Frederick "Fritz" Augustus Heinze () (December 5, 1869 – November 4, 1914) was an American businessman, known as one of the four Copper Kings of Butte, Montana, along with William Andrews Clark, and Marcus Daly. Contemporary assessments variously described him as an intelligent, charismatic but also devious character. To some people in Montana, he was seen as a hero for standing up to the Amalgamated Copper Company, but he also eventually sold his Butte interests to Amalgamated for a reported $12 million. Thereafter, he played a significant role in the Panic of 1907, for which he was indicted but eventually exonerated. Ultimately, Heinze's flamboyant, hard-drinking lifestyle resulted in a hemorrhage of the stomach thought to be caused by cirrhosis of the liver, and he died in November 1914, aged 44.
Early life Fritz Augustus Heinze was born in Brooklyn, New York, to wealthy immigrant parents, Otto Heinze, from Germany and Elizabeth "Lida" Lacey, from Ireland. He was named Fritz but generally went by F. Augustus, and later by the name Frederick. He was very bright and had a good education in Germany (from 9 to 15 years of age)George Redmond, "Stock Market Operators", 1999, Financial Times/Prentice Hall, London, and at Brooklyn Polytechnic Institute (now part of NYU) and was fluent in multiple languages. He then graduated from Columbia School of Mines, New York, in 1889. Instead of undertaking further studies in Germany, as his father wished, he headed west to Colorado and Salt Lake City to pursue his interest in mining.Michael P Malone, "The Battle for Butte – Mining and Politics on the Northern Frontier, 1864–1906", 2006, University of Washington Press, Seattle, Washington,
Mining interests in Montana
Heinze arrived in Butte, Montana, in 1889 as a mining engineer for the Boston and Montana Company. He became known for his hard drinking and fun-loving antics in Butte's saloons and gambling dens, whilst donning society dress and having a shy demeanor and polished manners that impressed the ladies. Assisted by an inheritance of $50,000 from his recently deceased father, Heinze revelled in working hard to be a significant player.Plain-Dealer (Cleveland), 5th Nov 1914, "Copper King Dies, leaving Millions" In 1894, Heinze's Montana Ore Purchasing Company opened a sophisticated new smelter, allowing Heinze to offer low-priced smelting to small mining companies. Originally, Heinze had to lease mines and secure ore from independent companies in order to keep operating. Heinze was able to locate rich ore bodies and the Rarus Mine, purchased in 1895, turned out to be one of Butte's premier mining properties.Northwest Digital Archives (NWDA), "Guide to the Montana Ore Purchasing Company Records 1900–1910", Retrieved 2011-03-10
When Heinze arrived in Butte, the first two "Copper Kings", William A. Clark and Marcus Daly, were well-established, (Daly's company was Anaconda Copper, after 1899 known as the Amalgamated Copper Mining Company, whose directors William Rockefeller and Henry H. Rogers also were major figures in Standard Oil). In order to build his own influence, Heinze's strategies included reducing the working day for his miners from ten to eight hours. For this, they considered him a hero. Heinze also built power by using a provision of the General Mining Act of 1872 which allowed a mine owner to excavate the veins that outcropped on his claim and follow them underground wherever they went, even if they went beneath claims owned by others. This was known as the law of the apex, and Heinze maintained that his miners had the right to follow veins and take out copper ore wherever it could be found. Using this law to his advantage, when his works encroached upon the mines of others, Heinze would employ up to 30 lawyers at a time and tie up his opponents in the legal system with case after case.
With skillful political maneuverings, Heinze also saw to it that individuals sympathetic to his legal position were appointed as judges in Butte. In one incident, a "pretty girl" was found to have offered a judge $100,000, and Heinze was implicated but never charged. Heinze was also a brilliant orator, and in speeches to the miners and public he would paint the Amalgamated Company as a ruthless and oppressive organization, and himself as the hero of the working class.
In 1902, Heinze combined his various mining interests into a company called United Copper Company, valued at $80 millionAnaconda Standard, 7 Jun 1901, "Heinze's New Company"Anaconda Standard, 27 Apr 1902, "Heinze forms a Syndicate" with capacity to produce 40 million pounds of copper a year, compared to 143 million a year produced by Amalgamated.
In 1903, frustrated when the Rarus property was subject to a court order to cease mining, Heinze's miners continued anyway, breaking through from the Rarus into an adjoining Amalgamated property. Before being stopped, Heinze succeeded in taking out a hundred thousand tons of high grade copper ore. There was hand-to-hand combat with Amalgamated miners, opposition mine shafts were fouled through burning rubber and spreading caustic slaked lime, grenades were thrown, and high pressure hoses were fired. Dynamite was also set off, caving in the property and completely obliterating all the evidence. Heinze was charged with contempt of court yet he was fined only $20,000.
The actions of Heinze had severely hampered the giant Amalgamated Company. In 1906, after a decade of the mining war, John D Ryan negotiated with Heinze for Heinze to sell his Butte interests to Amalgamated for a reported $12 million.Philadelphia Inquirer, 14 Feb 1906, "Heinze Sells Out; Copper War Over" His mining days in Butte, Montana, had come to an end but Heinze had amassed a fortune.
