V — I. “The Real Old Times”
One month after the inauguration of President Harding, a certain Colonel Charles R. Forbes showed up in the nation’s capitol. He was a ruddy-faced, hard-drinking, swaggering adventurer, with a penchant for spinning extravagant yarns and an easy way with members of the opposite sex. During the war he had been decorated with the Croix de Guerre and the Distinguished Service Medal. His chequered career had also included desertion from the U. S. Army, crooked ward politics on the West Coast, shady operations as a business contractor, and several years of lucrative underhand dealings as a public official in the Philippine Islands.
The reason Colonel Forbes came to Washington in the early spring of 1921 was that President Harding himself had summoned him . . .
Colonel Forbes and Senator and Mrs. Harding had met in Hawaii before the war. The Hardings were enchanted by Forbes* inexhaustible tall tales and boisterous affability; Forbes found Harding to be a good-natured loser at poker; and a warm friendship quickly blossomed between the Colonel and the future President and his wife. During the 1920 Presidential campaign, Forbes, who was then vice-president of the Hurley-Mason Construction Company of Tacoma, campaigned energetically for Harding on the West Coast; and following his election; Harding called his old friend to Washington to take charge of the Bureau of War Risk Insurance. Soon afterwards, Forbes was appointed director of the newly formed United States Veterans’ Bureau…
As head of the Veterans’ Bureau, Colonel Forbes was responsible for the management of all veterans’ hospitals in the country, the disposal of wartime medical supplies and hospital equipment, and the construction of new hospitals for veterans. The total expenditures of the Veterans’ Bureau were estimated at approximately $500,000,000 a year.
The swashbuckling colonel lost little time in exploiting the bonanza that had fallen into his hands. He promptly appointed as his aides and subordinates a number of friends and old cronies, men who could be relied upon to do just what they were told and whose scruples were no more exacting than his own when it came to matters of graft and embezzlement. The offices of the Veterans’ Bureau were soon swarming with hard-boiled swindlers and petty racketeers, who travelled around the country, staging wild parties, carousing and living in luxury on government funds that had been set aside to care for disabled war veterans . . .
A typical letter written by one of Forbes’ field representatives, R. A. Tripp, to his immediate superior in Washington, read in part:
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.
Regarding the site of one veterans’ hospital, Tripp jocularly noted:
Fire hazards— say, if Forbes could only see the “lovely” high (3′) grass & if fire comes— boom! up she goes.
The letter concluded:
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 and 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.
Colonel Forbes himself, like the members of his staff, strongly believed in mixing business with pleasure. None of his exploits as head of the Veterans’ Bureau more clearly revealed this proclivity than his dealings with Elias H. Mortimer, a representative of the Thompson-Black Construction Company.
Soon after Forbes and Mortimer became acquainted early in 1922, they began privately discussing the extensive building program then being initiated by the Veterans’ Administration. During one of their first chats on the subject, Forbes told Mortimer about his own career in the construction game. The Colonel said pointedly, “We fixed things so that no one lost money.”
That April a small clandestine conference took place in Forbes’ Washington apartment. Present were Forbes, Mortimer, and J. W. Thompson and James Black, heads of the Thompson-Black Construction Company. The Colonel informed the others that he was about to let a number of major contracts on hospital buildings, the sites of which had not yet been made public. He himself would soon leave on a cross-country tour to make final arrangements in connection with the jobs. He suggested that Mortimer and his vivacious young wife accompany him on the trip.
“You can look things over at Chicago,” said Forbes. “We are going to put up a five million dollar hospital at Chicago. We are going to put up a hospital at Livermore, California, and one at America Lake, which is just outside of Tacoma. On the way back you can stop off at St. Cloud, Minnesota— and in this way have advance information over everybody.”
Presently, Forbes drew Mortimer aside. He was, he explained, in a rather embarrassing predicament that he hesitated to mention in front of the others. To put it in a nutshell, he was “very hard up” . . .
Mortimer asked, “What do you want me to do?”
“I need about five thousand dollars,” said the Colonel.
Before the group separated, Mortimer had arranged with his associates for Forbes to get the money . . .
The five thousand dollars, it was understood, represented only a token payment. According to the terms of the final agreement reached between Forbes and the contractors, the Colonel was to receive one-third of all profits on hospitals built by the firm of Thompson and Black . . .
That summer Colonel Forbes and Mr. and Mrs. Mortimer travelled across the country together. Their first stop was in Chicago, where most of their stay was devoted to lavishly entertaining business acquaintances and friends in their $5o-a-day suite at the Drake Hotel.
Despite the merrymaking, and in a way because of it, a somewhat trying situation soon developed between the Colonel and his two travelling companions. Describing one of the parties in his suite at the Drake, Mortimer subsequently related:
. . . Colonel Forbes’ room was off to the right of our apartment . . . Colonel Forbes, when I came in there at about 4:30 in the afternoon was shooting craps with Mrs. Mortimer on the bed. . , There was a bottle of Scotch there, and he had his coat off . . .
Although piqued at this and similar episodes, Mortimer did not at first permit the personal complication to interfere with his business dealings with the Colonel. Together, the Mortimers and Forbes proceeded on to California, having, in Mortimer’s own words, “one royal good time all the time we were on the trip.”
Meanwhile, Forbes’ trusted aide, Charles F. Cramer, Chief Counsel of the Veterans’ Bureau, was receiving sealed bids in Washington on Government hospital contracts. Following Forbes’ instructions, Cramer opened all bids and immediately telegraphed their details to the Colonel in California. Forbes then relayed this supposedly confidential information to Mortimer, so that the firm of Thompson and Black might be able to gauge its own bids accordingly . . .
Forbes was delighted with the way things were going. “We’ll all make a big clean up,” he enthusiastically assured Mortimer.
