Monthly Archives: March 2019

The Devil’s Town: Chapter 10: “Game Over”

(March 28, 2019) The following is an edited excerpt from my latest book, The Devil’s Town: Hot Springs During the Gangster Era. It is taken from Chapter 10 and concerns the shutting-down of illegal gaming at Hot Springs during 1966-67.

Chapter 10

Game Over

Despite losing the 1964 gubernatorial election to Orval Faubus, Winthrop Rockefeller was sufficiently pleased with his 44% share of the vote to announce immediately thereafter that he would run again in 1966. Both men realized that the growing number of voters who wanted to give up the futile fight for racial segregation would increasingly be drawn to Rockefeller during a rematch.

Partly to win incremental support from voters concerned with another issue, therefore, Rockefeller repeatedly assailed incumbent Governor Faubus for his failure to end illegal gambling. After Faubus announced that he would not run for a seventh term, the state’s Democratic Party nominated a rabid segregationist thereby enabling Rockefeller to win the 1966 general election with a combination of moderate white voters and about 95% of the black vote. Although ending the segregation fight was the chief campaign issue, Rockefeller’s repetitious pledges since the end of the 1964 to shut down illegal gambling if elected in 1966 was at least a high profile secondary one.

The day after his January 10, 1967 inauguration, however, Rockefeller curiously said that he expected local authorities to take care of the gambling problem. That led reporters to question him the next day at a news conference when he clarified, “If gambling again becomes flagrant . . . I will move of my own initiative.” Early in February he sent the state police on hunting expeditions to discover if illegal gambling in Garland and Pulaski counties was as flagrant as recent press reports had suggested. During one weekend the troopers visited a variety of establishments where they found nearly forty blackjack tables, a dozen crap tables, two roulette wheels and hundreds of slot machines.

Governor Winthrop Rockefeller: 1967 – 1971

As a result, the governor sent letters to law enforcement organizations in the two counties, as well as the mayors of Hot Springs and North Little Rock, giving them until 27 February to close down any gambling operations in their jurisdictions. The letter concluded by warning that any such business remaining open after the deadline was subject to state police raids. Thus, on 28 February Rockefeller told state police director, Colonel Herman Lindsey, to take whatever action was necessary to eliminate illegal gambling throughout the state. Since the governor realized that Lindsey might have been a source of the habitual advance raid warnings that casinos received during the Faubus era, Rockefeller announced that Lindsey was on probation until the end of April.

Meanwhile four state senators introduced a bill to permit state supervised gambling on a local option basis. The resulting bill proposed to create a state crime commission to police and license gaming clubs. There were to be five commissioners appointed by the governor with the consent of the senate. In order to enforce the applicable laws, the commission would be empowered to carry out investigations and subpoena witnesses. The bill would authorize no more than one casino per 15,000 residents in the affected counties. It also stipulated that the state would collect an annual $10,000 license fee from each business as well as a tax of 8% of its gross revenues.

In early March, the bill passed both chambers of the Arkansas legislature by the narrowest of margins. For several days its sponsors expected that Rockefeller would either sign it, or let it become law without his signature. On 8 March, however, he vetoed the bill.  The sponsors immediately charged that Rockefeller had broken his word to them. All four claimed that they would never have introduced the bill if the governor had not privately indicated weeks earlier that he would let the bill become law should it get through the legislature. Other legislators who voted for the bill also claimed that they would not have done so except for rumors of the governor’s acquiescence, if not direct support. After the veto, a number of legislators that voted “Yea” renounced their votes in order to remain on the popular side of statewide public sentiment.

In response to accusations that Rockefeller broke his word, the governor denied that he ever promised to support the bill. He even claimed that he was unaware of it until it was formally introduced. He speculated that the misunderstanding might have resulted from an earlier meeting with selected legislators and others in which methods of revitalizing the Hot Springs economy were discussed. Although the meeting included conversations about the possibility of legalizing gambling, it also contained discussion about changing the laws governing mixed alcoholic drinks, which were also generally prohibited in Arkansas. Rockefeller replied to a proposal on the latter topic by saying that he would send it to an aide for further study. He did not, he avowed, make any definite statement about his stance on legitimatizing gambling.

The first sign of defiance against Rockefeller’s enforcement materialized with Hot Springs Municipal Judge Earl Mazander shortly after the state police raids started. Specifically, he ordered that all gambling equipment seized and taken to Little Rock during an 11 March raid be turned over to the Hot Springs police chief. Although the state police partly complied by sending some of the items intended for use as evidence to Hot Springs, Mazander issued an arrest warrant for the state trooper that led the raid. While the judge was eventually persuaded to dismiss the case, he ordered that no evidence captured on future raids could be removed from Garland County without the consent of local authorities.

Next, Q. Byrum Hurst, who had become a state senator, introduced a bill to abolish the Criminal Investigative Division (CID) of the state police, which was the enforcement arm Rockefeller was using to raid the illegal businesses. Hurst dubiously suggested that the state’s highways were becoming unsafe because too many troopers were involved in anti-gambling activities. Traffic fatality statistics later discredited Hurst’s allegation when they revealed that Arkansas might have been the only state in the country to report a decline in traffic deaths in 1967. After Hurst’s bill was voted down he tried to tack it onto the state police appropriations bill, but the legislature also rejected that tactic.

