August 1965 | Volume 16, Issue 5
When the wheeling and dealing of some of President Harding’s closest friends was revealed, the mud spattered Cabinet members, the heads of oil companies, the chairman of the Republican party, and eventually the President himself
In the spring of 1920, very few realistic Democrats expected to win that autumn’s presidential election. Their party had been in power for nearly eight years, including the World War, and had accumulated all the assorted resentments invariably incurred in wartime. Their situation was not helped by the fact that President Wilson lay ill and and incapacitated in the White House while his wife and his doctor ran the Executive branch of the government.
The Republicans were correspondingly optimistic, as I knew better than most people. In that year I was managing editor of the liberal New York afternoon newspaper, The Globe , and naturally, as an editor who really preferred to write, I assigned myself the juicy job of interviewing all the potential presidential candidates of both parties, asking them identical questions so that their answers could be compared. I found most of the possible Democratic candidates lukewarm indeed. When I went to Miami to talk to Governor James M. Cox of Ohio, the cold-faced, weary, hard-driven man who finally got the Democratic nod, he breathed fire for public quotation: privately, he was pessimistic. He considered the nomination as hardly more than a plaque presented for meritorious past service, to be hung on the wall of his den along with the gilded golf ball with which he had once made a hole-in-one.
This impression was confirmed when I went out to San Francisco to cover the Democratic national convention. The delegates fell in love with the city—who doesn’t?—and they were happy with the excellent connections with bootleggers that their hosts had provided; but I found nobody who fell that the party had any real chance of winning. Having picked Cox to head the ticket, the delegates rather casually chose as his running mate a tall, athletic young unknown with a good political name—Franklin D. Roosevelt.
But there had been a very different attitude when I made my rounds among the GOP possibilities. General Leonard Wood, Governor Frank Lowden of Illinois, Herbert Hoover, and Senator Warren G. Harcling of Ohio all took the hope of nomination very seriously indeed, and none more so than the last.
I interviewed him in his suite in the Senate Office Building, and like everyone else I instantly perceived that this man, who talked like somebody invented by Sinclair Lewis, looked more like a President than any President who ever lived, with the possible exception of George Washington. With his leonine head of white hair, his huge, mobile, frank and friendly face, and his portly dignity, it was hard to see why Harcling had not been chosen by acclamation years earlier.
Two of his remarks in that interview stand out in my memory. The first was his answer to my stock question as to what he would do, if elected, about the American tariff system that was holding back the restoration of Europe and making it harder for the Allies to pay their war debts—even if they had wanted to. His reply startled me so that I asked him to repeat it, and wrote it down verbatim.
“The United States,” he said earnestly, “should adopt a protective tariff of such a character as will best help the struggling industries of Europe to get on their feet.”
The other memorable remark came when he was talking about the general tendency of people to spend more money than they could afford. He lumbered from his chair, opened the door a crack, and pointed to the back of a young woman sitting at a desk twenty feet away. “That girl,” he told me in a conspiratorial whisper, “owns a five-hundred-dollar fur coat. That’s twice as much, by George, as I can afford to spend on a coat for Mrs. Harding.” I have often wondered since if, with a touch of pixieish humor, he was pointing to Nan Britton, mother of a baby whose father, she claimed long afterward, was Harding himself.
Not long thereafter, following a deadlock between Wood and Lowden, Harding was nominated and went on to win the election handily, sixteen million votes to nine million. Then the country settled back to enjoy itself. “Normalcy,” as Harding called it, with characteristic ineptitude in the use of language, was the new order of the day, but it took almost a decade for the country to learn all the chief facts of what really happened during the Harding administration. He had brought with him to Washington one of the most astonishing collections of crooks, grafters, and blackmailers ever assembled. They came to be known as “the Ohio Gang,” though not all of them were from that state.
The key figure was Harry Micajah Daugherty, whom Harding made Attorney General. A corporation lawyer from Columbus who already had an unsavory reputation as a lobbyist and fixer, he had managed his friend’s presidential campaign. He had come from the little Ohio crossroads of Washington Court House, where his brother was president of a bank, and had brought with him a devoted henchman, Jess (or Jesse) Smith, who had owned a dry-goods store there. Smith, though he had no title, promptly commandeered an office in the Department of Justice near that of Daugherty and began issuing orders, orally or in writing, in the Attorney General’s name.
