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Even respectable businessmen were not immune to machinations
Feb 05, 2015

by Bruce Cherney (Part 2)

Jay Cooke was an American banker, bond seller and railway entrepreneur. In 1860s newspapers, Cooke was referred to as “our modern Midas.” But Cooke’s vaunted Midas touch ended on September 18, 1873, when the stock market collapsed and his company was forced to close its doors.

Gordon left Minneapolis for New York just after the New Year 1872. He had in his possession letters of introduction, including one from Col. Loomis addressed to Horace Greeley, the owner and publisher of the New York Tribune, who coined the phrase, “Go west young man.” Greeley was apparently enthusiastic about Gordon’s plan to bring Scottish settlers to the American West.

Accompanying him on the train to New York was Mrs. William Belden, the first wife of James Fisk. Her acceptance assured Gordon of an early introduction into New York society as her husband was wealthy in his own right. Gordon became a long-term guest at the Belden home in New York.

According to a May 2, 1872, affidavit Belden provided for the later New York Supreme Court trial of Gordon on May 17, he introduced himself as Lord Gordon, the Earl of Aberdeen, “a Scottish nobleman, and one of the peers of Great Britain; he told me that he had taken a seat as a member of the House of Lords of Great Britain when he was only twenty-two years of age, then being the youngest member of that body ...”

He told Belden of his vast wealth, which Gordon alleged included an annual income of $3 million.

Belden said Gordon talked about the Erie, claiming his investments in the railway totalled $30 million in stock, which he owned outright. Another claim was Gordon also represented a group of English stockholders, who possessed another $20 million in Erie Railway shares.

Using this information, Belden obtained a free lifetime pass on the Erie from Gould for Gordon, who met Gould for the first time on March 2, 1872, at the Metropolitan Hotel in New York.

According to Gordon’s affidavit, he informed Gould that he held 60,000 shares of Erie stock and had an interest in more that he intended to use to manipulate the election of board directors in favour of Gould. In return, Gordon said he wanted to name three English directors to the railway’s board while the other directors could be named by Gould, although Greeley had to be one of the latter. 

Gould was apparently enthused by Gordon’s proposal, as following the “Erie Battle,” the railway was in the process of being reorganized with rival factions vying for control. Gould feared his enemies would force him out as a director and president of the company.

Gould was taken in hook, line and sinker by Gordon’s tall tale, and for two weeks the co-conspirators in the scheme to rig the railway company election worked out the details of their agreement.

Another part of Gordon’s plan was revealed when he told Gould that his preliminary investigations had cost him at least $1 million and insisted that one-half of the amount would have to be paid to him by the new management when it was elected. In the meantime, he would have to acquire more than Gould’s word. Believing that he was being saved from disaster, Gould agreed to give Gordon 600 shares in companies related to the Erie, 4,722 shares in the Old Creek and Allegheny Railway, $21,000 in bonds of the Nyack and Northern Railway and $160,000 in cash.

The 600 Erie shares were given to Gordon by Gould for security to be used in the alleged purchase of farm in Chappaqua opposite to a property owed by Greeley. According to Gordon, Greeley had urged him to buy the farm.

“The careful recipient of these securities and cash presently found an error of $40,000 in the footing of Gould’s memorandum and sent word of the shortfall,” wrote Folwell in his History of Minnesota. “Gould did not think there was such an error, but under the circumstances he would not dispute the point and came back with an additional $40,000.”

Gould asked for a receipt for the cash, but Gordon replied that his word was sufficient and handed the bundle back to Gould, who made it as far as the door before turning around and laying the cash on a table in the room.

“It must have been sheer sport in playing a fish which had taken his hook so greedily that led Gordon to demand that Gould separate himself from the old directorate (of the Erie),” commented Folwell. “On March 9, Gould delivered to him his resignation as director and president of the Erie Railway Company, to take effect upon appointment of his successor.”

Of course, Gould believed his successor would be himself.

“It is amazing to us to see a schemer like Jay Gould ‘hoist with his own petard!,’” wrote Bryce.

Gould came to realize he had been duped when it was reported that Gordon  began selling his Oil Creek and Allegheny stock at a reduced price. 

In his affidavit to the court, William M. Tweed, the infamous “Boss” Tweed, who controlled New York politics through Tammany Hall, said Belden and Gould visited his Duane Street office where Gould told him that he was swindled by Gordon. Gould was a friend and supporter of the highly-corrupt Tammany Hall politician and a frequent visitor to Tweed’s law office. It was Tweed who helped Gould and Fisk gain control of the Erie Railway from Vanderbilt by legitimizing their watered down stock in the state legislature. For his help, Tweed received a hefty chunk of Erie Railway stock and was named as a company director. 

If Gould wanted something done about Gordon, Tweed was the man to see.

Tweed said he had heard of Gordon in connection with transactions involving the Erie Railway, but that was all since he had never inquired further about the man nor had he met the alleged lord.

“I told Mr. Gould that if he wanted to make an arrest (of Gordon) he might as well speak to Judge (Edward J.) Shandley (of the Essex Market Police Court), who was in the next room waiting to see me on business,” said Tweed. “I then called Judge Shandley in and told him Mr. Gould had a matter which he would explain ...”

Tweed said the three men left his office and he later went to the Metropolitan, finding Gould, Belden and the judge in the room that he used in the hotel. 

“As I first entered the room I saw lying on the sofa two packages, which Mr. Belden told me contained $200,000 in greenbacks each, and had been returned by Gordon, with the statement that he was willing to do whatever was right in the matter ...”

Gordon said he gave up the money, because he “feared outrage.”

During his subsquent trial on May 17, 1872, Gordon testified that he submitted to the “extortion only because I had no means to avoid it except by submitting to greater utrage and wrong.” 

Afterwards, he was watched or followed on the street, and on April 9 was arrested by Deputy Sheriff Jarvis for felonious conversion of the stock he received from Gould, who wanted the New York Supreme Court’s help to recover $273,000 in stocks and certificates from Gordon. 

His bail was set at $37,000 which was paid by Horace Clark, and Gordon was released pending his trial in May. Gordon then telegraphed his Philadelphia brokers not to turn over the stock he was in the process of selling, contravening a promise he made to Gould. 

(Next week: part 3)