(1935) Privileged Characters: Teapot Dome Scandal

Privileged Characters
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BY M. R. WERNER
New
ROBERT M. McBRIDE & COMPANY
PRIVILEGED CHARACTERS
COPYRIGHT, 1935
BY M. R. WERNER
PRINTED IN THE UNITED STATES
OF AMERICA
FIRST EDITION
TO
H. H. W.
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Contents
I. HAIL! HAIL! THE GANG'S ALL HERE, 3
II. TEAPOT DOME, 27
III. COLONEL FORBES AND THE VETERANS, 193
IV. JUSTICE A LA DAUGHERTY, 229
V. SHIPS FOR SALE, 319
VI. MONOPOLY IN THE AIR, 380
VII. THE PIED PIPERS OF WALL STREET, 434

Prefatory Note
The material in this book is based almost entirely on the testimony

taken before various committees of Congress since the World War.
I have used the
leading investigations which had to do with the
relationship of the government and the individual business en-
trepreneurs during the administrations of President Harding, Presi-
dent Coolidge and President Hoover. The
period covered was,
perhaps, the most active in searching inquiries in the history of the
United States, with the possible exception of the eight-year ad-
ministration of President Grant,
following the Civil War, during
which thirty-seven investigations were held by Congress.
The bibliographical note at the end of the book gives a complete
list of the
investigations and other material used.
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CHAPTER ONE
Hail! Hail! The Gang's All Here
WHEN Warren G. Harding succeeded Woodrow Wilson as President
American people publicly proclaimed that there

of the United States, the
was no God. The World War had been a religious conversion by force in
the course of which everyone had been compelled to sacrifice his life, his
freedom and his money, and the Treaty of Versailles, which ended that
war, had made manifest that there was no possibility of heaven on earth.
The reaction the American people was one of eager desire for the
among
pleasures of this world. Those whose idealism had received rude shocks
from the obscenities of the War, followed closely by the selfish tactics
of the Peace,no longer dared to care; those whose conversion had come
about through shame, fear or expectation of gain were anxious to get all
four feet into the trough again.
In 1920 the American people, impatient to repudiate the rigid morality
of Woodrow Wilson, turned instinctively to the Republican Party as
the historic vehicle for the satisfaction of their predatory desires. A con-
vention of that party was to meet in June of that year at the Coliseum
in Chicago. The two leading presidential candidates were General
Leonard Wood, whose backers were counting on the theory that a
military man was a popular candidate following a war, and Governor
Frank O. Lowden, of Illinois, who was very rich, and who had the
3
political support of his important state. For many months the repre-
sentatives of these two candidates had been lining up delegates to vote
for them, but the eager friends of both men had made the social blunder
of spending scandalous sums of money in their behalf. The result was
that before the Republican National Convention met
Chicago the at
representatives of all candidates of both parties were called before an

investigating committee of the United States Senate. They were asked
to explain their expenditures, and many of them had a very difficult
Harry M. Daugherty, the political manager

time, indeed, doing so, except
of an obscure candidate, Senator Warren G. Harding, of Ohio. Mr.
Daugherty was suave in the presence of the Senators and insisted that
the funds received for his candidate's campaign were collected in small
denominations from the great common people of the land.
In the book which he wrote in collaboration with Thomas Dixon,
author of The Birth of a Nation, Harry M. Daugherty tells of a six-
hour conversation which he had with his life-long friend, Senator Harding,
some time before the meeting of the Republican convention at Chicago.
The Senator was reluctant to give up his sure, comfortable seat in the
United States Senate for the uncertainty of a presidential nomination. In
the Senate Harding had been safe, amiable and untroubled for some
years. He had followed the course of his party religiously and had left
it to more restless men to quarrel over its policies and their ambitions.
Mrs. Harding, too, was against the move. She was known in the circle
of their pleasant friends as "The Duchess," and she always poured the
drinks whenever the Senator and his colleagues and friends were en-
joying a genial game of poker at night. They all thought it would be

nice for Harding to be President, but none except Harry Daugherty
seemed to realize how important and how possible it might be.
Daugherty tells us in The

Inside Story of the Harding Tragedy that
in the effort to persuade his friend to take the chance, he mentioned one
by one the political disadvantages of the other Republican candidates.

Then Harding asked his friend a significant question: "Am I a big
enough man for the race?"
"Don't make me laugh!" Daugherty recorded that he answered. "The

day of giants in the presidential chair is past. Our so-called Great
Presidents were all made by the conditions of war under which they
HAIL! HAIL! THE GANG'S ALL HERE 5
administered the office. Greatness in the presidential chair is largely an

illusion of the people. ... In spite of everything I still believe that our
everyday garden variety of man is the best citizen of any republic of the
world today. And that his love for his country, for his neighbors and
government is the prime force that makes our nation great."
Harding was apparently comforted by this heart-to-heart talk. He

realized fully that he was "our everyday garden variety of man," and
no one could ever have accused Warren Harding of lacking a sentimental
attraction for his country, his government and his lifelong neighbor,
Harry Daugherty. Daugherty had transformed Harding from an amiable
small-town newspaper proprietor into a figure of prominence. From
newspaper work Harding had turned naturally to an interest in politics.

He had first met Harry Daugherty in 1898 when they both were cam-
paigning, and they took a great liking to each other. In 1900 Harding
was elected to the State Senate of Ohio, and in 1904 he became Lieutenant
Governor of Ohio. He had run for governor of that state but was de-
Daugherty had forced Harding to try for the Republican

feated. In 1914
nomination for the United States Senate. Daugherty is reported to have

said: "When it came to running for the Senate, I found him sunning
himself in Florida like a turtle on a log, and I had to push him into the
water and make him swim."
In the end Senator Harding yielded to Daugherty's persuasion and
decided to make a try for the presidential nomination in 1920. Daugherty
us that he assured Harding: "When General Wood and Lowden
tells
and Johnson have worn each other to a frazzle in the convention, we'll
swing the delegates to you at the right moment. . . . We'll take no
chances. Our
organization will be a perfect machine. It will begin to
function from the day you make your decision." Harding decided to
enter the race, and Daugherty began to function.
Harry M. Daugherty was a lawyer, a member of the law firm of
Daugherty, Todd and Rarey, of Columbus, Ohio, but his real business
was politics. He had been a pupil of George B. Cox, who taught Cincin-
nati how to outdo Tammany Hall, according to Representative Thomas,
of Kentucky, who said so on the floor of the House in 1923. Daugherty
gradually became a power in state politics in Ohio and had taken part
in national campaigns in that state. He was thoroughly experienced in
political manipulation and political methods. When the primary elections

were held in Ohio in 1920, Harry Daugherty made a startling statement.
"At the proper time after the Republican National Convention meets,"
he said, "some fifteen men, bleary eyed with loss of sleep and perspiring
profusely with the excessive heat, will sit down in seclusion around a big
table. I will be with them and will present the name of Senator Harding
to them, and before we get through they will put him over." This frank
prophecy, which turned out to be all too accurate, caused Daugherty
himself to be defeated for the position of delegate-at-large from Ohio to
the Republican convention.
The convention began its sessions at the Chicago Coliseum in awful
heat. Steaming, listless crowds filled the hotels, committee rooms and
convention hall. To make matters worse there was at the moment a
strike of hotel waiters. Delegates and spectators were restless and irritable
from lack of sleep and lack of comfort. The New York Times corre-
spondent began his first dispatch with the words: "The Republican
National Convention opened today with an impressive lack of enthusi-
asm." The correspondent noted a feeling of painful duty among the
bored delegates. They listened listlessly to one hour and twenty-one
minutes of Henry Cabot Lodge. But they had all heard Henry Cabot
Lodge's opinions on Woodrow Wilson and the League of Nations many
times before.
first days of the convention Hard-
In the newspaper reports of the
ing's conspicuously absent. On June 7th, the day before the
name is
convention met, the Wall Street odds on Harding were 8 to 1; even

Hoover at that time was 4 to and Coolidge was even with Harding,
1,
8 to 1. The World correspondent found Senator Harding's suite in the

FlorentineRoom of the Congress Hotel "a vast vacancy into which has
been thrown a mass of decorations." "When a World reporter dropped
in this afternoon," he added, "the conspicuous features were three young
couples, apparently here on their honeymoon, holding hands and ap-
parently thinking of other things than the high cost of living. As a spoon
room it is a success, however it may work as a political headquarters."
But the real work of the convention, as at other conventions, was
not being done at the official headquarters of the candidates or on the
floor of the Coliseum. Manipulation was going on day and night in
rooms throughout the hot city. Samuel M. Vauclain, presi-

private hotel
dent of the Baldwin Locomotive Works, had arrived, according to
Clarence W. Barron, of the Wall Street Journal, "with a carload of
politicians looking for the presidential nomination."
Harry F. Sinclair
was there with Archie Roosevelt, one of the officials of Sinclair's oil
company. Barron met them, and they discussed with him the bribery
prevalent in Latin-American countries. Barron recorded Sinclair as re-
marking: "Our title in Costa Rica is just as good as the title to your
farm. But of course in Latin-American countries they always want a
little grease."
One of the most important delegates to the Chicago convention was
Jake Hamon, of Oklahoma. He was an oil man too, and he had managed
to get himself into control of Republican politics in Oklahoma. Al Jen-
nings, who had been a cowboy, land boomer, train robber and lawyer
in Oklahoma, gave the Senate committee investigating the Teapot Dome
deal a picturesque account of Jake Hamon and his activities. Al Jennings
had once been sentenced to life imprisonment for robbing the United
States mails, and he had been pardoned at the solicitation of Mark
Hanna. Jennings then returned to Oklahoma, gave up robbery, always
admitted his past and ran for prosecuting attorney of Oklahoma City,
the Republican and the Democratic
fighting the political machines of both
Parties. He told Senator Thomas J. Walsh and the Senate Committee on
Public Lands an amazing story in 1924:
"Did you know one Jake Hamon of the State [Oklahoma] during his
lifetime?" SenatorWalsh asked.

"Yes, sir."
"How long had you known him?"

"Since 1902."
"What degree of intimacy was there between you and Mr. Hamon?"
"Well, a very close degree of intimacy. We
were what would be
termed, ordinarily, friends."
"Did you attend the Republican convention at Chicago during the sum-
mer of 1920?"
"Yes, sir."
"And were you with Mr. Hamon?"

"Yes, sir."
"Prior to the assembling of that convention was there something of a
contest out in the State of Oklahoma in which Mr. Hamon was involved
a political contest?"
"He was trying to carry it for the Republicans."
"He became the Republican committeeman for that State, did he not?"
"Yes, sir."
"Now, Mr.Jennings, did you have any conversation with him prior to
hisgoing to the Republican convention in which the subject of his plans
and purposes were discussed?"
"Yes; we had a conversation."
"I wish you would tell the committee about that, Mr. Jennings."
"That goes back to 1917, in the city of Ardmore, Oklahoma."
"Mr. Jennings," Senator Spencer, Republican of Missouri, interrupted,
"Mr. Hamon, I think is now dead, is he not?"
"Yes, sir," Jennings answered.
Jake Hamon was

shot to death at Ardmore, Oklahoma, in November,
1920. ClaraSmith Hamon, the wife of Jake Hamon's nephew, who had
been Jake Hamon's secretary and was alleged to have been his mistress
for many years, was accused of the murder, but after a sensational trial
at Ardmore, Oklahoma, a jury found her not guilty. Jake Hamon's was
the first of many tragedies among the friends and associates of Presi-
dent Harding.
"Jake Hamon is now dead?" Senator Selden

Spencer insisted.
"Yes; I heard he was," Al Jennings answered.
"And this is a conversation that you had widi Mr. Hamon back in
1917?" Senator Spencer asked.

"Yes, sir."
"Proceed, Mr. Jennings," said Senator Walsh.

"In his room at the hotel," Al Jennings continued, "I lodged with him
that night. I had arrived at Ardmore at his solicitation. I couldn't get a
room. I inquired of the night clerk if Hamon was in. He says, 'Yes.'
I
go up and sleep with Jake.' He said he had strict
said, 'Well, I will
orders not to let anybody disturb him. It didn't daunt me a great deal,
so I went up and kicked the door pretty loudly, and told him to open
up in the name of the Lord just in a kidding way. He threw the door
open, and used an expression that was just a compliment out in the West,
HAIL! HAIL! THE GANG'S ALL HERE
of calling names. He told me to come in and spend the night with him.
I spent the night with him, and we sat on the bed all night and talked,
and we had a few drinks of Four Roses that he had just brought back
from NewYork with him. In that conversation he had said that he
wanted to come back and make the race again for governor. He
me
"
said, 'You were elected, and I even had helped to count you out.'
"Referring to what?" Senator Walsh asked.

"To a campaign I made for governor of the State. . . That was .
in 1914. He said, 'You can come back and be elected, and I will get
behind you.' He said, 'You acted the blank fool, and you got everybody
afraid of you, and they had to count you out.' And that is history down
there. I said, 'What have you got up your sleeve, Jake? What really is
behind all this?' He said, 'Iam going to be the biggest man in the
United States before I close my career.' He said, 'If you will get back
of me as governor, I will put a couple of hundred thousand dollars
behind you.' He said, 'We have an association together here of the oil
men,' and he named Mr. Condon and Harry Sinclair and many others
that I knew.
"I said, 'What would you want me to do for you, Jake? What is all the
money for? What do you want me to do for this?' 'Well,' he said, 'I want
to see you enforce the law.' 'Well,' I said, 'you would be about my first
victim.'We were just speaking as we always talked to one another, josh-
ing a great deal on facts.
"Finally we spoke of the 2-cent tax on oil there, and he wanted that
removed. I said, 'There is
something else, Jake.' He said, 'I will tell you
this. You will disrupt the Democratic Party to such an extent that I can
carry it for the national ticket.' If you will pardon me, I had already done
that in the 1914 campaign not the Democratic Party, but the machinery
in power. Then he told me of his plans. He said, 'I can really be the biggest
man in the United States, and I can make enough money which speaks
for everything.'
"He had already been saying he had talked to a Senator from Pennsyl-
vania Boies Penrose. He said he would have Penrose's support, and he
would name the President of the United States. I was naturally anxious to
know who would be the next President and who he would name, and I
asked him if it was Wood."

"Mr. Jennings," Senator Spencer interrupted, "you knew that Senator
Penrose also was dead? You know that is a fact?"
10 PRIVILEGED CHARACTERS
"I believe I had read it," Al Jennings answered, "but I was not sure.
Perhaps it is best for the country."

"At any rate," Jennings continued, "he said that Harding would be the
nominee of the Republican convention; that he was going to put up the
money. He said, 'Money talks. There is not any doubt about it.' I was
talking with him along certain lines, and I thought it was all a wild
dream."
"Mr. Jennings," Senator Spencer asked, "you also knew that President
Harding was dead, did you not?"
"Well, now, let me see, Senator," Al Jennings answered. "I have been
informed through the public press that he was dead. I had the pleasure of
speaking and being a memorial speaker in Texas when he was buried, at
the request of the Texans. There has nobody in Missouri died lately, has
there?"
"Our longevity is very good in Missouri," Senator Spencer replied.*
Al Jennings testified further that he turned down Jake Hamon's propo-

sition that he run for Governor of Oklahoma and split the Democratic
Party in the state wide open. Then when the time came for the Republican
National Convention to meet at Chicago in 1920, Al Jennings told the
Senate committee, he received a telegram from Jake Hamon asking him
to meet him in Chicago, which he did. "Really and truly," Al Jennings
explained, "I wanted to see the manipulation. I did not take any part in
it, did not even stay with him, but we went to a room in one of the
hotels. He told me
Harding would be nominated the next day, and
that
it had cost him a million dollars. He said he had
put up $250,000 to Boies
Penrose, and in the conversation that was brought out in some way I
will not be perfectly clear about that that it had been agreed upon
by
Mr. Daugherty, Will Hays, and he named somebody else from Ohio,
that he was to be Secretary of the Interior. He said it had all been settled;
that Mr. Daugherty at first was in favor of Senator Fall occupying that
position, and they had a fight, but he put it all over them, and it cost
him a lot of money to do it. That was about all I knew of it." On cross-
examination Jennings said that Jake Hamon told him he had also given
*
Jennings's testimony is taken from "Leases Upon Naval Oil Reserves," Hearings
before the Committee on Public Lands and Surveys, U. S. Senate, 68th
Congress, 1st
Session, pp. 2993-2999. This document will hereafter be referred to as Teapot Dome
Investigation.
Daugherty $25,000 and Will Hays $25,000, and that he himself expected
to become President of the United States following Harding, after he had
made enough money.
"Well, Hamon started in for General Wood, didn't he, for President?"
Senator Bursum asked.
"No, sir," Al Jennings answered. "No; he didn't like Wood. He said

Wood was too much impregnated with the damn fool honesty of Theodore
Roosevelt."
Al Jennings's fantastic tale was corroborated in part by the testimony

of other friends and associates of Jake Hamon. Hamon had told his
J. B. French, that he had put up $25,000 to
friend and business associate,
pay the hotel Harding delegation, but another friend, J. E.

bill of the
Dyche, testified that "Jake was not in the habit of giving up his own
money." Still another friend told of meeting Jake Hamon on the street
and of his boasting: "I signed the check that nominated Warren G.
Harding to run for President." The story was also told to the Senate
committee that the oil interests were putting up money for the election
of a Republican President on condition would be permitted to
that they
name his Secretary of the Interior, who would lease them the naval oil
reserves at Teapot Dome and in California. But that story was never
proved. Whatever the fact or the fiction in the tales of Jake Hamon's
activities in Oklahoma and Chicago in the interest of the Republican
Party, we do know that this boastful oil man and politician did exercise
some weight at Chicago in June, 1920. Harry Daugherty himself, in his
book on Harding, wrote: "And we kept our eyes on Jake Hamon. He
had more influence among the delegates than any other one man in the
convention."
Harry Daugherty was keeping his eyes wide open at Chicago, and it
is doubtful if much
opportunity to close them in sleep during the
he got
four long days and nights of the convention. Harding was only one of
many possible compromise candidates, but because of his amiably nega-

tive character, there was little against him from the politician's point of
view, however might be in his favor from the public's point

little there
of view. After General Wood and Governor Lowden, Senator Hiram
Johnson, of California, was the leading candidate. Boies Penrose was

reported to have sent the following message to Johnson: "Tell Johnson
that the ideal ticket is Philander Knox for President and Hiram Johnson
for Vice-President. Tell Johnson, too, that Knox is a very sick man."
Johnson firmly refused all offers to be a Vice-President of the United

States.
The first ballots taken by the convention showed General Wood as the
strongest candidate, Governor Lowden next,

Sprout Hiram Johnson, third,
next, and Nicholas Murray Butler next; then came Harding and then
Hoover. Daugherty had made an alliance with the Lowden men to beat
General Wood by lending Lowden men Harding votes. Then, after
first
Wood was was to be between Lowden and Harding.

defeated, the fight
Four ballots were taken on Friday, June llth, but the convention was
hopelessly deadlocked.The heat was great, hotel bills were mounting,
tempers were getting ragged, and the delegates were eager to go home.
That night, Friday, some selected men met in the smoke-filled room of
Colonel George Harvey at the Blackstone Hotel.
Those present in Colonel Harvey's room were Senator Henry Cabot
Lodge, of Massachusetts, Senator Medill McCormick, of Illinois, Senator
James E. Watson, of Indiana, Senator Reed Smoot, of Utah, Senator
James W. Wadsworth, of New York, Senator William M. Calder, of New
York, Senator Frank B. Brandegee, of Connecticut, and Joseph R. Grundy,
campaign collector and lobbyist, of Pennsylvania, who represented Sena-
tor Boies Penrose, the boss of that state, who lay seriously ill at his home
in Philadelphia.There was a private telephone wire and a private tele-
graph wire between Senator Penrose's house and Chicago. In Chicago John
T. King, Republican politician, carried the messages which came from
Penrose's sickbed. It was later said by a witness at the Teapot Dome inves-
tigation that a telephone message came from Senator Penrose's bed to
General Leonard Wood that Friday night at about 9:30. "Will you ask
General Wood if he were nominated tomorrow would he give us three
Cabinet members," the message is
alleged to have been. Wood's campaign
worker, Mr. Himrod, was said to have delivered this message to the
General. General Glenn, one of Wood's managers, reported to have
is
remarked: "Now, General, one word will make you President of the
United States." Wood is said to have turned to Mr. Himrod and said:
"Tell Senator Penrose that I have made no promises, and am making

none." *
Joseph R. Grundy was questioned in 1929 about the conference in the

room of Colonel Harvey when the Senators were
"smoke-filled" hotel
investigating Mr. Grundy 's activities as a lobbyist.
Senator Walsh, of Montana, asked Grundy concerning his presence
in Colonel Harvey's room: "Could you tell us why you were thus
"
honored ?
"I can't," Mr. Grundy answered, "only I suppose Pennsylvania had a

large number of delegates at the convention, and they probably asked for
some one to come from Pennsylvania and they asked me. I certainly
appreciated the compliment that they paid me."
"And that had reference to the fact that you had been accustomed to
collecting funds for the campaign?"
didn't mention it on that occasion."
"They
The senatorial junta assembled in Colonel Harvey's room were not men
who mentioned money, whatever may have been their respect for it.
None of them could have been elected President of the United States
himself without a desperate and uncertain fight, however much some of
them may have wanted to make the attempt, but by combining their
influence all felt that they could name the next President, which, politically
and financially, would be just as valuable.
"What was the business of that meeting?" Senator Walsh asked Mr.
Grundy.
"Why, Senator Lodge opened the proceedings," Mr. Grundy answered,
"and stated he as the presiding officer of that convention had
that
watched the proceedings with great interest; that he had come there
. . .
Leonard Wood, and the developments in the convention

in the interest of
during that week were such as to convince him that the nomination of
Leonard Wood would be ill advised; that the nomination of Governor
Lowden for like reasons was ill advised."
"Those reasons were that they had put up too much money?" Sen-
ator Caraway asked.
* Dome
Teapot Investigation, pp. 3202ff., 3211-12.
"Their friends had, apparently," Mr. Grundy replied. "It was then
Friday evening. It had been a tremendously hot week, the hottest week
I had ever spent anywhere. . The delegates were pretty well tired out.
. .
Their money, in many instances, had run out; and he doubted if he could
hold that convention there over Sunday, and he believed there should be
an effort made that evening, between then and the convening of the con-
vention next day, to agree on a candidate, and that in looking the picture
over he was satisfied that the most available man was Senator Harding.
Whether the Senator's friends would or would not have spent a large
amount of money such as had been spent by the others was not open
for discussion, but they apparently had not spent it. But, moreover, the
Republican Party had never elected a President without the vote of

the State of Ohio, and it looked as if Governor Cox, who had carried the
State twice for governor, would be the Democratic nominee for Presi-
dent, and therefore he deemed it especially important that the vote of

Ohio should be secure, and for this and divers other reasons he believed
it was our business to go out and do what we could to bring about the
nomination of Warren G. Harding early Saturday morning."
Roxy Stinson, former wife of Jess Smith, Daugherty's closest friend, told
a Senate committee that she had frequently heard Daugherty, Jess Smith
and their fellow campaign workers discuss this conference in Colonel
Harvey's room. Their version of the incident was that Daugherty had
gone into the conference room of the Senators at two o'clock in the morn-
ing and had made the deal that nominated Harding for President. John
B. Alcorn, a telegraph operator who was working for one of the news-
papermen, told the Teapot Dome investigating committee that in the

early hours of Saturday morning he distinctly heard the word "Harding"
being ticked over the private telegraph wire from Senator Penrose's head-
quarters in Chicago to Senator Penrose's sickbed in Philadelphia. Colonel
Harvey's conference broke up around three o'clock Saturday morning,
and the newspapers in Chicago came out at four o'clock in the morning
with the news that Harding would be nominated for President when
the convention met that day.
There is a story that before they adjourned Colonel Harvey and the
Senators called Senator Harding into their presence. A
malicious rumor
had been going about the country that Mr. Harding had negro blood.
The Senators are reported to have asked Senator Harding solemnly if he

knew of any reason why he could not be President of the United States.
"Gentlemen, I should like to be alone for a little while," Harding is sup-
posed to have replied. He retired from the room into another, where, it
was alleged that he prayed and questioned his soul. Returning into the
"smoke-filled" room of Colonel Harvey, he is reported to have said:
"Gentlemen, there is no reason in the sight of God, why I cannot be
President of the United States."
Ray Tucker and Frederick R. Barkley, in their book Sons of the Wild
Jackass, report the following scene as Senator Hiram Johnson, of Cali-
fornia, lay in his bed that morning towards dawn:
There came a timid knock at his door, and there entered a timid
man Harding. Over his arm and a wilted
the latter carried his blue coat,
collar gave evidence that the immaculate Ohioan had been subjected to
more Chicago heat. He had, in fact, just emerged
terrifying elements than
from thatfamous "midnight conference in a smoke-filled room" at which,
in accord with Harry M. Daugherty's earlier prediction, a President was
to be chosen.
"Hiram," began Harding, "the boys have just agreed to give me my

run to-morrow, and I am going to be nominated. I want you for my
vice-presidential candidate."
"I don't care to consider
it," replied the Senator as he pulled the sheets
over his leonine head and rolled toward the flowered wallpaper and
comparative obscurity.
Next day, Walter F. Brown, one of Harding's Ohio managers, sought
him out with word that Harding had been nominated, and that second
place was still open for him.
"Remember, Hiram," pleaded Brown, "only a thin thread of life stands
between the Vice-President and the Presidency."
"Walter," replied Hiram, "go sing your siren songs to somebody else."
When the convention took ballot on Saturday morning, June

its first
12th, Harding received 78 votes, more than he had had on any previous
ballots. On the next ballot Harding received 89 votes, and on the follow-
ing, the eighth ballot, he received 133 Vz- Then the convention recessed
for lunch until four o'clock in the afternoon, and there was a conference
between Harding and Lowden, who had led on all ballots that day. When
the convention reassembled that afternoon, Lowden withdrew his name
from the race. On the ninth ballot Harding received 374 votes, and Gen-
eral Wood was the next highest candidate. As the convention started to
take tenth ballot, Harry Daugherty stood beside Mrs. Harding in a
its
box in the spectators' gallery. When it was announced that Harding had
received 692 ^
votes and was nominated, Daugherty tells us that his
shoe was full of perspiration, and that Mrs. Harding in her excitement had
jammed her hatpin into his side.

The New York Times on Sunday, June 13, 1920, printed the following
editorial on its front page:
"Upon a platform that has produced general dissatisfaction, the Chi-

cago convention presents a candidate whose nomination will be received
with astonishment and dismay by the party whose suffrages he invites.
Warren G. Harding is a
very respectable Ohio politician of the second
class. He has never been a leader of men or a director of policies. For years
a protege of Foraker, he rose to a subordinate office by favor of 'Boss'
Cox of Cincinnati. . . . Senator Harding's record at Washington has been
faint and colorless. He was an undistinguished and indistinguishable
unit in the ruck of Republican Senators who obediently followed Mr.
Lodge in the twistings and turnings of that statesman's foray upon the
Treaty and the Covenant.
"The nomination of Harding, for whose counterpart we must go back
to Franklin Pierce if we would seek a President who measures down to
his political stature, is the fine and perfect flower of the cowardice and
imbecility of the Senatorial cabal that charged itself with the management
of the Republican Convention, against whose control Governor Beeckman
so vehemently protested."
"And for principles," the Times remarked, "they have only hatred of
Mr. Wilson and a ravening hunger for the offices."
Warren Harding's own comment on his nomination was: "We drew
to a pair of deuces and filled."
IN THE election campaign o 1920 the Republicans felt that they could
yellow dog. There was confidence in the Republican camp that

elect a
Warren Harding could be elected President of the United States without

half trying. While the Democratic candidate, Governor James M. Cox,
toured the country in a hopeless effort tomake the American people feel
that the issue was a "solemn referendum" on the League of Nations, Hard-
ing remained most of the time on the front porch of his home in Marion,
Ohio, and aped William McKinley. He greeted visiting delegations as

William McKinley had done, wore a McKinley carnation, and made
speeches in which he was very careful to say nothing. In answer to Gov-
ernor Cox, he denounced the Treaty of Versailles with the sentiments of
Senator Lodge and spoke vaguely of American participation in an "asso-
ciation of nations," so that he might capture some votes among those who
still believed in the possibilities of peace. "Bluff the People" was the
slogan of his managers, and Harding was noted for doing what he was
told to do by sharper men. In spite of their confidence, these men were
taking no long chances; Will H. Hays and his associates raised a large
campaign fund from -the leaders of American industry and finance; and,
later in the campaign, when it looked as if Governor Cox might be mak-
ing a little progress, Harding was hurriedly shoved on a train and sent
to a few key places in the country to make speeches and let the people
see his well-groomed, regular features.
Harding was elected by a huge majority, but less than half the voters
of the country bothered to vote. Harding received 16,152,000 votes as
against 9,147,000 for Cox, and he won 404 electoral votes and carried every
state except Kentucky and those of the Solid South. The voters also sent
a large majority of Republicans to both the Senate and the House of
Representatives, so that it looked like easy sailing so far as legislation and
support were concerned. After the 1920 election there were in

legislative
the Sixty-seventh Congress 59 Republican Senators and 37 Democrats,
and in the House 300 Republicans and 132 Democrats. The repudiation
of Woodrow Wilson and all his works seemed complete.
President-elect Harding announced that his Cabinet would consist of a
group of "best minds." And apparently Harry Daugherty had a great

deal to do with the selection of these best minds. He tells us in his book
of a conversation with Harding on his prospective Cabinet:
"What do you think of Hughes as Secretary of State?"

Harding asked.
"The you could possibly make," Daugherty said he an-
best selection
swered, and then added: "You and Hughes are men of the same breed.
The religion you both profess is the most democratic of all denominations.
You're a Trustee of the Trinity Baptist Church of Marion. Hughes is a
Trustee of the Park Avenue Baptist Church of New York. Your tempera-
ments are sympathetic. He'll like you and you will like him." One is
inclined to be skeptical as to whether Harding and Daugherty ever

bothered to discuss religion.
Then Harding, Daugherty tells us, suggested Dawes as Secretary of
the Treasury, but Daugherty thought General Dawes too valuable in
other fields "to lock him up in the United States Treasury." He tells us
that he suggested Andrew W. Mellon, of Pittsburgh. Harding did not
seem to know the name.
" "
'I've met him,' Daugherty wrote he said to President-elect Harding,
"'and in opinion he is the ablest financier in America. He would
my
doubtlessly deny it, but I believe he is the richest man in this country,
richer than either Ford or Rockefeller. And he is the only man that the
big interests, the Rockefellers and Morgans will not bluff.'

"'And you think his great wealth a recommendation?' he broke in.
"
'I certainly do. A man who can quietly make the millions this modest-
looking man has gathered is little short of a magician. If there is one

thing he knows it's money. He will make
you the greatest Secretary of
for
the Treasury since Alexander Hamilton and render the Nation an

"
immense you can get him.' And if there was one thing the
service if
Harding administration was to need it was a magician.

It must be remembered that Harry Daugherty wrote his book in an
attempt to justify himself and preserve the reputation of his friend twelve
years after the events he describes, and that he wrote it in collaboration
with Thomas Dixon, author of The Clansman and other novels. The
language employed in conversations was hardly such as old friends would
use when sitting around in their shirtsleeves.
Other men besides Harry Daugherty were interested in the appointment
of Andrew W. Mellon as Secretary of the Treasury. The two leaders of

Pennsylvania, Boies Penrose and Philander C. Knox, were trying to get
all they could in the way of appointments for men they could trust with
the industrial interests of the important state of Pennsylvania. James J.
Davis, who was appointed Secretary of Labor by Harding, also came

from Pennsylvania, James M. Beck who was made Solicitor General
as did
of the United States. These facts, perhaps, lend some color to the story
that Boies Penrose threw his great influence to Harding at the Chicago
convention in return for definite promises of Cabinet posts and other
favors. Daugherty wrote that both Penrose and Knox were bitterly
opposed to the appointment of Herbert Hoover as Secretary of Commerce,

which Harding wished to make, and that their approval of the appoint-
ment was given only after Daugherty had threatened that Mellon would
not be appointed to the Treasury if Hoover was not confirmed by the
Senate. Penrose, according to Daugherty, was apoplectic but finally
capitulated.
The
next most important appointment was that of Secretary of the
Interior,who would have charge of the vast public lands interests of

the United States. There were ex post facto rumors that the oil interests
and others had made a deal at the Chicago convention to contribute to
Harding's campaign fund and to support Harding for President on the
express condition that Senator Albert B. Fall, of New
Mexico, should be
appointed Secretary of the Interior in the Harding Cabinet. proof No
of this rumor was ever secured, though Senator Walsh and his investi-
gators during the Teapot Dome investigation made efforts to ferret out
any evidence of it. We
only know that some leading oil men, including
Harry F. Sinclair, were present
at the Chicago convention, that
leading
oil men contributed heavily to the Harding campaign fund, and that
Fall was appointed Secretary of the Interior.
Daugherty wrote that Harding and Fall were thrown into intimate
contact by the chance that their seats in the United States Senate had
been next to each other for six years, and that Harding came to
respect
the older man's great knowledge of law and public lands. "I made no
effort to break their friendship," he wrote. "I could see at the time no
possibleharm to Harding." "Fall and I," he added, "could never have
been chums in any political enterprise. And we never were. He had fol-
lowed the sheep into the desert with Roosevelt, and I could never
forget it."
In any case, President-elect Harding, who was in Florida fishing and

selecting his Cabinet, announced the appointment of Secretary Fall on
February 4, 1921, the last day on which Fall could resign from the United
States Senate. Senator Nye, chairman of the second oil investigation of
1928, made the statement that immediately after the announcement of Fall's
appointment, "Mr. Doheny and Mr. Fall came to Washington on what

was declared to be a secret mission at that time." Mr. Edward L. Doheny
was president of the Pan-American Petroleum Company and a lifelong
friend of Albert B. Fall.
When came for the Senate to confirm Harding's Cabinet
the time
appointments, the name of Fall was greeted by the Senators with great
applause. He had been a member of their body since 1912. Senator Henry
Cabot Lodge moved that Fall be confirmed unanimously without reference
of his name to a committee, and the motion was carried amid applause.
All the other Cabinet nominations were referred to a committee and
then confirmed.
Daugherty tells us that he himself was persistent in his efforts to retire

from politics and re-enter the private practice of law after he had elected
his best friend President of the United States. But Harding, he wrote,
made a matter of personal loyalty and friendship, and begged him not
it
to desert him. "I've never needed you in my life as I do today," he

quoted
Harding as saying to him. Daugherty claimed that he was in favor of
the appointment of Senator George Sutherland, of Utah, as Attorney
General of the United States, but that Harding wanted to make Senator
Sutherland a justice of the Supreme Court. "So," Daugherty wrote, "in a
moment of mental aberration I accepted the post of Attorney General
in theHarding Cabinet and made the tragic blunder of my life."
There were others who felt that the appointment of Harry Daugherty
was a mental aberration on the part of President Harding. Harding
announced Daugherty 's appointment as Attorney General on February 22,
1921. When it had been rumored that he was to have the office, there
had been consternation even in the ranks of the Republican Party. After
the public attacks on the appointment when it was announced, Harding
told the newspapermen: "I may say that this opposition served only to
strengthen my purpose to appoint Mr. Daugherty. I believe in Harry

Daugherty. I think he will make a great Attorney General. You can put
that in your valued papers in black type and box it if you wish." The
New York Times commented editorially in its issue of February 22, 1921:
"If a best mind is needed anywhere, it is in the Department of Justice.
Mr. Harding has been content to choose merely a best friend."
Instead,
Daugherty had held only one public office, many years before, when he
was a member of the Ohio State Legislature, and while a member of
that body he had been charged by a Columbus newspaper with having
been paid to vote for Senator John Sherman. He had also been charged
with being a lobbyist for many years before the Ohio Legislature. He had
been defeated five times for public office in Ohio, and once by Myron T.
Herrick, when Daugherty had been a candidate for the office of United
States Senator. As a lawyer Daugherty was known in Ohio for his influ-
ential political connections and his ability to command large fees rather
than for any great knowledge of the law. All of Daugherty's partners
were made judges in Ohio, and that was offered as evidence of his great
political prowess.
The appointment of Postmaster General in Harding's Cabinet was
given to Will H. Hays, who had been chairman of the Republican
National Committee. Mr. Hays had been a lawyer in Sullivan, Indiana,
where he showed ability at the game and he had done a great
of politics,
John W.
deal to organize the easy success of the Republican Party in 1920.
Weeks, of Boston, Massachusetts, became Secretary of War. Mr. Weeks

had been a banker and a broker, a member of the firm of Hornblower &
Weeks, and he had also been Senator from Massachusetts and a prominent
Republican politician of that state. The post of Secretary of the Navy
was accepted by Edwin Denby, of Michigan, who had practiced law in
Detroit, had been a member of the House of Representatives from 1905
until 1911, and was active in Republican politics in
Michigan. Henry C.
Wallace, of Iowa, who had a wide knowledge of agricultural affairs, was
Harding's Secretary of Agriculture.
In his inaugural address on March 4, 1921, which he delivered after
he rode to the Capitol with Woodrow Wilson, whose body was shattered
and his prestige broken, President
Harding said:
"The earth is thirsting for the cup of good will; understanding is its
fountain source. I would like to acclaim an era of good feeling amid
dependable prosperity and all the blessings which attend."
There were similar sentiments among President Harding's friends and
associates. They, too, looked forward to an era of good feeling and the
blessings of prosperity, but they applied the words with a more personal
we shall see, can be aptly expressed in the words of
touch. Their idea, as
that popularAmerican convention song: "Hail! Hail! The Gang's All
Here," which is followed immediately by the ribald slogan: "What the
Hell Do We Care Now!"
WHILE President Harding and Mrs. Harding were getting settled in the
White House, other interesting characters were taking up their residence
in Washington. Harry Daugherty brought with him from Washington
Court House, Ohio, his jovial, rotund, combination confidant and valet,
Jess Smith. Smith had been delighted to sell his small department store
inWashington Court House to come to Washington to help Harry out
and to have his picture taken standing next to President Harding as often
as he could manage it. Jess Smith took over a desk in the anteroom of the
Attorney General's private office, and he and Daugherty moved into a
small house at 1509 H
Street, which their friend "Ned" McLean had turned
over to them.
Edward B. McLean and his wife had known the Hardings and
Daugherty for many years in Ohio, where McLean's father, John R.
McLean, had established the Cincinnati Enquirer as one of the leading
newspapers of the state; Daugherty had worked for McLean's father,
first as a reporter, and later as an attorney. When he was a young man,
"Ned" McLean had inherited his father's houses and his father's news-
papers, the Cincinnati Enquirer and the Washington Post, and he also
received a huge income from his father's investments in natural gas, trac-
tion companies, Washington banks and Washington real estate. In addi-

tion to his large town house in Washington, McLean owned his father's
"Friendship," on the heights above Georgetown, where he soon

estate,
began to entertain the Harding administration lavishly. McLean was

chairman of the Harding Inaugural Committee and Jess Smith was his
assistant.
A less conspicuous group of men from Ohio also began to establish
themselves quietly in Washington after the inauguration. Howard Man-
nington, a local politician and lawyer from Columbus, moved into the
green house at 1625
little K
Street. Mannington had been Harry Daugh-
erty's assistant at the Republican convention in Chicago, where his par-

ticular job had been to secure southern delegates for Harding. After
Harding's nomination Mannington went along with the President-elect

to Marion, where, according to the man he lived with at the Little Green
House in K Street, M. P. Kraffmiller, "he seemed to be manager of the
front-porch campaign." Mannington had also busied himself collecting

funds for the Harding campaign. His headquarters at Marion were ad-
joining the Harding home there, in the house which had formerly
belonged to George B. Christian's father. George B. Christian had been
Harding's secretary when he was Senator Harding, and he, too, came to
Washington as secretary to President Harding.

Soon after the inauguration Mannington and Kraffmiller were joined
at the Little Green House in K Street by a Mr. Caskey, of Marietta, Ohio,
who quickly became a specialist in getting permits from the government,

which permitted the withdrawal of whisky from distilleries during Pro-
hibition. William A. Orr, who had been secretary to Governor Whitman

of New York and had Republican political influence in that state, began
to arrive regularly at the Little Green House in K Street with suitcases full
of liquor and to depart with permits for the withdrawal of liquor, which
he had purchased for interested parties in New York. "Bill" Orr was
credited with having raised $35,000 for Harding's "front-porch" cam-
paign, and he was consulted by Attorney General Daugherty on appoint-

ments to federal offices in New York. He obtained the appointment of
Colonel William Hayward as United States District Attorney for the
southern district of New York. One of Mannington's functions in Wash-
ington, Orr testified later at the investigation of
Daugherty, was to help
the Attorney General make up his mind on appointments in the federal
service. Alfred R. Urion, a lawyer from Columbus, Ohio, whom Daugh-
erty later recommended to a prospective client, "Jap" Muma, as "one of
the greatest little men you
have ever met in your life," opened offices in
the Munsey Building in Washington soon after the inauguration of
Harding, and we shall hear of his activities later. Urion and Daugherty
had been close friends in Ohio for many years. Samuel Ungerleider, also
of Columbus, came to Washington and opened a stock brokerage office.
There was a select contingent from Marion, Harding's home town.
Dr. Charles E. Sawyer, who had operated a sanatorium in Marion, became
physician to the President with the rank of brigadier general in the Army,
and chairman of the Federal Hospitalization Board. In his office General
Sawyer had a framed card which authorized him to enter any public build-
ing in Washington at any time. Mrs. Carolyn Harding Votaw, sister of
President Harding, also arrived in Washington with her husband, Heber
H. Votaw. Mrs. Votaw received an appointment with the Public Health
Votaw became Superintendent
Service of the federal government, and Mr.
of Federal Prisons under Daugherty.
Another early arrival in Washington was Colonel Charles R. Forbes.
Forbes and Harding had met at a social function in Honolulu several years
beforeHarding was nominated for President, and the Colonel's geniality

had made a great impression on the Senator and Mrs. Harding. Forbes
had been a commissioner of public works in Hawaii, a harbor commis-
sioner there, and had held other important posts in the federal service on
that island for five years. He had made the stay of Senator and Mrs.
Harding in Honolulu very pleasant. When he heard that his friend the
Senator was a candidate for the presidency, Colonel Forbes hurried to
Marion, Ohio. During the Harding campaign he spent a lot of time and
energy swinging his own state, Washington, for Harding. After the elec-
tion Forbes tried very hard to get himself appointed chairman of the
United States Shipping Board, which would have charge of disposing to
private interests the vast shipping resources which the United States gov-
ernment had developed during the war. But Harding refused to give him
this post and made him director of the Veterans' Bureau instead. That
bureau, too, was to have authority over the expenditure of huge sums of
money, for the care of those disabled in the late war. Colonel Forbes took
the job.
Colonel Thomas W. Miller, who had been in the Army during the war,
and had been one of the incorporators of the American Legion after-
wards, also came to Washington, to become Alien Property Custodian,
and as such he was to have absolute control of enormous sums of money
and other property sequestrated during the war, when it had been taken
from enemy aliens of the United States who were doing business in this
country and its possessions. Colonel Miller had been eastern director of
the Republican National Campaign Committee during Harding's cam-
paign.
A little later Walter F. Brown, of Toledo, Ohio, who was one of Hard-
ing's campaign managers, came on to Washington to head a committee
entrusted with the reorganization and co-ordination of all the federal gov-
ernment's departments. Albert D. Lasker, a Chicago advertising man,
become chairman of the United States Shipping Board. He, too,
arrived to
had been a staunch supporter of President Harding during the election
campaign. And last, but not least, there was William J. Burns. Mr. Burns
had had a long and erratic career as a detective, and was at the moment
head of the William J. Burns International Detective Agency. He had
known Harry Daugherty for forty years in Columbus, Ohio, where
Burns's family also lived. Burns was made chief of the Bureau of Investi-
gation of the Department of Justice, and he soon brought with him the
bulky, jovial Gaston B. Means, who was eager to investigate anyone at any
time on the request of anyone, and for money.
The Harding official family must have felt very secure and very con-
fident as its various members started to take up their respective tasks.
There was the President, an affable, accessible, good fellow, who never
bothered his head with details. An inhabitant of Marion said of him:
"The best fellow in the world
to play poker with all Saturday night."
There was the enormously wealthy Andrew Mellon, of Pitts-

quiet, keen,
burgh, in charge of the finances of the United States. He had divested

himself of his manifold directorships in banks, the Aluminum Company,
railroadsand other corporations by turning them over to other members
of his family and associates, for the Secretary of the Treasury was not
permitted by law to engage in any business activity. He was now ready

to devote himself unstintingly to the monumental task of reducing the
taxes of rich men throughout the United States. Charles Evans Hughes,
who exuded prestige, who had resigned from the Supreme Court of the
United States to be barely defeated for the Presidency by Woodrow Wilson
four years before, was in charge of foreign affairs. He was determined that
the United States should have nothing whatever to do with what he
regarded as an international monstrosity, the Union of Socialist Soviet

Republics, and he was at the same time anxious that the United States
should make every effort to bring peace on earth by limiting her own
navy and those of her rivals, England and Japan. There was the suave,
thin Will H. Hays, who was attending to the mails and to such patronage
as Attorney General Daugherty had no taste for. Business welfare was in
the hands of the engineer, Herbert Hoover, who had a reputation for
getting things done. Labor was in charge of James J. Davis, who had been
an iron puddler himself, and who enjoyed fraternity. The Army was in
charge of a portly, solid banker and stockbroker, who had been in the
Navy as a young man, John W. Weeks; and the Navy was in charge of
Edwin Denby, a lawyer who had served in the Marine Corps during the
war. Justice was in the hands of a cynical, astute political manipulator,
Harry Daugherty, who enjoyed pleasing his friends and

outwitting his
enemies. And the public lands with all their unexploited wealth, in spite
of a protest filed by the Indians, had been turned over to Albert B. Fall,
who was described in the following words by Clinton W. Gilbert: "With
a long drooping mustache, he looks like a stage sheriff of the Far West
in the movies. His voice is
always loud and angry. He has the frontiers-
man's impatience. From his kind lynch law springs."
And 'in the background was the Vice-President of the United States, a
taciturn Yankee, Calvin Coolidge, who said literally nothing as he waited
for Fate.
fTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
CHAPTER TWO
Teapot Dome
AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAJ
I N 1921 the price of oil was the highest it had been in twenty years. In
the spring of that year Colonel A. E. Humphreys had struck oil at Mexia,
Texas, and it was expected that the fields he had opened up there would
produce at least 100,000,000 barrels. There was keen competition for crude
oil among the refining and selling organizations, and various large cor-
porations were eager to get Colonel Humphreys's oil. Colonel Robert W.
Stewart, chairman of the board of the Standard Oil Company of Indiana,
one of the most enterprising of all the Standard Oil units, was anxious to
buy Colonel Humphreys's oil; they were introduced to each other in the
first days of the summer of 1921 by H. M. Blackmer, president of the
Midwest Refining Company, which was a wholly owned subsidiary of
the Standard Oil Company of Indiana.
Colonel Humphreys wished to sell his oil to the Standard Oil Company
of Indiana, but in return for he wanted stock in that valuable company.
it
Colonel Stewart, however, did not want to sell stock in his company, and
he would consider a contract for the oil only on a "when, as and if pro-
duced" During the summer of 1921 both men maintained their
basis.
James E. O'Neil, president of the Prairie Oil & Gas Company,

attitudes.
another Rockefeller company closely affiliated with the Standard of In-

diana, was a friend of Colonel Humphreys. Stewart brought O'Neil into
27
the negotiations in the early fall of 1921 in the effort to persuade Hum-
phreys to sell his oil for cash instead of stock. During the fall Stewart,
Blackmer and O'Neil were writing each other letters concerning the
prospect that Colonel Humphreys might yield.
In October, 1921, Colonel Humphreys, tired of playing a form of bluff
with Colonel Stewart, started negotiations for the sale of his oil to the
Pure Oil Company, of which Beaman G. Dawes, brother of General
Dawes, was president. This news made H. M. Blackmer very anxious,
and he telegraphed to Stewart and O'Neil and suggested that they all
meet Colonel Humphreys in New York City on October 17, 1921. O'Neil
doubted the wisdom of this move, for he felt certain that Colonel Hum-
phreys would not be able to make
good deal with the Pure Oil
a
Company, and he felt equally certain that Humphreys would soon need
money in order to develop his oil property. But O'Neil's tactics were
wrong, for Colonel Humphreys made a contract with the Pure Oil Com-
pany in October, 1921, to sell that company one-half his crude oil pro-
duction and a one-quarter interest in the entire Mexia property. In fact,
he had already sold the Pure Oil Company one million barrels of his
crude oil in July.
Towards the end of October, H. M. Blackmer met Colonel Humphreys's
son at French Lick; he asked whether Humphreys was interested in sell-
ing some of his oil outright and requested A. E. Humphreys, Jr. to tele-
graph his father. Colonel Humphreys agreed to come to New York to
negotiate for the sale of a large quantity of oil.
On November 15, 1921, Colonel Humphreys and H. M. Blackmer met
at 60Broadway and agreed tentatively on the number of barrels of oil

Blackmer and his associates would purchase and the price they would pay.
The price fixed was $1.50 a barrel for 30,000,000 barrels of oil. Colonel
Humphreys then telegraphed to his attorney in Washington, Charles S.
Thomas, former Governor of Colorado and former United States Senator
from that state, asking him to come to New York at once to represent
him in this colossal deal. The next day Governor Thomas arrived, and
there was a luncheon60 Broadway, which was attended by H. M.
at
Blackmer, James O'Neil, Harry F. Sinclair, Colonel Humphreys and

Governor Thomas. The men discussed the details of their contract, and
as they were about to part, Colonel Humphreys remarked that he would
TEAPOT DOME 29
like the contract to be for 33,333,333 Vs barrels of oil instead of thirty
million, "because that will make the consideration $50,000,000, and I have
some pride in wanting to be a party to a contract of these dimensions."
Governor Thomas later testified that Blackmer, O'Neil and Sinclair
whim of Colonel Humphreys's.
readily agreed to this
Governor Thomas suggested that since he was to draw the contract,
he should meet with the lawyer for the other oil men that afternoon, so
that the document might be ready in the morning. One of the oil men
replied that that would not be necessary, that, though the contract was
large, it was simple, and they would be perfectly willing to trust Governor
Thomas to draw it
up himself. Probably whoever made this suggestion
wanted the contract to be seen by as few eyes as possible, for there was
to be good reason for secrecy.
Governor Thomas went back to the Waldorf-Astoria Hotel and drew up
a memorandum of agreement for the sale of 33,333,333 1/3 barrels of oil
at $1.50 a barrel. He also drew up an additional memorandum of agree-
ment for the sale of one-half of all the oil which Colonel
Humphreys's
companies might thereafter produce, at the market price prevailing at the
time of delivery. In his contracts Governor Thomas designated the names
of the purchasers of the oil as the Prairie Oil & Gas Company, of which
James O'Neil was president, and the Sinclair Crude Oil Purchasing
Company, of which Harry Sinclair, H. M. Blackmer and Colonel Robert
W. Stewart were in control, by virtue of interlocking stock ownership
in the various companies of which they were officers.
On the
morning of November
17, 1921, there was an historic meeting
in the suite of H. M. Blackmer at the Vanderbilt Hotel in New York.
Besides Mr. Blackmer, there were present Colonel Robert W. Stewart,
Harry F. Sinclair, James E. O'Neil, Colonel A. E. Humphreys, A. E.

Humphreys, Jr.,Beaman G. Dawes and Charles S. Thomas. On the day
before the day when the oil men and Governor Thomas had taken
lunch together to discuss their proposition H. S. Osier, barrister-at-law
of the firm of Osier, Hoskin & Harcourt, of Toronto, Canada, had made
application in Toronto for the incorporation of a company to be known

as theContinental Trading Company, Ltd. In the articles of
incorporation
H. Osier was designated president of the new company, another barrister
S.
and three students at law of Toronto, Mr. Osier's clerks, were named as
itsother officers, and its chief place of business was given as the village of
Port Perry in the Province of Ontario. Its capital was to be not less than
$500,000, and its designated officers each held one share of its stock.
At the Vanderbilt Hotel on the morning of November 17th the oil men
discussed the details of their contract, and in the afternoon they had come
to all the necessary agreements; Governor Thomas rose and suggested
that he go into the next room and dictate the revised contract to a stenog-
rapher; one of the men present he believed later that it was Mr. Blackmer
said to him: "In this contract, the vendee in the contract will be the
Continental Trading Company of Canada."
"Well," Governor Thomas testified that he replied, "that is the intro-
duction of a new factor in the situation." He wanted to know more about
the Continental Trading Company, Ltd. Someone Governor Thomas
thought later it might have been either Blackmer or Sinclair then spoke
up and said that was all right, both the Sinclair Crude Oil Purchasing
Company and the Prairie Oil & Gas Company would guarantee the con-
tract made in the name of the Continental Trading Company, Ltd., and
no further explanation was offered of the identity of the Continental
company. Governor Thomas turned to his client, Colonel Humphreys,
and the Colonel agreed that so long as the contract was guaranteed by
those two responsible parties, the Sinclair and Prairie companies, he was
satisfied. Governor Thomas then asked who would sign and execute the
contract on behalf of the mysterious Continental Trading Company, Ltd.,

and Mr. Blackmer told him that the president of that company would be
in New York in the morning to do so.

Next morning at ten o'clock the same men met again at Blackmer's
suite in the Vanderbilt; but this time a new member of the party was
present, a Mr. H. S. Osier, barrister-at-law of Toronto, Canada, and presi-
dent of the brand-new Continental Trading Company, Ltd., of that
country. He had the entire property of the company in his pocket, a
silver-plated seal and papers of incorporation. "Osier reached in his side

pocket after signing the contract," Governor Thomas testified, "and
brought out a small silver-plated seal and attached it to the contract, and
I remarked in substance that that was a very simple way of executing a
tremendously big contract, and he said that it was necessary to do them

that way sometimes."
TEAPOT DOME 31
After the contracts had been signed and guaranteed by O'Neil, Sinclair
and Stewart, Colonel Humphreys, his son, Beaman Dawes, his partner in
the deal, and Governor Thomas, his lawyer, left the room with a copy of
The four men left in the room, Sinclair,
their contract for $50,000,000.
Stewart, Blackmer and O'Neil, made a contract that same day by which
the Continental Trading Company, Ltd. of Canada, which had just pur-
chased 33,333,333V3 barrels of oil from Humphreys for $1.50 per barrel
resold the same amount of oil to the Sinclair Crude Oil Purchasing Com-
pany and the Prairie Oil & Gas Company for $1.75 a barrel, a profit of
$8,333,333.331/3.
The deal with Colonel Humphreys for his oil was one of the largest
contracts for oil ever made.
In 1928 Senator Walsh questioned Colonel Robert W. Stewart about
enormous oil deal which concerned the mysterious Con-
that part of this
tinental Trading Company, Ltd. of Canada. When Colonel Stewart first
took the witness stand he was truculent in his insistence on his innocence
of the purposes and results of the formation of the Continental Trading
Company, Ltd. He had first heard of it, he said, when he arrived in New
York for the conference with the other oil men, though, he admitted, he
had known Mr. H. S. Osier for a good many years. Mr. Osier had, in fact,
as Senator Walsh brought out, acted as the agent for the purchase of the
Midwest Oil Company stock by the Standard Oil Company of Indiana.

It was only at the meeting in New York, Colonel Stewart insisted, that
first heard that the Continental Trading

he Company was going to pur-
chase Colonel Humphreys's oil and resell it to the Sinclair and Prairie
companies, with which Stewart's company was affiliated.
"It did not take me long to see somebody was going to make some
money out of this thing," Colonel Stewart testified, "and I am here to
tell did not care what they made out of it. I knew that we were
you I
getting that oil for $1.75 when the posted prices for that oil were $2,
I knew that
and premiums were being paid down there for that oil from
25 cents up as high as 50 cents a barrel, and I wasn't thinking for one
second of what the Continental Trading Co. was making out of this or
what anybody else was making out of it, except what these companies
were going to make out of it. Those companies got that oil cheap and I
was thinking more of the $16,000,000 that these companies would make
at 50 cents per barrel on that oil than what somebody else was getting
on a brokerage.
"We wanted that oil and the men who were in the oil business at
that time knew how important it was to get that oil."
Senator Walsh, however, persisted in wanting to know if Colonel Stewart

had not inquired whether he could not buy the oil for $1.50 as the
mysterious Continental Trading Company, Ltd. was able to do, for in that
case the stockholders whose interest Colonel Stewart and his associates
were supposed to be protecting could have made over $8,000,000 more on
the deal. Colonel Stewart stuck to his previous answer, that he was told
he thought it
may have been Mr. Blackmer who told him so that he
would have to pay $1.75 and he did not mind doing so.
"It looks as ifyou had some good reason for signing that guaranty,"
Senator Walsh commented, concerning the guaranty by the Sinclair
company and the Prairie company that if the Continental company did
not pay Humphreys for his oil, the other two companies would.
"No, sir," Colonel Stewart replied, "except what appears upon the
face of it. If you are intimating by that that I ever made a dollar out of
that personally you are absolutely mistaken."
"
"No, Colonel
"I never made a dollar personally out of that transaction in any way,
shape, or manner," Colonel Stewart interrupted heatedly. It is note-
worthy that he did not say that he had never received a dollar personally.
Colonel Stewart was also a lawyer.
"We will not have any quarrel about that," Senator Walsh said. "I
have not intimated anything of the kind."
"I have a lot of respect for you, Senator," Colonel Stewart said, soothed
for the moment, "maybe I am shooting off a little too fast here."
"
"But you knew that somebody made Senator Walsh began, when
the Colonel interrupted again exuberantly:
"Absolutely, that is a cinch."

"Or stood to make," Senator Walsh continued relentlessly, "$8,000,000
out of the contract."
"That is a cinch," Colonel Stewart repeated. "Of course, obviously,
they got 25 cents a barrel."

TEAPOT DOME 33
Colonel Stewart insisted that Mr. Blackmer, though he had taken an

active part in all the preliminary negotiations to
buy Colonel Humphreys's
oil in behalf of the Standard Oil Company of Indiana and its subsidiaries,
might have been acting as much for Colonel Humphreys as he was for
Colonel Stewart. Mr. Blackmer was in France at the moment, a fugitive
from subpoenas, and he remained there steadfastly for many years; it was
easy to attribute anything to him without danger of refutation.
"If a man had written to me such letters as that," Senator Walsh

commented, "and then had held out 25 cents commission on me our
relations after that time would not be quite as cordial as they had been
theretofore."
"I don't know that Blackmer held out 25 cents," Colonel Stewart
answered blandly.
"I don't, either," Senator Walsh retorted, "and I don't believe he
did."
Senator Walsh was referring to the letters and telegrams Blackmer had
sent Stewart when the preliminary negotiations were going on for the oil.
As we shall see presently, Mr. Blackmer did not hold out a personal
commission of $8,000,000 on the deal, and it was absurd to expect that
anyone would believe that he would have been permitted to do so by such
sharp business men as his colleagues.
When Senator Bratton asked Colonel Stewart the obvious question,
why he had not asked Colonel Humphreys to sell his oil direct at $1.50
instead of in the roundabout fashion to the Continental Trading Com-
pany, Ltd., the Colonel, trapped, grew angry:
"Maybe I made a mistake," he answered. "Maybe you should have

been chairman of the Standard Oil Co. in making that deal. I figure
that a man is 50 per cent right, you can not be right all the time, but if
you are right half of the time a man has got a pretty good average.
It may be that I made a mistake there. Maybe we could have gotten, that
for 25 cents a barrel less but stockholders certainly did not complain
my
if the contracts have been
fairly profitable to them, and if the situation
did develop along the lines so that the board of directors of the com-
pany got this crude and we were able to run our refineries."
"And you it as cheaply as you could?" Senator Walsh asked.
got
"Well, I know," Colonel Stewart answered, "but I don't think
don't
a man should be indicted if sometimes he pays more than he might for
a certain thing. Maybe I am not a good trader."
In answer to a question by Senator Walsh in 1928, John D. Rockefeller,
Jr.,whose interests owned about 15 per cent of the stock of the Standard
Oil Company of Indiana, said: "It certainly is not characteristic of the
Colonel to pay more than he has to in any trade, Senator."
Senator Cutting wanted to know something about the guaranty which
Colonel Stewart, Harry Sinclair and James O'Neil signed that the Con-
tinental would pay for the oil:
"Is that sort of guaranty usual in business guaranteeing a competitor

in order that he may get a contract for 25 cents cheaper?" he asked.
"I don't know," Colonel Stewart answered.
"You are unquestionably a very able business man," Senator Cutting
said. "We have heard that testimony repeatedly and naturally you would
not be where you areif you were not a very able business man. You did
something which you say is unparalleled according to your present

recollection in allyour business experience."
"I have said nothing of the sort. ... I have not said it was unparalleled,
and I would not be at all surprised if it is done every day... If you . .
are putting this up to me for specific cases now, I can not remember
1
any specific case." . . .
"It didnot occur to you," Senator Cutting asked, "whether Mr.

Blackmer was doing anything odd or Colonel Humphreys was doing
were doing anything odd?"
anything odd or you yourself
"I am always doing odd things, Senator," Colonel Stewart replied.
Colonel Stewart testified that after he arrived back in Chicago, with
copies of
the signed contracts in his pocket, he called together the board
of directors of the Standard Oil Company of Indiana and presented the
contracts to them for their approval. There was no discussion about them,
for the board of directors "had implicit confidence in Colonel Stewart,"
as Edward G. Seubert, president of the company, testified. Then the con-
tracts were presented for their approval to the board of directors of the
TEAPOT DOME 35
Sinclair Crude Oil Purchasing Company, who met in Chicago especially

for that purpose, for their usual place of meeting was the home office at
Tulsa, Oklahoma. The contracts were approved automatically by this
board without the directors even having seen them. "We have every con-
fidence in Mr. Stewart and Mr. Sinclair, and that what they did was for
the best interests of the company," H. L. Phillips, president of the Sinclair
company, was the same old refrain to become so familiar later

testified. It
when boards of directors were questioned by lawyers concerning the smash
of the Bank of United States, the Insull dictatorship and the Kreuger
empire.
The only avowed activity of the Continental Trading Company, Ltd.
was to receive on the 10th of each month $1.75 a barrel from the Sinclair
and Prairie companies and to pay $1.50 a barrel on the 15th of each month
to the Humphreys companies. The difference of 25 cents a barrel was
invested for the account of the Continental Trading Company, Ltd. in
3 !/2 per cent United States Liberty bonds, which were purchased by
H. S.Osier through the New York office of the Dominion Bank of Canada,
of which he was a director. Mr. Osier admitted that the entire business
of the Continental Trading Company, of which he was the president,
only occupied him for about half an hour each month, and that he was
the only officer of the company who did any work at all. Mr. Osier went
personally to the office of the Dominion Bank of Canada in New York to

receive the Liberty bonds. Clifford Scott Howard, chief agent of that bank
in New York, testified that Mr. Osier always instructed the bank to have the
bonds wrapped in four packages of equal amounts, and that each time
he came to collect them he took them away under his arm. "But at one
time," Mr. Howard testified, "I suggested sending a messenger with him,
but he laughed about it. He said, 'No'; that he was not afraid of gunmen."
Mr. Osier then delivered one bulky package to Harry F. Sinclair, one to
H. M. Blackmer, one to James O'Neil and one to Colonel Robert W.
Stewart. A few of the bonds he kept for himself as his commission, and
on the entire deal these amounted to $60,000.
After he had no further legal excuse for not revealing the circumstances,
Colonel Stewart told the Senate committee on April 24, 1928, that on
November 26, 1921, Mr. Osier visited him in Chicago. Colonel Stewart
was getting ready to leave that day for Mexia, Texas, to attend a barbecue
,
which Colonel Humphreys was giving for him and the other oil men to
celebrate their colossal deal. Mr. Osier handed Colonel Stewart a bulky
package of 3 /2 per cent Liberty bonds and told him that it was his
l
personal
share of the profits of the Continental Trading Company, Ltd. Colonel
Stewart insisted before the Senate committee that he had not known until
that moment that he was have any personal share in its profits, and that
to
he told Mr. Osier at the time that he did not think he was entitled to the
bonds. Mr. Osier answered, Colonel Stewart testified, that he could do
what he pleased with them.
When it was impossible for him to evade questions any longer, Colonel
Stewart testified that he then called in Mr. Roy J. Barnett, the tax official
of the Standard Oil Company of Indiana, and explained to him "in a
general way, the circumstances of my participation in these profits which

were to be handed that I had
did not think
to me; I any right to them;
that they belonged to the companies, one or the other of them, and asked
him if he would act as trustee." Mr. Barnett agreed to do so, and Colonel
Stewart wrote out a trust agreement in his own handwriting. Before he
became an oil executive, Colonel Stewart had been a lawyer and was
general counsel for the first Standard Oil Company before its dissolution
into its component parts by order of the Supreme Court. This trust
agreement provided that in case of the death of Colonel Stewart his share
of the Liberty bonds was to be turned over in equal shares to the Standard
Oil Company of Indiana and to the Sinclair Crude Oil Purchasing

Company.
Mr. Roy J. Barnett was called before the Senate committee to testify to
his part in this curious transaction. He testified that Colonel Stewart, his
employer, sent for him one day :
"Iremember he asked about how long I had been with the company
and what my training had been and then he said, he asked me, if I
would accept a trust, and I said, 'What is it?' And he said that he didn't
exactly know yet, so I said, 'Sure'; so then he proceeded to draw up a
document and after he got it drawn he presented it to me and had me
read it and asked me to sign it and I signed it. That is the substance of
it. ... Well, I remember this, he said, 'This is a matter of secrecy and
"
I don't want you to talk about it until I talk to you.'
TEAPOT DOME 37
Mr. Barnett recalled that once later he asked Colonel Stewart where the
trust agreement was and suggested that he ought to have a copy of it.
Instead, it was agreed between him and his employer that Colonel Stewart
should seal the agreement in an envelope and put it in his safe deposit box.
In the early part of 1922, Mr. Osier met Colonel Stewart at the Belmont
Hotel in New York and handed him another package. Colonel Stewart
testified that he did not open it but took it with him to Chicago and then
called Mr. Barnett into his office; they opened the package together and
found that it contained 3 l/2 per cent Liberty bonds.
After each package of mysterious bonds was received, Barnett testified,

he and Colonel Stewart counted them together, and then put them into
a safe in Colonel Stewart's office. Barnett kept a memorandum of the
totals, but he claimed when he was a witness that he tore up these
memoranda after each installment of bonds arrived, adding the new
ones to the last total; he had torn up his final memorandum when he had
finally disposed of the bonds as Colonel Stewart later directed. The sum
total of the value of the bonds that Colonel Stewart received was $759,500.
"Did you not wonder where those bonds were coming from?" Sen-
ator Bratton asked Colonel Stewart.
"No, sir," he answered. "I assumed they were profit out of these
contracts. I did not know anything about it. I did not inquire and did
not want to inquire."
"That is all," Senator Bratton said.
"Was there any reason for Mr. Osier giving you any moneys?" Senator
Wagner asked.
"You will have to ask Mr. Osier about that," Colonel Stewart replied.
But Mr. Osier at the moment was hunting lions in South Africa and
could not be persuaded by the Canadian or the United States government
to return to the North American continent.
When Senator Cutting asked him what right and title he had thought
he had to these Liberty bonds, Colonel Stewart became heated, insolent
and reluctant to answer. But in the face of all his truculence Senator
Cutting persisted in wanting to know why any part of the profits of the
Continental Trading Company should have been turned over to Colonel
Stewart. "There is no reason on earth why they should have, I am very
said. "I know no reason." Senator Cutting
glad to tell you," the Colonel
then inquired why, when he received these $759,500 worth of bonds,
Colonel Stewart had not inquired the reason they were being given to
him. Colonel Stewart then became very angry indeed and refused to
discuss the matter further with Senator Cutting. He was in a tight corner,
tried to bluster his and ended up with the angry admission:

way out,
"I cannot give any explanation." George Whelan, of the United Cigar
Stores Company, told Clarence W. Barren, of the Wall Street Journal,

when they were discussing Colonel Robert W. Stewart one day: "He is
the big fellow of Standard Oil and does as he pleases. He is a great big
strapping fellow, and when I crossed the ocean with him I found him in
the smoking room with two other fellows, and they had twenty-seven
rounds of cocktails. Think of that. I don't know who drank them."
Colonel Stewart was very sensitive about the word "share" as applied
to his part of the profits of the Continental Trading Company:
"
"In all cases, however, in his delivery of bonds as your share
Senator Nye began a question.
"Don't say that as my share," Colonel Stewart interrupted.
"
"Of the profits
"I didn't have any share."
"He told you itwas your share?"
"No; he told me nothing of the sort. He said I was to have a par-
ticipation in the profit."

"All right, then, your participation, your share of the participation,
the delivery was made to you."
When Colonel Stewart had first testified before the Senate committee
a couple of months before, he was

willing to talk at all about the
less
Continental transaction and did not reveal that he had received any
bonds. Senator Walsh had asked him:
"Were you consulted in any wise, either directly or indirectly, con-
cerning any purchase of bonds by the Continental Trading Co.?"

"No, sir."
"Did you know anything about the purchase of the bonds?"
"With great deference, Senator, I again reiterate what I said before,
TEAPOT DOME 39
that I never personally profited one dollar by this deal and with all due
respect to your committee I shall refuse to answer."
"Were you ever consulted about the purchase of the bonds?" Senator
Walsh persisted.
"No, sir."
"Why did you hesitate about that?"

"That is
my business, Senator, why I hesitated and why I wait here
a little while to consider what my answer should be,and with all respect
to you, I do not think that that is a proper question from you or for
this committee."
As the Colonel's grilling drew to a close, the chairman, Senator Nye, said :
"With the Federal Trade Commission report and the testimony of

Mr. Bain hand, it strikes me, Colonel, that early in 1920 the Standard
at
Oil Co. of Indiana had a better claim to Teapot Dome than any other
oil company did, a better right to expect leases in there."
"The Standard Oil Co. of Indiana had a claim to Teapot Dome?"
Colonel Stewart said. "Why, you are crazy."
"Very well," Senator Nye remarked, "I have been accused of that
before."
After lunch Colonel Stewart thought better of his remark to Senator Nye,
and during the afternoon session, he said:
"Senator, now that I see that you are getting pretty close to the end
of this thing, or I want to
I imagine you are, apologize for something I
was speaking to you as I would have to
accidentally did this morning. I
any dear friend of mine when I said you must be crazy about this thing.
I assure you I did not have any ulterior motive."
"That is not the first time, Colonel, I have been accused of being
crazy," the Chairman remarked.

"I do not want you to get the idea I was trying to be smart," Colonel
Stewart said.
Senator Nye persisted in believing that if he himself had entered into

such an arrangement as the Continental deal, had known Mr. Osier for
as long as Colonel Stewart had known him and had guaranteed the
Continental company's contract with Humphreys, "I would have known
more about the Continental Trading Co. than you have told this com-
mittee." "That does not prove anything else than that you have a bigger
bump of curiosity than I have," Colonel Stewart remarked. "If we had

not had a material bump of curiosity on this committee, we never would
have gotten much information," Chairman Nye said.
Senator Cutting asked Colonel Stewart:
"Colonel Stewart, we had testimony before the committee that Mr.

O'Neil received, roughly speaking, one-quarter of the share of the
profits of this transaction, and that he felt he was not entitled to them,
and handed them over for the benefit of his corporation under rather
dramatic circumstances. We
had testimony that Mr. Blackmer, who
had, roughly speaking, about one-quarter of the profits, was in very
grave doubt as to the status of his participation in them, and that he
instructed his agent to hold them and not cash them. We have had
testimony from you to-day that you did not think you were entitled
to any share or participation, and that you put them in a trust com-
pany for the benefit of these two corporations that you mentioned.
Apparently the only one of the men who received, roughly speaking,
one-quarter of the shares who felt that he had some right to them was
Mr. Sinclair. Can you give us any explanation of that?"
"Those facts," Colonel Stewart replied, "those observations you have
made are matters that I know nothing about. ... I do not know if
just
Mr. Sinclair got one of those bonds. I do not know whether he got
any of the bonds at all."
But we do know now as a matter of fact that Harry Sinclair did receive
one-quarter of the Continental Company profits in 3

l
/2 per cent Liberty
bonds, and if Mr. Sinclair had not been so reckless as to give some of his
share of these identical Liberty bonds to public officials and politicians

for value received, no one in the world except Mr. Osier, Mr. Blackmer,
Mr. O'Neil, Colonel Stewart and Colonel Humphreys, his son, his partner
and his attorney, ever would have known of the existence of the Con-
tinentalTrading Company; the four executives could then have cashed
theircoupons and lived happily ever afterwards. But Mr. Sinclair was a
rash man. "I have always considered that Liberty bonds were practically
TEAPOT DOME 41
cash," Mr. Sinclair told the Senate committee later. And he forgot that
Liberty bonds have registered numbers.
WHETHER Colonel Stewart, Harry Sinclair and H. M. Blackmer discussed
anything more interesting than the quality of Colonel Humphreys's

roasted meat at the barbecue in Mexia, Texas, during the winter of 1921,
we shall never know. But one witness, Leo Stack, who was an oil pro-
moter himself, told the Teapot Dome investigating committee that he
had heard a rumor in the "oil fraternity" that Sinclair, Stewart and
Blackmer had met at Mexia in December, 1921, and had agreed among
them that Sinclair should get the lease to the naval reserve at Teapot
Dome from the government, and build a pipe line which would be used
by both the Standard Oil Company of Indiana, of which Stewart was
chairman, and its subsidiary the Midwest Refining Company, of which
Blackmer was president. Since the Standard Oil Company of Indiana
owned a large interest in the Sinclair Crude Oil Purchasing Company and
the Sinclair Pipe Line Company, it would have profited along with Sin-
clair in the Teapot Dome deal; and since the Midwest Refining Company,
wholly owned subsidiary of the Standard Oil Company of Indiana, had

almost a monopoly of the Wyoming oil product, it would have profited
by having the lease in the family and a pipe line to boot.

Between Christmas and New Year's Eve, 1921, soon after the barbecue
at Mexia, Texas, Harry F. Sinclair arrived in his private railroad car at
Three Rivers, New Mexico, where Albert B. Fall, Secretary of the Interior,
was spending the holidays on his ranch.
In the meantime, just before leaving Washington for his ranch, Secre-
tary Fall had had a large financial transaction with Edward L. Doheny,
millionaire oil operator, who was the head of the Pan-American Petroleum
& Transport Company, of California. Fall and Doheny had known each
other ever since the early days when they had prospected for metals and
oil together and studied law together in the Southwest. Doheny, too,
was very much interested in the naval oil reserves in both California and
Wyoming.
On November 28, 1921, Mr. Doheny wrote to the Hon. Albert B. Fall,
Secretary of the Interior, offering to construct storage tanks for the Navy
at Pearl Harbor, Hawaii, in exchange for oil to be taken out of the Navy's
reserves in California. The

next day Secretary Fall telephoned to Mr.
Doheny, who was New

York, and said that "he was prepared now to
in
receive that loan, to make that loan," if Mr. Doheny was willing. Mr.
Doheny was willing; he sent his son, Edward L. Doheny, Jr. to the bank
for $100,000 in bills, which were drawn by two checks on the son's account;
he instructed his son to wrap the bills in paper and put them in a hand
satchel and personally take them to Secretary Fall in Washington. Edward

L. Doheny, Jr. carried the satchel to
Washington, gave the $100,000 in
bills to Secretary Fall and received from him a note, made out to Edward
L. Doheny, Sr., without endorsers or other security. No record of the

transaction was kept in Mr. Doheny's books or those of his son. When he
went on Christmas holidays to his ranch in New
his vacation over the
Mexico, Secretary Fall took the $100,000 in bills with him.

Admiral John Keeler Robison, chief of the Bureau of Engineering of
the Navy Department at the time of the Harding administration, told the
Senate committee investigating the naval oil leases a strange tale concern-
ing Edward L. Doheny's first interest in the Navy's oil reserves:
"What I would like to know from you now, Admiral," Senator

Walsh asked, did you get your own actual information which
"how
you have concerning the condition of those three reserves?"
"From various sources," Admiral Robison replied. "In the first place
that I got information from was very queer, and I would like to tell
you about it. It happened some several years before I was made en-
gineer in chief, in 1917, in the harbor of Pensacola, while I was captain

of the ship Huntington. And I had in my command a young lieutenant
in the Navy, named Doheny, and his father came down to see the
boy, and while the boy was busy he came down to see me, and we
sat and talked, and the father, while the boy was busy, sat with me
and talked for an hour or two. I knew who he was. He was one of the
TEAPOT DOME 43
successful oil magnates, so-called. And in the course of the conversation

I asked him I
feeling sure that our handling of the naval reserves
was excellent we always do, until we know something about it, feel
sure that what we are doing is right I asked him what he thought
about the way the naval reserves in California were being handled.
He said:
"
'Well, it is being handled very well for the people you have for
neighbors, but you are not going to have any property there in a very
few years. One of them is gone already, at all events, and the other
soon will be, or just as soon as the Southern Pacific wants to destroy it.'
"I was astounded. The information is the sort of information that
I believe. It had come to me
was not engineer in chief and did not
I
have any expectations of being one, and I certainly did not think I
would ever have anything to do with that claim. It came casually and
incidentally in the course of a social call from a man he was not
getting $2,500 for the job, but he was a man who made millions know-
ing how. That is the kind of information I believe. I remembered it
later, and that, as much as any of the official information that I
got
from anybody, made me to believe that our California reserves needed
protection to a much greater extent than they were getting it, and I
acted. I got official information from another source. Our own in-
spector out there reported that the fields were being drained; a com-
mander on the retired list, Commander Landis ." . .
"Mr. Doheny is the president of the company that now has leases
on the whole of Reserve No. 1?" Senator Walsh asked.

"Yes; if he has leases on the whole of Reserve No. 1, he is the man,"
Admiral Robison replied.
It never seemed to occur to the Admiral as he sat talking with "a man
who made millions knowing how" that this same man, being in the oil
business himself, in which he had made his millions, might have a
personal interest in getting his hands on the naval oil reserves in

California. Perhaps Admiral Robison's intelligence was not so naive as
his testimony would imply; nevertheless, Mr. Doheny, as we shall see,
did get his hands on the naval oil reserve in California for a time, and he
was the same man who gave Secretary Fall, who leased those reserves,
$100,000 in cash.
"Now, outside of that, that is all the information you had about the
matter, and maybe from the Bureau of Mines?" Senator Walsh asked.
"Well," Admiral Robison answered, "I gave a good deal of weight
to some first-hand information from a man who evidently knew some-
thing about it, as I told you."
"Excuse me; Mr. Doheny?" Senator Walsh asked.

"I really think his remark," Admiral Robison said, "you know, that
became a fact to me. I have to learn from other people, and when I
can get advice of that sort information of that sort I consider his
information given to me in that little casual conversation much more
valuable than any report from any one hired man."
"Yes," Senator Walsh said, "I can assert it is a good thing for any
man to talk to Mr. Doheny; he is a well-informed man."
"Yes; especially when he is talking about oil, he is," the Admiral
remarked.
"On anything," Senator Walsh said.
"He was talking oil to me," said the Admiral.
It was one of the minor ironies of the Teapot Dome investigation that
Senator Walsh, its steadfast, honest and able prosecutor had been a life-
long friend of Edward L. Doheny 's. When Senator Walsh's wife had died
and he was in great distress, Mr. Doheny had taken care of him and
brought him back to an This, however, did not prevent
interest in life.
the Senator from mercilessly getting out of the oil man the entire truth
concerning his transactions with the government which Senator Walsh

was representing, though it took great effort and persistence to pin Mr.
Doheny down, as we shall see.
That "little casual conversation" with Admiral Robison turned out to
be an excellent day's work for Mr. Doheny. Admiral Robison was not at
the time in charge of the naval oil reserves, but four years later, in 1921,
when Harding became President and Denby Secretary of the Navy,
Admiral Robison was made head of the Bureau of Engineering, which
had charge of the naval oil reserves. One wonders whether pressure had
been brought to bear on anyone to have Admiral Robison transferred
to that post, but no evidence of that effort ever came out before the Senate
committee. We do know, however, that when Denby became Secretary
of the Navy, on March 4, 1921, Robison became aide to the Secretary
TEAPOT DOME 45
and that in October of that year he was made head of the Bureau of
Engineering. On October 6, 1921, Admiral Robison wrote a letter to
Mr. Doheny telling him of his delight at his good fortune in getting the
post which would place him in supervision of the naval oil reserves. Be
that as it may, the seed which Mr. Doheny had planted in 1917 came to
flower in 1921. Admiral Robison, when he was placed in charge of the
naval oil reserves, remembered that pleasant little chat in his cabin on the
Huntington, lying in the harbor of Pensacola, with the millionaire oil
magnate for whose millions and his ability to acquire them Admiral
Robison had such an exalted respect. The Admiral's whole attitude
towards the naval reserves changed, and he became an impatient advocate
of immediate leases of the reserves to private oil interests in return for
oiltanks and oil for the Navy. His own advisers in the Navy Department
urged strongly against such a policy, and they were men who had studied
the problem for many years, but Admiral Robison put their attitude down
to jealousy, and thought the Navy just wanted to keep its oil because the
Navy liked to keep anything got hold of, he testified. Even those who
it
reported that some oil was being drained from the California reserves
were not in favor of leases of the naval reserves to private interests as the
remedy, but in favor of the drilling of offset wells by the government to
protect the drainage, or at most, they advocated leases to private com-
panies to drill offset wells.
The naval oil reserves in Wyoming and California were created in
September, 1909, when
President Taft signed an executive order with-
drawing oil lands in those two states from the public domain and reserving
them for the use of the government. That order was confirmed by Con-
gress in the following year when it passed the Pickett Act. The lands
finally reserved were three areas: Naval Petroleum Reserve No. 1, con-
sisting of 38,969 acres at Elk Hills, Kern County, California; Naval
Petroleum Reserve No. 2, consisting of 29,341 acres at Buena Vista Hills,
Kern County, and Naval Petroleum Reserve No. 3, consisting
California;
of 9,481 acres at Teapot Dome, Natrona County, Wyoming. The purpose
of the government in setting aside these oil reserves was to keep the oil
in the ground for future use by the United States Navy in case of emer-
gency, if the time should come when commercial oil resources were de-
pleted and the Navy could not purchase sufficient oil for its needs. In
1916, Josephus Daniels, Secretary of the Navy in President Wilson's
Cabinet, established the Naval Fuel Oil Board, with Commander H. A.

Stuart in charge, to care for the Navy's oil reserves. In its report of
December 22, 1916, the Naval Fuel Oil Board, which had been investi-
gating the efforts of private interests to gain leases to the naval oil
reserves, declared:
In the four years that have passed since the creation of the first
naval petroleum reserves there has been a continuous attack on the
Navy's tenure of these lands by private interests and corporations. The

strength of this attack is sufficient to threaten achange of existing law
in order to wrest control of these lands from the Navy. Legislation
now pending intends to destroy the Navy's title to the bulk of its oil
in the naval reserves. Action of the Congress in this matter will indicate
whether it is possible to retain these or similar reserves after they have
become commercially attractive. It will determine whether in such a
contest between private interests and those of the Government the latter
can survive.
One by oil promoters in the effort to get leases to the

of those enlisted
Navy's was George Creel, secretary of propaganda and official

oil reserves
censor during the war. After he had completed his war work, George
Creel wrote articles on the Mexican situation which attracted the attention
of Mr. Doheny, whose oil companies had extensive interests in Mexico,
and who was active in the effort to get American protection for those of
his interests at all costs. Mr. Doheny hired Mr. Creel as "a publicity con-
sultant." "I was not to write, but to advise," Mr. Creel told the Senate
committee investigating Teapot Dome. "He [Doheny] protested very ve-
hemently that he was sick and tired of being called an interventionist,
when all that he desired was peace and love and justice. Now, he had
. . .
the clearest blue eyes I ever saw," Mr. Creel went on, "and the most child-
like candor, and he fascinated me to a point where I really wanted to write
his life as a textbook, as an inspiration for young Americans. My employ-
ment was indefinite, and it was at $10,000 a year. I resigned at the end of
three months."
Mr. Doheny's clear blue eyes could get dark with rage when he was
crossed in the least way. "I have no charges at all to make against Mr.
TEAPOT DOME 47
Doheny," George Creel continued, "except that we were not only not
in the same general direction. He
seeing eye to eye, but we were not seeing
was a man who seemed utterly unable to view anything except in the
light of his own desires. Whatever he wanted was right; whatever was
opposed to him was the work of enemies and devils." Mr. Creel and Mr.
Doheny had one conference on Mexico at which Mr. Doheny "flew into
one of his famous brain storms and denounced me as an upstart who was
intruding himself into matters of which I knew nothing and which I had
no concern with." Then Creel added "Well, his Napoleonic dementia was
:
carrying him on to the point of apoplexy, and I left the room."

After the war Mr. Doheny's ideas about the dangers of radicalism and
Bolshevism in the United States were just as definite as his ideas on the
need for American intervention in Mexico. Sitting in his suite on board
the S. S. Aquitania on Friday evening, February 1, 1919, Mr. Doheny told
his old friend, Clarence W. Barren, and Mr. Barren made a note of it:
"If you believe in democracy you cannot believe in Socialism. Socialism

is the poison that destroys democracy. Democracy means opportunity
for all. Socialism holds out the hope that a man can quit work and be
better off. Bolshevism is the true fruit of socialism and if

you will read
the interesting testimony before the Senate Committee about the
middle of January that showed up all these pacifists and peace-makers
as Germansympathizers, Socialists, and Bolsheviks, you will see that a

majority of the college professors in the United States are teaching
socialism and Bolshevism and that fifty-two college professors were on
so-called peace committees in 1914. President Eliot of Harvard is teach-
ing Bolshevism. The worst Bolshevists in the United States are not
;
only college professors, of whom President Wilson is one, but cap-

italists and the wives of capitalists and neither seem to know what
they are talking about. William Boyce Thompson is teaching Bolshevism
and he may yet convert Lament of J. P. Morgan & Company. Vanderlip
is a Bolshevist, so is Charles R. Crane. Many women are joining the
movement and nor their husbands, know what it is,
neither they,
or what it leads to. Henry Ford is another and so are most of those one
hundred historians Wilson took abroad with him in the foolish idea
that history can teach youth proper demarcations of races, peoples,
and nations geographically."
In 1919, Mr. Doheny must have had the discouraging feeling that every-
body was out of step except himself. But he was sure of himself; he had
even named his private railroad car, "The Patriot."
"Democracy," Doheny had told Barren, "means opportunity for all,"

and "Socialism holds out the hope that a man can quit work and be better
off." When that "Bolshevik" college professor, Woodrow Wilson, was
nearing the end of his term of office as President of the United States, Mr.
Doheny was already an old man, but he had no hope of quitting work and
intended to make the most of his opportunities under a democracy. As
early as the fall of 1920, Mr. Doheny had accepted the proposition made
to him by Leo Stack, an oil prospector of Denver, to get Doheny a lease
from the government to Teapot Dome. On January 7, 1921, Mr. Doheny
and Mr. Stack signed an agreement, whereby Doheny guaranteed to give
Stack $400 a month during
the period of his efforts to get a lease to Teapot
Dome; he all of Stack's expenses and in the event of

also agreed to pay
the success of the scheme, Doheny was to pay Stack 10 per cent of the
accruing from said lease.

total net profits
Stack had meanwhile been busy in Washington. Immediately after the

election of Harding in November, 1920, Stack visited his old friend
George Creel in Washington. Stack proposed that Creel help him to get
a lease to Teapot Dome, and, Creel testified later, he showed Creel figures
which were very convincing to him that the oil reserve was losing its oil
by drainage into neighboring private wells. Stack also told Creel that he
was certain that the incoming Republican administration would lease Tea-
pot Dome to someone, and that he was very anxious to get the lease from
the Democrats before the Republicans could grant it. He wanted Creel to
see Secretary of the Navy Daniels about the matter. Creel testified that he
told Stack "Leo, you might as well try to change a Missouri mule as try
:
to change Secretary Daniels on this question of naval reserves." Neverthe-

less, Stack paid Creel $5,000 on 'November 8, 1920, five days after
Harding
was elected President, and Creel took Stack to see
Secretary Daniels, who
refused to listen to any proposition for a lease to
Teapot Dome or any
other naval reserves. Creel testified that
Secretary Daniels said to Mr.
Stack, when Stack assured him that the Republicans would give someone
the lease: "I have no doubt in the world that this thing will be
attempted to
be done, but I don't think that public opinion will countenance it,"
TEAPOT DOME 49
Secretary Daniels wrote later to Senator La Follette

that private oil
interestshad tried to get their hands on the naval oil reserves as soon as
he became Secretary of the Navy in 1913 and had continued their efforts
from time to time during the entire eight years of his administration. He
also wrote to Senator La Follette in this letter of April 18, 1922:
I remember one night toward the end of a session that Mr. Roose-
velt [Franklin D. Roosevelt, then Assistant Secretary of the Navy]
and I remained at the Capitol all night long, watching the legislation
of closing hours, fearing that some act might be passed that would
turn over these invaluable oil reserves to parties who laid claim to them
without even decent shadow of tide. *
After they had been turned down by Secretary Daniels, Creel and Stack
went to see the Navy charge of the oil reserves, Commander
officers in
Stuart and Lieutenant Shafroth. Creel testified later that they "spent weeks
trying to get them to listen to some proposition," but the naval officers
refused even to consider any schemes for leases or exchange of crude oil
from the naval reserves for fuel oil.
"Do you practice before the departments generally?" Senator Walsh

asked Mr. Creel.
"Why, I never took a cent in my life for any purpose other than
writing, except that one time," Creel answered, "and here was my
friend who came from Denver, that I had known, who said, 'We
will go into the oil business together, George, and we will make a
fortune.' Now, that may sound perfecdy idiotic, Senator, but it did
not seem so to me. Every writer in the world has a dream of getting
into a business where he is going to become a magnate."
Creel testified that while he was working with Stack he ran into Mr.
Doheny in the lobby of the Shoreham Hotel in Washington. They had

not met since Doheny had denounced Creel angrily when they were work-
ing on Mexico together. Creel testified that he did not know whether
they were on speaking terms or not, but that Doheny "came up very genial
and grinned like a Cheshire cat and informed me that I was on his pay
*
Congressional Record, vol. 62, p. 5792.
roll, and for a second time I resigned." Creel said that after this chat with
Doheny, he went to see his friend Stack, learned for the first time that it
was Doheny's money which Stack had given Creel, and that he then got
out of the deal at once. He did not, however, return the $5,000. Stack
testified that Creel knew from the first that Doheny was behind the
scheme to get a lease to Teapot Dome, for he had told Creel so when they
had first discussed the matter.
In the meantime, other people were after a lease to Teapot Dome, and
some of them were eager to keep Edward L. Doheny from invading the
Wyoming oil territory after his great success in California and Mexico.
The Pioneer Oil & Refining Company, which was then owned by the
Midwest Oil Company, which in turn was owned by the Standard Oil
Company of Indiana, and the Societe Belgo-Americaine des Petroles du
Wyoming, which was also owned then by the Midwest Oil
Company,
claimed that they had bona fide leases to lands within the Teapot Dome
naval reserve. The Pioneer Oil & Refining Company laid claim to lands
in the northern part of Teapot Dome and the Societe Belgo-Americaine
des Petroles du Wyoming laid claim to the southern part. The companies
claimed that they owned lands within Teapot Dome before President Taft
had set them aside as naval oil reserves; the claims had been declared
invalid by the Department of the Interior, and it was these same claims
which Secretary Daniels referred to as worthless in his letter to Senator
La Follette. But those who were interested in keeping Doheny out of
Wyoming used these oil claims to discourage and to tire him, and after a
year of fruitless effort, he declared that he would be willing to give up all
attempts to get a lease to Teapot Dome, if he could only get back the
money he had paid out to Leo Stack for his expenses. L. L. Aitken, presi-
dent of the Mountain States Oil Company, also a subsidiary of the Mid-
west Oil Company, which in turn was a subsidiary of the Standard Oil
Company of Indiana, gave Leo Stack a check for $14,944.25, which Stack
handed to Doheny in repayment of what had been expended on behalf of
Doheny up to December 31, 1921.Then Stack entered into a contract with
the Pioneer Oil & Refining Company and the Societe Belgo-Americaine
des Petroles du Wyoming to get them a lease to the whole of Teapot
Dome. By this contract Stack was to receive $1,000 a month and 5 per cent
interest in the profits of Teapot Dome. This agreement was dated Decem-
TEAPOT DOME 51
her 31, 1921. It was at that time that Harry Sinclair's private railroad car
drew up to the small way-station of Three Rivers, New Mexico, where

Mr. Sinclair had business with Secretary Fall.
"Is it not a fact," Senator Adams, of Colorado, asked Mr. Doheny, "that
the Sinclair people came in there and rode rather roughshod over you in
that matter?" Mr. Doheny answered: "I do not know about that. All I
know is I was out of it the time Sinclair bid." Senator Adams hinted that
Doheny did not try to get a lease to Teapot Dome because he was assured
of compensation in another form, but Doheny refused to admit this. He
insisted that he did not try to get Teapot Dome Wyoming was
because
too far from his California properties. But, as Senator Adams pointed out
to him, he had not considered Wyoming too far from California when
he had hired Leo Stack to get a lease to Teapot Dome for him. Doheny
was then asked whether, as a matter of fact, he had not come to an under-
standing with the Sinclair people and the Standard of Indiana people,
with whom Sinclair was affiliated, that if Doheny did not interfere in the
effort of Sinclair to get Teapot Dome, they would not interfere with
Doheny's efforts to get leases to the naval oil reserves in California. He
refused to admit any such gentleman's agreement.
ALBERT B. FALL was no conservationist; whenever there was a question

of government control or private profit in connection with the public
domain, Secretary Fall was all for private profit. Early in his career as
a Cabinet officer Mr. Fall began with Congressmen, and a
to talk oil
bevy of oil men began Washington. But before he could do

to frequent
anything about oil, the Secretary of the Interior had to get the naval oil
reserves out of the jurisdiction of the Navy Department, where they
had been lodged by President Taft and Congress, and into his own hands
at the Department of the Interior. At the same time Mr. Fall coveted
other authority; he was very eager to have the administration of the

Forestry Service transferred from the Department of Agriculture to the

Department of the Interior, but Henry C. Wallace, Harding's Secretary
of Agriculture, strenuously resisted Fall's efforts; Fall wanted control
of the rich natural resources of Alaska, but he was also unsuccessful in
accomplishing that purpose. He had more luck when he came to deal

with the complacent Edwin Denby, Secretary of the Navy.
Rear Admiral R. S. Griffin, who was in charge of the naval oil reserves
as head of the Bureau of Engineering from March 4, 1921, until the
following October, when Mr. Doheny's acquaintance, Admiral Robison,
was appointed to that post, had a conversation with Secretary Denby
about the naval oil reserves less than a month after Denby took office.
Denby told Admiral Griffin that he intended to transfer the administra-
tion of the naval reserves to the Interior Department. Admiral Griffin
told him that he "was very sorry to hear it and hoped that he would
reconsider the matter." The Navy, he pointed out to Secretary Denby,
had been fighting to retain its oil for ten years, and in all controversies
about it, the Interior Department had been opposed to the Navy,
"and that if he turned the administration over to the Interior Department
we might justas well say goodby to our oil." Denby replied that President
Harding was in favor of turning all public lands over to the Interior
Department, and that he himself was also in favor of such centralization.
Admiral Griffin pointed out that as soon as the naval reserves had been
withdrawn from the public domain, they were no longer public lands,
but "they were as much naval property as were the navy yards."
Other officers of the Navy who were interested in its oil problems were
dismayed at the news that the reserves were about to be turned over to
particularly those who had had anything
Fall, and to do with the
reserves. Commander H. A. Stuart testified that he knew of no naval

officers who did approve the transfer, and that there was no occasion for
it whatsoever.
The order placing control of the valuable naval oil reserves in the
hands of Secretary Fall had to be an executive order of President Harding.
On May 10, 1921, about two months after the new administration had
come into power, Secretary Fall and Secretary Denby had a brief con-
versation with the President about the transfer. The next day Secretary
Fall submitted to Secretary Denby a memorandum of the facts and the
TEAPOT DOME 53
law concerning the naval reserves and a draft letter to be sent to the Presi-
dent with Denby's signature. Fall also drew up the draft of an executive
order for President Harding's signature.
Admiral Griffin, anxious to save what he could of the Navy's oil from
Secretary Fall's grasp, suggested that a clause be inserted in Fall's draft
executive order, requiring that before any leases to lands within the naval
oil reserves could be let by the Department of the Interior, such leases must
be referred to the Secretary of the Navy for his approval. Theodore Roose-
then Assistant Secretary of the Navy under Denby, took Admiral
velt, Jr.,
Griffin's clause over to Secretary Fall's office, and he told Admiral Griffin
that he was going to do the best he could to get the clause inserted in the
executive order.
Theodore Roosevelt, Jr. had been one of the original directors of the
Sinclair oilcompanies when they were formed; he was a stockholder in
the Sinclair companies until he became Assistant Secretary of the Navy;
and at the time when he was Assistant Secretary of the Navy, his brother,
Archibald Roosevelt, was a vice-president of one of the Sinclair companies;

Theodore Roosevelt, Jr. admitted on the witness stand that he had ob-
tained this position for his brother by speaking to Harry F. Sinclair in
the spring of 1919.
Theodore Roosevelt, Jr. took the draft of the executive order and Ad-
miral Griffin's suggested clause over to Secretary Fall's office. The sug-
gested modification of Secretary Fall's original draft read: "But no grant,

lease, patent, license or permit pertaining to any lands, or the contents
thereof, in the naval petroleum reserves or naval shale reserves shall be

made without the approval of the Secretary or Acting Secretary of the
Navy." When Mr. Roosevelt came back from Secretary Fall's office, this
clause read: "But no general policy as to drilling or reserving lands in a
naval reserve shall be changed or adopted except after consultation and
in co-operation with the Secretary or Acting Secretary of the Navy." This
modification gave Secretary Fall full authority to lease the entire naval
reserves after a chat, with Edwin Denby or Theodore Roosevelt, Jr.
Theodore Roosevelt, Jr. then took Fall's draft executive order over to
the White House, and President Harding signed it. The order was issued
May 31, 1921. On June 8th, Secretary Fall wrote to his old friend Edward
L. Doheny:
There will be no possibility of any future conflict with Navy officials
and department, as I have notified Secretary Denby that I shall

this
conduct the matter of naval leases, under the direction of the President,
without calling any of his force in consultation unless I conferred with
himself personally upon a matter of policy. 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 in his department, but only
with himself, and such consultation will be confined strictly and entirely
to matters of general policy.
Very sincerely yours,

ALBERT B. FALL.
On May 31, 1921, Secretary Fall was in control of the Navy's oil reserves,
and it had taken him only a little more than two months to accomplish
his aim. It was to be some time, however, before he granted leases to the
reserves; there were many negotiations necessary, both official and per-
sonal. And there were also those pesky naval officers, who were always
meddling in affairs which Secretary Fall felt did not concern them. They
wished to conserve the Navy's oil in the ground for an emergency, and
Fall wished to sell it as fast as possible to his friends, and he grew more
irritable and more impatient with them every day. According to various
witnesses, Secretary Fall had a mean temper. The Naval Fuel Oil Board,
which had been established by Secretary Daniels to conserve the Navy's
oil, was composed of naval officers who were particularly troublesome,

and so in October, 1921, Fall's associate, Denby, obligingly abolished
the Fuel Oil Board and placed entire supervision of the reserves in
the hands of Admiral Robison, who had had such an enlightening con-
versation in the harbor of Pensacola four years before with Edward L.
Doheny, "the man who made millions knowing how." But there were
still two Navy officers whom Secretary Fall could not abide, for, in spite
of the acquiescence of their superiors, Denby and Robison, they persisted

in expressing opposition to any leases being granted to the Navy's oil lands.
They were Commander H. A. Commander Shaf-

Stuart and Lieutenant
roth; Captain John Halligan, Jr. was another naval oil expert who op-
posed the leasing of the reserves. Just at the time when Secretary Fall
finally leased Teapot Dome to Harry Sinclair, Captain Halligan was
TEAPOT DOME 55
sent from Washington on service at sea and the other two officers were
detached from service at Washington to service in other cities.
At a general council of the Navy Department's high command which

was held on October 18, 1921, Secretary Denby had informed the officers
that he intended to turn over the leasing of the Navy's oil lands to the
InteriorDepartment, saying, "that matter of leasing is most difficult and
dangerous thing to be done. It is full of dynamite. I don't want to have
anything to do with it."
The private oil men who were after the Navy's oil were not worried
about the dynamite in the oil leases; it appeared rather to them that the
matter was full of dollars. Edward Buckley, a former waiter at the
Bankers' Club in New York, told the Senate investigating committee in
1928 of a conversation he had heard while waiting on Harry Sinclair,
James O'Neil and two of their friends some time in the spring of 1922,
he believed:
"Mr. Sinclair said," Mr. Buckley testified, "that the Secretary of the
Navy was objecting to the leasing of the Teapot Dome, and they had
to overcome that, so they were to make another appointment with Mr.
Hall Fall later on, a week or 10 days later; and he spoke about
from $80,000 to $125,000 bonds at that time that he had, and one of
those men said he said, 'I wish I was Secretary of the Navy for about
two years.' Harry Sinclair said, 'Well, you would have a better job than
"
the President.'
"Mr. Sinclair said, 'Well, you would have a better job than the
President?'" Senator Nye asked.
"Yes. He said, 'I would clean up some millions,' and Harry Sinclair
said, 'You all have to be careful after this, and each one will have to
look out for himself,' and one man spoke up and said, he said, 'Sup-
posing there was some future trouble to come up afterwards, who would
take care of it?' Harry Sinclair said, 'The Sinclair Oil Co. is big enough
to take care of that,' and James O'Neil said, 'If the Sinclair Oil Co. is
not big enough to take care of it the Standard Oil Co. is big enough to
take care of it.' . . James O'Neil said, 'Why, we make $100,000 a year.
.
(After a pause.) A hundred millions a year, I mean. A hundred

"
millions. A hundred millions a year.'
Buckley told the committee: "Whenever you saw Harry Sinclair around
you could expect James O'Neil the next day or maybe the same day. We
always expected that." He described Harry Sinclair "He is a bald-headed :
man, about 56 to 60 years old, I guess, now, and a man about 5 feet, 8 or 9,
pretty thick, heavy-built man; but Mr. O'Neil is a much heavier man,
bigger man than Mr. Sinclair. . . .
Yes; Mr. O'Neil is a big six-footer."
"What was Mr. O'Neil 's manner at those meetings?" Senator Nye
asked.
"Well," Mr. Buckley replied, "will I express the way that he expressed
himself?"
"Yes, we should like to have it."
"He said, 'Oh, hell; we will make a hundred millions a year.'
(Laughter.)"
Mr. Buckley did not know who the other two men were at the table
with Sinclair and O'Neil; it would be interesting to know whether they
were H. M. Blackmer, of Midwest Refining Company, and Colonel
Robert W. Stewart, of Standard Oil of Indiana. Mr. Buckley described
one of them, the man who had expressed the wish to be Secretary of the
Navy for two years, as "the dark stout man."
"You are sure he didn't say he wished he was Secretary of the In-
terior?" Senator Nye asked.
"No, sir," Mr. Buckley replied; "of the Navy, because I didn't know
how that could be connected at the time, and I never heard of the
Teapot Dome until that day at the table. I was surprised. I was in-
terested myself, because I said, 'If this is a good thing I will try and
get in when they issue the stock.' (Laughter.) 'I will try and get in on it.'
(Laughter.)"
Secretary Fall's version of Harry Sinclair's visit to Fall's ranch at Three

Rivers was given by Fall in a report to President Harding which he made
on June 3, 1922, after the lease to Teapot Dome had become public in-
formation:
On about January 1 [1922], while at my home in New Mexico

spending the holidays with my family, I received a telegram from
TEAPOT DOME 57
J. W.
Zevely asking if I would remain there a few days longer as Mr.
H. F. Sinclair and himself desired to meet me immediately and present
to me an application for a ruling with reference to deferred payments
upon Indian lease lands in Oklahoma. Within the time limited,

Mr. Sinclair and Mr. Zevely, with their respective wives, traveling in
a private car, reached Three Rivers. They presented their particular
problem for my consideration and secured from me a telegram to the

department in Washington, calling its attention to a possible necessary
modification of certain rules then in force.
These remained at Three Rivers, my home, for two or three
parties
days, residingupon their car and visiting with my family and myself.
The day that Mr. Sinclair left Three Rivers, he for the first time
asked me if I were contemplating the opening up of the Teapot Dome.
I answered immediately that I was considering the matter but was
yet
awaiting final reports from the Bureau of Mines experts in that field
upon the danger of immediate drainage. I was then informed that if
the policy of the Navy and the Interior Departments was to open up this
field, he would be glad to consider making a proposition to the Govern-

ment. I detailed to Mr. Sinclair exactly what I have heretofore set forth
and which had theretofore been communicated to two or three oil men,
as I have stated.
Shortly after my return to Washington, namely, on February 3,

1922, Mr. Sinclair and his attorney came into my officeand presented
me a paper stating that it contained an oudine of what he was willing
to do if he should receive a contract for the development of petroleum
reserve No. 3.
The same train which brought Harry Sinclair, his lawyer, J. W. Zevely,
and their wives to Three Rivers brought another guest, in the public cars.
H. Foster Bain, director of the Bureau of Mines of the Department of
the Interior, was traveling west to California in the company of J. J.
Cotter, vice-president of Doheny's Pan-American Petroleum & Trans-
portCompany. Before he became a vice-president of Doheny's company,
Mr. Cotter had been employed in the Department of the Interior, and
he and Dr. Bain were old friends. When the train reached the little station
atThree Rivers, Dr. Bain testified later, he discovered that Harry Sinclair's
private car had been attached to it. Mr. Cotter stopped for a few moments
to greet Secretary Fall and then continued on the train to California,
where Dr. Bain was to follow him the next day, after he had had a con-
ference with Secretary Fall, his chief.
Dr. Bain told the Teapot Dome committee that he and the Sinclair party
arrived atThree Rivers around eleven o'clock in the morning of Decem-
ber 31st. "Mrs. Fall took Mr. Sinclair and his party to a cowboy dance
that night, so that I might have an
opportunity to talk business with
Secretary Fall on these California reserves," Dr. Bain testified. The next
day he continued on to California and was met at the station by John J.
Cotter. He spent the day with him and with Crampton Anderson,J.
of the Pan-American company, and next morning Dr. Bain met with
Mr. Doheny, Mr. Cotter and Mr. Anderson and other members of the
Pan-American organization. Dr. Bain's business in California was osten-
sibly to consult with oil companies concerning bids to build storage tanks
for naval oil at Pearl Harbor, Hawaii, in return for leases to take oil out
of the California naval oil reserves. It was necessary by law that there
should be at least a semblance of competitive bidding for this lease and
contract. But one month before Mr. Doheny had sent Secretary Fall
$100,000 in bills in a hand satchel.
The Pan-American Petroleum company was an oil company and not
a construction company, and therefore could not build storage tanks, but
that little difficulty was solved simply: Dr. Bain introduced members of
the Doheny company to members of the J. G. White Construction Com-
pany, who could build the tanks. Then Dr. Bain went to see officials of
the Standard Oil Company of California, the General Petroleum Com-
pany, the Associated Oil Company and the Pacific Oil Company, so that
they could not say afterwards that they had had no opportunity to com-
pete with Doheny for the leases and the contract.
The officers of the Standard Oil Company of California told Dr. Bain
that they would not submit a bid, because their attorneys had informed
them that it was not legal for the Department of the Interior to make a
contract by exchanged the Navy's oil for storage tanks. The officers
which it
of the General Petroleum Company said the same thing and suggested
that an opinion on the legality of the proposition be obtained first from
Attorney General Daugherty. The Associated Oil Company and the
Pacific Oil Company said that they would bid only if Congress approved
the proposed contract first. Dr. Bain then went back to see Mr. Doheny
TEAPOT DOME 59
and his associates and left California with the assurance from them that
they would offer a bid on the contract.

Meanwhile, Harry Sinclair, Colonel Zevely and their wives were having
a pleasant and profitable time at Secretary Fall's ranch in New Mexico.
They slept in their private railroad car, and spent their day* hunting deer,
quail and wild turkeys with the cowpunchers and their evenings talking
with Secretary Fall before the fire in his ranch house.
"On this visit to his farm in January, 1922, when this question
came up what was the object of your visit at that time?" Senator Len-
root asked Mr. Sinclair later.
"I went to Three Rivers to discuss with Senator Fall the leasing of
Teapot Dome," Mr. Sinclair answered.
Sinclair testified that he had also discussed with Secretary Fall the matter
of royalty payments on Indian oil lands which the Sinclair company held
under lease at the time. In his report to President Harding, Secretary Fall
had made it appear that this was the object of Mr. Sinclair's special
journey to Three Rivers, but Mr. Sinclair's testimony made it clear that
the real object of the trip was to talk about a lease to Teapot Dome, and
he admitted that it would not have been necessary for him to go there
specially to talk of such a routine matter as payments on Indian lands
in Oklahoma.
While Mr. Sinclair was visiting at Fall's ranch, Secretary Fall men-
tioned that he wouldhave some milch cows, according to J. T.
like to
Johnson, foreman of the Fall ranch, who was present with the party. Mr.
Sinclair said that he had some blooded Holsteins on his Rancocas Farm,
that he had more than he needed, and that he would be glad to send the
Secretary some. After Mr. Sinclair got back home, Secretary Fall received
six heifers, one yearling bull, two six-months-old boars and four sows
under six months old. Mr. J. T. Johnson, Fall's foreman, received a pres-
ent of an English race horse from the Sinclair stock farm.
"So far as you know, Mr. Sinclair," Senator Lenroot asked, "is there
any be received in this transaction that Mr. Fall received, any

profit to
benefits or profits, directly or indirectly, in any manner whatsoever, in
connection with you?"

"No, sir," Mr. Sinclair replied; "none, unless he had received some
benefits from the cattle."
The detailed negotiations for leases to Teapot Dome were carried on

with great secrecy. In the early days of February, 1922, the lease was
drafted in the Washington law office of Colonel J. W. Zevely, Sinclair's
personal and confidential attorney and companion, after whom Sinclair

had named the famous race horse, "Zev." On February 1st and 2nd, Sec-
retary Fall, having come up from his ranch in New Mexico, was staying
at the Waldorf-Astoria Hotel in New to his expense
York, according
vouchers at the Department of the Interior. Sinclair's main office was also
in New York. On February 3rd, Secretary Fall was back in
Washington,
and on that day he met Sinclair and Colonel Zevely and received from
them at his office in the Department of the Interior their formal proposi-
tion for the lease to Teapot Dome.
Other oil companies had heard of the possibility that the naval reserves
might be leased early in the Harding administration, and other companies

wished to offer bids for them. Secretary Fall did the best he could by eva-
sions and falsehoods to keep these companies from bidding. Colonel Birch
Helms, vice-president of the Texas-Pacific Coal and Oil Company, in Sep-

tember, 1921, spoke to Theodore Roosevelt, Jr., to Judge Finney, Assistant
Secretary of the Interior, and to Secretary of the Navy Denby about the
possibility of his company's getting a lease to Teapot Dome. He was told
by all three of these officials that the government had no intention of leas-
ing the oil field. In his letter of June 3, 1922, Secretary Fall told President
Harding that he had had conferences in his office with the officials of at
least three companies before he de-
big oil
letting the lease to Sinclair, but
clined later to state the names of these companies. On the witness stand
Secretary Fall admitted that no public bids were ever asked for the contract:
"
"When I say 'bid,' he told Senator Walsh, "you understand what I
mean; that, in the matter of dealing with these gentlemen who com-
municated that they would like to get in on this proposition, I went
very fully into it. I allowed no one to make this contract. I made it
myself. I determined what I wanted, and I presented to each of the
inquiring parties a memorandum showing exactly what I demanded."
TEAPOT DOME 61
And it was strange that the only one of the companies that could meet
Secretary Fall's specifications was that controlled by the visitor to his
ranch on New Year's Eve, who was soon to give Fall more than $230,000
in Liberty bonds, which he had received from the illicit deal in which
the Continental Trading Company had participated.
Fall tried brazenly to explain to the Senate committee that Mr. Sinclair
was the only person in the United States who could have entered upon
the contract, because Mr. Sinclair's company was both a
refining and a
distributing company. "He was in the unique position," Mr. Fall testified,
"where he could afford to bid more for the raw oils and enter into a con-
tract with the Government of the United States for the development of
Teapot Dome oil than any other company in the United States." There
were, however, several oilcompanies in the United States who needed
and wanted oil to refine and to sell, and who could have met the require-
ments of a lease; the struggle for crude oil was intense at the time, as we
have already seen from the competition for Colonel Humphreys's oil
three months before.
Secretary Fall signed the lease to Teapot Dome on April 7, 1922. He

locked it in his desk at the
Department of the Interior and gave the key
to the desk drawer to one of his subordinates, Mr. Stafford. He also told
Assistant Secretary of the Interior Finney that the signed lease was in the
desk and instructed both Judge Finney and Mr. Stafford that they were
to give out no publicity concerning the lease. A
few days later Fall went
back to his Three Rivers, New Mexico, for a rest and to super-
ranch at
vise improvements he had been making on the

property. A short time
before Mr. Sinclair had visited him, Fall, with the money Doheny had
given him, purchased the property adjoining his ranch, and he was stock-
ing the ranch with blooded cattle for the first time in its history. He was
also installing an expensive hydroelectric plant and putting in wire fencing
and building roads.
Meanwhile, the news that Fall had leased Teapot Dome to Sinclair was
seeping out. People in Wyoming were telegraphing to their Senators, and
people in Wall Street were buying the stock of the new Mammoth Oil
Company, which Harry F. Sinclair had formed to exploit the Teapot
Dome lease. On April 5, 1922, two days before the lease with Sinclair was
signed, the Denver Post, a lurid newspaper owned by Frederick G. Bonfils
and H. H. Tammen, had printed a story that the lease had been signed.
The written by the financial editor of the Post,
article, pointed out that
the large oil companies regarded the lease as the end of their troubles,
because by its terms Sinclair was required to build a pipe line from the
Teapot Dome field, which they would be able to use. The independent
oil operators, however, who had no affiliations with Sinclair, Colonel
Robert W. Stewart and other Standard Oil groups, were not so
happy
about the news, and they regarded the Teapot Dome lease as "a wide-
open violation of the leasing act," since the oil field had not been offered
up at public sale. The independent oil men feared that with Sinclair's
Wyoming pipe line in operation, Colonel Robert W. Stewart, who already

had a grip on Wyoming through the ownership of the Midwest Re-
oil
fining Company by the Standard of Indiana, would be able to force down

the price of oil and drive them out of business. This article was sent at
once to Secretary Fall by the agent of the Department of the Interior in
Denver, Mr. M. D. McEniry. On April 7, 1922, the day he signed the lease
with Sinclair and locked it in his desk, the Denver Post published a
denial from Secretary Fall that he had made any lease with Harry
Sinclair.
Others besides the Wyoming oil operators were excited as soon as they
heard the news that Fall had given Teapot Dome to Sinclair. Colonel
Birch Helms, of the Texas-Pacific Coal and Oil Company, who six months
before had discussed with Theodore Roosevelt, Jr., Secretary Denby
and Judge Finney the possibility of his company's getting the lease, and
had been told that the government had no intention of leasing the field,
called again on these three high government officials, and they all referred
him to Secretary Fall. The Secretary, who had not yet left for Three Rivers,
saw Colonel Helms on April 10th, told him the matter of a lease to
Teapot Dome was still open, and asked him whether his company was
prepared to build oil storage tanks for the Navy at Portsmouth, New
Hampshire, and from the Teapot Dome field to the
to build a pipe line
east. At the moment Secretary Fall was sitting at the desk where lay the
lease he had signed with Sinclair. Later at his trial in Cheyenne, Wyoming,
Secretary Fall tried to maintain that he had not been discussing Teapot
Dome with Colonel Birch Helms at all, but that he was referring to a
contract for the Navy's royalty oils from the neighboring fields of Salt
TEAPOT DOME 63
Creek. Colonel Helms testified that he had also spoken to Secretary Fall
about the Navy's royalty oils at Salt Creek, but that he was sure that this
particular conversation was about Teapot Dome and none other. Secretary
Fall had Teapot Dome
told him, he testified, that the matter of a lease to
would be open for another month, that he was going to his ranch at Three
Rivers, and that nothing would be decided until he came back, when
the Texas-Pacific company would have a chance to bid.
The next thing Colonel Helms heard about Teapot Dome was when he
read in the newspapers that Sinclair had got the lease. He sent Secretary
Fall a telegram at Three Rivers, reminding him of his promise, and offered
to come to Secretary Fall's ranch with the executives of the Texas-Pacific
company and discuss a lease to Teapot Dome with him. To this telegram,
he received the following reply :
Three Rivers, N. Mex. April 20, 1922.

