Chapter 5 No.5

On the Eve of the Great Goldfield Smash

It was early in November, 1906. Indian Summer held Goldfield in its soft embrace. Nature wore that golden livery which one always associates with the idea of abundance. The mines of the district were being gutted of their treasures at the rate of $1,000,000 a month. Under the high pressure of the short-term leasing system new high records of production were being made. The population was 15,000. Bank deposits totaled $15,000,000. Real estate on Main Street commanded $1,000 a front foot. The streets were full of people. Every one had money.

In years gone by men had died of thirst on that very spot. Three years before there were no mines and the population numbered only a corporal's guard. The transformation was complete. Within three years the dreams of the lusty trail-blazers, who had braved the perils of the desert to locate the district, had become a towering reality. The camp, which two years before was dubbed by financial writers of the press as a "raw prospect" and a "haven for wildcatters and gamblers," had developed bonanza proportions. The early boast of Goldfield's press bureau, that Goldfield would prove to be the greatest gold camp in the United States, was an accomplished fact.

Listed Goldfield mining issues showed an enhancement in the markets of nearly $150,000,000. Stocks of neighboring camps had increased in market value $50,000,000 more. The camp rode complacently on the crest of the big boom, than which history chronicles no greater since the famous old days of Mackay, Fair, Flood and O'Brien on the Comstock.

There was no premonition that a climax must be reached in climbing values at some period, and that a collapse might be near.

Goldfield Consolidated shares were selling on the exchanges at above par, $10, or at a market valuation of more than $36,000,000 for the issued capitalization of the company. You could have bought all of the properties of this company for less than $150,000 when the camp was first located. A score of leases were operating the Consolidated's properties. The leases were soon to expire. Much market capital was made of the fact that the company would presently "come into its own."

More than 175 stocks of Goldfield and near-by camps were listed on the exchanges and curbs. All of these were selling at sensational prices and enjoyed a swimming market. The successful merging by Wingfield and Nixon of the principal producing properties of Goldfield at a $36,000,000 valuation, more than four times the value of the known ore-reserves, stimulated the whole list.

Columbia Mountain, promoted by the mergerers of Goldfield Consolidated, but excluded from the merger because not contiguous to the other integrals and because it had no ore, had been ballooned to $1.35 per share on a million-share capitalization, and stood firm in the market regardless of the fact that it was still only an unpromising "prospect." The issued stock of a dozen other companies in control of the promoters of the merger was selling at an aggregate value of many millions more. The most despised "pup" in this particular group was Milltown, of not even prospective value; yet it easily commanded a per-share price that gave the "property" a market valuation of $400,000.

Silver Pick, capitalized for 1,000,000 shares of the par value of $1 each, had scored an uninterrupted advance from 15 to $2.65 a share without a pound of ore being found on the property. The market price did not waver.

Kewanas, another million-share company, was in big demand at $2.25 per share, a valuation of $2,250,000 for the property and an advance of 2,250 per cent. over the promotion price. Kewanas's gain was also made despite the fact that mine developments had failed to open up pay ore in commercial quantities. Eight months earlier the entire acreage had been offered to me for $35,000 and I had refused to buy.

Goldfield Daisy, promoted by Frank Horton, a faro dealer in George Wingfield's Tonopah gambling joint, had been ballooned from 15 cents to $6 a share on a capitalization of 1,500,000 shares. It had never earned a dollar for stockholders, but was actually selling in the open market at a valuation of $9,000,000. The price showed no sign of weakening.

Combination Fraction, owning a few acres of ground, which was promoted at 20 cents a share on a capitalization of 1,000,000 shares, had risen rapidly, because of ore discoveries and contiguity to the Mohawk, to $8.50 a share. Stockholders gave no sign of a tendency to unload.

Great Bend, situated in the Diamondfield section of the Goldfield district, four miles from the productive zone, had been carried up from 10 cents a share to $2.50 without a mine being opened up, establishing a market valuation for the property of $2,500,000.

These are but a few of the more striking instances of price appreciations. All of these stocks, excepting Goldfield Consolidated, are now selling for a few pennies per share each, the average not being so much as ten cents. There were over a hundred other Goldfield stocks that also enjoyed spectacular market careers, on which it is now impossible to get any quotation at all.

THE RISE OF WINGFIELD AND NIXON

ANY one in Goldfield who was willing to admit that stocks were selling too high at the time was decried as a "knocker." You could borrow freely on all listed Goldfield stocks at John S. Cook & Company's bank, owned by the promoters of the Goldfield Consolidated, and the men of the camp for that reason felt that there must be concrete value behind nearly all of them. Brokers in Eastern cities reported that few of their customers were willing to take profits even at the prices to which stocks had been skyrocketed. Most mining-stock brokers of the cities had "knocked" the stocks of the camp in the early days before the advance. At this stage, when prices had reached undreamed-of levels, the brokers did not advise their customers that values had been worked up far beyond intrinsic worth. Indeed, they actually waxed enthusiastic in their recommendations to buy. Every one was a bull.

Sessions of the Goldfield Stock Exchange reflected the extent of the craze. Outside of the exchange the stridulous, whooping, screeching, detonating voices of the brokers that kept carrying the market up at each session could be heard half a block away. Later, did you find your way into the crowded board-room, the half-crazed manner in which note-books, arms, fists, index fingers, hats and heads tossed and swayed approached in frenzy a scene of violence to which madness might at once be the consummation and the curse.

George Wingfield and his partner, George S. Nixon, were the heroes of the hour. Less than five years before, Mr. Wingfield had come into Tonopah with a stake of $150, supplied by Mr. Nixon, whose home was in Winnemucca, Nevada. Mr. Wingfield had formerly been an impecunious cowboy gambler. Born in the backwoods of Arkansas, and later of Oregon, he hailed from Golconda, Nevada. Mr. Nixon, at the time he staked Mr. Wingfield and until his election as a United States Senator in 1904, was known as the "State Agent" of the Southern Pacific Company for Nevada, having succeeded on the job the notorious "Black" Wallace, who for many years handled the "yellow-dog" fund for the Huntington régime when franchises were hard to get and legislatures had to be bought. Mr. Nixon was also president of a bank in Winnemucca, which was a way station on the Southern Pacific Railroad.

