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The Boss
MAKING POLITICS PAY

By David Dayton McKean
This Web version, edited by GET NJ, COPYRIGHT 2003

The committee had the same difficulty when it sought to obtain information about some mysterious condemnation matters that occurred during the early years of the Hague regime. In this case someone certainly made politics pay:

In 1915, H. S. Kerbaugh, a resident of the state of New York, owned a one-half interest in a tract of land at Secaucus [Hudson County], New Jersey. In that year he acquired the outstanding one-half interest, and conveyed the land to the Secaucus Heights Land Company, which he controlled.

In 1919, Hudson County condemned this tract of land in order to build a county institution upon it and paid for it $386,215, a profit to Mr. Kerbaugh of $326,215. The Secaucus Land Company was immediately dissolved, its records cannot be found, and Mr. Kerbaugh refused to appear before the committee to disclose the ultimate recipients of the profit which accrued on the transaction. (Report, Senate Journal (1929), p. 1131.)

Mayor Hague told the committee that he had known the fortunate Mr. Kerbaugh for some years, but of course he had no first-hand information about the land deal. The committee prepared a letter requesting Kerbaugh to come to New Jersey and to answer questions, but the Mayor refused to sign it. The Secaucus land deal was not the only one from which the elusive resident of New York profited handsomely:
On December 28, 1921, the Montclair Water Company, a New Jersey corporation, owner of a property in Morris County comprising a natural lake and considerable acreage known as Split Rock Pond, entered into a contract to sell the property to Joseph G. Hoffman for $125,000, payable $15,000 in cash and $110,000 on a purchase money mortgage. Hoffman was Kerbaugh's secretary. The property, which lay in Jersey City's watershed, had been in the market for a long time at $150,000 to the knowledge of various Jersey City officials and had been offered for sale to the city. Immediately after the execution of the contract, Kerbaugh caused to be organized the Montclair Service Corporation, a Delaware corporation, the officers and organizers of which were all residents of New York. Hoffman's contract was assigned to this corporation, which acquired title April 4, 1922.

On December 19, 1922, Jersey City acquired the property by condemnation proceedings, in which the Montclair Service Corporation was awarded $325,000. Mr. Kerbaugh made a profit of $200,000. Mr. John Milton represented the city.... Mr. Milton testified that the financial records of the law firm of Treacy and Milton, of which he was a member while this proceeding was in progress, had been destroyed. Mr. Kerbaugh refused to appear and testify. The Committee, therefore, was unable to ascertain affirmatively whether the $200,000 profit accruing from this transaction remained with Mr. Kerbaugh or was shared with others. (Report, Senate Journal (1929), pp. 1131-1135.)

It would appear from the record that Mr. Kerbaugh, living in New York, had an uncanny prescience concerning real estate in which Jersey City was about to become interested. It appears too that John Milton was very likely to turn up somewhere in the transaction:
In 1922, H. S. Kerbaugh acquired from the United Railway and Canal Company, with which the Pennsylvania Railroad is affiliated, a tract of land at Journal Square in Jersey City, known as the Bowl, and paid for it $218,500.... Mr. Kerbaugh conveyed the Bowl to the New Jersey Bergen Square Realty Company, in which he and John J. McMahon, Register of Hudson County, who was a close political associate of Frank Hague ... were the controlling stockholders.

During the pendency of the Bowl condemnation about to be referred to, Mr. McMahon acted as dummy for Mayor Hague and held for him title to real estate at Deal, New Jersey, for which Mayor Hague paid in cash money.

At the time that Kerbaugh transferred the Bowl property to the New Jersey Bergen Square Realty Company, the Board of Freeholders of Hudson County was planning the Journal Square Improvement. It was originally contemplated that there should be a two-way bridge, one leg of which terminated on Magnolia Avenue. In July, 1922, one Thomas Davis acquired several properties in the path of this leg of the bridge. He was represented by John Milton, who testified that Thomas Davis's principal was Patrick Casey, General Manager of the Keith-Albee theatrical interests, with offices and residence in New York City. Mr. Milton testified that these transactions were handled in cash. The Committee was unable to locate either Thomas Davis or Patrick Casey to obtain their testimony. No aid was given to the Committee by Mr. Milton in this respect, and neither appeared before the Committee.

At the same time a property lying between the two properties acquired by Thomas Davis was acquired by The Duncan Corporation, owner of the Duncan apartment, in which both Mayor Hague and John Milton were stockholders.

Subsequently the plan of the bridge was changed, and the leg leading to Magnolia Avenue was never constructed. These properties are still in the name of Thomas Davis. The revenues are insufficient to pay carrying charges, which are paid by check of John Milton, who testified that he is reimbursed in cash by Mr. Casey.

On July 16, 1924, Hudson County instituted condemnation proceedings for the acquisition of about one twelfth in area of the property acquired by H. S. Kerbaugh from the United Railway and Canal Company, as hereinbefore mentioned. The condemnation resulted in an award of $320,430 for one twelfth of the property which Kerbaugh had acquired ... for $218,500.

John J. McMahon declared in answer to specific questions that Frank Hague had no interest in the New Jersey Bergen Square Realty Company or in this transaction....

The condemnation award was made August 18, 1924, to the New Jersey Bergen Square Realty Company. The Company kept its account at the Steneck Trust Company, Hoboken, New Jersey, and the check was deposited at that bank. A transcript of the Company's account at that bank was produced.

It showed that on August 19, 1924, the day after the payment of the award, the Company paid to H. S. Kerbaugh $200,000, which he deposited in his individual account in the Steneck Trust Company. On that same day H. S. Kerbaugh drew against this deposit of $200,000 in his individual account five checks, two for $25,000, one for $13,000, one for $10,000, and one for $12,000; in all $85,000.

Mr. McMahon was unable to tell who received the money represented by these checks. H. S. Kerbaugh refused to appear and testify. The only documentary evidence consisted of Kerbaugh's check book and the canceled vouchers which were in his possession in New York City. The Committee, therefore, does not know who received the $85,000.... The financial result of this transaction is, in short, that H. S. Kerbaugh and his associates paid $218,500 for a tract of land, one twelfth of which was acquired by Hudson County by condemnation for $320,430, a profit of $101,930 plus eleven twelfths of the original land .... (Report, Senate Journal (1929), pp. 1133-1134.)

The committee felt that Mr. Kerbaugh's unusual and consistent good fortune in his real-estate operations deserved comment:
Between 1919 and 1924 11. S. Kerbaugh happened to find himself the owner of three tracts of land required by Jersey City or Hudson County for public purposes.... The Secaucus tract yielded a profit of $326,215, Split Rock $200,000, and the Bowl $101,930, plus eleven twelfths of the original land, a grand total of $628,145....

The extraordinary coincidence that H. S. Kerbaugh three times in five years found himself in a spot about to be struck by the lightning of condemnation, with such fortunate pecuniary results, the disappearance of the records of the Secaucus Heights Land Company, the utilization of a Delaware corporation, manned by dummy non-residents of New Jersey as a means of transferring the Split Rock property ... and the tremendous financial gain accruing to those involved, compel the Committee to find that public moneys were wasted as a result of a conspiracy operating under cover of legal forms. (Report, Senate Journal (1929), pp. 1134-1135.

With the satisfactory conclusion of his last real-estate deal Mr. Kerbaugh left New Jersey, as far as the record goes, never to return. The evidence turned up by the Case Committee, not only on his activities but also on those of Hudson County officials, was submitted to the Hudson County prosecutor; but no indictments ever resulted.

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