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Tea Pot Dome Scandal - History

Tea Pot Dome Scandal - History

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Misuses of power for private gain had been rampant in the Harding Administration. The extent of these infractions only became clear with the public disclosure of the "Teapot Dome Scandal." A naval oil reserve was leased to private individuals by the Secretary of the Interior. He was convicted and sentenced to a year in prison.

As the US Navy converted its ships from coal burning to oil burning it acquired a strategic reserve of oil in Wyoming and California. The Wyoming field was known as the Tea Pot Dome field. In 1921 President Harding issued an executive order transferring the control of the fields from the Navy to the Interior Department. In 1922 when the transfer was actually implemented Secretary of the Interior Albert Fall leased the fields without competitive bidding at a below market rate. Tea Pot Dome he leased to Harry F. Sinclair of Mammoth Oil, a subsidiary of Sinclair Oil Corporation and the California fields to Edward L. Doheny of Pan American Petroleum and Transport Company. Leasing the fields without bidding was legal, the problem was that Fall received bribes in return for what he did. Fall received a no interest loan of $100,000 and other gift valued at $400,000.

The scandal began to come to light when a competing firm wrote a letter to Senator John B Kendrick. Kendrick then introduced a resolution in the Senate to investigate the matter. The Senate Committee on Public Lands. By 1924 the basic outline of what had taken place had become clear. Fall was charged with accepting bribes and was eventually found guilty and served time in prison. Those doing the bribery were acquitted. In the meantime, the Supreme Court invalidated the lease and returned them to the Navy stating the Harding could not transfer the leases from the Navy.

The Teapot Dome Scandal was part of a larger pattern of misconduct that had taken place during the Harding Administration. In early 1923, Colonel Charles Forbes was found guilty of stealing from the government. It was estimated that he and his accomplices stole tens of millions of dollars in connection with the building of a Veteran's hospital.

Teapot Dome Scandal

Early in the Harding administration, Secretary of the Navy Edwin Denby persuaded the president to transfer responsibility of some of the Navy Department’s oil reserves to the Department of the Interior. Oil fields at Elk Hills, California, and Teapot Dome near Casper, Wyoming, were involved. Secretary of the Interior Albert B. Fall, a former senator from New Mexico, secretly leased the Wyoming reserve to oilman Harry F. Sinclair in April 1922 a few months later the California lands were similarly leased to Edward L. Doheny. Neither of these transactions was opened to competitive bidding. In 1923, a Senate investigation was opened by Thomas J. Walsh of Montana. It was found that Secretary Fall had received more than $400,000 in "loans" for assisting Sinclair and Doheny. The leases associated with the Teapot Dome Scandal were canceled in 1927, a move that was challenged by the oil companies. The Federal District Court of Wyoming held the lease valid, but the decision was reversed by the Circuit COurt and the reversal was upheld by the Supreme Court later that year on October 27. In 1929, Fall was convicted of taking a bribe, fined $100,000 and sentenced to a year in prison. His fall from grace earned him the distinction of becoming the first cabinet officer to be jailed for crimes committed in office. Doheny and Sinclair used their wealth to hire expert counsel and were acquitted in their own trials. However, Sinclair was later convicted on a lesser charge of contempt for refusing to provide testimony to a Senate committee. There was no reasonable suggestion that Harding either knew about this affair or profited from it. His failure was not greed, but rather making some poor choices for cabinet positions and failing to monitor them. The Teapot Dome Scandal was lasting blot on the record of his administration.

See other domestic events during the Harding administration.

Warren Harding's Surprise Nomination

Warren Harding had prospered as a newspaper publisher in Marion, Ohio. He was known as an outgoing personality who enthusiastically joined clubs and loved to speak in public.

After entering politics in 1899, he held a variety of offices in Ohio. In 1914 he was elected to the U.S. Senate. On Capitol Hill he was well-liked by his colleagues but did little of any real importance.

In late 1919, Harding, encouraged by others, began to think of running for president. America was in a period of turmoil following the end of World War I., and many voters were tired of Woodrow Wilson's ideas of internationalism. Harding's political backers believed his small-town values, including quirks such as his founding of a local brass band, would restore America to a more placid time.

Harding's odds of winning the presidential nomination of his party were not great: His one advantage was that no one in the Republican Party disliked him. At the Republican National Convention in June 1920 he began to appear to be a viable compromise candidate.

It is strongly suspected that lobbyists of the oil industry, sensing that enormous profits could be made by controlling a weak and pliable president, influenced balloting at the convention. The chairman of the Republican National Committee, Will Hays, was a prominent attorney who represented oil companies and also served on the board of directors of an oil company. A 2008 book, The Teapot Dome Scandal by veteran business journalist Laton McCartney, provided evidence that Harry Ford Sinclair, of the Sinclair Consolidated Oil Company, funneled $3 million to fund the convention, which was held in Chicago.

In an incident that would later become famous, Harding was asked, late one night in a backroom political meeting at the convention, if there was anything in his personal life that would disqualify him from serving as president.

