-Caveat Lector-
An excerpt from:
The Ohio Gang
Charles L. Mee, Jr.©1981
M. Evans and Company, Inc.
216 East 49th Street
New York, New York 10017
ISBN 0-87131-340-5
218 pps — out-of-print/one edition
--[10]--
XXVIII.
The Big Oil Rip-Off And the Even Bigger One that Got Away
ON NEW YEAR'S Eve, the last day of 1921, Harry F. Sinclair arrived aboard his
private railroad car, The Sinco, to visit with Secretary of the Interior
Albert Fall at his Three Rivers Ranch in New Mexico. Sinclair had brought his
lawyer, Colonel J. W. Zevely, and each had brought his wife. Fall met them at
the branch-line Three Rivers station. There was no town, only a station, and
the whole spread seemed somewhat down-at-heel and dustblown. Not long before,
when another visitor had arrived at the ranch, he said that Fall owned a
Franklin car "that we had to get out and fix three or four times to get 3 or
4 miles up to his house ... [on] a very inferior, winding road, unmade road,
and very rough." The ranch was vast, composed of prize lands, but the fences
had gone unrepaired, the house was dilapidated, and the gossip in that part
of the country was that Fall had not paid his taxes since 1912 and that he
was broke.
Fall was ill, too. He suffered from chronic bronchial problems and pleurisy
and arthritis, and not long before, he had been gored by a pet stag he had on
his ranch. Two of his four children had died in the influenza epidemic of
1918; he had told his wife just before the 1920 Republican convention that he
was disgusted with politics and wanted to get out. But he planned to leave
his ranch to his children, and he wanted it to be in good repair and free of
debt; so he held on a while longer until Three Rivers Ranch could be handed
over to his children intact.
Harry Sinclair, bald, with bulging, froglike eyes, had started his business
career as a drugstore clerk. He had grown up in Kansas and inherited a small
sum of money when his father, the drugstore owner, died. He used that small
stake to invest in options in the new Kansas oil fields. He bought his first
oil well in 1905, and by 1915, he had become one of the biggest operators in
Kansas. By 1920, he was one of the richest oilmen In the world.
Sinclair and his party stayed at Fall's ranch for three days. They slept
aboard The Sinco, and they spent their days hunting deer and quail with the
ranch hands and their evenings sitting before the fire in the main ranch
house, talking oil.
The situation was this: in 1909 and 1910, President William Howard Taft had
begun to take over certain tracts of land that were in the public domain and
that appeared to hold oil, to keep them from private prospectors, and to
reserve them for the future use of the navy. By the beginning of World War I,
an eighth of all the oil lands in the United States had been reserved for
possible military needs-and had become a bone of contention between navy men
and oil men.
Three Rivers, said Fall, as he strolled about the ranch with his foreman and
Harry Sinclair, was short of milch cows. Sinclair spoke up at once to say
that he had far more blooded Holsteins on his own ranch than he really needed
(and he made it a point to remember, after he returned home, to send six
heifers, one yearling bull, two 6-month-old boars, and four young sows—along
with an English racehorse for the foreman—over to Three Rivers Ranch). A few
cows did not constitute a bribe worth millions of dollars in oil, but they
did break the ice.
Sinclair was hardly the only fellow interested in oil. One of Fall's oldest
friends, dating back to his prospecting days in New Mexico, was Edward
Doheny, a little, meek-looking man with wire-rimmed glasses down on his nose
and a large, sad, white walrus mustache. He had been a fruit packer, a mule
driver, a waiter. He had fought off a mountain lion with a knife. He had
fallen down a mine shaft and broken both legs, and while he had recuperated,
he had studied the law. He was worth at least a hundred million dollars, and
he had a yacht, and a fine home in California. Aside from the yacht and the
home, however, Doheny lived a simple life; he seemed not so much a
businessman as a wandering Celtic misfit lost in some private dream.
The trick about making a deal with Sinclair or Doheny on any of the
government oil reserves was that, if a private operator were given the right
to drill on navy reserves, as some private operators had been permitted to do
on a limited basis in the past, he would have to pay a royalty to the
government. The royalty payment would go directly to the Treasury. In this
way, however, the navy got nothing out of its oil—so the navy opposed any
deals on oil, saying that they were harmful to the national security.