Birch Helms,
Vice President Texas Pacific Coal & Oil Co.
Fort Worth, Tex.
Regret can not make appointments while on this trip. Teapot Dome
matter closed. Salt Creek royalties open until after my return Wash-
ington.
FALL, Secretary.
Thereupon, Colonel Birch Helms sent a telegram to President Harding

requesting an interview on either April 25th or 26th. He also sent another
telegram to Secretary Fall protesting against the lease and informing him
that he had telegraphed to the President. That same day Colonel Helms
also telegraphed to John W. Weeks, Secretary of War, Herbert Hoover,

Secretary of Commerce, and Attorney General Daugherty, repeating to
them his telegram to the President and requesting that they discuss the
matter with the President.
To his telegram to President Harding, Colonel Helms received in reply
from George B. Christian, the President's secretary, regretting that
a letter
the President would be unable to see Colonel Helms on April 25th, as
the Cabinet was to meet that day, nor on April 26th, "as the President
is
planning to leave for Ohio to take part in the centenary celebration of
the birthday of General Grant." Clio must have been playing tricks, for
General Grant was another President who had been duped shamefully by
his friends. Mr. Christian's letter to Colonel Helms concluded with this
comfortless sentence: "In any event the matter to which you refer seems
to be one which should come to the President through the Secretary of
the Interior, and I suggest, therefore, that you confer with Secretary Fall
on the subject."
To his telegram to Secretary of War Weeks, Colonel Helms received
the following reply : "No doubt President will give you hearing. For good
reasons cannot become involved in controversy."
Herbert Hoover, when he received Colonel Helms's telegram, wrote
to Judge Finney and was informed that Colonel Helms had mistaken the
purport of Secretary Fall's conversation, that the Secretary had been talk-
ing with him about Salt Creek and not Teapot Dome. Secretary Hoover's
assistant thereupon wrote to Colonel Helms enclosing a copy of the letter
from Judge Finney. From Attorney General Daugherty, Colonel Helms

received no reply at all.
Colonel Helms went to Washington at once. He saw Secretary Weeks.
who told him that the matter was not in his province; he saw Attorney
General Daugherty, who told him that the matter was not in his province ;
he saw George B. Christian, who told him that the matter was not within
the President's province and referred him back to Secretary Fall, who
had lied to him in the first place; he saw Secretary Hoover, who repeated
to him in substance what his assistant had already written.
The testimony of Colonel Birch Helms, taken before the Senate com-
mittee on April 3, 1928, a few months before Mr. Hoover was nominated
for the Presidency, made it clear that Mr. Hoover was acquainted with
the Teapot Dome affair in made no move
time to protest, and that he had
to do so. It members of Harding's
established that at least three important
Cabinet and the President himself knew what their sly colleague was up
to in time to take action, or, in the case of Hoover and Weeks, in time to
make their protests effective by resignation; none of them moved. They
apparently felt that it was not their business, though Fall was engaged in
the process of bartering what was estimated to be $500,000,000 worth of
the people's resources by his leases to Teapot Dome and the California
reserves.
TEAPOT DOME 65
Meanwhile, with protests raging about his department from newspapers,

Senators and oil men, Secretary Fall
attempted to keep the lid jammed
tight on the public announcement of the lease to Sinclair, while he at-
tended to the additions to his ranch, the new cattle he had purchased and
the installation of a $35,000 hydroelectric plant at Three Rivers. On April
13, 1922, the bureau chiefs of the Department of the Interior were warned
in a stern memorandum not to give out any information concerning the
lease. On April 14th, Assistant Secretary Finney gave out statements at
that no agreement had been reached for a lease,
his office
though he knew
that the lease had been signed one week before and was now locked up in
Secretary Fall's desk. No copies of the lease were made public, and Judge
Finney declined to give one to Mr. John C. Shaffer, an oil operator and
newspaper publisher. As an excuse for this secrecy Judge Finney offered
"military reasons." High naval officers knew nothing about the lease to
the reserves and were shocked at the published rumors concerning it. On
that same April 14th the Wall Street Journal published the statement that
Sinclair had received a lease to Teapot Dome, and there was great activity
in Sinclair stocks on the stock market.
Secretary Fall paid no attention to the protests and kept the matter
long as possible. On April 6, 1922, Senator Robert M. La Follette
secret as
had written the Secretary of State that he understood that there were in
existence Executive Orders of the President of the United States concern-
ing naval oil reserves and coal reserves, and asking for copies of those
orders, particularly the one empowering the Secretary of the Interior to

handle the naval oil reserves. Mr. Hughes forwarded Senator La Follette's
request to the Secretary of the Interior, who answered it on April 12, 1922.
He transmitted with his reply the orders transferring the naval oil reserves
and the coal reserves of Alaska to the Department of the Interior. No
information, however, was given to Senator La Follette about any lease
to Teapot Dome, or any contemplated lease.
When Fall was asked why he had not given out any information con-
cerning the lease, he replied that he could not divulge military secrets of
the United States, even to Senators. He used the excuse "military secrets"
so often in his testimony before the Teapot Dome investigating committee
that Senator Walsh, vexed by his evident hypocrisy, reminded him
sharply that patriotism was not confined to himself.

While Fall remained on his ranch, demands were being made in Wash-
ington for the text of the Teapot Dome lease, and telegrams followed him
to New Mexico, informing him of the insistence that the lease be made
public. His reply instructed his assistants at the Interior Department to
turn the entire matter over to the Secretary of the Navy, "to give or not
to give publicity, as he pleased." There was no loyalty in Secretary Fall,
and he was quite willing, not to say anxious, to put the entire responsibility
back on the shoulders of his careless dupe, Secretary Denby, so long as he
was able to collect money for his personal use from the recipients of public
benefits, Doheny and Sinclair.
But Secretary Denby was not anxious to assume the burden Secretary
Fall so obviously wished to shift upon him, and no official information
was forthcoming from the government on the Teapot Dome lease. Then
on April 16, 1922, Senator Kendrick, of Wyoming, introduced a resolution
in the Senate calling on the Secretary of the Interior to inform the Senate
whether a Teapot Dome had been signed. The resolution was
lease to
passed, and the lies and evasions concerning the matter had to stop. On
April 18th, the Department of the Interior issued a statement that the lease
had been made; on April 21st, Assistant Secretary Finney wrote the Senate
that each a lease had been signed with Mr. Sinclair.
Mr. Fall's answers to Senator Walsh's questions concerning this un-
seemly secrecy on his part were unctuously evasive:
"Well, what objection was there, if there was

any objection," Senator
Walsh asked, "to giving to the public immediately upon the execution
of this contract information that the contract was, in fact, executed,
inasmuch as the public would necessarily know as soon as Mr. Sinclair
began work that he had the lease?"
"Certainly no sinister purpose could have been served by it," Mr.
Fall replied.
"Was there any purpose not sinister?"
"Now, you are going into the policy which I had in mind with
reference to this thing," Mr. Fall answered. "I have undertaken to ex-
plain that I regarded myself as a business agent of the

Secretary of
the Navy, acting in what I regarded as a military matter under the
President of the United States. I did not propose, so far as I was
concerned, to call attention to the fact that contracts providing for
TEAPOT DOME 67
enormous storages for future use in a crisis of oil were being made
off the coast or in certain parts of this country. That was what I had
in the back of my head. If that information should be given out through
publicity of the contracts, it must be by the parties who were interested
in itmore than I was. I did not suggest it to them. It was up to them.
I had my own ideas."

"I did not speak about the matter of the details of the contract,"
Senator Walsh said. "All I inquired about was what objection there
was, if making public a statement to the effect that a lease of
any, to
the Teapot Dome had been executed to Mr. Sinclair and his interests."
"I think," Mr. Fall answered, "that was pretty well known or else
these inquiries as to the contract, where it was and what was being
done about it, causing a Cabinet meeting during my absence, as I
understand it, would not have occurred. . . . The Secretary of the Navy
had stated that after a Cabinet meeting it had been decided, in view
of the talk about it, to give out the contract. I wired to Secretary Finney
that we had no objection. It was the Navy's business."
"Well, I am told," Senator Walsh said, "and possibly we will have
some evidence upon that point, that during the time between April
7, when it was executed, and April 21, when it was made public,
transactions in Sinclair oil stock on the New York market amounted
to thirty million."
"I do not know," Mr. Fall replied. "I have heard that rumor and it
was so stated in the records of the United States Senate. I immediately

caused an investigation to be made and found that practically all oil
stocks had gone up at that time, many of them much more than the
Sinclair stocks."
Some evidence was developed of speculation in Mammoth Oil stock,

the Sinclair company, formed to exploit Teapot Dome, and other Sinclair
stocks. Brokers with inside information and Attorney General
Daugherty
were trading in Sinclair stocks at this time, which may have been a moti-
vating reason for Secretary Fall's secrecy about the lease. Daugherty had
an account at the brokerage house of Hibbs & Company in Washington,
and there was trading in that account in Sinclair Consolidated stock and
other Sinclair stocks.
"Before we proceed," Senator Walsh told the Teapot Dome in-

vestigating committee, "I want to call the attention of the committee to
a rather notable instance, that the Daugherty account was changed from
his own name to the name of Spaid on the 18th of April, 1922, which
was the very day that official information was given out from the
Department of the Interior of the execution of the Sinclair lease."
Others who bought and sold Sinclair and Doheny stocks, of which the
committee was able to trace records, were Senator Charles Curtis, later
Vice-President of the United States, Senator Davis Elkins, and Represent-
ative Wells Goodykoontz. There may have been others who traded under
names other than their own. It was estimated that on the announcement
to the public that Sinclair had received a lease to Teapot Dome the market
for stock in the various Sinclair companies increased in value by $57,-
000,000.
After he had submitted to Secretary Fall his first formal proposals for
a lease to Teapot Dome on
February 3, 1922, Harry Sinclair organized the
Mammoth Oil Company, with a capital stock issue of 2,005,000 shares;
2,000,000 of these were Class A, nonvoting shares, and the other 5,000
were Class B, the voting shares. All of the shares were issued to Harry
F. Sinclair personally on April 17, 1922, except the few shares needed to
secure the articles of incorporation. In consideration of receiving these
shares, Mr. Sinclair turned over to the Mammoth Oil Company the lease
to Teapot Dome which he had obtained from Secretary Fall ten days
before.
Part of the stock in the Mammoth Oil Company which he had received
Mr. exchanged for stock in the Hyva Corporation, a personal
Sinclair
corporation owned by him and members of his family. It was named

Hyva after Mr. Sinclair's two children, Harry and Virginia. G. T. Stan-
ford, attorney for the Sinclair companies, testified that the object of the
organization of the Hyva Corporation was to keep Mr. Sinclair's income

tax down to the 12 Vz per cent tax on corporations and thus to make it
unnecessary for him to pay any surtaxes. The Hyva Corporation traded
some of the Mammoth Oil Company shares which it had received for its
own shares to the Sinclair Consolidated Oil Corporation, in return for
250,000 shares of that corporation's stock. The Hyva Corporation also
bought Mammoth Oil Company stock at $17 a share at a time when the
public was paying $50 a share for it, so that Mr. Sinclair profited hugely
TEAPOT DOME 69
by the stock deals in connection with the Teapot Dome lease. It was esti-
mated that Mammoth Oil stock had a trading value of more than
$50,000,000. In his transactions in Mammoth Oil stock Sinclair had real-

ized $17,059,700 on W/ 2 per cent of the stock. In addition, the value of
Sinclair's holdings and those of his family corporation, Hyva, increased
tremendously in value as a result of the lease which his friend Fall had
granted to him.
In October, 1922, Mr. Sinclair requested Jesse L. Livermore, stock
market trader, to "make a market" for Mammoth Oil stock. A group was
formed, consisting of Sinclair, Elisha Walker, of Blair & Company, Edward
R. Tinker, president of the Chase Securities Corporation, and Jesse L.
Livermore, to trade in shares of Mammoth Oil Company stock in order
to create a market for that stock with the public. The group had an option
to buy 400,000 shares of Mammoth Oil stock at $26 a share, which were
sold at prices ranging from $40 to $56^, but Sinclair was not satisfied
that the public was paying enough for the stock and bought some back
himself at prices as high as $88% a share. Mr. Tinker, of the Chase
Securities Corporation, assured Senator Walsh that this operation in Sin-
clair's Mammoth Oil Company stock from the govern-

was no different
ment's effort during the war to make a market for Liberty bonds. Senator
Walsh, however, pointed out a vital difference:
"But there wasn't anybody, you see, that got an option on 400,000
bonds," he remarked.
"No," said Mr. Tinker, "because you had a war on and people
would work for nothing. Now you are in peace times and it is a
different proposition."
In January, 1923, Mr. Sinclair was called before the Senate Committee
on Manufactures, which was investigating the oil business in general.
At the time, not fearing investigation of the Teapot Dome lease, he

testified: "I personally consider the value of the Mammoth property at
this time it is
only a guess at a greater amount than $100,000,000." The
only property which the Mammoth company possessed was the lease to
Teapot Dome. At the time the lease was made it was generally believed
that Teapot Dome oil fields contained about 135,000,000 barrels of oil.
H. S. Reavis, an man and former publisher of an oil trade journal,
oil testi-
fied that the Teapot Dome lease was so valuable that it would have been
easy for the government to get

a bonus in addition to royalties of at least
$10,000,000, and possibly as high as $50,000,000, if the contract had been

let in open competition instead of in the privacy of Secretary Fall's office.
On May 8, M. T.
Everhart, Secretary Fall's son-in-law, met Harry
1922,
Sinclair and Fall in Washington. It was just a month since Fall had signed
the lease to Teapot Dome. Everhart and Sinclair went down to the rail-
road siding where Harry Sinclair's private car was lying, and Sinclair
handed Everhart $198,000 in 3> /2 per cent Liberty bonds. Everhart then
l
took the bonds to Secretary. Fall, who kept $2,500 worth of them and
Everhart took back the rest. Then Everhart went to New York where
gave him another $35,000 worth of 3 /2 per cent Liberty
l
Harry Sinclair
bonds. It was at this time in Sinclair's office that Everhart gave Sinclair
one yearling bull, two young
a check for $1,100 to pay for the six heifers,
boars and four sows which had been shipped to Secretary Fall's ranch
from Sinclair's Rancocas Farm the previous March. G. D. Wahlberg, Sin-
clair's private secretary, testified that the Sinclair offices had to telephone
to the Rancocas Farm in order to get a price on the cattle, and that then
Everhart paid $1,100 for Fall. The bill of lading for the cattle showed that
the freight charges which Sinclair's farm paid had been $1,105.20. Mr.
Sinclair had never intended to charge Secretary Fall anything for his
present of cattle, nor had Secretary Fall intended to pay anything for
them, but, between the time of the shipment in March and the day in
May when Everhart paid for them, the newspapers had announced that
Sinclair had received a lease to Teapot Dome from Fall's department,
Senators were asking questions, and a resolution had been passed by the
Senate calling for an investigation of the leases to the naval petroleum
reserves. Secretary Fall and Mr. Sinclair thought it safer to cover them-
selves on and sows, but they never
the matter of the heifers, bull, boars
imagined that the Liberty bonds which Sinclair had given to Everhart
could be traced to Fall in any way. But Mr. Sinclair was careless in diving
box to get Liberty bonds for Fall. He saw no reason
into his safe deposit
why he should not give Everhart the same Liberty bonds which Osier
had given to him as part of the Continental Trading Company's illicit
profits. Those Liberty bonds, however, like all Liberty bonds, had num-
TEAPOT DOME 71
bers, and the numbers were registered at the Dominion Bank of Canada,
when they were purchased for the account of H. S. Osier.
On that same day, May 24, 1922, when he received the $35,000 worth of
Liberty bonds in Sinclair's office in New York, Everhart told Sinclair
that Secretary Fall would like a loan, and Fall received $36,000 in cash
from Sinclair. Then in November, 1922, when Sinclair visited Fall again
at Three Rivers, New Mexico, to talk over the matter of a contract for
the government's royalty oils in the Salt Creek oil fields of Wyoming,
adjoining Teapot Dome, Mr. gave Mr. Everhart $10,000 in bills
Sinclair
for Secretary Fall. In January, 1923, Mr. Sinclair gave Mr. Everhart
$25,000 in bills in Sinclair's suite at the Wardman Park Hotel in Wash-
ington. He took no receipt for these payments and no note for them.
Four years later, when all these payments were finally revealed, Everhart
insisted that Sinclair had given him this money in payment of a one-third
interest in Secretary Fall's ranch in New Mexico. It had been Mr. Sinclair's
intention, he said, to turn part of the ranch into a sporting club for himself
and his friends, but Everhart admitted that so far as he knew Mr. Sinclair
had never come back to Three Rivers November, 1922, when he came
after
there to talk with Fall about Salt Creek oil. So that Mr. Sinclair's name
need not appear on the books of Secretary company, the Tres
Fall's cattle
Ritos Cattle Company, his interest in the Fall ranch was held in trust for
him by Mr. Everhart, but nothing was ever put in writing to prove that
Sinclair had a one-third interest in the property in return for his Liberty
bonds. And no steps were ever taken to turn any part of the ranch into
"a recreational club."
The excuse Secretary Fall offered for leasing Teapot Dome and the
California naval reserves to his friends was that oil from them was being
rapidly lost to the Navy by drainage into neighboring fields which were
in private hands, andwas absolutely necessary to save the Navy's
that it
oil by having it taken out of the ground as fast as possible. However,

neither Fall nor Denby ever asked the opinion of the United States
Geological Survey on drainage of the naval reserves, for the Survey was
of the opinion that the oil should be kept in the ground, and that there
was no important drainage that could not be remedied by drilling a few
offset wells.
Fall, Denby and Admiral Robison all insisted on their high patriotic
motives in agreeing to lease the naval reserves to private oil interests.
Fall and Denby feared the Navy's oil would all be drained away, so they
said, and Robison also feared foreign invasion of our coasts soon and the
Navy ground and not
in the pitiable condition of having crude oil in the
enough in Both K. C. Heald, chief of the Oil and Gas Section of

tanks.
the United States Geological Survey, and W. C. Mendenhall, chief geolo-
gist of the United States Geological Survey, testified that the drainage
from Teapot Dome was negligible.
Secretary Denby testified that it was of vital importance in case of war

for the Navy to have oil in tanks ready for use. Senator Walsh agreed,
but he wanted to know why in that case the Secretary had not asked
Congress for an appropriation to build tanks and to buy oil instead of
oil
bartering the invaluable assurance for the future in exchange for tanks
and oil. Denby answered that the oil was being drained off rapidly, a
fact which had been called to his attention as soon as he took office, and
Senator Walsh pointed out that the lease was only executed thirteen
months after Denby had become Secretary of the Navy, and that Congress
was in session all the time.
Secretary Fall informed the Senate committee that, having realized

that the Navy was to be cut down by agreement with foreign governments
at President Harding's Washington Naval Conference, he had let the
contracts to Sinclair and Doheny in order to insure that the Navy would
always have an adequate supply of oil, with the result "that the efficiency
would be more than doubled, and that one-half of
of the Pacific Fleet
the battleships then on the would be worth more than the total
Pacific
number under other conditions; that this change would make one-half
of the battleship fleet worth more than the total fleet had heretofore been."
Secretary Fall then concluded in a letter to the Senate investigating com-
mittee: "But I will say right now, without fear of successful contradiction,
that the efficiency of the United States fleet in the Pacific waters today
is more than doubled already by this policy. You can see for yourselves
what the experts may think of it; I do not know, but that is the offhand
opinion of a layman who is and has been very much interested in the
entire situation." And Secretary Fall did not wish to have to speak of it
again.
TEAPOT DOME 73
MEANWHILE, the negotiations for leases to the California naval reserves

between Secretary Fall and his lifelong friend, Edward L. Doheny, were
quietly making progress. It was necessary to have a semblance of com-
petition for the contract to drill certain oil wells within the California
reserve,which were to be drilled in order to prevent drainage into neigh-
boring wells. Secretary Fall with the co-operation of his friends at the
Navy Department had stipulated that the lessee of these wells should
build storage tanks for naval oil at Pearl Harbor, Hawaii. As we have
seen, some other California oil companies had questioned the legality of
such an arrangement.
Admiral Robison testified that he was told by Secretary Fall that the
had been questioned, but that Fall was convinced that
legality of the deal
it was all right. He said that his own anxiety was to see the Navy in
possession of storage tanks full of oil, and that he took Secretary Fall's
word for the legal part of the transaction. "I knew that Secretary Fall, as
Senator, was a party making of the laws," Admiral Robison

to the testified.
"I rather thought he knew what was meant by it."
"And he told me," Admiral Robison continued, "that after ad-

vancing such objections as you have just made, and after hearing me
as to the needs of the situation, it was all right; he advised me that it
was all right, and that he could arrange to bring it about, he thought.
Later he did advise me that there was grave doubt as to whether, in
view of some question as to the legality of undertaking such an ex-
tensive project as was involved in this million and a half barrels, he
could get any bids from anybody to put it across. Well, I felt pretty badly
about it and I don't know whether this is

quite pertinent to your
question, but I would like to state it because I want to pay a tribute to
a man. I told this young officer who had been with me aboard ship, and
who was a friend of mine, about it, and I said, 'I don't know
how to
handle this thing. Talk to your dad, won't you?' I got a letter from
him saying that he had talked to his father, and his father would see
me within a day or so and talk it over. That he agreed that the defensive
well proposition was necessary. And then I got hold of the old man, of
Mr. Doheny, the president of the Pan American Petroleum & Transport
Co., and I recited the circumstances, and I appealed to him as a Cal-
ifornian to help me accomplish what I showed him was needed, and he
promised that we would have at least one bid. And that is the only
way this thing was accomplished, I believe."
It is difficult to tell whether Admiral Robison was naive to the

point
of incompetence in his work, or clever to the point of deception in his
testimony; but, if he appealed to Mr. Doheny as a Calif ornian to do what

Mr. Doheny had shown put in a bid for the
alert willingness to do
California naval reserves Mr. Doheny must have enjoyed a chuckle.
The lieutenant aboard his ship whom Admiral Robison said he had used
as an intermediary in his appeal to patriotism and local pride was the
same young man whose father had used him as an intermediary to take
$100,000 worthy of currency in a little satchel to Secretary Fall in No-
vember, 1921, two days after Mr. Doheny had made his first offer to
build tanks in return for naval reserve oil.
At noon on Saturday, April the bids for building storage tanks

15, 1922,
for the Navy at Pearl Harbor, Hawaii, were opened in the office of
Assistant Secretary Finney at the Department of the Interior. Secretary

Fall was at the moment down in New Mexico supervising the additions
and improvements to his ranch. Three bids were submitted. The Standard
Oil Company of California submitted a bid which covered only the supply
of oil for the tanks and not their construction. The Associated Oil Com-
pany, of California, submitted a bid, with the proviso that Congress must
first approve the contract. Doheny's Pan-American Petroleum & Transport
Company submitted two bids. The first, marked "Proposal A," was in
strict conformity to the conditions set down in the invitations to bid and
provided for a straight profit on the work of constructing the oil tanks
at Hawaii, which profit was to be taken in oil from the naval reserves.
The second, marked "Proposal B," agreed to perform the work for
$255,000.1ess in oil than the first, but in it was the provision that the Pan-
American Petroleum & Transport Company was to have a preference
on any lease to the entire Naval Petroleum Reserve No. 1 which the
government might give in the future. In the invitations sent out to oil
TEAPOT DOME 75
companies to bid for the contract nothing had been said about any possi-
bility that a lease to the California naval reserve might be made in the
future.
On Monday Dr. Bain and his assistant in the Bureau of Mines rendered
a report favoring Doheny "Proposal B." Judge Finney then conferred
with Doheny's other friend, Admiral Robison, and telegraphed to Secre-
tary Fall that both he and Admiral Robison approved of the Doheny
company's bid. Secretary Fall answered that since such was the case,
they should close the contract with Doheny's company and make it
public. The Pan-American Petroleum & Transport Company then re-
ceived a letter informing it that "Proposal B" was accepted. Mr. Cotter,
vice-president of that company, was taking no chances, however; he
demanded an assurance in writing that the company would receive a
lease to at least part of the California naval reserve within a year.
The first Doheny contract, which was signed on April 25, 1922, pro-
vided that the Pan-American company was to build storage tanks at
Pearl Harbor, Hawaii, to hold 1,500,000 barrels of oil. In payment the
company was to receive 6,000,000 barrels of oil from Naval Petroleum

Reserve No. 1 in California. Then in June, 1922, Secretary Fall granted
to Doheny's company a lease to some acres in Naval Petroleum Reserve

No. 1. But the big prize was still to come.
Judge Paul J. McCormick, of
the United States District Court of California, wrote in an opinion in
1925 concerning Mr. Doheny's contracts and leases:
The contract of April 25, 1922, meant no profit to him. The lease of
June 5th was not valuable. It was small in area and was coexistent with
the April 25th contract. It was the preferential right to further leases
granted by the April 25th contract that Mr. Doheny expected would
fructify into a valuable property right.
At a meeting of the Cabinet, Attorney General Daugherty had made a

verbal statement that the contract with Doheny was legal, according to
Secretary Fall. Dr. Bain now
suggested that, in view of the attitude of
Mr. Doheny's grumbling rivals in the oil business in California, some of
whom had even threatened to bring suit to test the legality of the contract,
Secretary Fall should ask Attorney General Daugherty to put his verbal
statement in writing. But no action was ever taken on this suggestion.
Secretary Fall had pulled the wool further over the eyes of Secretary of
the Navy Denby by writing to him that he had delayed the Doheny
contract so that Congress might pass a bill authorizing the exchange of oil
for storage tanks, but no such bill was ever introduced into Congress, and
Secretary Fall never had any intention of having such a bill introduced,
for it would have brought out into the open the dangerous question of
the legality of his clandestine leases with Doheny and Sinclair.
In the fall of 1922, Mr. Doheny had another talk with his friends,
Secretary Fall, representing the Interior Department, and Admiral

Robison, representing the Navy. He
proposed that the Pan-American
company should increase the number of oil tanks it was building for the
Navy, fill them with oil, and that it should erect a refinery at San Pedro,
California, and a pipe line from the naval oil reserves to this refinery. In
return for tanks, oil and Pan-American company was to
royalties, the
receive a new lease to all the remaining acres of oil lands in Naval
Petroleum Reserve No. 1 for fifteen years, with the right to drill out of
them at once the oil which was being kept in the ground in case of an
ultimate shortage. "It was," wrote Judge McCormick, "in effect a complete
surrender and transfer of approximately 30,000 acres of valuable proven
oil land and its oil contents, estimated at from 75,000,000 to 250,000,000
barrels of oil for fifteen years at least."
A contract embodying the features of Mr. Doheny's proposal was signed
by Secretary Fall on December 11, 1922. The prize was at last in Mr.
Doheny's hands, and it had only taken about a year from the time he had
sent Secretary Fall $100,000 in bills. Mr. Doheny himself, when testifying
later before the Senate committee, estimated that "we will be in bad luck
if we do not get $100,000,000 profit. But that will depend
upon the price
of gasoline." Mr.Doheny insisted, however, that the contract was highly
advantageous to the government, and he maintained that before he was
granted the right to drill offset wells in the California reserves, the Navy
had lost 100,000,000 barrels of oil
by drainage. Senator Walsh wanted
to know whether the Bureau of Mines had had access to this information
concerning drainage, and he pointed out that the bureau had estimated
"that the loss to the Navy by reason of the failure to drill offset wells at
_ TEAPOT DOME 77
all times prior to March 4, 1921, on the two California reserves has been
11,100,000 barrels."
"No, sir," Mr. Doheny answered. "No man on earth has access to
the same information I have, because my information comes from
29 years of close study of the proposition, such as no other living man
has given to the business. That sounds egotistical, I grant you, but that
is
absolutely the truth, since you have asked the question."
But further questioning revealed that Mr. Doheny was making a sheer
guess.
When his machinations with the oil men were completed, Secretary
Fall had leased to Sinclair and Doheny naval oil reserves valued by each
of them at $100,000,000 profit apiece. And some men considered the oil
in the reserves to be worth $500,000,000. In return for these leases the
government was to get storage tanks for the Navy to be built by Doheny
at Pearl Harbor, Hawaii, and by Sinclair at Portsmouth, New Hampshire.
The cost of construction of the tanks was estimated to be $103,000,000.
The two men were to take the oil out of the naval reserves, pay the Navy
17 per cent royalty, and out of this royalty the Navy was to pay the
companies the cost of construction of the storage tanks.
Naval officers and geologists maintained that if the oil were left in the
ground would prove invaluable to the Navy and the nation. "Tanks,"
it
Captain John Halligan, Jr., U.S.N., pointed out to Secretary Denby, "may
be destroyed by lightning, fire, or by the acts of an enemy." Oil in the
ground could not be destroyed if proper precautions were taken to prevent

drainage and gas pressure. And Chester W. Washburne, formerly of
the United States Geological Survey, pointed out another important
factor to the Senate committee investigating the leases. He maintained
that if the crude oil were left in the ground it could be used in the future
in any form required then, whereas if taken out at once, refined and placed
it could be used
in storage tanks, only as fuel oil. "It may be that in
another generation the need will not be fuel oil at all," he said, "but will
be some other kind of oil. . . . We
can always get anything out of crude
oil." Gasoline as well as fuel oil was necessary to the Navy to run its
airplanes and battleships, Mr. Washburne told Senator Jones. "They do

not operate battleships with gasoline," Senator Smoot remarked. "We do
not know how they will run battleships in another generation," Mr.
Washburne replied. "When they adopted this policy they assumed
that
the storage of fuel oil would answer that problem; whereas the naval
reserve holds any kind of oil product that may be needed for the future,
it is the only way we can hold gasoline, say, for fifty or a hundred
years. . . .
They decided all that when they made this lease. Instead of
keeping the one kind of insurance which covers all possible needs for
the Navy in the way of oil, they have reduced it to one particular species
of insurance, fuel oil against all kinds of oil which they had in the
reserve."
W. W. Tarbell, an oil expert, told the Teapot Dome investigating

committee:
"To summarize, we have been bound by this agreement, to a con-

tractworth millions perhaps without one cent of cash consideration,
with faked royalty terms, with special and monopolistic carrying
privileges, with unfair and exclusive sales conditions, with our values
and their disposition under the absolute control of the 'other party
"
thereto.'
Mr. Tarbell was referring to both the Doheny and the Sinclair contracts.
He also pointed out that these contracts gave Doheny and Sinclair prac-
tically a monopoly of the business with the Navy in gasoline and oil
products, because the Navy had to buy these products from those two
companies in return for the oil which it received as its share of the opera-
tion of its reserves. Mr. Tarbell gave it as his opinion that, granting that
the government's policy was to lease the reserves, Fall had thrown away
between fifteen and twenty millions of dollars for the Teapot Dome
lands alone, for that much would have been paid as a cash bonus for
the lease if it had been offered in competitive bidding.
When asked by Senator Walsh concerning his authority to barter the
naval oil reserves for storage tanks and fuel oil, Fall insisted that, "it was
the only salvation for that oil," and that his contracts constituted an
advantageous deal. "But some of us might differ about that," Senator
TEAPOT DOME 79
Walsh remarked, "and the trouble is that we must find some authority
in the law for you to do it." "Well, I did it," Fall replied.
Secretary Fall was not one to let a little thing like authority stand in
the way when he wanted to negotiate between the government and his
friends. He
took other arbitrary action in favor of his friend and bene-
factor, Harry Sinclair. Testimony concerning another oil deal between
Fall and Sinclair was taken before the Select Committee of Congress to
investigate the Shipping Board in 1924. During the administration of

Woodrow Wilson the United States Shipping Board had made a con-
tract with the Department of the Interior whereby the Shipping Board
for its vast ship operations was to use royalty oil due to the government
from government-leased oil lands. The Shipping Board consumed more
oil than any other unit in the world; its oil bill for 1923 alone was
$26,453,170.31.
When the contract for oil between the Shipping Board and the Depart-
ment of the Interior came up for renewal in May, 1922, one month after
he had leased Teapot Dome to Sinclair and made his first contract with
Doheny Fall suddenly refused to The Shipping Board also
renew it.
had a contract with the Midwest Refining Company by which it was

obligated to exchange crude oil which it received from the Department
of the Interior for fuel oil which it received from the Midwest Refining
Company. By this arrangement the government saved between two and
three millions of dollars a year on the cost of Shipping Board oil. M. W.
Bowen, manager of the department of purchase and supplies of the
Shipping Board's fleet, testified that the contract with the Interior De-
partment gave the Shipping Board its oil at half the market price. Secre-
tary Fall declined to renew the contract, Mr. Bowen said, on the grounds
that he was then negotiating to sell the government's oil for a higher
price than had been received hitherto, and that he would
thereby save
the government money. There was doubt whether Secretary Fall could
get a higher price, and meanwhile the Shipping Board contract was a
sure advantage to the government. "While the Interior
Department might
get $1,000,000 more, might we have to
pay $5,000,000 more," Joseph E.
Sheedy, of the Shipping Board, testified. Fall insisted that by bringing
another oil company into the competition for the government's
royalty
oils from the Salt Creek fields in Wyoming, he was going to get a higher
price.
"Did he tell you that Sinclair was the man that he expected to make
that arrangement with?" Representative Davis asked.
"I think Mr. Fall did tell me that he was considering making an
arrangement with Sinclair," Mr. Bowen answered. "Sinclair's repre-
sentative was there all the time when we were negotiating, and so
was the Midwest, and were other companies there."
so
"Sinclair's representatives were sitting in with Secretary Fall, were
they?" Mr. Davis asked.
"Not while we were talking with him, but I meant that they were
about the department all the time."
"Oh, yes," Mr. Davis commented, "he was keeping hisi
eye on the
situation."
Another factor in this situation was that in its contract with the
Department of the Interior the Shipping Board had an option to renew

the contract when it
expired, but that legal formality meant nothing to
Secretary Fall.
"Did any of you call Secretary Fall's attention to that fact?" Mr. Davis
asked Mr. Bowen.
"Yes, every argument at our command under heaven was used and
even what pressureswe might be able to bring in the matter. Well, . . .
the Secretary stressed wholly on the grounds that he was a trustee

it
not only for the Federal Government, but for the State government
[of Wyoming] as well, and, as trustee, was charged with the re-
sponsibility of getting the largest possible returns from operation of

a property in his charge."
"It has since been developed he is trustee for Sinclair, too, has it not?"
Mr. Davis asked.
"You do not want me to answer that? (Laughter.)"
Albert D. Lasker, chairman of the Shipping Board under Harding,
Sheedy, Smull, Phelan and Bowen, other Shipping Board officials, visited
Secretary Fall and tried to get him to change mind. But Secretary
his
Fall's mind was in one of its favorite states obdurate. Lasker then went
TEAPOT DOME 81
to see President Harding about the matter, and the President ordered the
Director of the Budget, Mr. Lord, to make an investigation of the situa-
tion and to report to him. Mr. Lord appointed Redmond D. Stephens
to investigate the matter, but before Mr. Stephens could go into it
thoroughly, Secretary Fall hastened to sign a contract with Sinclair for

the government's royalty oil in Wyoming and Montana. In the mean-
time Lasker and Fall had agreed between themselves not to renew the
contract with the Shipping Board. There was feverish haste to have the
contract with Sinclair signed before the Director of the Budget could
put in any objections to it. The contract was sent over to the office of
the Director of the Budget after office hours by special messenger from
the Department of the Interior and then signed at nine o'clock the fol-
lowing morning before the Director of the Budget could have it examined
by his investigators. When Mr. Stephens arrived at the Department of
the Interior that morning at 11:30, he was handed a release to the press
announcing that Secretary Fall had signed a contract for all the govern-
ment's oil with Sinclair. The press release was to be issued at noon, but
Mr. Ambrose, one he would permit Mr.
of Fall's assistants, said that
Stephens, of the Budget Office to see he happened to be at the

it since
Interior Department. There had been controversy for some days between
Mr. Stephens and the Interior Department as to whether Fall had

authority to act in this arbitrary manner as trustee for the United States
and the State of Wyoming.
Mr. Sinclair had gone down to Three Rivers to see Secretary Fall again
in November, 1922, about this Wyoming oil in the Salt Creek fields,
which the government received as royalties from private companies for
its leased oil lands. While Sinclair was at the ranch with Secretary Fall,
bids for the oil were being received at the Department of the Interior in
Washington. Secretary Fall telegraphed to his Assistant Secretary, Judge

Finney, to hold up all bids. Then Mr. Sinclair sent in a bid by telegraph,
which was received late in the afternoon of November 15, 1922, after
the advertised bids were supposed to be closed.
Colonel Robert W. Stewart and H. M. Blackmer were also after this
oil, and they, too, visited Secretary Fall at his ranch in November, 1922.
But Sinclair had an inside track with Fall.
82 PRIVILEGED CHARACTERS _
"What was the result of your visit at Three Rivers with respect to
the Salt Creek rights?" Senator Nye asked Colonel Stewart.
"We did not get the contract, Senator," Colonel Stewart answered.
"We did not get the oil."
"There was a great push down there in a general way by oil interests
to secure those rights there in the Salt

Creek field?"
"Oh, everybody was after that oil at that time," Colonel Stewart
said."There was a tremendous scarcity of oil and a great scramble
for oil at that time."
The contract with Sinclair for the oil in the Salt Creek fields was dated
December The Shipping Board had a contract with the Midwest
20, 1922.
Refining Company, of which H. M. Blackmer was president, by which

it was obligated to deliver crude oil from its Department of Interior
contract in exchange for fuel oil. If it defaulted on this contract, the
Shipping Board would have had to pay the Midwest Refining Company
$600,000. For a time it looked as if Secretary Fall would not deliver oil
to the Shipping Board in order to enable it to fulfill its engagement.
Secretary Fall told Mr. Stephens, of the Budget Office, that President
Harding could compel the Secretary of the Interior to give the Shipping
Board^enough oil to meet the contract, "but that if he did, the Secretary of
the Interior who did carry it out would not be named Albert B. Fall."
"In other words," Representative Cooper asked, "if he was told to

carry out the provisions of contract No. 3 [between the Midwest com-
pany and the Shipping Board] that he, Fall, would resign?"
"That is what he said," Mr.
Stephens answered. "He did carry it
out, though, and did not resign until sometime later."

"Well, that was just a bluff, was it not?"
"Apparently."
TEAPOT DOME 83
HARRY SINCLAIR was subjected to financial pressure from other oil opera-
tors and promoters in connection with his lease to Teapot Dome. He
had given Secretary Fall $233,000 in Liberty bonds, but that was by no
means all he had to pay out before he could be assured of peaceful
possession of the government's oil lands.
Mr. Fall later claimed that he had made it an absolute condition before
he would lease Teapot Dome to Sinclair that Mr. Sinclair must buy up
all the claims to lands within the naval reserve and thus clear the title
completely. In March, 1922, about a month before the lease was signed,
Sinclairhad interviews with representatives of the Midwest Oil Com-
pany, which now owned the questionable claims which had been main-
tained by the Pioneer Oil & Refining Company and the Societe Belgo-
Americaine des Petroles du Wyoming. On March 11, 1922, Sinclair
signed an agreement with the owners of these disputed claims by which
he contracted to pay them $200,000 down and $800,000 in oil in return
for their relinquishment of all claims to any lands within Teapot
Dome reserve.
Meanwhile, Leo J. Stack still had a contract with the Pioneer company
and the Societe Belgo-Americaine to get them a lease to Teapot Dome.
While Sinclair and Fall were carrying on their private negotiations for
the lease, Stack wanted to try to get the lease, but his employers showed
great reluctance to permit him to go toWashington in their behalf,
and they told him that satisfactory progress was being made. As soon as
Stack learned that his employers had sold out their claims to Sinclair
for $1,000,000, he was indignant. They offered him a certified check for
$50,000, 5 per cent of their profits. Stack did not have a 5 per cent interest
in the old claims of the Pioneer and Belgo-Americaine companies, but
merely a 5 per cent interest in any lease those companies might obtain to
Teapot Dome through his efforts. Stack testified later that he answered
the offer of $50,000 by asking his associates, "if they had any more funny
stories to tell." Stack claimed that the Midwest Oil Company had no
right to sell to Sinclair his share of the prospective lease, which he felt
might be worth $1,500,000 tohim eventually. "They offered me $50,000,"
Stack told the Teapot Dome committee. "The day they offered me
$50,000 I had only $187 to my name, but I refused their $50,000, feeling
"
that I had been 'gypped.'
Stack testified that the Standard Oil Company of Indiana, Colonel
Stewart's company, of which the Midwest Oil Company was a subsid-
iary, was willing to sell out to Sinclair for $1,000,000, because the oil men
knew that the value of the pipe line which Sinclair would build to Teapot
Dome would be far greater to their interests than the value of their spurious
claims. Senator Walsh maintained that Sinclair had been willing to
pay $1,000,000 for spurious claims in order to buy off possible competition
on the part of the powerful Standard Oil Company and its subsidiaries
for the lease to Teapot Dome.
When the news that Sinclair had received a lease to Teapot Dome
was first rumored in April, 1922, Leo Stack went to see Frederick G.
Bonfilsand H. H. Tammen, owners of the lurid Denver Post. Bonfils
and Tammen had been picturesque and unscrupulous blackmailers for
many years; Bonfils was a flamboyant, stingy character whose main asset
was a colossal nerve, and his partner Tammen was a ribald, mischievous
person who enjoyed profiting at the expense of anyone so long as there

was fun and money to be made out of it. Stack had known them in Denver
for some years. He told them his story and showed them his contract
with the Pioneer company and the Societe Belgo-Americaine. Bonfils

and Tammen and their lawyer, H. H. Schwartz, examined the contract
and decided that it offered an opportunity for all of them to make a lot
of money. They made a contract with Stack on April 14, 1922, by which
they agreed to help him to collect money from the oil companies, and
if they were successful, the profits were to be divided as follows: 46%
per cent to Stack; 23> /8 per cent to Bonfils; 23% per cent to Tammen;
l
and 7 /2 per cent to Schwartz.

l
Then the process of holding up Harry Sinclair began. The day after
they signed their contract with Stack, Bonfils and Tammen began a
vigorous onslaught in the Denver Post on the Teapot Dome lease which
Secretary Fall had granted to Sinclair a week before. The Post had
always pretended to be the defender of the people, and in its columns
Bonfils kept an editorial feature running from time to time which he
TEAPOT DOME 85
headed, "So The People May Know." "A few such arbitrary and auto-
cratic deals as this," said the Denver Post on April 15, 1922, "will set
the country aflame with protest
against these kinds of methods, these
kinds of deals, and this kind of favoritism of the Government for the
powerful and already completely intrenched oil monopoly." The next

day there appeared an even more vigorous attack on the Sinclair lease,
headed "So The People May Know." "If carried out," said the Denver
Post, "it will consummate one of the baldest public-land grabs of a
century."
On June 24, 1922, Leo Stack started the preliminary process of a suit
in the United States District Court of Denver, Colorado, against the

Midwest Oil Company, the Standard Oil Company of Indiana, the Pioneer
Oil & Refining Company, the Mammoth Oil Company, Henry M. Black-
mer, L. L. Aitken and Harry F. Sinclair for $5,000,000. Then Colonel
J. W. Zevely, Sinclair's attorney, went to Denver to see Bonfils and his
fellow contractors and invited them to visit Sinclair in New York City.
Some time around the Fourth of July, Bonfils testified, he, Tammen,
Stack and Schwartz went to New York. They had an appointment with
Mr. Sinclair at his private office in 45 Nassau Street, which appointment
Mr. Sinclair broke. Then another appointment was arranged, and at this
interview Mr. Sinclair was brusque and angry. According to Bonfils, Sin-
clair said to them "I don't know why you gentlemen came here at all." He
:
maintained that Stack's was not any of his business, and that any
suit
redress to Stack should come from the Midwest Oil Company, which
owned the claims of the Pioneer company and the Societe Belgo-Ameri-
caine. That was true, but, as Sinclair had purchased the Midwest claims
for $1,000,000, the other parties maintained that their interest was of con-
cern to Mr. Sinclair. In any case, as they made clear by implication, they
could be of great nuisance value to Mr. Sinclair. The Denver men went
home angry and determined to make further trouble for Sinclair.
During the summer of 1922 Bonfils sent Mr. Stackelback, one of his
best Denver reporters, to New

Mexico, to find out all he could about
Secretary Fall and his relations with
Mr. Sinclair. Stackelback remained
in New Mexico for a month, interviewing people who knew about
he was cautioned not to quote his
Fall's affairs, and, according to Bonfils,
informants and not to reveal his identity, as to do so might result in

bodily harm. Bonfils testified that Stackelback brought to Denver "a

shocking and astounding statement from there, a statement that we all
hesitated to believe because of the nature of the information or rumors
or what was told him down there." Bonfils testified that he, his managing
editor and his lawyer decided that Stackelback's material could not be
printed, for fear of libel suits; Bonfils and Tammen had rarely feared
libel suits before.
The attacks on the lease to Teapot Dome went on in the Denver Post
during the summer of 1922. Then, in September, 1922, Colonel Zevely
invited Bonfils and his associates to come to New York again to see
Mr. They declined, but finally agreed to meet Mr. Sinclair at
Sinclair.
the Muehlbach Hotel in Kansas City. Bonfils and Karl C. Schuyler, an

attorney of Denver, who represented Stack, went to Kansas City to
negotiate with Sinclair and Colonel Zevely.
Zevely had offered Bonfils $100,000 in cash and a one-half interest in
the net profits from 120 acres of oil lands in Teapot Dome for Stack's
claims. Bonfils, who was notorious for his greed, wanted to accept this
offer at once, but Schuyler, acting for Stack, declined it. Sinclair then
said, Schuyler testified, "Stack will not get another dollar." After going
over the legal aspects of the matter, Schuyler argued with Sinclair that
Stack had performed valuable services which had made it possible for
Sinclair to get a lease, because he had worked
for some time in Washing-
ton to demonstrate that the was being drained by neighbor-

oil reserve
ing wells of private companies. This argument must have struck Mr.
Sinclair as humorous, for he knew, what Owen J. Roberts mentioned
in the courts some years later, that the only drainage had been from
Sinclair to Fall and consisted of $233,000 worth of Liberty bonds.
"We were discussing this subject," Mr. Schuyler continued, "when

Mr. Sinclair broke into the conversation with the remark that $100,000
is a lot of money and Stack ought to be satisfied with it. This was
the opening of the conversation lasting about one hour and a half.
Among other things, I told Mr. Sinclair that I could not understand
how he, a man accustomed to doing big things, would seriously offer
$100,000 to the man who in great measure had made it possible for
him to get a lease which at that time was estimated to be worth
TEAPOT DOME 87
several hundred millions of dollars. This remark seemed especially to
challenge Mr. Sinclair's interest. He launched into a recital of several of
the big accomplishments which have made him such a prominent figure
in the oil industry. I remember, he seemed to enjoy particularly a
transaction with the late John T. Millikin, of St. Louis, which involved
many millions of dollars and the final outcome of which vindicated

completely Mr. Sinclair's estimate of the values involved.
I said, 'Mr. Sinclair, if any young man

"Getting back to our subject,
came toyou today and created a situation for you to enter upon
whereby you might secure an oil property as valuable as the Teapot
structure, would you think of valuing his services at less than $1,000,000?'
Mr. Sinclair replied, 'You must think this is all net and forget the burdens
I have to carry,' to which I replied, 'If the property is as valuable as it is
believed to be you could pay a million to Stack and still have plenty left
for expenses.' We then got into a lengthy discussion as to the cost of
pipe lines, royalties to the Government, costs of field equipment,

storage tanks, etc. I again brought before Mr. Sinclair the elemental
justice of Mr. Stack's position as I saw it and presented every argument
that occurred to me. Mr. you don't expect a million
Sinclair said, 'Well,
in cash?' to responded, 'No; in view of your burden of expense

which I
it should be part cash and part deferred, the deferred part to come out
of oil land in which Stack would take his chances with you. 'Mr.
Sinclair finally said, 'Well it's a big thing, and perhaps you are not
asking too much.'"
It was finally agreed that Mr. Sinclair should pay Mr. Stack $250,000
in cash and one-half of the profits of 320 acres in Teapot Dome. After
some further arguing, it was also agreed that if Mr. Sinclair did not
work the particular 320 acres within 18 months, he should buy out Stack's
half-interest in them for another $750,000, but in case Stack did not want
to sell, Sinclairwas to have the right to buy them out for $1,000,000.
"There was joking conversation," Mr. Schuyler testified, "as to that
creating a sporting proposition where the parties would have to do some
real guessing as to values when the time had expired."
After he had finished this transaction, Mr. Schuyler could have felt as
proud of his own prowess in deals as Mr. Sinclair had been of his when
they began their conversation. For the interest of his client in a question-
Mr. Schuyler had obtained $250,000 in cash and a potential
able contract,
Mr. Bonfils and Mr. Schuyler went back to
$1,000,000 within 18 months.
Denver with their contract, and the Denver Post ceased at once any
further notice of Teapot Dome in the "So The People May Know"
column. In fact, after this contract was signed by Sinclair there appeared
in The Great Divide, a weekly newspaper published by Bonfils and
Tammen, on Harry F. Sinclair.
a highly laudatory article
Bonfils came in for a severe grilling concerning the Stack contract
when he was called as a witness before the Senate committee investigating
Teapot Dome. Bonfils grew lyrical, which he did whenever the oppor-
tunity was offered, about the great service which the Denver Post per-
formed common man. He told of its campaigns against wicked
for the
corporations, how it had sold coal to the poor and thus earned the enmity
of a large coal corporation, and how its circulation was more than the
combined circulation of all the newspapers printed in Denver and the
states of Wyoming and New Mexico. "I say that," he told Senator
Lenroot, "not in the spirit of braggadocio, but in the spirit of gratitude.
I would man coming into my office carrying a dinner
rather see one
pail, than to see a man

leaving the finest limousine and coming in. And
I am never going to forget my allegiance to the common man. He has
made the Post, and he has not breathed the scandal, and the lies that
have been circulated by the wealthy and the rich in that State."
Senator Lenroot wanted to know why Mr. Bonfils's defense of the
rights of the common man in Teapot Dome had ceased as soon as Mr.
Sinclair had made this profitable contract with Mr. Stack. Senator Len-
root also wanted to know why Mr. Bonfils, knowing what he did about
the Teapot Dome affair, had waited
be subpoenaed before the Senate
to
committee on the suggestion given to Senator Walsh by his reporter,

Mr. Stackelback, instead of coming before the committee voluntarily.
Mr. Bonfils answered that he had sent copies of his articles on Teapot
Dome to all the Senators of the United States. "Ipresume you got your
copy," he said to Senator Lenroot. "I did," Senator Lenroot replied, "but
I got nothing from you, sir, after you made this deal with Sinclair."
"Well, how many times did you have to get things from me, Senator,
before you would act?" Mr. Bonfils inquired.
TEAPOT DOME 89
"And yet, so long as you got your piece out of it, a million dollars,
you were willing to become a party to it and stand upon this rotten
deal and contract?" Senator Lenroot asked.
"I was not," Mr. Bonfils replied. "That had nothing to do with
it at all." . . .
"Is not a fact, Mr. Bonfils, that your transactions with Mr.
it
Sinclair were not based upon any supposed legal rights of Mr. Stack?"
"That is not true at all."
"But that this whole deal was for the purpose of Mr. Sinclair
purchasing your silence in your newspaper?"
"That is not true at all. It is as false as it could be; absolutely false." . . .
"Do you think that Mr. Sinclair paid you $1,000,000 on the theory
that there might be any legal liability there?"
"I do."
"Do you think that, Mr. Bonfils?"
"I do. Did you ever know of Sinclair giving anything away to any-
body?" Bonfils asked. "He is about as close-fisted a man as you ever

met."
"I think Mr. Sinclair thought he was getting value received for
whatever he paid to you, sir," Senator Lenroot remarked.
"He fooled himself if he did, sir," said Mr. Bonfils,
IN THE summer of 1922, during the same period when Sinclair was
having his troubles with Stack, Bonfils and their associates, there was
another controversy over some oil wells within the
Teapot Dome reserve,
and it was solved in an extraordinary fashion.
Colonel James G. Darden had known President Harding since 1917,
had contributed money to Harding's campaign fund when he ran for
President, and was vice-chairman of the Harding inauguration com-
mittee. In 1919 Colonel Darden and two associates, R. C.
Taylor and
John F. Campion, had acquired title to some of the lands in Salt Creek
and Teapot Dome which had been claimed by the old Societe Belgo-
Americaine des Petroles du Wyoming.
After President Harding's inauguration, Roxy Stinson, Jess Smith's
former wife, met Colonel Darden with Harry Daugherty and Jess Smith
at a shack which Daugherty and his friend Smith used for recreational
purposes about fifteen miles outside of Washington Court House, Ohio.

Roxy Stinson testified later before the Daugherty investigating com-
mittee of the Senate that, "personally I did not care for Mr. Darden
myself." She added that Jess Smith had told her that he and Daugherty
had each given Colonel Darden $2,400. "They had a deal on an oil
proposition out West," Miss Stinson testified. "Colonel Darden had for
years been trying to get through some leases some way through Wash-
ington this is as told to me prior to this administration. Jess says, 'I
"
think he is a dreamer, but we are taking a chance.' Smith also told
Roxy Stinson: "Now, if this is not a pipe dream we have put this much
in it will probably make us a lot of
money it; money." Roxy Stinson
testified that she replied: "You will never see your money back." It may
be that Colonel Darden, too, was trying to get the coveted lease to Teapot
Dome before Sinclair got it, and that he aimed to work for it through
his own influence with Harding and through Daugherty and Jess Smith;
but, be that as it may, Secretary Fall, who had been an enemy of Colonel
Darden for thirty-five years, arranged matters otherwise. It also may be
that Colonel Darden intended to use his antiquated claims to make a lot
of money for himself and associates.
When Colonel Darden heard from some oil men that Sinclair was
going to get a lease to Teapot Dome, he went at once to see his friend
Attorney General Daugherty, who referred him to Secretary Fall. Colonel
Darden testified before the Teapot Dome investigating committee that

he called on Fall, who told him that Sinclair would take care of Darden
by buying up the claims of himself and his associates in Wyoming.

Meanwhile, Colonel Darden made a contract with the Mutual Oil
Company to drill some wells on his claim in Teapot Dome, after Fall had
leased the whole of Teapot Dome to Sinclair. Fall was in a rage. He went
to see President Harding in June, 1922, and urged that the marines be
sent at once to Teapot Dome to eject Colonel Darden 's drillers from the
TEAPOT DOME 91
land. The President was perplexed. Colonel Darden was his friend and
campaign contributor; Fall was his Secretary of the Interior and adviser.
The President wrote to Fall that he would talk to Colonel Darden

personally about the matter. Colonel Darden told the Teapot Dome
committee that he received a letter from President Harding saying that
he would like to see him, and Darden went to the White House and
spoke to George B. Christian, the President's secretary:
"
"I said," Colonel Darden testified, 'George, the President wants to see
me.' He said, 'He is busy, or playing golf, or something.' I said, 'I will
come back.' He said, 'No; wait.' So after awhile he came back, and I
went in. He [Harding] said, 'Jim, how about this property you think you
own in Teapot Dome,' or in Wyoming, he put it. I said, 'I don't know; I
couldn't tell you. We feel naturally we own it, because we spent some
money to get it.' He said, 'Fall doesn't think you own it. He is kicking
up Jack'; no, he didn't say 'kicking up Jack.' He said, 'He is T.N.T.'
And then we began to discuss it. Then he said something about Senator
Bursum [of New Mexico], He said, 'What do you know about Senator
Bursum?' I said, 'He a good fellow.' He said, 'Is that so?' I said, 'Yes.'
is
He said, 'Why is it he and Fall don't

get along together?' I said, 'I don't
know. I have my reasons, but I don't want to discuss it.' He said, 'What
are you going to do?' I said, 'I guess we have to go into court, Mr.
President.' So I left."
On July 26, 1922, Secretary Fall wrote to President Harding and sug-
gested again that marines be sent to eject the men who were drilling
an oil Darden in Teapot Dome. In his letter Fall said
well for Colonel
that no action in the courts was necessary, and that immediate action
must be taken, or else there was danger that Mr. Sinclair's lease would
be put in jeopardy, and that Mr. Sinclair might back out of his con-
tract. Fall was probably exceedingly anxious that there should be no suit
in the courts of the country concerning Teapot Dome, for that might
raise the question of the entire validity of his lease. Harding reluctantly
gave Fall his approval to send marines to Teapot Dome.
On Saturday, July 29th, three days after he had written to President
Harding and had obtained his reluctant consent, Secretary Fall sent a
note to Theodore Roosevelt, Jr., Assistant Secretary of the Navy,
asking
him to come to see him at once. When Mr. Roosevelt arrived at the
Department of the Interior, Secretary Fall told him that there were
trespassers taking oil out of Teapot Dome, and, Mr. Roosevelt testified
later, "that he and the President, as I recall it, wanted them put off with
some marines. He then said that he had looked up the legal phases of it,
and that that was O.K.; that it was all right legally, and supplemented
that by a remark to the effect that, furthermore, he had looked and found
that Secretary Danielshad done the same thing in a like instance." When
questioned by Senator Walsh, Mr. Roosevelt could give no instance from
the records of the Navy Department when Secretary Daniels or any
other Secretary of the Navy had ever used marines for a like purpose.
That Saturday afternoon Theodore Roosevelt, Jr., who was Acting
Navy at the moment in the absence of Secretary Denby,
Secretary of the
sent forMajor General John A. Lejeune, commanding officer of the
United States Marine Corps. He told General Lejeune to select an
officer and a small detachment of marines to send to Wyoming for the
purpose of ejecting trespassers from the

naval oil reserve there.
At about two o'clock that afternoon Captain George K. Shuler, who

had been a captain in the Marine Corps for twelve years, was asked
by his commanding officer at the Marine Barracks in Washington whether
he would like to make a trip to Wyoming. He said he didn't mind if
he did, and then he was told, "General Lejeune wants to see you."
Captain Shuler went at once to Marine headquarters, and General Lejeune
told him that he had a delicate mission for him to perform, and that he
had confidence that Captain Shuler could carry it out. He then told
Captain Shuler that Secretary Fall was waiting at the Department of

the Interior to talk with Captain Shuler and added that the mission
involved a trip to Casper, Wyoming; he showed Captain Shuler where
Casper was on the map.
"I went over to the Interior Building," Captain Shuler told the Senate
he
committee, "and the Secretary was waiting there, and I went in, and
said: 'I have got a job for some marines. We
have a naval reservation
out in Wyoming, the Salt Creek country, and there is an oil company
are drilling
that is going in there and they are trespassing; that is, they
a well/ and he says, 'We know that they have no rights there,' and that he
TEAPOT DOME 93
had called on the Secretary of the Navy to detail some marines to go out
and drive them off. And he said that he had taken the matter up with
the President that morning, and that the President did not want to take
this action because an officer of the company that was trespassing was a
close personal friend, and contributed to the campaign fund. And Mr.
Fall told me that he had told the President that his friend was a low
down S.O.B., and Mr. Fall said that the President told him that he
supposed he was all that when he sent him his check, and Mr. Fall said
that he told the President, 'Mr. President, by God he was.' But he said
the President finally consented, and that was why the marines were to go
out.
"He said, 'What would you do if they served an injunction on you,
signed by a Federal judge?'
"I said, 'Mr. Secretary, I have never seen an injunction in my life, and
wouldn't know one if I saw it, and if they served one on me I would
file it.'
"He said, 'I

guess you will get along all right out there.' And he said
he had made arrangements with Mr. Ambrose of the Bureau of Mines, to
accompany me, and that he had sent for Mr. Ambrose and expected him
every minute. About that time Mr. Ambrose came in, and Mr. Fall asked
me how soon I could go.can go immediately, as soon as
I said,
'Why, I
I get some money.' And after conferring with Ambrose, who had some
reports to make up before he left, we arranged to leave on the same

train the next day, that was Sunday."
Captain Shuler then reported to General Lejeune what Secretary Fall

had told him, and General Lejeune asked how many men Captain
Shuler wanted to take with him. Shuler testified that he replied that,
"if we were going out there and fight the whole State of Wyoming we
probably would have to take quite a few, but if there wasn't going to
be any fight, I would not need anybody." But General Lejeune suggested
that Captain Shuler take four or five marines with him and told him
he could have any men he wanted. Shuler selected some men who had
been with him in the late war.
Sunday evening, July 30th, Captain Shuler, four marines and Mr.
Ambrose, of the Bureau of Mines, left for Wyoming. When they arrived
at Casper, the nearest station to Teapot Dome, the party was met by
officials of the Department of the Interior and taken in automobiles at

once to the oil fields. "We got there," Shuler testified, "and Mr. Patterson
was driving the car I was in, and had two marines with me in the same
car. He said, 'There is your battle field,' and we got out of the car."
Captain Shuler testified that he saw before him a large oil
drilling rig,
with a barbed-wire fence around it, covering about three-quarters of
"The wire was new and bright; it had not been rained on, even. I went
up to the fence and yelled out and asked where the boss was, and a man
came over and said that he was Harry McDonnell, or O'Donnell. I said,
'Do you represent the Mutual Oil people?' He said he did. I said, 'I am
the commandant of this Navy district.' I assumed that title, being the
only representative of the Navy Department around there, and some-
body had to be commandant, so I took the title. I said, 'I have orders to
stop the work in this part of the reservation.' He says, 'Well, I have
orders to keep everybody outside of this fence.' I said, 'Well, I have orders
here from the Secretary of the Navy that I think will supersede any
orders you have/ I said, 'Do you realize that I am absolutely serious
about this thing, and I am going to back up what I say?' He said, 'Yes.'
He looked at the marines; they had pistols, and rifles, and belts full of
ammunition, and everything that goes with it. He said he thought we
meant business. I said, 'You have got to stop drilling.' He said, 'I can't
give the order.' I said, 'Who is

your boss driller?' So he called over a
fellow named Harry Martin, and I said, 'Are you in charge of the opera-
tion?'He said he was. I said, 'How long will it take you to stop this
"
work?' He said, 'Well, it all depends on what you want me to do.'
Harry Martin said that he could carry out the Navy's orders, which
Captain Shuler wrote out after consultation with the officials of the
Interior Department, in five minutes. "I will give you ten," Captain
Shuler replied. Then Shuler placed a government seal on the oil rig,
which the Interior Department officials told him was "absolutely sacred;
it was a Government seal, and no one would disturb it." Then the field
superintendent of the Mutual Oil Company arrived on the scene. "He

was rather peeved," Shuler testified, but ended up by inviting the
marines to lunch with him. The next day Captain Shuler posted "No
trespassing" signs on the fence and started back to Washington with his
TEAPOT DOME 95
marines two days later. When he arrived in Washington, Captain Shuler

received the congratulations of both the Secretary of the Interior and the
Acting Secretary of the Navy for his good work. To the letter of com-
mendation which Secretary Fall sent to Captain Shuler, Theodore
Jr. added in his own handwriting in ink "You did excellently
Roosevelt, :
and confirmed our pride in the ability of the Marine Corps to measure
up to whatever it was put up against. T. R."
After Captain Shuler had testified, Senator Walsh made a statement
to the committee, pointing out that it was settled law of the mining
country that anyone with a bona fide claim could get an injunction
almost automatically restraining the party in possession from extracting
mineral from the ground until the courts had decided the claims. In the
case of the government of the United States, he pointed out, it was not
even necessary to post a bond indemnifying the possessor in case of loss
ifthe litigation went against the government. In his conference with the
press on August 4, 1922, President Harding had referred to Fall's action

in sending marines to Wyoming as "lawful and efficient." When he was
cross-examined by Senator Walsh as to his part in the transaction,

Theodore Roosevelt, Jr. tried to defend his action on the grounds that
the naval reserves were as much the property of the Navy as were the
navy yards, and that therefore trespassers could be chased by marines
without court action. When they were protesting against the leases to
Sinclair and Doheny, some of the Navy's officers had pointed out that
the naval petroleum reserves were as much navy property as the navy
yards, but at that time both the Navy and Interior departments had
chosen to ignore the analogy. Senator Walsh told Theodore Roosevelt,
Jr. that since the Navy and Interior, acting in conjunction, had leased
Teapot Dome to Sinclair, it was no longer in the same class with a navy
yard, butwas private property of the Mammoth Oil Company, which
should have been defended in the United States courts like any other
private property and not by force of marines.
"Yes, Senator," Theodore Roosevelt, Jr. said, "but I did not assume
you understand that I am
not a lawyer?"
"Colonel Roosevelt," Senator Walsh remarked, "I suppose when
you
were at school you learned, did you not, that it is a fundamental principle
of our Government that the military is to be kept in strict subordination
to the civil power?"
"Yes; absolutely."
Senator Walsh pointed out to the Senate committee, after he had given
the Assistant Secretary of the Navy a lesson in the relative positions of
the civiland military powers, that neither Sinclair nor Fall wanted to
go into any court in the United States and start a lawsuit which would
raise any question of any feature of Sinclair's lease to Teapot Dome. "So
they put them off," Senator Walsh said, "just merely because they did
not want to precipitate litigation in which the validity of this lease would
be raised." That was why Secretary Fall was so frantic to get President
Har ding's permission to use marines in a civil case, in the effort to eject
the President's friend and campaign contributor. At a Cabinet meeting
two or three days after Captain Shuler left for Wyoming, Acting Secre-
tary of the Navy Roosevelt told President Harding, Roosevelt testified, that
"
he had sent "a very excellent man to go out there, and he said, 'Good.'
Colonel Darden testified that he never protested against this unusual
use of marines: "I took it Government could do what-
for granted the
ever they wanted to do. I it." Colonel Darden

didn't pay any attention to
also testified: "Senator Fall, if you knew him at all, was kind of peevish
about anything he wanted to do and might be, like myself, hard-headed."

The eviction of the Mutual Oil Company from Teapot Dome by United
States marines caused indignation in the West and played right into
the hands of the team of Bonfils and Tammen, who were trying at the
time to get as much money as they could out of Harry Sinclair. On
August 5, 1922, the jovial Tammen
wrote to George B. Christian,
Harding's secretary, enclosing a copy of the Denver Post, with the story
of the eviction and seizure of the Mutual Oil Company's rig. Mr. Tammen
wrote :
Of course, I am sending all of this to you, but if you think it wise, I

would like to have the President see it. Our investigation so far of the
Teapot Dome in its various forms suggests that it is an awful mess and
a smear.
TEAPOT DOME 97
I hope that you all are well and happy and believe me, with love and
good cheer, as always.
H. H. TAMMEN.
BY THE end of 1922 Sinclair and Doheny were in possession of the rich
naval oil reserves, and Fall was in possession of the cash and the Liberty
bonds. The work had cost enough effort, what with protestsfrom naval
from competing oil companies, protests from Senators,
officers, protests
individuals tobuy off and companies with claims to satisfy or send the
marines against. But the troubles of Secretary Fall, Harry Sinclair and
Edward L. only beginning. And, before they had heard the
Doheny were
last of very likely that all three regretted that they had ever heard
it, it is
those euphonious words, so easy for the public to remember: Teapot

Dome.
Although there were forebodings of difficulties almost from the start
of the enterprise, during 1922 Fall, Sinclair and Doheny could feel safe.
On April 16, 1922, about a week after the lease with Sinclair was signed,
Senator Kendrick, of Wyoming, it is true, had submitted a resolution
calling for information from the Secretary of the Interior and the
Secretary of the Navy as to their intentions with respect to Teapot Dome.

But that was not so serious. Secretary Fall sent to the Senate copies of
the executive order of May 31, 1921, transferring the naval reserves to
his department, and the order of 1909 creating the reserves. He hoped
that thesemight keep the Senate quiet. Then, in response to Senator
Kendrick's demand, Assistant Secretary Finney had informed the
Senate on April 21st that a lease to Teapot Dome had been made. But
Senator Robert M. La Follette continued to ask embarrassing questions
of the departments. He wanted to know particularly from both the Navy
and the Interior "the legal opinion upon which your department based
the authority for the President to make this transfer and also to trans-
fer jurisdictionfrom the Navy department to the Interior Department
granted by a Federal statute." He asked, too, under what law the Sec-
retary of the Interior was leasing the naval oil reserves.

In the absence of Secretary Fall at his ranch in New Mexico, Judge
Finney answered, "that I am not informed as to the legal opinion
upon which the President based his order of May 31, 1921." Secretary
Denby have no record of a formal legal opinion on this

replied, "I
question." Before his departure for his ranch Secretary Fall had written
to Senator La Follette stating in general terms his policy in having the
oil reserves transferred to his jurisdiction; he had then added that details
as to the handling of the navallands were withheld unless permission

oil
was given by the President as Commander in Chief of the Army and

Navy, on the grounds that they were "military plans." At the same time
Fall had written to President Harding advising that these "military plans"
"should not be given to Senator La Follette or anyone else." President
Harding approved this attitude of his Secretary of the Interior and sup-
ported him in it.
Then on April 29, 1922, Senator La Follette introduced a resolution
in the Senate calling for a complete investigation by the Senate Com-
mittee on Public Lands and Surveys of the leases to naval oil reserves.
This was important, but still would be some time before the com-
it
mittee could begin its investigations and public hearings, and in the
meantime Fall, Sinclair and Doheny, as well as the other minor char-
acters involved, could take whatever precautions they thought advisable
and could feel confident that they had covered their tracks. Besides, the
Republican Party was in power, and the personnel of the committee

v/ould be made up of leading Republicans with a minority membership
of Democratic Senators.
On June 7, 1922, in response to the Senate resolution of Senator
La Follette, Secretary Fall sent 2,300 copies of
documents concerning the
leases to the Senate Committee on Public Lands in mail sacks. His own
estimate was that this data consisted of between ten and fifteen thousand
pages, and, he wrote significantly in his letter of transmittal, the mechani-

cal cost of assembling the documents was $6,000. "Of course," he added,
TEAPOT DOME 99
"it has been a great pleasure to comply with the direction of the Senate
of the United States to the best of our ability." The best of his ability,
however, was not very good, for, it turned out later, significant docu-
ments, including a certain letter from Edward L. Doheny, were not
among the 2,300, and these turned up only after Sentaor Walsh sent his
own investigators to the files of the Department of the Interior some

months later.
The following day, June 8, 1922, President Harding issued a statement

expressing his full approval of the leases to the naval oil reserves and
took full responsibility for the acts of his Cabinet officers; he defended
the deals with Sinclair and Doheny, using for that purpose the facts and
figureswhich Fall had supplied to him.
Meanwhile, Secretary Fall continued his leasing activities with Doheny
and his sale of Shipping Board oil to Sinclair. By December, 1922, the
last lease and contract were made. Then the rumors, which had been
prevalent from time to time, that Secretary Fallwas going to resign his
post, once more became public. As early as February 10, 1922, there had
been rumors of Fall's resignation, and at the time it was said that he was
not getting on well with the other members of President Harding's

Cabinet. There was Secretary Wallace, who had objected strenuously
to turning over Alaska and the Forestry Service to Secretary Fall. Fall
was also said to have been opposed to the Washington Conference on

Naval Limitation, which Secretary of State Hughes had sponsored; then,
too, Fall had always been an ardent advocate of the use of force against
Mexico by the United States, and Secretary Hughes was not in favor
of such a policy. And Secretary Hoover, the gossips said, was making
Secretary Fall very jealous by his water power projects in the West.
However, Secretary Fall, who never liked anyone to disagree with him,
who was a bit peevish, according to Colonel Darden, and T.N.T.,
according to President Harding, swallowed his resentments until the

last lease with Doheny and the last contract with Sinclair were signed.
Then, on January 9, 1923, it was announced that Secretary Fall would
resign, effective
March 4, 1923. President Harding announced at the
time that he had offered to appoint Fall a justice of the Supreme Court
of the United States but that Fall had declined, for he wished to attend
to his private affairs, after so many years spent in the public service
as Senator and as Secretary of the Interior, as well as his service in New
Mexico as associate justice of the state supreme court and as attorney
general.
On February 16, 1923, Secretary Fall was the leading speaker at the
convention of the American Electric Railway Association in Washing-
ton. He said:
"Despite some misgivings as to whether a politician is entitled to

himself with the meek and lowly Christians or with the rough-
classify
necked barbarians of the gladiatorial arena, I shall venture, here on the
eve of my political dissolution, to adopt the same greeting: 'We who are
about to die salute you.' I have read that the, Christian martyrs frequently
were so reconciled to their fate, so assured of the happiness awaiting them
that they would burst into the singing of hymns following the grim
greeting to their Emperor. If that ancient tale of religious faith may be
accepted, then, I feel entitled to classify myself with the martyrs; for I
confess to a grateful sense of satisfaction as I contemplate my approach-
ing political demise.
"A good many years of more or less philosophical observation of public
lifehas gone far to convince that your public man is likely to be appre-
ciated just about as much as he deserves, and, as a rule,
considerably less
than he thinks he deserves. On the whole, I have considerable confidence
in the rough justice of public verdicts on public servants and their careers.
"Whether in our own country or in others, there never has been a time
when the public was so exacting in its attitude toward its servants, as it
is was a time when the critic on the outside looking in
today. There never
found more to criticise than he can find in these days. Today the tendency
is not
only to criticise a public servant for any act of omission or of com-
mission, but to charge him personally with being actuated by ulterior
motives, or motives of personal or purely selfish interest."
One week later, on February 23, 1923, the Committee on Public Lands
met and decided to hold public hearings on the naval oil reserves the
following October.
After Fall, like Cincinnatus, had reared to the plow, he received the
following letter:
TEAPOT DOME 101
DEPARTMENT OF COMMERCE
OFFICE OF THE SECRETARY
Washington, March 12, 1923.
Hon. Albert B. Fall,
Three Rivers, N. M.
My dear Fall:
This note is
by way of expressing appreciation for the many kind-
just
nesses I had your hands during the last two years in the Cabinet. I
at
know that the vast majority of our people feel a deep regret at your leav-
ing the Department of the Interior. In my recollection, that department

has never had so constructive and legal a headship as you gave it.
I trust the time will come when your private affairs will enable you
to return to public life, as there are few men who are able to stand its
stings and ire, and they have got to stay with it.
Yours faithfully,
HERBERT HOOVER.
Before he left Washington there was one little matter Mr. Fall attended
to. He had shipped to him at Three Rivers, New Mexico, the elegant
Jacobean office furniture which had occupied his room in the Department
of the Interior. He purchase by first having the
accomplished this
authority over the furniture transferred to the General Supply Committee

of the Treasury Department and then giving that committee his check
for $231.25. It was a bargain, for the furniture was estimated to be worth
between $2,500 and $3,000 at the time.
IN THE spring of 1923, while he was on his ranch in New Mexico, Fall
received a telegramfrom Sinclair asking him if he would come to New
York at once, prepared to go to Europe. Fall telegraphed for further
details and was informed that the trip was to be concerned with the
lease of oil lands in the southern half of Sakhalin Island, which belonged
to the Russian government of Chita. Sinclair was negotiating a contract
with the Russian government which provided that he was to get the
lease to the Sakhalin oil lands on condition that, within five years of the
date of the contract, the United States government recognized Soviet

Russia.
Colonel J. W. Zevely made a special trip from New York to Three
Rivers in May, 1923, to talk with Fall about the Russian matter. At this
conference Fall told Zevely that he would have to have some money for
the trip and would require $25,000. Liberty bonds worth $25,000 were
sent to a bank in El Paso for Mr. Fall's account. In addition, Colonel
Zevely later testified, Fall received $10,000 in cash for expenses of the
trip. Fall later told the Teapot Dome committee that he had received
only $10,000 for his Russian expedition, and that he was very anxious
"to see American citizens secure oil supplies abroad for the future use
of the Navy and the shipping of the United States." Colonel Zevely
testified that the additional payment of $25,000 in 3 l
/2 per cent Liberty
bonds was a loan, but he was forced to admit that he received a note for
the payment from Fall only after they had returned from Russia.
During the summer of 1923, while President Harding was on his
journey to Alaska, Sinclair, Fall and Archibald Roosevelt, a vice-president
of the Sinclair export corporation, were negotiating with the Soviet
government in Moscow. Sinclair signed the contractwith the Soviet
government providing for the lease to Sakhalin Island oil lands on con-
dition that the United States recognize Russia within five years from
date. When they returned to New York in July, 1923, Mr. Fall told the
reporters that he had been much impressed with what he had seen in
Russia, that the country was not so bad as it had been painted, and
that he looked forward to the recognition of Soviet Russia by the United
States.
President Harding arrived in San Francisco in July, 1923, from his

Alaskan trip and was taken suddenly ill. On the voyage he was accom-
panied by Herbert Hoover and a large group of newspaper men, includ-

ing the smooth Frederick G. Bonfils, editor of the Denver Post. William
Allen White, who was in the party, wrote later that the President "kept
asking Secretary Hoover and the more trusted reporters who surrounded
him what a President should do whose friends had betrayed him." Then,
TEAPOT DOME 103
suddenly, on August 2nd, at the Palace Hotel in San Francisco, President

Harding died while Mrs. Harding was reading to him.
The clergymen and the newspapers poured forth their fulsome eulogies
of the dead President, for the country was still unaware of what had been
going on behind the scenes while a "good fellow" was President of the
United States. There had been, it was true, disquieting charges against
the President's best friend, Attorney General Daugherty. Their crony,
Jess Smith, had shot himself through the head in the Wardman Park
Hotel in the previous May. Grave misconduct had been established, as
we shall see, on the part of Charles R. Forbes, Harding's friend, whom
he had appointed director of the Veterans' Bureau. But as yet nothing
had been proved about anyone except Colonel Forbes, who had resigned
early in 1923. Rumors about Teapot Dome, about "the little green house
in K Street," were flying about Washington. But Senator Walsh was
still
patiently examining the mass of documents on the naval oil leases.
On October 23, 1923, the Senate Committee on Public Lands held its
first public hearings on the leases to naval oil reserves. The first witness
was Albert B. Fall. He was garrulous, hypocritical, brazen and evasive in
his testimony. He resented any implication that the leases he had granted
to his friends were not both patriotic acts and good business deals, entered
into in good by himself as a public officer with the interests of his
faith
country at heart and with no personal profit to himself. At the end of
two days on the witness stand Fall had admitted nothing damaging and
had not hesitated to take refuge in patriotism and in the shroud of his
dead friend, the President.
After Fall had completed his incorrect and incomplete version of the
Walsh remarked that as matters developed it
lease transactions, Senator
might be necessary to ask Mr. Fall some further questions, but that he
did riot want to keep him before the committee constantly.
"If I am here," Mr. Fall replied, "I will be glad to answer and throw
any light upon this subject that I can. I want it understood that I am
here for this particular purpose, and at the same time one of the matters
I made reference to is not finished, and may require considerable time
and attention. I might be called out of the city at any time and might
be called quite a distance."
Harry Sinclair testified after Fall concerning the Teapot Dome lease,
and he, too, gave the committee very little enlightenment concerning the
real nature of the transaction. Senator Lenroot asked him:
"So far as you know, Mr. Sinclair, is there any profit to be received
in this transaction that Mr. Fall received, any benefits or profits, directly
or indirectly, in any manner whatsoever, in connection with you?"
"No, sir," Mr. Sinclair replied, "none unless he had received some
benefits from the catde."
The hearings continued with testimony of geologists, naval officers

and government officials. Then Senator Walsh put on the witness stand
several witnesses from New Mexico. Carl C. Magee, a newspaper owner
of Albuquerque, gave the first

testimony concerning Mr. Fall's financial
condition before and after the leases to Teapot Dome and the California
naval reserves.
Mr. Magee had had dealings with Fall when the latter was Senator.
Magee was eager to buy the Albuquerque Morning Journal,
In 1919, Mr.
which had been a strong supporter of Senator Fall in New Mexico. The
paper was then owned by the El Paso & Southwestern Railway, Senator
John W. Weeks, of Boston, Price McKinney & Company, of Cleveland,
the Chino Copper Company and a firm in Boston. Senator Fall became
irritated when some of these interests were in favor of selling the strong
Republican newspaper to Mr. Magee, who was an independent in politics.

He gave the El Paso & Southwestern Railway Company water rights in
perpetuity on his ranch at Three Rivers in return for $25,000 worth of
stock and bonds of the Albuquerque Journal. Until then Fall had received
an annual payment for his water rights from the railroad.
In 1920, Senator Fall asked Mr. Magee to meet him at his ranch in
Three Rivers newspaper. Mr. Magee went
to negotiate for the sale of the
there in February and spent a day and night. He and Senator Fall had
a long talk about politics in New Mexico, and Fall told Magee that he
needed money, and that he would sell his interest in the
Albuquerque
Journal and get the other owners Magee, if he could
to sell theirs to
get cash at once. He also told Mr. Magee that he was going to resign
TEAPOT DOME 105
from the United States Senate in order to rehabilitate his fortunes; that
being a Senator "had broken him"; "that he couldn't pay his taxes on
his property; that his ranch was in a dilapidated condition, and it showed
it,and that he must rehabilitate himself financially, and dwelt quite at

length upon the personal private financial problem he had on his hands."
That was before Senator Warren G. Harding was being considered by
anyone except Harry Daugherty as a possibility for the presidential
nomination.
"You spoke about the condition of and the appearance of the ranch
at the time you were there, Mr. Magee. What can you tell us about
that?" Senator Walsh asked.
"Well, Senator Fall met me at the railway station at Three Rivers.

There nothing but a station there. There is no town there.
is And I was
impressed with the character of the car he was driving. He had a
Franklin that we had to get out and fix three or four times to get 3 or
4 miles up to his house, in a very dilapidated condition, and I was im-
pressed before he told me about his financial situation, with the very
dilapidated condition of the house, both inside and outside, and the
general run-down condition of the place. I at first attributed it to the
fact that his son had died in 1918 he had had charge of the ranch and
I
thought it was neglect. He informed me that it was poverty, in the
course of a conversation; that he needed the money." . . .
"And what was the character of the road which you traveled over?"
"It was a very inferior, winding road, unmade road, and very rough."
Senator Walsh then introduced into evidence tax assessments and

other proof that Fall had been unable to pay his taxes from 1912 to
1921, that on June 4, 1922, about two months after he had signed the
lease to Teapot Dome, Fall had paid his taxes from 1912 to 1915, after
a court order had been issued, and that that same day he had paid his
taxes from 1916 to 1920 inclusive. On June 22, 1922, he paid his taxes
for 1921.
In August, 1923, after all the leases to naval oil reserves had been signed
and Fall had resigned from the Cabinet and returned from his trip to
Russia with Sinclair, Mr. Magee had occasion to pass through Three
Rivers again. He testified that he was going from Carrizozo to Alamo-
gordo in his automobile, and that when he came in sight of Three Rivers
he "was lost."
"I knew I was on the right road," Mr. Magee told the Senate com-
mittee, "but I couldn't locate myself. And I was
puzzled, and I discovered
when I came down there that a change had been made in the road going
to Mr. Fall's place, was the cause of my confusion. There had been
pillars built up to this road, and beautiful woven wire fence put along,
and trees planted, and beautifully concreted gutters,and a very expensive
road, as far as I could see, up to the ranch house. I couldn't see all the
way. The conditions were so changed I couldn't recognize it."
Mr. Magee met an electrician at Carrizozo whom he had known in

another part of the state. "I asked him what he was doing in that part
of the country," Mr. Magee testified, "and he said he was making a
$40,000 electrical installation on Senator Fall's ranch."
"That is all," said Senator Walsh.

In November, 1921, after he had received $100,000 in bills from Edward
L. Doheny, Secretary Fall went down to his ranch at Three Rivers and
began negotiations to purchase the neighboring property, a ranch be-
longing to Will Ed. Harris and his family. The ranch was 3,200 acres
and included cattle and buildings. "I think it was about the best small
ranch in New Mexico," Mr. Harris told the Senate committee. Fall paid
$91,500 for it, according to Mr. Harris, and not $140,000 as his neighbors
said. Fall made the first payments in one-hundred-dollar bills at the
office of his son-in-law, C. C. Chase, in El Paso, Texas, Mr. Harris testified.
C. C. Chase was Collector of Customs at El Paso during the Harding
regime. Early in the year 1922, Fall also acquired additional land for which
he paid $33,000 and bought four Hereford bulls for which he paid
$3,000; Fallhad introduced no new blood into his herd since he had
assembled it ten years before.
The information obtained from the witnesses from New Mexico caused
among the investigators, interest among the public and uneasi-
curiosity
ness among those who had had dealings with Secretary Fall. It was not
much as yet in the way of evidence, but it was indicative of a great deal
TEAPOT DOME 107
that required explanation. Fall had been poor; he had then been Secretary
of the Interior under Harding; he had suddenly become affluent; and
the naval reserves had been leased by him to private oil men who were
his friends. Where had he obtained the money to buy land and cattle?
The testimony of the witnesses from New Mexico was taken in Novem-
ber, 1923, a few weeks had given his testimony and after Sinclair
after Fall
had testified that the only thing he had ever given Fall was a present
of a few cattle from the Rancocas Farm. The Republican Senators on the
Teapot Dome investigating committee were anxious for Fall to come

before the committee and where he got the money for his land, his
tell
cattle and his improvements. Senator Reed Smoot, then the chairman of
the investigating committee and a brahmin of the Republican Party, sent

Fall a telegram suggesting that he would want to answer certain evi-
dence just given to the committee, and that he "had best return" to
Washington. Fall answered with a telegram dated November 20, 1923,
in which he attacked Carl C. Magee, the New Mexico newspaper owner,
as a libeler,because Magee had once been tried in New Mexico for libeling
the chief justice of that state. Magee later told the Senate committee the
circumstances of this case, and appeared to be a quarrel between himself
it
and politicians in the course of which he had accused them of corruption.

In his telegram to Reed Smoot, Fall added that C. C. Chase, his son-in-law,
who knew all about Fall's tax matters and ranch business, was on his way
to Washington. "Of course if
go there personally after
necessary will
Walsh has concluded," the telegram continued, and then added: "I under-
stood Doheny, Robison and Bain were to testify before Walsh went
any
further. This very important." Senator Smoot then sent Fall another
telegram urging him to come to Washington and answer the testimony

of Magee and other witnesses concerning his financial affairs. On Decem-
ber 3rd, Fall answered that he was leaving for Washington and would
be prepared to meet the Senate committee the following
Friday if he
arrived on time.
Meanwhile, C. C. Chase came north ahead of his father-in-law and

stopped off at Cleveland to see an old friend of Fall's, Mr. Price
McKinney.
Mr. McKinney had known Fall for more than twenty years in Texas
and Mexico. Mr. McKinney had previously received a letter from Fall
asking him if he would testify that on a trip which he and Fall had made
together to California in December, 1921, Mr. McKinney had lent Fall the
money with which buy the Harris ranch in New Mexico. Mr. Mc-
to
Kinney had not answered the letter. Then, after the witnesses from New
Mexico had testified to Fall's financial condition before and after the
leases to the naval reserves, C. C. Chase suddenly arrived at Mr. Mc-
Kinney's home in Cleveland. "I think I did most of the talking," Mr.
McKinney told the Senate committee. "It only got started, and I said, 'I
"
have not made him a loan, and I could not say that I have.'
Mr. Chase then went to Washington, where he saw Colonel J. W.
Zevely, Sinclair's lawyer, whohim not to appear before the Tea-
advised
pot Dome investigating committee. Chase went from Washington to

Kansas City to meet Fall, who had decided in the meantime to come
north himself. From Kansas City they went together to New York,
where Fall saw Doheny, Sinclair and Zevely. According to testimony
given four years later by C. C. Chase, Fall inquired of Doheny whether he

still had his note for $100,000.
Meanwhile, Edward L. Doheny had appeared before the Senate com-

mittee for the first time on December 3, 1923, and was questioned about
his leases with the government. He said that he had "felt very badly"
when he heard the reflections made upon his old friend Fall, with whom
he had mined and studied law when they were young. "I want this record
to show," said Mr. Doheny, "that I felt very badly about it; in fact, felt
greatly outraged about it." When he was asked point-blank by Senator

Lenroot whether Fall had profited in any way, directly or indirectly,
"through the making of this contract with you," Mr. Doheny replied,
"Not yet." And he added that he would always be glad to employ Mr.
Fall in his company as he had Secretary Lane. "This is not an ofTer at
Mr. Doheny, "but I just want to say that I have got too high
all," said
a regard for Mr. Fall to think that anything in connection with this
matter has injured his reputation, in my opinion." Mr. Doheny said
nothing about the $100,000 which he had sent to Fall in cash by his son
Edward.
The Senate committee next heard from Fall on December 13, 1923,
when he wrote to Senator Lenroot, who had taken Senator Smoot's
place as chairman of the investigation, that he had been confined to his
room, "with an exceedingly bad and threatening cold." "I am also

TEAPOT DOME 109
thoroughly run down physically," he wrote, "and after an examination
my attempting do any work for a few

yesterday the doctor prohibited to
days, commanding absolute rest." He had not, he added, been able to go

through the testimony given by the witnesses from New Mexico, which
Colonel Zevely had brought over to New York from Washington for
Fall, sent to him by Senator Smoot. "I found it absolutely impossible
to go into this voluminous record and have not been in a physical or
I
mental state to give much attention to the matter since," Fall wrote
Senator Lenroot, who was eager for Fall to come to Washington and
defend himself and the Republican Party. In his letter Fall also tried to
make it appear that Senator Walsh had attempted, "to besmirch my
character or to raise a smoke screen," and had not given him an oppor-
tunity to explain But he had had plenty of opportunity to explain
first.
his sudden wealth when he was first a witness and plenty of time to do
so afterwards, but he still remained carefully away from Washington, and
the condition of his health seemed to continue to demand any climate
except that surrounding a Senate investigation.

After his conferences in New York with Doheny, Sinclair and Sinclair's
lawyer, Fall went to the Ritz-Carlton Hotel in Atlantic City. He wrote

Senator Lenroot from there that he was under doctor's orders to go there
to rest and would not be able to come to Washington by December 19th
after all to tell the committee of his financial affairs. "I will advise you as
soon as my health is regained," he telegraphed. But his health seemed to

get progressively worse, though he continued to do a great deal of
traveling.
From the Ritz-Carlton Hotel at Atlantic City, Mrs. Fall telephoned to
Edward B. McLean in Washington. She asked him to come to Atlantic
City as Albert was very anxious to see him and was ill and nervous.
McLean told Mrs. Fall that he was leaving for Palm Beach soon and did
not want to come to Atlantic City unless it was absolutely necessary.
"Then she called up again," Mr. McLean testified later, "to the best of
my recollection in about an hour and a half I know it was at 7 o'clock,

because I was having supper, and she said, 'Yes, he wants you to come
"
down, and he come up.'
can't
The next day, December 20, 1923, Mr. McLean and his two confidential
secretaries, W. O. Duckstein and John Major, went to Atlantic City in

Mr. McLean's private car, "The Enquirer." He arrived at the Fall suite
in the Ritz-Carlton during the afternoon.
"They had three or four rooms, and a very big parlor," Mr. McLean
testified a few months later. "It struck me as a very big parlor; it was
the biggest I have ever seen in a hotel. And she said, 'The Secretary is
asleep, and you can't wake him/ She said, 'He had a dreadful night.'
'Well,* I said, 'Mrs. Fall, I have to go back in an hour and a half from
now to catch the train; it is! the
only decent connection I can get; and
I will wait as long as I can possibly.'
"I think I stood there in the room for at least 20 minutes, Senator,
before Mr. Fall finally came in. He was in a sort of a dark red wrapper,
or smoking gown, and he had been asleep, and he was in a very nervous,
bad physical condition. It didn't need a doctor to tell me that, or any-
thing. And he talked to me for a couple of minutes, and he was awfully
upset. He seemed to be in a very bad condition, as I have said.
"But what you want to hear I will tell you now, Senator. He said,
'Ned, you remember our check transactions of two or three years ago.' I
said, 'I do.' He said, 'Will you say' or 'do you mind saying' I don't
know the exact phraseology used 'that you loaned me that in cash?'
And he said one thing, he said, has nothing to do with Harry Sinclair
'It
or Teapot Dome.' And now these are his exact words: He said, 'They are
barking up the wrong tree,' and he said, 'Will you do this? I am in an
embarrassing position here. Some of my enemies are just trying to make

it look as if it was something which it is not, and it has nothing to do
with Harry Sinclair or Teapot Dome: not a cent of it came from them.'
"
"Then the result of that was I said, 'Yes, I will, Senator.'
Mr. McLean was questioned further about the proposition which Mr.
Fall put up to him :
"Mr. McLean," asked Senator Adams, "referring back to your Atlantic

City conversation, as I recall, Secretary Fall said in substance to you,
'Would you be willing to say, in place of saying that you had given me
checks, that you gave me cash?'"
"You are correct, sir," Mr. McLean answered. . . .
"Well, now, Mr. McLean," Senator Walsh said, "I want to get back to
this meeting at Atlantic City."
TEAPOT DOME 111
"Yes, sir."
"When this extraordinary request was made of you by Senator Fall."
"Yes, sir."
"That, in substance, you should deceive the committee."

"Yes, sir."
"Concerning the source from which he got this money. Now, what did
he tell you as to his situation which impelled him to make such enormous
draft as that on the friendship which you had entertained theretofore
for him?"
"Senator, just what I told you before. He said that he was being be-
deviled by his political enemies. Whether he said Mexico politicians New
or not I am not positive, but the impression is that he did. And he said:
'Ned, this has nothing to do with Harry Sinclair or Teapot Dome what-
ever. They are barking up the wrong tree.' That is the best of my
recollection of what he said, sir."
"Well, yes; but what did he say as to why he did not go on and tell
the plain truth about it, instead of asking you to tell a lie about it?"
"I don't know, sir. He didn't say anything. If he had brought it

up as
clearly as that I never would have done it."
"Well, that was the plain situation, was it not?"
"Unfortunately, it was, sir."
"And without inquiring of him what the embarrassing feature was

which induced him to withhold the true sources of it and to endeavor to
get you to join him to impose upon the committee, he did not make any
explanation?"
"Only about his political enemies, and assuring me that it had nothing
todo with Harry Sinclair or Teapot Dome, Senator. Those are the very
words he used."
"Yes; but the political enemies were pressing the inquiry as to where
he got the money. We
understand that. His political enemies were just
bedeviling him and trying to find out where this money came from?"
"Yes, sir."
"Yes. Did you not say to him: 'Well, why don't you tell the truth
about it; where you got the money?'"
"No, sir; I did not."
"It would be a good deal easier for him to tell the truth than for you
to tell a falsehood about it, Mr. McLean."
"It would have, and for me too; both of us, yes, sir."
But Mr. McLean had only come to this realization that the truth is best
in the end, after he had been through a very hectic period indeed, as a
result of Fall's extraordinary demand upon his friendship and his own
acquiescence in that demand.
Fall finally went to Washington again on December 26, 1923, and
took rooms at the Wardman Park Hotel. He wrote to the Senate com-
mittee on December 28th, saying that he had intended to come before
the committee to make a statement about his financial affairs. "I am still
confined to room," he wrote, "and I am therefore dictating this state-

my
ment with the request it may be placed upon your records." He then
added the information that he had borrowed $100,000 from Edward B.
McLean and concluded:
The fact that Mr. H. F. Sinclair came to Three Rivers with his wife
and another lady and gentleman on December 31, 1921, or January 1,
1922, just after I had taken possession of the Harris home ranch property
and of the Harris-Brownfield cattle, has incited some evil-minded persons
to the conclusion that I must have obtained money from Mr. Sinclair.
It should be needless for me to say that in the purchase of the Harris
ranch or in any other purchase or expenditure I have never approached

E. L. Doheny or anyone connected with him or any of his corporations
or Mr. H. F. Sinclair or anyone connected with him or any of his cor-
porations nor have I ever received from either of said parties one cent on
account of any oil lease or upon any other account whatsoever. . . .
I shall go into no further detail in discussing this matter. The entire
subject, of course, is more or less humiliating even to refer to.
Very respectfully yours,

ALBERT B. FALL.
By this statement in writing to the committee Fall obviously hoped to
escape cross-examination by Senator Walsh on his tale of his sudden

affluence after years of unpaid taxes and financial embarrassment.
The Republican leaders were now thoroughly worried at the effect
of the revelations before the Senate committee on the reputation of their
party, which was come up before the people for re-election in the
to
following fall. While he was confined to his room in the Wardman Park
Hotel, Fall was visited by Will Hays, who had resigned from Harding's
TEAPOT DOME 113
Cabinet on March 4, 1922, to become czar of the motion picture industry,

by Senator Smoot, Senator Lenroot, and Senator Charles Curtis, who was
later to become Vice-President of the United States.
Senator Smoot and Senator Lenroot being Republican members of the
Teapot Dome investigating committee, went together to visit Fall at
the Wardman Park. They found him in a dressing gown, attended by

a nurse. Senator Lenroot testified later that he told Fall that it was his
duty to the committee, the country and the party to disclose the facts
as towhere he got the money to buy the Harris ranch. Fall insisted that
it was a private matter. Lenroot said that the circumstances were suspicious
and should be cleared up. Then Fall offered to tell Smoot and Lenroot
privately who gave him the money, but Senator Lenroot refused to receive
in confidence any information which he felt should be given to the com-
mittee publicly. Fall then volunteered the information that he got the
money from Edward B. McLean. It was after this interview with the
Senators that Fall sent his letter to the Senate committee disclosing that
he had borrowed the money for his private affairs from Edward B.
McLean.
In 1928, Fall told the Associated Press that in 1923 two Senators and
a former Cabinet officer had advised him to write to the Senate committee
that McLean had lent him the $100,000 which Doheny had
actually given
him. Fall then claimed that they had been anxious for him to conceal
Doheny's name because Doheny had just lent the Mexican government
10,000,000 pesos and the Senators thought that the disclosure of this fact,
together with the fact that Doheny had given a Cabinet officer $100,000,
might embarrass the Republican administration in its policy of protecting

American interests in Mexico. The Associated Press dispatch containing
this interview with Fall, which was sent out on April 2, 1928, added:
"The McLean letter was the only act in the whole deal of which he was
ashamed, Fall declared." Senator Lenroot denied in 1928 that there had
been any persuasion on his part or that of Senator Smoot in 1923 to make
Fall do anything but tell the truth to the Senate committee. Mr. Fall was
up to his old trick of hiding behind the foreign policy of the United
States, and taking refuge from his misdeeds in a form of sniveling
patriotism.
Meanwhile, Mr. McLean, who was in Palm Beach, was getting nervous.
"I have heard indirectly that I may be called as a witness before the Tea-
pot Dome investigating committee," Mr. McLean telegraphed to his
confidential man, John Major, on December 26th. That same day he
telegraphed Major: "Keep all my wires in your possession." Later that
day he telegraphed again: "Ask Mitchell Palmer if in case Fall should

testify that I had loaned him $100,000 I should send a telegram to the
chairman of the Teapot Dome investigating committee, or whether he
would personally tell them that I know nothing which in any conceivable
way or manner, no matter how remotely, would have any possible bearing
upon the investigation." A. Mitchell Palmer, former Attorney General
of the United States in the administration of Woodrow Wilson, was
Mr. McLean's Washington attorney. Mr. McLean was badly frightened,
and he did everything he could think of and his advisers could think of
to avoid testifying before the Teapot Dome committee. Mitchell Palmer
spoke to Senator Walsh in the interests of Mr. McLean, and then informed
McLean by telegraph and through his secretary, John Major, that while
Walsh would not commit himself, Palmer did not think McLean would
be called before the committee. That same night, December 29, 1923, Mr.
McLean received the following telegram:
Mrs. Fall and I leaving for Palm Beach tonight 9.40. Love to you both.
A. B. FALL.
The day before Mr. Fall had written to the Senate committee saying that
he was too ill to attend its sessions, and that McLean had lent him
$100,000.
McLean's employees in Washington were using all the influence they
could to prevent Senator Walsh from calling McLean as a witness. Senator
Charles Curtis testified that Ira E. Bennett, editor of McLean's Post,
called on him together with John Major, McLean's secretary, and told
him thatMr. McLean was ill, that his boy had just had an operation, and
that he could not come to Washington at this time. They asked Curtis
to seeWalsh and find out if a statement in writing from McLean would
not serve his purposes just as well. Senator Curtis testified that he told
Bennett and Major that they ought to see a Democratic Senator and sug-
or Robinson. They then went to see Senator Under-
gested Underwood
TEAPOT DOME 115
wood, who told them that it would not do any good, but that he would
speak to Senator Walsh.
Mr. McLean's anxiety was now so great that he had a private telegraph
wire installed between his home in Palm Beach and the office of the
Washington Post. The wire was opened at six in the evening and closed
at six in the morning. Its operator was E. W. Smithers, who during the
day worked as telegraph operator at the White House. He was employed
for McLean's wire at the suggestion of W. O. Duckstein, another secre-
tary of Mr. McLean's. Mrs. Duckstein worked at the Bureau of Investi-
gation of the Department of Justice, and Mr. McLean himself was a

special agent of the Department of Justice by courtesy of Attorney Gen-
eral Harry Daugherty. As such Mr. McLean possessed a copy of the
special code book of the Department of Justice, which code was used
for many of his telegrams between Palm Beach and Washington. In
order to reassure his friend McLean, Attorney General Daugherty at
this time gave Ira E. Bennett the following message to telegraph to his
employer: "You know what to depend on. The fight is on me and I am

ready for them and feeling fine."
During the lastdays of December, 1923, and the first week in January,
1924, telegrams were going between Palm Beach and Washington in
rapid succession. McLean later testified that during this period, when
the Senate committee was beginning to get on the scent of Fall's finan-
cial affairs, he received between 150 and 300 telegrams every night.
Many of these were in the Department of Justice code and contained

for various characters in the drama. Secretary Fall
special designations
was known as "apple" and Senator Walsh as "jaguar." There were also
a "peaches" and an "apricot." The following are examples of telegrams
flying back and forth between Palm Beach and Washington:
Just had long talk with Apple and it was perfect for you his mind
was very clear and you need not worry about peaches would follow
the whole thing will be at office after
apricot and advise to forget about
seven where I will see apricot again regards.
THE CHAMPION.
Another read:
Haxpw sent over buy bonka and householder bonka sultry tkvouep
prozoics sepic bepelt goal hocusing this pouted proponent.
On January 3, 1924, A. Mitchell Palmer wrote a letter to Senator Len-
root, chairman of the investigating committee. In it he quoted the fol-
lowing telegram which he had received from his client, Mr. McLean:
In 1921 I loaned Fall $100,000 on his personal note. I have never met
Harry Sinclair nor have I ever met Doheny or any of the so-called oil
crowd. Ihave never owned any Sinclair oil stock nor stock in any of its
subsidiary companies. I have never owned any stock in Mr. Doheny 's
company or any company with which he is 'connected, nor any of his sub-
sidiary companies. There is no stock of these oil companies pledged with
the note. It is absolutely unsecured.
Mr. Palmer added in his letter to Senator Lenroot that Mr. McLean re-
gretted that owing to the condition of his own health and that of his wife,
he would not be able to come to Washington to testify in person.
Mr. McLean was getting very nervous, indeed. When he heard

now
the rumor that A. Mitchell Palmer was advising Fall and Doheny as
well as himself, he sent telegrams asking that another of his attorneys,
Francis McAdoo, son of W. G. McAdoo, should go over all statements
issued to the Senate committee in his behalf. Then another attorney
still
for Mr. McLean, Mr. Wilton J. Lambert, appeared before the Senate
committee with a telegram from McLean's physician, and the further
assurance that McLean knew nothing about Teapot Dome.
Mr. McLean, according to his ownstatements and those of his physi-
cian, was suffering from sinusitis. Senator Walsh told the committee
that he himselfhad undergone an operation for sinusitis a few weeks

before, and the disease was not serious. However badly Mr.
that
McLean's sinuses may have been acting, Senator Walsh's did not in-
capacitate him work or for traveling, and the committee finally
for
McLean would not or could not come to Walsh, that
decided that since
Walsh should go to McLean and examine him in Palm Beach concern-
ing his alleged loan to Fall.
Meanwhile, the nervous little group in Palm Beach became worried
and excited when they received the news that Senator Walsh was leav-
TEAPOT DOME 117
ing for that winter resort on the committee's business. On January 9,

1924, W. O. Duckstein, known in the McLean code as The Duck, sent
his employer the following message in code, which, when decoded by
the War Office for the Senate committee read:
Zevely thinks trend of investigation favorable to you. Not impressed

with Jaguar [Walsh] as cross-examiner. Thinks you need have little
apprehension about forthcoming interrogation. Zevely had conference
with Lambert regarding your answers to questions which may arise of
which Lambert will advise you. Walsh leaves Seaboard tonight. Due
Friday morning 8.
W. O. D.
Later that day "W. O. D." telegraphed again in code:
Walsh leaves Coast Line 12.35 tonight instead of Seaboard. Lambert

on same train.
Lambert was Mr. McLean's attorney.

Another visitor in Palm Beach at this time was C. Bascom Slemp, sec-
retary to President Coolidge, who was spending a vacation there. He

met Fall at lunch and dinner several times at Mr. McLean's house. On
one occasion, Mr. Slemp testified, Mr. Fall told the assembled ladies and
gentlemen that he was going to straighten this thing out and tell the
committee exactly what had happened, unless a personal friend of his
of thirty years' standing did so. Mr. Slemp told the Senate committee
that he had urged Fall to tell the whole truth, and that Fall had answered
that Mr. Slemp would look
if at the record, he would see that that was
exactly what he had done.

Mr. Slemp also said that there was great excitement in Palm Beach at
the news of Senator Walsh's imminent arrival. Until then, he said, the
conversation there had been confined almost entirely to Prohibition, the
weather and Secretary Mellon's tax bill, which aimed to reduce appre-
ciably the taxes of rich people. But as soon as Senator Walsh arrived,
the oil scandals took the spotlight at dinner parties and luncheons. Mr.
Slemp testified that he had met "Ned" McLean walking along the beach
the morning Senator Walsh arrived in Palm Beach, and that Mr. McLean
had told him that he was going "to tell it all" in about an hour. Mean-
while, Mr. Fall took to his bed in The Breakers Hotel.
At the request of Mr. McLean, Senator Walsh postponed his examina-
tion until two o'clock that afternoon.Meanwhile, Fall and McLean were
having conferences at which their attorneys were present. Fall was
anxious to know whether Senator Walsh had the authority to compel
him to testify. McLean, when he testified again later in Washington, de-
scribed Fall's condition as one of nervous indecision:
"One minute he said, 'I am going right down and testify before
Senator Walsh'; the next minute he wasn't going to go. That was the
thing right along, as Mr. Lambert can tell you. One minute he thought
you were going to drag him before you. The next minute he would go.
The next minute he would not go. There was never any you couldn't
have had a conference with Senator Fallat that time if you had seen him
yourself,more than two or three minutes."

all that I would like to find out, Mr. McLean, if
"Well, you can tell
us about it," Senator Walsh asked, "is what the trouble was, so far as
Senator Fall was concerned?"
"Senator, I be doggoned if I know today what the trouble was," Mr.
McLean replied.
Perhaps Mr. Fall was suffering from acute guilt.

The examination of Mr. McLean took place at The Breakers Hotel,
where both Senator Walsh and Fall were staying. Mr. McLean told Sen-
ator Walsh that in November, 1920, after the election he was on the
fishing trip in the South which President-elect Harding took with some
of his friends. McLean met Fall at this time in Brownsville, Texas, and
Fall spoke to him of his ranch at Three Rivers; he told McLean that it
had great possibilities as a

breeding place for thoroughbred horses, and
that money was to be made in such a venture, because there was a big
race track at Juarez, one hundred miles away. One year later, in Novem-
ber, 1921, Mr. McLean said, he received a letter from Secretary Fall,
describing the Harris ranch in New Mexico, "a rather bulky letter," Mr.
McLean testified, "I should think about 14 pages approximately that any-
how, asking me if I would care to
buy it or go into partnership with
him. I replied that it was impossible at that time."
TEAPOT DOME 119
Two weeks later, according to McLean's story, Secretary Fall came to

Mr. McLean's house in Washington and asked if he would lend him
$100,000 on his personal note, as the Harris ranch was about to be sold
and Fall had to act at once in order to get it.
They had a long conversa-
tion, and Mr. McLean testified that he agreed to lend Fall $100,000. He
gave Fall two or three checks he was not sure how many on different
banks. Two or three days later Fall dropped in again and gave McLean
his note for $100,000 with a memorandum attached, McLean said. Then
he came back two or three days later, returned the checks and said that
he had made other arrangements, but he did not say what the other
arrangements were. Mr. McLean told Senator Walsh that he had no copy
of Fall's alleged note, no copy of the memorandum attached to it, that
he never kept the stubs in his checkbooks but merely got statements from
his banks at the end of the month, and that therefore he had no record
whatsoever of the checks he claimed that he gave to Fall and which Fall
returned uncashed.
After he had told this tale, Senator Walsh asked Mr. McLean when he
had seen Mr. Fall last, and he answered "Fifteen minutes ago." He then
:
admitted that he and Mr. Fall had conferred that morning concerning
the nature of McLean's testimony, and that they had talked it over sev-
eral times previously.
After he had examined Mr. McLean, Senator Walsh wrote a letter to
Mr. Fall, telling him in substance of the testimony which Mr. McLean
had given that Fall had not used McLean's $100,000 and added: "I
just
shallbe glad to take, for the information of the committee, any further
statement in respect to the matter you may care to make, either orally,
before me at your convenience at any time, or in the shape of a letter
to the committee, if you prefer to take that course." Senator Walsh signed
and sealed this letter. He told the committee when he got back to Wash-
ington:
"I took it to the desk in the office at the hotel, and accosted the gentle-
man at the desk, whom I assumed to be the manager of the hotel. I asked
him if he would not have the kindness to present the letter to Senator
Fall. He said, 'Senator Fall is not registered here.' I said, 'I understand he
is not registered here, but I know as well that he is in the hotel, and I
very respectfully ask you to hand the letter to him.' He said, 'Well, I do
not want to hand him the letter.' I then said to him, 'Now, I do not
care to place this in the hands of the sheriff and have him go rummaging
through your hotel to find Senator Fall, but Senator Fall must get this
letter.' He thereupon said, 'Well, I will give this letter to Mr. McLean
"
and let him deliver it to Senator Fall.' I said, 'That will be satisfactory.'
Soon afterwards Mr. McLean and his attorney, Wilton J. Lambert,

came to see Senator Walsh and told him that Mr. Fall desired very much
to talk with him, but that he was too ill to do so that day. Senator Walsh
said that he told them: "Very well, I will see Senator Fall tomorrow
morning at 10 o'clock."
Mr. McLean testified later in Washington that it was only after he had
delivered Senator Walsh's letter to Mr. Fall that Fall told him for the
first time that he had got $100,000 from Doheny:
"And what did he tell you then?" Senator Walsh asked Mr. McLean.
"He said that Mr. Doheny had loaned him the money."
"Well, what did you say?"
"
"I said, 'I be damned.'
"What is that?"
"I said, be damned,' if you want to know exactly what I said, sir.
'I
Just on the theory that I never thought it had anything to do with these
leases, sir."
"How long did Senator Fall remain there as your guest after that, Mr.
McLean?"
"After you left?"
"Yes."
"I think about four or five days, Senator, and he went from there
"
to
"New Orleans, was it not?"

"To New Orleans; yes."
"Did you recall to him the fact that he had left upon your mind the
"
impression
"No, sir."
"That this loan did not have anything to do with the leases?"
"No, sir; I was in then, and the water was over the dam."
TEAPOT DOME 121
"Well, anyway, you knew about the source of the money before I
left Palm Beach?"

"Yes, sir."
"That is all."
McLean testified that when he brought Senator Walsh's letter up to
room, he found Fall writing out a telegram to Doheny informing

Fall's
him that he was going to tell the committee that he got the money from
him. Fall wrote to Senator Walsh in answer to Senator Walsh's note to
him:
I desire to advise
you that I have carefully read the testimony which
Mr. McLean gave today and that I endorse the accuracy of same. I will
also say that before giving his testimony Mr. McLean had a conference
with me and I told him that,* so far as I was concerned, it was my wish
that he answer freely, and in this connection, I will say that it is abso-
lutely true that I did not

finally use the money from Mr. McLean,
which he expressed himself willing to give me, because I found that I
could readily obtain it from other sources. I wish it thoroughly understood
that the source from which I obtained the money which I used was in no
way connected with Mr. Sinclair or in any way involved in any con-
cession regarding the Teapot Dome, or any other oil concession.
Further than this I would not care to go at the present time, inasmuch
as I am not in anything like the physical condition to stand the ordeal
of an examination. It may be, though, that I will desire to amplify this
statement to you for the committee at a later date.
Very truly yours,

ALBERT B. FALL.
Mr. McLean testified later in Washington to this conference with Fall

mentioned in Fall's letter to Senator Walsh, but his version of it was
slightly different from that of Fall :
"And you had a conference evidently with Mr. Fall prior to the time
you testified?" Senator Walsh asked Mr. McLean.

"Yes, sir."
"As to what you were to say?"

"No, sir."
"No; as to what you were going to say?"
"Yes, sir; that is correct."
"Now, tell us about that conversation. What was that?"

"I just told him, I said: 'Albert, this thing has gone as far as it can go.
I have gone down the line for you. I have done everything but it has
"
come to the point where I have got to tell the truth.'
On January 7, 1924, two days before Senator Walsh had arrived in
Palm Beach, McLean had telegraphed to his adviser, Francis T. Homer :
"Wire me your opinion as to whether investigating committee can force

me to tell from what sources I accumulated sum of $100,000. Think over
certainprominent people at that time and you will realize why large
cash fund was kept on hand." The next day, the day before Senator
Walsh left for Palm Beach, Mr. McLean had telegraphed to his confiden-
tial man, John Major: "Find out in careful manner from bank about
matter I will talk to you about over telephone today." Then, later that
day, he telegraphed again :
This is a hypothetical question: John Doe draws a check for $10,000.
On the back of the check is written indorsement as follows: 'John Doe,

for purchase of house.' Does bank simply keep a record of the amount
of cash drawn or does it keep a, record of explanation written on back
of check?
Mr. Major answered that a bank did not keep a record of the purpose
for which a check was drawn. Both of these telegrams were in code and
were decoded for the Senate committee by the Signal Office of the War
Department.
On January 16, 1924, after Senator Walsh had left Palm Beach and
was back in Washington, Mr. McLean received the following telegram
from Edward S. Rochester, Attorney General Daugherty's confidential
publicity man at the Department of Justice:
Informed investigation is being made by Senate committee to determine
you had $100,000 in cash in any bank at the

if time you testified you
TEAPOT DOME 123
gave Fall checks for that amount. Thought I better advise you concern-
ing this phase. Regards.
ROCHESTER.
After Senator Walsh had left Palm Beach, Mr. Fall's health improved
sufficiently to enable
him to leave for New Orleans, where he had ar-
ranged by telegraph to meet Edward L. Doheny, who was on his way
to Washington from Los Angeles. Fall had also telegraphed to Sinclair's
lawyer, Colonel J. W. Zevely, asking him to meet him in New Orleans.

Colonel Zevely testified later that he was glad to go at once from Wash-
ington to New Orleans to meet Fall, as he and Fall were old friends. A
rumor flew about that Fall had gone abroad suddenly and that
Doheny
had also gone abroad. On Sunday, January 20, 1924, Senator Smoot re-
ceived a telegram from Mr. Fall from New Orleans:"I am contemplat-
ing no sea voyage until hearings close. Will hold conference parties ar-
riving this evening, and wire fully not later than Tuesday."
Although Fall was not contemplating a sea voyage, Harry Sinclair de-
parted suddenly for Europe after Senator Walsh got back from Palm
Beach with the sworn testimony that Fall had not used "Ned" McLean's
$100,000. Care was taken to see that Mr. Sinclair's name was not on the
passenger list of the S. S. Paris.

On Monday, January 21, 1924, the Senate committee investigating the
naval met at two o'clock in the afternoon and spent one of the
oil leases
most sensational days of its existence. First it heard Senator Walsh's report
Palm Beach and examination of Mr. McLean. Then it heard
of his trip to
testimony from Archie Roosevelt and his brother Theodore, Assistant

Secretary of the Navy, who, as we have seen, had played a part in the
administration and transfer of the Navy's oil reserves.
After he had read in the newspapers of Senator Walsh's journey to
Palm Beach and its results, Archie Roosevelt had
telephoned to his brother
Theodore and asked him if he
thought he ought to resign from the Sin-
claircompany. Theodore Roosevelt, Jr. went to New York on Friday
night and saw his brother Archie early Saturday morning. "Archie came
down, and Archie outlined to me certain things thathad happened to
him, and certain conversations that he had had during the past three or
four days, which I felt were of such a nature that they should be
brought
Jr. testified. He and
to this committee's attention," Theodore Roosevelt,
his brother went to Washington and saw Senator Walsh and Senator
Lenroot on Sunday, January 20th. Archie told them his story, and the
Senators agreed with the Roosevelts that Archie should tell it to the com-
mittee the next day. Archie Roosevelt testified :
"I will begin the story by saying that on Sunday a week ago what
date was that?"
"The 13th," said Senator Smoot.
"The 13th Sunday, the 13th, I read Senator Walsh's experience in
Florida, and that was the thing that finally convinced me that I was in
the wrong place. On Monday Mr. Sinclair had me taken up to his office
or had me sent for."
"That is the 14th?" Senator Smoot asked.
"That is the 14th, Monday; and asked me to get him a ticket on the
steamship Paris. The steamship Paris sailed Wednesday, and it was the
next boat departing for Europe that week, after Sunday, that is. There
was no boat Monday or Tuesday. On Wednesday Mr. Sinclair sailed.
On Thursday Mr. Galloway, wasn't it or Senator Caraway?"
"Caraway," said the chairman.
"Senator Caraway's speech came out, and I read that with great in-
terest, because it clearly showed me by its very able summing up just
where the matter stood at present. On Friday I received a call from a
friend of mine, who is Mr. Sinclair's private secretary, Mr. G. D.
Wahlberg."
"Mr. Roosevelt," Senator Walsh said, "before you go into that, will
you tell us what conversation you had with Mr. Sinclair at the time he
asked you to get the ticket?"
"Mr. Sinclair asked me to get him a steamship ticket, and to see that
his name was not put in the passenger list, nor was I to tell anyone in
the office."
"Do you know why he assigned you to this work?"
"Yes, sir; because I because my brother Kermit is connected with
the steamship company, and I know all the officials, and I am able to
get the steamship ticket, you know, and the best places that we can.
Then, also, I am connected with the foreign work of this Sinclair com-
I knew there was absolutely no well, I want to qualify that. As
pany,
TEAPOT DOME 125
far asI knew, and I am connected with most of the

foreign work, there
was absolutely no reason which would require the immediate presence
of Mr. Harry Sinclair in Europe at the present time." . . .
Mr. Roosevelt continued:
"Mr. G. D. Wahlberg, as I was saying, called me uo and said that

he would like to speak to me."
"Who is he?"
"Mr. G. D. Wahlberg is Mr. Sinclair's
private secretary; not the cor-
porate Sinclair Oil Co.'s secretary, the private secretary of Mr. Sinclair. We
have been friends for quite a while. He shut the door and he said to me
that he had some advice. This is all a general conversation, and itwent
through a couple of hours. He said to me that he wished I would
resign from the company. That I had a name and a reputation which
I should guard jealously. That he personally was unhappy to see me
there, as a friend. Mr. Wahlberg stated that he himself was extremely
unhappy in the company, or not in the company but with Mr. Sinclair.
That he was connected with the Hyva corporation that, I believe, is,
according to your testimony, Mr. Sinclair's privately owned corporation,

isn't it?"
"Yes."
"He was an officer of that. Then I asked him if he
thought that Mr.
Sinclair had bribed Secretary Fall. Mr. Wahlberg hesitated it is a nasty
word and he said: 'I think somebody lent Mr. Fall money.' No, he
didn't; he said, 'Somebody might have lent Mr. Fall money.' I think that
is how he put it. I want to get his words as nearly accurate as possible.
Then I asked him why he thought Mr. Sinclair was leaving the country.
He shook his head, and he said, 'Well,' and he said, that 'it must be,
of course,on account of the findings of Senator Walsh's trip down at
Palm Beach.' He then said to me that he was extremely worried. That
leaving him over here all alone with Mr. Sinclair away, he was afraid
that he would be forced to explain certain things; that he would then
undoubtedly be expected to lie about certain things; that one of the

things that he was worried about was a payment which was made to a
foreman of Mr. Fall's; that that payment was $68,000, and that he had
the canceled checks. Now this was the main reason. This, of course, was
the thing that took my breath away at first."
It was with Mr. Wahlberg that Mr. Roosevelt
after this conversation
Theodore on the telephone and went to Washington

called his brother
with him on the midnight train at the end of the week. Before leaving
for Washington, Archie Roosevelt saw a friend of his named Crandall,
who also worked for Sinclair. He told Mr. Crandall that he was "worried
to death how it connected me up with it, worried to death how it con-
nected my up with it," and that he was going to Washington

brother
probably, and if there

was anything he wanted attended to for him in
New York, he expected Mr. Crandall as a friend to do it for him. After
seeing Senators Walsh and Lenroot on the Sunday they arrived in Wash-
andhis brother, went to Theodore Roosevelt's house. On
ington, Archie
Monday at one o'clock in the morning Archie Roosevelt telephoned to his
friend Crandall and asked him to go to see Wahlberg at once and ask him
to telephone Archie Roosevelt at his brother Theodore's house in Wash-
ington as soon as possible; Archie had forgotten Wahlberg's telephone
number.
Mr. Crandall called on Mr. Wahlberg, and at about one-thirty Monday
morning, Wahlberg got the telephone connection to Washington. Archie
Roosevelt told Wahlberg that he must come down to Washington to
testify before
the Senate committee. Wahlberg agreed to come. "I didn't
testified later, "or didn't say anything against
question him," Wahlberg
coming, or any reason why I didn't want to come, because there was a man
in the room listening to me." Theodore Roosevelt, Jr. was also listening
on the extension telephone in his house to the conversation between his
younger brother and Wahlberg. Wahlberg testified that Assistant Secre-
tary of the Navy Roosevelt also told him over the telephone that he would
have to come to Washington, and that a subpoena would be served on
him soon enough to enable him to catch the 9:15 train that same Mon-
day morning.
Mr. Wahlberg did not sleep any more that morning. Instead, he thought
the matter over. He testified later that he saw no one except Mr. Roose-
velt's friend Mr. Crandall from 1:30 Monday morning until he testified
before the Senate committee that afternoon. At 7:30 that morning Wahl-
berg telephoned to Archie Roosevelt again. Archie got out of bed and
hurried to his brother Theodore's room and said: "Get on the
telephone.
TEAPOT DOME 127
Wahlberg is on the telephone." Meanwhile, Wahlberg would have had

plenty of time to consult a Sinclair lawyer. Colonel Zevely was down in
New Orleans conferring with Mr. Fall. But other Sinclair lawyers were
inNew York. At any rate, at this telephone conversation at 7:30 Monday
morning, Wahlberg told Archie Roosevelt that he must have misunder-

stood him, that he had no facts about any payments to Fall, that he could
not prove that any money had gone from Sinclair to Fall, and that he did
not want to come to Washington to testify. In this second telephone con-
versation Wahlberg also denied that he had ever said anything about
$68,000 going from Sinclair to the foreman of Fall's farm. "I never remem-
ber of saying anything like that to you, Mr. Roosevelt," he testified he
told Archie Roosevelt. "I couldn't have said that. That doesn't exist." On
examination by Senator Walsh, Wahlberg admitted that he had not de-
nied the $68,000 payment in his first telephone conversation at 1:30 that
morning. He said that the reason for his silence at that time was because
of the presence in his room of Mr. Crandall, and that, "it is almost a busi-
ness rule of mine not to talk any more than is necessary."
"Some of us suspect that you are acting on that principle now, Mr.
Wahlberg," Senator Walsh said.
"I regret that," Mr. Wahlberg answered. "I regard this as totally
different from a circumstance under which I do that."
Archie Roosevelt testified that he also had

said to Wahlberg: "Are you
willing to go through with it?" and that Wahlberg had answered: "I will
come down and tell the truth." "Are you scared?" Mr. Roosevelt asked.
"Yes; am
awfully scared," Wahlberg replied.
I "And I said I was too,"
Archie Roosevelt told the committee.
Meanwhile, a subpoena had been issued for Wahlberg, and he had to
take the early morning train to Washington. Archie Roosevelt decided
that it was important for him to talk with Wahlberg before he saw anyone
else, and Archie and his wife drove down to Baltimore from Washington
to meet Wahlberg's train. At Baltimore they left their motor car and rode
the rest of the way Washington in the train with Wahlberg. Archie
to
hired a drawing room, and he and his wife took Wahlberg in there to talk
with him. Wahlberg insisted at this conversation that Archie Roosevelt
128 PRIVILEGED CHARACTERS _
was mistaken, that he had not mentioned a payment of $68,000 to the

manager of Fall's farm, and Archie Roosevelt insisted that Wahlberg had.
"Well, now," Wahlberg said, according to Mr. Roosevelt, "that seems

to be such a doubtful point, what are you going to say about it?"
"I have got to say that I
thought that that was the case," Mr. Roose-
velt told the Senate committee he had replied.
Mrs. Archibald Roosevelt then remarked to Wahlberg: "It is awfully
hard for you, because looks as though the public would believe him
it
and would not believe you, and it is perfectly awful."

