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Chapters

Preface

One
accountants portrayed in popular culture

Two
death from overwork

Three
accountants' glamorous world

Four
history of accounting
"Sarbanes-Oxley Blues," words and music written by Headwaters Co-Founder & Chairman Dave Maney

Five
evil taxers

Six
U.S. tax history

Seven
IRS history

Eight
Al Capone, FDR, LBJ, MLK, Watergate

Nine
Sex of a Hippopotamus

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Tax Court

Eleven
tax return publicity

Twelve
famous wealthy people

Notes

Index


Corruption in the Gilded Age Senate:
Nelson W. Aldrich and the Sugar Trust


by Jerome L. Sternstein

Capitol Studies
A Journal of the Capitol and Congress
Volume 6, Number 1 (Spring 1978)

(c) 1978, United States Capitol Historical Society
reprinted by permission

Until recently, one of the most durable stereotypes in American political history was that of the Gilded Age senator as spokesman and hireling of big business, accumulating a fortune by looking after the needs of Wall Street. From Charles Beard through Matthew Josephson to Richard Hofstadter and Ray Ginger, the standard treatment of the men who prowled the corridors and cloakrooms of the upper house between the administrations of Ulysses S. Grant and Theodore Roosevelt often has read like an extended, though refined, paraphrase of such celebrated muckraking tracts as David Graham Phillips's The Treason of the Senate. Ginger's description of the quid pro quo relationship which James G. Blaine supposedly pioneered with the business community in the 1870s encapsulates the traditional historical interpretation and its governing assumptions in two sentences: '`He would watch out for their interests, day in and day out. They in turn would let him in on a few stock deals and would fiance his campaigns for reelection." FN1

FN1 Charles A. and Mary R. Beard, The Rise of American Civilization, 1 vol. ed. (New York, 1930), 285-343; Matthew Josephson, The Politicos. 1865-1896 (New York, 1938); Richard Hofstadter, The American Political Tradition and the Men Who Made It (New York, 1948), 164-79; Ray Ginger, Age of Excess. The United States from 1877 to 1914 (New York, 1965), 100.

This view of the politicos is being rapidly revised. New biographies and monographs have demonstrated that the majority were seasoned politicians possessed of a highly developed professional self-consciousness which reinforced their partisan commitments and bent them firmly in the direction of order and system. FN2 A number of these studies have suggested that the most important development on Capitol Hill during these years was not the capture of Congress by Wall Street, but the transformation of Congress. From two loosely structured bodies in which significant legislative influence was dispersed among several competing factions in both parties, it evolved into highly partisan and disciplined chambers in which principal legislative control rested with a few party leaders who held dominant positions on key committees as well as homogeneous views on public policy. FN3 To underscore these findings, fresh examinations of the economic and political issues of the day have found that conflict was often just as characteristic of American enterprise as was consensus, thereby shattering the conventional concept of a monolithic, overweening business community. FN4

This revisionist assault has much to commend it. But before historians replace all unfavorable references to the politicos with testimonials extolling their virtues, a word of caution is necessary. For, if the revisionists have demonstrated that the politicos were accomplished politicians who were never as subservient to private business as critics alleged, it does not follow that their. professionalism and subordination to party always made them as resistant to favor-seeking corporations, and as constrained about exploiting their official positions [or pecuniary gain, as many of the recent reevaluations would have us believe. For example, David Rothman effectively disposes of the notion that big businessmen had the overwhelming leverage over decision-making that the stereotype accords them. That the Senate in the 1890s became tightly organized, and that the leadership skillfully managed it largely to serve party ends, are propositions solidly supported by his evidence. Unsubstantiated by significant data, however, is his claim that the emergence of party government during the 1890s sharply curtailed corruption by establishing an environment in which "corporations could not expect to affiliate public officially, through bonds and retain-

FN2 These views are best represented in: David J. Rothman. Politics and Power: The United States Senate, 1869-1901 (Cambridge, Mass.. 1960); John A. Garraty, The New Commonwealth, 1877-189O (New York, 1968), 220-58; John R. Lambert. Arthur Pue Gorman (Baton Rouge, 1953): Lewis L. Gould, "New Perspectives on the Republican Party, 1877-1913," The American Historical Review, LXXVII (October 1972), 1074-81; Morton Keller, "The Politicos Reconsidered,'' in Perspectives in American History, ed. by Donald Fleming and Bernard Bailyn (2 vols., Cambridge, Mass, 1967), 1, 4O1-08.

FN3 Rothman, Policies and Power, 4-5, 73-108, passim; Randall B. Ripley, Power In the Senate (New York, 1969), 21 50; George B. Galloway, History of the House of Representatives (New York, 1961). 131-36.

FN4 Lee Benson, Merchants, Farmers, and Railroads (Cambridge, Mass., 1955); Irwin Unger. The Greenback Era: A Social and Political History of American Finance, 1865-1879 (Princeton, 1964); Stanley Coban, "Northeastern Business and Radical Reconstruction A Re-Examination," The Mississippi Valley Historical Review, XLVI (June 1959), 69-90.

ers... Senators could no longer dare accept such offers, and companies, anticipating rebuff or scandal, feared to initiate them.'' FN5 This argument, positing an inverse correlation between political consolidation and political morality, is as misleading as the idea that senators who gave aid and comfort to corporations were in their employ.

Theoretically, it is easy to understand how a party that can enforce adherence to its policies can enfeeble otherwise powerful private interests, thereby erecting formidable barriers to corruption. But if a disciplined party can more effectively repulse interest groups and restrain graft than an undisciplined one, the reverse is equally true: Legislative bodies characterized by a high degree of organization can, if their leadership is so inclined, more effectively enact legislation sought by chose with money and connections than can fragmented ones, thus fostering rather than inhibiting corruption. What a centralized party machine does usually is contingent upon the purposes and ambitions of those who control it. The mere development of a cohesive party does not automatically reduce corruption or make public policy less subject to manipulation by aggressive private interests, as this article will attempt to show. In other words, far From insulating the legislative process from big business and reducing the incentives for corruption, the concentration of institutional authority in the hands of senators like Nelson W. Aldrich had precisely the opposite effect.

To give substance to these remarks, this article will focus primarily upon the mutually beneficial relationship that evolved during the last two decades of the nineteenth century between the American Sugar Refining Company, better known as the Sugar Trust, and Aldrich, the powerful Rhode Island lawmaker who grew rich as the trust's most successful fixer. The belief is that an exploration of the interplay between the sugar industry and the senator not only will illustrate how personal financial benefit accrued to those who spent long years acquiring a power base in Congress, but also will help to identify some of the components of legislative corruption and clarify the role played by important private business interests in determining public policy in the Gilded Age.

The process by which Nelson Aldrich became the Sugar Trust's "man in Washington" began in 1882 when, shortly after entering the Senate, he was appointed to the Finance Committee. With this assignment he achieved a measure of status both within and outside the chamber that was otherwise attainable only after long tenure. A seat on Finance attracted to its occupant a swam, of special interests and concerned politicians eager to enlist his good offices.