Fall's stroke of genius was to figure a way to get the navy on his side. The
navy, Fall realized, did not have as much oil as it thought it should have
already pumped out of the ground and ready for use in storage tanks. Fall's
idea was simple: private operators would drill on navy lands, but they would
pay their royalties not in money—which would go to the Treasury—but in
certificates that the navy could exchange for oil and for oil storage tanks.
Thus the navy would get something out of the deal and support it.
All that stood in Fall's way then was the need for him to open the oil lands
to competitive bidding. Fall reasoned, however, that competitive bidding
would force the United States to disclose its plans to build storage tanks:
this information would be helpful to a potential enemy; thus, to open the
bidding to competition would be to endanger the national security. Surely it
was in the nation's interest to make a quiet deal.
With Doheny, Fall worked out a deal whereby Doheny's Pan American Petroleum
and Transport Company would build storage tanks at Pearl Harbor, in Hawaii,
and would be paid for the job with a grant of drilling rights at Reserve
Number 1 in Elks Hill, California. The deal with Sinclair was a variation on
the same theme. Sinclair got some reserves near Casper, Wyoming, the reserves
that took their name from the eroded sandstone formation that sat atop the
dome of oil like an inverted teapot—Teapot Dome.
Doheny's lawyers drew up a formal agreement incorporating Doheny's
understanding with Fall and submitted a proposal to the Department of the
Interior. Coincidentally, the day after the department received Doheny's
proposal, Fall telephoned Doheny to say that he was "prepared now to receive
that loan" that they had once casually mentioned in their conversation. On
the following day, Doheny's son, Edward, Jr., withdrew $100,000 from the
Doheny accounts at the brokerage house of Clair Company, wrapped the bills in
paper, put them in a little black satchel, and took them over to Fall at his
suite in Washington's Wardman Park Hotel.
The next week, Fall took the cash with him to Three Rivers. There, for
$91,500, he bought the neighboring, 3,000 acre Harris Ranch. The Harris Ranch
controlled the headwaters of the Three Rivers Canyon, and thus controlled the
source of much of Fall's water for his ranch. With this purchase, he had
bought a crucial measure of security for his children; and so it was that his
first money went into the Harris Ranch acquisition.
>From Sinclair, Fall received $198,000 in Liberty Bonds, then another $35,000
worth of bonds, and then a "loan" of $36,000 in cash. By the time he got his
last gift from Sinclair, Three Rivers Ranch was beginning to look quite
prosperous. Fall added another 6,500 acres to the ranch, fixed up the house,
put in a new hydro electric plant, paid off his back taxes, and did some
landscaping. The visitor who had been to Three Rivers earlier, when Fall's
car kept breaking down on the way from the station to the ranch, returned for
another visit, driving his own car this time, and, as he got closer to Three
Rivers, he felt increasingly "lost." He knew he was on the right road, he
said, "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
beautiful concrete 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."
The improvement in Fall's financial condition was nice, but modest compared
to that of Doheny and Sinclair. Doheny figured his Elk Hills property was
worth $100 million. Sinclair figured his property at Teapot Dome was worth
the same. Sinclair found a way to convert some of his holdings into instant
cash. He formed the Mammoth Oil Company, with a capital stock of 2,005,000
shares, all of them issued in his own name. He exchanged a portion of these
shares for stock in the Hyva Corporation, a family corporation. The Hyva
Corporation then traded a portion of these Mammoth Oil shares for 250,000
shares of Sinclair Consolidated Oil, at the same time that it purchased
shares of Mammoth Oil at $17 (when the market price was $50 per share). When
all these transactions are sorted out, it appears that Sinclair made a profit
of $17,059,700 on about one-third of the shares of Mammoth Oil, without
somehow ever letting them go.
The Elk Hills and Teapot Dome deals were okay, but they were nothing compared
to the idea Harry Sinclair had for an even bigger operation. Soon after Fall
had secured the deals with Doheny and Sinclair, he told Harding that he felt
he had done about as much as he could in the service of the public and he
thought he would like to retire to his ranch. Harding accepted his
resignation with regret, and Fall went to Three Rivers.
Fall had only just arrived at Three Rivers when he got the telegram from
Harry Sinclair, asking him to come to New York at once, prepared to leave for
Europe. Fall telegraphed back for details. It turned out that Sinclair was
after a lease on the oil lands in the southern half of the Soviet Union's
Sakhalin Island.
