1920 (33 page)

Martin agreed. The attention he paid, however, was not close enough. At nine o'clock on the first night of his assignment, which was the day Smith learned he wasn't going to Alaska, Martin said goodnight to his temporary roommate, who claimed he was tired despite the early hour. Martin said Smith did not seem distracted, did not seem depressed, only tired. He went to his room, closed the door, and Martin stood against it listening for several minutes. He heard only the sounds he expected to hear: a man undressing, a bed being unmade, teeth being brushed, a desk light being turned out. For the first time that day, Martin relaxed. He went to an adjoining room where he would spend the night. It passed without incident.

The next morning, May 30, Martin was awakened suddenly by a sharp, familiar noise. He was foggy and initially could not place it; then, in an instant, he did. He had heard similar bangs all too many times before. He told police that he dashed through the doorway into Smith's room and found the body. Still in his pajamas, Smith had fallen with his head in a wastebasket, a revolver in his hand, a bullet hole in his head.

“Mystery had surrounded Smith's death,” says Dean, “because there was no autopsy, and he had burned all of his personal papers just before his death.” And, of course, mystery meant even more whispers in Washington, a roar of them. Had he
really
killed himself? To those who knew of Smith's fading status in the Harding administration, his health problems, and the crimes he had committed, crimes that might be revealed at any moment, the answer was a resounding yes.

By committing suicide, however, he had created repercussions at the highest levels of government, making his superiors fear that their own crimes might soon be revealed. The cover story, quickly decided upon, is reviewed by Robert K. Murray: “Although Jess Smith's suicide was more eloquent than words in indicating the creeping malaise affecting the administration, both Harding and Daugherty pretended that nothing serious was wrong. They turned aside queries about the rumors of corruption by claiming that Smith's death was due to a mentally unbalanced condition brought on by diabetes, and nothing more.”

It seemed to play. The papers went along with it and the populace thought it was a shame that Smith had been afflicted with a disease so terrible that he could no longer live with its torments.

THE LAST TWO MAJOR FELONIES
during Harding's administration were not discovered until after he had passed away. Both were examples not only of scandalous activity but, given the person involved in one, and the audacity on display in the other, which could easily have compromised national security, they were the most surprising of all the criminal acts in which the federal government engaged early in the twentieth century.

After weeks of speculation that most Washingtonians found hard to believe, despite the eagerness with which they repeated it, Attorney General Harry Daugherty was indicted on charges of fraud. Listed on
the indictment with him was Colonel Thomas W. Miller, a former war hero and former congressman. The two men were accused of having been “illegally transferring a German-owned American subsidiary of American Metal Company to a syndicate that paid [Miller] $50,000 and Jesse Smith $224,000, of which $50,000 ended up in a joint account belonging to both Smith and Daugherty. When government investigators tried to get the records for the account, Daugherty saw to it that they couldn't.”

Miller was fined $5,000, meaning, one supposes, that he came out $45,000 ahead, and sentenced to a year and a half in jail, meaning that he came out eighteen months behind. About Daugherty, the jury could not make up its mind, in large part because of the blustering sanctimoniousness of his denials and the eminence of his office. In addition, his claim that he could not take the stand because he was protecting the memory of the late President Harding was a master stroke of public relations—if not of logic—making him seem, at least to some, more honorable than evasive. Through his attorney, he “maintained that he had been unaware of Smith's activities until shortly before the suicide and that the ‘Reds' were after him.” Another good idea; when in doubt, blame the Bolshies. It was as effective a defense in the twenties as it was during the heyday of the Cold War.

Only access to Daugherty's bank records could prove or disprove the charges against him, but the attorney general claimed that to grant access would be a breach of privacy. He was standing on principle, he claimed, not hiding his guilt. Initially, the court ruled in his favor.