In 1882, few businessmen were more anxious to develop a working relationship with Aldrich than those in the eastern sugar refining industry. Following the panic of 1873 and the subsequent depression, this industry

FN5 Rothman, Politic. and Power, 219.

fell on hard times. The basic problem was overproduction Large profits in the years after the Civil War, low start-up costs and wages, improved transportation and technological breakthroughs, and the Hawaiian Reciprocity Treaty of 1875 promoted the rapid growth of the industry. But demand for refined sugar began to lag behind the ever-increasing supply, and the depression brought a further decline. The effect was cut-throat competition-plummeting prices, desperate efforts to slash costs, and rapidly shrinking profit margins. Of the thirty-eight independent refineries in the East in 1878, only a few major ones, like Havemeyer & Elder of Brooklyn, which enjoyed the benefits of advanced machinery and locations on the waterfront were able to earn a narrow profit. For the great majority of other refiners, each downward turn in prices brought them closer to bankruptcy. FN6 Because of the cost-price squeeze, eastern refiners joined in bringing pressure on Congress to lower the duties on imported raw sugar on the theory that this would reduce their major cost. But the smaller firms suffered much more than the majors, and clamored for a change in the way the duties were levied, precipitating an intra-industry struggle over tariff structure. Although this controversy was couched in terms of what was best for the consumer, the real issue was competitive advantage. The small refiners wanted the government to impose a uniform duty on all grades of unrefined sugar regardless of their market value, instead of the existing system of placing a progressively higher tax on the better grades. Grades were determined by the Dutch Standard system, which classified sugars according to ascending categories of colon Small refiners claimed that a uniform tariff would eliminate customs fraud. Their unstated reason for demanding a uniform rate was that it would help to neutralize the technological superiority of the major refiners by making the cheaper grades of raw sugar too costly for them to import because those sugars would then carry a comparatively higher tax than the finer grades. Such a development, the small refiners believed, would restore competitive parity within the industry. The majors objected violently to the uniform rate concept. They argued that the polariscope, which optically measured and classified sugars according to their degree of saccarine strength, could be employed to combat fraud. Treasury officials agreed, but an alliance of small refiners and sugar importers thwarted the introduction of the device on the grounds that it would lead to more, rather than less, fraud. Their real fear was not the polariscope's susceptibility to manipulation, but its accuracy. The Dutch Standard system undervalued the better grades of raw sugar used by the

FN6 Alfred S. Eichner, The Emergence of Oligopoly: Sugar Refining as a Case Study (Baltimore, 1969), 42-50; David M. Pletcher. The Awkward Years: American Foreign Relations Under Garfield and Arthur (Columbia, Mo., 1961), 146-47.

small refiners. They worried that the polariscopic test would reflect this and increase their costs. The majors favored the polariscope for precisely that reason. FN7

This furor reverberated so loudly in Congress that it drowned out attempts to lower the tariff on raw sugar. In effect, this was a victory for the majors who, though interested in slashing tariff rates, were more concerned about preventing a uniform rate on cheap sugar. But the underlying problem of overproduction remained unresolved. Moreover, beginning in the late 1870s, the eastern industry encountered a growing threat from the San Francisco sugar tycoon, Claus Spreckels. Capitalizing on the Hawaiian Reciprocity Treaty, which permitted raw sugar from the Islands to enter the United States duty free, he managed to gain almost monopoly control of the refining business on the Pacific slope. Until then, eastern refiners had dominated the sugar market in the Midwest. After Spreckels drove his competition to the wall in California, he began to do the same thing along the Missouri River. A spokesman for the hardpressed eastern industry complained that Spreckels's untaxed Hawaiian sugars "came into competition with the eastern coast importations on a basis that is entirely unfair." FN8 Consequently, with their share of the Midwest market shrinking, eastern refiners put their differences aside and commenced a fierce, no holds barred campaign to abrogate the reciprocity treaty. As a New York refiner warned, "either [we] must crush Mr. Spreckels or be crushed by him." FN9

Although no sugar refiners operated in Rhode Island, Nelson Aldrich was suited ideally to take up their cause in Congress. Not only was he committed to the principle of utilizing the resources of government to foster the growth and development of American business enterprise in general but, as a banker and partner in one of southern New England's largest wholesale grocery firms, which specialized in buying and selling sugar in carload lots, he had a functional interest in promoting the economic wellbeing of the eastern sugar trade. He was intimately acquainted with many of its leading figures and their esoteric language and techniques. He was one of the few legislators who could discuss intelligently a subject ''so inextricably confounded," Senator John J. Ingalls of Kansas once confessed in debate, "that...nobody in the Senate understands it." FN10

FN7 Eichner, Emergence of Oligopoly, 54-62; Theodore Havemeyer to David A. Wells, 16 November 1880, Library of Congress (LC), David A. Wells Papers, vol. 18; George C. Tichenor to John Sherman, 28 January 1882, LC, John Sherman Papers, vol. 267.

FN8 Eichner, Emergence of Oligopoly. 87-89; Jacob Adler, Claus Spreckels: The Sugar King of Hawaii (Honolulu, 1966), 10-15; Ralph S. Kuykendall, The Hawaiian Kingdom: The Kalakaua Dynasty, 1874-1893 (3 vols., Honolulu, 1967), 111, 374-75; National Board of Trade, Proceedings of the Thirteenth Annual/ Meeting of the Board of Trade...January, 1883 (Boston, 1883), 136. The speaker was John E. Searles Jr.

FN9 Quoted in Kuykendall, The Hawaiian Kingdom, 111, 378-79.

FN10 U.S. Congress, Senate, Congressional Record. 47th Cong., 2nd sess., vol. 14, Pt. 3, 2553.

Aldrich first began to grapple seriously with the tariff in December 1882, when President Chester A. Arthur's Tariff Commission submitted its long awaited report. Though molded with tender regard for the sensibilities of the various interests whose representatives made up the commission, the report surprised almost everybody by calling for reductions, averaging 20 to 25 percent, on both manufactured products and raw materials. Although all the proposed schedules supported protection, the commission generally asked for duties well below existing ones, a request which outraged industrialists. The loudest protests came from the small refiners, for the commission not only had bowed to heavy pressure from the Louisiana Sugar Planters' Association and failed to recommend more than a nominal cut in the duty on raw sugar, but also had deferred to the wishes of the major refiners and proposed a new rate classification system based on the polariscope."

Aldrich believed the high tariff on raw sugar made a mockery of the protective system. To the detriment of a valuable segment of the eastern manufacturing community, it sheltered a handful of inefficient, high cost, domestic growers who could never supply more than a fraction of the nation's needs. He assumed that most of the industry's problems were soluble through changes in the sugar duties, and took seriously the predictions of mass bankruptcies, with the consequent loss of thousands of jobs and millions of dollars. After hearing a steady stream of sugar people plead for relief, and learning of the small refiners' readiness to give up the fight for a uniform rate and accept the polariscope in order to get "a low duty which we consider the important point," he assured industry representatives of his wholehearted support for "a much greater reduction than that proposed by the Tariff Commission." FN12

Within weeks Aldrich proved true to his word. When the Finance Committee considered the sugar schedule, he moved to slice the duty on raw sugar to approximately 1.85 cents per pound-not a steep cut but as much as he thought the committee would accept.'3 An unlikely coalition of tariff reform Democrats, led by Senator James Beck of Kentucky, who feared that Aldrich's proposal would injure the Louisiana sugar planters, and protectionist Republicans, including committee chairman Justin Smith Morrill of Vermont and former Treasury Secretary John Sherman of Ohio, who worried about the impact of such a large reduction on the sufficiency of the nation's revenues (sugar duties provided one-sixth of the govern

FN11 Thomas C. Reeves, Gentleman Boss: The Life of Chester Alan Arthur (New York, 1975), 329-33: J. B. Thomas, et al., The Burden of the Sugar Tax. Protest Against Recommendations of the Tariff Commission (pamphlet, Boston, 1882), 5-12.

FN12 Edwin F. Atkins to Aldrich, 27 December 1882, LC, Nelson W. Aldrich Papers; Atkins to Charles C. Harrison, 22 December 1882, Boston, Massachusetts Historical Society (MHS), Atkins Family Papers; Aldrich to Atkins, 28 December 1882, Notes of J. P. Nichols, Aldrich Papers.

FN13 Aldrich to Mahlon D. Spaulding and Aldrich to George S. Hunt. 6 January 1883, ibid.

ment's income), outvoted Aldrich and adopted a measure which reduced the Tariff Commission's rates on raw sugar from 2.25 cents per pound to 2 cents. Predictably, the smaller refiners denounced the new rates. FN14 The majors, who had gone along with the commission's schedule because of its provisions incorporating the polariscope, echoed their competitors' sentiments when they discovered that the committee also had lowered the duties on certain grades of refined sugar. Whether this "terrible blunder," as David A. Wells, noted tariff reformer and sometime lobbyist for Havemeyer & Elder, termed the committee's action, was serious enough to have breached the protective walls erected against European beet sugar imports is highly questionable. FN15 But Theodore Havemeyer was certain that there were devious "influences at work which if not watched & counteracted have strength enough to carry a bill through... which will destroy our industry." With this in mind, he offered Wells a five thousand dollar fee to drop what he was doing and go to Washington to "fix things right." FN16

When the sugar schedule reached the Senate floor, Aldrich was forced to make a crucial choice: Should he continue his campaign to tailor it to the needs of the eastern refiners, or accept the will of the Finance Committee? Though he strongly objected to the way the committee treated the sugar industry, practically every other aspect of its report met with his approval. He did not want to jeopardize the chances of the tariff becoming law before the end of the Forty-seventh Congress, when leadership of the House of Representatives would pass into Democratic hands. He explained to a Rhode Island manufacturer that the tariff was ''important alike to the business interests of the country and to the welfare of the Republican party." FN17 In a decision that was highly indicative of the priorities which would govern Aldrich's senatorial behavior for the rest of his career, he chose to honor his commitment to the sugar industry even at the risk of holding up passage of the tariff, alienating powerful and respected colleagues, and breaking with the majority of his party.

