Montague returned to New York and plunged into his work. The election at which he was scheduled to become president of the Northern Mississippi was not to come off for a month. Meantime there was no lack of work for him to do. It would, of course, be necessary for him to return to Mississippi to live, and he had to close up his affairs in New York. Also he wished to fit himself for the work of superintending a railroad. Through the courtesy of General Prentice, he was introduced to the president of one of the great transcontinental lines, and made a study of that official's office system. He went South again to inspect the work of the surveyors, and to consult with the engineers who had been selected for the work. Price went ahead with his arrangements to take over the control of the road, without paying any attention to the old management. He sent for Montague one day, and introduced him to a Mr. Haskins, who was to be elected vice-president of the road. Haskins, he said, had formerly been general manager of the Tennessee Southern, and was a practical railroad man. Montague was to rely upon him for all the details of his work.
Haskins was a wiry, nervous little man, with a bad temper and a sarcastic tongue; he worshipped the gospel of efficiency, and in the consultations with him Montague got many curious lights upon the management of railroads. He learned, for instance, that a conspicuous item in the construction account was the money to be used in paying local government boards for right of way through towns and villages. Apparently no one even considered the possibility of securing the privilege by any other methods. Montague did not like the prospect, but he said nothing. Then again, the road was to purchase its rails and other necessaries from the Mississippi Steel Company, and apparently it was expected to pay a fancy price for these; it was not to ask for any of the discounts which were customary. Also Montague was troubled to learn that the secretary and treasurer of the road were to receive liberal salaries, and that no questions were to be asked, because they were relatives of Price.
All that he put up with; but matters came to a head about ten days before the election, when one day Haskins came to his office with the engineers' estimates, and with his own figures of the probable cost of the extension. Most of the figures were much higher than those which Montague had worked out for himself.
“We ought to do better on those contracts,” he said, pointing to some of the items.
“I dare say we might,” said Haskins; “but those contracts are to go to the Hill Manufacturing Company.”
“I don't understand you,” said Montague; “I thought that we were to advertise for bids.”
“Yes,” replied Haskins, “but that company is to get the contracts, all the same.”
“You mean,” asked Montague, “that we are not to give them to the lowest bidder?”
“I'm afraid not,” said the other.
“Has Price said anything to you to that effect?”
“He has.”
“But I don't understand,” said Montague; “what is this Hill Manufacturing Company?”
And Haskins smiled. “It's a concern that Price has organised himself,” he said.
Montague stared in amazement. “Price himself!” he gasped.
“His nephew is president of the company,” added the other.
“Is it a new company?” Montague asked.
“Organised especially for the purpose,” smiled the other.
“And what does it manufacture?”
“It doesn't manufacture anything; it simply sells.”
“In other words,” said Montague, “it's a device whereby Mr. Price proposes to rob the stockholders of the Northern Mississippi Railroad?”
“You can phrase it that way if you choose,” said Haskins, quietly; “but I wouldn't advise you to let Price hear you.”
“I thank you,” responded Montague, and brought the interview to an end.
He took a day to think the matter over. It was not his habit to act upon impulse. He saw that the time had come for him to speak, but he wished to be sure of his course of action before he began. He had dinner at the Club that evening, and, seeing his friend Major Venable ensconced in a big leather chair in the reading-room, he went and sat down beside him.
“How do you do, Major?” he said. “I've got another case that I want to ask you some questions about.”
“Always at your service,” said the Major.
“It has to do with a railroad,” said Montague. “Did you ever hear of such a thing as a railroad president organising a company to sell supplies to his own road?”
The Major smiled grimly. “Yes, I have heard of it,” he said.
“Is it common?” asked Montague.
“Not so common as you might suppose,” answered the other. “A railroad president is commonly not an important enough man to be permitted to do it. If it happens to be a big road, and the president is a power in it, why, then he may do it.”
“I see,” said Montague.
“That was Higgins's trick,” said the Major. “Higgins used to go around making speeches to Sunday schools; he was the kind of man that the newspapers like to refer to as a model citizen and a leader of enterprise. His brothers, and his brothers-in-law, and his cousins, and all his family went into business in order to sell things to his railroads. I heard of one story—it has never come out, but it's very amusing. Every year the road would advertise its contract for stationery. It used about a million dollars' worth, and there'd be long and most elaborate specifications published—columns and columns. But sandwiched away somewhere in the middle of a paragraph was the provision that the paper must all bear a certain watermark; and that watermark was patented by one of Higgins's companies! It didn't even own so much as a mill—it sublet all the contracts. When Higgins died, he left eighty million dollars; but they juggled the records, and you read in all the newspapers that he left 'a few millions.' That was in Philadelphia, where you can do such things.”
Montague sat thinking for a few moments. “But I can't see why they should do it in this case,” he said. “The men who are doing it own nearly all of the stock of the road.”
“What difference does that make?” asked the Major.
“Why, they are simply plundering their own property,” said Montague.
“Tut!” was the reply. “What do they care about the value of the property? They'll unload it before the public finds out; and in the meantime they are probably manipulating the stock. That's the scheme they're working with the street railroads over in Brooklyn, for instance; the more irregular the dividends are, the more violently the stock fluctuates, and the better they like it.”
“But this is the case of a railroad that is being built,” said Montague; “and they are putting up the money to build it.”
“Yes,” said the Major, “of course; and then they are paying it back to themselves by this dodge; and they'll still have the stock, and whatever they can get for it will be profit. And if the State Legislature comes along and asks any impertinent questions, they can open their books and say: 'See, we have spent this much for improvements. This is the cost of the road; and if you reduce our freight-rates, you will cut off our dividends and confiscate our property.'”
And the Major gazed at Montague with a mischievous twinkle in his eye. “Besides,” he said, “another thing. You say they are putting up the money. Are you sure it's their own money? Commonly the greater part of the cost of railroad building is paid by bonds, and they work those bonds off on banks and insurance companies and trust companies. Have you thought of that?”
“No, I hadn't,” said Montague.
“I know very few men in Wall Street who use their own money,” the Major added. “Take the case of Wyman, for instance. Wyman's railroad keeps a cash surplus of twenty or thirty millions, and Wyman uses that in Wall Street. And when he has made his profit, he takes it and salts it away in village improvement bonds all over the country. Do you see?”
“I see,” said Montague. “It's a bad game for the small stockholder.”
“It's a bad game for the small man of any sort,” said the Major. “When I was young, I can remember, a man would save a little money and put it into an enterprise of some sort, and whatever the profits were, he would get his share of them. But now, you see, the big men have got control, and they are greedier than they used to be. There is nothing hurts them so much as to see the little fellow get any share of the profits, and they've all sorts of schemes for doing him out of it. I could take a week off and tell you about them. You are manufacturing soap, we will say. You find there are too many soap manufacturers and too much soap, and so you propose to combine, and put your rivals out of business, and monopolise the soap market. Your properties are already capitalised at twice what they cost you, because you are naturally hopeful, and that is what you expected they would earn; but now for this new combination you issue............