The Erie War: Corporate Conflict in the Gilded Age
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The Erie Railroad Company was one of the early success stories of the first railroad era. Begun in the 1830s, there was track from Buffalo to New York City by 1851. The Erie was the longest line in the world.
In the Civil War, while the line prospered, James Fisk, Jay Gould and Daniel Drew grew wealthy as traders in gold and government bonds. Following the conflict, the trio ploughed their profits the purchase of railroads—the great boom industry of the postwar period—and emerged as the Erie's controlling directors. They proceeded to drain the line, divert funds into their own pockets and allow the railroad to deteriorate.
Cornelius Vanderbilt, owner of the New York Central Railroad, had experienced unpleasant dealings with Drew. In 1867, he launched a hostile bid to control the Erie. Drew and his compatriots reacted by issuing thousands of new, illegal shares that inflated the line's assets to more than three times their true worth. The unsuspecting Vanderbilt was eventually thwarted and lost heavily in the process.
After discovering how he had been duped, Vanderbilt alerted public officials (whom he had bribed over the years). An arrest warrant was issued for Drew and his friends. Before New York agents could apprehend them, the three were rowed across the Hudson River to temporary safety in New Jersey. The fugitives soon returned to New York where they proceeded to buy the votes of Albany legislators. This maneuver served to secure new laws that prevented the New York Central and Erie's merger and legitimized the trio's earlier stock-watering exploits. The key to the New York assembly's corruption was none other than Boss Tweed, who was granted cash, stock and a seat on the Erie board for deserting Vanderbilt.
Vanderbilt fumed. Gould, Fisk and Drew went on their merry way. The Erie, crippled by enormous debt, would not become profitable for more than 70 years.
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