USA > California > San Francisco County > San Francisco > San Francisco, a history of the Pacific coast metropolis, Volume II > Part 7
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These, however, were not practiced for the purpose of controlling the City government which toward the middle of the decade had become a non partisan affair, despite the fact that attempts were made to preserve party lines. The new ballot law, which grew out of the shameful effort of federal officials to compel the workingmen at Mare island navy yard to vote the narrow strip of bristol board called the "tapeworm ticket," had resulted in bringing the bosses together. There was so much "scratching" that party nominations became a negligible factor, and those who devoted themselves to political manipulation found it more expedient to put up men who would serve their purposes. Nominally they were democrats or republicans, but so far as municipal affairs were concerned they were for them- selves. This apparent abstention from municipal interference on the part of the local bosses facilitated legislative control, and resulted in greatly strengthening the power of the railroad. The political managers of the corporation were chiefly concerned in perpetuating their hold on the legislature, thus insuring the return of a satisfactory United States senator, and incidentally, by the use of the election machinery created for the purpose of maintaining power at Sacramento, keeping the delegation in the lower house of congress in line. Out of this condition of affairs, and the concurrent looseness of federal management in Washington which lent itself to a system of plundering that has since become impracticable, there arose one of the greatest scandals in the history of San Francisco and which in its consequences was more far reaching than the Vigilante uprising.
This political corruption was intimately connected with the sand lot uprising, but has been passed over by historians, most of whom have wholly omitted mention of it from the list of causes that helped to produce the discontent which brought about the framing and adoption of the constitution of 1879. In the beginning of the Seventies, William B. Carr, or Billy Carr as he was familiarly known later, had developed into a local boss of some consequence. His power was originally gained by acting as a lobbyist at Sacramento for the Central Pacific, his chief busi- ness at the capital being to keep the legislative delegation from San Francisco in line for the railroad. One of the instruments employed by him to achieve results was federal patronage, which was dispensed impartially in the interest of the cor- poration, and of those it had selected for political favor.
Bossism in the Seventles
Bogus Non- Partisanism
The Federal Ring
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At that time every federal office in San Francisco was filled with men who divided their allegiance between the government, and the interests or persons who gave them their positions. They openly identified themselves with political move- ments, a practice not forbidden at the time, and practically took charge of them. The mint, the custom house, the post office and every federal office was filled with politicians who were more than mere figureheads. The situation was not unique in San Francisco; it was paralleled in other large cities, but the remarkable wave of speculation in the early Seventies produced a condition which caused some pecu- liarities of management of the federal offices in San Francisco which were not witnessed elsewhere.
Conduct of Federal Officials
George M. Pinney and the Bosses
In the early part of the decade one Oscar H. La Grange was made superin- tendent of the United States mint. He was an appointee of General Grant and his selection was probably due to his service as a soldier in the Civil war. He was a capable but a very facile man, and easily accommodated himself to the idea that his position was to be used for the benefit of the party of which he was a member, and incidentally to promote the political fortunes of individuals who were in the saddle at the time. His chief clerk was George M. Pinney, a man of more than ordinary ability, whose talents, however, were oftener exercised in the promotion of his own fortunes and of the band of politicians who had put him in place, than in performing the duties of his office. It was subsequently disclosed that he was so useful politically that even the limited attention he gave to his clerical duties in the mint detracted from his value. Consequently another job was made for him, which had few or no irksome routine attachments, and left him free to devote himself to his own and the interests of his friends. He was made the clerk of United States Naval Pay Inspector Rufus C. Spalding. The acceptance of this position entailed the enlistment of Pinney in the navy. The emoluments were small, but that was a matter of small consequence to Pinney as the sequel will show. Indeed, it is asserted, that he turned over his salary to someone else, which is not impossible but not very probable as he really did all the work, and practically took all responsibility from the shoulders of the pay inspector who, when the ex- posure was made, admitted that he hardly knew what was going on in the office over which he had nominal charge.
While Pinney was acting as navy pay inspector's clerk he bought a broker's seat in the Mining Stock Exchange. He was not as continuously on the floor as other members who were solely engaged in executing orders, but he made excellent use of the facilities of the board, and it is believed that during 1872-3 he was ahead in the speculative game to the extent of a million or more. His luck, as in many other cases, tempted him further. If his accounts of his transactions are true he had early associated himself with Carr in mining ventures in Idaho and other places, some of which proved unprofitable and finally wiped out his fortune and more, for when he became embarrassed he resorted to practices which made it seem prudent for him to temporarily absent himself from California.