Mr. Wingfield had signalized his money-getting prowess by running Mr. Nixon's $150 into $1,000,000 as principal owner of the Tonopah Club, the biggest gambling house in Tonopah, and later "parleying" the money for himself and partner into ownership of control of the merged $36,000,000 Goldfield Consolidated, which was their corporate creation.

Mr. Wingfield was said to be behind the market. He was looked upon as boss of the mining partnership, and Mr. Nixon as a circumstance. Mr. Wingfield was a conspicuous figure at nearly all the sessions of the Goldfield Stock Exchange, of which he was a member. In the early evenings, when informal sessions were held on the curb, he could also be seen in the thick of the tumult. He was on the job at all hours.

At that time Mr. Wingfield was about thirty years old. Of stinted, meager frame, his was the extreme pallor that denoted ill health, years of hardship, or vicious habits. His eyes were watery, his look vacillating. Uncouth, cold of manner, and taciturn of disposition, he was the last man whom an observer would readily imagine to be the possessor of abilities of a superior order. In and around the camp he was noted for secretiveness. He was rated a cool, calculating, selfish, surething gambler-man-of-affairs-the kind who uses the backstairs, never trusts anybody, is willing to wait a long time to accomplish a set purpose, keeps his mouth closed, and does not allow trifling scruples to stand in the way of final encompassment. Among stud-poker players who patronized gaming tables in Tonopah, Goldfield and Bullfrog, he was famed for a half-cunning expression of countenance which deceived his opponents into believing he was bluffing when he wasn't. In card games he was usually a consistent winner.

His partner, George S. Nixon, looked the part of the dapper little Winnemucca bank manager and confidential State Agent of the Southern Pacific that he was before becoming Senator. He was considerably below middle weight, and above middle girth at that part of his anatomy which a political enemy once described as seat of his thoughts and the tabernacle of his aspirations. His steel-gray eyes were absolutely without expression. Newly-rich, his money and his Southern Pacific connections had gained him a toga, but he did not carry himself like a man upon whom the honors had been thrust. Around Goldfield he strutted with the pride and gravity of a Spanish grandee.

The pair were in control of the mine, bank and market situation. Brokers, bank men and officers of mining companies waited upon them and did their bidding. At night, in the Montezuma Club, where leading citizens were wont to congregate, Mr. Wingfield would on occasion ostentatiously offer to wager that Goldfield Consolidated "would sell at $15 before $9," etc. Men with money who had flocked to the camp from every direction listened in rapt attention. At a later hour they secretly wired the news to their friends in the East. Next morning the market would reflect more public buying and still higher prices. Goldfield itself was blindly following the lead of the twain. It was indeed easier for these men to mark prices up than to put them down.

THE WINNINGS OF A TENDERFOOT

What about me? Where did I stand and what was my position at this conjuncture? Did I have foresight? Did I realize that stocks were selling at much higher prices than were warranted by intrinsic worth and speculative value? Was not the fact that the mergerers and waterers of Goldfield Consolidated were in command of the mine, market and bank situation sufficient to make me suspect that possibly the cards might be stacked and that maybe cards were being dealt from the bottom of the deck? Was I, in fact, wise to the exact situation and did I realize a smash was bound to ensue? 'Tis a pity hindsight were not foresight, for only in that event could I laurel-wreath myself.

I had been on the ground for more than two years. In reality I was still a tenderfoot. My experiences had been unique-all on the constructive side. I had mastered the first rudiments of the game, but only the first. Intrinsic value didn't figure as the only item in my conception of the worth of a Goldfield mining issue. The millionaires of the camp were not miners by profession and their judgment of the value of any mining property would not have influenced a Guggenheim, a Ryan or a Rothschild to extend so much as $4 on the development of any piece of likely mineral ground. Goldfield was a poor man's camp. And it was making good despite the croakings of school-trained engineers who had turned the district down in the early days, as they did Tonopah.

At this period I was living frugally. I never touched a card. I worked at my desk on an average of sixteen hours a day, including Sunday, and I never relaxed. Although I had arrived in the camp broke, had I been offered $2,000,000 for my half interest in the L. M. Sullivan Trust Company I think I should have refused it.

I liked my job. The leaven of my environment appealed directly to my perceptions. I was saturated with the traditions of Western "mining luck" and also with the optimism of my sturdy neighbors. These men had stood their ground in the early period of the camp's days of "trial and tribulation." They had triumphed like their forebears on the Comstock, just as did the hardy pioneers of Leadville and Cripple Creek and as their brethren of Tonopah did. Their influence over me was unbounded. I relished the work, anyhow. As a matter of fact, I had little use for money except for the purposes of business. And never a suggestion came to me that it was time for a "clean up."

The L. M. Sullivan Trust Company, of which I was vice-president and general manager, was doing remarkably well. The stocks of the mining companies that were organized and promoted by the trust company were listed on the San Francisco Stock Exchange and New York Curb and showed a market appreciation of $3,000,000 above the promotion prices. Indian Camp, promoted at 25 cents, was selling freely at $1.30. Jumping Jack, for which subscriptions were originally accepted at 25 cents, was in hot demand at 62 cents. Stray Dog, sold to the public originally at 45 cents, was active around 85 cents. Lou Dillon, put out less than a month before at 25 cents, had worked its way up to 64 cents. Silver Pick Extension, which was oversubscribed at 25 cents and commanded 35 cents two hours after we announced that subscriptions were closed, was selling on the exchanges and curbs of the country at 49 cents. Eagle's Nest Fairview, which original subscribers got into at 35 cents, was very much wanted at 65 cents. Fairview Hailstone, floated at 25 cents, was in constant demand at 40 cents.