From the start of the Senate debate on the sugar shedule on January 30, 1883, to its conclusion on March 2, Aldrich almost singlehandedly was responsible for keeping the refiners' case alive. He introduced a welter of compromises, weakening amendments, obfuscating and delaying motions, which had a two-fold aim: to shave about one-sixth of a cent from the committee's duty on raw sugar and to restore the rate on refined to its former level. FN18 At first Aldrich found very little backing for his position. He might

FN14 John E. Searles Jr. to Aldrich, 22 January 1883, ibid.

FN15 David A. Wells to William Boyd Allison, 6 January 1883, Des Moines, Iowa State Department of History and Archives, William Boyd Allison Papers.

FN16 Theodore Havemeyer to Wells, 4 January 1883, Wells Papers, vol. 19; Wells to Edward A. Atkinson, 5 January [1883], MHS, Edward A. Atkinson Papers, box 6.

FN17 Aldrich to Albert L. Sayles, 21 December 1882, Notes of J. P. Nichols, Aldrich Papers.

FN18 Senate, Congressional Record, 47 Cong., 2 sess., vol. 14, pt. 2, 1794-1802, 1843-45, 1849.

well have faltered but for the assistance he received from chief industry lobbyist John E. Searles, Jr., then the managing partner of a leading small refining company, and indirectly, from David Wells, who diligently worked the Democratic side of the aisle, where his reformist views on the tariff were held in high esteem. FN19

Searles was shortly to achieve national recognition as one of the top organizers and operating officers of the Sugar Trust. Before Aldrich entered the Senate, however, Searles often found himself pleading his cause to deaf ears. He now had a powerful and highly accessible sympathizer and he made the most of it. He helped mobilize a petition and letter writing campaign, fed Aldrich reams of statistics and information, furnished technical assistance, and haunted the cloakrooms and corridors buttonholing senators. FN20

Aldrich was wedded ardently to the concept that legislation affecting businessmen should be drawn up in close collaboration with businessmen. He assumed that only successful business leaders possessed the skills, experience, and knowledge which legislators needed if they were to deal intelligently with the multitudinous and complex problems of a modern industrializing society. America's productive economy was not the work of politicans and theorists, but of innovative businessmen making business decisions in a most practical, efficient way. Members of Congress, therefore, had an obligation to clear appropriate legislation with them. Effective lawmaking, he held, especially that required to carry out the Republican gospel of prosperity and economic growth through vigorous state action in the form of protective tariffs and subsidies, was next to impossible otherwise. FN21

Aldrich was not blind to the need of having his efforts appear in the best light. Even as he plotted parliamentary strategy with Searles, he labored long and hard during the floor debate to create the impression that he had only the welfare of the people at heart. His break with the Finance Committee, he insisted, was prompted solely by the consideration that "sugar is a prime necessity in every family in the United States...." FN22 To refute those who questioned his motives, he dramatically read into the Congressional Record a letter "from the largest sugar refiner in the country," Theodore Havemeyer, purporting to ask for a much higher duty on raw sugar than the one he was then proposing. FN23 Aldrich chose not to say that a close associate of Theodore and Henry Havemeyer had cautioned him

FN19 Theodore A. Havemeyer to Wells, 12 April 1883, Wells Papers, vol. 19; Wells to Thomas F. Bayard, 1 August 1883, LC, Thomas F. Bayard Papers, vol. 183.

FN20 Searles to Aldrich, 7 February, 27 January 1883, Aldrich Papers.

FN21 Senate, Congressional Record, 47 Cong., 2 sees.. vol. 14, pt. 3, 2028 contains an excellent example of Aldrich's reasoning.

FN22 lbid., pt. 2, 1795.

FN23 Ibid, pt. 3, 2507.

against taking their public utterances seriously. They were carrying out a bargain with the Louisiana Sugar Planters' Association, under which the growers promised to help the Havemeyers get the Tariff Commission to adopt the polariscope if they would consent "not to advocate a low rate" on raw sugar. FN24 Nor did Aldrich see fit to inform the Senate that another eastern refiner candidly admitted: "[W]hen we shout for the poor consumer you may know that shouting is in the direction of our personal interests." FN25

No matter how dubious some of Aldrich's contentions, he had little reason to fear rebuttal. None of his colleagues possessed his technical expertise and information sources on questions relating to sugar. Aldrich was clearly the single most effective speaker on the issue and, as the floor consideration of the bill gathered momentum, so did his reputation and influence. "So far as the statements of the Senator from Rhode Island are concerned," Senator Morrill admitted, "he is really entitled to a great deal of credit for the accuracy and care with which he has investigated the subject..." FN26

In mid-February, the Senate, by a vote of forty-five to sixteen, accepted a complex amendment drafted by Aldrich but introduced by Democratic Senator Thomas F. Bayard of Delaware, which gained the grudging consent of almost everybody-the refiners, by lowering the rates on about 95 percent of all imported raw sugar approximately one-tenth cent per pound, to 1.90 cents; the senators from Louisiana, by enabling them to claim victory for limiting the reduction to one-tenth of a cent when the refiners wanted to eliminate the duty entirely. FN27 Finally, Aldrich confirmed his command of the situation by persuading his fellow conferees in the conference committee to ignore their instructions and raise the rates on refined to substantially above their former level. It was, Senator Beck charged when the work of the Conference Committee became public, ''the worst outrage in the bill. No man can justify it."28 The Republican majority quickly concurred in the conference report and President Arthur signed what became known as the "Mongrel Tariff" into law.

With the passage of the tariff, Aldrich fulfilled his promise to the sugar industry and gained the respect and confidence of politicians and businessmen. But the new sugar schedule turned out to be neither the panacea the industry was looking for nor the giveaway critics had claimed. Trimming the duties on raw sugar and raising them on refined should have reduced manufacturers' costs, stabilized or increased prices, and pumped up profits. However, lowering the rates seemed only to stimulate greater

FN24 Atkins to Aldrich, 17 January 1883, Aldrich Papers.

FN25 Mahlon D. Spaulding to Aldrich, 2 January 1883, ibid.

FN26 Senate, Congressional Record, 47 Cong., 2 sees., vol. 14, pt. 2, 1799.

FN27 Ibid., pt. 3, 2551-55.

FN28 Ibid., pt. 4. 3579.

production, causing the price difference between raw and refined sugar to shrink even further, competition to intensify, and more refiners to close their doors. By 1887, plummeting prices and the shrinking profits of even the most efficient firms would force most of them to consolidate their operations in the Sugar Trust under the leadership of Searles and the Havemeyers.29 Until that time, the only method of moderating competition that all eastern refiners were able to agree upon was one aimed at crippling their bitter West Coast rival, Spreckels, through the termination of the Hawaiian Reciprocity Treaty. Aldrich gladly committed himself to that end and further strengthened and deepened his ties with eastern refiners. The treaty survived, not because Aldrich and his clients lacked energy and ingenuity in their efforts to kill it, but because of an event that was in some measure an unintended consequence of the attempt to kill the treaty-the Hawaiian Revolution of June 1887, which forced the reluctant King Kalukaua to dismiss his chief minister, accept a new constitution, and most importantly, cede Pearl Harbor to the United States.

