by Rick Shenkman
HNN August 13, 2015
The name Teapot Dome refers to a tract in Wyoming under which there lay a large pool of oil, one of the giant oil fields of the time. It is because of the euphony of the name — which alludes to a giant sandstone rock formation that dominates the site and once looked like a teapot but no longer does, alas — that we tend to remember Teapot Dome as a scandal involving oil. There was much more to it than that, however. To Americans who lived through it Teapot Dome referred to a long litany of unsavory events involving fraud, intimidation, several overlapping cover-ups, bribes, blackmail, and even sex. Teapot Dome had it all.
The first whiff of scandal rose up from the Veterans Bureau like the malodorous stench at a badly run pig farm. Warren Harding, who was president, set up the bureau to handle the claims coming in from the wounded veterans of World War I. Harding looked with pride upon his creation, which consolidated some half a dozen malfunctioning agencies, and had the biggest budget in the government. It was one of the accomplishments for which he hoped to be remembered. Unfortunately, he made the mistake of putting his old drinking buddy Charlie Forbes in charge. There is a wonderful description of Forbes as a “pursy, rufous, convivial, highly energized individual, full of snappy stories and insinuating gossip boisterous in mirth and fellowship” that suggests why Harding fell for him. But he shouldn’t have. Forbes was a thief. After he got Harding to give him control of the warehouses where the government stored hospital sheets, pajamas and gauze, among other items purchased for World War I, Forbes arranged for the sale of the stuff at rock bottom prices to a Boston firm run by friends. It was the deal of a lifetime and it could make you rich. The company was allowed to buy goods that were worth more than $5 million on the open market for $600,000. Forbes, of course, took a cut. He made off even better when he got into the hospital-building business. Hospitals were needed to take care of wounded vets. Under a deal with one of his contractors, he received a $50,000 kickback for every hospital that was built.
Harding himself was no paragon of virtue. Rumors trailed him. One was that as a newspaper publisher before he got into politics he had colluded with other publishers to rig the bids on county printing contracts so that all of them got a “little slice of the profits.” The rumor was true. As a politician he hung around with unsavory people and repeatedly cheated on his wife. He had a baby with a mistress, Nan Britton, shortly before he became president and enjoyed carnal relations with her in a White House closet. But he never took responsibility for the child. In his will he left Nan nothing. As president he recklessly bought half a million dollars in stocks on margin based on a tip that came through the president of Bethlehem Steel. (The stock plummeted, resulting in a margin call of over $100,000.) But he considered himself basically honest and as president tried to do the right thing — or told himself he did. When he found out about Forbes he was furious and heartsick. “The next afternoon,” Harding’s biographer Francis Russell reports,
a visitor to the White House with an appointment to see the President was directed by mistake to the second floor. As he approached the Red Room he heard a voice hoarse with anger and on entering saw Harding throttling a man against the wall as he shouted: “You yellow rat! You double-crossing bastard! If you ever …” Whirling about at the visitor’s approach, Harding loosed his grip and the released man staggered away, his face blotched and distorted. “I am sorry,” Harding said curtly to his visitor. “You have an appointment. Come into the next room.” On leaving the White House, the visitor asked the doorman who it was who had just gone out after he had come in, and the doorman replied: “Colonel Forbes of the Veterans Bureau.”
Harding let Forbes flee to Europe, where he resigned.
The story of the oil scandal that is closely identified with Teapot Dome revolves around the man Harding installed to run the interior department: Senator Albert Bacon Fall. By profession Fall was a New Mexico rancher. He liked to wear string ties and a broad hat and he looked like a Teddy Roosevelt Rough Rider, which was appropriate, as he had been one. A large walrus mustache hung loosley over his mouth like Yosemite Sam’s adding (to modern eyes) a somewhat comical touch to his appearance. But there was nothing funny about Albert Fall and you didn’t toy with him. Once he drove a New Mexico newspaper that was publishing unfavorable articles about him into bankruptcy by having a bank call in a note and pressuring advertisers to stop running ads. The president had absolute confidence in him. “If Albert Fall isn’t an honest man,” he told one associate, “I’m not fit to be president of the United States.” But Fall proved to have as little integrity as Charlie Forbes.
