of 1891 Wallace Grand Jury on Corruption
Between Labor and Capital
Failure to Control The District Attorney's Office
into SchimitzRuef Regime
of Types of Graft
Fight Trust Briberies
Park Side Bribery
Home Telephone Bribery
Pacific Telephone Bribery
Gas Rate Briberies
Corporations' Share in the Briberies
Park Side Company Board of Directors
Railroads' Board of Directors
Gas and Electric (PG&E) Board of Directors
States Telephone Board of Directors
Valley Water Co. Board of Directors
of Immunity to Certain Supervisors
of Citizens to Help Prosecute Crime
of the Prosecutions
of D.A. Langdon in 1907
of Municipal Corruption
of Supervisor Gallagher's Home
of Fremont Older
of Francis J. Heney
of Government Papers and Secrets
in the Police Department
Union Labor Party Platform
Timeline of Graft Investigations
"The Situation in San Francisco" by James D. Phelan
Boston Herald Interview With James D. Phelan
Mysterious Death of Police Chief Biggy
Fremont Older Wants Ruef Released from Prison
on the Causes of Municipal Corruption
in San Francisco, as Disclosed by the
Investigations of the Oliver Grand Jury,
and the Prosecution of Certain Persons for
Bribery and Other Offenses Against the State Part 2 of 4.
Wide Spread of the Evils Lending Support
to Corrupt Government, as Shown by the
Character of the Crimes for Which Indictments
were Brought by the Oliver Grand Jury.
was happening during the period before and after the fire is best learned
from the testimony given before the Oliver Grand Jury, and in the confession
of Ruef, which came as a result of the facts there developed. The crimes
unearthed belong to three classes customarily found in American cities,
namely those for the protection of illicit or demoralizing enterprises,
commonly known as "Police Graft", those for obtaining franchises
or privileges, known as "Franchise Graft", and those for securing
advantageous rates to corporations supplying quasi-public utilities,
known as the "Rate Graft". The French restaurant cases fall under
the head of the first class; the Parkside, the Home Telephone, the overhead
trolley deals and the prize fight monopoly under the second; and the gas
rate bribery under the third.
shall, in the succeeding sub-sections of this chapter, endeavor to
analyze these crimes and to show something of the relationship they bar
to the social, financial, political and economic organization of the city.
FRENCH RESTAURANT EXTORTIONS. There are many respectable restaurants in
San Francisco conducted by Frenchmen, but the term "French Restaurant"
has a meaning in the parlance of the town which conveys much more than
the implication that a given restaurant has a French proprietor. The term
is applied to a peculiar kind of transient house of assignation, obviously
arranged for immoral purposes, sometimes having a conventional restaurant
dining room on the ground flood, and sometimes a banquet room and a few
private dining rooms without the assignation accompaniments. The building
is often five or six stories in height, and in nearly all cases built expressly
for illicit purposes.
presence of the restaurant on the ground flood gives a certain air of legitimacy
to the enterprise. On account of the large profits from the sale of foods
and liquors to persons using the upper stories, and for the rental of the
rooms above, the prices in the restaurant are kept exceptionally low, considering
the skill of the cooks and the quality of the food served. As strict propriety
of conduct is required in the public dining room, many innocent and respectable
people patronizing the place do not stop to analyze the reason for the
low price. Behind this veil of respectability many a tragic "first
step" downward is taken.
business is very prosperous, and, as is usual, the landlord shares in its
prosperity. People of social prominence were known to accept a portion
of the profits of such establishments, through the extremely liberal rentals
paid, and the system is received with easy toleration. One of the largest
of these assignation places was located on a prominent corner of the downtown
shopping district, where hundreds of women daily passed its doors. The
building, five stories in height, had four stories devoted to the private
supper bedrooms. The land was owned in trust by one of the largest, if
not the largest, trust company in the West. A lease was sought and obtained
by a man notorious in the line of business above described; the building
was constructed by the trust company according to plans satisfactory to
him for this purpose, and the enterprise conducted there for seven years
until the building was destroyed by fire.
significant thing about such a transaction is, not that there are people
who are willing to accept money from such a source, or financiers willing
to put trust moneys to such uses, but that the facts, though well known,
did not seem to detract in the slightest from the social recognition accorded
to the persons so taking a share of the profits, while the officer of the
trust company which made the lease of that particular house situated in
the shopping district, was appointed a regent of the State University.
striking illustration of the toleration which permits a corrupt Mayor to
deal in illicit privileges and to take profits from vice, arose in connection
with a raid on a famous house of prostitutionpresumably similarly
licensedduring an earlier and unsuccessful investigation of the
Ruef-Schmitz regime, undertaken by a grand jury of which Mr. T.P.