Harding did, in fact, have a number of scandals in his personal life, including mistresses and at least one illegitimate child. But after thinking for a few minutes, Harding claimed nothing in his past prevented him from being president.

Teapot Dome Scandal

In 1920, Ohioan Warren Gamaliel Harding won election as President of the United States. President Harding’s legacy largely still is tied to the Teapot Dome Scandal. The scandal received its name from the government-owned oil fields in Teapot Dome, Wyoming. Oil lands in Elk Hills, Ca., also were included under the Teapot Dome umbrella.

The upshot of the Teapot Dome Scandal was the accusation that Harding’s Secretary of the Interior, Albert Fall, had bypassed the open bid process in awarding leases for government oil land to private oil companies. The practice of leasing government oil land was common because of the passage of the General Leasing Act under President Wilson.

Fall, who had been a well respected senator from New Mexico prior to his two-year stint in Interior, allegedly had routed the leases to two oil companies in return for a $100,000 gift. At the end of a lengthy Senate investigation and ensuing trial, he was convicted of accepting the bribe, sentenced to a year in jail and fined $100,000 one oilman spent six months in jail for perjury the other was acquitted of giving Fall the bribe.

Secretary Fall resigns in Teapot Dome scandal

Albert Fall, the secretary of the U.S. Department of Interior, resigns in response to public outrage over the Teapot Dome scandal. Fall’s resignation illuminated a deeply corrupt relationship between western developers and the federal government.

Born in Kentucky in 1861, Albert Fall moved to New Mexico in 1887 because doctors told him the dry desert air would improve his health. Fall thrived in his new home, quickly building up a large ranching operation near Las Cruces and investing in silver mining and other ventures. By the turn of the century, Fall was a well-respected and powerful western businessman, and he used his considerable resources to win a seat in the U.S. Senate when New Mexico became a state in 1912.

In Washington, D.C., Fall quickly discovered the enjoyable prerogatives of power. He made several powerful allies, including President Warren G. Harding, who appointed him secretary of the U.S. Department of Interior in 1921. As secretary of the interior, Fall was responsible for managing the government’s vast western land holdings in the public interest. Unfortunately, Fall’s close ties with western developers tempted him to abuse his position. Ostensibly acting to ensure adequate oil supplies for the navy in the event of war, Fall set aside a large oil deposit in Wyoming known as Teapot Dome. Secretly, he then began to sign leases with big western oilmen allowing them to exploit the supposed reserve.

When news of the secret leases leaked out, Fall claimed he had signed them with the best interests of the public in mind. Subsequent investigations, though, threw Fall’s integrity into question when they disclosed that many of his investments in New Mexico had recently collapsed, and he was on the verge of bankruptcy. Desperate for money, Fall had accepted “loans” of about $400,000 from the same oil men he granted access to Teapot Dome, two of whom were old friends from his New Mexico mining days. Fall insisted that the loans were unrelated to his granting of the Teapot Dome oil leases, but conservationists and government reformers were outraged. Such conflicts of interest were inevitable, they argued, when western developers were given control over federal agencies responsible for managing western natural resources.

The Teapot Dome Scandal

The Teapot Dome scandal of the 1920s involved national security, big oil companies and bribery and corruption at the highest levels of the government of the United States. It was the most serious scandal in the country’s history prior to the Watergate affair of the Nixon administration in the 1970s.

And this controversy was named for an oil reserve near a rock formation north of Casper, Wyo., that looked just like a teapot.

Events that led to the scandal began decades before when government and U.S. Navy officials, contemplating a new, global presence, realized they needed a fuel supply that was more reliable and more portable than coal.

During the Theodore Roosevelt presidency early in the 20th century, Department of the Navy officials aspired for an American navy that could sail all the world’s oceans, demonstrating the country’s newly found imperial powers. The U. S. Navy, bound by weight limitations with coal-fired ships, resorted to building coal-fueling stations around the world.

They watched carefully as other nations began development of petroleum-powered ships. Beginning in 1909, during the Taft administration, Navy administrators decided to convert the fleet to the more efficient petroleum. Ships would have no need for coaling stations. Once fueled, the petroleum-powered ships had far greater range.

The USS Wyoming, a battleship initially launched in 1900, became the first ship in the fleet to be converted to oil power in 1909. (The vessel was later renamed the USS Cheyenne when the new battleship USS Wyoming was launched in 1910.), As more ships were converted from coal, Navy officials grew more concerned about the long-term availability of oil. What would happen if oil were to run out? The Navy would be paralyzed.

Consequently, Navy administrators asked Congress to set aside federally owned lands in places where known oil deposits most likely existed. These “naval petroleum reserves” would not be drilled unless a national emergency made it necessary. One of the three petroleum reserves set aside was near Salt Creek in northern Natrona County in a place named for an unusual rock formation nearby—Teapot Dome. A dome is a geological formation that traps oil underground between impervious layers of rock, with the upper layer bent upward to form a dome.

