A History of Canadian Wealth/Chapter XII

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Chapter XII. Contest for the Pacific Railway

Preface | Chapter I | Chapter II | Chapter III | Chapter IV | Chapter V | Chapter VI | Chapter VI | Chapter VII | Chapter IX | Chapter X | Chapter XI | Chapter XII | Chapter XIII | Chapter XIV | Chapter XV | Chapter XVI | Chapter XVII

When the Hudson’s Bay Company formally relinquished, in consideration of a payment of $1,500,000 and a reservation of one-twentieth of the area surrendered, its claim upon the vast territory from the Red River to the Rocky Mountains, railway projectors at once saw an opportunity to transfer into their private possession much of this coveted region.

Land Grants and Subsidies Assured

The first move to this end was not long in coming. On April 11, 1871, Sir George E. Cartier moved in the Dominion House of Commons that the House go into Committee on a resolution that a Pacific Railway be constructed by private enterprise and that it be given liberal public aid in grants of land, money and other modes of subsidy. Galt supported Cartier’s motion, which was adopted.1 Cartier was then solicitor for the Grand Trunk Railway, and Galt, as we have seen, had been not only a leading promoter of that railway, but only two years previously had, in association with Charles J. Brydges and others, secured a charter for the Sherbrooke, Eastern Townships and Kennebec Railway2 The head, real or titular, of the particular Company now seeking the Pacific Railway charter and grants was Senator David L. Macpherson who, as we have previously noted, was a member of the contracting firm of Gzowski and Company which had constructed the Grand Trunk Railway west of Toronto, and which was so large an owner of the stock of one of the Grand Trunk’s chief subsidiary lines. The Grand Trunk Railway was now controlled by an English board of directors headed by Thomas Baring, Lord Wolverton and others, and by a Canadian board consisting of Brydges, James Ferrier and William Molson.

It was evident that the Grand Trunk capitalists intended getting hold, if they possibly could, of this immensely valuable projected Pacific Railway charter and subsidies. But they quickly discovered that the rush for so great a prize was not to be uncontested. Another company of capitalists came forward in hot competition.

Sir Hugh Allan’s Company

This competitive group was headed by Sir Hugh Allan of Montreal. Allan was one of the most conspicuous men of capital of his time ; and as the founder of one of the largest and at present most powerful Canadian fortunes, his career deserves more than a passing notice. Sir Hugh Montague Allan, son of Sir Hugh Allan, today is a dominating factor on the board of directors of nineteen of Canada’s large corporations.

A merchant, contractor and shipbuilder, Sir Hugh Allan founded the Montreal Steamship Company, or Allan Line, the ships of which plied to Europe. It was in about the year 1853, Morgan says, that through the influence of John Ross, Cartier, L.T. Drummond and other politicians in power that Allan obtained ship-building and mail-carrying contracts from the Canadian Government.3 From these long-continuing mail subsidies, Sir Hugh Allan gathered in enormous profits. A contract that he secured from Postmaster-General Campbell in 1869 provided for the payment to him of £54,500 a year as mail subsidy.4 The great sums thus paid to Allan were later — on April 18, 1873 — the occasion of a severe opposition on the part of Holton in the Dominion House of Commons.

Montreal Warehouse Transaction

By means of his political connections Sir Hugh Allan obtained other privileges and properties. He was president of the Montreal Warehouse Company, one of the transactions of which was exposed in the Dominion House of Commons.

According to a statement there made by Mr. Holton on April 1, 1871, the Government, in 1865, had bought from private parties a tract of land adjoining the Lachine Canal basin in Montreal. This purchase was made on the recommendation of Allan for the ostensible purpose of increasing the wharfage and shed accommodation at the place. After the Confederation of the Provinces and the formation of the Dominion Government, the Montreal Warehousing Company applied to the Government for the purchase of a lot. On the advice of the officials of the Public Works Department, the Government refused to sell it. But, on July 19, 1870, when the Minister of Public Works was absent, the Minister of Militia acting for him reported to the Council in favor of granting the lease of this lot to the Montreal Warehousing Company for the term of 21 years at an annual rental of $l00. This ridiculously small sum represented less than the simple interest on one-half the cost of the land.

When Holton moved that the Government take immediate steps to resume possession of the land for public uses, as conditionally provided for by a clause in the lease, Hector Langevin, Minister of Public Works, defended the transaction. In the course of his explanation, Langevin ironically described a similar transaction by which accuser Holton, along with Hooker and John Young, had themselves benefited when, in 1851, they had bought Lachine Canal basin lots at public auction from the Government. Young had not only purchased lots from the Government, but Holton and Hooker had also sold him for £4,000 the lots which they had bought, “making a very handsome profit by the transaction.”