"Your wife evidently had suspicions about it?" asked Mr. G. T.
Stanford, Sinclair's lawyer.
"Oh, she always suspects me," Mr. Roosevelt answered.
"I take it, Mr. Roosevelt, there is no ground for that suspicion,
though?" Mr. Stanford asked.
"Oh, I hope not," Mr. Roosevelt answered, "I try to do my best."
Immediately after Archie Roosevelt told his story, G. D. Wahlberg was

called to testify. He was a quiet, cautious man, who was born in Gothen-
burg, Sweden, had come to the United States in 1899 and had become
naturalized in 1912. He had worked for Harry Sinclair as his private sec-
retary since November, 1916. Mr. Wahlberg asked first if he might make
a short statement:
"Why, after today," he said, "I don't expect to be in the employ of

Mr. Sinclair, as I will probably forward my resignation to him tonight
after the committee has adjourned.
"There is one thing I would like to correct after Mr. Roosevelt's
testimony, namely, that the $68,000 that he understood he heard me say
was paid to Mr. Fall's cattle man, must have been an error on his part
in hearing what I said, because we were talking about the cattle, and I
think I referred to six or eight cows, and he probably understood that
to mean $68,000 in some manner. I talked to Mr. Roosevelt about that,
and he still clings to his recollection that I said $68,000, but I want
to say that that was not what I said, because that is not the case."
Mr. Wahlberg's statement that Mr. Roosevelt had misunderstood the

cows Sinclair had sent to Fall as a present to mean sixty-eight
six or eight
TEAPOT DOME 129
thousand dollars which Sinclair sent to the manager of Fall's farm was
one of several phonetic misunderstandings which came up in the course
of the testimony taken before the Teapot Dome investigating commit-
tee. Mr. Francis T. Homer, Edward B. McLean's adviser, was alleged to
have said over the telephone that if Mr. McLean took a leased wire be-
tween his home in Palm Beach and his office in Washington, it would give
"easy and quick access to the White House." Mr. Homer testified that this
construction of his telephone conversation amazed him, that the telephone
service at his home in Maryland was wretched, and that what he had
really said was "easy and quick access to Wiley at your house," Wiley
being the editor of McLean's Cincinnati paper, who was then staying with
McLean at Palm Beach. Mr. Homer testified that he had thought it inad-
visable for Mr. Wiley to be in Palm Beach without a leased wire, out of
touch with the general news situation. But Mr. McLean's private wire was
used for personal telegrams and not for news. Presently we shall see how
by another phonetic misunderstanding the "manager of Fall's farm" be-

came "the manager of the horse farm," referring to Sinclair's Rancocas
Stables.
"What induces you to resign, Mr. Wahlberg?" Senator Walsh asked

the witness.
"Well, must I answer that question?"

"Oh, yes."
"Might I say," Senator Lenroot, the Chairman, interposed, "the com-
mittee desires from you, Mr. Wahlberg, all facts in your possession?"
"I see,"Mr. Wahlberg replied. "Well, I think after today's testimony
I would not remain in Mr. Sinclair's employ in any event." . . .
"Well, of course," Senator Walsh continued, "but for some reason or

other you told us that you proposed to tender your resignation this
evening."
"Yes."
"And you go on and tell us why you are going to do so."
"Well, because I feel that I could work under more happy circum-
stances to do work that was more agreeable to me."
"Well, what are the disagreeable features of the work?"
"Well, it is primarily the fact that I am burdened with a great deal
of responsible work, and that I amnot in very good health and have
not been for several years. I haven't had a vacation for three years."
"
"Yes, but Mr. Wahlberg
"I am stating my personal reasons."
"I know, but all that has existed for some time. Something has
happened now that you are now going to resign. What is it?" Senator
Walsh asked.
"I amat a loss to answer it in any other way. As I have already stated,
I am very unhappy. I feel that I could work under more ideal conditions."
"Well, when did your state of unhappiness begin?"
"Oh, it has gone on for two or three years, probably."
"Oh, that is the point. You have gone on for two or three years, and
now it just happens that you put in your resignation now. You didn't
put it in last week?"

"No."
"You did not put it in last month?"
"No."
"But you are going to do it tonight. Now, what is it that has now
brought you to the sticking-point where you are going to put in your
resignation?"
"Well, I haven'tfelt happy about the particular business that I have
handled any time. And I have been called upon to come down to
at
Washington quite a few times, worked very hard, and I can not give
you any other particular reasons for it."
"Well, certainly there has not been anything unpleasant happened

here? We have treated you very courteously, have we not, Mr. Wahlberg?"
"Yes."
When pressed further for the reason he wanted suddenly to resign his
position, Mr. Wahlberg remained guarded in his answers.
"In my confidential capacity," he said, "I have to handle a great deal
of personal work. And I am called upon to do some very difficult things."
"Well, what are these difficult things that you are called upon to do,
Mr. Wahlberg?" Senator Walsh asked.
"Financial matters."
Except for the detail of six or eight cows instead of sixty-eight thousand
dollars, Mr. Wahlberg said when he testified

the first time that Mr. Roose-
velt had given an accurate account of their conversation. After he had had
TEAPOT DOME 131
time to think the matter over from 1 :30 Monday morning until late Mon-
day afternoon, when he first went on the witness stand, Wahlberg insisted
that he had no knowledge of any checks drawn by Mr. Sinclair to the
order of the foreman of Fall's farm or anyone else connected with Mr.
Fall.He also testified that the checkbooks of Mr. Sinclair's family cor-
poration, Hyva Corporation, had been taken up to Mr. Sinclair's home
from his office at Sinclair's request the night before Sinclair had sailed
suddenly for Europe. When he was questioned further concerning his
conversation with Roosevelt, Wahlberg said that the misunderstanding
may have come about because of a net profit of $268 on the shipment of
cattle by Sinclair to Fall. Instead of $68,000 perhaps he had mentioned $268.
But Senator Walsh brought out that instead of a profit of $268 for Sin-
clair on his present of cattle to Fall, there was a loss of $5.20.
"And you think," Senator Walsh asked, "that talking about six or
eight cows, you think that Mr. Roosevelt got that confused with $68,000
paid to the foreman of the Fall ranch?"
"I believe that is what happened," Mr. Wahlberg answered.
Mr. Wahlberg was asked how it was that Mr. Roosevelt had remembered
the words "canceled checks" and "foreman of Fall's farm" coming into
the conversation. He insisted that he had made no mention of canceled
checks, and that he had seen no canceled checks, but he testified that he
may have mentioned the foreman of Fall's farm in connection with the
six or eight cows which Mr. Roosevelt had taken to mean $68,000. Archie
Roosevelt was then put on the witness stand again for a few minutes:
"I want to ask you just one question," Chairman Lenroot said. "With
reference to the original conversation, what is
your recollection as to the
conversation with reference to the $68,000?"
"I was dead sure." .
"Won't you repeat it just as you recollect it?"

"As I recollect it, he said, 'What' it is hard to say now. Just a
minute. He said that he wouldn't like to have to explain about *'-e
sixty-eight about the canceled checks he had for $68,000. That is what
I understood."
"Well, what did you say?"
"I think I whistled."
"Was that all that was said about the $68,000?"
"Yes, sir."
"Well," Senator Walsh said, "you did not tell us, Mr. Roosevelt, in your
statement just now, concerning the conversation, to whom he said the
checks went?"
"Oh, the foreman of Fall's cattle ranch; he did not mention the name.
I don'tknow the name yet yes, somebody told it. No; I don't think
I know the name yet. Somebody mentioned it here, perhaps."
In the course of his testimony Mr. Wahlberg admitted that there was
another thing which had aroused his uneasiness and contributed to his
unhappiness. This was the loan of Liberty bonds and securities by Mr.
Sinclair to Colonel Zevely and to Will H. Hays, former chairman of the
Republican National Committee. He had hoped that he would not have

to testify concerning these transactions before the Senate committee. When
the Senators asked him why he had hoped that, Mr. Wahlberg answered:
"Because I knew so little about them. I had only ideas, and no more." But
the Senators wanted his ideas.
"And in your mind," Senator Adams asked, "there were suspicions that
these particular loans had some relationship to the matters being investi-
gated by this committee?"
"Yes."
"What led to that suspicion?"
"I can not answer that except that Colonel Zevely of course was active
in the matter of Teapot Dome. That is the only thing."
"Mr. Zevely was acting actively at the time of the negotiation of the
Teapot Dome lease?"
"Yes, sir."
"Was he in touch with or acting in contact with Secretary Fall?"

"That I do not know. He was active, I said, at that time." . . .
"So that if there were any irregularities or

anything inducing a sus-
picion it was contained in the three things you have mentioned the
cattle, Liberty bonds, and the stock?"
"That is all."
"And what you do know of these things leads you to feel that you
should resign your connection with the company?"
TEAPOT DOME 133
"Yes."
"Now, one of the stateme-nts made to us by Mr. Roosevelt upon the
stand here, Mr. Wahlberg," Senator Walsh said, "was to the effect that
he asked you if you thought Sinclair had bribed Fall. That part of the
conversation you have not adverted to, but have, generally, indorsed what
he said. . . . Mr. Roosevelt said that you answered in reply to that that
sometimes people loaned money and loaned securities."
"Yes, I think that is correct," Mr. Wahlberg said. "I think Mr. Roose-
velt is correct there. I think that was my answer."
"Well, just what did you mean by that?"
"Some money might have been lent to Mr. Fall."
But Mr. Wahlberg disclaimed all knowledge of any such loan; he said
that it might have been made, but that he did not know that such a loan
was made.
The next time Mr. Wahlberg testified, on January 26, 1924, he had
another explanation of the difference between what Mr. Roosevelt said he
heard him say and what he claimed he had said. He then stated that at
the time when he and Mr. Roosevelt were talking he had on his desk
checks for $68,000 made out to the order of Sam Hildreth, the manager of
Sinclair's Rancocas Stables, and that it was to these checks he had referred
in his conversation with Archie Roosevelt and not to checks for $68,000
to the manager Thus there had been another phonetic mis-
of Fall's farm.
understanding "the:
manager of Fall's farm" became "the manager of the
horse farm." Mr. G. T. Stanford, counsel for the Sinclair company, brought
out this information in his examination of Wahlberg:
"Mr. Wahlberg," Mr. Stanford asked, "at the time you had your con-
Mr. Roosevelt on or about Friday, January 18, did you have
versation with
in your possession or on your desk checks aggregating approximately
$68,000?"
"I did have on my desk checks for that amount," Mr. Wahlberg
answered. "I turning from Mr. Roosevelt for a moment and to my
recall
desk, and these checks were lying there waiting for a letter to be sent with
them, to be sent out to Mr. Hildreth. He is manager of Mr. Sinclair's
. . .
Rancocas farm, and the sight of the checks brought to my mind

stable at
a comparison between the horse racing man's situation and mine, and
that caused me to say to Mr. Roosevelt, 'Now, here are these salary
checks for $68,000 to the farm horse manager,' or 'the manager of the
horse farm,' I don't recall which, and evidently Mr. Roosevelt mis-
understood me and "
thought that I said, 'to the manager of Fall's farm.'
Mr. Stanford then offered for identification and for the record two checks,
one for $25,000 and one for $43,244.27, made out to the order of S. S.
Hildreth, and dated January 14, 1924. They totaled $68,244.27.
"Mr. Wahlberg," Chairman Lenroot asked, "you did not remember this
transaction when you were here before?"
"No, sir."
"When did you first remember it?"
"Tuesday night, I believe."
"When was it you testified? On Monday?"

"On Monday."
"What called it to your mind then?"
"Why, reviewing all the circumstances of the day, of the afternoon,
when we had the talk, it came to my mind very clearly because I recalled
exactly what I had in front of me and what I had said. I recalled the
substance and the spirit of what I had said, and had the feeling that it
is absolutely as I have stated it; that die conversation occurred in that
manner, and was caused by those checks, and that I said, 'the horse farm
manager' or 'the manager of die horse farm,' I am not sure which, or
something that could have been misunderstood to mean 'manager of

"
Fall's farm.'
"That is the way you think the misunderstanding occurred?"

"Yes, sir. And I said it somewhat in the way of contempt, or I would
not have called it 'horse farm.' I recall that very, very vividly."
"And the occasion for the remark was the disparity between what the
man on the horse farm was making and what you were making?"
"That is true."
Mr. Wahlberg told the committee that he had been dissatisfied for a
long time with his position and

his compensation as private secretary
to Harry Sinclair:
TEAPOT DOME 135
"Our relationship Mr. Sinclair's and mine is

quite formal," he said,
"and we very seldom discuss anything that does not need to be discussed.
And Mr. Sinclair does not tell me anything that he does not want me to
know. Besides, my situation has been somewhat unfortunate there. I felt
I have done about three men's work, and I have purposely avoided talking
to Mr. Sinclair, because I have been nervous and did not dare trust myself
to talk to him and disagree with him on the question of the compensation
for my work there."
At this second session with the committee Mr. Wahlberg added other
detailsconcerning the conversation in his office between himself and
Archie Roosevelt, and he indicated that both of them were bitter about
their employer, who had left suddenly for Europe that day. Wahlberg told
the committee that the conversation did not take place on Friday, January
18th, as previously statedby Mr. Roosevelt, but on Wednesday, January

16th, theday Harry Sinclair sailed on the S. S. Paris in the stateroom which
Archie Roosevelt had obtained for him through the influence of his brother
Kermit. The occasion for the conversation, Wahlberg testified, was that
Archie Roosevelt called him on the telephone to ask whether Mr. Sin-
clair's accommodations on the boat had been satisfactory. Wahlberg said
that he answered that they were very bad, and that he was afraid that that
would be held against him by Mr. Sinclair. Archie then said that he
would come up to his office and talk to him about it.
"He inquired of me what was my concern about the accommodations

for Mr. Sinclair," Wahlberg "I told him I was very sorry,
testified.
because would be a reflection on me, that I had given Mr. Sinclair

it
assurance he would get the good room. Mr. Roosevelt says, 'Tell him to
'
go to hell.' I said, 'I can not do that.' 'Well, he is an upstart anyway

"Who said this?" Chairman Lenroot asked.
"Mr. Roosevelt said, 'Well, he is an upstart anyway. What does he
expect?' . . . He
asked me what I thought Mr. Sinclair was going to
Europe answered probably on account of the turn in the investi-

for. I
gation occasioned by Mr. McLean's testimony in Florida. Mr. Roosevelt

said something about Mr. Sinclair running away. Then I think I said, 'I
believe he is
going to Russia some time or other, because we have a
contract pending there,' . . ,
.136 PRIVILEGED CHARACTERS
"
'Well,' Mr. Roosevelt said, 'if he does go to Russia and makes a
contract he will only turn
over to the Sinclair corporation [Hyva
it
Corporation] the same as he did the Mammoth Oil Co. stock.' And he
says, 'I am connected with that Russian petroleum corporation. My name
is attached to it. I think I will resign.' He says, 'What would you do?'
'Well,' I said, 'yes, decidedly. You
have your name, and you have your
future to think about, and I think I would.' 'Well,' he says, 'I am going
to speak to my brother Ted about it.'
"And I believe it was at that point I turned around to my desk, and
Ihad stopped talking about him and the fact that he was going to resign,
and I was talking about myself. The conversation with reference to the
checks you already know."
Mr. Wahlberg went on to say that he was worried because with the turn
was taking, he might be called on any day to
the Senate investigation
submit books and checks and explain things of which he did not have
the explanation.
Senator Walsh cross-examined Mr. Wahlberg carefully concerning this
change in his story from "six or eight cows" to "the manager of the horse
farm":
"Mr. Wahlberg," Senator Walsh said, "when you were here before you
thoughtit
quite likely that it was your talk about six to eight cows that
Mr. Roosevelt got confused with the $68,000?"
"That was the nearest explanation that I could offer at that time of how
it occurred," Mr. Wahlberg replied.
"Reflecting upon that you rather came to the conclusion that that was
an improbability, didn't you?"
"Yes, sir."
"That story would scarcely wash?"

"Nevertheless, we had had a conversation about the cows."
"I understand. You had talked about the cows?"
"Yes, sir." . . .
"Anyway, you conclude now that that is not the case? That really he
did not get it confused with cows, but he got it confused
six or eight
with these $68,000 checks to the manager of the horse farm?"

"That is how the confusion occurred."
TEAPOT DOME 137
"That is your present theory?"

"Yes, sir."
Mr. G. T. Stanford, for the Sinclair defense, took the witness and at-
tempted to establish that Sam Hildreth, who was known all over the
United States as one of the most famous trainers of race horses was "the
manager of the horse farm" in Wahlberg's mind. The word "trainer" did
not possess the same values for phonetic misunderstanding as the word
"manager" or "foreman."
At the conversation between Archie Roosevelt and G. D. Wahlberg
another secretary had been present for a time. Merritt Baldwin, Wahl-
berg's assistant, testified at the 1928 oil investigation that Archie Roose-
velt"had quite a few highballs" before he spoke with Wahlberg. The
checks for Hildreth were lying on Wahlberg's desk at the time, Mr.
Baldwin said, and he testified that he had remarked to Wahlberg:
"The chief signed this check, and I guess I had better shoot it out
to Sam Hildreth,' and he said, 'Go ahead.' I held it out and let Archie
see it. The check was for $68,000 to Sam Hildreth, which covered
$25,000 plus 10 per cent of the purses that was his contract on the
purses, and that brought it
up pretty heavy. Of course, Wahlberg was
great on this kind of stuff, and he figured that Hildreth was not entitled
to that from an economic point of view and he thought it was too much
money for he did not appear
Hildreth to get; to be happy about
Hildreth getting $68,000 for one year. He asked me about that and,
of course, told me that Roosevelt said this, that, or the other thing; and
I said, 'Well that is
my recollection of the affair.' I had the check, and
I put the check in the mail chute myself that night.
"You Mr. Baldwin added, "Wahlberg is a pretty sincere sort
see,"
of a person, and he was very much troubled that Archie should have
made these statements, and he said to me, 'Archie would not deliberately
tell a lie and it must have been Archie's
understanding of what took
place'; so I said, 'Maybe it was because you had a couple of drinks in
there?' He said, 'No; that did not have anything to do with it.' I just
told him my recollection of what took place, just to ease his conscience
and sethim right that Archie was incorrect."

"What was the attitude of Mr. Sinclair about the whole transaction?"
Senator Walsh asked Mr. Baldwin.
"Well, I do not know; he just laughed it of?; I mean he did not
seem to take it very seriously."
From Paris, Mr. Sinclair sent the Senate committee a long cable, stating
that hehad come to Europe on business only after he had been discharged
from further testimony by the committee, and he reiterated that neither
he nor any of his companies had ever "given Secretary Fall or any repre-
sentative of the Government any money or any consideration whatsoever
in connection with the Teapot Dome lease." He refused to turn over the
books of the Corporation, however, on the ground that the President
Hyva
of the United States had ordered legal proceedings to be instituted to
determine the question of fraud in the leases, proceedings which, he
cabled, he personallywelcomed, and that he alone was the proper party
concerning any records which might be pertinent. "Any other
to testify
procedure," Harry Sinclair concluded, "it seems to me, is entirely unfair

and not in accord with the American idea of a square deal."
The sensational testimony which had been taken by Senator Walsh
during the month of January had aroused the interest of the country. At
first there to regard the Teapot Dome investigation
had been a tendency
as a mere designed to gain votes for the Democrats, but
political inquiry
as Senator Walsh gradually brought out facts and circumstances it de-
veloped that the situation was much more serious than even the Demo-
crats had suspected.
The next important witness was Edward L. Doheny, who had testified
previously to the purity

of his relations with Fall, but who was now con-
strained to admit that money had passed between them, however pure his
intention. Doheny met Fall in New Orleans, after McLean's testimony
in Palm Beach. Colonel Zevely also met Fall there. But now there was a
tendency on the part of the Doheny faction to keep strictly separate from
the Sinclair group. If there was to be any hanging, Doheny seemed to
prefer to take his chances alone rather than to join forces by advice of
counsel. All the two groups had in common was Fall, and perhaps each
knew him well enough to realize that there was no telling how much and
by what means he had got from the other.

TEAPOT DOME 139
There was a conference in the St. Charles Hotel in New Orleans about
eight o'clock Sunday night, January 20th. At that moment Archie Roose-
velt and were in Washington preparing to tell all Archie
his brother
thought he had heard. Those present in Fall's room at the St. Charles
Hotel were Fall, Doheny, Gavin McNab, Doheny's lawyer, and W. A.
Hawkins, Fall's law partner. Colonel Zevely was anxious to join the con-
ference, but Mr. Doheny, on advice of Mr. McNab, refused to see him.
Mr. McNab testified later that when he and Doheny entered Fall's rooms,
Doheny said to Fall: "Why didn't you do as I told you to in the beginning
when these things started tell all about this thing? You remember that
I told you to do so." It would be interesting to know whether in the early
hours of Monday morning Colonel Zevely received a long distance tele-
phone call in New Orleans from G. D. Wahlberg, who was worrying in

New York after he had been told that he must come to Washington to
testify. It was obvious that now Doheny had to tell the Senate committee
of his "loan" to Fall. On January 24, 1924, he testified again before the
committee.
Mr. Doheny told a peculiar tale. He began by informing the committee
in a belated confession that on November 30, 1921, he had loaned Albert
B. Fall $100,000 on Fall's promissory note, in order to enable Fall to pur-
chase a ranch in New Mexico. Fall's desire to acquire the Harris ranch,
adjoining his own property, Mr. Doheny told the committee, "was a hope
of his amounting to an obsession," and he added that when Fall had
failed to raise the necessary money out of his Mexican mine holdings, he
had felt "that he was a victim of an untoward Doheny and Fall had
fate."
been friends for thirty years, and, Doheny testified, they had camped
together, mined together and worried about the Indians together in New
Mexico; he felt, he said, that when one had mined, camped and worried
about the Indians with a man, one naturally lent him $100,000.
"We both worked in the same mining district in New Mexico in

1885," Mr. Doheny testified. "In those days the Indian troubles were still
on the country, and we were bound together by the same ties that men
usually are, especially after they leave camp where they have lived under
trying circumstances and conditions. Sometimes when men are in camp
where their conditions are hard, and where the struggle for a living is
precarious and the danger from Indians is bad, they do not have such
a very great feeling for each other; but after they leave there they become
warmer friends by reason of having associated under the same conditions.
"Furthermore, I studied law at the same time that Senator Fall did.
I practiced for a short time in the same district that he did. I watched
his career allthrough the development of it, as district attorney, United
States judge, and United States Senator. I was very much interested in
him on account of our old associations. I, myself, followed prospecting.
I was fortunate and accumulated quite a large amount of money.
Senator Fall was unfortunate, and when he was telling me about his
misfortunes, and at a it was
time when
coupled with his misfortune of
having to bear the two children two grown children I felt
loss of his
gready in sympathy with him. He was telling me about his hope of

acquiring this ranch, and being of an impulsive nature I said to him,
'Whenever you need some money to pay for that ranch I will lend
"
it to you.'
It was singular that one day after Secretary Fall had received a letter
from his old friend Doheny offering to construct oil tanks for the Navy
at Pearl Harbor, Hawaii, in return for oil from the naval reserves in
California, Secretary Fall should need the money to pay for that ranch,
and that two days after Fall had received Doheny 's letter about the Navy's
oil, Doheny should have sent his own son to Washington with $100,000 in
United States currency in a satchel. Thereafter, Mr. Fall, too, may have
remembered the old days when he and Doheny had fought Indians to-
gether, studied law together
and mined and camped together; he, too,
had watched his old friend's career with interest, and saw that he had
prospered; being likewise of an impulsive nature,
Mr. Fall, who had
acquired control of the Navy's oil lands, was quite willing to turn over
the nation's property to his old friend of prospecting days.
A newspaper in New Mexico published the following parody, entitled
"The Golden Fleece," which, perhaps, sums up the situation:
"Abou Dough Heenie (may his tribe increase)!
Awoke one night from a deep dream of peace

And saw within the moonlight in his room,
Making it rich and like a lily in bloom,
TEAPOT DOME 141
A Senator writing in a book of gold.

Enormous wealth had made Dough Heenie bold-
And to the Senator in his room he said:

'What writest thou?' The statesman raised his head,
And with a look which made Abou boil
Answered, 'The names of those who seek for oil!'

'And is mine one?' said Abou. 'We will see!'
Replied the Senator; but Abou Dough cheerily
Responded in a still and softer tone,

'Write me as one who loves to make a loan.'
The Senator wrote and vanished. The next day

He came again it looked like Caraway
And showed the names of those whom Fall liked best,
And lo! Dough Heenie's name led all the rest."
Mr. Doheny insisted that his loan to Fall and the leases his company
received were two entirely separate transactions and had nothing what-
ever to do with each other. Then Mr. Doheny 's attorney read a prepared
statement offering to turn back the naval oil reserves to the Government,
if a board of experts appointed by the President of the United States
should decide that the contracts made by Fall were not "wise, desirable
and advantageous for the Government." The offer, however, was a little
late, for the courts of the United States had now to decide whether the
leases were collusive and fraudulent.
"How did you come to make this remittance to Senator Fall in cash?"
Senator Walsh asked Mr. Doheny.
"That it just what I said a moment ago. I do not remember whether
it was the result of his request or whether it was my own idea of
sending it to him pay for the property. But he was going to

in cash to
use down
it in NewMexico, and I thought perhaps well, I do not know
exactly how that was, as my memory is not good on that point."
Senator Walsh inquired whether the method Doheny had used

of sending
the cash to Fall in a satchel with his own
son as messenger, after the bills
had been drawn out of the son's account in a New York bank, was not
unusual. Mr. Doheny could find nothing unusual in the procedure. He
said that he had been used to doing business in Mexico where cash was
often used. "I was not speaking of Mexico," Senator Walsh reminded him.
"I dare say a remittance to Mexico would require that it be made in
essentially different way than in this country. But I am speaking of a

remittance from New York to Washington." But Mr. Doheny had no
further explanation to offer of his unusual use of cash.
Mr. Doheny also testified that to lend an old friend like Fall $100,000
"was a bagatelle was no more than $25 or $50 perhaps to

to me; that it
the ordinary individual. Certainly a loan of $25 or $50 from one individual
to another would not be considered at all extraordinary, and a loan of
$100,000 from me to Mr. Fall is no more extraordinary."
"I am examining you," said Senator Lenroot, "concerning your own
statement, that by reason of your accommodation to Mr. Fall you think

that had he a discretion to exercise he might have been' more likely to
exercise it in your favor."
"Why, I admit that," Mr. Doheny said.
"Very well."
"I don't think he is more than human," Mr. Doheny remarked.
Mr. Doheny also admitted on cross-examination that his company had
got the leases to the naval oil reserve from Secretary Fall without com-
petitive bidding, and that he expected to make $100,000,000 out of his leases,
though other oilmen, he said, were not so confident as he of their

potential value. His partner and brother-in-law, Mr. Anderson, Doheny
testified, was against the idea of the lease, but he himself wanted to
help out Admiral Robison and the Navy. "There is nothing extraordinary
about me," Mr. Doheny told Senator Walsh. "I am just an ordinary,
old-time, impulsive, irresponsible, improvident sort of a prospector, and
I do not pretendkeep track of the details of our business."
to
When Doheny had first testified before the Senate committee on

December 3rd, he had said nothing of a loan to Secretary Fall. He had
then told the committee that he felt very badly about the finger of
suspicion which was being pointed at his old friend, Fall, that in fact
he was "greatly outraged about it." Senator Lenroot wanted to know, on

TEAPOT DOME 143
January 24th, why, in view of his outraged feelings, Doheny had not
told the committee the facts on December 3rd. Mr. Doheny replied that
he felt that it was Fall's business to tell the committee of the loan, that
after his first testimony he had met Fall in New York and urged him to do
so, and then he added that "it was not pertinent to any question I had
been asked all the wav through."
"'I refer," Senator Walsh said, "to the letter sent to the committee by
Senator Fall in which he stated to the committee that he got the money
from Edward McLean."
"Yes," Mr.
Doheny remarked, "I read that letter."
"Now, where were you at the time that you learned of the com-
"
munication ?
"I was in California."
"Mr. Doheny, why did you not promptly advise this committee that
that was not correct?"
"Well, that is a difficult question to answer, I will say, Senator. I was

willing to await developments and see what they were going to develop."
"And you did wait, Mr. Doheny?"
"I did wait; yes, sir."
"Until the developments resulting from the taking of the testimony
of Mr. McLean in Florida."
"Yes, sir."
"Well, you appreciate now that that was rather dangerous, do you not?"
"Rather dangerous for whom?"
"For both of you."
"I don't see how it can be."
"Perhaps did not express myself properly," Senator Walsh said. "You
I
appreciate that a greater degree of suspicion attaches to the transaction

by reason of that evidence?"
"Sure."
"I would like to have you tell us, then, in that situation of affairs,
just what developments you were awaiting, Mr. Doheny, and just why
it was that you did not come forward at that time and tell the com-
mittee about it?"
"Well, I think that I came forward pretty promptly. I am here, and

this is still
early in January, and that occurred in the holidays. I don't
know whether I read it the day it was published or not. I know I was
not taking on any concern of what happened here during the holidays.
"
I was with
my family and
"Mr. Doheny," Senator Walsh interrupted, "you doubtless heard as
well that Mr. McLean had sent a communication to this committee in
which he told the committee that he had loaned this money?"
"I heard that also."
"And that this committee was being deceived by both Mr. McLean
and Senator Fall concerning the origin of those funds?"
"It was not my business to identify the money that I loaned to Senator
might well be he had borrowed some money from Mr. McLean.

Fall. It
He had talked to me about borrowing money from Mr. McLean. 'I

didn't know but he did, because there was more than $100,000 ex-
pended on the ranch. I came forward prompdy."
The committee, however, did not feel that Mr. Doheny had come for-
ward promptly to tell the truth, and even after he testified the second
time, he had not told all. On February 1, 1924, Mr. Doheny was examined
a third time by the Senate committee. This time he had with him the note
he had received from Secretary Fall in return for his $100,000. But the
note was torn into two parts, one the note proper, and the other the sig-
nature of Mr. Fall. He explained that in December, 1921, he and Mrs.
Doheny were leaving New York for
California, and that as he was going
through his papers, he came across Fall's note. Mr. Doheny testified that
he thought at the time that in case he and his wife were destroyed in a
train wreck on the way to California, he would not like to have Fall
bothered by his estate for the money, and so he tore the signature off and
left it in New York, while the note itself he kept in his
pocketbook in his
inside pocket. When he had been before the committee the second time,
he had this mutilated note in his pocket, but he had not presented it to the
committee when the Senators had asked to see it. When he was asked why
he had not told the committee about the note in his pocket on January
24th,Mr. Doheny said: "I thought that the wisest thing to do was to
produce the entire note, and not produce a part of the note, which might
add to the suspicions which you folks already entertain, and which the
world entertains, that this was a crooked transaction."
TEAPOT DOME 145
"Well, if you were asked by any member of the committee to tell all
about this loan and that note, then you did not tell the whole truth,
did you?" Senator Pittman asked Mr. Doheny.
"Are you trying to get me to admit that I lied about it?" Mr. Doheny
asked. "Because there is no use; if I lied about it, I lied about it. I don't
need to admit it to
you. It is in the evidence, whatever I said, and my
admitting it doesn't make any difference in the testimony at all."
"No," Senator Pittman remarked, "I am trying to see if you are as
innocent as you are pretending to be."
Then Mr. Doheny and Senator Pittman got into a discussion as to

whether or not Mr. Doheny was a liar. Senator Pittman pointed out that
if he had not wanted to be considered such, he could have reached into his
pocket and produced the torn half of the note without the signature.
To have done that, of course, would have been to confess to the commit-
tee that Fall's note was not negotiable, and it would have added to the
suspicions which those and the world already entertained that the
folks
transaction was crooked. Mr. Doheny blandly told the committee that
he had not regarded the note as a note without its signature, and there-
forehad said nothing about it.
Mr. Doheny was asked how he expected that the note with the signa-
ture torn off could have been collected from Mr. Fall. He answered
that in the event that he and his wife were killed in a railroad wreck,
"
their son could have gone to Mr. Fall and said: 'The note you gave to
my father was lost when they were in that wreck, and we want a new
note for it,' and we believed that Fall would give him a <new note, and
in case we were all killed in a wreck, why of course it would have been
a legacy to him."
"Could you not have provided in your will that this should be con-
sidered as a legacy to Senator Fall?" Senator Pittman asked.
"It might have been done in a dozen different ways, and every one
better than this, but this is the one I adopted, Senator Pittman.
A few moments before Mr. Doheny had burst out with: "What dif-
ference does it make now if I could have thought of any other way of
doing it? I did it this way. This thing is done." Mr. Doheny also admitted
that he had not listed Fall's note as an asset in his income tax returns. All
the circumstances seemed to indicate that Mr. Doheny regarded his pay-
ment to Fall as more in the nature of a gift than a loan.

Another circumstance which Mr. Doheny had kept from the committee
on the occasion of his second testimony, and which had to be dragged
out of him at his third examination, was that he had borrowed the $100,-
000 to pay Fall from his son and had paid his son in two separate checks,
thus making it harder for investigators to trace the payment to Fall if
they should try to do so. When asked why he had not told the committee
about this element in the transaction, Mr. Doheny said that it was be-
cause he wasn't asked. Senator Lenroot reminded him that he had come
before the committee with a voluntary statement which was supposed
to be the truth, the whole truth and nothing but the truth.
Before finishing his final testimony before the Senate committee, Mr.
Doheny tried to shield Fall from the charge of lying when he said that
McLean had lent him the $100,000:
"Mr. Doheny," Chairman Lenroot asked, "did you ever tell Mr. Fall
what you had done with reference to mutilating this note?"

"Yes; I told Mr. Fall about it."
"When?"
"Last December, when I urged him to come in and tell about the
note. I told him that I had torn the note in two, in case it should be
used to injure him. And I want to say right now, and I don't mind
saying it under oath, without any question being put to me, that I
think it was poor Fall's attempt to screen me that caused him, that note
being mutilated, to tell that white lie, or black lie, whichever you call
it, about getting the money from McLean, and he told it because he
thought that might screen me until I could get the note together. He
knew I only had a part of the note."
By the time Senator Walsh and the other members of the committee
had got through with Mr. Doheny, the country was as suspicious as the
Senators that Mr. Fall had received money from Mr. Doheny in return
for leases to the Navy's oil lands. It was now obvious that Fall had profited
by his position as Secretary of the Interior, if

only in the form of so-called
TEAPOT DOME 147
loans.But the country was prosperous, Coolidge was in the White House,
and the national slogan was, "Don't Rock the Boat." Senator Walsh, who
had done such able work in dragging the truth out of evasive and unwill-
ing witnesses, was considered in many parts of the country as a malicious
muckraker with political ambitions. The San Francisco Chronicle ques-
tioned the importance of his revelations; a St. Louis newspaper called
him a hyena clawing into the grave of President Harding. While Senator
Walsh was delivering his speech on the floor of the Senate on February
8, 1924, outlining the details of the oil scandals thus far revealed and rec-
ommending that President Coolidge should demand at once the resigna-

tion of Secretary of the Navy Denby, there were only five Republican
Senators who remained in the chamber to listen to him, and they were
progressive Republicans who were not in the good graces of their own
party. Senator Walsh's comment on Denby was: "Stupidity is not a
ground for impeachment, so far as I have been able to discover." He there-

fore recommended that Denby's resignation should be demanded, since
he could not be impeached. On February llth the Senate voted by a vote
of 47 to 34 to ask President Coolidge to demand Denby's resignation.
Coolidge denied the Senate's request, but a week later Denby resigned
still insisting on the legality and
voluntarily, propriety of the leases.
President Coolidge accepted the resignation avidly.
Fall was under subpoena to appear before the Senate committee again
after the McLean testimony, the Roosevelt and Wahlberg testimony and
Doheny's belated admissions. On January day Fall was sup-
29, 1924, the
posed to appear to explain his financial transactions and their connection

with the oil leases his attorney, Levi Cooke, appeared before the com-
mittee and read a statement from Dr. John Wharton, Dr. Henry P.
Parker, Dr. William Mercer Sprigg and Dr. Caryl Burbank:
The undersigned have this day carefully examined Hon. A. B. Fall.

We find that it would be detrimental to Mr. Fall's health for him to
leave his residence in his present condition.
We we see no objection from a medical standpoint
further state that
to Mr. being examined by the Senate committee at his residence.
Fall's
We recommend that the examination be conducted at the earliest

convenient moment.
Mr. Fall was then in Washington, though for a very sick man he had
done a great deal of traveling about the country within the past month,
going from New Mexico to Washington, to New York, to Atlantic City,
to Washington, to Palm Beach, to New Orleans and to Washington
again. In the ensuing discussion as to whether the committee should
go to Fall or Fall to the committee, Senator Walsh said: "I should dis-
like very much to intrude myself in Senator Fall's sickroom." Senator
Walsh was probably thinking of the occasion when Senator Fall had
been a member of the Senatorial committee which went into President
Wilson's sickroom to ascertain his condition. It was reported at the time
that Senator Fall had bent over the bed and said unctuously to the sick
I am praying for
President: "Mr. President, you." And it was also re-
ported at the time that Mr. Wilson had said it was the only time in his
life when he had felt like smashing a man in the face.
All during his difficulties Fall used his health as an excuse whenever
possible, and he tried in every way to put the Senate and the courts in
the position before the public of hounding a dying man to the grave.
Senator Walsh asked Fall's attorney when Mr. Fall would be able to
appear before the committee. Mr. Cooke replied that from his own
observation Fall was "on the verge of a nervous breakdown." "He has
been under great strain for the past few weeks"; he added, "he has
traveled extensively; he has been put to great physical strain as well as
mental concern, and I gather from the statements which the physicians
make to me that delay in examination adds to the difficulty of his posi-
tion as a matter of health." Mr. Cooke also requested that if Fall's physi-
cianswere to be examined by the committee concerning Fall's health that

they be examined privately in executive session, as "the question of a
person's health is a matter that can be well considered privately." The
Senate committee decided to send three physicians of its own to Fall's sick-
bed instead of questioning him in the privacy of his room and thus gain-
ing him the sentimental sympathy of a portion of the public. The com-
mittee's physicians reported:
Mr. Fall shows the effect of severe nervous strain, but his general
appearance is
fairly good. He is somewhat anemic looking and his
TEAPOT DOME 149
muscles are flabby. The radials are soft, the pulse 92 to the minute and
regular.The blood pressure is 170 systolic, 90 diastolic.

The heart is normal as to size and sounds. The lungs are apparently
normal. The abdomen is
negative except for slight tenderness in the
gall-bladder region.
We are told by the attending physicians that there is no evidence
of disease of the kidneys.
He is in an anxiety state, but there is no evidence of organic nervous
disease and no psychotic symptoms.
In our opinion Mr. Fall is in condition to appear before the com-
mittee.
THOMAS A. CLAYTOR.
DANIEL D. V. STUART.
STERLING RUFFIN.
Dr. Sterling Ruffin had been one of President Wilson's physicians.

The committee then ordered a subpoena to be issued for Fall, calling for
his appearance before the committee at 10 o'clock the following morning.
Fall appeared, and at the first Walsh put to him, he
question Senator
read a prepared statement declining to answer on the grounds of the
technicality that the Senate resolution under which the committee was
sittingwas no longer in operation, having expired with the end of the

Sixty-eighth Congress, and on the grounds that his answers might tend
to incriminate him, inasmuch as Congress had ordered the President to
institute criminal and civil suits in connection with the leases. Senator
Caraway had introduced Senate Resolution 54 on January 7th, declar-

ing that it appeared from evidence taken before the Committee on Public
Lands that the leases to Teapot Dome and the California naval reserve
"were executed under circumstances indicating fraud and corruption." It
was not until after the McLean testimony, the Roosevelt and Wahlberg
testimony and the Doheny testimony, however, that the Senate passed
the resolution unanimously on January 31st and it was concurred in by
the House.
The committee adjourned answer questions on
after Fall's refusal to
February2, 1924, and, when met on the following Tuesday, February

it
5th, it had additional authority from the Senate to sit, but Fall still in-
sistedon his constitutional rights not to answer on the grounds that his
answers might tend to incriminate him. His subpoena was vacated rather
than grant him immunity from prosecution.
After Harry Sinclair returned from Europe, he, too, was subpoenaed
again by the Senate committee. He appeared on March 21, 1924, ac-

companied by his lawyer, Martin W. Littleton, who argued that the
committee had no further authority to continue its investigation be-
cause of the fact that the Senate had passed its resolution calling for crim-
inal and civil suits. Mr. Littleton also argued that the committee had no
right to exercise judicial powers and therefore could not compel witnesses
to tell them anything if the witness declined to answer. He maintained
that since his client was a defendant in a suit brought by the United
States, he could not answer without incriminating himself. The Senate
committee denied Mr. Littleton's contention that it had no authority to
investigate and voted by advice of counsel, de-

to call Sinclair. Sinclair,
clined to answer all questions put to him by Senator Walsh. At the com-
mittee session of March 24, 1924, Mr. Sinclair was cited for contempt
of the Senate and a few days later a grand jury indicted him for contempt.
In their arguments on the contempt charge Sinclair's lawyers, Martin W.
Littleton, J. W. Zevely, George P. Hoover and G. T. Stanford quoted
Patrick Henry, George Washington, Alexander Hamilton, George Mason
and James Madison on usurpation of official powers.
The stockholders of the Sinclair Consolidated Oil Corporation refused
to see anything wrong in what Sinclair had done, and on May 23, 1924,
they gave Harry Sinclair a vote of confidence for the manner in which
he had negotiated the Teapot Dome lease. After the resolution of con-
fidence was passed, Mr. Sinclair "admitted" that "the government did get
a little better of the contract." "Nevertheless," he told his stockholders,
"I made it and am going to carry it out." In his speech to his stockholders
Mr. Sinclair expressed his appreciation of their confidence and declared
the work of the Senate investigating committee to be "unfair and un-
American." Mr. Sinclair had expressed his attitude toward the Senate
investigation in March, 1924, to Clarence W. Barren: "Everything is now
a matter of fashion. Sometimes everything is exposed and sometimes you
can't see their ankles. The government," he added, "hasn't a Chinaman's
TEAPOT DOME 151
chance to cancel the Teapot Dome lease. The only mistake Doheny made
was to offer to cancel the lease."
On June 30, 1924, Fall, Sinclair, Doheny and Doheny 's son were in-
dicted by a special United States grand jury for conspiracy and bribery.
WHEN the first Teapot Dome investigation ended in the spring of 1924,
the government knew only that Fall had leased the naval reserves to his
friends Sinclair and Doheny without competitive bidding, that he had
spent more money in 1922 than could be accounted for even by the Doheny
payment to him of $100,000, and that Doheny had paid him $100,000
which Mr. Doheny insisted was a friendly loan. The leases had been
denounced in the Senate as fraudulent and were now to be considered
by the courts, and some of the principals were under indictment.
Owen Roberts and Atlee Pomerene, appointed by President Coolidge
J.
to handle the government's case in the effort to get back the naval oil
reserves and to punish the alleged conspirators, went to work promptly.

During the summer of 1924, while the political orators were using some
of the material unearthed by Senator Walsh in the futile effort to defeat
Coolidge and the Republican Party, Mr. Roberts and Mr. Pomerene were
quietly examining Fall's bank accounts. They visited the banks at which
Fall had had accounts and found that 3 /2 per cent Liberty bonds had
l
been deposited to his account at the First National Bank of Pueblo, Colo-
rado, and that some of them had found their way into accounts of his at
a bank in New Mexico and bank in El Paso, Texas. The attor-
at another
neys took the serial numbers of the Liberty bonds and began to trace
their origin. The bonds had been deposited in the First National Bank of
Pueblo by M. T. Everhart, Fall's son-in-law, and all that could be learned
was that Everhart had been in the East before bringing the bonds
at first
west for deposit. After diligent search Roberts and Pomerene learned
that along with other Liberty bonds,
bonds bearing these particular serial
numbers had been purchased by the New York branch of the Dominion
Bank of Canada and had been delivered to H. S. Osier, barrister-at-law
of Toronto.
The government attorneys went to Canada to call on Mr. Osier, but
they found him reluctant to talk. He mentioned, however, that he had
purchased the bonds in question for a Continental Trading Company,
Ltd., ofwhich he was the president. The government attorneys had never
heard of this one, but they did not let Osier know that. Osier made a
few careful remarks about the business of the Continental Trading Com-
pany, and said that it had dealt in oil in New York. He also mentioned
that Colonel A. E. Humphreys had had something to do with the trans-
action. The attorneys then went to see Colonel Humphreys, who told
them of the conference at the Vanderbilt Hotel in New York on Novem-
ber 17, 1921, at which he had sold the mysterious Continental Trading
Company 33,333,333 Vs barrels of oil, and where he had made his agree-
ments with Sinclair, Stewart, Blackmer and O'Neil.
Meanwhile, those who had purchased Cclonel Humphreys's oil at the
Vanderbilt Hotel and resold it to their own companies at a potential
profit to themselves of more than $8,000,000 had begun to get worried.

On May 26, 1923, the contract of the Continental Trading Company, Ltd.,
with the Humphreys oil company was assigned to the Sinclair company
and the Prairie company directly in consideration of a payment of $400,-
000, and the affairs of the Continental Trading Company, Ltd., were
wound up. The four men thus gave up a potential profit of about $5,000,-
000. Liberty bonds worth $3,080,000 had already been purchased for the
Continental Trading Company and distributed to Sinclair, Stewart, Black-
mer and O'Neil by the time the company was liquidated. The books and
records of the Continental Trading Company, Ltd.,were destroyed, and
its charter returned to the State Department at Ottawa. Mr. Osier later
insisted that this was done only because he was moving his law office,
and as the company's functions had ceased he saw no reason for keep-
ing its records. The last packages of Liberty bonds were delivered by
Osier to Sinclair, Stewart, Blackmer and O'Neil in June, 1923.
The Senate committee appointed to investigate the leases to naval
oil reserves began its sessions in October, 1923. In September, 1923, James
TEAPOT DOME 153
O'Neil, one of the most prominent figures in the oil world, suddenly
resigned his position as president of the Prairie Oil & Gas Company.
In December, 1923, after the Senate committee had begun to get informa-
tion on the activities of Fall, Sinclair and Doheny, H. M. Blackmer, an
equally prominent figure in the oil world, resigned his position as presi-
dent of the Midwest Refining Company. In January, 1924, when Senator
Walsh had got on the trail of Fall's sudden wealth, Colonel Robert W.
Stewart, James E. O'Neil and H. M. Blackmer stopped cashing the cou-
pons on the 3 /2 per cent Liberty bonds which Mr. Osier had given
l
them. O'Neil and Blackmer left for Europe in February, 1924, and re-
mained there for many years far from Senate subpoena servers.
The government bonds pur-

attorneys, having the information that
chased for the mysterious Continental Trading Company, Ltd., had found
their way into the bank accounts of Secretary Fall, tried their best to
find out more about the Continental Trading Company. At the trial
of Fall and United States govern-

Sinclair for conspiracy to defraud the
ment, which was held in Cheyenne, Wyoming, in September, 1924, an

attempt was made to get Osier to testify concerning the company of which
he was the president, but he refused to disclose the confidential relation-
ship between attorney and client. Application was then made to the
Canadian courts to compel him to testify, and it was ruled that he must
testify. But in the meantime Mr. Osier had remembered a pressing engage-
ment to hunt lions in Africa, and he refused to return to Canada. He re-
mained abroad and resisted all attempts to get him to testify, or to pay
an income tax on the $60,000 he had received as his commission in the
Continental transaction. The United States government sent officers to
France to take depositions from Blackmer and O'Neil, but they declined
to answer questions, and by French law they could not be compelled
to do so.
On March 9, 1925, the government openedits suit at Cheyenne,
Wyoming, Teapot Dome. Meanwhile, in Octo-

for return of the lease to
ber, 1924, suit to recover the California reserve from Doheny had been
started at Los Angeles. When the Teapot Dome trial began, an effort was
made to subpoena Colonel Stewart, in order that the
government might
find out somethingfrom him about the Continental Trading Company.
But Colonel Stewart had pressing business at the moment in South
America and Mexico and could not see his way clear to returning to
the United States in time for the trial. John D. Rockefeller, Jr., whose
interests owned about 15 per cent of the stock of the Standard Oil Com-
pany of Indiana, of which Stewart was the head, sent Colonel Stewart
a cablegram urging him to return to the United States and testify. When
Colonel Stewart finally did return to the United States at his convenience,
he met Mr. Rockefeller and expressed considerable resentment at the
latter's interference and the implication he felt was in Rockefeller's tele-
gram that Stewart was absenting himself from testimony.

At the trial in Cheyenne, Judge Kennedy refused the government's re-
quest for a continuance of the trial until Osier could be found in South
Africa. Since Sinclair was under indictment, he could not be compelled
to testify against himself concerning the Continental Trading Company;
the other participants, as we have seen, had gone abroad. Judge Kennedy
dismissed the government's suit to break the Teapot Dome lease, and this
first legal skirmish ended in victory for Fall and Sinclair, with the gov-
ernment knowing nothing more about the purpose and activities of

the Continental Trading Company, Ltd.
The government had better luck in its suit against the Doheny company
at Los Angeles. Judge Paul J. McCormick decided in the United States
District Court of California: "That the payment of $100,000 by Edward
L. Doheny to Albert B. Fall, under the circumstances under which said
payment was made in this case, was contra bonos mores and against
public policy." It constituted, Judge McCormick said, a fraud and made
void all contracts between the government and the Pan-American
Petroleum & Transport Company for these transactions.
In May, 1925, while the government's suit to recover Teapot Dome
was still going on, James E. O'Neil came secretly to Canada. In the
previous November, Mr. C. H. Kountz, a vice-president of the Prairie
Pipe Line Company, who had been O'Neil's secretary, had visited him
at the home O'Neil had established in the Villa San Antonio at Cannes,
France. When Mr. Kountz returned to the United States, he told Mr.
W. S. Fitzpatrick, chairman of the board of the Prairie Oil & Gas Com-
pany, that Mr. O'Neil wanted to see him about something personal. In
May, 1925, Mr. O'Neil arrived at Montreal and sent Mr. Fitzpatrick a
telegram asking him to meet him there. Mr. Fitzpatrick went to Mon-
TEAPOT DOME 155
treal, accompanied by Mr. Kountz and Judge Flannelly, general counsel

of the Prairie Oil & Gas Company.
Mr. O'Neil told the three officials of his former company that he pos-
sessed a share of the profits of the Continental Trading Company, that
he had kept that share intact, except for some coupons on the bonds
which had been cashed, "by some inadvertence or some slip." Mr. O'Neil
had not made out an income tax return for these bonds, "because," Mr.
Fitzpatrick testified later, "he did not believe it was his money and did
not believe it belonged to him, and he wanted to make it right." Mr.
O'Neil also told Mr. Fitzpatrick that the doctors had given him eighteen
months to two years at most to live, "and he seemed to believe it, and
he wanted matter righted before the end came." But there was one
this
thing Mr. O'Neil wished to be sure about, and that was that the Prairie
Oil & Gas Company would do nothing with the Liberty bonds which
would embarrass his friend Harry Sinclair, who was then on trial. Mr.
Fitzpatrick agreed that the Prairie Oil & Gas Company would not cash
the Liberty bonds at present, and then Mr. O'Neil arranged for Mr.
Fitzpatrick and Mr. Kountz to go to New
York and get from his son,
Wayne O'Neil, the bonds O'Neil had received from Osier and turn them
over to the Prairie company, where he felt, belatedly, that they belonged.
Mr. Fitzpatrick testified later before the Senate committee:
"I asked Mr. O'Neil at that time when he made that request if the
Teapot Dome was connected with this matter, and he raised his hand
and said he would swear to God he never knew anything about Teapot
Dome, and that it had no connection whatever so far as he knew with
the Continental Trading Co."
Mr. O'Neil probably knew, since he was so anxious not to embarrass

his friend, Harry Sinclair, that Sinclair had given Fall some of the
Liberty bonds he had received as his share of the Continental deal. He
may also have known, what very few people knew at the time and what
the country only learned a few years later, that Mr. Sinclair had also
given some of these Liberty bonds to Will H. Hays to help pay off the
huge deficit which the Republican Party had contracted in the expensive
campaign to elect Warren G. Harding President of the United States.
At any rate, Mr. O'Neil was worried, and he wanted to be rid of his
Liberty bonds as fast as possible, what with Senate investigations into

oil deals and criminal and civil trials going on.
Mr. Fitzpatrick received from O'Neil's son about $800,000 in Liberty

bonds and took them back to Independence, Kansas, the home of the
Prairie Oil & Gas Company. He meeting of the directors of the
called a
company, told them of the two days he had spent in Montreal with
their former president, that he had agreed to accept the bonds from O'Neil
in settlement of any claim against him by the company, and that he had
assured O'Neil that if the government claimed an income tax on the
bonds, the Prairie company would

either pay the government the tax or
defend any Mr. Fitzpatrick then turned the bonds over to

suit for taxes.
the treasurer of the Prairie company and took a receipt for them. Mr.
O'Neil went back to his Villa San Antonio at Cannes, where he remained,
an exile from the United States, until he died on August 24, 1931. He was
blind, and it was said that in his last years he was "wrapped up in the
church."
The Prairie Oil & Gas Company did not cash the coupons on the
Liberty bonds, because, Mr. Fitzpatrick told Senator Walsh, he had
promised Mr. O'Neil that they would not embarrass anybody. The com-
pany, Mr. Fitzpatrick testified, "were very loyal to Mr. O'Neil. Mr. Kountz
was to be his successor, and loved him like you love your wife." When
Senator Bratton asked Mr. Fitzpatrick why the company had failed to
cash the coupons on the bonds, Mr. Fitzpatrick answered:
"I presume that the reason they have not was because they did not
want to volunteer any information to the public that might be dragged
into this controversy, to be perfectly frank with you. We all loved
Mr. O'Neil and love him yet and I would do as much for Mr. O'Neil
he made all of us, brought us up and gave us the positions we now
have, he taught us the business and this is the only thing that anyone
of us ever knew or ever heard of in connection with him that might
be questioned and we love him and will do as much for him, all of us,
as we would do for our own family."
Senator Bratton asked Mr. Fitzpatrick what he and Mr. O'Neil had
talked about during their two days' visit to Canada. "Well," Mr. Fitz-
TEAPOT DOME 157
his health but there was

patrick answered, "we talked a good deal about
not much else said about this particular transaction, this particular matter.
He showed a disposition not to talk about the details of this matter, and
I certainly had a disposition not to want to know anything more about
it than I had to."
In July, 1926, more than a year after his friend James O'Neil had made
restitution of the Liberty bonds he had received from Osier, H. M. Black-
mer also made a trip from France to Canada. Myron K. Blackmer, his
son, who had visited his father in Paris in 1926, told the Senate com-
mittee in 1928: "He told me, when I saw him in Paris, that he thought
that hewould make frequent visits to the United States, but he thought
he would live in Paris. He told me that he liked it there." Mr. Blackmer
did not make frequent visits to the United States, but he did arrive in
Canada in July, 1926.
Mr. Blackmer had requested Karl C. Schuyler, the Denver attorney
who had represented Leo Stack in the negotiations with Sinclair, to meet
him at the Mount Royal Hotel in Montreal. Mr. Schuyler and Mr. Black-
mer had been acquainted since childhood. In November, 1925, one of
Mr. Blackmer's attorneys, George E. Holmes, had told Schuyler that he
had some of Mr. Blackmer's papers in a safe deposit box at the Equitable
Trust Company in New York, that he preferred that the custody of the
papers should be in the names of three attorneys rather than one, in case
of absence, incapacity or death of one of them, and Mr. Holmes asked
Mr. Schuyler to serve along with himself and George Gordon Battle as
custodian of the papers. Schuyler had consented. Then in July, 1926, when
he went to see Blackmer in Montreal, Blackmer told him that the papers
in the safe deposit box were $763,000 worth of 3^ per cent Liberty bonds,
which Blackmer had received as his share of the Continental deal. He
assured Mr. Schuyler that, so far as he knew, the Continental Trading
Company had never dealt in public officials of the United States and had
not been used in connection with the Teapot Dome transaction. Schuyler
Senate committee that he then asked Blackmer
testified later before the
why he had not made a public statement of his position, and why he had
not testified in the suit of the United States against the Mammoth Oil
Company, to cancel the Teapot Dome lease. Blackmer replied that he

was not legally bound to appear as a witness, and that he did not want
to volunteer to testify because his testimony would expose private affairs
which might involve him in litigation.
Blackmer was afraid, Schuyler testified, that the Midwest Refining
Company, parent, the Standard Oil Company of Indiana, might sue
or its
him for the bonds he had received from the Continental Trading Com-
pany on the grounds that he was not supposed to devote himself to
"outside work" while president of the Midwest. Blackmer said he had
not paid an income tax on the bonds, because he was afraid that if it
were held later by a court that he was not entitled to them, he would not
be able to recover the tax, which would amount to about $300,000 on the
$763,000 worth of bonds. He he had kept the bonds intact "awaiting
said
developments." He had cashed some of the coupons, but since then

purchased other Liberty bonds with the proceeds, except for one bond,
which he had kept to reimburse himself for his expenses.
Schuyler advised Blackmer at their conference in Montreal that while
he did not think either the Midwest Refining Company or the Standard
Oil Company of Indiana had good cases against Blackmer, he would be
wise not to take possession of the bonds himself. He advised creating a
trustee for them, and Schuyler consented to act as trustee himself. He
went to New York, got the bonds from the one safe deposit box, opened
another in the same bank and deposited them therein. The bonds were
still reposing in that box, "awaiting developments," in 1928 when Schuyler
testified before the Senate committee.
After his conference with Mr. Schuyler, Mr. Blackmer went back to
France and remained there for some years. In August, 1928, his passport
was taken away from him, and in the same year he was charged with
making improper income tax returns and assessed $8,498,000 for addi-
tional taxes and penalties. He was also charged with perjury for making
false income tax returns. France refused to extradite him in December,
1928. In February, 1929, $100,000 in Liberty bonds were confiscated to
satisfy judgments against Blackmer, and in September of that year he was
fined $60,000 for contempt of court because of his refusal to return to the
United States and obey the subpoenas to testify in the cases of Fall and
Sinclair. He appealed to the United States Supreme Court and in Feb-
ruary, 1932, was held to be in contempt. In May, 1932, he paid the govern-
TEAPOT DOME 159
ment $3,670,784 to settle tax evasion charges and his fine of $60,000 for
contempt of court.
Meanwhile, the government's suits against Fall, Doheny and Sinclair,
and the cases to break the leases to the naval reserves were being tried in
the courts. On September 28, 1926, the Circuit Court of Appeals reversed
the decision of Judge Kennedy in Cheyenne, Wyoming, and held the
Teapot Dome lease to be invalid. On October 10, 1927, the Supreme Court
of the United States declared unanimously that the lease to Teapot Dome
was made with fraud and corruption and branded Fall as a "faithless
public officer."
The Supreme Court had previously decided that the leases to Doheny
should be canceled, and in both the Teapot Dome case and the California
case the lands were not only returned to the government, but the govern-
ment was also reimbursed for all oil drilled from them under the con-
and received the tanks which Doheny had constructed and the pipe
tracts
tanks and other improvements which Sinclair had made at Teapot

lines,
Dome. It was seven years from the time President Harding first trans-
ferred the naval oil reserves to the Interior Department until the Supreme
Court turned them back government. On August 1, 1927, the oil
to the
lands became the property of the United States again and were once more
put under the administration of the Navy Department. Since then private
interests have made efforts to get leases to them, but these have not been
successful.
The government also won a suit against Doheny's Pan-American

Petroleum& Transport Company for recovery of $9,277,660.17, but
com-
promised with the Doheny company for $5,001,000. In March, 1934, how-
ever, Attorney General Cummings filed suit to recover $9,282,561.85 from
the Doheny company on three canceled leases.
Fall and Doheny were tried together on a charge of conspiracy to
defraud the United States government and were acquitted
by a jury in
the criminal court in Washington, D. C. The legal troubles of Fall, Sin-
clairand Doheny, however, were by no means over.
In March, 1927, Harry Sinclair was tried in the
Supreme Court of the
District of Columbia for contempt of the Senate. He was convicted and
sentenced to serve three months in jail and to pay a fine of $1,000.
In October, 1927, the trial of Fall and Sinclair for criminal conspiracy
to defraud the United States government began in the Supreme Court

of the District of Columbia. When court opened on Tuesday, November
1, 1927, Fall was in the room, surrounded by his counsel; Sinclair, whom
the New York Times reporter described as "a fashion-plate in blue," was
chatting with his lawyer, Martin W. Littleton. Beaman G. Dawes was
waiting to testify, and so was Colonel Robert W. Stewart.
The government counsel, Owen J. Roberts and former Senator Atlee
J. Pomerene, sat silent in their chairs, waiting for Justice Siddons to

appear. They looked tired. At one minute after ten Justice Siddons was
on the bench. Mr. Pomerene rose to his feet and told the judge that he
had a matter of the gravest importance to offer in the form of affidavits
and suggested that it be heard in chambers. The Times reporter noted

(hat Harry Sinclair, who had been jaunty and confident during the two
weeks of the trial, turned ashen pale.

The government's affidavits were sworn to by Assistant District Attorney
Neil Burkinshaw, Assistant District Attorney Walter M. Shea, Donald
T. King, a newspaperman on die Washington Herald, and a streetcar
conductor, J. Donald Akers. They concerned the activities of Harry
Sinclair and his associates in "shadowing" the jury during the progress
of the trial by the use of detectives of the William J. Burns Detective
Agency.
Between half past eleven and midnight of October 28, 1927, J. Donald
Akers, a streetcar conductor on the F Street car line in Washington, tele-
phoned to the offices of the Washington Herald. He asked if that news-
paper would be interested in a new lead on the Fall-Sinclair case. He
talked on the telephone to Donald T. King, a rewrite man, who told him
the paper certainly would be interested. Then Akers told King that "they
are going to hang the jury." King asked how he knew that, and Akers
replied that one of the jurors had told him so. King asked the juror's
name, and after some hesitation Akers answered, "Kidwell." Then King
asked Akers for his own name, and after more hesitation, he finally gave
it. That
day Akers had heard Edward J. Kidwell, a juror in the Fall-
Sinclair case, whom Akers knew, remark that the jury would disagree,
and Akers said that Kidwell had added: "If I don't get an automobile as
TEAPOT DOME 161
long as this block I will be very much disappointed." Kidwell had also
said that a detective had told him that Sinclair was "a fine fellow."
On morning after this telephone conversation, Saturday, October
the
Donald T. King obtained Mr. Akers's address from the streetcar
29, 1927,
company where he was employed and visited him at his home. He asked
Akers to make an affidavit concerning the statements he had heard Kid-
well make. This Akers refused to do, but he offered to take King to a
place which Kidwell frequented. That afternoon Akers and King met by
appointment at a soft drink establishment at 411 Four and a Half Street,
Southwest. King was introduced to Kidwell by Akers, who called Kid-
well "Eddie." They started a conversation, and Akers drew out Kidwell
for King. He remarked jocularly to his friend Eddie that, after all, he
had no right convicting anybody of anything considering the things
all
he had done himself. Kidwell laughed and said modestly that he had
never done anything. Akers then remarked that he didn't see how Kidwell
had been picked as a juror, and Kidwell said that he was "a pretty good
yes-and-no man," and that "none of the smart lawyers could make him
say what lie did not want to say." Kidwell remarked that he was getting
his $5 a day while serving as a juror and was just putting in his time
without paying much attention to the evidence; he added that "he could
not see any advantage to him in bringing in a verdict of conviction, while
theremight be some advantage in bringing in a verdict of acquittal."
Kidwell added "that there was nothing wrong with this fellow Sinclair,
that he was all right, and that he was a democratic fellow, and that he
acted just like anybody else, and that he had so much money that he
didn't have to put on airs."
Akers Kidwell that he supposed he would be riding around in

said to
a big car soon, and Kidwell answered "Well, if I don't have one as long
:
as this block, I will be very much disappointed." Akers then said that
he supposed Kidwell was figuring on getting something out of this, and

Kidwell answered that "Sinclair had plenty of money, that money was
nothing to him, and that there was no limit to what he might do if he
wanted to." Kidwell also told Akers and King that the members of the
jury had had a game of cards on one occasion, and that he himself had
suggested a game of dice, and "that he would get something out of the
dice game if he didn't get anything else."
King brought back to the Washington Herald the statements of what

Kidwell had said in the soft drink establishment, and the newspaper
turned them over to the District Attorney's office in Washington. In the
meantime, the District Attorney's office had information that the jury
in the Fall-Sinclair casewas being "shadowed" by Burns detectives, and
government agents had been keeping watch on the detectives who were
following the jurors. The government attorneys had planned to wait until
they had all their evidence collected before presenting proof
of these
activities, but since Kidwell had talked of the jury's intentions, they
decided to work fast. On Monday night, October 31, 1927, the government
agents searched Room 111-E in the Wardman Park Hotel, occupied by
Charles G. Ruddy and G. N. Robbins, detectives in the employ of the
Burns Agency. They seized carbon copies of detailed reports which the
detectives had made on their activities.
The government had received its information about the jury "shadow-
ing" from one of the Burns detectives assigned to do the work. Operator
L.36, a man named W. J. McMullin, who was known to his associates in
the Burns Long, had furnished the information.

Agency as
The federal authorities established later that the scheme to "shadow"

the jury had been worked out carefully before the Fall-Sinclair case had
begun. A clerk in Harry Sinclair's office in New York was waiting to get
a telephonic flash from Henry Mason Day, vice-president of the Sinclair
Exploration Company. If Justice Siddons ordered the jurors to be locked
up, there could be no "shadowing," but if he permitted them to go to
their homes each day after court sessions, the detectives were to be em-
ployed. When Justice Siddons did not order the jury to be locked up, the
signal was flashed by telephone to the clerk in New York, who tele-
phoned Sherman Burns, son of William J. Burns, head of the detective

to
agency. The clerk gave Sherman Burns a telephone number in Washing-

ton which he was to call and ask for Mr. Day. Sherman Burns telephoned
to Henry Mason Day, who gave the order for the jury
"shadowing" to
begin at once. Then Burns telephoned to his Philadelphia agent, Charles
Ruddy, who went to Washington together with fifteen other Burns
detectives.
Next morning a detective was assigned to each member of the Fall-

Sinclair jury. The operatives were all young men who did not look like
TEAPOT DOME 163
detectives.For the next ten days they never permitted a juror to get out
of their sight after hehad left the jury room, and they only left the jurors'
homes when they felt certain that each juror was in his or her bed. They
also investigated the financial condition and personal habits of each juror
and got lists of his or her friends and neighbors. They tried particularly
to find out which might have mortgages on their homes. They

jurors
learned whom the jurors saw and talked with and took down the license
numbers of all automobiles in which the jurors rode. They followed the
jurors into restaurants, and one detective took a room in a lodging house
next to a juror's home. One of the reports on the jurors, which was
typical of the others, read:
No. 5, J. J. C., 10-31-27 Special Report.

Washington, D. C., Sun., Oct. 30, 1927.
New York Operating No. 5023.
New York Investigator M-20 reports:
Continuing surveillance of together with N. Y. Investigator
0-14,we proceeded to subject's home at 7 A.M., and saw car parked just
where we left it the night before.
At 2:20 P.M. subject, an old man, a woman and two children drove
to a private house in country at 412 Pine Street, Silver Springs, all en-
tering the house at 3 P.M.

Subject looked at a house, picked some Autumn leaves and returned
to his home at 5:15 P.M.
At 9:45 P.M. subject walked to a near-by store and got some malted
milk.
We remained till 11 P.M., discontinuing.
Expense, $9.70. Time 1 /2

1
days.
The report of the detectives on the talkative juror, Edward J. Kid-

well, read:
Kidwell, Edward J., Jr. White, aged 25, 1,637 U Street, S. E., works
for Kneesi, leather goods. Protestant. Organizations, none. Single. This
young man is the son of Edward J. Kidwell, who for thirty years has
been employed (general labor) at St. Elizabeth's Insane Asylum. Juror
has a brother who is a barber.
Since becoming of age he has worked for Kneesi Brothers (trunks and
leather goods), 409 Seventh Street. He was born in Anacostia, D. C.
Education, local schools. As a boy he was pretty wild. He has quieted
down now but is still a sport.
In addition to "shadowing" the jurors, the Burns detectives had a

plan to make the jurors believe that government detectives were follow-
ing them and thus antagonize them against the government's case. They
also planned to get a mistrial declared, if necessary, by making it appear
that the government itself had "shadowed" the jury. The Burns men
obtained the license number of the automobile belonging to Assistant
Attorney General H. R. Lamb and made false affidavits to the effect that
one of the jurors, Norman L. Glasscock, had met Mr. Lamb at the Potomac
Flying Field. It was which McMullin, alias Long, was forced
this affidavit
to sign, and as a result he became disgusted with the work of jury

"shadower." He went to see Gifford Pinchot, who he felt was honest, and
told him the entire story of the jury "shadowing" activities of the Burns
detectives. to see Owen J. Roberts, government
Mr. Pinchot took him
attorney. It was decided McMullin should go right on working with
that
the Burns detectives every day and report to Assistant District Attorney
Neil Burkinshaw every night. McMullin lived with the other men in a
Washington hotel, worked with them at watching the jurors and investi-
gating their affairs, and then at about one o'clock each morning he tele-
phoned to Mr. Burkinshaw and reported the day's work. The government
was carefully accumulating this evidence, when the streetcar conductor,
J.Donald Akers, telephoned to the Washington Herald.
A
mistrial was declared in the Fall-Sinclair case on November 2nd,
and the grand jury began to investigate the jury "shadowing" activities
of the Burns men whom Sinclair had employed. After the publication of
King and the two United States district attorneys,

the affidavits of Akers,
more than twenty persons came forward and reported that they had heard
rumors about the intentions of the Fall-Sinclair jury. William J. Burns
justified the activity of his agency in the case by the false assertion that
the government was also "shadowing" the jury.

On November 22, 1927, Harry F. Sinclair, Henry Mason Day, vice-
president of the Sinclair Exploration Company, Sheldon Clark, vice-

president of the Sinclair Refining Company, William J. Burns, his son,
TEAPOT DOME 165
Sherman Burns, and Charles L. Vietsch, manager of the Baltimore office
of the Burns Agency, were cited for criminal contempt of court and
and influence" the jurors
charged with an attempt "to bribe, intimidate
in the Fall-Sinclair conspiracy trial. After a trial lasting eleven weeks, dur-
ing which more than 1,600,000

words of evidence were taken, they were
convicted. Harry Sinclair was sentenced to serve six months in jail;
Henry Mason Day was sentenced to serve four months in jail; William
J. Burns was
sentenced to serve fifteen days in jail, but was later relieved
from serving; his son Sherman Burns was fined $1,000; and Sheldon
Clark was discharged by the court.
10
WHILE Sinclair's trial for "shadowing" the jury was taking place in
February, 1928, the Senate Committee on Public Lands held public hear-
ings to investigate the activities of the Continental Trading Company,
Ltd. At the court trials of Fall and Sinclair thus far, it had only been
disclosed that there was such a corporate entity, that it had dealt in oil,
and that it had bought 3 l/2 per cent Liberty bonds. It had not yet been
possible to prove that the Liberty bonds which Sinclair had received from
the Continental Trading Company had gone to Fall and other public
officials, though it was known from their numbers that some of the
identical bonds had been deposited to Fall's account at the First National
Bank of Pueblo, Colorado.
In 1921 one of the of Attorney General Daugherty had been
first acts
to get Congress law

to pass aextending the statute of limitations for all
offenses against the United States from three years to six years. Daugherty
had represented that Democratic officials during the war had been guilty
of gigantic frauds, criminal in character, and that they would be likely
to escape punishment unless the statute of limitations was extended, be-
cause the complicated nature of their transactions required much time to
untangle. As a matter of fact, no gigantic frauds on the part of officials

of President Wilson's administration were ever proved, but Daugherty's
act worked to the advantage of Fall and his friends for a time. Under the
statute M. T. Everhart, Fall's son-in-law, who had deposited Liberty bonds
for Fall's account, could not be compelled to testify, so long as he stuck
to his contention that what he said might tend to incriminate him and
he stuck to that contention like dear life.
During the interruption of the Fall-Sinclair trial occasioned by the
attempt of Sinclair to "shadow" the jury, Senator Walsh induced Con-

gress to repeal Daugherty's act extending the statute of limitations, thus
cutting away Everhart 's immunity. He was called before the Senate com-
mittee in February, 1928, and compelled to tell how he had got the
Liberty bonds he had deposited to the account of Fall. He told how Sin-
clair had given him the bonds in his private railroad car in Washington
and at his office in New York. Everhart insisted, however, that Sinclair
had given him the bonds for Secretary Fall in return for a one-third
interest in Fall's ranch properties, which Sinclair intended to use as a
gentleman's riding and hunting club. A new

organization was created
to hold Fall's property, with Fall and Everhart as its officers, and Ever-
hart acting as trustee for Sinclair's one-third interest, so that Sinclair's
name did not have to appear on the stock books of the Tres Ritos Cattle
Company, which held Fall's ranch property, and there was nothing in
writing to prove Sinclair's interest. Mr. Everhart also admitted on

examination that the club was never established on the property.
The Senate committee now knew that Sinclair had given Fall $233,-
000 in Liberty bonds which he had received from the Continental Trading
Company. In addition Everhart testified that Sinclair had given him

$36,000 in cash as a loan for Fall; and Zevely had also given Fall $25,000
in Liberty bonds and $10,000 in cash in order to induce him to go to

Russia with Sinclair. In all Sinclair had given Fall $304,000. Fall had also
received $100,000 as a "loan" from Doheny, and Doheny had
also paid
their joint expenses when they were on

together for conspiracy to
trial
defraud the United States government. Doheny and Fall had been ac-
quitted of that charge by a jury in Washington on December 16, 1926. Fall

had received from his two friends, who had received leases to the naval
oil reserves, a total of $409,000.
There were other things, however, which the Senate committee learned
TEAPOT DOME 167
about the Continental Trading Company besides the fact

activities of the
that Sinclairhad given Everhart Liberty bonds for Fall. When the com-
mittee was directed to resume its work, it was the general belief that the
Continental Trading Company had accumulated a fund which was
devoted to corrupt uses, and that the Continental deal had something
to do with Teapot Dome directly. Senator Walsh called as witnesses
former Governor Thomas, of Colorado, who had been Colonel Hum-

phreys's lawyer in the big oil deal, A. E. Humphreys, Jr. and Beaman G.
Dawes, who were also present at the Vanderbilt Hotel conference in
November, 1921. Colonel Humphreys himself had accidentally shot and
killed himself at his home in Denver on May 8, 1927, while he was
examining his shotguns. As the details were gradually unfolded, it ap-
peared that the Continental Trading Company deal was primarily a shady
business transaction on a colossal scale and not an attempt to establish
a fund for bribery. Senator Walsh wrote in his report to the Senate :
It seems now, however, to have been the ill-gotten gains of a con-
temptible steal, the peculations of trusted officers of great industrial
houses, pilfering from their own

companies, robbing their own stock-
holders, the share of the boodle coming to one of the freebooters serving
in part as the price of the perfidy of a member of the President's
Cabinet.
Before the details of the transaction at the Vanderbilt Hotel could be

extracted, Senator Walsh had to do a lot of drilling. Blackmer and O'Neil
were abroad and remained there. Stewart was in no hurry to return
still
from Havana on his way from South America. Sinclair only consented
to testify before the Senate committee after he was cited for contempt of
the Senate and sentenced to three months in jail.
The bring Colonel Stewart to the witness chair was a great

effort to
one, and in that effort John D. Rockefeller, Jr. did the best he could with
a truculent executive of a profitable Standard Oil company. Mr. Rocke-
feller was a witness before the committee, and he said:
"The situation, Senator, and gentlemen of the committee, is far
reaching. It affects certain individuals, but far beyond that it affects

the whole oil industry. The oil industry is under suspicion because of
the facts that have not yet been brought to light. The business struc-
ture of the country is under suspicion for these reasons. The cynic is
"
saying: 'Is there any such thing as basic integrity in business?'
Colonel Stewart finally arrived in Washington and testified before the

Senate committee. He denied all knowledge of the Liberty bonds distrib-
uted by Mr. Osier and denied indignantly that he had ever received any
share personally of the proceeds of the Continental Trading Company.
He refused to answer questions on the grounds that he might be called
to testify at Sinclair's trial. For his refusal to answer some of the Senate
committee's questions, Stewart was cited for contempt.
Sinclair and Fall were acquitted on the charge of conspiracy to defraud
the government by a jury on April 21, 1928. The jury deliberated only
two hours. The defense had not denied the payments by Sinclair to Fall,
nor had it denied that the lease to Teapot Dome was made in secrecy. The
jury preferred to accept the story that Sinclair had bought an interest in
Fall's ranch to use for a recreational club rather than that he had bribed
Fall for a lease to Teapot Dome. The New York Times reported: "A
man in the crowd something about 'millionaires.' Another was over-
said
heard to tell his companion that had the case involved a poor man the
result would have been different." Senator Norris, when asked for his
comment, said: "We ought to pass a law that no man worth $100,000,000
should be tried for a crime. That at least would make us consistent."
On the same day that Sinclair and Fall were acquitted Colonel Robert
W. Stewart called the board of directors of the Standard Oil Company, of
which he was chairman, to his office. He told them of the bonds he had
in a safe; Mr. Barnett, whom Stewart had made trustee for the bonds,
opened the safe; seven of the nine directors of the company stood in a
group around Colonel Stewart and looked at the $760,000 worth of
Liberty bonds lying there so innocently. They came to the conclusion that
the bonds should be turned over to the Standard Oil Company of Indiana
and the Sinclair Crude Oil Purchasing Company jointly. The guilty bonds
were thereupon placed chastely in a safe deposit vault in the First National
Bank of Chicago.
After Sinclair and Fall were acquitted of the conspiracy charge, Colonel
Stewart was called to testify before the Senate committee again, for now
TEAPOT DOME 169
he no longer had the excuse that he might be a witness at the trial. This
time Colonel Stewart told his elaborate story of the receipt of the bonds
from Osier and his trust arrangement through his employee.
"I have never had those bonds in my possession as the owner of them
at all," Colonel Stewart insisted. "I have not been in possession of them,
except as a mere conduit from Mr. Osier to the trustee, and those are the
facts as far as I know them with regard to these bonds. I assume these
bonds which Mr. Osier turned over to me must have been connected
with the Continental."
Although he claimed to be merely a "conduit from Mr. Osier to the
trustee," Colonel Stewart admitted that nobody else knew that he had
the bonds. Also, he had cashed some of the coupons and deposited them
in his own bank when he suddenly stopped
account, until December, 1923,
cutting and cashing the coupons. The first Senate committee investigating
the oil leases was then in session and was beginning to get on the trail
of Fall's sudden wealth. When Senator Bratton asked why Colonel
Stewart had ceased to cash the coupons in December, 1923, he replied:
"Largely on account of the desire to avoid publicity." "There was a great

deal of newspaper notoriety about this proposition at that time, and I
thought it was best not to do it," Colonel Stewart added after further
questioning.
"Well, Colonel," Senator Bratton asked, "if the bonds were received
in the ordinary course of business and turned over to the company, the
two companies, or a trustee for the two companies, what reason did you
have for objecting to the whole world knowing about it?"
"Oh, I don't know the reason, sir," Colonel Stewart answered im-
patiendy. "I just did not do it. Maybe I made a mistake, Senator, I
do not know."
Colonel Stewart had not been accustomed in the course of his long
and successful business career to have his acts questioned, but he was
destined to undergo much difficulty as a result of his attitude towards the
Continental deal. He was indicted for perjury because of his denials
when he first testified before the Senate committee, and he was also
indicted for contempt of the Senate. In June, 1928, he was acquitted of
the charge of contempt of the Senate, and in the following November he
was acquitted of the charge of perjury on a technicality. The technicality
was that a bodily quorum had not been present when Colonel Stewart
had testified before the Senate committee the first time.
Colonel Stewart's biggest fight, however, was still to come. John D.
Rockefeller, Jr. owned 402,280 shares of the stock of the Standard Oil
Company of Indiana, and Mr. Rockefeller was shocked at Colonel

Stewart's conduct. Mr. Rockefeller did not believe that people should do
things like the Continental deal, and Colonel Stewart did not care what
Mr. Rockefeller believed. It was a dramatic situation. The austere moralist
who headed the largest aggregation of corporations in the United States
was pitted against the bluff freebooter who made profits for his stock-
holders, including Mr. Rockefeller.
Besides the shares of stock he owned himself, Mr. Rockefeller also
controlled other large blocks of the Standard of Indiana stock. The Rocke-
feller Foundation owned 460,760, the University of Chicago owned 30,000,
and a more than 500,000 shares were held in trust by the Equitable
little
Trust Company for Mr. John D. Rockefeller's two sisters. The combined
Rockefeller control was just under 15 per cent of the capital stock of the
corporation. Mr. Rockefeller, with the aid of his brother-in-law, Winthrop

W. Aldrich, began early in 1929 a fierce and dramatic campaign for
proxies held by stockholders throughout the country so that he might be
able to oust Colonel Stewart from the chairmanship of the board of the
Standard Oil Company of Indiana. Colonel Stewart had insisted to Mr.
Rockefeller that his acts were legitimate, and that the Continental trans-
action was a proper one. He had also offered to resign if Mr. Rockefeller
should ever lose confidence in him. After Colonel Stewart's second appear-
ance before the Senate committee and his admission that he had received
Liberty bonds from Osier, Mr. Rockefeller wrote to him :
Your recent testimony before the Senate Committee leaves me no al-
ternative other than to ask you to make good the promise you voluntarily
gave me some weeks ago that yeu would resign at my request. That
request I now make.
TEAPOT DOME 171
But Colonel Stewart refused to resign. Then Mr. Rockefeller and Mr.
Aldrich formed a committee on January 2, 1929, to get stockholders'
proxies. A
printed booklet was issued by the Rockefeller forces, detailing
to the stockholders Colonel Stewart's relationship to the Continental
Trading Company deal, and giving a chronological account of some

features of the oil scandals. The employees and many stockholders of
the Standard Oil Company of Indiana appealed to stockholders to support
Colonel Stewart, and they hailed him as the man who had made profits
for them on a large scale. Many of the employees were also stockholders.
During the leadership of Colonel Stewart the Standard Oil of Indiana

had declared enormous dividends. The Rockefeller forces charged that
the employee-stockholders of the company had been coerced into voting
for Colonel Stewart through fear of losing their jobs.
There were 9,232,000 shares of stock of the Standard of Indiana in the

hands of 58,000 stockholders. The Rockefeller committee sent out its re-
quests for proxies before the usual time for sending out proxies each year,
and Colonel Stewart claimed that this was deceptive and gave the Rocke-
feller forces an unfair advantage. Colonel Stewart sent out his requests for
the stockholders who

proxies at the regular time with a clause permitting
had already given them to Rockefeller to revoke them. Then both sides
began tobuy stock of the Standard of Indiana on the Curb market, and
the stock gained more than four points in a day. On the first of February,
1929, John D. Rockefeller, Sr. broke the silence he had maintained since
the fight began and announced publicly that he was opposed to Colonel
Stewart. Until then Stewart's forces had claimed that the elder Rockefeller
was in favor of their administration. Then on February 4th, Colonel
Stewart's board of directors declared a stock dividend of 50 per cent and
a regular cash dividend of 62 /2 cents a share as well as an extra cash
l
dividend of 50 cents a share, in order to win the stockholders over to

Colonel Stewart.
The annual meeting of the Standard Oil Company of Indiana took
place in the white and gold
auditorium of the Community Centre of
Whiting, Indiana, a building which had been put up with the joint contri-
butions of the Rockefellers and the company. Mr. Rockefeller was at the
moment in Jerusalem on a tour of the Holy Land. He was represented by
Winthrop W. Aldrich. Colonel Stewart, who already knew that he was

defeated, was genial and jovial as he presided over the meeting, which was
attended by only a few hundred stockholders, some few spectators and
newspaper reporters. Colonel Stewart and the directors sat on the stage
with a background of gold draperies. A pickpocket got into the meeting
and stole three wallets, including that of Melvin A. Traylor, of the First
National Bank of Chicago, who was elected a new director.
Colonel Stewart reported to his stockholders that the net earnings of
the company for the year 1928 had been $83,437,166, as compared with
were represented by proxies
$33,179,456 in 1927; 8,446,120 shares of stock
at the meeting, and 5,510,313 were voted for the Rockefeller forces, as
against 2,954,986 for Stewart. The small stockholders voted for Stewart.
One large block of stock owned by the National City Bank, with which
institution Percy Rockefeller was associated, was voted for Stewart. For
many years William Rockefeller and his son Percy Rockefeller had held
different ideas of finance from those entertained by their kinsmen, John
D. Rockefeller, Sr. and John D. Rockefeller, Jr.
Then the stockholders whom Colonel Stewart had been accused of de-
priving of 25 cents a barrel on 33,333,333 Va barrels of oil in the Con-

tinental deal voted Colonel Stewart a pension of $75,000 a year. His
salary had been $125,000 a year. Colonel Stewart was retired, but his son,
Robert C. Stewart, remained as president of the Pan-American Petroleum
& Transport Company, formerly controlled by Doheny and then owned
by the Standard Oil Company of Indiana. Another son, James Stewart,
was vice-president of the Pan-American company.
11
THE USE which Sinclair had made of some of the Liberty bonds which he
had received from the Continental Trading Company was the subject of
careful inquiry by the Senate committee when it took up its
investigation
again in 1928. Sinclair was called as a witness,

and this time he was com-
TEAPOT DOME 173
pelled to answer questions, for he had already been sentenced to jail once
for contempt of the Senate. But he still remained rather uncommunicative.
At the trial of Sinclair and Fall in Cheyenne, Wyoming, Sinclair's
lawyer, Martin W. Littleton, addressing the jury, made this statement
concerning his client:
"He had never had a bond which the Continental Trading Co. (Ltd.)
distributed. It will be made clear that he never passed a bond of the
character mentioned here, or anything else. It will be made clear that
he was never the owner of bonds of the description mentioned here,
and that he never passed the bonds to Fall or anybody else on behalf of
Fall."
When he was questioned by Senator Walsh about his attorney's state

ments Mr. Sinclair insisted that he did not know that the
at the trial,
bonds he had received had come from the Continental Trading Company.
All he knew, he said, was that they were coming to him from Mr.
Blackmer. "Mr. Blackmer," Sinclair added, "is a very rich man as I
understand." "Well," Senator Walsh asked, "he was not making any
present to you, was he?" "I do not believe he offered me any present,"
Mr. Sinclair admitted. But he still insisted that he thought the entire
arrangement by which the oil was purchased from Colonel Humphreys

for $1.50 a barrel and resold to the Sinclair and Prairie
companies at
$1.75 by the Continental Trading Company was for the purpose of giving
H. M. Blackmer He testified that he
a commission of 25 cents a barrel.
thought this an exorbitant commission and was only satisfied when Black-
mer agreed to take care of Sinclair's company with a part of it.
when the arrangement

"Well," Senator Cutting asked, "you thought
was put up that Mr. Blackmer was getting more than his share of
first
the brokerage, or whatever you called it?" . . .
"I thought it was all his share, the 25 cents, but I felt it was a
little exorbitant," Mr. Sinclair answered.
"That is what I mean. Why did you guarantee a contract which
. . .
gave him an exorbitant commission?"

"Because he had agreed to protect my companies in a fair way and a
fair amount of this commission."
"And you left it to him what would be a fair amount?"
"I did."
"Is that a usual way of doing business?"
"It is. I do business that way with people I have confidence in and
have known."
"But you could not have had much confidence in Mr. Blackmer if you
thought he was putting something over, putting something exorbitant
over on your companies."
"Not at all. I rather admired him if he could put it over."
Senator Nye wanted to know whether it had not struck Mr. Sinclair
asunusual that he was receiving this share of Mr. Blackmer's commission
in Liberty bonds instead of in cash. "I have always considered that Liberty
loan bonds were practically cash," Mr. Sinclair answered. Finally, after
fencing further with Senator Nye, Mr. Sinclair admitted: "Well, it was
a procedure that we do not come in contact with daily." "Just so," Senator
Nye said, "and perhaps a transaction, Mr. Sinclair, the like of which you
never participated in before or since so far as a transaction in dollars
and cents is concerned." "It would be very unusual," Mr. Sinclair answered,
"to participate in the same kind of transaction day after day. I would say
perhaps you are correct."
Mr. Sinclair also insisted to the Senate committee that he had regarded
the bonds as belonging to his company and not himself, but he had to
admit that he had never told anyone connected with any of his com-
panies that he possessed the bonds in the private vaults at his home and
in his banks. Some of the bonds also found their way into the treasury of
his personal family corporation, the Hyva Corporation. When pressed by
Senator Bratton as to why he had told no one in the oil company about
the Liberty bonds he had received, Sinclair answered: "I had reasons for
not advising them, and also I felt that they would be advised sooner or
later about the matter." "Suppose something had happened to you, Mr.
Sinclair, how would your company have learned all the facts about that
transaction?" Senator Bratton asked. Mr. Sinclair answered that his com-
pany was not interested in all the facts that the investigating committee
was interested in. He had made a pencil memorandum of the bonds, he
testified, and he rather thought that that was sufficient to safeguard the
company in case of his death. When asked to produce the pencil memo-
TEAPOT DOME 175
randum, Mr. Sinclair replied that he had destroyed it after he had received
a subpoena to testify before the Senate committee again. Senator Bratton
wanted to know why
he had done that, thus destroying "the only writing
made time the transaction occurred and the only writing that would
at the
tend to corroborate your statements that you have made here today." Mr.
Sinclair replied : "Personally, I do not think it is necessary for my statements
to be corroborated."
When he was asked why he had not turned over the Liberty bonds to
his company soon as he had received them, Mr. Sinclair replied that
as
at the time tRere was too much newspaper publicity about himself and his
companies in connection with the Teapot Dome investigation. He told

Senator Walsh that he did not inform the directors of his company about
the bonds just because he did not, and he would give no other reason
to the committee. Mr. Sinclair had turned over to the Sinclair Crude Oil
Purchasing Company $757,000 in Liberty bonds and $142,000 for the

intereston those bonds only after the facts became public that he had
received them and how he had received them. The delivery of the bonds
to the company had been delayed for six years, and meanwhile Mr. Sin-
clairhad acted as if they were his personal property, by cashing the cou-
pons, by presenting Fall with $233,000 of them, and by giving Will H.
Hays $100,000 of them to pay his stock market losses and also $185,000
worth of them to be used to help pay the Republican campaign deficit for
the Harding campaign in 1920.
"Well, Mr. Sinclair, do you mean to say that you really expect the
public to consider that a legitimate transaction?" Senator Cutting asked
concerning the entire Continental deal and Sinclair's part in it.
"I can not be responsible for the public's opinion," Sinclair answered.
"Well, no; I do not think you can. I was wondering if

you could not
shed some additional light which might make the public believe this was
a legitimate transaction." . . .
"I do not know, Senator, how

the public feels about it. I rather am
inclined to leave that matter to the public."
"Without any additional assistance from you?"
"Yes."
"That is all."
Will H. Hays was an important witness at the 1928 Senate investigation.
Mr. Hays had resigned from President Harding's Cabinet on March 4,
1922, to become moral arbiter for the executives of the motion picture
industry. Piling platitude on platitude, Mr. Hays had fashioned the fol-
lowing statement during the Harding campaign of 1920, when he was

chairman of the Republican National Committee :
There is no zone of twilight in politics or public affairs. Right is right,

wrong is wrong, and the samestandards of morals, equity and
strict
justice must obtain as in any private business or professional matter.
Mr. Hays's connections with Harry Sinclair had been close for many
years. He and his brother, Hinkle Hays, had been attorneys for the
Sinclair Consolidated Oil Corporation for a long time before Will Hays
entered Harding's Cabinet, and Hinkle Hays remained one of Sinclair's
lawyers after his brother became Postmaster General. Mr. Sinclair's secre-
tary, Merritt Baldwin, testified in 1928 that Will Hays was a frequent
visitor atHarry Sinclair's private office: "He would
just stroll in, walk
in and walk out; probably be in there 5 minutes or 10 minutes." In July,
1923, Will Hays had tried to induce Henry Ford to go into the oil busi-
ness with Harry Sinclair.
At the first investigation of the naval oil leases in 1924 it had been
brought out that Harry Sinclair had given Will H. Hays $75,000 as a
contribution to the Republican campaign fund of 1920. In 1924 the New
York Times had printed a story that Hays had received 75,000 shares of
stock from Sinclair for the campaign committee's deficit. Mr. Hays was
called to testify on March 21, 1924:
"Mr. Hays," Senator Walsh had said, "a statement has been made
before another committee of the Senate to the effect that with a view to
making up the deficit of the Republican National Committee after the
election of 1920 certain bonds of the Sinclair Consolidated Co. were de-
livered to you. Tell us about that, please."
"I can not tell you about that, Senator," Mr. Hays testified, "because
it is not true. That story is as false in content as it is libelous in purpose.
Really, it isn't true. Well, that is the fact about it."

TEAPOT DOME 177
On March 1, 1928, Mr. Hays was called as a witness again. In the four
years which had elapsed since his flat denial a great deal had become public
concerning Mr. Sinclair's activities, and the bonds of the Continental
Trading Company had been traced. This time Will Hays admitted that
Sinclair had contributed more than the $75,000 Mr. Hays had said he
had contributed when he was a witness in 1924. After examination by

Senator Walsh, Mr. Hays admitted that in addition to the $75,000 con-
tributed in 1920, Mr. Sinclair had given Hays in 1923 $185,000 worth of
3 l/2 per cent Liberty bonds to help pay off the Republican deficit. The
only explanation Hays had to offer of why Harry Sinclair had been so
liberal was that Hays had asked him to help out. Hays also insisted that
he had known nothing of the oil leases while he was a member of
Harding's Cabinet, and that he knew nothing about the Continental
Trading Company deal.
"Mr. Hays, by examining the testimony you gave when you were here
before the committee before," Senator Walsh remarked, "I observe you
did not say anything at all about any bonds."
"Well, I did not volunteer about these Government bonds," Mr. Hays
said. "I was not asked about that."
"You were asked about contributions made by Sinclair."
"I was talking, in the other testimony, as you will remember, about
the story of Sinclair having given 75,000 shares of stock, worth at that
time from $1,500,000 to $2,000,000, and was negativing that as hard as
I could."
"Yes; and having disposed of that matter you were interrogated about
contributions made by Mr. Sinclair?"
"Yes."
"And you told us that he gave $75,000?"
"The maximum. I said I did not know. Then I did not know; I was
not qualified on contributions and political situations, and I said I just
did not know; but it was not to be over $75,000, and that was the
understanding with him."
Senator Walsh then brought out that all of Mr. Hays's financial trans-
actions with Sinclair had ended in 1923, and he had testified in 1924.
"I am wondering, Mr. Hays," Senator Bratton asked, "why it was that
in testifying about the $75,000 that Mr. Sinclair delivered to you in New
York, you failed to mention the $185,000 that were given to you at the
same time and as a part of the same transaction?"

"Well, it had been returned," Mr. Hays replied. "I was not asked
about that. That whole context was on this other proposition, and I was
not asked about that."
The "other proposition" was a very complicated and interesting piece

of financial jugglery with
Harry Sinclair's ill-gotten Liberty bonds, which
involved some of the leading Republicans in the land. In the report
which he wrote for the Senate in 1928, Senator Walsh pointed out that
Harry Sinclair had given Will Hays $185,000 in Liberty bonds for the
Republican deficit in November, 1923, at the very time when the first
Senate committee was hearing testimony from the witnesses from New
Mexico concerning Fall's sudden affluence.
This synchrony [Senator Walsh wrote] suggests at once that the ex-
traordinary sum yielded up at that critical time by Sinclair was not alto-
gether voluntarily donated, and that either hope or fear, if not gratitude,
stimulated his generosity and accentuated his devotion to the principles
of the Republican Party. In the predicament in which he found himself
at that juncture he stood in dire need of friends at court.
When Senator Walsh questioned Mr. Hays on this extraordinary syn-

chrony, Mr. Hays could see no connection between Teapot Dome testi-
mony and his peculiar transaction with Mr. Sinclair:
"These witnesses gave testimony which led everybody to believe that

prima facie Albert B. Fall had been bribed in connection with that trans-
action by Sinclair," Senator Walsh remarked.

"This transaction by Sinclair was as far divorced from his dealing with
the Government as it was possible to imagine," Mr. Hays said. "I had no
reaction on that when I solicited him or when it was used."
"Very well."
"Never related them at all."
TEAPOT DOME 179
Though he claimed that the two transactions were not related, Mr. Hays
was afraid to use Mr. bonds openly. It would have
Sinclair's Liberty
looked very bad if it had become public that Will Hays had taken $185,000
from Harry Sinclair for the Republican Party at the very time when
Teapot Dome was being questioned and when it was
Sinclair's lease to
being indicated that he had bribed Albert B. Fall. Therefore, Mr. Hays
decided to use those bonds in a roundabout fashion. He sent some of
them Fred Upham, Treasurer of the Republican campaign committee,
to
who Mr. Upham gave them in turn to Republicans in

lived in Chicago.
Chicago and received their checks for amounts of money equivalent to

the value of the bonds they received. Thenthese checks were used to pay
off the Republican deficit. Hays also gave some of the bonds to John T.
Pratt, brother ofHerbert Pratt, of the Standard Oil Company. On Novem-
ber 28, 1923, John T. Pratt took $50,000 worth of the 3 /2 per cent Liberty
l
bonds from Will Hays and on November 28, 1923, John T. Pratt sent
Fred Upham his check for $50,000.
Mr. Hays also tried to peddle Sinclair's bonds to Andrew W. Mellon,
Secretary of the Treasury, but Mr. Mellon was too wise to accept them.
Mr. Mellon preferred to make a direct contribution of $50,000 of his own

money which had once been in the possession of
rather than accept bonds
Sinclair. Mr. Mellon, dealing in bonds for many years, realized that they
had serial numbers. Mr. Sinclair, according to his own testimony, had
always, to his misfortune, regarded Liberty bonds as the same as cash,
and when he was paying off a Cabinet officer, thought nothing of giving
him Liberty bonds. Mr. Hays also peddled some Sinclair bonds to John
W. Weeks, another wealthy Cabinet officer, who was to dispose of them
in hishome town of Boston. He tried, too, to get William M. Butler,
chairman of the Republican National Committee which elected Coolidge,
to take some of the bonds, but Mr. Butler was also too canny to have
anything to do with Sinclair's money.
Both John T. Pratt and Fred Upham were dead in 1928 when the Senate
committee inquired into Will Hays's use of Sinclair's bonds, but from
their files and method Hays had used was pieced to-
their secretaries the
gether. On Saturday morning, March 10, 1928, some small slips of paper
found in the personal files of John T. Pratt were brought into the Senate
committee room. The chairman, Senator Gerald P. Nye, had in his hand
a large magnifying glass. V. E. Hommel, cashier of Charles Pratt & Com-
pany, which handled the late John T. Pratt's estate, was the witness. One
scrap of paper had on it in Mr. Pratt's handwriting in pencil the figures
"$50,000" and then some names which it was difficult to decipher. Senator
Nye handed Mr. Hommel his magnifying glass :
"Take that first notation on the slip there and see if you can not trans-
late it for us," Senator Nye requested. "The first one is, 'Weeks,' that
is clear enough."
"
'Weeks'; yes, sir," Mr. Hommel answered.
"What is the next one?"
"
"I am trying to read it; see if that is 'Candy/
"Candy?" Senator Nye asked.
"That is what it looks like," Mr. Hommel said.
"Might it not be 'Andy'?"
"Possibly."
"Possibly, you say?"
"That is quite possible,from his writing here."
"And just what might the notations of those names mean there?"
"I have not the slightest idea."
"Might it be to write a letter to the individuals named on there,
addressing a letter to each of them of what he had done?"

"I would not presume to say what a notation of that kind would
mean."
"You think it quite possible, though, that that second name is
Andy?"
"It is quite possible."
"You would not venture to say who Andy was?"
"I have no idea."
The crowd roared with laughter, for it was obvious that "Andy" re-
ferred to the venerable Andrew W. Mellon, Secretary of the Treasury.
"If it were 'Candy,' would it have any added significance to you?"

Senator Nye asked.
"None, whatever."
"You have no recollection of a name of that kind?"
"No."
TEAPOT DOME 181
"You saidit was quite likely that it was Andy?"
"It is quite likely that that is the name; yes."
On Tuesday morning, March 13, 1928, Mr. Mellon, the Secretary of the
Treasury, was a witness before the committee. He told how Will Hays
had telephoned to him in Washington from New York and said that he
was sending him a package with valuable contents, that he was coming
to Washington soon and would talk to Mr. Mellon about the contents
of the package. A messenger brought the package to Mr. Mellon's office.

He was busy at the time and did not think of it again until he was walking
home that night. Next morning he opened the package and found that
itcontained $50,000 worth of 3 l/2 per cent Liberty bonds. As Will Hays
did not appear that day to explain the package, Mr. Mellon took it to his
home and put the bonds in a safe. Soon afterwards Hays arrived in Wash-
ington and explained to Mellon that he wanted him to take the bonds
and give his personal check for $50,000 in return for them to the Repub-
lican campaign committee. Mr. Mellon declined. He would, he said, give
Mr. Hays his check for $50,000 made out to the Republican campaign
committee, but he would not accept any bonds in return. "They had come
for a purpose which did not suit me so far as I was concerned, and I
returned them," Mr. Mellon told Senator Walsh.
Although the Teapot Dome investigation had begun in October, 1923,

and Mr. Hays had visited Mr. Mellon in November to discuss the pack-
age he had sent him, Mr. Mellon testified that he did not connect the
two things. Senator Walsh pointed out to Secretary Mellon that the
Senate committee's investigation had been going on while Mr. Hays
and Mr. Mellon were discussing Mr. Sinclair's Liberty bonds. "That may
well be," Secretary Mellon answered, "but I do not follow all the in-
vestigations that are started. I have plenty of troubles of my own there

to keep me busy and I had no knowledge of it
personally at the time."
Mr. James Patten, of Chicago, a retired grain speculator, had taken
$25,000 of the Liberty bonds Hays had got from and had given
Sinclair
Mr. Upham his check for $25,000. Reflecting on the matter, Mr. Patten
told the Senate committee, he came to the conclusion that the transaction
was indecent. He
could not do anything about it then, so, to ease his con-
science, Mr. Patten testified, he had donated $25,000 to a Chicago hos-
pital. When Mr. Patten was first approached on the proposition that he
give $25,000 for $25,000 worth of Sinclair's bonds, he had become incensed,
but he had agreed to do it. Telling Secretary Mellon of Mr. Patten's ex-
Walsh asked:
perience, Senator
"And Mr. Patten told us he became very much incensed at the proposi-
tion and indulged perhaps some language that he thought would not
in
be appropriate to put in the record. Did the proposition strike you in
prettymuch the same way?"

do not know that I am of that temperament," Secretary Mellon
"I
answered, "and I do not become incensed. If you take things in this

world as they are, and according to your own conscience, I do not see
that there is much use in getting incensed. At least I do not recall any-
thing of that nature particularly."
Neither Mr. Mellon personally nor his department had been interested
in helping the Senate committee to discover the malfeasance of their
Republican associates. Mr. Mellon did not offer to tell the committee about
the proposition put to him by Mr. Hays until the name "Andy" was de-
ciphered with the aid of a magnifying glass on the scrap of paper left in
by John T. Pratt. When asked why he had not told the
his personal file
committee of Hays's proposition before, Secretary Mellon answered that

he did not think it important to bring the matter before the committee,
and that he did not believe it would have altered the situation at all.
"Except," remarked Senator Dill, "that we are getting more and more
of the patchwork by which we are putting this quilt together."
"Yes," said Mr. Mellon.

"And I suppose you do know," Senator Wagner said, "that the com-
mittee has been in pursuit of this information for some time, particularly
with relation to the transaction of Mr. Sinclair with the national com-
mittee, and there has not been any information volunteered to the com-
mittee on that point."
"Was it my responsibility?" asked Secretary Mellon. "I was not con-
nected with the national committee."
The Treasury Department under Secretary Mellon had known of the

Liberty bonds purchased by the Continental Trading Company as early
TEAPOT DOME 183
as 1925, when the secret service branch of the Treasury had made investiga-
tions for thegovernment prosecutors of Fall and Sinclair, but no attempt
was made by Secretary Mellon to collect taxes on the Continental's Lib-
erty bonds until after the Senate investigation had concluded its testimony
in 1928. Senator Walsh in his report commented on this laxity:
A suit brought against the distributees would have brought out all the
essential developed by the committee, affording as it would, an
facts
opportunity to examine under oath the participants in the unsavory

affair, including Blackmer and O'Neil before they fled beyond seas.
Even after Secretary Mellon had been informed by the Senate committee
of the probability that taxes had been evaded and asked what legislation
would be required to help him to collect them on the Continental bonds,
he had replied that he had no legislation in mind at the moment, but that
if he thought of any that would be helpful in the future, he would advise
the committee. He never thought of any legislation that would be helpful.

Senator Walsh asked Mr. Sinclair:
"Mr. Sinclair, when Mr. Hays was on the stand he was unable to
recallany sum of money contributed by anybody approximating even
the amount that you have contributed, and we are told by Mr. Andrew
Mellon, Who is reputed to be the third richest man in America, that

he gave only $50,000. How came it that you gave more than three times
as much as Mr. Andrew Mellon?"
"I can only answer your question," Mr. Sinclair said, "by saying that
Mr. Mellon was much more sensible than I was."
Sinclair refused to admit that he had any interest other than personal in
the success of the Republican Party, or that he had any need for the influ-
ence of Republican politicians.
Will H. Hays was called to the witness chair again after the
testimony
of SecretaryMellon and Senator William M. Butler of their refusal to
accept the bonds he proffered them. He had been caught in so many
evasions that now Mr. Hays wriggled under the lash of Senator Walsh's
pertinent questions. His language became befuddled, and he groped for

words, so that frequently his answers were broken off his to by inability
express himself properly. He continued to evade as much as possible, but

this time it was hot and uncomfortable work, and his mind seemed to
squirm to avoid the traps his own conduct had set for him.
When asked by Senator Walsh whether he cared to say anything as to
why he had not told the committee about the transactions with Secretary
Mellon and Senator Butler when he was last on the stand, Mr. Hays of-
fered the lame excuse that because they had not accepted his Sinclair bonds,
he had considered the matter "entirely irrelevant."
"If you had attempted to bribe a public official with the bonds, and
he had rejected your offer, you would not have considered that relevant
either, would you?" Senator Walsh asked scornfully.
"Certainly; and that is not a fair question, Senator, really," Mr. Hays
replied.
"This committee conceives," Senator Walsh told him, "that an effort to
make use of the bonds for any purpose is just as relevant to this inquiry
as a successful effort to use the bonds, Mr. Hays, I might say to you."
"Well, I do not," Mr. Hays insisted.
Senator Walsh read Mr. Hays his 1924 testimony, when, asked whether
Mr. Sinclair had given him Sinclair Consolidated Corporation securities,
he had answered "I can not : tell you about that, Senator, because it is not
true. That story is as false in content as it is libelous in purpose. Really,
it isn't true. Well, that is the fact about it." Senator Walsh then asked
if the only particular in which was not true was "that instead
that story
of getting Sinclair Consolidated bonds you got Government bonds." Mr.
Hays then proceeded to quibble ineffectually. He said that the story pub-
lished in the New York Times that he had received from Sinclair 75,000
shares of the stock of the Sinclair Consolidated Corporation was what he
had intended to brand as "false in content as it is libelous in purpose."
"But you successfully get away from my question, Mr. Hays," Senator
Walsh said, "but you won't get away from it. I am going to have an
answer to that question. . . . The Times story is not in relation to stock
at all."
"Yes," Mr. Hays answered excitedly, "it is stock, and that is where
you are wrong."

TEAPOT DOME 185
"It is not in relation to stock at all," Senator Walsh insisted. "It is in

relation to bonds. But that is neither here nor there."
"Yes, it is," Hays said. "It is the whole gist of the matter."
Like a slippery Mr. Hays found himself entangled in the broken

insect,
strands of the web he had
himself woven, and he became so rattled and
excited that he jumped up from his chair, until Senator Walsh had to order
him to sit down. The fact remained that Mr. Hays had said nothing about
$185,000 worth of Liberty bonds which he had taken from Sinclair. Sen-
ator Walsh kept after him relentlessly, though he tried his best to slide out
of his previous evasions and misrepresentations. Hays had previously testi-

fied that he did not know to whom Sinclair had given money for the
Republican deficit, and then four years later, after the facts had come out
he had been forced to admit that Sinclair had given the
at court trials,
$185,000 worth of Liberty bonds to him. When confronted with this ob-
vious inconsistency, Mr. Hays replied: "Let us not get technical about
it." He himself, however, had used every available technicality, drawing a
fine distinction between stocks and bonds when asked for truth.
The point was that there was to be a meeting of the Republican cam-
paign committee in Washington on December 8, 1923, and Mr. Hays did
not wish the members of the committee, which was meeting to plan the
Coolidge campaign of 1924 and to clean up the debts of the Harding cam-
paign of 1920, to know that Mr. Sinclair had been dunned for $185,000. At
the time Senator Walsh was hot on the trail of Fall's sudden wealth, and
the public already knew that Sinclair had visited Fall in Three Rivers and
that Sinclair had received secretly a lease to Teapot Dome, which he esti-
mated to be worth more than $100,000,000.
"Would you have ventured to go before your committee on the 8th of

December and tell them about this transaction with Mr. Sinclair that you
have detailed to us?" Senator Walsh asked Mr. Hays, after he had
dragged the truth out of Mr. Hays with much effort.
Mr. Hays became incoherent:
"I don't think that that situation would have I hardly know. I don't
know whether that would have the status of that investigation would
have involved, ifthere had been a big contribution at that time, as you
say $135,000, I don't assume that the status of that investigation was
such as that it would have affected the minds of the committee. I don't
know. Sinclair was regarded, I think, as a rich man."
"Yes," Senator Walsh remarked, "he would also be remembered, how-
ever, as having sold [bought?] the Teapot Dome lease,and he would
also be remembered as having paid a visit at that time to Three Rivers
with Secretary and it would be disclosed that
Fall, Secretary Fall/ had
suddenly arisen from the state of being absolutely broke to a condition
of reasonable affluence and opulence. That testimony was then public,
made public by this committee, and are you undertaking to assert that
under those circumstances the declaration before your committee that
you were indebted to Sinclair to the amount of $135,000 or $185,000
would not have been a sensation?"
"Are you undertaking to assert that the committee [Republican cam-
paign committee] had this knowledge of all these things you have said?"
Mr. Hays asked.
"They were all published," Senator Walsh replied. "The newspapers
were full of the testimony every day."
"The committee's members' minds were not on that as yours was,"
Mr. Hays said. "They did not regard it then as you did. I assume that
must be so. I think that time but this is far-fetched, guessing at the
minds of men, as Mr. Mellon said, but at that time I rather think, as he
said, that the state of mind of the committee would probably have been
one, while not of indifference, but not of great concern, because I don't
think they knew much of about what you recognized or you thought
was fact."
"Some of them have been established pretty conclusively since," Sen-

atorWalsh remarked. "However that may be, Mr^ Hays, you did not, as
a matter of fact, or no one for you did disclose to your committee at
this meeting here the actual state of affairs?"
"I did not attend the meeting," Mr. Hays replied. *'I don't know what
was done in the Finance Committee. I don't know." . . .
"It was not really intended, Mr. Hays, that the committee should
know anything about it, was it?"

"Well, there was no intention on my part that it should not."
However, Mr. Hays was finally forced to admit that he had told of his
jugglery of Sinclair's bonds only to those members of the Republican

TEAPOT DOME 187
Finance Committee to whom he had tried to dispose of the bonds.

When Will H. Hays left the office of Postmaster General in Harding's
Cabinet on March 4, 1922, to become the benevolent czar of motion pic-
ture morals, he made this statement :
"We must have toward that sacred thing, the mind of a child, toward
that clean and virgin thing, that unmarked slate we must have toward
that the same sense of responsibility, the same care about the impression
made upon it, that the best teacher or the best clergyman, the most inspired
teacher of youth, would have."
After Mr. Hays's testimony before the Senate committee in 1928, Sen-
ator Caraway rose on the floor of the Senate and said:
"The most that can be said for Mr. Hays is to say that he was a fence;
that he knew that certain goods were stolen goods and he was trying to
help the thief find a market for them; that the Secretary of the Treasury,
although he declined to aid in the marketing of the goods, after he had
knowledge of what they were, refused to disclose this information, but
handed them back so that the fence could find somebody else who would
act for him."
12
THE SENATE investigations paid for themselves in money many times

over. Not only were large sums collected from Doheny's company and
valuable improvements collected from Sinclair when the leases to the
naval oil lands were declared void, but the four oil brothers, Sinclair,
Stewart, Blackmer and O'Neil had to pay heavy penalties for not making
income tax returns on the Liberty bonds they had received as a result of
the Continental Trading Company deal. Blackmer alone had paid the
government $3,670,784 for tax evasions. The penalties and taxes assessed
against the four men amounted to $606,097.19, and the government re-
ceived $1,398,910.09 in other income taxes as a result of the disclosures
brought out by the committee. Senator Walsh reported the total expense
of the 1928 investigation as $14,165.
In addition to the money penalties, some of the principals received
punishment as a result of their designs on the naval oil reserves. It was

found impossible to get juries in the District of Columbia to convict any
of them of conspiracy to defraud the government, but Harry Sinclair
served nine months in jail for contempt of the Senate and for attempting
to "shadow" the jury in the Fall-Sinclair conspiracy trial. Doheny was
acquitted of conspiracy by a jury.
Fall was placed on trial in October, 1929, charged with accepting a
bribe. In the meantime Doheny 's son had been shot and killed by his
secretary, Robert Plunkett, who thereupon had killed himself, and when
Mr. Doheny told of the part of his dead son as messenger of the cash, he
wept on the witness stand. He insisted to the jury that the payment of
$100,000 to Fall was a loan and not a bribe, and he reiterated the war
scare motif which Fall's attorneys had tried hard to inject into the case
in the effort to make Fall a patriot rather than a crook. Both Doheny and
Admiral Robison tried to make the jury believe that the leases were a
an imminent war with Japan.
patriotic effort to prepare for
Admiral Robison was retired from the Navy as a captain instead of a
rear admiral. His name had been sent to the Senate for promotion to rear
admiral by President Coolidge, but was withdrawn. After his retirement

he became a consultant for the Sinclair Navigation Company, a subsidiary
of the Sinclair Consolidated Oil Corporation.
In 1926 the New York World discovered that Mr. Doheny, who had
been a lifelong Democrat, and who had been a candidate for office on the
Democratic Party's ticket in years past and a contributor to its campaign
fund, had turned Republican after the Senate investigations. Both he and
his son were registered with the Republican Party in Los Angeles in
April, 1926.
As soon as the time came for his bribery trial, Fall became very ill once
more. He refused, however, to be examined by Dr. Sterling Ruffin, whom
the court designated to examine him, on the grounds that Dr. Ruffin had
been one of President Wilson's physicians at the time Fall had gone with
the Senate committee to investigate the President's condition, and that
therefore Dr. Ruffin was prejudiced against him. On the first day of the
trial Fall was half carried into thecourtroom and collapsed dramatically,
and on the second day he did not show up at all. Four physicians were
TEAPOT DOME 189
sent to examine him and reported that he was ill. On the following day
Fall appeared melodramatically in court in a wheel chair. On one side of
him was a physician and on another a nurse, and he was entirely sur-
rounded by his womenfolk. He sat in his wheel chair wrapped in a large
blue automobile rug. Mr. Roberts and Mr. Pomerene, government counsel,
asked that a mistrial be declared because of the effect on the jury of Fall's
scene, as well as his melodramatic collapse in front of them on the first
day of the trial. As they were arguing the matter with the judge and
Fall's attorney, Frank J. Hogan, who insisted on going on with the trial,
Fall appeared suddenly in his wheel chair and was lifted into a great
green morris-chair, which he occupied during the entire trial. The jury,
however, were not in the courtroom at that moment. Later in the trial,
while Fall's attorney was summing up to the jury, Mrs. Fall brought into
the courtroom a little girl, Fall's
grandchild.
Senator Atlee Pomerene, referring to the defense set up for Fall of
patriotism, and the contention that the leases were important to prepare
the United States for war with Japan, quoted Dr. Johnson to the effect
that "patriotism is the last refuge of a scoundrel." When it came time for
him to sum
up, Fall's attorney, Frank J. Hogan, began his plea by de-
nouncing Dr. Johnson as the man who had slandered George Washing-
ton and vilified the American Revolution.
Owen J. Roberts told the jury that Fall's physical condition was not
their concern, and that they must ignore it. "It is all simple," he was re-
ported by the New York Times to have said. "There are four things of
a controlling nature for you to remember. One is that Doheny wanted the
lease of the Elk Hills. The second is, Fall wanted money. The third is,
Ejoheny got the lease, and the fourth is, Fall got the money." Mr. Roberts
also denied that the oil reserves were in danger of drainage and re-
marked: "The only drainage in this case was from Doheny 's to Fall's
pocket."
One of Fall's counsel, Mark Thompson, of Phoenix, Arizona, addressed
the jury with a sentimental plea for "two old men," Fall and Doheny, who
had met "on the deserts of the Southwest." "One," he said, "was a red-
haired young man, the other a black-haired young fellow from Ken-
tucky." Justice Hitz interrupted to remark: "The color of Mr. Doheny's
hair is not in evidence."
On October 25, 1929, after deliberating for one whole day and night,
the jury declared Fall guilty of accepting a brfbe. Doheny was heard
by a
New York Times reporter to mutter: "That damn court," referring to
the judge's charge to the jury. One of Fall's lawyers fainted; Mrs. Fall
wept; and Fall's daughter sobbed aloud. The jury recommended mercy.
JusticeHitz sentenced Fall to serve one year in jail and to pay a fine of
$100,000. The maximum penalty he could have imposed was three years
in jail and a fine of $300,000, and in sentencing him he told Fall that he
would have given him the full penalty if he had been in good health.
at Santa Fe, New Mexico, in July, 1931. Presi-
Fall finally went to jail
dent Hoover received a petition for his pardon, which was signed by
every member of theNew Mexico State Legislature, by Governor Selig-

man, of that state, and by Senators Cutting and Bratton, but he declined
to pardon Fall. In May, 1932, Fall was released from jail after serving his
time with allowances for good behavior. It was the first time in the his-
tory of the United States that a Cabinet officer had served a term in prison.
Five months after a jury had declared Fall guilty of taking a bribe from
Doheny, another jury in the Supreme Court of the District of Columbia
acquitted Doheny of the charge of giving Fall a bribe, after taking only
one and deliberating about one hour.
ballot
Of the minor characters in the Teapot Dome spectacle, Fall's son-in-

law, C. C. Chase, was impeached as Collector of the Customs at El Paso,
Texas, and Fall's friend, Edward B. McLean, who had been willing to
say that he had lent Fall $100,000 but not to swear to it, had a succession
of severe troubles. He newspaper property, the Wash-
lost control of his
ington Post; his wife and he fought each other in courts here and abroad
for the right to divorce each other; and in October, 1933, a lunacy com-
mission was appointed to determine "Ned" McLean's sanity. He was

then in the Sheppard-Pratt Hospital, and the doctors declared him "of un-
sound mind and incapable of governing himself," due to excessive use of
alcohol. The doctors added that he had "delusions of grandeur, feelings
of persecution, emotional and aggressive outbursts and misidentification
of those around him." He was declared insane by a sheriff's jury in
Towson, Maryland, on October 30, 1933.
Senator Gerald P. Nye in his report on the 1928 investigation of the

activities of the oil men wrote:
TEAPOT DOME 191
The investigation thus far discloses that the leasing of the naval oil
reserves constitutes criminal conspiracy against the rights, interests, and
properties of the United States Government unparalleled in the history
of this or any other civilized nation.
Never has the world known a case involving a degree of fraud, quite
evident bribery, thievery, conspiracy, and corruption to compare with
what has come to be known as the Teapot Dome-Elk Hills-Continental
Trading Co. case. The leases involved in the case are estimated to have
been worth not less than $500,000,000, and were consummated, to use
the language of the Supreme Court of the United States, "by conspiracy,
corruption, and fraud."