Oilmen throughout the West coveted the opportunity to drill within these federally owned reserves. Soon after Republican Warren G. Harding was elected president in 1920, he appointed his poker-playing friend, U.S. Sen. Albert Fall, to be his secretary of Interior.

Fall, a rancher and New Mexico’s first U.S. senator, accepted the cabinet post. Within a few weeks, he convinced President Harding to allow transfer of the naval petroleum reserves from the Navy to the Department of the Interior, arguing that the department was “better able” to oversee the protection of these areas where oil was not to be produced, but kept in case of emergency.

What resulted became known as the Teapot Dome scandal, but even though the scandal gained its name from a Wyoming place, the wrongdoers were from elsewhere.

Secretary Fall, once the Teapot Dome oil field was under his control, made secret deals with two prominent oilmen, Edward Doheny and Harry Sinclair. Both men, close friends of Fall, paid him bribes to authorize them to drill in the three naval petroleum reserves—contrary to the letter and spirit of the law.

Back in Wyoming, independent oilman and later, Democratic Wyoming Gov. Leslie Miller became suspicious when he saw trucks with the Sinclair company logo hauling drilling equipment into the Teapot Dome naval petroleum reserve. He asked U.S. Sen. John B. Kendrick, also a Democrat, to look into the matter. Kendrick, sensing wrongdoing, turned the question over to a special Senate investigating committee.

Meanwhile, President Harding took a summer trip west, stopping in Wyoming, enjoying Yellowstone and continuing on to Alaska and, eventually, to San Francisco. While there, the President died suddenly. Some historians believe Harding escaped impeachment for his role in Teapot Dome by having the “good fortune” of dying as the scandal was unfolding. Of course, such a conclusion cannot be proven.

Fall was not so lucky. Following a lengthy Senate investigation, he was tried for accepting bribes. He was convicted and sent to federal prison, the first Cabinet-level officer in American history to go to jail for crimes committed while serving in office.

Both Sinclair and Doheny were exonerated of the main charge—giving bribes to Fall. As a newspaper reporter observed when the two wealthy oilmen were found not guilty, “You can’t convict a million dollars.” Sinclair was sentenced to a 9-month prison term not for bribery but for contempt of Congress, and for charges connected to his hiring of detectives to trail members of the jury in the original bribery trial.

Teapot Dome, the U.S. Marines and a President's Reputation

In 1922, Wyoming was invaded by the U.S. Marines. Four marines, to be exact. They were dispatched by Assistant Secretary of the Navy, Theodore Roosevelt, Jr., and joined by a few officials of the Department of the Interior and some Denver newspapermen to remove—at gunpoint, if necessary—an oil prospector’s crew from U.S. Naval Petroleum Reserve No. 3, better known then and now as Teapot Dome.

The Teapot Dome Oilfield lies in northern Natrona County, Wyoming, about 25 miles north of Casper. The field is six miles east of Teapot Rock, an eroded sandstone formation that formerly looked like a teapot. The rock is still easily visible from Wyoming Highway 259 about 12 miles south of the town of Midwest. Tornadoes and windstorms in the 1920s broke off what resembled a teapot’s handle and spout.

Early inhabitants

Before any prospectors sought their fortunes in the oil seeps, rocks, sage and dry creek beds around Teapot Dome, Native Americans lived and hunted in the area for millennia, and there is evidence of their use and occupation (e.g. rock shelters, cairns and hearths) in and around the Teapot Dome Oilfield. By the mid-1800s, conflicts with whites had broken out into sporadic warfare. The Bozeman Trail, a shortcut from the Oregon Trail along the North Platte River north to gold fields in Montana, became a focal point for conflict by 1865.

That trail cut northwest across the center of the Powder River Basin in what is now northeastern Wyoming—and across the northeast corner of the Teapot Dome Oilfield. The route was only used for a few years, however. Most of the traveling was done on the dry creek bed of Teapot Creek no traces of the trail are present at the Teapot Dome Oilfield.

The oil companies start production

The first report on the potential for oil in the area was at nearby Salt Creek in 1886, which eventually led to the development of the Salt Creek Oilfield adjacent and north of the Teapot Dome Oilfield.

The town of Casper was established in 1888 with the completion of a spur of a subsidiary of the Chicago and Northwestern Railroad. The town was located on the former Oregon Trail, near where the Army had maintained a post at a bridge over the North Platte River decades earlier. Natrona County was formed in 1890 with Casper as its county seat. After oilfields were discovered, Casper became Wyoming’s largest oil refining center.

After 1900, oil began to replace coal as the fuel source for railroad locomotives, as well as for the engines that powered oil drill rigs and pumps. The Navy and Merchant Marines began converting ships from coal to fuel oil and setting up refueling stations at naval bases.

Based on the oil discoveries in the Salt Creek Oilfield and concerns about securing oil for the U.S. Navy, the U.S. Department of the Interior declared in 1909 that all unclaimed land around Salt Creek would be withdrawn—that is, that no new government land would be available for occupancy and/or mineral claims.

