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one of the small homes of New England, he had become a millionaire before he arrived at middle age. As years rolled on, and wealth increased, his business reputation lifted him into Congress. In that body he was a prominent member of the Pacific Railroad Committee, and must have been thoroughly cognizant of these great offers, if he did not, as is most probable, actually inspire them. He was honest, as the world reckons honesty; his word was perfectly good, nor were his plans above or below the morality of Wall street. He well knew the commercial value of a reputation for integrity, and made that value his standard. So clear-headed was he that though doing a private business of millions of dollars a year, though guiding the affairs of a large firm, carrying on three separate factories, attending Congress, and building more than one railroad, he kept no books and employed no book-keeper for his private affairs; nothing but dates was ever forgotten by that capacious brain. He had no dread of large sums; no objection to taking a contract for forty-seven millions of dollars, provided the margin for profit was sufficiently large; and he testified that he never once saw the books which kept the account of his contract for that amount. He believed to some extent in the integrity of men, but acted on their selfishness; and he worked for profit rather than for patriotism. He would have the road built for the good of the nation; but he took hold of it for his own advantage.

Mr. Ames was too clear-sighted a man not to see all the difficulties in the construction of the road. The consummation of this enterprise involved building a railroad for a thousand miles through a desert country, crossing three mountain ranges, through a district swarming with hostile Indians, by whom engineers and laborers were repeatedly killed and scalped.

While one part of the construction force was digging, another part, armed with Sharpe's rifles, was watching and fighting. A large part of the route was destitute of water, which had in some cases to be transported a hundred and fifty miles on horseback. All the iron, all the cars, much of the timber would have to be brought from five to fifteen hundred miles before it could be used. And more difficult than all else, capital to a large amount was needed; capitalists were to be so convinced of the money to be made some

where, or somehow, that they would invest to a large amount.

The first object of Mr. Ames and of the other gentlemen who prophetically saw that government was offering more than was sufficient to build the road, was the discovery of some scheme by which the great profits that would ensue from building the road might be diverted from the road itself into the pockets of its stockholders. Government was asking somebody to take twenty-seven millions of dollars for the Union Pacific Road alone, besides as much more for the construction of its continuation, the Central Pacific. It was authorizing them to borrow twenty-seven millions more on a first mortgage; and giving them lands that would ultimately sell for fifty or sixty millions. Liberal as were these offers, the directors did not find it enough. The road has since issued land-grant bonds to the amount of ten millions of dollars and income bonds for over nine millions more. But even on the original offers, it was evident that here were some fifty millions of dollars floating round, waiting to be pocketed. It is not probable that Mr. Ames considered that there was much, if any, practical dishonesty in devising some scheme to this end. Stock-dealings in Wall street are not favorable to delicate notions of honor, nor was Mr. Ames's mental composition such that he would be likely to strain at any financial gnat. But it should be distinctly understood by every reader of this article that as an investment of money in railroad stock, to be repaid from the future earnings of the road, not a dollar would have been subscribed for a road to the Pacific. The only possibility of that construction arose from the profit to be made out of the liberal offers of Government. It was well known to a few men, to Mr. Ames and his confidential friends, that the road could be built for a much smaller sum than Government was offering. Dey, the Chief Engineer of the road, had already estimated that the first hundred miles could be built for thirty thousand dollars a mile, while Government was offering thirty-two thousand, and the land-grant besides. It was known that the road through the mountains could be built along their gradually ascending slopes nearly as cheaply as in the level valleys, and that the cost would not exceed forty or fifty thousand dollars a mile. Government offered sixty-four thousand a mile

Mr.

for a large part of the way, and ninety-six thousand for the remainder, the landgrant to be thrown in as additional. The great question, therefore, was how to transfer this excess of values over cost of construction from the treasury of the United States to the private purses of the builders; and this device was agreed upon: a corporation of a different name, but owned by the same parties, should build the new road. That other corporation should receive all these vast profits and divide them among its stockholders, who were also stockholders in the Union Pacific, but who as such could not legally receive them. Should Congress subsequently make inquisition for its hundred millions, the stockholders of the Union Pacific road would reply: "We have no bonds or moneys; we paid them over to the Crédit Mobilier for work that that corporation did for us." To the same inquiry of the other company the reply would be: "We are not a United States corporation, and, therefore, are not amenable to Congress. We contracted to do so much work for so much money, and have done it. Now, what are you going to do about it?" Such was the ingenious plan devised and subsequently carried out. By it Oakes Ames, Cornelius S. Bushnell, John B. Alley, T. C. Durant, and their associates built the road, and divided among themselves all funds not used in its construction.

