Two Lawyers with a Nefarious Scheme
Two Lawyers with a Nefarious Scheme
In Johnny Abercrombie’s office, Emory Fulton stared at the rows of figures Johnny had asked him to prepare for their meeting with Curtis Glen, who was chairman of the expansion committee for the B&O. “If you let him sign those long-term contracts with Buckland Shipping, we’re doomed. You’re giving them a rate below our current cost.” Fulton wore thick spectacles and a thin mustache. He had taken off his coat and sat hunched over the desk in his shirt sleeves and vest.
“Look again. The price increases five percent each year, that’s fifty percent in ten years’ time, Emory. Even if inflation goes down, they’ll still be paying us at the present rate of increase.”
“What if inflation crops up again? It’s going back down now, but—”
“President McKinley’s economics have all but eliminated inflation. The dollar is sound as a nut.”
“For now, Johnny. But that could change.” Fulton hunched over his desk, adding the figures again. “You’re planning twenty years ahead.”
“It won’t be going up.” Johnny smiled. “Not with McKinley in the White House and if the election goes our way, it will continue to go down. And he will win again.”
“Even if you knew that, Johnny, the railroad can’t afford to be locked into this contract. We’ll lose money the first three years no matter what.” Emory pushed the papers away. “The cost of coal alone will put us in the red.”
Johnny Abercrombie leaned back in his chair and stretched. “There’s ways around that.” He smiled. “What if we could control the cost of coal?”
“There’s no way we can do that.” Emory’s eyes looked very large behind his spectacles.
“Well, suppose we borrowed against our B& O shares and set up a separate company to buy and own some coal mines. Not just one, and not just in one state—a holding company to own mines in Pennsylvania, West Virginia, Tennessee... Anywhere fairly close to our lines. We could not only supply our own fuel for the cost of the labor, but we could sell it to our competitors at a much higher price. Then their costs would certainly go up. And our profits on coal will cover any losses for the first couple of years on these contracts.”
“Controlling the cost of coal? Wouldn’t that be against the law, Johnny?”
“There are antitrust laws, to be sure. But they haven’t many teeth and they won’t have for some time to come. McKinley’s too busy with foreign policy. The holding company can’t be tied too closely to the B&O. We’ll set that up ourselves. We just need to get a few private shareholders together. With you, me, Katzenberg and a few of the shares my mother holds, we’ll have more than enough. Of course we’d have to pick our bank.”
“The smart thing would be to spread the loan out to a lot of banks. That way if there’s a problem the risk would be less.”
“Sure. And word would get out. We need a nice fat merchant bank. Someone just a little greedy, who can foot the bill for the whole thing. And I have just the man in mind.” Johnny smiled again. “Hildon Follansbee.”
“From Inter-Continental Trust?”
“Isn’t there some scandal about him? I read something in the Flag.”
“Follansbee financed the deal with the Inland Waterways Commission and the steamboat lines. There were accusations of price setting, but nothing was ever proven.” Johnny smiled again. He’d made a tidy sum on that deal.
“The man’s next best thing to a crook!” Fulton choked.
“We need a banker who controls enough cash, and one who won’t ask too many questions. Above all, we need a banker who knows how to keep business matters confidential.”
“If it’s kept quiet enough we’ll be safe. If the attorney general starts looking for a target on the railroads, we can campaign to set his antitrust goals further west. The way the transcontinental lines operate is scandalous. The same man owns all three. They can run things any way they want and set prices right and left. It’s practically a license to steal.”
“Johnny, we just can’t afford to do this.” Fulton shook his head and bit at his mustache. “Sure you could set it up with Follansbee. But essentially we’d borrow against our railroad shares to buy the mines. We’d have to put those shares up as collateral. If anything went wrong and the bank sold them short, the price of all the B&O shares would drop like a stone. We’d lose everything and the B&O would be in debt for years, because of us. It’s too dicey.”
“It’s risky, not dicey. The shares are worth what they’re worth. No bank is going to dump them as long as w...