THE CREDIT MOBILIER, AND A VILLAINOUS CONTRACT.
We now approach one of the grandest schemes for defrauding a people ever
conceived in the breast of the speculator. Before considering the Credit
Mobilier, and to show the utter rottenness of the policy of affording
congressional aid to railroads, indulge us in a brief re-survey of the
subsidy bonds issued to the Pacific railroad corporations. We may
concede that at the date of the original charter of these companies,
there were no congressman interested in the grand scheme, and that it
was planned by outside combinations. The charter received various
amendments, with additional aids and privileges after members of
congress had became interested; these amendments were made while
directors of, and contractors for, these Pacific roads were occupying
seats in congress. Whether or not they voted for these amendments does
not appear, but it is certain they did not oppose them. As we have
already shown, the aid voted by congress was ample to build and equip
these roads, taking the statements of the Railroad Manual upon the
character of the country through which they pass, and the average cost
of railroads, as the basis for our conclusion. The companies could have
built the roads without using the capital stock they reported as paid
up. The Union Pacific has made no public exhibit of the cost of its
portion of the roads, and from this fact we are at liberty to infer that
an honest exhibit would present a bad look. Facts enough have been
disclosed to prove that the stockholders and directors of the Union
Pacific company had formed a combination for the purpose of defrauding
the government and the people. The letting of the contract for the
construction of its division of the roads presents one of the most
perfect combinations for private speculation at the expense of the
public that was ever planned or executed. When this division was
completed, according to the statements of the company it was indebted in
the sum of $112,911,512. The cost of the whole line of road, at the
highest price per mile given, to-wit, $50,000, would amount to less than
one-half of the reported indebtedness of the company, including the
paid-up capital reported as $37,000,000. To show what was done with the
subsidy bonds issued to this company, we must look at the contract made
by the directors with Oakes Ames for the construction of six hundred and
sixty-seven miles of the road, and the subsequent transfer of this
contract to the Credit Mobilier of America. Let us remember that, in
addition to the bonds issued by government to the amount of $16,000 per
mile for a part of the road, $32,000 per mile for a part, and $48,000
per mile for a part, congress, by a subsequent amendment to the charter,
allowed the company to issue its own bonds, for a like amount per mile,
as first mortgage bonds, and that at the time of making the contract now
under consideration, the directors of the company, and of the Credit
Mobilier were the same persons, some of whom were at that time and since
members of congress. With these facts before us, we can see the reason
for the excess of the debts over the cost of the road, as well as for
many of the peculiar features of this singular contract. The executive
committee of the company was composed of the following named persons:
Oliver Ames (brother of Oakes Ames, contractor and member of congress),
C. S. Bushnell, Springer Harbaugh, and Thomas C. Durant. The seven
directors of the company who were made trustees, and who signed the
transfer of the contract to the Credit Mobilier, were Thomas C. Durant,
Oliver Ames, John B. Alley (a member of congress), Sidney Dillon, C. S.
Bushnell, H. S. McComb, and Benjamin E. Bates; and the president of the
Credit Mobilier was Sidney Dillon.
The grant of lands and bonds was made to the railroad company, as well
as the right to issue their first mortgage bonds. All of the contracting
parties were directors in the railroad company, and in the Credit
Mobilier. As a body they controlled the whole matter. If a desire to
protect the best interests of the company, and to deal honestly with the
public had actuated these men, and not a determination to plunder the
public, no reason can be shown for this strange contract; but if it was
the intent of a combination of men to defraud the public and the
government, then the contract and its assignments can easily be
accounted for. All of the stockholders of the company, at the time the
contract was made with Oakes Ames, by indorsement on the back of their
certificates of stock, appointed the above named seven trustees,
irrevocably to represent their stock at all business meetings and
elections of directors, during the existence of the Ames contract. The
following is a correct copy of the contract and assignments:
THE "OAKES AMES CONTRACT."--ITS ASSIGNMENTS TO THE CREDIT MOBILIER.
Agreement made this 16th day of August, 1867, between the Union Pacific
railroad company, party of the first part, and Oakes Ames, party of the
second part, witnesseth:
That the party of the first part agrees to let and contract, and the
party of the second part agrees to contract, as follows, to-wit:
_First._ The party of the second part agrees and binds himself, his
heirs, executors, administrators, and assigns to build and equip the
following named portions of the railroad and telegraph line of the party
of the first part, commencing at the one-hundredth meridian of
longitude, upon the following terms and conditions, to-wit:
1. One hundred miles at and for the rate of $42,000 per mile.
2. One hundred and sixty-seven miles at and for the rate of $45,000 per
mile.