Andrews was foreman. The immunity from police interference which this place
was accorded had earned it the name of the "Municipal Crib".
In the raid one hundred and sixty prostitutes were arrested from the one
house, and released on the deposit of bail money exceeding in all Sixteen
Thousand Dollars. It was subsequently publishedand never deniedthat
the money was furnished by a prominent liquor man who was, at the time
of the publication, the president of one of the oldest, the most powerful,
and the richest of the associations of merchants in the city. That their
president, a wholesale liquor man, might be also a wholesale backer of
prostitution, did not arouse the merchants to the extent of even making
an investigation, and he served out his term, which, at the time of the
exposure had less than one-half expired. The fact that his company
was, at the time of the raid, selling liquors to a large number of resorts
whose licenses were dependent upon the Schmitz Board of Police Commissioners
was accepted by many as a sufficient excuse for his supplying the bail.
Ruef-Schmitz organization, recognizing how easily such illicit enterprises
could be made to pay tribute, devised a plan to obtain a share of their
profits. They included in their attack the trust company's restaurant already
described. This was made the easier from the fact that one of the members
of the Board of Police Commissioners had consistently opposed the granting
of licenses to these places as soon as he had become aware of their extremely
vicious character. The Mayor inspired another member of the Board of four
commissioners, who had absolute power to grant or withhold liquor licenses,
to commence an attack on the system and to threaten refusal to renew the
licenses. The restaurant keepers soon discovered it was necessary to employ
Ruef as an attorney to defend them before the Board. It is interesting
to note that the member of the Board who had apparently conscientiously
anticipated the attack on the system, refused to cease when the matter
had been arranged, and was subsequently removed by the Mayor. Ruef was
paid large "fees" by the restaurant proprietors, and the licenses
were renewed at their expiration.
indictments were brought against Schmitz and Ruef based on these extortions,
and Ruef later pleaded guilty to the charge on one of them. Schmitz was
convicted by a jury, but the conviction was set aside by a decision of
the District Court of Appeal, on the ground of a technical defect in the
indictment. This defect also released Ruef.
PRIZE FIGHT TRUST BRIBERIES.
might be expected in a community which gilds its so-called social
evils with the accessibility and attractiveness of its French restaurants,
San Francisco still licenses prize fighting. This is done through the medium
of its limited-round boxing permits. The words "limited"
and "boxing" are a sham that deceives no one, and encounters
are openly advertised as for the various prizefighting championships either
local or for the world. The "knockout", inducing unconsciousness,
is a frequent termination of the encounter, while the "limit"often
twenty rounds, extending over nearly two hoursfinds the contestants
seriously beaten up and the audience in a frenzy of brutal excitement.
This gladiatorial brutality is apparently the sole reason for the continuance
of the fights, as there are few persons who are induced by the example
of the prize ring to take up the sport for physical development or athletic
first crime in which the Ruef-Schmitz Board of Supervisors participated
as a whole was the creation of a monopoly of these fight permits for a
body of promoters known as the Prize Fight Trust. These men paid Ruef a
large sum of money for the exclusive right to the permits, and Ruef in
turn distributed a part of the money to members of the Board. The price
was high, as in the case of the French restaurants, for there was a strong
feeling in the community against the continuance of the "fight game",
particularly because of its essential barbarity, and secondarily because,
being prohibited in most of the other large cities of America, San Francisco
became the rendezvous of a large proportion of the pugilists and their
following of trainers and rough sporting men of the entire country.
have found no indications in the prize ring graft which connect it up with
the higher financiers, or the landlord, as in the case of gambling and
the social evil, but it appears that the business is as firmly established
and as regularly organized as either of the former. the "People of
the State of California", the plaintiff in all these cases, or the
"Prosecution", as they are nicknamed, by focusing the public
attention on their character through these indictments and raids, were
placing all three of these institutions in jeopardy. the cry that the prosecution
was "hurting business" became the watchword of all those who
profit by the tenderloin enterprises, both high and low, as well as others
in more innocent employments who were led to imagine they would be better
off if the city's vices were left to run "wide open".
