The Union Pacific Railroad and the Crédit Mobilier Fraud

The Central Pacific Railroad was funded privately by four major investors who put their own money on the line until they received government bonds for financing. The Union Pacific Railroad took an entirely different route. Although the infamous Ponzi Scheme came into being in the 1920s, decades after the building of the Union Pacific, it appears it was a cousin to the form of fraudulent financing scheme entered into by some major players in the Union Pacific management.

Dr. Thomas C. Durant, Union Pacific Vice President

At the meeting of stockholders on October 9, 1863, John A. Dix was elected president. Dr. Thomas C. Durant was chosen as vice-president. Durant turned out to be the real leader of the corporation. He had graduated from Albany College of Medicine at the youthful age of 20 but disliked his humdrum position as assistant professor of surgery. Daring, adventurous, and energetic, he threw all of his constructive genius and fortune into the enterprise of building the Union Pacific Railroad.

To Thomas Durant, the official financial incentives were not enough. As a part of their scheme to take advantage of the government subsidies, Durant and entrepreneur, George Francis Train, joined together in March 1864 in a business venture to buy out the Pennsylvania Fiscal Agency, changing its name to Crédit Mobilier. The company was one of the first to take advantage of the new limited liability financial structures. Previously, investors were responsible for the finances of a company if it had problems.

Under limited liability, their only responsibility was for money paid in. Durant created this limited liability company to encourage Union Pacific investors to agree to take on the railroad's construction after contracted employee, Herbert Hoxie, announced that he would fail to meet his deadline for building 247 miles of track. Investors thought that this contract, given the high construction cost, was too great a risk, but the protection offered by Crédit Mobilier convinced them to take on the construction. Durant then manipulated Crédit Mobilier's structure so that he wound up in control of it. Union Pacific effectively paid him via Crédit Mobilier to build the railroad. Durant covered his tracks by having various politicians, including future President James Garfield, as limited stockholders.

Members of Crédit Mobilier

This company was supposedly independent, and thus impartial, from the Union Pacific Railroad. In actuality, it was a front company put together to purchase construction goods for the railroad and issue contracts for construction managers. This extra layer of corporate complexity allowed Durant to pay himself and his cronies to build his railroad. Union Pacific directors funneled projects through Crédit Mobilier, which charged inflated prices or its products and services.  Many of those directors were also investors in Crédit Mobilier. Those inflated charges were paid to this transparent holding company by the bonds. The true cost of the goods and services were paid, and the investors pocketed the difference. Durant achieved considerable profits for himself by this arrangement.

The Union Pacific contracted with Crédit Mobilier to construct 667 miles of the railroad. The actual cost to Crédit Mobilier was about $44,000,000. The contract, using government subsidized funding, was for more than $94,000,000.

How did they get away with it?

The principal means of the fraud was the method of indirect billing. The Union Pacific presented genuine and accurate invoices to the U.S. government, as evidence of actual construction costs incurred and billed to them by Crédit Mobilier of America for payment. The railroad then prepared and presented meticulously detailed invoices to the U.S. government, requesting payment for these bills, accrued by the Union Pacific from Crédit Mobilier, for the construction of the line. The bills reflected only a small additional fee over the cost stated on the Crédit Mobilier invoices for the Union Pacific's operating and overhead expenses, incurred during the line's construction at a time when no traffic (freight or passenger) was being carried.

Any audit of the Union Pacific and its invoices to the U.S. government would not have revealed any evidence of fraud or profiteering. Union Pacific was accepting for payment genuine Crédit Mobilier invoices and which it applied an auditable overhead expense for management and administration of the Union Pacific during construction of the railroad.

The underlying fraud of a common and unified ownership of the two companies, as regards their principal officers and directors, was not revealed for years. Nor was it revealed that, in every major construction contract drawn up between the Union Pacific and Crédit Mobilier, the contract's terms, conditions, and price had been offered by Crédit Mobilier and accepted by the Union Pacific through the actions of corporate officers and directors who were one and the same persons.