The investigation has uncovered the slimiest of slimy trails beaten by
privilege. The investigation has us hope, privilege at its worst.
shown, let
The trail is one of dishonesty, greed, violation of law, secrecy, conceal-

ment, evasion, falsehood, and cunning. It is a trail of betrayals by trusted
and presumably honorable men betrayals of a government, of certain
business interests and the people who
trusted and honored them; it is a
trail showing a flagrant degree of the exercise of political power and
influence, and the power ard influence of great wealth upon individuals
and political parties; it is the trail of despoilers and schemers, far more
dangerous to the well-being of our Nation and our democracy than all
those who have been deported from our shores in all time as undesirable
citizens. And in the end the one of the crushing of brilliant
story, is
careers when played upon those who schemed those
finally the light is
unhealthy schemes born in darkness.

Slow to unfold itself, and slow in being unraveled, the tale of those
who engineered, aided, and abetted in the naval oil-reserve leases and
the affairs of the Continental Trading Co. goes beyond the most fertile
imagination.
Mr. W. W. Tarbell, independent oil operator, told the Senate committee
investigating the oil leases :
"The men who handle the levers of the great marketing machines,
must have brains of steel. If,in the bearing of their great burdens, they
seem to lose something of their humaneness and, guided only by the light
that leads to dividends, they sometimes take, from them who give it
easily, that which seems unfair to the donors; remember that there are
not many of us who would not do the same, that these same men won
your war for you in a way, for without them you would have failed, and
remember, too, that their integrity among their business associates, with
some exceptions, stands the highest."
After the startling, dramatic revelations had been made to the Ameri-
can public in 1924 and 1928 about the activities of the oil men and govern-
ment officials, there was, by and large, a reaction of indifference. The
Stavisky scandal in France in 1933 was productive of far more public
fervor and political action than the far more important oil scandals in the
United States between 1924 and 1928. But the country was feeling in-
ordinately prosperous at the time. Senator Walsh was blamed for reveal-
ing what the average businessman did not wish to know, and those who
were indignant at the corruption in the Republican administration were
regarded as irresponsible agitators or politicians in search of office. The
effect of the Teapot Dome scandal on the political situation was almost
nil, and the Republican Party elected Coolidge overwhelmingly in 1924
and Hoover by a huge majority in 1928. "Don't Rock the Boat" was still
the slogan of those who believed that rugged individualism must thrive
at all costs.
TTTTTTTTTTVTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTVTTTT
CHAPTER THREE
Colonel Forbes and the Veterans
wy y HHILE
at the
Secretary Fall
Department
was engaged in leasing the Navy's
of the Interior, Colonel Forbes, Harding's genial
oil reserves
com-
panion in Honolulu, was having a gay and profitable time

in the Arling-
ton Building in Washington, where the offices of the Veterans' Bureau

were located.
When the war ended, the politicians of the United States indulged in
an oratorical orgy over the graves of the dead and the bodies of the dis-
abled. America, it was said, would never neglect her heroes. During the
years between the Armistice and the election
two of President Harding
there were no adequate facilities for taking care of the men who had been
wounded or disabled by disease in the war. They were kept in inadequate
Public Health Service Hospitals, in old army cantonments and in non-
descript buildingswhich had been hurriedly converted into hospitals dur-
ing the war. In the closing hours of the Congress which was in
session
until President Harding's inauguration, a bill was passed appropriating
$18,600,000 for the construction of veterans' hospitals. The construction
of the buildings was placed in charge of the Treasury Department, and

the Secretary of the Treasury appointed the White Committee to advise
concerning the selection of sites for hospitals and the construction of them.
Meanwhile, President Harding had appointed his acquaintance and

193
loyal campaign worker, Charles R. Forbes, to be director of the Bureau

of War Risk Insurance. The Veterans' Bureau had not yet been organized,
but it was planned to consolidate the Bureau of War Risk Insurance, the
Public Health Service and the Federal Board for Vocational Education
into the Veterans' Bureau, with Colonel Forbes at its head.
Charles R. Forbes took office on April 28, 1921. He received a salary
of $10,000 a year, and he was soon to be placed in charge of work which
would entail expenditures of almost $500,000,000 a year. In
August, 1921,
Congress passed the Sweet bill, creating the United States Veterans' Bu-
reau, and on April 20, 1922, the Langley bill, providing for an appropria-
tion of $17,000,000 to be used to build hospitals for veterans, was passed
tosupplement the previous appropriation of $18,600,000. Colonel Forbes
had promised a committee of Congress that he could build hospitals faster
and cheaper than the Treasury Department. On April 29, 1922, President
Harding issued an executive order transferring the control and manage-
ment of all veterans' hospitals from the United States Public Health
Service to the new
Veterans' Bureau, and on the same day he issued an
executive order transferring the huge supply depot at Perryville, Mary-
land, from the Public Health Service to the Veterans' Bureau.
Colonel Forbes was now in complete control of the construction of
hospitals for veterans, for which he had large appropriations, and of the
disposal of medical stores and hospital supplies, of which there were large
quantities left over from the war purchases. There was, however, one
little difficulty after he began to
which Colonel Forbes soon discovered
powers of expenditure and administration. President
exercise his large
Harding had appointed his friend and family doctor from Marion, Ohio,
Charles E. Sawyer, to be head of the Federal Hospitalization Board;
Colonel Forbes and Brigadier General Sawyer soon indicated that they
were jealous of each other's authority. Colonel Forbes later maintained
that General Sawyer wanted to run the Veterans' Bureau to suit himself,
and that he did not wish to have any specialists consulted on the care of
disabled veterans. He also claimed that General Sawyer, who had run a
small private sanatorium at Marion, was a homeopathic physician and
wanted Forbes to employ only homeopaths, so that his theories might have
a good chance to be tried out on the veterans. General Sawyer occupied

four rooms on the tenth floor of the Veterans' Bureau building, and in his
COLONEL FORBES AND THE VETERANS 195
officehe had a card, framed, which granted him the privilege of entering
any public building in Washington at any time; he also had a letter signed
by his friend President Harding giving him authority at the Veterans'
Bureau. Whenever he felt like it, Colonel Forbes maintained, General
Sawyer sent for employees of the Veterans' Bureau and gave them arbi-
trary orders to carry out.

When he was young, Charles R. Forbes went to sea, and then became
a drummer boy in the Marine Corps. At that time he was stationed at the
Washington Navy Yard and used to play baseball with the other boys,
including Sidney Bieber, whose father had a shop near the Navy Yard.
Bieber later became Republican National Committeeman for the District
of Columbia, and when Forbes came to Washington they met again and
renewed their acquaintance. After his service in the Marine Corps, Forbes
had enlisted at Boston as a private in the Army in 1900. Two months

laterhe was charged with desertion, was located and restored to duty
without trial. He completed his enlistment, serving in the Philippine
Islands, and was discharged from the Army as a sergeant first class, with
an excellent character.When he left the Army, Forbes engaged in con-
struction work and in ward politics in the Pacific Northwest. He then
went to for five years, becoming Commis-
Hawaii and remained there
sioner of PublicWorks, chairman of the Public Service Commission,
chairman of the Harbor Commission and chairman of the Reclamation
Commission. During the war Forbes joined the Army again, was com-
missioned a major in the Signal Corps and served in France with the 41st
and 33rd Divisions. He received the Croix de Guerre and the D.S.M. for
his war work and was promoted to be a lieutenant colonel. After he re-
turned from France, Forbes took up construction work again, and he

became associated with Charles B. Hurley, of the Hurley-Mason Construc-
tion Company, of Tacoma, Washington. At the time of his appointment
as director of the Veterans' Bureau, Forbes was a vice-president of that
company.
Colonel Forbes as director of the Veterans' Bureau had in his gift a
large number of appointments to office, and the bureau soon employed

30,000 men and women. Forbes appointed as his subordinates men who
had been personal friends or men who had been good Republicans, and
he listened carefully to the recommendations of Republican Congressmen
and acted on them. It was not long before the veterans' administration
was overstaffed, and it wasto the interests of the staff to place as many
men as possible on veterans' relief, so that they might demonstrate the
need for their own services. Doctors were accused of permitting men to
remain in veterans' hospitals long after they had been cured, and it was
discovered later that at the Speedway Hospital in Chicago more than 80
per cent of the patients spent their time in town. In the tuberculosis hos-
pital at Greenville, South Carolina, one-third of the patients were not
suffering from tuberculosis, and similar irregularities were discovered

elsewhere. Other veterans who needed attention badly found it difficult
to get it.
IN FEBRUARY, 1922, Colonel Charles R. Forbes first met Elias H. Mortimer.

Mr. Mortimer was staying at the Wardman Park Hotel in Washington and
was the representative of the Thompson-Black construction companies.
Mrs. Mortimer, who was an intimate friend of Mrs. Heber Votaw, Presi-
dent Harding's sister, was doing social welfare work for the war veterans,
and it was she who first met Colonel Forbes. She introduced her husband
to Forbes at the entrance to the Veterans' Bureau in February. It was

Mortimer's aim and job to get contracts for the Thompson-Black com-
panies for the construction of veterans' hospitals.

Colonel Forbes soon became intimate with the Mortimers. He himself
lived near the Wardman Park Hotel, and he used to come to their apart-
ment every night. He dined with the Mortimers every Sunday regularly
and several times during the week. In the latter part of March, 1922,
Colonel Forbes told Mr. Mortimer that he wanted to go away for a rest
and asked his advice about where he should go. Mortimer told him that
usually he himself went to the Traymore Hotel in Atlantic City, and he
accompany Forbes. Colonel Forbes, his secretary, M. L. Sweet,
offered to
and Mr. and Mrs. Mortimer went to Atlantic City for four days. Mr.
Mortimer paid all the bills.
Previously in their conversations Colonel Forbes

and Mr. Mortimer had
spoken vaguely of the possibility that Mr. Mortimer's company might

some of the contracts to construct hospitals. Colonel Forbes had known
get
the head of Mr. Mortimer's company for twenty years. The day before
they left Atlantic City Mortimer and Forbes

had a conversation about the
letting of the contracts

for the hospitals. According to Mortimer's testi-
mony later, Forbes told Mortimer that he had absolute power to let the
contracts, and that he was going to let them on a cost-plus basis, a system
which had proved a paradise for contractors during the war, for costs
could be padded easily and extravagantly. Colonel Forbes had been a con-
tractor himself, and he remarked to Mortimer that when he had been
Commissioner of Public Works of Hawaii, he had worked with a repre-
sentative of the Twin City Iron Works of St. Paul. "We fixed things,"
he added, "so that no one lost any money," and he left Mr. Mortimer to
draw his own conclusions, Mortimer testified later.
In April, 1922, Mr. and Mrs. Mortimer accompanied Forbes on a trip

to New York; they stopped off at the Ritz Hotel in Philadelphia, and
again Mr. Mortimer paid the bill. In New York, Mr. Thompson and Mr.
Black, Mortimer's bosses, visited Forbes and Mortimer. They were also
joined by Charles F. Cramer, general counsel of the Veterans' Bureau,
and one of Colonel Forbes's leading associates. The purpose of the expedi-
tion was to inspect possible sites for veterans' hospitals, but Mortimer
testified that drinking parties started in the afternoon and ended early the
following morning. "Well, they didn't do very much inspecting," Mor-
timer told the committee which later investigated the affairs of the Vet-
erans' Bureau. "The inspecting was done by just getting out everybody
would get out and look over the sites, and probably would stay 15 or
20 minutes there and go on to another place." Officials of the Thompson-
Black company were present on these inspection tours of prospective
and in New York Colonel Forbes held a private conference with
sites,
J. W. Thompson.
Mortimer then arranged to give a party at the Ritz in Philadelphia
for those who had been present in the gay group in New York, and it
was after this party that Colonel Forbes told Mortimer that he would
give him a list of the prospective sites for veterans' hospitals, so that
Mortimer, Thompson and Black might have the advantage over other
contractors of inspecting them in advance. Representatives of other con-
tracting firms found it impossible at this time to find out where veterans'
hospitals were going to be located. Mortimer, Black and Thompson then
inspected the proposed sites for hospitals at Chillicothe, Ohio; Columbus

and Cleveland, Ohio; Liberty, New York; and Northampton, Massa-
chusetts. They decided that they wanted the contract especially for the
hospital at Northampton, Massachusetts, and when Mortimer told Forbes
this, he answered: "All right." Forbes gave Thompson the plans for
the Northampton hospital ten days before they were made public.
Forbes's plan to let all the contracts on a cost-plus basis was thwarted
when President Harding insisted that advertisements for bids be issued,
but, Mortimer testified, Forbes said to him: "Don't worry; if you are
I will see that you get the work." Mortimer
anywheres in line at all,
also testified that Forbes had arranged with him, Thompson and Black
to make the time limits in their bids as short as possible.
"Why?" Senator Walsh, of Massachusetts, asked.

"Because then, if we were high in our bidding, the time was the
and Forbes could manipulate things then so that
essence of the contracts,
we could get the work; we would have a better opportunity and a better
show."
Later in the spring of 1922, Mortimer met Forbes at Forbes's apart-
ment, where a conference was going on with the two contractors, Thomp-
son and Black. Forbes told Mortimer on that occasion that he was going
to make a trip to the West, and that he would like Mortimer and Mrs.
Mortimer to go along with him.
"
'You can look over things at Chicago,' he said. 'We are going to put
up a $5,000,000 hospital at Chicago. We are going to put

up a hospital
at Livermore, California, and one at American Lake, which is just out-
side of Tacoma.' And he said, 'On your way back you can stop off at
St. Cloud, Minnesota, and in that way have advance information over
everybody.' He said, 'I want you to work with me.' He said, 'You
. . .
arrange to have Black and Thompson there [in Chicago] too.' And I
had a conversation with Black, and he agreed to go out there."

Then Forbes called Mortimer into the apartment. Thompson and Black
were sitting on the veranda outside the rooms.
"He had gone abroad; he was very hard up and

said that his wife
wanted to possible for me to loan him any money. I
know if it was
asked him what he wanted that was the first time that he mentioned
anything to me about money. I said, 'What do you want, Forbes?' He

said, 'I need about $5,000.' I said, 'Personally, I haven't got it, but I will
"
see what I can do toward getting it for you.'
Mortimer then went out to the veranda and talked with Thompson and
Black alone. He told them that Forbes wanted him to go west with him,
and that Forbes needed money. Mortimer returned from the veranda and
told Forbes that he had arranged with Thompson and Black that when
all of them got to Chicago, they would see that Forbes got $5,000.
In June, Forbes and the Mortimers left for Chicago and took suites
of rooms at the Drake Hotel there, where they were met by Thompson
and Black. Mortimer testified that their suite at the Drake Hotel cost
$50 a day, that meals averaged $3 or $4 a person, and that there were
usually from five to ten persons at each meal except breakfast. Drinking
parties continued throughout the trip to the Pacific Coast, and he stated
that they "were simply having one royal good time all the time we were
on the trip from the time we left Chicago." And before they left Chicago
there was one interesting scene:
"I want to turn your attention to the party of which you spoke at
the Drake Hotel in Chicago. You stated then that there was quite a party
in that suite?" Senator David A. Reed asked Mortimer.
"Yes, sir."
"That you and Colonel Forbes had at the Drake Hotel. What was the
nature of that party?"
"We had, as I explained before Colonel Forbes's room was off to the
right of our apartment, connecting with this living room. Ours was of?
to the connecting with this living room. Colonel Forbes, when I came
left,
in there about 4.30 in the afternoon was

shooting craps with Mrs. Mor-
timer on the bed."
"In whose room?"
"In my room."
"At what time was that?"
"About 4.30 in the afternoon. There was a bottle of Scotch there, and
he had his coat off, and he was well, I think he had won $220 from
Mrs. Mortimer, or something like that, because I know I gave her the
I don't know whether she ever
money. gave it to him or not. I gave it
to her to pay him."
"You stated that there were 15 or 20 people present in the
living room
at some time during the day. What time was there such a crowd there?"
"That was between about 4.30 to 6 o'clock. There was a lot of drink-
ing going on out there, also."
"You mean these people were out in your living room while Colonel
Forbes and Mrs. Mortimer were there shooting craps?"
"Forbes was in and out. There were other people shooting in craps
the room also."
"They were not alone, the two?"

"No, sir; they were not alone."
"Was Thompson shooting craps?" Senator Walsh, of Massachusetts,
asked.
"He was. He was pretty good."
"Were
Veterans' Bureau employees there at the time while this
per-
formance was going on?" Senator Reed asked.
"I cannot say whether they were connected in any way with the Vet-
erans' Bureau."
"What time of day was it that you gave him these ten $500 bills that
you spoke of?"

"Five o'clock. I had not been in that place more than 15 or 20 min-
utes before Thompson gave them to me."
"Where did Thompson give you those bills?"
"He gave them to me in the bathroom, off the living room."
"Where did you give them to Forbes?"
"In the same place."
"That is, in the same bathroom?"
"Yes, sir. Forbes was in with Mrs. Mortimer when Thompson and I
were in this bathroom. I got the money. Thompson came out and went
in with me into our room, and I said, 'Forbes, I want to see you.' He
said, 'All right, Mort.' He came out and we went in there and I counted
them out. He put them in his pocket and didn't do anything more, only
just laughed and went back into the room and started shooting craps.
After that we dressed for dinner, and Thompson took us out to a club,
one of the country clubs there."
Mortimer testified that Thompson gave him $15,000 in new $500 bills,
and that he gave the Thompson-Black company his personal note for
the money; that he gave Forbes $5,000 and used some of the rest of the
money for the expenses of their joint journey to the Pacific Coast. He
said that he had never received a note from Forbes for the $5,000, nor
had he received anything in writing acknowledging any debt; Forbes

He said that he also loaned Forbes money on
never repaid the $5,000.
later occasions. On the trip west Mortimer paid all of Forbes's expenses
except his railway fare, which he received from the government, as he

was supposed to be traveling on government business.
When it came time for Colonel Forbes to testify in his own behalf,
he insisted that Mortimer had never given him any money, and that
on the day of the scene in the Drake Hotel mentioned by Mortimer he
had been very busy inspecting hospitals for veterans in Chicago until
late in the day. He denied all business relations with Mortimer, and any
carousing on the trip; he insisted that the only drunkenness during that
journey was Mortimer's drunkenness. When his counsel, Colonel Easby-
Smith, mentioned to Forbes for his comment the fact that Mortimer had
testified that in addition to the loan of $5,000, he had subsequently loaned
Forbes $1,500 and given him a check for it, Forbes answered: "Produce
the check." Colonel Forbes was a difficult, disorderly witness, and even
his own counsel had to call him to order on several occasions. "Produce
the check?" Colonel Easby-Smith repeated the words of his client. "Now,
answer my question. Did he ever lend you we
have disposed of the
$5,000 did he ever lend you $1,000 or $1,500?" "He never loaned me
a bean, nor did I ever ask him for any," Colonel Forbes testified.
Major General O'Ryan, counsel for the Senate committee, cross-ex-

amined Colonel Forbes concerning the day when Mortimer testified he
had given Forbes the $5,000 in bills in the bathroom, and when Forbes
insisted that he was busy all afternoon inspecting veterans' hospitals:
"Now, as I recall your testimony, you stated after breakfast you left
immediately and went out on inspection?"

"Shortly after breakfast."
"Did you see Mortimer between the time you had your breakfast and
the time you left the hotel?"
"Yes, sir."
"Where?"
"I was going down the hall, and I heard a woman scream, and I went
in and this man [indicating Mr. Mortimer] was beating up his wife."
"That is when you saw him?"
"That is when I saw him, and when I last saw him."
"How long did that incident delay you on your departure from the
hotel?"
"How long?"
"Yes."
"I just spoke to him."
"How many minutes? You just spoke to him?"
"
"I said, 'That no way to do.'
is
"You admonished him, did you?"

"Yes, sir."
"And then you walked on?"

"Yes; I walked on."
"And that is the only conversation you had with him then?"
"Yes; that is all." . . .
"Your claim is, Colonel," General O'Ryan asked, "that all of your
relations with Mortimer were honorable, and that you never received any
bribe from him directly or indirecdy?"
"Absolutely." . . .
"Colonel, in that connection, do you expect this committee, who have
seen Mr. Mortimer and heard his testimony' and observed his intimate
knowledge of the details of so many of the various contracts, to believe

that Mortimer was spending his time running around the country with
you and spending his money on you month after month and making
these inspection trips in connection with these contractors without any
business purpose connected with you?"
"Absolutely. If he was not with me he would have been with some-

body else," Colonel Forbes answered.
"That might be; but do you believe now, as you look back at it, that
he did not have some ulterior purpose in accompanying you on these

trips?"
"I do not know what he had in his mind."
John B. Milliken, an official of the Veterans' Bureau, who accompanied

Forbes on this official business trip to the Pacific Coast, also wondered
what Mortimer and Mrs. Mortimer were doing in the party. He asked
Forbes why the Mortimers were there, and, he testified, Forbes told him
that they were friends of his who stayed at the same
Washington, hotel in
and that they happened to be going to California at the same time and
had joined him. Before they had left Washington in June, Forbes had
moved into the Wardman Park Hotel, where Mortimer and his wife had
an apartment. Daugherty and Jess Smith had an apartment there also;
William J. Burns lived there; and Fall and Sinclair when they came to
Washington usually stayed at the Wardman Park. Mortimer testified
that he had paid all Forbes's hotel bills and other expenses on the trip
to the Coast, except transportation, and that the trip of a little more than
a month had cost $5,400.
When the party reached San Francisco, they inspected a proposed

site for a tuberculosis hospital at Livermore, California. The land had
been sold to the government by Lucien Johnson, of the Casa Blanca

Vineyard, who wanted construction work to be put off until the fall
crop of grapes could be harvested. Mortimer testified: "I told Forbes it

was too bad to have all those grapes cut down, and he said, 'Don't you
worry; we will get all the wine we want there, anyway.'" Two dozen
quarts of wine were brought from Livermore in suitcases to Forbes's
suite at the Fairmont Hotel in San Francisco.
The head of the American Legion, Major Quinn, and Judge Graupner,
of California, called on Forbes at the Fairmont Hotel, as did several
others, to protest that the sale of the land at Livermore had been corrupt.
The owner of the land, Lucien Johnson, had been heard to say after he
had received his check for $105,000 for his land, that $25,000 was to be
split between Forbes and his general counsel at the Veterans' Bureau,
Charles F. Cramer, who was from California, and who had helped to
sell the land to the government at a high rate, in collaboration with Forbes.
Johnson was also alleged to have made the statement that he had to send
one hundred cases of his wine to Washington, which was to be split
between Forbes, Cramer and another person, whose name was not men-
tioned. Judge Graupner made the following memorandum of his visit
of protest to Colonel Forbes:
During the time that these charges were being presented Director
Forbes exhibited neither concern, anger, or particular interest, and at the
conclusion of the statements above made Director Forbes made no denials
of any of the chargesmade. His reply was an interrogation as to whether
or not the property was suitable for a tuberculosis hospital, and, upon
an affirmative answer being given by the writer, Director Forbes then
asked what it mattered to me what price was paid for it as long as it
was a good site.
The land which Mr. Johnson sold to the government for $105,000 had cost
him $19,257.
In California Forbes and Mortimer had some intimate conversations.
Forbes confided to him that Mrs. Forbes had gone away to Europe with
all of his securities; Mrs. Forbes divorced Colonel Forbes. He also con-
fided to Mr. Mortimer that he was going to succeed Albert B. Fall as
Secretary of the Interior as soon as Fall resigned that post. This con-
versation took place in July, 1922, while Fall was still
busy putting the
finishing touches on the leases to the naval reserves. He did not resign
until March, 1923, and by that time Colonel Forbes was in trouble. But,
sitting on the porch of the Coronado Beach Hotel, Forbes expanded and
told Mortimer and another friend, Mr. Lindley, of his ambition; Mr.
Lindley was in politics in California, and Forbes and he were discuss-
ing the large amount of money that would be appropriated for reclamation
work in the Northwest. Mortimer testified that they mentioned "that the
Secretary of the Interior would have the giving of this work to anybody
that they wanted."
"And at that time," Mortimer added, "Forbes came out with the
assertion that he was going to be the next Secretary of the Interior;
that he had everything all fixed with President Harding to that effect;
and that the work could be handled very nicely. . Well, he said that
. .
it was practically an admitted fact that he would get it."

"Yes, but having gotten it, what, if anything did he say that he was
going to do with it?" General O'Ryan asked.
"That he was going to see that we got the work. . . .
Well, that we
would all make a big clean up the expression that he always used in
is
regard to any contract. From that time on we were very intimate on
the trip, naturally, traveling together from Washington to the coast and
being together all the time. His suite was adjoining our suite, and we
were just about as chummy as two people could be; that is all." . , .
"Did you express concern about the possibility of Colonel Forbes leav-
ing the Veterans' Bureau before these deals were put through?"
"Yes; I did. I asked him I said, 'We have gone to a lot of time and
expense on this,' and I said, 'Colonel, when do you think this thing
will happen?' He said, 'It will take some time
yet before anything like
"
that will happen, and all these contracts will be placed.'
Perhaps Colonel Forbes realized that Secretary Fall would not resign
until he had all of his contracts placed too.
Before leaving Washington, Colonel Forbes had arranged with Charles

F. Cramer, his legal adviser at the Veterans' Bureau, to open all bids
of rival contractors for the hospital contract at Northampton, Massa-
chusetts, which the Thompson-Black company wanted. any bids were If
more Thompson-Black company, Cramer was

favorable than that of the
to telegraph Forbes at once, and he was also instructed to hold up the
letting of the contract until he heard from Forbes. For their convenience,
Forbes and his contracting friends and their associates in the deals for
hospital construction work had a special telegraphic code and special code
names. In this code Forbes was known as "McAdoo," his secretary, M.
L. Sweet, was referred to as "Pickles," and Mortimer was called "Moxey."
In San Francisco Forbes and his party were joined by Forbes's old
friend and former partner in the construction business, Charles Hurley.
Forbes introduced Mortimer to Hurley and said that he wanted him to
know Hurley "intimately." Hurley and Mortimer got together at once
and arranged a secret telegraphic code.
From San Francisco the party went to Tacoma on the S. S. Alexander,
which was making its maiden voyage. H. F. Alexander, head of the
steamship company which operated the ship, gave up his private suite
to Forbes and the Mortimers. And in return Forbes gave an extraor-
dinarily brazen performance. He had with him some copies of the in-
auguration medal which had been struck for the inauguration of Presi-
dent Harding, and which could be purchased by anyone inexpensively.
In the course of his journey across the country Forbes had presented
copies of these medals to various people, but on board the S. S. Alexander

he was feeling especially exuberant, and he got up at a dinner of five
hundred people and presented Mr. Alexander with one of the inaugura-
tion medals, accompanied by a speech in which Colonel Forbes said
that President Harding had asked him to present it. This was too much,
even for Mortimer, and he testified to the following conversation with
Forbes afterwards:
"Why, I asked Forbes we were all sitting around laughing, and I
me, did the President ask you to present that?' And

said, 'Charlie, tell
he said, 'No,' he said, 'I just wanted to make him feel good.' He said,
'He was pretty good to us and put us in his private suite on the boat,'
and he said, 'I knew him when he did not have any money,' he said.
'And he is going up in the world now, and he is a big man in Tacoma.'
... It was just an impulsive thing on the spur of the moment. He had
no more intention of doing it when he started off to speak than we
have of presenting a medal here. But he is very spontaneous. I was never
so surprised in my life. I was sitting down at his table and he was
standing right next to me, and when he presented the medal it was like
a thunderbolt out of the sky."
Mortimer newspapers were full of the incident, and

also said that the
that Colonel Forbes, when he

got back to Washington, "was called on
that particular item." When the party reached Spokane, according to
Mortimer, Colonel Forbes received a telegram from President Harding,

"asking if there was any truth in the report that was being circulated
that he was going to resign his position."
It was at Spokane, on the shores of Hayden Lake, that Forbes, Morti-
mer and Hurley came to an arrangement concerning the profits on the

construction of veterans' hospitals. The three men took a walk in the
morning along the lake, and when they had got out of hearing of any-
one else, arrived at an agreement. One-third of the profits on all hospitals

constructed by Mortimer's employers or by Hurley's firm was to go to
Colonel Forbes; one-third was to go to Mortimer's company; and one-
third to Hurley's company. They estimated, Mortimer testified, that the
profit would be about $150,000 on each hospital costing $1,500,000. In
San Francisco, Charles B. Hurley, Forbes's former partner, had agreed
with James W. Black, Mortimer's employer, that the two construction
companies would share the profits on all construction work which they
did for the Veterans' Bureau west of the Mississippi River, except for the
project atAmerican Lake, which was to be in the control of the Hurley

company and the project at Northampton, Massachusetts, which was to
be in the control of the Thompson-Black company. Hurley's company
received a contract for the hospital at American Lake, in the State of
Washington, at a cost of $1,397,000 though there were two lower bids

submitted, according to Mortimer.
In May, 1922, before he left for the West with Colonel Forbes, Morti-
mer had arranged with Thompson and Black that he was to get 35 per
cent of the profits on all construction work which the company might
do for the Veterans' Bureau. J. W. Thompson also said that if he received
any work from Colonel Forbes, he would give Mrs. Mortimer a single-
six Packard coupe. On the strength of the promises which Colonel Forbes
had made to Thompson and Mortimer in regard to contracts, Mr. Thomp-

son ordered the Packard motorcar for Mrs. Mortimer. Letters were in-
troduced into evidence before the Senate committee investigating the
Veterans' Bureau from the Packard Motor Car Company explaining the
necessary delay in delivery. Then the party went West, and by the time
they had returned, the relations of Colonel Forbes and Mr. Mortimer
were strained, and the motorcar was never delivered to Mrs. Mortimer.
Colonel Forbes and Mortimer had their first quarrel at Spokane.
Mortimer claimed he was disgusted when Colonel Forbes and

later that
one of the ladies jumped into Hay den Lake with their clothes on, and
that he and Colonel Forbes had words over this incident. They also
quarreled about Mrs. Mortimer, according to Mortimer's testimony.
"Out at Hayden Lake," Mortimer told the Senate committee, "when

I decided to come in and not tolerate any more of the situation as it
was going along, I had quite a talk with Mr.
Hurley, and Mr. Hurley
explained several things to me in reference to private matters affecting
the lives of other families Colonel Forbes had known favorably prior
to that time."
But Charles B. Hurley reconciled Forbes and Mortimer this time, saying
that things had gone too far on the contracts now for them to be falling
out with each other.

The reconciliation, however, was only temporary, and when the party
returned to Washington, further quarrels, both personal and financial,
took place. Colonel Forbes learned that at the Drake Hotel in Chicago
Mortimer had received $15,000 from his employers, and, according to
Mortimer's testimony, he insisted that he should have got half of it

instead of the $5,000 Mortimer said that he paid to him. At this Mortimer's
employer, James W. Black, became belatedly disgusted with Colonel

Forbes and told Mortimer that he wished to have nothing further to do
with him and wanted to show him up. "I think he is a double-crosser,"
Black told Mortimer. According to Mortimer's testimony, Thompson and
Black advanced Colonel Forbes about $30,000 altogether.
Then, on Labor Day, 1922, Forbes and Mortimer quarreled again at
the Wardman Park Hotel, when Mortimer came into the apartment and
found Colonel Forbes and Mrs. Mortimer alone. Questioned about this
personal incident, Colonel Forbes answered: "He did, with the doors
wide open." He also said that he and Mrs. Mortimer had only been in
the room together for about two minutes. It was after this quarrel that
Colonel Forbes was alleged to have told a representative of the Suther-

land Company, which was interested in getting a contract for a veterans'
hospital, that the company would get no contract so long as Mortimer

had anything to do with it.
According to the testimony of some of her relatives, Mrs. Mortimer

became estranged from her husband after the return of the party to the
East, and Colonel Forbes was said to have made a great effort to get
in order to prevent Morti-
papers which Mortimer had in his possession
mer from using them to incriminate Forbes; he was also said by witnesses
to have made great efforts to get incriminating evidence against Morti-
mer. Mortimer also testified that his apartment at the Wardman Park
Hotel was broken into twice and all the papers he had there were stolen;
he claimed, papers which he had in a trunk in Philadelphia were

too, that
also stolen after the visit of someone from the Veterans' Bureau to the
place where the trunk was kept.
James M. Williams, an ice cream manufacturer, in whose house at
Mrs. Mortimer's sister lived, testified that one day he met

Philadelphia
Colonel Forbes and Mortimer at Staunton, Virginia. Colonel Forbes,
both Williams and Mortimer testified, was trying at that time to interest
the local druggist of Staunton, Virginia, in the large quantities of nar-

cotics which the Veterans' Bureau had at the supply stores in Perryville,
Maryland. But Mr. Hogshead, the druggist of Staunton, told Colonel

Forbes that he did not handle narcotics. Subsequently, in the kitchen of
Mr. Williams's home, Colonel Forbes, Williams testified, tried to interest
him in carting away broken packages of liquor and narcotics in his empty
milk cans. He also offered Mr. Williams, Williams said, the contract for
supplying the hospital at Perryville with cream and condensed milk,
but Williams told him that he was not equipped to handle hospital work.
"We have a great many broken packages there," Williams quoted Forbes
as saying to him. "I might make it interesting for you." Mr. Williams also
testified that that same night in his house Forbes and Sidney Bieber had
been talking about the surplus and liquor at the Perry-
stores of narcotics
supply depot and said that they had made arrangements to ship
ville
away the "straight packages," but that there were a great many broken
ones which Forbes wanted Williams to cart away in his empty milk cans.
Lillian Henry, the maid at the Williams home, testified:
"I heard Colonel Forbes speak of liquor; that he had a deal with Mr.
Mortimer; and I heard him say that Mr. Mortimer seemed I don't know
just the word he used, but he didn't take the deal. He said he had a
million-dollar deal up with Mr. Mortimer, but he didn't take it, and it
was liquor, I heard Mr. Forbes say."
Mortimer testified that Colonel Forbes had told him that at Perry-
depot he had $5,000,000 worth of drugs and 67,000 quarts of liquor,

ville
which he wanted Mortimer to sell for the Veterans' Bureau. Forbes also
suggested to Mortimer, according to Mortimer's testimony, that he should
get an agency for supplies to be used in veterans hospitals, "as he was

7
going to buy complete new equipment for all of the hospitals; that is, the
12 they were going to put up out of the $17,000,000 and I turned the
matter over to my associate, A. N. McDonald." McDonald got numerous
hospital supply agencies, Mortimer testified, but then Mortimer broke
with Colonel Forbes, and they never sold any supplies to the Veterans'
Bureau.
"Did you hear Forbes say that he was about to have Mortimer ar-
rested?" Senator Reed asked Mr. Williams.
"Yes."
"By whose 'strong-arm' men?"

"Well, they talked a great deal about the Department of Justice men,
and the 'strong-arm' men that they have in Washington. They even went
some of their 'strong-arm'
so far as to say that they were going to have
men take Mortimer outside of Washington and flog him and turn him
loose with the promise that he would leave Washington."
"Did you hear Forbes say that?"
"Yes, sir."
When Colonel Forbes was examined by the Senate committee, he

testified that he had had information from the Department of Justice
that Mortimer was "the social and professional bootlegger of Washing-
ton." Colonel Forbes made every effort to blacken Mortimer's character.
"During the time that you knew Mortimer previous to this, Colonel
Forbes," Senator Walsh of Massachusetts asked, "did you suspect that he
was a bootlegger?"
"No; I didn't suspect that he was a bootlegger."
"So while you were traveling with him and associating with him you
saw nothing of his activities as a boodegger?"
"Only what I suspicioned."
"It was after there had been a break in your relations that you
learned from the Department of Justice that he was a bootlegger?"
"Oh, I learned it well, of course I heard it off and on before that.
And then the Department of Justice brought me the real information."
This would seem to indicate the possibility that Colonel Forbes had put
William J. Burns's sleuths of the Bureau of Investigation on the trail of
Mortimer after the break in their relations. At this period in the history
of the United States, Department of Justice agents were acting
practically
as private detectives for certain members of the administration in the
effort to get material which could be used against their opponents. At

the investigation into the administration of Attorney General Daugherty,
Gaston B. Means testified that he had investigated E. H. Mortimer for
the Department of Justice.
Colonel Forbes denied that he had ever been in the Williams kitchen,
or that he had ever had any conversation with Mr. Williams about the
narcotics and liquor at Perryville depot. Mrs. Williams testified that
Colonel Forbes had been in her kitchen "quite a number of times when
he was in my house." Colonel Forbes said that on the night mentioned
by Mr. Williams when they had their conversation in the kitchen, they
were in the living room all the time. "And he began talking about cheese,"
Colonel Forbes testified. "He talked cheese for about four hours and a
half. Now that was the whole conversation at the Williams's house."
As for Mortimer, Colonel Forbes, naturally, did not have a good word
to say for him. He
was, according to Forbes, a wife-beater and a boot-
legger, and he claimed that Mortimer and Williams had conspired against
him.
"Now, Colonel," General O'Ryan asked, "for quite a time after you
met Mortimer the first time you visited regularly and frequently at his
apartment?"
"Yes."
"Now did you find his companionship so attractive to you?"
"Well, he seemed to be plausible."
"You like plausible people?"
"He seemed to be a fellow that was all right socially, and I wasn't
going around any place in particular. I wasn't interested in him for any
particular reason."
About the only truth Colonel Forbes credited Mortimer with was that
he had said that White Sulphur Springs was a nice place, "and it was a
nice place."
The chairman of the Senate investigating committee, Senator David A.
Reed, asked Mortimer:
"Mr. Mortimer, you have testified to some matters here which are very
incriminating to yourself. Do you realize that?"
"Yes, sir; I do."

"What is your motive in giving us such full testimony which in-
criminates you?"
"Well, you are touching on a very delicate point with me, Senator,
and one which I would like to have the privilege of telling the com-
mittee personally rather than advertise it."
"I do not want you to go into details. It is a personal reason, is it?"
"Yes, sir." . . .
"As Senator Reed has said," Senator Walsh of Massachusetts re-
marked, "you have made a remarkable disclosure here. Do you not think
that you have been somewhat actuated by feelings of hostility to Colonel
Forbes by what you believe to be interference with your domestic life?"
"To quite an extent, Senator; yes, sir."
"Do you think that hostility and feeling that you have has somewhat
warped your judgment?"
"No, sir; it has not. I have saved every paper on that western trip.
I have heard enough, Senator, about his past to warrant me taking every
precaution to safeguard home, and I thought probably that some
my
day something would arise, which has; and I have never had an"
trouble in my life before until I met this fellow Forbes."
Mr. and Mrs. Elias H. Mortimer had been married in 1920, and they
had separated after three months of marriage; then they were reconciled,
separated again, and had been reconciled again shortly before they met
Colonel Forbes in February, 1922. Their final separation took place
after the western trip with Colonel Forbes. According to Mortimer,
on the night before he was to testify before the Senate committee,

Mrs. Mortimer tried to bring Mortimer and Colonel Forbes together.
Both Colonel Forbes and Mortimer came to the house of Mrs. Morti-
mer's father in Philadelphia, Dr. George B. Tullidge. She placed
Colonel Forbes in one room and Mortimer in another and then begged
her husband to talk with Forbes and not to testify against him. Mortimer
testified later that he told her: "If I go into that room, only one of us
will come out." Next day Mortimer went to Washington and told tht
whole story of his relations, financial and personal, with Colonel Forbes
The Senate committee happened to get in touch with Mortimer be-

cause he had told his story to General Drain at the Manufacturers' Club
in Philadelphia. General Drain told it to General O'Ryan, and Mortimer
was asked to testify. He
had previously made an affidavit concerning his
relations with Colonel Forbes on a hospital construction deal, and the
affidavit had been presented to President Harding, he claimed.
The Senate investigating committee was not interested in the domestic
affairs of Mr. and Mrs. Mortimer, and after the first testimony concerning
their difficulties, and the part Colonel Forbes was alleged to have played
in their lives, Senator David A. Reed, the chairman, announced that no
more scandalous testimony about the relations of the Mortimers and
Forbes would be admitted to the record. The committee heard Mrs. Morti-
mer in executive session, and her testimony was not made public. In
view of the insinuations against her character, Daniel Thew Wright, her
attorney, appeared before the Senate committee on Tuesday, November
20, 1923, and asked that she be heard publicly to protect her reputation.
"A woman's character," Mr. Wright told the committee, "is a very fragile
thing, as delicate as the frost upon the morning window, which a breath
dispels, and it is forever gone. And yet, a woman's character is her most
priceless possession."
To which Senator Reed replied: "We were not appointed to investigate
the domestic affairs of Mr. and Mrs. Mortimer; and although we had
knowledge of those domestic affairs, we, so far as possible, restrained Mr.
Mortimer and I believe he wanted to be restrained from testifying
about them, except where it was absolutely necessary to bring out matters
that had to do with the bureau and its management."
After their last quarrel at the wedding of Mrs. Mortimer's sister, Colonel
Forbes, who had previously awarded the contract for the foundation of
the veterans' hospital at Northampton, Massachusetts, to the Thompson-
Black company, gave the contract for the superstructure of the hospital
to the Fuller Construction Company.
IN NOVEMBER, 1922, Colonel Forbes started negotiations for a big deal.
He had let his contracts for hospital construction to firms whose bids were
sometimes higher than other bids submitted for the same work, and he
now turned his attention to the huge supply depot for medical stores,
drugs, liquor and clothing at Perry ville, Maryland. The goods at Perryville
were stored in fifty buildings, which were crammed full to the ceilings.
Besides sheets, towels, gauze, drugs, liquor, paraffin, paper, pajamas,
thread, moleskin and other materials used by veterans in vocational train-
ing, there were thousands of grindstones and emery stones and hundreds
of old trucks; there were also thousands of monkey wrenches and much
other hardware. No proper inventory had been made of the goods, and
some of them were being ruined because of the dilapidated condition of the
roofs of the buildings. The approximate value of the goods stored at
Perryville was between five and seven million dollars. On April 29, 1922,
just about the time when Secretary Fall was selling the Navy's oil re-
serves to his friends, President

Harding signed the executive order by
which the administration of the supply depot and all its supplies was
turned over to Colonel Forbes. The executive order provided, however,
that 20 per cent of the supplies were to be the property of the United
States Public Health Service for use in its hospitals.
On October 9, 1922, Colonel Forbes placed Lieutenant Commander
Charles R. O'Leary, of the Navy Department, in charge of the supplies
at Perryville. Lieutenant Commander
O'Leary had had experience with
Navy supplies. About a month later Colonel Forbes called Commander
O'Leary to his office and introduced him to a Mr.
Thompson and a Mr.
Foster, of Boston, who were there tomake an offer for the supplies stored
at Perryville. Mr. Thompson was a member of the Boston firm of Thomp-
son & Kelly, Inc. On November 10th, a committee at the Veterans' Bureau
approved Colonel Forbes's plan to sell the supplies. On November llth,
Thompson & Kelly made their bid for the goods. There had been no
public advertisement of the sale, but two other firms who had heard that
the goods were to be sold demanded a chance to bid; Thompson & Kelly
got the contract.
Before the sale could be completed, the list of goods to be sold had to be
approved for sale by the Co-ordinator of the Budget. Colonel Forbes

telephoned to Colonel Smithers, of the Co-ordinator's office on November
14, 1922, and told him that Commander O'Leary was on his way over to
the Co-ordinator's office with a list of damaged supplies which Forbes
was anxious to sell as soon as possible. Commander O'Leary took a three-
page list over to Colonel Smithers's office. In a few minutes Colonel

Smithers approved the list, except for soap, for he felt that the Army
and Navy could always use soap. After the approved list came back to
the Veterans' Bureau, two other lists were attached to it, giving Forbes
authority to more property than had been included in the original
sell
list. The second list was three times the size of the one which he had
approved, Colonel Smithers testified. The next day, November 15th,

Forbes signed a contract with Thompson & Kelly, Inc., for the sale, and
on the following day goods began to move out of Perryville. Forbes's
contract provided that Thompson & Kelly were to get the goods at 20 cents
on the dollar of their cost to the United States government.
Meanwhile, Mrs. Lila Cramer, wife of Charles F. Cramer, Forbes's

leading confederate in the Veterans' Bureau, sent her husband the follow-
ing telegram to California, where he was at the moment:
Just finished talking with Koegel. Think it necessary you return at

once; think colonel is a traitor. Has ordered Perryville cleaned out this
week. I am seeing General S. in your behalf tomorrow. Koegel's advice.
All my love.
LILA.
The next day, November 13th, she sent another telegram, this time to
Frank Graham, Higgins Building, Los Angeles, California:
Get hold of Charlie [Cramer]. Have him telephone me or send word

where I can telephone him at once. Things very wrong in bureau. Most
important.
LILA CRAMER.
Other contractors who wished an opportunity to bid for the valuable
government supplies were talking with their Congressmen and visiting
Forbes. In his colloquial way, Colonel Forbes testified to the following
scene in his office shortly after he had signed the contract with Thomp-
son & Kelly:
"But two days later in walks a little fellow," Colonel Forbes replied
to questions of his counsel, Colonel Easby-Smith, "and he said, 'I am
looking for the guy that sells this property.' And he threw out a handful
of canceled checks on my desk. And I told him to get out. He said
Senator So-and-So had sent him; he was a friend of his, and that he was
to talk to me. Well, I threw him out."
"Who was he, Colonel? Did you learn his name?"
"Silberman. The
next day in walks this hombre sitting right over here
(indicating), swinging a gold-headed cane like a drum major."

"What is his name?" General O'Ryan asked.
"This man here (indicating)."
"Mr. Anchester, do you mean," Colonel Easby-Smith asked.
"Yes; that is his name."
"Proceed, Colonel. What did Mr. Anchester want?"
"He says, 'I am a friend of W. J. Burns, of the Department of Justice,
and I want to figure on and I am going to get some
this surplus property,
of it.' I said, 'You are going to get out.' And he got out. He walked up
to the legal department and he started something up there. Then he
went down to the Supply Division and started something down there."
"Colonel Forbes, in that connection did you receive any other bids
"
or offers from any other
"Let me finish withwill you? This man
this hombre, (indicating)
went around the building making threats what he would do to me; and
he came back in a week or two, and he was in the legal office again. I
went back there and he wanted to make another proposition. I was quiet
then and 'You make your proposition and put
I said, it in writing.' He
did make a proposition and put it in writing." . . .
"You may proceed as to the subsequent conduct of Mr. Anchester

in respect to endeavoring to purchase supplies at other places."
"
"This bird Colonel Forbes began.
"Now, Colonel," his counsel warned.

"Excuse me. I am sorry. He goes out to North Chicago and stirs
the people up there about sales and buying the stuff. He goes to New
York and chases them around there, scaring those people down there with
his importance as the representative of William J. Burns."
"To whom did he go you mean, to your district managers?"
"Yes. He went all around to all of the departments there. So I went
to seeMr. Burns about him, and what Mr. Burns said to me about him
would not do to put on that paper there."
On November 15th, the day Forbes signed the contracts with Thompson
& empty freight cars rolled into the Perryville railroad
Kelly, Inc., fifteen
yard, and the next day they were loaded with sheets, towels, gauze
and other material and removed on their way to Boston. C. H. Bierman,
purveyor of supplies at Perryville, testified to this haste and also informed
the Senate committee that he had telephoned the Surgeon General of the
United States at once and informed him of what was going on. Mr. Bier-
man also had appealed
to the representatives of the Veterans' Bureau at
Perryville to hold up the shipments, for the Public Health Service, of

which Surgeon General Gumming was in charge, was entitled to 20 per
cent of the supplies being shipped out. "The cars had been loaded, and
they said they must be pushed out," Mr. Bierman testified.

Thompson & Kelly received 84,920 bed sheets for 20 cents each, which
had government more than $1.00 each. The Chief Co-ordinator
cost the
of the Budget had authorized the sale of 2,622 damaged and soiled bed
sheets, but Thompson & Kelly got 72,000 new bed sheejts in unbroken
packages, and 12,000 damaged sheets. And while Colonel Forbes was
selling new hospital bed sheets at 20 cents, he was buying new ones for
the Veterans' Bureau hospitals at $1.03% each. General O'Ryan intro-
duced into the record of the Senate investigation bills from Parker, Wilder
& Company, for consignments of 5,040 sheets on August 15, 1922, 5,040
on September 15th, 5,040 on October 13th, and 5,040 on December 15th
at $1.03!/2 each.
Thompson & Kelly also purchased 1,169,800 towels. Hand towels cost-
ing the government 54 cents each were sold to Thompson & Kelly for
a little more than 3 cents each. Also 98,995 winter pajamas, Red Cross
type, made by the women of America during the war and donated to
the Army by the Red Cross, new and unused, were sold to Thompson &
Kelly for 30 cents asuit; 47,175 packages of gauze were sold at one-fifth
was new and could always have been used in Army and
of their cost. It
Navy hospitals. Then, the gauze supply having been depleted by the sale,
the government had to purchase more gauze. There were 5,387 pounds of
paraffin paper in excellent condition, which had cost the government

about 60 cents a pound and were sold for 5 cents a pound. Thread which
had been bought for $1.05 a pound was sold for 21 cents. In a report to
Surgeon General Gumming, C. H. Bierman, medical purveyor at Perry-
ville, wrote:
To sell supplies at 2054 per cent of their value that can be used in the
next 5 or 10 years, and would have to be purchased at 100 per cent,
should they be sold, does not appeal from a business standpoint. The
difference between 20% per cent and 100 per cent in value of the supplies
would cover a great many years of overhead expense in storage of same
under proper conditions. Furthermore, the fact should be considered that
the original cost to the service amounted, I believe, to
only 9 per cent
of their value, including all charges, as they were transferred gratis
except as to handling and transportation charges.
Respectfully, C. H. BIERMAN.
Thompson & Kelly paid the government just under $600,000 for supplies
estimated to be worth between five and seven million dollars.
On November 20, 1922, Surgeon General Gumming wrote to Colonel
Forbes protesting against the sale of goods, some of which belonged to
the Public Health Service in his charge. He received no reply. He wrote
again, and still received no reply

from Forbes. Then he and Dr. Smith,
of the Public Health Service, called on Brigadier General Sawyer, friend
of Harding, and told him about the Perryville deal. The three men then
called on Colonel Forbes at his office. Forbes admitted that he had sold the
supplies, but only after a heated conference, according to the testimony

of General Sawyer, would Forbes agree that the Public Health Service
was entitled to any consideration at all, in spite of the terms of President
Harding's executive order. General Sawyer then took up the matter with
President Harding, who asked him to go at once to Perryville and find
out what was going on there. The President arranged for swift military
conveyance to Perryville for General Sawyer, Surgeon General Gumming

and Dr. Smith.
The three officials found great activity at the railroad yard in Perryville.
Stores were being loaded rapidly into 155 freight cars and shipped away
as fast as possible. Assuming the authority which President Harding had
given him, General Sawyer ordered that the shipments be stopped at

once. He then returned to Washington and reported to the President
that the material sold and being shipped out so hurriedly was of great
value to the veterans' hospitals and the Army, Navy, Marine and Public
Health Service.
On November 24th, President Harding ordered that the shipments
should be stopped, and he asked Colonel Forbes to come to the White
House for a conference.
Colonel Forbes told President Harding that he had sold the Perry-
ville supplies in order to cut down overhead and storage expenses, which
he estimated would amount to $650,000 to $660,000, but the man in charge

of supplies estimated that the cost of storing them would not have ex-
ceeded $28,000. At President Harding's request an appraisal of the goods
was made, but it was said to have been a false appraisal; in the meantime
the President's order to stop shipments was disregarded, and shipments
were going out to Thompson & Kelly from Perryville. On December
still
12, 1922, Colonel Forbes, Lieutenant Commander O'Leary, and Major
Carmody went to the White House and discussed the supplies with
President Harding. They brought along with them selected samples of
goods to show the President how inferior the quality of the material was.
They did not tell the President that the sheets sold to Thompson & Kelly,
with the exception of about 12,000 of the 84,000, were brand-new and
unopened. After the others had left the White House, Colonel Forbes
remained behind and had a private talk with the President. After this
conference President Harding removed the embargo on the shipment of
supplies, and more and more rapidly the freight cars were loaded and
shipped out of Perryville.
Then further protests against the sale of the Perryville supplies were
made to Harding by General Sawyer and by Senator Calder, of New
York. President Harding then called Colonel Forbes to the White House
again and ordered him once more to stop the shipments. But still goods
went out from Perryville to Boston. Four or five days after the President's
second order on January 24, 1923, to cease the shipments, Colonel Forbes
leftsuddenly for Europe. Attorney General Daugherty wrote in his book
that Harding had asked for Colonel Forbes's resignation, but that the
Colonel had refused to resign. In order to make it easier for him to do so,
Daugherty wrote, President Harding permitted him to go abroad first

on a minor foreign mission. But there was other evidence that Colonel
Forbes had been trying to get President Harding to permit him to go
on a junket to Europe for the ostensible purpose of attending to the
training of disabled American veterans abroad, but that Harding re-
fused and Forbes's trip was at his own expense.
In addition to the corruption charged against Colonel Forbes's admin-
under his care was absurdly negli-
istration, the construction of hospitals
gent. Atthe Neuropsychiatric Hospital at Palo Alto, California, for

instance, no laundry was constructed, and the government had to pay
$5,000 a month for its laundry work; in the hospital at Excelsior Springs,
Missouri, no kitchen had been provided. The Veterans' Bureau also pur-
chased supplies and equipment in extravagant quantities and at exorbi-
tant prices.For example the bureau bought 35,035 gallons of floor cleaner
and 32,115 gallons of floor wax at 87 cents a gallon. The Bureau of Stand-
ards estimated that this material was worth 1.8 cents a gallon. The
quantity was declared to be far greater than the Veterans' Bureau had
any use for, and the contract for its purchase from the Continental Chem-
ical Corporation at $70,944.45 was later characterized by an investigator
as fraudulent and collusive.
During Colonel Forbes's administration of the Veterans' Bureau dentists
throughout the country were fixing teeth lavishly and charging large
fees to the government. During 1921 the government paid dentists $5,627,-
851.54 ostensibly for fixing the teeth of war veterans, and one dentist
in charge of veterans' work testified that local dentists were persuad-
ing citizens to get their teeth fixed and charge it to the government,
whether the teeth needed attention or not and whether or no the patients
had been disabled. Dentists also charged the government for gold used
in their work and substituted copper, nickel and brass. Innumerable cases
were discovered of charges for dental work which had never been done.
Frank Ross Chambers, Jr., a mechanical engineer, made an affidavit
concerning his business and social relations with Colonel Forbes. Mr.
Chambers owned a farm near Washington known as Featherstone Farms,
which he was trying to sell to the government for use as an aviation field.
Mrs. Chambers had met Colonel Forbes and introduced him to her hus-
band. She also brought the Colonel down to Featherstone Farms, and the
Colonel, Mr. Chambers testified, brought some whisky, and "after a few
drinks assured me that he had sufficient influence to carry through this
arrangement." Forbes also said that there were a number of young men in
the Veterans' Bureau who would enjoy a picnic, and he asked Mr.
Chambers if he might bring them to Featherstone Farms.
Mr. Chambers said that he was approached a few weeks later by a
William G. Lipscomb, of the City Investment Company, of Washington,

D. C., who told him that the Veterans' Bureau wished to lease a large
farm near Washington for vocational training of disabled veterans in
agriculture. Mr. Lipscomb told Mr. Chambers "that he had been ap-
proached by a man named Raidy described by Lipscomb as a grafter
who said that he could put over such an arrangement for Featherstone
Farms and could arrange to lease Featherstone Farms for that purpose.
The rental suggested by Lipscomb was $30,000 per year, and Lipscomb
was quite frank in stating that there was included in this amount an
allowance of $15,000 to $20,000 as commission or graft. He said Raidy
was to pass it on."
Mr. Chambers heard no more from Lipscomb, and he decided "that
way to try to handle this plan was to go direct to Colonel
the only sensible
Forbes, which I did." Mr. Chambers said in his affidavit:
Colonel Forbes sent three men down to look the farm over, probably
about the middle of November, 1921. After their visit I called on Colonel
Forbes a number of times in his office and found that the best time of
day to see him was late in the afternoon when he was free from other
visitors and when his assistant, whose name I believe was Major Fraser,
would usually slip in with a bottle of gin. I remember one occasion very
distinctly when I took but one drink because the Colonel appeared thirsty
enough to finish the bottle, and did so.

It was impossible, Chambers stated, to get Colonel Forbes to commit
himself about the sale of Featherstone Farms, but Colonel Forbes made
it a habit to drop in at Mr. Chambers's apartment on his way home from
the Veterans' Bureau, "but these visits," Chambers's affidavit stated,
"when was no Scotch in the apartment were very short; when

there
there was Scotch there, which was most of the time, his visits lengthened
out and there would be a good deal of talk about the use of the farm
and good deal of drinking of Scotch whisky done. He also came to the
a
apartment one or two evenings after dinner accompanied by Cramer,

who
acted as a perfect shadow, and they would play poker and drink and
sometimes talk of the farm. The day before Christmas, 1921, the colonel
called on me and presented me with a bottle of Scotch as a Christmas
present, and the day after Christmas he called on me and drank most
of it
up."
On New Year's Day, Forbes, his man Cramer and Chambers went to
Featherstone Farms "to shoot ducks." They drank a great deal, however,
and became sick on too much whisky and pork chops. On cross-examina-
tion Colonel Forbes admitted the pork chops. While Colonel Forbes was
sleeping off his pork chops, Cramer, who was
also drunk, Mr. Chambers
stated, suggested that this deal on the lease of Featherstone Farms to
the Veterans' Bureau "was big enough 'for all of us to get something out
of it,' with the further suggestion that I leave the entire matter in his
hands and he would put it over."
The next evening Colonel Forbes called at Chambers's apartment and

asked about the rent of the farm. Chambers told him that that depended
on how many people had to have commissions. "The colonel flared up
and said he stood for no graft," Chambers stated. That same evening
Cramer telephoned and asked Mr. Chambers to meet Tom O'Day, of
California, who had had a part in the deal by which the land at Liver-
more, California, was sold to the government for a tuberculosis hospital.
Mr. O'Day, Chambers understood, "was the man who was to get a
commission which would go to some one in the bureau." When Chambers
saw O'Day at the Willard Hotel, however, O'Day pretended to know
nothing about the whole deal, "and talked to me about using the farm
as a place on which we might collect a cargo of mules to be shipped to
northern Africa for the use of the Spanish Army. Mr. O'Day suggested
that he could easily get the mules if I would make the necessary arrange-
ments with the Spanish embassy for a commission to be paid them so
that the mules might be passed. Promptly I decided Mr. O'Day was not
the kind of man with whom I wished to do any business, so left him."
Mr. Chambers, however, still wanted to do business with Colonel
Forbes, he could rent his farm thereby, and he saw both the Colonel
if
and Cramer again, but could never get a decision from them. He said
that he was told by Mr. Raidy "that the whole trouble was that no com-
mission had been figured. He proposed to put the deal through by paying
a commission to what he called 'the right man,' but I never got any
further information from Raidy and he did not state who the right man
was."
Getting no further action, Chambers telephoned to Cramer and told

him what he thought of him and of Colonel Forbes. Cramer answered
that Forbes was away at the moment, "and that he was not Forbes's
guardian." "I answered that he might not be his guardian, but he cer-
tainly was his wet nurse." Chambers saw Colonel Forbes again, but the
most he could get from him was an introduction to his bootlegger, a
captain, who brought Chambers a case of excellent Scotch whisky for
$125.
Colonel Forbes on examination admitted discussing the lease to the
Chambers farm, but denied all drinking, except a few cocktails, and
stated "I never had a bootlegger in my life." Forbes also testified that he
:
had given Mrs. Chambers a job at the Veterans' Bureau doing welfare
work, at the request of Mr. Chambers. "He said," Forbes told the com-
mittee, "he wanted to do something to get her away from the place."
Colonel Forbes was lavish with jobs in the Veterans' Bureau for his
acquaintances. He gave Mrs. Mortimer's brother, Tullidge, a boy of

twenty-two, a job at $3,500 a year, inspecting hospitals and sent him
traveling about the country. Previously young Tullidge had driven a
cream truck for Mr. Williams, Mrs. Mortimer's uncle.
While Colonel Forbes was director of the Veterans' Bureau, men
traveled about the country at government expense and even went to
Europe without any specific duties. In the record of the Senate investi-
gation of the Veterans' Bureau is a ribald letter from an employee of the

bureau, named Tripp, to his superior, named Black. Some of its sen-
tcnccs were omitted because of their obscenity. Mr. Tripp, who was at
the moment in Ohio attending to the sale of Veterans' Bureau property,
started out by telling his friend what a fine time they were having on
the job:
You are missing the real old times. Hunting season is on rabbit
dinners, pheasant suppers, wines, beers, and booze and by God we
haven't missed a one yet. Collins and I get invitations to 'em all. Last
Wed. I was soused to the gills on rabbit, etc. Last Sat. wines Oh, Boy!
. . . We eat and wine with the mayor, the sheriff, the prosecuting atty.
To hell with the Central Office and the work. And the fun is in the
field 'tis all the work I want just travel around.
[Tripp wrote exuberantly about the grounds of the

Fire hazards
veterans' hospital], say, if Forbes could only see the "lovely" high (3')
grass & if fire comes boom! up she goes.
Concerning the difficulty in heating the buildings for patients, he wrote

gayly: "Really, you know 'tisa big world to try & heat." He ended with:
Well, old Boss, 'tis a wonderful time as happy as can be as soon

as we can lift the freight embargo we will be thru. You should see us
when we can't get a switch engine, we "swipe" the cars & take the crane
to spot 'em or use a liberty truck then the Jews Oh, my, how they
weep: "I got stung." Ha! Ha!
Let me know when Forbes is going to sell by sealed proposals, then's
when I get a Rolls Royce. Got a good drink coming, so here's back to
you.
Respectfully, TRIPP.
In their report Senators David A. Reed, David I. Walsh and Tasker

L. Oddie wrote:
But the disheartening truth is that many of the men who had charge
of the bureau during that period flouted the sacred trust that had been
reposed in them, and their treatment of disabled soldiers and sailors
was harsh, unfair, and often brutal.
COLONEL FORBES sent in his resignation as director of the Veterans'

Bureau Harding on February 15, 1923, from Europe. It was
to President
generally said that Harding had demanded the resignation to take effect
at once. Congressman W. W. Larsen, of Georgia, had been trying as
early as March, 1922, to get a resolution passed by Congress calling for

an investigation of the Veterans' Bureau. He had heard of Elias H.
Mortimer and his relations with Colonel Forbes, and he had tried to get
a copy of the affidavit which Mortimer was alleged to have submitted
to President Harding, but without success in both endeavors. Then in
December, 1922, the "Disabled American Veterans" started an agitation
for an investigation, and posts of the American Legion also took up the
case against Colonel Forbes. In October, 1922, the American Legion had
also demanded the removal of Brigadier General Sawyer from the Fed-
eral Hospitalization Board on the charge of his neglect of veterans' hos-
pitals, but President Harding stood by his friend and physician. Gaston
B. Means claimed later that he had investigated General
Sawyer's actions
for President Harding.
In February, 1923, after Colonel Forbes had resigned and his conduct
was being discussed in Congress, Charles F. Cramer, legal adviser to the
Veterans' Bureau, and Colonel Forbes's "shadow," as one witness ex-
pressed it, resigned his post. On March 14, 1923, Cramer, who lived in
the house formerly owned and
occupied by President Harding when
he was a Senator, locked himself in the bathroom and
put a bullet
through his head. His body was found in the bathtub, and on his dresser
was found a poem on death, which he had clipped from a
newspaper.
On March 2, 1923, the Senate had passed a resolution calling for a com-
plete investigation of the affairs of the Veterans' Bureau.
"Did you ever suspect him of taking graft?" Senator Reed asked
Colonel Forbes concerning Mr. Cramer.
"The man is dead, Senator," Colonel Forbes answered.
"I know he is dead, but there are a great many men who are disabled
and are still living who have suffered from what seems to have been
maladministration, and Ido not believe that the record of any dead man
ought be spared if
to he was responsible for that maladministration, so
I you to answer that question."
will ask
"Well, I have heard some very very many things in connection with
his association with the bureau."
"Well, let me ask you specifically: Cramer recommended very hard
that you buy Livermore at $150,000 did he not?"

"I believe he did."
"The records show that he did."
"Yes, sir."
"Now, the record also shows that the owner only got $77,500, plus
a small amount of grapes."
"Yes, sir."
"Andthe records show that O'Day, who was the agent, took down a
commission of $20,000. Did you ever suspect Cramer got a part of that?"
"I don't know. He had a lot of friends out there, and I think that most
of those folks were his friends." . . .
"Do you know why Cramer committed suicide?"
"No, sir; I do not."

"Did you make any investigation to find out?"
"I have asked a great many people."
"What did you learn?"
"Oh, I learned domestic difficulties and financial difficulties and some
oil lands."
"Any irregularities in the Veterans' Bureau?"

"Some have said so."
"Did you ever see the letters that he left when he killed himself?"
"No, I did not."

"Did you ever ask to see them?"
"No; I sent a wreath to his home at his death, and that was all."
The Senate committee assigned to investigate the Veterans' Bureau
appointed Major General John F. O'Ryan as its counsel, and he was
assisted by volunteer lawyers, physicians and other experts throughout the

country, numbering more than 1,350 persons. From March, 1923, when
the Senate passed its resolution, until October, 1923, the
investigators
sifted the multitude of rumors that came into the committee pouring
concerning the activities and maladministration of Colonel Forbes and

his subordinates. On October 22, 1923, the day before the Teapot Dome
investigating committee heard its first witness, Albert B. Fall, the Vet-
erans' committee started its
public hearings. Among the first witnesses
was H. Mortimer, with whose testimony we are already familiar.

Elias
Colonel Forbes testified on November 13, 1923, and denied the incrimi-
nating evidence of witnesses who had testified against him. He maintained
that he had performed faithful service.
"I worked sixteen long hours a day there," he told the committee,
"and I have been charged with inefficiency; but I will stake my education
against anyone who has made that charge of inefficiency against me and
take any sort of examination that has to do with that particular work
of the bureau; and no man loved the ex-service men any better than I
did."
it was all a
Colonel Forbes claimed that conspiracy against him on the
part ofMortimer and Williams and General Sawyer. He also maintained
vaguely that "politics" was responsible for the charges against him. "I
regret exceedingly," he told the committee, "that the name of the late
President has been injected into this investigation and it is desire and my
intention to refrain from any mention of him except where
it
appears
to be absolutely necessary for the production of the truth."
The material brought out in the course of the public hearings caused
throughout the country, and as soon as
criticism of the administration
the Senate committee had finished taking its testimony in December,
1923, the evidence was presented to the Department of Justice, which

asked for indictments in Chicago against Colonel Forbes and John W.
Thompson, of the Thompson-Black company, because Mortimer's testi-
mony had been that $5,000 was paid to Colonel Forbes at the Drake
Hotel in that city.
Colonel Forbes and John W. Thompson were tried at Chicago in
1924 for conspiracy to defraud the United States government. The trial
and the star witness against them was E. H. Mortimer.
lasted nine weeks,
John W. H. Grim, Assistant Attorney General who prosecuted the case,

branded Mortimer, his own witness, as "a crook and a fixer." In addi-
tion to his testimony concerning the payment of $5,000 to Colonel Forbes
in the bathroom of the Drake Hotel suite, Mortimer testified that he had
bribed Forbes with $1,000 for the hospital contract at Tupper Lake, New
York, when Mortimer was acting as representative of the Sutherland
Construction Company.
Meanwhile, in May, 1923, Mortimer himself had been indicted for
bootlegactivities. His attorney was Colonel Thomas B. Felder, former
associate of Harry M. Daugherty, and the indictment was quashed.

Mortimer was then appointed a special agent of the Department of
Justiceby Mrs. Mabel Walker Willebrandt, who had charge of liquor
prosecutions during a part of the prohibition era. Mrs. Mortimer obtained
a divorce from Mortimer in Philadelphia on June 15, 1925.
The jury in the Forbes-Thompson case found them guilty after de-
liberating for five hours. Neither of the two defendants had taken the
witness stand in his own Judge George A. Carpenter sentenced
behalf.
each of them to two years in prison and to pay fines of $10,000 each; the
United States Supreme Court upheld the convictions.
Colonel Forbes began his prison term at Leavenworth Penitentiary
on March 21, 1926. John W. Thompson was seriously ill with a bad
heart and could not go to prison with Forbes. He died in St. Louis on
May 3, Forbes was released from prison on November 26,

1926. Colonel
1927. When he came out of jail, he declared that he had two intentions:
one was to clear the name of his late friend, President Harding; and the
other was to clear the name of Dr. Frederick Cook, who was a cellmate
of Colonel Forbes at Leavenworth Penitentiary and who, Forbes was
convinced, had discovered the North Pole.
'YYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY
CHAPTER FOUR
Justice a la Daugherty
AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAJ
H, -ARRY DAUGHERTY had been Attorney General of the United

States for less than a year when the sinister nature of his administration
began to cause open opposition to him, and before he had held office for
two years impeachment charges against him had been presented to the
House of Representatives. The Harding administration was indeed in
trouble by the time the new year 1923 began. Colonel Forbes had been
caught red-handed selling hospital contracts and hospital sheets; the
naval reserves had been leased under scandalous circumstances; and now
intimate and detailed revelations of the activities of Daugherty and his
pals at the important Department of Justice were beginning to be made

public.
In the apologia which Daugherty published in 1932 there are these
bitterparagraphs concerning the atmosphere of Congress at the time:
The Senate became a caldron of filthy gossip and slanderous accusa-

tions. The destruction of the character of public officials became a national
sport. Red Senatorial gas bags poured poison fumes into the air until an
honest man could scarcely breathe within the walls of the Capitol.
229
Republicans were deceived and swept off their feet.
Democrats were deceived and swept off their feet.
Then he added that the Senate at the time was not the same body in which
Clay and Calhoun had sat:
The rough riders who were making disgraceful speeches were now
rarely seen in public offices. They never went to the Department of
Justice to find the facts. They never went to the White House to get the
truth. They listened only to the scandal mongers, and felt that they
had accomplished something which entitled them to be called statesmen
when the newspapers published their names!
Leaders?
There were no leaders.
It all began, Daugherty wrote sadly, with the direct primary, after
which the Senate began to represent the masses instead of the states and
degenerated from "big-brained men, removed from the threat of popular
clamor." "I'll go further," Daugherty added, "and say that under present
conditions the Senate is fast becoming a menace to national progress,
if not a threat against the principles on which our Republic was founded."
Gone were the days of such "big-brained" Senators as Boies Penrose,
Jim Foraker, Mark Hanna and Tom Platt!

There were good reasons why men did not go near the Department
of Justice for facts during 1922 and 1923, nor to the White House for
truth. In the administration of Daugherty and Harding, the Department
of Justice resembled the den of a ward politician and the White House
a night club. Daugherty's Department of Justice was also something of
a private detective agency with the melodramatic William J. Burns as

chief of the spy system, which worked under the name of the Bureau
of Investigation. Jess Smith, Daugherty's personal and confidential handy-
man, played the roles of go-between, district captain, valet and errand
boy. Men who had tried to get information and facts from Daugherty's
office became and gave up the futile effort.
disillusioned quickly
The first on Daugherty began in 1922. Samuel Unter-

public attacks
myer, well-known lawyer, branded Daugherty as the link between the

Harding administration and the big business interests which wished to
JUSTICE A LA DAUGHERTY 231
thwart prosecution for war frauds and antitrust violations. Then Senator
Caraway rose on the floor of the Senate and introduced evidence of

Daugherty's past as an indication of his unfitness to serve as head of
the Department of Justice. Senator Caraway's charges concerned Daugh-
erty's activities in conjunction
with Thomas B. Felder, a New York
lawyer, in the effort to obtain a pardon for Charles W. Morse from

President Taft. Daugherty and Felder had obtained a pardon for Morse,
who had been sent to prison for financial frauds; in this endeavor they had
enlisted the aid of John R. McLean, father of "Ned" McLean, who was
influential with Taft, who also came from Ohio, as did Daugherty and
McLean. It had been represented to President Taft that Mr. Morse would
die if not released from prison, and it was charged that Morse had been
given medicine to make his kidneys bleed before the physical examina-
tion which won him his release. Then Morse had refused to pay Daugh-
erty and Felder the fee he had promised to pay them. Thomas B. Felder
had written revealing letters in the effort to collect $25,000 from Morse,
who had paid Daugherty and Felder $6,000 for expenses, although he
had promised to pay them $100,000 if he was released. Senator Caraway
read Felder's letters into the Congressional Record in May, 1922. After
their publication even the New York Tribune, loyal defender of all Repub-
lican administrations, demanded Daugherty's resignation.

When asked in 1922 whether he was going to resign, Daugherty told
the reporters: "I wouldn't have given thirty cents for the office of Attorney
General, but I wouldn't surrender it for a million dollars."

Daugherty
also tried tobrazen matters out by accusing his accusers of being actuated
by corrupt motives and of wishing to stop him from prosecuting war

fraud cases. But as he never did anything to prosecute the war fraud
cases, his answer was as embarrassing as the accusation.
Towards the first accusations against his administration Daugherty
adopted the same attitude which he continued to maintain throughout

hisincumbency he attacked his accusers publicly and tried to incrimi-
nate them and spy on them
privately. Gaston B. Means, special agent
for theBureau of Investigation, and later private detective for President
Harding, testified that he was directed by Jess Smith to investigate Sen-
ator Caraway after Caraway had attacked Daugherty and Harding on
the floor of the Senate. Means hired an assistant from Caraway's home state
Arkansas, Miss Laura Jacobson, to help him on this job, and Miss Jacobson
corroborated Means's testimony concerning the spying on Caraway.
Means also testified that he had been instructed to rifle Senator La Follette's
office after Senator La Follette had introduced his resolution calling for
an investigation of the leases to Teapot Dome and the California naval

reserves. At the investigation into the administration of Attorney General
Daugherty's office, Gaston Means gave the following testimony:
"You have never gone through my offices yet, have you?" Senator
Wheeler asked.
"If somebody will assign me to do it, I will do it, though," Means
answered.
"Senator Moses suggests to me that I can save time by asking you
what Senators you have not investigated," Senator Wheeler said.
"Oh, there are lots of them I haven't," Means replied. "They are a
pretty clean body. You don't find much on them, either. You don't find
very much."
"Now, Mr. Means, coming back to Senator La Follette, you investigated
him at the instance of whom?"
"I investigated him in April [1922], right after he introduced his
resolution."
"What resolution?"
"To investigate Teapot Dome."
"You went through his office then, as I understand it, for the purpose
of ascertaining what information he had relating to the Teapot oil
scandal; is that correct?"
"Anything he had where he could be stopped in what he was doing.

... I got these orders from Mr. Jess Smith and Mr. Underwood. I
didn't investigating with me is the man is a number; I never ask who

he is. It doesn't make any difference. I would soon investigate a
just as
tramp as anybody else. It doesn't make any difference to me. I never

ask who he is or what position he occupies. I designate the number and
go ahead and get the facts if I can, and I get nothing but the facts,
and report what I find. ... I mean by that it doesn't mean anything about
investigating a Senator. Thousands of people have been investigated.
Bishops have been investigated without knowing it. And clergymen."
"When did this terrific spy system start in the United States," Senator
Brookhart asked, "by what official authority, if you know?"
"I have been investigating since I was 21," Mr. Means replied. "It had
been going on prior to that time. I never saw a candidate that loomed up,
any little candidate for town marshal, that they didn't go out and make
inquiry about him. One crowd makes it confidentially, and the other
"
crowd
"What kind of crowds is it that make this kind of inquiries," Senator
Brookhart interrupted, "financial crowds, big fellows?"
"I don't work for the church crowd because they haven't got any
money," Mr. Means answered. "The financial crowd only finance and get
investigations."
"You mean the financial interests investigate every one who is a
candidate for office to get something on him so they can control him, is
that the idea?"
"Well, yes; that would be my interpretation; yes; they would want to

find out what he is
up to."
"And that gang then that is behind those investigations of that

nature is the same gang that I have denominated as the Non-Partisan
League of Wall Street, is that the crowd?"
"I think that President Wilson gave them the best designation:
"
'Invisible Government.'
"Well, that is the same gang."
"That is the best interpretation of them."
But the investigations of Senators which Means made were paid for
not by "the financial crowd" but by Daugherty's friend Jess Smith. When
asked whether Jess Smith had told him to investigate Senator La Follette
for the Attorney General, Means replied: "Say, we don't do things that
way. ... A man don't have to knock me down with an idea."
"You would not have worked for Jess Smith, though, if there was
nothing but Jess Smith?" Senator Brookhart asked. "You believed there
was more behind him than his personality?"
"Oh, I would work for anybody if they had the money," Means
answered. "Just like a lawyer. I would first ask him how much
money
he has got."
"You did not ever ask Smith how much money he had, did you,"
Senator Wheeler asked, "because you knew that it was coming from the
Attorney General and from those higher up? You knew that, did
you not?"
"Well, I could look at Jess Smith and tell he had money," Means said.
"Yes; and you knew that he was living with the Attorney General of
the United States, did you not?"
"Yes; I knew that."

"And you knew that he was occupying his house?"
"I knew that he was a close friend of the President of the United
States. I think he was a closer friend of the President of the United
States than he was of the Attorney General."
Means also testified that Attorney General Daugherty had said to him:
"
'When Jess Smith comes to you, Gaston,' sometimes he called me
Gaston and sometimes Mr. Means. He said, 'When Mr. Smith comes
to you, that is a strictly confidential matter.' ...He told me he liked me,
because I didn't let my right hand know what my left hand was doing;
I knew how to investigate. They . . . told me not to tell Burns. . . .
No; Daugherty didn't I wouldn't say that. But Jess Smith said, 'Don't
tell Billy.' Of course, he was referring to Mr. Burns."
Means also investigated General Sawyer, Mrs. Cross, E. H. Mortimer,

Colonel Forbes's friend, and Colonel Darden, President Harding's friend
and Secretary Fall's enemy.
Gaston Means told Senator Wheeler of the kind of material he tried
to get on Congressmen: "Well, if you were running for United States
Senator out in Montana, and somebody hired you, and you had stolen
a chicken, and I heard of it, and I was working for the crowd on the
I would try to ascertain all those facts, and let them
opposite side, spring
it on you some speech some night."
in
Congressman Woodruff had said on the floor of the House of Repre-

sentatives on April 11, 1922, that unless the Attorney General of the
United States took some action in the case of the government against
the Lincoln Motor Company, he would move his impeachment on the
floor of the House. That was the occasion for setting the sleuths on him,
and his office was rifled of papers thereafter.
In September, 1922, Attorney General Daugherty had gone to Chicago

and obtained an injunction prohibiting railroad shopmen from going

out on strike. On September 2nd, Judge James H. Wilkerson, of Chicago,
had granted this injunction depriving organized labor of its right to
strike, after Daugherty had argued
the case passionately in person. This
earned Daugherty the enmity of organized labor; he was already un-
popular with those who had tried to get action against big business
individuals who did not enjoy the favors

corporations and with various
which their competitors received from the Department of Justice, and
it was hinted that favors from the Department of Justice required a con-
sideration. On September 16, 1922, Congressman Oscar E. Keller, of
Minnesota, presented charges calling for the impeachment of Attorney
General Daugherty, and they were referred to the Committee on Judiciary
of the House, which began public hearings on them on December 4th,
with Andrew J. Volstead as chairman.
Eight minutes after the impeachment charges against Daugherty were

off the typewriter of the Congressional stenographer, Means testified, he
had a copy of them and started with them to the Department of Justice.
He he picked up some bootleggers he was "roping"
said that en route
and then walked into the Attorney General's office and handed the im-
peachment charges Paul Howland, of Cleveland, Ohio, who was
to
Means testified that Howland was

's
Daugherty lawyer. eager to get the
charges before they were made public, so that he might rush out an
answer to them. Means also claimed that he had obtained for Daugherty
and Howland a photograph of Congressman Keller's home, and that he
was assigned to find out where Keller had got the money to buy the
home. Paul Howland denied that he had ever had any relations with
Gaston Means and said that he would not employ him "to clean cuspi-
dors." Nevertheless, Means insisted that
Daugherty and his associates
used the photographs of Congressman Keller's Washington home in the
effort to defeat him for re-election to Congress, even
though he was a
Republican; they supported the candidate of the Democratic Party against
Keller, although ordinarilyDaugherty and his friends were devout party
men.
The public hearings on the impeachment charges against Daugherty
began on December 4, 1922, and on December 5th, Jess Smith wrote to his
former wife, Roxy Stinson:
My Dear Roxy: I have been so rushed since returning to Washington
that have scarcely had time to turn around.
I
There is a lot to do, but things are going at top speed. The Attorney
General's answer to the charges was filed within 36 hours after receiving
copy of the charges; it covered about 48 pages, and was wonderfully
accomplished. I will keep you posted and will write you a letter tonight
if I have time; am pretty tired.

Take good care of yourself and keep everything going. Hope your
house will come along all right. Write me a long letter.
These are hard days; just like war. Everybody is full of fight, and
that's what wins. . . .
Senator Wheeler asked Miss Roxy Stinson at the Daugherty investigation:
"Miss Stinson, let me ask you if it is not a fact that he [Jess Smith]
told you about the time they filed impeachment proceedings against
Mr. Daugherty didn't this fear begin about that time?"
"Oh, yes; he was scared to death for Harry Daugherty, and he com-
mented and remarked; he said he was a major; he said he never was
so fearless in his life. It didn't bother Harry Daugherty. It slipped right
off his back. And it worried him to death the impeachment proceed-
at all. The proceedings they had just
ings. It didn't worry Daugherty
like this instance."
"What did he tell you about the committee?"

"Yes; he said it was all arranged; that they wouldn't dare to go into
the Senate, because the Senate was stacked, and they were going to
bluff it in front of the committee; and, in fact, they didn't try him,
but the man that was tried was the man that brought up the proceed-
ings. He was the man that was tried instead. And justwhat Harry
Daugherty is doing to me today, since you happened to use me first
in this proceeding."
"Did Jess Smith tell you that before the hearings were opened?"
Senator Ashurst asked.
"Yes. And they sent me one of these fine, nice bound copies that
Mr. Daugherty has arranged containing all the statements. He . . .
sent me one of Mr. Daugherty's bound copies of statements and clip-

as to how he handled the situation, you see that book. It was a
pings
beautifully bound thing. He sent it all over the United States. I have
one some place. ... It was very well managed and arranged for Mr.
Daugherty."
"That was prepared in the Department of Justice itself?" Senator
Wheeler inquired.
"Oh, yes; absolutely."
The charges which Congressman Keller brought against Daugherty

concerned his lack of activity in the prosecution of various trust cases
and war fraud cases, but they could not be substantiated at the time by
sufficient evidence to warrant impeachment, and the impeachment pro-
ceedings were quashed. Even if it had been possible to substantiate the

charges fully, it is doubtful if the Committee on Judiciary of the House
would have passed an impeachment recommendation against Daugherty,
because at the time the committee was made up of partisan Republicans
who supported the Republican administration at all costs. Daugherty
claimed that he was being attacked and hounded by the labor lobby in
Washington because of his fearless action in obtaining a blanket injunc-

tion against the railroad strikers, who, he maintained, would have de-
stroyed property and undermined the foundations of American civiliza-
tion, if they had been permitted to go on strike. Officials of the American
Federation of Labor were witnesses against Daugherty, and the main
prosecutor of the impeachment charges at the hearings before the Com-

mittee on Judiciary was the American Federation of Labor attorney. But
it was the time to get anyone else to prosecute Daugherty.
difficult at
"There wrote Daugherty in 1932, "perhaps no parallel in the history

is,"
of our Republic for the brazen attempt of the Labor Lobby to impeach
and destroy a Cabinet officer for performing the duties of his position."
Gaston Means later testified that at the time of the impeachment pro-
ceedings the Department of Justice had men following witnesses against

Daugherty and reporting everything they did and said. "The Attorney
General," Means had remarked a few minutes before, "is kind of like
myself; they have accused him of everything in the world."
THERE was plenty of which to accuse Attorney General Daugherty, and
one of the most interesting phases of the investigation concerning him

which was held a few months after the impeachment charges had been
quashed was the extraordinary relationship between him and his friend
Jess Smith.
At about 6:30 in the morning of May 30, 1923, the body of Jess Smith
was found dead, with a bullet hole in it, at the suite which he and
Attorney General Daugherty shared at the Wardman Park Hotel
Daugherty was spending the night at the White House with his friend
President Harding and a group of friends; it was said later that the group
included Sinclair and Doheny. He had asked his secretary, Warren F.
Martin, to spend the night in his bed, because he was worried about Jess
Smith, who had been "acting queer" lately. Early in the morning Mr.
Martin heard a crash, but he paid no attention to it at first, thinking
that a door had slammed or that a waiter had dropped a tray. But he
could not get to sleep again and went into the sitting room. As he looked
into the other bedroom, he saw Jess Smith's body on the floor, his head
in an iron waste basket and a revolver in his right hand.
Mr. Martin informed William J. Burns, who also lived at the Wardman
Park Hotel, and Burns took charge of the body. No autopsy was ever
performed.
The Select Committee of the Senate on Investigation of the Attorney
General began its dramatic hearings on March 12, 1924, in Room 410 of the
Senate Office Building, with Senator Burton K. Wheeler, of Montana,
conducting the inquiry and Senator Smith W. Brookhart as chairman.

At the same time Senator Wheeler's senior colleague from Montana,
Senator Walsh, was completing his extraordinary investigation of the
Teapot Dome scandal in the large caucus room of the same building.
Meanwhile, Daugherty's old friend Harding had died suddenly and
had been succeeded in the White House by the canny, taciturn Coolidge,
of whom Daugherty remarked in his book: "He is a man of friendly,
peaceful instincts." Calvin Coolidge

had inherited a pigsty from the care-
less, jovial Harding, and he had to move warily in order not to splash
on some of the most important members of his party, whose services

filth
he would need in his coming campaign for re-election in November, 1924.

On February 8, 1924, Senator Walsh had demanded in the Senate that
President Coolidge should ask for the resignation of Secretary of the Navy
Denby, but the President refused to do so; the tractable Denby, however,
had resigned voluntarily a week later. Daugherty was a much harder
nut to crack. It was obvious that his presence in the Cabinet of Harding's
successor was an embarrassment and a handicap, but he refused to resign
under and the problem of getting rid of him without accusing him
fire,
of guilt which had not yet been established was a difficult one. And, after
all, Harry Daugherty was a leader in Republican politics in Ohio, and
Coolidge was a man of peaceful political instincts.
On January 29, 1924, Senator Wheeler had introduced a resolution
in the Senate calling for Daugherty's resignation. On Sunday night,
February 17th, there was a conferenceWhite House between
at the
President Coolidge, Senator Borah, and Harry Daugherty. Borah did
most of the talking, and he suggested to Daugherty that he should resign.
Daugherty refused to do so while he was under fire. Then two Republi-
can brahmins took a hand in the negotiations; Borah was a Republican
maverick, but Senator Lodge and Senator Pepper were regulars, and
they called on President Coolidge and suggested that it would be well
for the Republican Party if he were to ask for Daugherty's resignation.
But Coolidge was still reluctant to make political enemies. Senator Borah
then had another conference with the President and demanded that
Daugherty be removed on the grounds that he could not be an impartial

Cabinet adviser while he was being investigated and criticized in the
Senate. Coolidge refused to remove Daugherty.
Towards the end of February, President Coolidge and Daugherty had
three conferences within twenty-four hours, and the press correspondents
noted that the Attorney General appeared to be "extremely nervous,"
but defiant. It was rumored at the time that, in these conferences with
Coolidge, Daugherty was practically incoherent and that the meticulous
President had a hard time keeping his spluttering Attorney General to
the point. Then Daugherty suddenly rushed away from Washington,
making a defiant statement first that he would not resign, and leaving
behind him at the Department of Justice another statement to be issued
to the press in the event that President Coolidge dismissed him.
Daugherty went to Chicago, and he was reported to have ridiculed the

Senate oil investigation in the smoking room of the train before crowds of
travelers. It was said that he had gone to Chicago on Department of Justice
business connected with the indictment of Colonel Charles R. Forbes for
fraud in the Veterans' Bureau. But Daugherty did not remain in Chicago
long and soon afterwards went to Florida for ten days on personal business.
The newspapers reported that he continued to ridicule the Senate investi-
gations in the smoking rooms of trains.
Meanwhile, on February 29th, the Senate had passed its resolution

calling for an investigation of the Attorney General,
and the Wheeler
committee was getting ready to hear public testimony. The Republican
were in a panic, for the Attorney General was obviously their
politicians
most vulnerable point; Teapot Dome was bad enough, but, after all, Fall
and Denby were out of the Cabinet. The effort to get Daugherty to come
to the aid of the party and resign went on all during March. Then on
March 12th the Wheeler committee held its first public hearings and
heard the startling testimony of Roxy Stinson, divorced wife of Jess Smith.
A succession of bootleggers, go-betweens, detectives and businessmen were
heard, and every day the revelations established more clearly the nature
of the Department of Justice under Daugherty. Finally, on March 27th,
President Coolidge wrote to Daugherty:
You have a personal interest in this investigation which is being

made of the conduct of yourself and your office, which may be in con-
flict with your official interest, as the Attorney General. I am not

questioning your fairness or integrity. ... I do not see how you can
be acting for yourself in your own defense in this matter and at the
same time and on the same question acting as my adviser as Attorney
General.
This letter came after Daugherty had refused to open the files of the
Department of Justice to the Senate investigating committee on the

grounds that government secrets would be revealed if he did so. This
was the same kind of evasion Secretary Fall had clung to when he kept
repeating that he was not one to reveal the military secrets of the United
States. On March 19, 1924, one week after the investigation of Daugherty
began, the Department of Justice gave out the following statement to

the press: "The constantly increasing amount of business which the De-
partment of Justice is compelled to take care of makes it impossible for
the Attorney General to give much personal attention to the various
investigations now being conducted by Congressional committees."

Daugherty replied to President Coolidge's letter of March 27th:
I can not escape the conviction, Mr. President, that your request
for my resignation is also most untimely. It comes at a time when the
truth is banishing falsehood from the public mind, even though I have
not as yet had an opportunity to place upon the witness stand before
the Senate committee a single witness in my defense or in explanation
or rebuttal of the whispered and gossipy charges against me.
He was forced, however, to forward with this protest the resignation

which President Coolidge had been compelled to request. After his dis-
missal Daugherty told the reporters that he contemplated a trip to France
to look over the battlefields.
In the book which he and Thomas L. Dixon wrote in 1932, Daugherty

tried the old dodge of accusing his accusers of Communism and of under-
mining the foundations of the Republic. He called Senators Brookhart
and Wheeler the associates of Communists, and wrote: "I think now as
I thought then, that Wheeler and Brookhart were
extremely anxious to
secure [from the Department of Justice] and destroy the secret records
of their visit to Soviet Russia." And he added: "Borah, of course, found

himself in a position in which he could not antagonize the chief repre-
sentative of Soviet Russia on the floor of the Senate. He had himself
introduced the resolution for the recognition of the Soviets. . . Up to .
this time I had counted Borah, one of the men of

big brains and powerful
personality in the Senate, my friend. I was to find now that I had hope-
lessly alienated him by the aid I had given to Secretary Hughes in his
fight against the resolution on Soviet Russia." Daugherty claimed that,

at the personal and confidential suggestion of Secretary of State Hughes,
he had given out to the newspapers the statement that here was evidence
of Communist propaganda directed from Moscow in the United States.
In his book he portrays this touching scene between himself and the Secre-
tary of State at the next Cabinet meeting after Daugherty's statement on

Communist propaganda. Hughes, he writes, took his hand and said:
"
"You're a brick." 'No,' I answered, 'I
just play ball with the fellows on
my team.'"
I believed then, as I firmly believe now [Daugherty wrote] that

Soviet Russia is the enemy of mankind. That unless the forces of
civilization stamp out this nest of vipers who have enslaved a hundred
and sixty million human beings, our social system as well as our form of
government will perish from the poison that is being poured into our
vitals.
Soviet agents are busy today as they were at that time, poisoning
the hearts and minds of the youth and manhood of every nation of
the earth. These madmen have launched a new religion with which they
have set out to conquer not only America but the world. And every
nation of Europe and Asia is
today trembling at their approach.
In this new Paradise of Communism, the human race is reduced in
theory and practice to the level of a herd of hogs. I call it the lowest,
the most degrading, the most bestial nightmare the human mind has
ever conceived.
Then Daugherty and the author of The Clansman go on with a de-

scription of Soviet Russia which was obtained from the accounts by
Henry Wales, a newspaper correspondent, of his trip to that country,
and they add:
And a growing number of morons are gathering around the Red

Rag lifted symbol of the Brotherhood of Man!
in our country as the
If these people are so enamored of Russia and her new scheme
of life why do they not migrate to her vast, undeveloped reaches of
territory, and leave to honest Americans the inheritance of their
fathers?
"I was the first public official that was thrown to the wolves by orders of
the Red borers of America," Daugherty wrote. "The object was not only
to intimidate me but all those who followed in the office of Attorney
General. Again I repeat: 'Eternal vigilance is the price of liberty.'" But
by 1932 the Red herring was so old that it did not even smell, and
Daugherty's book was soon selling at cut rates in the drug stores. Honest
Americans had received some light on what Americans like Harry
Daugherty were doing to the inheritance of their fathers. The Senate

committee investigating Attorney General Daugherty's administration
made valuable contributions to that insight.
ROXY STINSON was a witness on the day before the committee. She had
first
lived for most of her life in Washington Court House, Ohio, where she
was graduated from the local high school. Her mother was a music
teacher in Washington Court House, and Roxy Stinson went abroad to
study music. When she came back, Jess Smith, who ran the local depart-
ment store, became interested in her, and they were married in 1908.
The marriage lasted one year and a half, and Roxy Stinson was granted
a divorce in 1910. She lived thereafter in an apartment above Jess Smith's
store,and the town gossips didn't approve of their seeing so much of each
other after their divorce; as a result Roxy Stinson was denied member-
ship in a local golf club.

Jess Smith continued to be devoted to Roxy Stinson until the end of
his life.advised her about the gentlemen who were interested in her
He
from time to time, and, she testified, he knew all about her friends and
referred to her relations with them in his letters. During the Harding
campaign she was frequently present with him and Daugherty and their
friends at exuberant conferences and gatherings in Ohio. After Jess Smith
went to Washington as steward-politic to his friend Harry Daugherty,
he communicated with his former wife and friend every day either by
letter or telegram and sometimes called her on the telephone. Frequently,
he made trips back to Washington Court House and spent much time
with her talking about "the doings in Washington," as she expressed
it. When
he was back in Washington Court House with Roxy Stinson,
Jess in constant communication with Harry Daugherty in
Smith was
Washington, just as when he was in Washington with Harry Daugherty
he kept in constant communication with Roxy Stinson at Washington
Court House. The two men called each other often on the telephone and
sent frequent telegrams when they were separated.
"What would be the tenor of those telegrams?" Senator Wheeler

asked Miss Stinson.
"The personal ones were that Harry Daugherty would express his
lonesomeness without him," she answered, "and hoped that he would

return soon, or at different times he hoped it would be convenient
for him to come Monday, or soon, always suggesting coming back."
When Jess Smith came to see her in Washington Court House, Roxy
Stinson told the Senate committee, Harry Daugherty was "the first thing
we talked about and the last thing." At one point in her examination
she remarked: "The topic of conversation, Mr. Daugherty." "Why, Jess
Smith was a great admirer of Harry Daugherty all his life long," Miss
Stinson said. "I think he was his ideal."
"He was in constant touch with Harry Daugherty," she testified.
"They They were most intimate friends, and Jess adored

lived together.
him. He wanted to shield him in every possible way. He lived for him,
he loved him. He had not been here in Washington more than three or
four months until he said, 'I am not made for this. This intrigue is
setting me crazy. If I could just come home, but I am in now and I

"
have to stand by Harry.'
She also said that Jess Smith had been offered positions in the govern-
ment but that he always refused them "He always answered that he was
:
not an office seeker, he was just here to help Harry. His only interest
. . .
was in Harry Daugherty." According to another witness, Jess Smith also
cared tenderly for Mrs. Daugherty, who had been an invalid for many
years. Roxy Stinson testified that Harry Daugherty

had trouble sleeping
and always wanted Jess Smith to sleep in the same room with him. When
they first came to Washington together, they lived in the house at 1509
H Street, which "Ned" McLean had lent to them. But the neighborhood
was too noisy for Daugherty, and after about a year and a half, they
moved to a suite of seven rooms at the Wardman Park Hotel. When
they moved from the McLean house, Jess Smith sent Harry Daugherty 's
bed to Roxy Stinson, as they did not have room for it or need for it in their
hotel apartment. "This is one grand bed," he wrote her, "and you can
certainly enjoy it."
Sometimes Roxy Stinson became exasperated with Jess Smith's attach-

ment for Harry Daugherty, and she expressed her annoyance in her
and telegrams when she wanted Jess Smith's advice and company
letters
herselfand he had to be with Harry, nursing him through the illness

which he suffered early in 1923. When Jess Smith and Daugherty were
down in Florida in March, 1923, staying with "Ned" McLean and join-
ing President Harding's party, Roxy Stinson telegraphed him on March
24, 1923:
Miserably cold here. Won't you be home for Easter? With Mai there,
why do you have to stay? Why is all responsibility put on you always?
Nothing new here. Same old humdrum; wish weather would let up. Best.
ROXY.
Jess answered that he, too, was eager to get away to see her for Easter,
and was doing his best to manage it, but later he found that he could
not make it, and she telegraphed her exasperation:
Have most important deal on. You must get home as quickly as
possible. Time is limited. May have decisive developments tomorrow.
I need you right now when opportunity knocks, not when agreeable or
convenient to your friends. My patience is threadbare with this con-
tinuous and perpetual situation. Think you might get short leave of
absence to say the least. Best.
ROXY.
He finally got back, but not until the Monday Sunday, when
after Easter
he met Roxy Stinson in Columbus, Ohio. Jess had gone with his friend
Harry to Asheville, North Carolina, and from there he sent Roxy Stinson
arbutus to plant around the house she was building for her mother and
herself, and he also offered to send her some Biltmore homespun for
a suit.
Jess Smith was also very nice about giving Roxy Stinson money, she
testified. "I never asked him for money," she said, "it was not necessary,
he was so nice about it." He sent her checks for $250, $350 or $500 from
time to time. He also gave her securities which he had received for noth-
ing or had bought. Sometimes, she said, he sent her a $100 bill or a $500
bill "just loose in an envelope." "I have had $500 bills in a letter quite
frequently," Miss Stinson testified. "And when he would be home he

would give me $500 bills or $100 bills, a lot of them."
Roxy Stinson testified that she received much more money from Jess
Smith he came to Washington with Daugherty than she had ever
after
received before. "He had very much more money than he was accustomed
to having," she testified. When asked whether Jess Smith had talked to
her about his financial affairs before his death, Roxy Stinson answered:
"I had heard nothing else for six months." He also told her that he owned
stocks, which were "given to them," Harry Daugherty and himself. "He
always said that he would share with me," Roxy Stinson testified, "and
he was always very nice to me. There wasn't any arrangement by which
he would give me a fifth or a tenth or anything of that sort, but, as he
would often remark, 'We are all very much better off than we have ever
"
been before.'
"I also wish to add," Miss Stinson testified, "I had seen seventy-five
$1000 bills in Jess Smith's possession. . . . Mr. Hays [William R. A.

Hays, of the stock brokerage firm of Ungerleider & Company] told me
himself that Mr. Smith told him he had it in a belt around his waist.
But I saw them because he showed me the money."
"Seventy-five $1000 bills?" Senator Wheeler asked.

"Yes, sir."
"When he showed them to you what, if anything, did he say in

reference to them?"
"Nothing."
"Did he say anything at all when he showed them to you?"
"No; because was after I got to not want to know."

that
"How come to show them to you?" Senator Jones asked.
did he
"Well, he would just tell me about different deals and of money
they would make."
"By 'them' whom do you mean?" Senator Ashurst asked.
"Mr. Daugherty and him."
"Mr. Harry M. Daugherty?"
"Yes, sir."
"When he showed you the seventy-five $1000

bills where had he
been; where had he come from?" Senator Wheeler asked.

"He had come from Washington."
"He had brought them with him in his belt from Washington?"
"Yes, sir; apparently."
"It was not in a black satchel, was it?" Senator Ashurst inquired
facetiously.
"It was not," Miss Stinson answered. "I did not see it in a satchel."
Miss Stinson also testified: "I was given stock to put on the market
quickly and quietly. From the time of the inauguration up until his
. . .
death." She sold 25 shares of White Motors stock "quickly and quietly"
for Jess Smith, who delivered the stock to her without any name filled
in for the holder of and without any endorsement on it. Jess Smith
it,
told her that he and Daugherty had got the White Motors stock for
nothing, and that the 25 shares were only part of what the two had re-
ceived without paying for it. He also gave Roxy Stinson stock in Beaman
G. Dawes's Pure Oil Company. Jess Smith had several accounts at bro-
kerage houses, Roxy Stinson testified, and besides his other accounts he had
one at Ungerleider & Company inWashington called "William R. A.
Hays No. 2." Roxy Stinson also had a blind account at Ungerleider &
Company known "William R. A. Hays No.
as 3."
Gaston Means testified that he had often seen Jess Smith in Daugherty 's
the Department of Justice at Daugherty's desk, getting stock
office at
market reports over Daugherty's private wire. Means said that he had
tried to catch the names of the stocks himself, so that he might speculate
in them and tip off his friends, but that Smith and Daugherty abbreviated
them with the brokers so that no one could tell what they were trading in.
"And you have seen him take the reports of the stock market off of
the telephone and give them to the Attorney General, have you not?"
Senator Wheeler asked Mr. Means.
"I was never in there when he didn't get reports from the stock mar-
ket," Means answered.
"He was constantly getting reports from the stock market, was he
not?"
"That is true. . . . Yes, Jess would write them down. How I know
they were stock market quotations, Iwould see the memorandum there,
and then when the telephone bell would ring Jess Smith would read
them back to the Attorney General."
Roxy Stinson told the committee: ". and I found the less I asked . .
questions the more he talked about things, so I asked very few questions.
I have asked one or two pointed questions which he answered me."
"Well, now, for instance," Miss Stinson would not presume

testified, "I
to ask him any direct questions, and I am a too, because I had

woman,
been taught that he did not do that, and I had gained that from him.
I did ask him, on a deal he told me about here in Washington, D. C.,
if he had profited by it."
"What deal was that?" Senator Brookhart asked.

"He said that five men in the past few days had made $33,000,000, and
I said, 'Were you in on it?' Or rather, my exact words were, 'Were you
and Harry in on it?' He said, 'No; that is what we are sore about. They
"
were our friends too.'
"Who were those men?" Senator Brookhart asked.

"I am not sure that I can remember."
"Was E. B. McLean, of the Washington Post, one of them?"
"I am not right sure now that I remember."
"What was the character of the deal; did he tell you?" Senator Jones
asked.
"Yes, sir."
"What was it?"

"It was an oil deal."
"What oil?"
"Sinclair oil."
"When was this?" Senator Moses asked.
"I would say in fact, I can't tell you the exact date, but it was in the
fall of 1922."
Evidence was introduced at the Teapot Dome investigation that in the

fall of 1922 Jesse L. Livermore, stock market gambler, had organized a
pool in Sinclair stocks for Harry Sinclair, Blair & Company and the
Chase Securities Corporation.
By means of his influence in Washington, Jess Smith obtained a free

trip for Roxy Stinson and her companion, Mrs. Oldham, to Panama,
as guests of the United Fruit Company in March, 1922.
"And you were upon that trip?" Senator Wheeler asked.

entertained
"Royally. . . . We
were given the suites. The same suites that
. . .
were given to any of their honored guests. We were entertained

. . .
at every port by the United Fruit Co. people afterwards, you know. We
were really treated very nicely. Too nicely."
While she was in Havana, Jess Smith called her on the telephone. "Got
my bill today for $52.50," he wrote afterwards, "but it was worth it."
When Roxy Stinson's cruise ended at New York in April, 1922, Jess
Smith met her there, and they stayed at the Waldorf-Astoria Hotel. Joe
Weber, she gave them free tickets to any theaters they wished to
said,
visit. Miss Stinson overheard a conversation between Joe Weber and Jess
Smith about a pardon for Joe Weber's brother-in-law, who was in prison.
Jess Smith told her, Miss Stinson testified: "He wants his brother-in-law
out of jail," that he and Daugherty got a lot of such appli-
and he added
cations. "He
awful cheap," Jess Smith said to Roxy Stinson, referring
is
to Joe Weber. "But," he added, "I think we are going to do something
for him." "He is awful cheap and wants something for nothing," Jess
Smith remarked.
when they got back from New York, Jess Smith fell
In May, 1922,
illwith appendicitis, and he was very anxious that his friend Harry
Daugherty, the Attorney General, should come to Columbus, Ohio, for
his operation:
"At the time of this sickness of Jess Smith," Roxy Stinson told the
committee, "when he was quite ill and when there was very much doubt
about him living, I did not see any indication that Harry Daugherty
was coming for his operation, and he was in Washington. Jess Smith
adored Harry Daugherty. ... I asked him on Wednesday, 'Is Harry
coming for your operation?' And he choked up with tears in his eyes
and said, 'Why, no; I could not expect him to come for just me. He has
important matters on now.' I could see that that hurt him a lot, and I
determined I would try to get Harry Daugherty there in some way."
A day or two later Roxy Stinson was at the Hotel Deschler in Columbus,
and she met Draper Daugherty, Harry Daugherty 's son, who asked her:
"Is there anything I can do for you?" "I said, 'Yes, there is. I want you
to send word to your father to be here for Jess's operation, and tell him
"
I said so.' Draper Daugherty managed to get in touch with his father
about Jess Smith's operation.
"He did come," Roxy Stinson testified, "but I never told Jess, because
I did not want to hurt his feelings by letting him know that Mr. Daugh-
erty was sent for for the operation. ... I never told Jess that Harry
Daugherty had been sent for to come to his operation; but he was so
pleased that he cried like a baby when he came into the room."
After he had been operated on for appendicitis, Jess Smith was very
fond of talking about his operation. "He was always telling about that,"
Mr. Duckstein, McLean's secretary, testified. "He showed it to me at
one time."
The day after she gave her first testimony Roxy Stinson telephoned to
the committee that she had a nervous headache and could not appear.
But she testified again later. Meanwhile, Harry Daugherty and his associ-
ates did their best to malign her character and to indicate that she was
malicious and disappointed because she had not been the sole heir of Jess
Smith. These attacks caused her to become ill, Senator Wheeler claimed,
and he told the committee:
"And I say if ever a man stooped to a cowardly, low-down trick, it

was the Attorney General of the United States when he made that
attack. . . .
Nobody has attempted to go into his private lire; nobody has
wanted to go into his private life. And yet we could, possibly, if we
wanted to. Nobody has wanted to besmirch the character of any woman
in this case, and it remained for the Attorney General to adopt that kind
of tactics in this case."
Roxy Stinson was not a voluntary witness, and she 'had done nothing to
bring herself into the limelight, but, in fact, had resisted previous efforts
to get her to tell what she knew, until she was subpoenaed to appear
before the Senate committee. On the witness stand she told her story with
dignity and convincing detail; she volunteered nothing until she was
asked questions, and then told what she knew straightforwardly. Un-
fortunately for them, Harry Daugherty and his associates had antagonized
her by their petty tactics.
When Jess Smith died, there was an account at the brokerage house of
Ungerleider & Company, known
"William R. A. Hays No. 3"
as the
which had a balance of $11,000. Roxy Stinson claimed that this was an
account which Jess Smith had opened for her, and that everybody closely
connected with that to be so. But Mai S. Daugherty, who was a
him knew
banker at Washington Court House, and together with his brother Harry,
coexecutor of Jess Smith's estate, insisted that this money belonged to the
entire estate. Mai Daugherty Roxy Stinson, she testified, that he
told
was perfectly satisfied in his own mind that the money belonged to her,
but that it must go into the estate. She wanted the money, she testified,
to pay for the house she was building for herself and her mother.
The will of Jess Smith which was offered for probate was one he had
made a long time before his sudden death. A new will written on Ward-
man Park Hotel stationery by Jess Smith the Monday before the Wednes-
day on which the bullet killed him, was found on his person. This will
was said to have provided that most of his estate should be given to
Roxy Stinson and other relatives, but there were no witnesses to it, and
therefore it was regarded as invalid and never even submitted to the
court for inspection. The will which was admitted to probate named
Harry and Mai S. Daugherty as executors and left $25,000 to each of them;
it also left $25,000 and his Cole sedan automobile to Roxy Stinson. Jess
Smith also had a box of diamonds, and he left one to Harry Daugherty,
one to Mai Daugherty, one to Edward McLean and one to John T.
B.
King, Republican politician of Connecticut, who was alleged to have

been associated with Jess Smith and Daugherty in corrupt deals. His
antique rosewood desk Jess Smith left to Mr. and Mrs. Edward B.
McLean. He also left $2,000 to the B. P. O. Elks of Washington Court

House to build themselves a clubhouse there and $1,000 to the First
Presbyterian Church of Washington Court House. Miss Mary Yeager,
Jess Smith's stenographer, testified: "Mr. Smith was himself a prominent
Elk; he had visitors from all over the country who were sent to him by
various Elks."
Roxy Stinson sued in the probate court for the $11,000 in the "William
R. A. Hays No. 3" account. She then had a two-hour conference with
Mai Daugherty at the Deschler Hotel in Columbus. She told him that
if this little lawsuit for $11,000 were permitted to go into court, it would
bring up other things which he and Harry Daugherty might not like to
"
have revealed. "He said," Roxy Stinson testified, 'Of course, I do not
know anything about that.' I said, 'Well, of course you do know about the
"
large sums of money deposited in your bank?' He said, 'Yes; of course.'
Just before this conversation the Daugherty s had antagonized Roxy

Stinson further by a clumsy attempt to "frame" her, she testified. In
Cleveland in February, 1924, she met a man named Fink, whom she and
Jess Smith had known for many years. The purpose of the meeting was
to discuss a stock deal. Fink had hired a hotel room in Cleveland forRoxy
Stinson under an assumed name, and as soon as she realized this she was
very angry and moved to another hotel, registering in her own name.
Before this time, she testified, she had been followed in Columbus by
detectives, and she knew that her telephone conversations were being
listened to. After Roxy Stinson's firstappearance before the Senate com-
mittee, Harry Daugherty made the statement that she and a man had
occupied the same hotel room together in Cleveland. It was this statement
that called forth Senator Wheeler's denunciation of the "cowardly, low-
down trick" of the Attorney General.
Roxy Stinson testified that she asked Sam Ungerleider and Fink why
the Daughertys did not come and talk with her, if
they had anything to
say about her claim to the $11,000.
"
'They don't want to talk to you,' Ungerleider answered, 'they just
want your promise not to say anything or conspire against Harry Daugh-
erty.' Ithen made this answer, 'I have been asked for months to talk
about Harry Daugherty. I have not done so to anyone whatsoever,
as I have told Mai Daugherty; but you may go back to your friends and
tell them also, as I have told Mai Daugherty, and with my compliments,
that if I am subpoenaed at Washington I shall tell everything I know.

It is a frame-up, and I am going to tell them so.' Ungerleider said, 'I
wouldn't do that. You know Harry Daugherty is a pretty stubborn man.'
'So am I, not going to strong-arm me. I am not Jess Smith, and
and he is
"
there is not going to be a convenient bullet in my head,' Roxy Stinson
said she answered.
Before Sam Ungerleider left the room, Roxy Stinson asked him: "Shall
I see you again?" "I hope never you again," he answered.
to see
When she left Cleveland, Roxy Stinson was followed from the Statler
Hotel:
"I remember the gentleman as plain he was a nice looking gentleman

too, very nice," she told the Senate committee. "I was followed from my
room down the elevator. I don't know whether he was in a taxi in front
of me or behind, but he was at the station. He followed me on the train,
and I didn't have a reservation, and I had to take a day coach, and I
missed him some place, I think he took the smoker apparently."
In the statement which he made after Roxy Stinson had testified before
the Senate committee, Daugherty branded her as "a malicious woman
because the friends of the Attorney General have brushed aside and disre-
garded all her tentative efforts to capitalize her silence." She retorted that
his statement was "utterly false" and told the committee that people had
been trying to get information from her for months, that she had been
offered money for her information and had always refused. She said that
a young man, claiming to represent the Associated Press, had called at her
house one morning before she was out of bed. She asked through the door
who he was and what he wanted. He asked her questions about Teapot
Dome and Sam Ungerleider and tried to get her to talk. She dressed,
signaled to a neighbor who lived upstairs to come down as a witness and
let the reporter in. She told him that she knew nothing about Teapot
Dome and would not talk about Daugherty, as she was in litigation with
the Daugherty brothers. He then said that his name was Lyle Johnson,
and that he had been sent from Washington.
"
"I said," Miss Stinson testified, 'If I know anything, I don't want
to get mixed up in this sort of an affair; I don't care anything about it.'
He said, 'Well, Miss Stinson, if you will just give me a lead about where
to go to find evidence, I will give you a thousand dollars.' And I laughed
at him. I said, 'I might use a thousand dollars to great advantage, but
"
you are talking foolish to me.'
Then one day in March, 1924, Senator Wheeler came to Roxy Stinson's
door with a subpoena.
"And Senator Wheeler came to

my door," Roxy Stinson told the com-
mittee, demanded credentials, to know whether it was him or
"and I
not. I didn't know what a subpoena was. It was 'forthwith.' I said,

'Don't you want to talk to me first; maybe it isn't of any consequence?'
He said, 'Yes; I will talk with you.' I said, 'Do I have to go anyway?'
"
He said, 'Yes.' Then won't talk to you.'
I said, 'I
On the train en route to Washington Roxy Stinson told Senator Wheeler

what she knew of the and personal, between Harry
relationship, financial
Daugherty and Jess Smith and then told her story to the Senate committee.
"Well, he performed a very splendid public service in forcing you to

come," Senator Ashurst told Miss Stinson after she had finished her
"
testimony, "and you are doing a service in coming
"And I am the martyr," Miss Stinson interrupted.
BEFORE President Coolidge asked for Attorney General Daugherty's

Roxy Stinson and Gaston B. Means had both testified to the
resignation,
between Jess Smith and Harry Daugherty in a financial

close relationship
and personal way. As the investigation proceeded, the details of deals in
which the two men and others were alleged to be involved were revealed.
"Mr. Smith was one of Mr. Daugherty 's partners, was he not?" Sen-
atorWheeler asked Miss Stinson.
"Oh, no," Senator Moses protested.
"I say,he was one of Mr. Daugherty's partners, was he not?" Senator
Wheeler persisted.
"In law?" Miss Stinson asked.
"No; in crime," Senator Wheeler remarked. "He was one of the

partners of Mr. Daugherty in these different deals that were pulled off?"
"Yes, sir."
"Let me ask you, how do you know that?" Senator Jones asked.
"I have his word for it," Miss Stinson answered.
"Mr. Daugherty's word?"
"No; Mr. Smith's words."
"Your knowledge of that comes from Mr. Smith?"
"Yes,sir; and the results of money."
Daugherty's and Smith's living expenses in Washington were very high,

according to what Jess Smith told Roxy Stinson:
"He said that it was a fright the expenses they had. He also said time
and again that he paid half the living expenses of the household. I never
thought that was quite fair, and I expressed myself, and he said, 'Oh, that
is all right.' . . .
They were interested in things jointly, and he felt that
he was able to pay his part through the remunerations he would get. He
felt that he could afford it."
"What did his part amount to, do you know? What did he ever tell
you that his part of the expenses, or his living cost here, amounted to?"
"It cost considerably over $50,000. 1 don't mean individually, you under-
stand, but their expenses ran very high. ... It cost them over $50,000, he
expressed himself, to that extent. ... A year."
Walter De Marquis Miller, a negro butler who had worked for "Ned"
McLean, was turned over to Daugherty and Smith along with the H
Street house and Emma Parker, an aged cook. Mr. Miller testified that
Will H. Hays, Thomas B. Felder, Howard Mannington and Colonel
Darden were frequent visitors at 1509 H
Street. President Harding had
a habit of dropping in occasionally. Harry Sinclair was there whenever

he was in Washington, Miller said, and Secretary Fall was a very welcome
visitor: "He would come any time," Miller testified, and he added that
Fall often stayed to meals. Later when Daugherty and Smith moved to
the Wardman Park Hotel, Fall had breakfast with them whenever his
family was out of town. Sinclair came to meals often, Miller said, and
gave him tips "in two figures."
"What did they do when he [Sinclair] came up there, generally?"

