Haverhill’s Gilded Age Robber Barons: Haverhill Gas Light Co.

At right, Haverhill Gas Light Co.’s gas manufacturing plant, 284 Winter St., in 1949. The photograph was taken after a major derailment.

By Tim Coco
WHAV President and General Manager

Concentration of wealth among the upper classes, stock manipulation, corporations sticking it to working families and a socialist promising change should he be elected.

No, it is not the presidential campaign of 2016, but rather Haverhill’s fight against the robber barons during the Gilded Age. In 1899, instead of Bernie Sanders, it was democratic socialist John C. Chase fighting a large corporation, a shady state legislator and an unfriendly media. There were heroes and villains—some were rewarded, and others escaped the judgment of history.

Until now.

It all started innocently enough with the formation of the Haverhill Gas Light Co. in 1853. The new company, beginning with capital of $45,000, would manufacture gas for lighting and heating. Unlike today, where natural gas is piped to New England from distant fields, the gas companies of the day heated coal in special ovens, captured the escaping gas, cleansed it of sulfur and cyanide and sent it to homeowners and businesses.

Newly elected Massachusetts Gov. John Henry Clifford signed legislation Feb. 12, 1853, granting permission to Francis G. Macy, George Odiorne and George B. Parrott to launch Haverhill Gas Light Co. The legislation was clear.

“Said corporation, with the consent of the selectmen of the town of Haverhill, shall have power to open the ground in any part of the streets, highways and lanes in the said town, for the purpose of sinking and repairing such pipes and conductors as it may be necessary to sink for the purpose aforesaid…put the same again into repair, under the penalty of being prosecuted for a nuisance: provided, that the said selectmen, for the time being, shall at all times have the power to regulate, restrict and control the acts and doings of the said corporation, which may in any manner affect the health, safety or convenience of the inhabitants of the said town.”

It was a corporation initially subject to local regulation. It built its gas works next to the elevated railroad tracks at 284 Winter St. (where Haffner’s gas station exists today) and large gas holders across the square at 98 Hilldale Ave. Management eventually included such local luminaries as James V. Smiley, Haverhill’s third mayor, who served as president in 1878. The company operated frugally and shareholders took only reasonable dividends, averaging 14 percent annually. By 1888, shareholders’ total investment amounted to $75,000. Thanks to reinvestment of ratepayer fees into the business, however, the company had accrued assets of $401,000.

With the growth of gas and electric companies and debates over whether there should be competitors—all digging up city streets with rival lines, the legislature settled on “natural monopolies.” It created the Board of Gas and Electric Light Commissioners, which went to work in 1885.

Robber Barons Stone and Webster Commit ‘Flagrant case of Exploitation’

Everything changed during July, 1899, when a seemingly benign “general brokerage business” was founded with $500,000 capital as the Haverhill Gas Securities Company. The company went on to buy out the shareholders of Haverhill Gas Light Co. and fire its local management. Eventually, Stone and Webster of Boston revealed themselves as the new owners, and whose aim was to enrich themselves with the capital of the gas company.

Stone and Webster was founded in 1889 by Charles A. Stone and Edwin S. Webster, two electrical engineering graduates from the Massachusetts Institute of Technology (MIT). Taking advantage of the panic of 1893, the country’s worst economic depression to that date, the nefarious duo started buying utilities.

The new owners sought to raise rates and make gas users pay them dividends on the company’s wildly inflated stock price. Chase, who became Haverhill’s—and the nation’s—first socialist mayor in 1898, called the plan “stock watering and stock manipulation.”

“A $75,000 plant had grown to a $401,000 one, without a dollar of capital being invested by the stockholders. The people did the contributing, which increased the value from $75,000 to $401,000,” said Chase.

Chase hired attorney George Weston Anderson to fight the company by insisting the stock transaction was illegal.

“Apart from their breach of the criminal law, they followed out the dictates of ordinary human selfishness and greed. Law must be made, not with reference to the sanctified human nature of saints, martyrs and philanthropists, but with reference to the ordinary, sordid, grasping, selfish, human nature which makes business what it is,” Anderson testified.

Instead of rate increases, Anderson argued, ratepayers deserved a reduction from $1 per thousand cubic feet of gas to between 70 and 75 cents and “certainly it should not exceed 80 cents.” The Board of Gas and Electric Light Commissioners agreed, setting the rate at 80 cents—the lowest in the state. (By comparison, 2014’s gas rates were, on average, $13.36 per thousand cubic feet and involved no manufacturing cost.)

