The Original Agreement to Fund the Building of the Transcontinental Railroad, Acquired Directly From the Descendants of the Builder Himself

"The Parties are to pay into the capital stock of the concern an amount sufficient to prosecute the work";  It links Union Pacific (and Credit Mobilier) principal Sidney Dillon with famed railroad contracting firm of John S. and Dan T. Casement

The Transcontinental Railroad made possible the winning, settlement and development of the American West. It led to a revolution in interstate and international trade, opening the markets of the west coast and Asia to the east and Europe, while bringing products of eastern or European industry to the growing populace west of the Mississippi and beyond. The railroad caused a great production boom, and was in a sense America’s first technology corridor. As it encouraged the growth of American trade and business, so too did the railroad impact the nation's public discourse and intellectual life by making it possible to come and go across the length of the continent in just over a week. Now, for the first time, the beauties and riches of the central part of the continent could be accessed any anyone in days. Nothing was the same afterwards. Many people consider the Transcontinental Railroad the greatest technological feat of the 19th century, and one of the most consequential major construction projects ever undertaken.

Before the advent of the Transcontinental Railroad, a journey across the continent to the west coast meant months of careful preparation and acquisition of a conveyance and supplies, then a dangerous six month trek over rivers, deserts, and mountains, all the way risking the loss of necessities and encounters with blizzards and Indians. Alternatively, a traveler could hazard a three to six month sea voyage around ferociously stormy Cape Horn (which proved a graveyard to many ships), or sail to Central America and cross the Isthmus of Panama through the jungle, in part by pack animal and in part by rail, which took five or six weeks, risking exposure to any number of deadly diseases in the crossing.  So it is no surprise that interest in building a railroad uniting the east and west coasts of the continent began soon after the advent of the locomotive.

Early Trains in the US and the Idea to Build a Train Connecting East and West Coasts

The first trains began to run in the U.S. in the 1830s along the East Coast, and by the 1840s the nation's railway networks extended throughout the East, South, and Midwest. The annexation of the western territories (including California) following the Mexican War, the almost immediately subsequent discovery of gold in the region in 1848, the resultant Gold Rush starting in 1849, and statehood for California in 1850 brought momentum to the idea of building a railroad across the nation to the Pacific. Meanwhile, thousands of immigrants and miners sought their fortune in the West. During the 1850s, Congress sponsored numerous survey parties to investigate possible routes for a transcontinental railroad. No particular route emerged as a clear favorite, as the project became yet one more point of contention between the North and South before the Civil War, with each wanting the railroad to go through their section.

Theodore Judah was a civil engineer who helped build the first railroad in California, and he became obsessed with the idea of a transcontinental railroad running through Nebraska, Wyoming, Utah, Nevada, and California. In 1859 he drew up letters of incorporation for the Central Pacific Railroad Company.  Judah surveyed the route, creating maps that he used to bolster a presentation of the scheme he made to Congress in October 1861. Many Congressmen were leery of beginning such an expensive venture, especially with the Civil War underway, but President Abraham Lincoln, a long-time supporter of railroads, saw in the proposal an important additional opportunity: to help knit California and the West to the Union. He agreed with Judah, and on July 1, 1862, Lincoln signed the Pacific Railway Act, authorizing land grants and government support, which amounted to $32,000 per mile of track laid, to two companies, the Central Pacific Railroad and the Union Pacific Railroad. The Central would start at California’s eastern rail point in Sacramento, cross the Sierras, go through Nevada and into northern Utah where it would meet up with the Union Pacific. The Central Pacific Railroad spiked the first rail on October 26, 1863, and its construction crews began building the line east from Sacramento.

At the eastern end of the project, Gen. Grenville Dodge and his assistant, Peter Dey, surveyed the potential route the Union Pacific would take. They recommended a line that would follow Nebraska’s Platt River, along the North Fork, would then cross the Continental Divide at South Pass in Wyoming and continue along to Green River, then head into Utah. President Lincoln favored this route and made the decision that the eastern terminus of the Transcontinental Railroad would be Council Bluffs, Iowa, across the Missouri River from Omaha, Nebraska.

