of grain to be at the same time dealers in grain, and thus enabled to select and set aside for their own purposes the best of what may come under their charge. No objection is made to all of the grain coming to Chicago that can be legitimately brought here, but it is against public policy, and it is not the legitimate function of a public warehouseman operating under a license from the State and the rules of this board to be so engaged. It is the dual capacity that we object to, and that is prohibited by law. Last spring the quality of millions of bushels of grain stored in public warehouses was adversed by interested speculators. This board, through its officers, sought to have such an investigation made as would refute the slander against grain stored in public warehouses and restore the confidence of buyers and holders of property made regular by your rules. But every elevator proprietor in Chicago joined in refusing permission to your representatives to make that necessary and wholesome examination. They knew the grain was above the average in quality and condition, but were willing to have it inspected in order to increase the carrying charges. The present monopoly is against everything and everybody but themselves. By the rankest and most brazen manipulation they seek to control the price and movement of our commodities and force every buyer and every seller to their terms. A year ago they were selling spring wheat at 5 or 6 cents premium. Now they are selling winter wheat at a like premium, while they have not been the owners of either. While they are nominally the custodians of your property, they are able, in violation of the laws of the State, to set aside and sell at a premium millions of bushels every year not owned by them, but in their custody as warehousemen. Would any court permit a trustee of an estate to thus handle trust funds for his own advantage? This gain is not the legitimate profit of a public warehouseman. It belongs to you, or whoever owns the grain. The lawful profit of the business of public warehousing has been attractive enough to create an enormous system of elevators. If the business has been overdone, it has been due to the stupidity of those engaged in it. This board will cheerfully concede a fair return on capital actually employed in the operation of elevators, but will forever resist the use of its machinery for unjust or illegal practices. If it is possible to close the courts against us, we have remedies within our own association that neither money nor influence can buy. The pulse of business is felt in the great exchanges of the country, and nowhere is it more sensitive than in this board of trade. What affects the weal or woe of the commerce of this country is immediately reflected here, so that no class of business men can have greater interest than we in the pending practices in national finances. [Extract from address delivered in January, 1897.] The question between the board and the elevator proprietors has reached a decision in the circuit court in our favor on every controverted point. The decision of Judge Tuley is so comprehensive and convincing that the elevator proprietors can hardly hope to have it reversed by the Supreme Court, though they have taken an appeal. I earnestly recommend that no backward step be taken by this board, if there has been nothing in the advance of the past year to make the elevator monopoly more incurable. Their control of the property of which they should be simply guardians or trustees, the property which does not belong to them, but to members of this board to whom they have sold it, has enabled them not only to manipulate prices, but to create intolerable obstruction to the free current of commerce which is the most important function of this board to foster. The legitimate storage charge is no longer a prime consideration with them. Their alliance with the railroads and the privileges and immunities enjoyed by them on this board enable them to levy tribute on the producer and consumer alike, while the centralization of the control of stocks of grain in store robs the banker and the common carrier of the legitimate advantage of competition that would come with the restoration of the natural order of business. This board has never questioned the right of any of its members to deal in grain an store it in their own warehouses, but when its members elect to do business they should not at the same time become public warehousemen with the stamp of regularity upon their warehouse receipts. The opportunity to select and sell at a premium the best of a grain while offering the holders of their receipts the poorest is a manifest injustice and contrary to public policy. The market price is always based on the least desirable, while for the better quality such a premium as the necessities or desires of consumers may warrant is exacted by the custodian of the property, who do not even pretend to be its real owners. The well-known fact that the poorest quality that is deliverable on contracts established the price of the entire stock in store, and to a certain extent the price of the general market is a constant injustice to producers for all the territory