Wall Street History

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Wall Street History

10/20/2000

Teapot Dome, Part II

"Warren G. Harding was the kind of president American people
of all classes loved - kind, genial, decent, ordinary, human, one
of them."

--Historian Paul Johnson

As we pick up our story of the Harding administration and the
Teapot Dome scandal, it''s March 1921 and Harding has just been
inaugurated. For him, it was also Cabinet selection time.

Harding had some enlightened choices, principally Andrew
Mellon at Treasury, Charles Evans Hughes as Secretary of State,
and Herbert Hoover at Commerce.

But Harding also found room for his Ohio friends, to become
known as the "Ohio Gang." One of his worst choices was to
select his Ohio campaign manager, Harry Daugherty, to be his
new Attorney General. Daugherty promised Harding that he
would screen him from all the influence peddlers from Ohio that
would inevitably be seeking favors. "I know who the crooks
are, and I want to stand between Harding and them," boasted
Daugherty. [Source: Johnson, "A History of the American
People."]

Well, as we''ll learn later on, this wasn''t to be the case. But there
was one Cabinet selection that Harding made that had nothing to
do with Ohio, yet proved to be a colossal mistake; that being the
nomination of Albert Fall to be the new Secretary of the Interior.

Born in Kentucky, 1861, Fall went west as a young man. He
tried his hand at a variety of occupations including cowboy,
logger, miner and U.S. marshal. This latter position included an
encounter with the legendary gunfighter John Wesley Hardin,
which, of course, requires some embellishment.

Hardin was the most feared gunman in Texas, killing anywhere
between 21 and 40 men. If the second figure is accurate, that
would be the most by any single gunfighter in the history of the
Wild West. He was a quick-draw artist and perhaps the fastest
gun alive.

Hardin was eventually thrown in jail and, after 16 years as a
model prisoner, he settled in El Paso, Texas. It was here that he
met his end at the hands of policeman John Selman who, after
being threatened by Hardin on an earlier occasion, walked up to
the gunfighter in a saloon and shot him in the back of the head.
And who should defend Selman from his own murder charge?
Why if it wasn''t Albert Fall, who successfully won an acquittal
for his client. [Selman deserved to be convicted of murder.]

But back to our original intended story. Fall and Harding had
been best friends in the U.S. Senate; Fall representing New
Mexico, Harding, Ohio. Upon assuming the presidency, Harding
sought to take care of his friends and, thus, despite the fact that
Fall was hardly a conservationist, he was tabbed for Interior.

Albert Fall was known for his "florid" style. He had a thick
handlebar mustache and always wore a flowing black cape with a
broad-brimmed Stetson. Harding was charmed by this "Bad
Man from the Border." And Fall was so popular among his
Senate colleagues that he was confirmed for the position of
Interior Secretary by acclamation, the only time in American
history a Cabinet member has received such a vote of
confidence.

But Albert Fall was really a figure of tragic weakness. At one
time he was wealthy, but his extensive mine holdings were lost
in the Mexican Revolution, leaving him with little more than a
ranch in New Mexico. He desired the trappings of the rich.

During his mining days in New Mexico, Fall made two
acquaintances, Edward Doheny and Harry Sinclair, both of
whom ended up in the oil business. The three were to become
enmeshed in "Teapot Dome."

Back in the early 1900s, the government had begun to establish
oil reserves for the navy. Two examples of this were Elk Hill,
California (established in 1912) and Teapot Dome, Wyoming
(1915). As historian Robert Sobel writes, "At the time, the navy
was converting its fleet from coal to oil, and it was feared that
the supply of oil would be too small to meet future needs. Thus,
the need for the reserves was deemed pressing."

The oil reserves were administered by the Interior Department.
But once Albert Fall took control of the department, he brought
his old friends, Doheny and Sinclair, into the picture.

With the acquiesence of the Secretary of the Navy, a nanve man by
the name of Edwin Denby, Fall entered into an alliance with the
two. Doheny was chairman of Pan-American Petroleum and
Transport Company while Sinclair owned Mammoth Oil
Company. Fall then gave them some of the navy''s oil reserves
for development; Doheny was granted the Elk Hill holdings,
while Sinclair gained the right to develop Teapot Dome in
Wyoming. In return, the government obtained oil storage tanks
in Pearl Harbor, Hawaii.

But what made this a real scandal was that the negotiations were
conducted in secret, without competitive bidding, and that Fall
had received $400,000 in bribes from Doheny ($100,000) and
Sinclair ($300,000).

We''ll pick up the story next week.

Sources: See Part I.

Brian Trumbore

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