3. One hundred miles at and for the rate of $96,000 per mile.
4. One hundred miles at and for the rate of $80,000 per mile.
5. One hundred miles at and for the rate of $90,000 per mile.
6. One hundred miles at and for the rate of $96,000 per mile.
_Second._ At least three hundred and fifty miles shall be, if possible,
completed and ready for acceptance before the first day of January,
1868, provided the Union Pacific railroad company transport the
material. The whole to be constructed in a good and workmanlike manner,
upon the same general plan and specifications as adopted east of the
one-hundredth meridian of longitude. The party of the second part shall
erect all such necessary depots, machine shops, machinery, tanks, turn
tables, and provide all necessary machinery and rolling stock at a cost
of not less than $7,500 per mile, in cash, and shall construct all such
necessary side tracks as may be required by the party of the first
party, not exceeding six per cent of the length of the road constructed,
and to be constructed under this contract. The kind of timber used for
ties and in the bridges and in its preparation, shall be such as from
time to time may be ordered or prescribed by the general agent, or the
company, under the rules and regulations and standard as recommended by
the secretary of the interior, of the date of February--, 1866.
_Third._ Whenever one of the above named sections of the road shall be
finished, to the satisfaction and the acceptance of the government
commissioners, the same shall be delivered into the possession of the
party of the first part, and upon such portions of the road, as well as
on that part east of the one-hundredth meridian now completed, the party
of the first part shall transport, without delay, all men and material
to be used in construction at a price to be agreed upon by the party of
the second part, his heirs, executors, administrators or assigns, and
the general agent, but not less than cost to the party of the first
part.
_Fourth._ The party of the second part, his heirs, executors,
administrators or assigns, shall have the right to enter upon all lands
belonging to the company, or upon which the company may have any rights,
and take therefrom any material used in the construction of the road,
and may have the right to change the grade and curvature within the
limits of the provisions of the act of congress for the temporary
purpose of hastening the completion of the road; but the estimated cost
of reducing the same to grade and curvatures, as established by the
chief engineer, or as approved from time to time by the company, shall
be deducted and retained by the party of the first part, until such
grade and curvature is so reduced.
_Fifth._ The party of the second part, his heirs, executors,
administrators, or assigns, is to receive from the company and enjoy the
benefits of all existing contracts, and shall assure all such contracts
and all liabilities of the company accrued or arising therefrom for work
done or to be done, and material furnished or to be furnished, for or on
account of the road west of the one-hundredth meridian, crediting,
however, the party of the first part on this contract all moneys
heretofore paid or expended on account thereof.
_Sixth._ The party of the second part, for himself, his heirs,
executors, administrators, and assigns, stipulates and agrees that the
work shall be prosecuted and completed with energy and all possible
speed, so as to complete the same at the earliest practicable day, it
being understood that the speed of construction and time of completion
is the essence of this contract, and at the same time the road to be a
first-class road, with equipments; and if the same, in the opinion of
the chief engineer, is not so prosecuted, both as regards quality and
dispatch, that then the said party of the first part shall and may,
through its general agent or other officer detailed for that purpose,
take charge of said work and carry the same on at proper cost and
expense of the party of the second part.
_Seventh._ The grading, bridging, and superstructure to be completed
under the supervision of the general agent of the company, to the
satisfaction of the chief engineer, and to be of the same character as
to the workmanship and materials as in the construction of the road east
of the one-hundredth meridian.
It is, however, understood that all iron hereafter purchased or
contracted for, shall be of the weight of not less than fifty-six pounds
to the yard, and to be fish bar joints.
_Eighth._ All the expenses of the engineering are to be charged and paid
by the party of the second part, except the pay and salary of the chief
engineer and consulting engineer, and their immediate assistants, and
the expenses of the general survey of the route.
_Ninth._ The depot buildings, machine shops, water tanks, and also
bridges shall be of the most approved pattern, and they, as well as the
kind of masonry and other material used, shall be previously approved by
the general agent and chief engineer of the company, and all tunnels
shall be arched with brick or stone, when necessary for the protection
of the same.