For Mortimer, however, notwithstanding the mounting profits, the situation was becoming increasingly irksome. As the summer drew to a close, his forbearance finally at an end, Mortimer firmly told his wife and Forbes that he had had enough of their more than friendly relationship.
Returning east a few weeks later, Mr. and Mrs. Mortimer permanently separated. At the same time, the secret partnership between Colonel Forbes and the firm of Thompson and Black came to an abrupt conclusion . . .
Graft from the construction of veterans’ hospitals was only one of Colonel Forbes’ multiple sources of income as head of the Veterans’ Bureau.
By buying Government supplies at fabulously high prices and selling them at a fraction of their worth, Forbes won the esteem of numerous business executives, who naturally did not object to sharing profits with the Colonel.
From one favoured firm, for example, Forbes purchased $70,000 worth of floor wax and floor cleaner— a quantity, it was later estimated, sufficient to last the Veterans’ Bureau for one hundred years. The Colonel paid 87 cents a gallon for the material, which was worth approximately two cents a gallon . . .
Forbes’ largest single transaction in this field involved the Government’s immense supply depot at Perryville, Maryland, where there were more than fifty buildings filled with vast quantities of medical stores and other supplies. Without any public advertisement of the sale, the Colonel signed a contract with the Boston firm of Thompson & Kelly, Inc for the disposal of the entire con- tents of the Perryville warehouses. The day the contract was signed, fifteen empty freight cars moved into the Perryville railroad yards; and before a week had elapsed, more than 150 freight cars were being simultaneously loaded with huge amounts of goods and materials from the Government supply depot.
In all, Thompson & Kelly purchased at Perryville for the sum of $600,000, supplies whose actual value was conservatively figured at $6,000,000.
By the end of 1922, from all parts of the country, furious criticism of Forbes’ management of the Veterans’ Bureau was pouring into Washington from veterans’ organizations, high Army and Navy officers, and businessmen who had had no opportunity to bid on Veterans Bureau contracts.
The Perryville deal brought matters to a head.
Early in January 1923, President Harding summoned Colonel Forbes to the White House. Forbes came bringing with him a bundle of old dilapidated sheets to indicate the “worthlessness” of the goods he had sold at Perryville. The President was not impressed. He told his friend that the irregular practises at the Veterans’ Bureau would have to stop.
Before the month was out, Forbes sailed for Europe. From France, he sent his resignation to President Harding.
That spring the Senate initiated an investigation of the Veterans’ Bureau. Public hearings began in Washington in October.
Among those to appear at the hearings was Colonel Forbes, who had just returned from Europe. “I worked sixteen long hours a day “ declared the Colonel about his directorship of the Veterans’ Bureau, “and no man loved the ex-servicemen better than I did.”
Another witness was the building contractor, Elias Mortimer, who described in intimate detail his various dealings with Colonel Forbes, including those involving Mrs. Mortimer. After Mortimer’s testimony, Mrs. Mortimer’s attorney appeared at the hearings to request that his client be given the opportunity to testify, so that she might publicly defend her reputation. The attorney told the senators, in what was probably the most poetic utterance at the hearings: “A woman’s character is a 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.”
Following the Senate committee hearings, Colonel Forbes was indicted on charges of conspiring to defraud the United States Government. He was tried in Federal court, found guilty and sentenced to a fine of $10,000 and two years’ imprisonment.
It was estimated that Forbes’ machinations as Veterans’ Bureau director had cost the American people about $200,000,000, a fair portion of which had ended up in the Colonel’s own pocket. Impressive as the sum was, it represented only a fraction of the vast loot that was being systematically extracted from the public treasury by U. S. Government officials and American big businessmen during the Harding Administration.
One day in the early spring of 1922, Harry F. Sinclair of the Sinclair Oil Company and James E. O’Neill, president of the Rockefeller-controlled Prairie Oil and Gas Company, met with two business associates for a quiet meal at the exclusive Bankers’ Club in New York City. The four men had come together to discuss a highly confidential, multi-million-dollar oil transaction.1
“I wish,” said one of the men during the meal, “that I was Secretary of the Navy for about two years.”
“Well,” replied Sinclair, “you’d have a better job than the President.”
“I’d clean up some millions!”
“You all have to be careful after this,” warned Sinclair, “and each one will have to look out for himself.”
“Suppose there’s some trouble afterwards? Who would take care of it?”
“If the Sinclair Oil Company isn’t big enough, the Standard Oil Company is,” remarked O’Neill, whose firm was closely tied to Standard interests. He added, “Why, we make a hundred million dollars a year.”
The secret deal that the four men were discussing concerned the leasing of certain oil lands at the Naval Oil Reserve at Teapot Dome, Wyoming.
For a number of years the largest American oil companies had been trying to get control of the rich naval oil reserves established in 1909 in Wyoming and California by an Executive Order of President William H. Taft and confirmed by Congress in the Pickett Act. The oil reserves were Navy Petroleum Reserve No. 1 at Elk Hills, California; Naval Petroleum Reserve No. 2 at Buena Vista Hills, California; and Naval Reserve No. 3 at Teapot Dome, Wyoming. The purpose of these reserves was to hold the oil in the ground for possible future use by the U. S. Navy, in the event that regular commercial oil resources should become depleted.
During and immediately after the First World War, as the value of oil soared to unprecedented heights, American private oil interests became all the more determined to get their hands on the naval oil reserves. With Harding as President, the oilmen knew their chance had come . . .
A few weeks after taking office, President Harding issued an Executive Order, against the vigorous opposition of high-ranking Navy officers, transferring control of the naval oil reserves from the Navy to the Department of the Interior.