Smith and another man from Ohio rented what came to be known as “the Little Green House” at i6ï5 K Street, and it soon was a center of revelry almost twenty-four hours a day. For the right people, good liquor was available in unlimited amounts; much of it had been confiscated by the government, and sometimes it was delivered in official vehicles by armed guards in uniform. The Ohio Gang eagerly solicited bribes from bootleggers seeking immunity, men in jail who wanted to be released, men under indictment who wanted the proceedings dropped, and German owners of property sequestered during the war. Nobody knows what the take amounted to in the thirty months or so that the Ohio Gang was in the saddle, but it has been estimated that, in graft and waste, this group cost the country about two billion dollars.
What was the President’s role in all this? At the beginning, he certainly did not know what was going on. Harding did not frequent the Little Green House on K Street, where he would have met bootleggers, dope peddlers or their agents, women of easy virtue, professional gamblers, and other sordid types. He did, however, spend much time in a similar establishment on H Street. One of his cronies was Ned McLean, young multimillionaire playboy, whose family had come from Cincinnati; Ned obligingly rented this second refuge. If some underworld character proved hard to convince that a few hundred thousand dollars put into the right hands would give him a license to break the law, Jess Smith or one of his colleagues woidd take the doubting Thomas over to stand near the door of “the House on H Street,” to see Daugherty or some other high-level crook emerge from a presidential limousine and enter the house arm in arm with the President and his lady. This usually worked.
Just how much Harding knew of what was going on is not certain; but it is clear that he had some information about it. In the summer of 1923, just a few weeks before his death in San Francisco of a cerebral hemorrhage, he was visibly worried and depressed; he kept asking those about him what a President should do when he was betrayed by his friends.
The most famous and in some ways the most important of the scandals that came to light after Harding’s death had to do with oil, and is commonly known as “Teapot Dome,” from the name of one of the naval oil reserve areas involved.
In those days before nuclear power, there was concern lest our Navy in time of emergency might run out of its precious fuel. As early as 1910, Congress began setting aside special oil fields. Two of them, Elk Hills and Buena Vista, were only a few miles apart, near liakersfield, California; the third, Teapot Dome, was not far from Casper, Wyoming. (Geologists speak of a “dome” when the earth strata curve upward and then down again, a situation that may bring oil (lose to the surface.)
There were commercial fields nearby, and supposcdly there was some danger that the government oil might he drained oil. Accordingly, in 1920 Congress gave the Secretary of the Navy almost unlimited power to save it. He might drill new wells anywhere within any reserve, pump out lh” oil, and stoic it. He might permit private operators to drill inside these areas, but only on condition that a certain proportion of the oil be turned over to the Navy for storage.
One of Harding’s best friends while in the Senate had been Senator Albert K. Kail, of Three Rivers, New Mexico. With his western clothes, his luxuriant, drooping mustache, and his weather-beaten face, he looked like a movie sheriff. Fall had a terrible temper, which he made no elfort to control; there were rumors that as a youth he had “killed his man,” though he denied this. He had studied law, and President Cleveland had once put him on the Supreme Court bench of New Mexico Territory. Km he had to be removed when he abruptly left the courtroom one day to join the pursuit of a Hecing bandit. Harding actually wanted to make him Secretary of State—which would not have suited Fall’s plans at all. He persuaded the President to make him Secretary of the Interior instead.
Three months after the Cabinet was sworn in, Fall got Harding to transfer all the oil reserves from the Navy to the Interior Department, on the grounds that they would thus be better protected from depletion through private drilling nearby. Many people thought the transfer was unwise. Senator Robert M. La Follette of Wisconsin made a vigorous objection on the floor of the Senate; though he later gave his reluctant approval, Secretary of the Navy Edwin Denby protested to the President, but his letter mysteriously disappeared in transit.
Secretary Fall—promptly, secretly, and without the competitive bidding the law required—leased two rich oil reserves to two wealthy men. Elk Hills in California went to his friend of forty years, Edward L. Doheny, who had started with nothing and had accumulated about one hundred million dollars in oil holdings in the United States and Mexico. (Oddly enough, Doheny looked like a much warmer version of Fall, with the same ragged white mustache and weather-beaten face.) Teapot Dome went to Harry Sinclair, reputed to be more than three times as rich as Doheny. The Sinclair lease was for a minimum of twenty years and was to continue indefinitely as long as oil and gas could be produced at a profit. The government was to get a royalty of around sixteen per cent, and Sinclair was required to build some storage tanks and a pipeline. Doheny’s lease required him to build, without profit to himself, :i pipeline and ;i refinery in California and storage tanks at Pearl Harbor. Doheny and Sinclair expected to make at least one hundred million dollars each; since there was much more oil in the ground than anyone then kn:?w, their profits might have been larger still. If the oil lands had been leased under competitive bidding, the government’s share would have been much more than sixteen per cent; M. R. Werner and John Stair, in their book, Teapot Dome , estimate that it might have been worth as much as fifty million dollars.