Congressman Oakes Ames, Massachusetts

One of the early Union Pacific stockholders was Congressman Oakes Ames. In the 1860's the attention of Oakes Ames, a congressman from Massachusetts, and his brother was drawn to the Union Pacific and the generous subsidies it was receiving from Congress. The two, having made a fortune in the management of their father's shovel works which boasted of an average yearly production of over 1,400,000 shovels a year, bought enough stock that they acquired control over the Union Pacific.

Ames decided that Crédit Mobilier could not work with Durant anymore. Ames took Durant to court and fired him from Crédit Mobilier in May 1867, ousting Durant from his position managing Crédit Mobilier.

Crédit Mobilier replaced Thomas Durant with the Congressman Oakes Ames. In that year, Ames offered to members of Congress shares of stock in Crédit Mobilier at its discounted par value rather than the market value, which was much higher.

The high market value of the stock resulted from the superb performance of Crédit Mobilier of America as a corporation, which in turn succeeded due to its major contract with the Union Pacific. Crédit Mobilier declared substantial quarterly dividends on its stock.

Speaker of the House, Schuyler Colfax, later Vice President

In order to avoid Congressional investigation, a large block of Crédit Mobilier stock held by Congressman Ames as trustee was ostensibly "sold" to influential congressmen for one-third of its actual value. Congressmen included Schuyler Colfax,  then-Speaker of the House (who, by 1872, was the sitting Vice President). However, the "sale" did not require actual money. The sales price was paid from the dividends resulting from the profits on the railroad construction. The congressmen and others allowed to purchase shares at a discount could reap enormous capital gains simply by offering their shares on the market, knowing that they would be purchased at a higher price by investors desiring to own stock in such a "profitable" company. These same members of Congress made the company appear to be profitable by voting to appropriate government funds to cover Crédit Mobilier's inflated charges.

Congressman James Brooks, New York

Most of the Members got rid of their stock quickly, nullifying the large returns they could have received. However, Representative James Brooks of New York (who also served as a government director for the Union Pacific) profited from a large block of shares.

The Crédit Mobilier fraud orchestrated by Thomas Durant and continued by Oakes Ames came to a head on September 4, 1872 when the New York Sun revealed that several members of Congress had accepted cash bribes or shares of Crédit Mobilier stock.

The paper opposed the re-election of Ulysses S. Grant and was regularly publishing articles critical of his administration. Following a disagreement with Ames, Henry Simpson McComb, an associate of Ames and a later executive of the Illinois Central Railroad, leaked compromising letters to the newspaper. The Sun reported that Crédit Mobilier had received $72 million in contracts for building a railroad worth only $53 million. The revelations left the Union Pacific and other investors nearly bankrupt.

Although no one was indicted, the scandal resulted in a Congressional investigation. When the scandal became public, Speaker James Blaine of Maine appointed a select investigation committee chaired by Representative Luke Poland of Vermont in December 1872. Speaker Blaine noted that “A charge of bribery of members is the gravest that can be made in a legislative body. It seems to me . . . that this charge demands prompt, thorough, and impartial investigation.”

 

Political cartoon depicting Uncle Sam telling Ames he should commit hari-kari

On February 27, 1873, the House censured Ames and Brooks for using their political influence for personal financial gain. Congressman Ames died several months later, his reputation ruined.

As for Thomas C. Durant, President Ulysses S. Grant fired him from Union Pacific after it was discovered he had violated the 1862 Pacific Railroad Act by using his control of the Crédit Mobilier to become the majority stockholder in the Union Pacific Railroad. There was also suspicion that Durant had taken money from the company, but those around him feared exposing him. Like many others, he lost a great deal of his wealth in the Panic of 1873. He sold his remaining stock in Union Pacific and started a new railroad company, Adirondack Railroad. He spent the last twelve years of his life fighting lawsuits from disgruntled partners and investors. However, he weathered the financial crisis while numerous Crédit Mobilier investors went bankrupt.

 Escape from Gold Mountain, which was released last month, is now available on Kindle Unlimited. 
Please CLICK HERE for the book description on Amazon. The print version is also available on Barnes & Noble, which you can reach if you CLICK HERE. 



My new Christmas novel, Two Sisters and the Christmas Groom, is also now available. Please CLICK HERE for the book description and purchase link. I appreciate any and all reviews on Amazon and GoodReads.