The Union Pacific and Credit Mobilier

Thomas Durant, a medical doctor turned businessman, gained control of the Union Pacific Railroad Company in July 1863 by manipulating a controlling interest and installing his own man  – war hero Gen. John A. Dix – as president. Durant took the office of vice president but was the actual leader of the railroad. In 1864 Congress passed the second Pacific Railway Act, which doubled the size of the land grants and allowed the railroads to sell their own bonds. Durant then created and became president of Crédit Moblier of America, a business front that appeared to be an independent contractor, which Union Pacific would hire to manage construction of the railroad.  Crédit Moblier would go on to swindle the government out of tens of millions of dollars by charging extortionate fees for the work.  Because the government paid by the mile of track built, Durant also insisted the original route be lengthened, further lining his pockets. Soon after the completion of the railroad, Durant's corrupt business schemes became a public scandal with Congress investigating not only Durant, but also Senators and Representatives who had benefited from his shady dealings by accepting stock in the company at a fraction of its value in return for agreeing to vote the appropriations to keep the profits coming in. But that would take time to uncover.

The Union Pacific had begun to lay tracks at Omaha, Nebraska, in July 1865. But Durant's management of the actual building of the rail line was sub par, and lacked both organization and people with sufficient knowledge and skills to accomplish its ambitious task. Moreover, the company suffered from sufficient funding. So the construction effort proceeded with little progress; in fact, the project was an absolute mess and was on the verge of collapse.  

A call went out for investors and among those answering the call were the Ames brothers, Oliver and Oakes, east coasters with the money and vision to move the project forward.  It is said that Lincoln himself encouraged them to clean up the mess.  Along with them came their own men, men with means and knowledge, chief among them Sidney Dillon, who had real experience in rail building.  Dillon was a deal maker who made a fortune off his business savvy.  These men, in late 1865/early 1866, now all took interests in Credit Mobilier and for the first time, the project had a chance.

The Real Work Begins

Dillon became actively involved in the Union Pacific and Crédit Mobilier in 1865. In 1866 he was given the potentially lucrative and thus key role of managing much of the contracting for the Union Pacific; in 1867 he would become outright president of Credit Mobilier; and in 1874 was rewarded with the office of president of the Union Pacific, a post he held for a decade.

Durant now had experienced businessmen on his team, but not men who could actually get the railroad built. So as 1866 dawned he hired Grenville Dodge as chief engineer of the railroad (Dodge began advising Durant immediately although he would not leave the service until May), and Dodge insisted up front that Jack Casement and his brother be hired to lay the track and actually construct the Union Pacific line. John S. (Jack) Casement had worked as a railroad contractor on the Ohio Railroad prior to the Civil War. During the war he rose to the rank of General and Brigade commander, and was admired for his bravery, management skills, and railroad experience. Jack and his brother Daniel had formed the firm of J.S. & D.T. Casement; “General Jack” was construction leader, while Daniel handled financial matters.

The Casements came to a general understanding with Durant, and they submitted their proposal letter dated February 6, 1866, to Durant as Union Pacific vice president. He wanted a few changes, which were made, and the parties agreed on a new proposal letter, dated the same day, which provided that the Casement firm would "lay and fill the track on the Union Pacific Rail Road for seven hundred fifty dollars per mile, on the following terms and conditions. The Rail Road Company to furnish motive power, cars, wood and water and tracks for boarding cars and pay for delays of over three consecutive days caused by want of material, motive power or other default or neglect of Company. The track to be laid in a good and workmanlike manner and filled and surfaced with material taken from the side of the road, the whole to be subject to the approval and acceptance of the Engineer of the Company in charge of the work, and the track to be accepted on the completion of every twenty miles, and approximate estimates to be made by the Engineer in charge and paid monthly. We will lay the track as fast as required (not to exceed one mile per day), and will at the option of the Company on ten days notice reduce our gang to a force sufficient to lay one half mile per day. We will furnish engineer men and all other help for the trains used in distribution of material, and take the materials for track at any point on the Rail Road within one hundred feet of the track and we will furnish oil waste etc for trains in our employ. All trains used in construction or for any purpose by us are to be run subject to the regulations & schedule time of the Company & under the general control of the Superintendent of the Company. We will make no extra charge in cutting and filling, in leveling ties, unless it exceeds six inches. No extra charge for putting in frogs and switches for all necessary sidings. And we will place the labor of all our men at the disposal of the  Company whenever the delays exceed three days and charge for their time as per our payroll. We will commence as soon as the Company requires & will lay track during the whole of the present season and longer if the Company requires.” This proposal was signed “J.S. & D.T. Casement.”

This document is in the University of Iowa Library as part of the Levi O. Leonard Railroading collection. Also a part of that collection is a memo in Casement’s hand indicating that the understanding is between Casements and “T.C. Durant, Esq., Vice Pres. of the UPRRC”.