Why the Senate attached a proviso to the treaty requiring the Hawaiian government to grant the United States exclusive naval rights to Pearl Harbor and where the responsibility for that action rests is a mystery. When the Arthur administration's secretary of state, Frederick T. Frelinghuysen, renegotiated the treaty and submitted it to the Senate for approval in December 1884, it contained no reference to the acquisition of Pearl Harbor. Nor was any interpolated by the Cleveland administration, whose secretary of state, Thomas F. Bayard, stood fast against the lobbies and their congressional spokesmen who pressured him to withdraw the treaty. Instead, Bayard repeatedly urged the upper house to renew the agreement quickly, insisting that it was necessary to preclude foreign powers from getting an economic foothold in the Islands. FN30 For seventeen months, Senate opponents of the treaty, led by Aldrich and the Democratic senators from Louisiana, bottled it up in the Foreign Relations Committee, while Searles, coordinating his actions with them, intensified his campaign against it. FN31

Suddenly, on April 14, 1886, without Bayard's knowledge, and to the consternation of the Hawaiian minister to the United States, H. A. P. Carter, the committee reported the treaty to an executive session of the Senate, with a provision calling for the cession of Pearl Harbor. Secretary Bayard joined Carter in strenuously objecting to the amendment, warning that the Hawaiian government would reject the treaty rather than relin-

FN29 Eichner, Emergence of Oligopoly, 66-70.

FN30 Edward P. Crapol, America for Americans: Economic Nationalism and Anglophobia in the Late Nineteenth Century (Westport, Conn., 1973), 152-53; Charles C. Tansill, The Foreign Policy of Thomas F. Bayard. 1885-1887 (New York, 1940), 372-74.

FN31 Merz Tate, Hawaii Reciprocity or Annexation? (East Lansing, 1968), 167-69; Searles to Aldrich, 25 January 1884, Aldrich Papers; Aldrich to Bayard, 18 March 1886, Bayard Papers, vol. 86; Atkins to Searles, 16, 22 December 1886, Atkins Family Papers.

quish any territory. The Senate ignored them and ratified the committee's action by a vote of twenty-eight to twenty-one on January 20, 1887 and subsequently passed the treaty as amended by a vote of forty-three to eleven. FN32

The prevailing interpretation of the origins and purposes of the amendment stresses the role played by members of the Foreign Relations Committee, who supposedly favored establishing a strong American presence in the Pacific. According to this view, the proponents of the reciprocity agreement, hoping eventually "to make the Islands industrially, commercially, and strategically a part of the United States," formulated the amendment as a "political counterweight" to secure the support of other senators who doubted the wisdom of extending further economic benefits to Hawaii, but found the arguments for the acquisition of a harbor and coaling station there to head off potential foreign intrusion persuasive. Senators motivated by expansionist sentiments appended the amendment to the treaty to make it palatable to some of their peers who would not otherwise have accepted it on the basis of its commercial provisions.33 In the light of newly discovered evidence, such an analysis of the factors responsible for the amendment cannot be accepted without serious qualifications.

While it is true that a major reason for approval of the treaty was America's desire "to maintain predominance over the Hawaiian Islands," the machinations of the treaty's opponents deserve equal weight, particularly since the votes of senators hostile to its continuation provided the margin necessary for its passage. FN34 This anomaly often has been overlooked by historians, but did not escape the notice of Carter, who concluded that "the vote was carried in the Senate by the aid of those who...wanted to make the treaty obnoxious to us...." FN35 His suspicions are corroborated by a letter Searles sent to Aldrich two days after the Senate vote. It reveals that they quietly but forcefully supported probably working with committee member George F. Edmunds of Vermont the provision concerning Pearl Harbor in a calculated effort to sabotage the treaty. Why they chose this route when all available information indicates that the treaty could not have been ratified without it cannot be gleaned from the records. In any event, Aldrich and Searles acted on the premise that the surest way to block its passage was to distort it with the Pearl Harbor amendment so it would succumb in Honolulu. In his letter to Aldrich, Searles laid bare the considerations behind their strategy:

FN32 Tansill, Foreign Policy of Thomas F. Bayard, 376-81: Tate, Reciprocity or Annexation, 190-91.

FN33 Ibid., 206, 185-86; Crapol, America for Americans, 155.

FN34 Tom E. Terrill, The Tariff, Politics, and American Foreign Policy, 1874-1901 (Westport, Conn., 1973), 95.

FN35 Quoted in Tate, Reciprocity or Annexation, 192.

I tried to see you yesterday in order to tell you how well satisfied I am with the action of the Senate on Thursday concerning the Hawaiian Treaty. From information which I have from the Islands I am satisfied that the second article, interpolated by the Senate, is impossible: that the Kanakas will not allow His Majesty to make the concession even if he were so disposed, and that should they show any disposition to make such concession the existing treaty with England and other nations would stand in the way. Hence I think they must reject this proposition, and that the rejection will give us a majority in the Senate for abrogation of the existing treaty. FN36

Searles's optimism proved premature. Unaccountably, both he and his informants neglected to reckon with the long-smoldering hostility of many American sugar planters in Hawaii toward the regime of King Kalakaua. This hostility flared into open rebellion when the king threatened to refuse to accept the amended treaty. It culminated in the installation of a new government and the cession of Pearl Harbor to the United States. FN37

Although the campaign to terminate the Reciprocity Treaty was aborted, neither the American cane growers in Hawaii nor Spreckels was destined to remain the exclusive beneficiaries of free sugar much longer. The trials of the period following the passage of the "Mongrel Tariff" convinced most eastern refiners that, if the industry were to regain profitability, they must consolidate in order to stabilize prices and reach an accommodation with Spreckels. In October 1887, seventeen of the twenty-four refiners east of the Rocky Mountains formed the Sugar Trust. The new firm quickly set out to talk Spreckels into joining the combination. When he demurred, the trust purchased the American Sugar Refining Company, the only West Coast refinery not under his control, and commenced a bruising price war to force him to submit. FN38

The trust also launched a new legislative effort to put raw sugar on the free list. This movement coincided with, and was greatly abetted by, the problem of the growing revenue surplus upon which President Grover Cleveland focused national attention in his annual message of December 6, 1887. Charging that the Republican policy of protection was responsible for piling up specie in the Treasury, as well as for the development of trusts and monopolies, Cleveland made the tariff the paramount political issue. This touched off' a furious round of congressional rate-setting, eventually resulting in the McKinley Tariff Act of 1890, and the successful conclusion of the campaign to allow all raw sugar into the American market duty free.

Aldrich again played a crucial role, working vigorously and adroitly to model the sugar schedule to the satisfaction of the trust. Beginning in January 1888, and continuing intermittently into the fall, a subcommittee

FN36 Ibid., 191-92, contends the treaty's opponents had nothing to do with framing the amendment and simply voted for it in order "to make the convention ...disagreeable to Hawaii...." There is evidence that Edmunds might have been playing a duplicitous game from the beginning. See clipping, n.p., n.d., Bayard Papers, vol. 101, in which the author writes: "As Senator Edmunds has been a constant opponent of the treaty, his proposition may awaken some apprehensions as to the sincerity of his amendment." Searles to Aldrich, 22 January 1887, Aldrich Papers.

FN37 Tate, Reciprocity or Annexation, 197-205; Kuykendall. The Hawaiian Kingdom. 111. 391-97.

FN38 Eichner, Emergence of Oligopoly. 70-84, 91-92.

of the Senate Finance Committee, led by Aldrich and Republican Senators William Boyd Allison of Iowa and Frank Hiscock of New York, held private hearings and conferences to devise a protectionist answer to both Cleveland's manifesto and the low tariff Mills bill passed by the House. Their "Senate Substitute," a high tariff bill incorporated in a fifty-seven page report written by Aldrich and submitted to the upper chamber on October 3, 1888, called for, among other things, a 50 percent cut in the duties on raw sugar. FN39

Obviously designed to avoid the slightest injury to any protected interest other than the Louisiana sugar growers, the measure was nevertheless judged insufficient by the Sugar Trust and the few remaining independent refiners in the East. Though the refiners would have liked the subcommittee to have removed the raw sugar duties entirely, they did not make an issue of this, realizing that some Republican senators felt "that we can hardly afford to spare the revenue altogether from sugar, and pay the pensions, and make other great expenditures...which the Republican Party deems essential...." FN40 Most disturbing was that the duties on lightly colored sugars suffered reductions proportionate to the cuts on raw, leaving the way open for the possible importation of' semi-finished European beet sugars, thus breaching the principle of protection. Out of deference to Aldrich, they refrained from attacking the bill publicly in the midst of the presidential campaign of 1888. They communicated their concerns to the subcommittee privately and threw their considerable financial resources behind Benjamin Harrison's candidacy. Searles, now the secretary-treasurer of the trust, proved an especially "good friend in 1888." FN41

After Harrison's victory, Searles quickly indicated what he expected his friendship to accomplish. When the subcommittee again took up the bill, he reminded Aldrich of' Aldrich's promise to visit a refinery to become better informed, and stressed that "the present schedule in the Finance Committee's bill is not a fair nor adequate protection to the Sugar Refining Industry...." FN42 Aldrich and Allison toured the trust's huge new Brooklyn refinery during the Christmas recess. They were apparently much impressed, for the Senate's final version of the schedule was amended to bring the tariff on refined to a point suited to the industry's requirements. FN43 Nothing came of this, because the Democratic House adjourned without acting on the bill.