On the 1st of September, 1875, Pinney disappeared from his wonted haunts and it soon transpired that he had fled the country. His flight created a mild sen- sation, more social than political or financial in its character. It soon leaked out that he had sailed on a British ship named the "Baron Ballantyne," and that he was accompanied by a notorious woman. As Pinney was a married man, and had
Pinney Becomes a Millionaire
Flight of Pinney
LICK MONUMENT TO PIONEERS OF CALIFORNIA, IN MARSHALL SQUARE
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established social connections, the interest in his flight centered upon the desertion, diverting attention from other facts of more general concern, which were revealed later in a highly sensational fashion. About a year after his sudden departure interest in the matter was revived by his abandoned wife obtaining a divorce. This gave occasion for a few days' talk, in which but scant attention was paid to his financial relations. The statement that he was in debt, and had defrauded numer- ous friends and others was widely disseminated, and there were hints that certain banks had been incautious in their dealings with the spectacular clerk and poli- tician, but these rumors died away and were soon forgotten.
If Pinney had been content to remain away from California the course of events might have shaped themselves differently, but he was not. After leaving the City on the "Baron Ballantyne" he got tired of the woman who had accompanied him, and according to his own story he made an amicable arrangement with the captain of the ship, by which the latter acquired possession of the "lady," and for a fur- ther consideration of $2,000 he put his vessel out of her course and landed the fugitive at the port of Pernambuco in Brazil. From thence Pinney took another ship, rounded Cape Horn and went to Valparaiso. He also made a voyage to the Society islands. In his subsequent relations of his wanderings Pinney was not accustomed to stating his reasons for making these voyages, but he allowed it to be inferred that a suddenly developed taste for sea air was responsible for his uneasiness.
It was generally supposed at the time of his flight that Pinney had carried a large sum of money with him, but he afterward declared that he had only $12,000, which amount was received for the sale of his seat on the stock board, which was negotiated for him by Carr. On the other hand it was stated by persons who had heard of his mode of life in Valparaiso that he was gambling heavily and spending money with a free hand in that city. Be that as it may, Pinney at last reached the end of his tether. Although he was discreetly silent regarding details, it is known that he had vainly sought to persuade Carr and others with whom he had operated to supply him with additional funds, but they flouted his requests and disregarded his threats, imagining that he would not dare to return to the United States. But they were mistaken. One fine day Pinney turned up in Washington and went straight to the navy department, where he surrendered himself as a de- serter. Rather inconsistently he later stated that he had been constantly tormented with the fear that he would be arrested but his subsequent course indicates that he was under no such apprehension. He had no reason for anticipating that Carr and his political associates would venture to attack him with such a weapon. They might have set machinery in motion which would have resulted in his capture, but they could not prevent his speaking if he were court martialed, and above all things they desired to have things kept quiet.
Pinney was of a different mind. Having practically made his peace with the navy department officials, who regarded him as a white elephant, and concluded to left him shift for himself, the fugitive clerk betook himself to the office of the "New York Sun" and there unbosomed himself of a story which was published simul- taneously in New York and in the "Chronicle" of San Francisco on the 7th of May, 1877. At that time the "Sun" was making a vigorous assault on Naval Sec- retary Robeson, and the statements of Pinney substantiated its accusations against
The Wanderinge of Pinney
Pinney Surrenders as a Deserter
Pinney's Disclosures Create a Sensation
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that official which had been made the basis of an investigation by a committee of the house of representatives. The story of Pinney, therefore, proved as sensational in New York and Washington as it did in San Francisco, although it only devel- oped serious consequences in the latter city, where the revelations of the absconding clerk shook the political and financial world from center to circumference. The major part of Pinney's story, as told in Washington, was devoted to an explanation of the doings of the navy pay office which, he declared, had been manipulated in the interest of a gang of contractors and politicians. His disclosures implicated Senator A. A. Sargent and Congressman Horace F. Page, whom, he declared, were leagued with men named Montagnie, Hanscom and Jordan, all of whom had inti- mate relations with United States Secretary of the Navy Robeson, who had afforded these contractors unusual facilities for making money. Sargent and Page, in return for the assistance rendered these contractors, were permitted to manipulate the federal offices to advance their political interests. Billy Carr, the local boss, was the active manager of affairs in San Francisco, and in the state, and kept the fences of the politicians mended while they were absent from California.
Naval Abuses in the Seventles
At this particular time the attitude of the democratic house of representatives towards naval construction was extremely hostile. It was charged that the navy department, under the control of Robeson, was corruptly administered and appro- priations for new vessels were refused. The policy met the approval of the coun- try, the people generally being opposed to the expenditure of large sums of money for the maintenance of a big army and navy. But congress, while denying money for the construction of new vessels, made appropriations for the purpose of keep- ing in repair those on the list which were deemed available for use, or could be made so by overhauling them. The result was that, under the guise of making repairs, practically new ships were built, and the opportunities for squandering money were multiplied. It was under the operation of this system, and through the in- fluence of Robeson, that the contractors named were put in the way of profitable jobs and were given practical control of the furnishing of naval supplies on the coast; and it was to make things easy for them that Pinney was placed in the navy pay inspector's office in this City. As already related Pinney had purchased a seat on the stock board and was speculating heavily in 1873 and with some suc- cess. He was not the sort of man to resist temptation and when the opportunity presented itself to enlarge his operations by making use of the facilities which were created to promote the pecuniary interests of the contracting group he promptly seized it, and apparently extended the fraudulent practices.