The Government official now responsible for determining what happened to the naval oil reserves was Secretary of the Interior Albert B. Fall
A cantankerous short-tempered man with a drooping white moustache and long wavy white hair, who looked like an elderly frontiersman. Secretary Fall had one main interest in life: to make as much money as he could, as quickly as possible, by whatever means were necessary.
Within a week after the promulgation of Harding’s Executive Order, Secretary Fall dispatched a confidential letter to Edward L. Doheny, the president of the Pan-American Petroleum and Transport Company of California. The letter read in part:
There will be no possibility of any future conflict with Navy officials and this department, as I have notified Secretary Denby that I shall 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 about a matter of policy. He understands the situation and that I shall handle matters exactly as I think best . . .
Edward L. Doheny, a millionaire oil operator whose insatiable yearning to exploit new oil resources were equalled in intensity only by his burning hatred of “Bolshevism,” was an old friend of Secretary Fall. Years before, Doheny and Fall had prospected together for oil in the Southwest.
Now, once again, the two men were to become profit-sharing partners in an oil venture . . .
Certain obstacles precluded the immediate leasing by Secretary Fall of the naval oil reserves to Doheny’s company. There was, for example, the Naval Fuel Oil Board, which had been set up to safeguard the reserves. In October 192 1 Secretary Fall’s associate. Secretary of the Navy Edwin N. Denby disbanded the Naval Fuel Oil Board.
This accomplished, Secretary Fall put through a telephone call from the Department of the Interior to Doheny, who was then in New York City.
“I’m prepared now to receive that loan,” Fall told Doheny.
The oil magnate promptly dispatched his son, Edward L. Doheny, Jr., to the bank, where he drew $100,000 in bills. Carrying the money in a small black satchel, Doheny, Jr., travelled to Washington. There he turned the $100,000 over to the Secretary of the Interior . . .
Soon afterwards, Fall granted to Doheny’s Pan-American Petroleum and Transport Company a 15-year lease to all the oil acreage of the Naval Petroleum Reserve No. 1 at Elk Hills, California.
Regarding these arrangements, Judge Paul J. McCormick of the United States District Court of California subsequently stated:
It was 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.
Doheny, at the time, put the matter more simply. “We’ll be in bad luck if we don’t get $100,000,000 profit,” the oil tycoon— whose private railroad car was named The Patriot — said of the contemplated draining of the naval oil reserves.
While furtively negotiating with Doheny, Secretary Fall was engaged in similar clandestine dealings with Harry F. Sinclair of the Sinclair Oil Company.
On the morning of December 31, 1921, Sinclair and his attorney. Colonel J. W. Zevely, after whom the oil magnate had named his famous racehorse, “Zev,” arrived from New York in a private railroad car at Three Rivers, New Mexico. The two men had come to visit Secretary Fall, who was spending the Christmas vacation at his nearby ranch.
The purpose of the visit was not purely social. As Sinclair himself said later: “I went to Three Rivers to discuss with Senator Fall the leasing of Teapot Dome.”
Following several additional private conferences in Washington and New York between Sinclair, Zevely and Fall, a contract leasing the property of the Teapot Dome oil reserve to Sinclair was secretly drafted in Colonel Zevely’s Washington law offices. On April 7 Secretary Fall signed the contract with Sinclair.
One month afterwards, Sinclair travelled to Washington. In the seclusion of his private railroad car, Sinclair handed $198,000 in Liberty Bonds to Secretary Fall’s son-in-law, M. T. Everhart. Later that same month, Everhart visited New York City, where, in Sinclair’s office, he received another $35,000 in Liberty Bonds and $36,000 in cash, to take to his father-in-law. When Sinclair again visited Fall’s ranch that autumn, he gave the Secretary of the Interior an additional $10,000 in cash; and, in January 1923, in his suite at the Wardman Park Hotel in Washington, the oil magnate presented Fall with another $25,000.
In all Secretary Fall and his son-in-law, Everhart, received $233,000 in Liberty Bonds and $71,000 in cash from Harry Sinclair…
From Sinclair’s viewpoint, it was a conservative investment. Appearing in January 1923 before the Senate Committee on Manufactures, Sinclair declared: “I consider the value of the Mammoth property at this time — it is only a guess— at a greater amount than $100,000,000.”
Sinclair was referring to the Mammoth Oil Company, which he had incorporated solely for the purpose of exploiting the oil resources at Teapot Dome.
Although profitably concluded. Secretary Fall’s leasing of the oil reserves at Teapot Dome and Elk Hills had not failed to arouse considerable suspicion among certain Naval officers and congressmen.
In the Upper House, Senator Robert M. LaFollette secured a passage of a resolution calling for an investigation by the Senate Committee on Public Lands and Surveys of the leases to the Teapot Dome and Elk Hills Naval Petroleum Reserves . . .
At the same time, angry protests were mounting among oilmen whose companies had been given no opportunity to bid on the contracts. There were increasing demands for the resignation of Secretary Fall.
Fall, however, clung obdurately to his post until the last of his secret financial transactions had been concluded with Sinclair and Doheny. Finally, on March 4, 1923, he handed in his resignation to President Harding.
After reluctantly accepting the resignation, Harding announced that he had offered Fall an appointment as Supreme Court Justice; but that Fall— because of the tribulations of public office and a desire to return to private life — had gratefully declined the offer . . .
“I feel entitled to classify myself with the martyrs,” Fall publicly stated, referring to the early Christians who had met their fate singing hymns in Roman gladiatorial arenas, “for I confess to a grateful sense of satisfaction as I contemplate my approaching political demise.”
Before leaving Washington, Fall purchased the handsome Jacobean furniture in his office at the Department of the Interior and had it shipped to his ranch at Three Rivers, New Mexico. The value of the furniture was estimated at $3,000.00. The price Fall paid for the furniture was $231.35 . . .