During April, Garland County authorities decided it was better to pretend to be cooperating with the governor rather than resisting. Thus, Sheriff Bud Canada assisted state troopers on a number of raids. In May he told reporters that he would “use the full facilities of [his] office to carry out this [enforcement] policy,” concluding insincerely, “as I have in the past.” He did not clarify that some of the seized gaming equipment supposedly stored in his office was trickling back into circulation instead of being destroyed as intended.

In June Governor Rockefeller conceded that illegal gambling was mysteriously returning to Hot Springs even after the raids. After futilely asking that local authorities increase their vigilance, he reasoned that the state police would need to become even more involved. Equally important, he concluded that the state organization needed a new commander.

Lindsey had basically failed his probation. For the preceding twenty years the colonel had become habituated to erratic anti-gaming law enforcement, which fluctuated from governor to governor and year to year. Given such a pattern, casino owners too readily presumed that Lindsey’s enforcement under Rockefeller would also prove to be only temporary. Therefore, Rockefeller announced before the end of June that an outsider would replace Lindsey, who decided to retire.

Early in 1967 Arkansas native and thirty-three year old FBI agent Lynn Davis requested a transfer from Los Angeles to Little Rock in order to be closer to his ailing mother. Before the Bureau acted on the request a previous college classmate, who worked for Rockefeller and was aware that the governor was looking for a newcomer to lead the state police, contacted Davis. About two weeks later Davis met with Rockefeller in Little Rock. The day after Davis returned to Los Angeles the governor phoned him to offer him the top slot at the Arkansas State Police. Davis eagerly accepted.

Although Davis would take decisive action against the gambling businesses, he would also face entrenched resistance and unexpected obstacles. Even before he arrived his appointment provoked resentments among some incumbent state police employees and politicos who benefitted from the habitual corrupt methods of enforcing anti-gaming laws. Since nothing in his seven years at the FBI suggested that he was unqualified to accept Rockefeller’s offer, gambling interests looked for other ways block Davis. The first one took the form of a technical objection raised by Democratic Attorney General Joe Purcell.

Specifically, Arkansas law required that anyone appointed as director of the state police had to have been a state resident for the preceding ten years. The requirement was adopted shortly after World War II in order to protect Colonel Lindsey who might otherwise have been displaced by a returning war veteran since former soldiers were popularly respected among the public, as the “GI (McMath) Revolt” in Hot Springs would demonstrate.

Rockefeller responded to Purcell by noting that Davis had always remained an Arkansan at heart and was therefore eligible. Surprisingly, an initial court ruling upheld the governor’s liberal interpretation. But Purcell promptly appealed the case, which would eventually land at the state Supreme Court. Nonetheless, Davis took his oath of office on 1 August and stated that he would not accept a salary while his qualifications were under appeal. He added, however, that he would not let doubts about his eligibility inhibit his plans to act.

Since Davis could not know how long the appeal might take, he quickly moved against the gamblers. His first objective was to destroy gambling equipment instead of arresting casino owners or customers. Gaming could not continue if the equipment was demolished whereas the prosecution of alleged violators was subject to delays and uncertainties through a historically corrupted legal process.  Once the gaming equipment was destroyed, any attempts to replace it from sources outside the state would likely trigger violations of interstate commerce laws, thereby authorizing additional enforcement by federal marshals and FBI agents.

His first raid took place in Hot Springs less than three weeks after taking office and was executed without notifying local authorities. After plainclothes officers observed gambling at four casinos, Colonel Davis placed men at parade rest in front of the building entrances to prevent any equipment from being removed. Next he surprised the local prosecuting attorney at one-thirty in the morning with a request for the search and seizure warrants required to raid the businesses. As a result, gaming equipment was confiscated at each location.

Unfortunately, the troopers were not permitted to destroy the captured gear because the warrants only authorized search and seizure. Consequently, the colonel turned the equipment over to Hot Springs officials who were expected to destroy it. In later raids Davis would be angered to learn that at least some of the relinquished gear had been recycled to other casinos instead of destroyed.

Unsurprisingly, Sheriff Canada was incensed that Davis did not seek local cooperation during the August raid. But despite the sheriff’s complaint Davis remained firmly resolved to exclude Canada’s men in future raids as well. In a 2008 interview near the end of his life Davis indicated that he did not know anyone in a position of authority in Garland County at the time who was trustworthy.

Davis’s raiders returned to Hot Springs in October and confiscated $250,000 worth of slot machines. They also located secret casino equipment repair shops where they found one hundred functioning machines and parts enough to build an additional two hundred and fifty. A rental truck full of slots was also captured. When the machines in the truck were destroyed Davis discovered from some of the serial numbers that almost twenty of the slots had been seized in earlier raids but never demolished as intended.

Angered by the discovery that gaming equipment was being redeployed instead of demolished, Davis decided to openly pinpoint the responsible Garland County enforcement officials. During an October address to a Little Rock civic group he accused the Hot Springs police chief and his assistant of helping the casinos. Moreover, he warned that if a Garland County grand jury would not indict the two men, he would take matters into his own hands. The speech triggered the Hot Springs Civil Service Commission to urge an investigation. Since Judge Mazander was presiding he predictably concluded that Davis’s accusations were based on rumors instead of facts.

Nonetheless, Davis’s well-publicized raids and his rising public profile seemed to be promoting a new resolve in favor of enforcement throughout many of the state’s localities. For example, local authorities confiscated about twenty slots long known to be operating at clubs on North College Avenue in Fayetteville where the University of Arkansas is located.

