Liveblogging the Civil War False Claims Act: A scandal over ship purchases

by Ben Vernia | February 3rd, 2012

In December 1861, the House Select Committee on Government Contracts provided a report which described numerous problems with Civil War contracting. One person singled out for criticism was George D. Morgan, whom the Secretary of the Navy contracted to purchase merchant ships to use in the war effort. It was an early example of the perils of compensating on a “cost plus” basis: Morgan received a commission of 2 1/2% of the money spent. From the December 18, 1861 New York Times:

The Committee especially call attention to the arrangements between the Secretary of the Navy and Mr. MORGAN, for purchasing vessels for the Government, saying it is of such a character, whether it be in the stipulated amount received or in the mode of payment, alike indefensible and reprehensible. That arrangement is a system of commission, usually 21/2 per cent, of the purchase money paid for each vessel, and one under which Mr. MORGAN received as compensation during the period of seven weeks previous to the 6th day of September, when this testimony was taken, the enormous sum of $51,584, as admitted by himself before the Committee. If he has received the same rate of compensation since as before that date, there must be added to this sum paid him before that date, the further commission of $43,425 for services rendered since, making in all the sum of $95,000 paid to a single individual for his services as agent of the Government since the 15th of July, a period of four months and a half. The Committee next devoted themselves to the subject of the purchase of arms.

The Morgan scandal led one citizen to write a letter to the New York Times 150 years ago today, on February 3, 1862:

Mr. Morgan’s Purchases of Vessels for the Navy.
To the Editor of the New-York Times: In common with many of the honest portion of our community, I was much gratified with your notice in yesterday’s TIMES, of the Naval Committee’s report upon the “Morgan Agency,” and I desire to thank you in behalf of our moral community for your fearlessness and faithfulness in the further exposure of those unfortunate transactions. So long as there are no statutes to reach and remedy such evils, there is the greater need that public opinion should be properly directed and sustained in condemning the parties guilty of such conduct. When such means shall be faithfully used, men of wealth and persons ambitious of any respectable position in society will shrink from all such questionable transactions; but so long as excuses for such conduct are freely offered, and the parties are publicly justified in our respectable journals, there can be no reasonable hope of any reformation. There is now in our community too much of that sickly sentimentalism which tends to excuse or extenuate all crime — especially in high places; and which constitutes the principal encouragement and safeguard for the too frequent transgressions in high places. Persons thus offending are not only excused, but they are too frequently cordially received into “good society” — and sometimes feasted and toasted not only by their accomplices, but by others, overemulous of an acknowledged acquaintance with the rich and those holding high official positions. Hence the necessity that our public journalists, and others in positions of influence, should take high ground upon this subject, and fearlessly rebuke all such offences upon public morals; and hence, too, the greater pity and public misfortune, that any respectable journal should attempt to palliate such conduct. In this respect not a few of our good citizens were grieved at the positions assumed by your worthy neighbor, the Commercial Advertiser, in last evening’s paper. The writer has too high an opinion of, and too much respect for, the respectable proprietors of that excellent journal, to believe that either of them ever carefully read the article referred to till after it was in print, and therefore he feels the more free to offer a few comments upon some of its unfortunate positions. First, it is assumed in the article referred to that the “Senator from New-Hampshire” is alone responsible for the report under review, while it is submitted as the unanimous report of the Naval Committee; and then that Senator is by implication censured, because he did not “show undue consideration” for the parties implicated; and at the close of the article it is said that “something of personal animosity is as apparent in Mr. HALE’s report as in the other attacks upon him.” Now, Mr. Editor, I have no personal acquaintance with Mr. HALE, or either member of the Committee, nor with either of the accused parties; but it seems to me that the Commercial Advertiser — to use its own language in the same article — “might give” the gentlemen of the Committee “the credit to which their high personal characters entitle them, of a determination” of being governed by the principles of common honesty, if not of a desire to save our country from ruin by the fraudulent acts of its professed friends. Mr. HALE is censured because he did not give “the Government Agent the credit which his high personal character entitles him, the determination to pay no more for any vessels than they were worth,” &c. This is begging the whole question. “The high personal character” and “the worth of the vessels,” are among the questions at issue, upon which there is certainly some difference of opinion. It is hardly safe to assume that because a party is rich, and has high social relations, that therefore he can do no wrong; and if it be true that “he paid, in no case, any more than in his judgment the vessels were worth,” it will be replied that in that case, his judgment was not good, and his services not entitled to the extraordinary commissions charged; for, it will probably be claimed that prices were paid, in some cases, not only more than the vessels were worth to either Government or the owners, but also extravagant in view of the cost of their construction, or their market value at the time. But the prices paid are not the most important point in this discussion. That will be considered in its proper place. The Commercial concludes, that “because the letter of the Secretary of the Navy and that of Mr. MORGAN — (written after the transactions referred to were condemned) — declare their sincerity clearly existed,” therefore it must not be called in question; — not a very safe line of argument to adopt in such cases. Again, it seems to be argued by the Commercial, that because Government was extensively cheated in other transactions, the Committee ought not to take any notice of these; and it seems to ignore the fact that these other transactions are also the subject of investigation; and it then, with much apparent confidence, refers to the “certificate of some of our first merchants” to prove, not only the judicious management of the parties accused, but to show also that “the report can only sustain its censure on Mr. WELLES by impugning the motives, and insinuating distrust of those gentlemen” — (that is, the parties signing that remarkable certificate;) but it does not explain that those gentlemen were mostly, if not all, interested in the vessels thus sold to Government, nor that many of them had the conscience to ask their bleeding Government from $10,000 to $65,000 more than they were afterwards glad to accept for the vessels thus “judiciously purchased.” Nor does the Commercial notice the other important circumstance that, when these purchases were made, their trade with the rebel ports, in which they had been employed up to the last moment in which it could be safely prosecuted, was destroyed by the war, and that the value of said vessels was thereby greatly reduced. Compare the signatures to this certificate with the list of names from whom Mr. MORGAN made his purchases, and then inquire a little further into the silent ownership of some of these vessels, and even the Commercial Advertiser would lose confidence in the value of such a certificate. But I am not disposed any further to criticise the Commercial’s defence of Messrs. WELLES and MORGAN. They doubtless have their reasons for the course they have adopted. Our Senators and Representatives will not thereby be diverted from their very laudable purpose to expose all transactions calculated to destroy our Government in this time of its peril, and it is to be hoped that the public will also, by and by, come to a right conclusion upon all such transactions. My principle object in submitting these remarks is to thank you for your manliness in advocating right views upon such matters, notwithstanding the unpopularity and possible risk thereby involved; and to bear my testimony against all such acts, whether in high places or low. But before any satisfactory improvement can be expected the public must be enlightened and warned of the danger, and this duty devolves mainly upon our public journalists. Hence the importance that they should be honest and fearless in treating such subjects. You have often, heretofore, remonstrated against both national, municipal and more private corporate transgression. Continue to be thus faithful and our country may yet be saved. AN OLD MERCHANT. NEW-YORK, Jan, 29, 1862.

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