Back at his ranch, Fall received this letter from Washington:
My dear Fall, This note is just by way of expressing appreciation for the many kindnesses I had at your hands during the last two years in the Cabinet.
I know that the vast majority of our people feel a deep regret at your leaving 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.
The letter was signed, “Yours faithfully, Herbert Hoover.”
3. Mr Smith Goes to Washington
“I wouldn’t have given thirty cents for the office of Attorney General,” remarked Harry M. Daugherty one year after taking office, “but I wouldn’t surrender it for a million dollars.”
Among the various lucrative enterprises connected with the Justice Department while Daugherty was Attorney General were:dismissing various Federal court actions against large corporations, and failing to prosecute them for committing war frauds and violating anti- trust laws; selling pardons and paroles in connection with Federal prison sentences; removing and selling liquor from bonded warehouses; selling Federal Judgeships and U.S. District Attorney posts; disposing of various property seized by U.S. Government authorities as a consequence of violation of Federal statutes.
“We did not play for marbles,” the Justice Department agent, Gaston B. Means, said later. “The harvest was ripe, and we knew we were there as the reapers.”
None of the many adventurers connected with the Harding Administration was more unscrupulous and remarkable than Gaston B. Means. A hulking, 200-pound, six-foot southerner, with a bulging forehead, thin receding hair, and little eyes set in a pudgy moon-shaped face, Means had formerly served as a German Secret Service agent in the United States, under the direction of the German naval attaché and espionage chief, Captain Karl Boy-Ed. He had also operated from time to time as a secret agent for the Mexican, Japanese and British governments, and for a number of years had been employed as an undercover man by the William Burns Detective Agency. When Attorney General Daugherty appointed William J. Burns director of the Justice Department’s Bureau of Investigation, he brought Means with him to Washington. In Burns’ opinion, Means was “the best investigator in the business.”
Among Means’ various duties as an agent of the Bureau of Investigation were collecting graft from bootleggers, selling confiscated liquor, acting as a liaison in surreptitious deals between the Justice Department and the criminal underworld, and spying upon congressmen who were calling for investigation of Attorney General Daugherty.
According to Means’ subsequent testimony before a Senate investigating committee, he personally collected hundreds of thousands of dollars for providing bootleggers with liquor permits and for “insuring” various gangster operations against Federal interference.
In his book, The Strange Death of President Harding, Means gives this description of how he received his “payments”:
the big bootleggers in New York City wanted to pay for Federal protection … It became known in the underworld that they could pay this protection money to me. I was then stationed at the Vanderbilt Hotel first . . .
Our method there was simple. We had our runners, twenty-five men, —tipsters of the underworld. They were to keep us posted as to how much money different bootleggers were making. From their reports, my superior officers would estimate how much each one would pay, for protection. These bootleggers were then notified . . .
We did not want these bootleggers to be handing this money to any individual. I then had another room engaged— on another floor of the Vanderbilt Hotel— we will say number 518. The register would show that another man had engaged this room. In similar manner, the room next door, number 517 was engaged.
In room 518, I took a big round glass bowl that one could easily see through, a big gold fish aquarium. We made a peephole in the door connecting 518 and 517. This big glass bowl was conspicuously placed on a table in 518 . . .
The “purchaser of protection” was instructed to come to the hotel room containing the glass bowl:
He would enter 518, — would see nobody, but he would see the glass bowl, which always had bills of money in it. From 517, through the peephole in the door, I could see him all the time. They were instructed never to bring a bill less than $500.00. He would throw into the bowl so many $500.00 bills— or so many $1000.00 bills. I watched for two reasons: to make sure that he put his money into the bow-l and to be sure that he took none out. As soon as he would step out, quick as a flash, I’d unlock the door between and lock the outside door. I’d check up. Never once was I short-changed! Then, I would leave the money, — say $10,000.00 in the bowl, unlock the outside door again and wait for the next man . . .
Bootleggers are straight shooters in matters like that. Seeing money in the bowl gave them assurance that others were paying for protection also . . .
According to Means’ account:
By this process . . . we covered in territory besides New York City and New York State, — Massachusetts, Connecticut, Rhode Island, New Jersey and Eastern Pennsylvania.
A conservative estimate of the sum total of each visit I made, I would put at a quarter of a million, — $250,000.00 . . .
Fully $7,000,000.00 passed through my glass bowl and through my hands.2
After the money had been collected, Means records, it was turned over to Jesse Smith, Attorney General Daugherty’s private aide and confidante.
Jesse W. Smith was really not cut out for his job with the Attorney General. He was a plump, middle-aged, rather effeminate man, who had formerly owned a dry goods store in the little town of Washington Court House, Ohio, and was happiest when discussing clothing fabrics. A close friend and worshipful admirer of Daugherty, he had readily accepted the latter’s invitation to come to Washington to “give a hand” with the nation’s affairs. Dazzled by the glamorous atmosphere of the capitol and by the fact he was rubbing shoulders with the most famous personages in the land. Smith became a frequent caller at the White House, arranged when- ever possible to be photographed standing alongside President Harding, and periodically went shopping with Mrs. Harding, fastidiously helping the First Lady select hats, dresses and shawls for her wardrobe.
While holding no official post, Smith had a private desk directly outside the office of the Attorney General, and word soon got around Washington that the way to approach Daugherty was to “see Jess first.” 3
Soon after joining Daugherty in Washington, Smith began having large sums of money at his disposal. “We are all much better off than we have ever been before,” he cheerfully told his former wife, Roxy Stinson. She and Smith had been married in 1908; and although their marriage had lasted less than two years before they were divorced, they had remained warm, intimate friends.