_Tenth._ Payments to be made as the work progresses, upon the estimates
of the chief engineer, in making which the engineer shall deduct from
each section its proportion of the cost of equipment not then furnished,
station buildings, superstructure, and cost of telegraph, but all
materials delivered or in transit for the account of the company may be
estimated for.
_Eleventh._ Payments hereon shall be made to the party of the second
part, his heirs, executors, administrators, or assigns, in cash; but if
the government bonds received by the company cannot be converted into
money at their par value net, and the first mortgage bonds of the
company at ninety cents on the dollar net, then the said party of the
second part, his heirs, executors, administrators, and assigns shall be
charged thereon the difference between the amount realized and the
above-named rates; provided the first mortgage bonds are not sold for
less than eighty cents on the dollar, and if there shall not be realized
from the sale of such bonds an amount sufficient to pay the party of the
second part, his heirs, executors, administrators, or assigns, for work,
as stipulated in this contract, and according to the terms thereof, then
such deficiency shall from time to time be subscribed by said party of
the second part, his heirs, executors, administrators, or assigns, to
the capital stock of said company, and proceeds of such subscriptions
shall be paid to said party of the second part, his heirs, executors,
administrators, or assigns, on this contract.
_Twelfth._ On the first one hundred miles on this contract, there shall
be added to the equipment now provided for and intended to apply on this
section as follows, viz: Six locomotives, fifty box cars, four passenger
cars, two baggage cars, and a proportionate amount of equipment of like
character be supplied to the second section of one hundred miles, after
the same is completed.
_Thirteenth._ The amount provided to be expended for equipment, station
buildings, &c., shall be expended under the direction of the party of
the first part, and in such proportion for cars, locomotives, machine
shops, station buildings, &c., and at such points as they may determine;
the party of the first part to have the full benefit of such
expenditures without profit to the contractor, or they may, in their
option, purchase the equipment and expend any portion of said amount
provided at any point on the road where they may deem the same most
advantageous to the company, whether on the section on which said
reservation occurs or not.
_Fourteenth._ The telegraph line is included herein under the term
"railroad," and is to be constructed in the same manner and with similar
materials as in the line east of the one-hundredth meridian.
The said parties hereto, in consideration of the premises and of their
covenants herein, do mutually agree, severally, to perform and fulfil
their several and respective agreements above written.
This contract having been submitted to the executive committee by
resolution of the board of directors, August 16, 1867, and we having
examined the details of the same, recommend its execution by the proper
officers of the company with the Hon. Oakes Ames, the party named as
the second part.
OLIVER AMES,
C. S. BUSHNELL,
SPRINGER HARBAUGH,
THOMAS C. DURANT.
_Executive Committee Union Pacific
Railroad Company._
_Resolved_, the foregoing contract between the Union Pacific railroad
company and Oakes Ames, referred to the executive committee by a
resolution of the board, August 16, 1867, to settle the details, be
approved, and that the proper officers of the company be instructed to
execute the same, subject, however, to the written approval of the
stockholders of the company, as understood by the board of directors
when the same was voted upon.
_Resolved_, that the option to extend this contract to Salt Lake be
referred to the board, with recommendation that said option be accepted.
ASSIGNMENT OF CONTRACT TO SEVEN TRUSTEES.
Memorandum of agreement, in triplicate, made this 15th day of October,
1867, between Oakes Ames of North Easton, Massachusetts, party of the
first part, Thomas C. Durant, of the city of New York; Oliver Ames, of
North Easton, Massachusetts; John B. Alley, of Lynn, Massachusetts;
Sidney Dillon, of the city of New York; Cornelius S. Bushnell, of New
Haven, Connecticut; Henry S. McComb, of Wilmington, Delaware, and
Benjamin E. Bates, of Boston, Massachusetts, parties of the second part,
and the Credit Mobilier of America, party of the third part.
That whereas, the party of the first part has undertaken a certain large
contract for the construction of certain portion therein named of the
railroad and telegraph line of the Union Pacific railroad company over
the plains and through and over the Rocky mountains, which will require
a very large and hazardous outlay of capital, which capital he is
desirous to be assured of raising, at such times, and in such sums as
will enable him to complete and perform the said contract according to
its terms and conditions.