The scandal that led to Fall’s fall from grace began with the project he thought would be what he would be remembered for (to the extent that secretaries of the interior are ever remembered for anything). It was an ingenious idea and it involved the Navy, which was in the process of switching its ships from coal to oil. The switch, which had started before the war, was going well thanks to years of careful planning. Officials had been so careful that they had even purchased huge tracts of land in California and Wyoming that were known to contain large supplies of oil so that their ships would never find themselves stranded for lack of oil. Three of the biggest reserves were Elk Hills (Naval Petroleum Reserve No. 1) and Buena Vista (Naval Petroleum Reserve No. 2), which were located in the San Joaquin Valley south of Sacramento, and Teapot Dome (Naval Petroleum Reserve No. 3), which lay just north of Caspar, Wyoming. There was just one problem. The next likely war was expected to be with Japan and that meant the ships would need accessible oil tanks in the Pacific at Pearl Harbor. And there weren’t any oil facilities there. They would have to be built along with wharves, a shipping canal and the like. The cost was estimated to run north of $200 million. Unfortunately, the Navy lacked the requisite funds. Following the end of World War I military budgets had been slashed as the public became disenchanted with the outcome of the war that was supposed to make the world safe for democracy but didn’t. Fall’s solution was to lease the reserves to private companies and then divert a certain percentage of the royalties earned from the sale of the oil to the Navy.
The deal attracted controversy from the outset, even from some leaders in the military, who were upset that the interior secretary was involved in a decision involving their oil, but that wasn’t his fault. The new secretary of the navy under Harding had asked Fall’s department, which oversaw millions of acres of public land, to take over control of the reserves, which were in danger (it was feared) of being drained by nearby wells. Some also questioned the wisdom of selling oil that had been purchased expressly to provide the Navy with a ready supply in the event of war. That, in hindsight, seems ludicrous. The supply of oil in the United States was increasing every year. But at the time not everybody was confident the supply of oil would last, which was why the government had purchased the reserves in the first place.
But these complaints, though serious, weren’t the stuff of scandal. To have a real, rock-ribbed, blood curdling scandal, something the dictionary says is defined by “an action or event regarded as morally or legally wrong and causing general public outrage,” you need something more. You need a villain. You need an Albert Fall. If you were a novelist you couldn’t do better. He had the misfortune to be born with a name that seemed to invite jokes once his demise began. Fall. It was too good to be true, like something Dickens would concoct. Better yet, he was like the chef of scandals. He seemed to know exactly the right ingredients that you need to make a dish that draws an outraged response.
First, as we’ve seen, he came up with the idea of selling the Navy’s oil, which was guaranteed to be controversial among military people who had taken comfort in the fact that the government was sitting on vast supplies. Then he decided it would be a good idea to sell the oil leases secretly to friends without competitive bidding and without public discussion. Then he decided to take “gifts” from these friends. You can see how this didn’t look too good. But we are getting ahead of ourselves. First, about those friends …
His friends happened to be two of the richest people in America: Edward Doheney and Harry Sinclair. Doheney was worth about 100 million dollars. Sinclair was the founder of the multimillion dollar oil company that still bears his name. Both were known for using their money to buy influence in Washington. Doheney’s dealings particularly smelled. Recently, he had hired one Franklin Lane at a salary of $50,000 a year, a salary equal to what Woodrow Wilson earned just a few years earlier as president of the United States before the salary of the president was increased. What merited this extravagance? Lane had been Wilson’s secretary of the interior and had useful contacts. Doheney bragged that he hired four of Wilson’s cabinet secretaries “for their influence.”
Inevitably, news of the land deals with Doheney and Sinclair leaked, immediately causing a ruckus among local oil men. A Denver newspaper, fed information by a politician with oil holdings in Wyoming, began running frontpage stories about a land grab. A New Mexico newspaper began reporting that Fall had recently started making major improvements on his ranch, installing new wells and irrigation ditches, which raised questions. Was Fall using his position in Washington to his personal benefit? It turned out, he was.