Governor John Sparks was now president of all of these companies.

You could have sold big blocks of the Sullivan stocks at these profit-making prices on any of the mining exchanges and curb markets of the country without reducing the price a cent, so constant was the public demand and so broad was the market. With the exception of Bullfrog Rush, for which the Sullivan Trust Company had refunded the money to subscribers when the mine under development proved to be a "lemon," every promotion of the trust company showed investors a handsome stock-market profit. In the aggregate the promotion price of the seven Sullivan mining companies figured $2,000,000 for the entire capitalization. The market price of these was now $5,000,000, or an average gain of 150 per cent.

It was a record to be proud of, and I was proud of it, not alone because I was vice-president and general manager of the trust company, but also because a firm of expert accountants, recommended by the American National Bank of San Francisco to examine the books of the trust company, had reported that our assets were $3,000,000 in excess of liabilities, all of which had been gathered in about ten months' time. About $1,000,000 of this represented promotion profits. The remainder was earned by the appreciation in price of mining securities carried or accumulated through the boom.

It was the common boast of the camp that George Wingfield had "parleyed" or "pyramided" $1,000,000 which represented the profits of his gambling place in Tonopah, into ownership of control along with his partner Nixon, of the $36,000,000 Goldfield Consolidated. As heretofore related, I had experienced a lot of hard luck in missing by a hair's breadth, ownership of the Hayes-Monnette lease on the Mohawk and the Nevada Hills mine, which would have increased our profits $8,000,000 more, but I felicitated myself that I had done very well by pyramiding $2,500 into a half interest in a flourishing $3,000,000 trust company. I was vain enough to believe that my achievement was as unique as that of Mr. Wingfield, because he had had the influence of a United States Senator and the money deposited in a chain of newly established banks in Goldfield, Tonopah and other points to aid him in his operations. Against this I had not only been compelled to rely on my own resources, but was actually required to combat the work of black-mailers who from time to time attempted to levy tribute. On my failure to "come through" (I never did) they rarely hesitated to take a malevolent smash in print at the Sullivan Trust Company, because in years gone by its active head happened to have had a very youthful Past, even though they knew that Past was no longer his and he had passed it like milestones on the way.

I AM LANDED HIGH AND DRY

The Nevada State election took place in November. The Democratic ticket, headed by "Honest" John Sparks for Governor and Denver S. Dickerson for Lieutenant-Governor, was victorious. The Republican ticket, headed by J. F. Mitchell, a mining promoter and engineer, backed by United States Senator Nixon, the Republican political boss, suffered humiliating defeat.

Denver S. Dickerson was the candidate of the labor unions. During a former labor war in Cripple Creek Mr. Dickerson had been confined in the "bull-pen" when the Government intervened to quell the labor riots there. Goldfield miners to a man very naturally voted for him. Governor Sparks had accepted the renomination at the urgent request of the L. M. Sullivan Trust Company, and his victory, as well as the complexion of the ticket, was credited largely to the activities in politics of the trust company.

The trust company, while not a banking institution in the sense that it accepted deposits of cash from citizens of the town, having confined its operations to the financing of mining enterprises, loomed large on the political and business horizon because of its increasing financial and political power. The trust company carried all of its moneys in banks that were not affiliated with the Wingfield-Nixon confederacy and worked at cross-purposes with it in this particular, too.

The Wingfield-Nixon crowd had pyramided a gambling house in Tonopah and a little one-horse bank in Winnemucca into ownership of control of the $36,000,000 Goldfield Consolidated; into ownership of John S. Cook & Company's bank in Goldfield, which was credited with deposits aggregating $8,000,000; into a new bank in Tonopah, known as the Tonopah Banking Corporation, and into a newly formed bank in Reno, called the Nixon National. In politics it had succeeded in seating Mr. Nixon in the United States Senate, placing at his command the Federal patronage which goes with that exalted office.

The confederacy was reaching out.

In Goldfield it had overcome such strong banking opposition as the Nye & Ormsby County Bank and the State Bank & Trust Company, both of which were in business before John S. Cook & Company were dreamed of. It had accomplished this by loaning large sums of money to Goldfield brokers and other citizens on mining stocks of the camp at a time when this class of securities was not so readily accepted by the other banks as good collateral. In Tonopah the newly-established Nixon bank, known as the Tonopah Banking Corporation, was making gradual headway against both the Nye & Ormsby and the State Bank & Trust Company, which still carried about 75 per cent. of the business of that camp. In Reno the Nixon National found it hard to compete with such old institutions as the Bank of Nevada, the Washoe County Bank and the Farmers & Merchants National, but rumors were already in the air that the Nixon bank was soon to buy out and consolidate with the powerful Bank of Nevada.

In Goldfield the power of the confederacy was strongest in all lines except politics. There it already had its grasp on the throat of the mining and financial business of the camp, and through the out-of-town draft collection department of its bank held its finger on the pulse of the mining-share markets. Its sore spot was politics.

Wingfield and Nixon's market operations were clouded in mystery. No one knew exactly where they stood. Brokers in Goldfield and San Francisco, who had compared notes, were convinced that the two had unloaded many millions of shares of the smaller companies not included in the merger, and had raked in not less than $10,000,000 during the boom as the result of this selling. The disposal of huge blocks of stock by Wingfield and Nixon, however, was not interpreted as meaning that stocks were selling too high. The general idea prevailed that the proceeds were used to enable the confederacy to finance its stock purchases in the integral companies that were turned over in the making of the merger and to finance its new chain of banks.

About the middle of November the market for Goldfield securities took a turn for the bad. Prices gave indication of having reached a stopping place. Goldfield promoters began to complain that they were compelled to lend strong support to the market because of selling from many quarters that could not be explained. There was much market pressure. In a few days the market became unsteady, then soft, then wobbly again. In camp Wingfield and Nixon were reported still bullish.

The securities of the Sullivan Trust Company were under attack in all markets. Salt Lake and San Francisco were reported to be spilling stock. Great blocks were being thrown over.

