CHAPTER 16Complications

In the summer of 1876, as suitors courted Albert's daughters, Americans struck a triumphal tone by celebrating one hundred years of independence. Among the festivities was a world's fair, the first outside Europe. Held in Philadelphia, Pennsylvania, planning for the Centennial Exposition got off to a rough start when the Keystone State's General Assembly refused to pay the costs and demanded only private monies be used. At that point, the Pennsylvania Railroad stepped in. Seeing the event as a great opportunity to commemorate itself and marshaled by its president, Tom Scott, the company sent its chief lobbyist to Harrisburg to twist some arms. Bolstered by a subsidy from the railroad, the state legislature agreed to fair funding.

The Pullman Company took full advantage of the Centennial Exposition to show off its wares. Unlike the Vienna World's Fair of 1873, the Philadelphia exposition promised to highlight the railroad industry and in particular to exhibit rolling stock. The Pullman Company built a train of sleeping, drawing-room, and dining cars specifically for the exposition to display comfort, luxury, and clever engineering. The most famous of the batch was the President, a hotel car boasting a roaster and a broiler in its kitchen, chandeliers and inlaid wood panels in the passenger quarters, and all the fixtures of an elite men's club.¹ As the opening approached, George and Albert rode to Philadelphia in the Viceroy hotel car, one of six Pullmans on their new train. Press coverage noted the quietly closing doors, the absence of odors from the kitchen, and the presence of lavatories in each car.² Built at the company works in Detroit and designed for daily service from downtown Philadelphia to the exposition grounds, the cost of designing and building the new train was underwritten by the Pennsylvania Railroad.³

Pullman placed several full-sized cars in the main fair building, along with a gold and silver model of a sleeping car, located adjacent to a miniature Silver Palace Car.⁴ Railroads serving the exposition attached Pullman cars to as many trains as possible and provided direct travel wherever feasible. This allowed visitors to “be relieved of all annoyance of changing cars, and [to] be deposited at the very gates of the Exposition after a rapid and entirely comfortable ride.” Catching the spirit of the celebration, the Pullman Company reduced fares for traveling on its vehicles. Fairgoers gaped at the multihued inlaid wooden flowers and painted-flora on the ceilings.⁵

Though fair publicity was positive and copious, it did not result in a rush to renew Pullman contracts by railroad companies. Passenger complaints about high ticket prices increased in volume and intensity as the Panic of 1873 squeezed individual pocketbooks and corporate coffers. Newspaper editors called for railroads to demand lower fees for hiring the cars while antimonopolists in Congress made noises about investigating Pullman's dominance of overnight travel. American railroads had been chaffing at how George's contracts limited their ability to operate their own sleeping cars. An 1874 Pennsylvania Railroad (PRR) stockholders’ committee, concerned about the financial state of that company, recommended PRR charge an additional fare above the supplement passengers already paid to travel on Pullman cars. This initiative came to nothing, but it does suggest George Pullman's bargaining skills were pushing some of his partners to the limit.⁶

In this climate of growing dissatisfaction, the Chicago, Burlington & Quincy (CB&Q) Railroad began renegotiating its contract with Pullman's Palace Car Company (PPCC). The railroad had entered into a ten-year agreement in 1868, largely at the urging of its president, Robert Harris. General superintendent of the CB&Q at the time of the contract signing, Harris was also a member of the first board of directors of PPCC and holder of fifty shares from the inaugural issue. His elevation to the presidency of CB&Q in 1876 proved invaluable to Pullman during contract talks.

Not all CB&Q managers were as committed to Pullman as Harris. William Strong, who succeeded Harris as general superintendent, believed Pullman contracts unfairly favored the sleeping-car company and hurt the railroads. Strong complained to CB&Q vice president Charles E. Perkins about the high cost of repairs and the depreciation Pullman charged. Strong recommended that railroad companies pay no more for a Pullman car than if they had built it themselves because ticket revenue was unpredictable and Pullman demanded a minimum income if sales fell below a threshold stipulated in the contract.⁷ Strong urged Perkins to request completely new sleeping cars from Pullman to be maintained and repaired at PPCC expense. He also recommended CB&Q demand a share of the profits from operating Pullman cars, the right to end the contract by purchasing the cars at their depreciated cost, and the freedom to permit sleeping cars from other manufacturers to run over CB&Q rails.⁸ To bolster his case, Strong shared confidential information he obtained from other railroad executives showing how renegotiating the cost of repairs and sharing less of the ticket revenue with Pullman could materially benefit the CB&Q.⁹

Luckily for the Pullman Company, it had President Harris as its friend and advocate. He met with George and explained the pressure he was under to renegotiate on terms favorable to the railroad.¹⁰ Aware that other railroads had already done so, Harris recommended renewing the contract along the lines of the Chicago & North Western deal, which demanded new or recently refurbished cars, stipulated lower repair costs, and included the right to purchase depreciated cars at specified intervals.¹¹ As company president, Harris had the authority to veto all major contracts, and he had a personal interest in this one. He therefore declared himself “in favor of” allowing Pullman to maintain a monopoly on sleeping-car operations over CB&Q rails while Perkins and Stone got the right to charge Pullman for the costs of repairing its cars.¹² The resultant fifteen-year contract gave Pullman the exclusive right to operate sleeping cars over the lines of the CB&Q and its many subsidiary companies, except for sleeping cars the railroad had built itself. By conceding these points, George kept his vision of creating a national monopoly firmly in sight.