Senator Wheeler asked.
"They discussed their business, as any gentleman calling on another

would do," Miller replied.
"Frequently hold conferences there?"
"I say sure."
Colonel Forbes was another frequent visitor at the Daugherty-Smith
menage, and General Sawyer was also a welcome guest, "any time he saw
fit,"according to Miller, "a fine gentleman." Colonel Miller, the new

Alien Property Custodian, who had in his charge millions of dollars of
confiscated war property, Mai Daugherty and Alexander P. Moore were
frequent visitors. Before Richard Washburn Child was appointed Am-

bassador to Italy, he was said to have visited Daugherty and Smith at
the H Street house, and William J. Burns came there just prior to his
appointment head of the Bureau of Investigation. John Ringling, the

as
circus man, came there to arrange for his circus to pitch its tent on a
plot of ground in Pittsburgh owned by Andrew W. Mellon and his

family. J. Ogden Armour was a frequent visitor, and the Washington
branch of Armour & Company were said to have supplied the Street H
house with hams, bacons and other products free of charge. "Bill" Orr,
of New York, was said to have brought liquor to the Street house H
frequently in suitcases. Miller said that they kept it in
unlabeled bottles
in the safe in the wall, which John R. McLean had used for his important
papers. Howard Mannington, who kept the Little Green House on K

Street, where the Harding administration officials were alleged to havt
held their drinking and poker parties, and where men were said to go
who wanted to put through various kinds of deals with the government,
was also a regular caller at the H Street house. "Every time I went to the
door and seen was Mr. Mannington," Miller testified, "I didn't have
it
"
to go back and report. I said, 'Come on in.'
When he first came to Washington, Jess Smith asked Miller, the

butler, where the best stock brokerage house was, and Miller told him
to go to Hibbs & Company. Miller would also "get the market" often
for Jess Smith on the telephone.
W. O. Duckstein, McLean's secretary, testified that he would not call
Jess Smith's way of life extravagant: "He lived as a gentleman should

who had money."
"What position, if any, did he occupy with Mr. Daugherty after Mr.
Daugherty was selected as Attorney General?" Senator Wheeler asked
Roxy Stinson concerning Jess Smith.
"Bumper intimate friend," she answered.
Jess Smith had a desk outside Daugherty's suite on the sixth floor of
the Department of Justice, where he sat, like a faithful St. Bernard dog,
and warded of! undesirables or entertained the useful. William A. Orr
testified that Jess Smith would get the railroad reservations for his friend
Harry, "hold his overcoat; yes, anything." Smith impressed Orr as "more
like a military secretary" than anything else. He was not on the govern-
ment payroll, but he usually traveled on Department of Justice transpor-

tation orders, according to Roxy Stinson, "for a long time, and then he
stopped that."
"Was Jess Smith on the pay roll of the Department of Justice?" Senator
Ashurst asked Miss Stinson.
"No, sir."
"He was not a dollar-a-year man under Mr. Burns?"

"No, sir."
"Well, how did he get those orders for transportation?"

"Look who he was."
"What was that answer?"
"Look who he was."
"Oh, I see."
Everybody around the Department of Justice called him "Jess" and he

quickly called people by their first names; he loved to refer to the Presi-
dent as "Warren" and to exhibit his familiarity with the great ones of the
moment. At every opportunity Jess Smith got his picture taken standing
Warren Harding.
or sitting next to
At the Department of Justice, Jess Smith was credited with "having the
hiring and firing of all employees," Pierce Miller, a newspaperman who
covered the Department of Justice testified.
"He seemed to be in full command whether Mr. Daugherty was there

or not," Pierce Miller also "because Mr. Daugherty would shut
testified,
himself up in his office, and he was almost unapproachable. You couldn't

get in there very readily. Jess had three means of access to the Attorney
General's office, either one of which he would use without being an-
nounced. . . . He had perfect freedom in the building."
According to other witnesses, Jess Smith had access at any time to the
Department of Justice files, and to the minds of most people who had to
do with the Department of Justice. Pierce Miller testified, Jess Smith
"was in a higher position than any of the Assistant Attorneys General."
John W. H. Crim, First Assistant Attorney General under Daugherty,
testified:
"What did you understand was Mr. Smith's relation to the department,
Mr. Crim?" Senator Jones asked.

remember very distinctly, Senator, why my curiosity was aroused,
"I
and think I had better tell it. I met Mr. Smith somewhere casually;
I
was introduced to him. A day or two afterwards I was walking from the
Shoreham Hotel to my office when I met Mr. Smith. He stopped me,
and in a very abrupt way said, 'John, do you know Warren well?' I was
thunderstruck, and went back to the department and made inquiry as to

who he was. . . . He had no mental capacity of his own, no ability. I
supposed that he was a hanger-on, a good-natured fellow, and that the

Attorney General used him to run errands and that he was particularly
valuable in the Attorney General's home when the Attorney General was
absent."
Mr. Grim testified that he did not believe that Daugherty was crooked,
or that he knew that his best friend, Jess Smith, was taking money from
various people for favors he rendered to them, ranging from permits to
withdraw liquor during Prohibition to exemption from prosecution for
crimes and pardons from prison after they had been convicted of crimes.
But if we are to believe that Harry Daugherty did not know that Jess
Smith was taking money, as he himself maintains in his book, and as
Grim testified, we must first believe him to have become much more
obtuse than he had ever showed signs of being in the history of his
astute career. He lived with Jess Smith, saw him at the Department of
Justice most of the time when Daugherty himself was there, carried on
stock market operations with him, and shared his living expenses with
him. It is hard to imagine that Daugherty could have thought that Jess
Smith was paying his half of the expensive Washington living on the
proceeds of the sale of his small department store in Washington Court

House and his other, comparatively meager, possessions.
Mr. Grim admitted that Daugherty was easily amenable to outside
influences :
"Senator, let me put it this way," he testified. "I went in that room
[ Daugherty 's office] a number of times I expect I saw him less than
any other assistant, but I went into thatroom a number of times, and if
I did not convince him I was right I would say, 'Let us adjourn it until
I more facts.' I never acted on anything that I recall at this moment
get
by and with his consent and approval that it was not generously and
freely given after I had gotten through with him. The other side would
get in there. He would listen to them. They would get in in every way.
And very often he would look at me, or he would send me a note indi-
cating to me that they had all been around, but he was very glad that I
was going along, and he was sorry that he could not help me to push it
a little further, to go ahead."
Mr. Grim also testified: "There were times when I would have raised
more dickens with them than I did if the Attorney General had been
right there, a well man. There were times when he was ill and in bad
shape, and I hesitated to take up matters with him." Another witness
testified that Daugherty in the afternoon usually disappeared to his
apartment in the Wardman Park Hotel to rest.

L. J. Bailey, who had been in the Department of Justice since 1908,
and who was acting chief of its Bureau of Investigation when Daugherty
took office, testified that he had never known anyone in the department
to occupy a position similar to that occupied by Jess Smith. He also said

that Attorney General Daugherty had told him that he was too busy
to see him much, but that he would get his orders through Jess Smith,
that Jess lived with him and would talk matters over with him at night.
Anyone who was removed from a position was removed at the request
to be
of Jess Smith, testified, and usually the post was filled by Jess
Mr. Bailey
Smith's appointee. "Everybody around there," Mr. Bailey testified, "recog-
nized him as a man they better pay attention to. They figured he was the
most powerful man there outside of the Attorney General. At least that was
the opinion of the people I heard discuss the matter." "Everybody that
I ever heard talk about understood that they should do whatever he
it
told them to do," Mr. Bailey added.
Former Senator George E. Chamberlain, who acted with Paul How-

land as Daugherty's counsel at the investigation, denounced the testimony
of the relationship between Daugherty and Smith as "hearsay testimony."
Senator Smith W. Brookhart, chairman of the committee, then said:
"Let me say this, gentlemen. It is a rule that is as old

as the criminal
law in regard to a conspiracy that when you show the acts of one member
of the conspiracy and show a conspiracy exists, it becomes the act of

every member
of the conspiracy. There never was such strong testimony
indicating a conspiracy as there is of one between Jess Smith
and Harry
M. Daugherty. If that testimony is true, it means that every statement
and every act of Jess Smith, and every act in furtherance of these con-
spiracies, are proper evidence against Harry M. Daugherty, and not hear-
say, and we are proceeding on that theory. And there is considerable
evidence as to Howard Mannington in the same way. I do not feel that
you have any right to charge the committee with going ahead here with
incompetent evidence, because I have convicted men of conspiracies on

very much less evidence than this that has been introduced
here."
"Mr. Chairman, I will not discuss it any longer," Mr. Chamberlain said.
Gaston Means testified:
"Well,have gone to the apartments with data, and he [Jess Smith]

I
would me, 'J ust wait here, Means, in this room; I will take this
tell
right to the Attorney General.' And he would walk in the Attorney

General's bedroom and hand it to him. They knew the game. A man <
don't never allow two men present. When you are a good investigator,
or anything else, keep separate."
"You knew the game, and you never talked with but one
say they
at a time?" Senator Wheeler asked.
"Yes; two of us, and then separatq and two more talk. I would sug-
gest to do it that way myself."
Mrs. Duckstein, who was Jess Smith's secretary for a time, said that he
was also very close to President Harding and Mrs. Harding. "He could
always call up and go over there any time he wanted to," she testified.
"Did he go over there quite often?" Mr. Chamberlain asked.

"Yes; he called up and went over there."
"Well, that is a pretty dangerous suggestion to make," Mr. Chamber-
lain remarked, "that he was intimate with the White House and the
President."
"Well, if
you had sat there and heard him call up over the phone and
talking with them you would have thought they were on intimate
terms."
Mrs. Duckstein also testified that Jess Smith attended to personal matters
Harding and Mrs. Harding. She said that Jess Smith and
for President
Gaston Means worked for the President on the investigation of a scurrilous
book, written by a professor, which stated that Harding had negro blood.
For Mrs. Harding, Mrs. Duckstein said, Jess Smith gave tradesmen orders
for presents and clothes, and that "he would get things from New York
at a better price, I suppose, than she could get them, but I do not know
exactly why it was."
There is
good evidence besides Mr. Means's own word for the fact that
President Harding had Jess Smith hire Gaston Means to conduct special
investigations for him. Mrs. Duckstein testified that she took a letter
by dictation from Jess Smith for the signature of President Harding which
served as credentials for Means.
"What was the letter in reference to; was it in reference to prohibi-

> tion?" Senator Wheeler asked.
was authorizing Mr. Smith to have Mr. Means and this Mr. W. T.
"It
Underwood to conduct an investigation on prohibition matters and to
employ such men as they might see fit, as nearly as I can remember the
letter," Mrs. Duckstein answered.
At the investigation of the Teapot Dome and California oil leases,
William J. Burns, head of the Bureau of Investigation, testified:
"Is there an agent under you in the department by the name of
Gaston Means?" Senator Dill inquired.

"No. We did have a man by that name," Mr. Burns answered.
"How long since he severed his connection?"
"Oh, some months ago," Mr. Burns testified on March 4, 1924.
"Did you find him an effective man?"
"One of the very best investigators I ever knew; the best in this
country, I think."
"Did he do any special work for President Harding when the Presi-
dent was living, that through your department?"

is,
"He may through me."
Means testified that Gutzon Borglum, the sculptor, had recommended

him to President Harding. Means also said that he was paid $150 a week
and his expenses while he worked for Harding, and that Jess Smith paid
him. This was in August, 1922, and Jess Smith told him that the money
for the investigations made for Harding came from
an emergency fund
"that belonged to the President."

The main investigation which he conducted had to do with bootlegging,
Means testified. After Jess Smith got the letter of credentials signed for
him by President Harding, Means told the Senators, he asked Smith:
"Now, Jess, am I to understand that you really want to get the big
bootleggers?" Jess Smith assured him that they did, and he then explained
that they were David Blair, Commissioner of Internal Revenue,
really after
whom Secretary Mellon would not remove at the request of Daugherty
and his associates. They also wanted Haynes, Prohibition Director, re-
moved, so that the Department of Justice could get its hands on the ap-
pointment of Prohibition enforcement officers and take charge of the
Prohibition enforcement or the lack of it, without interference from the
Treasury Department.
Gaston Means testified that his investigations for Harding and Jess
Smith of bootlegging led directly to Secretary of the Treasury Mellon,
whose family owned large whisky distilleries. Means also claimed that
Secretary Mellon had worked out a plan with Rex Sheldon to pay the
troublesome Republican campaign by money collected from boot-
deficit
leggers for permits to withdraw liquor. Gaston Means said that he had
worked on a whisky withdrawal case in which the permits authorizing
the withdrawals for medicinal purposes of 2,950 cases of Overholt whisky
from the Mellon-controlled Overholt distillery were eventually traced to
the files of the Mellon bank in Pittsburgh. After the Harding election,
he the indictments against the bootleggers accused of removing
testified,
were dismissed, and Means maintained that "the gentle hand

this liquor
of Andrew Mellon forced Harry M. Daugherty to come to his rescue."
"We picked up an enormous amount about Mr. Mellon," Means

testified. "For instance, the coal mine that he owns in Kentucky, where
he has the deputy sheriffs on his pay roll, and controls the courts all the
way down. But I first came in contact with Mr. Mellon in connection
with Mr. Frick, where they each thought the one was gipping him.
They are like banana peddlers when you get to know them."
"As a matter of fact," Senator Wheeler recalled to Means, "when you
first talked with me, Means, what you suggested to me was that instead
of the Attorney General being investigated, that it
ought to be Mellon
that ought to be investigated."
"I insisted upon it," Means said. "He is the arch enemy of the Gov-
ernment, the arch traitor."
"That is what you told me."
"Yes, I tell you that now. I repeat it. That is my belief. Attorney
General Daugherty is a much higher class and finer man than Mr.
Mellon. Mr. Mellon was born grabbing at dollars."
"Well, that is some recommendation for Mellon," Senator Wheeler
remarked sarcastically.
"I never had any feeling against Mr. Daugherty," Means said. "I
think he is a man of great ability in many respects."
Gaston Means had a personal grudge against Secretary Mellon at the

time he testified, because on October 18, 1923, he was indicted for con-
spiracy to violate the Prohibition act, and it was charged that Means was
paid $15,000 by a man named Johnson to get his trial for illegally remov-
ing whisky adjourned from time to time, and for helping him to get
whisky removed from a government warehouse to a private place. Means
claimed that this indictment was the result of his activities among New
York bootleggers during the investigation he was conducting for President

Harding and Jess Smith. According to the newspapers, it was Secretary
Mellon who personally pressed Means's indictment.
"He had reason to personally direct it, too," Means told the Senators,
and then he added: "I never have believed, and I do not believe today,
because a man accumulates millions and millions of dollars and can
swing the Government and courts that he has got any more intelligence
than any other man who is not always vitally concerned in making
money. Money is not everything in the world by a long shot. It is no

use to worship a liquor man's boots because he has got money. It is
the powerful thing in America today, but it should not be."
A short time before, it will be remembered, Gaston Means had boasted
to the committee that he would work for anybody with enough money,
"just like a lawyer."
Means also claimed that Secretary Mellon had stopped the Department
of Justice from enforcing the Prohibition laws. He testified :
"I do know of my own knowledge that Mr. Daugherty was called off
from attempts to enforce the prohibition laws by the Treasury Depart-

ment. ... do know that Mr. Mellon did not want Mr. Daugherty to
I
have anything to do with it. I do know, in addition to that, that the
bootleggers became very much alarmed when they found that Mrs.
Willebrandt was taking a very active part in uncovering, not waiting for
a case to be uncovered, but uncovering violators of the Volstead law. . . .
There were many cases that they changed."

"How do you know that was at the direction of Mr. Mellon?" Sena-
tor Brookhart asked.
"Because I was told so. Mr. Mellon went to the President, and the
President had to tell the Attorney General that he did not want Mr.
Daugherty interfering with his department."
"But that is information that Burns gave you, and information that
Mrs. Willebrandt gave you, and not your own information?" Senator
Wheeler asked.
"Yes, sir."
But the information of William J. Burns and Mrs. Mabel Walker Wille-
brandt, Prohibition enforcement officer of the Department of Justice, was
more reliable than that of Gaston B. Means in this instance, because they
had no personal grudges against Secretary Mellon, they were not of the
Baron Munchausen type, and they were, unlike Means, intensely loyal
to the Harding administration. Their sources of information were also
much closer than Means's. Burns testified:
"Now, let us get this right: The Attorney General came back from
a cabinet meeting one day, and he sent for me, and was very angry. He
asked me why we persisted in butting into matters that were wholly con-
nected with the Treasury Department. I told him because we had been
requested to do so, and that we never did butt in or do anything with-

out a request from either Mrs. Willebrandt or one of the United States
attorneys throughout the country. Well, he stated that the Treasury

. . .
Department was not at all pleased with our butting into their matters,
and for me to let them alone."
Burns said that he then went to see Mrs. Willebrandt and told her
the Attorney General's orders, that she was very upset and went to see
Daugherty; she then came back to Burns and said that the Attorney
General had permitted her "to take up the more important matters that
are prohibition." One of the Department of Justice agents in New York,
Mr. Holdridge, testified that Burns issued orders to all Department of
Justice agents, which were read to them in the district offices, ordering
them to let Prohibition matters strictly alone and to do nothing about
Prohibition violators without his express permission.
An Associated Press dispatch from Washington on November 28, 1922,
gave Secretary Mellon's views on the Prohibition enforcement problem

with which his department was charged: "Questions of profits seemed to
be one of the most direct causes of heavy traffic in liquor, in the Secretary's
view. But how to break up the big profits proved another matter which
Mr. Mellon was said to have declared presented, for the present, an in-
soluble problem of enforcement."
At a Cabinet meeting held on November 25, 1922, President Harding
and Cabinet were reported to be worrying about the debauching effect
his
of bribes to revenue agents and Prohibition enforcement officers. They

decided that it would be futile to appropriate more money for enforce-
ment, as that would only subject more men "to the tremendous temptation
of easy wealth." In his message to Congress of December 8, 1922, President
Harding said: "Let men who are rending the moral fiber of the Republic
through easy contempt for the prohibition law, because they think it
personal liberty, remember that they set the example and
restricts their
breed a contempt for law which will ultimately destroy the Republic."
And then he added: "In plain speaking, there are conditions relating to
its enforcement which savor of nation-wide scandal. It is the most demoral-
izing factor in our public life."

But some of President Harding's best friends were bootleggers, and
many of his intimates were connected with this "most demoralizing factor
in our public life." Among those who had "easy contempt for the prohi-
bition law, because they think it restricts their personal liberty," were, it
was Harding himself and most of his closest friends.

alleged, President
For instance, Alice Longworth, who knew the Hardings well and liked
them, gives this picture of the White House in those days in her book,
Crowded Hours:
While the big official receptions were going on, I don't think the
people had any idea what was taking place in the rooms above.
One
evening while one was in progress, a friend of the Hardings asked me if

I would like to go up to the study. I had heard rumors and was curious
to see for myself what truth was in them. No rumor could have exceeded
the reality; the study was filled with cronies, Daugherty, Jess Smith, Alec
Moore, and others, the air was heavy with tobacco smoke, trays with
botdes containing every imaginable brand of whisky stood about, cards
and poker chips ready at hand a general atmosphere of waistcoat un-
buttoned, feet on the desk, and the spittoon alongside.
Roxy Stinson testified: "Well, they had plenty of liquor at their dis-
posal for their personal use." In answer to Senator Wheeler's questions,
she replied that whenever Jess Smith and Harry Daugherty came back
toWashington Court House from Washington, D. C., Jess Smith brought
with whisky, and that he gave some of it to her, some to
suitcases filled
Mai Daugherty and drank some of it. At Howard Mannington's Little

Green House in K Street, where the
officials of the Harding administra-
and business conferences, the Wells Fargo

tion held their "whist parties"
Express Company delivered twenty cases of liquor at a time. "There

would be a revenue man in the wagon," Daniel E. Smith, butler at the
LittleGreen House in K Street, testified. "Well, how do you know it
was a revenue man?" Senator Wheeler asked. "Well, he had a badge on
and a revolver," Mr. Smith testified.
As in most investigations which yield personal material, witnesses were
willing to testify against Daugherty's pals, because they had been cheated.
M. P. Kraffmiller, for instance, who lived with Howard Mannington
in Washington, testified fully to his relationship with Mannington, be-
cause they had quarreled over refunds to "clients." Kraffmiller said that
he had returned money to some bootleggers who had failed to receive
the liquor withdrawal permits for which they had paid, and that then
Mannington refused to give up his share of the money on the grounds

that a retainer once paid is never to be returned. As a result, Kraffmiller
testified, he was forced into bankruptcy.
A Mr. Caskey, of Marietta, Ohio, came to Washington and also worked
with him and with Howard Mannington obtaining liquor withdrawal
permits and selling them, Krafrrniller testified. When they first came to
Washington, Mannington and Kraffmiller lived together at the Lafay-

ette Hotel, but on May 1, 1921, they moved into the Little Green House
at 1625 K Street. The liquor withdrawal permit which they got,
first
Kraffmiller testified, was obtained for the General Drug Company, of

Chicago, who, he said, paid $20,000 for it. He retained one-third of that
fee and, he testified, gave the rest, $13,666.67, to Howard Mannington.

Kraffmiller testified that Caskey, when he first arrived in Washington,
had to borrow money from him, but that after they had been in Washing-
ton for a few months, Caskey bought an expensive house on Wisconsin

Avenue.
"And the only client he had was Howard Mannington?" Senator

Wheeler asked.
"Yes, sir," Mr. Kraffmiller answered.
"And the only office that he had was in the little green house on K
Street?"
"That is correct."
Kraffmiller received $25,000 from J. B. Scheuer & Company for liquor
permits, he said, and he gave it all to Howard Mannington. For repre-

senting them in their application for a tax refund before the Bureau of
Internal Revenue, the Marland Refining Company gave Kraffmiller
$7,500, he testified, of which he retained$2,500 and gave the rest to
Mannington. The Marland company, Kraffmiller testified, wanted a

delay in their tax case, "and we obtained such delay by having a re-
examination of the matter, and by that time the stock of the Marland
Corporation reversed itself and they became insolvent." Mannington and
he Shipping Board, Kraffmiller
also represented the corporation before the
testified. Mannington, he said, had never been admitted to the bar, though
even he had thought for a long time that Mannington was a lawyer.
Kraffmiller testified that two or three times a week Jess Smith came
to the Little Green House on K Street for a conference with Mannington,
but that he was always excluded from those conferences.
"You know that Jess Smith and Mannington had a lot of deals in New
York?" Senator Wheeler asked.
"Yes, sir," Kraffmiller answered.
"And you do know that they were collecting money from the New
York end, do you not?"
"I do not know, but I would surmise."
Mannington and Caskey went to New York every ten days or two weeks,
Krafifmiller testified, but the New York end of their business was kept
secret from him; he handled Chicago.
Jess Smith told Roxy Stinson, she testified, that through Daugherty's
influence, they were getting liquor withdrawal permits and selling them:
"And what did he say with reference to their making any money out
of it, if anything?"
"Well, there was money made out of it, because I think that was
avenue of money, or among
their first their first avenues of money,"
Miss Stinson answered. . . .
"And I understood you the other day that they afterwards, toward the
last of it, got cold feet on it?"
"Yes; I am sure that is right."
"Now, let me ask you, Miss Stinson, if it is not a fact that it was
these whisky deals that Jess Smith was worrying about just prior to his
death?"
"He had worried about that quite a bit, and to the point that for the
months before he passed away he would not take a drink. He

last six
was not a drinking man, yet he probably would take a drink as any of
the gendemen would. He was not a drinking man, but he would not
even do that, through his caution."
The $11,000 in the "William R. A. Hays No. 3" account, which Roxy
Stinson claimed after Jess Smith's death, was also claimed by the whisky
interests, who maintained that it should have been refunded for liquor
permits they had paid for and never received.

William A. Orr was alleged to have handled the New York end of Jess
Smith's and Howard Mannington's liquor deals. Kraffmiller testified that
on one occasion when Mannington had refused to refund money paid for
permits not received, "Bill" Orr had said that he was going to get his
money back or "shoot up" Mannington and Jess Smith. "I asked Caskey
why," Kraffmiller testified, "for the simple reason that Howard Manning-
ton seemed to get so nervous when he was told that Orr was in Wash-
ington." Orr testified that he had paid Mannington money in connection

with liquor deals for the withdrawal of alcohol. When asked whether the
money was paid to Mannington for going into court, Orr replied: "No;
I should say in most cases it was to prevent going into court. ... It is
costly togo into court. It is much more costly to go into court than to
have a lawyer that can fix it outside of court." Orr stated hisown function
to be "As a means of introduction to a lawyer here who
: knew the ropes."
According to Senator Wheeler's statement, the New York bootleg in-
terests turned over $200,000 to Mannington, but Orr would neither

affirm nor deny this estimate. Senator Wheeler asked him if he did not
know as a matter of fact that Jess Smith had refused to turn back some
money that was turned over to him. "Not of my own knowledge, I do

not," Orr answered.
Orr was indicted with others for conspiracy to have liquor permits
issued fraudulently, but the indictment was not upheld by the court, and
the conspiracy was declared not to exist. When Orr was indicted in New
York, Howard Mannington expected to be indicted too, Kraflfmiller testi-
fied, and when the news of Orr's indictment reached the Little Green
House on K Street, Mannington left Washington at once for Louisiana,
giving out that he was going to Mexico.

When the Daugherty investigation started, Howard Mannington went
to Europe. Senator Ashurst charged collusion on the part of the Attorney
General to get Mannington out of reach of the committee. He finally
turned up in Washington when he got ready to do so and testified that
he had been abroad on private business; there had been a rumor that he
was made a member of the Dawes Commission on Reparations in order
to get him abroad plausibly. The committee got practically nothing in the
way of information out of Howard Mannington concerning his alleged
activities, but it learned from other witnesses the details of transactions
which he and Jess Smith were said to have had with bootleggers, liquor
companies and others.
John Gorini, of the Alps Drug Company, 410 Eighth Avenue, New
York City, had been selling liquor for medicinal purposes legally.
In May,
1921, he testified, the Prohibition director refused to grant him legitimate
permits to withdraw 500 cases to be sold to drug stores for medicinal

purposes only. Then Paul Lundy, a theatrical agent, Gorini testified, called
on him with the message that if he saw "Bill" Orr, the matter could be ar-
ranged. Ten minutes after Orr took the matter up, Gorini testified, he had
a permit for his 500 cases of whisky.
Orr also took Gorini to the Astor Hotel to meet Jess Smith. He was
told, Gorini Smith could "help a lot" and that Howard
said, that Jess
Mannington, Daugherty's other close friend, "was getting so much a case

from Bill Orr every case that went through the prohibition office."
"How much was that that he told you he was getting?" Senator
Wheeler asked.
"$2 a case," Mr. Gorini said.
"And who did he tell you Howard Mannington was?"
here in Washington. ... He said he was from
"He said he was
Columbus, Ohio ... he belonged to the crowd from Columbus."
"They were a pretty tough crowd, were they not?" Senator Wheeler
asked.
"I should say so," Mr. Gorini answered.
"You were willing to work with them?" Senator Jones remarked.
"Yes; I wish I had broken my arm the day I signed the first paper,"
Gorini replied.
"You wish it now, but you were glad to work with them."
"I was forced in."
"You were willing to do business and use the Columbus crowd?"

"I wanted to do business; a legitimate business."
Gorini testified that he had paid William A. Orr $50,000 in thousand-

dollar bills.
"Where did you get them?" Senator Wheeler asked.

"I got them from John Lynn."
"And who is John Lynn?"
"He used to be with Park-Tilford, and then went in business for
himself in liquor, and he hanged himself last year. . . . Yes; he was
broke and hung himself."
Orr was selling liquor permits, Gorini testified, for $15 a case. Gorini
said that in addition to the money which he had paid to Orr, he had paid
$150,000 to a man named Owen B. Murphy for withdrawal permits for
his own and five other drug companies in New York between May and
August, 1921. Gorini testified that the $2 a case which Howard Manning-
ton received was split into three parts. One part, he testified, went to Jess
Smith; one part went to Howard Mannington; "I never could find out
where the other part went," Gorini said. When he asked Orr where the
third part went,Orr refused to tell him. Gorini said that he used to meet
Orr, Murphy and a man named L'Esperance at the Exclusive Club, a
speakeasy at Forty-seventh Street near Sixth Avenue in New York.
L'Esperance was an attorney who worked in the office of William Hay-
ward, who had been appointed United States Attorney for New York at
the solicitation of William A. Orr. Gorini was told "that Mannington can
take care of everything," and that Jess Smith was "from the Attorney
General's office."
The drug companies that Gorini represented never received the liquor
which was withdrawn in their names; it was turned over directly to boot-
leggers, who paid the drug companies $1 a case for the use of their names
in withdrawing the liquor by permits; the bootleggers paid Gorini $15 a
case, he testified, and he gave Orr or Murphy $14 of it, keeping the one
dollar for the drug companies. Altogether about fifty to sixty thousand
cases of liquor went through in this way and netted the liquor ring be-
tween $750,000 and $900,000.
Gorini testified that he had imported from Scotland for legal medicinal
purposes 7,100 cases of Scotch whisky, and that Thomas B. Felder, the
New York attorney who had worked with Harry Daugherty to get
Charles W. offered him a quarter of a million dollars to
Morse a pardon,
give up Scotch
his whisky to bootleggers. Gorini refused, and later
Attorney General Daugherty sent a telegram to New York ordering the
reshipment of the Scotch whisky to Scotland, though, Gorini maintained,
it was imported legally. Gorini tried to get a replevin against the shipment
of the liquor, and the sherif? who served the writ was carried three miles
out to The steamship company, Gorini testified, had a tug following
sea.
the ship on which the liquor was supposed to go back to Scotland, and
when the ship was four miles outside the port of New York the sherifl
and a special agent whom Gorini had hired to bring his liquor back, were
put on board the tug and sent back to New York.
"Now, do you know that those goods were never shipped out of the
port at but that other whisky, other cases, fake cases were shipped
all,
out?" Senator Wheeler asked.

"That is my understanding," Gorini answered. "I heard the rumor of
that. That is why they ran away with the sheriff."
Gorini said that empty cases to represent Scotch whisky were thrown into
the ship. At one time the plan had been to steal his Scotch whisky and
replace it with bricks, he testified. Gaston B. Means was sent from Wash-
ington to New
York, ostensibly to see to it that Gorini's whisky was not
shipped away, but he arrived in New York on the Monday after the fake
shipment had been made on the previous Saturday. Gorini testified that
the same kind of Scotch whisky, "King's Liqueur Whisky," which had
never been sold in New York previously during Prohibition, was being
soldby the bootleggers of New York soon after his shipment was supposed
tohave been sent back to Scotland in such a hurry on the order of Attorney
General Daugherty.
Nick Cimino, who operated the Italian Kitchen, a speakeasy in Forty-
eighth Street, New York, was also a witness before the Senate committee.
He saidthat after Howard Mannington first came to his speakeasy in 1920,
he,Nick Cimino, became a loyal worker for President Harding's election

among the Italians of New York. The Italian Kitchen was said to be the
New York rendezvous of Daugherty, Mannington and their friends dur-
ing the Harding campaign. After the inauguration of President Harding,
Nick Cimino visited the Little Green House in K Street and obtained the
appointment of two court stenographers in Brooklyn; he testified that he
had received about $1,500 for these appointments. Later Nick Cimino felt
that his share of the liquor deals in New York, in which the Washington
ring were involved, was not enough; he wanted more than 50 cents a case,
and KrafTmiller testified that when he took the matter up with Manning-
ton for Cimino, Mannington had replied: "To hell with the Dago. Let
him fight his own battles."
George Remus, an Ohio bootlegger who owned seven distilleries, was
finishing a term of two years in Atlanta Penitentiary for conspiracy and
nuisance in violating the Volstead Act, when he testified before the Senate
committee investigating Harry Daugherty's office. Remus swore that he
had worked with Jess Smith getting permits to withdraw liquor, osten-
sibly for medicinal purposes:
"What was the occasion of your meeting Jess Smith?" Senator Wheeler
asked.
"Well, from the viewpoint of obtaining withdrawals from drug com-

panies, so as to obtain the liquorfrom the bonded warehouses and the
distilleries, that I was the owner of, if you please."
"When was that? What time was that?" Senator Brookhart asked.
"In 1921, about the fore part of 1921. I can not answer really the
month, if you please." . . .
"That was in New York City?"

"In New York City; yes."
"And when you met him at New York, what did he say to you with
reference to being able to get these permits through for you?"
"He had heard of me as being a reasonably large operator from the
viewpoint of the whisky industry. Of course that was pursuant to the
meeting; that was so understood."
"That was the reason that he met you?"
"Yes; absolutely."
"You had no other purpose for meeting Mr. Smith?"
"Other than to do what he could from the viewpoint of holding a
person harmless in the event of legal entailments. He was pretty close . . .
to the Attorney General."
"What did he say with reference to these permits, or what did any-
body else tell you with reference to it?"
"Well, he said that for a consideration he would obtain permits, if I

would pay so much for the permits per case. And then I agreed to give
him so much per case for his efforts in the premises."
"What did he say with reference to your being indicted in these mat-
ters, or prosecuted?"
"That there never would be any conviction maybe a prosecution,
but no ultimate conviction, that no one would have to go to the peni-
tentiary. . . . But I am there, Senator."

"What was the first amount that you paid him?"
"I think it was $50,000."
"But how much did you pay Jess Smith in the aggregate, to the best
of your recollection?"
"Oh, between $250,000 and $300,000. That is

my best judgment at
this time."
Jess Smith received $1.50 to $2.50 a case for all liquor permits which he
furnished to Remus.
"And whom did he say he divided that with?" Senator Brookhart

asked.
"Well, that was not there was no talk with him and I as to the
division, Senator. There was not."

"How was this money paid, Mr. Remus?"
"In cash; always."
"What size bills?"
"Oh, depending upon we would have it in various denominations.

Sometimes thousand-dollar bills; other times $500, $200, $100 bills cash.
Sometimes I would send to the Federal Reserve in Cincinnati and get
thousand-dollar bills through the bank."
Roxy Stinson, it will be remembered, testified that she often received $500
and $100 enclosed in letters from Jess Smith.
bills
Mrs. W. O. Duckstein testified:
"Well, I wrote some letters for Mr. Smith about whisky permits, but
they were not in connection with the Attorney General at all."
"Did you make copies of those letters?" Senator Wheeler asked.
"No. Mr. Smith never kept copies of his letters."
"He never kept copies of his letters?"
"No; never."
"Did Mr. Smith tell you not to make copies of his letters?"
"Yes."
George Remus testified that he went on withdrawing liquor on permits

for about a year with full protection from prosecution, and that he had
withdrawn and sold in that time between seven and eight hundred thou-
sand gallons. Every time he saw Jess Smith, he said, he gave Jess Smith
money.
"That was the only business you had with Jess Smith, wasn't it?"
"Yes, and to see that the business went on all right," Mr. Remus replied.
"Yes," Senator Wheeler said, "you had no personal acquaintance with
him? I mean, there was no friendship between you and Jess Smith? It
was a pure, cold-blooded business proposition, wasn't it?"
"Considering my present position, surely," Mr. Remus replied, "yes,
sir. Not a bit of sentiment attached to it, Senator."
After he was indicted for violating the Prohibition laws, George Remus
met Jess Smith in New York and discussed the matter with him. Jess
Smith told him that the Department of Justice would pretend to fight for
a conviction, but that "I would never see the penitentiary," Remus testi-
fied. Even after Remus was convicted by a lower court, he testified, Jess
Smith told him that it would not make any difference, and that even if
the Court of Appeals upheld the conviction, he could get Remus out
of serving his sentence.
"He said he was assured that there would be no ultimate sending

away Remus or his men to a penitentiary," Remus testified.
of
"And who did he say assured him of that?"
"The General."
"He called him the General, did he? Is that the way he referred to
him?"
"Yes, sir."
"Now,did he tell you, or did he not tell you that if the Supreme Court
affirmed that decision you would still be granted a pardon, or that you
would never have to serve a day in jail?"
"Yes; he said that. . . .

Yes; on account of his friendship to the
General."
"That is what he told you."
"Yes." . . .
"Did he tell you whether or not he had talked with the Attorney
General about your case?"
"I knew that someone had talked to the Attorney General about my
case."
"Howdid you know that?"
"Mr. James Clarke, the former district attorney of Cincinnati, told
me after my conviction that he had talked with the Attorney General
in Columbus in reference to my case, at which time the General had
told Jim Clarke that he had to prosecute my case, as there was some talk
in Columbus that he was one of my partners."
Once when Daugherty and Jess Smith were in Indianapolis together,

where Attorney General Daugherty dismissed the soft coal cases pending
there between the government and the soft coal interests, George Remus
met Jess Smith at the Claypool Hotel and paid him about $30,000; he
could not remember exactly how much. While Remus was talking with
Jess who had been standing with Jess Smith a moment
Smith, Daugherty,
Remus was never permitted to meet the General.
before, did not join them.
When his case was finally decided against George Remus in the Supreme
Court, and he had to go to prison, Jess Smith was dead:
"
"Iknow this," George Remus testified, "I have been prosecuted
"And been double-crossed, too, haven't you?" Senator Wheeler asked.
"Well, the dead don't speak, so what is the use of having to answer
that."
George Remus was not uncomfortable, however, when he went to
Atlanta Penitentiary for two years at least not until after he had testified
before the Senate committee; Daugherty 's appointees and associates made
life as difficult as possible afterwards for anybody who had testified against
the Attorney General. At Atlanta Remus was known as one of the three
"millionaires" of the penitentiary, according to J. E. Wilkins, superintend-
ent of the prison school. Wilkins testified that George Remus "has all
the privileges that I consider a man could ask for." At first he had lived
in the "politicians' apartment" in the basement of the isolation hos-
pital, but a little later he had his own private apartment built for him,
with bath, in the isolation hospital building. There were two other
"millionaire" prisoners in the penitentiary at the time, Wilkins testified,
Mr. Sweetwood, a bootlegger, and Mr. Kessler, a bootlegger. The three
men had their meals sent up from the officials' mess to the Catholic chapel.
There was great dissatisfaction among the other prisoners, according to
Wilkins, because of the privileges granted to the millionaire bootleggers,
and this system began, he said, when Sartain, a former sheriff at Colum-
bus, Ohio, was appointed warden at Atlanta by Daugherty. In July, 1921,
J. E. Dyche,who had managed Jake Hamon's campaign for Republican

national committeeman in Oklahoma, and had helped to throw that state
to Harding at the Chicago convention of 1920, was appointed warden
of Atlanta Penitentiary. He soon discovered, he testified, that the place
was with narcotic addicts, and that narcotics were sold freely to the
filled
said that he had tried to stop the evil and

prisoners by the guards. Dyche
had asked for detectives from Burns's Bureau of Investigation. The detec-
tiveswere sent down to Atlanta, and the situation received publicity. Then
Heber Votaw, brother-in-law of President Harding, a minister of the
gospel who had been appointed Federal Superintendent of Prisons by
Harding, arrived in Atlanta; he put a stop to the narcotics investigation
at once, Dyche testified, and Dyche was called before Daugherty, who told
him that there had been altogether too much publicity about narcotics in
the prison and that it must stop. Dyche testified that at his interviews with
Daugherty and Votaw they were only interested in the harmful effect of
the publicity about the narcotic traffic and not at all interested in the
harmful effect of the narcotics. Dyche also said that he was sure that
narcotics were still sold at Atlanta after he had left the position of warden,
"and it is worse at Leavenworth than it is at Atlanta," he added. William
J. Burns admitted in his testimony that his men could have found the
men higher up in the prison narcotic traffic, if they had been permitted to
continue their investigation. The prisons were notorious as the preparatory
schools for narcotic addiction,and if stopped there, the habit might have
become less and less profitable, which would have cut consider-
prevalent
ably into the incomes of dope importers
and dope sellers. It might also
have been very embarrassing to many people if the men higher up were
found who sold the dope to the men who sold it to the prisoners.
Evidence was also introduced before the Senate committee that under
the Daugherty administration paroles and pardons were sold at Atlanta
Penitentiary. Senator Wheeler introduced

the following letter from
Charles Vincenti,who was doing eighteen months in Atlanta, to E. H.

Mortimer, Colonel Forbes's traveling companion:
The Baltimore & Jamaica Trading Co., Inc.
Importers of Fruits,
Baltimore, Md., August 12, 1921.
E. H. Mortimer,
Wardman Park Hotel, Washington, D. C.
Dear Sir: I hand you herewith my demand note for $50,000 and it is
understood between us that demand for payment of same shall not be

made until I have received commutation or remission of my sentence of
18 months imposed by Judge Rose and it is also further agreed that
a certain transactionmust be consummated in addition to the remission
of sentence before payment shall be demanded or paid.
Very truly yours,

CHARLES VINCENTI.
Accepted and agreed, E. H. Mortimer.
August 13, 1921.
J. E. Dyche testified that when he was warden at Atlanta he had heard

rumors in the prison that payments of $2,000 and $5,000 were made for
paroles from the Attorney General's office. Jess Smith, it will be remem-
bered, had told Roxy Stinson when they were in New York together that
he was negotiating with Joe Weber for a pardon for his brother-in-law,
and that "they" had many such applications.

Cecil H. Kerns, an Ohio bootlegger, who had been sent to Atlanta for
violating the Prohibition laws, testified :
"There was one source that I heard where a pardon could be obtained
absolutely if the money was paid. That was mentioned as being a Mr.
Muma, a New York representative of the Cincinnati Enquirer."
"Tell me Mr. Chamberlain, Daugherty's attorney, said.
that again,"
"The name Muma
was mentioned as a sure source of obtaining a
of Jap
pardon if I had money to pay him," Mr. Kerns said.

"You did not fall for that?" Mr. Chamberlain asked.
"I did not have the money, Senator," Kerns answered. "I think I
would have taken a chance if I had had money. ... It seemed to be an
understood fact."
Kerns also testified that the name of Thomas B. Felder, as an intermediary

for pardons and paroles, was "quite well known in Atlanta."
"Tell me this: Who was Jap Muma supposed to work through?"
Senator Wheeler asked. "Do you know?"
"Well, yes. He was supposed to work through McLean."
"Ned McLean?"
"Yes."
"And did you understand that pardons were being signed up in Ned
McLean's house?"
"I did not know any of the details of the signatures on them; no."
Cecil Kerns also testified that those who knew Dr. Johnson, a colored
physician, who had been convicted in Ohio of violating the Harrison
Narcotic Act, told Kerns that Dr. Johnson had been released from Atlanta
"by reason of the influence of Walter Brown, of Toledo, who secured his
release upon parole." "Who is Walter Brown?" Senator Wheeler asked.
"Well, he is reorganizing some of the departments here in

Washington
now," Mr. Kerns answered. Walter F. Brown became Postmaster General
in President Hoover's Cabinet later, and we shall hear of him again.
Cecil Kerns
also gave testimony implicating Samuel Ungerleider,
Daugherty's friend and stockbroker, with the bootlegging trade, and H. J.

Burton, a Prohibition investigator also testified to that effect. After the
testimony of the bootlegger Kerns, Samuel Ungerleider wrote to the
Senate committee denying the connections in the liquor business attributed
to him.
In answer to a question by Daugherty's attorney, Kerns said:
"Well, I never would have got to Atlanta, if I had had the money
to pay."
"Remus had the money, and he went," Daugherty's attorney said.
"Yes," said Kerns, "but he was a fool. More men arc in Atlanta
for being fools, than being knaves."
Kerns himself had been out on parole before he testified before the Senate
committee, but as soon as he had mentioned in conversation the nature of
the testimony he intended to give, he was ordered returned to Atlanta
Penitentiary on the grounds that new facts had been discovered in his
case.
Alonzo Everett Bunch, who had been in the liquor business in the
District of Columbia for many years prior to the time when Prohibition
went into effect, owned 100 cases of Haynes whisky, 5 cases of Black &
Green rye, 3 cases of Haig & Haig and 3 cases of Budweiser which were
at his place of business, the Colonial Wine Company.
Before Daugherty
took office the Department of Justice had seized Mr. Bunch's liquor, and
the courts decided that the seizure had been illegal and Mr. Bunch's liquor
must be returned to him. Until Daugherty and his associates came into
the building, Mr. Bunch's liquor had been intact at the Department of
Justice. After that he found it very difficult to learn where his liquor was.
Francis M. Boucher, a clerk at the Department of Justice, testified that he
"had the pleasure of man
[Bunch] off for quite a long while
stalling that
regarding his liquor." Boucher testified that Bunch's liquor was assorted
on the floor of the chief's office at the Bureau of Investigation, and that
some of this liquor was delivered by Boucher and another clerk to the
house in H Street occupied then by Daugherty and Jess Smith. Some of
it found its way into a safe in the office of the director of the Bureau of
Investigation, Boucher said."There was always a supply of good liquor
kept in the office of the Chief of the Bureau of Investigation," Boucher
testified, and it was doled out to officials from the safe, he said.
Mr. Bunch testified that he had been to the Department of Justice be-
tween fifty and hundred times concerning his liquor. "I don't know a
a
man who is the head of an office I have not talked with in regard to this
matter," he said. "It got so lately," he added, "every timeI go up there
they run and shut the door." He was referred by everybody to William J.
Burns, who said to him, Bunch testified:
"'Look here, Bunch, I will investigate about this whisky. The

whisky is gone.' I said, 'What?' He said, 'It is gone.' He said, 'You
come back in a few days; I am not going to stand for this being pulled
"
of! in my office on any consideration.'
Bunch went back again and again, but he never saw a bottle of his whisky.
He wrote to President Harding, he saw Senators, and after Harding's
death, he started writing to President Coolidge, and he saw
C. Bascom
but everybody referred him back to Burns.
Slemp, Coolidge's secretary;
that what he needed was "some
Mrs. Duckstein told him, Bunch testified,
political influence to bear," and she gave him a note to her husband, who
was "Ned" McLean's secretary. Duckstein, according to Bunch, offered
to get his whisky back for him in return for half of it, but Bunch refused.
"You do not know where the whisky is now [1924], of course?"

"I don't think anybody else does," Mr. Bunch answered. "I think it
has all been drank up."
ALTHOUGH Prohibition was a great source of profit and corruption, it was

not the only source for the friends of the Attorney General. There were
war fraud cases, land fraud cases, antitrust cases, and the vast property
in charge of the Alien Property Custodian, which yielded large sums of
money to the hangers-on of the Harding administration.

One of the most interesting deals involving the Department of Justice
gang and their friends was the transaction over the films of the Dempsey-
Carpentier prize fight which was held at Boyle's Thirty Acres, New
Jersey,on July 2, 1921. The law permitted films of a prize fight to be taken,
but it
prohibited their transportation in interstate commerce. F. C. Quimby,
of the F. C. Quimby Film Company, had a contract with Tex Rickard,
promoter of the Dempsey-Carpentier fight, to take motion pictures of the
spectacle. Jess Smith went to the fight, and two days later he was in
Atlantic City with Roxy He
took her to see the films of the fight
Stinson.
twice and was very enthusiastic about them. The pictures, he told her,
were better than the fight itself, and then he added that he and Daugherty
would make $180,000 out of them by arranging for their transportation
from state to state.
On that same Fourth of July, when Jess Smith and Roxy Stinson were
looking at the fight films in Atlantic City, "Jap" Muma, New York
representative of "Ned" McLean's Cincinnati Enquirer, took a print of
them to Washington. "Ned" McLean was giving a party that night at

which the President of the United States and Mrs. Harding were guests,
Hughes, Postmaster General New, Attorney
as well as Secretary of State
General Daugherty, a number of Ambassadors, and many Senators and

Congressmen. The fight films were shown to the guests, and they were
very enthusiastic about them. After the exhibition was over, "Jap" Muma
had a talk with Attorney General Daugherty, and they were joined by
President Harding and Secretary Hughes, Muma told a Department of
Justice agent later. Someone in the group made the remark that it was
a shame that people all over the United States could not see the fight
pictures, and it was recalled that the law prohibiting the transportation
of fight films in interstate commerce was the result of the Jeffries-John-
son fight, when it was feared that there might be trouble in certain parts
of the country from the exhibition of
showing the "humiliating
films
spectacle of a white man beaten by a negro." Daugherty was said to have

remarked that the law was only concerned with the transportation of
the films and did not prevent their exhibition if
they got from state to
state. He
suggested to "Jap" Muma that he see Daugherty's old friend
from Ohio, Alfred R. Urion, who had opened a law office in the Munsey
Building in Washington immediately after the inauguration of Presi-
dent Harding. "One of the greatest little men you ever met in your life,"
was said to have been the recommendation of Urion that Daugherty
gave "Jap" Muma. Urion and Daugherty, it was said, had been associated
together in legal work for the packing interests in Chicago before Daugh-
erty became Attorney General. Then Daugherty suggested to "Jap"
Muma: "If you put this across, you ought to get a big cut not less than
50 per cent."
"Jap" Muma followed the advice of the Attorney General of the United
States and worked out a scheme with his friend Urion for getting around
a foolish law. But first "Jap" Muma, Urion, "Bill" Orr and Ike Martin,
who ran an amusement park in Cincinnati, arranged with Quimby and
Rickard, who owned the fight films, to give them 50 per cent of the net
proceeds of the sale of the films throughout the United States.
Mr. Urion, Mr. Quimby testified, gave him the name of a lawyer in
each state where the pictures were to be shown, who would manage
the details by which someone would be fined as low a fine as possible for
violating the law by transporting the pictures, and then they could be
shown for profit. It was also arranged that the fight pictures should be
shown first free of charge before the American Legion audience, if pos-
sible, in each place, or before some World War veterans' organization;
arrangements were also made to have the newspapers protest against

the ban on the pictures. Quimby showed the pictures first in New York
State at the disabled soldiers' hospital on Staten Island. The United States
Attorney in New York was compelled to prosecute Quimby and Rick-

ard for bringing the fight films over from New Jersey, and they were
fined fl,000 each. Then, Quimby testified, they were told by the United
States Attorney to wait a few weeks before showing the pictures again
in NewYork. Meanwhile, the newspapers printed editorials in favor of
the exhibition of the fight films. The pictures were shown later and made
a profit of $75,000 in New
York.
The Department of Justice agent in New York, Ralph Navarro, had
obtained the arrest of Tex Rickard and F. C. Quimby, and after their
arrest, Quimby complained to "J aP" Muma that they were not getting the
protection they were paying for. Muma went to Washington to have
the Department of Justice agents called off the fight films. He called on
his boss "Ned" McLean and explained the situation to him. "Jap" Muma
later told a Department of Justice agent, Holdridge, that he said to Mc-
Lean: "Fine; Jap Muma, general manager of the McLean newspapers;

personal friend of the Attorney General; old acquaintance of President
Harding; called him 'Warren,' calls me 'Jap'; fine; on my way to Atlanta
as a conspirator!"
McLean telephoned to Daugherty, and Daugherty in turn got in touch

with Burns, in whose department Ralph Navarro worked as an investi-
gator. Then McLean told "Jap" Muma to call on William J. Burns. When
Muma entered Burns's office, he told Holdridge later, Burns said to him:
"If you have come down here to intercede for that Rickard, there is no
use in you wasting your time, for I am
going to put him in Atlanta
Penitentiary." "Jap" Muma said that he answered: "It isn't Tex Rickard
you are trying to put into Atlanta Penitentiary, it's me for I carried out
the whole transaction." Then he told Burns the whole story and, stand-
ing up, tapped his chest and said to Burns: "Behold, the master mind!"
Muma related all this with appropriate gestures to two Department of
Justice agents, Holdridge and Spellacy, at Muma's apartment on the

thirteenth floor of the Ansonia Hotel in the winter of 1921 in order to
impress them with his influence and importance, and one of them,
Holdridge, made a memorandum of the conversation which was intro-
duced when he testified before the Senate committee. Burns, according to
Muma's account, appeared to be very much irritated and burst out with:
"By God! Everyone knows everything going on around here except me."
"Jap" Muma also showed the two men an autographed photograph of
William J. Burns and two signed H. M. Daugherty and addressed,
letters
"My Dear Muma." Muma's complaint about the presumption

After "Jap"
of Ralph Navarro in arresting Quimby and Rickard for violating the law,
Mr. Navarro was sent on an assignment to the island of Haiti, and when
that was finished, to the island of Hawaii. The films, meanwhile, were
transported into twenty-one states of the Union; they were exhibited and
made a lot of money.
Quimby testified that Jess Smith was interested in the proceeds of the
through "Bill" Orr. "I knew there was some connection be-
fight films
tween Mr. Smith and Mr. Orr," Quimby told the Senate committee, and
when pressed, he admitted that Orr had told him so. William A. Orr, who
owned a 20 per cent interest in the fight films, denied that Jess Smith had
received any part of his interest or that he represented Jess Smith in any
way on that particular deal. But Jess Smith had told Roxy Stinson that he
and Daugherty expected to make $180,000 from the fight films, and Mrs.
Duckstein testified that she wrote letters for Jess Smith concerning the
Dempsey-Carpentier fight films "to somebody in New Jersey."
"Did you sell them here in the District of Columbia?" Senator Brook-
hart asked Mr. Quimby.
"No," he answered.
"You just let them use them here in the District of Columbia free of
charge, didn't you?" Senator Wheeler asked.

(Witness smiles and bows his head.)
"Everything was free here, was it not?" Senator Wheeler asked.
(Witness smiles and bows his head.)

FREEDOM to violate the law was not the only thing men paid for in Wash-
ington during the Harding administration. They also arranged for free-
dom after they had violated laws under the previous administration.
Gaston B. Means testified:
"For the benefit of this committee," Senator Wheeler asked him,

"state when was the first time and the first instance that you ever
collected money and give the amount of that money that you collected
and how it was collected and to whom it was paid and for what."
"One hundred $1,000 bills; one hundred $1,000 bills in connection
with the Standard Aircraft cases," Means answered. "$100,000. ... I
received it at the Bellevue Hotel?"

"The Bellevue Hotel where?"
"In a room. A Jap delivered it to me from Mitsui & Co."
"In what city?"
"Washington."
"Who delivered it to you?" Senator Moses asked.
"A Jap from Mitsui & Co."
"Who were Mitsui & Co.?" Senator Wheeler asked.
"They were the firm that financed the Standard Aircraft case."
"Who did you give the money to?"
"Mr. Jess Smith."
"In one hundred $1,000 bills?"
"Yes, sir."
It was in February, 1922, Means testified, that the Japanese man came
into his hotel room in Washington, handed him the one hundred $1,000
bills and went out. Then Means remained in the room at the Bellevue
Hotel, where he lived with his wife and boy, until Jess Smith came for
the money. Smith had previously told him that a Japanese would come
with the money, and he had asked Means to receive it and to count it.
Perhaps it was seventy-five of these one hundred $1,000 bills which Roxy
Stinson saw in Jess Smith's money belt when he had come from Wash-
ington to Washington Court House, Ohio,

where Mai S. Daugherty
was president of two banks.
"One of the specifications that the Attorney General was charged with
in his impeachment proceedings was the failure to prosecute the Standard
Aircraft case, was it not?" Senator Wheeler asked.
"Yes; he was charged with that. ... It had not been prosecuted when
I left there. They withdrew the case from the Department of Justice."
"Who withdrew it?"

"The War Department."
Mr. Paul Howland, Daugherty's attorney, cross-examined Gaston Means

on this extraordinary scene and got more than he was looking for:
"Now, on this evening when this Japanese fellow that you had never
seen knocked on your door and handed you $100,000, in the night season,
"
with nobody present you alone, and the Jap alone
"Iwas not alone," Means interrupted.
"The Jap was with you?"
"Oh, no; my wife and boy were sitting right in the room the adjoin-
ing room."
"The adjoining room?"
"Yes; I am a great man to stay at home, unless I am working on a
case, active on something."
"It was such a common occurrence for a Jap to rap on your door and
hand you a hundred thousand dollars that it did not make any im-
pression?"
"I have had men knock at my door and hand me a million and' a half,
which was in connection with the German investigation. I had it; I had
the bonds that were convertible in had a plant in the Belmont
my hands. I
Hotel, when they tried to put through the deal about the submarine
chasers that were being built for the Russian Government; had it
"
irrevocably
"I didn't ask you about biography," Mr. Howland remarked. "Now,
let me ask you, at that time, from your relations with Jess Smith, did you,
when that hundred thousand dollars was handed to you, have in the
back of your head the thought that it was in connection with some
illegitimate transaction?"
"No; I didn't question I didn't allow myself to think on that subject.
When Jess Smith asked me to hand the chorus girl $5,000 that he
knocked on the head with a bottle I didn't ask
any questions. I found
out afterwards what he did it for."
"That is purely a gratuitous remark," Mr. Rowland said.

"I am saying I don't ask
any questions," Mr. Means replied.
During the war, before the United States entered it, Means had worked
for the German secret service in the United States. Mrs. Means once testi-
fied that at that time Mr. Means had given her as much as $60,000 and
$70,000 to carry around in her waist, and she also said that Captain
Boy-Ed and Captain von Papen were often guests at the Means home.
Means himself once claimed that the German agent, Captain Karl Boy-Ed,
had given him $1,000,000 "behind a tombstone in Trinity Churchyard at
midnight." Means told the Senate committee that Mitsui & Company,
the paymasters for the Japanese government, were also working with the
Germans in the United States during the war. Mitsui & Company owned
and financed the Standard Aircraft Corporation and the Standard Aero
Company through one Harry Mingle and a lawyer named Max J.
Finkelstein. The Standard Aircraft Corporation, Means testified, sold
models of American airplanes to the Japanese government through
Mitsui & Company, and he also claimed that Japanese artists made
sketches in the United States for the Germans during the war, sketches
of bridges and other public works. Means said that when he was working
for the German Intelligence, he was sometimes paid by Mitsui & Com-
pany.
After the war the United States government claimed that the Standard
Aircraft Corporation and the Standard Aero Company, to which the
government had paid $16,461,680.15 during the war, had no records to
account for $9,948,028.42 of this money. The Standard Aero
Company
went into bankruptcy and the Standard Aircraft Corporation was liqui-
dated after Mitsui & Company, it was charged, had taken out of it
$4,770,000 in quick assets as well as sums in excess of two million dollars.
The report of a Department of Justice agent read: "Mitsui & Company

are indirectly exercising powerful influence in this country, which extends
to Congress and departments of the Government, and they have on their
JUSTICE A LA DAUGHERTY ,289
pay rolls attorneys and politicians who are attempting to run roughshod
over this country to whom they owe their first allegiance."
Cadwalader, Wickersham New York law firm, was employed

& Taft, a
by Mitsui & Company, and was reported to have requested the

that firm
War Department to permit the same auditors, who, it was charged, had
helped to defraud the government in the Standard Aircraft case, to work
on the books again. "Their request was refused," the Department of
Justice investigator reported, "unless Mitsui & Company would admit its
liability in the premises." The Department under Daugherty was

of Justice
charged with the duty of collecting $2,267,342.75 from the Standard Air-
craft Corporation, which was the sum the government was finally willing
to take as acompromise of the claims. Thomas F. Lane, legal adviser to
the Air Service, testified before the Senate committee that he had nego-
with Harry Mingle, the Mitsui company's Amer-
tiated for this settlement
ican dummy.In September, 1923, Harry Mingle was found dead in New
York City; Lane testified: "Nobody knew what caused the death," and he
added: "So there are two gone of the Standard Aircraft people."
After the Japanese from Mitsui & Company had brought him $100,000
in $1,000 bills for Jess Smith, Means testified, the Standard Aircraft case
was taken out of the jurisdiction of the Department of Justice, and that
department made no further effort to collect the money which was claimed
by the government. Before his death Jess Smith was very uneasy,
Means testified, and he wanted to know if Means had ever told anybody
about the $100,000 he got from the Japanese. Jess Smith also told him,
Means said, that some progressives had been elected to the United States
Senate, that the Harding crowd had been "sitting pretty until then," but
that now they had to be careful. Jess Smith said that the progressive Sena-
tors were Bolshevists.
Means testified that in his role as collector for Jess Smith, he had handed
him altogether between $225,000 and $250,000 in cash from various
sources, mainly bootlegging. Towards the end of his life, Means testi-
fied, Smith was worried because discontented bootleggers were demand-
ing the return of $200,000 for permits they had never received
or protec-
tion which had not been successful. "On that proposition Jess told them
to go to hell," Means testified,"he wasn't going to give them nothing."
Means testified that the night before Jess Smith died, he had asked Means
to return some money to bootleggers in New York for him, but that
Means had refused to have anything to do with the matter.

There were other aircraft fraud cases which came in for private manip-
ulation besides the Standard Aircraft case. During the war the United
States spent $1,051,511,988 for airplanes to be manufactured in the United
Statesand shipped to France; no American fighting plane ever reached
France. Charles Evans Hughes was appointed to investigate the aircraft
situation, and he issued a report which charged the motor and aircraft
companies with extensive frauds against the government.

Colonel Edward A. Deeds, since then associated with Charles E. Mitch-
ell of the National City Bank, and the large aircraft combines, be-
came head of the equipment division of the Air Service on August 2,

1917. He was charged with using his personal business interests to profit
at the expense of the government. Colonel Deeds, Justice Hughes charged

in his report, had a one-fourth interest in the Dayton Metal Products
Company, which was said to have owned part of the Lincoln Motor
Company. The estimated profits of the Lincoln Motor Company during
the war for airplanes were $11,250,000, and it was reported that the com-
pany had been overpaid by approximately $4,825,000. Colonel Deeds was

also vice-president of the United Motors Company; after he became
head of the equipment division of the Air Service in 1917, he trans-
ferred his stock in the United Motors Company to his wife's name.
Justice Hughes recommended in his report that Colonel Edward A. Deeds

should be tried by court-martial, but a military board finally decided
against the suggestion. Instead

Colonel Deeds's military associates gave
him a dinner, at which Major General George O. Squier is said to have
stated in a speech that if Colonel Deeds had not done irregular things
the United States would not have had an air fighting force worthy of
the name. As the United States under Colonel Deeds's administra-
tion had no fighting force of airplanes worthy of the name, it may be
presumed that one of the reasons for that fact was that Colonel Deeds
and others were doing irregular things.
In 1919, John W. Weeks, then a Republican Senator from Massachu-
setts, rose on the floor of the
Senate and denounced the aircraft frauds
of the wartime administration of President Wilson. He suggested punish-
ment for those whom Justice Hughes in his report had found culpable,
and he denounced the War Department under President Wilson for not
having punished them. "I maintain, Mr. President," said Senator Weeks,
"and I have always done so, that nine-tenths of the trouble of the people
of the country is lack of publicity."
When Harding took office, John W. Weeks became Secretary

President
of War. Not only was nothing done during his administration to punish
the culpable, but nothing was done to collect the government's claims
for huge overcharges under cost-plus war contracts. Daugherty, too, had
made a great show of wishing to punish the guilty war contractors, and
he had asked Congress to increase the statute of limitations from three
years to six, so that he might have time to prosecute
them. But he never
found the time.
On June 17, 1921, a few months after John W. Weeks became Secretary
of War, Charles Hayden, of Hayden, Stone & Company, Boston stock-

brokers, wrote a letter to the Secretary, which began, "My dear John,"
and which read in part:
Ordinarily I would hate to bring these matters to your personal
attention, but the waythe general situation has been developing in the
last six months it seems to me that everything that can be done by
co-operation between bankers and the Government to inspire confidence
in a legitimate way should be done, and that is

why I feel a perfectly
clear conscience in giving you this little additional bother.
The little additional bother was the matter of a claim that the Wright-
Martin Aircraft company, of which Charles Hayden was a director, had

received $5,267,467.75 more than it was entitled to during the war in
payment for Hispano-Suiza airplane motors. Mr. Weeks, who had also
been a stockbroker in Boston, wrote his friend Hayden on June 22, 1922:
My Dear Hayden: In view of the steps that have already been taken,
I amconvinced that the proper procedure is for the company to come in
before the Air Service section and make their showing.
Whatever decision may be reached by the Air Service section you should
understand is not conclusive. Not only is the approval of a higher officer
required, but even if that approval is obtained, there is a further appeal

to myself.
This note must have reassured Mr. Hayden that co-operation between
bankers and the government of President Harding was going to inspire
confidence.
The government claimed that the Wright-Martin company under its
cost-plus contract had been guilty of many exorbitant payments and had
made profits of 270 per cent. After the war was over, tools and processes
which had cost the government $792,865.03 were sold to the Wright-
Martin company for $24,392.37, and special tools and patterns for which
the government had paid more than $1,000,000 were sold to the company
for $10,642.64. Secret service men hired by the company for the govern-
ment, though it had not been authorized to do so, were paid huge salaries,
one man who had previously been a secret service man in the Treasury
Department from the government

at a salary of $4,220 a year, getting
through the Wright-Martin company about $39,000 a year and a guar-

anty of $25,000 in case the war stopped
before his services were termi-
nated. The Wright-Martin company put in large bills for laundry and
and charged the government $4,294.96 for executive meetings
for tips,
which were never attended; bills for $995.29 were put in for cigars, and
one was added for $3.25 for a box of cigars for G. H. Houston, presi-
dent of the company. Dinners for the company's officials cost the govern-
ment $848.78.
The Department of Justice at the request of Secretary of War Weeks
delayed prosecution of the Wright-Martin case, and then shifted the super-
vision of it from one attorney in the department to another in order to
delay bringing the company to trial.

When Congressman Keller's im-
peachment charges against Daugherty, which included laxity in the
Wright-Martin case, were presented to the House of Representatives,
there was alleged to be a gentleman's agreement between the Department
of Justice and the other side that action would be taken in the case.
But after the impeachment charges were quashed, no further action was
taken on the case. Harry Daugherty owned 500 shares of stock in the
he owned 2,500 shares of
Wright-Martin company in 1920, and in 1921
stock in that company, according to his tax reports.
There were war fraud cases against other large corporations which
Harry Daugherty never found time to prosecute. The du Pont powder

plant case was one of these, and John W.
H. Crim, Daugherty's first as-
sistant, tried repeatedly to get action on it, but found it impossible to ac-
complish and finally resigned. Among other charges against the du Pont
company was that during the wartime influenza epidemic, it charged
the government $75 for each corpse buried at the Old Hickory Powder
Plant near Nashville, Tennessee, and that the bodies were "wrapped in
muslin, and were sold to the Potter's field at $11 per body," according
to George W. Storck, who investigated the case. Storck testified that his
confidential report on the government's case against the Old Hickory
Powder Company was shown to the du Pont lawyers in advance, so that
they mightknow how to answer it. According to Cecil Kerns, bootlegger,

JessSmith was partner in a deal by which grain alcohol was removed
from the Old Hickory Powder plant during Prohibition as industrial
alcohol for 30 cents a gallon and resold by Jess Smith's partners for $10 a
gallon.
Gaston Means told the Senate committee and Mr. Howland, Daugh-
erty's lawyer:
"Mr. Howland, I never knew a case in the United States Government

that concerned corporations of vast wealth and influence that they did
not have to reaudit, take it up with another set of lawyers, switch those
lawyers over, and switch those lawyers over. . . And I never knew a case
.
in the Department of Justice where it concerned some weak corporations,
financially, and without influence, that it was not slapped before the
courts."
"That has always been so, hasn't it?" Mr. Howland asked.
"Always been so," Means said.
"And you think it

always will, don't you?"
"Oh, no. I am a great believer that there is a
great God in heaven.
It will come around. It takes years to bring about the millennium."
The United Gas Improvement Company, a large public utility corpora-

tion, was under indictment for molesting its
competitors by starting
prosecutions against them, having them arrested falsely and charging
them falsely with counterfeiting trade-marks; it was also charged with
acquiring control of competing companies secretly, and of making collu-
sive bids for street lighting contracts by
having two or more companies
which it owned bid against each other, representing them to be inde-
pendent. A New York grand jury had returned criminal and civil indict-
ments against the U. G. I., and also a bill was filed calling for the dis-
solution of its monopoly. The officials of the U. G. I. then got
busy and
saw Daugherty. R. Colton Lewis, who had charge of the case against
the U. G. I. for the
Department of Justice, was removed from it and
Daugherty appointed a personal friend of his from Columbus, Ohio,
Harry F. West, to "make special investigations." West told Lewis: "Put
yourself in the Attorney General's position. He
has indicted these people,
and he finds now that they were friends, and contributed to the cam-
paign which he had charge of." Lewis tried to see Daugherty about the
U. G. I. case, but was not successful. "The Attorney General was a hard
man to see," he told the Senate committee. But the representatives of
the U. G. I.
monopoly did not have the same difficulty as an assistant
attorney of the United States. They were coming constantly to the De-
partment of Justice for conferences with Daugherty. Francis S. Hutchins,
Daugherty 's friend, and an attorney of the firm of Baldwin, Hutchins
& Todd, wrote to Daugherty:
New York, April 24, 1922.

Re Randal Morgan, Samuel Bodine, United Gas Improvement Co.
Hon. H. M. Daugherty
Department of Justice, Washington, D. C.
My Dear Harry: I am wondering if you could not with propriety now
give out a statement along the lines of your suggestion Saturday,
some-
what as follows:
"In the matter of the so-called 'gas mantle indictment,' new facts have
been brought to my attention which would seem to indicate the possibility
that certain defendants have been improperly included. I have, therefore,
directed that a further searching investigation of all the facts be made
I have ordered that
by the department, and, pending such investigation,
proceedings both in the criminal and civil actions,
all be suspended."
Such a statement seems extremely desirable:
First,because it would seem to be plain justice to men who are riding
under the stigma of an unjust indictment.

Second, because it would company in getting decent men
assist the to
serve on its directorate at the coming stockholders' meeting.

Third, to warn off the blackmailers and bloodsuckers who are now
attempting to approach us.
I feel strongly that anything you can
consistently do along these lines
will further the ends of justice.
Yours very sincerely,
FRANCIS S. HUTCHINS.
Daugherty ordered both criminal and civil actions against the directors
of the U. G. I., some of whom had been contributors to his Harding
campaign fund, and against the company, which was powerful politically
and financially, suspended. The "further searching investigation" which
Mr. Hutchins mentioned in the convenient draft which he wrote for his
friend Harry to give out to the press, was conducted along the lines of
the regular Daugherty plan, namely, those who had complained against
the U. G. I. were investigated, and not the company itself. Burns's sleuths
were put on the trail of Mr. Ragland Momand, street lighting contractor,
who had been instrumental in obtaining the indictments against the
U. G. I.
monopoly.
Mr. Momand had been writing he wrote to President Harding,
letters;
telling him that the action of his friend and Attorney General in halting
prosecution "of this band of big criminals" on the grounds of insufficient
evidence of guilt "was a fraudulent attempt to deceive the people of the
United States" and permit "the escape of these big criminals from the
toils of the law in which they now find themselves enmeshed as the result
of their flagrant criminal practices the past 25 years, during which time
they have by these criminal practices robbed the people of millions of dol-
lars." He called on Harding to remove Daugherty, "who has proved
false to the people." But so many people and newspapers had been calling
on Harding to remove Daugherty that by this time he was used to it.
To his letters to Harding, Mr. Momand received no reply. Then he pub-
Harding in the New York newspapers.
lished his letters to
Congressman Keller and Mr. Momand called at Daugherty's office

but were unable to see the Attorney General; at the suggestion of Daugh-
erty they were having a conference with Daugherty's friend Harry F.

West, who was supposed to be making the "further searching investiga-
tion" of the U. G. I. case, when William J. Burns entered the room. "He
walked past us through the room and over to the window and gave
"
Mr. Keller and me, as we say, the 'once over,' Mr. Momand testified,
"evidently wanted to identify us. ... For the next two or three days," he
added, "Mr. Burns personally was at our heels while we were in Washing-
ton here; we could hardly turn around but we would see Mr. Burns."
Daugherty was up to his old tricks: trying to get something about the
prosecutors of his friends which would warrant prosecuting them. In his
announcement to the press of the appointment of his friend, Harry F.
West, to make a thorough investigation, he wrote: "It may be necessary for
him to investigate the investigators."
During the administration of the Department of Justice by Harry

Daugherty monopoly had a picnic and restraint of trade ran riot. Price
of corporations was prevalent throughout the
fixing by large associations
of Justice was negligent about enforcing
country, and the Department
all laws against such practices. For instance, the large tobacco companies
in the United States were fixing the price of their product to the consumer,
and at the same time two buying combinations practically fixed the price
of leaf tobacco to themselves by buying secretly through other firms in
order to keep the price to the farmers low. The Federal Trade Com-
mission wrote to Attorney General Daugherty recommending prosecu-

tions of the tobacco monopoly, and the Attorney General did not reply
to its letters. Huston Thompson, chairman of the Federal Trade Com-

that after receiving no
mission, testified before the Senate committee
repliesto letters, the Federal Trade Commission came to the conclusion
that it was useless to send reports and requests for legal action to the
Attorney General's office. Finally, afterCongressman Keller had charged

in hisimpeachment proceedings that Daugherty paid no attention to the
Federal Trade Commission's recommendations, Daugherty
wrote at last
to the chairman of the Commission suggesting a conference

with his
assistant, A. T. Seymour, on the tobacco cases. But even then he took no

action to prosecute the tobacco monopoly.
Federal Trade Commission had also issued reports on the lumber
The
who had financed a Your
monopolies throughout the country, "Buy
Own Home" and writers to
campaign by hiring teachers, clergymen
and then, by controlling the price of lumber
spread that propaganda,
had made the process of buying your own home much more expensive.
In the lumber cases two of Daugherty's friends from Columbus, Ohio,

had come to Washington, enjoyed a friendly chat with Harry Daugherty,
and thereafter nothing more was done about the lumber cases at the De-
partment of Justice. The Federal Trade Commission had also made a
study of the high cost of farm implements and had called attention to
the price-fixing activities of the Harvester Trust, and the refusal of com-
binations in the farmimplement industry to sell to farmers' co-operatives,
in an efforton the part of the monopolies to break up the farmers' co-
operative movement. Nothing was done about prosecution by Harry
Daugherty's Department of Justice.
"My idea," Huston Thompson told the Senate committee, "is that
criminal prosecution and jail sentences is the only thing that will cure
the state of mind that now exists in the business world with regard to
trade associations." Fines for violation of the laws against unfair practices
were merely charged up to profit and loss by the monopolies, and they
went right on violating the law. But Daugherty never could see the point
of putting potential campaign contributors and possible clients into jail.
Daugherty's attorney, former Senator George E. Chamberlain, told the

committee that his client had prosecuted monopolies, and he gave as the
only instance the prosecution of some men who had been trying to estab-
lish a monopoly of perforated music rolls in the United States. Daugherty
had made the United States a comfortable place for those who had player
pianos, but those who smoked cigarettes, built their own
homes, or were
served by public utility corporations and railroads were not as carefully
protected by the Department of Justice. In some instances, Daugherty's
administration interfered in the effort to make monopoly surer and safer.
There was, for instance, the case of the New York, New Haven & Hart-
ford Railroad, which was trying to control the Boston & Maine Railroad
and enjoy a complete monopoly of New England transportation. The
New York, New Haven & Hartford had controlled the Boston & Maine,
but in the course of years the New York bankers had debauched the
railroads, with great profit to themselves and ruin to the small New
England stockholders. Finally, the courts ordered that the Boston & Maine
be divorced from the New York, New Haven & Hartford. A long fight
then began on the part of the New York bankers to regain control of
New England's railroads; Boston financiers and railroad men wished to
develop the freight possibilities of the Boston & Maine, which served
northern New England, by merging it with either the Grand Trunk-
Chicago, Milwaukee & St. Paul system or the New York Central system,
and thus gaining outlets directly from Boston to the West. The officers
of the New York, New Haven & Hartford were eager to prevent such a
move, and so were the officers of the Pennsylvania Railroad, which owned
large blocks of stock in the New Haven.
During the administration of President Wilson the bankers had found
itimpossible to do anything about having the divorce decree of the New
Haven and the Boston & Maine rescinded, though they took the matter
up with two of Wilson's Attorneys General, McReynolds and Gregory.
But when Harding became President and Daugherty Attorney General,
the hopes of the bankers rose. An application was made for the dissolution
of the decree divorcing the two railroads, and though the minority stock-
holders were vigilant, Daugherty gave them little chance to protest. He
went to Boston in December, 1921, in the company of R. E. McCarty,
general manager of the Pennsylvania Railroad lines. Mr. McCarty, accord-
ing to Senator Wheeler, had often loaned Daugherty and Jess Smith his
private railroad car.
A
few days before he left Washington for Boston, Daugherty issued a
statement to the press that he intended making a trip to Boston to look
into the matter of the two railroads; no official notice of any hearing
was given to the stockholders of the Boston & Maine. Daugherty then
appeared at the Hotel Touraine in Boston for a public hearing on the case.
At this meeting he spoke in generalities of the government and the
railroads. He told those stockholders and officials who had been able to
learn of the meeting: "Now, on the general proposition as to the necessity
of maintaining transportation facilities, I have acquired in a period of
some years of experience, sufficient information to know positively that a
community can not get along without transportation facilities." Then Mr.
Daugherty called on the most interested party present, Mr. Edward G.
Buckland, vice-president of the New York, New Haven & Hartford Rail-
road, to give his views on whether or no the two railroads were competi-
tive. It was charged by the representative of the minority stockholders of
the Boston & Maine that the New Haven "had gone through the back
door of the Department of Justice and gotten Mr. Daugherty to come
down and open this hearing." The officials of the Massachusetts Public
Service Commission pointed out Daugherty that they had not had
to
sufficienttime before this hasty public hearing to study the competitive

features of the two railroads and would prefer to discuss the matter at a
later date. Mr. Buckland made a general speech on why the decree should
be modified and his railroad permitted to reunite with the Boston & Maine.
Mr. Conrad W.
Crooker, counsel for the minority stockholders, then told
Daugherty that the courts and the Interstate Commerce Commission had
already closed the matter by their decisions against the combination of the
two railroads.
Daugherty then went to New York, where he held a private conference

with Federal Judge Julius Mayer, who had to decide whether directors
of the New Haven should be permitted to climb on to the board of the
Boston & Maine. Daugherty was representing the interests of the United
States in the matter, for the government was a creditor of the two railroads,
holding $83,000,000 of loans to the New Haven and $46,775,000 to the

Boston & Maine.
In New York Daugherty also held private conferences with the New
York, New Haven & Hartford Railroad officials. It was suggested to the
board of directors of the New Haven that R. G. Hutchins, Jr. would be a
suitable person to become a member of its board. Mr. Hutchins was a
brother of Mr. Francis Hutchins, the lawyer who had written to his friend
Harry enclosing a draft statement to be given to the press by the Attorney

General in the United Gas Improvement case. Mr. R. G. Hutchins, Jr.
was a member of the banking firm of Hallgarten & Company, which had
close relations with Kuhn, Loeb & Company, the financiers and advisers
of the Pennsylvania Railroad, which was the largest individual stockholder
in the New Haven Railroad. Mr. Hutchins had grown up in Columbus,
Ohio, with Harry Daugherty. Mr. August P. Loring told the meeting of
the board of directors of the New York, New Haven & Hartford Railroad :
"Mr. R. G. Hutchins is the junior member of the firm of Hallgarten & Co.,
Pine Street, New York. He is the financiaj adviser of the Attorney General
of the United States." Senator Wheeler remarked: "The only surprising
thing to me is that Jess Smith and Howard Mannington were not put on
the board of the New Haven Railroad."
Mr. Hutchins's close connections with both the Attorney General of the
United States and with Kuhn, Loeb & Company were considered to be
useful to theNew Haven Railroad in another matter besides the control of
the Boston & Maine by the New Haven. French bondholders held a large
loan of the New Haven Railroad, and they had been threatening to fore-
close. At the time the French government owed huge sums of money to
the United States government in war debts. It was represented to the
New Haven directors, according to the testimony of Mr. Conrad W.
Crooker, that the Attorney General of the United States could force the
French bondholders not to foreclose their loan because of the French
government's war debts to the American government. Mr. Hutchins was

also considered useful in getting the French bondholders to wait for their
money because of his influence with J. P. Morgan & Company and Kuhn,
Loeb & Company.
But Mr. Hutchins was said to have performed still another valuable
service for the New Haven directors. It was testified that Attorney General
Daugherty sent his friend Hutchins to see Mr. Smith, the president of
theNew York Central Railroad, which was also trying to get control of the
Boston & Maine, with the message that the New York Central Railroad
would be prosecuted under the Sherman Anti-Trust Act, if it "did not
keep out of New England." As soon as Mr. Smith received this informa-
tion, he dropped all negotiations he had been carrying on with Mr. Philip
Dexter, Mr. Gordon Abbott and Mr. Guy Currier for the New York
Central to take over the Boston & Maine.
Judge Julius Mayer, with whom Daugherty had had a private conference
in NewYork, signed a decree permitting directors of the New Haven
to go on the board of the Boston & Maine. The minority stockholders of
the Boston & Maine were not represented at the private conference between
Daugherty and Judge Mayer. A public hearing was held in court, at which
Attorney General Daugherty made a speech:
"You are able to distinguish between a speech and a legal argument,

are you not?" Mr. Rowland asked Mr. Crooker.
"Yes," Mr. Crooker replied, "and this was a speech. There is no ques-
tion about it."
"Did you ever hear Mr. Daugherty make a legal argument?" Senator
Wheeler asked.
"I never did," Mr. Crocker answered. "I do not think he is capable
of it.
My own
personal opinion is that he
. is the biggest false alarm
that ever sat in the Department of Justice."
Although Judge Mayer ruled that the directors of the New Haven
might sit on the board of the Boston & Maine, it was another matter to
get them there, for the stockholders of the Boston & Maine by an over-
whelming vote declined to accept the New Haven directors on their board.
Then the New Haven crowd tried through Daugherty to force some
Boston & Maine directors to resign and give their places to New Haven
directors. This, too,proved unsuccessful, for the Boston & Maine directors
refused to resign. At the annual meeting of the Boston & Maine Railroad
in January, 1923, an attempt was made to elect five New Haven directors,
but they were defeated again. Then the entire decree of divorce of the two
railroads was vacated by Judge Mayer in June, 1923, after Daugherty's
plea in favor of that action, and the situation which the Interstate Com-
merce Commission and the courts had tried to remedy in 1914 was created
again. At the meeting of the Boston & Maine Railroad in April, 1924, the
New Haven crowd finally succeeded in forcing their directors on the
board. When Mr. Paul Howland was cross-examining Conrad W.
Crocker, representing the Boston & Maine Stockholders' Protective Asso-
ciation, which controlled about 100,000 of the 800,000 shares of the railroad,
Crocker turned on Daugherty's attorney and said:
"Any blame that attaches to your client is because he reversed a well-

settled policy of the Department of Justice for seven years and turned
these people loose on us again after they had damaged the Boston &
Maine stockholders more than $100,000,000, a$ found, not by me, but by
the Interstate Commerce Commission. If you can make anything of that
go to it."
IN THE spring of 1923 Daugherty and his friends had cause for worry.
Businessmen were complaining about the lack of activity of the Depart-
ment of Justice in behalf of men of small means; bootleggers were com-
plaining that they had not received liquor permits for which they had
paid; and Congressmen and governmental departments were complaining
that they could get neither action nor information from the Department
of Justice. Daugherty himself had become very ill early in 1923; Jess Smith
was suffering from diabetes and fear; even President Harding, prince of
good fellows, seemed to have a dim realization that all was not right in
his political family. Fall's private leases to public property were being
investigated; Colonel Forbes had been caught red-handed selling govern-
ment property and government contracts; Lasker's attempt to put over
a large ship subsidy had failed; and criticisms of Daugherty's administra-
tion continued to pour about the President's head.
Roxy Stinson testified that during the last months of Jess Smith's life,
he and Harry Daugherty were not getting on so well as previously.
Daugherty's illness, she said, had made him irritable, and Jess Smith was
very depressed at the way his old friend sometimes talked to him:
"And one thing which impressed Jess so much," Miss Stinson told the
committee, "was his courteousness to him always. For instance, if he
wanted him to do anything he wouldn't say, 'Do that.' He would say,
'Would you like to do this for me?' or 'Would you mind doing that?'
or he would wire him at home, 'I am awfully lonesome without you. Will
be so glad back. Will you be back Monday?' He wouldn't
when you come
say, 'Come back.' Jess wouldn't
have gone then. I don't want to give you
the impression that Jess Smith was namby-pamby or didn't have any
backbone or intellect of his own, for he was a very bright man, and it is
only through his loyalty and devotion to this man was enmeshed.
that he
I reiterate, I want you to get this impression; I want you to believe,
know it is true."
Jess Smith visited Roxy Stinson the last two weeks before his death, and
she testified that on this trip, he was in mortal terror:
"The man was afraid," she said. "He was afraid. ... He indicated it
at various times. For instance, we were at the Deschler Hotel for lunch
or dinner, and we would be sitting at the table at dinner, and he would
say to me, 'See that man over there? How does he look to you?' 'Oh,' I
would say, 'he is all
right.' He would say, 'I don't like his looks.' I would
say, 'Don't look at him. He is all right. He is just a traveling man.'
"Or we would be sitting out in the lobby of the hotel, or out in the
foyer, and we would be sitting in two chairs, just Kke this (illustrating),
and he would say, 'Don't let us sit here, let us sit over there; let us go
over,' and it would be on a lounge with our back to the wall.
"And the last time he came home, the last two weeks home, he was
home for two weeks, as I stated before. I came tQ Columbus, and the
driver was to come and take us back later in the afternoon, and he
grabbed me there in the hotel, in the Deschler, and he threw his arms
around me, and he said, 'I never was so glad to see anyone in my life.'
He seemed to have forgotten that he was doing something that was more
or less embarrassing it wasn't; it was sweet, and he meant it, just in
his direct manner, and he said, 'I never was so glad to see anyone in my
life.'"
On that occasion, Roxy Stinson had made plans for them to go together
to a dinner dance, but Jess Smith asked her to do him a favor and go
home. He said, she go home before dark." And instead
testified, "Let's
of waiting for the automobile that was to return for them, they took the
train. In the train, while Roxy Stinson was telling him about the house
she was building, Jess Smith became suspicious of a man asleep in the
chair opposite theirs. "Don't talk so loud," he said, "he will hear you."
After she told him that she was not saying anything of any consequence,
he said : "I don't like the looks of that fellow." "I said, 'Oh, stop looking
at him.' Directly this man had

got up and gone out, I said, 'Oh, he is just
tubercular,' I And all this time I had this brief [case]
said, 'he is all right.'
with these important papers in my lap all the time. He said, 'Carry them;
I don't want to carry them.' . His brief case that he was bringing home
. .
from Washington on this trip." Miss Stinson said that she did not know
what papers this brief case contained.
When they got off the train and into a taxi, Roxy Stinson said, Jess
Smith kept looking back, and she told him not to do that. He answered
that he just wanted to see if that fellow got off the train when they did:
"I said, 'Don't you do that again,' and he said, 'All right,' and kind of
smiled, and looked up a little bit assured, and the man didn't get off the
"Who did he say he was afraid of?" Senator Wheeler asked.

"He said, 'They are going to get me.' ... He said, 'They are going
to get me.' I said, 'No; they won't.' And he said, 'They passed it to
"
me.'
"They what?"
"
'They passed it to me.' And I knew what he meant. I didn't ask.
At assumed presumed, if you will. And he was in mortal fear.
least I
And I said, 'Oh, don't. You are all right. You are all right.' He would
always pacify me if I had troubles, imaginary or otherwise, and I tried
to do the same thing for him. . . . Well, what I understood that he
meant, that he had been passed the blame. That was my interpretation.
Now that is purely my own, you understand. That is my interpretation.
And I think that he figured I am sure, because he indicated he had his
house absolutely in order. He asked me to destroy the papers."
"What papers?" Senator Brookhart asked.

"Any papers I might have relative or letters, or anything relative to
any situation, and I have many more of them, maybe of consequence
or not; as I know. But he had his house absolutely
said before, I don't
in order. ... Isaw no bank books, no receipts, no checks; everything had
been destroyed. Just as he made the request which he asked me to do the
next day, he said, on Sunday, 'Will you tomorrow afternoon destroy all
"
these things?'
"And you did?" Senator Jones asked.
"No; because I felt very badly, and I went out in the country and spent
the afternoon with my mother."
"You never destroyed any of his papers, then, did you?" Senator
Jones asked.
"No," Miss Stinson replied. "I never had any of his papers. He was
talking about mine."
"He was referring to his letters and things like that?"
"Yes. I didn't get around to it. The reason I didn't if you could only
understand the great stress we were under there. I said, 'Tell me all
about it, Jess. I know so much.' 'No, no, no,' he said, 'just cheer me up.
Just cheer me up.' It was pitiful. And he would say, 'Do you miss me
when I am gone?' and he knew what he was going to do."
"You said he walked down the middle of the street?"
"Yes; at night. He asked different people if they wouldn't stay all
night with him. He was afraid. He asked Mr. Mai Daugherty if he knew
of some one he could get there to stay all night. Mr. Daugherty has told
me that himself. No one stayed with him; he was alone. If he would
leave my house at 10 or 11 o'clock, whatever the time he would leave, he
would go to Harry Daugherty 's house, and Mrs. Daugherty was ill, and
Mr. Daugherty was up, and he would go in there and stay with him as
long as he would stay up, until 1 or 2 o'clock, and then he would go
over to his home. ... If he had broken down and told me, I am sure I
could have helped the situation, because I could have braced him up, I
know."
"Madam," Senator Ashurst asked, "you say he was afraid. Do you
mean he was afraid of an expose?"
"Yes. ... Or the ultimate results."
"Results flowing from an expose of these deals?"
"Yes. He was a proud man. He had a right to be so."
"Well," Senator Jones said, "his actions did indicate, in some respects,
too, that he was afraid he would be shot or killed?"
"Yes, sir. He was afraid of that for me. ... I told you that the last
evening he told me not to go out after dark. He made me promise not

to go out after dark by myself; never, never to drive alone. That is the
lastthing he said to me." . . .
"Let me ask you one more question. Did he ever indicate to you that
he feared Mr. Daugherty?" Senator Jones asked.
"Yes; he feared Mr. Daugherty."
"Well, what did he say about that? What did he say that indicated
that?"
"Do you want me to tell about that incident at the shack on Friday
afternoon, Senator Wheeler?" Miss Stinson asked.
"Yes; go ahead and tell them all."
Miss Stinson said that one week before Jess Smith was killed, he and
Daugherty went out to the shack which they owned near Washington
Court House:
"Yet I find that that afternoon," Miss Stinson continued, "Mr. Harry
Daugherty always had the habit of taking a nap after lunch, and this was
about 1 or 1.30 I don't know which you can corroborate my story if
you wish I got it second hand, yes, from Mr. Daugherty and from one
other present there that day Mr. Mai Daugherty I mean he
who was
was taking a nap, and there was a gentleman came from Columbus
down and wanted a consultation, or rather wanted an appointment with
Mr. Daugherty; and Jess, as I have said before, he was his bumper, and
he would arrange this or that for him, and he said, 'He is asleep and
can't be disturbed.' And he was so persistent and insistent, and he was
an old friend of Jess's too, and Mr. Daugherty 's he is from a near-by
town, a gentleman I know and so he insisted, and so Jess finally went
upstairs to Harry's room and aroused him and told him this man wanted
to see him, and Harry immediately flew off and abused Jess unmercifully
for arousing him from his sleep. He said, 'You know I won't be dis-
turbed,' and he swore at him, and he talked to him disgracefully, and he
his driver and his
got up and put his clothes on and started to leave, got
car, and Jess didn't have a car there, and he
was going to leave Jess
there at the shack by himself. The people had gone at that time. He was
mad, and was going; to leave him there by himself, and so Jess called
up Mr. Mai Daugherty, asking his son Ellis to call for him, and he said he
would as soon as he couldn't leave the bank until 3 o'clock, and he called
him up two or three times, and finally Mr. Daugherty waited and took
Columbus, and he was so mad, and he
Jess at the crossroad leaving for
took him to Washington Court House, and Jess got out of the Daugherty
car and walked right to the hardware store and got a gun, saying, This
is for the Attorney General.' He had made his decision. Harry had been
so unkind to he had shifted his responsibility to him that he
him after
had made his decision what he was going to do, and that is why he could
hold his head up and walk down the street and come to me his old self,
and I said, Are things all right?' And he said, 'Yes.' And that is the first
time in months that he would walk straight and carry his head up. Yet
he was making all this preparation." . . .
"Now, who told you about this buying of the gun?" Senator Wheeler
asked.
"No one has told me that directly, but it is generally current there in
town that he went to this hardware store I am sure you could verify it
and bought this gun, and just casually remarked that he was buying it
for the Attorney General, I suppose, to give people a reason why he

would buy it, you know, like anybody would be apt to do."
"He told you about this trouble with the Attorney General, did he?"
"Yes; he told me about this trouble with the Attorney General." . . .
"Had Smith ever used a gun, or ever owned a gun in

Jess his life-
time?" Senator Wheeler asked.

"He wouldn't look at one, much less touch one."
"He was actually afraid of a gun, was he not?"
"He had a natural horror of a gun. I know it hadn't been later than
last fall that we were going by a window where they had guns on
display, and I stopped a moment, and he said, 'Oh, come on, I wouldn't
stop to look at the window.' He might have been wanting to go on for
something else, but I know his natural abhorrence of guns. After the war
there was a lot of banditry going on in the neighborhood, and I wanted
to get a gun, but he wouldn't permit me to have a gun."
In answer to Senator Brookhart's questions, Roxy Stinson testified that
she was convinced that Jess Smith had committed suicide. "However,"
she added, "I also consider Harry Daugherty as morally responsible for the
death of Jess Smith." She said that she had seen the body at Washington
Court House, where it was brought for the funeral, and that she was told
that the bullet had entered the left temple and come out the other side.
There was a great bruise on Jess Smith's left temple, "which they said was
caused by his falling into this waste-paper basket." Daugherty did not go
to the funeral, Roxy Stinson testified.
In the book which he published, Daugherty gave the impression that
Jess Smith had become affected by his appendicitis operation and his
suffering from diabetes. He also wrote that Jess Smith was greatly dis-
appointed and depressed because President Harding had refused to permit
him to join the President's party for the expedition to Alaska which took
place two months after Jess Smith's death. Daugherty also wrote that Jess
"
Smith had been "acting 'queer.' "After his death," Daugherty remarked,
"I learned that while in Ohio he had bought a pistol a thing I had never
known him to own before." When they came back to Washington together
from Washington Court House on their last trip, Daugherty wrote that
he went to stay at the White House and asked his secretary, Warren F.
Martin, to spend the night in the apartment at the Wardman Park Hotel
with Jess Smith, "as I was uneasy about his condition." "On the morning
of the 30th," wrote Daugherty, "shortly after breakfast, the President and
Dr. Boone came to my room in the White House and told me of the
suicide. The
President was greatly shocked."
When he got to the Wardman Park Hotel, Daugherty wrote, he found
that Jess Smith had destroyed all of Daugherty's household accounts and
personal correspondence. "In fact there was hardly anything left pertaining
to my personal affairs." "I was afterwards informed," Daugherty wrote,
"that Mr. Crim, Assistant Attorney General, had said that he obtained
evidence that Smith had been mixed up in questionable deals, confronted
him with the truth and informed him that I would be made acquainted
with the facts. And that this was but a few days before Smith committed
suicide."
Smith's mother, Daugherty wrote, had also suffered from diabetes and
had died of it. Jess was
reported to have remarked at the time that "if he
ever had diabetes there would be a shorter way out for him."
"This insidious disease," wrote Harry Daugherty, "plays sad tricks with
the human brain. It has caused loss of memory. It has produced homicidal
impulses. It has made suicides. It has broken down the moral fiber of
character.
"I shall always remember my friend before his illness when he was
himself, kindly, helpful, loyal, generous."
Whether Jess Smith committed suicide, or whether he was murdered,
will probably never be definitely established. There is evidence that he
feared cheated bootleggers and suspected that strangers were following
him and lying in wait for him, and there is also evidence that he was
depressed enough and worried enough about the consequences likely to
come from his acts to make him commit suicide; and then when Harry
Daugherty began to get irritable with him, his whole fragile world seemed
to go to pieces. He was proud, sensitive and disreputable; obviously he had
been threatened, if we can judge from his actions as described by Roxy

Stinson. In any case, his death was a great convenience to his beloved
friend, Harry Daugherty, who was able to maintain that his "kindly,
whose memory as such he would always
helpful, loyal, generous" friend,
cherish, "had been mixed up in questionable deals," without the knowledge
of his friend and roommate, the Attorney General. Also, Daugherty no
longer had to worry what a man whose moral fiber had been broken down
by diabetes might do or say about bootleg deals and sales of influence.
Jess Smith would have been an interesting witness before the Senate
committee which began its hearings less than a year after his death, except
that he probably would have been able to maintain that anything he
might say would tend to incriminate or degrade him. An effort was made
by the Senate investigators to examine the books of the Midland Bank,
of Washington Court House, Ohio, and the Commercial Bank of that
town. Mai S. Daugherty, the Attorney General's brother, was president of
both those banks. Mai Daugherty denied examiners access to the accounts
in thebanks on the grounds that any examination would violate the sacred
trustput in the bank by its depositors. But before the books were closed
to them, investigators for the Senate committee had noticed deposit slips
in the name of Harry M. Daugherty. "The most striking thing to me,"
the committee's examiner, Mr. Phelon, testified, "was the very large cer-
tificates of deposit, as I mentioned. I have here four certificates of deposit
which aggregate over $100,000."
"And your recollection is that about $74,000 of that was in the name
ofHarry M. Daugherty?" Senator Wheeler asked.
"As I recall," Mr. Phelon replied.
He name of Jess Smith for

also noticed a certificate of deposit slip in the
$63,000marked "Liberty bonds" and also a certificate of deposit in the

name of Mai S. Daugherty for $50,000 marked "Liberty bonds." A total
of about $20,000 was deposited in the Daugherty Midland Bank in the
name of J. E. Grey. Some name of
of these certificates of deposit in the
J. E. Grey were endorsed by Harry M. Daugherty. The mayor of Wash-

ington Court House, Rell G. Allen, testified before the Senate committee
that, though he had lived in Washington Court House since 1887, he had
never heard of a resident of the small town by the name of J. E. Grey.
Also, none of the other residents of Washington Court House deposited

so much money in the banks as the Daughertys and Jess Smith. The
deposit slips of other depositors were seldom higher than $400, John L.
Phelon testified. The cashier of the Commercial Bank of Washington
Court House also testified that for Washington Court House a deposit of
$10,000 was very large indeed and that one of $30,000 or $40,000 was most
unusual. Senator Brookhart remarked:
"The Mr. Daugherty show that he had no property; he

tax returns of
was in debtmore than he was worth when he became Attorney General.
The evidence again shows that we found in his brother's bank live certifi-
cates of deposit to him of nearly $75,000, which would be accumulated
within these two or three years, on a $12,000 salary. The Wright-Martin

aircraft stockis a circumstance that certainly needs explanation. . . .
"The refusal to let us see those bank records is exceedingly pre-

sumptuous against innocence in these matters."
Senator Brookhart also told the committee:
"Now, in the first place, this criminal organization of Jess Smith's in
Mr. Daugherty 's household is established by the evidence in this case;

it is established by direct and circumstantial evidence stronger than I
have heard of any conspiracy in any court anywhere, and I have heard
and convicted men of conspiracies myself as a prosecuting attorney. Jess
Smith profited in a way that is not explained, except on the theory of
this criminal traffic. His estate shows it; his manner of living and every-
thing shows it; and he was living with Daugherty as a member of his
household."
In The Inside Story of the Harding Tragedy, Daugherty wrote: "I was
never subpoenaed before the committee and never attended a session."
In June, 1924, the committee requested Harry Daugherty 's appearance
before it. He declined to be a witness on the grounds that the committee
had not laid a groundwork for an investigation of his administration by
calling his assistants who knew the details of the work of his department.
He also stated that the committee had not confined its activities to investi-
gation of his official conduct, but had made personal attacks on him. He
questioned the authority of the Senate committee to compel his appearance
and offered in support of this contention the recent decision of Judge
Cochron in the case of his brother, Mai S. Daugherty, who had refused
to answer a subpoena of the committee and had fought its authority in
the courts.
In his book Daugherty called the members of the committee "Reds,"

its witnesses "a procession of perjurers," and its testimony "a mass of
insinuations, innuendoes, vicious gossip and shameless lies." Of Roxy Stin-
son, whom
he called "the Prima Donna of Wheeler's play," he wrote:
"This unfortunate woman had become my bitter enemy because I had
refused to allow Smith to bring her to Washington while he was in charge
of my house. The moment the Wheeler Committee began its attack on
me, she saw an opportunity to get her revenge." Of Senator Wheeler,
whom Daugherty called contemptuously, "the little lawyer from Butte,"
he wrote: "In the little borough of Montana, masquerading as a state,
boasting two United States Senators who represent a population about the
size of a county in Ohio, there suddenly appeared a District Attorney
appointed under Wilson, as a candidate for the Senate. On his banners he
"
had inscribed the slogan Til get Daugherty.'
:
Soon Senate had passed a resolution calling for an investigation

after the
of Daugherty's administration, the Department of Justice under Daugherty
began to investigate the two Senators from Montana, the "little borough
. . .
masquerading as a state." Burns's sleuths were sent out to Montana
to get what they could about Wheeler and Walsh, and friends of Wheeler's
were visited with suggestions that they do what they could "to pull
Wheeler off Daugherty," according to testimony taken before the Senate
committee. A Department of Justice agent, C. F. Hately, visited John S.
Glenn, of Nashville, Tennessee, who knew Senator Wheeler and his

Mr. Glenn testified that Hately asked him "what kind of a fellow
family.
Wheeler was" and "about Senator Wheeler's morals." He was offered his
expenses to Washington, if he would attempt "to pull Wheeler off
Daugherty." Mr. Glenn testified that he saw Hately send Burns a telegram
in the Department of Justice code, and that he saw his transportation
order from the Department of Justice.
When the Senate committee began its public hearings, sleuths shadowed
the witnesses and watched the proceedings, endeavoring to get what
they
could to discredit the investigation and to aid Daugherty's side. W. O.
Duckstein testified that he had met in Washington two detectives, P.
J. O'Brien and Walter Petit, who were alleged to be working for Hiram
Todd, special assistant of the Attorney General, in charge of the indict-
ments against Gaston B. Means. These indictments were being pressed
against Means with unusual alacrity for the Daugherty Justice Depart-
ment after Means had testified before the Senate committee. O'Brien
and Petit, Duckstein testified, told him that they had a crew of male and
female detectives at the Capitol and a crew of wire tappers with them
"to find out everything they could about the committee." "They told me,"
Duckstein they had lady investigators in the ladies' retiring
said, "that
rooms near your [Senator Wheeler's] office, and also near Senator Brook-
what they could. . They said one
hart's office, to listen to find out . .
thing they were going to try to frame Senator Wheeler." "They also told
me they were going to railroad Mr. Means when his case came up in New
York," Duckstein testified.
As the investigation of Daugherty proceeded, Senator Burton K.

Wheeler received telegrams from Montana informing him that the
Department of Justice had agents there investigating his entire career.
"You are not alone," Senator Brookhart, the chairman, remarked. "I got
notice they are investigatingme in Iowa." Twenty-four of Burns's Depart-
ment of Justice agents were working in Montana to "get something on"
Senators Wheeler and Walsh. Senator Wheeler was suddenly indicted in
Montana charged with misuse of the mails in the interests of the Gordon
Campbell-Kevin Syndicate No. 2 of Great Falls and Kevin, Montana.
A. A. Grorud, an attorney of Helena, Montana, who had formerly been a
law partner of Senator Wheeler's, and who was once Republican attorney
general of Montana, testified that Blair Coan, a Department of Justice
agent, had come to him in his effort "to smear Senator Wheeler," as he
frankly admitted. Mr. Grorud said that he had asked Mr. Coan how he
had managed to put over the indictment of Senator Wheeler, and he testi-
fied that Coan answered "Well, you know we made
:
Slattery, the United
States district attorney, go through, because we had so much on him that
he had to go through for us in connection with the prosecution of the
liquor or the violations of the Volstead Act, so he had to go through
with us." William J. Burns admitted when examined by the Senate com-
mittee that he had conferred with this same Blair Coan about Senator
Wheeler's career and had consulted others on the same subject.
It took a year after his indictment in Montana for Senator Wheeler to
which the Department of Justice

get vindication of the charges of fraud
under Daugherty had trumped up against him, and it cost the people of
the United States a large sum of money to try the case. Senator Walsh
was one of Senator Wheeler's counsel at the trial, and it took a jury only
ten minutes to acquit Senator Wheeler on all counts in the indictment.
Then Senator Wheeler was indicted again in the District of Columbia,
and twenty months after the original indictment had been obtained in
Montana by the aid of Burns's sleuths, the charge in the District of
Columbia was dismissed in December, 1925, as absolutely groundless.
The case had cost the people of the United States $103,720.75 so that
Daugherty and his pals might vent their spleen.
Some of the witnesses before the Senate committee were molested in

other ways. Mr. Storck, who had Old Hickory Powder
investigated the
case against the du Fonts found one day that someone had cut open his
brief case, which was in his hotel room, and his cabinet in the Department
of Justice, and had stolen his papers, while he was testifying before the
committee. John Kosterlitzky, another special investigator, found that his
suitcase was stolen at about the same time that Mr. Storck lost his papers.
An active battle took place between the Senate committee and the
Department of Justice attorneys in New York over Gaston B. Means.
Means was under four indictments in New York when the Senate com-
mittee met, and he was charged with conspiracy to violate the Prohibition
laws. Afifth indictment was found against Gaston B. Means on March 7,
1924, for conspiring to bribe officials of the Department of Justice. This

indictment was returned shortly before Means testified before the Senate
committee. Colonel Thomas B. Felder was indicted along with Means
for attempted bribery of Department of Justice officials. Means had ob-
tained adjournments on the grounds of illness, but a doctor who examined
Means for the prosecutors reported "that there was nothing the matter
with him except that he had had a tooth pulled." Then Means had three
more teeth pulled and a part of his jawbone extracted. But this did not
prevent him from talking before the Senate committee, as we have seen.
Two weeks after he appeared as a witness before the committee,
first
Hiram Todd wrote to the chairman, Senator Brookhart, asking that

Means be excused as a witness before the committee so that he might be
tried in New York. The effort was made not only to keep Means from
testifying further but to put the committee investigating Daugherty in
the position of thwarting Means's prosecution. Senator Wheeler, examining
Hiram Todd, brought out that he had obtained Means's indictment by a
grand jury in New York on the testimony of bootleggers against whom
Means had been assigned to get evidence, and that by testifying before
the grand jury against Means the bootleggers had earned immunity from
indictment themselves.
As soon as Means became a witness before the Senate committee he was
"shadowed" by Department of Justice agents. R. P. Burruss and Mrs.
Alaska P. Davidson, special agents of the Department of Justice, testified
that they were assigned by E. R. Bonner to spy on Means, and that they
watched him constantly between March 6, 1924, and April 1, 1924, and
reported their findings every day to the office of William J. Burns at the
Department of Justice.
Means and Colonel Thomas B. Felder were tried on the charge of
attempting to bribe Harry M. Daugherty, Attorney General, William
Hayward, United States Attorney in New York, and two of Hayward's
quash indictments against the Glass Casket Company. Means
assistants, to
and Felder were convicted, and Means was sentenced to two years in jail
and a fine of $10,000; Felder was fined $10,000 but not sentenced to jail.
The Glass Casket Company was have paid Colonel Felder's office
said to
$65,000 to fix a case with Daugherty charging it with using the mails to
defraud in the sale of bogus stock. Means was charged by witnesses in
the bribery case with having tried to create an impression of his importance
by pretending to be in conference with Secretary Mellon and looking up

the telephone number of President Harding's secretary in the presence
of others.
Gaston Means came out of jail in July, 1928. In 1930, he raided a ware-
house in Baltimore for Communist propaganda and found a crate of
lettuce. In 1931, he was arrested for beating his wife and assaulting an
officer when he resisted arrest. In 1933, Means was sentenced to fifteen
years in the penitentiary for stealing $104,000 from Mrs. Edward B.

McLean on the pretense that he could find the Lindbergh baby. Means
claimed that he had given the money which Mrs. McLean had given him
to obtain the release of the Lindbergh baby to a man who jumped on the
running board of automobile en route from North Carolina, under

his
the impression that the man was Mrs. McLean's agent. Between jail terms
Gaston Means published a fantastic book in which he claimed that Presi-
dent Harding had been murdered by Mrs. Harding because of jealousy

of another woman. Every page of the book is implausible, and there is
no evidence in it
any of the contentions Means made.
for
In 1926, Harry M. Daugherty and Thomas W. Miller, Alien Property

Custodian, were tried in New York for "conspiracy to defraud the Govern-
ment of their honest, impartial and unprejudiced services." They could
not be indicted for bribery, because the statute of limitations had expired
on the acts they were charged with committing. Miller, who had taken
part in the election campaign of President Harding, was appointed to the
valuable office of Alien Property Custodian by Harding. Jess Smith,
Howard Mannington, Alfred Urion, Wade Ellis, another of the Ohio
group, and John Todd, Daugherty 's law partner, appeared frequently
before Miller on behalf of claimants. Colonel Miller testified before the
Senate committee investigating Daugherty 's administration:
"I am occupying an office that is

holding hundreds of millions of
dollars belonging to other people, and they think they ought to get it
back, and maybe they should, I hope it will be settled up soon. But
naturally when they want their property back they are probably willing
to pay big fees for it, which, of course, is an incentive to people represent-
ing them to use every means within their power to get their claims
allowed for their clients. I have a certain amount of independence and
stubbornness in me, and being responsible only to the President of the
United States I had no hesitancy in telling him that I did not like the
some people, regardless of who they were. .
actions of . But I told .
Harding that I did not like some of the ways of some people
President
who came from his State, the way they walked into my office at least."
Whatever Colonel Miller may have thought of the way some people
from Ohio walked into his office, he often permitted them to walk out
again with the favors for which they had come. Jess Smith, for instance,
asked that some of the funds in the custody of the Alien Property Cus-
todian be deposited in Mai S. Daugherty's Midland National Bank, of
Washington Court House. Miller testified that he took the matter up with
Harry Daugherty, who said that it was his wish, and the funds were
deposited in the Daugherty bank. But the particular charges against
Colonel Miller, Harry Daugherty and John T. King, Republican national
committeeman from Connecticut, concerned the American Metals case.
The American Metals Company, a German firm, was taken over by the
Alien Property Custodian during the war. Richard Merton, the represent-
ative of an alleged Swiss corporation, whose affiliations were German,
claimed the ownership of the American Metals Company. He gave John T.
King $391,000 in Liberty bonds and $50,000 in a check for arranging to

have the $7,000,000 stock of the American Metals Company turned over
to the Societe Suisse pour Valeurs des Metaux. The government main-
tained that the $391,000 in Liberty bonds which Merton admitted putting
up was distributed as follows: $224,000 to Harry M. Daugherty and Jess
Smith; $112,000 to John T. King; and $50,000 to Colonel Thomas W.

Miller; $5,000 worth of the bonds were unaccounted for. King had aided
the government by voluntary testimony; he died on May 13, 1926, about
a week after the indictment against him, Daugherty and Miller was
returned. According to the New York World of July 17, 1926, there was
found in the estate of John T. King, which was valued at $1,200,000,
1,000 shares of American Metals Company, Ltd., valued at $50,000. Richard

Merton, who had given the money and Liberty bonds to John T. King,
testified at the trial of Daugherty and Miller that he had paid the money
for King's services in introducing Merton to Jess Smith, who in turn took
up the American Metals case with Colonel Miller.
Daugherty was defended at his trial by the well-known criminal lawyer,
Max D. Steuer. Colonel Miller was defended by Colonel William Rand.
Daugherty's defense admitted that $200,000 of Merton's money had gone
to Jess Smith and maintained that this was for "expediting the claim
through his acquaintance in Washington." It was impossible to trace the

Liberty bonds or cash to Harry Daugherty's account or that of his brother,
Mai, because Daugherty had burned the ledger sheets of the Midland
National Bank, as well as the ledger sheets for the Jess W. Smith Extra
account. These he destroyed some time in 1925, after his as
resignation
Attorney General.
Daugherty and Miller did not take the witness stand in their own
and the defense put up for Daugherty blamed
defense, everything on the
dead Jess Smith. It was also convenient for the defense that
John T. King
had died suddenly. Daugherty refused on the grounds that his
to testify
relations with President Harding, Mrs. Harding, the Midland Bank
and Mai Daugherty were "of the most confidential character as well
S.
as professional."And he also declined to testify because: "The answer

I might give or make and the testimony I might give might tend to in-
criminate me." Max D. Steuer explained to the jury that his client did
not wish to take the witness stand and disclose things which he knew,
but would never disclose, "about matters political." "The destruction
of the ledger sheets," Mr. Steuer stated, "did not conceal anything that
had the slightest bearing on this case. If the jury knew the real reason
for destroying the ledger sheets they would commend rather than con-
demn Mr. Daugherty, but he insisted on silence."
The jury deliberated for sixty-five hours and forty minutes, and then
reported that they were unable to agree about the guilt of Harry M.
Daugherty. They convicted Colonel Thomas W. Miller. It was said later
that the jury were divided on Daugherty 's guilt, 11 for conviction and 1
for acquittal. A second trial was held, and the jury again failed to agree
on Daugherty 's guilt after long deliberations, but convicted Colonel
Miller. Miller was sentenced to eighteen months in prison and to pay
a fine of $5,000. He served thirteen months of his sentence and was then
paroled. His citizenship

was restored by President Hoover on February
2, 1933.
In 1930, Mai S. Daugherty was indicted on 15 counts, charged with

mishandling the affairs of theOhio State Bank, of which he had been
president, and which closed its doors on May 12, 1930. The Ohio State
Bank was a merger of Mai Daugherty's two Washington Court House

S.
banks with another. He was charged with misapplication of funds and

credit, embezzlement, deceiving state bank examiners, making false
entries in the books, and more than fifty other offenses, including the use
of his wife's and his son's name as well as other names for concealed
loans from his bank. He suffered a nervous breakdown. On March 4,
1931, he was convicted and sentenced to ten years in the Ohio Penitentiary
and fined $5,000. The jury found him guilty on the first ballot.
In his book, The Inside Story of the Harding Tragedy, Harry Daugh-
erty wrote :
When the last obscene literary scavenger has uttered his dying howl,
the figure of one of the knightliest, gentlest, truest men who ever lived
in the White House will emerge from the din of slander and take his
rightful place in the hearts of our people.

The American, deep down, loves fair play.
For a time he may listen to the clamor of fools and chuckle over
vicious slander. But in the end he demands the truth.
History, perhaps, will prefer as an epitaph for President Harding the

statement of Alice Longworth in her book, Crowded Hours:
Harding was not a bad man. He was just a slob.
At the belated dedication ceremonies of the Harding Memorial at
Marion, Ohio, which were postponed by embarrassed Republican col-

leagues until delay became more scandalous than dedication, President
Hoover said:
"Warren Harding had a dim realization that he had been betrayed

by a few men whom he had trusted, by men whom he had believed were
his devoted friends. It was later proved in the courts of the land that
these men had betrayed not alone the friendship and trust of their
staunch and loyal friend, but they had betrayed their country. That was
the tragedy of the life of Warren Harding."
Harry M. Daugherty, a member of the board of trustees of the Harding

Memorial, sat behind President Hoover on the platform as he pronounced
these words. When the President arrived in Marion to make the dedica-
tion speech, he and Daugherty, who had sat together in Harding's
Cabinet, exchanged no words of greeting.
CHAPTER FIVE
Ships for Sale
A, -T THE end of the war in 1918, the United States Shipping Board
had under control 4,500 vessels of 24,500,000 dead-weight tonnage.
its
Of these ships 2,316 had been constructed by the government's corpora-

tion, the Emergency Fleet Corporation, a subsidiary of the United States
Shipping Board, for which the government supplied all the capital. The
other vessels had been chartered, requisitioned, commandeered, or seized
as the property of enemy aliens. In addition, during the war the Emer-
gency Fleet Corporation had built shipyards, villages and homes for
workers in the shipyards, transportation and other public utilities in the
villages. After the war vast stores of material as well as ships were left
in the government's hands.