And whereas, the Credit Mobilier of America, the party of the third
part, a corporation duly established by law, is empowered by charter to
advance and loan money in aid of such enterprises, and can control large
amounts of capital for such purposes, and is willing to loan to said
party of the first part such sums as may be found necessary to complete
said contract, provided sufficient assurance may be made to said party
of the third part therein, that said sums shall be duly expended in the
work of completing said railroad and telegraph line, and that the
payments for the faithful performance of said contract by said railroad
company shall be held and applied to reimburse said party of the third
part for their loans and advances, together with a reasonable interest
for the use of the money so loaned and advanced.
And whereas, said party of the third part fully believes that said
contract, if honestly and faithfully executed, will be both profitable
and advantageous to the parties performing the same, and therefore
willing to guarantee the performance and execution of the same for a
reasonable commission to be paid therefor.
And whereas, both parties of the first and third parts have confidence
and reliance in the integrity, business capacity, and ability of the
several persons named as parties of the second part hereto, and
confidently believe that said persons have large interests as well in
the Union Pacific railroad company as in the Credit Mobiler of America,
they will execute and perform the said contract, and faithfully hold the
proceeds thereof to the just use and benefit of the parties entitled
thereto.
Therefore, it is agreed by and between the said parties of the first,
second, and third parts hereto as follows; that is to say:
That said Oakes Ames, party of the first part hereto, hereby, for and in
consideration of $1.00 lawful money of the United States, to him duly
paid by the party of the second part, and for divers other good and
valuable considerations herein, thereunto moving, doth hereby assign,
set over, and transfer unto the said Thomas C. Durant, Oliver Ames, John
B. Alley, Sidney Dillon, Cornelius S. Bushnell, Henry S. McComb, and
Benjamin E. Bates, parties of the second part, all the right, title, and
interest of, in, and to, the said certain contract heretofore made and
executed by and between the Union Pacific railroad company and the said
Oakes Ames, bearing date the 16th day of August, 1867, for the
construction of portions of the railroad and telegraph line of said
railroad company, to which contract reference is herein made for them,
the said parties of the second part, to have, and to hold the same to
them and their survivors and successors forever in trust.
Nevertheless, upon the following trusts and conditions and limitations,
to-wit:--
1. That they, the said parties of the second part, shall perform all the
terms and conditions of said contract so assigned in all respects which
in and by the terms and conditions thereof is undertaken and assumed and
agreed to be done and performed by the said party of the first part
herein named.
2. That they, the said parties of the second part, shall hold all the
avails and proceeds of the said contract, and therefrom shall reimburse
themselves and the party of the third part hereto, all moneys advanced
and expended by them, or either of them, in executing or performing the
said contract, with interest and commission thereon as hereinafter
provided.
3. Out of the said avails and proceeds to pay unto the parties of the
second part a reasonable sum as compensation for their service, as such
trustees, for executing and performing the terms and conditions of this
agreement, which compensation shall not exceed $3,000 per annum to each
and every one of the parties of the second part.
4. To hold all the rest and residue of the said proceeds and avails for
the use and benefit of such of the several persons holding and owning
shares in the capital stock of the Credit Mobilier of America on the day
of the date hereof, in proportion to the number of shares which said
stockholders now severally hold and own, and for the use and benefit of
such of the assignees and holders of such shares of stock at the times
herein set forth, for the distribution of said residue and remainder of
said avails and proceeds, who shall comply with the provisions,
conditions, and limitations herein contained, which are on their part to
be complied with.
5. To pay over on or before the first Wednesday of June and September
each year, or within thirty days thereafter, his just share and
proportion of the residue and remainder of the said proceeds and avails
as shall be justly estimated by the said trustees to have been made and
earned as net profit on said contract, during the preceding six months,
to each shareholder only in said Credit Mobilier of America, who being a
stockholder in the Union Pacific railroad shall have made and executed
his power of attorney or proxy, irrevocable, to said several parties of
the second part, their survivors and successors, empowering them, the
said parties of the second part, to vote upon at least six-tenths of all
the stock owned by said shareholders of the Credit Mobilier of America,
in the capital stock of the Union Pacific railroad company, on the day
of the date hereof, and six-tenths of any stock in said Union Pacific
railroad company he may have received a dividend, or otherwise, because
or by virtue of having been a stockholder in said Credit Mobilier of
America, or which may appertain to any shares in said Union Pacific
railroad company, which had been so assigned to him at the time or times
of the distribution of the said profits as herein provided; and this
trust is made and declared upon the express condition and limitation
that it shall not enure in any manner or degree to the use or benefit of
any stockholder of the Credit Mobilier of America who shall neglect or
refuse to execute and deliver unto the said parties of the second part
his proxy or power of attorney, in the manner and for the purpose
hereinbefore provided, or who shall in any way, or by any proceeding,
knowingly hinder, delay, or interfere with any execution or performance
of the trust and conditions herein declared and set forth.