“A Very Nice Transaction”

“ Were you then opposed to the Government selling this land ?” Langevin in effect asked Holton. “ The action of the Government at that time,” Langevin taunted, “ met the approval of the honorable gentleman, and was a very nice transaction for him.” Which it was, Holton admitted, but asserted that he had opposed the Government sale, and only when it was held had he stepped forward in his character, not as a member of Parliament, but “ as a merchant doing business in Montreal. I invested in them as a good speculation.” The John Young here referred to was the eminent John Young who at the very time that the foregoing transaction was accomplished was a member of the Hincks Government ; Young was also a pushful railway promoter. Mr. Mackenzie bluntly declared of the Montreal Warehousing Company’s lease that “the whole matter could only be regarded as a ` job.’” Holton’s motion was lost.5

Very shrewd was Sir Hugh Allan considered in thus getting this valuable land for a mere pittance of a rental. While securing such governmental favors, Allan was reaping extraordinary profits from the promotion of many interests. His steamship line yielded large revenues. If the proved disclosures that were subsequently made as to the methods of the Allan Line are to be regarded as evidence of its previous methods, then it is fair to assume that those methods were by no means new when the Montreal Witness newspaper arraigned the Allan Line for the filth, overcrowding, discomfort and incivility to the herds of steerage passengers whose sufferings were coined into profits. This particular fact is one of court record.

The Allan Line sued the Montreal Witness for $50,000 damages for alleged libel ; and when this case came to trial in 1883, less than a year after Sir Hugh Allan’s death, the jury, after hearing all of the evidence during a trial of eight days, returned a verdict in favor of the Montreal Witness on all counts. This verdict was considered all the more conclusive inasmuch as the Allan Line had spent large sums in getting evidence taken by a Commission.6 Severe comments were generally made upon this Company which, while drawing large subsidies from the Dominion Government, was thus indirectly proved guilty of flagrant mistreatment of the most helpless class of its passengers crowded under the most pitiful, inhuman conditions down in the steerage.

Squeezing of Laborers

There was no official investigation previous to 1887 of the treatment of its workers by the Allan Line ; but it is not unreasonable to assume that the practices then reported by the “ Royal Commission on the Relations of Capital and Labor” had not been suddenly introduced. The testimony revealed the most oppressive exploitation of its workers by the Allan Line ; many of the longshoremen were often compelled to work 30 to 35 hours at a stretch for the wretched wages of 20 cents an hour, and they had to submit to the meanest exactions, besides.7

“ The Allan Line,” reported the Commission, “ retains one per cent. of the wages of its employes, and with this amount so retained insures them in the Citizens’ Insurance Company, which, in case of death, pays $500 to the heirs of the victim, or $5 a week in case of inability to work resulting from accident. . . . We find that the longshoremen of the Allan Line pay a premium . . . equivalent to an annual premium of $9.12 for a protection of ten hours a day during 365 days. An accident insurance company of Montreal would give the same indemnity . . . upon a premium of $8.75, payable per quarter, and the policy which it would give covers not only accidents happening during the ten hours of the work but all the accidents that could happen during the twenty-four hours of the day.

“The insurance system put in force by the Allan Line is, then, onerous for the insured workmen ; moreover, it has the double effect of being compulsory, and of being completely beyond the control of those interested, who are not in possession of any document establishing their claim.”8

The president of the Citizens’ Insurance Company which thus mulcted the workers of the Allan Line was Sir Hugh Allan, and he remained so till his death,9 when his holdings went to his family. Longshoremen employed by the Allan Line testified that no man could get employment from the Allan Company unless he consented to this insurance scheme.10

Sir Hugh Allan, Foremost Capitalist

Multifarious were Sir Hugh Allan’s financial and industrial interests. He was president of the Merchants’ Bank for which he secured the charter in 1864, and he was or became president of 15 more corporations and vice-president of six corporations. These corporations comprised telegraph, navigation, coal and iron, tobacco, cotton manufacturing, sewing machine, cattle, rolling mills, paper, car, elevator, coal and other companies. He was the first president of the Quebec, Montreal, Ottawa and Occidental Railroad, originally projected as the Northern Colonization Railroad.

An aggressive type of capitalist, Sir Hugh Allan lived in his “ handsome residence of Ravenscraig,” and knighted “ as some have supposed because he entertained, splendidly, some members of the Royal Family.” A contemporary writer further wrote of him, “ Rigid as a martinet, and a stickler for economy and system in business matters, Sir Hugh Allan still could find time to lecture in church.”

The prize of the Canadian Pacific franchise was one of magnitude. There they lay, immense domains of public land all ready to be secured under color of law, and there was the public treasury easy of access as experience had proved. So far as the Canadian Parliament went, a majority of its members could be favorably swayed. But what of the Canadian people ? Some strong argument was necessary for the influencing of them to the point where they would agree that the donation of tens of millions of acres of land and tens of millions of dollars was a patriotic and indispensable act.

“Give Generously and Patriotically”

The railway promoters had their argument ready. They pointed to the “distinguished liberality,” of the United States Government and the State Legislatures in giving bountiful subsidies in lands and cash to railway promoters. Was the Canadian Government to be less patriotic ?

In making this plea, the Canadian railway promoters omitted mentioning two facts.

One fact was that compared to those of the United States, the population and resources of Canada were poor and meager. The second fact was that virtually every subsidy and other railroad legislation in the United States had been obtained by bribery.

