Recent Postings
2nd November 2007
Roger Stonebanks
Curator's Note: The following article by Roger Stonebanks was first published on Sunday May 4, 1997 in The Times Colonist. It is reprinted here, with permission of the author. (Colored text is hyper-linked.)
His mansion, now Royal Roads University, remains a monument to his incredible wealth. But he saw no need to change conditions in his mines, where the fatality rate was three times that of British coal mines, and had no qualms about overpricing his mines.
He was known as a selfish millionaire.
Millionaire James Dunsmuir tired of business in 1910, at the age of 58, and spent the rest of his life (another 10 years) as a country squire, hunting and fishing.
He sold his Wellington Colliery Company Limited (coal mines at Cumberland and Extension, near Ladysmith), together with his 51-per-cent interest in Robert Dunsmuir Sons Company of California (wharves and bunkers at San Francisco), for his asking price of S11 million - more than double their actual worth - to railway baron Sir William Mackenzie of Toronto (1849 - 1923).
In an era before regulation (let alone deregulation), Mackenzie promptly issued stocks and bonds worth $25 million with the new company, Canadian Collieries (Dunsmuir) limited, which he headed with his partner, Sir Donald Mann.
The losers in the watered stock scandal were the mainly-British investors, who complained later they were obliged to buy into Canadian Collieries (Dunsmuir) Limited to get government-guaranteed Canadian Northern Railway bonds, and the coal miners who were defeated by the new company in a two year strike for union recognition in 1912-14.
James Dunsmuir (1851-1920) never wanted unions when be ran the coalmines and neither did his father Robert Dunsmuir (1825-1889). "I object to all unions. federated or local, or any other kind," James Dunsmuir told a federal royal commission in 1903 inquiring into strikes at his mines.
He was even more direct with his own workers: "To hell with the union! To hell with the committee! To hell with the men!," he shouted at a delegation of miners in 1901 who wanted the men to be paid at Extension rather'than be forced to travel 12 miles to Ladysmith for their pay. But Ladysmith was a company town which Dunsmuir owned and be was selling lots to the miners.
Nor did Dunsmuir have any wider sense of responsibility. "Did it ever occur to you that wealth carried some corresponding obligations with it - the possession of large riches and lands, " he was asked by the 1903 royal commission.. "No, sir. From my standpoint it doesn't," he replied.
Dunsmuir was the wealthiest man in B.C. His coalmines made a profit for him of $3,368,84S.59 between 1904 and 1909, or $2,545,393.09 if allowance was made for exhaustion of mineral assets and depreciation. His mansion at Hatley Park in Colwood, now Royal Roads University, remains a monument to that wealth, as does his father's Craigdarroch Castle in Victoria:, now a non-profit museum. But for the miners, working in Dunsmuir's mines and the other coal mines in B.C. meant laboring in conditions where the fatality rate was three times that of British coal mines between 1892 and 1901. The death rate worsened between 1907 and 1916.
By 1910, Dunsmuir had grown tired of running the mines, fighting fledgling unions every few years, being premier (1900-02) and lieutenant-governor (1906-09). He was publicly labeled "a human hyena" (and more) by Nanaimo Socialist MLA James Hawthornthwaite. Privately, he was described as "a selfish millionaire" and "a tyrannical autocrat" by a future prime minister of Canada, Mackenzie King. More recently, Victoria author Terry Reksten (The Dunsmuir Saga) commented in an interview in 1991: "He lit up the Parliament Buildings with lights. That was probably the only good thing he did."
Dunsmuir picked the best of times to sell. His mines produced 898,908 long tons of coal in 1910, a level never reached again. Oil was becoming the new energy source. Capital improvements such as electrification were sorely needed. Of the $11-million purchase price, $1 million appeared earmarked for commission. Where exactly this went is unclear, but Dunsmuir did say that his lawyer, Richard Thomas Elliott, who received the option to purchase the mines from Dunsmuir and assigned it to Mackenzie, who in turn assigned it to Canadian Collieries (Dunsmuir) Limited, "got a commission."