Unlike in the Eastern U.S., in the West, the federal government owned the majority of the land. The land and mineral-claims laws that existed for agriculture and for gold, silver and copper mining were extended to cover petroleum exploration and drilling. Legal disputes over the government’s withdrawal of the lands around Salt Creek led in 1920 to the passage of new laws regarding petroleum. Oil companies were allowed to lease federal lands for oil exploration, while the government retained surface rights.

Still, there was overproduction, waste and lack of storage. The government attempted to enact conservation measures, but oil companies were self-regulated. As a result, these measures were largely ineffective until 1931, when President Hoover required the oil companies to coordinate activities to reduce waste and rapid depletion.

Meanwhile, larger companies had been edging out smaller ones. By 1910, two main companies, the Wyoming Oil Fields Company and the Midwest Oil Company, were well established on the Salt Creek Oilfield. By 1912, each company had built a refinery in Casper and had laid pipe from the wells on Salt Creek to the new refineries.

By the end of 1913, the Midwest Refining Company had bought, swapped for, or absorbed enough of the other interests to become the biggest company on Salt Creek. Midwest owned mineral claims, producing wells, pumping stations, pipelines, storage tanks and refineries. Most of its workers lived along Salt Creek in the biggest of the camps—a town that would become Midwest, Wyo.

The Navy steps in

At the same time, the U.S. Navy was rapidly converting from coal to oil-burning ships, and concern arose over the Nation’s need for a secure domestic supply of oil in case of war or a national emergency. In response to this concern, the Pickett Act of 1910 authorized the U.S. President to withdraw large areas of potential oil-bearing lands in California and Wyoming—then the most active states for oil exploration on federal lands—as sources of fuel for the Navy.

On July 2, 1910, President William Howard Taft set aside federal lands believed to contain oil as an emergency reserve for the U.S. Navy. This eventually led to an Executive Order by President Woodrow Wilson in 1915 designating the Teapot Dome area as Naval Petroleum Reserve No. 3. NPR-1 and NPR-2 were in Elk Hills and Buena Vista Hills, California, respectively.

All but 400 of the 9481 acres of the Teapot Dome Oilfield were littered with private claims however, many claims were invalid.

On May 23, 1921, President Warren Harding, by executive order, with the agreement of the secretary of the Navy, transferred administration of all naval reserves from the Department of the Navy to the Department of the Interior.

In 1921, Harding named New Mexico’s U.S. Senator Albert B. Fall, known as an opponent of federal conservation programs, the new Secretary of the Interior. Soon after taking office, Fall announced that the Naval Reserves would be leased for production in order to prevent private drillers on nearby claims from draining off the oil under the lands reserved for the Navy. Fall also argued that this would allow the Navy better access to fuel when needed, and that the Navy could trade the crude oil for refined fuel oil as necessary.

Fall leases the oil in a no-bid contract

In April 1922, Secretary Fall announced leases had been awarded for production of NPR -1 in the Elk Hills of California. He failed to announce, however, that on April 7, he, along with Secretary of the Navy Edwin Denby had also awarded lease rights for NPR-3 at Teapot Dome to the Mammoth Oil Company—without competitive bidding.

Mammoth Oil Company was controlled by Harry Ford Sinclair, owner of the large Sinclair Oil Company. The lease allowed the government to keep 12.5 percent to 50 percent of the oil produced from each well. Mammoth was to construct oil storage tanks on the Atlantic and Gulf coasts, and to construct a pipeline from the Teapot Dome Oilfield to pipelines farther east.

The lease terms were intended to secure fuel oil and its storage for the Navy, with a sub-text of supporting the Navy in response to recent threats from Japan, to avoid loss of oil by drainage to adjacent wells and to create a more competitive market, thereby securing higher government royalties from the Salt Creek Oilfield.

Secretary Fall avoided the government’s problem of having to clear rights of the doubtful private claimants by requiring Mammoth Oil to do so before the contract was signed. A subsidiary of Midwest Oil Company, meanwhile, had gathered control of all the nebulous claims, and charged Sinclair and Mammoth $1 million to clear the lease.

Theodore Roosevelt, Jr., sends in the Marines

An old friend and political backer of President Harding’s, James G. Darden, held claims on part of the Teapot Dome Oilfield that predated the Mammoth Oil Company lease by Harry Sinclair. Darden had entered the deal through the U.S. attorney general’s office, and in June 1922, he started drilling on land Secretary Fall had already leased to Mammoth.

When Fall, who despised Darden, discovered this, he demanded that Marines be sent immediately to Teapot to eject Darden’s “squatters.” President Harding wavered, but Fall pressed, and then spoke directly with Assistant Secretary of the Navy Theodore Roosevelt, Jr. and asked that the Marines be dispatched. Fall cited a non-existing legal precedent for this action.

Roosevelt complied, and on July 29, 1922, Capt. George Shuler, four Marines and a geologist left Washington, D.C. for Casper. There they were joined by some Interior Department officials and reporters from the Denver Post. They proceeded north to section 30 of the oilfield, the section in dispute, where they arrived on the morning of August 1.