OVERHEAD TROLLEY BRIBERY.
so-called trolley bribery was for the purpose of securing a change
in the motive power of the roads belonging to the United Railroads of San
Francisco, from cable to the overhead electric trolley. These cable roads
had practically no loss from experimentation in the mechanism of their
cable systems and the right to charge five cents for the carriage of passengers
over the city's streets in cable cars had proved so profitablethat
is to say, the carriage after payment of all expenses and providing a sinking
fund for duplicating the plant, cost so much less than the five cents farethat
the franchises were valued at many millions more than the cost of duplication.
citizens had recognized that the cable franchises had turned out to be
gifts of millions in value to the railways, and there was a strong feeling
that if the company were to receive permits to install any other motive
power which science might have rendered cheaper, a considerable part of
the gain should be shared by the people. Negotiations for adjusting a bargain
whereby electricity might be substituted for the cable had begun in 1905
between the "Committee of Improvement and Adornment" and the
railway company, through its president.
the outside there was a demand that on certain main arteries of the city
the underground electric system should be used. The United Railroads insisted
on the universal use of the overhead trolley, and made no offer to share
the benefit of cheapened operation. Neither better seating accommodations
nor reduced fares were to be had in exchange for this valuable privilege.
The only offer, as against a grant worth many millions, was $200,000 to
the city to be expended on its parks, they will knowing that any moneys
expended on park improvement would be returned many times to the coffers
of the road carrying the people thither.
company retained Ruef as one of its attorneys in the latter part of 1905,
after the election of the Ruef-Schmitz Board of Supervisors. The negotiations
with the citizens were broken off in March, 1906, when the company announced
that it would deal directly with the Supervisors. Ruef confessed that the
arrangement had been made with him for the passage of the ordinance for
the overhead permits in the latter part of March, or early in April, and
prior to the fire and earthquakethat is, shortly after the company
announced that it would deal with the Ruef-Schmitz Board, and after
it had broken off negotiations with the Adornment Committee.
earthquake and fire of April 18, 1906, temporarily suspended transportation
on the cable lines. Only one of the United Railroads power plants for the
roads which were afterwards changed from cable to electricity was destroyedthat
of the Sutter Street system. The plant on Valencia street, which served
Market and Valencia streets, the main artery of the city, was so slightly
injured by the earthquake that its power would have been available on the
morning after, while the injuries by the fire would have delayed the resumption
of the operation of the road but a few days. The damage to the various
cable slots by the earthquake was not of a serious character, and there
seems no question that inside of a month after the fire all the cable roads
subsequently converted to electricity, save the Sutter Street system, could
have been running. The Geary Street cable road, an independent line, actually
commenced running on the morning of the earthquake. The width of the tracks
on the streets operated by the Sutter Street power house was greater than
the standard gauge for electric cars, and hence these lines were not available
for rapid conversion into electric roads. In fact no passengers were carried
on these lines for many months after the fire.
truth regarding the availability of the cable lines of the United Railroads
for the resumption of business was not disclosed by the company and no
beginning made on the comparatively slight repairs necessary to put them
in order. In the confusion and distress caused by the fire and the succeeding
struggle to rebuild the city, the facts were not investigated and the general
public believed that the cable roads could not be made available till long
after the time necessary for the installation of the trolley.
was a double purpose in concealing the good condition of the cable lines
after the fire. The company was not confined to the Board of Supervisors
to obtain an ordnance granting the permit to change its power from cable
to electricity. The San Francisco charter provides that such an ordinance
shall, on the filing of a petition signed by 15 per cent of the city voters,
be submitted to the people at the next election, and the obligations of
the city officials to submit such a proposed ordinance is mandatory.
