The 1871-1872 South Improvement Company conspiracy Amasa Stone

john d. rockefeller in 1885.

the second time came in 1871. rockefeller had long believed overcapacity in oil refining business cause crash in price of refined oil. anticipating crash, on january 10, 1870, rockefeller , partners established new joint-stock company, standard oil. 10,000 shares of standard oil created. john , william rockefeller, flagler, harkness, , andrews took shares. new investor, oliver b. jennings (william rockefeller s brother-in-law), invested $100,000 in new company , given 1,000 shares. old company of rockefeller, andrews & flagler given 1,000 shares reserve. stock set @ $100 per share par value ($1,894 in 2016 dollars), , standard oil paid 105 percent dividend in 1870 , 1871. overcapacity crash hit in 1871, , many refiners neared bankruptcy. in fall of 1871, rockefeller learned of conspiracy being promoted thomas a. scott (first vice president of pennsylvania railroad) , peter h. watson (then director of ls&ms). on november 30, 1871, rockefeller met scott , watson @ st. nicholas hotel in new york city, scott outlined plan: using vaguely-worded corporate charter had obtained pennsylvania general assembly, pennsylvania railroad, new york central railroad, erie railroad, standard oil, , few small oil refining companies create , invest in south improvement company (sic). sic s participating railroads give sic s investor-refiners 50 percent rebate on oil shipments, helping them drive competitors out of business. additionally, time sic carried oil of non-participating refiner, sic give 40-cents-per-barrel payment ($8 in 2016 dollars) investor-refiners. sic provide investor-refiners information on shipments of competitors, giving them critical advantage in pricing , sales.

rockefeller saw sic ideal mechanism achieving goal: monopoly on oil refining in cleveland. once sic had severely weakened competitors, standard oil buy out city s 26 major oil refining companies @ fire-sale prices. monopoly allow standard oil dominate national refining market, garner higher profits, , drive competitors out of business. higher profits, standard oil rapidly expand, becoming more dominant. make purchases, standard oil needed cash. secure cash, rockefeller allowed amasa stone, stillman witt, benjamin brewster, , truman p. handy—all of whom officers in cleveland banks—to buy shares in standard oil @ par in december 1871. stone , other bankers used influence @ own , other banks give rockefeller financial backing needed. stone owned equivalent of 5 percent of entire outstanding stock of standard oil.

the sic conspiracy collapsed in march 1872, between february 17 , march 28, 1872, rockefeller able buy out 22 of 26 major refiners in cleveland, event historians call cleveland massacre . stone played major part in success of event. rockefeller knew if bought out weak refiners first, d generate opposition , never chance take on larger, more profitable ones. tackled strongest competitor, firm of clark, payne & co., led oliver hazard payne , backed wealthy j. g. hussey family. in december 1871, rockefeller asked payne meet him @ second national bank in cleveland discuss business matters in bank had interest. stone , stillman witt both officers in bank. payne swiftly agreed merger of interests rockefeller s, , transaction closed in january 1872.

events moved additional capital needed, , rockefeller felt cleveland banks not counted on keep loan requests confidential. on january 2, 1872, standard oil issued 4,000 new shares of stock in form of dividend. stock issued on pro rata basis, gave stone 200 shares. later same day, issue of stock made. constituted 11,000 shares, of 3,000 given john d. rockefeller, 1,400 henry flagler, 4,000 owners of clark, payne , company (one of largest oil refineries in cleveland), 700 refiner jabez a. bostwick, 200 refiner joseph stanley, , 500 peter watson (who president of sic). 1,200 shares given john d. rockefeller retain reserve. on january 2, 1872, third new issue of 10,000 shares occurred, , given rockefeller hold in reserve. although these new issues had diluted stone s investment 2 percent of standard oil s stock, enough give him strong financial interest in company , allow john d. rockefeller tighten influence on railroads stone directed.

to further encourage stone meet needs of standard oil, rockefeller put stone on standard oil board of directors in 1871. 1872, amasa stone s personal fortune worth estimated $6 million ($119,950,000 in 2016 dollars).

cite error: there <ref group=lower-alpha> tags or {{efn}} templates on page, references not show without {{reflist|group=lower-alpha}} template or {{notelist}} template (see page).