STANDARD OIL FINED $29,240,000; COURT EXACTS UTMOST PENALTY

CHICAGO, Aug. 3., 1907-08-03. — The Standard Oil Company of Indiana was to-day fined $29,240,000 by Judge Kenesaw Mountain Landis in the United States District Court, a punishment without precedent in the American courts for its magnitude. The sentence follows the company's conviction for accepting concessions upon petroleum shipments carried by the Chicago and Alton Railroad. Upon each of 1,462 offences the judge imposed $20,000, the utmost fine allowed by the governing statute. A controversy concerning railway freight charges has thus produced a judgment large enough to command the attention of every important corporation engaged in interstate trade. The sentence is against the Indiana company, not against Mr. John D. Rockefeller personally.

The prosecution rests upon the principle that a railway's published tariff must govern its dealings with the great shipper and the small alike. The oil company paid a rate of six cents per hundred pounds upon the traffic in question, whereas the applicable published charge was eighteen cents. The Government maintained that acceptance of this lower charge constituted the unlawful concession forbidden by the Elkins Act. The defence disputed criminal responsibility, contending that the company had understood the rate given it to be lawful. A jury nevertheless found against the company earlier this year; to-day's proceeding determined the punishment rather than the original question of guilt.

Judge Landis treated the offences as something graver than a commercial misunderstanding or a merely technical departure from railway regulations. In language explaining the severity of his judgment, he declared: “The men who thus deliberately violate this law wound society more deeply than does he who counterfeits the coin or steals letters from the mail.” The comparison places the injury to the public, rather than the private advantage obtained upon a particular consignment, at the centre of the court's reasoning. A secret or unlawful freight advantage may be entered in a merchant's books as a saving; the court regards its wider consequence as an assault upon equality of opportunity under Federal law.

The prodigious total is explained by the treatment of the shipments as separate offences. The Elkins Act, passed in 1903, permits a fine of not less than $1,000 and not more than $20,000 for an offence within its provisions. Judge Landis selected the upper figure and applied it repeatedly, instead of treating the business as a single transaction punishable by one assessment. This arithmetic is essential to an understanding of the judgment. Congress did not write a single penalty of nearly thirty million dollars into the statute. The total results from the court's application of the statutory maximum to the numerous instances embraced in the conviction.

The financial standing of the defendant has itself been a conspicuous subject of inquiry. The Indiana corporation has a nominal capital of $1,000,000, a sum far below the fine now pronounced, but it belongs to the great Standard Oil organisation. Before sentence, Judge Landis sought information about the relationship between the defendant and the Standard Oil Company of New Jersey, and about the resources behind the enterprise. Mr. Rockefeller appeared in court on July 6 under summons and was questioned concerning the business. His appearance gave the proceedings an exceptional public prominence, though the celebrated head of the oil interest was a witness and not the accused.

That distinction remains important after to-day's sentence. The verdict does not constitute a personal conviction of Mr. Rockefeller, nor does it by itself dissolve the Standard Oil combination. It concerns the Indiana company's acceptance of unlawful transportation concessions. The Government's separate proceedings against the larger combination raise other questions and must take their own course. Nevertheless, the inquiry into corporate relationships shows the difficulty encountered when a court seeks to measure punishment against an enterprise whose operations are divided among associated companies. Nominal capital, corporate ownership, actual property and earning power are not interchangeable figures, and the vast assessment brings those differences sharply before the public.

The case belongs to the prolonged struggle over railway discrimination. A manufacturer who obtains transportation at a fraction of the published charge possesses an advantage which efficiency in production alone may not explain. His competitor, paying the tariff, must recover that heavier expense from customers or surrender part of his profit. The Elkins Act was intended to reach the recipient of an unlawful concession as well as the carrier granting it. Its importance therefore extends beyond railway management. The purchaser of transportation cannot safely assume that responsibility for a departure from the tariff belongs solely to the railway officer who quotes or collects the charge.

Politically, the judgment gives extraordinary force to the policy of subjecting great combinations to effective national supervision. President Roosevelt stated the governing argument in his first annual message to Congress: “Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and our duty to see that they work in harmony with these institutions.” That declaration was made years before to-day's sentence and is not a comment upon it. The present proceeding nevertheless supplies a striking test of the policy: whether statutory restrictions upon powerful commercial interests can be enforced with penalties substantial enough to command obedience.

For railway proprietors, industrial shareholders and the investing public, the immediate question is the extent of the liability established by this method of punishment. A concession repeated through a long course of business may expose a company to something far greater than repayment of the advantage received. Yet the amount pronounced in court is not money already collected by the Treasury. Review in the higher courts remains open, and the defence has substantial interests to protect in challenging both the legal foundation and the measure of the judgment. It would therefore be premature to reckon the entire assessment as a completed transfer from the company's resources.

The contest now turns from the jury's finding and the district judge's sentence toward the remedies available to the defendant. The construction of the tariff law, the company's responsibility for accepting the quoted rate, and the treatment of repeated shipments will remain matters of commanding importance wherever the judgment is challenged. To-day establishes no certainty about the ultimate collection of the fine. It does establish that a Federal court is prepared to employ the full scale of statutory penalties against one of the country's most powerful commercial interests. Upon the issue hangs not merely a great sum of money, but the practical authority of the published railway tariff.