The new contract failed to smooth relations between the two companies. CB&Q officials subsequently learned that its competitor, the Chicago & North Western, paid less to repair sleeping cars and complained to Pullman. Worried that the CB&Q would decide to build its own sleeping cars, George Pullman offered Charles E. Perkins, who had succeeded Harris as president in 1881, a reduced rate for most repairs and free repairs on heavily used services. This could have translated into a substantial savings for the CB&Q.¹³

Perkins mistrusted Pullman's offer because it seemed to benefit his railroad. Company executives had come to believe Pullman contracts tied their hands and primarily profited PPCC shareholders. Another stumbling block came in the form of the Pullman distinction between assigned cars and excursion cars. Assigned cars stayed with a particular route for the length of the contract while excursion cars, often called wild cars, could be moved around a railroad or even returned to Pullman in response to seasonal demand. Perkins wanted to get rid of assigned cars, which he believed limited his company's operational flexibility, but the repair rate on excursion cars was higher than for assigned cars.¹⁴ Working to Perkins's advantage was his knowledge that the Missouri Pacific Railroad paid less for repairs than the rate Pullman offered to his own company. Perkins ultimately won the day, and contract renegotiations resulted in lower repair costs for the CB&Q. With so much sunk capital, George could simply not afford to lose the contract, a fact Perkins understood and used to his advantage.¹⁵

In July 1878, Albert and George returned to Europe to superintend the assembly of another batch of Pullman sleeping cars for the Midland Railway at Derby. George met with railway company directors in Leicester and London in an attempt to solicit additional business. He regularly repeated Albert's boast that Pullmans would soon be running on all European mainlines.¹⁶ In Derby, Albert and Aaron Longstreet supervised the reassembly of three cars designed to run on the Midland between London and Manchester. That was Albert's sixth and final trip to Europe. Though falling far short of his claims, his work had proven largely successful; his ability to woo the wealthy and the influential was once again deployed to the advantage of the Pullman Company. The contacts and operations he and Longstreet made would allow Adolph Rapp, construction manager in Chicago, to tour European railroads and make recommendations for new Pullman cars to run on the continent's railways.¹⁷

Though the English ventures were bearing fruit and burnishing Albert's reputation in Chicago, a lawsuit tangentially associated with him ensnared George in 1878. The case was another hangover from the Great Western Insurance Company (GWIC) debacle. This one involved the president, Hart L. Stewart, who had brought Albert onto the board of that ill-fated concern. The insurance company's collapse had wrecked Stewart's property portfolio so he borrowed $125,000 in his relatives’ names to rebuild the St. James Hotel, which had served as a meeting place for the insurance company board. Stewart deeded shares in the hotel to his children and grandchildren, made George Pullman the hotel's trustee, and moved in.¹⁸ Stewart's daughters granted him ownership until he died and agreed to let him live rent free in the hotel for the rest of his life. In 1877, they consented to pay him a monthly salary of $300 to manage the building. Two years after that, Stewart began receiving an additional $500 annually for his personal use.¹⁹

But his family was not unified behind these plans. In 1878, Stewart found himself in the extraordinary position of being sued by a five-year-old grandson named in his honor, Stewart Patterson. Patterson had a legal right to a one-fifth interest in the title to the St. James Hotel through his mother, the late Jeanie Stewart Patterson, one of Hart Stewart's daughters. Brought by James B. Patterson, young Stewart's guardian and Jeanie's widower, the suit charged Stewart and George Pullman with mismanagement of the hotel. The plaintiff alleged, without evidence, that Pullman and Stewart refused to reinvest income, failed to pay taxes, and neglected interest payments on the original loan. Patterson claimed the two men had conspired to allow the property to deteriorate so Pullman could buy it inexpensively.²⁰ He also claimed his wife had not signed the deed allowing Pullman and Stewart to take control of the St. James property.²¹

Following an initial hearing, Patterson asked the court to appoint a receiver on the grounds that the rents were too low to meet expenses and the building was poorly maintained. George Pullman, calling himself “a friend and relative” of Hart L. Stewart, told the judge he had become trustee at the request of the Stewart heirs following the fire of 1871. When the rebuilt St. James Hotel opened, Stewart was to be the sole beneficiary of rents but, the court heard, another grandson, Francis Matthews, had demanded a partition of the property in order to sell his portion. To pacify him, Stewart agreed to waive his right to any profits the hotel might earn in return for a salary; after expenses, any cash left over would be divided among the heirs, but there had been none. George Pullman testified he had been lending money to the trust to help pay tax assessments on the hotel and was owed “a considerable balance in excess of his receipts from the property.” He also told the court the amount of money owed on liens and encumbrances was being slowly reduced and that the property was in a strong position financially.²²