Sources:

https://www.up.com/timeline/index.cfm/credit-mobilier-scandal

Museum Memories, Volume 1 (Salt Lake City, Utah: International Daughters of Utah Pioneers, 2009), Pgs. 408-410.

https://history.house.gov/Historical-Highlights/1851-1900/The-Cr%C3%A9dit-Mobilier-scandal/

http://www.wyomingtalesandtrails.com/sherman3.html

https://www.history.com/topics/19th-century/credit-mobilier

Wikipedia

BLACKFOOT INDIANS OF MONTANA

By Caroline Clemmons

The name Blackfoot Indians fascinated me since the first time I heard it. Until recently, I didn’t investigate this tribe. I felt certain this group of people didn’t really have black feet, but I did wonder why they were labeled Blackfoot. Their custom of dying their moccasins black gained them their name.

Blackfoot with horses

 

In the past few years I’ve set several books in Montana. I set out to learn more about the indigenous people there. Although there were Blackfoot, Crow, Sioux and smaller tribes in Montana, the area in which my latest book is set is where the Blackfoot live.

Blackfoot man wearing buffalo robe

The Blackfoot/Blackfeet are an Algonquian people who were migratory plains hunter-gatherers from the Great Lakes region until they acquired horses and rifles in the 1700s. They then became hunters and raiders and migrated to the Northwestern United States, specifically Montana and Idaho as well as Alberta Canada. They were notably defensive of their territory. Although either spelling is acceptable, Blackfoot is the original name.

Six chiefs of Blackfoot Confederacy
Note the way they wear feathers

Three groups make up the Blackfoot Confederacy. The Blackfeet (Siksika), the Blood (Kainai, Kainah), and the Piegan (Piikani, Pigunni). The Blackfoot Confederacy in the United States and Canada  were forced to divide their traditional homeland in the nineteenth century according to national borders. They were forced to sign treaties with one of the two countries and settle in reservations on one side of the border or the other. They were then enrolled in one of the two government bodies. The two successor groups are the Blackfeet Nation, a federally-recognized tribe in Montana, and the Piikani Nation, a recognized Indian band in Alberta, Canada.

Blackfoot girl teen

In my book, MELODY, book 7 of the Angel Creek Christmas Brides, the heroine and hero rescue an injured Blackfoot teen and take her to their home to recover. That meant I had to know what she would have worn. Blackfoot women wore long deerskin dresses. The photo of a teen shows her with a less elaborate style of dress than a woman would have worn. Men wore buckskin tunics and breechcloths with leggings. Blackfoot dresses and war shirts were fringed and often decorated with porcupine quills, beads, and elk teeth. Both Blackfoot women and men wore moccasins. In winter they wore buffalo-hide robes.

Burning sweet grass in the sweat lodge

 They used a sweat lodge for medical and purifying reasons. In the sweat lodge, they burned sweet grass. I had thought this was just nice grass. No, sweet grass is a plant they used for the scent and the idea that it purified the air.  

They used red paint on their
face for war. This is how I
described the girl's father in
my book

Blackfoot raised tobacco. Tobacco, Nicotiana rustica, was originally used primarily by eastern tribes, but Blackfoot often mixed it with other herbs, barks, and plant matter, in a preparation commonly known as kinnikinnick. They sometimes used kinnikinnick in a poultice to treat a medical condition.

There are many interesting facts about this group of people. I hope I’ve whetted your interest and you’ll dig into researching them. You can learn a little more from reading MELODY, now on pre-order for a November 8 release from Amazon. The Universal buy link is htpp://mybook.to/Melody.

The Angel Creek Christmas Bride Series for 2019 begins releasing November 1 with CAROLINE by Lily Graison. Releases will be each week. All six are available for pre-order. Covers are identical except for the author's name and the book's title.

NOT A WAGON TRAIN IN SIGHT! by Marisa Masterson

In my newest novel, the hero decides to follow the Oregon Trail in search of a newly created town, one he hoped would desperately need a blacksmith. To do this, he plans to join a wagon train for safety as he heads west.

Stop! Here's where I hit a wall. My book couldn't take place any earlier than 1871. A little research and, boom, my plan was totally blown. Any guess why? No more wagon trains.