I gave support in a jiffy.

There was no surcease.

Within ten days I was forced to throw all of a million dollars behind the market to hold it.

This didn't faze me. I was getting stock certificates for the money, and I believed they were worth the price.

But I was puzzled to determine what it was all about.

THE BEGINNING OF THE RAID

Soon it was reported to me that Senator Nixon was advising people at all points who held Sullivan stocks, or knew of anybody who held them, to unload. From San Francisco came word that a clique of brokers was operating for the decline.

On the following Monday the market on the San Francisco Stock Exchange opened strong and buoyant, and it looked for a moment as if the selling movement had collapsed. I felt relieved.

My 'phone bell rang. A stock broker of Tonopah called me on the long distance.

"Offer you 10,000 Lou Dillon at 48," he said. "Do you want them?"

Lou Dillon was a Sullivan stock that had been promoted at 25; 48 was now a point under the market, however.

"We'll take 'em," I said. "What's the matter?"

"Rumored up here that your books are under inspection by the Post-office Department. You have had five new men on your books for the past few weeks, and some one has spread a story here that Nixon has sicked the Government on to you."

I denied it, of course. The five men in question were the experts who had been sent up from San Francisco by the firm of accountants recommended to us by the American National Bank, and they were there at our own behest. The story was a raw canard.

Throughout the day the Sullivan Trust Company was called upon to stand behind the San Francisco market and take in nearly all of the big blocks of Sullivan stocks owned in the camps of Tonopah and Manhattan. Before our denials could reach the sellers the damage had been done. And it took $250,000 a day for four days to hold the market against this fresh onslaught.

Color had been lent to the wild rumors about a Postal investigation by the fact that an attack had been made on me in the columns of the Denver Mining Record a year before. Rumor said the dose was going to be repeated. In the early days of the camp, when I was at the head of the Goldfield-Tonopah Advertising Agency, I had represented the Denver Mining Record in Goldfield. As its agent I had secured advertising contracts for it which netted my agency in the neighborhood of $10,000 a year in commissions. The owners of the newspaper conceived the idea that I was making too much money on a commission basis and sent Wing B. Allen, formerly of Salt Lake, to the scene to take my place. Mr. Allen worked for smaller pay. He wanted me to divide my commission on standing business, and I refused. The publishers took Mr. Allen's part. As a result I withdrew all the advertising from the columns of the Denver Mining Record for which my agency had been responsible, and the Denver Mining Record was never able to regain the lost ground.

A short time before the raid on our stocks began Mr. Allen had been arrested in Goldfield on a warrant sworn out by L. M. Sullivan, tried before Judge Bell on the charge of extortion and bound over to the Grand Jury. At the hearing before Judge Bell the Sullivan Trust Company submitted evidence that Mr. Allen had threatened, if we did not give his paper a slice of the promotion advertising of the Sullivan Trust Company, that the Denver Mining Record would commence to attack me personally in its columns, and, because of my early Past, would do the trust company serious damage.

At the hearing despatches were submitted which were filed at the Goldfield office of the Western Union Telegraph Company by Mr. Allen, in which he had informed his paper that it had better proceed with the attack, because neither Mr. Sullivan nor myself gave indication of yielding. At the hearing, under oath and in a crowded courtroom, I openly denounced Mr. Allen and his newspaper as blackmailers of the very vilest type, and so did Mr. Sullivan. Judge Bell, on the submission by the Western Union of Mr. Allen's despatches to his paper, promptly held him for the Grand Jury.

On the advice of former Governor Thomas, of Colorado, to whom the Sullivan Trust Company paid a retainer as counsel, and who later became chief counsel for the Goldfield Consolidated, I employed Christopher C. Clay of Denver to commence suit against the owners of the Denver Mining Record. As a result I secured from them a settlement by which they agreed not to mention my name again in their paper. I was harassed at the time, or I would not have compromised. The stuff printed by the Denver Mining Record, which has been rehashed by every blackmailer who ever attempted to levy on me, was about two-tenths true and eight-tenths false. It was a literal copy of an anonymous publication put out by a set of blackmailers who had tried to circulate it years before in New York when I was head of the Maxim & Gay Company. I had spent thousands of dollars to run down the authorship then, but without avail. The lawyers had succeeded in seizing thousands of copies of the publication, and had made an arrest, but they failed to prove authorship of the screed and ownership of the paper, and the culprits therefore were not punished. In Denver when Mr. Clay applied for criminal warrants, he was asked first to furnish proof of authorship, which was impossible for us, the articles having been unsigned.

SOME PERTINENT PERSONALITIES

The same stuff has recently appeared without signature in a Goldfield paper which originally came into possession of George Wingfield through foreclosure proceedings, and in a Reno evening paper which is controlled by Senator Nixon, who owns a large slice of the paper's mortgage. It has also appeared in other papers "friendly" to Wingfield and Nixon. Tens of thousands of copies of the Goldfield publication containing the anonymous libel have been sent broadcast.

Other newspapers have reproduced the libelous stuff, some innocently and some for sordid reasons, but of this more later. My career is fraught with instances of recourse by enemies to blackmail and attempted blackmail. If I should undertake to tabulate the cases where men and interests, ranging from impecunious newspaper reporters to financial-newspaper publishers and mining-stock brokers and market operators who, from the background, publish market letters or furnish the capital for mining publications, have attempted to levy tribute or to club me into submission by the use of so vile a weapon, I should be compelled to write a big book on the subject.

And right here I should like to place myself on record to the effect that seemingly the principal shortcoming that has marked my mining-financial career has been that I had a youthful Past-a Past which during the last decade has never been taken into serious consideration by men who have held close business relations with me, but which, of course, is a thorn in the sides of men and interests whose bidding I have failed to obey.

