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The Crédit Mobilier of America scandal of 1872 involved the Union Pacific Railroad and the Crédit Mobilier of America construction company.
The company Crédit Mobilier of America had been formed by a vice-president of the Union Pacific Railroad, Thomas Durant. The company was designed to limit the liability of stockholders and maximise profits from construction. The company was the sole bidder for certain construction contracts from Union Pacific and in 1864 was given 1,074 km of the Transcontinental Railroad to build, with the hefty fees being paid by federal subsidies.
In 1867 Durant was replaced as head of the firm by Representative Oakes Ames. In that year Ames allowed members of Congress to purchase shares at face rather than market value, the same people who voted the government funds to cover the inflated charges of Crédit Mobilier.
The story was introduced to the public arena during the Presidential election campaign of 1872 by the newspaper New York Sun, which was against the re-election of Ulysses S. Grant. Henry S. McComb, an associate of Ames, had leaked compromising letters to the newspaper following a disagreement with Ames. It was claimed that the $47 million contracts had given Crédit Mobilier a profit of $21 million and left Union Pacific and other investors near bankruptcy.
A Congressional investigation of thirteen members led to the censure of Ames and also James Brooks. A number of other political figures had their careers theoretically damaged, including James A. Garfield, Schuyler Colfax, James W. Patterson and Henry Wilson. But Garfield, who denied the charges, went on to become President so the actual impact of the scandal is hard to judge.
External link
- "A Complete and Graphic Account of the Crédit Mobilier Investigation" by Edward Winslow Martin, 1873 (http://www.cprr.com/Museum/Credit_Mobilier_1873.html)