Chapter XIV · The Source of the Bribe Money.

After the confessions of the Supervisors, the Grand Jurors had definite, detailed knowledge of the corruption of the Union-Labor party administration. The Grand Jurors knew:

(1) That bribes aggregating over $200,000 had been paid the Supervisors.

(2) That of this large amount, $169,350 passed from Ruef to Gallagher and by Gallagher had been divided among members of the board. The balance, the evidence showed, had been paid to the Supervisors direct by T. V. Halsey of the Pacific States Telephone Company.

(3) The amount of each bribe; the circumstances under which it was paid; even the character of the currency used in the transaction.

(4) The names of the corporations benefited by the bribery transactions, as well as the character of the special privileges which their money had bought.

With the exception of the Home Telephone Company, the names of the directors of these benefiting corporations were readily obtainable.[187]

With this data before them, the Grand Jurors proceeded to trace the source of the bribe money.

Naturally, men who had long held places of respectability in the community were slow to admit having given Ruef vast sums, even under the transparent subterfuge of paying him attorney’s fees.[188] Some of them, when haled before the Grand Jury, testified reluctantly, and only under the closest questioning. Others frankly stood upon their constitutional rights, and with pitiful attempt to smooth out with studied phrases the harshness of the only acceptable reason for their refusal, declined to testify on the ground that their testimony would tend to incriminate them.

Nevertheless, the Grand Jury succeeded in wringing from the officials of the several corporations involved, damaging admissions; admissions, in fact, quite as startling as had been the confessions of the Supervisors. The refusal of some of those not unreasonably under suspicion, to testify was, too, quite as significant.

In the matter of the bribery of the Supervisors by T. V. Halsey, agent of the Pacific States Telephone and Telegraph Company, the Grand Jury had information that eleven Supervisors had been paid over $50,000 to oppose the granting of a franchise to the Home Telephone Company. A majority of the payments were made in an unfurnished suite of three rooms in the Mills Building. Frank Drum, a director of the company, admitted having engaged the rooms at Halsey’s request. E. J. Zimmer, auditor for the company, testified that Halsey held the position of General Agent of the company. Halsey’s duties, the testimony showed, were assigned him by Louis Glass, vice-president and general manager, and for a time acting president of the company. Halsey, under the company’s organization, reported to Glass. Zimmer testified that Halsey could not spend the company’s money except on the proper approval of the executive officer of the company. From October, 1905, when President Sabin of the company died, until February, 1906, when Henry T. Scott, Sabin’s successor, was elected, Glass acted as president and as executive officer. He had, according to Auditor Zimmer, authority to approve expenditures made by Halsey. After Scott’s elevation to the presidency, either Glass or Scott could have approved such expenditures. Zimmer testified further to giving Halsey, at Glass’s order,[189] as high as $10,000 at a time. Halsey[190] gave no vouchers for these large sums; they did not appear on the books;[191] they were carried on tags.

Zimmer stated that he did not know for what the funds were used; had merely followed out Glass’s instruction, and given Halsey the money.

The testimony of Thomas Sherwin threw some light upon the bookkeeping methods followed. Sherwin had been traveling auditor for the American Bell Telephone Company, which concern owned 51 per cent. of the stock of the Pacific States Telephone and Telegraph Company. Later he took Zimmer’s place as auditor of the Pacific States Company.

Mr. Sherwin admitted that some of Mr. Halsey’s “special expenses,” at least, were finally charged to the company’s legal department.[192]

Passing from the investigation of the bribery transactions of the Pacific States Telephone and Telegraph Company to the activities of the Home Telephone Company, the Grand Jury examined prominent business men of Los Angeles as well as of San Francisco.

The plan of operation followed by the capitalists behind this enterprise was to organize a construction company, whose part was to establish the plants, put them into operation and turn them over to the operating companies, taking their pay in the securities of the local operating company. Thus, at San Francisco, the Empire Construction Company played an important part in the Home Telephone Company enterprise.

As Heney put it, the Empire Construction Company received the most benefit from the granting of the Home Telephone franchise. The Empire Construction Company furnished at least part of the money that went into the fusion campaign fund in 1905. Investigation showed that 25 per cent. of the stock of the Empire Construction Company belonged to men who were in the construction solely, while 75 per cent. was in the hands of men who were financing the enterprise. This last block of stock at the time of the investigation was divided among James H. Adams and Thomas W. Phillips of the Adams-Phillips Company, A. B. Cass, Gerald S. Torrance and A. K. Detweiler. Detweiler could not be found. Adams, Cass and Torrance, after answering some of the questions put to them, availed themselves of their constitutional privilege, and refused to make further answers. The books of the Adams-Phillips Company disappeared and employees of that company undertook to evade answering questions regarding the disappearance, on the ground that they might incriminate themselves. But a sharp order from the Superior Court brought out their testimony. However, none of them gave testimony that led to the discovery of the missing volumes.