Bribery in the United States

Thus, for example, the projectors of the La Crosse and Milwaukee Railway corrupted Wisconsin legislators and influential politicians, State officials and certain editors with bribes totaling $800,000 in order to create favorable agitation and consideration for an Act giving to that railway company a land grant of about 1,000,000 acres, valued then at nearly $18,000,000.11

A special committee of Congress was appointed in 1857 to investigate charges of corruption in connection with an Act giving enormous land grants in Iowa, Minnesota and other States to the Des Moines Navigation and Railroad Company ; the committee recommended the expulsion of four members of Congress, reporting that one of them, Orasmus B. Matteson, was a leader of a corrupt combination and had received for disbursement a corruption fund of $100,000 and “ other valuable considerations.”12

The Union Pacific Railway Company obtained, in 1864, the passage of an Act giving it a land grant of 12,000,000 acres, and also a loan of $27,213,000 in Government bonds. A special committee of Congress reported after investigation, in 1873, that the promoters of the Union Pacific Railway had expended a corruption fund of $436,000 to get the Act of 1864 passed, and that another corruption fund of $126,000 had been used to get a supplemental Act passed in 1871.13

In the year 1868 Jay Gould and his associate directors of the Erie Railway spent at least $1,000,000 in corrupting the New York Legislature, and Cornelius Vanderbilt, of the New York Central Railroad, had spent a large amount for the same purposes.14

These are but a few instances of the frequency with which bribery had been employed in the United States.

American Capitalists League with Allan

Associated with Sir Hugh Allan in the Canadian Pacific Railway scheme were a choice group of American capitalists — George W. McMullen, W.B. Ogden, George W. Cass, W.G. Fargo, the banking firm of Winslow, Lanier and Company, Jay Cooke and others.

Some of these American capitalists such as Fargo were heads of express companies ; others were railway promoters or officials. Scott, for instance, controlled the Pennsylvania Railroad, and became the chief promoter of the Texas Pacific Railway project which was accompanied, in 1876, by such a wide corruption of Congress. Heading one aggressive group of railway capitalists in the United States, Scott was opposed by another group headed by Collis P. Huntington, the Central and the Southern Pacific railways magnate. These two groups furiously contested for the division of land-grant and other spoils in southwestern United States. Each side introduced its Bills in Congress, and each effectively, systematically set out to corrupt Congress. Both groups used great sums of money to attain their ends.15

He Tries to Unite Competing Interests

The folly of two companies competing for the Canadian Pacific charter and subsidies was evident to the discerning Sir Hugh Allan. Why not amalgamate all conflicting interests, join in sharing the proceeds, and thus remove all antagonisms and cross-purposes ? This was Allan’s plan, and he tried hard to bring it about. At the same time he sought by negotiation to provide for every interest or group that in any way presented themselves as obstacles to the consummation of his own ends.

“. . . A party in the interest of the Hudson’s Bay Company,” Allan wrote to McMullen, on December 29, 1871, “ consisting of Donald A. Smith, D. McInnes, G. Laidlaw, G. [eorge] Stephen, Daniel Torrence (of New York), and one or two others have given notice in the Official Gazette that they will apply for a charter to make a railroad from Pembina to Fort Garry. That is the only one that affects us. . . .” Allan wrote further that, “ I think we are sure of Cartier’s opposition.” Cartier, that powerful politician and Cabinet member of Macdonald’s Ministry, was (as we have seen), solicitor for the Grand Trunk Railway. Allan wrote that Brydges, of the Grand Trunk, was using all his influence with Cartier to thwart the scheme.

Seeks to Buy Over Competitors

Allan’s next letter revealed the methods he had in mind of seeking to win Brydges over. On January 24, 1872, Allan wrote to Charles M. Smith and McMullen saying that his (Allan’s) subscription of $1,450,000 to the stock of the proposed Canadian Pacific Railway Company “ includes the sum of $200,000 furnished jointly by you and myself, to be transferred in whole or in part to Mr. C.J. Brydges on condition of his joining the organization and giving it the benefit of his assistance and influence. . . .”16

Brydges, however, kept on making trouble, as was shown by a letter written by Allan, from Montreal, February 23, 1872.

On the next day, February 24, 1872, Allan wrote to Charles M. Smith of Chicago, “ Since writing to you yesterday, I have seen Mr. D.L. Macpherson of Toronto, who is a member of the Dominion Senate, and rather an important person to gain over to our side. He has been applied to by our opponents, and uses that as a lever by which to obtain better terms from us. He insists on getting $250,000 of stock, and threatens opposition if he does not get it. You will remember, he is one of those I proposed as Directors. I will do the best I can, but I think that McMullen, you and myself will have to give up some of our stock to conciliate these parties.”17

A Proposed Allotment of Stock

Four days later, Sir Hugh Allan wrote again to Charles M. Smith: “ It seems pretty certain that in addition to money payments the following stock will have to be distributed : — D.L. Macpherson, $100,000 ; A.B. Foster, $100,000 ; Donald A. Smith, $100,000 ; C.J. Brydges, $100,000 ; J.J.C. Abbott, $50,000 ; D. McInnes, $50,000 ; John Shedden, $50,000 ; A. Allan, $50,000 ; C.S. Gzowski, $50,000 ; George Brown, $50,000 ; A.S. Hincks, $50,000 ; H. Nathan, $50,000 ; T. McGreevy, $50,000;—total $850,000. Please say if this is agreeable to you ? I do not think we can do with less, and may have to give more. I do not think we will require more than $100,000 in cash, but I am not sure as yet. Who am I to draw on for money when it is wanted, and what proof of payment will be required ? You are aware I cannot get receipts. Our Legislature meets on the 11th of April, and I am already deep in preparation for the game. Every day brings up some new difficulty to be encountered, but I hope to meet them all successfully. Write to me immediately.