From the nation’s capital Smith frequently sent considerable sums of cash to Roxy Stinson in Washington Court House, Ohio. Sometimes the money Smith sent was for her personal use, and sometimes she was instructed to buy certain stocks at a brokerage firm where Smith had opened an account for her under an assumed name. Smith himself had several such blind accounts at brokerage houses, and much of his time at the Justice Department was spent on the Attorney General’s private telephone line, calling brokers and ordering the purchase and sale of various leading stocks . . .
In a short time the former dry goods store proprietor was discussing matters of high finance with the casual air of a veteran banker. “In the past few days,” he informed Roxy Stinson on one of his visits to Washington Court House, Ohio, “five men have made $33,000,000.”
“Were you and Harry in on it?” she asked.
“No,” he said ruefully. “That’s what we’re sore about. They were our friends too.”
Other big projects, however, were underway. Not the least of these projects concerned an internationally controlled copper concern called the American Metals Company.
During the war a large portion of American Metals stock had been seized by the U. S. Alien Property Custodian as German- owned and sold at Government auction for $7,000,000. In the fall of 192 1 a certain Richard Merton visited the office of the Alien Property Custodian. Presenting himself as the representative of a “Swiss Corporation”, Merton claimed his firm was the rightful owner of the American Metals stock that had been auctioned and that the American Government therefore owed his firm $7,000,000. The claim of the “Swiss representative” was quietly recognized as valid by the Alien Property Custodian and, at Merton’s request, the $7,000,000 was turned over to the Societé Suisse pour Valeurs des Metaux — a Swiss front for German metal interests . . .
A number of persons in Washington had been involved in facilitating this transaction for Merton, and they were generously rewarded for their assistance. To John T. King, Republican National Committeeman from Connecticut, who had acted as a general contact man throughout the negotiations, Merton presented $391,000 in Liberty Bonds and a $50,000 check. Of this sum, $50,000 went to the Alien Property Custodian, Colonel Thomas W. Miller, for his “services.” And, in appreciation of certain vital “introductions” in Government circles and various other help, $224,000 was passed on to Attorney General Daugherty’s aide, Jesse Smith . . .
The stakes, however, were getting too steep for Smith. The more deeply he became involved in the grandiose political-financial conspiracies afoot in Washington, the uneasier he felt. “I am not made for this,” he wrote to Roxy Stinson. “This intrigue is setting me crazy. If I could just come home— but I am in now and have to stand by Harry . . .”
By the spring of 1923, Smith had further cause for anxiety. The details of Colonel Forbes’ embezzlements in the Veterans’ Bureau were coming to light. The Senate Committee on Public Lands and Surveys was investigating the leases to Teapot Dome and Elk Hills, and Secretary of Interior Fall had just resigned. How long would it be, Smith wondered, before someone discovered what was going on inside the Justice Department?
When Smith visited Washington Court House, Ohio, that April, he was a terrified man. He knew “too much,” he told Roxy Stinson; and he could no longer trust anyone. Even the men with whom he had worked so closely— yes, even his old friend Daugherty— had now become suspicious of him. They thought he was weak and might talk. And they were men, he said, who would stop at nothing …
Smith and his former wife went to Columbus, Ohio, to attend a dance, but Smith urged that they return to Washington Court House while it was still afternoon.
“Let’s go home before dark,” he said. On the train back to Washington Court House, Smith handed Roxy Stinson his brief case, which was bulging with documents and papers. “Carry them,” he said, “I don’t want to carry them.”
When they were in a taxi driving away from the Washington Court House station, Smith kept glancing nervously out the rear window. Finally, Roxy Stinson told him, “Don’t you do that again.”
“All right,” replied Smith with a weak smile.
They drove on in silence for a while. Then Smith said, “They are going to get me, they are going to get me.”
“No, they won’t.”
“They passed it to me.”
“Oh, don’t,” said Roxy Stinson. “You are all right. You are all right.”
“You better destroy any letters and papers.”
Roxy Stinson placed her hand on his. “Tell me all about it, Jess,” she said. “I know so much.”
“No, no, no,” said Smith. “Just cheer me up, just cheer me up.”
The final thing Smith told Roxy Stinson before leaving Washington Court House to return to the Capitol was not to go out by herself after dark and never to drive alone.
“The man was afraid,” she said later. “The man was afraid.”
It was the last time that Roxy Stinson saw Jesse Smith.
Shortly before dawn on May 30, 1923, Jesse Smith was found dead in the suite that he shared with Attorney General Daugherty at the Wardman Park Hotel in Washington, D. C. He was lying on the floor with a bullet in his head, and in his outstretched hand was a revolver.
The coroner’s verdict was suicide. William J. Burns, chief of the Bureau of Investigation, took charge of the body.
No autopsy was performed before the burial.
Attorney General Daugherty was not present when Smith’s body was discovered. He had spent the night at the White House.
“The act,” stated Daugherty regarding the death of his old friend, “could be accounted for only on the ground of a complete mental collapse.” Smith, he added, had suffered severely from diabetes. “This insidious disease plays sad tricks with the brain . . . It has made many suicides. It has broken down the moral fibre of character. I shall always remember my friend before his illness when he was himself, kindly, helpful, loyal, generous.”
The Attorney General was conspicuously absent from Jesse Smith’s funeral.
Jesse Smith was not the only man prominently associated with the Harding Administration to break under the strain of criminal intrigue and the dread of exposure, and to die under unusual or mysterious circumstances. There were a number of others.
Among them was President Harding himself.
By early 1923 an extraordinary change had taken place in Harding’s personality and appearance. He was no longer the handsome, affable personage who had been sworn in as President in March 1921. He had aged shockingly. His face, now haggard, lined and sallow, wore a haunted look. Occasionally, when he made a public appearance, his features twisted into a grotesque grimace— he was attempting to smile. His hands shook uncontrollably. He could not sleep at night. Great dark pouches lay under his eyes, which seemed to stare fearfully at the world about him.
