The World’s Richest Man — Taken Down By Cheese

The richest man in the world was on the run.

President Theodore Roosevelt’s Justice Department was planning to file an antitrust suit against John D. Rockefeller’s Standard Oil Company in 1906, and the states wanted to get into the action before the Attorney General did. Multiple lawsuits were filed against the directors of the company that controlled over ninety percent of oil production in the United States and had, by prevailing accounts, used unfair practices to gain its monopoly in the market.

(If you’d rather listen than read, check out this episode of History’s Trainwrecks).

John D. Rockefeller, a Cleveland produce merchant during the Civil War, had diversified into the nascent oil business in 1870, taking huge risks in a new industry that no one believed would endure. He took advantage of this lack of confidence, buying up failing refineries. In one six-week period between February and March of 1872, he bought 22 of the 26 refineries in the city in what was later called “The Cleveland Massacre.” In his telling of the story, Rockefeller paid a fair price for refineries that were failing, poorly run, or had inferior equipment. He could have simply waited for them to go under and then picked up the pieces, but he believed he was doing a good thing by buying them out. Some of the later gripes about his tactics derived from the refiners he bought out for cash (most refusing shares of Standard Oil stock instead) who later saw him build a massive fortune from the bones of their endeavors. A lot of them were peeved they hadn’t taken the stock, which paid out over half a billion dollars in dividends between 1882 and 1906.

Ida Tarbell, one of America’s first and best-known investigative journalists called “muckrakers,” grew up in the oil fields of Pennsylvania during the early years of the oil boom. She saw what the oil business was like from the side of the original drillers and producers — fluctuating prices, deadly accidents, and the gradual squeezing out of small producers and refiners by Standard Oil. Her father’s refinery was put out of business by Rockefeller, she believed, because of the company’s unfair business practices, which included favorable transport rates achieved through secret collusion with the railroads.

In 1904, Tarbell wrote the bestselling “The History of the Standard Oil Company,” which laid bare the worst of Standard Oil’s monopolistic practices. She found evidence of strong-arm tactics, price manipulation that drove the sale price of oil below the costs of production, and collusion with the railroads that gave Standard a significant competitive advantage. And this was not merely history; at the time of her investigation, she was able to procure documents from Standard’s headquarters at 26 Broadway in New York that showed the company was still up to its usual monopolistic shenanigans.

John D. Rockefeller was portrayed as the evil mastermind behind the “Octopus,” as Standard Oil was derisively known, even though he had been retired from the business since 1895. Management of the company had been left in the hands of his mercurial and combative successor John D. Archbold, but Rockefeller remained its largest shareholder. His income from dividends in 1902 alone was $58 million. This massive fortune already made him a target, but once Standard Oil’s shady practices became known, Rockefeller became the poster child for everything that was wrong with big business in America.

President Roosevelt, having established a reputation as a trust-buster, could not ignore Standard Oil after Tarbell’s expose. He did believe that large and efficient companies were essentially good for the country, creating jobs and lowering the cost of items that most Americans had to buy or use on a regular basis like kerosene and oil byproducts, meat, sugar, and railway transportation. But Roosevelt owed a large part of his political success to mastering the press and its capacity to influence public opinion. Once Tarbell’s scathing indictment of the Octopus came out and outraged the country, the President was hoist with his own petard. The Standard Oil antitrust suit offered a shot at both the world’s largest oil monopoly and the unfair practices of American railroads.

He could not let this one get away.

***

Once the floodgates of lawsuits against Standard Oil opened, the focus landed on the company’s origins and rise to power, which meant the testimony of the company’s founder was essential. And of course, having the richest man in the world dragged into your courtroom was a pretty big deal.

Process servers with court orders and subpoenas (along with legions of reporters) went on the hunt for Rockefeller, whose testimony was sought in cases in Missouri, Indiana, New York, New Jersey, Pennsylvania, Kansas, and others. He went on the lam, moving furtively between his estates, living the life of a fugitive. Rumors spread that he was hiding on a yacht off the coast of Puerto Rico, or at his business partner Henry Flagler’s estate in Key West. Rockefeller asked his wife not to call him on the telephone, believing the line was tapped. He didn’t put return addresses on his letters. He hired detectives to guard his estates and turn away process servers. He told Standard Oil headquarters to send his correspondence in plain white envelopes, so that no one would get any sense that he was involved in the operations of the company (which he wasn’t).