News of the secret leases leaked out in a few days, and the Senate Committee on Public Lands and Surveys attempted to investigate. Fall brushed its members oil contemptuously, saying that he had taken his action in the interest of national security, which required him to suppress all the details. But the Senate was not satisfied, and in the fall of 1923 there began the long series of investigations and civil and criminal court actions that was to last almost a decade and to reveal the most shocking state of corruption since the Grant administration.
I spent a good deal of time in Washington during these investigations, writing a series of articles on the Ohio Gang for The New Republic , of which I was then managing editor. The reck of corruption hung over the city, apparent to anybody whose nostrils were reasonably sensitive. The spearheads of the Senate investigations were the two able senators from Montana, Thomas J. Walsh and Burton K. Wheeler. I sat in the committee rooms day after day and saw these men put together a jigsaw puzzle, many of whose pieces had been hidden by others with ingenuity and foresight.
Walsh was austere and carefully groomed, impeccable, soft-voiced, polite; he carried a formidable amount ol information in his head. Wheeler was more the rough frontier type, with tousled hair and a truculent attitude toward a squirming witness. Both of them had superlative abilities as detective-prosecutors. On the theory that the investigations were just a Democratic plot, Republican members of the committees did what they could to impede proceedings. The small importance that Washington attached to the investigations in the beginning is shown by the fact that the senators were unceremoniously thrown out of an excellent room into an inferior one because the ladies of the Senate wanted the good one for a tea party.
The members of the Ohio Gang dosed ranks against the attack and tried hard to thwart the investigation, in spite of the fact that Fall had repeatedly refused to let Attorney General Daughcrty give an official ruling that his actions were legal; Fall had a well-founded fear that Daugherty would want a big share of the loot.
William J. Burns had been brought from New York, where he was head of the Burns Detective Agency (today thoroughly respectable), to head the Bureau of Investigation, which was wholeheartedly on the side of the Ohio Gang. Any member of Congress who expressed public criticism was subject to harassment. Senator La Follette’s office was rifled; a detective went to Montana to investigate Senator Wheeler with the hope, as he openly admitted to one or two people, of finding something there that could be used to blackmail him. Senator Walsh was called a scandalmonger and a character assassin; his past life was investigated, his phones tapped, his mail opened; and anonymous letters threatened his life. His daughter, wheeling his three-year-old granddaughter along the street, was intercepted by a stranger who threatened her with harm if she did not force her father to drop the investigation. Female detectives hung around the ladies’ room used by Senator Walsh’s secretaries, hoping Io pick up some valuable gossip.
The members of the Senate who were engaged in lhe investigation refused to be intimidated and went ahead with their work. Their first big break came with news from New Mexico that Secretary Fall’s cattle ranch was showing remarkable prosperity, though his neighbors, because of depression and drought, were turning their cattle loose to survive as best they could.
There was a crusading journalist in New Mexico, Carl Magee, owner of the Albuquerque Journal , who had been having trouble with Secretary Fall for some time. Magee had exposed various ways in which the power of the Department of the Interior was being used for the benefit of private interests in New Mexico, which enjoyed such privileges as the improper use of public land. Secretary Fall responded by trying to ruin Magee, and he almost succeeded. Banks, under Fall’s influence, called Magee’s loans without warning; he was harassed with successive suits for criminal libel; people who feared Fall’s power were afraid to entertain Magee and his wife socially, or to be entertained by them. In one of the criminal-libel cases, Magee was sentenced to a year in jail, though he was pardoned by the Governor of New Mexico, a Democrat.
Magee now came to Washington and told his story. In 1920, he reported, Fall had been practically bankrupt and thinking of resigning from the Senate for that reason. He had paid no taxes on his property for the past eight years. Yet now, only a few months later, he was buying additional land worth $124,000, paying his debts (often with $100 bills), building new fences, pouring expensive concrete gutters.
