# Scandals

## Ulysses S. Grant's administration was plagued by a series of scandals, many involving those close to Grant.

#### Key Points

• Grant pursued different courses for prosecution depending on his friendship with those indicted, which caused controversy.

• The Black Friday scandal, which involved Grant's brother-in-law, was a scheme to control the gold market. When it failed, it rocked the United States economy.

• The Whiskey Ring scandal, which involved Grant's personal secretary, was a scheme to defraud the IRS of whiskey taxes.

• Grant himself was deposed as part of the Whiskey Ring scandal.

#### Terms

• In the United States, the Whiskey Ring was a scandal, exposed in 1875, involving diversion of tax revenues in a conspiracy among government agents, politicians, whiskey distillers, and distributors.

• Black Friday, September 24, 1869, also known as the Fisk/Gould scandal, was caused by two speculators’ efforts to corner the gold market on the New York Gold Exchange. It was one of several scandals that rocked the presidency of Ulysses S. Grant.

• An investment involving higher than normal risk in order to obtain a higher than normal return

#### Figures

1. ##### Orville E. Babcock, Private Secretary to President Ulysses S. Grant

Orville E. Babcock, Grant's private secretary, was indicted as part of the worst scandal to rock the Grant administration, the Whiskey Ring of 1875

The presidency of Ulysses S. Grant was marred by a series of scandals. Grant's standards in many of his cabinet appointments were low, leading to widespread charges of corruption. Beginning with the Black Friday gold speculation ring in 1869, corruption was uncovered during Grant's two presidential terms in seven federal departments. Reform movements initiated in both the Democratic Party and the Liberal Republicans, a faction that split from the Republican Party to oppose political patronage and corruption in the Grant Administration. Nepotism was prevalent, with over 40 of Grant's family members or relatives benefiting from government appointments and employment.

### Black Friday

The first scandal to taint the Grant administration in 1869 was Black Friday (also known as the "Gold Panic"), which was an attempt by two financiers to corner the price of gold without consideration for the nation's economic welfare. This intricate financial scheme was primarily conceived and administered by Wall Street manipulator Jay Gould and his partner James Fisk in September 1869. They managed to involved Grant's brother in law, Abel Rathbone Corbin, with the scheme in order to access Grant himself. Gould had also given a $10,000 bribe to the assistant secretary of the treasury, Daniel Butterfield, in exchange for inside information. Corbin himself had$2,000,000 invested in the gold market, and had given both First Lady Julia Grant and Grant's personal secretary Horace Porter $500,000 speculative accounts. On September 6, 1869, Gould bought the Tenth National Bank with the intention of using it as a buying house for gold, and Gould and Fisk began buying gold in earnest. Secretary Boutwell tracked the situation and found that the profits made in the manipulated rising gold market could ruin the nation's economy for several years to come. By September 21, the price of gold had jumped from$137 to $141; Gould and Fisk jointly owned$50 million to $60 million of it. Boutwell and Grant finally met on September 23 and agreed to release gold from the treasury if its price continued to rise. On the same day, Boutwell also ordered that the Tenth National Bank be closed. Then, on September 23, 1869 (known infamously as "Black Friday"), the price of gold soared to$160 dollars an ounce. This spurred Boutwell to release $4 million in gold specie into the market and buy$4,000,000 in bonds. The gold market crashed, foiling Gould and Fisk, while ruining many investors financially.

The gold panic devastated the United States economy for months. Stock prices plunged, and the price of food crops such as wheat and corn dropped severely, devastating farmers.

### Whiskey Ring

The most infamous scandal associated with the Grant administration was the Whiskey Ring of 1875, which was exposed by Treasury Secretary Benjamin H. Bristow and journalist Myron Colony. Whiskey distillers in the Midwest were no strangers to evading taxes, having done so since the Lincoln Administration. This intensified during the Grant administration, as whiskey distillers bribed Treasury Department agents, who in turn helped the distillers evade taxes to the tune of up to \$2 million per year; the agents would neglect to collect a duty of 70 cents per gallon, then split the bonus profits. The ringleaders had to coordinate distillers, rectifiers, gaugers, storekeepers, revenue agents and Treasury clerks by way of recruitment and extortion.

On May 13, 1875, Bristow, with Grant's endorsement, struck hard at the ring, seized the distilleries and made hundreds of arrests. Missouri Revenue Agent John A. Joyce and two of Grant's appointees, Supervisor of Internal Revenue General John McDonald and private secretary to the president Orville E. Babcock, were eventually indicted in the Whiskey Ring trials.

After Babcock's indictment, Grant requested that Babcock go through a military trial rather than a public trial, but the grand jury denied the request. Grant unexpectedly issued an order not to give any more immunity to persons involved in the Whiskey Ring, leading to speculation that he was trying to protect Babcock. Because Bristow needed distillers to testify with immunity in order to pursue ringleaders, the order caused friction between him and Grant. Prosecutor Henderson accused Grant of interfering with Secretary Bristow's investigation.

