The Credit Mobilier Scandal (exposed 1872)

The Credit Mobilier Scandal, exposed in 1872, was one of the most notorious political and corporate corruption scandals in 19th-century United States history.

Background

• Credit Mobilier of America was a construction company formed by major shareholders of the Union Pacific Railroad in 1864.


• Its purpose was to build the transcontinental railroad, but in reality, it was a front to siphon off huge profits from the government-funded railroad project.

How the Scheme Worked

• The Union Pacific Railroad company created Credit Mobilier, controlled by its own directors.


• They awarded construction contracts to Credit Mobilier at inflated prices - much higher than the actual cost of building the railroad.


• The federal government was paying subsidies to the Union Pacific, so the executives were essentially paying themselves with government money.


• To prevent investigation, they bribed members of Congress by selling or giving them discounted shares in Credit Mobilier.

Exposure (1872)

• The scandal broke during the Grant administration (President Ulysses S. Grant).


• The New York Sun published documents showing that several high-ranking officials, including Vice President Schuyler Colfax, Speaker of the House James G. Blaine, and future Vice President Henry Wilson, had received shares.


• Investigations followed, revealing the depth of corruption.

Consequences

• Several politicians’ reputations were severely damaged, though few faced legal punishment.


• Oakes Ames, a congressman and key figure in the scandal, was censured by the House of Representatives.


• The scandal shook public trust in the federal government and highlighted corruption during the Gilded Age.