FN39 U.S. Congress, Senate, Committee on Finance, The Tariff Bill of 1888: Report of N. W. Aldrich of Rhode Island, 50 Cong., 1 sess., 4 October 1888, 46-50.

FN40 John Coit Spooner to John A. Johnson, 7 August 1888, LC, John Coit Spooner Papers, box 107.

FN41 Charles C. Harrison to Allison, 19 October 1888, Allison Papers; James S. Clarkson to Benjamin Harrison, 20 September [1890], LC, Benjamin Harrison Papers, series 1, vol. 113.

FN42 Searles to Aldrich, 6 December 1888, Aldrich Papers.

FN43 Ibid., 12, 19 December 1888; N. W. Frazier to Matthew S. Quay, 28 May 1890, ibid.

When the Fifty-first Congress convened on December 2, 1889, the House Ways and Means Committee, under the chairmanship of Republican William McKinley of Ohio, began work on a comprehensive new tariff. Using the "Senate Substitute" as its guide, but operating on the assumption that the election was a mandate for even higher rates, it submitted a scale of protective duties to the House startling even to some protectionists. Only the sugar schedule bucked the tide of rising rates, provoking a tempestuous controversy. For various reasons connected with the desire to eliminate the surplus and to pacify farmers and workingmen made uneasy by the ultra-protectionist rates on manufactured products with the prospects of a "cheaper breakfast," the committee placed raw sugar on the Free list. So as not to appear to be playing into the hands of the Sugar Trust, the committee also removed or lowered the duties on various grades of refined sugars to levels well below what they were in the "Senate Substitute." To deplete the surplus further, appease the sugar growers in Louisiana, and gain the backing of western Republicans who envisioned the establishment of a beet sugar industry in their region, the bill provided domestic producers with a two cent per pound bounty, a subsidy equal to the former tariff. FN44

Opposition to the House schedule developed from two major sources. Secretary of State James G. Blaine came out strongly against free sugar. The tariff on sugar, he believed, should be used for opening the potentially abundant markets in Latin America by demanding most favored nation treatment in exchange for letting raw sugar in free. To give up such leverage without receiving anything in return, felt Blaine, was madness. During the drafting of the bill, he argued this thesis before the Republican members of the Ways and Means Committee in vain. His next stop was the Senate Finance Committee where, the press soon headlined, he smashed his hat in frustration at the equally intransigent attitude of that body. Recent findings suggest that nothing so dramatic occurred.45 In any event, the committee received his proposals coolly, partly because it was under pressure from sugar refiners who were lobbying to revamp sections of the House schedule. Where Blaine wanted the duty on raw sugar to be used as a tool of foreign policy, the sugar refiners' main objective was their profit margins. FN46 Again they had a powerful ally in Aldrich.

FN44 Spooner to J. L. Linderman, 14 February 1890, Spooner Papers, box 109; Henry F. Oxnard to Aldrich, 19 May 1890, Aldrich Papers; New York Tribune, 12 June 1890; Terrill, Tariff, Politics, and American Foreign Policy, 161 -62.

FN45 Ibid., 41-51; H. Wayne Morgan, From Hayes to McKinley: National Party Politics, 1877-1896 (Syracuse, 1969), 337-38, 349-50. Allison claimed the incident was blown out of proportion. See Allison to Edward Stanwood, 11 May 1905, Iowa City, University of Iowa, William Boyd Allison Collection.

FN46 Charles H. Harrison to John Sherman, 4 July 1890, Sherman Papers, vol. 522. See also, ibid, W. J. Sewell to Sherman, 6 June 1890, vol. 519; New York Tribune, 12 June 1890.

About the time of the supposed hat smashing episode, Senate direction of the McKinley Tariff; which passed the House on May 21, devolved upon Aldrich. The chairman of the Finance Committee, Senator Morrill, eighty years old and unable to bear a Washington summer, first offered the task to Allison, who declined and recommended Aldrich. FN47 As floor manager of one of the most important party measures in decades, Aldrich quickly justified Allison's faith by deft handling of the reciprocity problem. Blaine had no intention of letting this issue die. He launched a broad offensive, "profoundly convinced," he wrote the president, "that it will prove a fatal blunder not to make a serious effort for Reciprocal trade" by restoring the duty on raw sugar. FN48 Senators like Morrill and Sherman long had been convinced that Blaine was pursuing a "suicidal policy" certain to destroy the protective system and undermine the nation's prosperity, and they stoutly resisted him. FN49 Aldrich, though a confirmed protectionist, was intrigued by the prospect of increasing American exports. But he felt that it would "require something besides commercial treaties to create that trade" and, doubting their efficacy without first establishing instrumentalities abroad like adequate banking facilities, steamship connections, and consular services, he never had supported reciprocity treaties in the past. FN50 Because he was philosophically in favor of exchanging "the cotton goods of Rhode Island for the coffee of Brazil," he was quite willing to seek some kind of reciprocity formula capable of opening trade but consistent with keeping raw sugar free and safeguarding the principle of protection. FN51

Movement towards such a compromise began after several meetings between Aldrich and President Harrison who, on June 17, 1889, sent a special message to Congress praising Blaine's approach and chiding Congress for refusing to reimpose the duty on raw sugar. FN52 The question of who initiated the negotiations and authored the reciprocity provisions finally agreed upon is open to dispute. Harrison's private secretary and other contemporaries accorded him the honor; Senator Allison conferred the laurels on Aldrich. FN53 Whatever the case, in early August, well before the agreement became public, Aldrich told a reporter there was no "prospect of the Senate changing the sugar schedule so as to restore the duty." But, he continued, "there may be some provision inserted making it discretionary either with

FN47 Allison to Justin Smith Morrill, 23 June 1890, LC, Justin Smith Morrill Papers, vol. 39.

FN48 Terrill, Tariff, Politics, and American Foreign Policy, 164-69; Blaine to Benjamin Harrison, 24 July 1890, Harrison Papers, series 1, vol. 110.

FN49 Morrill to James Swank, 24 November 1884, Philadelphia, Historical Society of Pennsylvania, James Swank Papers.

FN50 New York Tribune, 27 December 1884.

FN51 Providence Journal, 28 February 1892.

FN52 Terrill, Tariff, Politics. and American Foreign Policy, 165, 169.

FN53 E. W. Halford, diary, 17 October 1890, E. W. Halford Papers, in Notes of J. P. Nichols Aldrich Papers; P. C. Cheney to Louis Michener. 23 March [1893], LC. Louis Michener Papers; Providence Journal, 28 February 1892.

the President or Congress to restore the duty if certain contingencies arise." FN54 The arrangement ultimately worked out incorporated these essential principles: Raw sugar remained free, but the president could, by proclamation, reimpose the duty on sugar and other free commodities if the country exporting them refused to grant the United States reciprocal advantages. Some critics called this "reciprocity with a club," and Blaine was not entirely happy with it, but it preserved free raw sugar. FN55

The struggle now shifted to the tariff on refined sugar. Where should protection begin and how high should it go? According to the House schedule, the raw-refined dividing line between free and protected commenced at No. 16 Dutch Standard. The trust, which by 1890 controlled over 60 percent of the market, and six independent refineries, expected no significant reduction of duties on refined in return for free raw sugar. They were outraged by the raw-refined dividing line in the House bill and by the "wholly inadequate protection" accorded sugars above No. 16. Their aim was a scale of duties similar to those in the revised "Senate Substitute." Such rates, they argued, were barely sufficient to keep foreign beet sugars from American tables, and would produce only a slight return on investment in an industry where "the margin of profit usually is small." FN56 Actually, ever since the consolidation in 1887, profits had skyrocketed and under the McKinley bill, were destined to become even more impressive. FN57

None of this was very clear to the Finance Committee when it took up the House schedule early in June. Most senators working on tariffs knew little more about the industries they dealt with than what industry spokesmen told them. Outside the Bureau of Statistics, government agencies neither collected nor supplied information. Customs appraisers attached to the committee during tariff debates drew up the technical language of schedules but had no further function or expertise. The committee's staff a few aged clerks and a handful of typists was inadequate to meet the members' legislative needs. Tariff hearings constituted the committee's only means of eliciting data and technical information, but were usually dominated by industry representatives who, with the aid of sympathetic senators, transformed them into windy dialogues.