But the general trend of the testimony went to show that the responsible agent for the Empire Construction Company and the Home Telephone Company in San Francisco was A. K. Detweiler. The testimony showed Detweiler to have been at Ruef’s office in consultation with Ruef and Supervisor Gallagher; he was active in every move that was made on behalf of the Empire Construction Company and of the Home Telephone Company in San Francisco, and had the disbursing of the funds.

Incidentally, through the testimony of Dr. Fred Butterfield, a representative of Adolphus Busch, the brewer, the Grand Jury learned that a third telephone company, the United States Independent, seeking a franchise to do business in San Francisco, would have bid for the franchise which the Home Company received, had not the franchise been so worded that only the telephone system controlled by the Home people could be operated under it. Butterfield stated that his company, made up of responsible capitalists, considered the franchise worth something over a million dollars, and was prepared to bid up to a million dollars, if necessary, to get it. The Home Company paid San Francisco $25,000 for the franchise. Butterfield testified that his company had intended to invest $4,500,000 in the San Francisco enterprise, and that Ruef knew of the extent of the company’s plans. With such testimony, the assertions of Ruef’s partisans that opposition to the Ruef-Schmitz administration retarded development of the community compare curiously.[193]

The Grand Jury could not secure the attendance of Mr. Detweiler, for about the time of the investigation Mr. Detweiler mysteriously disappeared. The investigation into the affairs of the Home Company had, therefore, to be concluded without Mr. Detweiler’s testimony.

Following the policy of the stockholders of the Empire Construction Company, the officials of the United Railroads refused to testify. President Patrick Calhoun[194] and Thornwell Mullally, assistant to the president, when given opportunity to state their side of the case under oath, stood upon their constitutional rights, and declined to give evidence that might incriminate them.[195] They were accordingly excused from the Grand Jury room.

But the employees of the company did not escape so easily. When, for example, George Francis, William M. Abbott, George B. Willcutt and Celia McDermott refused to answer questions put to them in the Grand Jury room, they were haled before the Superior Court, where they were informed that they must testify.

In spite of the hostility of these witnesses, the prosecution succeeded in securing a wealth of data regarding $200,000 which passed into the hands of Tirey L. Ford and, according to the theory of the prosecution, from Ford to Ruef.

The prosecution established the fact that two days before Mayor Schmitz signed the trolley permit, that is to say, on May 22, 1906, Patrick Calhoun, as president of the United Railroads, received by telegraphic transfer from the East to the United States Mint at San Francisco, $200,000.[196] Two days later, the day the trolley permit was signed, President Calhoun took Ford to the Mint and instructed Superintendent of the Mint Leach to give Ford $50,000 of the $200,000. Ford told Leach that he wanted currency. The currency was finally secured by exchanging gold for bills at the Mint headquarters of the relief work then being carried on in San Francisco. These bills, it was shown, were all in small denominations, having been sent to San Francisco from all parts of the country by individual subscribers to the relief fund.

This money was taken away from the Mint, the testimony showed, by Ford and William M. Abbott.

Soon after, Ruef loaned Supervisor Rea[197] $3500. By a curious trick of fate Rea had leased a piece of property from Rudolph Spreckels. In payment on this lease he used the money that Ruef had loaned him. This money was all in bills of small denominations. Late in July Ruef gave Gallagher $45,000, all in bills of small denominations, as partial settlement with the Supervisors for granting the trolley permit. Gallagher gave Wilson of this money $5000, and the other Supervisors with the exception of Rea $2000 each. They all understood that it was because of the trolley franchise deal. The balance Gallagher retained for himself.

The confessing Supervisors, with the exception of Wilson and Rea, testified that their first payment on account of the trolley permit was $2000 each, in bills of small denominations. Wilson testified to having received $5000.

Later, Ford, making two trips to the Mint, drew out the $150,000 balance of the $200,000 that had been telegraphed to Calhoun’s credit. As before, the Mint paid him in gold, and as before, Ford exchanged the gold for currency. But instead of getting bills of small denomination, on the two trips which Ford made for that $150,000, he secured fifty and one hundred-dollar bills.

On the day that Ford drew the last of that $200,000 from the Mint, an agent in the employ of the prosecution followed Ruef from his office to the car barns in which Ford’s office was then located. A few days later Ruef gave Gallagher $40,000 in fifty and one hundred-dollar bills, the greater part of which Gallagher distributed among the Supervisors as second and final payment on account of the granting of the trolley permit.

