Samuel Insull: A Small Man From Nowhere

July 31, 2012

For nineteen months the fugitive had been on the run. He had sailed to Europe after the collapse of his vast business empire, sick of getting hate mail and being hounded by newspaper reporters. In Paris he learned that he was a wanted man in the United States. Eventually he was hauled back to the States and thrown into a New Jersey prison cell. Lying on his cot that night, surrounded by hardened criminals, Samuel Insull—the man who brought electricity to millions of people for the first time—must have looked back at his life and wondered where he had gone wrong.

Samuel Insull - A Small Man From NowhereInsull was born in London England in 1860, the son of a Cockney lay preacher. While he was still in his teens he took a job as the operator of a telephone exchange. His hard work and organizational ability brought him to attention of the boss, Thomas Edison, who soon summoned him to New York to be his private secretary. The great inventor claimed that Insull was the first man he had ever met who worked even harder than he did. He was so impressed that he gave his young assistant sole responsibility for establishing a new subsidiary called Edison Machine Works.

Insull knew little about manufacturing, but he was a quick study. Within five years the company had grown from 200 workers to 6000, and was making a 30% return on investment. After a decade in Edison’s employ, Insull was appointed a senior vice president of the newly merged colossus called the General Electric Company.

That was why Samuel Insull loved America: a small man could come from nowhere and achieve great things.

In 1892 Insull decided to break out on his own. He accepted an offer, at one third of his former salary, to become the president of a small, independent electrical generating company in Chicago. He now believed that his greatest opportunity lay not in manufacturing electrical devices, but in creating the power they required.

Edison had staked his fortune on direct current, claiming that Nicola Tesla’s alternating current A.C. electricity was too dangerous. Unfortunately D.C. electricity could not be sent over long distances, and required small power stations to be built on nearly every city block. Because of the D.C. problem it was only feasible to supply electricity to large businesses and affluent homeowners.

But Insull wanted to empower all of the people and provide electricity for the whole city, the suburbs and even rural areas. Rejecting his old mentor’s prejudice against A.C. Insull took a chance on a newly discovered energy technology and ordered manufacturing of new rotary converters based on Nicola Tesla’s alternating current A.C. invention allowing A.C. to be transmitted over long distances and turned back on D.C. for local power use [1].

Then Insull made the single most important innovation in the energy field. He abandoned Edison’s flat rate model of billing for a two-tier system, and sought out customers who needed his electricity during low-use hours. His steam generators could now run at full blast. This allowed him to slash rates for households that put little demand on the system. Thousands of new customers signed up, most of whom had never had access to electricity before.

When Insull first arrived in Chicago there were 25 power companies, which meant that none could maximize its output. To deliver power more efficiently—and to lower prices even more—Insull started buying up his competitors. Within a few years his company had merged with 39 other utilities, expanding all over the region. To organize such a huge power system, Insull created a holding company—a company that owns a large enough portion of another company’s stock to be able to direct its policies [2].

Middle West Utilities was soon supplying one eighth of the power requirements of the whole country. All the new products coming on the market that required electricity, like electric irons, refrigerators and radios, further spurred the growth of Insull’s business [3].

Samuel Insull was now a very rich man. Like Henry Ford, he was also a generous boss. He paid his employees more for a 46 hour work week than they could get for a 60-70 hour week elsewhere. In his spare time he was a leading patron of the arts in Chicago, and worked tirelessly for the war effort. By the twenties Insull had become a hero to the man on the street.

But he had picked up some powerful enemies. The notoriously corrupt Chicago politicians were angry because he refused to pay them bribes. The Wall Street banks resented him because he preferred to deal with banks in London or to sell local bonds to raise funds. The members of the influential Progressive Party hated anyone with money on principle. They rubbed their hands in glee when Insull ran into trouble in the Great Depression, and would do anything they could to hasten his downfall [4].

After the stock market crash in 1929 Insull assumed that the country would soon recover, as most people did, and kept expanding his business. Unfortunately every time the market dropped the banks owned more of his empire. He was advised to sell his stock short, which would have given him an easy way out of his problem. He refused. “We’ve got a responsibility to our stockholders,” he said at the time. “We can’t let them down.”

The London banks ran out of money, and Insull had no choice but to ask Wall Street for a loan to prop up his ailing enterprises. They refused, forcing his holding company into receivership. Within a single day he had to quit more than 60 presidencies and directorships. Thousands of stockholders lost money when his business sank, and Insull went down with the ship.

Once perceived as the most powerful businessman in America, Samuel Insull became the perfect scapegoat for the country’s economic woes. The press took delight in kicking him when he was down. President Roosevelt attacked him in a speech. Illinois prosecutor John Swanson, facing a tough election, announced an investigation of Insull’s activities. “You know, Sam Insull is the greatest man I have ever known,” Swanson admitted in private. “No one has ever done more for Chicago and I know he has never taken a dishonest dollar. . . but Insull knows politics and he will understand . . . I’ve got to do it.”