Senator Walsh was interested in where the money had come from. Fall, pleading illness, did not appear on the witness stand, but sent a sworn statement that gave a ready explanation: He had with some difficulty persuaded Ned McLean to lend him $100,000. Senator Walsh decided to check this statement.
McLean was in a dilemma. He didn’t want to lie, but he didn’t want to tell the truth either. He was in Palm Beach, trying desperately to avoid returning to Washington and sending back coded messages to his aides. Finally, he sent Walsh a report saying that he had indeed lent $100,000 to his dear friend, Secretary Fall.
Walsh came near to accepting his word, but then the touch of the bloodhound in him made him decide to go to Palm Beach and see McLean. Face to face, the young playboy wilted and told the truth. At Fall’s request he had in fact written checks totalling $100,000, but it was understood that these were never to be cashed and they had actually been returned to him uncancelled. Fall could not have paid for his new land with them; where did the money come from?
It came from me, said Doheny, hurrying across the country to save Fall’s neck. He had loaned his old friend $100,000 in cash. He had sent the money by his son, Edward L. Doheny, Jr., who had carried a small black satchel full of greenbacks from New York to Washington. Was this not a large amount to be handled so cavalierly? “Not to me,” said Croesus, with a grand wave. “A bagatelle to me … no more than twenty-five or fifty dollars to the ordinary individual.” And had he demanded no security? Certainly not; but after long thought he remembered that Fall had given an unsecured note for the amount. Where was the note? Days later it was produced, but with the signature torn off. Why no signature? Doheny explained that he feared he might die suddenly and that his hardhearted executors might press Fall for the money at an embarrassing moment.
Doheny might have been able to bribe Fall out of cash on hand, but, as the investigating committee soon discovered, Harry Sinclair’s approach to this problem was different. He had decided to raise the needed money, and a great deal more, through a shady transaction at the expense of the stockholders in two oil companies, one of which was his own. On November 17, 1921, a group of wealthy oilmen met in a hotel room in New York City. Besides Sinclair they included Colonel A. E. Humphreys, who owned a rich oil field of his own in East Texas; Colonel Robert W. Stewart, chairman of the board of the Standard Oil Company of Indiana; James E. O’Neil of the Prairie Oil and Gas Company; and Henry M. Blackmer of the Midwest Refining Company.
All except Humphreys were cronies and were in on a simple scheme. A dummy corporation, the Continental Trading Company, Ltd., had been set up in Canada for the sole purpose of buying 33,333,3331/3 barrels of oil from Colonel Humphreys at the going rate of $1.50 a barrel, and instantly reselling it at an unwarranted profit of twenty-five cents a barrel to the companies of Sinclair and O’Neil. It was Colonel Humphreys who had decided upon the unusual number of barrels; the reason, he later sheepishly explained, was that this made the transaction come to a round fifty million dollars, the largest in his career.
With a profit of twenty-five cents a barrel, Continental stood to make over eight million dollars, which was more than ample for the illicit purposes for which the company had been formed. It actually did collect somewhat more than three million dollars. Then the Senate investigators began to get too hot on the trail: the company was liquidated, and all its records were destroyed. This money was turned into Liberty Bonds —an incredible blunder, since the bonds and their coupons were numbered, and the latter could be traced after they had been cashed. The law said that the Treasury Department must destroy these coupons after holding them a specified length of time; some of those that figured in the oil scandals were actually rescued by investigators only forty-eight hours before this would have been done.
The illicit profit was divided among the four oil men: Sinclair took about $750,000, Stewart $760,000, Blackmer $763,000, and O’Neil $800,000. (Humphreys got no cut, but of course he had made a neat—and legitimate—profit on the oil he sold to Continental.) At the time, none of them told the directors of their respective companies what was going on. Blackmer put his bonds into a safe-deposit vault; O’Neil kept his for four years and then turned them over to his company. In strict secrecy Stewart handed over his share to an employee of his firm, who hid the bonds in a far corner of a company safe. Sinclair took his money home. It was finally proved that he had given Fall a total of $304,000.
When the heat was really on, all these men left the country. Blackmer and O’Neil went to Europe and stayed there. Stewart went to Cuba, but finally came back to bully and berate the Senate committee investigators, refusing to answer their questions. In 1928 he was tried for contempt of the Senate and for perjury and was acquitted both times.