“ P. S.— I think you will have to go it blind in the matter of money — cash payments. I have already paid $8,500, and have not a voucher and cannot get one.”18

Adroit a business man as was Allan he did not know the danger of committing his surreptitious moves to writing. No doubt he did not harbor the remotest suspicion that before long these very tell-tale letters would become public property. He kept writing with the greatest freedom.

Sir Hugh Allan’s Secret Methods

On July 1, 1872, Allan wrote to an American capitalist in New York (name not revealed) that the cry “ No Yankee dictation ” had forced the unwilling and ostensible dropping of every American name from the scheme. In this letter Allan accused Cartier (then Dominion Minister of Militia and Defense, and at the same time salaried solicitor for the Grand Trunk Railway), of preventing the building of an opposition line from Montreal to Ottawa, “ and the same reason made him [Cartier] desirous of giving the contract for the Canadian Pacific into the hands of parties connected with the Grand Trunk Railway, and to this end he fanned the flame of opposition to us.” Allan added that Cartier, the leader and chief of the French party, had control of 45 members of Parliament “ who have followed Cartier and voted in a solid phalanx for all his measures.” Inasmuch as the Government majority was generally less than 45, Allan said that it was important to win over this compact body of Cartier’s followers, and that he had taken measures to that end. “ As you may suppose,” Allan concluded, “ the matter has not reached this point without great expense — a large portion of it payable when the contract is obtained ; but I think it will reach not less than $300,000.”

What means did Sir Hugh Allan now take to strike back at Cartier ?

Allan wrote further that, “. . . means must be taken to influence the public, and I employed several young French writers to write it up in their own newspapers. I subscribed a controlling influence in the stock, and proceeded to subsidize the newspapers themselves, both editors and proprietors. I went to the country through which the road would pass, and called on many of the inhabitants. I visited the priests and made friends of them, and I employed agents to go among the principal people and talk it up. I then began to hold public meetings, and attended to them myself, making frequent speeches in French to them, showing them where their true interest lay. The scheme at once became popular. I formed a Committee to influence the members of the Legislature. This succeeded so well that, in a short time, it had 27 out of 45 on whom I could rely, and the electors of the ward in this city, which Cartier himself represents, notified him that unless the contract for the Pacific Railway was given in the interests of Lower Canada, he need not present himself for re-election. He did not believe this, but when he came here and met his constituents he found, to his surprise, that their determination was unchanged. He then agreed to give the contract as required. . . .”19

“ Now Wanted — $200,000 for Elections ”

Sir Hugh Allan’s various methods were successful in influencing Cartier, for we find Cartier writing this “ private and confidential ” letter to Allan, July 30, 1872 :

“ The friends of the Government will expect to be assisted with funds in the pending elections, and any amount which you or your Company shall advance for that purpose shall be recouped to you. A memorandum of immediate requirements is below.” This memorandum read :

“ Sir John A. Macdonald .............. $25,000
Hon. Mr. Langevin ..................... 15,000
Sir. G.E.C. ........................... 20,000
Sir J.A. (add.) ....................... 10,000
Hon. Mr. Langevin .................... 100,000
Sir G.E.C. ............................ 30,000.”20

On August 7, 1872, Allan wrote, “ I have already paid away about $250,000, and will have to pay at least $50,000 before the end of the month. I don’t know as even that will finish it, but hope so.”21

An Attempted Fusion

The “ great bribery scheme ” engineered by Sir Hugh Allan had now reached the point where it was considered that the machinery of Government was “ properly fixed.” There remained the final necessity of attempting to unify the competing companies. On October 15, 1872, a Provisional Board of Directors for the Canada Pacific Railway Company was formed.

Heading this board was Sir Hugh Allan whose particular methods are aptly and with the fullest candor described in his own correspondence. The Hon. J.J.C. Abbott, M.P., was the second on the list ; of Abbott a eulogist wrote, “ Capitalists who are sensitive to their interests, elected him to the Directorship of the most important financial institutions, notably the Citizens’ Insurance Company, Merchants’ Bank, Bank of Montreal and Canadian Pacific Railway.” This biographer further wrote of Abbott that, “ Early in his career he had for clients the Molsons, Allans, Merchants’ Bank and Molson’s Bank, and, from its inception, the Canadian Pacific Railway,” the solicitorship of which he later resigned. He refused, said this writer, appointment to a chief justiceship, possibly because the receipts of his office were many times a judge’s salary.22

Other members on the Provisional Board of Directors of the Canada Pacific Railway were Senators A.B. Foster, John Hamilton, David Christie and James Skead. The Hon. Donald A. Smith, representing a Manitoba constituency in the Dominion Parliament, was on the Provisional Board of Directors of the Canada Pacific Railway. So, too, on the board, were Hon. J.J. Ross, M.P. and Legislative Councillor ; Hon. Chief Judge Coursol of Montreal ; Henry Nathan, M.P. for Victoria, B.C. ; Andrew Allan, brother of Sir Hugh ; Hon. Louis Archambault, M.P. and Dominion Minister of Agriculture, and sundry other members of Parliament.23

That this was a formidable combination of men of political and other influence was fully recognized.

