Tuesday, August 12, 2014

Oakes Ames: digging himself a hole

Source: findagrave.com

In his support of the transcontinental railroad, Oakes Ames also became one of the most significant figures in the Credit Mobilier financing scheme. Though he was perhaps the most helpful witness in implicating other legislators who were involved in the shady deals for the railroad, he was also one of the very few people punished for his actions.

Ames was born in Easton, Massachusetts, on January 10, 1804. He attended the public schools as well as Dighton Academy, but left at the age of 16 to begin working in his father's business, Ames & Sons. He and his brother Oliver would be the third generation of the Ames family to be involved in manufacturing shovels in North Easton, and they couldn't have entered at a more fortuitous time. Oakes and Oliver worked their way up to the head of the company in 1844, shortly before the demand for shovels went through the roof. The company supplied shovels to miners during the California gold rush and also provided them to people involved in agricultural development in the Mississippi Valley and another gold rush in Australia. The self-made fortune Ames earned from these sales got him the nickname "King of Spades."

Ames first became involved in railroads around 1855, when he joined in land speculation in Iowa. He became the principal stockholder and director of the Chicago, Iowa and Nebraska Railroad the next year. Ames also bought an interest in the Lackawanna Steel Corporation, knowing they would be primarily involved in the production on rails.

A founder of the Massachusetts Republican Party, Ames also joined the executive council of Massachusetts in 1860. Two years later, he was elected to the House of Representatives. That was the same year he became an early investor in the transcontinental railroad, loaning $200,000 to Central Pacific lobbyist Collis Huntington for that purpose. Ames also served on the committee that passed an amended Pacific Railroad bill in 1864. He became so closely associated with the railroad that a town in Iowa was named for him. Ames also recalled that President Abraham Lincoln told him early in 1865, "Ames, you take hold of this. The road must be built, and you are the man to do it. Take hold of it yourself. By building the Union Pacific, you will be the remembered man of your generation."

To secure funding for the transcontinental railroad, Oakes and Oliver joined with Union Pacific executive Thomas C. Durant to establish the Credit Mobilier. Taking its name from a defunct French firm, the Credit Mobilier would be used to generate support for the project in Congress and build the Union Pacific. Oliver was named president of that railroad in 1866.

The Credit Mobilier soon offered its founders an easy way to defraud the government. Durant arranged to have Herbert M. Moxie make the only construction bid for work on the Union Pacific. Since the government bonds were awarded to the Credit Mobilier, the firm was essentially paying itself for the work and subcontracting the actual labor out to builders. The estimates for the cost of the railroad were inflated, and the planned route out of Omaha was given several unnecessary twists and turns to increase profits.

The scheme nearly fell apart in a power struggle between Durant and the Ames brothers after the latter were able to oust Durant from the presidency of the Credit Mobilier board and replace him with Oliver. The board split into two factions, with construction on the railroad continuing at no profit. In October of 1867, Durant was readmitted as president and a revised construction contract brought in retroactive payments to the board.

The booming Credit Mobilier stock soon became popular among the legislators in Congress. "We want more friends in this Congress, and if a man will look into the law (and it is difficult to get them to do it unless they have an interest to do so) he cannot help being convinced that we should not be interfered with," Ames declared. He began distributing Credit Mobilier in blocks of 20 or more, usually keeping them in his own name for the sake of simplification. Union Pacific rounds also began making the rounds. It was a useful way to secure favorable legislation and derail any investigations into shady dealings with the railroad.

In the winter of 1866, Ames received 373 shares of Credit Mobilier stock and distributed 160 of them to nine members of the House of Representatives and two members of the Senate. Another 30 went to a a private party. It's unclear what happened to the remaining 183 shares. Ames may have kept it for himself, or he may have given it to other legislators. The latter option seems less likely, as Ames kept a record of his transactions in a ledger.

The Credit Mobilier dealings came under more scrutiny in the 1872 election season when a lawsuit against the firm led to the revelation of a partial list of stock gifts. The list included a number of major political figures including Vice President Schuyler Colfax, vice presidential candidate Henry Wilson, Speaker of the House James G. Blaine, and future president James Garfield. The opposition press made much of the accusations. Charles Francis Adams Jr. wrote the initial expose on the affair in an article for the New York Sun, dubbing the Credit Mobilier "The Pacific Railroad Ring." The article, published on September 4, included a list of 13 congressmen accused of taking stocks. Despite the scandal, President Ulysses S. Grant, the Republican candidate, was easily re-elected. It did lead Congress to form an investigative committee (led by Rep. Luke Poland, a Republican from Vermont) in December of 1872.

Ames told the committee that the transactions involving the Credit Mobilier stock were "influenced by the same motive: to aid the credit of the road." He didn't consider the activity to be illegal, saying the shares were sold in a "strictly honest and honorable way." Some of the legislators had even returned the stock soon after. However, members of Congress backed away from Ames' testimony, considering that he had readily admitted that he had sold them a lucrative stock at an insider's price in order to guarantee favorable legislation for the railroad.

Shunned by the other accused members in the case, Ames produced his ledger and began naming people who had received the stock. One friend of Ames wrote, "Ames had been bullied and badgered till his patience and good nature were exhausted. Sorrow and determination were written in every line in his strong face. He looked broken." Ames' ledger cleared Blaine and Wilson, but implicated everyone else who had been named. Most of the legislators had sold the stock quickly, realizing minor gains. Rep. James Brooks, a Democrat from New York, had held onto his stock longer and made a considerable profit.

By the time the Poland Committee completed its work, Ames was already running down his days in Congress; he had chosen not to run for re-election in 1872. But when the committee made its recommendations for punishment, it asked for Ames and Brooks to be expelled from the House of Representatives.

On February 27, 1873, the House of Representatives voted 115-110 to accept Republican Representative Aaron Sargent's suggestion that Ames and Brooks be censured for "seeking to secure congressional attention to the affairs of a corporation in which he was interested, and whose interested directly depended upon the legislation of Congress, by inducing members of Congress to invest in the stocks of said corporation." The recommendation passed 181-36 in the case of Ames and 174-32 in the case of Brooks. There was some talk of keeping the Poland Committee in place to investigate the other members who had been named, but these efforts faded out and none of the other members named in the Credit Mobilier scandal was punished.

Ames died only a few months after receiving this punishment. He passed away in North Easton, Massachusetts, on May 8, 1873.

There was still plenty of sympathy for the late congressman. In 1883, the state legislature of Massachusetts passed resolutions of gratitude for his work and expressed its faith in his personal integrity. It asked the United States Congress to extend a similar recognition to Ames, but this appeal apparently fell on deaf ears. Both Oakes and Oliver are also memorialized on a curious granite pyramid in Wyoming. Once set alongside the high point of the Union Pacific railroad, the rerouting of the line over the years has left the monument isolated in a remote prairie near Laramie.

Sources: Biographical Directory of the United States Congress, Oakes Ames biography on American Experience, "The Credit Mobilier Scandal" on American Experience, "The Credit Mobilier Scandal" on the Historical Highlights section of the House of Representatives website, Empire Express: Building the First Transcontinental Railroad by David Haward Bain, The Complete History of Railroads: Trade, Transport, and Expansion edited by Robert Curley, Business Scandals, Corruption, and Reform: An Encyclopedia by Gary Giroux

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