The Rockefeller family, of which John D. Rockefeller, Jr., was now the active head, owned nearly fifteen per cent of the stock of the Standard Oil Company of Indiana. John D., Jr., had tried unsuccessfully to get Stewart to make a clean breast of everything, and after his refusal, managed to get the stockholders to oust him at the next annual meeting. Stewart lost his job, with its $125,000 annual salary, and was forced thenceforth to scrape along on a pension of $75,000.
In January, 1924, after inconclusive testimony before the Senate committee, Sinclair had hurried off to Europe under an assumed name. But he came back some months later, for several reasons. His far-flung business enterprises demanded his presence; he believed his tracks had been well covered; and finally, he thought with some reason that he was too important an individual to be made to suffer seriously at the hands of the law.
In the meantime, the Senate committee had dug up some interesting evidence. Sinclair’s secretary had remarked casually to Archie Roosevelt, who was then a Sinclair employee, that Sinclair had turned over $68,ooo to the manager of Fall’s ranch. Archie, after resigning his position, told the Senate committee about the money, and the secretary was summoned. All a mistake, this gentleman explained. He had not said “sixty-eight thou’.” He had said “six or eight cows”—which anyone knows sounds much the same. Sinclair had in fact given Fall six heifers and a bull, and thrown in a horse and six hogs for good measure.
Since the committee still seemed skeptical, the secretary tried a new tack. He had indeed mentioned $68,000, but it was not money intended for the manager of Fall’s ranch. He had been talking about the transmission of money to the manager of Sinclair’s own farm—his celebrated racing stable.
Fall was by now out of the Cabinet, having finally been dismissed by Harding’s successor, President Coolidge. When at last they got him on the stand (over his doctor’s protest), he took the Fifth Amendment.
But by now too much was known to keep the story bottled up. With the utmost difficulty, Coolidge was finally persuaded to authorize court proceedings. He announced that he would appoint a prominent Republican and a prominent Democrat to act jointly in carrying through the investigation, and in prosecuting whatever cases seemed to justify it. His Republican was Owen J. Roberts, a little-known but reputable attorney from Philadelphia who had tried cases for the government during the war under the Espionage Act. Roberts’ Democratic colleague was former Senator Atlee Pomerene, who was now practicing law in Cincinnati. They had two able assistants, George Chandler and Ulrich J. Mengert, and four skilled members of the Secret Service, led by William H. Moran.
Roberts and Pomerene asked the courts to appoint temporary receivers to take charge of operations at Teapot Dome and the fields in California leased to Doheny, and to impound all the oil produced, until the cases had been decided in which the government was asking cancellation of the leases. This was done.
The two presidential appointees and their staff now began a monumental task of detective work, interviewing hundreds of people and checking bank records, brokerage accounts, and other files in half a dozen states and Canada. Finally, when they thought they had airtight evidence, they brought a group of civil and criminal actions, which were prosecuted with great skill. It was not the fault of Roberts and Pomerene that the results were rather disappointing as far as sending people to iail was concerned.∗
∗The national attention Roberts received was to be a factor in his appointment as Associate Justice of the United States Supreme Court in 1930 by President Hoover. Pomerene was considered for the Democratic presidential nomination in 1928, and later was chairman of the Reconstruction Finance Corporation.
Nothing could be more characteristic of the sickly moral atmosphere of the times than what happened when the three chief figures in the oil scandals were brought into court. Fall and Doheny were tried jointly for conspiracy, and were acquitted. The Washington jury, composed of average middle-class Americans, had no intention of sending a multimillionaire and a fine gentleman like Doheny to jail. Then Fall and Sinclair were also tried jointly for conspiracy, since the two crimes were substantially identical. They were also acquitted. Doheny was tried alone for giving the satchelful of money to Fall, and acquitted. Fall was tried for accepting the satchelful of money, but he was not a multimillionaire or a fine gentleman: he was found guilty and sentenced to a year in prison.
When Sinclair came back from Europe he had refused to answer questions by the Senate, but he made the bad mistake of failing to take refuge behind the Fifth Amendment, saying only that he intended to reserve his testimony until later. He was judged to be in contempt of the Senate.
There were other charges against him. During his trial for conspiracy, it was discovered that one juror had been bribed to vote for acquittal. This man indiscreetly told a friend that he had been promised, in a phrase that became famous, “a car as long as this block.” He also hinted darkly that he was to get some cash. The friend knew a reporter on one of the Washington newspapers, told him about it, and arranged a meeting between the juror and the reporter. They met in a saloon, the reporter’s occupation being concealed, and the juror repeated the substance of the story. The reporter promptly informed a representative of the prosecution.