Fifty Million Acres and $30,000,000

But this scheme failed ; the Interoceanic Railway Company refused to amalgamate, and Allan was driven to the necessity of organizing an entirely new company.

So long as the two big competing companies contesting for the transcontinental charter and subsidies had been unable to come to terms of amalgamation, neither could get anything from the Dominion Government. But the formation of the new company by Sir Hugh Allan settled the difficulty. On February 5, 1873, the charter of this Company was signed by the Governor-General. By the provisions of this charter, the Canadian Pacific Railway Company pledged itself to build the railway within ten years from July 20, 1871, in consideration of which it was to receive a land grant of 50,000,000 acres, and a subsidy of $30,000,000 payable from time to time in installments. The Company was allowed a capital of $10,000,000.

Charges of Bargaining and Bribery

After the session of Parliament opened, Lucius S. Huntington, in the House of Commons, rose on April 2, 1873, and in effect accused Premier Sir John A. Macdonald and the Government of having sold the charter for the Canadian Pacific Railway in return for a large sum of money to be used for election purposes. Huntington demanded an investigating committee ; it may here be explained, by the way, that Huntington was not a stranger to railway charters ; he, James Ferrier and other politicians and members of Parliament had been the incorporators of the Missisquoi and Black Rivers Railway Company, chartered in 1870,24 and he, John Henry Pope, Charles J. Brydges and others had secured, in 1866, a charter for the Waterloo, Magog and Stanstead Railway Company.25

At first Premier Macdonald refused to appoint an investigating committee, but subsequently regarded it as expedient to comply. In this case the House of Commons adopted the unusual procedure of itself choosing the investigating committee.

This committee was droning along, without any effect, when suddenly Huntington published a series of telegrams and letters written by Sir Hugh Allan ; from some of these we have already given extracts. “ It has never been clearly explained,” Sir Richard Cartwright wrote, “ how and why Sir John allowed these very compromising letters of Sir Hugh Allan and others to fall into his enemies’ hands when he could apparently have got possession of them by paying a comparatively small sum of money. He may have thought the offer was a trap. I do not know, and the reason remains more or less of a mystery, the more so as Sir John showed in other ways that he was in a temper to stop at nothing if he could escape a hostile verdict.”26

But who was it that supplied the incriminating McMullen correspondence ? If the statements made in the Dominion House of Commons, on April 24, 1877, by Mr. Haggart, are to be credited, the informer who thus turned against Macdonald’s Government, was the Hon. A.B. Foster. “ It was a notorious fact,” said Haggart, “ that the information used to turn out the late Government was furnished by the Hon. A.B. Foster, and everybody expected that the honorable gentleman would receive his reward for same. And he did. The manner in which the contracts for the Georgian Bay Branch and the Canada Central Railway were let showed it.” Haggart described the affair as a “disgraceful transaction.”27

The publication of Allan’s correspondence made a widespread stir and uncommon sensation except, as Governor-General Lord Dufferin cynically wrote, in that “ section of society within politics, whose feeling may be stimulated by other considerations.”28

A Royal Commission was now appointed to investigate.

The Evidence and Disclosures

According to McMullen’s statement, the only members of the Government with whom he and the other promoters dealt were Macdonald and Finance Minister Sir Francis Hincks ; that Hincks visited New York in the early part of August, 1871, and at interviews with two prominent railway bankers, had advised them and their associates to cease negotiations with C.W. Smith and himself (McMullen), and to open them directly with Sir Hugh Allan. McMullen further stated that Hincks later told him, (McMullen) of Cartier’s Grand Trunk jealousy of Allan. Large levies of funds, McMullen said, were levied on the American capitalists by the promoters.29 Daniel Y. McMullen, a brother and partner of George W. McMullen, gave corroborative testimony.

Sir John A. Macdonald was called as a witness ; as we have previously noted, Macdonald had, nearly twenty years before, been an incorporator of various companies, and he had been connected with the Trust and Loan Company of Upper Canada which “ owes much of its success to his exertions.” Later, he became president of the Manufacturers’ Life Assurance Company.

Macdonald’s own evidence showed that he had personally bargained in the charter traffic with Sir Hugh Allan, and that he had received funds from Allan for use in election purposes.

Premier Macdonald testified that the Government had asked Donald Smith to be a member of the Canada Pacific Board ; Smith was “ the representative man of the Hudson’s Bay Company in Canada ” and the “ Government thought it would be a great advantage to get the assistance and influence of that powerful corporation in England, if the Company had to go to that market to borrow. . . .” But when the Government, Premier Macdonald’s testimony continued, came to the conclusion to exclude members of Parliament, Smith was excluded, “ and upon Smith’s recommendation, Mr. McDermott, a wealthy merchant in Winnipeg, was appointed in Smith’s place.”30

Prime Minister Macdonald’s explanation was not well received. The testimony showed that the construction work was to be undertaken by a company composed of the identical men promoting the railway project, and thus from the profits of the construction work were to recoup themselves for their previous outlays.31

Allan Admits Expending $350,000

Summoned as a witness by the Royal Commission, Allan himself produced the letter in which Sir George E. Cartier had asked him for various sums of money for use by the Government in the pending elections. (We have already given the text of this letter.) “ As the letter now appears,” Allan testified, “the memorandum is for $110,000, but at the time it was written the first three items amounting to $60,000 only were mentioned. Sir George said, however, that they could talk of that afterwards. Accordingly, I paid over the first three sums of money to the gentlemen indicated. Afterwards Sir George requested me to send a further amount to Sir John A. Macdonald of $10,000, and $10,000 to Mr. Langevin and $30,000 to the Central Committee of Elections, and the three sums last mentioned in the memorandum were then added to it by Sir George.”

