The credit mobilier scandal (railroads) union pacific & credit mobilier

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George Francis Train and Thomas Durant created the Credit Mobilier company in 1864. Durant served as vice president of the Union Pacific Railroad. The new company served as a front for Union Pacific. Train and Durant hoped to fool the government into believing the two entities operated independently of each other. The pair hoped to hide graft and corruption within the company and then overcharge the government for construction of rail lines.
Credit Mobilier defrauded the government through billing. The front company presented legitimate invoices for construction to Union Pacific. The railroad forwarded the bill to the federal government. Union Pacific billed the government for the construction costs per their contract and added a fee to the invoice generated from Credit Mobilier. The company’s accounting techniques hid the fraud making discovery impossible.

CONGRESSIONAL INVOLVEMENT: In 1867, Dr. Thomas C. Durant was replaced as head of Crédit Mobilier by Congressman Oakes Ames. In that year Ames offered to members of Congress shares of stock in Crédit Mobilier at its discounted value rather than market value, which was much higher. The high market value of the stock was due to the superb performance of Crédit Mobilier of America as a corporation; which was in turn due to the fact that the company had a major contract in which it was charging the Union Pacific whatever it wanted; and through the Union Pacific, Crédit Mobilier was the exclusive construction and management agent for the building of the Pacific Railroad. The Union Pacific "suspected" nothing; and they "paid" Crédit Mobilier (themselves) whatever "they" were asked to pay. Crédit Mobilier's corporate balance sheet regularly showed huge earnings in excess of its expenses, and very high net profits in every quarter that it was engaged in the construction of the railroad. It also was declaring substantial quarterly dividends on its stock.

The Congressmen and others who were allowed to purchase shares at a discount could reap enormous capital gains simply by, in turn, offering their discounted shares to a grossly under-subscribed market, that was very eager to own shares of such a “profitable” company. These same members of Congress voted to appropriate government funds to cover the inflated charges of Crédit Mobilier. Ames' actions became one of the best-known examples of graft in American history.

THE SUN NEWSPAPER: The story was introduced to the public during the presidential election campaign of 1872 by the New York City newspaper The Sun, which was against the re-election of Ulysses S. Grant. Henry Simpson McComb, a future executive of the Illinois Central Railroad and an associate of Ames, had leaked compromising letters to the newspaper following a disagreement with Ames. It was claimed that the $72 million in contracts had been given to Crédit Mobilier for building a railroad only worth $53 million. Union Pacific and other investors were left nearly bankrupt

The Sun's story forced congressional action. The legislature investigated thirteen members of congress and Ames. The federal government also investigated. The investigations discovered over thirty members of congress from both parties took bribes. Congress censured Ames and former CEO James Brooks. The scandal implicated future President James Garfield and Vice President Schyler Coufax. For his part, Grant knew nothing of the graft. The scandal just happened to break during his presidency. However, Grant's administration suffered through several major scandals and Credit Mobilier seemed to confirm the perception that he ran a corrupt government.


One quarter of the money involved had been supplied to the railway by Congress, through loans and land grants. As the Union Pacific plunged into debt, Oakes Ames sought to prevent Congressional investigation by permitting leading members of Congress to buy Crédit Mobilier stock at greatly reduced prices. Congress finally investigated in 1872. The resulting scandal disgraced Vice President Schuyler Colfax, Senator James W. Patterson (New Hampshire), Representative James Brooks (New York), and Oakes Ames himself. But no one was expelled from office or tried in court. The Union Pacific was reorganized in 1897, and the present Union Pacific Railroad Company has no connection with the earlier company.

Top 10 Political Scandals in the United States

It’s not uncommon in the United States of America that those who wield power also have the dubious distinction of making the news for all the wrong reasons. With news channels exposing scandals and late night shows lampooning cover up efforts to the amusement of the audience.

Political scandals in the most powerful nation of the world have made headlines across the globe. Amongst these, there are a few scandals that have ‘stood the test of time’ and still remain seared into the public conscience years after they first came to light.