The Marines, armed with carbines, pistols and enough ammunition to take on a small army of oilmen, encountered a foreman, who, along with his supervisor, capitulated promptly.

After installing “No Trespassing” signs all over the rig, the Marines lunched with the foreman and supervisor, and that was it. It was, says historian Laton McCartney, the only time that a U.S. state had been ‘invaded’ by the U.S. Marines.

The lease hits the press

The invasion was not, however, the end of the drama of Teapot Dome.

In April 1922, prior to public knowledge of the lease agreement with Mammoth Oil, Leslie Miller, a Wyoming oil man, future Wyoming governor and a Democrat, asked Wyoming’s U.S. Senator John B. Kendrick, also a Democrat, to find out if leases were available for the Teapot Dome Oilfield.

On April 14, the Wall Street Journal reported on the Mammoth Oil Company lease, noting government officials citing its advantages, but also revealing it was a non-competitive agreement. The newspaper seized on the lack of competitive bidding and implied that a conspiracy was underway between the Department of the Interior and the oilmen.

Senator Kendrick and Wyoming Congressman Frank Mondell, a Republican, asked President Harding that the lease be voided Harding refused. Some oil producers were in favor of the agreement, assuming the pipeline being developed would be beneficial. As the arguments against the lease continued, Mammoth Oil moved forward with exploration and development of the Teapot Oilfield.

Mammoth develops the field

Harry Sinclair formed Mammoth Oil Company for the sole purpose of developing and operating the Teapot Dome Oilfield. Development came quickly, with multiple contracts to several drilling companies for the first round of wells. The company anticipated an output of more than 20,000 barrels per day. Sinclair’s contractors constructed more than 600 miles of pipelines to support anticipated production in Wyoming—including his interests at Salt Creek Oilfield—and to deliver the oil to the mid-continent trunk lines of both the Sinclair Pipe Line and Prairie Pipe Line companies near Kansas City.

About mid-May 1922, Sinclair Oil’s chief engineer arrived in Casper and immediately began inquiring for oilfield supplies and derrick lumber for 20 drilling outfits. By the end of the month, he had let contracts for 20 derricks, the drilling outfits had been shipped and construction had begun on a large tent camp, fleets of trucks were supplying the field from Casper “and the place generally represented an ant hill in point of activity,” writes historian Rear Admiral C.A. Trexel. To start drilling 20 new wells at once on a largely unproven oil reserve “raised public interest to a high pitch,” Trexel adds.

Most of the oilfield was developed between May 1922 and March 1924, and in May 1923 Mammoth Oil Company brought in a gusher. During the field’s development, crews established eight residence/operation camps, laid telephone and water lines, built roads and bridges, drilled natural gas and oil wells and installed tanks and pipelines throughout the field. When fully developed, the field included approximately 84 producing wells. Production peaked in October 1923 at 4,460 barrels per day.

By the summer of 1922, workers were living in 15 large tents with pinewood floors, pine tables and iron-frame beds. Permanent camps were completed in 1923.

Mammoth eventually developed four camps. They housed pump stations, dormitories, multi-room cottages, mess halls, classrooms and other support structures including tanks for oil. Sinclair, Houston, Chanute and Hardendorf companies also erected small camps on the field. Most of the Mammoth and Sinclair camps had water, gas, electricity and telephones, and the main Mammoth Camp had a sewer system. The other companies’ camps had just gas connections, with water available only from outdoor pumps.

The number of structures suggests Mammoth could house about 125 workers, providing family housing for 12 of the workers. The Sinclair Pipe Line Company could house approximately 25 more workers, assuming four rooms per cottage.

Congress and the courts intervene

Meanwhile, back in the U.S. Senate, Sen. Tom Walsh of Montana, a Democrat, was leading an investigation of the Sinclair-Mammoth lease. Walsh was suspicious of the lack of competition, of the lease’s origin in Secretary Fall’s office, and of Fall’s accelerated personal spending. Walsh was also concerned that the Navy’s previous policy of oil-reserve conservation had been so quickly reversed.

On March 13, 1924, Federal court-appointed receivers took control of the Teapot Dome Oilfield and stopped drilling operations but maintained production from existing wells. Drilling rigs were moved into storage at Casper, and many employees were laid off. At the time the receivers took over operations, 82 wells had been spudded in, and 60 wells were producing oil, gas, or water.

Years of argument in the courts and in public opinion continued. In October 1927, the U.S. Supreme Court upheld a U.S. Circuit Court decision that the Teapot Dome lease had been fraudulently obtained. The oilfield was officially turned back over to the Navy on January 7, 1928. Production was by then down to 730 barrels per day, and the Navy returned to its conservation strategy of storing the oil in the ground.

The Navy took steps to shut down the remaining wells and return the entire Teapot Dome Oilfield to conservation status. This resulted in the mudding and abandonment of almost all the oil and gas wells in the oilfield and the sale and removal of the infrastructure and camps. The shutdown and sales ended the initial development of the Teapot Dome Oilfield.