Before long both Davis and Rockefeller received death threats. In early December the police chief of San Angelo, Texas notified Arkansas authorities that a prisoner claimed to know of a plot to assassinate Rockefeller. At least one newspaper reported that the prisoner told a Texas official that Hot Springs gamblers intended to kill Rockefeller by sabotaging one of his jet planes. Upon investigation Lynn Davis dismissed the San Angelo threat as mere jailhouse talk. Nonetheless, he indirectly messaged the Hot Springs underworld that there would be revenge if any attempts were made on his life, or the governor’s. He even hinted that Rockefeller had already contracted for vigilante justice in case of such an eventuality. Lest there be any doubt about the vengeance, Lynn hinted that the vigilante justice might be performed through contracts with underworld figures instead of the state police.

Although the colonel downplayed the Texas rumor, Davis recalled years later that the governor did, in fact, once come close to losing his life in an airplane accident. It happened on a flight to Memphis with his staff. As the plane approached the airport Rockefeller’s Falcon Jet pilot was unable to lower the landing gear. The jet burned low on fuel as the crew tried repeatedly, but unsuccessfully, to lower the wheels. Without them, the pilot would need to try a belly landing, which could easily end with fiery deaths for everyone on board.

Eventually, someone suggested that the crew phone the manufacturer for recommendations while the plane circled to exhaust its fuel. Sure enough, Falcon personnel said that the crew could lower the gear with a manual crank after removing a metal plate on the floor to get at the mechanism. Although ripping up the carpet gave them access to the floorboard, they had no screwdriver to remove the metal plate. Fortunately, a dime proved to be a satisfactory substitute and the landing gear was cranked down manually after the floorboard was removed.

Perhaps because he sensed that his residency status appeal would be decided against him, Davis continued to move quickly and relentlessly to stamp out illegal gambling before he might be told to vacate his office. It was too much to expect that the politicos who secretly benefitted from the status quo for so long would watch silently while their ox was gored. The inevitable front-page confrontation unexpectedly occurred in Little Rock instead of Hot Springs.

Partly to placate resentment in Garland Country, undercover troopers soon raided eleven clubs in Pulaski County, which encompasses Little Rock and suburbs such as North Little Rock. At Barney Levine’s Club Westwood, for example, the raiders discovered 30,000 pairs of dice. In a suburb near that club they found a semitrailer full of gambling equipment that was supposed to have been confiscated by Hot Springs police.

Over the years prior to Davis’s Pulaski County raid the eleven Little Rock area bookies had been charged a total of 118 times with gambling related felonies but the charges were generally reduced to misdemeanors and sometimes dropped altogether. As a result over ninety percent of the time the ensuing fines were only fifty dollars. Since the habitual pattern strongly implied a corrupt legal apparatus, Davis told a group of Little Rock business leaders during a speech, “[I]t is time we insisted again that law enforcement officers, prosecuting attorneys, judges, and juries do their duty.”

His complaint annoyed prosecuting attorney Jim Adkisson who was assigned to the grand jury investigating the eleven bookies. As a result, Adkisson told Davis to disclose the name of the informant who had told the colonel about the Pulaski County gambling locations. On 5 December he called Davis before the grand jury where the colonel was repeatedly asked to reveal the name, but he repetitively declined. After several iterations, the jury foreman turned to Adkisson and said, “If he will not tell us the name . . . let’s take him before the judge. The judge will make him tell.”

Addressing Davis, Adkisson said, “Colonel, I am just going to have to take you before the judge to order you to tell us your informant.”

Davis replied, “Surely you have enough [evidence] to make a good case…without knowing the name of the informant.”

Adkisson did not reply but merely took Davis into the courtroom where Circuit Court Judge William Kirby addressed the colonel, “The prosecutor tells me you will not give him the name of your informant.” Davis confirmed the validity of the statement but again said he would not provide the name. Kirby then made a technical error by failing to ask Davis to give the name to him (the judge) as opposed to Adkission, and held Davis in contempt of court for declining to tell Adkisson. Kirby told the bailiff to put Davis in a prison cell until he was ready to divulge the name to the prosecutor.

Public reaction soon demonstrated that Adkisson and Kirby had overplayed their hand. The Associated Press later listed the colonel’s incarceration as the top news story out of Arkansas that year, ranking it even higher than Rockefeller’s election as the state’s first Republican governor in a hundred years. The New York Times interviewed Davis over a prison payphone. The chairman of a chiefs-of-police lobbying organization in Washington, D. C. wrote a letter supporting Davis. Governor Rockefeller asked the Arkansas State Supreme Court for an emergency ruling the next morning.

The Supreme Court overruled Judge Kirby on the technicality that he failed to ask Davis to reveal the name to him and had instead instructed Davis to disclose it to the prosecutor. The essentially comical distinction was good enough to get Davis released without bail after only a single night in jail. Rockefeller staged a press conference at the jailhouse upon Davis’s release, pledging his full support for the director. He labeled Kirby’s action as political harassment that nobody but gamblers and criminals could celebrate.

But less than three weeks later the state Supreme Court ruled against Davis on the residency matter. Since the decision basically rendered Davis ineligible to be state police director, he was forced to vacate his office on December 23, 1967.