1. Downing Street Memo (Year: 2002)

In a strange case, the ‘Downing Street Memo’ scandal was exposed by the UK press. The London Times released details of a memo which showed that President George W Bush had plans to give out false information about Saddam Hussein’s weapons of mass destruction. The supposed aim of this exercise was to project a just cause for initiating a war on Iraq. The memo which had this damning information found its way to British PM Tony Blair’s office through the British intelligence channels and made headline news in the UK. But the story was handled with extreme caution by the US press and a lot was hush-hushed.

2. NSA Surveillance Controversy (Year: 2001)

The Foreign Intelligence Surveillance Act (FISA) which was implemented in 1978 regulates intelligence gathering to protect the interests of the US and allies from perceived threats from foreign nations or nationals.

Post September 11, 2001, then President George W Bush initiated a program which allowed the National Security Agency (NSA) to tap certain phones without approval from the FISC. An FISC warrant is mandatory for such exercises under the FISA Act. Under this program, calls, text messages, emails and other communication from or to foreign nations with persons suspected of links with terrorist organizations were kept under surveillance.

The program was made public in a December 2005 report by The New York Times. The expose prompted both public outcry and political intervention against what was criticized as blatant disregard for the Fourth Amendment. The FISA was subsequently modified significantly with the Protect America Act of 2007.

3. The Keating Five (Year: 1989)

Five US Senators were accused of corruption after the infamous collapse of the Lincoln Savings and Loan Association in 1989. The collapse of the institution cost the federal government $3 billion and 23,000 bond holders were defrauded, some losing all their savings.

The country, already reeling under the wider Savings and Loans crisis, was shocked by the revelation that came to light during regulatory investigation of Charles Keating Jr., Chairman of the Lincoln Savings and Loan Association. The Federal Home Loan Bank Board (the loans and savings regulatory body) former head Edwin Gray accused the five senators of asking him to back off the Lincoln investigation. These senators had taken $1.3 million as campaign funds from Keating.

4. Teapot Dome Scandal (Year: 1922-1924)

The Teapot Dome was a Naval oil field in Wyoming which had been reserved by President William Taft for emergency oil supplies for the Navy. There were many politicians opposed to the idea of reserving oil fields in this manner as they held it unnecessary.

In 1921, Albert Fall was appointed as Secretary of the Interior by President Harding. Fall managed to lease part of the reserved oil fields to Sinclair of Mammoth Oil Corp without getting any competitive bids. Similarly, another reserved oil field was leased to Doheny of Pan-American Petrol and Transport Co. In spite of Fall’s best efforts, news about his murky dealings was leaked out by the Wall Street Journal. Details of the ‘gifts’ he received, totaling up to $404,000 also came to light. The scandal rocked the administration and prompted detailed investigations into the affair.

5. Abu Gharib Prison Atrocities (Year: 2003)

The Abu Gharib prison, a correctional facility in Baghdad wasn’t exactly an unlikely location for a US political scandal. And so was proved when Sergeant Joseph Darby of the United States military police blew the whistle on the atrocities that were being carried out by members of the US armed forces, CIA and other US law enforcement officials on the prisoners held there. Reports of abuse, torture and unprovoked attacks on prisoners began to make the rounds. But the scandal really grabbed big media attention when pictures of abused, naked prisoners hit the news followed quickly by online circulation. This scandal badly damaged the image of the then US government and its allies as international peace keepers.

6. Pentagon Papers (Year: 1971)

The Pentagon papers scandal involved the unauthorized release of a 7000 page document to the press. The papers were top secret US Department of Defense documents pertaining to the US involvement in the Vietnam War spanning a period of 1945 to 1971, commissioned by the Secretary of Defense Robert S. McNamara. Daniel Ellsberg, a worker with this department leaked the ultra secret information to the New York Times when he became disillusioned with the role played by the US in the war.