I defy any man to cite a single instance where I was guilty of crookedness in a mining transaction or a business transaction of any kind in my entire career as a promoter. I have been fearless-too much so. I have been a rabid enthusiast. I have tried to build. I have given quarter, but have never taken any. I have been honest. Were I really dishonest, I could have prevented every publication of an attack of consequence on me by lending myself in advance to the base purposes of my traducers, and I would have millions now for having compromised with them. It is heaven's own truth that in nine cases out of ten, when I have been attacked in print, the motive of the attacking party has been base and the facts have been so distorted or misrepresented that the fabric was a lie. Nor has the cruelty of the operation stayed any one's hand.

At the very moment in Goldfield when I knew that the Denver Mining Record would not assault the Sullivan Trust Company again because of the settlement of the libel suit by my lawyers out of court, fresh rumors were spread that the Denver Mining Record was getting ready for another attack and that tens of thousands of copies of that newspaper were to be circulated. But you can't stop a rumor by the declaration of the truth, and the Sullivan Trust Company decided that it would be unwise to make a denial in print, for by so doing it would communicate to all stockholders the news that the Sullivan stocks were actually under attack and thus cause more "frightened selling."

Sight drafts from brokers in New York, Chicago, Salt Lake and San Francisco, drawn on the Sullivan Trust Company, with large bundles of Sullivan stocks attached, were pouring into our office through the local banks for presentation. John S. Cook & Company made a specialty of this department of banking, and most of the drafts on us were cleared through the Wingfield-Nixon bank. It was reported to me that Senator Nixon was openly discussing the enormous volume of stocks coming in on us and was questioning our ability to stem the tide. As a strategic measure, the Sullivan Trust Company decided to "cross" sales on the San Francisco Stock Exchange so that it might ship out of the camp, through the banks, large blocks of stock with draft attached against San Francisco brokers and thus convey to the minds of local bankers that we were selling large blocks of stock as well as buying them. The volume of the "cross" trades caused some talk in San Francisco, and was magnified by brokers operating for the decline.

THE TIME WHEN MONEY TALKS

Some of our brokers in San Francisco now demanded an independent bank guaranty that the drafts on us would be honored. We asked for a line of credit at the State Bank & Trust Company. It was promptly given. As fast as the brokers asked for a guaranty, the State Bank & Trust Company telegraphed them formally that it would honor our paper to the extent of $20,000 or $30,000 in every case. To protect the bank and in order to be able to borrow a large sum of money, should we need it in the event of another selling movement starting in, we deposited stocks of a market value of $1,500,000 with the State Bank & Trust Company, which signed a paper that this collateral was to stand against loans for any amount which the State Bank & Trust Company might make to us on open account.

A few days later we borrowed from the bank $300,000 in cash, and it was agreed that should we need $300,000 more on the same collateral, it would be promptly placed at our disposal. We did not yet need the money, but I realized the desirability of assembling cash in an exigency such as that. Nor was this an unusual proceeding. There was a time during the Manhattan boom when the overdraft of the Sullivan Trust Company in the Nye & Ormsby County Bank was $695,000. The bank held against this overdraft Sullivan stocks at the promotion price. Nearly all of these stocks at that early period were as yet unlisted.

The idea of withdrawing support and letting the market go to smash did not occur to me at all. As already stated, I believed the stocks were worth the money. But that was not the chief reason for my stubborn market position. I took great pride in the fact that every listed stock of the Sullivan Trust Company showed a big profit to stockholders. I considered the greatest asset of the trust company to be, not its money, but its prestige, and I entertained big ideas as to a future I had mapped out for the corporation. I did not suspect that an organized campaign was on to destroy us and that the dominant interests of the camp were reaching out for everything in sight. Nor did I have any use for money for hoarding purposes. The only thing that seriously nettled me was the fact that the Sullivan Trust Company had been compelled to turn borrower.

Before the first selling movement started in, our assets were $3,000,000 more than our liabilities. But this $3,000,000 was not all cash. In fact, it was represented in part by stocks which we had purchased in the market with the idea that they were good stocks to own and would show the trust company a big profit, as they had. We could have cleaned up $3,000,000 in cash, but we had not done so. Now, within a month, all of our available cash had been put into fresh lines of our own securities, we had been compelled to sell other lines out, and the corporation was a borrower. I was stubborn-too stubborn for a man who boasted of so little experience in such a big game. It was a pet belief of mine that obstacles create character. I was in the heat of a battle and fighting my way against tremendous odds. I rather liked the sensation.

Another dominant trait which, deep down, has in recent years been the keynote of my actions is the fact that my philosophy teaches me that you can't down the truth, that a lie can't live, and that justice will be finally done. Had I always put the accent on the "finally" and mixed with my philosophy a little "dope" to the effect that while justice is always finally triumphant, injustice is often victorious for a while, I might have fared better.

In a previous chapter I stated that "Wall Street deals for suckers" and that "thinkers who think they know, but don't" are the suckers for which Wall Street casts its net. I also stated that Wall Street promoters realized that "a little knowledge is a dangerous thing" and that this "little knowledge" leads astray this particular kind of sucker. In "falling" in Goldfield for the philosophy that "justice is always triumphant in the end," by swallowing it whole, and in making no allowance for the fact that justice is sometimes tardy, even though it does prevail in the end, I here decorate myself with a medal as a top-notcher in the sucker class-in the academic sense-which I have described, and which is the usual sense in which I use the term "sucker."

Again the selling ceased, and it looked as if the Sullivan Trust Company would be compelled to wait only for a general turn in the market to relieve itself of money-pressure by disposing of some of the large blocks of stock it had accumulated during the periods of heavy liquidation.

CLOUDS IN THE WESTERN SKY

A new black cloud showed itself on the horizon. A labor war was threatened in Goldfield. It was very apparent, from the conduct of George Wingfield, that he was baiting the miners, and it appeared to be the general opinion of the people of Goldfield that he was trying to precipitate trouble. The miners had asked for higher wages. The Sullivan Trust Company, which was operating seven properties with a monthly pay-roll of $50,000, was the first to express a willingness to grant the terms. Wingfield and Nixon refused. The miners asked for arbitration. It was refused. The mines were then shut down for a few days and the terms of the leases were extended.