And the above transfer and conveyance of said contract is made upon
these further trusts and conditions, to-wit:--
1. The said parties of the second part, their survivors and successors,
trustees as aforesaid, in all their acts and doings in the execution and
performance of said contract, and in the execution of their several
trusts and conditions herein set forth, shall act by the concurrent
assent of four of their number, expressed in writing, or by yea and nay
vote, at a meeting of said trustees, either or both of which shall be
recorded in a book of proceedings of said trustees, kept for the purpose
by their secretary, and not otherwise.
2. Said parties of the second part shall keep an office in the city of
New York for the transaction of the business incidental to said trust.
Meetings of said trustees may be held on call of the secretary on
request of any two of their number; such call may be made personally or
by mail.
3. The said trustees shall appoint a competent person as secretary, who
shall keep a faithful record of all their acts, proceedings, and
contracts, in books to be provided for that purpose, and shall cause to
be kept suitable books of accounts and vouchers of all their business
transactions, which books shall at all times be open to the inspection
of any of said trustees.
4. The said trustees shall cause a monthly statement to be made, showing
the amount due from the Union Pacific railroad company on account of
work done or equipment or material furnished under the contract,
according to the estimates of the engineer of the Union Pacific railroad
company, as provided in said contract, a copy of which statement shall
be furnished to the Credit Mobilier of America.
And the above transfer and conveyance of said contract is made upon the
further trust and condition:--
1. That in case of death, declination, disability, by reason of sickness
or absence from the country for the space of six months, or neglect to
fulfil the duties and obligations of said trust for the same time by
either of said trustees, the remaining or surviving trustees may declare
the place of said trustee to be vacant, and to fill such vacancy by vote
in manner aforesaid.
2. That in case any one of said trustees shall wilfully neglect or evade
the performance of his duties as such trustee, or shall wilfully attempt
to hinder, delay, obstruct, or interfere with the execution or
performance of said contract, or the due execution or performance of
said trust and conditions, according to the true intent thereof, or
shall appropriate to his own use or benefit any money or other valuable
thing belonging or appertaining to said trust, fund, or property, he
shall not be entitled further to act as such trustee, or to receive any
of the benefits of said trusts, either as shareholder in said Credit
Mobilier of America, or otherwise.
The parties of the second part do hereby accept the said trust, and
agree faithfully to execute and perform the same according to the terms,
conditions, and limitations herein set forth.
The party of the third part, in consideration of the premises, hereby
agree to advance, as upon a loan, to the said parties of the second
part, their survivors and successors, all such sums of money, and at
such times as maybe necessary, to enable said trustees, economically and
promptly, to execute and perform the conditions of said contract, upon
the call of said parties of the second part, their survivors and
successors, such sums never to exceed in the whole the amount provided
for in said contract, to be paid by the Union Pacific railroad company,
for the execution and performance thereof, and to receive therefor
interest at the rate of seven per cent per annum, payable
semi-annually, on each sum so advanced, until the same are repaid.
And said party of the third part do further agree, for the consideration
aforesaid, and for an amount equal to two and one-half per cent on the
amount to be by them advanced, to be paid to them as commission, to, and
do hereby guarantee unto, the parties of the first part and second part,
the due performance and execution of the said contract, according to its
terms and conditions, and do indemnify and hold harmless the said
parties of the first and second part of and from all cost, liability,
loss or damage to them, or either of them, arising from or on account of
said contract, and to the faithful performance of the agreement,
contracts, and conditions herein above specified to be done and
performed by each.
And this conveyance and transfer is made upon the further trust and
condition.
That the trustees shall adjust and pay over to the Credit Mobilier of
America such portion of the net profits of the work done and material
furnished on the first one hundred miles west of the one-hundredth
meridian, as was done and performed prior to January 1, 1867.