The corporation they used for this purpose was first chartered as "The Pennsylvania Fiscal Agency." It was a corporation modeled after the Crédit Mobilier of France, and to this corporation came a cosmopolitan gentleman, widely but not favorably known as George Francis Train. He introduced himself as the financial agent of Dr. T. C. Durant, of New York, who was desirous of purchasing some manageable corporation; and he speedily bargained for the moribund charter of the Fiscal Agency for $26,645. Removed to New York, this company soon divested itself of its old name, as not sufficiently pretentious, and was baptized anew as "The Crédit Mobilier of America." The stockholders of the Union Pacific Railroad now subscribed for the same amount of stock in the Crédit Mobilier that they held in the railroad. Among others, Thomas C. Durant took six thousand and forty-one shares, involving an investment of $604,100; Oliver Ames took 3,125 shares; Oakes Ames, 900; and S. Hooper

& Co., and H. S. McComb each 500. By this action the Pacific road was transferred, bound hand and foot, to the Crédit Mobilier. Henceforth that road only drew the breath of life for the profit of the stockholders of the Crédit Mobilier.

But

The first step taken by the stockholders of the Crédit Mobilier under this understanding was to make the right kind of a contract with the Union Pacific. For this purpose Dr. Durant, of New York, the vice-president of the road, brought forward a confidential man of his own, H. M. Hoxie. Mr. Hoxie proposed to build and equip one hundred miles of road on certain specified terms. The proposal soon ripened into a contract, not signed by Hoxie, but by "H. C. Crane, attorney," Crane being the confidential clerk of Dr. Durant. So that an impecunious friend of a confidential clerk of Dr. Durant, not known to any one in the financial circles of the country, proposed to expend two millions of dollars in building and equipping this first hundred miles; but with this further agreement, that he should, when requested, assign this contract to Durant, or to such persons as Durant should designate. And this assignment was made within sixty days; so that, in fact, Durant, vice-president, contracted with himself to build this hundred miles of railroad. this was not enough; it was hardly the beginning. Within five days more this contract for one hundred miles was extended to one hundred and forty-six miles farther, and then anew assigned to Durant and his associates. By this contract, as it now stood, Hoxie agreed to expend over twelve millions of dollars in building two hundred and forty-six miles of road, and to subscribe one million dollars to the capital stock of the road, at par, which, when paid up, was not worth over thirty per cent The real intent of the contract was that by this assignment, Durant, Bushnell, &c., should build the road out of the large loans offered by government, and should at least pocket the million of stock. This contract cost the road in stock and bonds, valued at par, $12,974,416 24; it cost the Crédit Mobilier $7,806,183 33. The odd five millions, or so much thereof as was not absorbed in selling the bonds, remained for division among the stockholders. That amount may not have been large; but it was sufficient to prove that the road could be built from the offers of government, and without calling on the stockholders for

money. Yet even this large amount was not enough. Nearly two hundred thou- | sand dollars was demanded and paid on a change of the location of the track. That these assignees of Hoxie's knew that they were acting fraudulently is evident from the following facts.

Mr. Peter A. Dey was the engineer who surveyed and located the first hundred miles of the road. He estimated its cost at not over thirty thousand dollars a mile. When this estimate was shown to the Directors, it was returned to him with orders to re-touch it with higher colors, to put in embankments on paper where none existed on earth, to make the old embankments heavier, and to increase the expense generally; and then he was requested to send in his estimate that it would cost fifty thousand a mile. When Mr. Dey found that this part of the road was to be let to Hoxie at $50,000 per mile, for work which he knew could be done for $30,000,-this difference of $20,000 a mile, amounting to two millions of dollars on the first hundred miles, and to five millions on the two hundred and forty-six miles, he resigned his position as chief engineer, with a noble letter to John A. Dix, president of the road. He closed that letter with this statement:" My views of the Pacific Road are, perhaps, peculiar. I look upon its managers as trustees of the bounty of Congress. You are, doubtless, informed how disproportioned the amount to be paid is to the work contracted for. I need not expatiate on the sincerity of my course, when you reflect upon the fact that I have resigned the best position in my profession this country has offered to any man!"