In October 1929, Fall was found guilty of criminal conspiracy, fined $100,000 and sentenced to a year in jail. Sinclair was also tried. Oddly, he was found not guilty of bribing Fall but was sentenced 6 ½ months for refusing to testify and for contempt of court. Edward Doheny, another oil man, was tried for giving $100,000 in loans to Fall, but even more oddly, was acquitted. This entire episode permanently damaged Harding’s reputation and contributed to his administration’s reputation as riddled with controversy and shady deals.

Teapot Dome Scandal

In 1920, Ohioan Warren Gamaliel Harding won election as President of the United States. President Harding’s legacy largely still is tied to the Teapot Dome Scandal. The scandal received its name from the government-owned oil fields in Teapot Dome, Wyoming. Oil lands in Elk Hills, Ca., also were included under the Teapot Dome umbrella.

The upshot of the Teapot Dome Scandal was the accusation that Harding’s Secretary of the Interior, Albert Fall, had bypassed the open bid process in awarding leases for government oil land to private oil companies. The practice of leasing government oil land was common because of the passage of the General Leasing Act under President Wilson.

Fall, who had been a well respected senator from New Mexico prior to his two-year stint in Interior, allegedly had routed the leases to two oil companies in return for a $100,000 gift. At the end of a lengthy Senate investigation and ensuing trial, he was convicted of accepting the bribe, sentenced to a year in jail and fined $100,000 one oilman spent six months in jail for perjury the other was acquitted of giving Fall the bribe.

Tea Pot Dome Scandal - History

Within a few days after arrival of the ship at Pensacola, Doheny, Sr. arrived and visited the ship and a conversation with Captain John Taylor Robinson, its Skipper. By Robinson, what he thought of the Navy's handling of its oil reserves Doheny said "well it is being handled very well for the people you have for neighbors, but you were not going to have any property there in a very few years. Robinson later said that conversation from such a practical expert as Doheny had opened his eyes to the danger to the Navy from drainage by adjacent wells. In that conversation, something else must have been said for Doheny was detached within days from the ship on June 13, 1917 and assigned to duty in the Judge Advocates office in Washington, D.C. although he was not a lawyer. He spent the duration there.
Upon entry of the United States into the war, Doheny his family and his various companies did the patriotic thing, the Pan American Petroleum and Transport Co. and his Mexican Petroleum Company, bought two million dollars in Liberty Bonds, while Doheny Sr. and his family bought another 1.5 million dollars individually. More bonds were bought by Doheny and his businesses in subsequent Liberty Loan Drives. Doheny's companies also contributed one hundred thousand dollars to the war work of the Young Mens Christian Association while Doheny and his family contributed an equal amount. This patriotic generosity did not go unnoticed in Washington.
The war ended on November 11, 1918 and on November 17 Doheny was detached from the Judge Advocate's Office and sent to the submarine base in San Pedro, California to rejoin his family. He was released from active duty on January 14, 1919, but continued to participate in the Naval Reserve with the Lieutenant's commission until his murder on February 16, 1929. Civilian Life Upon release from active duty, Doheny joined his father's petroleum empire as a Senior Executive being a Vice President on the staff of the Petroleum Securities Corporation. He entered into the social life of Los Angeles becoming the President of the University of Southern California Alumni Association and was a great benefactor of the University and other causes, while his wife watched after a growing family. He enjoyed significant social contacts with the Los Angeles Athletic Club, the Los Angeles Country Club and membership on the boards of leading civic organizations. He became a trustee of the University of Southern California and was a generous contributor giving a two hundred thousand dollar endowment. The Washington Scene In 1920, there was a change in the administration in Washington. President Harding assumed the office and appointed various department officials. Edward Edwin Denby of Michigan and a former congressman was appointed by Harding to the Office of Secretary of the Navy. Denby, in turn, appointed Captain Robinson to head the Navy's Bureau of Engineering raising him to the temporary rank of Rear Admiral and placing him in charge of the Navy's Petroleum Reserve.
In the meantime, Albert Bacon Fall had become Secretary of the Department of the Interior and knowing Doheny's interests in acquiring additional domestic reserves began a scheme to have the petroleum transferred from the Navy Department to the Department of Interior under his control. Fall was pressured with financial obligations.
Earlier, President William Howard Taft had withdrawn the Public Lands for the use of the Navy in 1910 and by executive order created the Naval Petroleum Reserve consisting of 69,310 acres in the Elk Hills, Kern County, California and an additional 29,341 acres in the Tea Pot Dome area of Natoma County, Wyoming.
The Navy had converted from coal to oil burning ships by 1912 and the government wanted to be sure that petroleum reserves will be available if the commercial sources became scarce. Additionally, the availability of cheap government oil would act as a cap to extortionate prices charged by the commercial producers.
The fear of drainage from adjacent wells to Naval properties was a common fear and Secretary Josephus Daniels felt that under certain circumstances it may be necessary to lease parts of the Reserve. At his urging on June 4, 1920, Congress passed a law giving the Secretary of the Navy power to develop operate or lease parts of the Naval Reserve and giving him the power to sell or exchange petroleum products for the Navy, a small budget of half a million dollars was also appropriated for the project. By May 31, 1921, President Harding signed an executive order giving the Secretary of Interior, Fall, complete control of the Naval Reserves and a few weeks later Fall wrote to Doheny, "there shall be no further conflict with Navy officials" as he had told Denby, he would take complete charge, "he understands the situation and that I shall handle matters exactly as I think best and will not consult with any officials of any bureau of this department, but only with himself and such a consultation shall be confined strictly and entirely to matters of general policy".