Among those testifying at the tariff hearings, the Sugar Trust was notoriously devious and secretive about costs and earnings. It even refused to supply information required by law for the 1890 census. In response to its in

FN54 Ibid, 9 August 1890.

FN55 Senate, Congressional Record, 51 Cong., 1 sess., vol, 21, pt. 10, 9250; Morgan, From Hayes to McKinley, 315.

FN56 New York Times, 25 August 1890; N. W. Frazier to M. S. Quay, 28 May 1890, Aldrich Papers. Harrison's biographer incorrectly argues that the Sugar Trust did not want free sugar. He obviously has confused its position on sugars between Nos. 13 and 16 Dutch Standard with sugars below No. 13. Harry J. Sievers, Benjamin Harrison: Hoosier President (3 vols., Indianapolis, 1968), 111, 164, n. 5.

FN57 Eichner, Emergence of Oligopoly, 158-63, 97.

transigence, the superintendent of the census requested Congress to attach criminal penalties to the law for persistent unwillingness to answer census surveys, which it did in July 1892. But as late as 1894, the trust still avoided compliance and staved off prosecution. FN58

Quite naturally, most members of the committee turned to Aldrich for guidance. "Senator Aldrich... is thoroughly versed in the intricacies of the tariff;" Republican Senator James McMillan of Michigan explained. "My confidence in him is so great that I would give the utmost consideration to his views on this matter." FN59 And Aldrich just as naturally championed the rate structure demanded by the trust. Under his tutelage, the Finance Committee chambers became "a sugar shop" crowded with industry representatives as he conducted a crash course for his colleagues on why the refiners deserved greater protection. "Samples are strewn around, and one of the most active of the sugar refiners, a man who has had much experience in the lobby, flits in and out of the room," wrote an observer. FN60

Eventually, the doubts many committee members felt about a rate increase vanished under Aldrich's expert ministrations. On September 8, he reported an amended schedule which closely conformed to the trust's objectives. Aldrich insisted that, although "there is a trust which controls a portion of the sugar-refining business of the country...the people engaged in the refining of sugar, I mean the working people" and not the trust, would be the ones injured should the House bill become law. "Are we willing to legislate in such a manner that the sugars we consume must be refined in Germany or France?...That in a large degree would be the effect of the enactment of the House provision..." FN61 Reflecting the views of many Republicans worried about the upcoming congressional election, Senators Allison and Sherman broke with Aldrich, claiming the new rates were far too generous. In a vote which ruptured party lines, the Senate barely passed the Committee's amendments. Two days later, however, the bill swept through the upper chamber by a straight party vote of forty to twenty-nine. FN62

It was now up to the conference committee to reconcile the House and Senate versions. Here Aldrich, who chaired the Senate conferees, found the going much tougher. The Senate had proposed 464 amendments to the McKinley Bill, many of them downward revisions. None generated more opposition among nervous G.O.P. House members than those attached to the sugar schedule. As a result, the tariff on sugar became the "key to the

FN58 U.S. Congress, House, Refiners of Sugar. Letter from...Secretary of Interior transmitting...information...whether refiners...refused to answer questions of the Census Office...., House Exec. Doc. No. 242, 52 Cong., 2 sess. Journal of Commerce and Commercial Bulletin (New York), 23 March 1894.

FN59 James McMillan to C. I. Kimball, 21 October 1890, Detroit Public Library, James McMillan Papers.

FN60 Providence Journal, 7 September 1890.

FN61 Senate, Congressional Record, 51 Cong., 1 sess., vol. 21, pt. 10, 9878.

FN62 Ibid.. 9836-38, 9943.

whole situation..." noted a reporter. "Were an agreement reached on that less than five minutes would be required to settle all other questions." FN63 Instead, the conferees locked horns over the sugar schedule for nearly two weeks. Meanwhile, the sugar refiners, mobilized by Searles, and aided and abetted by Aldrich, Senator Matthew Quay of Pennsylvania, James Clarkson, assistant postmaster general and chief administration patronage dispenser, and Vice President Levi P. Morton, mounted an impressive lobbying operation. "It will be marvelous if the Sugar Trust does not win its fight here under the circumstances," remarked the New York Times. FN64 So intense was public hostility to the trust that the House conferees refused to compromise. Sensing that his presence on Capitol Hill might do more harm than good, Searles left industry lobbying to the independents. But he was ready to intervene at a moment's notice, as Vice President Morton made clear to Senate conferee Allison, whose earlier discomfiture about amending the House schedule somehow had been overcome. FN65 Armed with a letter of introduction from Clarkson, Searles quietly slipped into Washington for an interview with President Harrison late in September. FN66 Some days later, perhaps because of the president's attitude, the logjam broke. Aldrich decided that it was foolhardy to press the issue any longer. The schedule emerged along the lines of the House bill with one important exception: No. 16 remained the raw-refined dividing line, but sugars above No. 16 received a duty of 1/2 of a cent per pound, 1/10 of a cent more than the House rate. The Sugar Trust did not get everything it wanted, but with raw sugar now free and refined protected, neither would it suffer. Aldrich was the first to acknowledge this when he presented the conference report to the Senate and predicted the industry would be able to "live with" the new tariff. FN67

The sugar industry did not merely "live with" the McKinley bill it prospered as never before. Its passage eliminated Spreckels's advantage over eastern refiners and, in the spring of 1891, he entered into an agreement with the trust, now organized as the American Sugar Refining Company. Within a few years of the enactment of the McKinley Tariff, Searles and the Havemeyers attained a monopoly which enabled them to generate earnings estimated at from ten to twelve million dollars per annum. FN68

"Aldrich is looking out for the Sugar Trust's interests." So wrote E. W. Halford, President Harrison's personal secretary, in his diary. FN69 Aldrich's

FN63 Providence Journal, 24 September 1890.

FN64 New York Times, 23 September 1890.

FN65 Levi P. Morton to Allison, n.d. [September 1890], Allison Papers.

FN65 James S. Clarkson to Harrison, 20 September [1890], Harrison Papers, series 1, vol. 113.

FN67 Senate, Congressional Record, 51 Cong., 1 sees., vol. 21, pt. 11, 10738.

FN68 Eichner, Emergence of Oligopoly, 152-73, 211-13; Journal of Commerce and Commercial Bulletin, 12 May 1894.

FN69 E. W. Halford, diary, 1 December 1891, E. W. Halford Papers, in Notes of J. P. Nichols, Aldrich Papers.

