Archbald, William H. Hunt and Julian W. Mack. The first public sesssion was held in Washington. D. C.. on April 3, 1911.
railway stock and bond issues could properly come under Federal regulation.* The committee reported on December 11, 1911, that it would be practically impossible to do so, but made several important suggestions for amendments to the Interstate Commerce Act, which should provide for giving the fullest publicity to every detail of railway financiering.
The second part of the President's message of January 7 dealt with proposed modifications of the anti-trust law. The message argued that large
combinations of capital were not intrinsically unfair, yet it was necessary for judicial investigations to be instituted whenever suspicions of violations were aroused. This disturbance to business was to be deprecated and, it was thought, could be eliminated if the great concerns should subject themselves to to Federal regulation under the terms of a National incorporation act. This would enable a line to be drawn between trusts that had nothing to conceal and those that employed unlawful methods - between
good trusts" and "bad trusts." A constructive bill was drawn by the Attorney-General, Mr. Wickersham, and presented to Congress, but formal debate on it was soon withdrawn pending the decision of the Supreme Court in the Standard Oil and Tobacco cases. This postponement, as well as
* The members of this commission were: Arthur T. Hadley, President of Yale University, F. N. Judson, Frederick Strauss, Walter L. Fisher and Prof. B. H. Meyer.
the provisions of the bill itself, were considered as a few among many hopeful indications of a much more reasonable spirit as regards the regulation of industrial corporations ening of the demand for ruthlessly "smashing big trusts." In President Taft's "Lincoln Day Speech" at New York, for instance (in which, by the way, he reiterated his "best ever" characterization of the new tariff) he disclaimed "all intention of pursuing the corporations in a hostile spirit." The Administration's atti
tude toward the whole trust question made it more and more evident that
regulation and publicity, properly applied, would be powerful factors in discriminating between lawful and unlawful combinations; and that was one of the chief aims sought by the Wickersham bill.
Prosecutions were continued during 1910 and the early part of 1911 against the Sugar Trust, the meat packers, the Window Glass Trust, the Electrical Trust, and many others, but although, in nearly all cases, the Government advanced inexorably toward the heart of the citadel and no truce was called, yet the chances of final victory or defeat could not be accurately gauged until the decision of the United States Su
preme Court in the Standard Oil and Tobacco Trust cases should be announced. So momentous and far reaching were the consequences of these decisions felt to be that a little more detail must be ventured in recounting the procedure and its effects.
THE STANDARD OIL DECISION.
In November of 1909, the United States circuit court at St. Paul, Minnesota, had declared the Standard Oil Company of New Jersey a "combination in restraint of trade" and therefore illegal under the Sherman Act as not only a combination but a monopoly, the decree of the court being an order for dissolution and an injunction against the formation of any similar combinations. An appeal was taken by the company, in December of 1909, to the Supreme Court of the United States, alleging sixty-five errors. The case was first argued in March of the following year, but owing to the death of Justice Brewer and Chief Justice Fuller, the illness of Justice Moody, and the fact that Justice Lurton had not been upon the bench when the first arguments were made, a reargument was heard in January of 1911.
The principal contentions of the defence were, briefly, that the Standard Oil Company was not a combination of subidiary rival companies but only a natural, simple evolution of an expanding industry, a private undertaking that had a right to use trade devices in advancing its interests, not a public service corporation that would come under closer legal restrictions. The government, on the other hand, endeavored to show obvious "intent" to secure restraint of trade and monopoly, evidences being found, it was alleged, in transportation rebating, price discriminations, and other unfair methods that enabled the
company to establish and maintain monopoly.
The decision was handed down on May 15, 1911, written by Chief Justice White and concurred in by eight members (vigorously dissented from, however, by Justice Harlan), the crux of which was the now famous "rule of reason" principle that the Sherman Law should in each case coming up for adjudication be given a "reasonable" interpretation. The Supreme Court, nevertheless, found the Standard Oil Company guilty of illegal combination, and ordered its dissolution on September 1, 1911. The order of the court was strictly obeyed, and on that date the Standard Oil Company of New Jersey surrendered the ownership of the stock of other oil companies.
While the first effect upon business men of the decision was optimistic, there was a feeling of doubt whether the dissolution actually dissolved, although technically the law had been strictly complied with. There was a very general endorsement, too, of Justice Harlan's view that "reasonable interpretation " led, or might lead, to emendations of legislative enactments by means of the judicial construction placed upon them, creating "judgemade law" that would" in the long run prove disastrous for our political system." The uncertainty produced by the necessity of interpreting each particular case as it arose, rather than by a general principle applying to all cases, was deprecated also, and it was