In witness whereof, the party of the first part, the several parties of
the second part, in their own proper persons, have hereunto set their
hands and seals, and the party of the third part has caused these
presents to be executed by its president, attested by its secretary with
the seal of the said company, on the day and year above written.
OAKES AMES,
THOMAS C. DURANT,
OLIVER AMES,
JOHN B. ALLEY,
SIDNEY DILLON,
CORNELIUS S. BUSHNELL,
H. S. MCCOMB,
BENJAMIN E. BATES.
Signed, sealed, and delivered in presence of CLARK BELL.
The Credit Mobilier of America, by its president,
SIDNEY DILLON.
Attest: BENJAMIN F. HAM,
_Assistant Secretary_.
The first noticeable feature of this instrument is that the directors of
the company contract with one of their own body to build six hundred and
sixty-seven miles of its road.
Second, that they agree to pay to one of their own body nearly double
the actual cost of the work. Aside from these facts, nothing striking
appears in the contract. It is dated August 16, 1867. It was approved by
the directors, and on the 15th of October following, only two months
after its execution, it was assigned to the seven trustees for the
consideration of one dollar and diverse other good and valuable
considerations. These trustees agree to perform Oakes Ames' contract,
but upon consideration that they shall hold all the avails and proceeds
of the contract, reimburse themselves and the Credit Mobilier for all
money expended on said contract, with interest and commission, and
reserve to each of themselves $3,000 per year for services. The trustees
are to hold all of the residue for the several persons possessing and
owning stock in the Credit Mobilier, or to their assigns, but upon
condition that all stockholders in the Pacific railroad company, who own
stock in the Credit Mobilier, shall give an irrevocable proxy for their
railroad stock to the trustees named in the agreement. The Credit
Mobilier is to advance at seven per cent the money necessary for the
prosecution of the work, and for a commission of two and one-half per
cent, agrees to save harmless the parties of the first and second part
from all loss or damages to them, or either of them, arising from, or on
account of, said contract. The contracting parties are all stockholders
and directors in the railroad company, and in the Credit Mobilier
(whatever that may be) they are trustees for themselves. They loan to
themselves the money they receive as a grant from government (voted to
the railroad corporation while a part of their own members were members
of congress); they pay themselves seven per cent interest for loaning to
themselves their own money; also, two and one-half per cent commission
for furnishing this money, donated by government, to themselves, besides
$3,000 per year, each to themselves for their services in this most
extraordinary transaction. In order to have funds with which to
compensate themselves, they issue the first mortgage bonds on the road
of the Union Pacific company to the amount of many millions, and then
ask congress to relieve them from interest on the bonds received from
government; and congress, composed in part of the persons signing the
above quoted contract and assignment, relieves the company from
$3,125,000 per year, for thirty years, and taxes the people with this
vast sum, because the government requires "a _more safe and speedy_
transmission of the mails, troops, &c., across the territories to the
Pacific coast." We have nothing to do with the financial operations of
this company, only as far as the people are affected by them. Bearing in
mind that the eight persons concerned in and signing this contract and
assignment, were all directors of the Union Pacific railroad company;
that four of them were the executive committee; that one of them was the
contractor, and all of them stockholders in the Credit Mobilier,
probably at that time constituting that entire corporation; and that
seven of them were trustees for some persons, company, or corporation,
or what appears still more probable, for themselves, and Oakes Ames, the
contractor, and we can account for the wholesale robbery of the people,
perpetrated by these eight men with the aid of congress, as above shown.
But how the five non-stockholding directors, appointed by the president,
who are presumed to act for the government and its interest, could have
been ignorant of the whole matter, is not so easily understood. The act
of congress of July 2, 1864, section 13, provides:
"That at least one of said government directors shall be placed on each
of the standing committees of said company, and at least one on every
special committee that may be appointed. The government directors SHALL
from time to time report to the secretary of the interior, in answer to
inquiries he may make of them touching the condition, management, and
progress of the work, and shall communicate to the secretary of the
interior, at the same time, such information as should be in the
possession of the department. They shall, as often as may be necessary
for a full knowledge of the condition and management of the line, visit
all portions of the line of road, whether built or surveyed, and while
absent from home, attending to their duties as directors, shall be paid
their actual traveling expenses, and be allowed and paid such
reasonable compensation for their time actually employed as the board of
directors may decide."
