jun 12, 1871 - Henry S. McComb Testimony

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Henry S. McComb vs. The Credit Mobilier of America, Sidney Dillon, John B. Alley, Rowland G. Hazard, Charles M. Griskey, Oliver W. Barnes, Thomas Rowland, Paul Rohl, Jr., Oakes Ames, Charles H. Neilson, Thomas C. Durant, James M. S. Williams, Benedict Stewart, John Duff, and Charles M. Hale. Supreme Court, in Equity, Eastern District, January Term, 1869, No. 19.

Monday, June 12, 1871, 241 South Third St, Philadelphia. James E. Gowen and Samuel G. Thompson are for the complainants. Richard McMurtrie for defendants. Henry S. McComb was called, duly sworn, and proceeded to testify.

In McComb's testimony, he admits to have been a stockholder in the Credit mobilier of America for several years, recollecting that his original subscription was made sometime in 1865. McComb states that he knew who Dillon, Alley, Hazard, Griskey, Barnes, Durant, Williams, Stewart, and Duff were, but did not know who Rowland, Rohl, Jr., and Hale were.

Later on, McComb states, "I have never signed any subscription book from beginning to the end of any stock I ever had. I have now 851 shares." Referring to a subscription book, McComb states, "I never saw it and never heard of it... I was conversant with all its manipulations. The whole thing was organized by Thomas Durant, Cornelius Bushnell, and myself. We were the first subscribers to the Pacific Railroad."

McComb speaks of the purpose of the Credit Mobilier of America, "its name was changed by the instrumentality of George Francis Train and bought by the Pacific Railroad by the Credit Mobilier of America for the purpose of working in what was called the Inside Ring and being relieved of responsibility - cover individual responsibility - to do it under an incorporated form. The idea of this was those who went into it not to incur personal responsibility."

McComb agrees with the statement "that whatever profit was realized was realized through being a stockholder of the Credit Mobilier of America."

Alley, as a congressman and business associate of Oakes Ames, likely became aware of Durant's controversial methods, including the stock manipulation and fraudulent practices associated with the Credit Mobilier scandal. This could have led to tensions between the two men, especially if Alley sought to distance himself from the scandal while Durant continued to engage in questionable financial activities.

McComb explains how from 1865 to 1867, the Credit Mobilier Railroad Bureau steadily increased the capital from its starting value of $160,000 to not exceeding $2,000,000, then to $2,500,000, and finally to $3,750,000.

McComb proceeds to talk about the Hoxie Contract, an agreement between the Union Pacific Railroad and Thomas Hoxie, a railroad contractor, for the construction of a section of the railroad line. The specifics of the Hoxie Contract varied depending on the particular project or section of the railroad being constructed. Typically, these contracts outlined the terms and conditions of the construction work to be performed, including the scope of the project, the timeline for completion, and the financial arrangements, such as payment schedules and compensation for materials and labor. McComb states that the Hoxie Contract was in existence as of October, 1864, and that "Perhaps a million of dollars or more had been expended ; and there were considerable profits due to the Hoxie Contract, which were transferred to the Credit Mobilier of America." The contract proper was only for a hundred miles West of the city of Omaha, Nebraska, but was extended to the hundredth meridian, where it ceased.

McComb also states that in the summer of 1866, "There had been a contract made by Mr. Durant, which these people claimed was offered to a man by the name of Gezner, called the Gezner contract... Mr. Durant made that contract as Vice-President of the Union Pacific Railroad Company and President of the Credit Mobilier of America. He made it as he always alleged for the Credit Mobilier of America." He explained how since the contract was for beyond the hundredth meridian, it did not interfere with the Hoxie contract. The contract was disapproved of by the board because they alleged the Hoxie contract covered it, even though Durant stated to the board that it was made for the benefit of the Credit Mobilier of America.

The third contract was the Boomer contract proceeding the Gezner contract, which was also for building the road west of the hundredth meridian. McComb claims that "There was work done under both of them [referring to the Gezner and Boomer contracts]," but that the work was done "Not by the same people, who built under the Hoxie. They were figure heads. They put no money in and did no work. They were figure heads... It was all figure heads [referring to the Credit Mobilier of America]. All shams, except so far as the dividends went ; they were realities. The Pacific Railroad built the road all the way through by their own officers."