Intense interest in the sugar industry caused many to suspect there was much more to his efforts than met the eye. Washington gossips knew that Aldrich was very good friends with Searles and Henry O. Havemeyer, and as the years passed and he became noticeably wealthy, "the question was naturally asked, 'Where did he get it?'" As his former secretary, Washington newspaperman David S. Barry recalled,

men would smile when they spoke of Senator Aldrich's wealth, and raise their eyebrows, but no one of them ever openly accused him of wrong-doing. They were afraid to do so because, as they said, he was too smooth for them to catch and while they claimed to know they openly confessed their inability to prove anything. FN70

When Barry made this statement, he obviously had forgotten that the New York Times created a sensation by levelling specific allegations of corruption at Aldrich in the spring of 1894. The immediate occasion was Aldrich's leadership of the Republican effort in the Senate to defeat the Democratic sponsored Wilson-Gorman Tariff. Once again controversy erupted over the sugar schedule, but this time the Democrats were under fire for supposedly selling out to the trust. Vivid newspaper accounts claimed that Searles and Henry Havemeyer had colluded with certain Democratic members of the Senate Finance Committee to jack up the rates recommended in the House bill, and had then speculated in the resulting rise in Sugar Trust stocks. The accusation triggered a Senate investigation as well as sharp Republican attacks on the sugar schedule's alleged corrupt paternity.7' The G.O.P. strategy was to discredit the schedule and, by picking up Democratic votes hostile to the trust, revise it downwards. In that event, it was thought, the fragile coalition holding the Wilson-Gorman bill together would collapse, leaving the higher McKinley rates in force. As Republican Senator Redfield Proctor of Vermont explained, "we are all hoping that the whole tariff legislation may fail... [i]f the one-eighth on sugar can be stricken off..." FN72

Aldrich orchestrated the assault on the sugar schedule expertly. Invoking all his powers of analysis and obfuscation, he took to the floor repeatedly to charge that it gave far more protection to the trust than the McKinley Tariff, not less, as the Democrats contended.73 He assailed its mixture of

FN70 Interview with General Clarence R. Edwards, "Aldrich and Havemeyer," 16, 18 October 1926, Notes of J. P. Nichols, ibid; David S. Barry, "General Outline of Senator Aldrich's Career Prepared by Mr. Barry," n.d., ibid.

FN71 Allan Nevins, Grover Cleveland: A Study in Courage (New York, 1934), 577-78; Lambert, Arlhur Pue Gorman. 224-26.

FN72 Philadelphia Public Ledger, 15, 17 May 1894; Redfield Proctor to Justin Morrill, 23 July 1894, Morrill Papers.

FN73 Senate, Congressional Record. 53 Cong., 2 sees., vol. 26, pt. 6, 5641-44, 5659-60, 5726-27, 5755-58 Compare Aldrich's assessment of the Wilson-Gorman sugar schedule with that of Edwin F. Atkins, the Boston sugar refiner: "The new tariff will...work harm in every way to the sugar interest. The protection on refined sugar is reduced... which will admit refined sugar from Europe....'' Atkins to Don Esteban Caciedo, 4 September 1894, Atkins Family Papers.

ad valorem and specific duties as a "contemptible juggle," deliberately written "at the dictation of the American Sugar Refining Company" to confuse and exploit the American consumer. It was, he said, a horrible spectacle to see "a great party...hopelessly and helplessly under the control of influences outside of this Chamber...not known to the Constitution or the laws, not recognized as any part of the National Government...cravenly submit" without a whimper to the demands of the Trust. FN74

While Aldrich was thus hammering away at the integrity of the Democrats, the Times published its charges on June 20, 1894, in a lengthy story headlined on page one:

SENATOR ALDRICH AND SUGAR
THE REPUBLICAN TARIFF LEADER OWNED BY THE TRUST
INDEBTED TO IT FOR FINANCIAL AID

Terming Aldrich a "disgusting hypocrite," it arraigned him for posing as a critic of the trust when he was actually on its payroll. According to the Times, in 1892 the Sugar Trust, "grateful for the favors which it had received at his hands . . . came to the rescue of Senator Nelson W. Aldrich with substantial aid at a time when he needed backing for the consummation of a great business enterprise." It gave him $1,500,000 which he used in conjunction with several other investors to purchase all the existent stock in the Union Railway Company, a Providence Traction line. ''Mr. Aldrich conceived the idea that there was money in extending this railway company," but he did not have the cash to put his idea into effect. So he ''appealed to such capitalists as were his friends" and the Sugar Trust responded with the necessary funds as payment for what Aldrich did for it in the writing of the McKinley Tariff. "It was a pleasing exhibition," the Times concluded, "of how a great corporation which was under no legal obligation might be counted on not to forget a friend who had helped it...." FN75

As a rule, Aldrich never replied to public criticism. He believed strongly, he wrote a constituent, that "to try to create or correct current opinion in regard to any of my political opinions or actions . .. would be to unduly magnify their importance . . . without any compensating benefit." FN76 But he could not remain silent in the face of the Times's accusations. When the Times appeared in Rhode Island, newsdealers were sold out within minutes and second-hand copies went for fifty cents apiece.77 Aldrich was thus forced to confront his accusers for the first and only time in his career. On

FN74 Senate, Congressional Record, 53 Cong., 2 sess., vol. 26, pt. 6, 5643, 5758, 5775.

FN75 New York Times, 20, 21 June 1894.

FN76 Aldrich to Henry Metcalf, 29 May 1889, Aldrich Papers.

FN77 Providence Journal, 24 June 1894.

June 21, he issued a denial. There was only one statement in the account which contained ''even the semblance of truth," he said. Searles did indeed have "an interest in a street railway company in which I also have an interest." But he paid for his interest as others paid for theirs. "He did not," Aldrich asserted categorically, "nor did any other person, at any time, advance any money to or for me on this or any other account, and I am not and never have been under the slightest possible financial or other obligations, directly or indirectly, immediate or contingent, to him or to any other person who is or ever has been connected with the sugar refining company or the company itself." FN78

Aldrich's disclaimer sounded very convincing. The Times had offered no documentation to support its charges, relied heavily on innuendo and hearsay, and presented its case in a strident, prosecutorial tone. The New York Tribune probably spoke for many Republicans when, comparing Aldrich's cool, precise, lawyerlike refutation to the Times's impassioned rhetoric, maintained that he was being deliberately vilified in order to draw attention away from the corrupt dealings of the Democrats. FN79

It is true that the Times was then a partisan organ but, if its motives were questionable, most of its allegations have proved correct. They are supported by a considerable body of evidence, including two remarkable legal documents signed by the parties involved. The first, an agreement in principle dated January 7, 1893, acknowledges Aldrich's receipt of $100,000 in cash from Searles for the purchase of stock in the Union Railway Company, and commits Searles "to furnish the money necessary to carry through...the purchases thereby contemplated, and such other purchase of other Street Railroad stocks and charters as may hereafter [be] mutually agreed upon by us...." FN80 The second, a contract signed on February 2, 1893, formalized the agreement and established the terms and conditions which eventually enabled the senator to become a multimillionaire. FN81

Under its provisions, Searles and his associates agreed to provide Aldrich and his partners with at least $5,500,000 and up to $7,000,000 in cash to be used to buy, and later to electrify, modernize, and extend, four profitable but inefficient horse-drawn traction lines servicing the area in and around Providence. On the completion of the purchase of these lines-which cost less than $3,000,000-the Searles-Aldrich syndicate formed a New Jersey holding company, the United Traction and Electric Company (UTE), with Aldrich as president and Searles as a director, and transferred ownership

FN78 New York Times, 21 June 1894.

FN79 New York Tribune, 21 June 1894.

FN80 Statement of Aldrich to Searles, Marsden J. Perry, and William G. Roelker, 7 January 1893, Aldrich Papers.

FN81 Contract, 'IN CONSIDERATION of the mutual promises hereinafter contained, it is AGREED By and Between....", 2 February 1893, ibid.

of the various companies to it. UTE then issued $8,000,000 in forty year, 5 percent first mortgage bonds as collateral to Searles and his partners as well as $8,000,000 in stock, half of it going to the Aldrich group and half to the Searles group. In the next few years, the company electrified and expanded the system, and through Aldrich's control of the state's political machine, led nominally by "Boss" Charles R. Brayton, also obtained extremely favorable tax and franchise legislation from the Rhode Island General Assembly. In 1896, UTE's $100 par value shares sold for $40; by 1900, they had reached $110. In seven years, and without investing a penny of his own money, Aldrich thus had acquired properties worth many millions. He and his partners sold the properties in 1902, partly for cash (about $1,000,000 apiece), and partly for a large block of new stock, to the United Gas and Improvement Company, a holding company controlled by the Philadelphia traction magnates W. L. Elkins and P. A. B. Widener. FN82 They, in turn, in a deal Aldrich helped to set up and negotiate, sold out to the New Haven Railroad in 1906 for $21,000,000, a sum which even its president, Charles S. Mellen, conceded was "an unconscionable price," and one Aldrich partner, Marsden J. Perry, proudly called "a very profitable figure." FN83 Years later, Mellen explained to a body investigating the New Haven's management why he had overpaid for the Rhode Island traction lines. "I was dealing with Nelson W. Aldrich," he said plaintively. "Do you think I got the stock of these railroads at par?" FN84