Later, more demands upon Allan were made, and soon Allan found that he had contributed $162,600, of which $85,000 went to Sir George E. Cartier’s Committee, $45,000 to Sir John A. Macdonald’s election expenses in Ontario, and $32,600 toward Langevin’s electoral expenses in Quebec.

“ I also find,” Allan went on, “ for the assistance of other friends of my own in connection with the elections, between $16,000 and $17,000.

“ These sums, with the preliminary expenses on the Pacific and various railroads in which I was engaged, more or less directly connected with the Pacific enterprises, made up the amount of my advances to about $350,000.”32

Sir Hugh Allan also testified that Sir Francis Hincks, Dominion Minister of Finance, asked him to get his (Hincks’) son in the Montreal Warehousing Company’s offices ; of this Company, as we have seen, Allan was president. Hincks’ son failed to get the appointment. Allan further testified that “ my property invested in various ways connected with the country in business of all kinds, amounts to about $6,000,000,”33 an amount which, compared to the present purchasing power of money, equals perhaps $60,000,000. Allan’s income was reported at $500,000 to $600,000 a year ; expressed in terms of the then greater purchasing power of money, it was an annual income that today would perhaps be equal to $5,000,000 or $6,000,000.

The Large Bank Graft

It may be added that railway charter trafficking was not the only kind carried on ; the banks, also, did not lack their share of “ Government encouragement.” A.T. Galt, Dominion Finance Minister in 1867, was a big bank stockholder ; Sir John Rose who succeeded him was a partner in a large international banking firm, and Sir Francis Hincks, who succeeded Rose as Minister of Finance,34 was not only a bank stockholder and director, but became president of the Consolidated Bank of Montreal which failed so disastrously in 1879 with an assortment of $1,420,000 in bad and doubtful debts.35

It appeared, according to statements made in the Dominion Parliament by Mr. (later Sir) Charles Tupper, Sir Richard Cartwright and Mr. Blake that in the years immediately preceding 1873, the Bank of Ontario received an average of $360,000 a year of public Government money deposited without having to pay interest, thus giving that bank a present of $30,000 a year ; that $1,100,000 was deposited in the Montreal City and District Savings Bank of which Finance Minister Hincks was a Director or President, and that of this $1,100,000 of Government or public deposits, only $400,000 drew interest. Mr. Blake said that these deposits of the people’s money “ were spread over thirty-seven different institutions, and of course, members of Parliament were likely to be shareholders in the larger and more stable institutions.” Sir Richard Cartwright (Minister of Finance 1873-1878), stated that the amount of Government money on deposit on December 31, 1871, was nearly $8,000,000, of which $4,300,000 bore no interest ; the Bank of Montreal, it seems, was one of the banks profiting heavily.36

Donald A. Smith Turns Against Macdonald

The railway disclosures made it evident that Premier Macdonald had to retire, but if he had been able to obtain a favorable vote from Parliament itself, it was possible that Governor-General Lord Dufferin might have allowed him to choose his successor. “Finally,” wrote Sir Richard Cartwright, “ after some hesitation and after the debate had gone on for many days, Mr. Laird . . . declared his intention of voting with the Opposition. This, which was followed by a similar pronouncement from Mr. Donald Smith (now Lord Strathcona), put an end to all doubt as to how the vote would go, and Sir John, without more ado, tendered his resignation.”37 Out, therefore, went Prime Minister Sir John A. Macdonald and the whole of his Government, and in came a Ministry headed by Alexander Mackenzie.

Mr. Smith’s Change of Front

Why, however, did Mr. Donald A. Smith change so suddenly from being an ardent supporter of Macdonald’s administration to an opponent whose decisive vote at this critical juncture, added to a few other adverse votes, caused the resignation of Macdonald’s Ministry ? We have seen from Macdonald’s own testimony how the Prime Minister recommended Mr. Smith for a place on the Board of Directors of the Canada Pacific Railway.

