The Pacific Scandal

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Largely unknown today, the scandal that erupted in 1872 completely altered Canada and was one of the biggest stories of the last half of the 19th century for the new country. Called the Pacific Scandal, it would bring down the government, end careers, alter the building of the trans-continental railway and nearly cause British Columbia to leave Confederation only a few years after it joined.

As we saw in the last episode, British Columbia joined Confederation in 1871 and the Canadian government promised to build a trans-continental railway within 10 years to link the province to the rest of the country. This railroad would be no small feat, and it would be a full 1,600 kilometres longer than the American transcontinental railway that had been built in the previous decade.

With such a huge endeavor being taken, there was the desire to make a lot of money off the building of the railroad.

As the Canadian government began to plan out the building of the railroad, two syndicates would compete for the lucrative contract. One of those syndicates was the Canadian Pacific Railway, led by Montreal capitalist Hugh Allan. The other syndicate was the Inter-Oceanic Railway Company, run by David Lewis Macpherson. Allan was a supporter of the Conservative Party and the chief creditor to Macdonald. He also led the Merchant’s Bank, the second largest bank in Canada, which had several politicians serving as solicitors including John Ross, the former finance minister and future prime minister John Abbott.

There was also the desire to ensure that the construction of the railway and its financing had no American interference as there was the worry that the Americans and their concept of Manifest Destiny would attempt to annex huge areas of what would one day be Canada. For this reason, the federal government focused on building a line that went through all of what would be Canada, rather than the cheaper option of using routes through America for parts of the journey.

With the 1872 general election coming, Prime Minister Sir John A. Macdonald and several of his Conservative Members of Parliament were looking for campaign funds. At the time, the financial activities of political parties were unregulated and until 1897, the Conservatives and Liberals relied heavily on corporate donations. As with anything involving corporate donations, that can lead to scandals and that is exactly what happened in 1872.

The Conservatives wanted to do better in Ontario and Quebec in the election. The Conservatives had taken 33 seats in Ontario and 36 in Quebec, but the Liberals had taken 33 in Ontario as well, and 17 in Quebec. Hoping to cut into that seat count for the Liberals, the Conservatives needed funds and for that they looked to Hugh Allan.

With the help of American backers, Allan would donate $350,000 to the Conservative campaign, which would be about $7.7 million today. Allan was promised the presidency of the new railroad, while George Etienne Cartier made promises to Allan that Macdonald knew nothing about including giving Allan a majority of stock for helping to fund the election. Macdonald knew that money was coming from Allan but when he was told that it was $350,000 he did not believe it and he would write to Cartier to confirm it, which Cartier did.

In the 1872 election, the money did not help the Conservatives, who saw their seat count decline in Ontario and Quebec, although they still held onto power with a majority government, but the Liberals had gained 33 seats.

Once the election was over, Allan and his syndicate were rewarded with the contract to build the railway and Allan was given the contract on the assumption that the Americans on the syndicate’s board of directors would be removed.

What Macdonald did not know was that Allan had used the American’s money to supply the campaign funds to the Conservatives.

No one would have ever likely found out about the scandal, at least at the time, if not for the fact that Sir Hugh Allan wrote a lot of letters and kept all of them. While Allan was in England with his lawyer, future prime minister John Abbott, his private secretary, George Norris, and another man stole the letters that Allan had left with Abbott for safety.

Those letters, once leaked to the public, showed there was an agreement between Macdonald, Sir George-Etienne Cartier and Hector Louis Langevin that assured Allan of the railway contract in return for the campaign funds.

Norris would sell the letters to the Liberal Party for $5,000 and on April 2, 1873, the scandal erupted in the House of Commons when L.S. Huntingdon, the Liberal MP for Shefford, brought forward his charges.

Huntingdon would say in the House of Commons, quote:

“That the Americans feel aggrieved that they are not to be permitted to control the Canadian Pacific Railway is perhaps natural. That Sir Hugh Allen in his negotiations with them may have held out hopes which are now disappointed, is not at all improbable. But Parliament has surely something else to do than avenge the personal wrongs of these people.”

The Montreal Gazette would write, quote:

“Mr. Huntingdon took the manly course of making his charge from his place in Parliament. He made it in such specific terms that it was susceptible of proof or disproof and he asked for a committee to prove it.”

As the scandal began to grow, Macdonald stated that his hands were clean and he had not profited personally from Allan. Of course, Macdonald would also admit that during the 1872 election he was drinking heavily and did not remember much of the campaign or speaking with Allan.

Soon after the scandal became known, Macdonald had a parliamentary committee organized to investigate the allegations of conflict of interest and corruption.