How much money did Aldrich make on all these transactions? No accurate assessment is possible. His wealth at his death in 1915 was appraised for tax purposes at $5,700,000, and a good estimate would be that the great bulk of it flowed from the contract he signed with Searles in 1893. FN55

The question remains: Why did Aldrich's relationship with the Sugar Trust turn into a corrupt one? Certainly, no material incentives were needed to secure his loyalty to the sugar refiners in the 1880s, nor is there any evidence that he ever demanded compensation before agreeing to undertake or forego a particular legislative action. Indeed, on those rare occasions when the Senate debated what the ethical standards of its members should be when faced with possible conflicts of interest, Aldrich staked out an impressively high moral position. For example, he agreed when Senator Bayard assailed "the proposition that a man has a right to stand in either Hall of

FN82 Ibid; Robert E. Falb, "Marsden J. Perry: 'The Man Who Owned Rhode Island,'" (unpublished honors thesis, Brown University, 1964), 16-31; Providence Journal, 18 April 1895, 8 March 1902, 25 November 1906.

FN83 Charles S. Mellen to Howard Stockton, 10 October 1907, Concord, New Hampshire Historical Society, Charles S. Mellen Papers; Interview with Marsden J. Perry, n.d., Notes of J. P. Nichols, Aldrich Papers.

FN84 New York American, 17 April 1915.

FN85 For the value of Aldrich's estate at probate, see clipping in Scrapbook, Providence, Rhode Island Historical Society, S. S. Rider Collection. Most likely the estate was worth three or four times its probated value.

Congress and advocate his personal interests" so long as they comported with the interests of his constituents. He promised that "whenever a question arises in this body in which I have a personal interest, either directly or indirectly, I trust I may be found as sensitive as the Senator from Delaware in attempting to influence the action of the Senate either by my voice or my vote."86 Although his ethical code never proved as sensitive in practice as in theory, at no time did he publicly repudiate the principles embodied in this statement or seek to justify a less lofty conception of political morality. Why, therefore, did Searles find it necessary to take care of Aldrich financially? What prompted Aldrich to accept what was essentially a political payoff?

The main reason, apparently, was a very practical one-each party needed what the other possessed. By 189O, Aldrich had "long since determined to retire" from the Senate on the completion of his term in 1892. FN87 Much of the joy seems to have gone out of public life for him. Reelection in Rhode Island, virtually a certainty for any Republican after the Civil War, had become chancier as immigrants swelled the ranks of the Democrats and growing factionalism weakened the G.O.P. Although the psychic rewards of having reached a position of power and prestige in the Senate were considerable, he found the material strains of trying to run two households and support a family of eight school-age children becoming increasingly burdensome. Other than his Senate salary, his income in 189O, so he confided to Perry, amounted to $3,600 from $6O,OOO in investments. This was not nearly adequate, he said, to meet his responsibilities. FN88 As a young man he had experienced poverty, leading him once to exclaim in anguish what he wanted most from life: "Willingly or forcibly wrested from a selfish world, Success! Counted as the mass counts it by dollars and cents!" FN89 Obviously, he no longer intended to sacrifice his business affairs on the altar of political ambitions. Thus, when Perry broached a plan to consolidate Providence's street railways and offered to take him in as a partner, Aldrich jumped at the opportunity. FN90 What Perry neglected to say was that neither he nor the senator had the capital required to carry it off successfully. Searles did. The evidence indicates that he decided to back the scheme partly because it was potentially a money-making proposition, but mainly because this was a way of ensuring Aldrich's continued service in the Senate. Aldrich's retirement would have dealt the Sugar Trust a severe blow. The power he wielded over tariff policy was already immense and was bound to increase as he accumulated seniority and, eventually, the chairmanship of

FN86 Senate, Congressional Record, 47 Cong., 2 sees., vol. 14, pt. 37, 2028-29.

FN87 Aldrich to Edward Atkinson, 6 January 1890, Atkinson Papers.

FN88 Interview with Perry, Aldrich Papers. As far as can be determined, this figure included his wife's assets, much of which was invested in the grocery business.

FN89 Aldrich to Abby Greene, August 1866, ibid.

FN90 Interview with Perry, ibid.

the Finance Committee and the informal leadership in the Senate Republican power structure.

Reelected in 1892 with the monetary assistance of the trust, Aldrich demonstrated his special solicitude repeatedly throughout the 1890s, particularly in the framing of the sugar schedule of the Dingley Tariff of 1897. Once more, conflict over sugar duties brought the Senate to a virtual standstill and, once more, Aldrich placed his unrivaled expertise and influence at the disposal of the corporation to which he was now financially indebted. The result, after weeks of jockeying and debate, was a sugar schedule highly favorable to the American Sugar Refining Company but also one which deepened the already pervasive "feeling on the part of the people," one commentator noted, "that the Sugar Trust controls the Senate...." To former Minnesota Senator William D. Washburn, the ability of the American Sugar Refining Company to get its way in the upper house looked all too familiar. "As in 189O," he wrote Allison, "I fear you have too many speculators in the Senate...or rather the friends of the sugar monstrosity." FN91

In sum, Searles invested in Aldrich for the benefit of his company. Aldrich, in turn, capitalized upon his senatorial power and status for the benefit of himself and his family. The form their relationship took was in many respects a logical consequence of Aldrich's business oriented approach to legislation, and the growth of his influence over economic policy-making. Motivated as he was by a political vision which identified the national interest with the values, goals, and needs of business, and increasingly capable of putting it into a legislative framework desired by a variety of corporate interests, Aldrich found money and favors flowing to him. Businessmen did not bribe him, they did not dominate him-they simply rewarded and supported him. Only influential business-minded senators like Aldrich could expect to receive investment opportunities exemplified by the following proffered him by Henry P. Davison, a partner in J. P. Morgan & Company:

The enclosed refers to the stock of the Bankers Trust Company, of which you have been alloted one hundred shares. You will be called upon for payment of $40,000.... It will be a pleasure for me to arrange this for you if you would like to have me do so.

I am particularly pleased to have you have this stock, as I believe it will give a good account of itself. It is selling today on the basis of a little more than $500. a share. I hope, however, you will see fit to put it away, as it should improve with seasoning. Do not bother to read through the enclosed, unless you desire to do so. Just sign your name and return to me. FN92

FN91 Thomas K. Cree to Allison, 17 July 1897, Allison Papers; William D. Washburn to Allison, 18 June 1897, ibid.

FN92 Henry P. Davison to Aldrich, 6 August 1909, Aldrich Papers. For other business deals which came the senator's way, see Jerome L. Sternstein, "King Leopold II, Senator Nelson W. Aldrich, and the Strange Beginnings of American Economic Penetration of the Congo," African Historical Studies. 11 (1969), No. 2, 189-204.

On top of this letter there is a simple notation which reads: "signed and returned, Aug. '09." Perhaps these few words capture better than anything else the ethical perspectives of a whole generation of politicians.

Beginning as an alliance of the mind and heart, the relationship between Aldrich and the Sugar Trust became a mutually beneficial and corrupt one. Critic Lincoln Steffens understood. "What I really object to in him," Steffens wrote Theodore Roosevelt, "is something he probably does honestly, out of general conviction.... He represents Wall Street; corrupt and corrupting business; men and Trusts that are forever seeking help, subsidies, privileges from government." FN93 Whether political corruption always thrives best, as Steffens seemed to think, in an atmosphere where the leading power brokers and businessmen agree on fundamentals is, of course, debatable. But this examination of Aldrich's relationship with the sugar industry suggests that legislative organization and bureaucratization tended to increase the scale of corruption and to channel it in certain directions rather than inhibit it. The environment responsible for making Aldrich rich was the concentration and structuring of parliamentary power. The development of strong parties may, at times, weaken pressure groups, and political consolidation often does act as an enemy of graft. But in the Gilded Age Senate just the opposite proved true.

FN93 Lincoln Steffens to Theodore Roosevelt, 9 June 1908, LC, Theodore Roosevelt Papers.

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