contributary to our market. It is an application of the principles of the Gresham law to the familiar operations of the grain market that must be intelligible to anybody. The CHAIRMAN. The committee will stand adjourned at this point until 2 o'clock this afternoon. AFTER RECESS. The committee reassembled at 2 o'clock STATEMENT OF MR. SAMUEL H. GREELEY-Continued. The CHAIRMAN. The committee will come to order. Mr. Greeley, you may proceed with your statement. Mr. GREELEY. I would like to be certain, Mr. Chairman, that this introductory statement of this morning, with quotations from President Baker, will be inserted in full in the record. The CHAIRMAN. They will be inserted, of course. You understand we do not want to crowd the record with any unessential matters, but if you deem it important to put in the full opinion there, that would be all right. Mr. GREELEY. I want to quote from the opinion of Judge Tuley and would like also to include that brief quotation from which I read from his opinion. The CHAIRMAN. There will be no objection to that at all. Mr. GREELEY. The opinion of the supreme court sustaining the opinion of Judge Tuley is very important in the conduct of this investigation, to know that the Supreme Court of Illinois absolutely sustained the lower court in establishing the fact that a public custodian could not himself deal in grain while he acted as trustee of the property of others in the same elevator. I did not, however, previous to the lunch hour, quote anything from the supreme court, and there are only two or three brief paragraphs here that I want to simply refer to, because I think it is very essential. The Supreme Court says, in one paragraph Mr. MANAHAN. Give the name of that case. Mr. GREELEY. This is a supreme court decision, June 18, 1898, affirming Judge Tuley in the elevator cases, People v. Armour Elevator Co. and others, where in Henry S. Robbins conducted the suit for the attorney general and the board of trade. The supreme court said in that decision: It is a firmly established rule that where one person occupies a relation in which he owes a duty to another he shall not place himself in any position which will expose him to temptation of acting contrary to that duty or bring his interest in conflict with his duty. This rule applies to every person who stands in such a situation that he owes a duty to another. And courts of equity have never fettered themselves by defining particular relations to which, alone, it will be applied. They have applied it to agents, partners, guardians, executors, administrators, directors, and managing officers of corporations, as well as to trustees, but have never fixed or defined its limit. The rule is founded upon the plain consideration that the one charged with duty shall act with regard to the discharge of that duty, and he will not be permitted to expose himself to temptation or be brought into a situation where his personal interests conflict with his duty. The court is very broad on that, you will notice, that where a man conducting a public elevator assumes custodianship of the property of others he should never for a moment, in accepting that position, permit himself to be placed to the temptation of dealing in grain him self, or as to whether or not his own self-interest shall be brought in conflict with his duty to the public. In the mixing of grain the supreme court says: Such indiscriminate mixing gives an added quality of grain to all holders of warehouse receipts. Where the warehouseman is a buyer, the manipulation of the grain may result in personal advantage to him. Not only is this so, but the warehouse proprietors often overbid other dealers as much as a quarter of a cent a bushel, and immediately resell the same to a private buyer at a quarter of a cent less than they paid, exacting storage, which more than balances their loss. In this way they use their business as warehousemen to drive out competition with them as buyers. The warehouseman issues his own warehouse receipt to himself. As public warehouseman he gives a receipt to himself as individual and is enable to use his own receipts for the purpose of trade and to build up a monopoly and destroy competition. From the strength of that language, when we come here and maintain that there is a monopoly, we are absolutely approved in our position by the decision of the supreme court: The defendants answer that the practice had a beneficial effect upon producers and shippers and naturally were able to prove that when, by reason of their advantages, they were overbidding other dealers there was benefit to sellers, but there was an entire failure to show that in the general average there was any public good to producers or shippers. The paragraphs quoted for reference are marked "Decision of supreme court," marked with red line and the word "quote." This I should like to have inserted in the record. (The paper referred to is as follows:) [Supreme court decision. (June 18, 1898.) Affirming Judge Tuley in Elevator cases. People ex rel. v. Armour Elevator Co., Central Elevator Co., Geo. A. Seaverns, Chicago Railway Terminal Elevator Co., Nebraska City Packing Co., Alex C. Davis & Co., South Chicago