The Shipping Board had spent three and a half billions of dollars for the
construed on of ships, "a sum greater than any expended by any corpora-
tion in a similar period of time," according to the report of the com-
mittee of the Sixty-sixth Congress, which investigated its construction
activities. Although new organizations, shipyards and other facilities had
to be created with great haste, and there was waste and extravagance
with government money, the investigating committee of the House of
Representatives found no evidence of fraud in connection with the Ship-
ping Board's work. Considering all the facts, the committee concluded,
319
the activities of the Shipping Board during the war "constitute the most
remarkable achievement in shipbuilding that the world has ever seen."
Costly mistakes were made in the effort to build

ships quickly out of
wood and concrete, which later proved unserviceable at
sea, but the
steel cargo vessels built by the Shipping Board ranked in
quality with
the best steel vessels in service throughout the world.
Prior to the great westward expansion of the United States, this coun-
try had been an important maritime nation; the American clipper ships
were among the fastest in the world, and American
captains competed
favorably for the Far Eastern trade before the Civil War. After that
war, when railroad construction and internal development absorbed all the
available capital in the country and the capital flowing into it from Europe,
American shipping declined. During the World War the people of the
United States became painfully aware of their dangerous dependence
on foreign shipping; cargoes lay on wharves waiting for transportation at
enormous freight rates, while prices for goods soared in Europe during the
three years before the United States entered the war; then there was a
tremendous shipping problem involved in moving American soldiers and
supplies to France.
After the war, the United States Shipping Board was faced with the
double problem of disposing of its huge resources and still maintaining
an American merchant marine in competition with world shipping.
In his report on the investigation of the Shipping Board, Judge Ewin L.
Davis, a member of the House of Representatives, wrote:
While we were in the midst of war, the shipping interests took

advantage of the situation and profiteered in the most unconscionable
manner. They ran ocean rates up on both their Government and the
people as high as 1,250 per cent over pre-war rates, as admitted at the
hearings by the general manager of the American Steamship Owners'
Association; they made profits which were characterized as "almost
fabulous" by W. J. Love and as "enormous" by J. B. Smull, Messrs. Love
and Smull being two of the $35,000 a year experts of the Shipping Board
and vice-presidents of the Emergency Fleet Corporation. For instance, the
American-Hawaiian Steamship Co. paid dividends of 200 per cent in
1916 and 405 per cent for 1917; the Luckenbach Steamship Co. made
net profits on its capital of 236.2 per cent in 1916 and 666.9 per cent in
SHIPS FOR SALE 321
1917; the Pacific Mail Steamship Co. made 365.3 per cent net profit on
its capital stock in 1915-1920; the Atlantic, Gulf and West Indies Co. made
net profits greater than its capital in 1915-1920, and during 1921, the
very worst time in the history of shipping, according to its own annual
report made a net income of $1,781,337, after deducting all expenses,
taxes, interest, and losses on sale of Liberty bonds; the United Fruit Co.,
with a capital stock of $50,000,000, made net profits of $94,147,500 in
1915-1920, paid dividends of $77,080,277 and increased their surplus to
$66,176,490; the Dollar Steamship Lines made net profits on its capital
stock of 322.9 per cent in 1916 and 104.9 per cent in 1917.
In the two years immediately following the war the market for freight
was higher than ever, according to J. Barstow Smull, shipping executive,
because the countries of Europe began importing in huge quantities
goods which had not been available during the war years. A wild boom
in shipping followed. One vessel of 8,000 tons taking coal to northern
Europe made $150,000 gross profit on the cargo, which was about three-
quarters of the cost of the vessel before the war. J. H. Rossiter, formerly
of the Pacific Mail Steamship Company, gave an instance of the S.S.
Quistconcl^, which in a voyage of 92 days made a net profit of $461,151.29,
after depreciation of $37,800 and interest charges of $18,900 had been

written off from the gross profit. Another ship made more than $800,000
in a voyage of 110 days. "Anybody experienced or inexperienced in the
shipping trade could make money," J. B. Smull told a Congressional

committee in 1922.
Much of this vast profit went into dividends and salaries. The dividends
paid were colossal, and no attempt was made to store up sufficientmoney

for lean years ahead, although shipping men of experience knew that
the world had many more ships than it could use profitably at the moment.
In 1921, the depression in shipping began, along with a general de-
pression in trade.The Shipping Board vessels proved valuable at this

time.For example, they moved $650,000,000 worth of surplus American
wheat at a loss to the government of one million dollars, but at great
gain to the farmers and wheat merchants. Even during the shipping
depression some of the companies admitted that they were making a
profit, and others stated that they were not losing money at least.
The existence of a large government-owned fleet was both a
temptation
and an irritation to private shipowners. A concerted effort was made
to get the government to scrap and destroy the vessels which it had
built at such cost and effort, or to sell them at ridiculously low prices to
private interests; the ships would have been valuable after the temporary
trade depression of 1921, and meanwhile the upkeep of the vessels would
have averaged about $3,000 each. The object of the shipping men was to
prevent these vessels from falling into the hands of enterprising com-
petitors with new capital, and, according to the Select Committee of the
House of Representatives, there was a "desire on the part of some ship-
builders to destroy as many existing ships as possible in order that there
may be more ship construction in the future." Foreign shipowners

were also eager to see the American ships destroyed, and they helped
in the propaganda to that end. The existence of this large fleet of govern-
ment vessels made it impossiblefor American and foreign private
shipowners to levy tribute on American commerce by demanding ex-

orbitant freight rates, because as soon as the freight rates got too high,
the government could always send its large supply of ships into competition
with private buccaneers. This situation was hardly congenial to ship-
owners and shipbuilders, who hired lobbyists and propaganda experts
to make the nation believe that the activities of the Shipping Board were
a ghastly and a costly mistake.
And at this serious juncture in the history of the American merchant
marine, President Harding chose to appoint a propaganda expert as
chairman of the United States Shipping Board. Albert D. Lasker, of Chi-
cago, had been a successful advertising agent for many years. He was
a very good friend of Harding's friend, "Ned" McLean, and he had also
aided in the election of President Harding by campaign contributions
and otherwise. "I have made most of my political contributions in cash,"
Mr. Lasker told the Senate committee investigating the Continental
Trading Company. "Most politicians seem to like to get
it that way.
(Laughter.)" Mr. Lasker told another Congressional committee: "I was

the only man who would take this job. The President couldn't get any-
one else, and as Eva Tanquay says in her song, 'Gee, it
is
great to be
crazy.'"
President Harding and his friends must have been reading W. S. Gil-
SHIPS FOR SALE 323
bert'sPinafore when they gave the vast resources of the United States
Shipping Board into the hands of Albert D. Lasker. Mr. Lasker had never
had the slightest experience in shipping, and when called before Con-
gressional committees to testify, he exhibited a brash and pathetic igno-
rance of the work in his charge. His one great effort was to get the Con-
gress of the United States to grant a to private shipowners
huge subsidy
who had already profited so greatly at the expense of the rest of the nation,
and in that effort he kept up a steady stream of propaganda to make the
nation believe that the government-owned and operated fleet was a
colossal failure.
"The only fitness I can think of that the President dreamed I had for
the position he called me to was that I had been a doctor of failing busi-
ness," Mr. Lasker told a convention of newspaper publishers in 1922.
"Never in the history of government," he added, "was an administra-
tion, however, called on to take over such bankruptcy, such chaos, as
confronted President Harding in the Shipping Board." Mr. Lasker also
told the newspaper publishers on that occasion:
"I prize as the greatest achievement of my life the dear and close
friendship of the President of the United States whose sacred sense of

duty has led me to a love of him that amounts to worship. Next to him
in the administration, I hold in close personal friendship, the Attorney-
General. . . .
"I know there has been great difference among you gentlemen of the
Press with certain views of Mr. Daugherty, but my close contact with him
has shown me that he a man
of unalterable courage in fearlessly
is
making decisions whether against radical or conservative."
When Mr. Lasker made his speech, President Harding was still alive and
Daugherty had just obtained his injunction interfering with labor's right
to strike.
What Mr. Lasker called so loosely a failing business had turned over
$193,447,865 to the United States Treasury before the shipping depression
began in 1921. Besides, the Shipping Board had done work for the War
Department estimated as worth $98,500,000 and for the Navy Depart-
ment work worth $8,500,000, making a total return of $300,447,865, and
from 1918 to 1925 the appropriations for the Shipping Board had
amounted to $250,000,000. In addition, the Shipping Board's competition
had saved American farmers and other shippers large sums of money
by keeping freight rates reasonable.
Under Lasker a beautiful propaganda machine was built up hastily,

and the effect of it is not yet out of the consciousness of the American
people. "Waste" and "incompetence" were the words most Americans

were led to believe applied best to the Shipping Board. Lasker was also
fond of referring to government operation of ships as "poison ivy in the

garden of industry." "Private ownership," he told the newspaper pub-
lishers, "withers and dies against this incompetent competition of which
I am the head." He made no effort during his incumbency to make that
competition aid American industry and American shipping generally.

Almost every American citizen got the impression that the Shipping
Board was and probably corrupt. It was only in the ports
inefficient, costly,
of the Far East and in the harbors of Europe and South America that the
activities of the United States Shipping Board were both respected and
feared. Private ship operators in the United States were also worried
enough about Shipping Board efficiency. The Bulletin of the American

Bureau of Shipping printed an editorial in August, 1924, which read :
On another page we print excerpts of the platforms of both the great

political parties, which relate to the future of American shipping in the
foreign trade.
There is a striking similarity of intent regarding the ultimate disposi-
tion of the Government-owned fleet.
Shorn of all technicalities, it is evident that both parties are at one in

the idea of continuing the operation of at least the present number of
active ships. . . .
The great danger of continued Government ownership and operation

is, that with the increasing efficiency now being shown by the Shipping
Board and with advancing freight and passenger rates, there soon will be
no apparent loss to the Federal Treasury. While this in itself is to be
commended, little question that the radical element would
there is but
seize upon a strong argument for governmental ownership
this fact as
and operation of the railroads and other means of transportation. Such

action would be fraught with very serious consequences, as none but
those of socialistic tendencies will admit that public operation of such
SHIPS FOR SALE 325
great utilities would be for the best interests of the people, at least during
the present generation.
The italics are those of the Select Committee to Investigate the United
States Shipping Board.
Albert D. Lasker became chairman of the United States Shipping

Board on June 13, 1921. He started out by making himself the man
in complete command and relegating the other members of the Board

to the class of dummy directors in a large corporation. It was brought out
in testimony before the Select Committee investigating the Shipping
Board that President Harding had told Lasker to do what he thought
best, that Harding would back him up, "and that if any of the other mem-
bers of the Shipping Board did not act in accord with him on his
views, to advise the President and he would get rid of the members."
It was said that Lasker had taken the job reluctantly for one year; he
remained longer in order to try to get Congress to pass a bill granting
large subsidies to private shipping.
"Is it not a fact," Representative Davis asked Commissioner Plummcr,
of the Shipping Board, "that the whole proposition was just permitted to
drift and that Mr. Lasker devoted most of his energies and time, as well
as that of a large part of the Shipping Board organization, in an attempt

to put through his program embraced in what is
generally known as the
'Lasker ship subsidy bill'?"
"Well, of course, as I stated the other day," Commissioner Plummet

answered, "we were asked to give that legislation the right of way and
not do anything to cripple it." . . .
"And without saying that you Were right or wrong in doing so, feeling
that, wise or unwise, Mr. Lasker had been placed at the helm to take
charge and run things, you all thought you should acquiesce and give
whatever he suggested, generally speaking, a trial?"
"Yes; I think that is a pretty fair statement of it."
It had been the policy of the government for some years to get private
capital to operate American ships with American crews under American
ownership, so that American commerce might be served and also to in-
sure that in case of another war the country would not be in the help-
less condition of dependence it found itself in when the war broke out
in 1914. But, obviously, it would take time
Shipping Board
to get the
boats back to private ownership under proper conditions and without

the fear that they would fall into the hands of foreign operators. At first
the government leased the ships in many cases to private shipping oper-
ators under what was known as the M. O. 4 contract. By this contract
the government said in effect to private shipping companies, "Heads you

win, tails I lose," for the contract guaranteed that the government would
pay all losses and that the operators would receive a commission on gross
receipts.
The Shipping Board also had mapped out about thirty different trade
routes over which regular shipping service was to be maintained, in order
that all the ports of the country would have outlets to other nations
for their products. The effort was to get private shipping companies
to operate ships on these routes, but wherever capital was lacking or it
proved impossible to interest private parties in the venture, the Ship-

ping Board operated its own ships itself through the Emergency Fleet
Corporation, the very name of which suggested impermanence and con-
tributed to inefficiency. New capital at the time was reluctant to take
over the trade routes because while the government took the losses under
the M. O. 4 contracts, there was no advantage in taking the risks of
'ordinary business competition. After he had been

in office a month,
Albert D. Lasker went before the House Appropriations Committee to ask
for deficiency appropriations, and he told the committee concerning the
M. O. 4 contract that it was "the most shameful piece of chicane, ineffi-
ciency, and of looting of the Public Treasury that the human mind can
devise." He promised that the minute trade permitted he intended to do
away with all the M. O. 4 contracts, and to make the ship operators either
"If we have not fully
purchase or charter the Shipping Board's vessels.
succeeded in putting in our system," Lasker told the committee, "you
can hurl it back to me when I come again in six months." Up until the
time of his resignation, and even afterwards, the Shipping Board still
made these M. O: "4 contracts. Eventually, they were changed to lump-
sum contracts, by which the Shipping Board paid private operators of its
ships a lump sum for each voyage,
out of which the operators paid their
of the gross receipts,
expenses themselves, instead of getting a percentage
SHIPS FOR SALE 327
the government paying the expenses, by which arrangement the expenses

could be padded unmercifully. While American shipping companies
were operating Shipping Board boats under M. O. 4 contracts, many
of these same operators of government ships were acting as agents for
British and Japanese steamship lines, which paid them commissions on
profits and not also on losses. Thus they had every incentive to make
their foreign ships pay in competition with the Shipping Board boats.
The Shipping Board also had European passenger and freight
a regular
service which it operated under the organization of the United

itself
States Lines. This line had the Leviathan and other large steamers under
its
flag, and it
competed with the large British, French and German
passenger lines.
The government also wished to encourage new shipbuilding and new

shipping enterprise in the United States. The Merchant Marine Act of
1920 had provided that ships were to be sold only to corporations in which
a majority of the stock was held by American citizens, when the vessels
were to be used in overseas trade, and corporations in which at least 75
per cent of the stock was held by American citizens when the ships were
to be operated in the coastwise trade.
In 1920, before the Harding administration came into power, ships

had been sold by the Shipping Board to private operators at high prices.
These were known as "pioneer sales," and later, when the prices for ships
fell drastically because of the oversupply of world shipping, the 1920
purchasers asked for some of their money back, and for cancellation of
part of the installments still due, for the government had sold its ships
on an easy payment plan in order to encourage shipping. Lasker's admin-
istrationgranted reductions to these "pioneers," but the records of these

reductions could not be found anywhere around the Shipping Board,
according to J. Harry Philbin, the sales manager of Shipping Board

vessels. Before Lasker's regime stenographic minutes had been kept of the
meetings of the Shipping Board, but during his administration it was

ordered that no minutes should be kept. Also, during the Lasker regime
officials of the Shipping Board and its employees were ordered not to
give information to members of Congress or to the press. When news-
papermen and Congressmen inquired concerning the rebates on "pioneer"

sales, they found it impossible to get any information. Mr. Philbin, the
Shipping Board's own sales manager of ships, was told that these records
were "private." When Chairman Lasker was asked at the hearings on
his Ship Subsidy Bill what his policy had been on reducing the prices
for those who had bought ships, he answered: "I would prefer not to,
because it would be against the public interest. I would be glad,
happy,
to do so in executive session, to tell you all about it, because we are still
trading with these people." Representative Davis asked Mr. Philbin later :
"But do you know of any good reason why these transactions by Govern-
ment officials with regard to property of all the people should be con-
ducted secretly and kept secret?" "No, sir," he answered.

In the latter part of 1921, J. W. Powell, who had been an official of
the Bethlehem Shipbuilding Corporation before Lasker appointed him
Fleet Corporation of the Shipping Board at
president of the Emergency
a salary of $1 a month, instituted a new sales policy for ships. He took
the sales out of the hands of the sales department and placed them in the
hands of a special sales committee. No
board of appraisers of the value
of the ships was considered necessary, and Mr. Powell's new sales com-
mittee was in a great hurry to sell the Shipping Board's vessels without too
much hampering interference by the laws of the United States governing
such sales.
While Mr. Powell was acting as head of the Emergency Fleet Corpo-
ration, there was pending a claim against the Bethlehem Shipbuilding
Corporation; the government claimed that the Bethlehem company had
overcharged the United States $11,000,000 for war work, and the Bethle-
hem company made a counterclaim against the government of $9,000,-
000. Lasker made Powell, the former official of the Bethlehem company,
chairman of the claims committee of the Emergency Fleet Corporation,

'
and while he was in that office, Mr. Powell dismissed Mr. Adamson, the
only man in the Shipping Board who knew the history, details and status
of the Bethlehem case. Commissioner Haney, head of the Shipping

Board's legal department, testified that the government's case against the
Bethlehem company could not be tried without Mr. Adamson. When
Commissioners Thompson and Plummer, of the Shipping Board, heard
of Mr. Powell's action in discharging Mr. Adamson, they went to Lasker
and threatened to resign unless Mr. Adamson was brought back. Lasker
SHIPS FOR SALE 329
consented to bring him back, and Powell resigned. He was the only
"dollar-a-year man" on
the government's payroll after the war.
Under Lasker's administration of the Shipping Board, J. Harry Philbin
testified, steel cargo ships were sold at $30 a ton, "as is, where is, take
your pick; no matter which vessel you took." In 1920, before prices for
ships had fallen, the Shipping Board had sold 250 steel ships at between
$200 and $250 a ton. After Lasker resigned from the Shipping Board, the
Board decided to go back to a policy of selling its ships by the appraised
value of each individual ship instead of in the manner in which depart-
ment stores sell silk stockings, but twenty million dollars' worth of
government ships had already been disposed of under that bargain-

counter policy. When Representative Davis asked Admiral Plunkett
whether he was in sympathy with the plan of some Shipping Board
and other citizens to sell the cream of the Shipping Board fleet
officials
as fast as possible at thelow depression prices for shipping prevailing

during Lasker's time, and then to scrap the rest, he answered: "I think it
would be treason. That is the way I feel about it."
It was sometimes necessary
to go through the legal formality of adver-
tisinggovernment ships for sale, but these advertisements were frequently

nothing more than a formality, because insufficient time was given for
the advertisements to reach people who might be interested in inspecting
the ships and bidding on them. The Great Northern, which was sold
to H. F. Alexander the man who had given Colonel Forbes a suite and
had received a Harding inaugural medal in return was advertised seven
days before its sale. At the time the advertisements appeared the ship
was in the port of Guantanamo, Cuba, and prospective purchasers would
have had to journey there to inspect her. The ship was sold to Alexander
for $1,250,000 and would have cost about $4,000,000 to replace, according
to Mr. Philbin. He also testified that the ship could have been used
advantageously by the Shipping Board in the coastwise trade.
The Los Angeles Steamship Company, of which Harry Chandler,
publisher of the Los Angeles Times, was a leading stockholder, wished to
buy the Aeolus, renamed the City of Los Angeles, for $100,000. After the
war the International Mercantile Marine had offered $660,000 for the
ship. Then the Aeolus, which had been a German passenger ship used
to transport troops, was reconditioned and repaired at a cost to the United
States of $2,816,000. The vessel was worth more than $100,000 for scrap
material alone, according to Mr. Philbin's report to Admiral Benson.
At the time of its bid of $100,000 for the City of Los Angeles, the Los
Angeles Steamship Company was operating the boat for the Shipping
Board between Honolulu and Los Angeles, and by its contract with the
steamship company, the Board would have made a profit of $100,000 on
itsoperation in a very short time.
One year before the bid of $100,000 for the City of Los Angeles Harry
Chandler had telegraphed to Albert D. Lasker offering $500,000 for that
ship and another ship, the Huron, which was later sunk. He and his
company were together with other Los Angeles business

interested,
interests, in establishing a steamship service between Los Angeles and
Honolulu, in the effort to make Los Angeles an important port. The

only other service to Honolulu was that operated by the Matson Line
out of San Francisco.
According to the law, Lasker could not give Chandler the option he
wanted on the two ships for $500,000 without first advertising them for
sale, and it was said that he suggested to Chandler that he and his asso-
ciates arrange to raise the money to buy the ships, and that the ships
would then be advertised for sale in such a manner as practically to assure
the purchase to Chandler's company. The City of Los Angeles was adver-
tised for sale from July 15 to July 25, 1923, and sold to the Los Angeles
Steamship Company on August 9, 1923, for $100,000. Meanwhile, the

ship was on the Pacific Ocean running between Honolulu and Los
Angeles. Even when she reached ports for a short time, anyone who
wished to inspect her had first to get the permission of the Los Angeles
Steamship Company.
In a similar manner E. J. Farley, of the Shipping Board, sold four
cargo ships to the Dollar Line at $300,000 each. They were built in China
by a company with which the Dollars were associated, at a cost to the

government of $2,250,000 each. Mr. Philbin, the Shipping Board's sales
manager, was permitted to know nothing about the sale. Farley also
sold the Dollars the Callao, a combination cargo and passenger ship,
which had cost the government $900,000 and $719,503.27 for expenses of
reconditioning her, for $375,000. On January 17, 1920, when prices for
SHIPS FOR SALE 331
ships were still good, the International Mercantile Marine had put in a
bid for the Callao of $825,000.
In October, 1923, the Dollars purchased seven "President" ships for
$550,000 each. These ships were large passenger vessels, 502 feet long,
and had cost the government $4,128,000 each to build. The Dollar Line
received easy terms of payment from the government. The government
received a letter of credit due in two years for 25 per cent of the $3,850,000
purchase price for the seven ships, which had cost the government about
$29,000,000.The balance of the payments were to be made at the rate
of 5 per cent a year until March 15, 1936, and meanwhile the government
had liens on the ships. Mr. Philbin testified that no other ships had been
sold on such long and liberal terms. This deal was made after Lasker had
left the Shipping Board.
On December 10, 1923, the minutes of the Dollar Line stockholders'
meeting recorded a vote of thanks to the president, R. Stanley Dollar,

"for his services in negotiating and closing with the United States Ship-
ping Board the purchase of the seven passenger vessels of the 502 type."
One month later the minutes of the directors' meeting recorded that a
commission of $192,500 was voted R. Stanley Dollar for his services
to
in purchasing these ships for the company. The commission was to be
paid in eleven installments, one a year until 1936, when the last payment
was due the government on the ships; but Mr. Dollar was to receive
interest at 6 per cent on his commission, while the government received
interest of 4 per cent on its payments. In addition, the company paid
Mr. R. Stanley Dollar's expenses in Washington during his sojourn
there to purchase the ships.
On May 14, 1925, the directors of the Dollar Steamship Company gave
Mr. Dollar another commission of 5 per cent, for he had been to Wash-
ington again and had brought home five more "President" ships, this
time the larger 535-foot type, which he had purchased for his company
from the Shipping Board for $5,626,000 on easy terms. He received a
commission on this deal of $281,250 in addition to his salaries and ex-
penses. Up to November, 1933, the company had paid Mr. Dollar $410,-
493.75 in commissions for its The Dollar company de-
ship purchases.
faulted on payments to the government for the ships in 1933, but
its it
went right on paying its president, Mr. Dollar, his commissions after it
could no longer pay the government for the ships he had bought. Be-
tween 1924 and 1929 the Dollar company made a total profit of $6,746,-
759.33 on the "President" ships which it
purchased from the government.
On the purchase of 17 ships from the government for $13,975,000,
R. Stanley Dollar received from his company commissions of $635,493.75
and interest of $73,014.69. In 1933, at the time this material was brought
out by Senator Black in his investigation of Ocean and Air Mail con-
tracts, the Dollar company still owed Mr. Dollar a balance of $63,256.25
for his commissions, and the government many millions for its ships.
THE Lasker Shipping Board made great efforts to persuade Congress to

grant huge outright subsidies to American shipping. The theory on which
ship subsidy was based was that American shipping could not compete
with foreign, and especially British, shipping, because of the differences in
cost and operating expenses in the United States, Great Britain, Japan and
Scandinavian countries. The Lasker bill provided that every American ship
was from the government /2
to receive l
cent a gross ton for each hundred
miles the ship covered, and speedy vessels were to receive increases on this
basic subsidy, depending on the number of knots they could make; ships
doing 23 knots or more would receive 2.1 cents per gross ton for each
hundred miles covered. Under the bill the Shipping Board was also to be
granted power to double these rates, if it considered the subsidy insufficient
on shipping routes. The gave the Shipping Board absolute power to
bill
dole out the government's money without any recourse to Congress or any
supervision by the President or anyone else. The subsidy contracts were to

be valid for ten years, no matter what the economic conditions during that
period, and Congress would
have been powerless to repeal the subsidies
during that time.

In addition, the Lasker bill granted American exporters and importers
SHIPS FOR SALE 333
deductions of 5 per cent on their income taxes if

they used American
ships instead of foreign ships, and it also granted shipowners deductions
in their taxes for ten years, if they used their
profits to build new ships
in American shipyards. A construction fund to subsidize new shipbuild-
ing was also to be established, which would have granted American

companies building new ships loans of $125,000,000 at 2 per cent interest.
The Shipping Board vessels were to be sold as fast as possible to the
shipping companies at highly reduced rates, at either private or public
sale, and the proceeds of such sales were to go into the fund for the con-
struction of new ships. In order to create indirect benefits for American
shipping, there was a provision in the Lasker Ship Subsidy Bill that
50 per cent of the immigrants arriving at American ports must come in
American ships; the Army and Navy transport services were also to be
discontinued and contracts were to be made for American merchant ships
to act as transports.
Early in the discussion before the Congressional committees consider-

ing the Lasker bill, it was discovered that organizations like the Standard
Oil Company and the United States Steel Corporation would have been
entitled under the bill as drawn to the subsidy per ton for the vessels
which they operated exclusively to carry their own oil and steel. The
Standard Oil Company, for instance, would have received $1,500,000 a
year from the government for carrying its own product around the world,
and the United States Steel Corporation would have received $500,000 a
year for the same service. These possibilities were finally eliminated from
the bill, but when they were discussed with Shipping Board officials who
were attempting to push the bill through Congress, the Shipping Board
people thought the discussion rather superfluous. Under the proposed bill
the Leviathan would have received a subsidy of $1,250,000 a year from
the government, which could have been doubled by the Shipping Board
doing so. If the Shipping Board felt so disposed, it could
if it felt like
have withheld any subsidy compensation from a particular company

without giving its reasons. Those Senators and Representatives who were
opposed to the bill pointed out: "This power to build up or destroy ports,
to enrich or impoverish ship lines, thus dominating localities, controlling
shipowners, ship operators, and financial institutions, and the insurance

companies, and all other connecting interests, would make that bureau
a political autocracy and a dominating influence, equipped to work its
own will."
Lasker and his associates gave Congress an estimate of $30,000,000 a

year as the cost to the government of their subsidy bill, but at the hearings
on the bill it was developed that both direct and indirect benefits to
private shipping interests under the bill would have cost the nation
$75,000,000 a year. And under the bill there was no protection for Ameri-
can merchants and farmers against high freight rates after American
shipping companies had obtained control of American commerce.
In the course of the extensive propaganda effort for his subsidy bill
Lasker frequently warned in speeches and writings that without its

passage
the art of shipbuilding would become in America 'a lost art, and that "no
nation has been great save in proportion to its greatness on the sea."
The shipping interests, who worked with Lasker for the passage of
his bill, made much of the fact that in time of war the merchant marine
would become of great benefit to the nation, but the subsidy bill con-
tained the careful provision that in time of emergency the government
must pay the shipping companies "at the current rates" for any of the
ships it might need, and could have been charged huge war rates for
ships it had subsidized and furnished the capital to build.

Andrew Furuseth, president of the International Seamen's Union,
testified thatthe section of the Ship Subsidy Bill requiring crews of
merchant vessels to become members of the Naval Reserve was what "we
seamen characterize as the strike-breaking section of the bill." By its pro-
visionsmen could have been mobilized at any time by the shipowners
to break strikes or enforce lockouts.
The Shipping Board's propagandists and the shipowners' propagandists
stressed the war scare motif continually in their effort to get government
subsidies. They pointed out that since the Harding administration had
just agreed at the Washington Conference to limit naval armaments, it
was all the more important to build and develop the merchant marine
Homer L. Ferguson, president of the New-
as a potential naval auxiliary.
port News Shipbuilding & Dry Dock Company, said: "To neglect mer-
chant shipping while limiting war shipping is deliberately to invite
disaster." "Then," Representative Bankhead asked him, "instead of being
SHIPS FOR SALE 335
a competitive race in armaments, the effect of your formula would be

to create a competitive race in merchant ships?" "I think you might put
it that way," Mr. Ferguson replied. Mr. Ferguson also commented before
the committee of Congress on the depressed state of his shipbuilding
business:
"We are out for coal cars and water turbines and oil engines, and we
are trying to beat the swords into plowshares to the best of our ability.
is we find the plowshare business
The only trouble very much crowded
just at present,and we are not welcomed by the plowshare builders in
that hearty way we would like, but so far as merchant marine building
is concerned, I am frank to say we do not see much building ahead,
and we are just trying to keep our heads above water, and whoever has
the bestbank balance and the best surplus will keep going the longest.
There is now no work being let except just a litde odd job now and
then."
An attempt was made by Shipping Board executives, with Lasker at
their head, and politicians with the interests of ship operators and ship-
builders at heart, to rush the subsidy bill through Congress. Hearings
on the bill were held in a very short time, and at these the Shipping Board
men worked hand in glove with the private propagandists. Representative
Davis wrote in his minority report against the bill "The Shipping Board :
repeatedly refused to furnish important information called for by members

of the committee. The members of the committees, who were con-
. . .
vinced that the bill was bad either as a whole or in parts, neither had
the time, opportunity, nor facilities for ascertaining and procuring the
attendance of witnesses to testify to the iniquities of the bill." Witnesses
opposed to the bill had to pay their own expenses in Washington, whereas
the shipping companies could afford to send their witnesses. Represent-
atives of farmers and merchants, who did not benefit directly by ship
subsidy, found it they should be taxed heavily
hard to understand why
for the benefit of private shipping enterprise, even though the develop-
ment of a real American merchant marine would have been of great
indirect benefit to them.
When Albert D. Lasker appeared as a witness at the public hearings

on the bill, he read a long prepared statement warning the members of
the committee and the people of the United States in glittering gen-
eralities that if they did not pass this bill, they would become
powerless
in war and backward in peace. When his platitudes were subjected to
cross-examination by Congressmen, Lasker's ignorance of his subject
was plainly revealed; he constantly took refuge in the statement that he
intended to put experts on the stand, when he was asked the simplest
questions about his bill, but his experts did not prove much more en-
lightening as to controversial features of the subsidy program. The Con-
gressmen took up with Lasker the main contentions he had made, and
after muchsquirming, Lasker had to admit that American shipping
companies did not labor under great disadvantages as compared with their
nearest competitors, the British. He was asked to give details about costs,
subsistence and labor, and after much fencing finally admitted, "I can
only answer generalities."
There was one thing, however, on which Mr. Lasker was a self-con-
and that was the colossal loss to the government of the
fessed expert,
Shipping Board operations. He had continually proclaimed in the press

and on the platform and to Congress that the Shipping Board operations
cost the government $50,000,000 a year. But when these figures were
subjected to analysis, they proved about as valuable as Lasker's general
statements. "Any proof or suggestions of ships making profits invariably
caused a commotion among the representatives of the Shipping Board,"
Representative Davis commented in his minority report on the subsidy

bill. "They seem to absolutely resent any such proof."
Lasker used the press in his effort to create propaganda for a ship
subsidy and against government operation. The Chicago Journal of Com-
merce, a newspaper in Mr. Lasker's home city, had not been used much
for Shipping Board advertising of its ship sailings. In February, 1922,
that newspaper published an editorial in favor of the Lasker Ship Subsidy
Bill and thereafter it received advertising on an increasing scale, and for
the fiscal year ending June 30, 1923, the newspaper had received $34,652.53
in Shipping Board advertising. Fruit, Garden and Home, a farm publi-
cation, advised Lasker on how best to convert the farmers to the idea of
ship subsidies; Fruit, Garden and Home then received advertising for
steamship travel and freight sailings from the Shipping

Board. On May
SHIPS FOR SALE 337
12, 1922, Albert D. Lasker wrote to his friend Colonel Robert R. Mc-
Cormick, of the Chicago Tribune, in answer to a letter of Colonel Mc-
Cormick's apparently suggesting that the Chicago Tribunes Paris edition
should receive more advertising for Shipping Board sailings. In his reply
Mr. Lasker pointed out that the Shipping Board had just started a new
schedule of advertising for the Chicago Tribune of 1,400 lines a week, or
all. Then he added that he was
23,800 lines in sending under separate
cover copies of the hearings on the Ship Subsidy Bill and a copy of the
Shipping Board's study on subsidy submitted to the President. "You will

remember that when in your office," Lasker wrote, "I suggested that I
would send this data to you with a view to your consideration of pub-
lishing a series of articles, after due study, on the subject of the American
merchant marine." He then offered to put any prospective writer whom
Colonel McCormick might designate in touch with "the proponents and
the opponents of the Administration's program." The Chicago Tribune
did better than that; it syndicated a series of articles by Lasker himself,
entitled, "Why the United States Should Have a Merchant Marine." The
Shipping Board also gave the Chicago Tribune the contract for the news
service on board its boats, by which contract the Shipping Board paid
any deficit and divided any profits with the Tribune.

In spite of all his propaganda efforts, Lasker's bill met with great
opposition in Congress. It passed the House of Representatives as a Re-

publican administration measure, and would have passed in the Senate,
too, if Senator Brookhart and Senator McKellar had not kept up a fili-
buster against it, preventing the bill from coming up for a final vote before
the end of the session of Congress on March 3, 1923. Lasker resigned as

chairman of the Shipping Board on July 1, 1923.
IN 1924, Congress made an exhaustive investigation of the Shipping

Board and its activities under Lasker, before Lasker, and afterwards. The
SelectCommittee held public hearings for almost a year in Washington,
on ships and in European ports. The result was twelve volumes of re-
vealing testimony and exhibits. The committee reported the effort of
the Shipping Board officials during the Harding Administration and the
shipowners to discredit government operation in favor of subsidy. The

report suggested that the government should encourage private shipping
as much as possible and at the same time maintain its own services where
private American lines did not exist. It also recommended that the Ship-
ping Board activities be placed on a more permanent basis, and that the
confusing name of its operating unit, the Emergency Fleet Corporation,
be changed to Merchant Fleet Corporation, which was done.
By 1928 it had become apparent that private capital must be granted

some form of subsidy in order to induce
engage in large scale shipping
it to
operations and the development of an American merchant marine. Under

the Jones-White Act of 1928 subsidy was granted in the form of contracts
to carry the mails for ten years. The act also provided for a revolving
fund of $250,000,000, to be used for loans to companies at very low rates
of interest in order to help them to build new ships. The government

loaned three-fourths of the cost of construction of a ship, and the company
building it was to put up the other one-fourth. The prices paid to steam-
ship companies to carry the mails were sixty times the ordinary mail
might have the difference in subsidies,
contract rate, so that the companies
and ships were still sold to private companies by the government at very
low prices, in order to induce them to operate steamship lines. The result
was by the end of 1930 private American companies were operating

that
1,345 ships under the American flag with government aid, and the govern-
ment was only operating 433 ships directly. Forty-five new ships were built
with government loans, and the merchant marine was modernized for
the first time since the war.
After the shipping companies had been granted subsidies in the form
of mail contracts for the purpose of building up an American merchant
marine to carry American commerce at reasonable rates, they thwarted
this purpose in
many by cases joining in pool arrangements with foreign
lines and agreeing to keep up the freight charges on American trade. The
that the Cudahy Packing Company and the
freight rates became so high
International Harvester Company no radicals protested that the freight
SHIPS FOR SALE 339
rateon lard and other products was very much higher after the American
merchant marine had been subsidized than before.
The shipping companies kept up extensive and expensive propaganda
in Washington and throughout the country to further the interests of their
and the expenses of these campaigns for subsidies and aid
corporations,
were paid for out of the revenue which the government supplied to the
companies. J. E. Dockendorff, of the American Diamond Lines, paid the
law firm of Donovan & Bond a fee of $100,000 for representing the Ameri-
can Diamond Lines before Cabinet members in President Hoover's
Cabinet and with President Hoover himself. Publicity men and publicity
campaign organizations received large fees from the shipping executives

for persuading the American public that the money doled out to private
shipping companies was well spent; they could put their hearts into these
campaigns, for they received some of this money themselves. And then
there were the lobbyists for special bills and the legislative representatives
with permanent establishments in Washington, financed by the shipping
organizations.
Henry Herberman, president of the American Export Lines, was known
as "Mr. Tuesday" around the United States Shipping Board offices, be-
cause he usually appeared there every Tuesday to solicit contracts for ship
purchases at low rates, construction loans at low interest charges and

renewals and extensions of those construction loans. Mr. Herberman
testified before the investigation of ocean and air mail contracts that he
had paid out large sums of money for propaganda. He said that he had
paid the expenses of a magazine, but he could not quite remember its
name. "I tried to get a magazine," Mr. Herberman testified, "in fact, I
backed a magazine. What is the name of that thing? The Shipping I
have one of the magazines up in my room around here." He paid for the
magazine's publication during three years, he said, and had it sent around
the country. He also paid sums of money to men interested in other
magazines in order to induce them to publish merchant marine propa-
ganda, he testified. "My God, man, every one of them wanted money, and
Igave them," Mr. Herberman exclaimed, when Senator Black asked
it to
him whether he had ever given money to the Midwest Trade Association.
Whenever he made a trip to Washington, Mr. Herberman drew large
sums of money from his company for expenses, and he made out vague
vouchers for the amounts he spent for entertainment in the nation's
capital. In 1928, Mr. Herberman had received a salary of $125,000 from

the American Export Lines, and that year he charged the company $163,-
171 for his Washington expenses. He also drew $169,000 that same year
from another of his companies for expenses.
"What went with that money, Mr. Herberman?" Senator Black asked.
"Mr. Senator," Mr. Herberman replied, "if you had one child it would
cost you so much to keep. I had 43 kids I was supporting and trying
to develop that business."
"You mean 43 ships?"

them my children," Mr. Herberman
"I call replied.
The tailor bill of $510 for three suits and an overcoat for Chairman
T. V. O'Connor of the Shipping Board, was paid by the American Export
Lines at Mr. Herberman's request to the treasurer of that company. Mr.
Herberman also sent blooded cattle to the ranch of the father-in-law of
R. D. Gatewood, who was in charge of repairs and maintenance accounts
for the Shipping Board when Mr. Herberman was operating ships for
the Shipping Board under contract. For the year ending 1925, Mr. Herber-
man was allowed $792,139 for repairs and maintenance, and the following
year, after he had bought

the ships from the government, his repairs and
maintenance amounted to slightly more than half that amount, and in

the next year his repair bills had fallen to $39,799. Mr. Herberman also
bought 18 ships from the government for $1,071,431.77,

and in 1930, when
he got into financial difficulties, Mr. Herberman owed the Shipping Board
$8,000,000 in construction loans and owed the New
York Shipbuilding
for his share of the construction costs of the ships he had been
Company
building. The total granted to Mr. Herberman's American Export Lines,
including mail contracts, insurance and payments for repairs to ships,
amounted to $45,230,151. Before he received government contracts Mr.

Herberman had never operated a shipping company in his life.
Senator Black estimated that during a period of ten years up to 1933

direct and indirect sub-
the government had granted shipping companies
sidies amounting to $405,696,302. He also pointed out that if the difference
SHIPS FOR SALE 341
in the cost of ships to the government and the sales price to private com-
panies was included in this estimate, the subsidy would amount to about
one billion dollars. Even the shipping companies must have felt that their
government had been generous in keeping rugged individualism on the

seas; but eternal subsidies are obtained only by vigilance, and the Ameri-
can shipowners and operators kept up a steady stream of propaganda and
pressure to keep the government bountiful.

Efforts were made by the American Steamship Owners' Association
to get Frederick William Wile, newspaper and radio correspondent; Will
Rogers, topical humorist; Merle Thorpe, radio news commentator; and
Frank H. Simonds, writer on international affairs, to talk over the radio
in favor of subsidy for the American merchant marine. J. Caldwell
Jenkins, president of the association, wrote a letter in which he stated:
"The other day Mr. John Franklin states he had been talking to Will
Rogers and Rogers said he would make some mention of the merchant
marine in his talks or articles." The association worked with newspaper
editorial writers and inspired articles, which were then sent to Senators
and Representatives in Washington to indicate the sentiment of the
people of the United States. The association succeeded, too, in suppressing

material in newspaper articles which was opposed to its interests.
For their propaganda the shipowners also used chambers of commerce,
Propeller Clubs, the Minute Men of America, and trade associations.

Some of the propaganda was sent out under the names of these organiza-
tions and then forwarded to Congressmen. The American Steamship
Owners' Association proposed to conduct an educational campaign in the
schools of the nation by offering prizes for the best essays on the merchant
marine written by pupils, with prominent citizens of the country as the
judges of the pupils' essays.
At one time the American Steamship Owners' Association contemplated
contributing $94,000 to the American Farm Bureau for the use of its
propaganda machinery to convert the farmers of the nation to a belief in
ship subsidies. The American Farm Bureau, which boasted that it had
"the most powerful lobby in Washington," promised to reach 1,250,000
farm families in the United States in the interests of the steamship owners
for $94,000. The shipowners were to have the use of the Farm Bureau's
15,000 community units, 1,837 county farm bureau organizations, its

10,000 volunteer leaders and workers, its 6,000 salaried employees, and its
legislative bureaus in Washington and Chicago. The American Steamship

Owners' Association approved the plan and circularized its membership
concerning it, but the cost was decided finally to be too great. When the
Farm Bureau was trying to sell itself to the shipping association, its execu-
tivespointed out that the bureau had done excellent work of a similar
nature for the National Lumbermen's Association, the Portland Cement
Association, the Copper & Brass Research Association, and the National
Automobile Chamber. The steamship association looked up some of these
references and learned that the American Farm Bureau had done excellent
propaganda work for the power interests and the lumber interests.
When the administration of President Franklin D. Roosevelt took

office in American Steamship Owners' Association was con-
1933, the
cerned for its members'
subsidies. Its representative in Washington, Mr.
Duff, telephoned his ideas to Mr. R. J. Baker, its secretary-treasurer, and

Mr. Baker made a memorandum of them which was found by the Black
committee in Mr. Duff thought that it was no longer "worth a
his files.
tinker's damn run around and try, by buttonholing or otherwise

just to
individual Senators here to ascertain their possible position with reference
to how far we can look for support and so forth." The time had come, he
said, for the shipping men "to arrange through someone close to Mr.
Roosevelt for having a conference with him and have him call in the
Secretary of the Navy, so we may get the Administration's slant on this

ocean mail situation, and have emanate from the President and his Cabinet
to the leaders of the Senate some expression of opinion which is going to
be more or less controlling in the majority of those who follow Robinson's
leadership, because left individually, you are going to find that there will
be a large number of these new men who are going to take guidance from
these old fellows. A of them are bitterly opposed to ocean
great many
mail and air mail contracts, and left to their own resources they are all
wild to show the veterans and others that they have not abdicated to the
President to cut right and left in the way of benefits to various people
without having shown that some of the people who are enjoying certain
privileges, as they put it, have not been attacked."
When the expected attack in Congress began in 1933 with the resolution
for a Senate investigation of ocean and air mail contracts, Mr. Duff tried
SHIPS FOR SALE 343
to get certain Senators appointed to the investigating committee, and the

steamship owners also tried to get a counsel appointed for the committee
whom they liked. On March 7, 1933, Mr. Duff wrote to his employers in
New York:
As a matter of fact, I do not look upon! this undertaking as being
something that will give us any concern at all. I think you will find
several of the members will, during the summertime, take some trips
abroad and see whether the mail arrives and possibly make sure that
the airplanes are actually delivering mails for which the Government is
paying. The probabilities are that after they have all had some trips, the
committee will get together and tell the fine times diey have had and
possibly call in the Postmaster General and explain to him what had
been done during the recess.
Frankly, up to the moment, no one knows what will be done, but I
think my guess is not far off.
On March 14, 1933, Mr. Duff wrote again concerning the personnel of
the investigating committee:
I think this committee is about as good as we could have expected and

there may be something in the fact that the name of the chairman is
Black and one of the Republican members is White.
In other words, we start with everything looking black and end up
with it white.
But Mr. Duff was to The chairman of the com-

be sadly disappointed.
mittee, Senator Black, studied summer; no one took any trips; and
all
in September, 1933, an exhaustive and valuable survey was made of the

steamship subsidy via mail contracts.
WHILE the merchant marine operators were making every effort to get
money from the government and to get control of the government's ships,
the shipbuilders were working hard to make Congress appropriate money
for building both naval cruisers and merchant ships. Charles A. Beard in
his book The Navy: Defense or Portent? wrote:
On the one hand we are told that a big navy

is
necessary to protect
the merchant marine in waters of the world; the bigger the merchant
all
marine, the bigger the navy needed. On the other hand we are informed
that, since merchant ships are to be armed in war time, we must have
more of them to strengthen the navy. According to this logic we must
build more fighting ships to defend the merchant ships and more
merchant ships to defend the navy. With great cogency, Senator Walsh
of Massachusetts expounded this beautiful creed during the hearings on
the London Pact in 1930. Three cheers for old Ireland, down with the
British, and more jobs in shipyards!
The most brazen episode in the campaign of shipbuilders to persuade

the government and the world to continue giving them contracts for naval
cruisers and merchant ships was that which involved the confidential
relations of William Baldwin Shearer and the executives of the three
largest shipbuilding companies in the United States.
A writer in Collier's Weekly remarked in 1929 concerning Shearer: "In
the old days he would have sold patent medicine or lightning rods. Today
he sells patriotism, a product with a much higher social status and more
profitable to sell."
William Baldwin Shearer was born in Philadelphia on October 23,
which had lived there for many generations. He once
1874, into a family
furnished a record of his career to one of his employers, Laurence R.
Wilder, of the American Brown Boveri Electric Corporation, which
owned the New York Shipbuilding Company. Mr. Wilder had the record
checked for accuracy by the propaganda office of Ivy Lee, who was also
in the employ of the shipbuilders, and he received a telegram from Mr.
Lee's office reading: "Subject's statement correct as to biography details
and loyalty unquestioned."
Scotland Yard also had a record of Shearer, which read as follows :
W. F. Shearer, or William Baldwin Shearer, Also Known As Schalarer,
Roscovey or Roscowey, Sear, and Nevin.

SHIPS FOR SALE 345
American citizen; probable age about 50; height 5 feet 11 inches;

complexion fresh; hair brown; eyes gray; rather long thin face; thin
build; very smart appearance.
This man is a notorious associate of international crooks and swell
mobsmen, and is said to be well-known to Pinkerton's Detective Agency,

Chicago. He first came under the notice of the British police in 1904.
He was then associated in betting transactions with one Baron Seidlitz,

from whom he stole a check for 737. Shearer cashed the check by
opening a banking account with it, immediately afterwards withdrawing

the whole amount. A warrant for his arrest was issued, but the loser was
reimbursed and proceedings were withdrawn.
In 1912 Shearer was said to be associated with the boxer, Kid McCoy,
and others in a theft of jewels from the Princess of Thurn and Taxis at
the Royal Palace Hotel, Osten. Shearer was arrested in Paris, but escaped,
like the rest of the accused, on grounds of insufficient evidence.

Shearer's associates are said to have included the notorious crooks
"Captain" Arthur Huber Allison James, alias Captain "Baby" James, and
Montague Noel Newton, who was recently very prominent in the "Mr. A"
case. There are, however, no details as to his relations with these men, or
whether it was anything more than a friendship of thieves. He is said to

have interested himself in gaming houses in the West End, and before
leaving for America about the end of 1915 was largely interested in
running a night club in Garrick Street.
In March, 1918, Shearer was reported on for the information of the
admiralty. At the time he was in touch with the British naval authorities
in the United States of America, having a very clever invention which

they wished to develop on this side, where there Was less risk of its
getting into enemy hands. It was accordingly arranged that Shearer

should be sent over under escort of a naval officer. It appears that he came
here, for he returned to the United States in June, 1918, with an intima-
tion that he should not be allowed to land without reference to the home
office.
Shearer was last reported on in October, 1920, when the United States
naval attache was anxious for information about him. He was then
detained in America, it is believed on account of espionage.
The interesting thing is that Shearer is the man who the other day
made the widely disseminated disclosures about the Americans having
had a spy on board one of our battleships during maneuvers. This spy,
you may remember, was said by Shearer to have reported that we were
evading the Washington agreement in the spirit, if not in the letter.
1-1-25.
This Scotland Yard record was introduced into the Senate committee's
record at Shearer's request, so that he might have an opportunity to reply
to its allegations. Shearer testified that he had known "Kid" McCoy for
many years, that he was in Belgium in 1912, and that "Kid" McCoy had
asked him to promote a fight between him and Georges Carpentier.
Shearer also said that a man named Stockley, formerly of Scotland Yard,
whom Shearer employed to protect his theater and the night club which
he promoted in London, had told him that it was "his and the Yard's
assumption" that the jewel robbery of the Princess of Thurn and Taxis
was an attempt to collect insurance, and that there were conflicting stories
concerning the robbery. "Kid" McCoy was arrested for the robbery, but
Shearer believed he was liberated a short time afterwards for lack of
evidence against him. Shearer claimed that he himself was never arrested
in that connection and had nothing to do with the alleged robbery.
Mr. Shearer did not offer any direct denials of the Scotland Yard
record, or its innuendoes, with the exception of the robbery of the Princess
of Thurn and Taxis' jewels. He tried to indicate in this connection that
the characters of the Princess of Thurn and Taxis and of her husband
were not all they might be, and he blamed the check transaction on a man
named Doyle. But his past associations remained much as stated in the
Scotland Yard record, until he began to associate with shipbuilders.

After the war Shearer attracted some slight attention to himself in the
United States by bringing suit against the United States of America to
prevent the government from destroying the battleship Washington in
accordance with the terms of the Washington naval treaty. His suit was
thrown out of court, but he got publicity for himself out of it. Shearer
then began to agitate for an increase in pay for navy officers and started
a campaign for more battleships and more naval bases. He attacked John
D. Rockefeller, Jr., and branded everyone who questioned
as a pacifist
the advisability of a huge navy with the traditional epithets of the time,
"Bolshevist" and "Communist." Meanwhile, Shearer took part in the
Florida real estate boom. Then he went to Geneva in 1926 to be present
SHIPS FOR SALE 347
during the sessions there of the Preparatory Commission of the League

of Nations on naval disarmament.
In November, 1926, Shearer was back in New York, and he got in touch
with the editor of a minor newspaper, the New York Commercial. He
worked out a scheme by which he was to purchase a page in the New
York Commercial one day each week for six months for $18,000. Then he
tried to interest the leading shipbuilders of the United States in taking
advertising on this page for $36,000. The difference of $18,000was to be
used by Shearer for his expenses while conducting his perpetual campaign
for a large merchant marine and a huge navy.
A member of the staff of the New York Commercial, Shearer testified,
was vice-president of the Propeller Club, a big-navy organization which
gave a Marine Dinner each year in New York. It was arranged that
William B. Shearer should be the speaker at the Marine Dinner to be
held at the Waldorf-Astoria Hotel in November, 1926. After his speech at
the dinner in favor of a large merchant marine and a bigger navy, Shearer
told the Senate committee proudly, he was approached and surrounded by
admiring shipbuilders. "If I said twenty-five talked to me intimately, it
might be a very conservative statement," he testified. Among those who
were impressed with Mr. Shearer's speech at the Marine Dinner was Mr.
Homer, of the Bethlehem Shipbuilding Corporation, who told Shearer that
he thought the speech should be read by everyone in the United States.
After his oratorical success, Shearer got busy. He met Charles M.

Schwab, of the Bethlehem Steel Corporation and the Bethlehem Ship-
building Corporation, at the Ritz-Carlton Hotel in New York and dis-
cussed "sea power" with him. As a result of this conversation with Schwab,
Shearer claimed, Mr. Homer, of the Bethlehem Shipbuilding Corporation,
took up with him his advertising and propaganda scheme for sea power
in connection with the New York Commercial. Mr. Shearer summarized
the purpose of his scheme for Senator Robinson: "Well, it was, to use
my exact interpretation, or as I stated, that I considered before you could
ever create a merchant marine in this country you had to create a vote
value; and the only way to get a vote value was to sell it to the public."
Mr. Homer asked Mr. Shearer to put his plan in writing, and then he
took him Bethlehem Shipbuilding Corporation,
to see his superior in the
Mr. Samuel W. Wakeman, vice-president of the company. In the mean-
time, Mr. Shearer had interested in his scheme Mr. F. P. Palen, vice-
president in charge of the New

York office of the Newport News Ship-
building & Dry Dock Company. Mr. Palen was very much impressed
with the potential value of Shearer to the shipbuilders, and he wrote to
Homer L. Ferguson, president of the Newport News company, concern-
ing Shearer: "He is probably the most forceful speaker and the greatest
authority and enthusiast interested in this question, and I think it advisable
to offer him some financial assistance in connection with this speaking
tour." Mr. Ferguson, it remembered, was the man who told a
will be
Congressional committee that though he was willing to beat his cruisers

into plowshares, he found that the plowshare manufacturers did not wel-
come him in a very hearty way.
Mr. Palen recommended that the Newport News company take space
on Mr. Shearer's page for $2,600 in order to help him finance a speaking
tour on sea power. He wrote to Mr. Ferguson:
After making one more address in New York he expects to spend

some time in Washington after the opening of Congress in order to get
information on the probable attitude of Congress and the administration
toward appropriations and backing for the Navy and merchant marine,
after which he will start on his speaking tour, and intends to cover the
entire country, speaking before gatherings organized by the American
Legion, the chamber of commerce, and similar organizations that will

cooperate with him in getting the necessary audiences.
Mr. Bailey was present at the conference today with Mr. Shearer and
he will discuss this matter with you.
The shipbuilders finally decided that Mr. Shearer's idea that he be sub-
sidized by them via advertising in the New
York Commercial was not
wise. Instead the executives of the three large shipbuilding companies met
with Mr. Shearer on December 15, 1926, at the office of Henry C. Hunter,
attorney for the Council of American Shipbuilders. Those present were
Mr. Wakeman, of the Bethlehem Shipbuilding Corporation, Mr. Palen,
of the Newport News company, and Mr. C. L. Bardo, of the New York
Shipbuilding Company, a subsidiary of the American Brown Boveri Elec-
tric Corporation. They agreed to send Shearer to Washington to work
for the passage of the merchant marine act and the navy cruiser bill by
SHIPS FOR SALE 349
the Sixty-ninth Congress. Shearer received $7,500 for this job from the
three companies. Payment was made to him by a check paid through
Henry C. Hunter, of the Council of American Shipbuilders, and no

written contract or agreement of any kind was made with Shearer.
Senator Robinson asked Mr. Wakeman whether he had taken the
trouble to look Shearer up before hiring him:
"No, sir, I did not," Mr. Wakeman replied.

"Is that the custom of your company in employing individuals for a
confidential mission?"
"No; it is not. This was an act of my own, Senator."
"I know; but why did you pursue a different custom on that occasion
from the one that usually prevails?"
"Well, I do not know."
"You do not know?"
"I think I was just 'jazzed' off my feet on that proposition, if
you
want to know," Mr. Wakeman said. "I do not like to make the ac-
"
knowledgment, but
"Frankness is the best thing," said Senator Shortridge.
Mr, Palen testified that he had heard of Shearer first as the inventor of
the one-man torpedo boat during the war, which had gained Shearer pub-
licity. Senator Shortridge
seemed to doubt that Shearer had invented the
boat himself. "Oh, well, the boat carried his name," Mr. Palen replied.
Then Mr. Palen had heard Shearer make a speech, talked with him and
agreed to hire him as a propagandist.
Mr. Wakeman said that he and his colleagues had hired Shearer "to
supplement the work of the Shipping Board," but Shearer testified that
Wakeman said to him: "The idea of a campaign is very good. That will
help educate the people, but we want action in Washington. I have had
a talk with Mr. Palen and with Mr. Bardo, and we think that you should
go Washington for the Sixty-ninth Congress, to try to get through the
to
3-cruiser bill." Each cruiser built would cost the government about
$10,000,000.
Senator Allen tried to get out of Shearer just what he did in Washing-
ton to earn his $7,500, but the witness was vague and discursive. We know
from the Congressional Record, however, of one bit of his influence. Con-
gressman Loring M. Black, of New York, made a speech in the House of
Representatives on January 4, 1927, which was for the most part a rendi-
tion of a long letter by "a naval critic," who, Mr. Black assured the House,
was not a British critic. The signature at the end of the letter was that of
W. B. Shearer. The letter advocated 50 new naval cruisers, ten to be built
each year for the next five years; 15 destroyer leaders to be built at once;
replacement of the 103 destroyers then in commission as obsolete; 45 new

submarines; 3 new airplane carriers and 5 new dirigibles of the largest size.
Such a program would have kept Mr. Shearer's shipbuilding employers
busy for a long time. "There is every evidence," Mr. Shearer, the naval
critic, wrote, "that the United States Navy would be defeated in every
major engagement."
The naval cruiser bill was debated in Congress during January and
February, 1927, and many of the speeches of the Congressmen owed some
of their information and their color to Shearer's influence in the offices
and lobbies of Congress. The bill providing for six new naval cruisers,
was passed before the session ended on March 4, 1927, and Shearer returned
to New York early in March with the satisfaction of having earned his
money for his employers.

The Geneva Conference on Naval Disarmament was due to meet in
Switzerland in the spring of 1927, and the shipbuilders agreed with Shearer
that it would be a good idea for him to leave for Geneva at once. On
March 17, 1927, Shearer met at noon with Clinton L. Bardo, of the New
York Shipbuilding Company, F. P. Palen, of the Newport News Ship-
building & Dry Dock Company, and Samuel W. Wakeman, of the Beth-
lehem Shipbuilding Corporation, at the office of Henry C. Hunter, attorney
to the Council ofAmerican Shipbuilders. They made an oral agreement
to send Shearer to Geneva as an "observer" for them. That day they gave
Shearer $8,333.33 as the payment of $25,000 for his work abroad.
first
The avowed Geneva conference was to limit naval build-

purpose of the
ing with express reference to cruisers. Mr. Homer L. Ferguson, of the
Newport News company, testified, "it is a matter of very great importance
to us what these armament conferences do." He said that the Washing-
ton conference of 1922 had resulted in cancellation of work for which his
company had contracts with the government. "We had two battle cruisers
and one battleship scrapped by that conference, and we almost lost the
West Virginia," Mr. Ferguson told Senator Shortridge.

SHIPS FOR SALE 351
At the time when the shipbuilders sent Shearer hurriedly to Geneva,

each of the three companies who paid him had invitations to bid on the
new naval cruisers.
"Were those two cruisers upon which you bid, and contracts for
which you received, involved in any possible outcome of the Geneva

parley?" Senator Allen asked Mr. Bardo.
"The contracts contained the privilege to discontinue at any time,"
Mr. Bardo answered.
Senator Allen brought out that if the Geneva conference failed of its pur-
pose, then it was possible that the United States would enter on a program
to build fifteen new cruisers. Mr. Bardo testified that he was not thinking
of that possibility at all when he joined with the other two shipbuilders
in sending Shearer to Geneva, that he merely wanted to know what was
going to happen at the conference, and get firsthand information from
Shearer, so that he might prepare his business plans accordingly. He said
that $8,000was nothing compared with the cost of installing machinery
which might be useless if the naval cruisers were limited, and he gave
as an example one machine, which would have cost $60,000 to build and
would have been a loss if the cruiser program was limited.
"What is the relevancy of that illustration?" Senator Shortridge asked.

"To show," said Mr. Bardo, "that the business man who has any
conception of the value of a dollar has got to be thinking of a lot of

things besides his breakfast tomorrow morning."
"He is explaining, Mr. Chairman," said Senator Allen, "the reason
why it was so important to spend $25,000 for observation of this con-

ference at Geneva."
"To learn the trend of it, you mean?" Senator Shortridge said
sarcastically.
"That explained Senator Allen.
is it,"
"He was
not concerned with the result, but merely, as Senator Robinson
developed, with the trend."

"I did not care about tons and guns," Mr. Bardo remarked. "I wanted
it settled, that is all."

The shipbuilders had all testified previously that they had not sent
Shearer to Geneva to influence the conference by propaganda or other-
wise, but merely wanted him to "observe the trend" of the conference
so that theymight know where they stood.
But Shearer's conception of his job was rather different, as evidenced
by his own testimony, that of witnesses who had met him in Geneva, and
the reports which he sent to his employers in the United States. Shearer
left New York on March 19, 1927, two days after he was hired to go to
Geneva, sailing on the George Washington. He spent a few days in Paris
to renew old contacts and then went at once to Geneva, where he took
a luxurious apartment with plenty of space for entertainment. He got to
work quickly and prepared an advance publicity campaign before the
conference began its sessions. He sent out multigraphed articles to the
press, patriotic societies and members of Congress, and he made every

effort to influence newspaper correspondents by giving them naval data,
colored with his own belief in a bigger and better navy for the United
States and implications concerning the insidious influence of Great
Britain. He referred to himself fondly as "the bass drum," and his favorite
tune was "Perfidious Albion."
On May 26, 1927, Shearer wrote to Henry C. Hunter, who acted as
go-between for the shipbuilders with Shearer, and who received all his
reports from Geneva and passed them on:
My Dear Mr. Hunter: Watch all articles in Times of May 13 and 14,
which were reflections of views. Also hope you read article sent by
my
Williams (the Times correspondent here), printed in the York New
Times tomorrow, May 27, which is also my views and suggestions for
strong man, Dawes or Reed, given him.

Have sent out 250 copies of inclosed, including all newspapers. Mr.
Ochs, owner of the Times, now in Europe, has issued orders to all
correspondents to play up naval situation.
I consider best move to pound on naval bases to offset the British
thesis on cruiser situation.
Engineering, London, printing my article on Imperialistic for Peace.
Sincerely,
W. B. SHEARER.
SHIPS FOR SALE 353
Then on June 2, 1927, he wrote again to the agent of his employers:
Dear Mr. Hunter: New York Times was cabled story of 1,000 words
last night compiled from inclosed article, "A Merchant Marine."
Sent out: Imperialistic for Peace, 250 copies; Facing Geneva, 250
copies; A Merchant Marine, 250 copies being posted.

Sincerely,
W. B. SHEARER.
As yet there seemed to be nothing in Shearer's reports about the "trend"

of the conference.
The New York Times subsequently denied that Shearer had influenced
itscorrespondence. After Shearer's letters had been introduced before the
Senate committee in 1929, Edwin James, foreign editor of the Times,
cabled his newspaper:
Reference to the files of the New York Times shows that on the dates
of May 13and May 14, 1927, there were published no dispatches, big
or little by me, relative to naval matters, nor were any cabled by me for
publication on those days.
He added that he had not seen Mr. Shearer for two years, and that
Shearer never had had anything to do with the preparation of his articles.
He had met Shearer at the Paris office of the Times in the summer of
1927 and had refused Shearer's "offer to have him interviewed." Shearer
did not hesitate at all to misrepresent facts in order to impress his em-
ployers with his great influence.
Shearer told the Senate committee: "My titles, I want to say, are much
better than my writings." He was right, except that his titles were not
very good either; "Imperialistic for Peace," "The Marine Follies," and
"Facing Geneva," required little imagination to invent. Shearer's articles
were blustering, heavy and full of one set of culled facts which he used
as often as possible. His releases spoke vaguely of Communist plots, and
his main theme was still "Gott strafe England," and it

may be that his
difficulties in England in his palmy days as a racing
a nightman and
club promoter might have contributed to his persistence in this theme.
A sample of his style is the following peroration from his article, "The
Marine Follies," which he used over again with slight variations in words
in his pamphlet, "The Cloak of Benedict Arnold":
The crucible that once produced red blood and sturdy hearts will surely
produce a Paul Revere, sounding the alarm and riding like hell over
these Babylonian architects who would take us from the sea, and molding
the younger generation for the dance of death a self-inflicted torture
of driving seditious nails into the cross of national crucifixion.
W. B. SHEARER.
Mr. Shearer seemed to think that he was that Paul Revere, but there is
no evidence that the original Paul Revere was in the employ of the Lex-
ington& Concord Arms Manufacturing Corporation.
Drew Pearson, newspaper correspondent, who attended the Geneva
conference, testified that Shearer was "a person that you could not help
seeing: because, first he was a very well groomed and flashily dressed
gentleman. In the second place, he was very active in mingling with the
newspaper men and others at the press conferences which were held with
Ambassador Gibson and Admiral Jones, and in general conference cir-
cles." Shearer had credentials from the New York Daily News, a picture
paper which Henry Wales, correspondent of the Chicago Tribune and

New York Daily News
furnished to him, so that he might attend confer-
ences not open to the general public. Drew Pearson testified that Shearer
sat with the American naval delegation in their hotel lobby night after
night, and the conversation was largely anti-British; members of the
group, Pearson testified, said frankly that they were out to see that the
conference failed, because they felt that the 1922 Washington conference
had hurt the American Navy for political purposes.
At the was very busy prompting newspaper
press conferences Shearer
correspondents to ask questions, Pearson said, and after a press conference,
Shearer would gather a group of newspapermen around him and interpret
the news for them.
"And did the newspaper men become interested in these interpretations

of Mr. Shearer?" Senator Allen asked.
"I would not say they became interested," Mr. Pearson answered.
SHIPS FOR SALE 355
"Shearer is a forceful person, and if you do not want to listen to him he

more or less makes you listen to him. I mean he has a habit of expressing
his views under very difficult circumstances. I remember he even tried
to put his views across with the British correspondents."
"What were his relations with the British correspondents?"
"They more or less 'gave him the raspberry.' "...
"As they continued to 'give him the raspberry' did he continue to insist
upon instructing the British correspondents?"

"I think he got a little tired of instructing them. But I remember they
were very indignant, and inspired and wrote dispatches which were
published in England, pointing out that the condition of affairs in
Geneva was seriously retarded by his presence, and in which they openly
stated that he was in the pay of American I think they said steel
interests."
"Did Mr. Shearer's handouts to the press create the impression among
these intelligent newspaper men who were there that he had his facts
straight?"
"Senator, if you read his stuff carefully, his facts were usually correct;
but they were embroidered and tied up with so much color that the whole
effectwas poisonous."
"So that he was there apparently to poison his facts rather than to make
them tell the true story. Was that your judgment?"
"That is absolutely my judgment."
"Perhaps my question was not quite clear," Senator Allen said. "It is
whether Mr. Shearer was merely following his own sentimental attitude
in the matter or was working for some one to a definite purpose?"
"Well, Senator, there was every evidence that he was working for
some one to a definite purpose."
"What was the purpose?" asked Senator Shortridge.

"To break up the conference. From the way that he spent money
lavishly, I was surprised that he had only $25,000, because he spent money
hand over fist. He certainly did not make much money out of his
. . .
trip."
"But he spent money with the manner of a man who believed that
therewas plenty more where that came from?"
"It seemed so." . . .
"Was there a feeling that Mr. Shearer had an inside which made his
information of peculiar significance?"
"Yes; there was, to a certain extent, that feeling that he got his facts
straight from the Navy."
Shearer himself testified that he was assisting the naval delegation at

Geneva to "get out the facts and figures which they were not permitted
to give out." That, too, was quite another thing from "observing the
trend" for his employers.
"Did you tell these naval officers you had been sent there as the
employee of the Council of American Shipbuilders to help them?" Senator
Allen asked.
"Certainly not," Shearer replied.

"But they knew you were there to help them?"
"Naturally. They knew my record in naval matters, and I have always
helped them."
"And you are saying now that they knew you were there to help them;
theyknew you were there living in impressive style and doing all of this
work; they were glad to associate with you, but did not know who was
paying you?"
"They did not ask i.ie. They are not inquisitive."
Others were more inquisitive than the naval officers about who was
paying Shearer. Dr. Gordon, of the Church Peace Conference, called on
Shearer in Geneva and wrote to him asking whether he represented
American steel companies. Shearer testified that he did not reply. When
Wythe Williams, correspondent of the New York Times, and Henry

Wales, correspondent of the Chicago Tribune, asked Shearer whom he
represented, he replied that he represented the Pittsburgh Doorknob
Company, "because you build battleships you will have doors; and if
if
you have doors you must have doorknobs." "That was my only statement,"
Shearer testified, "because it was ridiculous for newspaper men to ask
me whom I represented." Shearer told the Senate committee that he would
have told an ambassador or a naval officerwhom he was representing, but
not the "English owned" and "English edited" New York Times. When
about this English ownership and editing, he could only feebly

pressed
offer as evidence that Frederick T. Birchall, foreign correspondent of
SHIPS FOR SALE 357
the Times,was an Englishman. Shearer finally had to admit that at Geneva

he gave out that he was endorsed by American patriotic societies, which
carried the implication that they were his employers.
In his spare time at Geneva Shearer made oil paintings of ships and
showed them to the newspapermen and naval officers. On July 12, 1927,
he sent this confident note to Henry C. Hunter, the agent of his em-
ployers :
Many thanks for letter with inclosure.

This show may end abruptly. Gibson has handled our case admirably.
This will be the only conference America ever won. Gibson gives the
credit to the American Press; we have been able to defeat the British
propaganda machine and get the figures out.

The inclosed is the shot I issued on the date of the plenary session
which was postponed.
The Chicago Tribune, Chicago, has from the start taken the same
stand as the New York Times. Colonel McCormick, owner of the
Chicago Tribune, sent word to Wales, the correspondent here, to shoot

all my stuff.
Sent out 250 copies of the Marine Follies. I issue a statement daily to
the leading American correspondents here, including the A.P. and U.P.
Yours very truly,
W. B. SHEARER.
The main difference between the American and British delegations to

the Geneva conference was concerning the number of cruisers each nation
should be permitted to build; both agreed to limit the total cruiser ton-
nage, but the Americans wished to build as many cruisers as they pleased
within that tonnage, and the British maintained that the number of
additional cruisers should be limited. Cruisers at $10,000,000 apiece were
what Shearer's employers wanted; they did not care so much about "tons
and guns," as one of them expressed it in another connection. Shearer
testified: "My purpose, as they [the shipbuilders] understood it, was to
see that the United States would get out their side of the story at Geneva;
that we would get a treaty of parity if possible, and if it was not a treaty
of parity, no treaty." In a confidential report which he sent to the ship-
builders, and which he suggested that they should send out under his
name inpamphlet form to members of Congress, the press, patriotic soci-
eties and prominent individuals, Shearer wrote:
A small
band of naval experts stood by their guns; they were thinking
of Washington in 1922. The ammunition was passed out and the well-
trained guns of the loyal American press fired their well-placed shots. The
enemy's propaganda guns were outranged, the subsidized pacificists' and

internationals' ranks were broken; the American people rose to the
occasion and allied themselves behind America's justifiable stand. And
as the echo of victory died it was realized that America had won its
first conference.
Shearer was proud to admit, especially to his employers, that he was the
man behind the well-trained guns of the press. The conference broke up
on August 4, 1927, and on the following day one of the leading
in failure
newspapers in Geneva published an article headed, "The Man Who

Wrecked the Conference." Drew Pearson testified that it was the im-
pression among the European newspapermen that Shearer had smashed
the conference with his propaganda, but that the American newspapermen
thought that there had been other factors as well, although they believed
that Shearer had contributed to its failure. Shearer, before the Senate
committee, emphatically disclaimed all credit for breaking up the Geneva
conference, and he said that he never had claimed that he had done so.
"I said the conference broke, not that I broke it," he testified. He added
that he had said that Secretary of State Kellogg had blamed him for
breaking up the conference, but that he himself had never taken such
credit. "I recall at no time, even in my enthusiasm as a bug, as I have
"
been referred to, when I said 'I broke up the conference.'
The shipbuilders smiled and exclaimed on the witness stand before
the Senate committee when asked whether Shearer had broken up the
Geneva conference in their interests. "The idea of one man breaking up
a conference!" exclaimed Mr. Laurence R. Wilder, of the American

Brown Boveri Electric Corporation. "You talk about a man breaking up
the Geneva conference!" said Clinton L. Bardo, president of its sub-
sidiary, the New York Shipbuilding Company. "I would be a silly ass
SHIPS FOR SALE 359
if I thought for a minute, or anybody would be who thought for a
minute, that a man could without power, without authority, the force
of authority, without backing, without prestige, the very things that are
necessary to get action, and break up anything dealing with international

relations. It is impossible." But Shearer had the authority of the Navy
for his facts, the backing of the shipbuilders for his money, and the re-
spectful attention of a part of the American press at least for his prestige.
When came time for the shipbuilders to testify before the Senate
it
committee, they became strangely ignorant of Shearer's activities at Geneva.

Charles M. Schwab admitted that he had heard of the man and had met
him, but testified that he knew nothing of his employment by Mr.
Schwab's corporation until after he had returned from Geneva. Mr.
Schwab also expressed his willingness to scrap his armament works; it
did not amount to Mr. Eugene G. Grace, president

much, anyway, he said.
of the Bethlehem Steel Corporation, with which the Bethlehem Ship-
building Corporation was affiliated, also knew nothing of Shearer until

he had returned from Geneva and then was angry that he had been em-
ployed. The men who had employed Shearer directly admitted that they
had received the reports on his activities, his press releases and other
and some of them even admitted that they had read them. But
articles,
all maintained that they had paid no attention to his

propaganda and
were only interested in Shearer as an "observer" of "the trend" of the
conference. Shearer, however, had sent them no word about the "trend"
of the conference except when he wrote gleefully that, "This show may
end abruptly." As the Washington correspondent of the New Republic
pointed out: "If they were not sinister they had to be stupid. Without
exception they agreed on the stupidity theory, and before they finished
had glowingly painted themselves as the prize boobs of the business
world."
Shearer arrived back in New York in October, and Mr. Palen, Mr.
Bardo and Mr. Wajceman, his employers, went to his rooms in the Fifth
Avenue Hotel to have lunch with him and to hear his verbal report on
the "doings" at Geneva, as Roxy Stinson said in another connection.
After his return from Geneva, Shearer remained in the employ of the
shipbuilders. His next propaganda activity was his lurid anti-British
pamphlet, entitled "The Cloak of Benedict Arnold," which was a virulent

attack on pacifists, internationalists and the British government. His
employers, the shipbuilders, found the pamphlet a little violent for their
taste, and they paid Shearer not to publish it. Each of the three com-
panies sent Henry C. Hunter $75, and Hunter gave Shearer $225 to pay
the expenses of printing the pamphlet which the shipbuilders wanted
suppressed. Nevertheless, Shearer, after he had taken the $225 on No-

vember 14, 1927, circulated "The Cloak of Benedict Arnold" widely in
the following January among newspapers, patriotic societies and others
interested in his cause. Shearer insisted before the Senate committee that
nothing had been said to him about suppressing the pamphlet, but that
the shipbuilders had merely paid him the expenses of printing it, just as
they had paid Ivy Lee for printing another pamphlet of Shearer's called
"Sea Power."
Then the shipbuilders decided to send Shearer to
Washington to work
on propaganda for merchant marine subsidies and to work on the
their
naval cruiser building programs which were to come up before Congress.

Shearer testified that Mr. Palen, of the Newport News Shipbuilding &
Dry Dock Company, was in favor of Shearer's coming out in the open as
the representative of the shipbuilders, but that Mr. Wakeman, of the
Bethlehem company, was opposed to that move; hefelt that the time was
not ripe for open lobbying. However, Shearer said, he was to go to Wash-
ington as their representative, hire a house and make his permanent

residence there. "I was to have a lovely house here," Shearer told the
Senators, "so I
put the real estate agents to work."
"On December llth [1927] I believe the date was," Shearer continued,
"Mr. Hunter phoned me to come to New York at once; so I naturally
assumed we all live on hopes that Charlie [Schwab] was going to
make me one of his boys. (Laughter.) So I pushed off with all this hope in
my and I was met at the railway station by one of Mr. Hunter's
breast;
men who whispered in my ear whispered, 'Go at once to the Lotos
Club.' ... So I went to the Lotos Club, and Mr. Huriter was there, and
Mr. Palen, and I am not sure whether it was Mr. Wakeman, or I think
it was Mr. Smith another vice-president I believe it was, from the
Bethlehem . and met me at his private room with the doors closed;
. .
and then they told me that Kellogg [Secretary of State] had called
the Bethlehem crowd on the mat; did not say which ones, whether it
SHIPS FOR SALE 361
was that tower of ivory who sat back here the other day [Eugene G.
Grace] or whether it was Mr. Schwab, or who it was, but the cat
was out of the bag; they were going to proceed against them unless they
fired me. I was to be the goat."
"Just prior to that they were arranging for you to come down to Wash-
ington?"
"It had been arranged. I was here."
"To have open employment?"
"Oh, yes."
"
"And represent them here in proceedings before the
"Yes; everything."
"In everything?"
"Oh, I was to be the big fellow. (Laughter.)"
"And when you went up to New York, you learned, or they told you,
that the Secretary of State had instructed them to get rid of you?"
"That is right."
Shearer added that a New York World reporter had learned that Shearer
was in the pay of the Bethlehem Shipbuilding Corporation, and that

that newspaper was about to attack Shearer. He also claimed that Secre-
tary of State Frank B. Kellogg, whom he referred to on the stand by the
slang nickname, "Nervous Nellie," until reprimanded for his disrespect,
had threatened Schwab and Grace that the suit for war frauds against the
Bethlehem company would be prosecuted by the Department of Justice
unless they got rid of Shearer at once.
The night of his meeting with the shipbuilders at the Lotos Club,
Shearer telephoned to Mr. Palen, who had been more friendly to him than
any of the other shipbuilders who hired him, and went to Mr. Palen's
home to talk with him. He asked Palen what was behind this new move
to discharge him. "Mr. Palen said, 'Schwab does not want to be tabulated
or accused of being behindall the "Big Navy" propaganda. He don't want
tobe tagged with it' exact words 'He don't want to be tagged with any
"
such charge,' Shearer testified. The next morning Shearer met with the
shipbuilders at Mr. Hunter's orHce and was discharged. He said that he

protested that he was being punished for a mistake of Mr. Hunter's :
"I said, 'Surely you are not going to punish me for your own mistakes?
I am not to be the victim of success? You are not going to make me walk
the plank? Your great mistake was made by your own attorney.' In
his enthusiasm, Mr. Hunter had called up the head of the Navy League
here in Washington, who was very close to the Secretary of the Navy
Mr. Wilbur, Secretary of the Navy at that time and suggested me as
the Navy Day speaker. Well, Mr. Wilbur does not need any more in-
formation than that, does he? The Council of American Shipbuilders
suggesting me for the Navy Day speaker! That was not clever."
But Mr. Shearer was a very hard man to get rid of once he had proved
himself useful to the shipbuilders. Mr. Bardo, of the New York Ship-
building Company, testified that after Shearer's work at the Geneva con-
ference, "there was a very determined disposition on Mr. Shearer's part
to fasten himself on the shipbuilders beyond the time when they were
willing to have him around." But there was also a disposition on the part
of some Mr. Shearer on Congress
of the shipbuilders to continue to fasten
and government departments. Mr. Laurence R. Wilder, who was Mr.
Bardo's superior as former head of the American Brown Boveri Electric
Corporation, which owned the New York Shipbuilding Company, was

very much impressed with Mr. Shearer, and he planned to use Shearer in
an important propaganda project.
The Transoceanic Corporation of the United States had been incorpo-
rated by Mr. Wilder in Delaware in January, 1928. It advocated the con-
struction, with the aid of construction loans from the Shipping Board, of
four huge liners capable of making the voyage to Europe in four days.
The ships were to cost between thirty and thirty-five millions of dollars
and were to be financed by the government and the stock-investing public.
were taken in the Carlton Hotel in Washington; Captain Her-

Offices
bert Hartley, former commander of the Leviathan, was hired as commo-

dore of the 4-day liners, and a uniform was purchased for him for $167;
and William B. Shearer was hired to paint pictures of the prospective
4-day liners and to do propaganda work for a huge merchant marine

under government subsidy. The 4-day liner plan was admittedly a huge
publicity scheme to create renewed interest in a government-financed
merchant marine, which would stimulate shipbuilding and ship operation.
Mr. Laurence R. Wilder, shipbuilder and organizer of the scheme, told
the Senate committee investigating Shearer's activities:
SHIPS FOR SALE 363
"Well, as I have stated before, in relation to shipbuilding, unless

we could create a large volume of merchant building we were going to
quit. There was no public interest in the merchant-marine problem.' It

was dead. Issues such as the International Mercantile Marine, the Ameri-
can Gulf & West Indies, and the Harriman interests in the United
American Lines, had created a very bad flavor for any merchant vessel
operating securities. We were proposing something radically new, and
we had a disinterested public. We believed that iti was up to us. That
is why the other shipbuilding companies joined us. We felt it was up
to us to arouse some interest, to arouse some enthusiasm, if we could,
in the public at large.
"We used the 4-day liner proposal as the nucleus of something with a
little in it, something new, something where the country would
romance
be stepping out into the forefront of ship operations, rather than be
lagging way behind the way it was. It went, and it went fine. It was
entirely satisfactory."
"What do you mean when you say it went fine?" Senator Shortridge
asked.
"I mean the publicity took well. The papers opened up to it, and we
really succeeded in stirring up a lot of interest in the merchant marine
again. It has been reflected since. The whole situation has changed now."
No 4-day liners were ever built, but the publicity was worth its cost to
the shipbuilders. "I venture to say we had half a carload of newspaper
clippings from all over the United States indicating an interest," Mr.
Bardo testified. The result was to facilitate the passage by Congress of the
Jones-White Merchant Marine Act, which granted huge subsidies in the

form of mail contracts to shipping lines and provided for a large con-
struction fund for new merchant shipbuilding. Mail subsidies and con-
struction loans were the idea of the Transoceanic promoters, which they
passed on to Senator Jones and Congressman White.

Those behind the Transoceanic 4-day liner project spent $143,000 in
Washington to promote their ideas. Ivy Lee got some of this money for
taking part in the propaganda campaign, and so did William B. Shearer.

Shearer painted four oil paintings of future 4-day liners, took a trip to
California to interest William Randolph Hearst in the project, gave Mr.
Wilder valuable information and aid and received in return from Wilder
$9,550.
After the passage of the Jones-White Act with its rich subsidy and
construction features, Clinton L. Bardo wrote the following letter to
E. M. Herr, president of the Westinghouse Electric & Manufacturing
Company :
August 13, 1929

Mr. E. M. Herr,
President Westinghouse Electric & Manufacturing Co., New York.
Dear Mr. Herr: The Jones-White merchant marine bill as passed by
the last Congress is the most helpful and constructive national shipping
legislation ever presented to the American shipping public. This legisla-

tion was only made possible by the energetic action of Mr. Wilder and
his associates in the transoceanic enterprise, with the help and cooperation
of other shipping and shipbuilding interests.
As a direct result of the passage of the Jones-White bill a number of
remunerative foreign mail routes have been advertised, and some con-
tracts let. A number of new ships are under active negotiation to build.
This activity was carried on in the interests of the shipper, shipbuilder,
shipowner and suppliers of materials used in ship construction. The

vision of the 4-day, high-speed transoceanic liners made an effective back-
ground for this legislation. Several months were spent in Washington by

Mr. Wilder and his staff, explaining and educating Congress as to the
need of an adequate merchant marine, privately owned and operated.
The expenses incident to this effort were approximately as follows:
Publicity and advertising $30,000
Salaries of staff solely engaged in M. M. legislation duties
and for reports submitted 22,000
Services of experts 26,000
Hotel expenses at Washington 23,000
Office expenses 12,000
Traveling expenses 15,000
Miscellaneous (printing, telephone, telegraph, photos, etc.) 4,000
Total $150,000
Every single dollar of this expenditure was spent legitimately.

The board of directors of the American Brown Boveri Electric Corpora-
tion have assumed these obligations without any assurance as to re-
SHIPS FOR SALE 365
imbursement but with an abiding faith in the fairness of others whose

interests have been so materially helped by this legislation. As stated
to you recently, we are hopeful that others whose interests have been
so vitally helped will contribute to a fund of $100,000, which will leave

the American Brown Boveri Electric Corporation to carry $50,000 of
the direct out-of-pocket expenses and $56,000 for transoceanic develop-
ment.
On the $100,000 basis your proportion as nearly as we can estimate
it
upon the division of ship costs, would be $5,000.
The other contributors who have been solicited are as follows:
American Engineering Co., Babcock & Wilcox Co., Bath Iron Works,
Bethlehem Shipbuilding Corporation, De Laval Steam Turbine Co.,
Federal Shipbuilding Co., General Electric Co., Hyde Windlass Co.,
Newport News Shipbuilding & Dry Dock Co., Pusey & Jones, Sperry
Gyroscope Co., Sun Shipbuilding Co., Worthington Pump & Machinery
Co.
I would very much appreciate the courtesy of an early reply.
Checks should be made payable to the company and forwarded to the
offices at Camden, N. J.
C. L. BARDO, Vice President.
Mr. Bardo had been very much opposed to Mr. Shearer's having any
part in the propaganda for the Jones-White Act via the 4-day liner project.
He had warned Mr. Wilder against Shearer. "I told him," Mr. Bardo
testified, regarded him as an undesirable man to have around;
"that I
that he was more likely to do harm than good; he would not stay hitched."
But Mr. Wilder was still much impressed by Shearer, and in spite of
Bardo's statements that he had learned that Shearer was not an American
"and that the British had enough on Shearer
citizen but a Prussian officer,
tohang him," Mr. Wilder told Shearer, according to the latter, that he
would not be dictated to by Charles M. Schwab, and refused to get rid
of Shearer, according to Shearer's testimony. Mr. Wilder did speak to
Shearer about these statements about his past, and Shearer took Wilder
to the Navy Intelligence, where Commander Powell told Wilder "that
if Mr. Shearer was paid $3,000,000 for his services at Geneva, he would
still be underpaid," according to Shearer's testimony.
Meanwhile, Shearer was trying his best to get back into the employment
of the three shipbuilding companies, but they remained wary of him. At
least, if he could not get direct employment again, he wanted his compen-
sation for what he had done and what he was doing. On this point there
was disagreement. Shearer claimed that his arrangement with the ship-
builders 'was that hewas to get $25,000 a year for eight years, and they
claimed that he was hired on a piecework basis for the cruiser bill propa-
ganda at the Sixty-ninth Congress, and for the "observation" work at the
Geneva conference. On January 30, 1928, Shearer wrote to Samuel W.
Wakeman, vice-president of the Bethlehem Shipbuilding Corporation,
who was the most anxious of all his erstwhile employers to get rid of him,
and he sent copies of this letter to Palen, Bardo and Wilder:
My Dear Mr. Wakeman: Pursuant to our last private conversation
and understanding in your office, that future negotiations would be with

me direct, I wish to call to your attention that as the result of my activi-
tiesduring the Sixty-ninth Congress, eight 10,000-ton cruisers are now

under construction.
Further, that owing to the failure of the Tri-Power Naval Conference
at Geneva, there is now before the Seventieth Congress a 71-ship-building
program costing $740,000,000.

The understanding for which expenses were furnished me to conduct
the campaign for naval preparedness was to March 5, 1928, to be paid as a
salary of $25,000 a year, receipt hereby acknowledged for year ending

March 4, 1928.
As stated by you, and agreed by your group, I am to receive at the
rate of $25,000 a year as a reward, a bonus, or money earned as the result

of the naval preparedness campaign which benefits, and, in reality, saved
the shipbuilding industry. . . .
At the request of Mr. Hunter, Mr. Palen, Mr. Bardo, and yourself I
have continued my activities in your behalf and in your interest to get

action on a naval building program which is now assured. By request
and instructions I am devoting considerable extra time and endeavor to
the merchant-marine program as laid down and approved by members
of your group. Considering the extra work assigned me and the expense
involved, I believe a part of my bonus should be paid me March 5, 1928.
Also I feel the time has arrived for me to come out in the open, as sug-
SHIPS FOR SALE 367
gested by Mr. Palen and Mr. Wilder, in the interest of all who are
seriously interested in the shipbuilding industry

and adequate seapower.
Very truly yours,
W. B. SHEARER.
The Cloak of Benedict Arnold has received a number of indorsements,
congratulations, and demands from patriotic organizations.

I have supplied small numbers on request to the War College, etc.,
in addition to copies sent Congress, Army, Navy, and the press of the
United States.
The oldest and foremost patriotic society in the United States has re-
quested at least 100,000 copies for distribution throughout the Nation.

They are not, however, prepared to pay the printing, therefore I am
unable to grant their request.
The pacifist convention opens January 15 at the Washington Hotel.
This is but the start against the Navy building program.
The sinking of the S-4 has changed public opinion. The attacks
through the press and the press itself has swung against the Navy; this
is reflected in Congress. A million copies of my book should be sent out.
Mr. Wakeman and the other shipbuilders thought otherwise, however.

In fact, they had thought that they had paid Shearer $225, the cost of
printing "The Cloak of Benedict Arnold," in order to suppress it. Also
they thought that they were finished with him financially when their
agent, Henry C. Hunter, had written to Shearer on December 17, 1927:
Dear Mr. Shearer: We have now fully completed our commitments

toyou and you in turn have carried out the obligation you assumed to-
ward us, which was to keep us informed regarding your observances at
the Geneva disarmament conference. Therefore you will please regard
our arrangement at an end.
With best wishes, I remain, very truly yours,
HENRY C. HUNTER.
When he was questioned before the Senate committee, Shearer ad-

mitted that he had no firm contract for $25,000 a year, but that he had
an understanding to that effect:
"Mr. Shearer," Senator Shortridge asked, "did I understand you to say
that that contract was to extend over a period of 10 years at $25,000 a
year?"
"That was my proposition to them."
"Did they accept it?"
"Well, no. What they said was 'Don't worry. You will be taken care
"
of.'
Shearer also testified:
"I would always be a part of the 'big thought' as it were, as they ex-
pressed it, to keep the Navy and the Merchant Marine situation before
the public. I was the only man that had ever given them service, though
they announced that they had paid Ivy Lee $150,000, but they got very
little or nothing out of it."
"But you were to receive $25,000 a year?"

"Yes, sir."
While with the shipbuilders over his pay was still going
his controversy
on, Shearer was working

in Washington with Mr. Wilder on the propa-
ganda for the Jones-White Act, with the 4-day liner project as bait. In
February, 1928, he and Clinton L. Bardo had a forty-five-minute quarrel
at the Hotel Carlton. Bardo, who made a memorandum of the incident for
his fellow shipbuilders, reported that Shearer "began in a raised voice
to tell me that the Fall-Sinclair-Doheny scandal was primarily due to
the failure of the above trio to keep a promise to pay some one on the
list $250,000 as their share in the Teapot Dome scandal." Shearer, Bardo
wrote, then threatened that if the shipbuilders "undertook to throw him
overboard that there would be a new era in scandal which would jar the
nation from its center to its circumference."
Shearer was particularly incensed at Samuel W. Wakeman, of the
Bethlehem company, and, according to Bardo, he threatened "to kill
him shoot him down like any other dog in the street . . . and get the
front pages if necessary to air his grievance." He also threatened to show
up the war activities of Charles M. Schwab, Bardo claimed.
"You did not threaten to kill anybody?" Senator Shortridge asked Mr.
Shearer.
SHIPS FOR SALE 369
"Well, I would not threaten to kill anybody who owed me money,"

Shearer replied. . . .
"I think," said Senator Allen, "there is no more amusing episode in

American than that they should give you
life now in addition to what
"
they have given you, $250,000
"I am worth it," Shearer interrupted.
The shipbuilders had already given Shearer a total of $51,230.

Shearer wrote to C. L. Bardo on February 21, 1928, pointing out that he
had been employed by the shipbuilders "to go out and get more business,"
Washington and Geneva had resulted in orders for
that his activities in
eight new cruisers distributed equally among the three firms he repre-
sented and a large navy building program, to the success of which he felt
he had contributed. He added:
The issue is not whether I am a German, which has been disproved,

or whether I am socially qualified to associate with shipbuilders or some-
thing worse. The issue is whether the American Brown Boveri Electric
Corporation, the Bethlehem Shipbuilding Corporation, and the Newport
News Shipbuilding Co. benefited by my campaign in their interest, for
which my expenses were paid and now acknowledged.
He then pointed out that at the close of the Geneva conference, the Euro-
pean press had announced: "The triumph of the theses of William

Shearer, the American, gave yesterday, the drop of the barrier to the most
formidable marathon of modern times. Tomorrow the race of armaments
will recommence." He
expressed himself as ready to get justice.
During the remainder of 1928 Shearer was still trying to collect money
from the shipbuilders. But he was also giving his spare time to other
activities. During the summer of 1928 he wrote an answer to Dr. Nicholas

Murray Butler's objection to the
Big Navy ideas in Herbert Hoover's
acceptance speech. Shearer's answer to Dr. Butler was sent out by the
Republican Campaign Committee to more than 2,000 editors, and Lau-
rence R. Wilder, shipbuilder, paid the
bills. Then,
according to Shearer,
he was sent to Boston by Senator Moses, Representative Bacon and Mr.
Archer, of the Hoover campaign committee to get publicity for Hoover's
Big Navy idea. His main tack was to denounce the British in order to win
the Irish vote in Boston for Hoover. Shearer also published an article in
the Gaelic American attacking the British and advocating a big navy. He
issued a memorandum in September, 1928, declaring his intention of ex-
posing the sinister influences of the shipbuilders and their co-operation

with certain foreign interests.
But while hinting at what he was going to do to the shipbuilders,
Shearer kept up his efforts to creep back into their employ. In the fall
of 1928 he was seeing F. P. Palen, of the Newport News company, who
seemed still to believe in him more than the others. Mr. Ferguson, presi-
dent of Mr. Palen's company, testified that when Shearer wanted to go
to Washington to work for the company on the new 15-cruiser bill, he
had told him "to keep away from Washington so far as he was con-
cerned." But Mr. Palen, Mr. Ferguson's subordinate, hired Shearer any-
way. Shearer wanted $1,000 a month for this work, and Palen wanted to
pay only $500 a month. "Mr. Shearer allowed as how he afterwards was
employed at a thousand dollars a month; that he had discussed it," Mr.
Ferguson testified. Finally, Mr. Ferguson ordered Mr. Palen to give

Shearer $2,500, get his receipt, "and let's get rid of him." "But he is very
easy to employ," Mr. Ferguson told the Senate committee, "and that is
the explanation of this."
During 1928, Mr. Palen lent Shearer money from time to time and
took his notes for the sums, giving him the money in cash and turning
the notes over to the Newport News Shipbuilding & Dry Dock Company.
He claimed that he had done all of this out of the generosity of his heart,
but he saw to it that his company reimbursed him for his generosity. The
Senators seemed to have their doubts about Mr. Palen's unalloyed gen-
erosity. The first loan Palen made to Shearer was one of $500 on June 25,
1928. Then, on July 5th, Shearer came back again for another $500.
"What was his grievance on that day; or what reasons moved you and
melted your heart that day, on July 5?" Senator Shortridge asked.
"Practically the same thing," said Mr. Palen.
"Oh, Mr. Palen!" Senator Shortridge exclaimed. He then asked what
Shearer's plea was on July 5th, when he came to borrow again.
"Principally," Mr. Palen answered, "that he was still financially dis-

tressed and that he was still working in general for the merchant marine,
SHIPS FOR SALE 371
and so on; he was working in the cause of shipping, and that was some
expense to him."
"Working for you?"
"Well, working yes; I would say working for me to the extent that
it benefited our business." . . .
Shearer came again a month later, on August 2, 1928, and got another
$1,000.
"Did he say in terms, or by inference, that he possessed information

which might be unpleasant to be disclosed?" Senator Shortridge asked.
"Not at all; not at all, to me."
"He did not suggest that perhaps he had information concerning you
or your company which might be distasteful to you to have made public?"
"Not at all; not at all. If he had, our relations would have ceased right
there." . . .
"When was the next money you advanced to him?"

"It was quiet on the west bank of the Hudson until December 28."
On December 28, 1928, Mr. Palen gave Shearer another $1,000. That,
he said, was the first payment on the $6,000 which the Newport News
company had decided to pay Shearer for his hire subsequent to the
Geneva conference, "and to get rid of him." Mr. Palen insisted in answer
to Senator Shortridge's insinuations, that nothing moved him to give
Shearer more money except that he felt that Shearer was entitled to more
because of his work for a large merchant marine, "and, after long dis-
cussion, I finally made a remark that I might go as far as paying him
$500 a month for a year in order that he might get started in something
besides this publicity business." Senator Shortridge wanted to know why
the payments to Shearer were always made in cash.
"Because I thought it would not be quite as public," Mr. Palen

answered.
"You did not want the newspapers, or the public at large, to know
that you were loaning, or giving, money to him?"
"Yes."
"Or paying him for services rendered, or to be rendered?"
"I think that is correct."
"May I suggest, Mr. Chairman," said Senator Allen, "that great men are
often modest about their charities?"
The payments to Shearer went on until March 27, 1929, when Palen gave
him $2,500 and took a final receipt from him. The Newport News com-
pany reimbursed Palen for all of his generous "loans" to Shearer. Shearer
claimed that he was not to repay Palen for his "loans" until the Newport
News company settled Shearer's claims against it for additional com-
pensation. "How would I get any money?" Shearer asked. "I don't know;
I imagine several ways," Senator Shortridge remarked.
At the beginning of 1929, Shearer, who had started a new business,
the Seapower Oil Company, Inc., to deal in marine oils and paints, was
writing the shipbuilders again in the effort to interest them in employing

him as well as giving him contracts for marine oils and paints. In a letter
to C. L. Bardo he mentioned the legislative work necessary to pass the new
cruiser bill and maintain in it a time-limit clause, and he added that he
found it necessary "to release, bit by bit, a British secret document that
has come into my possession." "There is much that I could tell you which
I don't care to write on the evidence in my possession," he added. Then
he asked for some money, which he claimed had been promised to him
by William Flook, president of the American Brown Boveri Electric Cor-
poration. It appeared that Shearer just would not stay "fired," but Mr.
Bardo was also firm in his intention to have nothing further to do with
Shearer. He answered Shearer's letter by pointing out that "the ship-
building and ship repair companies have created an organization for the
purpose of taking care of the requirements of the industry in a commercial
and way." Mr. Bardo added that Mr. Flook had left it up to
legislative
Bardo whether or not to employ Shearer, and that in view of the heavy
expenses of the new organization for "commercial and legislative" re-

quirements, to which his company contributed, he would not require
Mr. Shearer's services.
Then Shearer tried to go over the head of Bardo by writing to Flook.

He felt that there was a misunderstanding, that Mr. Flook had really
hired him and had ordered his secretary, Miss Howe, to give Shearer $250
and had told Shearer: "When you need any more just ask for it; but
SHIPS FOR SALE 373
anything that was big would have to come through the shipbuilders'
organization." Shearer claimed that he had accepted that as "final in-
structions" and had proceeded to carry on his publicity for shipbuilding.
Then Shearer dropped a hint about his "British secret document," which,
he said, was creating a great stir in the newspapers to which he had sent
it."I will appreciate a check as soon as convenient, as I have obligations to
take care of incurred by this last campaign," Mr. Shearer concluded. He

also sent some of his more recent publicity releases under separate cover.
When
Mr. Flook returned from Europe to find Shearer's letter, he
answered it at once and pointed out that he did not see how there could
be any misunderstanding, that he had given Shearer $250 for the specific
purpose of paying his expenses to the American Legion Convention in

Washington, where Shearer had coached Commander McNutt, of the
American Legion, for a speech advocating a big navy. "I told you re-
Mr. Flook wrote, "that I would not authorize any campaign
peatedly,"
of any kind, or any material expenditure, without the full approval of
Mr. Bardo; but that I was willing to advance the two or three hundred
dollars necessary to cover your mere living expenses in Washington for
the few days of the convention there."
To this letter Shearer replied without mentioning money. He told
instead of the pessimistic and dangerous attitude he had found in Wash-
ington. The town was full of "pacifists" and Congress was full of "little
Navy men." He had sent publicity broadcast to Congress and the public,
but it "was not enough to stem the tide." However, "something did
happen."
I became the possessor of a secret British document [Shearer wrote],

so vitaland amazing in its construction that I took it to the Navy De-
partment where, under the high authorities, this document was photo-
graphed. On the evening that a photostat was handed to me I imme-
diately placed it in the hands of a United States Senator, and the press
of this Nation reflected the power of his voice when he turned on them
and called them traitors. You have but to inquire and you will learn
that the speech for the cruisers goes down in the history as the greatest
speech ever made in the United States Senate.

T realize in writing you all this I am acquainting you with some in-
side facts, but my sincere efforts in the interest of national defense destroy
all fear of consequences, and that I was being supported by men who have
the best interests of the Nation at heart is no crime when you consider
millions are contributed to defeat this Nation as a naval power.

I could never understand how anyone interested in national defense
could be sincere and yet oppose me.

You are too intelligent for me to attempt to split hairs with you. You
know the case thoroughly, and so do I, and no one could possibly believe
that I have ever been treated fairly.
The "secret British document" to which Shearer referred so
mysteriously in his letters to the shipbuilders seeking money turned out

to be a brazen fraud. Shearer told the Senate committee investigating his
activities that he had got the document from Judge Summers, of California,
who had formerly been a member of the Department of Justice under
Daugherty. Judge Summers, according to Shearer, had got the document
from a United States Secret Service man named Wheeler, whom Shearer
said he had met at lunch with Judge Summers. The document was sup-
posed to be an account of the activities of Sir William Wiseman as head
of the British Intelligence Service in the United States during the war.
Shearer testified that he took the document over to the Navy Depart-
ment's Intelligence Service in Washington, where it was photographed
and the name of Sir William Wiseman added in black ink. Then, Shearer
testified, he took the original document and some photostats which he
had received from Commander Powell, of Navy Intelligence, to his
Washington hotel. He called Senator James A. Reed on the telephone,
because, Shearer said, "His stand throughouthad always been for national
defense." He
gave Senator Reed a copy of the "secret British document"
and told him how he had got possession of it. Senator Reed also spoke on
the telephone at Shearer's suggestion to Commander Powell and Captain
Johnson, who had made the photostats for Shearer at the Navy Depart-
ment. Then Senator Reed used the "secret British document" in passing
in a speech in the Senate against the Kellogg-Briand peace pact.
Shearer admitted that he had never made any attempt to ascertain
whether his "secret British document" was authentic but had taken the
word of the Navy Intelligence, who had taken his word for its authen-
SHIPS FOR SALE 375
ticity. Then, after the document was referred to by Senator Reed, A. S.

Merrill, a Navy Department expert, reported that the document was
spurious both from internal and external evidence, and that the photo-
stats made at the Navy Department were made from a printed and not
a typewritten document. He branded it as a fraud. Meanwhile, S. K.
RatclifTe, British journalist, identified Shearer's "secret British document"

as thesame thing as a pamphlet called "The Re-Conquest of America,"
which Dr. William J. Maloney, a New York nerve specialist of Irish
birth, had published in the United States in 1919 as a satire on Lord
Northcliffe's
propaganda activities in the United States during the war.
Dr. William J. Maloney was called as a witness before the Senate com-
mittee investigating Shearer and the shipbuilders on January 11, 1930,
some months after Shearer's testimony had been made public. He identified
his pamphlet and Shearer's "secret British document" as one and the
same. He said that he had written the pamphlet as a satire and had cir-
culated it for 5 cents and then for 10 cents in June, 1919.The document
had been sent out in the interests of "The Friends of Irish Freedom" and
was an entirely fictitious satire purporting to come from Sir William
Wiseman to Lloyd George concerning the best way to overthrow the
independence of the United States. Parts of it had appeared in the New

York World; it had also appeared as a newspaper serial in Canadian"
newspapers, and Lincoln Colcord had read it as an amusing skit at a
dinner given to Senator Borah in Washington. Five hundred thousand
copies of the pamphlet had been sent to editors, ministers, publicists and
individuals who wrote for it.
Shearer and his naval officers had not even taken the trouble to have
Dr. Maloney's pamphlet retyped. Senator Allen showed Dr. Maloney
a photostatic copy of Shearer's "secret British document," "so vital and
amazing in its construction," and Dr. Maloney testified: "The only differ-
ence is that there it is made smaller and photostated." Dr. Maloney also
said that he "had practically forgotten the pamphlet existed," until news-
papermen came to him and called his attention to the Shearer secret
document.
"During the years from 1919, or 1921, at the time you wrote this ex-
planation, up until 1928 when this comes to the surface as a photostatic
copy of a secret document, had you heard anything about this pamphlet?"
Senator Allen asked Dr. Maloney.
"No, sir," Dr. Maloney answered.
"It ceased to circulate in 1919?"
"In 1919; yes, sir. With the end of the fight on the League, the purpose
of the pamphlet was finished." . . .
"And then interest in it died?"

"Yes, sir."
"Until it was reinterpreted?"

"Yes, sir."
"It did not occur to you when you wrote this to label it as a satire?"
Senator Allen asked.

"If you label a thing 'satire' the effect of the satire is ruined," Dr.
Maloney answered.
"Have you any future plans for authorship?" Senator Allen asked.
"No, sir, I am sticking to medicine."
Dr. Maloney's pamphlet, which Shearer used in his efforts to induce
shipbuilders to support him and Congressmen to pass legislation, was so

obviously satire that it is difficult to believe that anyone could have been
fooled by it into believing it a secret British document. It may be that
Shearer showed only sentences from it or used excerpts from it in his
press propaganda work, for he wrote one of the shipbuilders that he was
"releasing" it "bit by bit." For instance, Dr. Maloney's pamphlet con-
tained the following passage on the cost of converting an American into
an Englishman:
Tables of cost and efficiency which I submitted to the Foreign Office

on December 1, 1916, showed then that the average duration of the
resistance of Americans to anglicization was in England 37 days, in
America 104 days; that the average percentage of anglicization obtained,

measured by the standard Foreign Office unit, was 53.28; and that the
percentage of failure was 9.31. The cost per converted American was
$31,02, but this figure does not represent actual outlay, as it includes
and court presentations at market price, as well as extravagant
titles
sums charged against us by other departments whose activities supple-

ment ours.
SHIPS FOR SALE 377
The author then goes on to say that by intensive application he was able
to reduce the average time it took to convert an American into an
Eng-
lishman, and that he had succeeded in reducing the time to 14 days in
England; "in America to 29 days, 3 hours, 16 minutes" and that he had
reduced the cost to "$.53 per colonist."
Dr. Maloney adds that during the war:
We common people to spy upon and to denounce

encouraged the
their neighbors;and an orgy of persecution followed which our secret
commission investigated (White Paper on American Atrocities, appendix
15). Some idea of the extent of this persecutory mania may be gathered
from the commission's conclusion that had the war continued the rank
and file of the army soon would have been all incarcerated in military
prisons, and the officers thereafter would have sought to satisfy their
frenzy by the court-martialing of one another.
In suggesting gratitude to various supporters of the anglicization cam-
paign, Dr. Maloney wrote in 1919:
I would especially call attention to the beneficence of Messrs. Insull

and Doheny, who were the generous supporters of the diversion devised
by Messrs. Taft and O'Connor entitled "Ireland Stabbed England in
the Back." These contributions doubtless will be, or have been, appro-
priately rewarded by His Majesty's Government.
Mr. Palen had given Shearer his last $2,500 on behalf of the Newport
News Shipbuilding & Dry Dock Company on March 27, 1929, but Shearer
still would not stay fired. He wrote a long letter that day to Homer L.
Ferguson, president of the Newport News company, pointing out his

past valiant services in behalf of shipbuilding and the crying need for
continuing the good work because of the activities of "pacifists and inter-
nationalists." Nine of the twelve Senators who had opposed the Navy
cruiser bill, Shearer wrote, "are recorded in the Department of Justice
records with past affiliations with the Communist Party." Could it be

that Shearer had been visiting with Harry Daugherty?
But Mr. Ferguson had had enough of Mr. Shearer, and he answered
his letter under date of April 2, 1929:
Mydear Mr. Shearer: Referring to your letter of the 27th ultimo:

have never made any agreement with you, verbal or otherwise, nor
I
have I ever asked you to do anything for me or for this company. Every
time I have seen you it has been as a result of your own insistence, as I
have never sent for you or asked to see you.

Yours very truly,
H. L. FERGUSON.
Mr. Ferguson's letter was technically accurate. He himself had never had
dealings directly with Shearer, but his vice-president, Mr. Palen, had had
many financial dealings with Shearer and had hired him for service with
the knowledge of Mr. Ferguson.
Shearer was on no shipbuilder's payroll, and he was hurt. He had, it
was true, received a total of $51,230 from the shipbuilders between De-
cember, 1926, and March, 1929. But the cost of propagating "sea power"
was heavy, for one had to dress well and entertain newspapermen, naval
officers On April 8, 1929, Daniel F. Cohalen, Shearer's
and Congressmen.
lawyer, wrote to Homer
L. Ferguson, who was then president of the
Council of American Shipbuilders as well as of the Newport News com-
pany, advising him of Shearer's claim against him and his associates for
$257,655 with interest from March 27, 1929, and costs of legal action. In
addition Shearer had threatened to sue his old friend Laurence R. Wilder
for $10,366.63 for work on behalf of the imaginary 4-day liners. Mr.
Wilder had received a lawyer's letter, too, but he replied that Shearer had
no claim on him whatsoever, and he heard nothing further about the
matter. But the other shipbuilders were not so fortunate. Shearer's an-
nouncement of his suit made public his relations with the shipbuilders.
On September 6, 1929, Hoover gave the reporters at his regular
President
press conference a scathing denunciation of the shipbuilders for hiring

Shearer to go to Geneva. Then the Senate passed the resolution intro-
duced by Senator Borah calling for a complete investigation of Shearer's
activities at Geneva by the Senate Committee on Naval Affairs.
In the meantime Shearer had still been

busy at his propaganda work,
and this time the
were being paid by William Randolph Hearst.
bills
Shearer had suggested to Mr. Hearst's representative, T. V. Ranck, in the
spring of 1929, that it would be a good idea for Shearer to organize the
SHIPS FOR SALE 379
patriotic societies of the United States against the World Court move-
ment, and Mr. Hearst had agreed to back the effort financially and with
the aid of his newspapers.
"So I immediately started to send out my bulletins to the patriotic
organizations of the United States," Shearer told the Senate committee,

"and they immediately started sending in their resolutions opposing the
World Court. As would receive them I would hand them to

fast as I
Mr. Ranck, but I would always send in advance to Mr. Ranck the pro-
posed bulletin, and the understanding was that if he did not object,
then I would have it
mimeographed and sent out."
For this work Shearer received $2,000 a month.
"Let me ask you a question, which I think will shorten this," Senator
Allen said. "At what time did your employment with Mr. Hearst close?"
"The minute you called this investigating committee," Shearer replied,
"all my connections, social and otherwise, closed. I found myself walking
the streets talking to myself."
"Did Mr. Hearst dismiss you from his services?"
"Immediately. That is, Colonel Knox dismissed me. Mr. Hearst was
in California. Mr. Knox wrote me a letter that this ended my value as
a writer for the Hearst organization, and that was the end of it." . . .
"Did he pay you for the articles you wrote for him from Geneva?"
"Never."
"Those were just free-will offerings?"
"Always; yes, sir."

"Did the Chicago Tribune pay you for this page article written about
the Geneva conference?"
"I gave that. I never served two masters. When I was
employed by the
shipbuilders I gave free to Mr. Hearst. When I was employed by Mr.
Hearst I gave free to the shipbuilders. I was never employed by two
groups at the same time."
TTTVTTTTVTTTTTTTTTTTTTTTTTTTTTTTTTTTTVTTTTTTTTT
CHAPTER SIX
Monopoly in the Air
.HE PIONEER industry of the world after the war was aviation. From a
successful experiment, aviation had developed into valuable merchandise,

and men became active in the endeavor to create airways throughout the
world. In 1918, the United States government started its first air mail
experiment, which was operated

as a government enterprise. Gradually
of traffic lanes
private operators airplanes developed throughout the
country, managed largely by men who had gained flying experience in
the Army during the war.
In February, 1925, Congress passed an act authorizing the award of
contracts to private companies to carry air mail. Under this act the private
air transport operators were to receive payments not to exceed four-fifths
of 80 per cent of the postage on the letters and parcels they carried, and
the contracts were to be let only after competitive bids were submitted.
This act had to be amended after one year, because it was discovered that
counting the letters in the post offices to determine the amount of money
to be paid air mail operators caused great delay and defeated the very
purpose of air mail, speed. It was then provided that contractors were to
receive not more than $3pound of air mail for each one thousand miles
a
they flew and 30 cents a pound for each additional one hundred miles.
But, as with the pioneer development of the American railroads, it did
380
MONOPOLY IN THE AIR 3m
not take long for pioneer entrepreneurs to cheat. In the case of the airplane,
the essence of the enterprise being speed, the speed with which the
government was cheated was proportionately greater than the speed of

cheating engaged in by the more cumbersome railroad enterprises. Men
were charged with loading their airplanes with lead shot, stove lids, flat-
irons and telephone books, mailed
to themselves, to anybody or to
nobody,
might get more money as air mail pay.
in order that they
Meanwhile, aviation was booming, along with the general business

activity which followed
the after-the-war depression. Bankers, stock-
brokers and railroad executives began to realize that there were huge
air. Then in May, 1927, Charles A.
potential profits in the Lindbergh, one
of the pilots employed by Major William B. Robertson, of St. Louis, to
carry mail and express, flew from New York to Paris alone in one of
Major Robertson's planes, The Spirit of St. Louis. The dramatic and
daring nature of the flight aroused interest throughout the nation in the
commercial possibilities of aviation. Lindbergh with unusual self-restraint
resisted all efforts to make of him a motion picture star, a vaudeville per-
former and an endorser of cigarettes and other products; instead, he allied
himself with bankers, lawyers and railroad executives and devoted himself
to the large-scale development of aviation as a commercial enterprise.
Other spectacular flights added to the American interest in aviation, and
companies and combines began quietly to organize for the exploitation
of the air traffic of the country.
Major William B. Robertson, Lindbergh's backer in his famous flight,

had been one of the pioneer aviation operators, together with his brother
Frank. Major Robertson, like so many of the other pioneers, had learned
to fly in thegovernment's during the war, and after the war
air service
he and his brother organized the Robertson Aircraft Corporation of St.

Louis, Missouri. This company operated a flying school, carried passengers
up in the air for joy rides, rebuilt airplanes and bought and sold surplus
war planes and spare parts. The Robertsons also established an airway
between St. Louis and Chicago, selected airport sites and developed the
passenger, mail and express business in their territory. They had three
pilots at the time, Charles Lindbergh, Phil Love and Freddie Nelson.
Major Robertson raised the money for Lindbergh's flight and aided him
with technical advice.
When Lindbergh returned from Europe, Major Robertson, Lindbergh
and two of their associates, Harry Knight and Major Lamphier, called on
W. W. Atterbury, president of the Pennsylvania Railroad, and suggested
the formation of a transcontinental air line in conjunction with the Penn-
sylvania Railroad. General Atterbury said that at themoment he was

working on an scheme with Colonel Paul Henderson, of the
air transport
National Air Transport. Meanwhile, Major Robertson and his associates

went to see C. M. Keys, a New York stockbroker, who later organized,
in conjunction with the Pennsylvania Railroad, the Transcontinental Air
Transport but Major Robertson was left out of the enterprise. He had
developed aviation, contributed money and technical advice, but the

bankers did not find him necessary for their scheme of things. Lindbergh,
however, they had use for, because of his advertising value primarily and
his technical aid and knowledge as well.
ThePennsylvania Railroad contributed $500,000 of the capital for

Transcontinental Air Transport known as T. A. T. and called, in the
advertisements, the "Lindbergh Line." Lindbergh, besides a position with
the company, received gratis 25,000 shares of stock, which were then
worth $10 a share, and he was advised to sell it soon. D. M. Sheaffer,
chief of passenger transportation of the Pennsylvania Railroad, was a
member A. T., as were: Colonel Henry
of the board of directors of T.
Breckinridge, Colonel Lindbergh's friend and adviser; Charles Hayden,

of Hayden, Stone & Company, who had been so active with his friend
Secretary of War John W. Weeks

in the Harding administration in the
effort to get the Wright-Martin war claims settled; Richard Hoyt, of
Hayden, Stone & Company, Leonard Kennedy of that company, and

William HVanderbilt.
At about the same time, in the spring of 1928, another large aviation
enterprise, Aviation Corporation, was formed. The board of directors con-
sisted of Richard Hoyt, of Hayden, Stone & Company, Leonard Kennedy,
of that company, William H. Vanderbilt, Cornelius Vanderbilt Whitney,
S. Sloan Colt, of the Bankers Trust Company, George Mixter, of Stone
& Webster, Boston bankers, Robert Lehman, of Lehman Brothers, New
York bankers, D. K. E. Bruce, son-in-law of Secretary of the Treasury
Andrew W. Mellon, and R. K. Mellon, brother of Andrew Mellon, Pitts-
MONOPOLY IN THE AIR 383
burgh bankers. Aviation Corporation began its activities by buying up

active aviation companies which had developed pioneer routes.
Meanwhile, the laws governing air mail had been amended again, and
contracts
good for four years were provided. But the air mail operators
wanted longer contracts, and the Kelly amendment, passed in 1928, gave
them the right to surrender their contracts to the Postmaster General
after they had operated to his satisfaction for two years and to receive in
lieu of them route certificates. These route to be good

certificates were
for ten yearsfrom the date the operators had started to fly the mail; the
operators were to adjust the rates of air mail pay every year with the
Postmaster General, with the provision that the rates of pay must never
exceed the original bids of operators for the contracts. The same law
reduced the rate of postage for air mail from 10 cents to 5 cents, and air
mail was encouraged tremendously as a result. Meanwhile, Herbert
Hoover was elected President of the United States. Postmaster General
New, Coolidge's Cabinet officer, carried out the provision of the law
reducing the postage to 5 cents and left the administration of the otter
provisions of the law to his successor, who was to take office on March
4, 1929.
Walter F. Brown, of Toledo, Ohio, had been one of the Ohio group of
Republican politicians for many years. We
have already seen that he
was an active worker for the nomination and election of President
Harding
in 1920, and he had been Har ding's floor manager at the
Chicago con-
vention in that year. Brown was born at Massillon, Ohio, on May 31,
1869. He had been graduated from Harvard in 1892 and thereafter from
the Harvard Law School. Then he practiced law at Toledo with his
father. In 1908 he campaigned for President Taft, which was his first
active political work. In 1912 he had left the regular Republican organ-
ization to follow Theodore Roosevelt into the political desert, but he had
got back into the favor of the regular Republican organization soon there-
after and was a candidate for the nomination of United States Senator
from Ohio in 1920, but was defeated by Frank B. Willis. Brown was,
however, generally recognized as the Republican boss of the city of Toledo.
After the election in 1920, President offered Walter F. Brown
Harding
the appointment of Ambassador to Japan, but he declined it. Instead he
accepted the post of chairman of the Joint Congressional Committee on
Reorganization of the Executive Department of the Government. Its
duty was to submit a plan for the co-ordination of the departments, and
it worked for several years on an efficiency plan -for the national govern-
ment. After Harding's death, President Coolidge asked Brown to con-

tinue his task, and a report was finally submitted in May, 1924. Then
Brown went back to Toledo, and remained there until October, 1927, when
he was appointed Assistant Secretary of Commerce under Herbert Hoover
and became manager of Hoover's boom for the presidential nomination
of 1928. The other Assistant Secretary of Commerce under Hoover was
William P. MacCracken, Jr., who was in charge of the Aeronautics Bureau
of theDepartment of Commerce, which had supervision over the safety
and other regulations of aviation. Just as Daugherty, more than any
other man, had helped to elect Harding President of the United States,
so Brown managed the political details of Hoover's candidacy. After the
election Hoover appointed Brown Postmaster General of the United
States.
WHEN Brown took the office of Postmaster General, which carried with
it the administration of ocean and air mail contracts, the air mail map
of the United States had developed into an extensive collection of con-
nected routes for passenger and mail traffic. Colonel Paul Henderson,
of National Air Transport, and later of United Aircraft &
Transport
Corporation, testified that between 1925 and 1930 lines had
developed
which carried mail on competitive contracts from New York
straight
through to San Francisco, connecting at Chicago. Other lines ran from
Chicago to Dallas, Texas, from Chicago to Minneapolis, St. Paul and
St. Louis, from Chicago to Atlanta, Georgia; from New York, through
Atlanta, to Miami, Florida; from Atlanta to New Orleans, to Houston
and Galveston, Texas; from Fort Worth to Dallas, Texas; from Seattle
to San Francisco; from Salt Lake City to Pasco, Washington; and from
Boston to New
York, connecting with the lines to Chicago, the Middle
West, the Far West, and the South and Southwest. "It would seem to
me," Colonel Henderson testified, "that that was a great deal more than
a few disconnected air lines. They were all connected and made a co-
ordinated air-mail service that was approaching Nation-wide character."
James G. Woolley, who was the vice-president and publicity representa-

tive of Western Air Express, testified that after the inauguration of
President Hoover in March, 1929, Harris Hanshue, an executive of

Western Air Express, returned to California from Washington, D. C.,
"and he was quite worried." "He said at the Gridiron Club dinner he
had been introduced to the new Postmaster General, and Mr. Brown
greeted him with an expression something like this: 'You are one of
"
the fellows I am going to get after.' Shortly after that Postmaster General
Brown delivered an address at Cleveland, in which "he rather pooh-
poohed the idea of air-mail service he was not sympathetic. I don't think
he will deny that. That summer, of course, I set out, naturally, right away
as job to try to convert these people to aviation, to figure out some
my
way we could change his attitude, and several of the other companies
apparently had done the same thing.
"As the result of our efforts," Mr. Woolley continued, "the Postmaster
General flew from Sacramento to Los Angeles in a Boeing plane on his
way home, then took a Western airship as far as Kansas City. I was in
Washington at that time and expecting the arrival of Hanshue from
the West, and when he got in he told me he had been fortunate in getting
the same train from Chicago down here that Mr. Brown was on just
accidentally and Mr. Brown and his wife had enjoyed the flight, and
he had called Mr. Hanshue into his stateroom on the train and told him
his opinion of aviation had changed; that he
felt that modern, multi-
motored ships were the only type of ships to travel the western deserts in,
and he was going to try to do something for the passenger lines and
aviation generally."
In September, 1929, Postmaster General Brown called the air mail
operators to Washington to negotiate with him for the surrender of their

contracts and the issuance instead of route certificates good for ten years,
as provided in the Kelly amendment of 1928. In the middle of October,
Department were abruptly ended,
1929, these conferences at the Post Office
and W.Irving Glover, Brown's Assistant Postmaster General, requested
the air mail operators to work out among themselves formulae for com-
pensation for carrying the mails. Conditions differed on different air

lines, but the Post Office Department was trying to develop a formula
for so that it would not have to negotiate with each one sepa-
all lines,
rately. Mr. Brown had always preferred doing things in a large way to
doing them in a detailed way. It proved impossible, however, to work
out the complicated problems by formulas, and Brown decided that he
needed further legislation from Congress, in order to permit the develop-
ment and alterations of the air map of the country. He issued extensions
of their present contracts to the operators for six months, and meanwhile
appealed to Congress for further authority.