Fall had decided — innocently, of course, he always claimed — to use his connections with Doheney and Sinclair to improve his situation. It started with a visit Sinclair made to Fall’s ranch. The two men, sitting in front of a warm fire, were discussing the Teapot Dome lease when Fall happened to mention that he sure wished he had some milking cows but unfortunately, he couldn’t afford them. No worries, said Sinclair. He had some he didn’t need. When he went back home to New Jersey Sinclair sent Fall a barn’s worth of farm animals including six heifers, a bull, two young boars, four pigs, and an English thoroughbred. Encouraged, Fall then thought, he later claimed, it would be a good idea to bring Sinclair in as a partner in his ranch, which hadn’t been doing too well. So he reoganized his ranch holdings under a new company and supposedly sold a third interest to Sinclair, Sinclair paying for his share with two installments of bonds. The first one was worth $198,000, the second $35,000. Sinclair also ponied up $36,000 to cover operating expenses and made two other payments of $10,000 and $25,000. Yet nowhere on any official document could you find Harry Sinclair’s name identifying him as a partner in the operation. The reason is obvious. Sinclair never was a partner. The money was paid to help grease the oil deal, a deal that garnered Sinclair $17 million in instant profits after his company’s stock went up in price. Fall kept the payments secret because they would look bad if disclosed (because they were bad).
Fall’s dealings with Doheney were also secret and just as brazen. One day Doheney had his son go to their brokerage house, Blair Company, to pull out a cool $100,000. In cash. Then, in a scene that sounds like it came from a Hollywood movie, the young Delaney put the money in a black satchel and headed over to Washington D.C.’s Wardman Park Hotel on Woodley Road where Fall lived and handed it over. Needless to say, the money wasn’t reported. On his next trip back home Fall simply packed the money along with his suitcase and off he went. In all Albert Fall’s dealings with his rich friends, Doheney and Sinclair, netted him a small fortune: $404,000.
While Charlie Forbes was cleaning out the Veterans Bureau and Albert Fall was making bank with his buddies in the oil business, the attorney general, Harry Daugherty, was busy using his office to help select businesses escape prosecution. The most egregious case involved the Wright-Martin Aircraft Corporation. Investigators had found that the company had failed to deliver aircraft bought and paid for during the war, defrauding the government of $2,267,342. It was an open and shut case. The company was supposed to deliver aircraft for the battle in France. The company never delivered any. Daugherty, however, decided not to prosecute. This infuriated the lead investigator, who resigned. What could possibly have been Dougherty’s reason? He never explained. But it may have been owing to his owning stock in the company. He owned 500 shares when he took office. Sometime during his tenure as attorney general he accumulated another 2,000.
That gives you an idea of Daugherty’s moral bearings. But it barely begins to suggest the brazen breadth of his larceny. A case which does involved the Alien Property Bureau. This was an office set up during World War I to confiscate enemy property. If you were German and you owned property in the United States the government claimed the right to take possession of it without compensation. Of particular interest were companies involved in war-related industries such as metals. One of these companies was the American Metal Company. Despite the name it was owned by a German family. In 1917 the Bureau confiscated the company and sold it to buy Liberty Bonds. This raised some $6 million dollars for the war effort, making it one of the bureau’s largest single acts of confiscation. (Half a billion dollars in property was confiscated in all during the war.)
After the war the German family that had owned the company wanted to be compensated. The American Metal Company wasn’t actually a German company, they claimed. A month before war broke out with the United States, the family had transferred the ownership of the parent company to a Swiss outfit. In their eyes this made the company Swiss. This was arguable since they conceded that the family actually retained ownership of the company. But this wasn’t what was so remarkable about the case. What was remarkable was that they didn’t have any paperwork to back up their assertion that the company had been sold and reconstituted as a firm based in Switzerland. The transfer allegedly had been made by oral agreement.
On its face this was about as weak a case as was possible. No paperwork? No proof? See you later. But in Washington under Harding there were ways to overcome a bad case. You just had to know the right people. The German family knew this but didn’t know who the right people were or how to get to them. So they asked around. Somebody suggested they should go see John King. It turned out he was exactly the right person to go see. For King, a GOP political hack, knew Jess Smith and Smith knew everybody who counted in Harding’s Washington. If you wanted to get things done, it was said, go see Smith. It wasn’t, in fact, entirely true. Smith gave off the appearance that he could get things done but often he couldn’t. While he knew everybody he didn’t have them all in his hip pocket. But he happened to have the one person who counted in this situation, his roommate at the Wardman Park Hotel (yes, the same hotel where Albert Fall had a suite). His roommate was Attorney General Harry Daugherty.
