On the first Thursday of every month, we throw it back to a classic political scandal. Today: Crédit Mobilier!
The Scandal: Fraudulent company forks out stock deals to sleazy pols.
The Scandalized: Presidents Ulysses S. Grant and James A. Garfield, Vice Presidents Schuyler Colfax and Henry Wilson, Speaker of the House James G. Blaine, and Congressman Oakes Ames, among others.
The Short Version: In 1864, when Abraham Lincoln was President (don’t worry, he’s not involved), the U.S. Government chartered the Union Pacific Railroad and charged it with building the Trans-Continental Railroad. Construction phases of these types of projects were good ways for sleazy businessmen to make big bucks, so a few sleazeballs of note had a stroke of evil genius and created a second company called the Crédit Mobilier of America and had the Union Pacific subcontract out a ton of work to it.
Crédit Mobilier was supposed to be an independent company, but it was actually pretty much the same guys getting paid coming and going. Union Pacific paid Crédit Mobilier for construction, Crédit Mobilier bought Union Pacific stock at face value, and then Crédit Mobilier sold that stock to the public at market rates, making lots of cash illegally. That’s all some quality fraud, but let’s get to the politics.
In 1867, Senator Oakes Ames took over Crédit Mobilier and started selling discounted stock directly to his government colleagues. Ames swapped the sweet deal for votes favorable to Union Pacific, which, remember, paid Crédit Mobilier (actually the same people) for work like it was an independent company, driving up Crédit Mobilier’s stock, which made the politicians more money, and so on in a unvirtuous circle of bribery and fraud – until a New York paper called The Sun brought it all crashing down.
The subsequent investigation named a Who’s Who of major political bigwigs, including sitting Vice President Schuyler Colfax. He was replaced on the 1872 ticket by Henry Wilson – who, ironically, was also involved. Wilson had better excuses, barely (it was his wife’s money!), and survived the scandal to become Veep; James A. Garfield was also implicated and also survived, going on to be elected President despite the whole thing. Today, the scandal is mostly associated with President Grant, who didn’t really have that much to do with it. Politics isn’t fair.
Scandal Level: Awesome scandal, dumb French name.