Fall would go, he telegraphed to Sinclair, but he was short of cash. Colonel
Zevely arranged for $25,000 worth of Liberty Bonds to be dispatched to Fall's
bank, along with another $10,000 in cash to Fall for expenses. Sinclair,
Fall, and Archibald Roosevelt set off for Moscow. They negotiated an
agreement without a hitch, almost overnight, for an awesome amount of Russian
oil. They signed the contract and returned to New York at once in the highest
of spirits.
There was only one hitch to the agreement. The Russians had made a single
stipulation: within five years of the date of the contract, the United States
government must recognize the Soviet Union. All Sinclair, Fall, and Archie
Roosevelt needed to do was to alter the foreign policy of the United States,
and they stood to make hundreds and thousands of millions.
Fall did not lose a moment in starting to work. When his ship docked in New
York, the former secretary of the interior was greeted by newspaper
reporters. How had he liked Russia? The Soviet Union, Fall declared solemnly
to the reporters, was not as bad as it had been painted. In fact, he said, he
looked forward to the day that the Soviet Union would be recognized by the
United States.
pps. 158-164
=====
XXIX.
The King of the Bootleggers Returns
SOMEHOW, MRS. MABEL Walker Willebrandt had been appointed assistant attorney
general in charge of Prohibition enforcement—perhaps because she had been
recommended to Harding by that undependable Progressive Hiram Johnson, and
Harding, eager to harmonize things with his opponent for the presidential
nomination, let Johnson have this bit of patronage. In any case, it turned
out that Mrs. Willebrandt, once given the job, to nearly everyone's
consternation, did it.
Born in a sod house in Kansas, she did not attend school until the age of
thirteen and then completed all her high school studies in three years. She
was expelled from a small college in Parkville, Missouri, because she
disagreed with the president over his Calvinist views on predestination. "She
couldn't imagine," according to Thomas Coffey, "that she was not the mistress
of her own fate." She turned to teaching high school and fell in love with
the principal, Alfred Willebrandt, a frail man. When he decided he needed to
move west for the sake of his health, she married him and went with him, to
care for him.
She studied law at night, was admitted to the bar, was elected president of
the Women Lawyers' Club and of the Women's Professional Club, and was
separated from her husband in 1916. "Dressed invariably," Coffey says, "in a
blue or grey suit so severely tailored as to obscure her trim athletic
figure, she was the first to arrive at her office and the last to leave. She
took an ice-cold bath every morning before breakfast, and often she walked to
work." She achieved her remarkable self-discipline at a cost: she told no one
of her urge to adopt a child, and when at last she did adopt a girl, she kept
it a secret from her associates. As for Prohibition, she had always been a
moderate drinker herself, but when the prohibition laws were passed, she gave
up liquor at once and saw no reason others should not do the same. She felt
that the law of the land, good or bad, must be obeyed and enforced.
Shortly after midnight on October 21, 1921, six federal agents moved in on
the bottling works at Remus's Death Valley Farm. A few lights were burning in
the farmhouse; a few cars were parked nearby. The agents made their way
silently up to the house, moved quickly to the front door, opened it, flicked
on the lights, and announced the arrest. Six armed men, dozing or sound
asleep, raised their hands in surrender. One man dashed out the back door,
but stopped and dropped his gun the moment one of the agents called out to
stop. Remus and six of his men were indicted.
In New York, Jess Smith took another payment and assured Remus that he had
nothing to worry about. The indictment might lead to a trial. It might even
be that a jury would convict Remus. Even so, Remus need not worry. The case
would then go to a court of appeals whose verdict could never be reversed.
pps.165-168
=====
XXX.
Nan Pays a Visit
ONE TIME WHEN Nan Britton arrived in Washington to see Harding, Tim Slade
told her "how they were 'putting it over' on 'the Chief,' as he often called
Mr. Harding." Nan determined to tell the president what Tim had said, and so,
as soon as she had been guided through the halls and Cabinet Room into the
president's office, she blurted out to Harding, "Sweetheart, Tim Slade says
they are doing things behind your back down here to hurt you ......
Harding smiled. "Say, darling, don't you worry about me! I'm all right."