Despite the ruling, the publicity from Davis’s brief imprisonment and the corruption implied by it, proved to be a turning point in the battle against illegal gambling in Arkansas. Rockefeller replaced Davis with an assistant director who proved to be a caretaker for a year before retiring. Next the governor selected another outsider. This one had twenty-eight years of FBI experience and renewed Davis’s aggressive enforcement. A final indication that sentiment had turned decisively against illegal gambling came in 1969 when a Hot Springs grand jury indicted twenty-five residents for gaming violations.

Although Lynn Davis was director of the Arkansas state police for less than five months he effectively ended illegal gambling in the state. He could not have done it without Rockefeller’s commitment, which partly reflected the governor’s financial independence. There was not enough money in the state to turn his head.

Soon after Davis was forced out of office, Rockefeller hired him privately to help conduct an investigation into alleged abuse of prisoners at the state’s prison farms. Although circumstances were bad enough, they were not as awful as depicted in the Hollywood movie, Brubaker, which was inspired by exaggerated narratives of the authentic situation. The true problems resulted from parsimonious efforts to minimize the cost of operating prisons by permitting trusties to function as prison guard assistants. When the trusty system was abolished many trusties tried to escape. They feared for their lives because the ordinary prisoners hated them.

Following the prison investigation Davis became director of the governor’s crime commission. He advised Rockefeller on reorganizing the National Guard, the Alcohol Beverage Control Board and other agencies. Before Rockefeller left office in January 1971 the governor persuaded President Richard Nixon to appoint Davis as the U. S. Marshal for eastern Arkansas where he remained five years. Davis earned a law degree while in the marshal service and thereafter became a practicing attorney for about thirty years.

U. S. Grant’s Failed Presidency: Chapter 3: “Corruption Culture”

(March 26, 2019) Provided below is Chapter 3 of my new book U. S. Grant’s Failed Presidency. This online version excludes all footnotes and contains only one illustration. Readers may buy the entire book at Amazon in either the paperback or Kindle format. The paperback price is $19.95 and the Kindle price is $4.95. You may buy signed copies by emailing me: phil_leigh@me.com. See all of my books at My Amazon Author Page.

U. S. Grant’s Failed Presidency

Chapter 3: Corruption Culture

SINCE MUCH OF Grant’s presidency was tainted by scandal, fairness requires a discussion of how a culture of corruption progressively infected the Republican Party even before he moved into the White House.  To be sure, Democrats of the era were also prone to corruption, as prominently exemplified by New York’s Tammany Hall. Nonetheless, bribe payers seeking federal favors were more likely to deal with Republicans because the GOP controlled all three branches of the federal government. Washington’s low ethical standards had a pernicious impact on the morality of the entire country. They perhaps most conspicuously affected the carpetbag regimes of the Southern states, which were the stepchildren of the national Republican Party.

The culture of dishonesty started during the Civil War when Lincoln was President. The enormous expenditures required to supply the victorious Union military and the profits available via inter-belligerent cotton trade were tempting ways for the politically well-connected to profit. Such practices were rife in Grant’s district prior to his first major victory at Fort Donelson in February 1862. Thereafter, his higher ascending public profile led him to sometimes condemn such activities although they continued to varying degrees until the end of the war. President Lincoln’s first attorney general, Edward Bates, wrote, “The demoralizing effect of this civil war is plainly visible in every department of life. The abuse of official powers and the thirst for dishonest gain are now so common that they cease to shock.”

[For more on Civil War and Reconstruction see My Amazon Author Page.]

During the war from 1861 to 1865, annual federal spending increased over 1600% from $80 million to more than $1.3 billion. By exploiting the army’s rush to get needed supplies, unscrupulous manufacturers were able to sell the federal government poor quality uniforms, guns that didn’t shoot, and ill-fitting shoes, among other faulty and overpriced items.Similarly, as cotton prices increased from a low of $0.10 a pound prior to the war to a peak of almost $1.90 before the fighting stopped, adroit Northern speculators made fortunes buying cotton at below-market prices from the enemy and selling it at full price on the New York and London exchanges.

Thus, historian C. Vann Woodward concluded that the war “combined heroism with shabby expedience and laid a terrible toll upon public morals as well as upon lives. For some it was the road to sudden and unscrupulously gained riches and for many the path from deserved obscurity to high office and power. It was the heyday of the claim agent, the speculator, the subsidy-seeker, the government contractor, and the all-purpose crook. The war left this priceless crew with power and influence, and they turned from military to other fields—politics among them.”

In his analysis of Civil War profiteering historian Ron Soodalter concluded, “government representatives awarded contracts based not on the best product, or the fairest price, but on the highest bribe . . . It would be easy to excuse a little corruption, or even a lot, if the result was high-quality equipment. But much of the contactors’ profit came from cutting corners.” From the beginning of the war, uniform and shoe suppliers provided some of the most egregious examples. Their clothing gave birth to the slang term “shoddy,” a superficially acceptable material that would disintegrate like Papier-mâché the first time it got wet. In fact, shoddy cloth was assembled much like Papier-mâché.

Only two weeks after the outbreak of the war, Brooks Brothers won a contract to supply 12,000 uniforms and filled orders for three times that number during the first eight months of the war. Many of the uniforms were so hurriedly manufactured that they had no buttons or buttonholes. Due to a wool shortage, “Brooks Brothers glued together shredded, often decaying rags, pressed them into a semblance of cloth, and sewed the pieces into cloth” that would fall apart in the first rain. Similarly, some suppliers provided shoes that were composed of glued-together wood chips that shredded after less than an hour of marching.