The creation of a parliamentary committee was not greeted with enthusiasm by some outlets. Le Nationale would write on May 29, 1873, quote:

“Whether Sir Hugh Allan subscribed towards election funds or not, we are not aware. Being a wealthy man and politically in sympathy with the government he certainly ought to have subscribed, just as Mrs. Brown and Holton and Huntington and Laflamme…and hosts of others, have subscribed money to aid in ousting the Administration and placing themselves of their friends on the Treasury benches. It does not require a Parliamentary Committee to prove that wealthy men of a party contribute to the funds necessary for carrying on a great electoral campaign.”

The committee would meet in July of 1873 and letters and telegrams that had been purchased by the Liberal Party soon began to appear in newspapers. One of the most incriminating telegrams was from Macdonald to John Abbott. It states, quote:

“I must have another ten thousand, will be the last time of calling, do not fail me, answer today.”

Another letter from Allan to the Americans stated that he would be made president of the CPR in exchange for monetary conditions.

Soon seeing that the writing was on the wall and the scandal was not going away, Macdonald would meet with Lord Dufferin in August, the Governor General of Canada, and ask that parliament be suspended. Lord Dufferin granted a 10-week prorogation but he stated to Macdonald, quote:

“Your personal connection with what has passed cannot but fatally affect your position as minister.”

In the House of Commons in November, Macdonald would state, quote:

“I have spoken of the prorogation. I believe that it was constitutional. I believe that it was wise and whether it was wise or unwise, it was sanctioned by this Parliament and I know that this Parliament cannot, without dishonor, reverse their vote and I believe and I know that this House accepted that proposition.”

For Lord Dufferin, he had only been in his viceregal position for one year by that point, but in that time he had found, in his opinion, that Sir John A. Macdonald was superior to the Liberal leader Alexander Mackenzie.

The scandal would make international news, with stories published in the London Saturday Review and the New York Times. On Aug. 23, the New York Times would write, quote:

“To an impartial observer it appears that the Opposition are making a mistake in sacrificing the investigation of this scandal, which is required for the honor of Canada to a vindictive political warfare upon the Ministry. If they believe they can prove Sir John Macdonald guilty let them do it by any means that may be offered and they will, doubtless, end his political career.”

The Aug. 30, 1873 Canada Gazette would have a proclamation to create a royal commission sent to Sir John A. Macdonald from J.C. Aikins, the Secretary of State, which would state quote:

“An understanding was come to between the Government and Sir Hugh Allan and Mr. Abbott, one of the members of the Honorable, the House of Commons of Canada, that Sir Hugh Allan and his friends should advance a large sum of money for the purpose of aiding the elections of Ministers and their supporters at the ensuing general election and that he and his friends should receive the contract for the construction of the railway.”

The proclamation would continue, quote:

“That the moneys expended by Sir Hugh Allan in connection with the obtaining of the Act of Incorporation and Charter were paid to him by the said United States capitalists under the agreement with him.”

By this point, the Pacific Scandal was the main news in the country, with entire sections of newspapers featuring in bold letters the newest developments when it came to news of the scandal.

On Oct. 23, the House of Commons would reconvene and several of the Conservative Members of Parliament left the party. Donald Smith, one of the most prominent MPs in the party, would become an independent Conservative. Smith would eventually be the president of the CPR and the man to drive in the last spike, but I’ll talk about him in his episode on Aug. 26.

There was the general consensus that if the prime minister had of forced a confidence vote early enough, he would have been able to survive it but that prospect was quickly fading.

With his government weakened, Macdonald realized that with Prince Edward Island joining Confederation and their Members of Parliament going against the Conservatives, he could lose a vote against the government.

Unfortunately for Macdonald, he sank into gin and despair, and waited for whatever trick the Liberals had up their sleave. He would make a rallying speech on Nov. 3.

He would acknowledge that he promised the presidency to Hugh Allan, telling the House of Commons, quote:

 “I made that promise but I wish the House to remember that at the time of that telegram, in which I stated that as we could not form a company before the election, we would form one afterwards out of the two and would do what we could to make Sir Hugh Allan president, at that time there had been not one single word said about money.”

He would continue, speaking of the stealing of the letters, quote:

“If we had spies, if we had thieves, if we had men who went to your desk, picked your lock and stole your notebooks, we would have much stronger evidence than honourable gentlemen think they have now. We are fighting an uneven battle. We are simply subscribing as gentlemen, while they were stealing as burglars.”

In closing, he would look to the time ahead, stating quote:

“I have fought the battle of Confederation, the battle of union, the battle of the Dominion of Canada. I throw myself upon this House. I throw myself upon this country. I throw myself upon posterity and I believe that I know that, notwithstanding the many failing in my life, I shall have the voice of this country and this House rallying around me and if I am mistaken in that, I can confidently appeal to a higher court, to the court of my own conscience and to the court of posterity.”