As the various Senate investigations moved relentlessly ahead, and the whole scandal of his Administration threatened to flare into the open, Harding periodically asked the few newspapermen he still trusted what a President should do “whose friends have betrayed him”…
In June, 1923, travelling in his private railroad car, the “Superb,” President Harding set out from Washington for a tour of the west coast and Alaska. The tour was never to be completed.
Returning by boat from Alaska in the latter part of July, Harding was stricken with what was at first reported to be an attack of ptomaine poisoning. On his arrival in San Francisco, he was con- fined to bed at the Palace Hotel, his illness now being diagnosed as pneumonia. A few days later, the President’s physicians announced that Harding was “resting comfortably” and was safely on the way to recovery.
Then, suddenly, on the evening of August 2, the startled nation was informed that President Harding was dead. “Death,” stated an official bulletin signed by Harding’s physicians, “was apparently due to some brain evolvement, probably an apoplexy.”
In the early morning hours of August 3, by the flickering light of an oil lamp in the living room of his family’s farmhouse at Plymouth Notch, Vermont, Calvin Coolidge was sworn in by his aged father, a justice of the peace, as the new President of the United States.
Various strange circumstances surrounded President Harding’s final illness and death.
The food poisoning from which Harding had supposedly first fallen ill was said to have come from eating crabmeat on the boat from Alaska. Crabmeat, however, was not among the supplies listed in the steward’s pantry. Furthermore, no other member of the presidential party was affected by “ptomaine poisoning.”
During the first few hours following the President’s death, newspapermen were officially informed that no physician was present when Harding died and that Mrs. Harding had been alone with her husband at the time. This report was then altered to specify that the President’s chief physician. Brigadier General Charles E. Sawyer had been in Harding’s bedroom when death came. On August 5, three days after Harding’s death, the New York Times reported:
There have been several versions of the incidents surrounding the death of President Harding … It was told by some of those in the vicinity that Mrs. Harding rushed to the door of the bedroom and called for help from her husband’s physicians . . . People with nerves on edge or stunned by the tragedy were unable to give any coherent account of what took place . . . The official bulletin was in error . . .
Several of the physicians who had been attending President Harding urged that an autopsy be held. On Mrs. Harding’s insistence, however, Harding was buried without an autopsy.4
“If I could write one sentence upon his monument”, said Bishop William Manning a few days after President Harding’s death, in a sermon delivered at the Cathedral of St. John the Divine in New York City, “it would be this, ‘He taught us the power of brotherliness.’ It is the greatest lesson any man can teach us. May God ever give our country leaders as faithful, as wise, as noble in spirit, as the one whom we now mourn.”
But Warren Harding was not long in his grave before the nation was getting a glimpse of what had been transpiring behind the scenes during his Administration.
On October 23, 1923, in a large caucus room in the Senate Office Building, the Senate Committee on Public Lands opened public hearings on the Government leases to the naval oil reserves at Teapot Dome and Elk Hills.
The first witness at the Senate hearings was ex-Secretary Fall himself. Verbose, arrogant and blusteringly evasive, Fall angrily denied there had been anything remotely improper about his conduct in office. In making the oil leases, as at all other times, declared Fall, he had been motivated by patriotism of the highest order.
Fall’s testimony was supported by that of Harry Sinclair, who emphatically stated that in his dealings with the Secretary of Interior the latter had received no “benefits or profits, directly or indirectly, in any manner whatsoever.” Edward L. Doheny told the Senate Committee, in a voice vibrant with emotion, that he was deeply shocked by the disgraceful accusations that had been levelled against his old friend, Albert Fall. “I want this record to show,” said Doheny, “that I felt very badly about it; in fact, felt outraged by it.”
But during the ensuing weeks, as dozens of geologists, naval officers, oil experts, government officials and other witnesses appeared before the Committee, one incriminating fact after another came into the open; and slowly but inexorably the pieces of the complex jigsaw of criminal intrigue, venality and fraud fell into place.
By the beginning of 1924, leading oil circles in the United States were infected with a mood of feverish anxiety. The rumour spread that the Senate Committee was about to subpoena a number of leading figures in the oil industry. Overnight, there was a sudden exodus from America of oil tycoons.
On January 16, Harry Sinclair sailed for France aboard the S.S. Paris with his name discreetly missing from the passenger list. In February, James O’Neil, president of the Prairie Oil and Gas Company, and Henry Blackmer, president of the Midwest Refining Company, after resigning from their respective posts, also sailed for Europe. Colonel Robert W. Stewart, chairman of the board of Standard Oil of Indiana, abruptly departed for Mexico and South America. H. S. Osier, head of the dummy Continental Trading Company, went to Africa “to hunt lions”. 5
On his return to the United States in the summer of 1924, Harry Sinclair was again summoned before the Senate Committee. This time, on the constitutional grounds that his answers might tend to incriminate him, Sinclair refused to answer any questions. He was indicted by a federal grand jury on charges of contempt of the Senate.
On June 30, 1924, Albert Fall, Harry Sinclair, Edward Doheny and Edward Doheny, Jr., were all indicted by a special federal grand jury on charges of conspiracy and bribery.
The federal indictments of Fall, Sinclair, Doheny and his son, were followed by months and months of protracted court action, with a battery of high-priced lawyers employed by the oil magnates resorting to every conceivable device to delay and frustrate the process of the law.
Not until March 1927, was Sinclair finally tried on the Senate contempt charge, found guilty and sentenced to three months, imprisonment and a $1,000 fine.