Transfer of the petroleum reserves embittered powerful figures in the Navy Department. Fall decided to pacify he Navy brass by helping them deal with an old problem for many years the Navy had wanted to build petroleum storage depots at Pearl Harbor, Hawaii and along the Atlantic Coast, but with the downsizing of the Military Congress had denied these funds.
The Navy thought that it could fund the construction work with royalties from some small oil leases it had granted. Although that Congress demanded these royalties be deposited in the Treasury's General Fund, but in any event the storage depot project would cost two hundred million dollars which was more than the Navy's oil income.
Fall found a way around this suggestion that Navy take its royalties and certificates from the Oil Companies which could be used to pay for the construction of the depots, that is if more of the Naval Reserves were leased there would be enough money and certificates to pay for the construction of oil storage depots by the oil companies.
On November 28, 1921, Doheny signed a proposal to build the oil storage depot at Pearl Harbor in exchange for the Navy's crude oil. The very next day, Fall called Doheny and told him to go ahead and said the "loan" they had talked about was due.
Doheny then dispatched his son, Edward L. Doheny, Jr. and Doheny, Jr.'s employee and friend, Hugh Theodore Plunkett, to deliver the loan. The two men went to the brokerage house of Blair and Company withdrew one hundred thousand dollars in cash from Ned's account wrapped the money in paper and put it in a little black bag and took it to Fall in his apartment at the Wardman Park Hotel in Washington. Later Ned Doheny claimed that Fall had given him a receipt for the "loan".
On April 17, 1922, the government accepted Doheny's bid to build the Pearl Harbor storage facilities in exchange for its choice of any lease on the Elk Hills Reserve in exchange for building a storage capacity of 1.5 million barrels of fuel oil, he would receive 6 million barrels of crude oil. Later, another agreement was made by which Doheny agreed to build oil storage tanks and build a refinery in San Pedro, California (the Port of Los Angeles) and build a separate pipeline from the Elk Hills in Kern County, California southward to San Pedro in exchange for which Doheny got the right to lease the entire Elk Hills Reserve for 15 years.
The oil in the ground at Elk Hills was estimated at between 75 and 250 million barrels being worth at least one hundred million dollars. Fall signed the contract on December 11, 1922. This undoubtedly a sweetheart deal and within a matter of months indictments were issued. Congressional hearings were held and indictments were issued against Albert Fall, Doheny and Harry Sinclair (Standard Oil of Indiana and a beneficiary of the Tea Pot Dome lease hold).
The first civil case, to rescind the Doheny oil lease contracts came to trial on October 21, 1924. This was Admiral John Keeler Robinson, Ned's former Commanding Officer who portrayed the whole thing as a patriotic project to ensure that there was fuel for the Pacific Fleet. He said that Doheny had told him that his company would bid on the construction of the storage facilities and "what is more, I will tell you admiral", said Doheny, "If you get a bid from me or my company it will be one that won't involve one cent of profit to me".
One of Doheny's lawyers laid it on thick, "America can sleep tonight secure from danger of being overrun by a Mongol country because the patriotism of such men as E. L. Doheny, Edwin Denby and Admiral John K. Robinson and their work in establishing a great Naval base in Hawaii. These men have been humiliated and vilified because they endeavored to save you and me and our country".
The civil trials were followed by criminal trials against Doheny and Fall. Fall was convicted of accepting a bribe.
Doheny was represented by lawyer Frank Hogan, a successful criminal attorney, who once remarked the ideal client is a rich man who was scared. Doheny paid Hogan $1,000,000 for his work on the case and he succeeded in having Doheny acquitted, although Fall went to jail.
Summation: The close of the case was a masterpiece of forensic showmanship. He made an emotional appeal to the jury portraying his client as a pioneer or prospector or patriot and pointing to Ned Doheny, he declared, "That old man offered that young man's life upon the alter of patriotism. He went on the ships of war over the turbulent and submarine infested oceans in his country's service." He reminded the jury that Ned was an only son, "and you are asked to believe that when Edward L. Doheny near the end of his life corruptly intended to bribe Albert B. Fall, a Secretary in the Cabinet of Warren G. Harding, he deliberately and purposely used as an instrument, therefore his son, the pride of his youth, the hope of his maturity, the solace of his old age!! And yet, unless you believe that, you cannot believe there was a bribe. You cannot believe that there was a criminal mind and a corrupt heart motivating this thing you cannot believe in all the labored argument of our opponents. Do you believe that man is a crook? If he's a crook, convict him. But can you believe that his mind was so corrupt that he conceived bribery and that he had fallen so low that he selected his own son, whom a few years before he had given to the Navy, as an instrument of his bribery. Now Doheny says to you from the grave that which in life he said from this very witness stand. This indictment charges that young Doheny was a briber. Can you believe that? Can you believe that a man who a few years before had offered his only son to his country and fallen so low that he took him, the expected solace of his old age, and made him an instrument of his bribery? It isn't human to believe it!"