Another Victoria lawyer, Bernard Perry, who was instrumental in pulling the deal together, "got some" commission.
Immediately after the cash sale, Mackenzie got $6 million back when Dunsmuir bought Canadian Northern Railway bonds. But, greedy to the last, Dunsmuir pocketed a self-proclaimed dividend of $700,000 just days before the sale went through, prompting outrage and a lawsuit by Mackenzie. A four-year court battle ended with the British Privy Council, the ultimate court for Canada at the time, ruling for Mackenzie. In a subsequent compromise, a net $393.052.76 was finally paid by Dunsmuir.
Sir William Mackenzie bought Dunsmuir's mines for double their worth, then floated a share issue for more than double that figure. The losers in the watered-stock scandal were the mainly-British investors, who complained they were obliged to buy these shares to get government-guaranteed Canadian Northern bonds.
In 1937, the B.C. Royal Commission on Coal and Petroleum Products, headed by B.C. Court of Appeal Justice Malcolm Macdonald, concluded that the real value of Dunsmuir's mines in 1910 was more like $4 million than $11 million. The holders of $10,000,026.67 in bonds received interest of $2,019,933.30 for the first four years of their investment and then Canadian Collieries (Dunsmuir) Limited defaulted and a bondholders committee took over management of the company rather than foreclose. Not until 1947 were bondholders paid off.
Preference stock owners only got dividends of $135,397.73 for the first two years on $5 million worth of shares. Nothing was paid on $10 million of common stock which was issued as paid-up shares to nominees of Mackenzie. In 1920, common shares were written down to a mere $100,000.
Macdonald said the course of transactions in the common shares was not known. The sale of bonds and preference shares, after payment of commissions and discounts, netted $13,821,032.58. The company spent $3 million on capital improvements. The impossible capital structure led to excessive coal prices, said Macdonald. The company disagreed sharply, saying the price paid to Dunsmuir was not excessive and did not result in high coal prices.
In 1915, the Vancouver trade journal Mining, Engineering and Electrical Record said the sale of the mines and the stocks and bonds issue were a "public scandal" and a "bogus capitalization" was unloaded on British investors. The journal said Dunsmuir's mines were worth only about half the $11 million paid and Canadian Pacific Railway had turned down an option to purchase at $6.5 million.
The Record also said Canadian Collieries (Dunsmuir) Limited engineered the 1912-14 miners' strike."It became necessary to find some excuse with which to fool the English investors still further and a labor trouble, for which there was neither necessity nor reason, was engineered. The provincial treasury was put to the expense of scores of thousands of dollars to employ special police to guard the mines for the little band of Eastern adventurers and frenzied financiers."
The company saw things differently: Officials said the strike was instigated by the United Mine Workers of America on a pretext (over the dismissal of one miner) and the union was simply seeking to extend its inf1uence.
"The fullest and most earnest consideration was given to the matter before it was determined to resist the attempt of the American Mine Workers organization to obtain control of your mines," general manager Walter Coulson (ironically, an American himself) told the mainly-British shareholders in 1913. The demands of the union, said Coulson, "if agreed to would have made it impossible for your mines to work at a profit." As it turned out, the union demands were not agreed to and the mines had become unprofitable anyway.
Years later, Parker Williams, Welsh immigrant coal miner, one-time union organizer, Socialist MLA for 14 years for Newcastle constituency (including Ladysmith) and Workmen's Compensation Board commissioner, wrote of the $10 million Dunsmuir received for his mines: "James Dunsmuir pocketed this enormous sum, and like a gambler rising from a gaming table where every hand had been against him, he swept up every last cent of it and neither then nor at the time of his death did the men who had made his millions - and lived through it - nor the widows or the orphans of the victims of his greed that fattened his graveyards, nor the Town of Ladysmith, profit to the extent of one red copper. The reapers in the fields of Boaz let fall heads of grain so that the gleaner might not go empty-handed. This reaper grabbed it all, he licked the platter clean."
_____________________________
Roger Stonebanks is a Times Colonist staff writer. Most of the information for this article can be found in the B.C. Archives and Records Service, Victoria, especially the Buckham Collections, and the Report of the B.C. Royal Commission on Coal, Volume 2. The Coal Industry, and Volume 3.