The accusation angered Grant, who fired Henderson as special prosecutor. Grant then replaced Henderson with James Broadhead, who had little time to research the facts surrounding Babcock's case and those of other Whiskey Ring members. At the trial, President Grant read a deposition stating that he had no knowledge of Babcock being involved in the ring. The jury accepted the president's testimony, and quickly acquitted Babcock of any charges. Broadhead went on to close out all the other cases in the Whiskey Ring. McDonald and Joyce were convicted in the graft trials and sent to prison. On January 26, 1877, President Grant pardoned McDonald.

#### Key Term Glossary

Black Friday
Black Friday, September 24, 1869, also known as the Fisk/Gould scandal, was caused by two speculators’ efforts to corner the gold market on the New York Gold Exchange. It was one of several scandals that rocked the presidency of Ulysses S. Grant.
##### Appears in this related concept:
colony
A territory under the immediate political control of a state. Some colonies were historically countries, while others were territories without definite statehood from their inception. The metropolitan state is the state that owns the colony. A colony has no independent international representation, and its top-level administration is under direct control of the metropolitan state.
##### Appears in these related concepts:
corruption
The act of corrupting or of impairing integrity, virtue, or moral principle; the state of being corrupted or debased; loss of purity or integrity; depravity; wickedness; impurity; bribery.
##### Appears in these related concepts:
Democratic Party
One of two major contemporary political parties in the United States, along with the Republican Party.
##### Appears in these related concepts:
economy
Collective focus of the study of money, currency and trade, and the efficient use of resources.
##### Appears in these related concepts:
faction
A group of people within a society who share a common belief or interest not shared by the rest of society. Factions were perceived as a danger to republican government, a concern addressed in the Federalist Papers and particularly Federalist 10.
##### Appears in these related concepts:
farmer
A person who works the land or who keeps livestock, especially on a farm.
##### Appears in these related concepts:
federal
Pertaining to the national government level, as opposed to state, provincial, county, city, or town.
##### Appears in these related concepts:
financier
A person who, as a profession, profits from large financial transactions.
##### Appears in these related concepts:
gold
A heavy yellow elemental metal of great value, with atomic number 79 and symbol Au.
##### Appears in these related concepts:
Liberal Republicans
The Liberal Republican Party of the United States was a political party that was organized in Cincinnati in May 1872, to oppose the reelection of President Ulysses S. Grant and his Radical Republican supporters.
##### Appears in these related concepts:
Midwest
The area of the continental United States contained in the central third of the of the country, especially the states of Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio, and Wisconsin.
##### Appears in these related concepts:
Missouri
Missouri is a U.S. state located in the Midwestern United States. Capital: Jefferson City. Largest city: Kansas City.
##### Appears in these related concepts:
National Bank
In the United States, the term "national bank" originally referred to the revolutionary era Bank of North America, later, First Bank of the United States, or its successor the Second Bank of the United States. All are now defunct.
##### Appears in these related concepts:
patronage
The act of providing approval and support; backing; championship.
##### Appears in these related concepts:
reform
Amendment of what is defective, vicious, corrupt, or depraved; reformation; as, reform of elections; reform of government.
##### Appears in these related concepts:
republican
Republicanism is the political values system that has been a major part of American civic thought since the American Revolution. It stresses liberty and inalienable rights as central values, rejects inherited political power, expects citizens to be independent in their performance of civic duties, and vilifies corruption.
##### Appears in these related concepts:
Republican Party
One of the two major contemporary political parties in the United States, along with the Democratic Party.
##### Appears in these related concepts:
Republicans
One of the two major contemporary political parties in the United States, along with the Democratic Party. The first elected Republican president was Abraham Lincoln in 1864.
##### Appears in these related concepts:
scandal
An incident or event that disgraces or damages the reputation of the persons or organization involved.
##### Appears in these related concepts:
specie
Money, especially in the form of coins made from precious metal, that has an intrinsic value; coinage.
##### Appears in these related concepts:
speculation
An investment involving higher than normal risk in order to obtain a higher than normal return
##### Appears in these related concepts:
state
State commonly refers to either the present condition of a system or entity, or to a governed entity (such as a country) or sub-entity (such as an autonomous territory of a country).
##### Appears in these related concepts:
states' rights
States' rights in U.S. politics refers to political powers reserved for the U.S. state governments rather than the federal government.
##### Appears in these related concepts:
stranger
The group of settlers in the Plymouth Colony known as "Strangers" included the non-Pilgrim settlers placed on the Mayflower by the Merchant Adventurers, and later settlers who would come for other reasons throughout the history of the colony and who did not necessarily adhere to the Pilgrim religious ideals.
whiskey
A distilled alcoholic liquor made from fermented grain, usually aged by storing in oak barrels.
##### Appears in these related concepts:
Whiskey Ring
In the United States, the Whiskey Ring was a scandal, exposed in 1875, involving diversion of tax revenues in a conspiracy among government agents, politicians, whiskey distillers, and distributors.