Wool mills sprang up in the North like mushrooms after a summer rain. While many operated conscientiously, they typically enjoyed enviable profit margins. Federal procurement attempts to import less costly wool instantly prompted domestic producers to demand high protective tariffs, which virtually assured continued prosperity in the domestic sector.

From Fort Sumter to Appomattox such practices enabled many suppliers to become millionaires. Before the war New York had only a few dozen millionaires, but by the end they numbered in the hundreds. Eighteen months before Lee’s surrender, the New York Herald characterized many of them as “Shoddy Aristocrats.” One example was George Opdyke who was elected New York’s mayor in 1862 on the Republican ticket. Not only was he the city’s largest clothing manufacturer, he also had earlier approved the shoddy Brooks Brothers shipments under his authority as an official inspector. His vigorous support for Lincoln and the war provided the political cover that permitted his unsavory conduct to escape reprimand.

The poor quality of early military supply shipments prompted Congress to form its Select Committee on Government Contracts less than three months after the war started. During the rest of the war it produced over three thousand pages of findings and disclosed numerous frauds. Since it was composed of political moderates, however, the steadily strengthening Radical wing of the Republican Party was suspicious of its motives and often opposed its work.

Early in the war, for example, the committee discovered extensive fraud in the department of Major General John C. Fremont in St. Louis, which included General Grant’s district at Cairo, Illinois. Fremont was the Party’s first presidential candidate in 1856. A year before Lincoln’s preliminary Emancipation Proclamation in September 1862, General Fremont issued a directive in an attempt to free Missouri’s slaves. Lincoln overruled it because he felt it could drive Missouri into the Confederacy at the time.

Simon Stevens, who was aprotégéof RadicalRepublican Congressman Thaddeus Stevens, also objected to the committee after it began investigating a fraud that became known as the Hall Carbine Affair.  Although Hall Carbines were obsolete, an arms merchant named Eastman agreed to buy 5,000 of them from the army’s Ordnance Bureau at $3.50 each. After Eastman rifled the barrels at a cost of $0.75 he sold them to Simon Stevens for $12.50. Stevens had previously arranged to resell them to General Fremont for $22.00. A youthful J. P. Morgan financed the original $20,000 required to purchase and refurbish the arms. Simon Stevens complained to anyone who would listen that the committee had “no honest purpose to know the truth” except to go “scandal hunting.”

After the war ended, no single factor shaped America’s economy more than the railroad industry. When Lee’s Confederate army surrendered the country had 35,000 miles of track but by 1900 the total was almost 200,000, which represented about forty percent of the World’s total mileage. Among the catalysts that drove the expansion, none were more important than the federal subsidies provided by the Pacific Railroad Acts passed during the Civil War.

After the 1849 gold rush, talk of an independent California Republic gained traction out west. Since most Americans wanted to maintain a single continental United States, both the Republican and Democratic Parties favored a transcontinental railroad, which would help economically tie California to the eastern part of the country. But the Parties differed over two points. First, as a Northern sectional Party the Republicans wanted the eastern terminal in the upper Mississippi Valley. In contrast, the Democrats were divided. Their Southern wing desired the eastern terminus to be in the lower Mississippi Valley, while the Northern wing wanted it upstream. Second, Republicans were generally more willing to provide land grants and other federal subsidies to finance construction of the railroad.

The temporary sectional split caused by the Civil War enabled Lincoln and a truncated Republican-dominated Congress to act. Lincoln signed the First Pacific Railway Act on July 1, 1862. It provided subsidies to the Central Pacific (CP) and the Union Pacific (UP) railroads, which were basically paper companies at the time. Their chief occupation for years thereafter would be to complete construction.

Organized in Sacramento, California, the Central Pacific was responsible for building a line eastward over the Sierra Nevada Mountains into Nevada. The Union Pacific was to simultaneously build a road from Omaha, Nebraska westward. The two would either connect at an undetermined point in between, or a third railroad would be organized to join them.

The Union Pacific’s initial stock capitalization hinted at the project’s enormous size.  The company was authorized to issue a hundred thousand shares with a par value of $1,000 each. Thus, stock capitalization alone (excluding debt) could total as much as $100 million. As a point of reference, the entire federal budget in fiscal 1861 was only $80 million. The speculative nature of the venture is underscored by the fact that only forty-five shares were sold in 1861. Furthermore, only the five purchased by Mormon Church leader Brigham Young were paid in full. The other buyers subscribed to the remaining forty shares by initially paying only ten percent up-front with the balance to be paid through future assessments.

In addition to the Union Pacific’s large stock capitalization, the transcontinental railroads were granted generous federal subsidies. Aside from a 400-foot right of way along its route each railroad was to be given land grants in a checkerboard pattern totaling five square miles (6,400 acres) for each mile of track completed. The checkerboard design was intended to ensure that the applicable public lands gained value in direct proportion to the railroad properties granted along the track.

To visualize the pattern, imagine a folding checkerboard with the crease down the middle representing the path of the track. The checkerboard is composed of alternating red and black squares extending for ten miles on each side of the track. The railroad gets the red squares whereas the black squares remain public lands. Ultimately the UP received lands equal to the total area of the combined states of New Jersey and New Hampshire while the CP got acreage that totaled slightly more than the area of the state of Maryland.