His mansion, now Royal Roads University, remains a monument to his incredible wealth. But he saw no need to change conditions in his mines, where the fatality rate was three times that of British coal mines, and had no qualms about overpricing his mines.
He was known as a selfish millionaire.
Millionaire James Dunsmuir tired of business in 1910, at the age of 58, and spent the rest of his life (another 10 years) as a country squire, hunting and fishing.
He sold his Wellington Colliery Company Limited (coal mines at Cumberland and Extension, near Ladysmith), together with his 51-per-cent interest in Robert Dunsmuir Sons Company of California (wharves and bunkers at San Francisco), for his asking price of S11 million - more than double their actual worth - to railway baron Sir William Mackenzie of Toronto (1849 - 1923).
In an era before regulation (let alone deregulation), Mackenzie promptly issued stocks and bonds worth $25 million with the new company, Canadian Collieries (Dunsmuir) limited, which he headed with his partner, Sir Donald Mann.
The losers in the watered stock scandal were the mainly-British investors, who complained later they were obliged to buy into Canadian Collieries (Dunsmuir) Limited to get government-guaranteed Canadian Northern Railway bonds, and the coal miners who were defeated by the new company in a two year strike for union recognition in 1912-14.
James Dunsmuir (1851-1920) never wanted unions when be ran the coalmines and neither did his father Robert Dunsmuir (1825-1889). "I object to all unions. federated or local, or any other kind," James Dunsmuir told a federal royal commission in 1903 inquiring into strikes at his mines.
He was even more direct with his own workers: "To hell with the union! To hell with the committee! To hell with the men!," he shouted at a delegation of miners in 1901 who wanted the men to be paid at Extension rather'than be forced to travel 12 miles to Ladysmith for their pay. But Ladysmith was a company town which Dunsmuir owned and be was selling lots to the miners.
Nor did Dunsmuir have any wider sense of responsibility. "Did it ever occur to you that wealth carried some corresponding obligations with it - the possession of large riches and lands, " he was asked by the 1903 royal commission.. "No, sir. From my standpoint it doesn't," he replied.
Dunsmuir was the wealthiest man in B.C. His coalmines made a profit for him of $3,368,84S.59 between 1904 and 1909, or $2,545,393.09 if allowance was made for exhaustion of mineral assets and depreciation. His mansion at Hatley Park in Colwood, now Royal Roads University, remains a monument to that wealth, as does his father's Craigdarroch Castle in Victoria:, now a non-profit museum. But for the miners, working in Dunsmuir's mines and the other coal mines in B.C. meant laboring in conditions where the fatality rate was three times that of British coal mines between 1892 and 1901. The death rate worsened between 1907 and 1916.
By 1910, Dunsmuir had grown tired of running the mines, fighting fledgling unions every few years, being premier (1900-02) and lieutenant-governor (1906-09). He was publicly labeled "a human hyena" (and more) by Nanaimo Socialist MLA James Hawthornthwaite. Privately, he was described as "a selfish millionaire" and "a tyrannical autocrat" by a future prime minister of Canada, Mackenzie King. More recently, Victoria author Terry Reksten (The Dunsmuir Saga) commented in an interview in 1991: "He lit up the Parliament Buildings with lights. That was probably the only good thing he did."
Dunsmuir picked the best of times to sell. His mines produced 898,908 long tons of coal in 1910, a level never reached again. Oil was becoming the new energy source. Capital improvements such as electrification were sorely needed. Of the $11-million purchase price, $1 million appeared earmarked for commission. Where exactly this went is unclear, but Dunsmuir did say that his lawyer, Richard Thomas Elliott, who received the option to purchase the mines from Dunsmuir and assigned it to Mackenzie, who in turn assigned it to Canadian Collieries (Dunsmuir) Limited, "got a commission."
Another Victoria lawyer, Bernard Perry, who was instrumental in pulling the deal together, "got some" commission.