If these government directors and the company observed the law, then one
of them was on the executive committee of the Union Pacific company and
must have known of this fraudulent contract and its assignment. If no
one of them was placed on the executive committee, then in the discharge
of their duty they should have reported the facts to the secretary of
the interior. One of two inferences is irresistible. 1st. That they were
ignorant of what it was their duty to know, or 2nd. That they were
unfaithful to the public trust confided in them.
Follow us a little further into this Credit Mobilier organization. It
was first organized in Pennsylvania as the Pennsylvania Fiscal Agency
for the buying and selling of railroad bonds, advancing loans to
railroads and contractors, and to do almost any kind of business except
banking. The charter was granted in 1860, to Duff Green and some fifteen
others, but included none of the Credit Mobilier company. In 1864 (the
corporation having done nothing up to this time) the secretary of the
company, supposing Duff Green (the president) to be dead, sold out the
charter to George Francis Train, Thos. C. Durant, Oakes Ames, Oliver
Ames, and others, and Train baptized it with the new name of, "The
Credit Mobilier of America;" and then George Francis seems to have
disappeared. It does not appear that any considerable amount of the
capital stock was ever paid in (the whole capital stock being
$5,000,000;) perhaps just sufficient to legalize their operations,
to-wit, $25,000. The first business done, of which there is any record,
was a contract made by the directors of the Union Pacific company with
one Hoxie, of Iowa, for building 247 miles of the road, at what price
per mile we cannot learn. It was not intended that Hoxie should build
this road, but, as the directors of the company could not contract with
themselves, it was arranged to contract with Hoxie, and then to set the
Credit Mobilier to "running," and divide the spoils. With the consent of
the executive committee of the company, Hoxie assigned his contract to
the Credit Mobilier. The first mortgage bonds of the company were sold
and sufficient realized to build forty miles of road in 1865, and in
1866 to complete the Hoxie contract. From the subsidy bonds received
from government, or from some other and unknown source, the Credit
Mobilier, in the year 1867, reported a paid-up capital stock of
$3,750,000, and were ready for extensive operations. In pursuance of the
plan formed by the executive committee of the railroad company and the
owners and directors of the Credit Mobilier, the contract with Oakes
Ames herein copied was made, and then assigned. The Credit Mobilier was
so used as to _do good_. It was "placed where it would do the most
good." It does not appear that this corporation had any considerable
financial transactions, or did any particular business save in
connection with the Pacific road; yet it proved to the holders the most
prolific stock of any on record. The Ames contract was assigned to
Sidney Dillon, and others, trustees, on the 15th of October, 1867. It
declared dividends as follows:
Dec. 12, 1867, Union Pacific R. R. bonds, valued at $2,700,000
Jan. 3, 1868, " " " " " 637,500
June 17, 1868, " " " " " 525,000
June 17, 1868, cash 2,250,000
July 8, 1868, " 1,125,000
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Total of dividends in seven months $7,237,500
In addition to the above, another dividend was declared July 3d, 1868,
of $2,390,625 in bonds, which were pronounced bogus, or worthless. It is
thus seen that the directors of the Pacific railroad company, who were
also the Credit Mobilier--trustees for themselves, and some of them
members of congress--by the aid of congressional legislation, and the
fiction of the Credit Mobilier, contracted with themselves, agreeing to
pay themselves extravagant prices for building their own road, and
getting their pay as a donation from the public treasury, and were able
in seven months to declare dividends to themselves of nearly two hundred
per cent upon the reported paid up capital, which capital was also
obtained from government. If the reader has followed us in the
statements we have made relative to the land and bond subsidies granted
to the Pacific railroad companies, he will not wonder that the
indebtedness of these companies, after the completion of the roads, and
after the receipt from government of more than their entire cost, nearly
doubles the amount necessary to build them, had honesty and economy been
used in their construction.
We might pursue this subject further, but we think enough has been shown
to convince the impartial reader, that whatever the pretence for making
these grants, the real object has been to enrich unscrupulous and
dishonest men at the expense of the public; and that this corrupting
power has become so great that those who occupy high and responsible
places in the government have become partners in these wholesale
robberies of the people. This conclusion becomes irresistible when we
find members of congress voting government aid to railroad companies in
which they are stockholders and directors at the time the aid is voted.