belief that the cable lines were destroyed made many citizens so apprehensive
regarding the resumption of traffic, and hence the restoration of retail
trade, that they were willing to ignore the method of procuring the permit
from the Supervisors. Without the cables it seemed to them entirely impracticable
to wait until the November election to submit an ordnance directly to the
people. Had the city cable been restored by June 1st, and the question
of voting an overhead trolley permit had been submitted in November, five
months later, there was no question that the citizens, realizing that in
granting a permit they were giving millions to the road in increased capacity
for issuing bonds and stocks, would have demanded a substantial return
either in additional seats or reduced fares.
to the bargain struck with the railroad interests before the fire, the
road, through Ruef, bribed the Supervisors to pass an ordinance permitting
the use of the overhead trolley on such of its cable lines as the company
should deem proper. The Supervisors were paid $4000 each, save Gallagher,
who received $15,000, and Wilson $10,000. The ordinance was passed, and
the roads are now operating the overhead trolley under the rights thus
company expressed a great desire to see transportation restored in the
city streets, and for a time their good faith was not questioned. This
impression was dispelled, however, when it was discovered that instead
of tearing up the cable conduits and replacing them with the overhead system
block by block, thus leaving the remainder of the street open to traffic
by team and motor, the company put to work gangs of unskilled laborers,
which were then easily obtainable, and tore up the streets for miles at
a stretch, leaving them in that condition for many months until small gangs
of more skilled workmenmuch more difficult to obtaingradually
installed the new system.
uneven contour of San Francisco had caused the transportation companies
to install their main cable lines along the streets of easy grade, and
the shopkeepers had likewise established their stores along such streets,
both because they were natural highways for persons on foot and because
of the traffic brought by the cables.
goodwill of such enterprises was entirely dependent on the habit of the
customer to come to the particular locality of the store. The tearing up
of the streets by the railway company destroyed hundreds of these establishments
and congested the trade in the shopping streets that remained open. The
motive was not a desire to harm these shopkeepers or to favor the open
streets, but to eliminate as quickly as possible the conduit for the cable,
which the citizens experts had declared available for the underground electric
system. The confusion and lax administration of the city government made
such a proceeding possible, and it was apparent that once the conduits
were torn out the business men of these streets, having already experienced
the ruin caused to their established trades by changing from cable to trolley,
would back up the company's opposition to any civic movement for the underground
system which, though much less offensive to sight and ear, has a somewhat
higher operative cost.
Parkside Company owned a large tract of land about a mile and a half south
of Golden Gate Park, which was called "Parkside." It was planned
to subdivide this tract into small home sites, and the company desired
a franchise for an electric road to connect it with the lines of the United
Railroads. No doubt had such an ordinance for the franchise been submitted
to the people under the charter provisions to that effect, it would have
passed at the election of the fall of 1906. However, this would have required
the selection of an unimproved street, as the only improved thoroughfare
was a macadamized boulevard, and, under the city's laws, a railroad could
not be run on any of its boulevards.
firm of attorneys for the company sent one of its members, who was also
an investor in its shares to the amount of $50,000, to secure Ruef's assistance
in passing an ordinance through the Board granting the franchise. He reported
back that Ruef demanded money. Subsequently the matter was arranged; not,
however, by the attorney in question. The agreement was that the Supervisors
should declare an unimproved street which adjoineda mere surveyed
streak of sandto be the boulevard in place of the macadamized
street. The latter thus becoming an ordinary city thoroughfare upon which
rails could be laid, the franchise was to be granted over some sixteen
blocks of its length. The money was paid, but the plot was discovered before
the ordinances were passed.
one has the temerity to urge that this transaction was an extortion or
a holdup. Not only did its profitable escape from paving over a mile of
street, the absence of any attempt to submit the ordinance to the people
at the election of 1906, and the failure to seek relief from the District
Attorney, preclude such a proposition, but in this case the District Attorney
got wind of the negotiations and on asking the company whether it was being
blackmailed was assured that it was not.
most striking incident in connection with this transaction, from the standpoint
of one trying to analyze the forces which have combined to embarrass the
people in these prosecutions, was the fact that the attorney who reported
the necessity for bribery was a former judge of the Superior Court and
the then president of the San Francisco Bar Association, a man of ability,
good social and professional standing, and attractive personality. Although
it was made public that he had neither disclosed the crime to the District
Attorney nor withdrawn from the investment, nor given up his attorneyship
or his directorship in the Parkside Company, he did not resign his presidency
of the Association. An indictment (subsequently quashed) was found against
one of his partners for alleged participancy in the offering of the bribe.
