When The Headlines Said: Charlie Schwab Breaks The Bank

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The “friends of Mr. Schwab” were quick to take the Times’ suggestion. An Associated Press reporter named Martin Egan recognized the gravity of the situation when the first reports came over the wires. After failing to reach Schwab’s brother, he telephoned his New York office, and urged the steel man’s secretary to cable a warning at once. This was done. Independently, James Gayley, first vice president of United States Steel, also cabled an account of what was going on. On the fourteenth alone, Schwab received forty cablegrams dealing with his alleged gambling. But the most drastic action was taken by Schwab’s former boss, Andrew Carnegie.

Carnegie was not directly engaged in the management of United States Steel. When the great trust had been created, Carnegie had pocketed over $225,000,000 and prepared to devote the rest of his life to philanthropic pursuits. But he was naturally interested in the welfare of his former property. Moreover, he was deeply attached to Schwab. He had picked up Schwab, a “round-laced country boy” of nineteen fresh from Spiegelmire’s general store in Braddock, Pennsylvania, in 1881, and raised him within five years to be superintendent of the vast Carnegie Homestead Works. Schwab had become his trusted lieutenant and his close personal friend. When Carnegie had decided to sell out, it was Schwab who had conducted the delicate negotiations with Morgan. The news that Schwab was gambling at Monte Carlo was a bitter blow to the strait-laced Scot, who was fond of pointing out to the youth of America that the gravest dangers besetting the road to business success were liquor, gambling, and lending money to one’s friends. After reading the Times editorial, Carnegie cabled to the culprit once, signing with his code name, “Wakeful”:

PUBLIC SENTIMENT SHOCKED. TIMES DEMANDS STATEMENT GAMBLING CHARGES FALSE. PROBABLY HAVE [TO] RESIGN, SERVES YOU RIGHT. WAKEFUL

This done, he clipped the Times editorial and sent it to J. P. Morgan, with the following letter:

Confidential

5 West Fifty-First Street, New York. Jany 14th, 1902

My Dear Mr Morgan

I feel in regard to the enclosed as if a son had disgraced the family.

What the Times says is true. He is unfit to be the head of the United States Steel Co.—brilliant as his talents are. Of course he would never have so fallen when with us. His resignation would have been called for instanter had he done so.

I recommended him unreservedly to you. Never did he show any tendency to gambling when under me, or I should not have recommended him you may be sure. He shows a sad lack of solid qualities, of good sense, & his influence upon the many thousands of young men who naturally look to him will prove pernicious in the extreme.

I have had nothing wound me so deeply for many a long day, if ever.

Sincerely Yours
Andrew Carnegie

Schwab, the unsuspecting cause of this righteous indignation, received the cables of Carnegie and his other “friends” at Nice. He had arrived in France for what was later described as a combined business and pleasure trip with his wife and a small party of friends, including his personal physician, Dr. C. O. Goulding, and Charles T. Schoen, recently retired president of the Pressed Steel Car Company. He had been working hard for months, first at arranging the sale of the Carnegie holdings to Morgan and then at the complicated task of helping to create the world’s first billion-dollar corporation. A charming, witty, happy-go-lucky sort, he knew how to enjoy himself when opportunity offered. In Paris he had purchased “a big fast automobile,” which he proceeded to drive to Nice in the then sensational time of eighteen hours. In Nice he had joined other friends, including Baron Henri Rothschild and Dr. Griez Wittgenstein, head of the largest steel works in Austria, who was known to the press as “the $100,000,000 steel man from Vienna.” They made, as Schwab later confessed, “a jolly party … racing all over the Riviera” in the new automobile. On four separate occasions they dropped in at the casino in Monaco to play roulette.