Chapter 8

HARRIMAN VERSES GOULD

Page 4

The operation of the Denver and Rio Grande and the Rio Grande Western, which connected at Grand Junction, forming a through line from Denver and Pueblo to Salt Lake City and Ogden, would now give the Missouri Pacific an outlet of its own and direct connection for the Pacific Coast trade. The Gould roads were thought to be in close relations with the Union Pacific and other properties under syndicate control and would therefore be in a situation to work harmoniously west from Salt Lake City and El Paso.

At a meeting of the stockholders of the Rio Grande Western Railroad held in New York on May 29, 1901 the resignation of W. J. Palmer as president was accepted and E. T. Jeffery, president of the Denver and Rio Grande Railroad elected in his place. A complete new board of directors was then elected as follows: George J. Gould, Howard Gould, Edwin Gould, E. H. Harriman, WinsIow S. Pierce, Louis Fitzgerald, Jacob Schiff, R. M. Galloway. The road thus became part of the Denver and Rio Grande system.

The Denver and Rio Grande line, at that time a very profitable one, articulated with the Missouri Pacific at Pueblo, and formed the Gould connection with Salt Lake City and Ogden. Gould's purchase of this road looked like a threat. With this link in his own hands, Gould, by building a line over the Sierra Nevada to San Francisco, would have a through system, all under his own control, from Chicago to the Pacific coast.

It was now Harriman's turn to drop in on Gould.

“You bought the Rio Grande for both of us, I suppose?" he said innocently.

But Gould, on his part, only smiled, saying "Oh, not at all."

"Well, I should like to have a half interest in it," insisted Harriman.

Gould replied that he preferred to keep the whole road himself.

Harriman did not wait long to retaliate. He did to Gould precisely what he feared that Gould had intended to do to him. Gould's system, which, through his amicable relations with Collis P. Huntington, had formerly had access to the Pacific coast and the Orient, now ended at Salt Lake City and Ogden. The Southern Pacific, now under Harriman control, no longer delivered half its Pacific business to Gould at Ogden; instead, it was sent East by way of Union Pacific. The Gould Texas lines had also for years obtained a large business from the Southern Pacific at El Paso; Harriman likewise cut that off. Gould had also exchanged business with Harriman at Omaha; Harriman similarly stopped that. In other words, as a result of these several moves, the Gould railroads lost an enormous amount of business. They were effectually " bottled up."

January 1902 found the Gould and Harriman interests engaged in a struggle for transcontinental traffic which would test to its utmost the strength of the community of interests. The two interests had, so far, been unable to get together, although several attempts had been made. The executive officials of the Colorado and Utah lines were unable to settle their differences in meetings held in Chicago. The fight which began for recognition as a transcontinental factor through the Ogden gateway by the Gould’s was the explanation for the withdrawal of the Missouri Pacific from the Colorado and Utah Association and the refusal of its officials to re-enter the talks.

The purpose of the acquisition of the Denver and Rio Grande and the Rio Grande Western by the Gould’s had become plain through the fight now in progress. Through their possession of the Rio Grande roads the Gould’s were laying claim to a large percentage of the through traffic from the coast. Should the Harriman people refuse to turn over to the Gould connections the amount of traffic the Gould’s thought they were entitled to the result would be problematical. Should the Gould’s decide to get the amount of traffic they are claiming their position entitles them to, rates would undoubtedly be cut, as they were in December 1900, and the bulk of the traffic would go from Ogden by the way of Grand Junction and Pueblo, where it would be delivered to the Missouri Pacific for St. Louis and the East.

It was thought that a refusal on the part of the Harriman people to accede to the demands of the Gould’s could mean an alliance between the Gould’s and Senator Clark, who would be able to give the Gould’s a Pacific Coast outlet by way of the projected Los Angeles-Salt Lake line, the San Pedro, Los Angeles and Salt Lake Railroad. From Los Angeles Gould could join with Prince Poniatowski and other capitalists who had faith that the Gould interests would ultimately build to the metropolis of San Francisco on the Pacific coast.

Poniatowski, a former ambasador for France, contended that the next transcontinental line that came into San Francisco must come by way of the San Mateo route. He believed that the most practicable route was to be found by avoiding the Ocean View grades and expensive cuts by striking oceanward and proceeding via the Lake Merced region and the Spring Valley Water Works. The Burlingame promoter expected to entertain George Gould in San Francisco and if the Central Pacific did not offer acceptable terms for traffic arrangements westward from Salt Lake it was predicted that Gould would rush through a coast extension of the Denver and Rio Grande, with San Francisco in view as the ultimate terminus.

In June 1902 J. Ross Clark and Thomas E. Gibbon were summoned back east from California by Senator W. A. Clark who was building the San Pedro, Los Angeles and Salt Lake Railroad from Los Angeles, California to Salt Lake City, Utah. It was believed they were to conclude arrangements with George Gould for a combination of the Salt Lake road with the Gould system, the line from Los Angeles to Salt Lake to form the western outlet for the Gould roads.

Senator Clark was a very rich man, but so was John D. Rockefeller. Relations between the Rockefellers and Harriman had always been close. The Rockefellers were leading members of the original Harriman syndicate, which purchased the Chicago and Alton and the Union Pacific railroads and they all had large interests in the Union Pacific, while they were in no way interested in the Gould lines. By forming an alliance with Gould Senator Clark would be entering into competition with the Oregon Short Line and the Southern Pacific both Harriman contolled lines.

Harriman took more traffic from Gould when in December 1902 in connection with new relations between the Rock Island and the Southern Pacific Harriman opened the Denver and Cheyenne gateway to Rock Island freight traffic. Formerly the Denver and Rio Grande had secured all of the Rock Island through freight. Now the condition was changed and the Union Pacific became the recipient of the bulk of it. The traffic agreement whereby the Rock Island exchanged traffic with the Union Pacific did not include passenger business, which was still is handled by the Denver and Rio Grande except that which originated at Memphis.

Another setback came Gould’s way in January 1903 when Harriman made an alliance with Senator Clark of Montana that left Prince Poniatowski's projected railroad from Los Angeles to San Francisco in the air and neutralized the danger of a possible combination between Poniatowski, Clark and the Gould railroad system. By the terms of the agreement the San Pedro, Los Angeles and Salt Lake road would run its trains over the Oregon Short Line tracks south of Salt Lake City to a point in Southwestern Nevada, about 300 miles, and that portion of the Harriman system would be turned over to Senator Clark. By making this deal Senator Clark got rid of a parallel line which Harriman was arranging to build.

On the other hand Harriman had an understanding with Clark, so it was said, by which Gould was shut out from part ownership in the road projected by Prince Poniatowski from San Francisco to Los Angeles to connect with the Clark system. Owning the three hundred miles of the Oregon Short line Senator Clark would have about 400 miles of road left to build. All the surveys had been made and construction was ongoing. That Gould and Harriman had been coquetting with the Clark road for the prior three years was an open secret.

Those who held the confidence of Gould had warned him against Harriman. "He isn't working for the Missouri Pacific," they would say; "he's only interested in his own roads. He'll wipe you off the map the first chance he gets." But Gould seemed to be not affected by this talk. He though thought of himself as a far richer, a far "bigger" man than Harriman. "I'm in there on the Union Pacific board," he would answer to his confidants warnings, "and nothing can happen that I don't know about."

The nothing that could happen without Gould’s knowledge had just happened. For now it looked as though Harriman had, at least temporarily, checked his rival.

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