Heavy selling in all Goldfield stocks took place during the shut-down. Rumors could now be heard on every side that Wingfield and Nixon were dumping overboard big blocks of stock. Could it be possible that they themselves were scuttling the ship that had given them such glorious passage?

Again the Sullivan Trust Company was called upon to stand behind the market.

Soon a cry of distress was heard in the camp from investors and stock brokers who had overloaded themselves with securities and who were in debt to the banks to the extent of millions, with stock of the camp put up as collateral. Inquiry revealed the fact that all Goldfield and Tonopah banks were overloaded. This condition had been brought about by the liberal terms which had been granted by the Wingfield-Nixon banks during the "ballooning" of Goldfield Consolidated, when the confederacy, according to common belief, was unloading millions of dollars' worth of stocks in the small companies and was using the proceeds to finance their purchase of the stock of several of the integrals that formed the big merger.

I began to get next to myself and to "smell a rat." I had never had so much as an argument with either Mr. Wingfield or Mr. Nixon, had never been engaged in any business transactions with them, and the campaign against the trust company, which I felt sure had been conceived at the outset in the interests of the Republican political machine, I now suspected was part of a general scheme to get hold of anything and everything that was valuable in the camp. By smashing the Sullivan Trust Company they could hurt the Democratic party of the State, with which we were affiliated, and for which it was currently believed we were supplying the sinews of war. By smashing us they might also cripple the bank with which we were doing business, and which in both Goldfield and Tonopah, particularly Tonopah, was a formidable competitor of their banking interests. And thus they might also facilitate a decline in the market which would shake out of their holdings borrowers at their banks.

I figured it out this way: Wingfield and Nixon knew that we had foolishly attempted to support the market for our stocks, that other promoters in Goldfield had done likewise, and that investors and brokers in Goldfield had borrowed heavily from all of the banks. John S. Cook & Company were calling for more collateral from their customers, and real estate was being added to the pledges of mining securities. What more easy, even though diabolical, than to "bear" the market, shake out the stockholders in various important mines of the camp, take their stocks away from them by foreclosure, and get possession again, at bankrupt-sale prices, of the millions of dollars' worth of securities which they had unloaded during the boom?

If this was the scheme of Wingfield and Nixon, what transpired could not have been patterned more perfectly.

Mr. Wingfield walked the streets day and night, armed to the teeth, and openly dared any of the miners to "get him." He threatened another shut-down, a reduction of wages, the installation of change-rooms at the mines and other dire things, all seemingly calculated to rouse the ire of the mine-workers.

The miners fell for the bait, became belligerent and nasty and did things with which the community was not in sympathy. Day by day the situation became more critical.

During one of the shut-downs which ensued, Senator Nixon revealed his hand by convening a meeting of the executive committees of the two Goldfield stock exchanges. He insisted that the exchanges close, arguing that the prices of stocks should be allowed to recede in sympathy with the labor troubles. No thought was his for the men of the camp who were committed to the long side of the market at boom prices and who had worked day and night to create the boom which had thrown into the laps of Wingfield and Nixon riches far beyond the dreams of avarice. The brokers refused to close the exchanges.

Goldfielders were slow to grasp the real import of what was transpiring. Things were very much unsettled. Optimism would rule to-day on apparently inspired rumors that the differences between the mine owners and the miners were about to be patched up. The next day gloom would pervade the camp because of the unfavorable action by the union on the peace plans. Nightly conferences were held. It was impossible to get an accurate line on the situation. Crowds gathered about Miners' Union Hall, where the meetings were held, and everyone sought something tangible on which to base his market operations. The officers of the union were in and out of the market, taking advantage of their official positions to anticipate every favorable or unfavorable development.

It was a critically sensitive market situation. The drift, however, was unmistakably downward. Values began to melt like snow in a Spring thaw.

Through it all the Sullivan Trust Company stood valiantly behind its securities in all markets where they were traded in-to the limit. I was bull-headed. I had never before been through a mining-camp boom of such proportions, and I failed to recognize that a reaction must ensue, whether it was forced by Wingfield and Nixon or not. Tens of thousands of shares of Sullivan stocks were thrown at our brokers on the San Francisco Stock Exchange and New York Curb from day to day, and we took them all in, refusing to allow the market to yield to the pressure.

FROM CREDIT TO CRASH

To convey an idea as to the standing of the L. M. Sullivan Trust Company during this crucial period, I cite an instance. Logan & Bryan, members of the New York Stock Exchange, Chicago Stock Exchange, Chicago Board of Trade, New Orleans Cotton Exchange and all other important exchanges, who conduct a leased-wire system from coast to coast at a cost of $300,000 per annum, and who have over 100 correspondents in nearly as many cities, all of high standing as stock brokers, made a tentative offer to the Sullivan Trust Company early in December to connect their wire system with our office in Goldfield and to give us the exclusive wire connection for Nevada at an annual rental of $100,000. This offer would not have been made if the credit of the Sullivan Trust Company had not been maintained at high notch, or if I, personally, had not convinced men of substance that I was strictly on the level, "Past" or no "Past."

Ben Bryan, the active member of this firm, was in Goldfield at the time. He asked as to our finances. There was present Cashier J. L. Lindsey of the State Bank & Trust Company.

"How much would your bank loan the Sullivan Trust Company on its unindorsed paper and at a moment's notice?" I asked Mr. Lindsey.

"A quarter of a million or more," answered Mr. Lindsey.

This apparently satisfied Mr. Bryan.

Our rating in Bradstreet's and Dun's was "AA1." A private statement issued by Bradstreet was to the effect that while our rating was only $1,000,000 and we claimed a capital and surplus of only $1,000,000 at the time the rating was given, it was believed in Goldfield that we were worth much more, and that we had actually understated our resources because we considered it bad policy to divulge the great profits in the promotion business.

