The following was originally posted on January 9. It did not get distributed to various social media sites with which I share my posts, so I’ll try again.
In January 1869, Charles Francis Adams, Jr., grandson and great-grandson of U. S. presidents, published an article in the North American Review (the oldest literary magazine in the US) entitled “The Pacific Railroad Ring.” He was making public the financial shenanigans of the Crédit Mobilier of America, the Union Pacific’s construction company. Adams exposed numerous Congressmen, bondholder trustees, corporate directors, and construction contractors who were getting rich off a scheme concocted by Thomas “Doc” Durant, the UP’s vice president/general manager. Crédit Mobilier charged the UP more money than it cost to build the railroad, then issued construction contracts at lesser amounts allowing the stockholders to pocket the difference. Some estimates put the illicit profit at more that $50 million. Durant and Oakes Ames, a member of the House of Representatives from Massachusetts and a member of the board of directors of the UP, distributed stock in Crédit Mobilier to thirty Congressmen and several bureaucrats who could influence the issuance of the government bonds used to finance the railroad. The growing scandal created embarrassing moments during the Presidential election of 1872.
Not as well known until several years later, it was eventually revealed that the Central Pacific Railroad had a similar contractual scheme. Their construction firm was known as the Contract and Finance Company and was managed by Charles Crocker. The big difference between the CP’s company and the UP’s was that the stock was owned only by the Big Four founders of the Central Pacific, plus Charles Crocker’s brother E. B. Crocker, an associate justice of the California Supreme Court. The records of the Contract and Finance Company were so convoluted that no one has been able to untangle them.
Out on the lines, both railroads continued to build through the winter weather. The ground was so frozen they used black powder to blow it into chunks which they then used to create roadbed. In the spring thaws, the tracks sagged and slid as the ice melted, requiring reworking large segments of the tracks. Still, they were able to show they had laid many miles of track during January and were thus able to collect government bonds. The Central Pacific had the further complication of battling heavy snowfall in the Sierra Nevada Mountains. They solved that problem by erecting miles of snow sheds.