*

*

It was the necessity of procuring funds to carry on this Hoxie contract that had led to the purchase of the Crédit Mobilier. To this company the Hoxie contract was now transferred, and the construction of a road to unite the Atlantic and the Pacific was fairly begun. The two brothers, Oakes and Oliver Ames, gentlemen of high financial reputation, of large wealth, and of great business capacity, were induced to invest, and Oliver was subsequently chosen President. Two and a half millions of dollars were subscribed to the stock of the Crédit Mobilier not to the road that was to be built with the money. The bonds advanced by Government were sold for what they would bring, and three or four millions of the company's bonds were hypothecated

At

at from fourteen to fifteen per cent. interest. But by degrees the funds from all these sources were exhausted. A meeting of the stockholders of the Crédit Mobilier was, therefore, called at the Fifth Avenue Hotel in New York, and there it was decided to increase the capital stock of the company fifty per cent; and, to induce the old stockholders to enlarge their subscriptions, it was voted to give to the holders of old stock a one thousand dollar Pacific Railroad bond, for every thousand dollars they should subscribe to the stock of the Crédit Mobilier. Every subscriber was to pay in one thousand dollars, and receive therefor one thousand dollars worth of stock in the Crédit Mobilier, and another thousand in the bonds of the Union Pacific road. that time the latter were selling in the market at from ninety to ninety-five per cent; so that this new stock in the Crédit Mobilier, subsequently so valuable, was obtained for five or ten cents on the dollar. Nearly all the stockholders accepted this generous offer, and paid in their thousand dollars to the Crédit Mobilier, and this company at once handed over the whole amount to the Union Pacific road. For it had been distinctly agreed between Ames, Bushnell, &c., of the Union Pacific, and Ames, Bushnell, &c., of the Crédit Mobilier, that whenever a contract should be made for the construction of the railroad, it should be given only to such persons as would hold it for the benefit of the stockholders of the Crédit Mobilier; and by this time the Hoxie contract had made known that such a contract would be tremendously profitable. Ten millions of the bonds of the road were at once put on the market and sold at over ninety cents on the dollar. It was determined to press the construction of the road with vigor.

The first two hundred and forty-six miles of the road now being fairly under way, an agreement was made by Dr. Durant, the Vice-President of the Union Pacific Road, with a Mr. Boomer, for the construction of one hundred and fifty miles further west at about $20,000 per mile; but this price was not to include a bridge, nor the equipment of the road. This agreement was never legally ratified by the corporation, but under it fifty-eight miles were built and formally accepted by Government. These fifty-eight miles, when the bridge was built and the equipinent completed, cost about $27,500 a mile; but this was actual cost. To convert this cost into

profit, the Board of Directors, against the protest of Dr. Durant, extended the Hoxie contract at $50,000 a mile, over the Boomer contract, already built at $27,500 a mile; thereby presenting to their stockholders in January, 1867, a New Year's gift of $22,500 a mile, or an aggregate of $1,104,000 paid by the Crédit Mobilier for work it had never done, never contracted to do, but which had been done by some one else, and was all paid for. And now the Hoxie contract had done its work. It commenced with an agreement for the construction of one hundred miles of road for $50,000 a mile, which cost $30,000; here was a profit of two millions of dollars. It was then stretched one hundred and forty-six miles farther at $50,000 a mile, and with another profit of three millions. It closed with swallowing up the Boomer contract with fifty-eight miles already built, on which was a profit of over another million. Truly, it was a most valuable and elastic

contract.

Ninety-eight miles were already built and
paid for; but this was a trifle; he wanted,
and the company granted, as much pay for
that portion of the road already finished as
for that not yet commenced. His offer
was therefore accepted. It was a gift of over
two millions of dollars from the corpulent
treasury of the Union Pacific Road to the
hungry pockets of the stockholders of the
Crédit Mobilier. But the consummation
of this project was defeated by legal pro-
ceedings instituted by Dr. Durant. Το
accomplish the same project in another
way and on a larger scale, without individ-
ual liability, and with the consent of Dr.
Durant, the "Oakes Ames contract" was
made-probably the largest and most pro-
fitable contract ever made by one man.
Drawn up under the advice of Gen. Butler,
who thought that advice worth $6,000, if not
$10,000, it was as strong as it was profitable.
This contract began at the hundredth
meridian and extended westward six hun-
dred and sixty-seven miles, for which the
railroad was to pay as follows:

For first 100 miles, $42,000 a mile, $4,200,000
For next 167

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The great profit to be derived from the construction of the road was now hastening the action of a formidable rival. By the act of 1866, the Central Pacific road, starting from California, was authorized to come eastward to meet the Union Pacific, and the same liberal offers were made to both corporations; and now commenced the most remarkable race in the construction of railroads the world has ever known. Here were nearly one thousand eight hundred miles of road to be built under offers which made it certain that great profits awaited the constructors. The more miles built the greater the profit. This competi-million dollars for nothing. tion between the two roads was so keen that, in the last year, it led to the construction of one thousand miles of railroad in a single season, through an uninhabited country, upon a route beset with unparalleled obstacles, and a largely unnecessary cost. For it was now known to both corporations that however great the expense of construction, the profit would be greater still; and it was evident that what one company did not build, the other would.