By December 15 the condition of the Sullivan Trust Company had become about as follows:

Our $3,000,000 surplus had been reduced to $2,000,000 and all of this $2,000,000, plus the loss, was represented by our own bought-back stocks. We had no money, except about $50,000, remaining of the $300,000 borrowed from the State Bank & Trust Company. We were committed in excess of this $50,000 to brokers for stocks in transit, but by the "crossing" process we were able to maintain a chain that kept intact our reduced cash balance. We figured that a fresh loan of $300,000, additional to the $300,000 already obtained from the State Bank & Trust Company, would enable us to take up all of our paper and to discontinue the "cross" trades. We promptly arranged for the loan, which Cashier Lindsey of the State Bank & Trust Company informed us would be immediately credited to our account whenever we required the money. Interest charges were at the rate of 1 per cent. a month in the camp at that time, and for that reason I did not ask that we be at once credited with the amount. I sent over to the State Bank & Trust Company another big batch of stocks, to be held as collateral against the promised loan, and got a receipt for it stating that it was accepted as collateral on our "open loan" account.

The market in Sullivan stocks had now steadied itself and it appeared that it would be impossible for any further selling of consequence to take place. We had bought back in the open market fully 50 per cent. of all the stocks promoted by the trust company. Distribution of the stocks of our early promotions had originally taken place in such a broad way that it now appeared as if selling must necessarily become scattered. We felt somewhat crippled, but in no danger, and were "still in the ring."

DOWN WITH THE SULLIVAN TRUST COMPANY

By this time I was "all in" physically. I had a cyst, of fifteen years' growth, on the back of my head. It had become infected. I was threatened with blood-poisoning. I suffered much pain. I had been on the desert for nearly three years, without leaving it for a day. My associates insisted that I go to Los Angeles immediately for treatment and a rest. Believing that the trust company was secure, I made preparations to go. Before leaving I busied myself with the preparation of a dozen full-page reading-matter advertisements on Sullivan properties, which the Salt Lake Tribune and Salt Lake Herald had contracted to publish in their New Year's Day editions. These are an annual feature of those newspapers. I decided to "make" Salt Lake on my return trip from Los Angeles and be there on New Year's Day with our mailing-list, to superintend the mailing of the papers to all stockholders in Sullivan properties. On account of the great value which we attached to the mailing-list, I would not trust anybody but myself with the job. I spent Christmas in Los Angeles and arrived in Salt Lake on New Year's Day, ready for work.

I was busy in the Salt Lake Herald office next day when affable Peter Grant, a partner of Mr. Sullivan, with whom Mr. Sullivan had at the outset divided his interest in the Sullivan Trust Company, walked in. I asked Mr. Grant, who had remained at the helm with Mr. Sullivan while I was away from Goldfield, about business. He assured me that the loan from the State Bank & Trust Company would not only be forthcoming, as needed, but that Cashier Lindsey had informed him that we could have $500,000 instead of $300,000 additional, if we actually had to have it, and that the bank would back us to the extent of a million in all, if necessary.

On calling next morning at the office of James A. Pollock & Company, our Salt Lake correspondents, I was astounded to learn that rumors had been telegraphed to them from San Francisco that our paper was being held up in Goldfield.

"That's nonsense!" said Mr. Grant. "Why, Lindsey has given me his word, and there can't be a question about it."

"Maybe he has 'laid down' on us," I said, "and that would be --!"

"Nonsense!" said Mr. Grant. "I'll telegraph him that in addition to honoring our Goldfield paper with the money we have borrowed from him, he must wire $150,000 to our credit in San Francisco, and you and I can jump on the train to-day and go to San Francisco and support the market right on the ground. If those rumors have spread around San Francisco a lot of short-selling will take place and the market will need support."

I agreed.

So confident were Mr. Grant, James A. Pollock & Company, and I that everything was right with us that we gave and they accepted a big supporting order to be used on the San Francisco Stock Exchange during the succeeding day while Mr. Grant and I should be on the train to the Coast city.

We arrived in San Francisco late at night. A number of brokers met us and conveyed the news that the State Bank & Trust Company had "laid down" on us. In the meantime despatches to us from the cashier of the Sullivan Trust Company had piled up at the hotel. He explained the situation, which was this:

All the trains carrying drafts in the mail to Goldfield had been stalled by snowstorms two days before New Year's. The next day was Sunday. Monday was New Year's Day, a legal holiday. Thus five days' mail had accumulated, and on Tuesday the delayed drafts were presented, all in a bunch.

L. M. Sullivan, president of the trust company, who was supposed to be on deck at Goldfield, was in Tonopah, where he was reported to be in imminent danger of arrest on the charge that during a New Year's brawl he had nearly brained a chauffeur with a butt-end of a revolver.

The bank people became alarmed.

In requisitioning the $300,000 we had stated that we would call for it piecemeal, as had been our custom in the past. The five days' mail had piled up drafts totaling nearly the entire amount. I was absent from Goldfield. Mr. Grant was away, and so was Mr. Sullivan. Employees were running the business. Cashier Lindsey concluded that we were "overboard." On top of it all, Donald Mackenzie, the heaviest depositor of the State Bank & Trust Company, had that very morning drawn out a large sum, said to aggregate $400,000, and had it transferred to San Francisco. Our wires from Goldfield stated he had been frightened by rumors that the Sullivan Trust Company was in trouble and that the State Bank & Trust Company would be involved.

That settled it. The enterprise that I had built up from such a meager beginning into a $3,000,000 trust company crumbled in a heap and left us stranded on the financial shoals of an over-boomed mining camp.

SOME HINDSIGHT THAT CAME TOO LATE

I attribute the destruction of the Sullivan Trust Company to six factors, namely, (1) politics; (2) blackmail; (3) lack of wide distribution of our later promotions, we having sold most of these stocks in large blocks during the exciting boom days through brokers to speculators instead of disposing of them in small lots direct to investors; (4) my lack of knowledge of markets and inexperience in market manipulation; (5) my own stubborn pride and optimism, and (6) the failure of the State Bank & Trust Company to keep its pledge of assistance.