Rockefeller went by boat from Tarrytown, New York to a fortress he had set up in Lakewood, New Jersey, complete with guards, floodlights, and thorough inspections of all incoming vehicles. Newspapers reported that Rockefeller was unable to visit his first grandson, born in 1906, because the process servers would get him. The New York World put out a headline, “Grandson Born to John D. Rockefeller and He, Mewed Up in His Lakewood Fort, Could Only Rejoice by Phone.” Rockefeller cut his correspondence by seventy percent and asked relatives to keep his location a secret: “Confidentially,” he told his brother-in-law, “I prefer not to have it known where I am. It often saves me much annoyance.”

Rockefeller was fond of understatement.

Long retired from the company, he dictated a letter in 1906 resigning as president of Standard Oil and asking the board of directors to approve it quickly. With the directors facing their own subpoenas, they stalled. John Archbold and Henry Rogers, who were running Standard Oil, “told him he had to keep the title of president.” They said, “these cases against us were pending in the courts; and we told him that if any of us had to go to jail, he would have to go with us!”

Despite all these many precautions, John D. Rockefeller was ultimately undone by cheese.

***

A modest and plain Baptist for most of his life, Rockefeller studiously avoided vice and ostentation. He made his children (and his business partners) pledge to abstain from alcohol (on one memorable occasion asking his daughter Edith to promise to never serve alcohol in her house on the day before her wedding) and metered out small allowances to them in exchange for household chores. He and his wife lived plainly, often using the furniture that was left behind in the houses they bought instead of buying new. His wife Cettie was horrified when she learned one of her daughters wanted to buy silk underwear. John, beset with digestive ailments, ate plain and simple food.

Cheese was both his luxury and his weakness.

To teach his children restraint when they were young, Rockefeller restricted them to one piece of cheese each day. His daughter Alta one day tattled on her sister Edith for having two pieces of cheese. “Rockefeller professed shock at this indulgence,” and for the rest of the day, whenever the offender was within earshot, he would say, “Edith was greedy” and “Edith was selfish.”

Rockefeller’s chickens came home to roost, as it were, while he was on the run from various state governments. He had his favorite cheese shipped to him daily. While holed up in his Pocantico estate in New York, the New York Central railroad delivered his cheese to the station, where hack drivers would take it the rest of the way. One of these drivers, Henry Cooge, told the press (with ominous gravity) that “suspicious cheeses were again entering Pocantico.” This was irrefutable evidence of Rockefeller’s current whereabouts. “Them cheeses,” Cooge said. “I would recognize anywhere, no matter whether it is day or night…Rockefeller, in my opinion, is somewhere on his estate.”

Rockefeller and his family had to leave the country, sailing for France in the spring of 1906. His name was discreetly left off the ship’s passenger list, and the rest of the family traveled under assumed names.

The heat was on back in the States. A court in Ohio brought an antitrust action against Standard Oil and issued a warrant for Rockefeller’s arrest. John Archbold sent a message that Rockefeller should extend his European vacation: “There seems to be a perfect wave of attacks all along the line.” A sheriff vowed to meet Rockefeller’s ship when it came back and arrest him right there on the dock.

Standard Oil had never taken lawsuits like this seriously, and there had been many over the years. It was able to fend them off with high-priced lawyers (and the fact that most of its rapacious practices weren’t illegal until the 1890’s). The company and Rockefeller remained silent in the face of public criticism, which was a tactical error; it made the company and its founder out to be as privileged and arrogant as everyone said they were. And as guilty.

In the new age of muckraking journalism and widespread attacks on the super-rich, this approach wasn’t going to work anymore. Standard Oil’s legal team arranged for Rockefeller’s voluntary testimony, and he was able to safely return to America.

Rockefeller was served and did testify in court in 1907, and the government’s case against the company was filed in 1909. In May, 1911, the U.S. Supreme Court ruled that Standard Oil was “an unreasonable monopoly under the Sherman Anti-Trust Act.” The company was broken up into 34 independent companies with different boards of directors.

Rockefeller ended up owning a quarter of the shares in all the smaller companies. With the advent of gasoline-powered automobiles, the value of those stocks “mostly doubled.” His fortune reached as high as 900 million dollars.

John D. Rockefeller, now even richer after the breakup of Standard Oil, was finally able to move freely about the land.

And wherever he went, his favorite cheese followed.

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Historian

Historian

Host of the History’s Trainwrecks Podcast — this is the stuff they never taught us in history class.