She judged from his expression that a look of relief must have passed across
her face. She said that she couldn't see what anyone "could do to
'double-cross' a President," but she did wish he would be careful.
He was surrounded by friends, Harding told her; no one was putting anything
over on him.
Harding was more worried, in fact, about the embarrassment that Nan might
cause him, and whenever he gave her a few hundred or five-hundred dollar
bills, he would always remind her to be careful about the way she spent it,
so that no one would talk. Once when she appeared in a squirrel coat, Harding
did say that the coat was beautiful, but he was clearly anxious about it.
"Nan, darling," he said, "do be careful! How in the world do you explain
these expensive-looking things?"
He was even more vexed when a picture of their daughter, Elizabeth Ann,
appeared in the newspaper. Back home, Nan had left Elizabeth Ann in the
bathroom for a moment while she went into the bedroom to get something, and
Elizabeth Ann, then two-and-a-half years old, had locked herself in the
bathroom. Nan called the fire department, and newspaper reporters came along
to get the amusing story of a fireman carrying a little girl down the ladder
from a bathroom window. When Nan showed the newspaper picture to Harding, who
had never seen his daughter, he said, "Oh, Nan, why did you allow it? Why did
you allow it?"
The newspaper reporters did not know whose child it was, of course, but
Harding was upset by it anyway. After a few moments, however, he relaxed and
took a closer look at the photograph.
"Really, Nan, she's much like you!"
"Oh, darling," said Nan, "she's much more like you.' Why, just look at her
eyes!"
"Well," said Harding slowly, not overeager to claim a paternal resemblance,
"if she's as sweet a baby as her mother is a woman
Sometimes Nan would bring along penciled scratches—"letters"—from Elizabeth
Ann, which she would show to Harding; and it was at those moments that she
usually cried. "I could not talk long with her father about her without
crying." She had arranged for Elizabeth Ann to be officially adopted by her
sister and brotherin-law, and at times she was overcome by depression at the
thought that she could neither acknowledge Harding as her lover, nor
Elizabeth Ann as her daughter, nor live in the same town with Harding, nor
let Elizabeth Ann know who her father was. At times like these, "Mr.
Harding's eyes would grow heavy with sadness as he turned the conversation
into other channels and pulled out a ready handkerchief to dry my eyes. He
would try so hard to bring a smile to my face!"
She asked Harding if she couldn't come to Washington to get a job, but that
never struck Harding as a prudent idea. She was once sitting in Harding's
office when his secretary came in with a question about something he had
written.
"Can't read it?" said Harding with a smile.
He interpreted the passage for his secretary, as Nan sat thinking how well
she knew his handwriting, how easily she could have deciphered the passage.
When the secretary left, she said, "Oh, I wish I could work for you, darling!"
Harding smiled—"the old smile of indulgence and love I liked to think he
smiled best at me—but shook his head. 'It will never do, dearie,' he said.
Then he went on to picture in the face of his refusal how he would love to
have me, and how, if I were his stenographer he would give me all his
dictation just to have me with him, and he feared the nation's business would
suffer! Thus it was that he would picture for me the things he would love to
do, making their impossibility a thing of unspeakable disappointment to me."
>From time to time, Harding would try to get Nan a better or a different job
elsewhere. He commended her, on one occasion, to the collector of the Port of
New York, and the collector evidently tried to find her a job in the Customs
House. In fact, Nan had several men in the Customs House trying to find or
create a job for her, although they had an embarrassing time of it, since Nan
could not do shorthand very well and was not a good typist.
"Don't go off and marry any of the fellows you meet, dearie!" Harding would
plead with her, as they sat on the dilapidated couch in the anteroom of his
office. "I love you so much, Nan," he would say, blushing slightly and
sometimes telling her how it would be once he got out of the burdensome
office of the president and returned to Ohio where he would buy a farm, have
a lot of farm animals, enjoy the country, and settle down with her and with
their daughter, at last—"and I don't like to have you be with anybody
else—that's the real truth!"
"And then for a brief space of time-all too brief—we became oblivious to our
surroundings, to his identity as President of the United States, and to all
the world. 'Why don't you tell me you love me, Nan darling,' he coaxed, and I
told him over and over again, as I had told him a thousand times, I love you,
darling Warren Harding, I love you.'"
pps. 169-172
--[cont]--
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris
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