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  Credit Mobilier Scandal
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ParentParent   
TypeScandal
TitleCredit Mobilier Scandal
Start Date/TimeSeptember 11, 1872 02:30pm
End Date/TimeFebruary 28, 1873 02:30pm
ContributorChronicler
Last ModifiedChronicler - March 24, 2008 09:04pm
Description The Credit Mobilier of America was a firm designed to enhance profits from federal funding of the transcontinental railroad, partially through bribes to federal officeholders. The first details of the scandal became public during the 1872 presidential election, and a timid congressional investigation followed during the lame duck session of Congress in 1873.

Early History of the CMA

The Credit Mobilier of America was incorporated by the Pennsylvania legislature on 3/26/1864. Its name came from a French investment organization incorporated in 1852. Though its original purpose was to serve as a subcontractor for the Union Pacific Railroad and construct the line leading west from Omaha, the CMA moved quickly to purchase the Union Pacific and thus control the route of the line. Within two years, CMA had completed the first goal of 246 miles of track, for which it received $13 million; the cost to CMA was only $7.8 million.

The second section of track, totaling 267 miles, began construction in 1867. U.S. Rep. Oakes Ames became president of CMA and oversaw the project. During his oversight, CMA began the process of wooing members of Congress. By the end of 1867, CMA billed the U.S. Government $57.1 million for work costing the corporation $27.3 million. When Congress assembled in 12/1867, Ames and a CMA official, the eccentric George F. Train (ironic name!), travelled to Washington DC to offer shares in CMA at reduced value as a means of enticing them into investing. This first offer appeared to be legitimate, unlike future such offers. By encouraging investment by members of Congress, Ames and Train hoped to increase their willingness to vote for needed legislation (particularly voting to pay CMA for its trackwork at a higher rate than originally agreed upon). One means of retaining his tie to members of Congress was to issue stock in the corporation to members of Congress without their knowledge. Ames then held the profit “in trust” for the member of Congress until needed in the future – which came sooner than he had anticipated, when Rep. Washburn of Wisconsin introduced a bill to regulate rail rates. In order to defeat the measure, Ames entered into the first agreements clearly falling into the realm of bribery. In one such transaction, a bribed Congressman from the South promised to “take care of the Democratic side of the aisle” [NYT 2/19/1873].

First Public Exposure of the Scandal

News of the scandal broke two months before the Presidential Election of 1872. Henry S. McComb, a railroad director for the Union Pacific, had a disagreement with Ames and delivered documents to leading newspapers. Though members of Congress on both sides of the aisle were implicated, the Democratic newspapers took up the issue as a means of undermining President Grant’s re-election effort. The New York Sun in particular carried stories of how Ames had skimmed off profits for his friends in Congress. The stolen profits represented staggering numbers for 1872, including $19 million from the last leg of the transcontinental railroad.

The members of Congress named by McComb immediately denied any wrongdoing. In at least one instance, McComb had the wrong name. Another member, Sen. Henry Wilson (candidate for Vice President), immediately returned his stock to Ames for the purchase price plus 10% interest (far below its market value).

The Congressional Investigation

As soon as Congress convened in 12/1872 for its lame duck session, an investigation began into CMA. The Speaker of the House, James G. Blaine, called for the official investigation to prove his innocence. Many implicated officials testified, some to offer additional information and others to exonerate themselves. Over 30 members of Congress had a connection with CMA, though some of these ties were only tangential. The committee specifically investigated the cases of the identified members of Congress: whether they owned stock in CMA, what dividends they had received, and whether they had been bribed. Most of the interrogations were routine, since many facts were not in doubt. The most troublesome were the allegations against VP Schuyler Colfax. He denied ever owning CMA stock. Ames produced company records attesting that Colfax had purchased CMA stock, that he (Ames) had written Colfax a draft on the House bank, and that Colfax had deposited this money two days later. Colfax denied the allegations, but his supporting evidence was skimpy. The report of the committee recommended that two members of the House be expelled – Ames and Brooks of New York.

The debate in the House was acidic. The media reported that members of the committee were persistent in setting forth the need to expel Ames and Brooks in order to remove the cloud over the House. Large sections of both parties showed no interest in taking the step. Lacking the vote for expulsion, the House voted 181-36 to censure Ames and Books (2/28/1873). The Senate committee recommended the expulsion of Sen. James W. Patterson, but since it was his last session of his service in the Senate anyway, he was allowed to complete his term. Brooks was deathly ill during the committee hearings and died two months later, and Ames suffered a stroke one week after that.

After the congressional hearings, proceedings began to dissolve CMA. The widow of James Fisk took the company to court, alleging that Fisk never received the dividends he was owed [NYT 3/2/1873]. The Attorney General sued CMA to recover the excessive profits, though by that time CMA was nearly bankrupt. Litigation continued for a decade. The Union Pacific became a separate legal entity, and its turned state’s evidence against CMA in 1879 (NYT 3/29/1879).


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