This made it apparent that it would be necessary for the Bar Association
to consider his partner's disbarment, either for the bribery or for the
purchase, as the legal representative of the Company, of Ruef's influence
over the Boarda political crime as subversive of the government
as bribery itself, and hence a violation of the attorney's oath. Several
other prominent attorneys were involved in similar transactions and there
was a plain need for a vigorous investigation to determine the propriety
of their disbarment as well. A motion was made at a meeting of the Association
that such an investigation be undertaken, and the matter was referred to
the Grievance Committee. In that body a sub-committee was appointed
to follow the criminal prosecutions and determine whether any unprofessional
acts, not amounting to crimes, had been committed. Nevertheless this man
clung to his position as the head of the Bar Association, and he received
a re-election to the presidency at the next annual meeting. At a subsequent
re-arrangement of the Grievance Committee he omitted the names of
the persons who composed the sub-committee which was to make the investigation.
To such lengths was this partnership in evil for personal gain carried
that honor, reputation, dignity, are forgotten, and those who should be
the bulwark of the state have become its peril.
are glad to observe that since this time there has been a different spirit
infused in the Bar Association, and that it seems to be awaking to a keener
appreciation of the obligation it owes the profession and the community
whose laws it is organized to sustain.
Home Telephone bribery was an attempt on the part of some owners of capital
in distant cities to obtain a franchise for a system to compete with the
Pacific Telephone and Telegraph Company, the local organization. As the
Supervisors were to offer a franchise which fitted the apparatus of the
Home Company only, and hence as no one else would bid against them, and
as the Home Telephone Company had no investment in San Francisco to protect,
here, as in other cases we have considered, the claim of extortion was
not present. These promoters were seeking a greater income on their moneys
and did not hesitate to debauch the city's officials to prevent competition
and make the profit possible. The franchise was successfully obtained,
the Supervisors receiving an average of $5000 each for their votes.
PACIFIC TELEPHONE BRIBERY.
Pacific Telephone and Telegraph Company bribed the Supervisors to prevent
the Home Telephone Company, or any other organization, from obtaining a
telephone franchise in San Francisco. No attack of any kind on the Pacific
Telephone and Telegraph Company was threatened by the Supervisors, and
the sole purpose of the crime was to maintain a profit which might be cut
by the competition of business rivals. The Supervisors were paid in all
over $50,000. The managing committee of the board of directors of the company
swore before the Grand Jury that they did not know how the funds were procured
for the bribery.
GAS RATE BRIBERIES.
have seen that all the crimes we have heretofore considered, save the French
restaurant extortions, were either briberies to secure privileges from
the city without making adequate compensation, or to obtain a profitable
investment of outside capital, or to prevent the competition of business
rivals with profitable monopolies. The element of extortion of "holdup"
seems lacking in all of those, in view of the large profits or advantages
obtained, the readiness of the District Attorney to enforce the laws, and
the further fact that the citizens could have been appealed to directly
for the passage of ordinances giving the rights sought, in the event the
Supervisors improperly refused them.
gas rate briberies present a different consideration. The fixing of the
rate to be charged for any quasi-public utility should be the result
of a judicial inquiry, based upon an intelligent consideration of the elements
entering into the cost of the utility at the time it reaches the citizen.
This is, in each case, a task of large proportions and should be approached
in a purely judicial attitude of mind. Such adjudications in fact involve
larger sums and the interests of more person, and require the consideration
of more diverse and intricate factors in reaching a judgment than any other
class of litigation brought before our courts or legislative bodies.
of creating a tribunal possessed of the requisite professional training
to deal with the evidence of values and the engineering and other scientific
questions which must necessarily be considered, practically all American
communities have turned these adjudications over to the municipal legislative
boards. These are made up of men elected on platforms almost exclusively
political in their character, and who serve for short terms and hence are
extremely sensitive to the clamor of the rate-payer. Not infrequently,
the party platform pledges the nominee to decide the question in a certain
manner before he can receive his nomination, and the citizens are asked
to vote for him because he has promised that, no matter what evidence may
be presented as to the cost of the utility, he will declare the rate to
be a certain figure. The Ruef-Schmitz Board was elected on such a
platformthat is to say, the citizens had pledged their Supervisors
to adjudicate gas rates at seventy-five cents per thousand feet. The
reduction was prevented by bribes aggregating $20,000, by which it was
established that some $600,000 in a year's income was saved for the lighting
company. It would seem much less a matter of surprise that the company
should bribe under such circumstances than that a self-respecting
community should permit the continuance of the system.