Postmaster General Brown sought legislation which would give him
the authority to put mail on airplanes and fix the rates of compensation
himself with the air mail operators according to the airplane mile flown
by each one. The necessity for competitive bidding hitherto required

would have been eliminated by his plan. Competitive bidding, Brown
told a Congressional committee, was only "a myth" anyway. The postal
laws at the time permitted the Postmaster General to put mail on railroad
trains without the necessity for competitive bidding, but the rates of
compensation for carrying these mails were fixed by the Interstate Com-
merce Commission and not by the Postmaster General.
There was opposition in Congress to granting the Postmaster General
such wide powers, and Congress amended Brown's bill, cutting out his
right to let contracts on consultation without competitive bidding. The

bill as passed in March, 1930, known as the McNary-Watres Act, did,
however, contain this useful section:
The Postmaster General, in establishing air-mail routes under this act,

when in his judgment the public interest will be promoted thereby, may
make any extensions or consolidations of routes which are now or may
hereafter be established.
Lehr Fess, son of Senator Fess, of Ohio, a friend of Postmaster General

Brown's, helped the mail companies to get the McNary-Watres Act

air
passed, according to Congressman Bulwinkle, and he received for that

service a fee of $3,000. Colonel Paul Henderson testified that he paid Lehr
Fess the $3,000 for his services in Washington in connection with air mail
legislation. After his part in these activities was made public in 1933, Lehr
Fess wrote his father a letter, which Senator Fess read into the Congres-
sional Record:
I may be so steeped in the alleged immoralities of the "premisdeal era"

that my conscience is hardened, but I sincerely fail to see anything wrong
in my accepting proper employment in Washington. The matter is not
of sufficient importance to warrant my asking for a hearing, but, of
course, if the committee should request me to appear

I will respond not-
withstanding my personal conviction that nothing

sought or intended is
by the investigators except the opportunity to muckrake in the interest

of destroying the confidence of the people in the sound principles of
government upon which our past progress has been made. The whole
end in the real American tragedy.
outfit are playing a farce that will
It is, however, questionable whether lobbying is not one of the real ele-
ments of the American tragedy.

In addition to the employment of Lehr Fess, and the son of Senator
Smoot, Colonel Henderson also lent $10,000 to Chase Gove, assistant to
W. Irving Glover, assistant to Brown in charge of air mail. Colonel

Henderson testified that he had been an intimate friend of Gove's for four
years, since the time when Colonel Henderson had been Second Assistant
Postmaster General himself, from 1922 to 1925. He also got a job for the
nephew of W. Irving Glover with T. A. T. and tried to get a job for
another son of Senator Smoot's, Harold Smoot, with United Aircraft. On
February 8, 1930, Colonel Henderson wrote to D. M. SheafTer, of T. A. T.:
Dear Dan: ... I would like to be able to tell Glover on Monday that
his nephew is fixed up some place on the western division of T. A. T.,
as per my wire to you of Friday. I think this is extremely important.
Glover will have more to do with the mail subsidy allocations than any
other one man.
When the McNary-Watres Act was finally passed to take effect April
29, 1930, Brown told the air mail operators that "it was not quite what
he wanted, but he thought he could act under it. He wanted to get some
opinions on it, and he would call us back after he got his opinions."
Then, in May, 1930, Postmaster General Brown called the leading
mail operators of the country to a conference in the so-called Gold
air
Room of the Post Office Department, which later became popularly known
as "the spoils conference."
The air line operators, some of whom had contracts with the govern-
ment for carrying mail and some of whom did not, met with the Post-
master General by invitation on May 19, 1930. The invitations were sent
out by telephone through Brown's assistants, and only those large opera-
tors whom Brown wanted in the conference and some smaller operators
who already had mail contracts, were permitted to be present at Post-
master General Brown's private party. Postmaster General Brown deliv-
ered a short talk to the operators. He told them that under the McNary-
Watres Act he had the power to extend existing air mail lines into
territory not then being served by air mail. He wanted the operators
present to consider a plan whereby those extended contracts could be
sublet to companies which did not have mail contracts at the time. Some
of the largest financial combinations which had been formed by bankers,
brokers and railroad executives were not then possessors of mail contracts,
and it was these Mr. Brown had in mind, including the company in which
the family of his Cabinet colleague, Andrew W. Mellon, was financially
interested. Mr. Brown told the operators that he would like to avoid
competitive bidding if possible. The law called for competitive bidding,

but Mr. Brown resembled Secretary Albert B. Fall in one respect: when
he wanted to do a thing he considered wise from a broad point of view,
he did not let the law stand in the way.
In other words, Postmaster General Brown wanted the existing con-

tractors for air mail to have contracts calling for larger areas, provided
they themselves would agree among themselves with his aid and arbi-
tration to farm portions of these out

which did not then enjoy
to lines
the government's bounties. Colonel Paul Henderson, an executive of one
of the leading companies which then had an air mail contract, National
Air Transport, testified later that at the time he heard Brown's speech,
he considered the plan Brown put forward as "so contrary to the spirit
of the law, . that I personally took the thing as a joke and immedi-
. .
ately made application for all the air lines I could think of that might
connect with our line. After a while I learned it was serious."
Colonel Henderson also testified that after the Postmaster General had
finished his opening address, Brown asked several of the leading operators
present for their opinion of his plan. Henderson was the first called on,
and he testified that he replied that the thing was very new to him, but
that the air mail operators had sympathy with those air line operators
who did not have mail contracts, and who were losing money rapidly, and
then he added, "if we had the rights which he had expressed himself as
believing that we had, I felt sure myself and my associates would favor
the plan." "As I made that statement," Colonel Henderson testified, "I
remember this distinctly. When I said, 'if we have the rights that you
have indicated that you believe we have,' I was interrupted by the Post-
master General, and he said, 'I don't say that you have any rights; I say
thatI have the right.' Then I continued my statement as I have told you."
After listening to other opinions of the operators present, some of whom
agreed that competitive bids should be avoided like the plague, Postmaster
General Brown left them to work out a new air mail map for the United
States,under the chairmanship of William P. MacCracken, Jr., who had

been associated with Brown as an Assistant Secretary of Commerce before
Hoover became President, and who was now the Washington lawyer for
the leading air lines. Colonel Henderson, after listening to Brown and
making his short reply, still was doubtful whether the Postmaster General
had the authority he so arrogantly claimed to alter the air map of the
United States by the simple device of adding routes to existent
at his will
routes. When the Postmaster General left the room, Henderson testified
that he moved over into a chair adjoining that of William P. MacCracken,
who had just been chosen chairman of the meeting, and said: "Bill, I
wish that you would adjourn this meeting immediately." "He asked me
why, and I told him I thought it was a great mistake to go on with it
further until we had some more definite information about the legality of
the plan that we were supposed to consider." "What did he say?" Senator
Black asked. "He said that I was crazier than hell, and that he would not
adjourn the meeting."

But Colonel Henderson, who had been Second Assistant Postmaster
General himself under Postmasters General Work and New, and who
realized that the usual legal method of doing business at the Post Office
Department was by competitive bids for contracts, was still worried about
the legality of what he and his fellow air mail operators were doing at
the request of Postmaster General Brown. He testified that he called
Chester W. Cuthel, who was a lawyer representing air lines, into the
corridor, "and told him that I believed this meeting was an improper one
and we should adjourn it at least until we learned something more about
it." Colonel Henderson testified that Mr. Cuthel
replied: "I quite agree
with you; if we were holding this meeting across the street in the Raleigh
Hotel, it would be an improper meeting; but, because we are holding it
at the invitation of a member of the Cabinet and in the office of the Post
Office Department, it is perfectly all right." Colonel Henderson said that

he replied: "Well, Chick, that does not seem common sense to me. I am
not a lawyer, but I do believe if I should happen to go down the street
and tell a policeman I intended to go up in your office and shoot you, I
would be no less guilty of shooting you after I got up there and did it."
That evening Colonel Henderson and some of his air line associates
discussed the propriety of the meeting, and after dinner, at the suggestion
of Colonel Henderson, they called on Judge John Edwards, Assistant
Secretary of the Interior, who was a friend of Colonel Henderson's. They

put the matter up to Judge Edwards, and he gave it as his opinion that
Postmaster General Brown's plan was not workable, and that nothing
"could or would or should come of it." He put the matter succinctly by
pointing out that the tail of a dog could not be construed to be longer than
the dog. Then Colonel Henderson and his associates went back to the
"spoils conference" next day and remained as "interested spectators," as he

put but they also made bids for
it, all the air mail routes they could think
of as within their territory.
Many of the leading air mail operators were opposed to Brown's
extraordinary, extralegal plan, even though some of them would benefit
by it, because it gave some large lines tremendous advantages over others,
and some of the operators could foresee legal trouble. On June 2, 1930,
Colonel L. H. Brittin, of Northwest Airways, wrote to his secretary,
Mrs. R. R. Clark:
Thanks for yours of the 29th. The air-mail contractors are having a
desperate session in Washington. The Postmaster General was not able
to get the necessary legislation in the Watres bill to enable him to grant
air-mail contracts to passenger-carrying lines without competitive bids.

He has made up his mind to do this anyway and has hit upon a plan that
is causing the operators no end of trouble. He has conceived, probably in
iniquity, a plan for three main "transcontinental routes" competitively
operating and several north and south lines as well. To work things out
he called the operators together, handed them this map and instructed
them to settle among themselves, the distribution of these routes. The
operators have been meeting every day for 2 weeks and to date have
arrived nowhere. The Postmaster General meets with them about once
a week, stirs them up a bit and keeps them going.
Other air line operators besides those invited to Postmaster General

Brown's exclusive conference were not welcomed at the sessions where
the air mail map of the United States was being carved up. Thomas H.
McKee, who was connected with the Wedell- Williams Air Service Cor-
which operated a passenger service between New Orleans and
poration,
Fort Worth and Houston, Texas, arrived in Washington on May 15,
1930, four days before the "spoils conference," to petition the Post Office
Department for an official air mail route for his company and to bid on
an air mail contract for that route. He talked first with W. Irving Glover
and submitted a formal petition. Glover told him that the matter would
be given consideration. He tried to see Glover again but was unable to,
and he made several attempts to see Postmaster General Brown, but he

was told by Brown's secretary, Mr. MacPherson, that the Postmaster
General was too busy to see him. Then he heard a rumor that the air mail
contractors were in Washington "attending a very mysterious meeting in
the Post Office Department."
Mr. McKee tried to find out from Brown's secretary about the confer-
ence and to get an invitation to it, but MacPherson said that he knew
nothing about it; he also tried Glover's secretary, who also claimed to
know nothing about the meeting; McKee tried the press, and they knew
nothing about it. Then he telephoned to Brown's secretary, MacPherson,
from his hotel room, "and tried told him I was an important official of
one of the air mail contractors. ... He said the meeting was to be held
in the anteroom of the Postmaster General at 10 o'clock."
"I walked in," Mr. McKee testified, "and laid my brief case on the
table and found 14 or 15 men talking and discussing in an atmosphere of
blue smoke." Then Mr. MacCracken approached Mr. McKee and asked
who he was. He replied that he represented the Wedell-Williams group
and was in Washington to get an air mail contract for his line:
"He said, 'I do not believe that you would be interested in these pro-
ceedings.' He It just happens that I and my associates have been

said,
delegated by the Postmaster General to draw up an entirely new air mail

picture for the Nation'; and he said, 'At the present time I am not fa-
miliar with your activities down in the Gulf section. . . . Where do you
operate?' I told him. So he got out a map, took a pencil and drew a line
from New Orleans to Shreveport and then over to Dallas and Fort
Worth."
Mr. MacCracken then said that he would bear in mind what Mr. McKee
had told him and would have a talk with Postmaster General Brown
about the Wedell-Williams line, and if Brown wanted the conference
to consider that line in its deliberations, McKee would be invited to
appear at the conference. Mr. McKee testified that when he entered the
secret conference as the unbidden bidder, MacCracken spotted him at
once:
"Was there any open discussion when you were there?" Senator Mc-
Carran asked.
"No, sir; heavy silence came over the room." . . .
"Did he ask you any questions as to the financial standing of your

line or its capability of carrying on the business?"
"No, sir; he was hopelessly 100 per cent disinterested."
That afternoon Mr. McKee called at Mr. MacCracken's office, "and

he came outjust a moment and said he had talked to Postmaster General
Brown and General Brown was just shot through with regrets it was not
consideration to our petition specifically at that
just possible to give any
time, but that the matter would be referred through channels through
Glover's office, as I recall it and given earnest consideration. ... I was

rather frozen out, so to speak."
Mr. McKee was also told by Earl Wadsworth, superintendent of air
mail, at the Post Office Department, he testified, that it was the
opinion
of the Post Office Department "that any line, regardless of the provisions
of the Watres law or otherwise, any line that operates on a route less than
700 miles long, is bound to be an uneconomical enterprise and therefore
the Department is not going to be interested in any such group petitioning
for mail." Mr. Wadsworth then added, after McKee's protest against the
"spoils conference"way of doing business, that the reason the small

operatorshad not been invited by the Post Office Department to the con-
ference was "because they are probably not interested. Many are
. . .
operating on a shoe string, and they probably cannot afford to send a

representative."
Mr. McKee then began to see his Congressmen about Mr. Wadsworth's
extraordinary interpretation of the Post Office Department's attitude
towards the law and the independent operator. Congressman Numa
Montet, of Louisiana, wrote to Mr. Earl Wadsworth asking if he had
made such statements to Mr.
McKee, and Mr. Wadsworth did not bother
to answer his letters. McKee went to see Mr. Ernest
Meanwhile, Mr.
Lee Jahncke, Assistant Secretary of the Navy in the Hoover administra-
tion, who also came from New Orleans. After Mr. McKee had told his
story, Secretary Jahncke said that he did not want to go to Brown per-
sonally just at that time, but he suggested that Mr. McKee write Jahncke
a letter outlining the situation, and that he would then forward this
letter to Postmaster General Brown, with a personal note asking for
consideration for the Wedell-Williams line.
Mr. McKee pointed out in his letter that the Postmaster General's
conference to carve up map of the United States among the

the air mail
large operators was unfair and undemocratic, and he added what must
have annoyed the arrogant Postmaster General greatly: "I have been
advised confidentially that there is likely to be a congressional investi-
I hope it may be had."
gation into this situation.
Three days after sending this letter, Mr. McKee received a telephone
call from Secretary Jahncke's secretary asking him to come to his office:
". . . and when I arrived I could see that there was a disturbed at-
mosphere, and I asked what was the matter, and the young lady told me.
She said, 'Your letter was sent to Postmaster General Brown and it was
then sent back by one of his messengers, and he (Brown) phoned the
Secretary (Jahncke) to the effect that my letter was one of the most in-
sulting letters he had ever read, and that unless I sent them an oral
apology that I could have nothing further to do with his office in con-
nection with this petition of the Wedell-Williams group for mail, and,
mark you, all I did was to set forth in a plain, straight-from-the-shoulder
manner what I have related to this committee. . . .
"After received this shocking

I news from Postmaster General Brown,
that I would have to go up there and apologize to him, after the way he
was carrying on, I decided that just violated my sensibilities and I called
Mr. Williams in New Orleans, and, in the meantime, I had sent him a
copy of the letter by airmail, and he had just received it when I got in
touch with him, and he said that no apology was necessary. He said, 'I am
"
flying to Washington tonight and will see you at the Mayflower Hotel.'
Two days later McKee's employer, Williams, went to Postmaster

General Brown's office in the company of Senator Sheppard, of Texas,
and Congressmen Montet, of Louisiana, and Lanham and Sumners, of
Texas. Brown told them that he intended "to do what was right by the
independent operators," but that "it would take a little time to iron the
proposition out." After the conference with the group of Congressmen,
Brown took Mr. Williams aside into his private office. When he came
out, McKee asked his employer what had happened. "Well, it looks
pretty good," Williams replied, "I am going to get a contract."
"Did you get a contract?" Senator Black asked Mr. McKee.

"No, sir." . . .
"What happened to Mr. Williams' line?"

"Mr. Williams' line finally folded up in November, 1931, after he had
made probably the most handsome gesture to the development of the
pioneer aviation industry of any man in the country, with the possible
exception of Erie Halliburton. I think both those men were outstanding
in their contributions to the early pioneer air industry."
After the first conference meetings in the office of Postmaster General

Brown, the air line and air mail operators met among themselves at
Washington hotels and in the Washington law office of William P.
MacCracken, in the effort to distribute the air mail map among themselves
amicably. But they could not agree on the distribution of certain lines,
and they reported back to Postmaster General Brown what they had
accomplished and what they could not agree upon, deciding to abide by
his decisions on various routes. Brown and his assistants received the
report on June 4, 1930, and read it several times. Then W. Irving Glover,
Second Assistant Postmaster General in charge of air mail, returned to
the room where the operators were waiting to hear what Brown thought
He told them that the Post Office Department was some-
of their report.
what disappointed in their report, "inasmuch as they had in effect 'taken
"
all the meat and left the bones.' They then decided to submit a supple-
mental report.
Meanwhile, Postmaster General Brown decided that he ought to submit
United States, Mr. McCarl, the question
to the Comptroller General of the
of whether he had authority to extend existing air mail routes. It was
thought best to do this, for if the Comptroller General should decide later,
after the contracts and extensions were granted, that they were illegal, it
would have been impossible for the air mail contractors to get their pay
from the government. The McNary-Watres Act gave Brown power to
extend existing lines where the public interest was served thereby, but it
was questionable whether the Postmaster General under this provision
had the right to "extend" a line by making the extension of it larger than
the original line, and thus award contracts without the necessity of calling
for competitive bids, which the law required. The Comptroller General
handed down a decision on July 24, 1930, that it was illegal for Brown
to extend the lines as he had planned and make the extensions longer
than the original lines.
"And when Mr. Brown found out he could not let them by extension,"
Senator Black asked Mr. Hinshaw, of Aviation Corporation, "I will ask
you if you did not tell Mr. Woolman that Brown almost had a stroke
of apoplexy when the Comptroller General's decision came out?"
"He probably did," Mr. Hinshaw replied. "When I made the explana-
"
tion that Mr. Brown hoped to do the thing directly by extensions
"He did not want to advertise any of them?"
"I think that was the way he wanted to do it."
Postmaster General Brown also took an active part in the movement

of the larger financial combinations to purchase the active flying services
of the smaller independent companies, and he was active in persuading
the independents to sell their lines to the larger companies. Brown's object
was to form three main transcontinental lines which would cover a
northern route, a central route and a southern route across the country,
with connecting links in other parts of the country. Monopoly and co-
ordination, according to Brown's way of thinking, were efficient, and
independence was a nuisance and had to be squeezed out, no matter

what the original rights of the independents. Brown was insistent on
monopoly, and even granting that his ideas would result in a more effi-
cient service which many not grant the methods

air line operators did
used in forcing companies out of the mail picture were ruthless and
air
improper. An alternative proposition had been put up to Brown, which

provided for two competing passenger lines carrying mail over each im-
portant route, thus giving the protection of good service and proper finan-
cial management. But Brown would not hear of it, for he believed in the
mergers. He had tried to merge the government's

efficacy of large-scale
departments, when he was working for President Harding, but his

ideas were not followed. Now, in the growing air line industry, he was
determined to carry out his monopolistic ideas to the limit.
It was necessary, now that the Comptroller General had decided that
Brown did not have the power to grant huge extensions without com-
petitive bidding, for the Post Office Department to call for bids on the
three great transcontinental routes. But smaller, pioneer air lines were
advised that it would be them in the long run if they did not
better for
bid, and that the larger air lines would "take care of them" by buying
them out. It will be remembered that Secretary Fall had used similar
methods when he told those oil companies which claimed rights in Teapot
Dome that Sinclair would "take care of them."
When Postmaster General Brown applied to Congress for unlimited
power over air mail contracts in March, 1930, he told the Post Office and
Roads Committee:
"I recommend this provision, not because I want any such respon-
Personally I should be glad to have anybody else have it, but

sibility.
because we can think of no other way in which, in the present condition
of the aviation industry and the art of flying, we can save to the United
States the experience of the men who have done the flying for the last
10 years and in no other way protect what we believe to be an equity, if
not a right, of the pioneers who are in this business."
But Mr. Brown's actions in regard to the pioneers of flying were quite
from his words to Congress. In every instance he favored the
different
financial combinations in their efforts to gain control of the growing

aviation industry by processes of stockjobbing, and in many instances his
actions in favor of those combines forced pioneers out of the aviation
business entirely.
Clifford Ball had operated an air line between Cleveland and Pitts-
burgh. Ball attended the "spoils conference" at the Post Office Department
on May 19, 1930. As early as the previous February he had been told by
his attorney, Mr. Orgill, that he would have to sell his line. There was a
charge against Ball that he had sent out mail advertising the air mail
service on his line and had collected air mail pay for it. Almost every
two weeks during the spring of 1930, Ball testified, Pittsburgh Aviation
Industries, in which the Mellons were interested financially, made efforts
tobuy out Clifford Ball. At the time the Mellon company owned nothing
but an impractical airport thirty-five miles outside Pittsburgh. Mr. Ball
met Mr. George Hann, of Pittsburgh Aviation Industries, in the corridor
of Postmaster General Brown's office after the first
meeting of the "spoils
conference":
"I said, 'This is called for air-line

operators and you have no air line.
What you doing here?' And he said, 'We are here to get our share of
are
the air-mail dollar, and we don't propose to be denied.' He said, 'We have
influence with Senator Reed; we have influence with two Cabinet officers,'
"
and he said, 'We will go into the White House if we have to.'
Mr. Ball also received a telephone call from Richard K. Mellon, brother
of Secretary Mellon, who "said he was interested in Pittsburgh Aviation
Industries, and hoped that some arrangements could be made whereby

our organizations could be joined together for our mutual advantage."
Ball's contract for carrying air mail was to expire in two days, and it was
arranged, with the mediation of Postmaster General Brown, that he was

to sell his company to the Pittsburgh company and receive a job with
money for his stock. Brown even suggested how much
the latter as well as
Ball's salary should be $1,000 a month which was the salary he re-
ceived when the merger was finally completed. After Mr. Ball had agreed
to sell out to Pittsburgh Aviation Industries, his company received a
renewal of its air mail contract, which was to be good until May 6, 1936.
Mr. Ball received $137,500 for his stock in his company and $30,000
in salary before he severed all connection with Pittsburgh Aviation In-
The job he received at $1,000 a month was of minor interest
dustries.
and importance compared with the work he had previously done for
aviation in his territory. Senator Austin, Republican member of the air
mail investigating committee, put a question that implied that Mr. Ball
had not received such a hard bargain:
"Yes, Senator, I do think it was a hard bargain," Mr. Ball answered.

"You understand I had inaugurated with practically no capital;
this line
I had devoted from 3 to 4 years without

any salary of any kind to build-
ing it up. I had accumulated considerable prestige, and I had consider-
able pride in this enterprise, and it was taken from me."
Mr. Ball, incomprehensible as it seemed to some minds, was interested

in aviation. Mrs. Ball told Mr. Hainer Hinshaw, who wrote it to Mr.
Hann, of Pittsburgh Aviation Industries:
"What would happen to Cliff? He has given the best part of himself
to building up this line. He would not know what to do with the money
if he got it, and neither of us would be happy unless we were in aviation."
I am of the opinion that Ball is more concerned with what would happen
to him if he were to relinquish control of his company than as to the
price he might get for it.
Other pressure was also used by the officers of Pittsburgh Aviation

Industries to force Ball to sell his company to them, according to Ball's
testimony. He said that Mr. Robbins, of the Pittsburgh company, came

into his office, "and in the presence of employees, said, 'Are you willing
my
to sell your company?' And I said, no, I wasn't. And he said, 'We are
going to report you to the Post Office Department for mailing telephone
books over your line, and we are going to force you to sell,' and that was
said in the presence of my employees." "Had you been sending telephone
books over?" Senator Black asked. "Never," Mr. Ball replied. After Mr.
Ball had obeyed orders and sold his company to the Mellon company,
the Post Office Department agreed to give him the $12,224.25 for carrying
mail which the government had been holding up because of the contro-
versy over the quality of the mail.
"May I ask," Senator Black asked Mr. Ball, "if it is true your route
went into the hands of a company that had never flown a plane over it?"
"That is correct."
"And you were the one that had done the pioneering?"
"That is correct."
"And you did object to selling it out?"
"I did, sir."
Erie P. Halliburton, pioneer aviation manager of the Southwest Air

Fast Express, had been operating a line between Kansas City and St.
Louis, Missouri, and Forth Wonh

and Dallas, Texas. He had offered to
flythe mail between Atlanta, Georgia, and Los Angeles, California, for
70 cents a pound for the first 1,000 miles and 7 cents a pound for each
At the time the Post Office Department was paying as
additional mile.
high pound to carry mail on that route. Mr. Halliburton had

as $3 a
modern planes and was an experienced operator and a pioneer in aviation

in the United States. He was told that he would have to sell out to
American Airways, a subsidiary of Aviation Corporation of Delaware,
the Mellon company, of which Pittsburgh Aviation Industries was also
a subsidiary.
Mr. Halliburton testified that it "was generally understood that all of
the operators had to abide by the wishes of the Postmaster General or
contracts would positively be canceled." W.
Irving Glover, Brown's
assistant, said to Mr. Halliburton: "I will ruin you if it is the last act of
my you have tried to buck

life; this thing all the way through, and you
are not going to do it."
"What reason did they [Brown and Glover] give to you for insisting
you out to the American Airways?" Senator Black asked.

sell
"They did not give me any reason," Mr. Halliburton answered. "They
alleged that I was offering to carry the mail too cheap, using that as an ex-
cuse. Outside of that reason I don't know of any particular reason."
W. G. Skelly, Republican national committeeman from Oklahoma,

who was a stockholder in Mr. Halliburton's air line, telegraphed to
Halliburton on August 4, 1930:
After thorough analysis of the air-mail situation I am firmly convinced

that it would be for best interests of you and your associates in Safeway
to work out consolidation with T. A. T.

W. G. SKELLY.
Mr. Halliburton answered on the same day from the Mayflower Hotel in
Washington:
W. G. Skelly, Skelly Oil Co., Tulsa, Oklahoma.

I merge with, or become connected with, or associated
do not intend to
with T. A. T. who prostituted names of Lindbergh and Earhart to gen-

eral public and then asked the taxpayers to pay for such prostitution. If
you care to sell your stock to T. A. T., I have no objection.

ERLE P. HALLIBURTON.
Finally, Halliburton realized that he would never get a mail contract

from the government he refused the request of Postmaster General
if
Brown that he merge with a large combine, and he agreed to merge with
Aviation Corporation, the holding company in which the Mellons were
interested, which also owned some of the stock of T. A. T. Mr. Halliburton
sold his company, including 11 Ford planes, three Lockheeds, a hangar,
machinery and other assets for $1,400,000. They were worth between
$700,000 and $800,000 he testified. In answer to Senator Black's question,
he could not say whether the gentlemen who bought him out were told
to buy, just as he had been told to sell. But they were glad to buy at a high
price and get a profitable mail contract from the government. Another
pioneer was thus out of the way. Halliburton estimated that if his bid for
carrying the mails had been accepted, the government would have saved
several millions of dollars a year on that one contract alone.
One of the most flagrant examples of the treatment of a pioneer by the
Post Office Department was that of Major William B. Robertson, who had
financed Lindbergh'sflight. Lindbergh was now a part of the large finan-
cialcombine backed by the Pennsylvania Railroad and others, but his
backer and employer was operating an independent air line between St.
Louis and New Orleans, for which he wanted to get a mail contract.
Postmaster General Brown promised Major Robertson that he would give
him a mail contract, Robertson testified. But the company did not get a con-
tract. Then, in 1931, Major Robertson and his brother Frank met a man
named Sacks, whom they had never heard of, but who turned out to be
connected with the Republican Party in Missouri. Mr. Sacks offered to
get the Robertsons a mail contract from Postmaster General Brown in

return for 5 per cent of their profits on the contract. He also suggested
that it would be a good idea for the Robertsons to contribute to the cam-
paign fund for the election to Congress of L. C. Dyer, of Missouri.
William Sacks testified that he was a member of the Republican State
Committee of Missouri, that he had always been active in Republican
politics
in Missouri, and that he had known Harry Daugherty and Jake
Hamon. On May 7, 1931, Mr. Frank Robertson wrote to his brother,
Major William B. Robertson:
Sacks says that the P. M. G. wants the favor of him which we are
confident is votes in the State of Missouri for the next election, as you
know campaign is being lined up for the next election,
the entire and if
Hoover not elected Brown, of course, will not be P. M. G. Sacks is
is
credited with obtaining 48 delegates out of 52 from the State of Missouri

in the last election against Hoover in favor of Lowden, and it seems that
Brown has propositioned Sacks that he would help us and Williams to-
his support to Hoover in the next election,
gether if Sacks would throw
which, of course, seems very logical.
Postmaster General Brown wanted to satisfy two disgruntled pioneers
with one mail contract by combining the Wedell-Williams line with
air
the Robertson line. But the Robertsons refused to deal with Sacks and
pay him a commission, and Postmaster General Brown commented to

Major Robertson that he and his brother "had given Mr. Sacks a cool
reception." Instead of Major Robertson's company receiving a mail con-
tract, the contract was awarded to the large combine, American Airways,
a subsidiary of the Aviation Corporation of Delaware, which the Mellons
were backing financially. This company proceeded to compete with
Robertson's line,and, having a government subsidy in the form of a mail
contract, it was able to put him out of business. He testified that the Post
Office Department paid American Airways $345,000 a year to carry the
mail, which he had offered to carry for $175,000 a year. After three or four
months of trying to compete with the combine, Major Robertson had to
go out of the business and junk his planes. Postmaster General Brown
then told him that he had made a mistake and was sorry and intended to
help Major Robertson establish a line from Tulsa, Oklahoma, to Charles-

ton, via Atlanta and Savannah. Brown, according to Robertson, had offered
to help raise the capital for this line and give it a mail contract. Robertson
spent time and money surveying the line,and then he never received con-
tract or capital.
There were also other instances of pioneer, independent air lines that
were driven out of business because of Postmaster General Brown's favor-
itism towards the large financial combinations owned by men who had
never had anything to do with airplanes, but who knew the stock market
from A. T. & T. toWestern Union. The independents had offered to
carry the mails for much less than the prices awarded by Brown to the
large financial groups. Paul R. Braniff, for example, of the Braniff Air
Lines, who operated a passenger service without a mail contract between
Oklahoma City, Tulsa, and Chicago, St. Louis and Kansas City, testified
that if his company had received 10 cents a mile for carrying mail, "we
would have been rolling in wealth." "You have not been paying $100,000
salaries ormore and bonuses to anybody?" Senator Black asked. "Not
yet,"Mr. Branifl answered. Branifl said that the Post Office Department
paid no attention to his offers to carry the mail at cheap rates, and that he
had even offered to carry the mail for his competitors at half the price
they were getting from the government, and still make a profit.
In addition to forcing small independents into the arms of stockjobbing
monopolies, the Post Office Department under Brown forced large

companies to merge when that was required to Brown had
suit the plans
for three main transcontinental airways. Before Brown had been at all
interested in aviation, Western Air Express was a large operating air line
on the Pacific Coast, with the financial backing of several of Herbert

Hoover's close friends and backers, including Harry Chandler, owner of
the Los Angeles Times, Henry M. Robinson, of the Security First National
Bank, and William May Garland. Western Air Express had built up a
valuable passenger service between Los Angeles and Salt Lake City, and
was the pioneer operator of that service. The company also had a passenger
servicebetween Los Angeles and San Francisco, and was working on a
its services east from Salt Lake
plan to extend City to Chicago and connect
with the railroad trains, offering a combination train and plane service
across the country. Meanwhile, the combination of eastern capital, with
the Mellons and the Pennsylvania Railroad as financial supporters, had
formed Transcontinental Air Transport, "the Lindbergh Line." C. M.
Keys, stockbroker, who was one of the financial organizers of T. A. T.,
invited Western Air Express to merge with T. A. T. and form one large
transcontinental service. Western Air Express, however, wished to keep
its identity and saw great advantages in doing so.
W. Irving Glover, Assistant Postmaster General, wrote to Harris

Hanshue, of Western Air Express, on May 16, 1928, expressing regret that
Western Air Express had not merged with T. A. T. "In expressing to me
his regret," Mr. Hanshue testified, "that we were not in the T. A. T.
picture, Mr. Glover, at the same time warned me that things were moving
pretty fast in the passenger game, and he hoped that we would not be
'squeezed' out of the picture."
Then Herbert Hoover was elected President of the United States and
appointed that astute politician, Walter Brown, who had done so much
to elect him, as his Postmaster General. Meanwhile, Western Air Express
had developed a passenger line from Los Angeles to Texas, via Kansas
City, Missouri. T. A. T. started in June, 1929, its combination airplane
and railway service from New York to Los Angeles. Western Air Express,
in order to compete with the line of the eastern bankers, made arrange-
ments with western railroads to carry passengers by night between
its
Kansas City and Los Angeles. The Western Air Express schedule made
the journey between New York and Los Angeles two hours faster from
coast to coast than its competitor, and also gave passengers five daylight
business hours in Chicago.
Then came Postmaster General Brown's effort to map the air mail lines
of America according to his own ideas and the financial interests of his
friends and political associates. He urged Western Air Express, Mr.

Hanshue merge with T. A. T, with the tacit understanding
testified, to
that this was the only way in which Western Air Express could get mail
contracts which would make it possible for them to stay in business.
Brown suggested the formation of the new Transcontinental & Western

Air by a merger of the two companies. Each company was to receive 47%
per cent of the stock of the new company in return for its assets; the other
5 per cent of the stock was to be sold to the Pittsburgh Aviation Industries,
which was the Mellon company that had bought out by force the pioneer,
Erie P. Halliburton.
Mr. Harris Hanshue, of Western Air Express, did not want to merge
on these terms, for, as he testified, his company, he considered, was capably
and economically organized and T. A. T. was "poorly conceived and
wastefully managed." Besides, Western Air Express had only sold $1,072,-
000 worth of stock, whereas T. A. T. had sold $3,900,000 worth. He and his
vice-president in charge of public relations, James G. Woolley, sat up

until three o'clock in the morning with Brown's friend William P. Mac-
Cracken, air line lawyer, discussing the merger plans.
Woolley testified that he advised Hanshue not to go into the merger

deal and warned him that as a newspaperman he had had experience with
such things, and "told him I thought the whole thing was a pretty bad
mess, and it might be construed as conspiracy." Woolley testified that
MacCracken answered this argument with the statement that "if the
Administration wanted it done that way it would be all right." Woolley
still insisted, however, that Hanshue should fight Postmaster General
Brown on this merger deal: "He said to fight Brown on this thing would
take a million dollars. I said, 'You better spend the million than to give
"
them [T. A. T.] 6 /2 million without
l
a fight.' Mr. Hanshue seemed
convinced by Woolley's arguments, but he said that he would like to
telephone to California. He went into the next room in their hotel suite at
the Carlton Hotel. "I understand," Mr. Woolley testified, "he called Mr.
Chandler or Mr. Garland couldn't get one of them and got the other."
"Who is Mr. Chandler?" Senator Black asked.

"The owner of the Los Angeles Times," Mr. Woolley replied, "who
was one of the principal supporters of Mr. Hoover in the campaign of
1928. Mr. Garland Olympic man, a very wealthy man, a delegate
is the
to the Republican National Convention of 1928. They are both men of
business standing and friends of Mr. Hoover."
When he came back from the telephone, Mr. Hanshue said that the
friend ofMr. Hoover he had talked to had "told him not to do anything
that would embarrass the President." Mr. Woolley also testified that these
wealthy Californians had invested in Western Air Express as a matter of

local pride, and that their investments were an infinitesimal part of their
financial holdings; therefore, they could afford the luxury of not embar-
rassing the President by obeying the merger orders of his close political
associate, Postmaster General Brown.
Mr. Hanshue then came to the conclusion that he could not afford to
oppose Postmaster General Brown's wishes and run his lines for six
months at a loss without a mail contract. He agreed to merge with T. A. T.
and to sell the Western Air Express line from Los Angeles to Dallas,
Texas, at a loss of $600,000 to American Airways, the large eastern com-

bine with Mellon money. Western Air Express and American Airways
could not agree over the price for this line, and so Postmaster General
Brown fixed it for them at $406,000.
The new combination, known as TWA Transcontinental & Western
Air had Mellon company in the
to agree to take over the interest of the
Butler Airport at Pittsburgh, in return for 25,000 shares of the new com-
pany. Meanwhile, the eastern combine had succeeded in forcing Halli-

burton to sell his company to them, as we have seen, and the new TWA
had to pay the bills for this, the price being $1,400,000 for a line which Mr.
Halliburton himself testified was worth between $700,000 and $800,000.
The Pittsburgh company had never flown any airplanes on any schedule
and had merely developed an airport of doubtful value. But they had
money, important connections with the Pennsylvania Railroad, which
was the main financial backer of T. A. T., and with the Republican Party,
of which Postmaster General Brown was a leading member. Neither the
Pennsylvania Railroad nor the Republican Party at this period in Ameri-
can history would have left a Mellon company out of anything in which
it wished to be included.
"Who first suggested to you the Pittsburgh Aviation Industries should

be let in on it?" Senator Black asked Mr. Hanshue.
"Well, the Postmaster General," Mr. Hanshue replied.
When Postmaster General Brown went to California in the summer of
1931, D. M. Sheatfer, an official of both T. A. T. and the Pennsylvania

Railroad, wrote to R. W. Robbins, an official of T. A. T., who went to the
Pacific Coast in order to be there while Brown was there: "Another thing:
You should arrange to furnish Mr. Brown, while in California, a brand
new Lincoln automobile." Perhaps Mr. Sheaffer had in mind at the mo-
ment that Mr. Brown was the Cabinet official who had insisted that the
government pay for a brand-new Lincoln car for him, because the one
provided for his use at the Post Office Department did not fit his high
hat unless he stooped before getting into it.
After all the independents and pioneers who were in the way of Post-
master General Brown's vision of air monopoly had been forced out of
business or into mergers, Brown was ready to call for bids for air mail
contracts on two of his transcontinental routes. He hated to do it, but
there was that pesky report by Comptroller General McCarl which had
declared it would be illegal to award the contracts by making the tail of
the dog longer than the dog itself and farming out the pieces.
Before the advertisements for competitive bids were sent out, it was
deemed best to make it as difficult as possible for anyone to bid whom
the Post Office Department and the combination of air mail operators did
not want to bid on the contracts. James G. Woolley, of Western Air
Express, testified that after a conference at the Postmaster General's office

William P. MacCracken asked him and several other air mail operators
to come to his office.
"Mr. MacCracken told us," Mr. Woolley testified, "the Postmaster Gen-
eral had told him he had to get some provisions that would stop the
possibility of wild-catters coming in,and he suggested that maybe if we
made them fly a thousand miles of night flying for 6 months before maybe
that would stop them. I was getting to be quite a chronic objector at that
time, and they sat down on me pretty hard, and we had three lawyers in
the room, and they were going to put in some other provision a man
that had never flown an air-mail route I think they finally wound up
merely taking in night flying. I was so damned mad that night I could
not sleep. I went out and got drunk."
When the advertisements for bids for the two transcontinental routes
went out from the Post Office
Department in August, 1930, they contained
the arbitrary provision which the McNary-Watres Act of
Congress did
not contain, that to qualify a company must have had at least six months'
experience in night flying over a route at least 250 miles in length. Mr.
Woolley testified:
"What I mean, Senator, is this: To an

operator of air lines, if he wants
to be honest about it, the night operation is no different from the day
operation if your pilots know the route and have got the equipment to fly
with. All of these lines went to night flying with no trouble whatever.
The provision requiring a man to have night flying experience before you
would let him have a mail contiact when you did not know that he was
going to have a night schedule, even, was to my mind quite ridiculous."
And Mr. Earl B. Wadsworth, Brown's superintendent of air mail contract
service, admitted to the Senate committee that when the provision requir-
ing night flying experience was put into the advertisements by the Post
OfficeDepartment, there were no lights on a large number of the routes
and could be no night flying on them. The provision, however, accom-
plished its purpose, and limited the possibility of obtaining contracts to
eleven air mail operators who already had contracts, and to companies
willing to merge with these lines. It disqualified the independent pioneers
in the air transport business.
On August 5, 1930, Erie P. Halliburton wrote a letter to Secretary of
War Patrick J. Hurley, who was a close friend and political associate of
President Hoover's. Halliburton pointed out the unfair requirements in
Brown's advertisements for bids and added that the small air mail com-
panies had been instructed that if
they combined to bid on either of the
two transcontinental routes, which Brown wanted to let to TWA and
Aviation Corporation, the Post Office Department would not issue new
them in exchange for their expiring contracts, and
route certificates to
would be granted no extensions of their mail routes until after
that they
Brown had let the two big transcontinental routes as he wanted them to
be let.
It is generally known in the industry [Mr. Halliburton wrote to Secre-
tary Hurley], that the Post Office Department intends that Western Air
Express and Transcontinental Air Transport are to organize an operat-
ing company for the transportation of mail over the central route from
New York via St. Louis to Los Angeles and that a subsidiary company of
the Aviation Corporation is to be awarded a contract over the southern
route from Atlanta, Ga., via Fort Worth, Dallas, and Los Angeles.
Whythe Transcontinental Air Transport, which prostituted the names

of Lindbergh and Earhart to the general public and then expected the tax-
payers to pay for this prostitution, should be favored by the Postmaster

General is beyond my understanding of all that is just.
If these contracts are awarded, as above outlined, I am quite certain it
cannot help but result in an investigation of the Post Office Department,

and due to the connection of Herbert Hoover, Jr., with the Western Air
Express and the part which they will play in connection with the opera-
tion, I am sure it will result in serious criticism of Mr. Hoover himself,
and for that reason, as well as personal reasons, I am passing this in-
formation on to you for whatever purpose you may care to use it.
With kindest personal regards,
Respectfully,
ERLE P. HALLIBURTON.
In spite of Brown's desires, a combination of smaller air lines, which

was formed in August, 1930, United Avigation Com-
and was called the
pany, dared to present a bid on the transcontinental air mail contract over
route 34, which was being arranged for the Transcontinental & Western
Air combine to get. The United Avigation Company's bid offered to carry
the mail for 64 per cent of the government's postage, and the bid of TWA
was 97 /2 per cent of the postage. The TWA, however, got the contract,
l
and the loss to the government was estimated to be $833,215 for each year
of the ten-year contract, or more than $8,000,000 on the entire contract.
This loss was calculated on the basis of one trip each day, but TWA made
government was
three trips daily, so that the difference in the cost to the
even greater. The bid of the United Avigation Company was thrown out
on the grounds that "this company was really not a company that was
formed for anything except to get the mail contract." That statement
applied equally to all the companies which Postmaster General Brown
had forced to merge in order to get mail contracts.
The United Avigation Company protested the award of the contract to
the high bidder, TWA, but the Post Office Department ignored the protest.
Then it was up to Comptroller General McCarl to decide whether the
award was legal and whether TWA could legally get the money from the
government. TWA
then hired Ernest Smoot, son of Senator Reed Smoot,
who had been secretary to his father for some years, to help Comptroller
General McCarl make up his mind in its favor. Senator Smoot was one o
the most influential Republican Senators, and on October 24, 1930, Mr.
Woolley wrote to Mr. Ernest Smoot:
Dear Ernest: Enclosed is a draft of approximately what we would like
your father to say in a Major General McCarl.

letter to
Not knowing how friendly the relationship between the Senator and
the Comptroller General may be, the form of address and the language
used in this draft are formal. It may well be that you will prefer to redraft
it on the basis of your closer knowledge of their relationship. In sub-
stance, what we would like is for your father to use his very potent in-
fluence with Mr. McCarl to persuade the latter that the award as made
should stand as being in the best interest of the public.
Knowing that you will fulfill this one additional mission for us and
counting upon the continued good will of yourself and your father as
one of our major assets, I am
Yours very truly,
JAMES G. WOOLLEY.
JGW:GM
Will appreciate immediate action Jim.
The enclosed draft for Senator Smoot to send to Comptroller General
McCarl read as follows:
Previously to the awarding of an air-mail contract on the middle trans-

continental route from New York to Los Angeles, I informed myself as
to the responsibility, experience, and proposal of the two bidders for that
contract, and became convinced that, regardless of the fact that they were
the high bidder, the best interests of the Government would be served
by awarding the contract on the joint bid of Transcontinental Air Trans-

port and Western Air Express. Since the award to this company I have
been confirmed in my opinion.
I can assure you that, in my judgment, in view of all the circum-
stances, the Postmaster General should not have taken any action other
than he did. Any alternative he might have taken would either have
seriously impaired development of commercial aviation in America or
committed the Government to an operation in which safety of the mails
and protection and service to the travelling public would not have been
of prime importance.
P.S. Not knowing the Comptroller General's initials nor knowing how
the Senator might address him, I have left this point for you to decide.
Senator Smoot, however, was an old hand at politics. He had reluctantly

and sullenly presided over the Teapot Dome investigating committee for
a time, and he was not so foolish as to take such a distinct stand in favor
of a controversial contract as the above draft would have committed him

to. Instead, he wrote the following letter to Comptroller General McCarl
on December 12, 1930:
My Dear Mr. McCarl: Appreciating the fact that you have numerous
things before you, as we have these days, I hesitate to write you in this
all
matter but I have been asked by certain constituents of mine if it is not

possible to expedite the decision on the Transcontinental-Western Air case
which is before you. If it is possible for you to do so I shall gready
appreciate it.
With kindest personal regards, I remain,
Yours sincerely,
REEU SMOOT.
That same day Mr. Ernest Smoot wrote to Mr. James G. Woolley:
Dear Jim: So that you may keep posted, this is to advise you that I pre-
pared a brief that father and I submitted to Mr. McCarl, asking him to
expedite the consideration of your contract which is before him.
I wired
you and phoned Doc as to the status of this last week. I have
no doubt but what the whole matter will be cleared up for us by the
middle of next week. Jim, this has been an awfully "tough" job.
I have not heard anything further from Frank and I think it is about
time that some definite arrangement be made. I air-mailed you today
copies of the Senate appropriation hearings. No doubt this bill will be

passed the first of next week. Will keep you posted as to progress. Let me
know if Doc is coming East.
With kindest regards.

Yours sincerely,
ERNEST W. SMOOT.
While Mr. Ernest Smoot was working for TWA

on this "tough" job
with the Comptroller General via his father, he was also busy for them
with the appropriations committees of Congress. At the time he was on
the government payroll for $3,325 a year as secretary to his father.
Comptroller General McCarl answered Senator Reed Smoot's letter by

pointing out the importance of the matter for decision by him, since the
bid of TWA was 97 / 2 per cent and that of the United Avigation was 64
l
per cent. He wrote that Postmaster General Brown's acceptance of the
higher bid was predicated on the theory that the specifications called for
at least six months' night flying experience over a route of at least 250 miles
in length. This, McCarl wrote, made it

necessary to get additional facts
from Brown, and that he would render a decision at the earliest possible
moment and send a copy of it to Senator Smoot.
On January 2, 1931, Mr. Ernest Smoot telegraphed his employers:
Have assurance that the whole matter will be setded next week. Stop.
Sorry it couldn't have been a New Year's present. Hope to see you in
about two weeks.
Meanwhile, Comptroller General McCarl had written to Postmaster
General Brown on December 16, 1930:
I feel compelled to state that the stipulation for

night-flying experience
isnot supported by law and in the absence of legislative authority other
than now appears, it is to be interpreted as restrictive of competitive
bidding and contracts hereafter made under such stipulation in specifica-

must be objected to by this office in the perform-
tions inviting proposals,
ance of duty to see that the withdrawal of public money from the
its
Treasury be in the discharge of valid obligations of the United States

only, and if that were the sole deficiency of the low bidder relied upon
by you in accepting the high bid in the instant matter, it would be the
duty of this office to make objection to proceedings had and to withhold
approval of payments from public moneys under the contract made
accordingly.
Apparently Postmaster General Brown was able to convince Comptroller

General McCarl that the lack of night flying experience was not "the sole
deficiency" of the United Avigation Company, the low bidder, for on

January 10, 1931, McCarl rendered a decision in favor of TWA, in view of
Brown. Meanwhile, Harris Hanshue, of
the additional facts submitted by
TWA, had been getting upset. He had been

forced to merge Western Air
Express with T. A. T. and now he was in danger of not getting the

government's money after all. He urged that strong pressure should be
brought on Brown, and also that the matter be brought to the attention
of President Hoover, whose son was a radio engineer in the employ of
Western Air Express, and whose friends were members of the board of
company. Mr. Hanshue felt that the matter of the

directors of that TWA
contract being approved by the Comptroller General should be made a
Cabinet issue. But this was not necessary after Postmaster General Brown
had supplied Comptroller General McCarl with additional information.
On February 2, 1931, Ernest W. Smoot wrote the following letter to
Harris Hanshue, president of Transcontinental & Western Air:
Dear Mr. Hanshue: I am enclosing my bill for specific services you in-
structed me on November 13 to perform in Washington.

Both of these projects, the decision of the Comptroller General of the
United States on the matter of domestic air mail appropriations have now
reached a successful conclusion. You will note in my bill that I have taken
into consideration the $2,500 advance made by James Woolley on De-
cember 17, 1930.
With kind personal regards and best wishes, I am
Yours sincerely,
ERNEST W. SMOOT.
(Enclosure)
Bill
To Transcontinental & Western Air for services rendered under

authorization from Messrs. Hanshue and Cuthell $15,000
Less (advance by James Woolley of 12/17/30) 2,500.
Mr. Smoot testified before the Senate committee investigating the con-
tracts that his other services besides the matter of the decision of the
Comptroller General of the United States consisted of work before con-

gressional committees with reference to appropriations for air mail. He
had, he said, "contacted the Post Office Committee; talked to different
members of the committee with regard to it what they thought about
it; what they thought about the air-mail situation." He said that he had
also talked with his father about the situation and with Senator Warren,
of Wyoming, chairman of the Senate Appropriations Committee.
The officials of TWA thought Mr. Smoot's bill of $15,000 was pretty
stiff for the work done, and they did not pay it. They considered that he
had received enough when he got the original $2,500 which James G.
Woolley had sent him five days after Senator Reed Smoot had written his
letter to Comptroller General McCarl. At one moment Ernest Smoot
thought of suing TWA, and, he testified, he had consulted Colonel Dono-
van, of the Washington law firm of Donovan & Bond, for whom Ernest
Smoot had also done work before government departments, "and he ad-
vised me not to go any further in the matter."

Postmaster General Brown continued to ignore the opinions and rulings
of the Comptroller General, in spite of the tight squeeze by which his
letting of the contract to TWA had been approved. Even after McCarl's
stern opinion of December 16, 1930, that the provision for night flying
experience was illegal, Brown continued to reissue it as a

specification in
the regulations for bidding issued by the Post Office Department on the
following April 13, 1931.
"What was the object of reissuing that order after the Comptroller's
decision, as you did issue it, in 1931?" Senator Black asked Mr. Brown.
"I have no recollection of that matter, Senator," Brown replied, "but of
course the Comptroller General was running the accounting office. I was
doing the best I could to run the Post Office."
Postmaster General Brown had certain resemblances to Louis XIV as

well as to Secretary Albert B. Fall.
Postmaster General Brown also ignored the ruling of the Comptroller
General that he did not have power to let air mail contracts by extending
existing routes. Between May, 1930, when he held his famous "spoils con-
ference" with the air mail operators, and May, 1932, Brown had created
12,095 miles of new air mail routes. Of these 4,500 miles had been created
by competitive bidding, as required by law, and more than 5,000 had been
created by granting extensions of existing lines on Post Office Department
orders, under the loose provision of the McNary-Watres Act which gave
the Postmaster General some power to extend existing lines in the public
interest. No
other contractors but the existing ones had any opportunity
to bid for these new 5,000 miles, and the bids on the other 4,500 miles
were made after the bidders had been in constant consultation with the
Post Office Department and had made efforts, it was said, to find out what
their competitors might bid.
BETWEEN 1930, when Postmaster General Brown called his "spoils con-
ference," and when he went out of office, $78,084,897.09 was paid to
1933,
air line operators for carrying the mails within the United States. The
government paid for more than twice the space actually used to carry the
mails, with the understanding that the difference was in the nature of a
subsidy for aviation development. Much of this money, however, went

into the bank accounts of executives of the air monopolies which Post-
master General Brown had helped to create.
Mr. Frederick B. Rentschler, brother of Gordon Rentschler, president

of the National City Bank, was one of the promoters of the large combine
known as United Aircraft & Transport, which consisted of air lines and
airplane equipment manufacturing companies, including the large Pratt
& Whitney Company, which did much work for the Army and the Navy.
The United Aircraft & Transport, with which Colonel Paul Henderson
was also associated, as a result of mergers, had a profitable mail contract
with the government. Mr. Rentschler owned 1,265 shares of Pratt & Whit-
ney Aircraft Company stock. He had paid 20 cents a share for these, or
a total of $253. In November, 1928, the Pratt & Whitney Company declared
a stock dividend of 79 shares for each share a stockholder owned, which
gave Mr. Rentschler 101,200 shares for his 1,265. Then the Pratt & Whitney
Company became a subsidiary of United Aircraft & Transport Corpora-
tion, and Mr. Rentschler received 219,604 shares of United Aircraft for his
101,200 of Pratt & Whitney. In May, 1929, the original 1,265 shares, which
had been transformed into 219,604, and for which Mr. Rentschler had
paid $253, were worth $35,575,848. Mr. Rentschler sold $9,514,869 worth of
his stock.When he testified before the Senate committee investigating air
mail contracts in January, 1934, he still owned 60,000 shares, which were
then worth an additional $2,100,000.
In addition to this profit from his shares in United Aircraft, Mr. Rentsch-
ler was let in on the ground floor when his brother's National City Bank's
National City Company floated the stock of the Boeing Airplane & Trans-
port Company. Rentschler's profit on this transaction was $92,176.50. Mr.
Rentschler and other executives of the United Aircraft were permitted by
the National City Company to buy Boeing stock at $25 a share when it
was offered to the public at $97 a share. The National City Company itself
made a profit of $5,895,311.39 on United Aircraft stock, which it sold to

an hysterical public stimulated to hysteria by its salesmen and sales adver-
tising.The National City Company also made arrangements to maintain

the price of the stock at a high level while it was selling to the public.
Besides Mr. Rentschler's enormous stock profits out of United Aircraft
and Boeing airplane stocks, others in his company were making huge
profits in the same way. Charles W. Deeds, son of the Colonel Edward
A. Deeds who Justice Charles Evans Hughes had recommended should
be tried by military court-martial for his activities as head of the equipment
division of the United States Air Service during the war, bought 200
shares of Pratt & Whitney stock for 20 cents a share at the time Mr.
Rentschler received his shares at that price. Mr. Deeds was treasurer of
United Aircraft, of which his father was chairman of the executive com-
mittee. The elder Deeds was also associated with the National City Bank.
By and merger, Mr. Deeds's shares were worth $5,624,640

stock dividends
in May, 1929; he had paid $40 for them. By January 16, 1934, when he
testified, Mr. Deeds had sold part of his $40 investment for $1,060,314.90,
and he still had left 15,000 shares worth $450,000. Mr. Deeds was thirty-one
years old in 1934,had never taken any active part in the development of
aviation and had no technical knowledge of it whatsoever.
In addition to the huge presents to themselves of stock and stock divi-
dends, the airplane executives drew enormous and exorbitant salaries and
bonuses from the companies which were subsidized so heavily by Brown's
bounty. Mr. Rentschler, for instance, in 1929 had received in salaries and
bonuses $429,999, according to his own testimony. In 1930 he received from
United Aircraft $243,736 in salaries and bonuses and $2,825.25 in director's
fees. In 1931, a bad depression year, his salary went down to $48,125.30, but
his bonus that year was $96,122.23, making his total for the year $144,247.53.
He also received $2,090 in director's fees that year. In 1932, Mr. Rentschler
did rather though the world was in a very low financial
better, state. He
drew $192,500.61 in salaries and a bonus of $6,650, making his total tak-
ings for that year $199,150.61. He also got $1,470 in director's fees. For the
firstten months of 1933, Mr. Rentschler had received $98,646.06 and $2,330
Between 1927 and 1933, Mr. Rentschler had received
for director's fees.
more than one million and a half dollars from the United Aircraft com-
pany in salaries, bonuses and director's fees.
Mr. Charles W. Deeds and Mr. George J. Mead, vice-president of United
Aircraft, also received large salaries and bonuses. Mr. Mead testified that
in six years he had drawn $499,124.66 out of the company, and he had
made about $7,800,000 from his stock, which had cost him $207. He still
owned $750,000 worth of the stock at the time he testified in January, 1934.
Mr. Deeds had drawn $293,789.88 out of the company in salaries and
bonuses.
"What rate of pay do you pay your pilots?" Senator Austin asked Mr.
Frederick B. Rentschler.
"I cannot answer that question exactly," Mr. Rentschler replied.
"Is it the American Federation of Labor wage scale?"
"I think it is, probably. It must be in line with that, at any rate. As to
pilots, maybe I was not clear in answering your question entirely. I have
some idea and can say the average salaries range anywhere from six or
seven thousand dollars up to ten or twelve thousand dollars a year, which
I think is
probably the maximum." . . .
"Have you had a pilots' strike recently?" asked Senator Black.
"There have been difficulties, yes."
"When was the last strike of your pilots?"
"Well, I think along in the fall of this year."

"The fall of last year you mean?" [1933]
"Yes, it was."
"What were you paying then, do you know?"
"I would not answer that question exacdy."
"As a matter of fact, you don't know much about the salaries' they
pay them at all?"
"I think I do. I mentioned the range within which they fall, and I
think that is correct." . . .
"I have the record of what the Government has paid to the United Air
Lines, for instance, since 1926," Senator Black said, "and I find that it
paid $40,174,412. Now, only a very small part of that went to the pilots,
didn't it?"
"Well, yes. I don't know just the figure off-hand." . . .
"Mr. Rentschler, do you think it is right for the United States Govern-
ment to subsidize any company where the officers draw salaries and
bonuses, either from the subsidized company or any of those with which
it is affiliated and
buys its goods, and the officers draw salaries and
bonuses of three or four hundred thousand dollars? Do you think that
is right?" Senator BLck asked.
"Well, that depends on just what extent the subsidy is."
"Where it is 40 million dollars, for instance?"

"I can't tell you what part of that is a subsidy. Some of it is service
a good part of it."
"There is no question about
that, but, Mr. Rentschler, as a citizen now
and not as an
of the company, if the Government is going to sub-
officer
sidize lines, do you not think that it should see that the Government
gets a square deal on salaries and bonuses and upon purchases of equip-
ment to the line which aids by subsidizing?"
"I think it is right to look into that. Why not?" said Mr. Rentschler.
"Do you not think it should limit that?"
"No; I don't know. I agree it certainly has a right to a full investiga-
tion before conclusions."
"Do you not agree that that has developed that through the company
itself and by its interlocking companies and associates it develops that
one individual draws in a period of 6 years a million and a half dollars
in salaries and bonuses, that the Government ought to limit hereafter
salaries and bonuses if it is going to aid in the operation? Do you think
that is the truth?"
"Yes; I think so." . . .
"Then, if it is true that those companies could have been making this
money so as to pay these large salaries with a subsidy, there isn't any
reason to have a subsidy at all, is there?"
"I can't answer that entirely, but I can answer that the United Aircraft
have made profits in part because it has been a well managed and ap-
parently efficient company, or the things I have just mentioned could not
be true."
"If it had not gotten this $40,000,000, do you believe these salaries
and bonuses could have been paid?"

"I can't answer that exactly."
it had not gotten this $40,000,000, is it
"If your judgment that the
bonuses and salaries amounting to over $400,000 to one man could have
been paid?"
"Possibly not."
"Is it also not true that if it had not been for the subsidies, then stock
could not have gone up from a value of $253 to a value of $35,000,000?"
"Possibly not."
"As a matter of fact, it would not, would it, Mr. Rentschler?"
"I say possibly not."
"That your best judgment, is it not?"
is
"I thinkyou are right."

"That is all, Mr. Rentschler. Thank you. (Witness excused.)"
Chairman Black asked Colonel Paul Henderson, who was associated with
United Air Lines, the subsidiary of United Aircraft:
"Do you believe that it was fair to the people of the United States to
make such mail business that in 1 year a company will make a million
dollars' profit of a $750 investment?"
"There is only one answer to that, sir," Colonel Henderson replied.
"It is no; it is no; of course, not."
BY THE spring of 1931 Postmaster General Brown had arranged the air mail
map of the United States to suit himself and the large air line companies
which he had helped to develop. On July 10, 1931, a meeting of the passen-
ger air lines without mail contracts which operated in that area was held
at Kansas City, Missouri. The independents were of the opinion that only
by a campaign of publicity could they correct the evils which they felt
Postmaster General Brown had created. For six months before their meet-
ing E. W.
Savage, adviser for the Ludington Air Lines, had been engaged
in research on the entire air mail situation and had gathered a mass of
data. Mr. Paul R. Braniff, of the Braniff Air Lines, an independent, wrote
to Mr. H. P. Williams, of the Wedell-Williams line, which had been

frozen out by Brown, concerning Mr. Savage's work: "He has developed
a mass of facts, which, if made might prove very embarrassing to
public,
the present postal administration and most effective in obtaining satisfac-
tion for the independent operators. He has set up an organization, includ-
ing G. P. Putnam, New York publisher, and Captain J. J. Reiley, public-

relations counsel, who handled the details of the Byrd Antarctic Expedition,
which organization offers its services to member lines."
The attempt of the independents to organize their own propaganda

first
service and lobbying service did not accomplish much, but on November
22, 1932, two weeks after Franklin D. Roosevelt had defeated Herbert
Hoover for the Presidency, the independents felt that they had a chance
to be heard, and they organized the "Scheduled Air Transport Operators'
Association." The statements issued by this organization called attention
to the fact that the administration of Postmaster General Brown had
fostered "an absolute trust" and that the stifling of all competition had
resulted. The
big lines, the organization pointed out, could afford to spend
in advertising and traffic promotion twice the revenues the small lines
could possibly receive without mail contracts, and still make four times
the income of the small lines by operating empty ships and carrying
nothing but mail at a lower speed, if they so desired.
"Such a condition," Paul R. BranifT told the House Committee on Post

Offices,"can only result in an absolute monopoly by the chosen few who
are favored by the Post Office Department, and the peculiarity of these
chosen few is few exceptions, been backed by large
that they have, with a
New York banking houses. Issues of their stock were sold to the public
at prices from four to twenty times their present value, and were they
forced to stand on a competitive basis with unsubsidized air lines in the
obtaining of mail contracts, none of them could exist under the present
system of extravagant operation."
Mr. Braniff companies that had offered to carry the

also maintained that
mail for much than the large combines were bought out or given
less
part of a mail contract by the large companies. Mr. E. L. Cord, for in-
stance, had offered to carry the government's mail for 50 per cent of the
price at which it was being carried. Then, suddenly, Braniff claimed,

there was a pilots' strike on Cord's Century Airlines, and afterwards Mr.
Cord, when he was
ready to listen to reason, was permitted to buy an
interest inAmerican Airways, the large eastern combine. "Twenty million
a year subsidy warrants some pretty sharp practices and plenty of politics,"
Mr. Braniff concluded.
The gossip in Washington and in air line circles concerning Postmaster
General Brown's administration of the McNary-Watres Act had been
going on for a long time, and soon after the Democratic administration
came into power, the Senate passed its resolution calling for a special
committee to investigate air mail and ocean mail contracts under the chair-
manship of Senator Hugo L. Black, of Alabama.

In the course of the testimony brought out by the special committee, it
developed that when Postmaster General Brown left office on March 4,
1933, the files concerning air mail and ocean mail contracts had been
emptied out; some of the correspondence had been destroyed, and

Mr. Brown took some of it with him to the Barclay Hotel in New York
City. The files of previous Postmasters General had been stored on the
eighth floor of the Post Office Department.
James Maher, stenographer in the Postmaster General's office during
the administrations of Hays, Work, New, Brown and Farley, testified
that a few days before March 4, 1933, Mr. MacPherson, Brown's secretary,
had instructed him to get out the copies of letters in the twenty-four filing
drawers in the Postmaster General's office and put them on his desk. Mr.
MacPherson then examined the letters sent and received by Brown, and
ordered Maher to see to it himself that those MacPherson had picked out
as useless were burned in the incinerator of the Post Office Building.
"Were those all the files in his office?" Senator Black asked.
"Yes, sir," Mr. Maher replied, "we destroyed everything. The last
couple of days we threw the whole bunch away."
Mr. Maher said that he and Frank Hauser, another stenographer in the
Post Office Department, who were watching the fire of correspondence,
had a conversation about it:
"I just mentioned to Frank in an offhand way," Mr. Maher testified,

"that we should not destroy the files; that someone in the next administra-
tion might want to see them. He agreed with me, but we were ordered
to destroy them and we did so."
"Were there letters or files of any kind that were in the Postmaster
General's you did not destroy?" Senator Black asked.
office that
"We destroyed everything," Mr. Maher replied. "But what he took with
him whatever personal he took I did not look to see what he took out.
I destroyed everything he gave me back."
"How did you take them to the furnace?"
"I carried some down myself and the messengers put the rest on the
trucks."
The files of W. Irving Glover, Brown's assistant in charge of air mail,
were also destroyed, according to the testimony of James J. Doran, an
inspector at the Post Office Department, who made a search for correspond-
ence for the Senate committee. Raymond L. Johns, in charge of the files
in Glover's office, who had worked for Glover for twelve years, testified
with great reluctance that the correspondence in twelve drawers had been
disposed of as waste paper at the order of W. Irving Glover. Four to six
sackfuls were thus destroyed, he testified. After much effort Senator
Black dragged out of Mr. Johns the fact that his former employer, Mr.
Glover, had telephoned him to ask if he had been called to testify before
the Senate committee yet.
"You deny that he told you that that he told you to tell the inspectors
and committee they were personal files and not official files?" Sen-
this
ator Black demanded.

"He did not tell me to tell anybody, but he said, 'these were personal
"
and unofficial files and you know it,' Mr. Johns testified.
When questioned about his previous examination by the inspectors for the
Senate committee, Mr. Johns said "I did not say anything to them, but they
:
said I was the dumbest witness they ever examined. (Laughter.)"

When he finally testified before the Senate committee himself, Walter
F. Brown told a strange tale concerning the disappearance of his files. He
testified that he had told his secretary, Kenneth MacPherson, to go over
all his personal correspondence and pack up for him any letters that might
have "a permanent interest or value to me, and to dispose of the parts he
thought had no permanent interest or value." The personal correspond-

ence to be preserved was packed in a long box, "like a coffin," together
with books, and sent to the Shoreham Hotel in Washington after March
4, 1933, then to the Securities Storage Company in Washington and finally
to the Barclay Hotel in New York, when Brown moved there. The box
of correspondence, Brown said, had reposed in the cellar of the Barclay
Hotel until the Senate investigation of air mail and ocean mail contracts
began to hold its air mail hearings. Brown said that he was so disturbed by
the publicity of the committee hearings that he finally decided to refresh his
memory on some things and looked into the coffin-like box. He and Mrs.
Brown opened the box together in their hotel suite, "and there in one
corner were two tied-up packages or folders, apparently containing cor-
"
respondence, one labeled 'Merchant Marine,' and the other 'Air Mail.'
"Now, then, what did you do with the files?" Senator Austin asked.
"Well, I was terribly have never been so upset,
shocked by the thing. I
I think, in my life, when I saw those things. I had just time to get my
train, and I said to Mrs. Brown, 'These files will have to go back to Mr.
Farley just as quick as I can get them there, and you lock them up where
you know nobody can get at them, and I will come back from Ohio just
as quick as I can get there, and will take them over to Mr. Farley' and
I then went to my train and went on my way."
Mr. Brown testified that he was so disturbed the testimony on the

destruction of Brown's files had been given committee by
to the Senate
James Maher about a week before that he did not sleep that night on
the train, and that instead of going to Cleveland, where he had a board
of directors meeting to attend, he took the train to Chicago to see his former
secretary, Kenneth MacPherson, and have a talk with him about the miss-
ing correspondence which had turned up in Brown's box. From Chicago

Brown said he went to Toledo, where he had some business, and dictated
a letter to Postmaster General Farley to one of his very faithful secretaries
in his law office. He took this letter with him to New York and showed
it
only to Mrs. Brown while he was shaving on the morning of his return
to the Barclay Hotel. Then Brown took the train to Washington, with
the package of correspondence and his letter to Farley in a zipper brief
case.
Brown testified further that Postmaster General Farley "was very cor-
dial," and took the correspondence Brown had brought back and the
letter, which was a detailed account of much the same story that Brown
had told on the witness stand, but with some further implications and
innuendoes. There were, he wrote, three possible theories as to how the
correspondence had got into his personal belongings. The first was care-
lessness: "Inquiries which I have been able to make convinced me that
this theory is altogether improbable," he wrote. "Second, that the official
files were placed in the box above described intentionally by someone of

my personal stafT. No
motive that would appear to the intelligence of a
6-year-old child can be assigned for such an action. There remains only
. . .
one other theory, to wit, that these official files were surreptitiously placed
among my personal papers at the instigation of someone who was engaged
in a conspiracy of character assassination. There is some evidence to sup-
port this theory."

But the only evidence which Mr. Brown offered to support his theory
of "character assassination" would not have appealed to the intelligence
He merely said in his letter that the box had been
of a six-year-old child.
Washington, had been moved to a storage warehouse and

at his hotel in
had then been moved again to his hotel in New York. The implication was
that someone interested in assassinating his character could have slipped
into the cellar of the Shoreham Hotel, the storage warehouse of the Secu-
rities Storage Company in Washington, or the cellar of the Barclay Hotel
in New York, opened the box and slipped the correspondence in, but he
had no evidence that anyone had done so.
Brown also wrote in the letter he brought to Farley that among the cor-
respondence he was returning were some letters from President Hoover,
of no particular importance, which he would like to have back, if Farley
decided that they were not needed in the Department. Brown concluded :
I am delighted to be able to return the official files relating to air mail

and ocean mail unscathed by their fantastic experience in the fiery fur-
nace as were Shadrach and his companions of old.

With personal regards and best wishes for the New Year, I am
Very truly yours,
WALTER F. BROWN.
But the correspondence which Brown returned was only a very small por-
tion of that contained in the twenty-four filing drawers in the Postmaster

General's office, which had found its way to the fiery furnace in the cellar
of the Post Office Department. Brown's folders contained no correspond-

ence concerning his personal and business relations as Postmaster General
with the leading air mail operators.
Brown testified to an interesting scene between himself and the man who
enjoyed the intimate political association with President Franklin D.

Roosevelt which Brown had occupied with President Hoover:
"Did he read the letter in your presence?" Senator Austin asked.

"Oh, yes," Mr. Brown answered.
"What conversation followed?"
"Well, I handed him the letter and he read it and he said, 'What do
you want me Mr. Postmaster General. After you
to do?' I said, 'Nothing,
have thought it over you may think you ought to make me some acknowl-
edgment of the receipt of these letters.' He reached for the button and he
said, 'I will do it now.' He reached to call a stenographer. I said, 'I would
rather you would not. This is a matter of some importance, I think, and
I would rather you would talk it over with your staff and your advisers
before you write me anything.' He said, 'All right.' Then he said, 'You
know, I haven't any sympathy with these political investigations.' And

I said, 'Well, I have always thought you were too
good a sportsman to
hit a fellow below the belt because he happened to belong to the other
party.' And he said, 'I would not hit anybody below the belt.' Then he
went on and told me about some friend of his who was a victim of a
political investigation upstate in New York some years ago and he said,
'That fellow was cleared entirely, but it ruined him. We ran him for
"
office and he got beaten to death.'
"Did he mention the name of the party ?"i Senator McCarran asked.
"I think he did."
"Do you remember what it was?"
"But I can't remember it. It was a case I had never heard about, but
he was very interested in it. Then I said to him, 'Well, I can't under-
stand what this Mr. Postmaster General. The only time that
is all about,
I remember seeing Senator Black was back in
my administration, and he
came to see me with Senator Heflin, and I am sure he was treated with
every courtesy. I don't understand it.' And he made a remark of a per-
sonal nature that I do not feel at liberty to repeat."
"Repeat it," said Senator Black. "You say he said something repeat it."
"I want it repeated," said Senator McCarran.

"After hemade it he asked me not to repeat it," Mr. Brown said.
"The committee calls on you to repeat it now," said Senator McCarran.
"I can't repeat it."
"Do you wish the ladies excluded from the audience?"

"No; it was not obscene at all."
"Then I want to call for it, as a member of the committee," Senator
McCarran insisted.
"Well, Senator, the minute he said it he said, 'I don't want you to
repeat that.' And I said, 'I won't,' and I am not going to unless he gives
his consent."
"Well," said Senator Black, "we will get him up here and give his
consent to you to repeat anything you say he said. Who was there when
the conversation took place?"
"Just the Postmaster General and myself."
The day after ex-Postmaster General Brown testified concerning this
conversation which he had promised not to repeat, Postmaster General
Farley was called before the Senate committee. After other testimony by
Farley concerning air mail contracts, Brown was recalled to the stand, and
the two political manipulators of the rival parties faced each other :
Senator McCarran. Mr. Brown, what was the statement made by Mr.
Farley relative to Senator Black, to which you testified and made refer-
ence in your testimony of yesterday?
Mr. Brown. Mr. Postmaster General, am I at liberty to say any-
thing
Senator McCarran. It is not a question of liberty.
Mr. Brown (continuing). With respect to our conversation on the 19th
of January?
Postmaster General Farley. Am I to answer?
Senator McCarran. Yes.
Postmaster General Farley. Mr. Brown is perfectly at liberty to make
any statement I am supposed to have made.
Mr. Brown. I said to the Postmaster General
Senator McCarran. I am asking you what Mr. Farley stated to you,
not what you stated to him.
Mr. Brown. I am going to connect it so you will understand it.
Senator McCarran. I want you to answer my question.

Mr. Brown. I will state it my way.
Senator McCarran. You will answer the question my way, and then
make the explanation afterward. What was the statement Mr. Farley
made to you relative to Senator Black?
Mr. Brown. Well it had reference

Senator McCarran.What was the statement?
Mr. Brown (continuing). To my request
Senator McCarran. Mr. Brown, will you answer my question, please?
Mr. Brown. Yes, sir; I will; and I will answer it clearly.
Senator McCarran. What was the statement? Make it now, and then
explain it afterward.
Mr. Brown. No; I will answer it my way.
Senator McCarran. You will answer it the way I want it answered.
What was the statement made by General Farley to you relative to
Senator Black and then make your explanation afterward?
Mr. Brown. It is not an explanation. It is just connecting it with my
question.
Senator McCarran. What was the statement made with reference to
Senator Black?
Mr. Brown. I asked him what it was all about, and why Senator Black
was pursuing me, and he said, "He is just a publicity hound" and then
he added, "but don't tell anybody I said so, because I have to get along
with him."
Senator McCarran. Mr. Farley, did you, in substance or effect make
any such statement with reference to Mr. Black?
Postmaster General Farley. Mr. Chairman, I made no such statement.
Senator McCarran. That is all I have to ask.
The Chairman [Senator Blac\]. Is that all of it?
Mr. Brown. Yes; are you finished with me?
The official correspondence of the Post Office Department was not the
only correspondence which was tampered
with as soon as the Senate com-
mittee began to get on the trail of the relations of Brown and the air line
monopolies. Colonel L. H. Brittin, of Northwest Airways, whose offices
were in Washington, was permitted to remove correspondence from the

files of the law office of William P. MacCracken, chairman of the "spoils
conference." Mr. MacCracken testified that this was merely correspondence

which Colonel Brittin had dictated in Mr. MacCracken's office, but there
seemed to be great haste to get correspondence out of Mr. Mac-
this
Cracken's office before the next session of the Senate committee when Mac-
Cracken would have to appear for a second time. On the first occasion he
had declined to submit the files of his clients without their permission,
and he had been instructed to telegraph for such permission. Mr. Mac-
Cracken demanded the privilege of the confidential relationship between
attorney and client, but Senator Black maintained that he deserved no
more privilege than an interior decorator would, for he had acted as
negotiator and chairman of the "spoils conference" and not as an attorney

in court. Mr. MacCracken, however, still refused at the second session to
waive this privilege, and both he and Colonel Brittin were cited for con-
tempt of the Senate, and were arrested. Colonel Brittin served ten days in
but Mr. MacCracken appealed his sentence.
jail,
Gilbert L. Givvin, a representative of Western Air Express, also took

some correspondence out of the MacCracken files after the Senate com-
mittee had subpoenaed them; two inspectors for the Senate committee
w'ere sitting in the offices of MacCracken & Lee all day long, but the
correspondence disappeared anyway. Mr. Givvin took the correspondence,
which he testified was selected by Mr. MacCracken while he looked over
his shoulder, and sent it to Mr. Harris Hanshue's apartment in the Essex
House, New York. But, meanwhile, Mr. Hanshue had read the newspaper
accounts in New York about disappearance of correspondence and con-
tempt of the Senate, and he sent the correspondence extracted on the

grounds that it was personal, back to the Senate committee by Mr. Givvin.
When opened, it proved to contain letters concerning the air mail contracts :
"This says down here," said Senator Black:

"
'The deal for the aero port was barely completed when we were ad-
vised by the P. M. G. that we must sell the Standard Air Line to Aviation
Corporation and combine our Kansas City and San Francisco divisions
"
with T. A. TV
"Do you consider that personal?" Senator Black asked Mr. Givvin.
"Yes," Mr. Givvin replied, "I considered it a personal matter to Mr.

Hanshue."
When Mr. Brown was examined about his relations with the air line
operators concerning air mail contracts, he denied that there had been
any intention to avoid competitive bidding and insisted that every one
of his arbitrary acts had been taken in strict accordance with law, and that
every one of them had been in the public interest as well as in the interest
of fairness to all concerned.
There were some of Mr. Brown's relations with Joseph H. Bagley, which
he was also called upon to explain. Brown had first met Bagley, he said,
when Brown had come to Washington in 1921 after the inauguration of

President Harding, to reorganize the government departments. They got
to be good friends. Bagley was vice-president of the American Bank Note
Company. Both he and Brown lived at the Wardman Park Hotel. On

January30, 1929, after Brown had worked hard to elect Herbert Hoover
President of the United States in the previous November, the stock broker-
age firm of G. M-P. Murphy & Company opened a joint stock trading
account in the names of Joseph H. Bagley and Walter F. Brown. The
account traded in the stock of the American Bank Note Company and
stock of the International Mercantile Marine, which had contracts for mail
with the Post Office Department. The firm of G. M-P. Murphy & Company
was one of the original handlers of the stock of National Aviation Corpora-
tion, and Mr. E. O. McDonald, a partner in Murphy & Company, was
president of the National Aviation Corporation.
Brown testified that Bagley and he had been old friends, that Bagley
had been "a very successful speculator, and he thought he would like
. . .
to help me make some money." Brown said that he was not sure whether
he had ever put up any money for the Bagley-Brown joint trading account,
and that he had no record anywhere of having done so.
Mr. Bagley had a contract with Bruce & Company, which manufactured
a patent block wood flooring, and also with Henry Klein & Company,
which sold fireproof wood for buildings where records were stored and
for steamships. Bagley 's contract with the Bruce company provided that
he was to represent them in the effort to sell their special block flooring
for use in government buildings. He was to receive a commission of \2 l/2
per cent of the price Bruce & Company received for their flooring from
the government. He
wanted 20 per cent, but the company refused to give
him that much, and he also wanted an option on stock in the Bruce
company, which they also declined to give him. Bagley told W. J. Wood,
sales representative of Bruce & Company in Washington, that "his crowd
assumed that he had this option all the time from the start."
Frank E. McMillin, post office inspector, testified before the Senate

committee:
"Were you formerly connected with the Post Office Department?"
Senator Black asked.
"Yes, sir."
"When?"
"I left there on June 30 at half past 4, 1932. (Laughter.)"
"Were you retired?"
"Yes, sir. I was told at 2.15 that I would be through at half past 4 and
I thanked them for giving me that advance notice."
"What were your duties just at the time and before you left there?"
"Iwas superintendent of engineering and research. ... I was post-
office inspector in the field. I was inspector in charge of the Washington
division and later post-office inspector for all the service."
"During that time did you have anything to do with inspecting the
flooring of post offices?"
"Well, I had charge of the plans for the interior part of the Federal
buildings which, of course, included flooring."
"Did you know anything about the flooring of Bruce & Co.?"
"Yes, sir."
"Did you know Mr. Bagley?"

"No, sir."
"What position did you take in connection with limiting the bids to
this particular type of block?"

"Well, I told him [Fourth Assistant Postmaster General] I would not
approve the installation of the Bruce block in the workroom space of
the post offices."
"Why?"
"Well, it was a very fine ballroom floor, about 1 1/32 inches in thick-
ness, and I did not believe that it would hold up where we were dragging
trucks around the floor, and what I call 'a heavy-duty flooring' was
needed. It would be all right for an office or postmaster's room, or some-
thing of that kind."
"What did Mr. Philip say?"
"He told me that it was the orders came from the Postmaster General
to use the flooring."
"Who was the Postmaster General?"
"Walter F. Brown."
"What did you say then?"
"I told him if the Postmaster General ordered it, of course, he could
get it or anything else that he ordered."

"And what did you do then with reference to this particular block?"
"Went ahead and specified it to be installed at different post offices."
Mr. McMillin testified that then he drew up specifications to include
the Bruce block, which would not apply to any other block, as the Bruce
company had a patent on this particular type of flooring. The specifica-
tions for buildings under construction at the time, he testified, were
changed to include the Bruce block and discard other types of wood
flooring. The Bruce block was used in the post office at Louisville, Ken-
tucky, in the new Federal Building at Philadelphia and at Newark, New
Jersey, and in the Parcel Post Building in New York.
Brown testified that he had never told anybody to use the Bruce floor-
ing. "I didhave a very thorough investigation made of the merits of it,"
he added, "and approved the specification that was finally drawn by the
committee." He also said that his friend Bagley had never told him that
he was an agent for the Bruce company and was getting commissions
from it.
Bagley died in November, 1932, and Brown was named executor
of his estateand residuary legatee. Brown testified that Bagley "had al-
ways been interested in wood, interested in it in an aesthetic way he had
beautiful wooden furniture, he had at his apartment a panel from
ceiling to floor, with wood." Bagley was so much interested in wood,

both aesthetically and financially, that he thought it would be a good
idea to sell wood to the United States Government for its "heavy-duty"
flooring and other parts of its post office buildings, and it so happened
that his close friend, Walter Brown, was Postmaster General at the time
and would have to approve the specifications for the buildings; it also
happened that he and his friend Brown had close financial relations.
It was only after Bagley's death, Brown testified, that he learned that
Bagley "had received some payments from, I think, the First National
Bank of Boston in connection with the purchase by the Government of
a post-office site there, and I remember the circumstances." According to
Brown, the circumstances were that two or three sites were under con-
sideration for a post office site in Cambridge, Massachusetts. Brown testi-
fied that as he had lived in Cambridge for six years himself, he knew the
terrain, "and would have approved the site if Mr. Bagley had not been
interested in it. I did not know that his interest was a pecuniary one at
the time." Perhaps Mr, Brown thought that Mr. Bagley's interest was an
aesthetic one, when he talked with Brown about the desirability for a
post office site of the ground

on which the First National Bank of Boston
had a mortgage; Brown also said that "one of the officers of the First
National Bank was an old, old friend of his."
Brown testified that when he was going in the train to Grand Rapids
with the body of his friend Bagley, one of Bagley's friends, Mr. White-
ford, told Brown that Bagley had been trying to get options on sites for
government buildings, "and Mr. Whiteford wanted to know whether

now that Mr. Bagley was gone, any consideration would be given to
them."
"I was very much surprised to find that Mr. Bagley had gone into that
sort of transaction," Brown testified. "I was devoted to him, and still
have every faith in him. The only reason I can think of that he did not
talk to me about it was thatf in the autumn of 1932, when that hap-
pened, I was away a good deal. I was a little interested in the campaign
and was in Ohio quite a bit, and Mr. Bagley never
1
I said anything to
me about it."
Mr. Bagley was also interested in the campaign to re-elect Herbert

Hoover President of the United States, which Walter F. Brown was help-
ing to manage. On September 27, 1932, Mr. Alfred C. Flather, of G. M-P.
Murphy & Company, wrote to Mr. Otis J. Glazebrook, Jr., one of the
partners of the stock brokerage firm:
Dear Otis: I have seen Mr. Bagley and had a very pleasant chat with
him. . . .
As you know, he is very close to the Postmaster General. He tells me

that Mr. Brown says that Ohio is absolutely safe for Hoover, but, as he
puts it, the funny thing is that he says nothing about any other State.
Bagley, I believe, has always been a Republican and has for years had
a pretty close working relationship with several administration officials
when that party has been in power, but I believe he is a little
skeptical
of the outcome in November. He told me he was not letting grass any
grow under his feet, but was lining up two or three friends on the other
side. He further said if he gets any information of a political nature that
he thinks might be helpful to me, he will pass it
along.
After the revelations brought out by the Senate investigation into mail
contracts under the administration of Walter F. Brown, Postmaster Gen-
eral Farley, after consultation with President Roosevelt and Attorney
General Cummings, decided that the air mail contracts had been let in
circumstances that pointed to collusion. Meanwhile the Department of
Justicehad made its own inquiry, and so had the Post Office Department.
On February 9, 1934, Postmaster General Farley issued an order can-
celing the air mail contracts then in existence, under which 90 per cent
all
of the air mail subsidy had gone to the three great air monopolies, United
Aircraft & Transport Corporation, Transcontinental & Western Air, and
Aviation Corporation.
A disastrous experience followed, when the Army carried the air mail
in very bad weather and lost the lives of eleven men. This circumstance
was taken advantage of to the full by the private air mail lines, but in
spite of the criticism of the government forhaving so hastily turned over

a difficult problem to the Army, the air mail contracts remained canceled,
and new bids were called for on a competitive basis. If the government
had not carried the mail during the interim, would have been subjected
it
to criticism because it had stopped a valuable service for a few weeks.

When bids were opened for carrying the air mails in May, 1934, they
proved to be very much lower than the rates paid to the large combines.
Postmaster General Farley calculated that the cost of flying the mails
would be $7,700,238 under the new bids, as compared with the $19,400,264
spent in 1933.
TTTTTTTTTVTTTTTTTTTTTVTTTVTTTTTTTTTTTTTTTTTTTTT
CHAPTER SEVEN
The Pied Pipers of Wall Street
'And it seemed as if a voice

(Sweeter jar than by harp or by psaltery
Is breathed) called out, 'Oh rats, rejoice!
The world is grown to one vast drysaltery!
So munch on, crunch on, ta\e your nuncheon,
BreaJ(jast, supper, dinner, luncheon!'
And just as a bulimy sugar-puncheon,
Already staved, li\e a great sun shone
Glorious scarce an inch before me,
Just as methought it said, 'Come, bore me!'
/ found the Weser rolling o'er me."
A, THE end of the examination of the members of J. P. Morgan &

Company by Committee on Banking and Currency on June 9,
the Senate
1933, Mr. J. P. Morgan submitted on behalf of himself and his partners

what he called "a little essay on the question of inflation and banking
cures, and that sort of thing," which his partner, Mr. Russell C. Leffing-
well, had prepared. "It is quite interesting," Mr. Morgan said modestly,
"and it has a lot of wisdom in it. I would like to have that put on the
record,if we may."
Mr. Morgan was understating; Mr. Leffingwell's document was full of

suggestion and confession concerning the immediate past in American
434
THE PIED PIPERS OF WALL STREET 435
finance, and in importance it ranks far above the more sensational facts
brought out before the committee that, due to the looseness of our income
tax laws, Mr. Morgan and his partners paid no income taxes during 1932,
and that some of the participants in their stock issues at privileged prices
were past and present statesmen.
Mr. Leffingwell's essay began with an historical sketch. He pointed out
what President Wilson had pointed out in his message to Congress of
December 2, 1919, the obvious fact that Europe could not pay the United
States what she owed her as a result of the war and still be prohibited from
selling her products to the United States, or giving them to us in return

United States chose to lend Europe the money with
for debts. Instead, the
which to buy our products and pay the debts she already owed us, clinging
meanwhile to high tariffs to protect local interests. Mr. Leffingwell wrote
of the possibility for a banker or leader in any political or economic field
who saw this ridiculous position clearly, as many of them did:
Perhaps the proper thing for anyone to do who understood this situa-
tion, was just to do nothing; to reject it, to say that the political and
economic set-upleft by the war and treaties of peace was impossible, that
nothing could be done about it. Perhaps a reasonable man would have
followed Rip Van Winkle and taken a long sleep in the Catskills, or at
least with Thoreau would have rejected the system and retired to Walden
Pond.
That is, however, not the way men behave. It is not for them to file a
non possumus, to declare that conditions created by governments, by
their wars and their treaties of peace and their settlements or unsettle-
ments of reparations and war debts are impossible. It is not for them
to say that the burden of debts, public and private, governmental and
intergovernmental, is excessive, and that therefore they refuse to carry on.

No, the man of affairs, the public spirited man, yes, even the far-seeing
man, decides to carry on in spite of these adverse conditions, and knows
he is fighting an uphill fight. He knows, too, that it is better to fight than
just to lie down and quit.
In his analysis Mr. Leffingwell failed to mention an important alternative

for "the man of affairs, the public spirited, yes, even the far-seeing man."
Such men could have chosen to be real leaders instead of leaping joyously
into the stampede of their own followers. Charles E. Mitchell, chairman of
the board of the second largest bank in the world, told the Senate com-
mittee of inquiry on the establishment of a National Economic Council in
1931, concerning American financiers and "Whether they

industrialists:
were led or were leaders is difficult to answer, Mr. Chairman." And Otto
H. Kahn told theCommittee on Banking in 1933: "I think, Senator, that
in 1929, there was a general brainstorm. 'Let him who is without sin first
"
cast the stone.'
While the men of affairs in the boom era had abdicated their positions of
leadership for the sake of huge commissions, large personal bonuses and
big dividends, the institutions which they controlled still dominated
American industry through American finance. It took some time and
exhaustive investigation before Congressional committees and bankruptcy
courts for the people of the United States to realize that their bankers
their all-powerful medicine men knew very little more than they did
themselves, and that many of the bankers were, in common with their
customers, sometimes careless to the point of criminal negligence, and

sometimes ignorant to the point of imbecility. In answer to a question by
Senator Couzens, Mr. George Whitney, of J. P. Morgan & Company,
admitted "It
: is hard to answer why we did things. It is even harder to say
why we didn't."
But one reason why the bankers and the government didn't do certain
things was that there seemed to be money in letting the public have its
fling. All of the bankers were not careless and ignorant; some were merely
predatory, and some lacked courage. Also ignorance and carelessness were
aided and abetted by those in power at the time. If the limited mind of
Calvin Coolidge detected any clouds on the restricted horizon of Andrew
Mellon, it prompted the President to
say nothing about them, and Herbert
Hoover was so eager for continued prosperity that he became obstinate at
any warnings of its

disappearance.
"Well, now, Mr. Whitney," Senator Cameron Morrison asked George

Whitney, "the charge is made that the brokers were doing that and
leading the thought of the country to make money out of it; but the in-
fluence of other peoplewho have the attention and the confidence of the
public boosting things could contribute to that inflation as much as any-
thing the brokers said, could it not?"

"Unquestionably, sir," Mr. Whitney replied. "I believe that those others
you refer to, whoever they may be, have far more influence or have more
standing in their utterances than what
may be said by brokers."
"Yes," said Senator Morrison. "If the President of the United States
should in such a situation make the boosting statements, Secretary of
the Treasury should make and other great leaders
the boosting statements,
of public thought, it would tend to carry that thing on, would it not, just
as much as some broker saying it?"
"Yes." . . .
"About that time the whole country had about reached the state of
mind that they thought poverty was about to be abolished in our country
forever, had they not?"
"Yes, sir. A new era was with us."

"And great public men were
leading the country to think along that
line, were they not, as well as brokers?"
"Yes, sir."
"And the whole public thought the days of hard times

and anything
like povertyhad passed away forever and the high-powered salesman was
being tremendously aided by the high-powered agent of prosperity, was
he not?"
"Yes, sir."
"You gentlemen," said Senator Glass, "are referring to 'a chicken in
every pot'?"
"We did not mention it, Senator," said Senator Morrison, "but we had
it in mind."
As early as 1928, Mr. Benjamin A. Javits, a New York lawyer, had sug-
gested that industry and finance prepare for its debacle by regulating itself
and avoiding disaster. In reply to his interesting proposals he received
enthusiastic generalities from the highest powered salesman in the land,
Charles E. Mitchell, and from the other sirens of false prosperity.
"It created quite a stir," Mr. Javits told Senator La Follette's committee
on an Economic Council in 1931, "but nothing happened, because most
of these men werebusy and most of them were not fully in sympathy
with something that was entirely new. They were altogether too practical,
of necessity. I say this sympathetically, because I realize that the average
business man, or the average big business man, or the average banker, no
matter how much he may think about a lot of things and how much he
may want them, is still tied up very much with what he is

engaged in at
the moment."
What the businessmen and bankers were engaged in so busily at the

moment was revealed by the thorough examination of some of the most
important of them which Ferdinand Pecora conducted for the Senate
Committee on Banking and Currency.
Mr. Javits and his associates went ahead with their plans for an economic
council in 1928, when Herbert Hoover was busy getting himself elected
President of the United States. Part of the Javits plan was to have a
Congress of Industry meet at Washington one or two days after the

inauguration of President Hoover in March, 1929. And he hoped that
the new President would address the meeting. The Congress of Industry
was to consider such subjects as: "Stabilizing prosperity; level peaks and
valleys of employment; progressively increase purchasing power; pro-
gressively increase cultural and leisure time for workers; the field of dis-
tribution and sound prosperity."
But when President Hoover's friends were sounded out, Mr. Javits and
his associates might be better not to ask the President
were told that "it
to address any such conference on the 5th and 6th of March, the day after
he was inaugurated; that he ought to be given an opportunity to get into
office and acquaint himself with what was happening. We were requested
to take the matter up with him at a later date." Prosperity at the moment
was said to be great, though many people knew that it consisted largely
of paper fancies, and Mr. Hoover was, above all, delighted to be President
of the United States and not at all anxious to give croakings to business,
which would denounce, and in denouncing blame him.
it
The Congress of Industry was held, nevertheless, "more or less in a

confidential fashion," as Mr. Javits expressed it. An attempt was made
later to get President Hoover to call a conference to discuss the stabiliza-
tion of prosperity by attacking the major problem of distribution, but

it. There were informal talks at the White
nothing was done about
House, and a was arranged for Mr. Javits and his associates
with
meeting
the of Commerce. "That meeting took place," Mr. Javits testified,
Secretary
"October 29, 1929, just when the break had begun in American industry."
Even so, Mr. Javits suggested that a real conference of all branches of
industry be held at this critical time, but Mr. Hoover preferred to call
instead what was termed a "prosperity conference," in which the leading
industrialists of the nation were to reassure the dazed people that every-
thing was quite all right, in spite of the earthquake in Wall Street, and
that they should go right along the same way they had been going to their
destruction.
Instead of expressing any vigorous opposition to the insane credit ex-
pansion and speculative mania which was overrunning the country, the
bankers were busy building a bridge by loans and credits from America
to Europe, as Mr. Leffingwell expressed it in his essay. The bridge, how-
ever, was constructedloosely and hurriedly of water, with immediate toll
for the building bankers as its motive rather than solid utility as its pur-
pose. In addition to the colossal structure of foreign loans, there was a
huge working day and night in the United States to
securities factory
manufacture people of the world to buy. Merger fol-

securities for the
lowed merger in bewildering and unsound rapidity, and underneath was

a sales foundation rather than one of necessity. And meanwhile the
Pennsylvania and Connecticut industrialists, who had contributed heavily

to the campaign funds of Coolidge and Hoover, were lobbying in Wash-
ington for higher and higher, rates of tariff in order to collect their pound
of flesh at the expense of the rest of the world. Senator Reed Smoot, that
glum follower of financial winds, directed the passage of the high tariff by
Congress, which had been written for it by the lobbyists of special interests,
led by the chief of lobbyists, Joseph R. Grundy.
"You think that the work that you undertook down there, Mr. Grundy,
has been fairly satisfactory as to results?" Senator Walsh asked Mr.
Grundy concerning his activities at the Capitol on the tariff.

"Well, of course," Mr. Grundy answered, "as I said, I don't like to
comment on that until this legislation is completed."
"
"Up to the present time
"There have been a great many things gotten into the bill that will be
very helpful to domestic industry and help carry out the pledge made at
Kansas City by the party that got 23,000,000 votes."
"Yes," said Senator Walsh, "I suppose that is
very close to your heart."
"Very close," said Mr. Grundy. "There is
nothing closer but religion."
Senator Walsh brought out that the Srnoot-Hawley Tariff Act called
for forty-two increases over the high tariff of 1932, eight decreases and
fifteen unrevised schedules.
"That is a fair statement of your work, is it, Mr. Grundy?" Senator

Walsh asked.
"May I say to you, as I did to Senator Caraway, that you flatter me?"
said Mr. Grundy.
Senator Walsh asked Mr. Grundy about his work in raising campaign
funds for the Republican Party from Pennsylvania manufacturers:
"This matter of raising money for campaign purposes was not new to
you at all in 1928?"
"Oh, no; no, sir."
"How long have you been engaged in similar work?"

"Well, I hate to admit my age, but ever since I have been active in
politics."
"Well, we are all quite youthful yet."

thank you for the compliment."
"Well, I
"You can not tell us, then, how long you have been engaged in that
kind of work?"
"No. I have cooperated it is not a thing that you jump into."
"Dating, we will say, back to 1896?"
"Yes."
"And apparently in every campaign that is a part of your work?"
"To help."
"And the rest were quite willing to let you."
"Yes; I hadn't any trouble butting in, as it were."
"Can you give us any idea about the amount of money you have raised
during that time for campaign purposes?"

"I wouldn't want to hazard a guess. All I could, though. I would like
to add that."
It was developed at this investigation into Lobbying and Lobbyists, at

which Mr. Grundy was the star witness, that from Pennsylvania manu-
facturers he had raised $700,000 for Calvin Coolidge's campaign in 1924
and $547,000 for Herbert Hoover's campaign in 1928, as well as $615,000

for theprimary campaign of Governor Fisher in Pennsylvania. Governor
Fisher reciprocated by appointing Joseph R. Grundy to the vacancy in
the United States Senate from Pennsylvania after the Senate committee
finished investigating him.
While foreign and domestic securities were being made by wholesale,
created out of mergers and sold in huge doses to the public, tariffs were
raised higher and higher. Neither Calvin Coolidge nor Herbert Hoover,
nor the astute bankers wished to rock the boat, and neither did they
desire to steer it, preferring that the winds of popular fervor should do
that for them. And in order to keep up prices and wages to an artificial
level,cheap money was permitted to flow through the land via the Federal
Reserve System. "The cheap-money policy of the last half of 1927," wrote
Russell C. Leffingwell, "the indecisive policy of 1928, and the board's
veto of a dear-money policy in the first half of 1929 these are the causes
of the great superinflation of that period and of all the disastrous conse-
quences." And he added: "When cheap credit is created at the central
reservoir, it is the central reservoir which is

responsible for the conse-
quences, and not the people who use it." The Hoover administration and
its Federal Reserve Board acted like a Department of Water
Supply which
opened its dams and blamed the people for bathing in a flood.
One reason for the lack of leadership on the part of the government's
Federal Reserve Board was that during the boom and the crash the board
was dominated by the metropolitan bankers, whose policy was to en-
courage the entire country to speculate in securities which they them-

selves issued. In March, 1929, the Federal Reserve Board did make a
feeble attempt to halt the speculative mania by issuing a public warning

against the great inflation of credit as represented by loans to brokers,
who in turn lent the money to their customers to buy more stocks and
thus created inflated prices for them. In an effort to stop the wild con-
struction of this insubstantial pyramid, the Federal Reserve Board raised
its rediscount rate in March, 1929, making it more expensive for the
banks borrow Federal Reserve money. Then Charles E. Mitchell, of
to
the National City Bank, "told the Federal Reserve Board to go to hell,"
as Senator Glass put it, and threw $25,000,000 of National City Bank
money into the call money market. If the government would not lend the
speculators money, Mr. Mitchell did not mind a bit using his depositors'
money for that purpose.
"And that was regarded as a flaunt on the warning sounded by the

Federal Reserve Board?" Mr. Pecora asked Mr. Mitchell.
"Itwas regarded as that in certain quarters; yes," Mr. Mitchell replied.
"In certain responsible quarters?"
"Yes, sir."
"In other words, at the time when the Federal Reserve Board was seek-
ing to apply the brakes to this inflationary process the National City
Bank was nullifying that to the extent that it threw this $25,000,000 into
the call-loan money market."

"That I deny, Mr. Pecora."
Mr. Mitchell maintained that his action was motivated by the desire to
avoid a money panic, and to aid honest borrowers who needed money to
meet their contracts overnight. "I do not believe that any man who has it
within his power to stop a money panic is going to take the responsibility
of seeing the money panic develop," Mr. Mitchell told the Senate com-
mittee. But the Senators wanted to know whether the investing public
would not have been saved many millions of dollars between March and
October, 1929, ifa money stringency had been allowed to develop in
March without the interference of Mr. Mitchell.
"The banker," said Mr. Mitchell, "could not see a panic occurring be-
cause of a money squeeze that was minor in its character. Security prices
were high, speculators and investors everywhere were borrowing more
money than they should; that was a fact that we all appreciated and
that we were trying to preach against and educate the public in regard
to."
"And the way you did it was to lend them more money," Senator
Brookhart commented. "That is what it means."
It also meant March, 1929, there had been more expensive money,
that, if in
the National CityBank and its securities-selling affiliate, the National
City Company, would have found themselves in financial difficulties, be-
cause of the reckless way in which they had handled both their banking
and their investment business.
The people of the world in that regrettable period [wrote Mr. Leffing-
well] were like marionettes dancing on an invisible wire, subtly influ-
enced by the excessive volume of cheap money. Irresistibly, farmers, mer-

chants, business men, and bankers responded to it, unreasoningly as they
would to a drug. Equally and instantly, they responded to the use of
dear money as a curative when at last, too late, it was employed in
August, 1929.
In addition to the fact that the Federal Reserve Board and the large
banking institutions were making money too cheap and thereby encourag-
ing use
its for speculation instead of growth, Mr. Pecora brought out
another important aspect of the picture. During 1929 many of the largest
corporations of the country were pouring millions of dollars daily into the
money market to be used by the brokers to lend to their customers so
that these customersmight continue to speculate in the securities of these
large corporations and others. On one day in 1929, for instance, the
Bethlehem Steel Corporation lent the brokers $157,450,000 and on one day
in that year the Standard Oil Company of New Jersey lent $97,824,000 to
brokers. These sums of money came from the proceeds of securities which
these companies had sold to the public in some instances and also from
their surplus earnings, undistributed dividends and from moneys which
the companies had on hand for operating and construction expenses. When
money was bringing as high as 15 per cent interest, the temptation was
great topour it into the market, no matter what it was used for. The
Standard Oil Company of New Jersey, for instance, received $4,945,217.65
in interest on its call money during 1929. Such loans were also made in
huge amounts by General Motors Corporation, Electric Bond & Share

Company, Cities Service Company, Sinclair Consolidated Oil Corporation,
Pan-American Petroleum & Transport Company, Radio Corporation of
America and United Gas Improvement Company.
Such loans were known in financial circles as "bootleg loans," and they
created a dangerous body of money with which the public was speculat-
ing in the securities of corporations and thus raising the prices of those
securities with the money poured out by the companies themselves. In
money to lend to speculators, some companies even floated
order to get the
borrowing money from the public which the companies did

securities,
not need in order to lend it to the public which did not need it, and thus
created exaggerated prices. And yet some people have been known to laugh
at the South Sea Islanders who thought that they could live by taking in
each other's washing!
Mr. Leffingwell gave the following reason for the evident lack of
controland of leadership during the boom years:
The growth of corporate enterprise has been drying up individual in-

dependence and initiative, drying up the life of the big town and the
small town, and the hamlet. We are becoming a nation of hired men,
hired by great aggregations of capital, theoretically controlled by absentee
stockholders, who are however so numerous and whose individual inter-

est is generally so small that their control is inarticulate and difficult to
express. This corporate growth in large measure was inevitable and no

doubt desirable. To attempt to reverse it would be like turning back the
hands of the clock.
Mr. Leffingwell concludes his essay for Congress with this paragraph:
Yes, we have made mistakes, but were we more mistaken than are
those prophets of evil, those defeatists, who accept the present level of
employment, of prices, of commodities and securities, as final or look for
even a lower level ahead? Were we after all wrong in our judgment that
it would be possible to build a new and better world on the ruins left by
the war? think not. We do not think our hopes and plans were fool-
We
ish or thoughdess or ill considered. We hope that the constructive plans
for the Administration will lead us out of the deflation, and, by wise
monetary management, by lowering trade barriers and by reducing arma-

ments, will justify our hopes rather than the fears of the defeatists.
In his peroration Mr. Leffingwell begged the question. The alternative

was not prophecy of evil, but controlled econ-
to uncontrolled speculation
omy on the part of statesmen who were not keeping their ears so close
to the source of campaign funds. So long as special interests are permitted
to profit by selling armaments, managing money for personal profit at
social and keeping up trade barriers for the purposes of personal

expense,
privilege, armaments will never be reduced, monetary management be-

come wise or trade barriers lowered.
DURING the era which Mr. Leffingwell called "that regrettable period,"
peculiar efforts were made to make the people of the world buy those
securities which the issuing bankers and borrowing brokers had for sale.
There was, for instance, Mr. David M. Lion, publicity agent de luxe
for the stockbrokers. The brokers gave Mr. Lion options on stocks in
return for publicity work to keep those stocks in the public mind. Lion
did his work by means of newspaper articles, his own magazine, and radio
talks. For his newspaper publicity he hired reporters and writers to get
his boosting articles space on the financial pages of the newspapers, and for
his radio publicity he hired a man named William J. McMahon. Mr.
McMahon was always introduced over the radio when he talked once
a week from the spring of 1928 until the end of 1929, as president of the
"McMahon Institute of Financial Research."
"Which was just Mr. McMahon?" William A. Gray, counsel to the

Senate Committee on Banking asked Mr. Lion.
"He was the president of the institute," Mr. Lion answered.
"I mean to say that there wasn't any institution known as the Mc-
Mahon Institute of Financial Research. It was only a name. That is all
that it was, wasn't it?"

"It was incorporated," Mr. Lion said. . . .
"He was introduced as an economist of some note, I suppose, when he

talked over the radio, wasn't he?"
"He was introduced as an economist. I don't know about the note."
"Each of his talks was devoted to a particular stock, wasn't it?"
"Yes, sir."
"And he was a salaried man on your staff for that purpose, wasn't he?"
"Yes, sir."
"How much did you pay him?"
"I paid him high as $250 a week."
as
"How long did he talk? Was it a 15-minute talk?"

"Yes; he rarely talked longer than 15 minutes."
Mr. Gray asked Mr. Lion what other methods of publicity he had used
during the boom years to boost stocks:
"I employed newspapers," Mr. Lion answered.

"You mean writers, I suppose?"
"I don't know what they were. I would give them a copy of an article
and sometimes it was in the paper and sometimes it wasn't."

"Did you give them anything else besides an article?" Senator Couzens
asked.
"Yes."
"What did you give them besides an article?"
"Sometimes I gave them calls."
"You mean by that options on certain stocks?"

"Yes."
"Did you give them cash?"
"Sometimes."
it depended upon who the writer was or the publication that he
"But
was employed by? Was that how you regulated the amount you gave
him?"
"Yes, sir."
"So that the committee may understand the extent of your work, Mr.
Lion, how many such operations would you have on hand at one par-
ticular time?" Mr. Gray asked.
"I had over 30 at one time." . . .
"And by whom would you be employed?"

"By pool operators." . . .
"Also by individual traders?"

"Yes."
"And also by pool operators who were members of brokerage firms
and were operating pools for their own houses at the time; isn't that
correct?"
"Yes, sir."
Among those whom Mr. Lion worked for was Ruloff Cutten, of E. F.
Hutton & Company, who was operating a pool in Kolster Radio stock.
Mr. Lion received an option on 15,000 shares of that stock for his work;
he put up no money and realized $40,000 on this deal, he testified. When
asked for his profit on his transactions, Mr. Lion said:
"I would say my personal profit was a half a million dollars."
"You mean after taking your expenses off?" Mr. Gray asked.
"No, just profit."
"Lion," said Mr. Gray, "didn't you tell me the other day that you made
between a million and two million dollars?"
"I said I did not say that I made $2,000,000, Mr. Gray. . . . Yes; but
there were expenses there that I couldn't call my profits."
He worked for a pool in Sinclair Consolidated Oil stock and received

also
work from Hayden, Stone & Company, Eastman, Dillon &

options for his
Company, Hirsh Lilienthal & Company, and others.
In Chicago, Halsey, Stuart & Company, who issued huge quantities of
securities for Samuel sponsored a radio program by "Old Coun-
Insull,
selor," who told the folks at the fireside about their investments. The
National Broadcasting Company selected the name "Old Counselor," who
was, in the flesh, Professor Nelson, of the University of Chicago, who
received $50 a week for the use of his name and his delivery.
"Is he still at the university?" Senator Reynolds asked Mr. Harold L.

Stuart, of Halsey, Stuart & Company.
"I think so," Mr. Stuart replied. "Of course, everything he delivered
was written for him. He was simply the deliverer of it."
"Who wrote it?"

"It was written in our office."
Upon the initiation of the "Old Counselor" program over the National
Broadcasting Company's network, Congressman Louis T. McFadden, of

Pennsylvania, then chairman of the Banking Committee of the House of
Representatives, delivered the introductory talk at the solicitation
of Mr.
Harold Stuart, Mr. Stuart testified.
Congressman La Guardia presented before the Senate Committee on

Banking evidence to show that A. Newton Plummer, a public relations
counsel and head of the so-called Institute of Economic Research, a pub-
licity organization,
was paid to have stories placed in the newspapers
boosting stocks at the time when pools and syndicates were eager to have
those stocks purchased by the public at the high prices the pools and syndi-
cateswere creating for them. Mr. La Guardia presented evidence that
payments by check had been made to financial writers on the Wall Street
Journal, the New York Times and the New York Herald Tribune. Mr.
Plummer had paid out $286,279 for publicity on stocks.
While the brokers and pool operators were hiring press agents to pur-
chase newspaper writers and radio artists for the boosting of their wares,
the larger banking houses were employing more dignified means of gain-
ing influence for their issues of securities and purchasing the goodwill
of important personages. J. P. Morgan & Company and Kuhn, Loeb &
Company had what the newspapers dubbed "preferred lists." These lists
included the names of politicians, public officials, editors, lawyers, officers

and directors of banks, trust companies, insurance companies, railroads
and industrial corporations. There were rumors that King George of
England, King Albert of Belgium, and Mussolini, of Italy, were on the

preferred list of the London and Paris
house of Morgan for shares of the
United Corporation, and also that leading politicians in France were
allotted shares in that issue at the special bargain price at which J. P.
Morgan & Company had purchased them.

Among those who received securities at cost from J. P. Morgan & Com-
the Navy, Charles Francis Adams, who
pany were Hoover's Secretary of
probably would have
been on the preferred list anyway, for he was also
the father-in-law of Mr. Morgan's son Henry; Franklin D. Roosevelt's first
Secretary of the Treasury,

William H. Woodin; and Newton D. Baker,
Cabinet. John J. Raskob, chairman of the
Secretary of War in Wilson's
Democratic National Committee in 1928 and an executive of the General
Motors Corporation, received a letter from his friend George Whitney,

of the shares of Alleghany Corporation, the
offering him $40,000 worth
Van Sweringen holding company, at the cost price to Morgan's of $20 a
share. He wrote in reply:
Whitehall, Palm Beach.

Dear George: Many thanks for your trouble and for so kindly remem-
bering me. My check for $40,000 is enclosed herewith in payment for the
Alleghany stock, which kindly have issued when ready, in the name of
John J. Raskob, Wilmington, Del. I appreciate deeply the many courtesies
shown me by you and your partners, and hope the future holds
sincerely
opportunities for me to reciprocate. The weather is fine and I am thor-

oughly enjoying golf and sunshine.
Best regards and good luck.
JOHN.
"What position did Mr. Raskob occupy at that time," Mr. Pecora
asked Mr. Whitney, "that could have enabled him to reciprocate the
many courtesies shown by you and your firm, of which the invitation
to subscribe to these shares was one?"
"My recollection is," Mr. Whitney answered, "that Mr. Raskob was
no longer an officer of General Motors where I had known him for 10
years. I am not sure of this, but did he not have something to do with
the Democratic National Committee?"
"I don't know," said Mr. Pecora. "Don't you know whether he had
or not?"
"I don't follow those things," said Mr. Whitney.
The preferred list of J. P. Morgan & Company also contained the name
of Joseph R. Nutt, who, besides being a close associate of the Van Swer-
ingens and thereby entitled to appear on the Morgan preferred list of the
issue of the Van Sweringen securities, was in his spare time treasurer of
the Republican National Committee. Cornelius N. Bliss, financier and

former treasurer of the Republican National Committee and Charles D.
Hilles, former chairman of the Republican National Committee, were also
among those invited to grow rich along with Morgan's at reduced rates.
Henry E. Machold, Speaker of the New York State Assembly, and chair-
man of the Republican Party's organization in New York for many years,
was on the Morgan list.
also
Aside from their political affiliations, it was natural that some of these
men should be on the preferred lists, for they had important financial
connections which brought them into contact with the house of
Morgan.
The report of the Senate's banking investigation issued in 1934 had this
to say about the propriety of preferred lists:
When officials of financial institutions which invest heavily in securi-

ties accept such favors, it is plain that the temptation exists to
reciprocate
directly by exercising their power to purchase securities from the bankers
on behalf of their institutions without regard to the nature of the risk.

By virtue of the influence gained by the granting of favors to persons
who hold multiple directorships in important corporations the bankers
are enabled to exercise substantial control over the affairs and the re-
sources of those corporations. Public officials who consent to participate
in "preferred lists" swiftly find themselves in a position where their use-
fulness is seriously impaired and they incur the danger of forfeiting the
respect of the public.
Implicit in the bestowal of favors on this magnificent scale is a per-
vasive assumption of power and privilege. Implicit in the acceptance of
such favors is a recognition of that power and privilege. The "preferred
lists," with all their grave implications, cast a shadow over the entire
financial scene.
Mr. George Whitney insisted that the five Morgan preferred lists
he objected "preferred" were made up largely

to the use of the word
of men who had been personal friends of the partners for many years and
men with whom the firm had done business and had close association
for many years. He also testified that the purpose of the preferred lists
was to enable the firm of Morgan to underwrite the five stock issues
without making a public distribution by sale of stocks which the firm

regarded as speculative. Since they were speculative, J. P. Morgan &
Company, Mr. Whitney said, wished to put these stocks in the hands of
men of means who were friends of the house and who could afford to
take losses if there were to be losses. Many of them made profits on their
allotments from Morgan, and others took losses. When the stocks were
sold publicly at much higher prices the public took huge losses in
those same stocks, but that was attributed to the public's speculative
greed and its desire to share in the opportunities of the insiders. The
rumors of the preferred lists, however, stimulated the sale to the public
on the stock market, for men believed that what was good enough for
Morgan's and their friends was good enough for them. And rumors in
the financial world travel wider and faster than in any other circle of
facilities for spreading them and the
society, because of the widespread
lure of the money return from them.
Bankers, like other merchants, have to get rid of their goods, and at
the investigation into the sale of foreign bonds, which was held by
Senator Hiram Johnson in 1932, there were indications that the large
banking houses of the eastern cities practically forced issues of securities

upon the smaller bankers of the country. The practice was for the
banking house or its securities-selling affiliate to allot a certain portion

of each issue to distributors of them to the public throughout the nation,
and to telephone on telegraph to these distributors what their individual
allotments would be. Then

the country banker practically had to take
the security, whether he liked it or not, for if he refused, he was denied
participation in issues which he might want later. Otto H. Kahn made

the statement to the Senate investigating committee on the sale of
foreign bonds that those dealers who took securities from bankers and
sold them to the public had the right to decline them if they thought
they could get better value for their money elsewhere, and that the public
had the same right. But he did admit that it was not unlikely that dealers
who refused securities which they did not think were good would lose
their connections with the houses of issue in New
York. He insisted,
however, that the dealer "is still free to decline or not to decline." "He
is remarked Senator Couzens, "as our seven or eight million
just as free,"
unemployed are free to either work or not work. But in practice they are
not free."
Senator George asked Mr. Kahn whether it was not a fact that because
of the method of distribution of bonds and other securities for sale the
small banks of deposit throughout the country did not become converted
into "brokerage houses, just to put it bluntly, and did not too many
banks in this country become mere brokerage houses?" "Yes, emphatically
yes," Mr. Kahn answered. In answer to a statement by Senator Johnson
that many small bankers had complained to him that securities were forced
on them, but that they were afraid to come before the committee and
testify because of the punishment which would follow, Mr. Kahn gave it
as his opinion that the small bankers were eager to get the securities allotted
to them and only complained to Senator Johnson about those which went
badly for them. Kuhn, Loeb & Company, he said, had had to turn away
dealers who were eager for their bonds. But that made it all the more likely
that a regular distributor for a banking house would hesitate a long time
before taking the risk of offending by refusing any securities offered to
him by the banking house.
Senator Glass burst forth at the banking investigation with this state-
ment to Winthrop W. Aldrich, of the Chase National Bank:
"The public cannot conceive of the harm done by these affiliates. One
of them Was your bank, too. I am not trying to embarrass you. You
know that. Everybody else knows it, for that matter. Nobody can conceive
of the damage done by these affiliates. They literally loaded the portfolios
of interior banks with foreign securities approved by this abominable
State Department here, which had not anything more to do with it than
my stable boy not a bit."