That's right. The wagon trains were done. By 1869, the railroad was pushing westward.  It was faster and safer to settle the west by train. For as little as $65, a person could take a seven day train trip.
While emigrants like my hero, Elias Kline, continued to use the trail. They didn't go with wagon trains, though. Most went alone or with another family.

Realizing this, I rethought my plot. My characters would travel only a small part of the trail. But would they start from Independence?

Train station in St. Joseph, MO.

My heroine would arrive by train as a mail-order bride. I looked at maps from 1869 that showed the railroads. Because my heroine came from New England, St. Joseph, Missouri, was the best spot for her to meet up with her hunky German-American groom.






By 1871, St. Joseph was a key spot in our country, sort of a gateway for goods. Items needed in the west were first shipped to St. Joseph before being hauled to destinations further from "civilization". Even before the railroad, steamers came up the river and delivered goods to be hauled west. Pioneers came by steamboat also and used St. Joseph as a jumping off point for travel by wagon overland. This history made the town a good choice as the place where my couple would meet, marry, and start their journey.

I still want to write a wagon train romance. Ruby's Risk, my soon to be released novel, just didn't turn out to be that, exactly. Maybe some day soon a wagon train romance plot will tickle my mind. Fingers crossed!

https://www.amazon.com/Rubys-Westward-Hearts-Mail-Order-Brides-ebook/dp/B07YBK98P8

 A man might homestead, but it takes a woman to turn that place into a home! This matchmaker will settle the West one couple at a time.

Under suspicion after his wife’s murder, Elias Kline knows he has to leave Mills Bluff. Learning a lynch mob is planning to kill him, he slips away from town. Taking only his smithy tools and his young son, he chooses a new name—Ezra King. Heading west seems a fine way to start over, but he’ll need a wife to raise his son and cook his meals. One sent by an agency shouldn’t expect love, he decides.

A matchmaker convinces lonely Ruby Hastings to take a risk on Ezra King. After all, the man is helping fulfill the nation's destiny of settling the west. Reading the man’s letter, Ruby aches for the widower's little boy and seizes on this chance to be a mama to him. After all, with a brother on the run from the law and a newly married sister, her siblings no longer need Ruby and this motherless boy does.

It should be a convenient arrangement. What happens when the mail-order wife begins to push past the walls guarding Elias’ heart, challenging him spiritually and emotionally? When danger follows him from Mills Bluff, will Elias be able to keep his family together?

Doc Susie's Colorado Contemporaries

Post by Doris McCraw

writing as Angela Raines

I've spent time looking at the women doctors who received their license to practice medicine around the same time as Susan, 'Doc Susie', Anderson, who started her practice in Cripple Creek, Colorado in 1897. She did not move to Fraser, Colorado until 1907 where she earned her 'fame'.

While the list is fairly long, I thought I would share some additional names and their contributions to Colorado and medicine.

Dr. Josepha Williams and Dr. Madeline Marquette opened a private hospital and sanatorium in Denver in 1889. In 1892 they added a nursing school to the hospital – Sanatorium. Dr. Williams was the superintendent of the facility. On a side note, Dr. Williams married Canon Charles Winfred Douglas a musician and Episcopal priest in 1896.

Dr.Genevieve M Tucker wrote "Mother, Baby, and Nursery: A Manuel for Mothers" published by Roberts Brothers, copyright 1896. She practiced in Pueblo, Colorado. Around 1898 she was elected president of the Colorado Homeopathic Medical Society.

Dr. Ida Putnam began her practice in Chicago, but in 1898 she received her Colorado license and began a practice in Telluride, Colorado.

Dr. Florence Sabin was a research doctor who did much to advance the area of medical research. Her accomplishments are too numerous to list here. 

Dr. Rose Kidd Beere was written up in the “History of Colorado” edited by Wilber Fiske Stone. She participated in the Philippine War of 1898-99 and WWI. She was unable to travel to the Philippine’s as a doctor so she gathered women to go there as nurses.

Dr. Mary Elizabeth Bates, I've written of before. As you know she was the first woman intern at Cook County Hospital in Chicago, Illinois. From the book “A History of Surgery at Cook County Hospital” by Patrick D. Guinan, Kenneth J. Printen, James L. Stone, James S.T. Yao, we find in the nineteen months she worked as an intern she worked in the morgue, took part in fourteen amputations. Of her time there she later said: “ the first six months were hell, the second six months were purgatory, the next six months were heaven; when it came time for me to leave, I wept bitter tears.”