Elevator Co., Charles Counselman, Chicago Elevator Co. John P. Wilson, John J. Herrick, Jacob R. Custer, Jas. E. Munroe, solicitors for elevator companies. Edward C. Akin, attorney general, and Henry S. Robbins, for people.] It is a firmly established rule that where one person occupies a relation in which he owes a duty to another he shall not place himself in any position which will expose him to temptation of acting contrary to that duty or bring his interest in conflict with his duty. This rule applies to every person who stands in such a situation that he owes a duty to another, and courts of equity have never fettered themselves by defining particular relations to which alone it will be applied. They have applied it to agents, partners, guardians, executors, administrators, directors, and managing officers of corporations, as well as to trustees, but have never fixed or defined its limits. The rule is founded upon the plain consideration that the one charged with duty shall act with regard to the discharge of that duty, and he will not be permitted to expose himself to temptation or be brought into a situation where his personal interests conflict with his duty. Courts of equity have never allowed a person occupying such a relation to undertake the service of two whose interests are in conflict, and then endeavor to see that he does not violate his duty, but forbids such a course of dealing irrespective of his good faith or bad faith. If the duty of the defendants, as public warehousemen, stands in opposition to personal interest as buyers and dealers in grain storing the same in their own warehouses, then the law interposes a preventive check against any temptation to act from personal interest by prohibiting them from occupying any such position. The public warehouses established under the law are public agencies, and the defendants, as licensees, pursue a public employment. It is clothed with a duty toward the public. The evidence shows that defendants, as public warehousemen storing grain in their own warehouses, are enabled to, and do, overbid legitimate grain dealers by exacting from them the established rate for storage while they give up a part of the storage charges when they buy or sell for themselves. By this practice of buying and selling through their own elevators the position of equality between them and the public whom they are bound to serve is destroyed, and by the advantage of their position they are enabled to crush out, and have nearly crushed out, competition in the largest grain market of the world. The result is, that the warehousemen own three-fourths of all the grain stored in the public warehouses of Chicago, and upon some of the railroads the only buyers of grain are the warehousemen on that line. The grades established for different qualities of grain are such that the grain is not exactly of the same quality in each grade, and the difference in market price in different qualities of the same grade varies from 2 cents per bushel in the better grades to 15 cents in the lower grades. The great bulk of grain is brought by rail and in carloads and is inspected on the tracks, and the duty of the warehousemen is to mix the carloads of grain as they come. Such indiscriminate mixing gives an average quality of grain to all holders of warehouse receipts. Where the warehouseman is a buyer the manipulation of the grain may result in personal advantage to him. Not only is this so, but the warehouse proprietors often overbid other dealers as much as a quarter of a cent a bushel and immediately resell the same to a private buyer at a quarter of a cent less than they paid, exacting storage which more than balances their loss. In this way they use their business as warehousemen to drive out competition with them as buyers. It would be idle to expect a warehouseman to perform his duty to the public as an impartial holder of the grain of the different proprietors if he is permitted to occupy a position where his self-interest is at variance with his duty. In exercising the public employment for which he is licensed he can not be permitted to use the advantage of his position to crush out competition and to combine in establishing a monopoly by which a great accumulation of grain is in the hands of the warehousemen, liable to be suddenly thrown upon the market whenever they, as speculators, see profit in such course. The defendants are large dealers in futures on the Chicago Board of Trade and together hold an enormous supply of grain ready to aid their opportunities as speculators. The warehouseman issues his own warehouse receipt to himself. As public warehouseman he gives a receipt to himself as an individual, and is enabled to use his own receipts for the purpose of trade and to build up a monopoly and destroy competition. That this course of dealing is inconsistent with the full and impartial performance of his duty to the public seems clear. The defendants answer that the practice had a beneficial effect upon producers and shippers, and naturally were able to prove that when, by reason of their advantages, they were overbidding other dealers there was benefit to sellers, but there was an entire failure