$47,915,000

But of this 667 miles, 138 had already been built and paid for. It was now included in this new contract, as if nothing had been done on it; so that the railroad agreed to pay Mr. Ames five and a half The average

Mr. J. M. S. Williams, a wealthy merchant of Boston, and a large stockholder in the Crédit Mobilier, appears as the next contractor. It was probably new business to him; for he agrees to assign the contract, as soon as executed, to trustees chosen by the Crédit Mobilier. He offers to build and equip two hundred and sixtyseven miles of road at $50,000 a mile.

contract price of these 667 miles was $72,ooo a mile; deducting the 138 miles already finished, it was $89,000 a mile; the actual cost was less than $40,000 a mile, or not one half of what was now offered. It was made by Oliver Ames, President, with his brother and business partner, Oakes Ames, stockholder, and with the distinct understanding, which was subsequently carried out, that it was for the benefit of all the stockholders; and a very handsome benefit it proved to be. This contract was executed in August, 1867, and within sixty days was assigned to the Crédit Mobilier. Hereby, Oliver Ames, President, contracted with himself and others, to take all the funds of the road, and after its construction to divide the remainder among the stockholders of the Crédit Mobilier "in proportion to the number of shares which

said stockholders now severally hold and own."

Under this agreement stockholders of either railroad or Crédit Mobilier could get no benefit from their stock or from this contract unless they gave an irrevocable proxy to Oliver Ames, and six associates, to vote on six-tenths of their railroad stock; in other words, unless they constituted them a majority of the stockholders, to remain such forever; and every director or stockholder who should "knowingly hinder, delay, or interfere with " this great fraud, should receive none of the enormous profits made by the Crédit Mobilier. Every stockholder, therefore, subscribed to this agreement; for its whole object was for their benefit, and at the expense of the United States.

As we have said, the contract thus made included one hundred and thirty-eight miles, already built, accepted, and paid for. Here were five or six millions of dollars made by signing the contract, and from these millions, and within sixty days from the execution of the contract, a dividend of one hundred and twenty per cent. was declared! Sixty per cent. of this was paid in first mortgage bonds of the Union Pacific Railroad Company; amounting to $2,244,000. Sixty per cent. was paid in stock of that company, amounting to another $2,244,000. Sold at the market rate on the day of its declaration, this dividend would have amounted to $2,917,200, equivalent to a cash dividend of seventy-seven per cent., from the profit of a contract not two months old, and under which work had hardly commenced! this amount was derived from the construction of the first one hundred and thirty-eight miles alone; the great profit was yet to come.

But

Before this contract was made the stock of the Crédit Mobilier was selling at five per cent. below par; when made, the stock jumped at once to sixty per cent. premium. In December, 1867, it was worth one hundred per cent. above par; and in January and February, 1868, it sold for three or four times its par value; in fact, there was none to be had. Nobody could afford to name a price for stock paying dividends of over five hundred per cent. a year! But the Oakes Ames contract did not extend the whole length of the line. One hundred and twenty-five miles yet remained between the end of the portion constructed by Mr. Ames, and the begin

ning of the Central Pacific Road. This was now put under contract to one J. W. Davis, a man without the requisite pecuniary responsibility for so large a contract, and who was not expected to fulfill its covenants. It was made under the same implied understanding as the Ames contract, and, like that, was no sooner made than it was assigned to the same trustees. Under this contract the Crédit Mobilier constructed the last remaining portion of the road at a cost to themselves of $15,629,633.62, and at a charge to the road of $23,431,768.11. This gain of nearly eight millions of dollars was speedily located in the same pockets that had received the previous profits. And now the whole length of line had been contracted for and was rapidly built amid the applause of a waiting nation.

Arithmeticians, who love the truths that figures always tell, may now see what it cost the nation to build the Union Pacific Road, and what it cost the stockholders of the Crédit Mobilier :

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