This was, indeed, a most vital question. It was but a few years later that Sir Charles Tupper, in the House of Commons, was so uncharitable as to accuse Mr. Smith in categorical fashion of certain distinct and supposedly palpable motives in thus turning against his political chief and patron, Macdonald. “ Mr. Smith was a representative of the Hudson’s Bay Company,” announced Tupper [who had, in 1872 and 1873 occupied the posts of Minister of Inland Revenue and Minister of Customs under Macdonald], and he [Smith] had been pressing a claim on his right honorable friend [Macdonald] for public money ; Sir John had held back, and Mr. Smith came to the conclusion that it would be just as well to jump the fence if there was to be a change of Government. But Mr. Smith was a canny man ; he held back and sat on the fence and watched the course, certainly not in the interests of his country, because he did not want to jump too soon and find he had jumped into a ditch. But when he came to the conclusion that the Government was going out, he made the bolt, and I have no doubt that he has had a great deal of reason since for congratulating himself on having jumped as he did.”38

An Uproar in Parliament

In the violent, extremely unparliamentary scene that occurred next day — a scene famous in the annals of the Dominion Parliament — various members more than intimated that after the honorable Mr. Donald A. Smith’s sudden flop, and after the new Government took office, extensive contracts and corporate powers and proprietary possessions somehow came into the ownership of Mr. Smith and associates. When Smith said that he had received or desired no more from Mackenzie’s than from Macdonald’s Government, Tupper asked him point blank whether he (Smith) had not, in 1873, telegraphed to Ottawa that he would be there to support the Government, and that he then knew all about the Canadian Pacific Railroad affair. Smith denied that he sent the telegram.

Whereupon there was a wild uproar. Mr. Smith charged Sir John A. Macdonald with having made certain statements in a private conversation. Macdonald accused Smith of stating a falsehood. Mr. Rochester got up and asked Smith “ how much the other side offered him ? ”

At this, members suddenly became bereft of decorum, and shouted and gesticulated excitedly. Tupper called Smith’s conduct a cowardly abuse, and charged him with detailing “ what he knows to be falsehood.” Excitement now multiplied ; some members shouted “Order ! ”; others exploded into asking running questions. Tupper asserted that Smith had begged him to implore the leader of the Government to make him (Smith) a member of the Privy Council of Canada and was refused, which allegation Smith denied. Here there was more disorder, and still more so when Tupper repeatedly called Smith a coward, a “ Mean, treacherous coward ! ”39 A message from the Governor-General came in at that moment, and had the effect of diverting the diversion. According to Sir Richard Cartwright, nothing but the presence of the Sergeant-at-Arms and “ a few stalwart keepers of the peace . . . prevented an absolute physical collision between the parties.” Cartwright described Sir John Macdonald and Dr. Tupper as “ absolutely beside themselves for the time being, while Mr. Smith was collected and composed.”40 Cartwright, it may be said, held a somewhat prejudiced and altogether opposing partisan view of Macdonald.

Of the charges made during this particular session we shall have more in detail to say in the next chapter. Whatever may have been the merits of the controversy as to why Donald A. Smith turned front, the fact remained that he and certain others chief of whom was George Stephen, future Lord Mount Stephen, became railway and land magnates of the first order under Mackenzie’s Government, and during that period, by a series of laws, contracts and acquisitions, prepared the way for their subsequent construction, acquirement and ownership of the Canadian Pacific Railroad.

Sir Hugh Allan Gets Nothing

All of Sir Hugh Allan’s bargainings and schemings were finally in vain ; the charter granted to him and associates never received the sanction of Parliament and never became of effect. But seven years later — in 1880 — a company headed by George Stephen, with Donald A. Smith interested in the background, put through the actual measures practically giving them the Canadian Pacific Railway virtually free of cost and with a land grant of 25,000,000 acres.

Donald Smith drives last spike of CPR in 1885, Nov. 7


1. Parliamentary Debates, Dom. House of Commons, 1871, Vol. II, p. 1028.

2. Statutes of Canada, 1869, pp. 242-243.

3. Biographies of Celebrated Canadians (Edit. of 1862), p. 673.

4. Sessional Papers, Dom. Parl., 1869, Vol. II, No. 5, Sess. Paper No. 34, p. 4.

5. Parliamentary Debates, Fourth Session, 1871, Vol. II, pp. 44 and 766-770.

6. See Monetary Times, Nov. 2, 1883 p. 491.

7. Report of Royal Commission on the Relations of Labor and Capital, 1889, Que. Evidence, Part I, pp. 176-184.

8. Ibid., pp. 20-21. (Appendix C.) The premium of $8.75 referred to by the Commission was unquestionably an annual premium, payable per quarter ; the Commission’s meaning on this point while not clearly expressed, is evident enough.

9. See Monetary Times, Dec. 15, 1882, p. 657, giving a list of corporations of which Allan was president or vice-president.

10. Report of Royal Commission on the Relations of Labor and Capital, 1889, Que. Evidence, Part I, p. 176.

11. Report of the Joint Select Committee Appointed to Investigate into Alleged Frauds and Corruption, etc., Appendices to Wisconsin Senate and Assembly Journals, 1858.

12. Reports of Committees, House of Representatives, Thirty-fourth Congress, Third Session, 1856-1857, Report No. 243, Vol. III.

13. Reports of Committees, Credit Mobilier Reports, Forty-second Congress, Third Session, 1872-1873, Doc. No. 78, p. xvii.

14. See History of the Great American Fortunes, Vol. II, pp. 310-317, giving the official facts.

15. Huntington wrote freely to Colton, an associate railway capitalist, of the specific sums used ; these letters later came to light in a lawsuit. “It is impossible,” reported the Pacific Railway Commission after an extended investigation (Vol. I, p. 121 of its Report), “to read the evidence of C.P. Huntingtor and Leland Stanford and the Colton letters without reaching the conclusion that very large sums of money have been improperly used in connection with legislation.” For full details as to this corruption see the chapter “The Pacific Quartet” in Vol. III, History of the Great American Fortunes, and pp. 572-573 History of the Supreme Court of the United States.