The Ottawa Daily Citizen, which was very much in favour of the Conservatives, and which called it the Pacific Slander, not Scandal, would write at the same time, quote:

“How Mr. Huntington added falsehood to slander to defame a living statesman whose grey hairs and increasing infirmities, if not for his past service to Canada, out to have saved him from such an attack. We have heard of honor among thieves but we have seen no evidence of it on the part of the Opposition in their present struggle to power.”

It would add regarding the speech, quote:

“For five hours he held the attention of the House and discussed amid much applause a subject that has for some time seemed threadbare and tiresome.”

On Nov. 5, Sir John A. Macdonald resigned as prime minister.  

The Ottawa Daily Citizen would state in its editorial on the resignation, quote:

“Tis too late this evening to review the history of the past or to discuss the probabilities of the future. We regret the success of the Opposition because that success, though commanded, has not been deserved. We deplore the fall of the ministry because it merits deserve a better fate.”

On Nov. 27, Lord Dufferin would write to his friend, Mr. Sturgis. He would write, quote:

“Personally, I was very sorry for Macdonald. I have a great deal of regard for him and he most certainly be regarded as the man who has created this nation.”

He would have harsh words for the Liberal Party, who he felt had taken an undignified approach, writing quote:

“They have accused him of corruption and of having sold the Railway Charter to an American Ring. There does not seem to have been the slightest foundation for one or other of these charges, nor indeed do I believe that he has sacrificed or even dreamt of sacrificing a single material interest of Canada to Sir Hugh Allan, although it is a most unfortunate circumstance that he should have like 20 years, and it is a great misfortune when a Parliamentary Opposition has ever known the responsibilities of office.”

The Liberals would then be invited by Lord Dufferin to form government, and Alexander Mackenzie became Canada’s second prime minister. In January of 1874, the Liberal Party won 138 of 206 seats to capture a huge majority.

This would prove to be a dark time for Macdonald. Alexander Campbell would write to the Lt. Governor of Manitoba, Alexander Morris and state, quote:

“From the time he left Kingston, after his own election, kept himself more or less under the influence of wine and really has no clear recollection of what he did on many occasions at Toronto and elsewhere after that period.”

After stepping down as prime minister, Macdonald offered to resign as leader of the Conservatives but his resignation was refused.

John White, the MP for Hastings, would state that he would, quote:

“go down with Sir John A. Macdonald, do battle with him and stand to his back so long as he was the statesman of the country as he was and having the honor of the young Dominion at heart.”

While there was the worry among some that the railway would not be built, most felt that it was something that was going to happen no matter the government in charge. The Ottawa Daily Citizen would say on Nov. 3, quote:

“We can surely take it for granted that the Pacific Railway will be built. There never was a great public work to which the public men on both sides of politics were committed to a greater extent than the Pacific Railway and there never was a public work to which a government was committed more inevitably.”

So, what happened to the major players in this scandal?

Sir John A. Macdonald would roar back into power with a majority government in 1878 and would continue to serve until his death in 1891. As for the railroad he was pushing, that would come in 1885.

Sir Hugh Allan would never see the railroad finished, nor would he ever have the supremacy he hoped for in the railroad industry. He still financed railroads through the Merchant’s Bank of Canada and had a vested interest in many Canadian railway companies. He would die in 1882. At the time of his death, he was one of the richest men in the world with a fortune worth $2.5 billion today.

Lucius Huntington, the man who exposed the scandal would continue to serve in Parliament until 1882. He would join a syndicate that was formed to continue construction of the railway. He would die in New York City in 1886.

As for George-Etienne Cartier, he had travelled to London after the 1872 election in the hopes of obtaining a cure for Bright’s Disease, a kidney disease, he was diagnosed with in 1871. His health would continue to fail and he would die on May 20, 1873, before the Pacific Scandal became the biggest story in the country.

What the Scandal truly hurt was the timetable of the building of the railroad. The 1881 deadline was not reached, and it would be another four years before the railroad was finally finished and British Columbia was link. The removal of the Conservatives from power over the scandal would lead to an impasse for five years, with barely any progress being made.

As for the Canadian Pacific Railway, it would have to reorganize itself before it once again took on the mantle of building the railroad across Canada.

Years later, Sir Charles Tupper would state that the Pacific Scandal should have been called the Pacific Slander, and that it was just a grave indiscretion on Macdonald’s part, rather than a serious moral offence.

If not for the scandal, Canada would have had its railroad earlier, setters would have come to the prairies sooner and the fabric of Canada would have been changed forever.

Information comes from Canadian Encyclopedia, Biographi, Wikipedia, YouLearn, GreatCanadianSpeeches.ca, Quebec History, Canada’s Governors General, Canada Gazette, Library and Archives Canada, Strange Empire: Louis Riel and the Metis People, Ottawa Daily Citizen, New York Times

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