It is conceded in Nevada by all honest men that, without exception, all of the properties promoted by the L. M. Sullivan Trust Company had merit, and that money was lavishly provided for mine development as long as the trust company was in existence. The properties were selected with great care. They were very much higher in quality than the average. Those at Manhattan are yielding treasure to this very day, and may make good yet in a handsome way from a mining standpoint. Those at Fairview bid fair to duplicate the performance. Had I kept out of politics, been a good market general, and taken cognizance of the fact that the law of supply and demand is as inexorable in mining-stock markets as in every other line of human endeavor, I could have saved myself and associates from financial ruin.

It would have been the better part of valor to have emulated Bob Acres-back up and "live to fight another day." Instead, I attempted the impossible in my endeavor to stem the tide of liquidation, and exhausted our resources to the last dollar in buying back the Sullivan stocks at advanced figures over the promotion prices. I didn't know then, as I know now, that the accepted practice of the successful market operators is to go with the crowd-to help along an advance when the public is buying, and, with equal facility, to further a decline when everybody wants to sell. It was my first experience, and, like so many beginners, I was overconfident, lacking in judgment, and fatally ignorant of the finer points of the game.

The complete collapse of the financial structure I had labored so hard to construct came as an overwhelming blow to the camp and marked the beginning of the end of the great Goldfield mining-stock craze.

Our enemies had overshot the mark. Public confidence was irreparably shattered by the smash of the trust company, and it would have been better for Goldfield and Nevada had Wingfield and Nixon possessed sufficient foresight to go to our rescue instead of facilitating our destruction. Money that had poured into the camp without cessation month after month for mine development started to flow the other way.

Less than a year later, when Wall Street's financial cataclysm put a quietus on market activities of every sort, the great fortunes of Wingfield and Nixon themselves hung in the balance, and had it not been for a quick transaction by which the United States Mint at San Francisco forwarded by express to Reno and Goldfield $500,000 in gold, the failure of Wingfield and Nixon and their chain of banks might have happened as a fitting climax to the scheme of aggrandizement which they had fostered.

It was rumored at the time that this money had either been obtained from the Government as a deposit for the Nixon National Bank in Reno or was obtained at great sacrifice from Wall Street bankers, and that only by virtue of Mr. Nixon's position as Chairman of the Committee on National Banks of the United States Senate was he able to get the Sub-Treasury in New York to instruct the Mint at San Francisco to supply the gold at this crucial period when fiat money was current in the East. Whether it was a Government deposit or not, Senator Nixon got it-and he needed it.

Even to this day Wingfield and Nixon are engaged in an effort to shift the responsibility to me for the destruction of the great mining camp of Goldfield, which to-day marks the graveyard of a million blighted hopes.

On the eve of the Wall Street panic of 1907, every bank in Goldfield and Tonopah that had existed through the mining boom with the exception of those of Wingfield and Nixon, went to the wall, and every Goldfield broker, with one or two exceptions, went broke. The business interests of the camp suffered the same experience. Wingfield and Nixon succeeded in annexing the remnants of the Goldfield banking business, along with the control of nearly all of the Goldfield properties for which they had been seemingly gunning. Wingfield and Nixon are, in fact, to-day in control of the political as well as the banking and precious-metal mining industry of the State. They have triumphed, but Goldfield, except for the big mine and one or two others of little consequence which they do not own, has been throttled and is dying the death. Had Wingfield and Nixon played a broad gauged game, the camp would undoubtedly still be on the map and, instead of having only two or three mines, might now boast of thirty.

As quickly as possible I convened a meeting of the creditors of the Sullivan Trust Company, all of whom happened to be either Western brokers or banks. The market had gone to smash and our liabilities were $1,200,000. The assets, calculated at the low market price of the securities that was reached after the embarrassment was publicly announced, were still in excess of the liabilities. The creditors agreed in jig time that if we would turn over all of the securities they would accept 80 per cent. of the net proceeds as full payment of our obligation and return the other 20 per cent. to the trust company.

Thomas B. Rickey, president of the State Bank & Trust Company, was appointed manager of the pool, and was also elected president of the Sullivan Trust Company, which exists in moribund state to this day. Mr. Rickey had even a higher opinion of the value of the securities than we had, and he refused to sell any of them at the prices which then prevailed. He held on. During the bankers' panic of 1907 the State Bank & Trust Company failed for about $3,000,000. The Sullivan mines were compelled to shut down. Mr. Rickey still held on. Manhattan, the mining camp, struck the toboggan. The boom in Goldfield securities collapsed at the same moment. The Sullivan stocks shriveled, like the rest of the list, to almost nothing.

As far as I can learn, neither the bank or broker-creditors nor any of the members of the Sullivan Trust Company have ever received a dollar as a result of the settlement. Had the securities been disposed of immediately after the embarrassment, the trust company would have paid dollar for dollar. Those of the public who did not sell their holdings in the Sullivan companies when we were supporting the market to the extent of more than $3,000,000, lost most of their investment. Those who did sell-most of them-made money. The market value of these securities, at the height of the boom, was in excess of $5,000,000. The price paid for them by the public, as already stated, was in the neighborhood of $2,000,000.

After settling with the creditors of the Sullivan Trust Company on the basis just outlined, I departed from Goldfield as broke as when I arrived there three years before. The only money I or my partners had drawn from the business during the life of the trust company was about $5,000, just sufficient to pay living expenses. My expenses to New York, where I went to have my head operated on-are you surprised?-were supplied by the proceeds of the sale of my seat on one of the Goldfield stock exchanges, from which I netted $400. I landed back in the big city with $200 in my pocket, the exact sum with which I had left town three years before.

My reward for three years of untiring work on the desert was a big fund of Experience. Believe me, I thought it would hold me for a while! But it didn't.