to show that in the general average there was any public good to producers or shippers. The answers also set up, and it is claimed here, that there was, at the time of the passage of the warehouse act, a general custom of warehousemen to deal in grain and to store it in their warehouses, and that the law was passed with reference to that existing custom. The evidence fails to establish any such custom. The amount so bought and stored or dealt in up to the year 1885 was trifling, and the first time when there was any material increase was in 1890. Many witnesses who would have known if such a practice or usage existed united in denying all knowledge of it, and many of them testified that they never knew or heard of any elevator owner buying or selling grain prior to 1885. There was no such custom. Having obtained the decision of the Supreme Court, having settled this vital question, then we proceed further in the conduct of this warehouse business, and what do we find? We find in the year 1908 a number of warehouses and public warehouses continuing to do business and violating the law. In connection with the public houses as law violators, we see a number of private elevators, mixing houses or hospitals, used for the purpose of mixing grades, storing in public houses, and selling ahead for future delivery on the system which I have previously described. And the list of these Chicago public warehouses, including every public elevator in the city, except one, in the grip of this combine, I wish to offer in evidence, in order to show that even at that time, 1908, there was in the grip of this monopoly every public elevator in the city of Chicago, licensed to do business by the Chicago Board of Trade under their rules to be "regular," which term I will explain in a short time. These private warehouses in this list are known as hospitals, where the poorly inspected grain may be doctored with grain of a higher grade and loaded into public houses, and the mixture loaded onto the public in future transactions. This is in control of the same five concerns which control the list of public elevators, page 2 in document "for reference called Bulletin No. 1." In 1908, to show how these men operated, and to show that a monopoly really did exist at that time and was discovered, I want to call attention to a pooling agreement whereby certain parties entered into an agreement and a working pool of public warehouses in Chicago. All public warehouses in Chicago, except one, were involved in an agreement to hold grain in Chicago, rob the public of storage, depreciate values, and generally debauch the grain trade. The essence of that agreement is as follows: A trustee handled the daily reports, collected and disbursed the earnings, arbitrated disputes, etc. He received a salary and was provided with office help. Sixty per cent of the earnings was paid to the trustee, and by him distributed to all parties to the agreement. No party to the agreement could, except under heavy penalty, remove grain from the warehouse of any other party to the agreement and store it in his, its, or their warehouse. All agreed to do all "lawful things" to prevent any "outside" warehouseman from removing grain from trust warehouses and storing it in warehouses of said "outside" warehousemen. Should any "outside party" have withdrawn grain from the trust houses and stored it in his-the outside party's warehouse, "A memorandum of record" was provided for, and if said "outside party" wished to return similar grain to any trust house, it was provided that the trust house accepting such grain from the offending "outsider" - unless he returns all he has taken out shall not receive its pro rata of the earnings. Warehouses partially or totally destroyed by fire were to continue to draw their pro rata of earnings from the pool on such grain as had been withdrawn prior to the fire. Severe penalties are provided in case of violation of the agreement Peavey Grain Co., by James Pettit. The pool was signed by him. South Chicago Elevator Co., by J. J. Stream, president. J. Rosenbaum, by E. F. Rosenbaum, by power of attorney. Those people signed that Grain Trust pool which was unearthed in 1908, and when the pool was discovered they promptly discarded it and did not continue their working operations under that pool, fearing the results that might happen on account of its discovery. In order to remove any question of doubt as to the existence of this pool, and, if necessary, for the Representatives of the people of the United States to confirm the existence of this monopoly, I ask that the parties named as being interested in this working-trust pool or agreement be summoned to produce their records to show that they were implicated in that monopoly. This system really constitutes the same organization which Judge Tuley, 12 years before, had decided was a monopoly and against the interests of the producers and shippers in that market. I offer in evidence, to be made a part of the record, page 2, public warehouses in control of the trust and private warehouses in control of the trust, contained in a paper called "Bulletin No. 1." The CHAIRMAN. Who prepared that bulletin? Mr. GREELEY. I did. |