Roberts and Pomerene also learned that at the beginning of the trial a horde of private detectives had been sent down from New York and assigned to shadow each member of the jury to learn all that could be learned about them. These agents, employees of the Burns Detective Agency, assumed new identities and worked with military precision, turning in daily reports that were co-ordinated at a central headquarters in a Washington hotel room.
One of the detectives, William J. McMuIHn, was ordered to assist in a frame-up that would involve Norman Glasscock, one of the jurors, and Horace Lamb, a lawyer in the Department of Justice. The spies knew the license numbers of the automobiles of Glasscock and Lamb; McMullin was to swear that he had seen these two cars parked side by side on a given day at the Potomac Flying Field, and the occupants conferring. This was of course entirely false. The plan was that if the trial seemed likely to produce a verdict of guilty, McMullin was to come forward with the charge of improper contact between a juror and a Department of Justice lawyer, which would force a mistrial.
But Sinclair’s forces had picked a poor choice for skulduggery in McMullin. A former New Jersey state trooper, he was sickened by what he had been asked to do. He made contact with former Governor Gifford Pinchot of Pennsylvania, his home state, and told him the story. Pinchot took it to representatives of the prosecution, who promptly made McMullin a double agent. He was to do everything that Sinclair’s representatives told him to do, but he was to make a secret daily report to the prosecution of what was going on.
Armed with this information, representatives of Roberts and Pomerene raided the headquarters of Sinclair’s detectives and seized carbon copies of a mass of field agents’ reports. As a result, they were able to subpoena scores of individuals who had knowledge of, or who had participated in, the spying on the jurors.
Under orders from the prosecution, McMullin executed the false affidavit about Glasscock and Lamb. Before it could be used, however, the government men told the judge about the bribery of the juror. There was indeed a mistrial, though not under the circumstances Sinclair had anticipated.
The oilman’s attorneys, seeking to turn public opinion against Roberts and Pomerene, produced McMuIlin’s affidavit. The prosecution promptly revealed that he had been a double agent and released the evidence showing that the affidavit was false. Sinclair’s attorneys now tried desperately to smear McMullin, digging up and publishing every unfavorable fact they could find about his past, but with little success. Fearing for his safety, the government gave him a bodyguard.
Some time later Sinclair was tried again, and found guilty of contempt of court. He was given six months in jail, in addition to the $500 fine and three months in jail he had received for contempt of the Senate.
But this was not the end of the tale of the Liberty Bonds, the profits from the only business deal ever made by the fabulous Continental Trading Company.
Will Hays, a smiling chipmunk of a man, had been Republican National Chairman in 1920, and had rashly promised that campaign contributions would be limited to $1,000 from any individual; the result was a deficit of $1,200,000. After he had made his deal with Fall, but before it was exposed, Sinclair felt it would be politic for him to make a substantial contribution toward erasing the deficit. Yet it was obviously undesirable for a single individual to give a large sum, especially an oilman who was in a position to get favors from Republican government officials.
Senator Walsh somehow picked up a rumor that Sinclair had made a very large contribution. Will Hays, who had been made Postmaster General by Harding, and then had become czar of movie morals, was summoned to the witness stand. Unluckily, Walsh’s information was wrong in one detail. It said that Hays had been given not Liberty Bonds, which was a fact, but bonds of the Sinclair Consolidated Oil Corporation. This enabled Hays to deny the whole transaction. Asked whether Sinclair had made a private loan to Hays himself, he refused to answer on the ground that this was a personal matter.
What had happened was this: Sinclair had turned over to Hays $260,000 in bonds, part of his profits from the Continental Trading Company; $75,000 of this was supposed to be a contribution, and $185,000 (in theory) a loan. Hays had then approached several wealthy men and asked each of them to turn over a substantial sum of cash to the Republican National Committee. Each man would in turn be given Liberty Bonds in the same amount to hold as security. If and when the loan was repaid, he would give back the bonds. As far as Hays was concerned, there was of course little or no intention of ever repaying the “loans”; they were simply a device to conceal the large gift from Sinclair. T. Coleman Du Pont, who had been treasurer of the national committee, received bonds worth $75,000; John T. Pratt, a wealthy New Yorker, $50,000; John W. Weeks, a millionaire Bostonian and Harding’s Secretary of War, $25,000. Fred Upham of Chicago, who was treasurer of the Republican National Committee in 1923, took $60,000 worth and sold them to various rich Chicagoans for cash.