But the prosecutors refused to give up. They finally convinced the judge that, given the crucial role Daugherty played in the American criminal justice system, the records should be made available to them. If they were, prosecutors declared, the case against Daugherty would be proven, one way or another, beyond doubt; the American people, they concluded, had a right to know whether a serious breach of faith had been committed by the nation's foremost guardian of the law.

Finally the judge agreed. But it didn't matter. The records, it turned out, were missing. No one could offer an explanation, certainly not Daugherty, not even anyone at the bank—but they had vanished. Without them, the
prosecution's case crumbled. Charges against the attorney general were dropped; but that he was responsible for the absent records few people doubted, and his reputation, as a consequence, plummeted.

He remained Harding's friend, though, perhaps his best friend among members of the Ohio Gang. He stayed on as head of the Justice Department whose standards he had been mocking since his first day in office.

He did not, however, go gentle into the controversy that engulfed him. His response to those suspicious of his actions was a combination of vitriol and arrogance. For the rest of his life, whenever he was asked about the charges against him and the conveniently missing bank records, he put the glibness of public relations behind him. “If anybody does not like my position,” he wrote to a friend, recapitulating his attitude toward one and all, “you can tell them to go to hell.”

EVEN STUDENTS WHO HAVE SAT
through the kind of high-school history classes so tedious that they end up making it impossible for a historian to find a place on the best-seller lists have heard of Teapot Dome. But for most of them, the knowledge doesn't go much further than the name. Some people know that whatever it was happened during the Harding administration. Fewer know it had something to do with oil, specifically the illegal sale of leases. And fewer still know the cabinet officer who made it all happen. Still, the odd phrase “Teapot Dome” has a resonance to it that transcends the absence of meaning, the ignorance of details. For what many people
do
know is that the words refer to what a majority would consider the second most outrageous scandal in the history of American politics.

Three oil reserves in the western United States had been set aside for future use by the military, especially the Navy. Two of them were in California, at Elk Hills and Buena Vista, and the third lay under a rock formation in Salt Creek, Wyoming, shaped somewhat like a teapot resting atop a dome—in this case, a dome covering a huge underground pool of oil, its quantity virtually unmeasurable. With the shadow of the Great War still draped over the nation, the reserves were considered vital to the country's defense, indispensable in the event of future hostilities. They were certainly not to be treated with the same cavalier disrespect as supplies in a Veterans' Bureau storehouse.

But one more member of the Ohio Gang had a different idea, finding in the oil an opportunity for self-enrichment that was simply too good to overlook. Albert B. Fall, another good friend of President Harding who, as a United States Senator from New Mexico, was a well-known critic of the previous petticoat government, “was regarded as above suspicion by friend and foe alike. The only opposition to him,” according to Eugene P. Trani and David L. Wilson, “came from those who opposed his conservation views, not his morals. A few rabid conservationists, such as Gifford Pinchot, maintained a drumfire of criticism against the Fall appointment, but they were not a large enough group to matter. From everybody else's point of view, the appointment was perfectly logical.”

The appointment was for Fall to be secretary of the interior, and the nomination passed both houses of Congress easily. After which, one of Fall's first acts was to arrange to have two of the three oil reserves transferred to his department from the Department of the Navy. The move should have seemed a suspicious one; instead it seemed a change of heart. It appeared as if Fall wanted to atone for past environmental indifferences by deciding to protect the oil reserves now, keep an eye on them himself. It was the perfect con, yet another of the many that stained this period in American history.

But it gets worse. As it turned out, it was not the Department of the Interior that would oversee the reserves—for after they were under Fall's jurisdiction, he promptly sold their leases to private investors, an act of criminal irresponsibility under any circumstances, but all the more egregious because the leases were sold without being put up for public bid. Of course, had Fall announced that he was opening the bidding, he would have been admitting that he was up to no good. Even Harding would have had to step in and tell him he couldn't do something like that. For this reason, the bidding was
so
private that there was really no bidding at all. The cards had been cut the moment Fall acquired the leases.