Doheny was acquitted in less than one hour after the jury was charged.
The United States Supreme Court handed its decision on October 11, 1927 declaring that the leases had involved fraud and were therefore rescinded as void. However, Sinclair and Doheny had to return to the government the Navy's Reserves at Tea Pot Dome in Elk Hills along with over 24 million dollars from Doheny's Pan American Petroleum Company and 500,000 dollars from Sinclairs Mammoth Oil Company. That ended the civil suits. Plunkett's Role Theodore Plunkett was born in Kansas and worked at a job changing tires in service stations. When World War I broke out, he served as a machinist on a submarine chaser. Returning from the War he went to work for the Doheny's and became a "secretary" of Ned Doheny. He was involved in many of the family's financial affairs and was a trusted gopher. He was given to nervous breakdowns and had been hospitalized at the Doheny expense.
At the time of the trial, Doheny, Sr. was still facing a trial in the criminal court for bribing Fall. Doheny knew that if Fall, who would be tried first were found guilty, he would have to convince the jury that he had not given the bribe that Fall had already been convicted of accepting. The case could be expected to hinge on the testimony of Ned Doheny and Hugh Plunkett who had actually delivered the money in the black bag. Obviously if Plunkett was diagnosed as psychotic and residing in sanatorium, Plunkett could not be called to testify about the bribe to Fall. Even if he were out of the institution, the testimony of a man with mental problems would lack credibility. Doheny, Sr. brought his friend and physician, Dr. Fishbaugh, who attempted to convince Plunkett to enter a sanatorium. That same day Mr. and Mrs. Doheny visited Plunkett at his apartment at Greystone in an attempt to convince him to enter the sanatorium and there was an argument. Later that evening when Plunkett showed up at the Doheny mansion. Ned decided the time had come to put him in a mental institution. The Los Angeles Times account said it was because of Ned's inability to quiet the mad man and his belief that a showdown on the plan to have Plunkett placed in a sanatorium for rest should be had then that caused Doheny to put in a hurried telephone call for Dr. Fishbaugh who later received the message at a Hollywood Theater.
On the evening of February 18, 1929, something happened. Plunkett apparently shot Ned to death and turned the gun on himself. There was apparently cover ups by the family physician and a delaying in reporting the events to the police department, with contrary reports of what really transpired.
Both Ned and Plunkett were the apparent victims of Old Man Doheny's ambition. It is with a bit of irony that the Teapot Dome Scandal caused Fall to be convicted of accepting a bribe and that Doheny Sr. was found innocent of offering to bribe. Search our Site!

Teapot Dome Scandal

The presidential administration of warren g. harding, from 1921 to 1923, was characterized by scandal and corruption, the most controversial of which was the Teapot Dome oil scandal.

Conservation was a popular cause throughout the first quarter of the twentieth century and was encouraged by various presidents. As a result, several oil reserves for the exclusive use of the U.S. Navy were established in Wyoming and California. The oil was kept in storage places called domes, one of which, located near Casper, Wyoming, was christened Teapot Dome due to a rock formation in the area that resembled a teapot.

Although many politicians favored the establishment of the oil reserves, others believed they were superfluous. One opponent of the oil policy was Senator Albert B. Fall of New Mexico, who sought to make the reserves accessible to private industry.

In 1921, Senator Fall was selected as secretary of the interior in the Harding cabinet. Authority over the oil fields was transferred from the Department of the Navy to the interior department, with the consent of Edwin Denby, Secretary of the Navy. Fall was in a position to lease the oil reserves, without public bidding, to private parties. In 1922, Harry F. Sinclair, president of the Mammoth Oil Company, received rights to Teapot Dome, and Edward L. Doheny, a friend of Fall and prominent in the Pan-American Petroleum and Transport Company, leased the Elk Hills fields in California. Fall received approximately four hundred thousand dollars in exchange for his favoritism.

Senator Thomas J. Walsh of Montana initiated a Senate investigation of the oil reserve lands at the recommendation of Senator robert m. lafollette of Wisconsin. Eventually, the U.S. Supreme Court declared the leases inoperative, and the oil fields at Teapot Dome and Elk Hills were returned to the U.S. government.

Sinclair served nine months in prison for contempt of court, but both he and Doheny were found not guilty of bribery. Fall, who had left the cabinet in 1923, was found guilty in 1929 of accepting bribes his punishment was one year in prison and a fine of $100,000. President Harding died in office in 1923, never aware of the notoriety of his administration.

Watch the video: History Brief: The Ohio Gang and the Teapot Dome Scandal (August 2022).