So there you have just a few of Doc Susie's contemporaries.

Researching the stories of these pioneering women has led me to heroines in my writing who were doctors. The first was Josie Forrester in "Josie's Dream" 

Amazon

Doris Gardner-McCraw -

Author, Speaker, Historian-specializing in
Colorado and Women's History

Angela Raines - author: Where Love & History Meet

Books: Angela Raines Books

The Wolf Girl of Texas

Since Halloween is almost upon us, I will share an old tale of a haunted part of Texas and the wolf girl who prowled there, so the legend goes.

In 1835, a trapper from Georgia named John Dent and his pregnant wife Mollie traveled up Devil’s River, already a renowned haunted area, in southwest Texas. They built a brush shelter and Dent set out to trap during the spring season while Mollie approached her due date.

Dolan Falls on Devil's River

A thunderstorm struck one night in May just as Mollie went into labor. She was having trouble giving birth, so Dent rode to a Mexican goat ranch and begged for help. However, as the goat herders prepared to go with him, a bolt of lightning struck him dead. Still, the men followed Dent’s directions and after a night’s delay at the river, they arrived at the Dents’ cabin the next morning.

Tragically, they found Mollie dead. She had evidently died in childbirth, but the baby was nowhere to be found. Fang marks on the woman’s body and many wolf tracks in the area convinced the herders the infant had either been devoured or carried off by the wolves.

TEN YEARS LATER

In 1845, a young sheep herder living at San Felipe Springs (now known as Del Rio) claimed to see “a creature, with long hair covering its features, that looked like a naked girl” attacking a herd of goats along with a pack of wolves. The boy's story was ridiculed by some but taken seriously by others. Seminole scouts working for the Army refused to go into the Devil’s River country after seeing human hand and footprints mingling with tracks of wolves.

Eventually, a hunt was organized to capture the “Lobo (or Wolf) Girl of Devil’s River” as she was being called. According to the story, the hunters, mainly Mexican vaqueros, found the wolf pack and trapped the animals in a box canyon. With them was a naked girl. She fought wildly, clawing and biting, but the men lassoed her and tied her up while she made terrifying sounds like human screams and wolf howls combined. Her howls drew a huge male wolf, likely the leader of her pack. He charged at her captors but was shot dead, causing the wolf girl to faint.

Mexican wolf; wikipedia; public domain

Examining the girl, the men found she was definitely human despite her long hair and wild animal behavior. Her arms and hands were strongly muscled, and she moved smoothly on all fours but not as well when forced to stand erect. She could not speak, only growling deeply.

Put on a horse, the girl was taken to a ranch and shut in an empty room. Offered clothing and food, she refused them, instead curling up in a dark corner and snarling at anyone who came near. Left alone, she was locked in the room, with a guard outside.

As night fell, unearthly howls came from her room, unsettling her captors and drawing answering calls from wolves somewhere beyond the house. The howls came closer, and the girl gave eerie cries from her room. Finally, the pack attacked the corralled goats, cows and horses, luring the guards out to drive them away.

Amid the bedlam, the girl smashed out a boarded-up window in the room and escaped. The howls stopped and the wolves melted into the night, along with the girl, presumably.

Over the following years, people reported seeing the girl suckling pups and attacking herds of sheep and goats with the wolf pack. But she always escaped into the Devil’s River wilderness, and no one ever tracked her down. In 1852, a surveying party laying out a new route to El Paso, were riding south to the Rio Grande, above the mouth of Devil’s River, when they spotted a young woman with two pups on a sand bar in the river. When she saw them, she snatched up the pups and raced away. This was the last sighting of the wolf girl, alive that is, although there were reports of “human-faced” wolves in the area up until the 1930s.

THE GHOST OF WOLF GIRL

Is the story of the Wolf Girl true or just a folktale? There is no concrete proof either way. However, she seems to haunt her former hunting grounds.

In 1974, during a javalina (wild pigs) hunt, a man named Jim Marshall and two of his friends camped along Devil’s River. They had been hunting for four days. It was near nightfall.

