Drew, Daniel

views updated May 29 2018

DREW, DANIEL

Daniel Drew (1797–1879) grew up under difficult financial circumstances in the early 1800s, but he grew to become an extremely wealthy and notorious stock manipulator. In an era noted for "robber barons" Drew used every means available, including fraud and deception, to make a fortune in investments in the transportation industry. In the end, however, Drew became of victim of his own game, and died a poor man.

Daniel Drew was born on July 29, 1797 in Carmel, New York, the son of Gilbert Drew and Catherine Muckleworth. Drew's father owned a modest hundredacre cattle farm. He died when the boy was only 15, and left the family in poverty. Drew then enlisted in the War of 1812 (1812–1814) as a substitute for someone who sought to avoid military service and could afford to pay Drew $100 to act as his replacement. After his brief military service, Drew worked with a traveling zoo before finding work as a cattle drover.

Drew began his business career by buying cattle and sheep in New England and the Midwest and selling them to butchers in New York City. He received some financial assistance from a wealthy businessman, Henry Astor. Drew, however, quickly gained a reputation on his own as a sharp dealer. For example, it was believed that Drew would have his cattle over-drink before their sale, so that they would look healthy and weigh more. Through this shrewdness Drew established himself as a capable businessman. In 1820 he married Roxanne Mead, and the couple had one son. By 1829 Drew had moved his young family to Manhattan, where he established the headquarters of his livestock business.

In the 1830s Drew became interested in the steamship industry. In 1834 he used the profits from his livestock trade to invest in a steamboat fleet that ran on Long Island Sound and the Hudson River. This business venture brought Drew into direct competition with Cornelius Vanderbilt (1794–1877), a shrewd businessman who liked to monopolize the industries in which he invested. Drew and Vanderbilt became lifelong business adversaries.

After a decade in the steamboat business, Drew had earned a fortune. He used these profits to open a Wall Street banking and brokerage firm in 1844, called Drew, Robinson, and Company. Within a decade Drew's business partners had died and, left to himself, he became an aggressive stock manipulator. He specialized in railroad stock and became involved in the Erie Railroad in 1853. In 1857 Drew took advantage of a financial panic to make himself director of the railroad. This brought him once again into direct competition with Cornelius Vanderbilt, who had also developed an interest in the railroad industry.

In 1864 Vanderbilt tried to drive Drew out of the railroad business. Vanderbilt failed, but he nonetheless caused Drew to lose $500,000. In 1866 Drew joined forces with James Fisk (1834–1872) and Jay Gould (1836–1892) to drive Vanderbilt out of their business. Drew was treasurer of the Erie Railroad, and he advanced company money for 50,000 newly printed shares of fraudulent stock. This move drove up the value of the stock. Drew then sold the fraudulent stock on the resulting bull market for a huge profit. As the price of stocks fell, Drew continued to make money by manipulating the bond market. In doing so, he further angered Vanderbilt and set himself up for a showdown.

Vanderbilt lost a considerable amount of money in the so-called Erie War and, in 1868, he persuaded a judge to order the arrest of Drew, Fisk, and Gould for their questionable stock market activities. To avoid arrest, the three ran off to a hotel in New Jersey, where they continued to run their business. The group never faced prosecution for their illegal dealings because Gould was able to bribe judges and state legislators to legalize the fraudulent stock issued by Drew.

Though Drew gained a fortune through the Erie War, he soon lost it because of the unscrupulous dealings of his business partners. After their joint defeat of Vanderbilt, Fisk and Gould betrayed Drew. In 1870 they sold Erie Railroad stock in England, driving down the value of Drew's holdings. Drew lost $1.5 million from their misdeed. Soon afterward, he lost the rest of his fortune in the nationwide financial panic of 1873. He was forced to declare bankruptcy in 1876. Shortly thereafter, Drew retired to New York, where his son William H. Drew helped to support him.

Notwithstanding his sly and often unethical business dealings, Drew was a pious man who contributed generously to the Methodist Church. In 1866 he founded the Drew Theological Seminary (now Drew University) in Madison, New Jersey, with an endowment of $250,000. He also founded Drew Seminary for Young Ladies in Carmel, New York, though he went bankrupt before he could give the seminary all the money he had pledged. Daniel Drew died on September 18, 1879, in New York City, leaving behind an estate worth less than $500.

See also: Jay Gould, Cornelius Vanderbilt

Daniel Drew

views updated May 17 2018

Daniel Drew

Daniel Drew (1797-1879) was one of America's sensational stock manipulators, speculating particularly in Erie Railroad securities.

Born July 29, 1797, at Carmel, N.Y., Daniel Drew Grew up on the family farm. His career began as a cattle drover and horse trader: he drove cattle from the countryside into New York City. Successful, he extended activity into Ohio and Illinois, bringing livestock back to his own New York stockyard.

Drew was said to have watered his beeves heavily before bringing them to market, thus increasing their weight (hence the origin of the term "stock-watering" in connection with the issuance of fraudulent corporate securities). By 1834 he was a New York City resident, operating steamboats on the Hudson River, Lake Champlain, and long Island Sound. A bold competitor, he made money and in 1844 set up the Wall street brokerage firm of Drew, Robinson and Company.

In 1853 Drew entered the life of the Erie Railroad and in 1857 became a director. He was soon notorious as a bold manipulator of Erie securities. He sold its stock short in 1866 and made a killing.

During 1866-1868, along with Jay Gould and James Fisk (Drew was really their "front"), Drew entered into a war with Cornelius Vanderbilt for control of the Erie. Vanderbilt had put together three railroads that gave him a direct line from Buffalo to New York City; he wanted the Erie in order to monopolize entry into New York and to prevent it from becoming a serious competitor on the Lake Shore route to Chicago he was contemplating.

Meanwhile the Erie management, with Drew as treasurer, has authorized issuance of convertible bonds for improvements. In order to check Vanderbilt, Drew (with Gould and Fisk on the sidelines) sold bonds in 1868 in defiance of a court order and issued 100,000 new shares of Erie, thus creating a wild market, with Vanderbilt buying and the manipulators selling short. Drew, Gould, and Fisk fled to Jersey City to avoid court action; then Gould bribed state legislators to get conversion of the bonds into stock legalized. Vanderbilt was frustrated, but Gould settled with him and compensated him for his losses. In the end Gould owned the Erie, and Drew was forced off the board of directors.

Drew's star sank in 1870, when Gould and Fisk sold Erie stock in England to force up its price: Drew, selling short, lost $1,500,000. During the depression of 1873-1879 Drew was finished; his banking firm failed, and in 1876 he filed for bankruptcy. He died on Sept. 18, 1879, in New York, wholly dependent upon his son. In his heyday Drew played the philanthropist, building Methodist churches at Carmel and Brewster, N.Y., and spending $250,000 to set up the Drew Theological Seminary at Madison, N.J.