In a short matter of time Smith set up a meeting for the family with the head of the Alien Property Bureau and himself. One day later exactly the bureau decided the case in the family’s favor, awarding them an amount greater than the value placed on the company at the time it was confiscated. The family would get their money back plus interest. The payment was to be made in the form of checks and bonds. The checks came to: $6,453,979 and 97 cents. The bonds were worth $514,350. One more step was needed, however. The deal had to be approved by the United States government’s official approver in such matters. This was Attorney General Harry Daugherty. This turned out not to be a problem. Two days later he affixed his signature to the document. And that was that.
But that wasn’t the end of the story. There was a coda. To express their gratitude for the speed and size of the compensation package the German family decided their new government friends deserved a reward. They gave King, the party hack, $391,300 in bonds and $50,000 in cash. King, in turn, gave $50,000 to the head of the Alien Property Bureau, and $224,000 to Jess Smith, the man-about-town, who promptly put at least $50,000 into a mysterious joint account (“Extra No. 3”) which he and Attorney General Daugherty, his roommate, controlled. No doubt more made its way to Daugherty through other means.
One day in the summer of 1923, as Harding was making his way west by train across the country on a long and arduous speaking tour, he conferred with his secretary of commerce, Herbert Hoover, whom Harding had invited along on the trip. Hoover later recalled what ensued:
When we were a few days out, Harding asked me to come to his cabin. He plumped at me the question: ‘If you knew of a great scandal in our administration, would you for the good of the country and the party expose it publicly or would you bury it?’ My natural reply was ‘Publish it, and at least get credit for integrity on your side.’ I asked for more particulars. He said that he had received some rumors of irregularities, centering around Smith, in connection with cases in the Department of Justice. He had followed the matter up and finally sent for Smith. After a painful session he told Smith that he would be arrested in the morning. Smith went home, burned all his papers, and committed suicide.
Harding, troubled by what he had learned about both Smith and others (including Charlie Forbes, the official who’d fled to Europe), found sleeping difficult. He complained that he wasn’t feeling well, forcing the cancellation of many of his scheduled appearances. Nonetheless he carried on, traveling to Alaska, where he became the first president to visit the territory. On his way back, as his train headed to San Francisco, exhausted and worn down by a job he protested he wasn’t qualified to hold, he laid down on his bed, his head jerked, and he died.
Harding passed away before the worst of the Teapot Dome scandals became public. At the time so few of the scandals had come to light that he remained a respectable figure. Millions turned out to watch his funeral train go by. His body lay in state in the Capitol Rotunda on the same catafalque that had held Abraham Lincoln’s. His hometown in Ohio even made plans to remember him with a large 48 columned Greek-style memorial made out of white Georgian marble. Unfortunately, by the time it was ready, in 1927, the public had long since lost interest in him. Too much had happened.
Jess Smith, paranoid and afraid, committed suicide, of course. Charlie Forbes, the fellow who stole the Veterans Bureau blind, resigned and ultimately was prosecuted after returning from Europe. He spent eight months in prison. Albert Fall, the secretary of the interior, took the Fifth when he testified at a Senate hearing and was tried for conspiracy. He was sentenced to prison for a year. He was the first member of a presidential cabinet to be convicted of a crime in connection with his official duties. His business friends Sinclair and Doheney were also prosecuted, but protected by a phalanx of high-priced attorneys, managed to evade harsh penalties. Though Fall had been found guilty of accepting a bribe from Doheney, Doheney himself was acquitted of giving it to him. Sinclair got six months in the D.C. jail for criminal contempt in connection with an attempt at jury tampering. This was on top of a three month sentence for failing to answer questions put to him by the Senate. And Attorney General Daugherty? After being forced to resign he was tried twice and acquitted twice. Harding’s girlfriend Nan published a memoir in which she laid out all of the lurid details of their affair. She referred to their baby as The President’s Daughter, the title she gave her book.
Despite the scandal Ohio officials pressed for a grand opening of the Harding memorial in 1931. They invited Calvin Coolidge, who’d succeeded Harding as president, and Herbert Hoover, who’d succeeded Coolidge and was now the incumbent. Though Coolidge and Hoover had both served in the Harding administration, they agreed to accept the invitation only grudgingly. Warren Harding had by then become the president presidents wanted to forget — as did the country.
Rick Shenkman, the founder and editor of the History News Network, is the author of Presidential Ambition. His newest book is Political Animals: How Our Stone Age Brain Gets in the Way of Smart Politics (January 2016).