8.7. ROBERT SCHUYLER’S NY&NH STOCK FRAUD IS UNCOVERED AND THE IC STATION IS BUILT

Otto Matz, the Illinois Central Station, S. Water Street Elevation, 1855. (Jevni & Almini, Chicago Illustrated)

The timing of the announcement of such an extravagant building, in that it came after Robert Schuyler, who on July 11, 1853, had passed the presidency of the IC on to William Burrall, and had also resigned as the president of the NY&NH on July 4, 1854, immediately once his sale of $2 million fraudulent, unauthorized NY&NH stock was uncovered, indicates not only a change of management policy pertaining to the quality of the IC’s construction, but also to a directed public relations campaign designed to restore confidence in the post-Schuyler IC. Schuyler had resigned from the IC, more than likely, following the worst train accident of the decade.  On May 6, 1853, an eastbound NY&NH morning express ran through an open drawbridge at South Norwalk, CT, killing 46 passengers.  Schuyler was also the president of this company at this time and probably felt he needed to focus on the resolution of this disaster, resigning from the IC within two months of the accident.  The railroad eventually would end up paying over $500,000 in damages.  

This may have been the reason that within five months of the accident, Schuyler had started to issue fake stock certificates in the NY&NH, as he was its Transfer Agent as well as its President, using three sets of accounting books in order to enable him to pocket every penny.  His fraud was caught by chance, after he had been taken ill on June 29, 1854, and was out of the office when a number of fraudulent certificates were innocently presented for transfer.   The Vice-President was, therefore called in to act as Transfer Agent, who needed to see the books to affect the transfer.   The following day Schuyler matter-of-factly resigned from the NY&NH, never to be seen again in the U.S. This was the first-time fraud of this magnitude had hit Wall Street, and although he had resigned from the IC the previous year, guilt through association once Schuyler’s fraud was publicized, resulted in the IC’s stock declining more than 40 points and its bonds dropping on the market to sixty-three.  The IC was forced to sell its last $4.5 million construction bonds at 35% under par (a loss of $1.55 million), in order to continue its construction and to meet its interest payments. In the face of this economic disaster, the erection of such a magnificent edifice at the mouth of the river speaks to a major public relations campaign on the part of the IC to restore public confidence.  Even so, such a costly building could have been afforded at this time by a private company only if it had been subsidized by the Federal government, which was exactly what the landgrant had done.  

The Fort Dearborn Reservation and the IC Railroad Station. (upper) Before construction of the station: landfill almost completed with a temporary station at the foot of S. Water St. (bottom) After the construction of the station. (Chicago Historical Society)

The IC had achieved a major real estate coup with the acquisition of the prime lakefront property that Fort Dearborn had once occupied that had managed to elude private ownership since the founding of the town in exchange for the initial capital outlay of the breakwater. The station was designed in 1854 by the company’s architect Otto Matz.  Matz had been born in Berlin in 1830, where he had completed the traditional polytechnic training for architecture.  He had immigrated to the U.S. where he was hired in 1853 by the IC and assigned to Mason’s engineering corps.  He had risen to the position of company architect upon the death of his predecessor, just prior to the start of the design of the Chicago terminal that was to be erected at the foot of South Water Street, depositing passengers conveniently at the eastern edge of the Lake Street business district.  

Otto Matz, the Illinois Central Station, 1855. View from the south, approaching the Train Shed. (Douglas, Rail City: Chicago, USA)

The train shed was the longest clear spanned space in the U.S. when it was completed.  Matz employed arched iron-lattice trusses that spanned 166’ and rose 42’ from the ground.  (This structure’s span was second in the world only to the recently completed 211’ span of New Street Station in Birmingham, U.K.) To the north of the train shed, Matz placed the freight house, in which the company’s offices were housed on the top floor. So while the MS had won the race into the city, Common Council had kept its station at the far southern edge of the business district; the MC and the IC, with a little help from its friends Sen. Douglas, Rep. Wentworth, and the new aldermen elected in the municipal election of March 2, 1852, were allowed to lay tracks directly to the mouth of the river and to the foot of the city’s commercial center, Lake Street.  Nonetheless, Common Council, with the assistance of the trestle in the lake, had still managed to keep the IC’s locomotives out of the streets of the business district, while getting the IC to pay for the breakwater that reduced the erosion along Michigan Avenue.

Richmond House, northwest corner of S. Water and Michigan, 1856. (Gilbert, Chicago and Its Makers)

Accompanying the erection of the IC station was the construction of a covey of hotels immediately to the west of the station to provide the railroad’s arriving passengers with appropriate accommodations.  The first constructed was the Richmond House, a six-story hotel located on the northwest corner of S. Water and Michigan.  The Massasoit House was constructed the following year one block farther south on Michigan Avenue at the northeast corner of Lake and Michigan. The Adams House was built in 1858 on the corner of S. Water and Central (now Beaubien Ct.).

Massasoit House, southwest corner of S. Water and Central (now Beaubien Ct), 1857. The view is taken in 1863 looking west down S. Water Street, with the Richmond House, the tallest building across from the Massasoit House. The north face of the IC Station is at the far left. Looking west down S. Water Street. (Chicagology)
W.W. Boyington, Adams House (far right), northeast corner of Lake and Michigan, 1858. Looking west sown Lake Street. (Gilbert, Chicago and Its Makers)

FURTHER READING:

Ackerman, W.K., History of the Illinois Central Railroad Company and Representative Employees, Railroad Historical Company, 1900.

Andreas, Alfred T. History of Chicago- vols. 1&2. Chicago, 1884-1886. Reprint, New York: Arno Press, 1975.

Brownson, Howard Gray. History of the Illinois Central Railroad to 1870. Urbana: University of Illinois Press, 1915.

Harlow, Alvin F. Steelways of New England. New York: Creative Age Press, 1946.

Johnson, Arthur and Barry E. Supple. Boston Capitalists and the Western Railroads. Cambridge:     Harvard University Press, 1967.

Mahler, Michael, “Robert Schuyler’s Stock Fraud on the New York and New Haven Rail Road: the Paper Trail,” 2009.

Meeks, Carroll L.V., The Railroad Station, New York: Dover, 1995.

Pierce, Bessie Louis. A History of Chicago– 2. New York: Knopf.  1940.

Stover, John F. History of the Illinois Central Railroad. New York: Macmillan, 1975.

(If you have any questions or suggestions, please feel free to eMail me at: thearchitectureprofessor@gmail.com)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s