On the witness stand in 1924, Hays mentioned only the $75,000 Sinclair contribution. In 1928, when the government knew more about the transaction, he was summoned again and confessed to the $185,000. And why had he kept silent four years earlier? “Nobody,” said the moralist indignantly, “asked me about any Liberty Bonds.”
Another man who figured in this episode was Andrew Mellon, Secretary of the Treasury. A multimillionaire Pittsburgh banker, he had inherited a fortune, greatly expanded it, and while in office had reduced the national debt by one third, from the gigantic sum of twenty-four billion dollars to sixteen billion dollars.
An investigator for the Senate committee found in the personal files of John T. Pratt, who had died some time earlier, small slips of paper that had on them in microscopic writing the names of several wealthy men, with a sum of money written after each one. In the 1928 investigation, the cashier for Pratt’s estate, V. E. Hommel, was asked to look at these names and read them aloud to the committee. He read the first one clearly enough; it was “Weeks.” The next name he professed to be unable to read. He thought it was the word “Candy.” When Senator Gerald P. Nye asked whether the word might not be “Andy,” Hommel admitted it might be, but had no idea who that could be. The spectators in the committee room laughed; there was only one famous Andy in the whole country. Mr. Mellon was now put on the stand and admitted that Hays had indeed sent him $50,000 in Liberty Bonds, suggesting that he regard them as security for a loan by himself of the same amount to the Republican National Committee. Mr. Mellon smelled something disreputable about this proposal, and instantly sent back the bonds, at the same time making an independent contribution of !50,000 of his own to reduce the Republican deficit. And why had he waited so long to tell about this? Like Hays, he was indignant; nobody had asked him.
Year after year, the government went on fighting to unravel the harm that Fall’s greed had produced. Case after case was fought through to the Supreme Court. The oil leases were at last vacated on the ground that fraud and corruption had been employed. Sinclair had to return to the government more than twelve million dollars, and Doheny, almost thirty-five million. (Doheny had spent about eleven million on storage tanks at Pearl Harbor, for which he was not reimbursed.) Sinclair had also obligated himself to pay large sums to a group of blackmailers who had learned early in the game that there was something fishy about Teapot Dome. These blackmailers included the two notorious owners of the Denver Post , Frederick G. Bonfils and H. H. Tammen, who softened up Sinclair by publishing many articles raising questions about the Teapot Dome lease; after he had agreed to pay them off, the articles stopped. The blackmail, most of which was to come out of the profits of Teapot Dome, amounted in all to more than two million dollars.
Doheny died in 1935 at seventy-nine and Sinclair in 1956 at eighty; neither man ever publicly admitted his guilt, nor did Fall, who died in 1944 at eighty-three. Blackmer finally came home from Europe in 1949, at the age of eighty, to face the music; he was immediately arraigned on charges of tax evasion and perjury. He was fined $60,000, and he owed nearly $8,500,000 in unpaid back taxes, penalties, and interest. He finally settled with the government for about $3,600,000, and the charge of perjury was dropped.
O’Neil died in France in 1932 at sixty-four. Seven years earlier a doctor had told him, erroneously, that he had only a year or two to live, and he therefore made a secret trip to Canada. There he told two officials of his company about the bonds he was holding, and turned over the bulk of them; he had cashed a few —by inadvertence, so he said. Ned McLean, who became an alcoholic, was declared incompetent and was put into a mental institution, where he died in 1941 at the age of fifty-five. Colonel Stewart died in 1927 at eighty.
Little by little over the late nineteen twenties other scandals of the Harding regime became known. One of the worst of them centered around Charles R. Forbes, whom the President had made head of the Veterans’ Bureau. The price of each new veterans’ hospital planned under his regime was to be padded by $150,000, of which Forbes took $50,000 while the contractors split the rest. Sites were bought at four or five times their actual value, and Forbes demanded and got his cut. He also bought staggering quantities of supplies at inflated prices, with the understanding that he receive a kickback. Finally brought to trial, Forbes got two years in prison and was fined $10,000. Will Irwin, who made a careful study of the episode, said he had cost the United States not less than 200 million dollars.