In the fall of 1927, Fall and Sinclair went on trial on charges of criminal conspiracy to defraud the Government. On the first day of the trial it was disclosed by the prosecution that jurors and witnesses were being trailed and intimidated by operatives of the William Burns Detective Agency and that Sinclair was paying the Agency for these services. It was also revealed that attempts had been made to bribe a number of jurors. The judge declared a mistrial.
Sinclair and William J. Burns, the former chief of the Bureau of Investigation, and several of their accomplices were subsequently tried for seeking “to bribe, intimidate and influence” jurors. Found guilty, Sinclair was sentenced to six months in jail and Burns to fifteen days. Burns was exonerated on appeal, but Sinclair served con- currently three months for contempt of the Senate, and six months for intimidation and influencing of jurors.
When Fall and Sinclair were tried a second time on charges of conspiring to defraud the Government, both men were acquitted . . .
In October 1929 Fall was tried on the charge of accepting a bribe from Edward L. Doheny. The former Secretary of Interior was found guilty, fined $100,000 and given a one-year prison term.
Five months after Fall was convicted of accepting a bribe from Doheny, the California oil tycoon was tried on charges of giving the bribe. Doheny was acquitted.
“We ought to pass a law,” Senator George W. Norris of Nebraska commented bitterly, “that no man worth $100,000,000 should be tried for a crime. That at least would make us consistent.”
The intrigues of Sinclair, Doheny and Fall were not the only ugly secrets of the Harding Administration to come to light after Harding’s death.
In the spring of 1924 a Senate Select Committee began public hearings on an investigation of the activities of Attorney General Harry M. Daugherty.
Republican Party leaders, apprehensive over the possible harm to their cause in the Presidential election that fall, decided that Daugherty must resign immediately. Daugherty angrily refused to do so. The Senate investigation, he said, was the work of “Communist agents and their tools,” and Senator Burton K. Wheeler, who was conducting the inquiry, was “no more a Democrat than Stalin, his comrade in Moscow.”
Only after President Coolidge sent the Attorney General a written request for his resignation did Daugherty resentfully resign . . .
One of the first witnesses before the Senate Select Committee was Jesse Smith’s former wife, Roxy Stinson. She not only told the Committee what she had learned through Smith about the criminal conspiracies in the Justice Department, but also revealed she had been repeatedly threatened in an effort to prevent her from testifying. “I am not Jess Smith,” said Roxy Stinson, “and there is not going to be a convenient bullet in my head”. 6
Another of the numerous witnesses to appear before the Senate Select Committee was Gaston B. Means. In copious, uninhibited detail, and not without a certain pride, Means described his criminal operations as an agent of the Bureau of Investigation. Among other disclosures, Means revealed how various Senators had been secretly investigated by Justice Department operatives, in an effort to forestall the Teapot Dome probe and other senatorial investigations.
“You also investigated Senator LaFollette, did you not?” asked Senator Wheeler.
“Yes,” replied Means.
“And you went through his ofﬁces here, did you not, in the Capitol?”
“I saw that it was done … I would just as soon investigate a tramp as anybody else . . . The man is a number. I never ask who he is . . . Thousands of people have been investigated. Bishops have been investigated. And clergymen—”
The Chairman of the Senate Committee, Senator Smith Brookhart, interrupted. “When did this terrific spy system start in the United States,” he asked, “by what authority, if you know?”
“I never saw a candidate that loomed up . . . that they did not go out and make an inquiry about him . . . The financial crowd finance and get investigations.”
“You mean the financial interests investigate everyone who is a candidate for office to get something on him,” asked Senator Brookhart, “so they can control him, is that the idea?”
“Well, yes, that would be my interpretation . . .”
“And that gang . . .” said Senator Brookhart, “is the same gang that I have denominated as the non-partisan league in Wall Street? Is that the crowd?”
Means nodded. “I think that President Wilson gave them the best designation, ‘invisible government’”. 7
Daugherty flatly refused to testify at the hearings. When Committee investigators sought to examine his accounts at the two banks in Washington Court House, Ohio, his brother, Mai Daugherty, who headed both banks, would not permit an inspection of the records. It was later learned that all the records had been destroyed.
Despite the extensive evidence of his malfeasance as Attorney General, Daugherty appeared in court to answer for only one of the many conspiracies with which his name had been associated, while he was in office. In 1926, together with the former Alien Property Custodian, Colonel Thomas W. Miller, Daugherty was tried on charges of conspiracy to defraud the Government and receiving bribes in connection with the settlement of the American Metal Corporation case.
Daugherty again refused to testify on the ground that his testimony might tend to incriminate him. Colonel Miller was found guilty, fined $5000 and given a year-and-a-half sentence. The jury reported they could not reach an agreement on the guilt of Daugherty, and he was acquitted . . .
To the bitter end, Harry Daugherty insisted he was the victim of a sinister international plot that had its fountainhead at the Kremlin in Moscow. “I was the first official,” he charged in his memoirs, “to be thrown to the wolves by the Red borers of America. Their ultimate success, in my case, was intended to intimidate men who succeeded me and make the American Republic thereafter cower under a reign of terror.”
But the actual menace to the American Republic during 1920- 1932 was of quite a different nature from that indicated by former Attorney General Daugherty. As Karl Schriftgeisser states in This Was Normalcy:
. . . Fall and Daugherty, Forbes and Jess Smith, and all the rest of the gangsters of this truly “incredible era,” were in reality merely symbols of a greater corruption which overtook the country during the next twelve disastrous years. They cannot be ignored by the historians, but their thefts and violences and the sounds of their revelry . . . were only coincidental to the abdication of the democratic spirit that was the fundamental crime perpetrated upon the people in these years.