Navy Pay Certificates
According to Pinney's story, afterward confirmed in court, and by subsequent developments, a species of negotiable paper, authorized and sanctioned by Secre- tary Robeson, was issued for the benefit of the contractors Montagnie, Hanscom and Jordan. This paper was known as navy pay certificates. They purported to bind the government to pay the three men mentioned for work done or material furnished whenever the funds therefore should be available. These certificates were deposited in various banks as collateral for loans made to the contractors and to other parties. Among thie latter Pinney figured largely. To what extent is unknown, and whether his borrowings were always on his own account is equally uncertain. But that he availed himself freely of his privilege there is no doubt.
Pinney's Disclosures
When Pinney's disclosures were published in the "Chronicle" on the morning of May 7, 1877, Senator A. A. Sargent and George C. Gorham were in the City.
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Page had returned to the coast from Washington, but had at once repaired to his home in El Dorado county. Carr lived in San Francisco. Gorham was secretary of the United States senate and his relations with Sargent were close. He was referred to in the article as one of the group constituting what the "Chronicle" called the "Federal Ring." He had been prominently identified with the repub- lican party in California and owed his position as secretary of the senate through the influence thus gained. La Grange, the superintendent of the mint, was also included in the group, and Carr was credited with the active manipulation of the local machinery. The accused men were greatly enraged at the publication, and at once took steps to have the "Chronicle" punished. Efforts were made to procure indictments for criminal libel in several counties simultaneously, but they proved unsuccessful everywhere, excepting in Page's home county where two trials were subsequently had, both of which resulted in disagreements of the juries. The "Chron- icle," however, appealed its case to the people of the state, and at the election in the ensuing November a legislature overwhelmingly democratic in complexion was chosen, a result wholly due to the exposures made by the paper, which thoroughly investigated all the ramifications of the frauds alleged against the so-called ring.
In addition to the criminal libel case tried at Placerville several civil suits were brought against the "Chronicle" none of which, however, were pressed. Among these was one filed at the instance of Page, based on the charge made by Pinney that he had loaned the congressman several thousand dollars, which was used in buying votes in his district at $3 per head. Although this statement was made solely on the authority of Pinney the "Chronicle" had no doubts about its accuracy. When challenged by the suit to prove the allegation the paper had no difficulty gathering information which proved conclusively that votes had been bought in San Leandro, Pleasanton and other parts of Alameda county by wholesale and at the figure named. Among the facts developed by the "Chronicle" was that of the organized and successful effort of Haggin, Tevis and Carr to secure large tracts of land under the Desert Land Act. Simultaneously with these exposures the "Chronicle" also undertook to put an end to the timber land frauds which were being perpetrated on an extensive scale. Although abundant proof of the irregu- larities was furnished it had no effect at Washington, the public land office at that time being completely under the control of a corrupt gang, whose operations were carried on as boldly as those of the whisky ring, whose frauds were practiced on a colossal scale at the expense of the people.
Although the interests at Washington were powerful enough to stave off in- quiries into the land frauds, the showing made by the "Chronicle" profoundly im- pressed the people of California, and served to greatly accentuate the already for- midable opposition to land monopoly that had theretofore been largely based on indisposition of the owners of large Spanish and Mexican grants to part with their holdings, and to the growing perception of the fact that the managers of the Cen- tral Pacific had flagrantly evaded the provisions of the Land Grant Act, which re- quired the railroad to sell the lands received from the government at not more than double the minimum price at which public lands were sold, by creating another cor- poration, of which they were the sole members and selling the lands granted by congress to themselves. As Sargent, Page and the others accused by Pinney were Vol. II-4
Votes Bought at $3 Apiece
The Anti- Monopoly Spirit Aroused
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zealous servants of the railroad the corporation did all in its power to embarrass the paper which had made the exposure.
Object of Pinney's Exposure
The obvious purpose of Pinney in making the exposure was to force the men with whom he had formerly worked to repair the wrongs which he charged them with inflicting upon him by their desertion. He measurably succeeded in this pur- pose. In the first trial at Placerville he was the "Chronicle's" principal witness, and the evidence he gave, although it was only part of the truth, was of such a character that it must have resulted in an acquittal in any other place than Page's home town. But at the second trial Pinney suffered a complete lapse of memory, and was unable to recall many of the details freely related by him when first put on the stand. His changed attitude was rewarded by a renewal of the old time intimacy with the men he had pilloried in his confession. Several civil suits brought against him were either withdrawn or not pressed, and presently he took on the appearance of a prosperous man about town, living at the best hotel and dressing in excellent taste. He followed no particular occupation, but was reputed to be dabbling in stocks.