According to Marshall, one man went to gather firewood, but came running back, his face white with fear. They asked him what was wrong. He said they needed to see for themselves. They followed a trail down to the water and looked around while the frightened hunter described what he had seen. At first there didn’t appear to be anything there, but then Marshall saw a figure on the opposite shore.

“The only way I can describe it,” he said, “is that it appeared to be a girl, a real skinny girl, with long hair and wild eyes. Even in the darkness we could see her. It was like she was in a haze, a kind of foggy mist, standing there partly bent over, digging into an ant mound. Suddenly whatever we were seeing was gone. I don’t know if it vanished or just moved quickly into the brush.”

The three men returned to camp and packed up to leave, working fast, keeping three large lamps lit. Once on the road, they didn’t stop until they reached Del Rio. This account is taken from GHOSTS OF THE OLD WEST by Earl Murray.

Before her husband led her into the wilderness – and to her untimely death – Mollie Dent penned a note to her parents, postmarked from Galveston in the autumn of 1834. It read:

“Dear Mother,
The Devil has a river in Texas that is all his own
and it is made only for those who are grown.
Yours with love
Mollie”

I don’t know about you, but her words kind of give me the shivers.

The Westbound Surge

I’ll be writing in another multi-author project next year which will be set in the 1880s. This is very “modern” for me and the research has been fascinating. Up until now, all my books have been either set in Regency era England (1805) or the American Midwest from 1855-1865. With the 1880s comes more technology, more developed towns and cities in the West, as well as opening up the possibility of setting some stories in Canada (where I’m from).

The rapid development of technology spurred the population growth of North America as well as the westward movement of people. The ability to more easily communicate made the expansion of business also possible. And “rapid” transportation meant you could travel all across the continent in less than ten days. In fact, in 1876, the Transcontinental Express from New York to San Francisco made the trip in 83 relaxing, comfortable hours. Imagine! Three and a half days! That really shrank the world for people of that time. Of course, the poor, penniless, mail order bride couldn’t afford that ticket, but even she could reach her new life in a week or less, depending on her destination. 

The consolidation and reorganization of the railroads in the late 19^th century lead to rapid industrial growth in many areas including the opening of hundreds of millions of acres of very good farm land ready for mechanization, lower costs for food and all goods, and a huge national sales market. Of course, all this growth and prosperity didn’t benefit everyone. While the average annual wage for an industrial worker rose by 48% between 1860 and 1890 (from $380 to $564), there was still abject poverty and inequality leading to contentious social issues. And the ability to travel broadened people’s knowledge and perspective, making them more involved in these various struggles and triumphs.

Railroads were the major growth industry, with the factory system, mining, and finance increasing in importance. Immigration from Europe, and the eastern states, led to the rapid growth of the West, based on farming, ranching, and mining. The rapid economic growth in America also fueled this influx of millions of European immigrants, especially due to the wage increases making the opportunities seem so very attractive to these new comers.

I’m thrilled with the research I’ve been able to do and am overwhelmed with story ideas for this exciting time period in history.

In the meantime, check out my Orphan Train series to learn a little bit about the early stages of these developments as three young women accompany a trainload of orphans to their new lives in the Midwest.

Book 1, Sophie’s story, starts the series off in its origins in New York City.

She’d happily give him her heart … if only it wouldn’t cost her the only home she’s known

Sophie Brooks thought she had everything she could want in life. Friends, loved ones at the orphanage where she was raised, a job that gives her purpose, and a chance to help children every day … what more could she need? But a chance encounter with a handsome stranger has her wondering if a life—and love—outside the orphanage might be exactly what she never knew she needed.

Renton Robert Rexford III has never wanted for anything. Until he meets Sophie. The charming, intelligent beauty draws him like no other.  But, thanks to a disapproving benefactor who threatens to pull the orphanage’s funding, his pursuit of her could cost Sophie everything she holds dear. She’s all he wants in the world, but how can he ask her to give up so much when all she’d get in return is his heart?

It’s not long before Sophie is forced to weigh her loyalty to the only home she’s ever known against the needs of her heart. Can love prevail—or is the cost simply too high?  

Available now on Amazon, Free with your Kindle Unlimited subscription.