Durant responded to the Casements two days later, on February 8, 1866. His letter stated: “J.S. & D. T. Casement, Painesville, Ohio. Gentlemen: Your proposition to the Union Pacific Railroad Company under date of Feb. 6, 1866, in relation to track-laying is received and has been considered. The Company decides to regard your proposition and this acceptance as the agreement upon the subject. The Company reserves the right to terminate this arrangement in case you do not perform the agreement on your part. Yours truly, Thomas C. Durant, V. P." The wording of this letter indicates that the agreement on the terms to build the Union Pacific Railroad was the brief counterproposal and this acceptance letter, together making one contract.

The Contract
But unbeknownst to history until now, the contract with the Casements specifying the construction terms was only one of two contracts to get the railroad built; there was another integral contract without which the Union Pacific/Casement venture could not proceed. So in fact, not one but two contracts composed the overall agreement to build the Union Pacific Railroad. The second contract, dated the same day as Durant’s letter accepting the Casements’ proposal, and likely a condition precedent to Durant posting that acceptance, was kept by John S. Casement and never disclosed; it has remained in the hands of his descendants until now.

The Casement firm was newly formed, and Dillon and Durant knew that while the Casements had the skill and experience in track laying, they did not have the capital at their disposal to perform the great work at hand.  So as part of the overall deal, in order that the railroad could be built, and the Casements could accomplish their obligations, Dillon (acting for himself and/or other unnamed investors) would inject capital and would also come in as partner in the Casement firm, providing counsel and perhaps being available to inject additional capital if required.  This arrangement would prove to be the key to the building of the railroad, as the combination of capital and the Casement's skill would ensure its success. It might seem odd that Dillon would play such a crucial role in the contracting of work on the railroad, benefit from it as part of Credit Mobilier, and also receive a percentage of the Casement profits. Today this would be a clear conflict of interest. Back then, it was more common place. And besides, the men involved in Credit Mobilier were not shy about cutting corners.

The Contract to Fund the Union Pacific

Autograph Contract Signed, on Union Pacific Rail Road Company, President’s Office letterhead, New York, February 8th, 1866, with Dillon, to fund the construction of the railroad. “Articles of Agreement between J.S. & D.T. Casement & Sidney Dillon. 1st. The above Parties agree to do all of the work on the Union Pacific Rail Road under the firm of J.S. & D.T. Casement. 2nd. That J.S. & D.T. Casement are to have three fourths (3/4) of the net profits arising therefrom and Sidney Dillon one fourth (1/4). 3d. The Parties are to pay into the capital stock of the concern an amount sufficient to prosecute the work and in proportion to their relative interests as specified in the 2nd Article of this agreement. 4th. None of the above Parties shall have a salary for any services rendered under the above agreement. Sidney Dillon.”

Historians and the public have been unaware of the existence of this funding arrangement until now, and this document has been largely unknown. Casement never made it public, and it has been with his descendants all these years until we recently obtained it. It has never before been offered for sale.

Jack Casement spent the winter at Omaha, preparing the rolling dormitories his crews would use in the coming year. He hired the workers (many of whom were former military personal), gathered the materials and supplies, and went into the field. As during the war, his post was at the front, in the construction camps (which he ran like an army), at the end of the line where the work was being done, or in his car at the tail of the work train. As one of the necessities of his job, to get to and from the work sites, the Union Pacific presented him with annual passes, which he and his descendants retained. Scrappy and hard-working, he oversaw not just the laying but the grading of the track as well.  Under his leadership, the Union Pacific laid 1,087 miles of track, from Fremont, Nebraska, west to Utah where the Central Pacific and Union Pacific Railroads met to form the transcontinental railroad. His was a magnificent achievement that compares well with the Central Pacific Railroad, which laid 690 miles.

On April 9, 1869, with construction work nearing a conclusion and both the Union Pacific and Central Pacific needing a meeting point, Congress established it as Promontory Summit, north of the Great Salt Lake in Utah.  Less than one month later, on the morning of May 10, 1869, locomotives from the two railroads met nose-to-nose to signal the joining of the two lines. At 12:57 p.m. local time, at a ceremony planned to connect the railroads, Leland Stanford, Governor of California and president of the Central Pacific, and Durant as vice-president of the Union Pacific, were to pound in the golden spike with silver hammers. Both men proved unable to hit the spike, so Jack Casement stepped up to do the job, accompanied by much cheering from the workers surrounding him. Telegraphers announced the completion of the Pacific Railway. Canons boomed in San Francisco and Washington. Bells rang and fire whistles shrieked as people celebrated across the country. The nation was indeed united.