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Updated: May 5, 2025
His fears were confirmed. He had been brought before the executive committee on a charge of rebating preferred by Kendrick. The evidence was complete in at least three cases and they all involved Brauer's clients. In short, Kendrick had sworn affidavits from three people to the effect that a representative of Starratt & Co. had granted a discount on fire-insurance business.
One day a close friend of Fred, who knew something of Insurance Exchange matters, said to him: "There's something going on inside, but I can't quite get the dope... I hope you're not giving Kendrick the chance to have you called for rebating... He's an ugly customer when he gets in action." Fred was annoyed.
Helen stopped her typing. Fred could feel his lips drying with mingled anticipation and apprehension. He knew just what demand Hilmer intended making. "The question is," Hilmer continued, "how much of the commission are you going to split up with me?" Fred shrugged. "You know the rules of the Broker's Exchange as well as I do, Hilmer. I've pledged myself not to do any rebating."
The majority of the claims I had been making from day to day were fraudulent, and in paying them the railroad company was merely rebating the coal rates for Consolidated Coal. It was easy to see where I stood. A scapegoat was necessary, and with a prison record behind me I had about as much show as a rat in a trap.
Despite the Interstate Commerce act, the practice of rebating had continued. Agreement was general that railroad men who, in other respects, were perfectly scrupulous, commonly violated the law in order to get business in competition with their rivals. Among the railroad men who had violated the law but who deprecated the necessity of so doing, was Paul Morton, president of the Santa Fe system.
Railroad officers became so arrogant that they seemed to assume that they were above all law; rebating and discrimination were the rule and not the exception. It was the public indignation against long continued discrimination and undue preferences which brought about the Granger Movement, which resulted, seventeen years later, in the enactment of the first Interstate Commerce Act.
Three days later a law was passed which established a Department of Commerce and Labor, whose chief was to be a cabinet officer. Included in the Department was a Bureau of Corporations headed by a Commissioner, who was authorized to investigate the organization and conduct of the business of corporations. Within another five days the Elkins Act had been passed a law designed to eliminate rebating.
Yes, the Hilmer premium was in, but he was very sorry he couldn't pay Starratt & Co. anything. "Why?" Fred demanded, hotly. Because the Insurance Broker's Exchange had sent out a circular asking the companies to withhold any commissions due that firm until certain charges of rebating were investigated further and disproved. Fred fled to the Exchange.
Whitney had listened to Scarborough's speech with the funereal countenance befitting so melancholy a recital. As Scarborough finished and sank back in his chair, he said, with energy and heartiness, "I agree with you, senator. The lawyers tell me there are as yet no signs of a case against the railways. Besides, the trouble seems to be, as I feared, deeper than this possible rebating.
A variety of circumstances had combined to arouse a popular demand for the reinforcement of existing legislation: the discovery of grave abuses in connection with the transportation of petroleum; the continuance of favoritism and rebating, together with increasing public knowledge of their existence; the rise in freight rates; and the consolidation of the railroads into a few large systems, with the accompanying concentration of power in the hands of a small number of persons.
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