Additionally, each company received financial aid in the form of government bonds, which could be resold to investors. The CP and UP were expected to repay the bonds by selling the red square portions of the checkerboard land grants, or through their future operating revenues after the lines were completed and hauling traffic. Nonetheless, the federal government guaranteed both the principal and interest of the bonds.

The amount of government bonds granted depended upon the miles of track completed in one of three terrain categories. The rate was $16,000 per mile on flat land, $32,000 per mile in the high plains and $48,000 per mile in the mountains. The sums eventually totaled about $65 million. The railroads were also given land for sidings and stations. During construction they were also allowed to use whatever was needed in the way of timber or stone.

Despite its generous appropriations, the ’62 Act was merely the industry’s opening bid for subsidies. Two years later the Second Pacific Railroad Act increased the largess. Land grants were doubled to 12,800 acres per mile and included the mineral rights, which had previously been excluded. The companies were also given the right to issue first mortgage bonds of their own, which enjoyed superior creditor status over the government bonds. Thus, if either the UP or CP went bankrupt, first mortgage bondholders would be repaid by the applicable railroad before it had to repay the holders of the government-guaranteed bonds.

The Pacific Railroad Acts triggered three lasting unintended consequences.

First, the large subsidies encouraged a culture of bribery and fraud. As the second bill was under consideration one Union Pacific lobbyist distributed $250,000 in bonds among influence peddlers. For example, twenty thousand dollars went to Charles Sherman for “professional services.” He was the eldest brother of Union Major General William T. Sherman and Ohio Senator John Sherman. The New York lawyer who wrote the bill also got $20,000 in bonds. One of the UP’s New York investors visited Omaha, charging $4,000 for “expenses and services.”

Second, the Railroad Acts prompted an increasing tendency toward government subsidization of politically connected industries. Capitalists outside the railroad sector demanded that they also be invited to The Great Barbecue. Radical Republican Congressman Thaddeus Stevens insisted that the acts require that all of the rails and other iron works of the CP and UP be “of American manufacture of the best quality”— meaning the highest price. Aside from being a persistent advocate for high tariffs, Congressman Stevens owned a Pennsylvania iron foundry.

Third, the entire railroad industry was soon obsessed with getting subsidies from all levels of government. Other transcontinental roads that were hardly beyond the planning stages would also be granted federal aid to build their lines. Examples include the Northern Pacific, the Santa Fe and the Southern Pacific. The Northern Pacific alone was ultimately granted forty-four million acres, which approximates an area the size of the state of Missouri.

Although the CP and the UP would link the eastern and western parts of the country, the railroads would need traffic to generate revenues and would therefore be unprofitable during the early years of operation until population density increased. Thus, privileged shareholders arranged matters so that they could profit during the construction phase. Consequently, the leading shareholders of each railroad set up construction companies to build the tracks. If the railroads could not be immediately profitable, the linked construction contractors could be because they were able to charge their affiliated railroads whatever fees were required in order to turn a profit.

Charles Crocker, Mark Hopkins, Leland Stanford, and Collis Huntington (the Big Four) were the sole owners of the Central Pacific and its construction arm, the Contract & Finance Company. The railroad paid about $79 million in cash, bonds, and stock to Contract & Finance. Experts estimate that reasonable construction costs should have totaled about $40 million thereby implying that the excess $39 million lined the pockets of the Big Four. When an 1873 congressional investigating committee asked to see the Contract & Finance Company records, Huntington explained that Hopkins had destroyed them because the railroad’s construction phase had ended four years previously.

The Union Pacific’s construction arm became infamous because it ultimately involved many more shareholders, including leading politicians. Early UP shareholder George Train had been assigned the job of persuading new investors to buy stock. He was largely unsuccessful until he stumbled upon the construction company concept. The Boston-based Train had earlier founded a clipper ship line, which yielded overseas business acquaintances. He learned of two French brothers that had been successful in similar circumstances with construction companies named Crédit Mobilier and Crédit Foncier.

In order to attract investors into a UP construction company, Train realized the affiliate must provide limited liability. He located such a corporation in Pennsylvania that was comparatively inactive and bought it for a moderate sum. He changed its name to Crédit Mobilier of America.

Like the CP’s Contract’s & Finance Company, Crédit Mobilier was certain to be immediately profitable. By one estimate it ultimately earned a profit of $40 million, nearly identical to the estimated $39 million of the Big Four’s Contract & Finance Company noted above. Thus, bargain-priced sales of the Crédit Mobilier shares would essentially become donations of a stream of reliable dividends to the buyers over the period of years that the UP remained under construction. Consequently, it was not long before shares of Crédit Mobilier were sold at below-market prices to key politicians. The distributor was Republican Massachusetts Congressman Oakes Ames.

Oakes, and his brother Oliver, had earned a fortune supplying shovels and similar instruments during the California Gold Rush and the Civil War. They also furnished shovels for railroad construction, which led them to become involved with the Union Pacific. Oakes started distributing shares of Crédit Mobilier to influential politicians in 1867 because, “We want more friends in this Congress. There is no difficulty getting men to look after their own property.”

