Oakes Ames, was made up of New England capitalists who favored the building of a substantial road, but had no compunctions about exacting all profits consistent with the attainment of that object. Durant was ousted from the presidency of the Credit Mobilier, but he was able to retain his office as vice-president of the Union Pacific. Sidney Dillon became president of the Credit Mobilier, and Ames was elected head of the railroad company. Durant's influence was still sufficiently strong, however, to prevent further contracts with the Credit Mobilier.

A compromise was finally effected by which a contract was taken by Ames, who agreed to assign it to seven trustees for the benefit of those who at that time were shareholders in the Credit Mobilier. This contract was for 667 miles of road west of the one-hundredth meridian, thus including the mileage which had already been constructed by the Credit Mobilier in excess of that which had been included in a contract. In order to participate in the profits of the Ames contract, the shareholders of the Credit Mobilier were required to execute irrevocable proxies to the trustees, empowering them to vote upon at least six-tenths of all Union Pacific share capital. To make the contract of the trustees absolute, the written consent of every shareholder of the Union Pacific was also obtained. After this "tri-partite agreement" became effective in October, 1867, the Credit Mobilier as a corporation had no further relation with the construction of the railroad.

Under the direction of the trustees, among whom were Ames, Durant, and the other leading shareholders in both companies, the work was completed. When the Ames contract expired, another similar in terms was made for the remaining 125 miles, and assigned in the same manner, though it was not made directly with Ames.

As the work progressed the Union Pacific turned over, first to the Credit Mobilier and afterwards to the trustees, the subsidy bonds of the United States and the securities of the railroad. The charter provided that shares should be sold only for cash, and that neither shares nor bonds should be sold below par. Little cash was ever paid in, however. The Union Pacific would give its check in payment for construction, and the same check would be immediately returned in payment for shares. This was considered a "cash" transaction, and as such was entered upon the books of account. The shares were then sold for as low as thirty cents on the dollar, and the proceeds applied to further construction. The surplus of securities and money was divided among the shareholders of the Credit Mobilier.

At the time when the contest for control of the Credit Mobilier was at its height, one of the Durant faction wrote an informing letter to a member of congress whose reputation was such as to give him the name of "watch dog of the treasury." This was mailed, and Ames notified. An agreement was immediately effected, and the letter was recovered from the mails. This incident brought to the minds of all concerned, a realization of the fact that a congressional investigation would expose the methods by which the law was being evaded, and result in shutting off the subsidy payments, and thus ruin the whole enterprise. The parties were therefore forced to agree upon a course of action. To Ames, who represented a Massachusetts district in congress, was given a number of Credit Mobilier shares to place at par among the influential members of congress in order that they might have a more active interest in the support of the venture. Already bills had been introduced which threatened to regulate the charges upon the road, and it was with the idea of protecting the undertaking from what he consid

ered confiscatory attacks, rather than to obtain beneficial legislation, that Ames set out to place the shares where they would "do most good," as he explained in a letter written at the time. "We want more friends in this Congress," he said, “and if a man will look into the law (and it is difficult for them to do it unless they have an interest to do so) he can not help being convinced that we should not be interfered with."

This expresses very clearly the attitude of Ames in the matter. It seems that he had no intention of bribing anyone; for the shares were to be paid for in cash (or in dividends). He employed none of the methods which are customary in conducting bribing operations. The characteristics of the method which ultimately brought its users into disrepute was failure to recognize that one party to the transaction was a trustee for the public; a trustee who theretofore had not been held very strictly to account, but one on whom increasing demands were being made. Ames' expulsion from congress has singled him out for a larger share of popular condemnation than was his deserts, but the attitude of Ames and his associates toward public officials was one which had been winked at and condoned for decades by a public that now demanded a sacrifice. But however much may be said in his favor, as the man to whose efforts the success of the great task is mainly due; the sober judgment of the people was then and since that time has been in full accord with the opinion expressed by the late Senator Hoar, who said:

He and his associates in the Union Pacific railroad seemed in this matter to be utterly destitute of any sense of public duty or comprehension of the great purposes of Congress. They seemed to treat it as a purely private transaction, out of which they might get all the money they could, without any obligation to carry out the act according to its letter, if they could only do so without being detected. They seemed to have thought that

they were the sole owners of the Union Pacific railroad and of the Credit Mobilier corporation, and that the transaction between the two concerned themselves only and not the public. The managers of the Union Pacific railroad made a contract with the Credit Mobilier Company to construct the road at a price which would exhaust all the resources of the road, including the proceeds of the bonds of all kinds, and divided the proceeds among themselves as dividends on the stock of the Credit Mobilier. This left the Union Pacific railroad to begin business mortgaged to its full value without any resources for its operation, and utterly stripped of the ample endowment which the bounty of the Government had provided for it.30

Construction of the California Lines.-The profits from the construction of the Union Pacific were distributed among all who held shares in the enterprise; in the case of the Central Pacific they were diverted to an inside group composed of Collis P. Huntington, Leland Stanford, Mark Hopkins, and Charles Crocker. With the exception of the first section of thirty-one miles east of Sacramento, which was built by small contractors, the work as far as the Nevada line was performed under contracts given to "C. Crocker and company." Crocker resigned from the railroad directorate to take these contracts, and his place was filled by his brother. It has been claimed that he had no partners in this undertaking, but there is good reason to believe from the evidence that at all times the four principals were equally interested in the results of the contracts; that the sole proprietorship was a fiction more or less carefully guarded to avoid successful attack in the courts of law, but nevertheless a fiction. When the "Contract and Finance company" was organized to take up the work across Nevada and eastward to a junction with the Union Pacific, the resources of C. Crocker and company were turned over for the benefit of the new company. The Contract and Finance company also built 30 Hoar, "Autobiography," I, 315, 320.

parts of the Western Pacific railroad and of the California and Oregon. It was dissolved in 1874, and its assets were divided among the four members. As a necessary precaution against disturbing intrusion or attack, its books were afterwards destroyed. The "Western Development company" was next organized to build parts of the California and Oregon and of the Southern Pacific. It was followed by the "Pacific Improvement company." This company not only took large construction contracts, but it also held valuable property which was necessary for the proper operation of the railroad. It owned the bridge over the Colorado river at Yuma, the great ferryboat which took the place of a bridge across the strait of Carquinez, station buildings at Los Angeles and Sacramento, coal mines in Washington and Mexico, piers at Santa Monica and San Pedro, and water front lands at Berkeley and Oakland. It also controlled the Pacific Mail Steamship company, and the street railroads in San Francisco and Oakland, and it owned steamers operating upon the Sacramento river and San Francisco bay. Through this company-which is still in existence, though possessed of little of this propertythe railroad was made to contribute generously to the private fortunes of the men who held control.31

System Responsible for Inferior Work and Over-construction. So long as an inside company was charged with the work, there was small chance of reaching a high standard of construction. The motive was profit and not efficiency. This resulted in loss to the shareholders through the diversion of earnings for immediate reconstruction of the road. The greatest public evil resulting from the system, however, was undoubtedly the building of mileage in excess of the needs of the country, and often in sections where there was little prospect of there ever being a paying traffic. Such a misapplication of capital had its place 31 Pacific Railway Commission, Report, 69-82.