Sanborn Incident (1874)

The Sanborn Incident (also called the Sanborn Contract scandal) was a corruption scandal in the administration of Ulysses S. Grant involving the use of private tax-collectors under the authority of the United States Department of the Treasury and its Secretary, William A. Richardson.

• Under a congressional provision (in an 1872 appropriations law), the Treasury Secretary was allowed to hire up to three private persons (so-called "moiety" collectors) to discover and collect unpaid federal taxes, with the private collector entitled to keep 50% of what he collected.


• On August 13, 1872, Richardson (as acting or full Secretary) entered into a contract with John B. Sanborn to collect unpaid excise and revenue taxes from certain distillers, railroads, etc. Sanborn’s mandate was later expanded to include hundreds of additional entities (including hundreds of railroads).


• Sanborn ultimately collected roughly $427,000 in delinquent taxes; under the contract he kept about $213,000 for himself (50% of the collection) and reportedly passed on large sums to others.


• A congressional investigation by the House Ways & Means Committee in early 1874 found serious fault with the supervision of the Treasury Department and Richardson’s oversight. The committee’s report was issued on May 4, 1874.


• On June 22, 1874, President Grant signed legislation (the "Anti-Moiety Acts") which effectively ended the moiety system for tax-collection and banned such private collector contracts.


• Though Richardson was never criminally convicted for wrongdoing, his reputation was damaged and he was moved to a judicial appointment (on the U.S. Court of Claims) by Grant in 1874.

Although President Grant was not personally implicated in the day‐to‐day operations of this scandal, it occurred under his administration and reflected poorly on its integrity. The scandal prompted Grant to take reform-oriented actions (notably signing the legislation ending the moiety system) and to replace Richardson.