While Insull was in Europe he was indicted for embezzlement and for using the U.S. mail to defraud the public by selling securities for more than they were worth. He refused to give himself up, convinced that politicians were only trying to cash in on his misfortunes. He fled to Turkey, a country that had no extradition treaty with the U.S., assuming he’d be safe. He was wrong. At the request of the American ambassador he was kidnapped by Turkish agents and shipped back home.

Almost overnight Insull had gone from being a hero to a villain. Locked up in a New Jersey jail cell, he must have searched in vain for an explanation. He was a small man who had come from nowhere and improved millions of people’s lives. Why did they want to cut him down to size?

The trial began on October 2, 1934. In his opening statement the prosecutor accused Insull of dishonest bookkeeping and making a fortune at the expense of “the little people” who had lost their life savings. The press, politicians and most of the general public were salivating, smelling blood.

A series of experts was called to the stand. One after another they testified that Insull had not cooked the books, but had employed exactly the same kind of accounting methods that the government used. He had not taken advantage of his investors, but in fact he had poured most of his fortune into his empire trying to shore it up. The prosecutor pointed to Insull’s income tax returns, in which he had claimed a half a million dollars a year in salary. The defense attorney used the same returns to show that Insull had given away more than that amount to charity [5].

Finally Insull took the hot seat. As he quietly told his story, something unexpected occurred: the people in the courtroom became fascinated by his rags-to-riches tale. The prosecutor tried to object, noticing what was happening. The judge overruled him; he wanted to hear the story, too. Eventually the prosecutor just sat back and listened, as curious as everyone else about Insull’s remarkable life.

When the jury retired, it took them five minutes to reach a verdict. Insull was cleared of all charges [6].

The courts may have found him innocent, but the press thought Insull was guilty by definition: he was a symbol of out-of-control capitalism and therefore responsible for the mess in the country.

Today many respected economists and historians have discovered factual evidence that traces the cause of the Depression to actions of the criminal elites who own the Federal Reserve and the deliberate actions of their goons causing U.S. government interventions in the economy and rigged the system to steal all there was for themselves.   The evidence were exposed and presented recently by Thrive documentary film as well.  Some things never change, until and unless we, the people change them [7].

Insull fled to Europe, a broken man. “I owe America nothing,” he said. “She did only one thing for me. She gave me the opportunity. I did the rest and I repaid America many times for what she gave me.”

A few years later Insull dropped dead of a heart attack in a Paris subway station. Before his corpse was identified, it was robbed. The press, assuming that Insull was flat broke, played up the angle of a rich man getting his comeuppance.

Once upon a time people were inspired by tales of boys who made good. These days, it seems, rags-to-riches stories have gone out of fashion.

[1] Insull took another risk when he installed massive new turbine generators, which his old friends at General Electric warned him were not feasible. “G.E. engineers can prove anything impossible,” he joked.

[2] By the late twenties Insull was operating one of the first “super-holding companies”, in which sub-holding companies and subsidiaries were stacked on top of each other like a pyramid, allowing him to retain control of 225 separate businesses.

[3] Insull was the first utility operator to realize the importance of marketing. Inspired by P.T. Barnum, he promoted not only electricity but the lifestyle it made possible. His marketing campaign included setting up a chain of shops and publishing a magazine, Electric City, that glamorized household products that ran on electricity.

[4] Insull’s downfall began when businessman Cyrus S. Eaton attempted a hostile takeover. Having to raise a big chunk of money in a hurry to fend off the raid, Insull was forced to turn to the Wall Street banks he had previously spurned.

[5] At the beginning of the Depression, Insull donated 100 million dollars to the city of Chicago to pay for teachers, policemen and firefighters.

[6] One juror, a former sheriff, later explained: “I’ve never heard of a bunch of crooks who thought up a scheme, wrote it all down, and kept an honest and careful record of everything they did.”

[7] We all must beware of the work of the following top crime families, responsible for all evils befalling on all people, all over the world, collectively orchestrating and funding wars, murder and mayhem, through their central banks, nation-less corporations and other institutions, deliberately causing millions upon millions of deaths and unimaginable destruction all over the world, to rule and control planet Earth, exposed by Thrive documentary film. -- The evil bastards are as follows: Rothschild(s), Morgan(s), Rockefeller(s), Carnegie(s), Schiff(s), Herminie(s) and Warburg(s), for centuries these criminal families have been instigating and funding wars, murder, countless fake revolutions, creating and funding terrorist organizations through their secret societies, rewriting the true history as fiction to only benefit themselves and their racketeering businesses at all costs.