In an affidavit to the court, George Pullman refuted the idea that the deed had never been executed and argued against selling the property because of indebtedness incurred in rebuilding. Denying claims of mismanagement and poor financial capacity, Judge William W. Farwell dismissed Patterson's request for a receiver because he felt the combination of Stewart and Pullman guaranteed a well-run property. Saying “he saw nothing to convince him that there was any danger in leaving the matter as it is until the final hearing,” Farwell referred the case to Chancery. Here, Patterson complained of “divers acts of fraud and conspiracy to injure him,” claiming Stewart had stolen $38,822 from the rents while Pullman had taken $1,179 in illegal fees. Patterson argued that, as a consequence of these thefts, the building trust owed him $20,000.²³ Rejecting his charges, the court ruled that the deed was valid, that Stewart had a life interest in the property, that no one else could benefit until Stewart died, and that Pullman would remain as trustee.²⁴ For George, however, adverse publicity during the trial threatened to damage his reputation and his anger smoldered. Like his brother, George found doing business with Stewart hazardous to his standing in local business circles.

For Albert, the St. James Hotel case led to a complete withdrawal from the business networks he had constructed with Stewart and his relatives because everything they touched turned to dust. This decision terminated Albert's access to one side of the family and forced him to deepen his engagement with a wider swathe of the Chicago business community. This was not necessarily a bad thing, as the Windy City was by then a center of lumber, grain transshipment, meatpacking, and, with the advent of Montgomery Ward's revived mail-order business, catalog sales. But all was not smooth sailing. Albert was drawn into a lawsuit involving his investment in the Winchell Car Ventilator Company, whose air-cleaning apparatus he had tried unsuccessfully to convince Pullman to adopt. Winchell had not enjoyed a particularly lucrative run—the general manger, Frederick Atkinson, had declared personal bankruptcy in 1878 and profits remained invisible—but claimed to be capitalized at $500,000.²⁵ In 1870, the Union Pacific spent a paltry $150 installing experimental Winchell ventilators in a few freight cars.²⁶ Albert owned one hundred shares on the usual terms of 20 percent up front and the rest unpaid. In June 1878, Thomas Fletcher, a supplier of components to Winchell, sued and won a judgment but attempts to satisfy his claim proved fruitless because the company's assets had disappeared.²⁷ Fletcher returned to court in late 1879 and asked that the shareholders be compelled to pay their full subscriptions.²⁸ Failing in this effort, Fletcher had the company declared insolvent and a receiver appointed, another, albeit small blow to Albert's portfolio.²⁹

As the Winchell tale trundled into 1879, Albert went to the Thousand Islands in New York for the annual family vacation.³⁰ This relaxing sojourn was cut short when one of the brothers’ early business acquaintances died unexpectedly. George Gage had moved to Chicago with his brother David and purchased the Tremont House months before the election of 1860. They owned the hotel in partnership with John Drake. Lifting the Tremont had been one of the early indications to George that Albert could be a successful and useful employee. Gage later became co-owner of the Grand Pacific Hotel with Drake, but his other real-estate holdings lost their value after the fire and he died with his finances mired in bankruptcy proceedings. Gage was a Universalist like the Pullmans, and his funeral took place at St. Paul's church.³¹ Sister Emma, visiting from New York, wrote of encountering old friends among the “immense congregation” that gathered for the ceremony. For her brothers, George Gage was one of the last casualties of the fire. In their eyes, the stress of bankruptcy and the loss of a solid future contributed to his death at the age of sixty-three.³²

Despite the many complications confronting his entrepreneurial efforts, Albert rarely stopped thinking about potential investments. He looked West for new opportunities. Perhaps remembering George's success with operations in Colorado, he decided to create a mining company to take advantage of developments in that state's “newest Eldorado,” Custer County, sometime during the late spring or early summer of 1879. High-yield silver ore had been uncovered the year before at the aptly named Silver Cliff, and an eponymous settlement had been established.³³ Albert and Cyrus Pratt, his partner in the fraudulent American Homestead Company, incorporated the Chicago and Silver Cliff Gold and Silver Mining Company, claiming to issue 150,000 shares worth $10 each. Albert and company secretary Pratt puffed it to newspaper reporters.³⁴ For the first few years, the Silver Cliff mines proved productive, but the veins ran dry.³⁵ Precisely how much Albert earned is unclear but he is likely to have made at least a modest profit on his investment.

In the wake of Albert's precarious investments and the long shadow of the Great Western Insurance Company, George grew impatient with his older brother. Albert had two skills vital to the early success of PPCC: his expertise as a craftsman and his ability to host compelling excursion runs. Pullman glamor attached itself to Albert as it did to all his siblings, but George needed Albert to be publicly successful to preserve the integrity of the family name. Instead, Albert's dodgy entrepreneurial forays threatened to damage the brand at a time of increasing criticism from railroad companies, members of Congress, and distant relatives. The complications that arose when Pullman contracts expired added to George's general displeasure. To make matters worse, corporate and interpersonal relations with railway companies in Great Britain also faltered, something for which Albert was not directly responsible but which also weakened the brotherly bond.