Buena Vista, the smallest of the three reserves, remained under control of the Navy. The Elk Hills lease went to a longtime friend of Fall named Edward Doheny, a respected and experienced figure in his field, the president of the Pan American Petroleum & Transport Company. Teapot Dome went to another well-qualified executive, the president of Sinclair Consolidated Oil, Harry F. Sinclair.

Both Doheny and Sinclair had dealt with drainage problems in the past, and both had the know-how and equipment to do so in the future. It was for this reason, Fall claimed, that he wanted oilmen, not government or military officials, to oversee the reserves, to make sure the oil would not seep beyond the bounds of public ownership and onto private property, where it would not only be wasted, but, if it did damage to the water supply on an adjoining ranch, might subject the government to legal action. Doheny and Sinclair would not let that happen, Fall confidently announced as he granted the leases. The oil was safe. From everything but greed.

Some accepted Fall's explanation at face value. Others, however, saw the risk immediately. The oil, United States Navy oil, was henceforth no longer under the Navy's control, but rather was the property of private, profit-making enterprises. Conservationists were enraged and insisted on hearings before the transfer could be finalized. Reluctantly, the Senate agreed. “When the hearings commenced,” John Dean reveals, “there was so little interest that [Thomas J.] Walsh [chairman of the hearings] initially had trouble mustering a quorum of his committee.”

That was soon to change. Walsh proved a relentless interrogator, especially when it was finally Fall's turn to testify, and before long the outlines of Teapot Dome, not as a rock formation but as a scam of greater than Ponzian proportions, began to emerge.

The interior secretary, Americans were about to learn, was still not a friend of the environment. Neither, unfortunately, was he an honest man. Unlike the case with Daugherty, Fall's bank records were readily available, and they showed that a man who had just suffered through “a decade of financial difficulties,” and whose annual salary as a cabinet member was $12,000, suddenly had a net worth of almost $125,000. It seems that the arrangements he had made with Doheny and Sinclair had less to do with oil drainage than they did with personal gain. And not just for Fall. In addition to stipulating that his two friends do all they could to prevent the oil from oozing beyond its boundaries, Fall allowed them to drill for profit, to keep for themselves vast amounts of black gold and then selling it to consumers through their companies on the open market. Doheny and Sinclair had kicked back more than
$100,000 for the favor—and much more money might await Fall if the profits were greater than expected.

The arrangement was breathtaking in its contempt for the public good, not only because it would have allowed Doheny and Sinclair to keep most of the money they made from drilling into the oil reserves, which could easily have been tens of millions of dollars, but because sufficient amounts of oil might no longer be there when the Navy, or other government agencies, needed it for military purposes. Who knew when that might happen? Who knew what kind of catastrophe might have resulted with depleted energy supplies? Up to this time, no other American scandal, with the behavior of Benedict Arnold and Aaron Burr excepted, had involved the sale of national security.

To be fair, if almost irrelevant, the deals did include a few crumbs for the government. Sinclair's lease, which was to last for a minimum of twenty years, required that he pay a sixteen-percent royalty into federal coffers on all oil drilled at Teapot Dome. As for Doheny, he too had to compensate the government for his lease, by building a pipeline, a refinery, and oil storage tanks in Hawaii at Pearl Harbor. It should not be necessary to point out that the amount of money the oilmen were supposed to spend was considerably less than what they stood to earn once they started selling the underground bounty that used to belong to Uncle Sam.

It did not take long for the real motives of Fall's transactions to become public, and when he was convicted for issuing the drilling permits, he became the first Cabinet officer in American history to suffer the indignities of arrest and imprisonment. He served nine months of a paltry one-year sentence but, although fined $100,000, never paid the money, claiming he did not have that much. In other words, he kept the entire bribe from Sinclair and Doheny. As for those two, for some reason neither of them even stood trial for their offense. Nor was a fine levied on them. The prime beneficiaries of Teapot Dome, they were, and it was as if they had had nothing to do with the subterranean dealings.