"Senator Glass," said Senator Gore, "I would like to interject at this
point to make this observation with reference to these affiliates unloading

on other banks. I think we all know that there was a
their securities
practiceon the part of the affiliates of these big banks and these big
underwriting houses of unloading foreign bonds on other banks through-
out the country."
"With the approval of the State Department," said Senator Glass.
"Yes," said Senator Gore. "I am afraid a little more than that. The
little banks took the word of the big banks that these securities were
good."
"And they were afraid not to take them," said Senator Glass.
"They were afraid not to take them," continued Senator Gore. "At the
same time the bank examiners were going to and fro in this country
urging these little banks to establish secondary reserves and to buy bonds,
bonds, bonds. Those two things worked together, and I have no doubt
there was a conspiracy going on."
DURING the years of our inflated boom, when America became a lender
for reconstruction of Europe instead of a borrower for its internal con-
words of General Pershing when landing in France
struction, the alleged
might have been paraphrased by Ivar Kreuger as he stepped off his

favorite transatlantic liner: "Jay Gould, I am here!"
Between 1914 and 1931 there were $14,883,633,000 worth of foreign se-
curities floated in the United States. As of March 1, were out-
1934, there
standing $8,193,237,200 worth of foreign securities, both industrial and

governmental, and of these $2,930,422,600 were in default. Mr. Charles E.
Mitchell told the Senate Committee on Finance in 1932: "Many of us
have found a real inspiration in the fact that in the issuance of this large
volume of foreign loans we were playing a part in the development of

American trade and industry. That is our first motive always." The profit
motive, however, was naturally strong, too, with Mr. Mitchell and his
fellow bankers. To take Mr. Mitchell's organization, for example: the
National City Company made a total net profit of $13,393,502.21 on its
sales of the foreign securities which it
managed, and a net profit of
$11,363,501.26 on securities in the sale of which the National City Com-
pany participated as part of a syndicate. These profits were over the period
from 1919 to 1930, and during that time the National City Company man-
aged issues totaling $1,171,955,000 and participated in issues totaling
$3,260,407,000.
During 1931 there was a rumor that the international bankers in the
United States were agitating for cancellation of governmental war debts,
so that they might safeguard private loans which they had floated. It was
this rumor which caused Senator Johnson to hold the investigation con-
cerning the sale of foreign bonds in the United States, and at that time
Mr. Charles E. Mitchell told the Senate Committee on Finance that the
National City Company had in its portfolio only $350,000 worth of the
more than three billions of foreign bonds it had floated, so that it could
not be accused of a personal stake in cancellation. The public held the
stakes, but, at the same time, it was naturally to the interests of the bankers
to get their loans collected so that they might sell more securities. Mr.
Mitchell's testimony shed an interesting light on how little financial stake
the affiliate of his bank had in the loans it had sold to the public, and the
same was true of the other large underwriting houses and bank affiliates.
"With reference to foreign bonds," Senator Connally said to Mr.

Mitchell, "you are like the saloon keeper who never drank. His whisky
was made to sell, not to drink."
"With respect to bonds generally, we are merchants," Mr. Mitchell
replied.
"That is what I mean," said Senator Connally.
"We are merchants," said Mr. Mitchell.
The competition among the merchants of foreign bonds for merchandise

to sell to the public was so great at this time that South American gov-
ernments and European ministries found bankers on their doorsteps
begging them to take money from America. The quality and safety of the
merchandise was ignored by even the largest and most reputable houses
in the effort to compete for merchandise to sell. The report in 1934 of the
Senate banking investigation stated:
The record of the activities o investment bankers in the flotation of

foreign securities is one of the most scandalous chapters in the history
of American investment banking. The sale of these foreign issues was
characterized by practices and abuses which were violative of the most
elementary principles of business ethics.
At the height of the debauch, some of the more reputable individuals

protested against the methods of their fellow craftsmen. Mr. Thomas W.
Lament, of J. P. Morgan & Company, warned
in 1927 against "rash and
excessive lending" and the competition "on almost a violent scale." S.
Parker Gilbert, then Agent General for Reparations, warned in 1926
against the recklessness of American bankers who were offering the se-
curities of German states and municipalities on the theory that reparations
were not a prior claim over private loans, a theory which was not accepted
by the other foreign governments. Secretary of State Kellogg issued a cir-
which he wrote concerning this situation: "The
cular letter to bankers in
do not owe
department believes that you should consider whether you
a duty to your prospective clients fully to advise
them of the circumstances."
But the bankers, including some of the largest houses, did not feel the same
sense of duty, and they paid no attention to either Secretary Kellogg or
Mr. Gilbert and gave improper information to their customers. In the
issued a solemn warning that Ger-
following year, 1927, S. Parker Gilbert
many was overborrowed and was overspending, but still the loans from
America went on. Some of the bankers lent the money directly to German
states and municipalities, and some of them lent it to Ivar Kreuger, osten-
sibly to make matches,
and Mr. Kreuger lent it in turn to Germany.
Otto H. Kahn testified that Germany had used the money borrowed
from the American investors to make life more bearable for the German
masses, for artistic and cultural improvements, and for reconstruction of
its factories and economic life. To which Senator Gore remarked: "If a
revolution should Germany and it should be followed by repudia-
come in
tion of these debts, Germany has the improvements and we have the
bonds." And that was exactly what did happen in Germany not long
after the advent of Adolf Hitler.
Although there was competition among bankers to lend the American
public's money Germany, the great field for cutthroat competition was
to
in South American and Latin American countries. The heaviest losses

which American investors have suffered have been in those risky loans
to Latin American countries which bankers from the United States were
so eager to float that they did not hesitate to bribe government officials
and their relatives in those countries for the privilege of selling their gov-
ernments' bonds to the American public.

The Department of Commerce had in its Finance and Investment Divi-
sion a very valuable service which was available to American bankers at
all times, and warned against loans to some South American

this division
and Latin American governments which it knew from its studies to be

overborrowed. Mr. Grosvenor M. Jones, chief of that division of the De-
partment of Commerce, testified before the Senate Committee on Finance

in 1932:
"On this particular Bolivian loan I remember very distinctly talking

with Arthur Young, or Mr. Livesey over at the State Department, and
telling them that we thought that Bolivia was borrowing too much in
this market. There was a good deal of hemming and hawing, and the
upshot of it was that we reluctantly gave our consent to it, for the reason
that at that particular time our diplomatic relations with Latin America
were a little upset. Our Government was under considerable attack for
its Nicaraguan policy, its Haitian policy, and so forth. There was shortly
to be held, I believe, a Pan American conference. As I recall it, the State
Department said that it might result in embarrassment if we turned down
this loan proposition."
In other words, the Department of State was willing to throw $23,000,000

of American investors' money into Bolivia in 1928 in order to take away
the bad odor of its own adventurous policies in behalf of American finan-
Nicaragua and Haiti. Before foreign loans were made by American

ciers in
bankers, they were always submitted to the State Department, which

could object to any it thought undesirable from the point of view of the
foreign policy of the government, though the department was always

careful not to give positive approval to
any loans.
The experience of American bankers and American investors in the
Republic of Peru was an interesting one, and though it had unique cir-
cumstances, it was declared by bankers in their own testimony to be not
unusual in South American countries. F. J. Lisman & Company, invest-

ment bankers of New York, heard that they might be able to obtain the
business of floating loans for the Republic of Peru. Harold Bolster, a
promoter, was introduced to Lisman & Company as a man who had great
influence in Peru. The banking house made a contract with Mr. Bolster
to pay him a commission on any business they might get in Peru within
the next five years.
Meanwhile, F. J. Lisman & Company, feeling that the business was

too large for them to handle alone, consulted the larger firm of bankers,
J.& W. Seligman & Company. Lisman's had sent one of their men, Mr.
Thomas V. Salt, to Peru, and he had reported that Bolster's influence
consisted largely of his acquaintance with a photographer there, who
took up with foreigners but who had very little influence. Mr. Salt then
tried to get an introduction to the President-Dictator of Peru, Augusto

Leguia, but he soon discovered that in order to get to the President it
was first necessary to cultivate the young son of the President, Juan
Leguia. Salt finally agreed on behalf of F. J. Lisman & Company that
Juan Leguia was to be a member of the promoters' group for Peruvian
loans, and was to receive the largest share of the group's commissions on
any business which Lisman & Company and their associates might get
from Peru. Frederick J. Lisman testified before the Senate Committee on
Finance in 1932 concerning Juan Leguia:
"I do not think he had any influence particularly with his father, except
a negative one, and he was known around Lima as spoiling business for
anybody who might start something, because if you wanted information
around the departments I know Mr. Mannasse told me that he tried to
see the President and Juan kept him waiting at the palace for four hours,
and, I believe, he did not see him that day. . . .
"My partners remind me of the fact that there was more or less dis-
cussion at the time and that the conclusion was arrived at that the group
had pay something to Juan Leguia, otherwise all the money we
better
spent on the business would be lost. In other words, as I look upon it,
Juan Leguia blackmailed us into paying him. I do not believe his father
got a cent."
"What did you pay him for?" Senator Johnson asked Mr. Lisman.
"For nuisance value," Mr. Lisman replied. "It was not a bribe, it was
a blackmail." . . .
"Do you run across that sort of thing often in Latin American coun-
tries?"
"I had heard of it

quite often; yes."
"That is, somebody who is related to the reigning power, or some par-
ticular official, will queer the whole pitch unless he is taken care of?"
"Those are the rumors one hears." . . .
"Let us say, then, do you know of any other instances where anybody
interested in the government was paid?"
"Not within my own experience. One does not know about other peo-
ples' negotiations. They are generally carried on pretty quietly."

"You had a shrewd suspicion about some of them?"
"I have a suspicion about some of them, but no knowledge." . . .
"Did Juan Leguia have any other occupation except that of son of the
President?"
"That is a mild way of describing it, but I would say that is about
it." . . .
"Were there others who were competing with you for the loan there?"
"We understood there were several banking houses there."
"All of them trying to get the loan from the Peruvian Government?"
"As usual."
"That is so all over Latin America?"
"It was so during the period from 1925 to 1928, all over, I would
say."
"Seeking in every way to obtain such loans as you could for flotation
here?"
"To satisfy the public demand for securities."
"To satisfy the public demand for securities?"
"Yes."
"That was the sole purpose?"
"Well, bankers do not knowingly float bad loans. But the purpose is
to do a good business at a profit."
After F. J. Lisman & Company had mentioned the Peruvian business

to J. & W. Seligman, that firm sent as their advance man to Peru, S. A.
Maginnis, who had been American Minister to Bolivia in the Wilson
administration. He was said at the time to have a large "entertainment
fund." Oliver C. Townsend, commercial attache of the United States at

Lima, Peru, in 1927, wrote in a memorandum for the American Am-
bassador to Peru, Miles Poindexter:
The ex-minister [Maginnis] is a big chap of about 50 ex-newspaper

man probably a lawyer by present profession loud voiced glad handed
just a little short of being offensive in his jovial familiarity. . . .
The puzzle suggested to my mind is: Why has all this undignified
scramble and promotion atmosphere become an accepted feature of the
program for disposing of an issue of Government bonds? There is some-

thing about such scrambling that is
highly appealing to Latin American
officials encourage the intrigue and delays accompanying them
who
as a coy maiden flirts with a group of suitors not in any spirit of in-
decision but for the long drawn out pleasure afforded by the game.
Mr. Townsend testified that when he was commercial attache at Lima

from December, 1926, until December, 1929, he had constantly warned

the Department of Commerce about the weakness of Peruvian finance,
and was "severely reprimanded for my pessimism." "It was clearly
stated that optimistic reports were what we needed," Mr. Townsend
testified. Dr. Julius Klein, who was one of President Hoover's leading
advisers, was head Bureau of Foreign and Domestic Commerce

of the
of the Department of Commerce at this time, and he was pouring forth
optimism in speeches and articles. Mr. Townsend told the Senate Com-
mittee on Finance: "In other words, I think any of your gentlemen who
have heard Doctor Klein's repeated offering on that subject will realize
that he did not want a subordinate of his department stating anything
that conflicted with his chronic optimism."
On March 1, 1927, the banking houses of J. & W. Seligman & Company,
National City Company, F. J. Lisman & Company, E. H. Rollins & Sons,
Graham Parsons & Company, and Ames Emerich & Company floated a
loan of $15,000,000 for the Republic of Peru. The 7 per cent sinking fund
gold bonds were offered to the American public by the bankers at 96 /2 ,

l
and the bankers received a gross spread of 5.03 points. The National City
Company, which participated in this loan, had refused to participate in
previous Peruvian financing after reports from its representatives that

Peru was not a safe risk. But in March, 1927, business was booming, and
the National City Company ignored its representatives' advice.
Having successfully floated this loan of $15,000,000, J. & W. Seligman
& Company were eager to do more business with Peru. On April 5, 1927,
Juan Leguia was staying at the Ritz Towers in New York. He had a
talk that day with Henry C. Breck, a partner in J. & W. Seligman &
Company, according to a memorandum from the files of the Seligman
company, and they agreed that Juan Leguia was to receive the lion's share
of a commission of one-half of one per cent on all the financing of Peru
which Seligman and its associates handled. Two days later Mr. Leguia
had lunch at the Midday Club with Messrs. Breck, White and Bailie, of
J. & W. Seligman & Company, and a formal agreement to that effect

was reached. On April 8th, Seligman & Company opened an account for
Juan Leguia on its books. Within the next two
years Juan Leguia re-
ceived $415,000 in commissions from the bankers. The agreement with
him was never put in writing, the Seligman partners testified. In addition
to the commission of $415,000 paid to Juan Leguia, the bankers paid
$67,373 to Harold Bolster, the original promoter of Peruvian finance with
F. J. Lisman & Company, who knew a photographer in Lima; $40,000
to S. A. Maginnis, the "glad-hand" American promoter; and $10,000
to T. V. Salt, representative of Lisman & Company in Peru.
Mr. Breck, of J. & W. Seligman & Company, testified that Juan Leguia
lived at the rate of $250,000 to $300,000 a year, and that his billswere
paid out of his banking account with J. & W. Seligman & Company.
"Did you convey to anybody to whom you ever sold these bonds the
you were giving to the son of the President

fact that of Peru half a
million dollars to get the right to sell these bonds to Americans?" Senator
Johnson asked Mr. Breck.
"No."
"Was there ever any indication of any kind or any sort given by you,
in writing or otherwise, through the press or in any way, direcdy or
indirectly, as to the transaction that occurred in relation to the payment

to the son of the President of Peru for the purpose of obtaining the sale
of these bonds by your house?"

"No."
"Why not?"
"It is not customary."
"It is not customary? Is the transaction such as you had a customary

transaction with international bankers?"
"I think it is quite customary for commissions to be paid in connection
with financing."
"Particularly South American loans?"
"Yes."
Mr. Breck testified that his firm had paid $25,000 to a Mr. Alvarado,
a Costa Rican citizen, for helping them to get business lending money
to Costa Rica.
"Were there many such people running around?" Senator Johnson

asked.
"A great many of them," Mr. Beck replied.
In addition to paying commissions to Juan Leguia, J. & W. Seligman
& Company granted him loans of $30,000 and $15,000, which were re-
paid with interest during 1928. Miles Poindexter, American Ambassador

to Peru, was alleged to have referred to Juan Leguia at a luncheon in
New York as "the Crown Prince of Peru." The New York Times con-
tained the following item on April 29, 1930:
Juan Leguia, 24-year-old son of the President of Peru, arrived yester-

day on the Santa Maria and heard for the first time of the attempt to
assassinate his father on Good Friday. Young Leguia said he was on his
way to Europe for polo and that the attempt on his father's life would
not change his plans. He will be in New York for several days, stopping
at the Ritz Towers, and will sail later for Europe to spend several weeks
there. He had already sent over a shipment of polo ponies from his
ranch in South America, he said.
At the Senate inquiry into the munitions industry on September 5,
1934, itwas brought out that the Electric Boat Company had paid Juan
Leguia $50,000. None of the officials of the company seemed to know
why this sum had been paid, but they testified that in South America
it was necessary to pay what they termed "special commissions" before
selling submarines.
On December 21, 1927, J. & W. Seligman & Company, the National
City Company, Blyth, Witter & Company, the Guaranty Company of
New York, F. J. Lisman & Company, and the Central Union Trust
Company an issue of $50,000,000 of 6 per cent bonds for the
floated
Republic of Peru, which were offered to the American public at 91% arid
sold rapidly. The gross spread to the bankers was 5 points. Between the
sale of the $15,000,000 issue of bonds nine months before and the sale
of the $50,000,000 issue conditions in Peru had not improved, and the
firms ofJ. & W. Seligman & Company and the National City Company
were so informed by their representatives in Lima. In the circular pros-

pectus for the $50,000,000 loan, the bankers said: "The Republic of
Peru the third largest country in South America, with an area of
is
approximately 550,000 square miles. It has a population estimated at 6,-

000,000." In a letter to Charles E. Mitchell on July 27, 1927, five months
before this circular was issued, Mr. J. H. Durrell, vice-president and over-
seas manager of the National City Bank, wrote:
As I see it, there are two factors that will long retard the economic
importance of Peru. First, itspopulation of 5,500,000 is largely Indian,
two-thirds of whom reside east of the Andes, and a majority consume
almost no manufactured goods. Second, its principal sources of wealth,
the mines and oil wells, are nearly all foreign-owned, and excepting for
wages and taxes, no part of the value of their production remains in the
country. ... As a whole, I have no great faith in any material betterment
of Peru's economic condition in the near future.
He added that President Leguia was in bad health, and that, although
the President was "reputed to be absolutely honest," he was "surrounded
by a group of rascals."
Lawrence Dennis, representative of J. & W. Seligman & Company,

reported against further loans to Peru before the $50,000,000 loan was
issued. The government of Peru, which was the dictatorship of Leguia,
was spending far more than its income and managing to do so by means
of its heavy foreign loans. "They were building up real-estate suburbs,
plotting land, and paving streets out in the desert," Mr. Dennis told the
Senate Committee on Finance. "It was an exhibition of all sorts of
follies." When he came back to New York for conferences with the
Seligman partners, Mr. Dennis testified, "they said that I was pessi-
mistic,and that these things would work themselves out." Then a
Seligman partner went to Peru, and the firm, in association with the
same bankers who had issued the loan of $50,000,000 on December 21,
1927, issued another loan of $25,000,000 for Peru in October, 1928, at
91, with a gross spread to the bankers of 5 points. Before this loan was
made both Seligman & Company and the National City Company had
received adverse reports from their representatives in Peru but did not
mention those reports in their sales literature to the American public
when they were getting rid of their bonds at a profit.The upshot was
that the American public bought in all $90,000,000 worth of bonds of
the Republic of Peru, which are in default. Seligman & Company made
net profits of $601,000 and gross profits of $5,475,000 on the loans to
Peru; the National City Company made a net profit of $681,000 on the
three loans.
Seligman & Company noticed that President Leguia was spending for
than financial return the money they had helped
political effect rather
him to borrow. His object was to keep his dictatorship in power at all
costs. They could do nothing, the Seligman partners testified, about
dictating how the money was to be spent; they could, of course, have
refused to lend more, but that never seemed to occur to them. In
August, 1930, the people of Peru decided that they would do some-
thing about President Leguia's cruel and extravagant dictatorship;
Leguia had filled the jails with his political opponents, exiled many of
the leading citizens and murdered some of his opponents. The President
had increased the national debt from about $10,000,000 when he took
office in 1919 to $110,000,000 when he was deposed by a revolution on
August 25, 1930. Leguia, who had welcomed President-elect Hoover
warmly and had distributed foreign concessions lavishly, was
in 1928
hailed in turn as theTheodore Roosevelt, the Napoleon and the Julius
Cxsar of Latin America. When he was deposed, Leguia said: "I hereby
close another chapter in Peruvian history."
After the revolution Leguia and his sons were imprisoned on the
island of San Lorenzo, in the harbor of El Callao, where he was wont to
send his political enemies when he was dictator. Their property was
confiscated, and they were charged with "illegal enrichment," according
to Henry C. Breck, of Seligman & Company, who did not like the word
"bribery" when Senator Johnson used it.
Leguia and his sons were fined
$7,625,000 by a revolutionary tribunal, but it was rumored that the
family had an immense fortune, deposited in Great Britain.

In February, 1933, at the time of the hearings before the Senate Com-
mittee on Banking and Currency, the Peruvian $15,000,000 loan, which
had been sold to the American public for $96 ^
was worth $7 per bond;
the $50,000,000 bonds and the $25,000,000 bonds, sold for $9iy2 and $91,
were selling in 1933 for about $4. Mr. Lawrence Dennis told the Senate
Committee on Finance that the bankers had a custom of "rigging the
market" for Peruvian and other bonds when they were about to place a
new issue before the American public. This was done by forming a
syndicate to buy up Peruvian bonds of the previous issue before the
new issue was floated. The syndicate paid high prices for the old bonds,
and took a loss of between $200,000 and $300,000, which loss was charged
against the expenses of floating the new issue. "You cannot bring out a
6 per cent Peru bond at 91 when other issues of 6 per cent Peruvian bonds
are selling at 88,"Mr. Dennis remarked. "Then, after the bankers have
marketed the new issue," he added, "they pull the plug and let the bonds
find their proper level in a free and open market." This same practice
was called in the English courts "as gross a fraud as has ever been com-
mitted" and declared to be a criminal offense, but it was perfectly legal
and very prevalent in the United States during the boom era.
Other American bankers were engaging in peculiar activities in Latin
American countries. In the summer of 1921, Mr. Robert Otis Hayward,
a member of the firm of Dillon, Read & Company, was in Rio de Janeiro,
Brazil. He met Dr. Carlos Sanpaio, mayor of the city, and heard from
him about his program of municipal improvements. In order to finance
these improvements, Dr. Sanpaio wanted to float a loan of $12,000,000
in the United States, and Mr. Hayward took an option on the loan for
Dillon, Read & Company.

The principal municipal improvement which the loan was to finance
was the leveling of Morro de Castello, or Castle Hill. This was a steep
hill in the center of Rio de Janeiro and constituted the slum section of
the city where 5,000 people lived in hovels. All around the hill was the
most valuable property in the city, and for many years it had been the
ambition of each mayor to tear down Morro de Castello. "It is a very
common thing in the case of Latin American officials," Mr. Hayward
testified, "to select some item of public works which they can tackle during
their term of office,and leave to posterity something with which their
name can be attached."
Mr. Hayward went with Mayor Sanpaio to look at the hill, and he
noticed that the attempt to level it was going on slowly and inefficiently
with pick and shovel labor and donkey cartage. He estimated that it
would have taken about twenty years to level the hill at that rate of
speed; he also noticed that the drivers who carted off the dirt were malin-
gering and grafting. The mayor was very sad about the situation, for he
realized that unless more efficient work were performed, the hill would
never be removed during his term of office, and the great work would
not be associated with his name. He asked Mr. Hayward to recommend
American contractors who could do the job quickly and economically.
Mr. Hayward recommended Kennedy & Company, American contractors.
Clarence Dillon, of Mr. Hayward's firm, and Mr. Dillon's family owned
Kennedy & Company.
45 per cent of
The plan was to sell lots on the level ground after Morro de Castello was
removed, and to pay of? the city's debt with the proceeds, for the land
adjacent to the hill was then selling for as much as $11 a square foot.
When Mr. Pecora, counsel for the Senate Committee on Banking, asked
Mr. Hayward concerning the adequacy of the land as security for a
public loan, Mr. Hayward replied :
"I would bond than I would, for

rather have this as security for a
instance, the bonds of a neighboring government which are secured by

1
the droppings of birds on a desert island. I would be rather afraid that
my security might be dropped in the wrong country which did not

recognize the right of recapture."
In October, 1921, Dillon, Read & Company issued $12,000,000 worth

of bonds of the city of Rio de Janeiro to the American
public, the proceeds
of which were to be used to remove Morro de Castello and to build a
municipal slaughterhouse. In 1929 the hill was not yet completely removed,
although more than $5,000,000 had been spent for the work. Mr. Hayward
testified that he had taken a great personal interest in that hill. He was
in Brazil in 1922, 1923, and 1924,and again in 1927, and each time he
always went around to see how the hill was coming down. "In fact," he
"there was nothing going on in Brazil that interested me per-
testified,
sonallymore than to see how this hill was coming down." But Mr. Hay-
ward and his associates showed a surprising lack of interest in just how
the government of Rio de Janeiro was using the $12,000,000 they had
helped it to get from American investors. Mr. Hayward admitted that he

had made no effort to find out and did not seem to wish to embarrass the
government by asking questions. He just enjoyed watching that hill

coming down. As for the rest of the money, he testified that he knew "in
a general way the balance was expended for municipal improvements."
When itcame time to sell the lots where Morro de Castello had been,
the world depression was on, and the city of Rio de Janeiro was able to
sell only $230,000 worth of lots. At the time when Mr. Hayward testified
in October, 1933, the bonds which Dillon, Read & Company had sold to
the American public for97% were selling for $16.
In addition to this loan to Rio de Janeiro, Dillon, Read & Company
floated in June, 1922, a $25,000,000 loan for the electrification of the Cen-
traleRailway of Brazil, which in October, 1933, was still not electrified.
Meanwhile, no one in Dillon, Read & Company seemed able to tell the
Senate committee what had happened to the $25,000,000. In 1927, Dillon,
Read & Company floated another loan for Brazil of $41,500,000. In 1933
the bonds were in default. On this last loan Dillon, Read & Company
made a profit of $598,789.69.
For Chile $90,000,000 worth of bonds were floated in the United States
through the efforts of Kuhn, Loeb & Company and the Guaranty Company
of New York. At the time the loans were made, between 1925 and 1929,
Chile was under military rule. The bankers did not care to put in their
prospectus for their loans the words "military council"; somehow it did
not sound just right. Kuhn, Loeb & Company cabled to Manuel Foster,
its representative in Santiago, Chile: "Is it not correct to refer to council
as government council which we prefer instead of military council?" In

the prospectus the bankers referred to the government of Chile as a
"governing council" and not a "military council." The bankers made no

independent investigations of the political, economic and financial con-
dition of Chile before issuing $90,000,000 worth of bonds to the American
public, and they ignored the reports of the Department of Commerce
concerning the decline of the nitrates trade, upon which Chile's prosperity
was largely dependent. The bonds were sold to the public at prices rang-
ing from 99% for one issue to 92 for the last issue. In 1933, at the time
of the Senate investigation, they were selling for 13, and payments on
them were in default.
IN 1915 the National City Bank of New York opened a branch in Havana,
Cuba, as part of its plan to spread out into foreign branch banking. It
began to money to Cuban sugar planters, for sugar was selling at

lend
the time at23% cents a pound because of the scarcity due to the World
War. This period in Cuba was known as the "Dance of the Millions," for
sugar millionaires ordered tons of luxury goods from the United States
with their huge war profits. The early loans of the National City Bank in
Cuba were all short-term loans, paid and renewed, and paid and renewed
again. But in 1921 the sugar boom collapsed, and sugar which had been
as high as 28 cents a pound fell that year to about 2 cents a pound. The
National City Bank at the time was carrying between $30,000,000 and
$35,000,000 in sugar loans.
Mr. Gordon S. Rentschler had been president of the Hooven, Owens,
Rentschler Company, of Hamilton, Ohio, which manufactured machinery,
especially sugar machinery. In that capacity Mr. Rentschler had become
very familiar with the Cuban sugar situation, and he worked during 1921
on the National City Bank's sugar loans. In 1933, Mr. Charles E. Mitchell,
Mr. Rentschler and Colonel Edward A. Deeds, who had also become
interested in Cuba, went to Cuba to survey the situation. After they
returned to New York, they organized the General Sugar Company,
which took over valuable sugar plantations in Cuba which could not meet
their loans from the National City Bank. Then the National City Bank,
through the General Sugar Company, added to its

plantation holdings in
Cuba, and finally its entire property consisted of between 325,000 and
330,000 acres of sugar plantations with a production of 2,100,000 bags of
raw sugar yearly, of 325 pounds to the bag.
Meanwhile, in 1923, Mr. Gordon S. Rentschler became a director of the
National City Bank, and in 1925 was made vice-president and assistant to
the president, Charles E. Mitchell. Then in 1929 he became president of
the bank, when Mr. Mitchell was chairman of the board of directors.
The price of Cuban sugar continued to decline after the National City
Bank, through its subsidiaries, the National City Company and the Gen-
eralSugar Company, went into the sugar business. In 1922 the price of
sugar opened at the beginning of the year as low as 1.81 cents a pound
and improved later to 4 cents. That was the year when the National City
Bank organized the General Sugar Company, and that was also
officials
the year when the national bank examiners began to criticize the loans
of more than $30,000,000 to Cuban sugar planters which the bank still
had on its books. "It is
questionable," said the report of the national bank
examiners, "whether or not the management is
according stockholders
and depositors the proper protection in continuing to operate these prop-
erties at a loss of several millions each year." These criticisms went on year
after year.
Then on February 15, 1927, Mr. Charles E. Mitchell and his associates
decided to form the General Sugar Corporation as distinct from the

General Sugar Company. On that same day the capital of the National
City Bank and its affiliate, the National City Company, was increased to
$75,000,000 from $50,000,000. To effect this increase 250,000 shares of

stock were issued to the stockholders of the National City Bank at $200
a share, and an additional $50,000,000 was obtained from the stock-buying

public. Twenty-five of these fifty millions were turned over to the National
City Bank to increase its capital and the other twenty-five millions were
turned over to the National City Company. On that same February 15,
1927, the National City Company purchased with its new $25,000,000 the
1,500,000 shares of the new General Sugar Corporation. And at the same
time the General Sugar Corporation assumed the debts of the sugar
companies in Cuba to the National City Bank. The General Sugar Cor-
poration then gave the National City Bank $23,000,000 of the cash it had
just received from the National City Company and also notes for $11,-
000,000 to pay for the $34,000,000 worth of sugar loans which the National
City Bank had been holding until that moment, and which were being
criticized as doubtful assets for a bank of deposit to hold. The National
City Company received stock of the General Sugar Corporation for its
cash.
Mr. Pecora wanted to know from Mr. Mitchell whether that process
was "what is known bank of
in the vernacular as a 'bailing out' of the
a bad loan." But Mr. Mitchell preferred other phraseology. He insisted

on calling the process the transfer of a questionable short-term investment
of the National City Bank into a good long-term investment for the
National City Company, which would have been valuable if sugar be-
came valuable again. But Mr. Pecora persisted in wanting to know
whether it was not a fact that by this process of raising
money from
stockholders the bank had not made its stockholders hold its
sugar bags
instead of its stock. Mr. Mitchell said: "It may be regarded in the light
of the subsequent write-offs as a repairment of the condition of the insti-

tution." Then Mr. Pecora asked Mr. Mitchell the embarrassing question,
whether the stockholders of the National City Bank and National City
Company had been told "that they were going to make this sort of a
reparation that you have just referred to." After a little uncomfortable
sparring, Mr. Mitchell answered: "I don't think so, but the record would
show it." "You have no recollection of any such thing being told the
shareholders?" "No, I have not, Mr. Pecora," Mr. Mitchell answered.
According to the record, the shareholders were never told what their
money was to be used for.
The National City Bank's investment of its shareholders' money in

Cuban sugar without telling them about it was predicated on the assump-
tion that the sugar from their properties would bring a profit of $3,000,000
to $4,000,000 a year, based on an average price over a 30-year period of
3 l/2 cents per pound. The price of sugar maintained a fair average during
the boom years of 1927, 1928, and 1929, but thereafter, due to the world
depression in trade and to the extravagant, terroristic government of
Gerardo Machado, which was supported in Cuba by bank loans from the
United States with the approval of the Department of State, the condition
of the Cuban people became worse and worse and was reflected in the
price of sugar. In 1933, when Mr. Mitchell testified before the Senate
committee, he said that the price of sugar was then eight-tenths of a cent
a pound.
Gerardo Machado, the dictator of Cuba, whom the American bankers
liked so much and supplied so lavishly with the American people's money,
began life as a cattle raider under his father's tutelage. He took part in
the Cuban insurrection against Spanish rule and was elected mayor of his
home city of Santa Clara. Under Jose Miguel Gomez, who became Presi-
dent of Cuba by using strong-arm gangs to enforce his election, Gerardo
Machado became Minister of the Interior. From Gomez he learned how
to be a boss, and his work as Minister of the Interior gave him a
grip on
the valuable public utility concessions of Cuba.
In 1921, the Electric Bond & Share Company, of the United States,
began to buy up Cuban public utilities, and its representative in Cuba,

Henry Catlin, became a great friend and collaborator of Machado. At
the time Henry Catlin was also courting the Chase National Bank, the
largest States. Machado and Catlin were partners in

bank in the United
Company. In 1925, Machado ran for President of
the Santiago Electric
Cuba, and, according to Carleton Beals's The Crime of Cuba, Henry

Catlin put up half a million dollars for his campaign expenses and other
financial interests from the United States put up another half million
dollars. "Though the customary riots, official and
coercions, falsifications
Mr. Beals wrote, "there is no doubt but that in 1925

of votes occurred,"
Gerardo Machado was the honest choice of the Cuban people, and re-
mained so until his assassination of Armando Andre." Machado was
pledged to a program of honest public works, no increase in public debts
and no re-election of himself. Between his election and his inauguration,
Colonel John H. Carroll, prominent lobbyist, brought Machado to Wash-
ington "to show him around," as he testified before the Senate committee
investigating lobbying and lobbyists.
On June Mr. Karl A. Panthen, of the Chase Securities Cor-
15, 1925,
poration, the affiliate of the Chase National Bank, made a memorandum

for Mr. R. A. Clarkson of a conversation he had had with
Henry Catlin.
Mr. Catlin told Mr. Panthen that the National City Bank, the greatest
competitor for Cuban finance of the Chase National Bank, was very
unpopular in Cuba:
The reason for the latter's unpopularity [Mr. Panthen 's memorandum
continued] is due to the fact that during the last trouble in Cuba the
National City Bank took over a good many plantations of the Cubans.
Mr. Catlin states that these people never forget. While Mr. Catlin is close
to the National City Bank and knows Mr. Mitchell very well, he states
that he prefers to play with the Chase crowd, mainly due to his very
high regard for Mr. Wiggin. He

informed us that recently he was in-
strumental in having the brother-in-law of General Machado made
Notorial Attorney for the Chase Bank in Habana, just beating out the
National City Bank.
Machado proceeded to entrench himself politically in Cuba by coercing

his
opponents and forcing the consolidation of opposing political parties.
He also suppressed all independent newspapers and cultural organiza-
tions. And in Cuba at the time daily life was dominated by a corps of
thugs and gangsters in addition to the Army. Under the cry of Com-
munism, Machado destroyed all labor organizations and completely con-

trolled the courts and the police.
On January 16, 1928, President Calvin Coolidge, addressing the Pan-

American Congress in Havana said:
"The very place where we are meeting is a complete demonstration

of the progress we are making. Her [Cuba's] people are independent,
free, prosperous, peaceful and enjoying the advantages of self-government.

. . .
They have reached a position in the stability of their government,
in the genuine expression of their public opinion at the ballot-box, and
in the recognized soundness of their public credit that has commanded
universal respect and admiration."
Three months later President Machado had the Cuban constitution
changed by his hand-picked convention. Then he held a fake election in

November, 1928, at which he was the only candidate, and received a new
term which was to end in 1935, although he had publicly pledged himself
not to remain in office for more than one term.
Meanwhile, the battle for the privilege of selling the American public
Cuban bonds to finance Machado's dictatorship was beginning in Cuba.
There were persistent rumors as early as March, 1926, that the Chase
Securities Corporation was eager to float a loan of $100,000,000 for the
Machado government. The difficulty the bankers were experiencing was
with the provision of the Cuban constitution and the Platt Amendment,
which tried to prevent Cuba from overborrowing and thus inviting
foreign intervention on the part of the United States or any other nation.
In order to appeal to that portion of his populace which he did not
have room for in jail, President Machado planned a vast public works
project. The main program was a large Central Highway

item in this
to run the length of the Island of Cuba and connect up with all towns
and ports along the coast. He and his Minister of Public Works, Dr.
Carlos Miguel de Cespedes, also had in mind a replica of the Capitol
Building in Washington, with a gilt dome, which was to cost the Cuban
people $18,000,000 before it was finished and became an eyesore of Havana.
At first the Cuban government planned sensibly to pay for its public
works projects as it went along out of a special fund set up for that purpose
from the government's revenues. But in order to make a show with the
people, the Central Highway was started in the five provinces of Cuba
at the same time, with the result that it then became necessary to link up
the five separate parts. On the way the officials stopped to put in orna-
mental parks and other establishments, which were both costly and
profitable to and public officials. The highway was also
contractors
neglected for the Capitol and the sea wall. What with these
work on
delays and graft, the government began to get short of funds to link up
the five separate sections of the Central Highway.
In order to finance the public works program the Cuban government
issued public works certificates to the contractors, who in turn discounted
these at the Chase National Bank. At

only $10,000,000 in these
first
certificates were issued, but the highway and other projects became
more and more expensive, and the Cuban government needed another
$50,000,000. This was rather large even for the Chase National Bank and its
associates in the United States, so it was arranged that some of the public
works certificates, which the bankers held, should be sold to the Ameri-
can public, thus avoiding a bond issue and getting around the Platt
Amendment. Twenty millions in public works certificates were sold
to the American public, and the bankers held an additional thirty
millions themselves. But the Cuban government needed still more money
for its public works program, and it agreed with the Chase National Bank
that the only way out was for the government to float a regular loan to
pay off its works certificates. Therefore, in February, 1930, the Chase
Securities Corporation and its associates sold to the American public
$40,000,000 worth of Cuban bonds. The proceeds of this sale were used
to pay off to the bankers the $30,000,000 worth of public works certificates
which they held, although these certificates were supposed to mature

later than those in the hands of the American public. In other words, the
Chase Bank and its associates sold the American public Cuban bonds
and paid themselves with the proceeds in part and gave the rest of the
money to Cuba, thus paying off Cuba's obligations to the bankers with
the American people's money. In the sale of the Cuban issue of $40,000,000
the bankers made Although the technique was
a profit of $1,404,867.35.
different, the process resembled the National City Bank's transfer of its
sugar loans from the bank to the public.

In August, 1930, the Cuban bonds had dropped in value, and the
bankers held another $20,000,000 worth of public works certificates. They

could not sell these to the American public, because it was obviously
impossible to sell new bonds at $98 when those they had previously sold
at that figure had fallen in value. In the prospectus issued for the sale of
the $40,000,000 bond issue no mention was made of the fact that during
the previous fiscal year, 1929, the expenditures of the Cuban government
had exceeded its revenues by $7,440,000, or almost 10 per cent. The pros-
pectus also failed to give an accurate account of Cuba's indebtedness,
omitting from the total $20,000,000 worth of public works certificates
which the bankers held. In all the Chase National Bank and its associates
had lent the Cuban government $80,000,000.
In order to get the finance business of Cuba, the Chase National Bank
found it advisable to take care of President Machado's son-in-law, Jose
Emilio Obregon y Blanco. On April 1, 1927, he was made "new-business
man" of the Havana branch of the Chase Bank at a salary of $12,000
a year, and later he became joint manager of the branch at a salary of
$19,000 a year. It was published in the Official Gazette of Cuba on Friday,
July 6, 1928, that Machado's son-in-law had received a commission of
$500,000 on the $40,000,000 loan deal. On February 23, 1931, James Bruce,
of the Chase Bank, wrote to Joseph Rovensky, of the Chase Bank:
To touch for a moment on Obregon. As we know, from any business
standpoint he is perfectly useless. He has neither any ability for banking,

nor has he the slightest ability in negotiating, which was something
which we thought it might be possible to build him up to do. The only
use that Joe has would be to do a certain amount of entertaining of our
more important customers when they come to Habana in the winter,
and also to do a certain amount of contact with regard to new business,
etc. . From what I could gather in listening to some of the Cubans'
. .
talk is little standing with the President, and I think

that Joe has very
this is probably true. On the other hand, where the rub comes in is that
if we did not pay him his salary the President would have to give him an
allowance, and in times as hard as these this might be fairly difficult to
do, so it would seem to me that the best thing to do at the moment would
be to let things go on as they are.
Rosenthall is
very much concerned because he says that when he goes
off on his vacation in the summer that if Obregon is next in charge he
will make all the bad loans all over again. . . . Obregon. spoke to me
about his position and he is evidently quite worried. Conditions have
entirely changed with him in one respect, and that is that he is not
threatening to resign but is very scared that he is going to get fired. This
isnaturally of course the best way to have him, as he can do the least
harm.
' "
The change in "J oe s attitude towards his job was a reflection of the
change in Cuban financial conditions. They had begun to get very bad
as early as May, and grew steadily worse thereafter. Exiles from
1929,
Machado's terrorism and certain Americans began to criticize the dic-
tatorship, but the natives were beaten into submission. Americans with
large financial interests in Cuba did not like the growing criticism of
Machado. Herbert C. Lakin, for example, head of the Cuba Company,
which had $170,000,000 in investments in Cuba, hired Colonel John H.
Carroll to help fight the growing opposition to Machado's government,
and particularly the claims of Joseph E. Barlow, an American citizen,
that his property had been confiscated illegally and turned over to
Machado's other son-in-law, Rafael Jorge Sanchez. Carroll was paid a

retainer of $10,000 and $4,500 a month to fight the Barlow claims for
$9,000,000 damages.
"Just why should Mr. Lakin be employing counsel to help sustain the
Government of Cuba?" Senator Borah asked Colonel Carroll at the
investigation into Lobbying and Lobbyists in 1929.
"Well," said Colonel Carroll, "all I know is he says they have
$170,000,000 down and they like the administration of Machado.

there,
Think it the best they have ever had down there, and they want to sus-
tain it, and they think this Barlow business is an assault on the integrity
of the Machado administration."
What the financial interests feared most was American intervention
against Machado, and Colonel Carroll's services may have been useful in
Carleton Beals wrote in The Crime of Cuba:

talking to the right people.
"The time Barlow went to Cuba, he was thrown into prison, put into
last
a convict's uniform; and because he refused to perform hard labor, was

housed with maniacs. He literally died of starvation."
In February, 1931, President Machado had to have a renewal of the

$20,000,000 loan via public works certificates which the bankers had
granted him. This offered an opportunity for the Chase Bank officials to
talk with Machado about reducing expenditures and re-establishing Cuba's
credit. Mr. James Bruce, of the Chase Bank, who talked with Machado,
wrote in a letter to Mr. Joseph Rovensky, of the Chase Bank:
This of course could only be done by making a compromise with his

politicalenemies, and naturally the only way he could do this was to
make some concessions, but the result of which would be that Cuba
would present a uniform front rather than have the tourist trade disrupted
and the security holders made nervous by not knowing when, if at all,
the Government would be thrown out of power. The President admitted
all this, and in fact went on to elongate on the same, stating what he
was doing to bring it all about. He mentioned that in this last Congress
two dissenting
there were one or voices, but he said that in the Congress
which would convene on April 1 there would not be one dissenting
voice (I suppose the two dissenting voices are already in jail).
Mr. Bruce also learned from President Machado that he had taken
most of the money out of the government trust fund for pensions and had
used it
governmental purposes, "which of course he had no
for other
business in using," Mr. Bruce wrote. "Naturally, the public do not know
about this," Mr. Bruce went on, "although why they should not get on
to do not know, but it is worrying both the President and our own
it I
State Department very much." Mr. Bruce added that the government of
Cuba had not more than a few hundred thousand dollars on hand at
any time in February, 1931, and that it hid its ridiculously short cash
position from the Cuban people by holding up checks and payments until
after making public its financial statements.
In August, 1931, there was a revolt in Cuba against Machado, which
was suppressed ruthlessly. According to Carleton Beals, the United States
Department of State and War Department were preparing at that time
to intervene in favor of Machado if it became necessary. In December,
1931, when the Machado government had to pay off some more of its
debts to American bankers, Machado managed to do so by not paying
his own government employees their salaries. A shipment of gold coins

to the Chase Bank was guarded carefully by armed men at the Cuban
customs house and sent off to New York secretly. Machado requested the
Chase Bank officials in New York to keep these payments secret.
During 1932 the American bankers had to advance Machado money

in order to meet the payments due on their loans, which they did, and
then made public the fact that he had met his obligations, as an indication
of the good credit position of his government. But between December,
1932, and June 30, 1933, when the next payments were due on Cuban
bonds, conditions in Cuba grew worse and worse. The bankers were
making great efforts to prevent Machado from declaring a debt mora-
torium, pointing out the disastrous effect on his credit. But in reply they
received a letter from Mr. T. M. Findlay, assistant manager of the Chase
Bank in Havana, informing them that the public employees were starving
and were eleven months behind in their salaries; the high officials of the
Cuban Army were two to three months in arrears in their pay, and could
getno more credit for food or fodder for their animals, "but were
required practically to take same by force."
Upon his retirement after the inauguration of President Franklin D.
Roosevelt, Hoover's ambassador to Cuba, Guggenheim, stated to Mr.
Findlay, of the Chase Bank, that in his opinion a Cuban debt moratorium
would be disastrous, and "it was a direct result of and a natural sequence
to the banking holiday, which had sadly shaken that intangible feeling
of respect for the United States and American institutions which has
never been questioned before." With the new administration of President
Roosevelt in power, the bankers gave up all hope that the American
Army would be used to collect their debts in Cuba. Machado could now
no longer pay his gangsters and his army. The payments due the American
bankers on June 30, 1933, were extended, but still Machado could not
keep down the rising discontent. In July the Cuban revolt broke out with
terrific force; Machado fled by airplane to the island of Nassau, with some
of his most intimate political henchmen. His son-in-law, Jose Obregon,
the Chase Bank's former "new-business man," who had lost his job in
1931, brought the Machado family to the United States on a
rest of the
Cuban gunboat, where they were later joined for a time by the ex-President
and his entourage, the island of Nassau proving too dangerously near to
Cuba. In their rage the Cuban populace tore the strings out of the piano
in the presidential palace after dumping the instrument into the street,
and then carried upright through the streets of Havana the dead bodies
of some of President Machado's hired gunmen.
The Cuban bonds which the Chase Bank and its associates had sold
to the American public for $98 were than $30 in 1933, at the
selling for less
time of the Senate investigation into the Chase National Bank's activities.
On June 19, 1934, the Cuban commission investigating the legality of
$60,000,000 of the American loans declared them to be illegal, but the
Chase Bank insisted in a public statement that there were no grounds
for repudiation.
THE ACTIVITIES of the two largest banks in the United States, the National
City Bank and the Chase National Bank, through their stock-selling
affiliates, were the subject of exhaustive investigation by the Senate

Committee on Banking and Currency. By the time the investigation
conducted by Ferdinand Pecora was completed, the reputations of two
of the demigods of the boom, Charles E. Mitchell and Albert H. Wiggin,
were such that it was found to be to the advantage of their institutions
to have them resign from all connection with them.
Mr. Mitchell and Mr. Wiggin were supersalesmen of securities, and it
was during their ascendancy that the technique of selling people reposi-
tories for their life savings and the dream of getting wealthy beyond reason
became highly developed in a manner which had previously been con-

fined to the sale of vacuum cleaners, sets of encyclopedias, and subscriptions
tomagazines.
In 1911 the National City Company was organized as an affiliate of the
National City Bank, but until 1927 it confined itself to selling to the public
only bonds, notes and debentures. Thereafter it also dealt in common

and preferred stocks of a risky nature. By 1929 the National City Company
had a private wire system which extended 11,386 miles and covered all
parts of the United States. It had 69 district and representative offices

throughout the country, served directly or indirectly by private wires, and
it had in addition
large numbers of correspondents in the country districts.
Three hundred and fifty high-powered salesmen were in its employ.
In order to keep its salesmen active, the National City Company con-
ducted sales contests in which districts competed with one another for
cash prizes to the men who could sell the American public the most stocks
and bonds. One large sales contest was for salesmen who could sell the
most stock of Cannon Mills, Oliver Farm Equipment Company, Wesson
Oil, Lautaro Nitrate Company, and the bonds of the State of Minas
Geraes in Brazil, all pet promotions of the officers at the home office.
The "New Business Department" of the National City Company com-
piled lists of prospective customers for stocks and bonds, which lists it
obtained from automobile registration lists, tax lists and others. During
1927 the main office sent its salesmen 47,447 new names of possible pros-
pects and during 1928 it sent out 122,000 new names. The salesmen
called personally on these people and tried hard to induce them to trust
thein savings to the National City Company, i they were not already
investors, and if they were to change their securities into those which
the National City Company was so recklessly sponsoring. The greatest
effort,however, was made to get the salesmen to persuade the American
people to buy National City Bank stock, for the National City Company's
main office rightly felt that a new investor in National City Bank stock was
a new potential customer for the stocks and bonds which the company
was issuing in rapid succession, without proper investigation into their
quality.
It was the habit of the National City Company to send over its private
wires telegraphic flashes signed "General Sales." On February 6, 1929,

"General Sales" sent its agents in the field a telegraphic dispatch from
the general headquarters entitled, "Loaves from Crumbs." This essay
pointed out that when clients sold securities and bought others, there
was frequently a cash balance to the credit of the clients. The salesmen
were instructed to do everything they could to induce the clients to buy
one, two or more shares of National City Bank stock with these small
cash balances. "If the amount is insufficient to buy one share you can
have the customer put up the remaining cash," the letter advised. "If you
will continue this practice it will not be long before each client and you
by the shares of the National City Bank stock
will be agreeably surprised
that he will have accumulated. By using the crumbs of cash resulting

from exchanges to buy the new stock of the National City Bank and
continuing that practice as opportunity arises you will work these crumbs
into a loaf of substantial size with consequent advantages to the client,
the National City Co., and yourself."
Although the law did not allow a bank to trade in its own stock, this
was circumvented by the bank's use of its alter ego, the National City
Company, which was the largest single trader in National City Bank
stock. The National City Company sold the public 1,950,000 shares of
the National City Bank stock at an approximate cost to the public of
$650,000,000. In September, 1929, the book value of the National City Bank
stock was $70 a share, or a total for the capital stock of $385,000,000. At that
time market value was $3,200,000,000, for the stock was selling as high as
its
$579 a share.
After Mr. Charles E. Mitchell's testimony before the Senate committee
on the morning of February 21, 1933, Senator Brookhart told the com-
mittee when it had reconvened after the luncheon recess:
"As this committee adjourned at 12 o'clock today I was surrounded

by a dozen people in this room who said they had lost all their life's
savings by buying securities in the National City Co. or the National City
Bank, and they are complaining about this situation. They are right here
in this room."
Almost every investigation has its human interest witness, and the
human interest witness of the banking investigation was Mr. Edgar D.
Brown, of Pottsville, Pennsylvania. Mr. Brown had been a theatrical

manager and producer. He had sold his theaters and had about $100,000.
His health was bad, and he was contemplating a trip to California. In
December, 1927, he happened to see an advertisement in one of our
national magazines, which read:
Are you thinking of a lengthy trip? If you are, it will pay you to get
in touch with our institution, because you will be leaving the advice of
your local banker, and we will be able to keep you closely guided as
regards your investments.
The advertisement was signed, "National City Company." Mr. Brown

answered the advertisement, and Fred Rummel, representative of the
National City Company in his district, called to see him. Some of Mr.
Brown's money was already invested in valuable United States govern-
ment bonds and valuable bonds of the Italian government. Mr. Rummel
took a list of Mr. Brown's securities and returned again after advising
with the home office about Mr. Brown's case. He advised Mr. Brown
to sell all his bonds, which he assured him were all wrong for him. In
order to facilitate the transfer of Mr. Brown's holdings to new securities

which the National City Company would sell him from its store, the
National City Bank loaned Mr. Brown $75,000. Then Mr. Rummel
showed Mr. Brown how He
pointed out that if he borrowed
to get rich.
money at 5 and 5 l/2 per cent from the National City Bank and bought
with it bonds which the National City Company was selling that yielded
7 l/2 per cent, he could make the difference in his interest and pay off his
loans with his profits. The bonds, Mr. Rummel assured Mr. Brown, were
sure to go to par very soon.
Mr. Brown wished to be conservative. He insisted that the National
CityCompany buy only fixed-income securities for his account and no

common stocks. Then the National City Company began to trade for
Mr. Brown, and the trading went on so fast and furiously from one
security to another that Mr. Brown testified he was utterly unable to keep
track of his own holdings. By means of loans from banks in his state,
arranged for him by the representative of the National City Company,

Mr. Brown found himself the possessor of between $200,000 and $250,000
worth of investments on his original capital of $100,000. But instead of
going up towards par, the bonds purchased for him by the National City
Company declined in value, and Mr. Brown, worried, complained to
Mr. Rummel.
"
"And he said," Mr. Brown testified, 'Well, that is
your fault for
insistingupon bonds. Why don't you let me sell you some stock?' Well,
the stock market had been continually moving up. So then I took hook,
"
line and sinker and said, 'Very well. Buy stock.'
"Did you tell him what stocks to buy?" Mr. Pecora asked.
"Never," said Mr. Brown.
"Did he buy stocks then for your account?"
"Might I answer that facetiously Did he buy stocks? (Great and pro-
longed laughter.)"
The witness then produced a mass of confirmations of purchases of various
stocks, too numerous to read into the record.

In August, 1929, Mr. Brown went to Los Angeles for his health. Mean-
while, the National City Company had purchased for him some of its
pet stock issues, in some ofwhich pools and syndicates were operating
to keep the market prices high and reap profits at the expense of the
stock-buying public. In September, 1929, Mr. Brown realized that the
prices of his stocks were declining, and he decided that he would like to
sell them at once. He went to the Los Angeles office of the National City
Company, determined to do so. "I was placed in the category of the man
who seeks to put his own mother out of his house," Mr. Brown testified.
"I was surrounded at once by all of the salesmen in the place, and made
to know that was a very, very foolish thing to do." He was told, he said,
that it was especially foolish to sell the National City Bank stock which
he owned. He also received an unsolicited telegram from his Pennsylvania
National City acquaintance, Mr. Rummel, reading: "National City Bank
now 525. Sit tight." Mr. Brown said he wondered how Mr. Rummel knew
his address. He still tried to sell his stocks, but each time he was told by
the National City salesmen that the market was going up, and that he
was very foolish.
Then on October 29, 1929, after the stock market crash had developed
into a stampede, the National City Company sold out Mr. Brown's hold-
ings of National City Bank stock at $320 a share without consulting him.
Watching the stock quotations in the office of the National City Company
in Los Angeles at seven o'clock in the morning with his wife, Marie,
Mr. Brown said : "I was about as blue as a poker chip." Later Mr. Brown
wrote Mr. Beebe, of the New York office of the National City
Company,
a letter of protest, in the course of which he said concerning this early
morning scene in Los Angeles: "Everybody was groaning and my godding
until I said, 'Come on, let's get out into the air. This stuff will be all
right.
These folks are just getting panicky.'" Meanwhile the National City
Company was selling Mr. Brown's stock. The result was that Mr. Brown
became literally penniless. In the course of the long letter of protest which
he wrote to Mr. Beebe, he pointed out:
Now get this picture.

I am now 1
40 years of age tubercular almost totally deaf my wife

and family are depending on me solely and alone and because of my
abiding faith in the advice of your company I am today a pauper.
Mr. Brown wanted Mr. Beebe to arrange to lend him some more money
tobuy more stock, but by this time even the National City Company had
had enough of lending people money to buy stock on its own advice with
the stock as collateral. At the time Mr. Edgar Brown testified before the
Senate committee, February 28, 1933, he gave his occupation as "clerking

for the poor board" back in Pottsville, Pennsylvania.
On the profits of selling billions of dollars' worth of securities to millions
of people throughout the world, the officers of the National City Bank
and the National City Company were good to themselves. They had for
many years what was known as the "Management Fund," out of which
they paid themselves large sums each year for their salesmanship. Mr.
Charles E. Mitchell testified that the Management Fund was necessary
and to prevent them from accept-
in order to keep the executives satisfied
ing lucrative partnerships in private banking houses. Most of the execu-

tives, he said, received salaries of only $25,000 a year, except himself; his
salary was $100,000 a year and was increased to $200,000 a year during
the depression year of 1931. A few of the other executives received more
than $25,000, but the bonuses made up for the comparatively small salaries,
Mr. Mitchell maintained.
The Management Fund of the National City Company, Mr. Mitchell
consisted of half of 20 per cent of the earnings of the company
testified,
after deduction of 8 per cent "for the tools." The officers met in January
and July of each year and voted by secret ballot how much of this half
of the 20 per cent should each one of them, each voter omitting his
go to
own share. Mr. Mitchell admitted that his share was
usually one-third
of the fund. There was also a Management Fund for the officers of the
National City Bank as well as for those of the company, and Mr. Mitchell,
being chairman of the board of directors of both institutions, shared

heavily in this fund also. Between 1921 and 1929 inclusive, the Manage-
ment Fund of the National City Company totaled $10,511,670.95 and that
of the Bank, between 1923 and 1930 inclusive totaled $8,490,634.22, or a
total of more than $19,000,000 for both institutions. During these years
Mr. Mitchell's share of the Management Fund of the National City Com-
pany amounted to $3,757,877.82 and for the bank to $3,192,662.01, or a
total of $6,950,539.83.
When Senator Couzens asked Mr. Mitchell whether he thought the
Management Fund system a good one, looking at it in retrospect, Mr.

Mitchell answered:
"Yes; I think so, and I would really feel quite strongly about that. I
have seen it apply in the bank where it was established after I became
president of the bank, and it establishes an esprit de corps and an inter-
est inone officer in another officer's work that is to me most noticeable."
It was brought out at the banking investigation that the system of
bonuses for high-powered salesmanship also established an elan vital

in the effort to sell the public any and all kinds of securities, without proper
investigation of their safety, with a view to increasing the profits of the

individual executives whose duty it was to pass upon and to investigate
issues of securities to the public.
"Does it not also inspire a lack of care in the handling and sale of
securities to the public, because each individual officer has a split?"
Senator Couzens asked.
"I can readily see," Mr. Mitchell answered, "from your point of view,
that that would seem so, and I must grant that it must have some in-
fluence, Senator Couzens. At the same time, I do not recall seeing it
operate in that way."

"You would not see it," remarked Senator Couzens. "Only the cus-
tomers would see it after they had gotten their securities."
After the stock market crash in October, 1929, a resolution was passed
at ameeting of the board of directors of the National City Bank setting
aside a fund of $2,400,000 of the bank's money to be used by Eric P.
Swenson and James H. Perkins as trustees, to make loans "either with or
without security as in their complete discretion they may deem proper,

to such officers of the bank and its affiliate corporations as they may deem
proper, for the purpose of making loans to such officers in the present
emergency, and thereby sustaining the morale of the organization." Mr.

Rentschler testified that these loans to officers were absolutely essential
to maintain the morale of the personnel for the good of the bank. One
vice-president received $296,000 from this fund and eventually he was
able to pay back only $11,000; the balance of $285,000 was taken over in
December, from an obligation of the bank and made an obligation

1930,
of the National City Company; at that time it was written down to
$65,000. No deductions were made from the officer's salary to meet this
payment. There were other similar cases, and Mr. Mitchell himself owed
the National City Company $666,666.67, which was written down to $1
on its books.
This convenience for helping them out of their stock market losses
was limited, however, to the officers of the bank and its affiliates. The
employees of the National City Bank and the National City Company,
whose morale was also important to the institutions, were accorded
different and drastic treatment. On that important
February 15, 1927,
when the stockholders of the National City Bank were
manipulated
into holding the bag for the bank's sugar loans in Cuba, the directors
had time for another enterprise.
They inaugurated that day a stock-
the employees of the bank. In December,
purchase plan for 1929, after
the crash in the stock market had occurred, this stock-purchase
plan was
further elaborated. At that time the employees of the bank were "per-
mitted" to buy stock of the National City Bank and pay for it over a
period of four years with interest to the bank for unpaid balances. Under
this plan 60,000 shares of the bank's stock were sold to employees, some
of whom may have feared for their jobs if they refused to
buy, at be-
tween $200 a share and $220 a share. In this way the bank received an
investment from its own employees of more than $12,000,000. The pay-
ments for the stock were deducted each month from the employees' pay
checks. In 1933 when Mr. Gordon S. Rentschler, the president, testified,
the stock of the bank was selling at $40 a share. But the employees were
paying for their stock at the rate of $200 to $220 a share, and these
still
payments were still being taken from their pay checks. Mr. Pecora
wanted to know whether this was good for their morale. Mr. Rentschler
replied that in his opinion the morale of his employees was as "strong
and fine" as that of any organization in the country.

At the Senate investigation, Mr. Charles E. Mitchell admitted that in
1929, when his income was more than $4,000,000, he had sold stock to
his wife,with the purpose of avoiding income taxes, and thus had not
paid any income tax in 1929. In February, 1933, Mr. Mitchell and Mr.
Hugh B. Baker resigned as heads of the National City Bank and National
City Company respectively, as a result of the criticism leveled at them
after the revelations brought out by the Senate committee. In June, 1933,
Mr. Mitchell was tried for income tax evasion, and after a long trial
before a jury, with Mr. Max D. Steuer as his attorney, Mr. Mitchell was
acquitted.
Most sound banks resemble each other, but most reckless banks are
reckless in different ways. The activities of Albert H. Wiggin and the
Chase National Bank showed distinctive characteristics as revealed in
the testimony of Mr. Wiggin and his associates before the Senate com-
mittee.
Mr. Wiggin formed three family corporations, similar to Harry Sin-

Hyva Corporation. These were called the Shermar Corporation,
clair's
the Murlyn Corporation and Clingston Company Inc. Mr. Wiggin testi-
fied that Shermar and Murlyn were named after parts of the names of
his two daughters, and that, "There was a little sentiment about it." The
purpose of these corporations, however, and their activities were not

By means of them Mr. Wiggin was enabled to trade actively
sentimental.
in stocks of his own bank and other institutions and also to avoid high
income taxes and inheritance taxes. The only stockholders of the corpora-
tions were the immediate members of Mr. Wiggin's family, but their
officers and directors included officers and directors of the Chase National
Bank and the Chase Securities Corporation, which Mr. Wiggin domi-
nated, as Mr. Mitchell dominated the National City Bank and the
National City Company.
In the five-year period between 1928 and 1932 the three family cor-
porations of Mr. Wiggin made total profits of $10,425,657.02 on transac-

tions in the stock of Chase National Bank; these were actual cash profits
and not paper profits. Meanwhile, the stock-trading corporation oper-
ated by the Chase National Bank for its stockholders, Metpotan Securities
Corporation, made a profit during the same period of only $159,573.84

on the stock of the Chase National Bank. Mr. Wiggin's family corpora-
tions sold the stock of Mr. Wiggin's bank short as well as bought it
long. Mr. Wiggin admitted in his testimony that it would have been
improper for him to sell the stock of his own bank short himself, but
he saw no impropriety in doing so via his family corporations. Besides his
family corporations, Mr. Wiggin had a group of Canadian corporations,
which were used to save income taxes on his speculations.
Officers of theChase National Bank borrowed money from Mr. Wig-
in stock market operations, and
gin's family corporations to indulge
they also borrowed money from the bank itself. Thus men who were
under obligation to Mr. Wiggin personally for loans from his family
corporations were the same men who approved Mr. Wiggin's transac-
tions in the bank and the transactions between the bank and Mr. Wig-
gin's family corporations.

The Chase National Bank under Mr. Wiggin made large loans to
syndicates and trading accounts for stock market speculations. Mr. Wig-
that we
gin finally admitted after cross-examination: "I certainly agree
should not have made those loans." Through his family corporations Mr.
Wiggin participated in pools and syndicates to

his profit. pool in A
Sinclair Consolidated Oil Corporation stock organized by Harry F. Sin-
clair, Blair & Company, Chase Securities Corporation, and Mr. Wiggin's
Shermar Corporation, made a by trading in Sin-
profit of $12,200,109.41
clair stock and influencing its price.Mr. Wiggin's corporation received
a profit of $877,654.25 on this deal. Mr. Sinclair and some of the directors
of his company, who participated in some cases in the profit of pool, the
approved the sale by the Sinclair company to the pool

of 1,130,000 shares
of stock to be used by the pool for trading.

When he appeared in the public eye again at the banking investigation
to testify to the details of this pool operation, Mr. Sinclair was far from
chastened his jail sentences and his experience before the Senate com-
by
mittee in connection with Teapot Dome. He gave it as his opinion that
the banking investigation "was a joke," and when this made the Senators
and Mr. Pecora indignant, Mr. Sinclair tried to amend it by saying that
he had been referring only to particular testimony concerning the pool
transaction. Senator Couzens remarked: "A good many people thought
Teapot Dome was a joke at one time. I hope that they do not go through
the same sentiments during this investigation."
Mr. Albert H. Wiggin resigned as chairman of the board of the Chase
National Bank on January 1, 1933, and was replaced by Mr. Winthrop
W. Aldrich, brother-in-law of John D. Rockefeller, Jr., the Rockefeller

interests being the dominant forces in the Chase National Bank. On
December 21, 1932, the executive committee of the Chase National Bank,
consisting of a small number of the officers, met and voted Mr. Wiggin
a salary of $100,000 for life upon his impending retirement. The purpose
of this gift was said to be in order to discharge the obligations of the
bank Mr. Wiggin in some measure and in order to keep him prepared
to
to continue to serve the bank. But when questioned by Mr. Pecora, Mr.
Wiggin could point out no particular services which he had performed

for his life pension to date, except that the fact of the pension made him
feel himself "at the beck and call of the bank." Mr. Wiggin also admitted
that was he himself who had taken up with Mr. Aldrich and the
it
directors the matter of a pension for life, and that he had even mentioned
the sum of $100,000 himsetf.
"Did you find any dissension in the views of the gentlemen with
whom you discussed it?" Mr. Pecora asked.
"On the contrary, I found enthusiasm for it,'* Mr. Wiggin replied.
As they were giving away their stockholders' money, the gentlemen, who
were also stockholders, could afford to be both generous and enthusiastic.
Perhaps they all expected to retire some day themselves and felt that the
pension to Mr. Wiggin was an encouragement to the young to give their

best to their institutions.
During Mr. Wiggin's administration the Chase National Bank had

engaged in reckless foreign financial adventures, of which the Cuban
finance, which we have already discussed, was outstanding, and in equally
adventurous domestic adventures among the motion picture companies and
other unstable financial elements in American life. In the course of those
activities the Chase Bank had sums of money.
lost great
Previous to his retirement Mr. Wiggin had drawn an annual salary of

$202,000 and had received in addition a bonus of $100,000 in 1929 and a
bonus of $100,000 in 1930.
"They creditedyou with being responsible for some of their added

profits in the good years?" asked Senator Adams.
"I think so, sir," said Mr. Wiggin.
"In the bad years did they charge you in any way with responsibility
for losses?"
"No, sir."
"It has only worked one way?"

"Only one way."
In addition to these salaries and bonuses, Mr. Wiggin had received

$40,000 a year from Armour & Company, $20,000 a year from the Brook-
lyn-Manhattan-Transit Corporation, $5,000 a year from the Finance Com-
pany of Great Britain and America, $3,000 a year from the American
Express Company, $3,000 a year from the Western Union Telegraph
Company, $2,000 a year from Underwood-Elliott Fisher Company, $2,000
a year from International Paper Company, $1,500 a year from Stone &
Webster, $300 a month from the American Locomotive Company and

$300 a month from the American Sugar Refinery. Of some of these
companies Mr. Wiggin was a member of the board of directors, and to
others he acted as adviser. In several important instances the
companies
or their executives were indebted to the Chase National Bank for large
loans.This was particularly true of Gerhard M. Dahl and the Brooklyn-
Manhattan-Transit Company, of which he was the head, and of Mr.
Graustein, of the International Power & Paper Company, of which he
was the head. The Chase Bank much money on loans to both of these
lost
companies and their officers. Mr. Dahl's loans at the Chase National Bank
reached as high as $4,758,000 at one time, and on June 15, 1932, he owed
the Chase National Bank $3,183,358.19, which had been written down to
$615,000.
"What was Mr. Dahl borrowing this money for?" Senator Couzens
asked."To buy B. M. T. stock?"
"I think so," Mr. Wiggin replied. "Speculation. Investments that turn
out wrong are speculations."
Mr. Wiggin's Shermar Corporation and the Chase National Bank sold
stock in the B. M. T. during the early days of June, 1932, at $24 a share
and by their sales depressed the market for the public to $11%- Then on
June 20, 1932, the board of directors of the B. M. T. met. Mr. Dahl was
chairman of the board; Mr. Wiggin was chairman of the finance
committee of the B. M. T. At that meeting the company decided to pass
its regular dividend. Mr. Wiggin insisted in his testimony that he did
not know when he sold his stock and when the Chase National Bank
sold its B. M. T. stock held on Mr. Dahl's loan, that the B. M. T. was
going to pass its dividend. "I thought they ought to," he added, "but I
was only one."
On the same day on which the Chase National Bank directors voted
Mr. Wiggin a salary of $100,000 a year for life, the Chase Securities Cor-
poration made an agreement with Mr. Wiggin concerning certain trans-
actions it had had with his Sherman Corporation. In conjunction with
Pynchon & Company, West & Company and W. S. Hammons & Company,
stock brokerage houses which were all in bankruptcy, the Chase Securities
Corporation and the Shermar Corporation had participated in various

trading syndicates and accounts dealing in speculation in the stocks of
General Theatres Equipment Inc. There was some question as to whether
Mr. Wiggin's Shermar Corporation might not be liable for all the moneys
still owed the syndicate by the three bankrupt corporations. Mr. Wiggin
testified that there was no doubt in his mind or that of his lawyers that
he was not liable for these debts, but in order to make doubly sure, he
agreed that the Shermar Corporation would turn over to the Chase
Securities Corporation 25,000 shares of Chase National Bank stock, then
worth $1,000,000, and thereby the Shermar Corporation was to be absolved
of all liability to the Chase Securities Corporation in this transaction.
Mr. Wiggin said that he did this "to avoid any possible criticism," although
he was sure that he did not have to do it legally.
After his testimony before the Senate committee, Mr. Wiggin sent the
board of directors of the Chase National Bank the following statement:
New York City, October 24, 1933.

To the Board of Directors of the Chase National Bank of the City of
New York, N. Y.
Gentlemen: At the time of the agreement to pay me annual compensa-
tion of $100,000 it was believed to be in the best interests of thebank.
As that agreement has been criticized, I beg to request that it be ter-
minated.
Yours sincerely,
ALBERT H. WIGGIN.
SENATOR Robert M. La Follette, Jr. called the leading bankers, industrialists

and economists Washington between October and December, 1931,
to
two years before the Senate's banking investigation, to get their ideas on
the advantages and disadvantages of forming a National Economic Coun-
cil to plan the economy of the United States thoughtfully. The detailed
opinions of the witnesses make interesting reading. Some of them were

helpful and some of them were hopeless. Mr. Daniel Willard, of the
Baltimore & Ohio Railroad, was conscious "in the last 10 or 12 years that
something has changed. Men get out of a job and they continue out and
it is not because they do not want to work." And he added: "The fact
is most of the trouble we have today arises from the fact that we are not
dividing things just right somehow. Our scheme of dividing up is not work-
ing. ..
Certainly it would be much more difficult if we did not have
.
enough to go around. That would be a real problem, but fortunately we

have no such problem as that."
Mr. Albert H. Wiggin sang a song which might have been called the
Ecclesiastes of Rugged Individualism:
"A man only lives so many years and his experience only lasts with
him many years," said Mr. Wiggin. "New generations succeed and
so
they will make the same blunders in the next generation

and succeeding
generations as were made in the first. ." . .
"Your counsel is one really of despair, then," said Senator La Follette.

"We are going to suffer these terrific dislocations and the suffering that
goes with them on the part of the people generally?"
"I think you are looking for a superman," said Mr. Wiggin, "and
there is no such thing. Human nature is human nature. Lives go on. So
long as business activity goes on we are bound to have conditions of crisis

once in so often. We
may learn from each one how to avoid that par-
ticular difficulty the next time, but you are always going to have, once
in so many years, difficulties in business, times that are prosperous and
times that are not prosperous. There is no commission or any brain in
the world that can prevent it."
"You think, then, that the capacity for human suffering is unlimited?"
"I think so."
Mr. Charles E. Mitchell testified in a similar strain. He found that

"mistakes are among the penalties that have to be paid for freedom."
"Freedom for the individual to engage in whatever business he chooses,
and to develop that business in accordance with his talent and judgment,
is a privilege which all Americans cherish," said Mr. Mitchell. He thought
that an economic council might be useful in gathering statistics, and he
added: "I can not help feeling, however, that business will be governed
bestby the natural laws of supply and demand, which will control the
situation more effectively than the best-intentioned regulatory or advisory
body imposed from above could possibly do. This is not a counsel of
despair, as I have heard it termed before this committee, but a counsel of
common sense."
As we have seen from the record since the end of the war, business has
run department of the government for aid whenever it could
to every
get such aid by subsidy or by corruption. The laws of supply and demand
have been violated constantly for many years, and the rugged individual-
ists seem to be the first to attempt to turn the centralized forces of the
community to their own uses whenever and wherever possible. It is

obvious from the actions of the privileged characters of the past that many
of them have had neither integrity nor ability. In order to insure that
even the predatory individuals may survive, it seems necessary to take
financial and political control out of the hands of men whose impotence
is more dangerous even than become willing
their selfishness. Unless they
cheerfully to reconcile their personal desires for power and wealth to the
needs of the community, they have staring them in the face that system
which has been so drastically successful in Russia, the complete control
of their lives, thoughts, opinions and wants, or at least the attempt at
that control.
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Bibliography
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Alleged Activities at the Geneva Conference. Hearings before a subcommittee
of the Committee on Naval Affairs, U. S. Senate, 71st Congress, 1st Ses-
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Index
American-Hawaiian S. S. Co., 320

American Legion, 25, 203, 225, 373
Adams, Charles Francis, 448 American Locomotive Co., 488
Adams, Senator, 51, 110, 132, 488 American Metals Co., 316
Aitken, L. L., 50, 85 American Steamship Owners' Assoc.,
Akens, J. Donald, 160, 161, 164 320,341,342
Alaska, coal reserves of, 65, 99 American Sugar Refinery, 488
Albuquerque Morning Journal, 104 Ames, Emerich & Co., 459
Alcorn, John B., 14 Anderson, Crampton, 58
J.
Aldrich, Winthrop W., 170-172, 452, Armour, Ogden, 256

J.
487 Armour and Co., 256, 488
Alexander, H. F., 205, 329 Ashurst, Henry F., Sen., 236, 247, 254,
Alleghany Corp., 448 257, 270, 305
Allen, Henry J., Sen., 349, 351, 354, Associated Oil Co., 58, 74
355, 356, 369, 372, 375, 376, 379 Atlantic, Gulf & West Indies Co., 321
Alps Drug Co., 270 Atterbury, Gen. W. W., 382
American Airways, 399, 400, 402, 405, Austin, Warren R., Sen., 398, 417, 423,
420 425
American Bank Note Co., 429 Aviation Corp. of Delaware, 382, 383,
American Brown Boveri Elec. Corp., 395,399,400,402,408,428,433
344, 348, 358, 362, 364, 365, 369,
372 B
American Diamond Lines, 338
American Elec. Ry. Assoc., 100 Babcock&WilcoxCo.,365
American Engineering Co., 365 Bagley, Joseph H., 429-432
American Export Lines, 339, 340 Bailey, L. J., 260
American Express Co., 488 Bain, H. Foster, 39, 57, 58, 75, 107
American Farm Bureau, 341, 342 Baker, Hugh B., 485
American Fed. of Labor, 237, 417 Baker, Newton D., 448
497
498 INDEX
Baldwin, Hutchins and Todd, 294 Boston & Maine R'd., 297, 299-301
Baldwin, Merritt, 137, 138, 176 Boucher, Francis M., 281
Ball, Clifford, 397-399 Bowen, M. W., 79, 80
Baltimore & Ohio R'd., 490 Boy-Ed, Capt. Karl, 288
Bank of the United States, 35 Brandegee, Frank B., Sen., 12
Bankers' Club, 55 Braniff,Paul,402,419,420
Bankers Trust Co., 382 Branifif Air Lines, 402, 419
Bankhead,W.B.,Rep.,334 Bratton, Sam G., Sen., 33, 37, 156, 169,

Bardo, C. L., 348-351, 358, 359, 362- 174, 175, 178, 190
366,368,369,372,373 Breck, Henry C., 459, 460, 463
Barkley, Frederick R., 15 Breckinridge, Col. Henry, 382
Barlow, Joseph E., 474 Brittin, Col. L. H., 390, 427, 428
Barnett, Roy J., 36, 37 Brookhart, Smith W., Sen., 232, 233,
Barron, Clarence W., 7, 38, 47, 150 238, 241, 248, 260, 265, 274, 275,
Bath Iron Works, 365 285, 304, 307, 310, 312, 313, 337,
Battle, George Gordon, 157 442, 479
Beals, Carleton, 470, 474, 475 Brooklyn Manhattan Transit Corp.,
- -
Beard, Charles A., 344 488, 489

Beck, James M., 19 Brown, Edgar D., 479-482
Bennett, Ira E., 114, 115 Brown, Walter F., 15, 25, 280, 383-433
Bethlehem Shipbldg. Corp., 328, 347, Bruce, James, 473, 475
348, 350, 359-361, 365, 366, 369 Bruce & Co., 429-431
Bethlehem Steel Corp., 347, 359, 443 Buckland, Edward G., 298, 299
Bieber, Sidney, 195, 209 Buckley, Edward, 55, 56
Bierman,C.H.,217,218 Buena Vista Hills naval oil reserve, 44
Birth of a Nation, The, 4 Bulletin of the American Bureau of
Black, Hugo L., Sen., 332, 339, 340, Shipping, 324
343, 389, 394, 395, 399, 400, 402, Bunch, Alonzo E., 280-282
405, 406, 414, 417-419, 421, 422, Burbank, Dr. Caryl, 147
425-28, 430 Bureau of Investigation, Dep't of Jus-
Black, James W., 197-199, 207, 208 tice, 210, 230, 231, 256, 260, 262,
Black, Loring M., Rep., 349, 350 278, 281, 311, 312, 314
Blackmer, Henry M., 27-35, 40, 41, 56, Burkinshaw, Neil, 160, 164
85, 152, 153, 157, 158, 167, 173,
Burns, Sherman, 162, 165
174, 183, 187
Burns, William J., 25, 164, 165, 203,
Blair, David, 263
210, 216, 217, 230, 234, 238, 256,
Blair & Company, 69, 249, 486
262, 265, 266, 278, 281, 284, 285,
Bliss, Cornelius N., 449
295, 296, 312, 313
Blyth, Witter & Co., 461 National Detective
Burns (Wm. J.)
Boeing Airplane & Transport Co., 415
Agency, 25, 160, 162-164
Bolster, Harold, 456, 460
Bursum,H.O.,Sen.,ll,91
Bonfils, Frederick G., 61, 84-86, 88, 89,
Murray, 12, 370
Butler, Nicholas
96, 102
William M., 179, 183, 184
Butler,
Borah, William E, Sen., 239, 241, 378,
474 "Buy Your Own Home" campaign,
296
Borglum, Gutzon, 262
INDEX 499
61, 70, 152-158, 165-177, 182, 183,

187, 191, 322
Cadwalader, Wickersham & Taft, 289 Cook, Dr. Frederick, 228
Calder, William M., Sen., 12, 219 Cooke, Levi, 147, 148
Campion, John F., 90 Coolidge, Calvin, 6, 26, 117, 147, 151,
Cannon Mills, 478 179, 192, 238, 239-241, 254, 281,
Caraway, T. H., Sen., 13, 124, 149, 384, 436, 439-441, 471
187,231,232,440 Cooper, John G., Rep., 82
Carpenter, George A., 228 Copper & Brass Research Assoc., 342
Carroll, Col. John H., 470, 474 Cord, E.L., 420
Catlin, Henry, 469, 470 Cotter, J. J., 57, 58, 75
Central Union Trust Co., 461 Council of American Shipbldrs., 348-
Centrale Ry. of Brazil, 466 350, 356, 362, 378
Chamberlain, George E., Sen., 260, Couzens, James C., Sen., 436, 446, 451,
261, 279, 297 483, 487, 489
Chambers, Frank Ross, Jr., 221-223 Cox, George B., 5, 14, 16
Chandler, Harry, 329, 330, 403, 404 Cox, James M., 17
Chase, C. C., 106-108, 190 Cramer, Charles F., 197, 203-205, 222,
Chase Nat. Bank, 452, 469, 470, 472, 223, 225, 226
473,475-477,485-490 Crane, Charles R., 47
Chase Securities Corp., 69, 249, 470- Creel, George, 46-50
472, 485, 486, 489 Crim, John W. H., 227, 258, 259, 292,
Chicago Journal of Commerce, 336 308
Chicago Tribune, 337, 354, 356, 357, Crime of Cuba, The, 470, 474
379 Crooker, Conrad W., 299-301
Child, Richard Washburn, 256 Crowded Hours, 266, 318
Chino Copper Co., 104 Cuba Co., 474
Christian, George B., 23, 63, 64, 91, 96 Cudahy Packing Co., 338
Church Peace Conference, 356 Gumming, Surg. Gen. H. S., 219
Cincinnati Enquirer, 22, 279, 282 Cummings, Homer S., 433
Cities Service Co., 443 Curtis, Charles, 68, 113, 114
City Investment Co., 221 Cutten, Ruloff, 447
Clansman, The, 18,242 Cutting, Bronson, Sen., 34, 37, 38, 40,
Clark, Sheldon, 164, 165 173, 175, 190
Clarke, James, 276, 277
Claytor, Dr. Thomas A., 149
Clingston Co., 485
Colliers Weekly, 344 Dahl, Gerhard M, 488, 489
Colonial Wine Co., 281 Daniels, Josephus, 46, 48-50, 54, 92
Colt, S. Sloan, 382 Darden, Col. James G., 89-91, 96, 99,
Commercial Bank, of Washington 234, 256
Court House, 309 Daugherty, Draper, 250
Congress of Industry, 438 Daugherty, Harry M., 4-6, 10-23, 26,
Connally, Tom, Sen., 454 58, 63, 64, 67, 68, 75, 90, 103, 105,
Continental Chemical Corp., 220 115, 122, 165, 203, 211, 220, 228-
Continental Trading Co., Ltd., 29-40, 269,318,323
500 INDEX
Daugherty, Mrs. Harry M., 244, 305 Durrell, J. H., 461
Daugherty, Mai S., 251-253, 256, 267, Dyche, J. E., 11,278,279
287,305,306,309,310,316,317
Davis, E. L, Rep., 325, 328, 329, 335,
336
Davis, James J., 19, 26 Easby-Smith, Col., 201, 216
Dawes, Beaman G., 28, 29, 31, 160, Eastman, Dillon & Co., 447
167, 247 Edwards, John, Judge, 390
Electric Boat Co., 461
Dawes, Gen. Charles G., 18, 28
Dawes Commission on Reparations, Electric Bond & Share Co., 443, 469
270 Eliot, Charles William, 47
Elk Hills naval oil reserve, 44, 189,
Day, Henry Mason, 162, 164, 165
191
Dayton Metal Prod. Co., 290
De Cespedes, Dr. C. M., 471 Elkins, Davis, 68
Deeds, C.W., 416, 417 Ellis, Wade, 3 15
Deeds, Col. Edward A., 290, 416, 467

El Paso & Southwestern Ry., 104
De Laval Steam Turbine Co., 365 Emergency Fleet Corp., 319, 320, 326,
Dempsey-Carpentier fight films, 282- 328,338
285 Equitable Trust Co. of New York,
170
Denby, Edwin, 21, 26, 44, 52-55, 60,
62, 66, 71, 72, 76, 77, 92, 98, 147, Everhart, M. T., 70, 71, 151, 166, 167
239, 240
Dennis, Lawrence, 462-464
Denver Post, 61, 62, 84-86, 88, 96, 102
Dill,C. C., Sen., 182, 262 Fall, Albert B., 10, 19, 20, 26, 41-43,
Dillon, Clarence, 465 50-86, 90-123, 125, 127-129, 131-
Dillon, Read & Co., 464-466 133, 138-149, 151, 153-155, 158-
"Disabled American Veterans," 225 160, 162, 164-166, 168, 169, 173,
Dixon, Thomas L., 4, 18, 241, 242 175, 178, 179, 183, 185, 186, 188-
Dockendorff, J. S., 339 190, 193, 203, 204, 205, 214, 234,
Doheny, Edward L., 20, 41-51, 53, 54, 240, 256, 302
57, 58, 61, 66, 72-79, 95, 97-99, Fall, Mrs. Albert B., 109, 110, 114
106-109, 112, 113, 116, 120-123, Farley, E. J., 330
138-147, 149, 151, 153, 154, 159, Farley, James A., 423-427, 428, 433
166, 187-190, 238 Featherstone Farms, 221-223
Doheny, Edward L., Jr., 42, 108, 151, Federal Board for Vocational Educa-
188 tion, 194
Dollar, R.Stanley, 33 1,332 Federal Hospitalization Board, 24,
Dollar S. S. Lines, 321, 330-332 194, 225
Dominion Bank of Canada, 35, 71, 152 Federal Reserve Board, 441-443
Doran, J. J., 422 Federal Shipbldg. Co, 365
Duckstein, W.
O., 109, 115, 117, 250, Federal Trade Commission, 39, 296,
257, 282, 311, 312 297
Duckstein, Mrs. W. O., 115, 261, 262, Felder, Col. Thomas B., 228, 231, 256,
275, 281, 285 272, 279, 313, 314

Du Pont powder plant case, 292, 293, Ferguson, Homer L., 334, 335, 348,
313 350, 370, 377, 378
INDEX 501
Fess, Lehr, 386, 387 Goodykoontz, Wells, 68

Fess, Simeon D.,
Sen., 386, 387 Gore, Thomas P, Sen, 452, 455
Finance Co. of Gt. Britain & Amer- Gorini, John, 270-273
ica, 488 Gove, Chase, 387
Findlay, T. M., 476 Grace, Eugene G, 359, 361
Finkelstein, Max J, 288 Graham Parsons & Co, 459
Finney, E. C., Judge, 60-62, 64-67, Grand Trunk-Chi, Milw. & St. Paul,
74, 75, 81, 97, 98 298
First Nat. Bank of Boston, 431, 432 Grant, Gen. U. S, 64
First Nat. Bank of Pueblo, Col., 151, Gray, William A, 445- 446
165 Great Divide, The, 88
Fisher, Gov. (Pa.), 441 Griffin, Rear Ad. R. S, 52, 53
Fitzpatrick, W. S., 154-156 Grundy, Joseph R, 12-14, 439, 440

Flather, A. C., 432 Guaranty Co. of New York, 461, 466
Flook, William, 372, 373 Guggenheim, Harry F, 476
Forbes, Col. Charles R, 24, 103, 193-
229, 240, 256, 278, 302, 329 H
Ford, Henry, 18, 47, 176
French, J. B, 11 Hallgarten & Co, 299
Fruit, Garden and Home, 336 Halliburton, Erie, 399-401, 404, 405,
Fuller Construction Co., 213 407, 408
Halligan, Capt. John, Jr., 54, 77
Halsey, Stuart & Co, 447
Hammons, W. S, & Co, 489
Garland, W.M., 403, 405 Hamon, Clara Smith, 8
General Drug Co., 268 Hamon, Jake, 7-1 1,278
General Electric Co., 365 Haney, Commissioner, U. S. Ship.
General Motors Corp., 443, 448, 449 Bd, 328
General Petroleum Co., 58 Hanna, Mark, 7, 230
General Sugar Co., 467, 468 Hanshue, Harris, 385, 403-406, 412,
General Sugar Corp., 468 413, 428
General Theatres Equipment Inc., 489 Harding, Florence Kling, 4, 16, 22,
Geneva Conf. on Naval Disarm., 350- 103, 261, 283, 316
359, 365-369 Harding, Warren G, 3-22, 44, 48,
George, Walter F., Sen., 451 52-56, 60, 63, 64, 72, 80-82, 89-91,
Gibson, HughS, 354, 357 95, 96, 98, 99, 102-105, 118, 147,
Gilbert, Clinton W, 26 155, 159, 175, 176, 193-196, 198,
Gilbert, S. Parker, 454, 455 204, 206, 213, 214, 218-220, 225,
Givvin, Gilbert L., 428 227-231, 234, 238, 239, 245, 256,
Glass, Carter, Sen., 437, 441, 452 261-266, 273, 278, 281, 283, 291,
Glass Casket Co, 3 14 295, 302, 307, 315, 316, 318, 322,
Glasscock, Norman L, 164 323, 325, 383
Glazebrook,O.J,Jr,432 Harding Cabinet, 25, 26, 176, 177
Glenn, JohnS, 311 Harding Inaugural Committee, 23, 89
Glover, W. Irving, 386, 387, 391, 393, Harding Memorial, 318
395, 399, 403, 422 Harris, Will Ed, 106, 108, 112, 113,
"Golden Fleece, The," 140 118, 119
502 INDEX
Hartley, Capt. Herbert,
362 Hunter, H. C., 348-350, 352, 353, 357,
Harvester Trust, 297 360-362, 366, 367
Harvey, Colonel George B. M., 12-14 Hurley, Charles B., 195, 205-208
Hawkins, W. A., 139 Hurley, Patrick J., 407, 408
Hayden, Charles, 291, 292, 382 Hurley-Mason Construction Co., 195
Hay den, Stone & Co., 291, 382, 447 Hutchins, Francis S., 294, 295, 299
Hays, Hinkle, 176 Hutchins, R. G., Jr., 299, 300
Hays, Will H., 10, 11, 17, 21, 26, 112, Hutton, E. F., & Co., 447
132, 155, 175-187, 256 Hyde Windlass Co., 365
Hays, William R. A., 246 Hyva Corporation, 68, 69, 125, 131,
Hayward, R. O., 464, 465 136, 138, 174
Hayward, William, 23, 272, 314

Heald, K. C., 72
Hearst, W. R., 363, 378, 379
Helms, Col. Birch, 60-64 Inside Story of the Harding Tragedy,
Henderson, Col. Paul, 382, 384, 385, The, 4, 310, 311, 317
387-390, 415, 419 Insull, Samuel B., 35, 447
Herberman, Henry, 339, 340 Institute of Economic Research, 448
Herr, E. M., 364 International Harvester Co., 338
Herrick, Myron T., 21 International Mercantile Marine, 329,
Hibbs & Co., 67, 257 331, 363, 428
Hildreth, Sam, 133, 134, 137 International Paper Co., 488
Hilles, Charles D., 449 International Power & Paper Co., 488
Hirsh Lilienthal & Co., 447
International Seamen's Union, 334
Hitler, Adolf, 455 Interstate Commerce Comm., 299,
Hogan, Frank J., 189 301, 386
Holmes, George E., 157 "Invisible Government," 233
Homer, Francis T., 122, 129
Hommel,V.E.,180
Hooven, Owens, Rentschler Co., 467 J
Hoover, George P., 150

Hoover, Herbert, 6, 12, 19, 26, 63, 64, Jahncke, Ernest Lee, 393, 394
99, 101, 102, 190, 192, 317, 318, James, Edwin, 353
Javits, Benjamin A.,
437-439
339, 369, 370, 378, 383-385, 403,
407, 408, 412, 425, 429, 432, 436, Jenkins, J.C., 341
438, 439, 441, 463 Jennings, Al, 7-11
408 Johns, Raymond L., 422
Hoover, Herbert, Jr.,
Howard, Clifford Scott, 35 Johnson, Hiram, Sen., 5, 11, 12, 15,

Howland, Paul, 235, 287, 288, 293, 451-453,457,460,463
300, 301 Johnson, J. T., 59
Hoyt, Richard, 382 Johnson, Lucien, 203, 204
Hughes, Charles Evans, 18, 25, 65, Jones, Grosvenor M., 455
99, 241, 242, 283, 290,

416 Jones, Senator, 77, 247, 248, 255, 258,
271,304,305,363
Humphreys, Col. A. E., 29-34, 36, 40,
41, 61, 152, 167, 173 Jones-White Act of 1928, 338, 363-
167 365, 368
Humphreys, A. E., Jr., 28, 29, 31,
INDEX 503
K Leffingwell, Russell C., 434, 435, 439,

441, 443-445
Kahn, Otto H., 436, 451, 455 Leguia, Augusto, 456, 462, 463
Keller, Oscar E., Rep., 235, 237, 292, Leguia, Juan, 457, 459-461
295, 296 Lehman, Robert, 382
Kellogg, Frank B., 358, 360, 361, 454, Lehman Brothers, 382
455 Lejeune, Maj. Gen. John A., 92, 93
Kellogg-Briand peace pact, 374 Lenroot, Irvine L., Sen., 59, 88, 89,
Kendrick, John B., Sen., 66, 97 104, 108, 109, 113, 116, 124, 126,
Kennedy, Leonard, 382 129, 131, 134, 135, 142, 146
Kennedy & Co., 464, 465 Leviathan, S.S., 327, 333
Kerns, Cecil H., 279, 280, 293 Lincoln Motor Co., 234, 290
Keys, C. M., 382, 403 Lindbergh, Charles A., 381, 382, 401
Kidwell, Edward J., 160-163 Lion, David M., 445-447
King, Donald T., 160-162, 164 Lipscomb, William G., 221
King, John T., 12, 251, 315, 316 Lisman, Frederick J., 457
Klein, Henry, & Co., 429 Lisman, F. J., & Co., 456-461
Klein, Dr. Julius, 459 Little Green House in K Street, 23,
Knox, Philander, 12, 19 103, 256, 267, 268, 270, 273
Kountz, C. H., 154-156 Littleton, Martin W., 150, 160, 173
Kraffmiller, M. P., 23, 267-270, 273 Livermore, Jesse L., 69, 249
Kreuger, Ivar, 35, 453, 455 Livermore, Cal., hospital site, 203, 204,
Kuhn. Loeb & Co., 299, 300, 448, 452, 222,226
466 Lodge, Henry Cabot, Sen., 6, 12, 13,
16, 17, 20, 239
Longworth, Alice Roosevelt, 266, 318
Lord, Herbert M., 81
Loring, August P., 299
La Robert M., Sen., 49, 50,
Follette, Los Angeles S. S. Co., 329, 330
65, 97, 98, 232, 233 Los Angeles Times, 329, 403, 405
La Follette, Robert M., Jr., Sen., 437, Love, W. 320
J.,
490, 491 Lowden, Frank O., 3, 5, 11, 13, 16
La Guardia, Fiorello H., Rep., 448 Luckenbach S. S. Co., 320
Lakin, Herbert C., 474 Ludington Air Lines, 419
Lamb, H. R., 164 Lumber monopoly, 296
Lambert, Wilton J., 116-118, 120 Lundy, Paul, 271
Lament, Thomas W., 47, 454
Lane, Franklin K., 108
Lane, Thomas F., 289
M
Langley Bill, 194
Lanham, F. G., Rep., 394 McAdoo, Francis, 116
Larsen,W.W.,Rep.,225 McAdoo, W. G., 116
Lasker, Albert D., 25, 80, 81, 302, McCarl, J. R., 395, 406, 409, 410, 411,
322-337 412, 413, 414
Lautaro Nitrate Co., 478 McCarran, Patrick, Sen., 392, 425-427
League of Nations, 6, 17 McCarty, R. E., 298
Lee, Ivy, 344, 360, 363, 368 Machado, Gerardo, 469-471, 473-477
504 INDEX
Machold, Henry E., 449 237, 247, 248, 254, 261-265, 273,
McCormick, Medill, 12 286,287-290,293,311-314
McCormick, Paul J., 75, 76, 154 Means, Mrs. Gaston B., 288
McCormick, Col. Robert R., 337, 357 Mellon, Andrew W., 18, 19, 25, 117,
McCracken, William P., Jr., 384, 389, 179, 180-184, 256, 263-266, 314,
392, 395, 404, 406, 407, 427, 428 382, 388, 436
McCracken & Lee, 428 Mellon, R. K., 382, 397
McDonald, E. L., 429 Mendenhall, W. C., 72
McEniry, M. D., 62 Merchant Fleet Corp., 388
McFadden, Louis T., Rep., 447 Merchant Marine Act of 1920, 327
McKee, Thomas H., 391-394 Merton, Richard, 316
McKellar, Kenneth D., Sen., 337 Metpotan Securities, 486
McKinley, William, 17 Mexia, Texas, 27, 35, 41
107, 108
Midland Nat. Bank, of Washington
McKinney, Price,
Court House, 309, 315, 316
McLean, Edward B., 22, 109, 111-123,
129, 135, 138, 143, 144, 146, 147,
Midwest Refining Co., 27, 31, 41, 50,
149, 190, 231, 245, 248, 251, 252, 56, 62, 79, 82-85, 153, 158
Midwest Trade Assoc., 339
255, 280, 282-284, 322
McLean, Mrs. Edward B., 314 Miller, Col. Thomas W., 25, 256, 315-
317
McLean, John R., 231
McMahon, William J., 445 Milliken, John B., 203
McMillin, F. E., 429-431
Minas Geraes, Brazil, 478
McMullin, W. J., 162, 164 Mingle, Harry, 288, 289
McNab, Gavin, 139 Mitchell, Charles E., 290, 436, 437,
441, 442, 453, 454, 461, 467-470,
McNary-Watres Act, 386-388, 391,
395, 407, 414, 420 477, 479, 482-485, 491
Mitsui & Co., 286, 288, 289
McNutt, Comm., 373
Mixter, George, 382
MacPherson, Kenneth, 391, 421-423
Momand, Ragland, 295, 296
Magee, Carl C., 104-107
Montet, Numa, Rep., 393, 394
Maginnis, S. A., 458, 460
Moore, Alexander P., 256, 267
Maher, James, 421, 423
Morgan, Henry, 448
Major, John, 109, 114, 122
Morgan, J. P., 18, 434, 435
Maloney, Dr. W. J., 375, 376 &
Morgan, J. P., Co., 300, 434, 436,
Mammoth Oil Co., 61, 67-69, 85, 95,
448-451, 454
136, 157
Morrison, Cameron, Sen., 436, 437
Mannington, Howard, 23, 256, 257,
Morse, Charles W., 231, 272
260, 267-273, 299, 315 Mortimer, Elias H., 196-213, 225, 227,
Marland Refining Co., 268
228, 234, 278, 279
Martin, Ike, 283 Mortimer, Mrs. Elias H., 196, 197, 199,
Martin, Warren F., 238, 307 200, 202, 203, 207-209, 212, 213,
Mass. Pub. Serv. Comm., 299 228
Matson Line, 330 Moses, George H., Sen., 232, 248, 255,
Mayer, Julius, 299-301 286, 369
Mead, George J., 416 Mountain States Oil Co., 50
Means, Gaston B., 25, 21 1, 225, 231-235, Muma, "Jap," 279, 280, 282-285
INDEX 505
Murlyn Corp., 485 "Non-Partisan League of Wall Street,"

Murphy, G. M-P., & Co., 429, 432 233
Murphy, Owen B., 272 Norris, George W., Sen., 168
Mutual Oil Co., 90, 94, 96 Northwest Airways, 390, 427
Nutt, Joseph R., 449
N Nye, Gerald P., Sen., 20, 38-40, 55, 56,
82, 174, 180, 190
National Air Transport, 382, 384, 388
National Automobile Chamber of
Commerce, 342
National Aviation Co., 429 Obregon y Blanco, J. E., 473, 474, 476
National Broadcasting Co., 447 Ochs, Adolph S., 352
National City Bank, 172, 290, 415, O'Connor, T. V., 340
416, 441, 442, 461, 466-470, 472, O'Day, Tom, 222, 223, 226
477-485 Oddie, Tasker L., Sen., 224
National City Co., 415, 442, 453, 459, Official Gazette, Cuba, 473
461-463, 467-469, 477-485 Ohio State Bank, 317
National Economic Council, 436, 437, Oil reserves, U. S. Navy, 10, 11, 41-46,
490 48-50, 52-55, 58, 60, 62, 64, 70-75,
National Lumbermen's Assoc., 342 77, 89, 90, 95, 97-100, 103, 105,
Naval Fuel Oil Board, 46, 54 107, 108, 123, 141, 142, 146, 151,
Naval Petroleum Reserve, No. 1, 44, 159, 166, 188, 191, 193, 204, 214,
76 229
Naval Petroleum Reserve, No. 44
2,
Oil reserves, U. S. Navy, California,
Naval Petroleum Reserve, No. 44
3, 43, 58, 64, 71-77, 104, 140, 149,
Navy: Defense or Portent? The, 344 153, 159, 189, 232, 262
Navy League, 362 Old Hickory Powder Co., 293, 313

Nelson, Prof. (Univ. of Chi.), 447 O'Leary, Lieut. Comm. Charles R.,
New, Harry S., 283, 383 214, 215, 219
News Shipbldg. & Dry- Oliver Farm Equipment Co., 478
Newport
dock Co., 334, 348, 350, 360, 365, O'Neil, James E., 27-29, 31, 34, 35, 40,
369, 370-372, 377, 378 55, 56, 152-157, 167, 183, 187
New Republic, The, 359 Orr, William A., 23, 256, 257, 269-272,
New York Central R'd., 298, 300 283, 285
New York Commercial, 347, 348 O'Ryan, Maj. Gen. John F., 201, 202,
New York Daily News, 354 205,211,213,217,226
New York Herald Tribune, 448 Osier, H. S., 29-31, 35-37, 39, 40, 70,
N. Y., N. H. & Hartford R'd., 297-301 71, 152-155, 157, 168470
New York Shipbldg. Co., 340, 344,
348, 350, 358, 362
New York Times, 6, 16, 20, 160, 168,
176, 184, 189, 190, 352, 353, 356, Pacific Mail S.S. Co., 321
448, 461 Pacific Oil Co., 58
New York Tribune, 231 Palen, F. P., 348-350, 359-361, 366,
New York World, 6, 188, 316, 361, 367, 370-372, 377, 378
375 Palmer, A. Mitchell, 114, 116
506 INDEX
Pan-American Petroleum & Transport Pratt, John T., 179, 180, 182
Co., 20, 41, 57, 58, 74-76, 154, 172, Pratt & Whitney Aircraft Co., 415, 416
443 Price, McKinney & Co., 104
Panthen, Karl A., 470 Propeller Club, 347
Parker, Dr. Henry P., 147 Public Health Service, 24
Parker, Wilder & Co., 217 Pure Oil Co., 28, 247
Patten, James, 181, 182 Pusey & Jones, 365
Pearl Harbor, Hawaii, 42, 58, 73-75, Putnam, G. P., 419
77, 140 Pynchon & Co., 489
Pearson, Drew, 354-356, 358
Pecora, Ferdinand, 437, 442, 443, 449,
465, 468, 469, 477, 481, 485, 487
Pennsylvania R'd., 298, 299, 382, 401, Quimby, F. C., 282-285
403, 406
Penrose, Boies, Sen., 9-14, 19, 230
Pepper, George W., Sen., 239
Perkins, J. H., 484 Radio Corp. of Amer., 443
Perryville, Md., supply depot, 194, Rand, Col. William, 316
209, 211, 214-220 Raskob, John J., 448, 4*49
Phelon, John L., 309 Ratcliffe, S. K., 375
Philbin, J. Harry, 327-331 Reavis, H. S., 70
Phillips, H. L., 35 "Re-Conquest of America, The," 375
Pickett Act, 45 Reed, David A., Sen., 199, 210-213,
Pierce, Franklin, 16 224, 225
Pinchot, Gifford, 164 Reed, James A., Sen., 374
Pioneer Oil & Refining Co., 50, 83-85 Reiley, Capt. J. J., 419
Pittman, Key, Sen., 145 Remus, George, 273-277, 280
Pittsburgh Aviation Industries, 397, Rentschler, Frederick B., 415-418
398, 404, 406 Rentschler, Gordon, 415, 467, 484,
Amendment, 471, 472
Platt 485
Plummer, A. Newton, 448 Reynolds, Robert R., Sen., 447
Plummer, Commissioner, U. S. Ship. Rickard, Tex, 282-285
Bd., 325, 328 Ringling, John, 256
Plunkett, Admiral, 329 Robbins, G. N., 162
Poindexter, Miles, 458, 461 Roberts, Owen J., 86, 151, 160. 164,
Pomerene, Atlee, 151, 160, 189 189
Portland Cement Assoc., 342 Robertson, Maj. William B., 381, 401,
Portsmouth, N. H., oil storage tanks, 402
62,77 Robertson Aircraft Corp., 381, 402
Post Office and Roads Committee, 397 Robinson, Henry M., 403
Powell, J. W., 328, 329 Robinson, J. T., Sen., 114, 347, 349,
Prairie Oil & Gas Co., 27, 29-32, 35, 351
152, 154-156 Robison, Admiral John Keeler, 42-45,
Prairie Pipe Line Co., 154 52, 54, 71-76, 107, 142, 188
Pratt, Charles, & Co., 180 Rochester, Edward S., 122, 123
Pratt, Herbert, 179 Rockefeller, John D., 18, 171
INDEX 507
Rockefeller, John D., Jr., 34, 154, 167, Select Comm. to Investigate U. S.
170, 171, 346, 487 Shipping Bd., 79, 322, 325, 338
Rockefeller, Percy, 172 Seligman, J. & W., & Co., 456, 458-462
Rockefeller, William, 172 Senate Comm. on Banking and Cur-
Rockefeller Foundation, 170 rency, 434
Rogers, Will, 341 Senate Comm. on Finance, 453
Rollins, E. H., & Sons, 459 Senate Comm. on Manufactures, 69
Roosevelt, Archibald, 7, 102, 123-137, Senate Comm. on Public Lands, 7,
139, 147, 149 10, 98, 100, 103, 149, 166
Roosevelt, Franklin D., 49, 342, 425, Seubert, Edward G., 34
433, 476 Seymour, A. T., 296
Roosevelt, Kermit, 124, 135 Shaffer, John C., 65
Roosevelt, Theodore, 11, 20 Shafroth, Lieut. Comm., 49, 54
Roosevelt, Theodore, Jr., 53, 60, 62, Shea, Walter M., 160
91, 92, 95, 96, 123, 124, 126 Sheaffer, D. M., 382, 387, 406
Rovensky, Joseph, 473, 475 Shearer, William B., 344-379
Ruddy, Charles G., 162 Sheedy, Joseph E., 79, 80
Ruffin, Dr. Sterling, 149, 188 Sheldon, Rex, 263
Rummel, Fred, 480, 481 Sheppard, Morris, Sen., 394
Sherman Anti-Trust Act, 300
Shermar Corp., 485, 486, 489
Ship Subsidy Bill, 325, 332-337
Sacks, William, 401, 402 Shortridge, Samuel M., Sen., 349-351,

Sakhalin Island, 101, 102 355, 363, 368, 370-372
Thomas Shuler, Capt. George K., 92-96
Salt, V., 456, 457, 460
Salt Creek oil reserves, naval, 43, 64, Simonds, Frank H., 341
Sinclair, Harry F., 7, 9, 19, 28-31, 34,
71, 80-82, 90, 92
35, 40, 41, 50, 53-72, 76-91, 95-99,
Sanchez, R. J., 474
San Francisco Chronicle, 147 101, 102, 104, 105, 107-112, 116,
121, 123-129, 131-135, 137, 138,
Sanpaio, Dr. Carlos, 464
150-155, 157-162, 164-168, 172-188,
Santiago Electric Co., 470
203, 238, 249, 256, 485-487
Savage, E. W., 419
Sinclair Consolidated Oil Corp., 68,
Sawyer, Dr. Charles E., 24, 194, 195,
150, 176, 184, 443, 486
218, 219, 225, 227, 234, 256
Sinclair Crude Oil Purchasing Co.,
Scheduled Air Transport Operators'
Assoc., 420 29-36, 41, 55, 175
Sinclair Exploration Co., 162, 164
Scheuer, J. B., & Co., 268
Schuyler, Karl C., 86-88, 157, 158
Sinclair Navigation Co., 188
Sinclair Pipe Line Co., 41
Schwab, Charles M., 347, 359-361, 365,
368 Sinclair Refining Co., 164
Schwartz, H. H., 84, 85 Slemp, C. Bascom, 117, 281

Seapower Oil Co., Inc., 372 Smith, Daniel E., 267
Security First Nat. Bank, Los Ang., Smith, Jess, 14, 22, 90, 103, 203, 230,
403 232-282, 285-289, 293, 298, 299,
Select Comm. to Investigate Attorney 302-311,315,316
General, 238 Smithers, E. W., 115
508 INDEX
Smoot, Ernest, 409, 411-413 Sweet Bill, 194
Smoot, Reed, Sen., 12, 78, 107, 108, Swenson, Eric P., 484
109, 113, 123, 124, 387, 409, 410,
411,413,439
Smoot-Hawley Tariff Act, 439, 440 Taft, William Howard, 45, 50, 51, 231
Smull, J. B., 80, 320, 321 Tammany Hall, 5
Societe Belgo-Americaine des Petroles Tammen, H. H., 62, 84-86, 88, 96, 97
du Wyoming, 50, 83, 84, 90 Tarbell, W. W., 78, 191
Sons of the Wild Jackass, 15
Taylor, R. C., 89
Southern Pacific R'd., 43 Teapot Dome, 27-192
Southwest Air Fast Express, 399 Teapot Dome investigation, 7, 12, 14,
Spencer, Selden, 8-10 19,31-192,248,410
Sperry Gyroscope Co., 365 investigation, cost of, and money re-
Sprigg, Dr. William Mercer, 147 covered by, 187
Stack, Leo, 41, 48-51, 83-89, 157 investigation, public reaction to, 192
Standard Aero Co., 288 Teapot Dome lease, 59-72, 78, 79,
Standard Aircraft Corp., 286-290 83-86, 90, 96, 97, 104, 105, 132,
Standard Air Line, 428 137, 149-151, 153, 154, 157, 159,
Standard Oil Co., 36, 333 168, 179, 185, 186,232,262
Standard Oil Co. of Cal., 58, 74 Texas-Pacific Coal & Oil Co., 60, 62,
Standard Oil Co. of Ind., 27, 31, 33, 63
34, 36, 38, 39, 41, 50, 51, 55, 56, Thomas, Charles S., 28-31, 167
62, 84, 85, 154, 158, 169-172 Thomas, R. Y., Rep., 5
Standard Oil Co. of N. J., 443 Thompson, Commissioner, U. S. Ship.
Stanford, G. T., 68, 128, 133, 134, 137, Bd., 328
150 Thompson, Huston, 296, 297
Stavisky scandal, 192 Thompson, J. W., 197-201, 208, 227,
Stephens, Redmond D., 81, 82 228
Steuer, Max D., 316, 317, 485 Thompson, Mark, 189
Stewart, James, 172 Thompson, William Boyce, 47
Stewart, Robert C., 172 Thompson & Kelly, Inc., 214-219
Stewart, Colonel Robert W., 27, 29, Thompson-Black Co., 196-198, 201,
31-41, 56, 62, 81, 82, 84, 152-154, 205, 207, 213, 227
160, 167-172, 187 Thorpe, Merle, 341
Stinson, Roxy, 14, 90, 235, 236, 240, Tinker, Edward R., 69
243-257, 267, 269, 275, 279, 282, Tobacco monopoly, 296
285,286,302-308,311 Todd, Hiram, 3 11, 3 13, 314
Stone & Webster, 382, 488 Todd, John, 315
Stuart, Dr. Daniel D. V., 149 Townsend, Oliver C., 458, 459
Stuart, Comm. H. A., 46, 49, 52, 54 Transcontinental Air Transport, 382,
Stuart, Harold L., 447 387, 400, 403-406, 408, 410, 412,
Sumners, H. W., Rep., 394 428
Sun Shipbldg. Co., 365 Transcontinental & Western Air, 404,
Sutherland, George, 20 405, 408-413, 433
Sweet, M. L., 196, 205 Transoceanic Corp. of U. S., 362-364
INDEX 509
Traylor, Melvin A., 172 Untermyer, Samuel, 230

Tres Ritos Cattle Co., 71 Upham, Fred, 179, 181
Tucker, Ray, 15 Urion, Alfred R., 24, 283, 315
U
Underwood, Oscar W., 114, 115 Vanderbilt, William H, 382
Underwood-Elliott Fisher Co., 488 Vanderlip, Frank A., 47
Ungerleider, Samuel, 24, 252, 253, 280
Van Sweringens, 449
Ungerleider & Co., 246, 247, 251 Vauclain, Samuel M., 7
Union of Socialist Soviet Republics, Versailles, Treaty of, 3, 17
Veterans' Bureau, see U. S. Veterans'
102, 241, 242
United Aircraft & Transport Corp., Bureau
384,387,415-419,433 Veterans' hospitals, see U. S. Veterans'
United Air Lines, 419 hospitals
United American Lines, 363 Vietsch, Charles L., 165
United Avigation Co., 408, 409, 411, Vincenti, Charles, 278, 279
412 Volstead, Andrew J., 235
United Cigar Stores Co., 38 Von Papen, Capt., 288
United Corp., 448 Votaw, Caroline H., 24, 196
United Fruit Co., 249, 321 Votaw, Heber H., 24, 278
United Gas Improvement Co., 293-
295, 443 W
United Motors Co., 290
U. S. Bureau of Mines, 44, 57, 75, 76, Wadsworth, Earl, 393, 407
93 Wadsworth, James W., Sen., 12
U. S. Bureau War Risk Insurance, Wagner, Robert F., Sen., 37, 182
194 Wahlberg, G. D., 70, 124-137, 139,
U. S. Forestry Service, 51, 99 147, 149
U. S. Geological Survey, 71, 72, 77 Wakeman, S. W., 347-350, 359, 360,
U. S. Navy, Bureau of Engineering, 366-368
42, 44, 52 Walker, Elisha, 69
U. S. Navy oil reserves, see Oil re- Wallace, Henry C., 21, 52, 99
serves, U. S. Navy Wall Street Journal, 7, 38, 65, 448
U. S. Public Health Service, 193, 194, Walsh, David I., Sen., 198, 210, 212,
214,218,219 344
U. S. Shipping Board, 24, 25, 79-82, Walsh, Thomas J., Sen., 7, 13, 31-34,
99, 268, 319-340, 349, 362 38, 42-44, 49, 60, 65-69, 72, 76, 78,
U. S. Steel Corp., 333 79, 84, 88, 92, 95, 96, 99, 103-132,
U. S. Veterans' Bureau, 24, 103, 136, 138, 141-153, 156, 166, 167,
193-228, 240 173, 175-178, 181-187, 192, 238,
U. S. Veterans' hospitals, 196-198, 239,311-313,439,440
201-204, 206-210, 213, 214, 217, Warren, Francis E., Sen., 413
219, 220 Washburne, Chester W., 77, 78
University of Chicago, 170 Washington Herald, 160, 162, 164
510 INDEX
Washington Naval Conference, 72, Whitney, George, 436, 437, 448-450
99, 334, 354 Wiggin, Albert H., 470, 477, 485-491
Washington Post, 22, 114, 115, 190 Wilbur, Curtis Dwight, 362
Watson, James E., Sen., 12 Wilder, L. R., 344, 358, 362-369, 378
Weber, Joe, 249, 279 Wile, Frederick W., 341
Wedell-Williams Air Service Corp., Wilkerson, James H., 235
391-394, 402, 419 Wilkins, J. E., 277
Weeks, John W., 21, 26, 63, 64, 104, Willard, Daniel, 490
179, 290-292, 382 Willebrandt, Mabel Walker, 228, 265
Wesson Oil, 478 Williams, H. P., 394, 419
West, Harry F., 294-296 Williams, James M., 209-211, 227
West & Co., 489 Wilson, Woodrow, 3, 6, 16, 17, 21, 26,
Western Air Express, 385, 403-406, 47, 79, 148, 166, 188, 233, 435
408, 410, 412, 428 Wiseman, Sir William, 374
Western Union Telegraph Co., 488 Wood, General Leonard B., 3, 5, 9,
Westinghouse Electric Co., 364 11-13, 16
Wharton, Dr. John, 147 Woodin, William H., 448
Wheeler, Burton K., Sen., 232-234, Woodruff, Roy O., Rep., 234
236-239, 241, 244, 246-248, 250, Woolley, James G., 385, 404-407, 409,
252, 254-257, 261-265, 267, 268, 411,413
270, 271, 273-278, 280, 285-300, World Court, 379
304-307,309,311-313 Worthington Pump & Mach. Co., 365
Whelan, George, 38 Wright-Martin Aircraft Co., 291, 292,
White, J. G., Construction Co., 58 310, 382
White, Representative, 343, 363
White, William Allen, 102
White Committee on hospital sites,
193 Zevely, J. W., 57, 59, 60, 85, 86, 102,
Whitman, Charles S., 23 108, 109, 117, 123, 127, 132, 138,
Whitney, Cornelius Vanderbilt, 382 139, 150, 166

(1935) Privileged Characters: Teapot Dome Scandal

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(1935) Privileged Characters: Teapot Dome Scandal

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Privileged Characters

I. HAIL! HAIL! THE GANG'S ALL HERE, 3

II. TEAPOT DOME, 27

III. COLONEL FORBES AND THE VETERANS, 193

IV. JUSTICE A LA DAUGHERTY, 229

V. SHIPS FOR SALE, 319

VI. MONOPOLY IN THE AIR, 380

VII. THE PIED PIPERS OF WALL STREET, 434

The material in this book is based almost entirely on the testimony

Hail! Hail! The Gang's All Here

WHEN Warren G. Harding succeeded Woodrow Wilson as President

American people publicly proclaimed that there

representatives of all candidates of both parties were called before an

Harry M. Daugherty, the political manager

joying a genial game of poker at night. They all thought it would be

Daugherty tells us in The

by one the political disadvantages of the other Republican candidates.

enough man for the race?"

"Don't make me laugh!" Daugherty recorded that he answered. "The

administered the office. Greatness in the presidential chair is largely an

Harding was apparently comforted by this heart-to-heart talk. He

newspaper work Harding had turned naturally to an interest in politics.

Daugherty had forced Harding to try for the Republican

nomination for the United States Senate. Daugherty is reported to have

political manipulation and political methods. When the primary elections

convention met, the Wall Street odds on Harding were 8 to 1; even

8 to 1. The World correspondent found Senator Harding's suite in the

rooms throughout the hot city. Samuel M. Vauclain, presi-

lifetime?" SenatorWalsh asked.

"How long had you known him?"

"And were you with Mr. Hamon?"

Jake Hamon was

"Jake Hamon is now dead?" Senator Selden

1917?" Senator Spencer asked.

"Proceed, Mr. Jennings," said Senator Walsh.

"Referring to what?" Senator Walsh asked.

asked him if it was Wood."

Perhaps it is best for the country."

Al Jennings testified further that he turned down Jake Hamon's propo-

made enough money.

"No, sir," Al Jennings answered. "No; he didn't like Wood. He said

Al Jennings's fantastic tale was corroborated in part by the testimony

pay the hotel Harding delegation, but another friend, J. E.

many possible compromise candidates, but because of his amiably nega-

view, however might be in his favor from the public's point

Johnson, of California, was the leading candidate. Boies Penrose was

Johnson firmly refused all offers to be a Vice-President of the United

strongest candidate, Governor Lowden next,

Wood was was to be between Lowden and Harding.

"Tell Senator Penrose that I have made no promises, and am making

Joseph R. Grundy was questioned in 1929 about the conference in the

investigating Mr. Grundy 's activities as a lobbyist.

Senator Walsh, of Montana, asked Grundy concerning his presence

"I can't," Mr. Grundy answered, "only I suppose Pennsylvania had a

Leonard Wood, and the developments in the convention

Republican Party had never elected a President without the vote of

dent, and therefore he deemed it especially important that the vote of

nomination of Warren G. Harding early Saturday morning."

papermen, told the Teapot Dome investigating committee that in the