Immediately after the cash sale, Mackenzie got $6 million back when Dunsmuir bought Canadian Northern Railway bonds. But, greedy to the last, Dunsmuir pocketed a self-proclaimed dividend of $700,000 just days before the sale went through, prompting outrage and a lawsuit by Mackenzie. A four-year court battle ended with the British Privy Council, the ultimate court for Canada at the time, ruling for Mackenzie. In a subsequent compromise, a net $393.052.76 was finally paid by Dunsmuir.
Sir William Mackenzie bought Dunsmuir's mines for double their worth, then floated a share issue for more than double that figure. The losers in the watered-stock scandal were the mainly-British investors, who complained they were obliged to buy these shares to get government-guaranteed Canadian Northern bonds.
In 1937, the B.C. Royal Commission on Coal and Petroleum Products, headed by B.C. Court of Appeal Justice Malcolm Macdonald, concluded that the real value of Dunsmuir's mines in 1910 was more like $4 million than $11 million. The holders of $10,000,026.67 in bonds received interest of $2,019,933.30 for the first four years of their investment and then Canadian Collieries (Dunsmuir) Limited defaulted and a bondholders committee took over management of the company rather than foreclose. Not until 1947 were bondholders paid off.
Preference stock owners only got dividends of $135,397.73 for the first two years on $5 million worth of shares. Nothing was paid on $10 million of common stock which was issued as paid-up shares to nominees of Mackenzie. In 1920, common shares were written down to a mere $100,000.
Macdonald said the course of transactions in the common shares was not known. The sale of bonds and preference shares, after payment of commissions and discounts, netted $13,821,032.58. The company spent $3 million on capital improvements. The impossible capital structure led to excessive coal prices, said Macdonald. The company disagreed sharply, saying the price paid to Dunsmuir was not excessive and did not result in high coal prices.
In 1915, the Vancouver trade journal Mining, Engineering and Electrical Record said the sale of the mines and the stocks and bonds issue were a "public scandal" and a "bogus capitalization" was unloaded on British investors. The journal said Dunsmuir's mines were worth only about half the $11 million paid and Canadian Pacific Railway had turned down an option to purchase at $6.5 million.
The Record also said Canadian Collieries (Dunsmuir) Limited engineered the 1912-14 miners' strike."It became necessary to find some excuse with which to fool the English investors still further and a labor trouble, for which there was neither necessity nor reason, was engineered. The provincial treasury was put to the expense of scores of thousands of dollars to employ special police to guard the mines for the little band of Eastern adventurers and frenzied financiers."
The company saw things differently: Officials said the strike was instigated by the United Mine Workers of America on a pretext (over the dismissal of one miner) and the union was simply seeking to extend its inf1uence.
"The fullest and most earnest consideration was given to the matter before it was determined to resist the attempt of the American Mine Workers organization to obtain control of your mines," general manager Walter Coulson (ironically, an American himself) told the mainly-British shareholders in 1913. The demands of the union, said Coulson, "if agreed to would have made it impossible for your mines to work at a profit." As it turned out, the union demands were not agreed to and the mines had become unprofitable anyway.
Years later, Parker Williams, Welsh immigrant coal miner, one-time union organizer, Socialist MLA for 14 years for Newcastle constituency (including Ladysmith) and Workmen's Compensation Board commissioner, wrote of the $10 million Dunsmuir received for his mines: "James Dunsmuir pocketed this enormous sum, and like a gambler rising from a gaming table where every hand had been against him, he swept up every last cent of it and neither then nor at the time of his death did the men who had made his millions - and lived through it - nor the widows or the orphans of the victims of his greed that fattened his graveyards, nor the Town of Ladysmith, profit to the extent of one red copper. The reapers in the fields of Boaz let fall heads of grain so that the gleaner might not go empty-handed. This reaper grabbed it all, he licked the platter clean."
_____________________________
Roger Stonebanks is a Times Colonist staff writer. Most of the information for this article can be found in the B.C. Archives and Records Service, Victoria, especially the Buckham Collections, and the Report of the B.C. Royal Commission on Coal, Volume 2. The Coal Industry, and Volume 3.
William Mackenzie