Five years later a newspaper blew his cover during President Ulysses Grant’s 1872 re-election campaign. The anti-Grant paper discovered a partial list of recipients disclosed in testimony involving a Crédit Mobilier lawsuit. The list included Grant’s previous Vice President, Schuyler Colfax, his current running mate, Henry Wilson and his former Treasury Secretary, George Boutwell. Other senators and congressmen on the list, or that were soon disclosed, included John Logan, Roscoe Conkling, Henry Dawes, James Brooks, James Harlan, Glenni Scofield, William “Pig Iron” Kelley, John Bingham, James Patterson, and William Allison, as well as future President James Garfield and sitting Speaker of the House James G. Blaine.  All but Brooks were Republicans. None were Southerners. Brooks, however, was the federal government’s representative on the UP’s board of directors. As shall be explained in chapter seven the revelations would cause a loss of public confidence in the federal government and big business, which would trigger an economic collapse.

Later chapters will examine how the culture of corruption grew during Grant’s presidency.

Money Makes the World Go ‘Round

(March 24, 2019) Initially the spread of Internet media threatened The New York Times with obsolescence. Like newspapers everywhere, free-falling print advertising revenues were offset by only modest gains in online advertising, which had to be offered at much lower prices due to the characteristically lower reader response rate.  Meanwhile the advent of Craigslist decimated classified advertising, which was the newspaper industry’s profit cornerstone. From 2005 onward the company announced a series of layoffs and employee buyouts that only ended in the first half of 2017.

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In order to offset the steady revenue decline, the newspaper created a paywall for unlimited access to its online version in March 2011. Although virtually no other newspaper had any success with an online paywall, The Times grew to 1.1 million subscribers five years later in March 2016.  Less than three years (December 2018) later, online subscribers had tripled to 3.4 million. In comparison, subscribers to the newspaper’s print version presently total only about 1.0 million and have been steadily declining. Due to the robust online growth, however, The Times recently announced that it will increase per-subscriber fees later this year while also setting a goal to reach 10 million Internet subscribers by 2025.

According to an Esquire magazine article last week, The Times’s turnaround results from a Faustian bargain to abandon objective news coverage in exchange for financial success.  Specifically, argues Esquire, in the manner of a demagogue The Times is pandering to President Trump’s critics in order to attract a mob of loyal subscribers by telling them only what they want to hear. It has become an echo chamber for confirmation bias, which has led critic Andrew Kalavan to routinely refer to The Times as “a former newspaper.” Thus, the newspaper hired and appointed Sarah Jeong to its editorial board, despite her public and shameless disdain for  white males.  As this chart shows, the newspaper’s online subscription growth accelerated during the 2016 presidential campaign. Even the company’s management confessedly refers to the acceleration that triggered the ensuing prosperity as the “Trump bump.”

From the perspective the Civil War, Esquire’s criticism explains The Times’s one-sided coverage of the controversies surrounding Confederate symbols during the past three years or so. Their articles have been consistently hostile to the Southern viewpoint. Even more significant is the newspaper’s intolerance of contrary opinions, which has contributed to a near total cultural censorship. Well reasoned letters-to-the-editor and Op-Ed submissions supporting such statues and flags are ignored. Simultaneously, expressions of hatred toward the supporters of the symbols are as obvious as cow patties on a snow bank among the authors and reader comments of such articles.

In contrast three open-mined Southern white males led the newspaper as Executive and Managing Editors during the pivotal 1960s when they put the paper’s influence behind the 1964 Civil Rights Act and the 1965 Voting Rights Act. They also supported feminism and other lasting liberal initiatives. Turner Catledge was a Mississippian while James “Scotty” Reston and Clifton Daniel were from North Carolina. But, as Drew Klavan might put it, that was back when The New York Times was a newspaper, and before it sold it soul to the Devil thereby transforming itself into “a former newspaper.”

U. S. Grant’s Failed Presidency: Chapter 2 “The New Normal”

(March 20, 2019) Provided below is Chapter 2 of my new book U. S. Grant’s Failed Presidency. This online version excludes all footnotes and contains only one illustration. Readers may buy the entire book at Amazon in either the paperback or Kindle format. The paperback price is $19.95 and the Kindle price is $4.95. You may buy signed copies by emailing me: phil_leigh@me.com. See all of my books at My Amazon Author Page.

U. S. Grant’s Failed Presidency

Chapter 2: New Normal

ROBERT E. LEE SURRENDERED ON Palm Sunday 1865. President Lincoln was shot on Good Friday and died on Easter. After Lincoln’s death no American was more popular than Ulysses S. Grant, although that wasn’t his real name. It was actually Hiram Ulysses Grant, but the true name did not match the admissions roster when the seventeen- year-old arrived at West Point on July 1, 1839. Rather than return home he acquiesced to the Ulysses S. Grant name that appeared on the list of incoming plebes. Classmates often called him Sam because the U. S. initials on the class roll suggested the simpler, nickname: Sam as in Uncle Sam. Nonetheless, the man with multiple names would enjoy unrivaled popularity for most of his remaining twenty-one years after earning a promotion to Lieutenant General in 1864. His reputation among historians, however, would fluctuate.

Grant avoided the Ford’s Theater assassination in Washington—for which he may have also been a target—because Julia insisted that the couple decline Lincoln’s invitation to join the presidential couple at the performance of Our American Cousin. Julia disliked Mrs. Lincoln. Officially Grant declined the invitation by explaining that Mrs. Grant was anxious to return to their children in Burlington, New Jersey, which was near Philadelphia. The couple no longer depended upon Jesse’s charity for a home. Grant’s military rank paid enough salary to enable an independent and comfortable living. He and Julia would strive ever after to sustain, or improve, the family’s economic and social status as their “new normal.” Public adulation soon resulted in gifts that only intensified the couple’s appetite for more possessions and honorariums.