In the Parkside deal, the Grand Jury had little difficulty in tracing the money involved. William H. Crocker,[198] a capitalist of large affairs, who owned the largest interest in the company, showed astonishing ignorance of the management. The Grand Jury learned little from him.

But those interested in the enterprise with Crocker not only told how half the money was paid Ruef, but how the books had been manipulated to conceal the payment.

Ruef, according to the testimony of officials of the company, had first demanded $50,000 as price for his employment to put the franchise through, but had finally agreed to take $30,000. This amount, officials of the company testified, was provided by drawing two checks, one in favor of H. P. Umbsen and the second in the name of Douglass S. Watson, secretary of the Parkside Company. Umbsen and Watson thereupon deeded to the Parkside Company two parcels of land. The transaction was then charged to the purchase of property.[199] The property was deeded back to Umbsen and Watson at the same time, but these last deeds were not immediately recorded.

Watson cashed the checks at the Crocker-Woolworth Bank, of which William H. Crocker was president. He testified that he received currency for them.

The $30,000 he took to G. H. Umbsen. Half the $30,000 Umbsen paid Ruef.

At the time of the exposure, Umbsen[200] testified he was withholding the second payment until the franchise should be put through.[201]

In the gas-rate case, the Grand Jury found that the corporation that would, in the final analysis, benefit by the increase in gas rates, was the Pacific Gas and Electric Company. The four responsible men in this company were found to be N. W. Halsey, John Martin, Eugene de Sabla and Frank G. Drum. Halsey was out of the State for the greater part of the time and Cyrus Bierce, acting as treasurer of the corporation, looked after his interests. This narrowed the responsibility down to de Sabla, Martin and Drum.

De Sabla testified before the Grand Jury that Ruef was not, to his knowledge, at any time on the pay roll of the company. Martin swore that he knew of no money that had been expended in connection with the fixing of the gas rates, and expressed himself as being as surprised as anyone at the confessions of the Supervisors to having received money after the gas rates had been fixed. Later, after Ruef had plead guilty to extortion, both de Sabla and Martin refused to testify further before the Grand Jury.[202]

Mr. Frank G. Drum, when called before the Grand Jury, stated that he had had no conversation with Ruef in reference to the fixing of the gas rates.[203] But later Ruef told the Grand Jury that the money which he had turned over to Gallagher in the gas-rate transaction had come from Drum.[204]

The first to be indicted because of these transactions was Ruef. Sixty-five indictments were on March 20 returned against him. Eighteen were based upon the bribing of Supervisors in the so-called fight trust matter; seventeen upon the bribing of Supervisors in fixing the gas rates; thirteen upon the bribing of Supervisors in the matter of the sale of the Home Telephone Company franchise; seventeen in the matter of granting the over-head trolley permit.

On the same day, ten indictments were returned against Theodore V. Halsey, of the Pacific States Telephone and Telegraph Company, for the bribery of Supervisors to prevent the sale of a franchise to a competing telephone company. A number of indictments were found against A. K. Detweiler, for bribing Supervisors in the matter of the sale of the Home Telephone franchise. The Detweiler indictments, thirteen in number, were based upon payments of money by Ruef to Gallagher, and by Gallagher to different members of the board. On March 23, the Grand Jury returned nine indictments against Louis Glass, vice-president of the Pacific States Telephone and Telegraph Company, based upon the bribing, through Halsey, of Supervisors to prevent the granting of a competing telephone franchise.

During the two months that followed, the Grand Jury continued at the steady grind of graft investigation. Finally, on May 24, one additional indictment[205] was brought against Halsey and two against Glass. On that date, fourteen indictments were returned against Patrick Calhoun, Thornwell Mullally, Tirey L. Ford, William M. Abbott,[206] Abraham Ruef and Mayor E. E. Schmitz, indicted jointly, for the bribery in connection with the granting of the over-head trolley permit.

The day following, May 25, G. H. Umbsen, J. E. Green, W. I. Brobeck and Abraham Ruef were jointly indicted fourteen times on charges of offering a bribe to fourteen Supervisors in the Parkside franchise matter. The same day, fourteen indictments were returned against Frank G. Drum, Abraham Ruef, Eugene E. Schmitz, Eugene de Sabla and John Martin on charges of giving and offering bribes to fourteen Supervisors in the matter of fixing the gas rates.

Still another series of graft indictments were to be found. Three prize-fight promoters, W. Britt, “Eddie” Graney and “Jimmie” Coffroth were, on nine counts, indicted jointly with Schmitz and Ruef for bribery in connection with the awarding to them of virtually a monopoly of the promotion of prize fighting in San Francisco.