The Pacific Railroad Company and James E. Williams, one of the directors of the Credit Mobilier of America, formed a contract on May 10th, 1867. It was intended to supersede the Boomer and Gezner contracts. During that time, the active members of the Credit Mobilier of America were said to be Mr. Durant, Oakes and Oliver Ames, and Mr. Williams. The managers of the Pacific Railroad who were active parties in getting the contract formed were Mr. Alley, Mr. Williams, Mr. Dillon, Mr. Duff, and Mr. Bushnell. At this time, Oliver Ames was the acting president pro tem of the Pacific Railroad instead of Thomas Durant due to a contract dispute in 1866. Durant filed an injunction forbidding Crédit Mobilier from assigning new construction contracts to replace the expiring Hoxie agreement. Further lawsuits paralyzed the railroad. Exasperated crews waited for work at the end of the tracks. The Ames brothers eventually set them working without a contract, which meant each completed mile equaled unrealized profit. The contract was to transfer to Credit Mobilier of America and take over all previous contracts, including the Boomer and Gezner contracts. It was never actually carried on, as Durant put his veto to the contract because "He was not even a director" at Credit Mobilier at the time.

Within the Credit Mobilier of America itself, two factions had been created between the parties who had become the power of the Credit Mobilier of America and Durant and his friends. There was the Ames Faction, who "had conceived the idea of putting Durant out of the direct management of the Union Pacific Railroad Company and Credit Mobilier," and there was the Durant Faction. The Ames Faction were "assuring him [Durant] they were going to make no change in the annual meeting, and he therefore didn't come." The Ames brothers marshaled support to depose Durant from the executive committee. For months a heated battle raged, rending the board in two. Oliver Ames was not leader enough to manage the division, so he acquiesced to readmitting Durant in late 1867. Crédit Mobilier awarded a new construction contract to Oakes Ames, who (like Durant before him) subcontracted work to crews led by Jack Casement. The line moved forward, and resulting profit patched the breach. Soon, Crédit Mobilier stock boomed. McComb admits to being one of the committee members from the Union Pacific Railroad Company that prepared the Oakes Ames contract in October of 1867. McComb states that "Dr. Durant had been the moving spirit in the Union Pacific Railroad Company from its organization until its close - that is to say, he furnished the brains for the concern [contract negotiations]."

McComb explains how Durant lost his power within the companies. "At the stockholders' meeting they did not elect him a director no an officer... They put in a new board, making Dillon President, and Dillon, Alley, and Hazard the Executive Committee of the Credit Mobilier of America, to whom all the powers of the Credit Mobilier of America are delegated, and I think Duff was in the Railway Bureau, making a full corps. Things had got now in the Pacific Railroad to a pretty high pass ; so high that in the meetings of the board and in the stockholders' meetings it almost resulted in blows. I think right at this time Durant had collared Williams and attempted to throw him out of the room. Just about then in the spring and summer time, the things were pretty excessively high, I assure you. So it went on and went on. He had a pistol, and it was with great difficulty that some of his friends held Durant quiet. He felt that he had been betrayed, abused, misused, and slandered by these men - Alley, Williams, and their cohorts. There was nothing to be done ; these [Boomer and Gezner] contracts were working along." Durant threatened to ruin them by revealing their unusual corporate procedure to the public.

"On the strength of renewed profits and a declared dividend, Crédit Mobilier boomed." Congressman Oakes Ames, representing company interests on Capitol Hill, became overwhelmed with legislators trying to profit off of Credit Mobilier. He distributed stock to two senators and nine representatives in 1867 in exchange for votes and actions favorable to the Union Pacific. Ames offered to members of Congress shares in Crédit Mobilier at its par value rather than the market value, which was much higher due to its fraudulent profits and exclusive contract with the Union Pacific Railroad. Credit Mobilier also set forth large quarterly dividends on its stock to its shareholders.

"Naming the congressmen involved—and in the thick of sitting president Grant’s reelection campaign—the story included correspondence between McComb and Ames, and reported that the sham corporation was granted $72 million in railroad building contracts when only $53 million was actually spent." History.com

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