a better precedent had been long established by the Spring Valley Water
Company, which in all cases of dispute as to the rates granted by the Supervisors
had sought the courts, where the rates may be set aside if shown to be
confiscatory. Under the Buckley regime the methods of this company had
been by no means above suspicion, but since the adoption of the charter
there had been no suggestion of any impropriety between it and the various
Courts were equally open to the Gas and Electric Company to set aside any
rate if it afforded a return which was confiscatory of its property. While
it is true that the company is entitled to an income which is something
more than a mere absence of confiscation, we have yet to hear it seriously
urged that this is an excuse for bribery, either in morals or at law. The
method of fixing rates, however, is radically unjust, and some rational
tribunal should be created for their determination.
CORPORATIONS' SHARE IN THE BRIBERIES.
is not in the province of this committee to fix the responsibility of the
individual human beings, other than those who confessed, for the crimes
committed for the benefit of the quasi-public companies. The beneficiaries
were in call cases corporations, and their boards of directors have absolute
power in their government. It is of course conceivable that the large sums
necessary to effectuate these briberies were smuggled though the companies'
budgets without the knowledge of some of the directors. It is also possible
that, in the case of the gas company and the railway company the moneys
were furnished by persons interested in "holding companies" owning
blocks of stock in the corporation benefited. The fact, however, that their
companies are the beneficiaries of the dishonorable acts placed upon these
directors the duty, not only of making reparation to the community for
the stolen benefits, but of lending vigorous assistance to the People and
in hunting down and punishing the criminals. We are unable to see any difference
in morals between the private person who knowingly keeps a case of wine
which his butler has bribed the merchant's clerk to sell at half price,
and the board of directors of a quasi-public corporation which knowingly
retains a franchise secured by bribery. In no case has any corporation
made reparation, and in no case has any substantial assistance been rendered
the government in unearthing the crimes or punishing the criminals.
Francisco will have many dealings in the future with the directors of these
quasi-public corporations. They will come to many agreements regarding
the supply of light, water, transportation and the telephone. Many of the
terms of these agreements are not capable of exact statement and their
performance is very largely a matter of good faith on the part of the directors
of the companies. A dishonorable management could, without detection, add
a few switches each month to the telephone bill of each business office
using its system. It could deteriorate the quality of gas till it reached
the minimum of light with the maximum of profit to the company. It could
falsify both its gas and water meters. I could, instead of supplying a
seat to each passenger, or running new lines temporarily without profit
to develop new districts and thus prevent unhealthy congestion of population,
divert the cost of such a service into interest and dividends, or watered
bonds of stock.
boards of directors which have on them many men of integrity in their private
affairs, but which are unable to discover that large sums are being paid
as bribes to secure benefits for their companies, and which retain the
benefits after they discover they have been stolen, would be any more efficient
in discovering or punishing such frauds on their patrons, is a matter for
the present and future officials of the city to solve. In answer to your
Honor's letter regarding the conditions leading to th graft prosecution,
however, we feel it within our jurisdiction to report the names of the
persons who sat on the boards of directors either during 1906, in which
time the briberies were committed, or in 1907, when the briberies were
disclosed. We have no evidence to show how far these persons were interested
in the stock of the company, and the list concerns solely their responsibility
Tobin and Mr. Kains severed their connections with the company about the
time of the disclosures. The remaining gentlemen have continued the operation
of the road under the bribed permit.
PACIFIC GAS AND ELECTRIC COMPANY.
AND TELEGRAPH COMPANY.
of San Francisco.)
have discovered no evidence of the names of the directors of the Home Telephone
directors of the Spring Valley Water Company should be named because of
the clean record of that corporation during the Payson regime. SPRING VALLEY WATER COMPANY.
to the top of the page.
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