7. Clinton Lewinsky Scandal (Year: 1998)

The Bill Clinton – Monica Lewinsky scandal was not one which had any far reaching implications for the country, but certainly tainted one of the most popular US Presidents of all time. The scandal resulted in the impeachment of President Clinton.

The Lewinsky scandal came to light after a similar sexual harassment case was filed against the President by former Arkansas state employee Paula Jones. In bid to strengthen the case, Jones’s lawyers began to question other women who had worked with Clinton. After the scandal became public, both Clinton and Lewinsky denied the relationship during questioning. However, a co-worker Linda Tripp, to whom Lewinsky had confided in, brought some startling facts to the notice of Kenneth Starr, an independent counsel investigating the allegations.

After the evidence was made public, the country was shocked by the blatant perjury that the President had committed by lying under oath. The Republicans had a field day with the expose and Bill Clinton suffered damage to his otherwise enviable reputation as an able administrator.

8. Iran – Contra Affair (Year: 1985-1986)

This scandal took place when Ronald Reagan was still in the White House. Many of the murkier details of the scandal are still hidden thanks to a thorough hush up job by loyal Reagan officials and it is still not clear to what extent the President’s complicity goes in the affair.

The scandal revolved around the arms-for-hostages deal which the US government allegedly arranged with some politically influential Iranian groups. The plan was to facilitate the safe return of US hostages who were being held in Iran by terrorists. The profits from these deals were going into funding the Nicaraguan contras, for whom President Reagan had expressed support earlier.

Although a direct link was never established connecting the President with the dealings, critics believe that the orders did come from high up in the line of command and that Reagan was in the know all the while. The President did publicly accept moral responsibility for all the dealings even though he was ‘unaware’ of them. An investigative committee was appointed by Reagan himself, which, understandably, declared him innocent.

9. Marilyn Monroe and the Kennedys (Year: Early 1960s)

Marilyn Monroe was perhaps the most star crossed lover in history. On one hand was her dazzling success in tinsel town and on the other, her volatile and highly secret relationships with the much-married President of the US and his brother. Monroe’s name was linked to both John F Kennedy and Robert F Kennedy.

Although many in the political circles knew of the affairs, they were carefully hushed up so that the public had no clear facts to chew on. Monroe however was becoming a public embarrassment and had even threatened to go public about the President’s infidelities. But her plans were short-lived as she was found dead in her home under mysterious circumstances. Although official reports say she committed suicide, there have always been rumors that the Kennedys had her ‘removed’ to protect their political image. The truth still remains elusive.

All of these scandals created a lot of furor and brought bad publicity to the politician(s) and the political party involved. But none had such a far reaching impact as the Watergate scandal which caused, for the first time, a reigning President to resign fearing impeachment.

10. Watergate Affair (Year: 1972-1974)

The Watergate scandal is probably the most infamous political scandal that US has ever witnessed. It left such a long lasting impression on the collective consciousness of the American public that ‘Watergate’ became synonymous with scandal. The Watergate scandal was basically a botched bid to re-elect the then president Richard Nixon to office in the approaching elections.

In a bid to boost the chances of a return to the office for Nixon, five loyalists broke into the Democratic National Committee headquarters on May 27, 1972. Among these five were former CIA operatives and a former NY district attorney. The men tapped phones, photographed documents and indulged in shadow practices. A second break in attempt was spotted by a vigilant security guard who called in the Washington police. The five men were arrested and with their arrest, subsequent investigation began to unravel what was one of the worst scandals that the US had ever seen.

The President’s involvement in the affair was proved beyond doubt by tapes which had recorded his private conversations with top ranking officials of the government. Coming on the heels of a complete denial by the President of any knowledge of the affair, these tapes sealed his fate. Faced with imminent impeachment, Richard Nixon was left with no choice but to resign as President of the United States on August 9, 1974.

The scandal is also well known for the mystery source that fed the investigative Washington Post reporters, Bob Woodward and Carl Bernstein, most of the critical information. The unidentified source was simply known as the ‘Deep Throat’.

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