Moreover, the board asked the legislature to revoke the charter of the Haverhill Gas Securities Company. “Its acts are indirectly but distinctly an effort to capitalize the gas company’s surplus, and its existence is a menace to the interests of the gas-consuming public in Haverhill,” the board said in its decision.

Chase was ebullient.

“It has undoubtedly taught the speculators who undertook to capitalize a $75,000 company at $500,000, and compel the people to pay dividends and interest on the whole amount, that the city where a socialist occupies the executive chair is no place to undertake such a scheme. This was the most flagrant case of exploitation of the people ever attempted in Massachusetts,” Chase said, using the victory to win re-election to a second term.

Meanwhile, Haverhill Gas Light Co. converted its gas-making operation from coal to the “Wilkinson water gas” method. Rather than freeing gas from coal, water was sprayed over hot coals to create a carbon monoxide/hydrogen gas mixture. Until the later invention of carburetted water gas—where oil is added to the spray—the heating and lighting capacity of the gas was much less. The effect on consumers was to buy more gas to compensate.

Gas Company Fights Back; Double Agent Back Stabs City

Haverhill Gas Light Co. refused to honor the rate reduction, suing the Commonwealth in federal court, claiming “confiscation contrary to the Fourteenth Amendment.” Ratepayers meanwhile continued to pay $1 per thousand cubic feet.

The gas company had a secret weapon in the name of former Haverhill state Rep. and Sen. Samuel W. George. As a state senator in 1898, George proposed legislation allowing the private consolidation of electric and gas companies. The petition failed. Gov. John L. Bates, however, named George in 1903 to one of only three slots on the Board of Gas and Electric Light Commissioners. While there was never any proof George was bribed by Stone and Webster, the commission suddenly stopped defending its Haverhill decision and the case languished for years.

To add insult to injury, the legislature approved a bill in 1903, granting Boston Gas the right to consolidate with various other gas companies and water its stock in much the same way Stone and Webster was attempting in Haverhill. The Public Franchise League of Boston admitted it was asleep when the law passed and urged its repeal.

“This act destroys the trust for the benefit of consumers, permits the shareholders to capitalize this surplus as though it had been contributed by themselves, and thus to collect from the consumers dividends upon their own contributions,” the league protested. The legislature ultimately repealed the law in 1908.

In 1906, Anderson called for the removal of George for his “crimes,” and won support from influential attorney, co-founder of the Public Franchise League and future justice Louis D. Brandeis. Brandeis recommended Anderson tone down the rhetoric, but made a similar, if not softer, request of then-Gov. Curtis Guild Jr. Guild agreed not to reappoint George.

Recognizing the undue influence of political money, the legislature acted in 1907.

“No corporation carrying on the business of a bank, trust, surety, indemnity, safe deposit, insurance, railroad, street railway, telegraph, telephone, gas, electric light, heat, power, canal, aqueduct, or water company…shall pay or contribute in order to aid, promote, or prevent the nomination or election of any person to public office, or in order to aid, promote or antagonize the interests of any political party, or to influence or affect the vote on any question submitted to the voters. No person shall solicit or receive such payment or contribution from such corporation or such holders of stock,” the legislature voted.

City Council Seeks to Enter Gas Business; Fight Begins Anew

While Chase had moved to New York by 1909, he would have approved of the city council decision in December of that year to take the first of two votes to acquire the gas company and make it a municipal department. Stone and Webster countered with a new proposal to sell Haverhill Gas Light Co. to a new “Haverhill Gas Co.” during the spring of 1910. Stone and Webster planned to keep the company, but it asked the gas and electric commission to now value it at nearly $1 million—a price far above the ability of the city to buy it.

If Stone and Webster’s new company was to succeed, it needed permission of the Haverhill City Council—a franchise agreement—to open streets and lay gas mains just as the original company did. Councilors, unaware of the planned stock swindle and hoping to settle more than 10 years of litigation over the original 80 cent gas price order, traded its approval for a reduction in gas rates. Stone and Webster first dropped the price to 90 cents and then to 85 cents per thousand cubic feet on July 1, 1911. A $21,000 customer rebate was also agreed upon. At the end of the following month, Attorney General Dana Malone capitulated, and the United States Circuit Court enjoined enforcement of the board’s order of 1900.

The city then learned of the latest stock-watering plot.

“Naturally, when this last scheme became publicly known, the community revolted; a mass meeting was held and resolutions passed calling upon the city council to take legal action to thwart this scheme of permanent extortion,” Anderson told commissioners Dec. 14, 1911 as he once again represented Haverhill. Anderson first argued adoption of the less efficient Wilkinson water process by the company means “light is costing the consumers of Haverhill about 15 percent more today than it was 12 years ago today.”

