Crédit Mobilier Scandal: Oakes Ames's Par-Value Bribes and a $44M Gap

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The first transcontinental railroad cost about $50 million to build, but the U.S. government was billed more than $94 million. Under the Pacific Railroad Acts, Congress offered the Union Pacific loans of $16,000 to $48,000 per mile and a 20-million-acre land grant, yet private investors stayed away from a 1,750-mile route through deserts and mountains with no towns or traffic to support it. Union Pacific vice president Thomas C. Durant and George Francis Train concluded the money was in construction, and in 1864 they formed Crédit Mobilier of America, borrowing the name of an unrelated French bank. The same men controlled both companies, so Union Pacific passed Crédit Mobilier's inflated invoices to the government as genuine bills.

Massachusetts congressman Oakes Ames took over Crédit Mobilier in 1867 and sold shares to fellow politicians at par value, far below their market worth. The scheme broke open after a dispute with associate Henry Simpson McComb, who leaked letters to the New York Sun, which published the story on September 4, 1872, during Ulysses S. Grant's reelection campaign. A Justice Department inquiry found shares had gone to more than 30 politicians from both parties, including Vice President Schuyler Colfax, vice presidential candidate Henry Wilson and future president James A. Garfield. Congress censured only Ames and New York Democrat James Brooks, and no one was criminally charged.

• Of roughly $44 million in profit, the directors reported about $23.3 million and quietly kept another $20.5 million.
• The Sun reported $72 million in contracts for a railroad worth $53 million.
• Henry Wilson testified that he bought the stock in his late wife's name with her money and that the deal was later reversed.
• Senator Henry L. Dawes returned his dividend and received $100 in interest from Ames.
• Historian Maury Klein concluded the builders defrauded the railroad and its investors rather than the government, but did use bribery to gain influence.