A month following Lincoln’s assassination, wealthy Philadelphians gave Grant’s family a grand home at 2009 Chestnut Street. It included closets full of snowy linen and dining tables set with fine silver. Grant planned to commute to Washington, but the five-hour train ride quickly rendered the plan impracticable. As a result, he temporarily accepted an offer from Henry Halleck, who was his predecessor as Army General-in-Chief, to use Halleck’s Georgetown Heights home. Still wanting a Washington residence of his own, in October he purchased a four-story structure for $30,000. A future brother-in-law, Abel Corbin, actually bought the home and gave Grant title in exchange for a note to pay Corbin $30,000 over ten years.

Four months later former Major General Daniel Butterfield led a subscription for Grant among rich New Yorkers that resulted in a purse of $105,000, which was equivalent to about $1.7 million in 2018.  Grant first used the money to repay his debt to Corbin. He then invested $55,000 in government bonds and took the last $20,000 in cash. Bostonians similarly gave him a personal library valued at $75,000. While living in Halleck’s home during the summer of 1865 he also accepted a $16,000 gift home back in Galena, Illinois. Four years later Butterfield and Corbin would teach Grant that there is no such thing as a free home.

Early in 1866 Horace Greeley’sNew York Tribune humorously wrote, “Since Richmond’s capitulation the stern soldier [Grant] spent his days . . .  in conjugating the transitive verb to receive, in all its moods and tenses, but always in the first person singular . . . ” Soon thereafter the Georgetown Courier continued in form by adding that Grant had conjugated the verb for a total of $175,000, which biographer Hesseltine concluded was “obviously too low.”

Grant learned by telegram around midnight on Good Friday 1865 while waiting at an intermediate Philadelphia stop to switch trains for Burlington, that Lincoln had been shot and was dying. After escorting Julia to Burlington, he complied with Secretary of War Edwin Stanton’s summons to Washington.

Washington, D. C. in 1866

Many leaders in the capital city wrongly supposed that the assassination was a high-level Confederate conspiracy. Initially the same suspicions infected Grant. He ordered the Union commander in occupied Richmond to arrest an official Confederate peace negotiator—Rebel armies were still in the field beyond Virginia—and all “paroled [Confederate] officers.” When the Richmond commander reminded Grant that such an order would include Lee and others surrendered at Appomattox presently living in Richmond, Grant rescinded the order. He also soon thereafter concluded that there had been no Confederate conspiracy.

The new President was Tennessee’s Andrew Johnson, the only senator from a Confederate state to remain Union-loyal during the Civil War. As a reward he became Lincoln’s vice-presidential running mate in the 1864 election and was inaugurated as VP only six weeks before Lincoln was killed. Although Johnson was a former slaveholder, he was born into poverty and disliked Southern aristocrats.

Immediately after Lincoln’s death, his disdain for the antebellum gentry provoked Johnson to make comments that implied he would align with the Radical wing of the Republican Party—a wing that wanted strict and vindictive Reconstruction terms, beyond those intended by Lincoln.  For example, he wrote Indiana’s Governor Oliver Morton, “Treason must be made odious . . . traitors must be punished . . . [and] their social power destroyed. I say as to the [Southern] leaders, punishment. I say leniency . . . and amnesty to the thousands they have misled. . . ” The day after Lincoln died, Johnson told Michigan Senator Zack Chandler, “Treason must be made infamous and traitors must be impoverished.” Continue reading

General Cleburne’s Birthday

Here  is an article I wrote about Confederate Major General Pat Cleburne for The New York Times in 2014.

He was an Irish immigrant in Helena, Arkansas born the day before St. Patrick’s Day in 1828.  In January 1864 he proposed admitting Black slaves as Confederate soldiers in exchange for their freedom. He felt it was necessary in order to win the war. When reading his formal proposal he also ventured his opinion about certain consequences if the Confederacy lost the war:

Confederate Major General Patrick Cleburne

“[Confederate defeat] means that the history of this heroic struggle will be written by the enemy; that our youth will be trained by Northern school teachers; will learn from Northern school books their version of the war; will be impressed by all the influences of history and education to regard our gallant dead as traitors, our maimed veterans as fit objects for derision.”

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The World Needs More Cowboys

(March 15, 2019) Leveraging the school’s Cowboy mascot, last summer the University of Wyoming adopted “The World Needs More Cowboys” as a student recruiting campaign slogan. Almost immediately the predictable sectors of the faculty and administration objected because they regarded the slogan as “sexist, racist, xenophobic and counterproductive to the goal of recruiting out-of-state students.” About two dozen formally complained to the school’s board of trustees. But unlike the leaders of most other universities, the Wyoming trustees figuratively told the whiners: “go pound sand.”

University of Wyoming Tee-Shirt

The trustees were right. The number of out-of-state applicants skyrocketed. Despite sharp production increases, the school’s gift shops cannot keep in-stock a supply a merchandise like Tee-shirts imprinted with the slogan.

It’s encouraging to see a school take a stand against political correctness, especially when it is urged by sermonizing a college faculty that self-righteously promotes identity politics. It is just such faculties that have demonized Southern heritage to the point of creating a cultural shift that has prompted the destruction and removal of Confederate statues.

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“All blessing and honor and power and glory be unto thee,” University of Wyoming trustees.