“It is also certain that the new Stone & Webster management that took control about two years ago, has increased the cost of gas, although they have dropped the apparent price from $1 to 85 cents; for they have decreased the candle-power and the heat units, and increased the pressure,” Anderson testified. “You are dealing with a management whose motto seems to be, ‘Less light and more money.’”

Anderson summarized Stone and Webster now wants to take the excess profit the company’s original shareholders refused. “In substance, they allege that the thrifty and hard-headed Yankee shoemakers who in the early decades of the life of this company owned it, were not sufficiently intelligent and selfish to take their just deserts, but sacrificed themselves to the gas company to such an extent that the present owners are entitled now to profit out of their sacrifices.”

Haverhill’s attorney also made commissioners aware of another way Stone and Webster was extracting money from gas customers. “The Stone & Webster Engineering Corporation is charging large sums to this gas company which they potentially own, for advising it and for consulting with themselves about the management, for themselves, of this property.” Anderson further accused the company of being poor engineers.

“The plain truth is that this plant is a badly located, poorly adapted water-gas plant, that it has been badly engineered for at least a dozen years.” On top of the engineering fees, Stone and Webster paid itself an average dividend on its gas stock of more than 34 percent, he noted.

Corporate Media Sides with Gas Company

Back in Haverhill, the city found the press—which benefited from gas company advertising—unwilling to tell the public about the inflated stock plan which, if approved, would ultimately mean higher costs to ratepayers.

“We find it in apparent control of part of the local press. Throughout this controversy it has been obvious that the press is dominated by the same interests that dominate this speculative gas scheme. In the local daily paper nothing has been published showing the real situation to the citizens of Haverhill. The news published has been misstatement and distortion. It becomes necessary, in order to let the people of Haverhill know what their city government is really trying to do for them, to have the substance of this argument printed and distributed in pamphlet form to the citizens of Haverhill,” Anderson reported.

Commissioners, free of George’s influence, reasserted themselves. They ignored Malone’s settlement and again set Haverhill’s gas rate at 80 cents per thousand cubic feet. They also denied Stone and Webster’s petition to sell its assets to the new Haverhill Gas Co. Again, Stone and Webster ignored the order, and moved June 21, 1912 to transfer assets to the new $1 million Haverhill Gas Co. New Attorney General James M. Swift intervened. Stone and Webster filed another suit in U.S. District Court Jan. 30, 1913.

Swift was not about to delay and settle as had his predecessor. On Feb. 24, 1913, he asked the legislature and Gov. Eugene N. Foss for $15,000 to carry on litigation. The request was approved. Another $7,500 was granted in April of the following year and $11,500 in July, 1914. Records show the gas company incurred $21,424 in litigation costs during 1914.

After 15 years of litigation, Attorney General Thomas J. Boynton reported “complete victory” in 1914.

“The case has been regarded by the officials interested as perhaps the most important litigation with reference to the authority of the state, and to the value of the orders of commissioners ever undertaken in this Commonwealth… The order of the court disposing of the case is entered by agreement of the attorneys and dissolves the injunction against the commissioners and dismisses the suit.”

Shortly thereafter, the operations of Haverhill Gas Light Co. resumed under its own name and received permission to expand into Groveland and Merrimac. It would not be until 1935 that Stone and Webster would be forced out of the utility business altogether. That’s when President Franklin D. Roosevelt won approval of the Public Utilities Holding Company Act.

Epilogue: Return of the Robber Barons

President Woodrow Wilson named Anderson United States Attorney for Massachusetts in 1914 and, in 1917, a First Circuit Court judge. Former Attorney General Boynton, who won the Haverhill Gas case, succeeded him in the former post.

Deregulation during the 1990s led to Boston Gas’ utility consolidation scheme. The Massachusetts Department of Public Utilities—successor to the Board of Gas and Electric Light Commissioners—this time effectively allowed Stone and Webster’s stock-watering scheme by permitting Boston Gas to buy Haverhill Gas (then known as Essex County Gas Co.) and other utilities. Keyspan went on to acquire Boston Gas and National Grid bought Keyspan.

Stone and Webster declared bankruptcy in 2000 after being accused of paying $147 million in bribes to a relative of Indonesian President Suharto to secure a contract. The legislature’s political money rule would also be overruled by the U.S. Supreme Court, and Roosevelt’s Public Utilities Holding Company Act was repealed by congress Aug. 8, 2005.

What Anderson wrote more than a century ago appears to have come to pass.

“The company passed out of the hands of people whose primary purpose was that of making and distributing gas at a fair profit, into the hands of persons who have held and used their control mainly for speculative purposes, security making purposes.”