Banks Ruined by Pinney
The banks on which he had imposed the worthless navy pay certificates were not equally flourishing. The Savings and Loan Society and the Masonic bank, which held his notes to the amount of over a half a million had brought suit against him, probably in the hope that he would substantiate the assertion that he had made in the Washington narrative that Billy Carr and others were interested in the undertakings for which the money was borrowed, and the worthless certificates given as collateral, but they were unsuccessful in bringing about such a result. Pinney had shot his bolt and had accomplished his purpose. The two institutions were powerless, for the paper accepted by them as security was not forged. The certificates when analysed were seen to be mere promises that in certain contin- gencies the navy pay office would pay certain moneys to persons entitled to draw them if the contingencies occurred. In a certain sense they were not even irregular, for the method, according to the statements of Spalding, was not disapproved by the department in Washington, and Pinney put the matter still more strongly by as- serting that it actually had the sanction of the secretary of the navy.
Whatever doubt may exist concerning the character of the navy pay certificates there is none about the result of accepting them as collateral. The two banks mentioned were driven to the wall. In 1878, when the commission created by the legislature of 1877-78, as a result of the scandalous laxity of bank management, began its investigations of the condition of the banks at San Francisco, they were the first to be closed. A singular reticence concerning the nature of the troubles that brought about the establishment of the much needed bank commission has been manifested by writers who have dealt with this phase of the subject. It has been made to appear that the failure of the Bank of California was responsible for all the financial difficulties of the three succeeding years, but it is impossible to connect that event directly with the closing of the Masonic Savings bank and the Savings and Loan Society. As already stated the rehabilitated Bank of Cali- fornia met all its obligations a few weeks after it resumed business. Excessive speculation was the cause of the failure of the greater institution, gross misman- agement and utter disregard of the principles of sound banking explain the mis- fortunes of the savings banks.
Mismanaged Savings Banks
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This mismanagement was openly commented upon after the revelations of Pin- ney, but the storm of criticism only began to rage in real earnest when the com- missioners found it necessary to close in quick succession eight banks. The first of these was the Masonic Savings and Loan, which owed its depositors $1,150,900; it was followed by the Farmers and Merchants, with deposit liabilities of $373,675; then the French Savings and Loan Society, with deposits of $5,503,100 closed. The Odd Fellows Savings bank experienced a heavy run in the fall of 1878 and tried to save itself by reorganization, but after a protracted struggle it went to the wall on the 5th of February, 1879, owing depositors $2,117,100. In one case, that of the Pioneer Loan and Savings bank, known as Duncan's, which closed its doors in 1877, even the sorry excuse of mismanagement could not be urged. The manager was a scoundrel pure and simple, who baited his hook with high interest rates to depositors, and caught the credulous with ease. His record was part of the criminal annals of the City, and hardly deserves to be included in a recital of financial transactions.
Prior to 1876 there had been absolutely no supervision by the state of the financial institutions within its borders. In the year mentioned a feeble effort was made in that direction in an act which compelled banks to make reports of a uniform character, but the disclosures of these publications were of little value, as the opportunity to check their accuracy was lacking. The legislature of 1877- 78 sought to remedy this defect by the creation of a commission of three members at a salary of $3,000 each, and traveling expenses to the amount of $1,500 per annum. One clerk at $1,800 was provided, $900 was allowed for rent and $200 for fuel, stationery, etc. One of the anomalies of the period was the antagonism aroused by the proposal to create this modest establishment. Had the banks op- posed the formation of the commission, considering all the circumstances, their opposition would not have been strange, for they had much to conceal; but it came from an entirely different source. It was the "sand lot" that voiced the loudest objection and it was based chiefly on the assumption that the object of the legis- lation was to make places for politicians, and that the commission would be con- verted into an instrument to screen the banks instead of exposing them.
The act was passed despite opposition on the 30th of March, 1878, and the first commissioners appointed were Evan J. Coleman, Robert Watt and James P. Murphy. If there was any sincerity in the expressed belief that the new board would accomplish nothing it was disappointed by the result, for within two years after its creation it compelled eight different institutions to close their doors, and made some cautious approaches towards the introduction of a system which de- manded that the savings banks should exercise something like care in the accept- ance of securities for loans. Their efforts were facilitated by the distrust created by the exposure of the recklessness of management, which resulted in a reduction of savings banks' deposits amounting to $24,000,000, and a contraction of the re- sources of the commercial banks amounting to $6,000,000, although the deposits in the latter had increased $4,000,000-a serious impairment of the banking power in the short period mentioned.
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