Heinze's role in the Panic of 1907 In 1907, Heinze moved to New York to be a major player, this time in the financial arena. He based his company, United Copper, at 42 Broadway, just around the corner from Wall Street. Heinze entered the banking business, forming a close alliance with Charles W. Morse with whom he served on the boards of at least six national banks, ten state banks, five trust companies, and four insurance companies.
Across the corridor from Heinze were his brothers Otto and Arthur P. Heinze, who had a brokerage firm. It was Otto who formulated the ill-fated financial ploy in October 1907 that dramatically failed and was a major catalyst to a massive American financial collapse, called "The Panic of 1907".Robert F. Bruner and Sean D. Carr, "The Panic of 1907 – Lessons Learned from the Market's Perfect Storm", 2007, John Wiley and Sons, Hoboken, New Jersey, Otto's plan was to aggressively purchase the stock of United Copper so that the price would soar. Then, with prices high, and Otto controlling most of the stock, he would force the short-sellers to repay the borrowed stock. The short-sellers would have no option but to settle with Otto for high prices.
But Otto overestimated how much of the company the family controlled. When he forced the borrowers to buy back stock, they were able to get it from other sources. When the market realized his "corner" had failed, the stock price of United Copper collapsed. From there panic spread, as people pulled money out of banks associated with Heinze, and then from trust companies associated with those banks. Heinze had eventually supported his brother's ploy and due to his heavy involvement in the financial system suffered great financial and personal losses. He was barred from any further involvement in financial institutions.
The Panic of 1907 was one of the most significant financial crises in American history. There had been several contributing factors, such as the huge cost of the devastating 1906 San Francisco earthquake, but it was the actions of the Heinze brothers that had caused much of the panic. The 1907 crash eventually lead to the formation of the US Federal Reserve System in 1913.David Fettig, "F. Augustus Heinze of Montana and the Panic of 1907", The Region, The Federal Reserve Bank of Minneapolis, Aug 1989, Retrieved 2011-03-11
Charges against Heinze In 1908, Heinze was indicted for his role in the corner, and there were a string of court cases that lasted for years in the New York courts.Philadelphia Inquirer, 6 Jan 1910, "Here and There About New York – Augustus Heinze under Charge of Morse-like Use of Bank Funds"Gillette News, 5 May 1910, "F. Augustus Heinze Goes Free" However, a series of fortunate incidents in the courts led to his full exoneration.
When Heinze returned to Butte after his exoneration "His arrival was a monumental event. Reception committees met his train ... A lively band and an automobile procession of his followers paraded into town ... A large rope was attached to the wagon tongue so more men could assist in pulling their hero."Sarah McNelis, "Copper King at War", 1968, University of Montana Press, Missoula
One of the more exciting stories is that of the missing financial records for United Copper. In June 1909, Heinze, his brother Arthur P. Heinze, and Carlos Warfield (President of the Ohio Copper Company) were indicted for spiriting away the books and correspondence of United Copper.Oregonian, 16 Jun 1909, "Heinzes are indicted" Secret service men trailed the United Copper men with their luggage trunks full of company books. The trunks journeyed from New York to New Jersey and back. Then one of the men tried to take a trunk to Montreal, Quebec, Canada, but the railway baggage man would not accept the 378-pound trunk. The trunks were eventually found in a basement on West Fifty-Fifth Street in New York. Two further trunks were missing but Heinze promised a judge that he would find them.Anaconda Standard, 21 Jul 1909, "On a Warm Trail leading to Quarry"
After the hiding of the books, the directors of the United Copper Company rebelled against Heinze, but on the day before he was to be removed, he replaced the board of directors, preempting his removal.The New York Times, 3 Jun 1909, "Heinze Puts out his Old Directors"
Heinze was also charged with assaulting a cab driver in New York, but the judge dismissed the case, agreeing with Heinze that the cab driver had charged too high a fee. Part of Heinze's defense was that just because the cab driver was smaller than him, that did not mean that he may not have a good punch and Heinze felt he had to punch him first.Pawtucket Times, 30 Apr 1909, "Heinze cleared – Chauffer's Charges of Disorderly Conduct and Assault Dismissed"
Mining interests in Utah Just prior to the tumultuous events of 1907, Heinze's interests had turned to the mines of Bingham Canyon, southwest of Salt Lake City, Utah. Heinze purchased a controlling interest in the Bingham Consolidated Mining and Smelting Company and the Ohio Copper Company.Salt Lake Telegram, 4 Dec 1906, "Becomes Heinze Holding" Unfortunately while Heinze fought his many charges in the courts, the operations struggled for fundingAnaconda Standard, 25 Oct 1910, "Ohio Copper" and Heinze's involvement in Utah eventually proved to be more as an impediment than as a savior.
The mining operation and mills of all the companies at Bingham were located in the narrow Bingham Canyon, including Ohio's small 150 ton/day Winnamuck mill. The story went that the canyon was so narrow that for a dog to wag his tail in the canyon the dog had to wag it up and down, not side to side.
Mascotte tunnel