16. See Enclosure No. 3 (Appendix) in Report of the Royal Commission, Pacific Railway, With Despatches, 1873, p. 72.

17. Ibid., p. 73.

18. Enclosure No. 3 (Appendix), Report of the Royal Commission, Pacific Railway, etc., 1873, pp. 73 and 194. Italics in the original. When these letters became public, George Brown, editor and proprietor of the Toronto Globe denied circumstantially that Allan, in proposing to set aside $50,000 stock for him, acted with his (Brown’s) authority or knowledge. “ I have never in my life,” Brown stated, “ had the slightest interest, directly or indirectly, in any contract or work of any kind dependent on public aid, and the Pacific Railway contract was certainly the last enterprise I could, under any circumstances, have been induced to touch.” There is no reason to doubt the truth of Brown’s statement. It is probable that the $50,000 of stock was thus proposed to be given to Brown in the remote hope — although an abortive one — of trying to buy off the opposition of Brown’s newspaper — the Toronto Globe.

19. Enclosure No. 3, Report of the Royal Commission, Pacific Railway, etc., 1873, pp. 75-76.

20. Report of the Royal Commission, Pacific Railway, etc., 1873, pp. 136-137 of Testimony.

21. Sir Richard Cartwright in his recently published Reminiscences wrote (p. 377, Appendix E) : “It must always be borne in mind, in dealing with this matter, that a contribution of $200,000 or $300,000 for election purposes meant a vast deal more in the Canada of forty years ago than it would today. Looking at the difference in population, and still more in available wealth, it is no exaggeration to say that it would almost equal a contribution of two or three millions in hard cash now.”

22. As we have seen, Abbott was one of the incorporators of the Chaudiere Valley Railway Company, chartered in 1864.

23. Report of the Royal Commission, Pacific Railway, etc., Appendix, p. 38.

24. Statutes of the Province of Quebec, 1870, pp. 118-119.

25. Statutes of the Province of Canada, 1866, p. 514.

26. Reminiscences, p. 105.

27. Debates in the House of Commons, 1877, Vol. III, pp. 1700 and 1789-1790. In 1871 Foster had bought the rights of a Mr. Bolckow in the Brockville and Ottawa Railway and the Canada Central Railway, and he also purchased large quantities of rails. He was to pay $2,000,000 in installments, but could not meet his obligations, and suffered financial reverses in 1877. At the instance of competitive American contractors he was imprisoned for a trivial debt of a few dollars. He died shortly afterward.

28. Dispatch of August 18, 1873.

29. Report of the Royal Commission, Pacific Railway, etc., 1873. Enclosure No. 5, Appendix, pp. 85-90. Sir George E. Cartier died before this investigation was held ; therefore his side of the story cannot be given.

30. Ibid., p. 115 of Testimony.

31. See Ibid., Exhibit K. pp. 210-211 of Report. The construction contract was to be let to the Canada Land and Improvement Company. This contract was signed by Sir Hugh Allan, Donald A. Smith, George W. McMullen, Jay Cooke and Company, Thomas A. Scott and others. Of the total capital of $5,725,000, Allan, Smith and McMullen subscribed $4,500,000.

32. Report of the Royal Commission, Pacific Railway, etc., 1873, p. 137.

33. Ibid., p. 143.

34. There were four successive Ministers of Finance under the Macdonald Administration from 1867 to 1873. Hincks occupied that post from October, 1869, to February, 1873, and was succeeded by Sir Samuel Leonard Tilley.

35. This bank was the result of the merger of two banks — a Montreal and a Toronto bank. It crashed in 1879 owing fully $3,000,000. Just before the failure Sir Francis Hincks at a stormy meeting of the stockholders tried to reassure them. “This bank,” then commented the Monetary Times, “has the advantage of being governed by a President whose qualifications are never better displayed than in making a speech under difficult circumstances. ‘Many a time and oft’ Sir Francis Hincks has confronted opposing forces in Parliament and he has a perfect mastery of the art of putting things in such a light as to disarm opposition.”—Monetary Times, June 13, 1879, p. 1534. Sir Francis Hincks was convicted on the technical charge of being a party to the making of false returns to the Government, but the general supposition was that he had been used by parties who managed to escape the consequences.

36. Debates in the House of Commons, Third Session, Third Parliament, pp. 919-923.

37. Reminiscences, p. 118.

38. Debates in the House of Commons, Dom. Parl., 1878, Vol. V, p. 2560.

39. Ibid., p. 2564. The language here given is exactly that reported in Hansard.

40. Reminiscences, p. 187. The scene as reported in Hansard, Cartwright further wrote, “but faintly represents what actually took place. The shouts and cries were so loud that but a part of what passed was heard and taken down by the reporters. . . .”—Ibid., p. 388.

Preface | Chapter I | Chapter II | Chapter III | Chapter IV | Chapter V | Chapter VI | Chapter VI | Chapter VII | Chapter IX | Chapter X | Chapter XI | Chapter XII | Chapter XIII | Chapter XIV | Chapter XV | Chapter XVI | Chapter XVII

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