Another notorious figure was Harding’s brother-inlaw, Heber Votaw, an ex-missionary from Burma, whom the President made Director of Federal Prisons. In his regime there was a huge increase in the bootlegging of narcotics to prisoners; Votaw’s office tried to hamper efforts to investigate and remedy the situation. When the director of the Atlanta Penitentiary complained, he was fired. With the death of Harding, his protector, Votaw’s days in office were numbered. There was insufficient evidence against him to impress a jury, and he was presently allowed to slip back into obscurity.
Of all the Ohio Gang, Harry Daugherty was the most brazen. With scandals exploding all around his head, he refused after the death of Harding to resign his post. Coolidge, characteristically, sent somebody else—Chief Justice William Howard Taft—to suggest this; the idea was coldly rebuffed. Finally, the odor of scandal became too strong, and Daugherty was forced out. When he came to trial at last, he refused to take the stand and invoked the Fifth Amendment.
It developed that a year earlier, Harry had gone to Washington Court House and had burned many records, some of them going back as far as 1916. The theory he circulated was that he did this to protect the good name of the dead President, since the records would tell both of financial irregularities by Harding and of his clandestine love life. Senate investigators were able, however, to discover that $75,000, its source unexplained, had been deposited to Daugherty’s account at a time when he swore on his income-tax return that he had no property. Also on deposit in the bank was $63,000 for Jess Smith, $50,000 for Mal Daugherty, and smaller sums for other members of the Ohio Gang. This bank had been for them what the cave was for Ali Baba’s forty thieves.
When the Senate committee tried to subpoena brother Mal, he fought all the way to the United States Supreme Court to avoid testifying. When he was cited for contempt of the Senate, an obliging judge, sitting in Ohio, set him free. His bank later failed with a loss of 2.6 million dollars, ruining a large proportion of the people around Washington Court House. (This was of course before the days of the Federal Bank Deposit Insurance Corporation.)
Harry Daugherty had been indicted with Thomas W. Miller, Alien Property Custodian, for having accepted bribes to turn back to a dummy Swiss corporation a large part of the assets of the American Metals Company, a German-owned firm in the United States, and I covered the trial for The New Republic . Daugherty looked, as always, shifty, squirming, and oily. Miller was thin-faced and sober, with, as I remember, a pincenez like that of Woodrow Wilson; he sat bemused, as though wondering what in the world he was doing in the prisoner’s dock. Well he might: He was a Yale graduate, from a good Philadelphia family, with an impeccable record until he went to Washington and came under the evil spell of the Ohio Gang.
The dummy Swiss corporation had paid $441,000 in bribes, of which Miller got $49,000 and Daugherty at least $40,000; where the rest went was never made clear. Miller was sentenced to prison, served some time, and was pardoned. More than fifty million dollars in German assets illegally released by his office was eventually returned to the U.S. government. In Harry Daugherty’s case, two successive juries disagreed, and he was able to boast that he had never been convicted. In 1924, after being forced to resign from the Cabinet, he retired to a pleasant life in Ohio and Florida. He died, unrepentant, in 1944.
Two members of the Ohio Gang had committed suicide even before Harding’s death. Charles F. Cramer, legal adviser to the Veterans’ Bureau, wrote a letter to the President and then shot himself. (Harding refused even to look at the letter, and it later disappeared without any revelation of its contents.) Jesse Smith, Daugherty’s shadow, was found dead one day in 1923 with a revolver beside him. Though cynics argued that he had been murdered, there is no doubt that he had been deeply depressed because both Harding and Daugherty had cooled toward him, had in fact exiled him back to Ohio.
Could we have a repetition of the Harding or Grant scandals today? It seems to me unlikely. The Grant and Harding administrations had several elements in common, and I feel that all of them, in combination, are essential for wholesale corruption. First, you must have a period of moral relaxation such as is common after a big war. Second, you must have a President in the White House who is complacent, ill-informed, and a poor judge of the integrity of his close friends. Third, and perhaps most important, the country must be unaware, before electing him, of these aspects of a nominee’s character.
Today, every serious candidate for the Presidency lives under intense scrutiny by magazines and newspapers, which in general do an enormously better job than they did forty-five (or ninety-seven) years ago. He also lives under the fierce white light of the television cameras, which have an uncanny way of revealing the things about a man that he would prefer to have concealed. If the media for mass communication do their work properly, we ought to be secure against the possibility of another Ohio Gang.