Albert E. Kahn, May 1950
1 The names of the two businessmen who met with Sinclair and O’Neill are, despite considerable speculation, still not definitely known. The dialogue quoted is taken from the subsequent testimony of a witness before a Senate investigatory committee, who had overheard part of the conversation between the four men at the Bankers’ Club.
2 There is no documentary substantiation of Means’ picturesque description of the manner in which he collected graft and “protection money” from bootleggers. However, the fact that such money was collected, in sums running into hundreds of thousands of dollars, and then turned over to Daugherty’s man, Jesse Smith, has been corroborated with ample evidence.
In view of the fact that Gaston B. Means was an unusually fluent liar, the author of this book has been careful to quote Means only in instances where there exists corroborative evidence of his statements, and where such does not exist, to so indicate.
3 Smith’s first name, Jesse, was soon abbreviated to “Jess” in Washington; and before long he himself adopted the shortened form, and used it even when signing his “official” correspondence in the Justice Department.
4 Various theories were subsequently advanced in explanation of President Harding’s death. One was that, facing imminent catastrophe from exposure of the corruption and crime within his Administration, Harding had committed suicide. Another theory held that Mrs. Harding had poisoned her husband, either because she had discovered the details of his affair with Nan Britton or because she wished to avert national disgrace for him from the mounting scandals in the Administration.
In 1930, in his book, The Strange Death of President Harding, Gaston B. Means, who had been in close touch with the White House while a Justice Department agent, clearly intimated that Mrs. Harding, in connivance with Dr. Charles E. Sawyer, had murdered her husband and that she had later practically admitted this to him. Means.
“Both the suicide theory and the Means story are very plausible,” writes Frederick Lewis Allen in Only Yesterday.
Oswald Garrison Villard, in Fighting Years, states: “I am of those who lean to the belief that there was foul play in his death . . .”
Some commentators on the period are of the opinion that there was nothing mysterious about Harding’s death and that he died from natural causes. “There was no mystery” observes Samuel Hopkins Adams in Incredible Era, “other than that conjured up by excited minds, or concocted, and commercialized by Gaston B. Means.”
But whatever the real cause of President Harding’s demise, there were in addition to his death and that of Jesse W. Smith, a strangely coincidental number of other sudden deaths and “suicides” of persons who had been closely connected with the Harding Administration.
On March 14, 1923, Charles F. Cramer, Colonel Forbes’ former aide and chief counsel of the War Veterans’ Bureau, was found dead in his bathtub at his Washington residence. A bullet had been fired through his brain. The coroner’s verdict was suicide.
On September 23, 1924, Brigadier General Charles Sawyer, Harding’s former personal physician, who was said to have been with the President at the time of his death, was found dead at his home, White Oaks Farm, at Marion, Ohio. The New York Times reported: “General Sawyer’s death was almost identical with the manner of death of the late Warren G. Harding . . . Mrs. Harding was at White Oaks Farm when General Sawyer was found dead. Members of his family had no intimation of the seriousness of the General’s condition up to the moment he expired.”
On March 12, 1926, Thomas B. Felder, a lawyer who had been closely associated with Attorney General Daugherty in Justice Department intrigues and had later been sentenced to jail along with Gaston B, Means, died at Savannah, Georgia. His death was reported due to a “heart attack” and “alcohol poisoning.” The New York Times stated that shortly before Felder died he had announced his intention to “publish the complete records of the case in a Georgia paper he intended to buy in order to vindicate himself.”
On May 13, 1926, John T. King, the former Republican National Committeeman who had been involved in the American Metals Company scandal died of “pneumonia.” Shortly before his death, King had been indicted on the charge of conspiracy to defraud the U. S. Government in the American Metals case. The New York Times reported that the Government had “expected to use Mr. King as a witness to prove the alleged payments of $391,000… to Col. Miller, the late Jesse W. Smith, friend of Mr. Daugherty, and himself.”
On May 3, 1926, J. W. Thompson, partner in the Thompson-Black Construction Company, who had been sentenced to jail along with Colonel Forbes, died of a “heart attack” in St. Louis, Missouri.
On February 16, 1928, while under indictment on conspiracy charges for his part in the bribing of Secretary Fall, Edward L. Doheny Jr., was murdered by his secretary, who then committed suicide.
5 The Continental Trading Co. was a dummy company incorporated under Canadian law late in 192 1 by Harry Sinclair, James O’Neil, Colonel Robert W. Stewart, and Henry M. Blackmer. Operating through this company, the four associates secretly arranged to buy more than 30,000,000 barrels of oil from a large new oil field in Mexia, Texas. The price they paid was $1.50 a barrel. Continental Trading Co. then resold the oil at $1.75 a barrel to the American companies headed by Continental’s promoters. The profits to Sinclair and his colleagues from this deal would have exceeded $8,000,000— and would have cost the stockholders in their American firms the same amount— if these oil magnates had not turned in these profits to their respective companies after the deal was exposed by Senate investigators.
There was no direct connection between the Teapot Dome and Continental deals; but Sinclair received some of Continental’s profits in Liberty bonds, and later turned over a portion of these bonds to Secretary Fall at the time of the leasing of Teapot Dome. It was through tracing these bonds that Senate investigators discovered the Continental Co. arrangements.
After hurriedly departing from the United States in 1924, the oil magnates connected with the Continental deal straggled back to the country during the following months, with the exception of Henry Blackmer. He remained in France until September 1949. After agreeing to pay the U. S. Government $3,671,065 in back taxes and $60,000 penalties, he returned to the United States. It was then reported that the Government had removed blocks on frozen assets of Blackmer amounting to some ten million dollars. Five criminal charges against Blackmer were dismissed, after he paid $20,000 in final settlement for income tax evasion.
6 One of the witnesses who testified at the Senate hearings was Mrs. W. O. Duckstein, former secretary to William J. Burns. The day after she had given her testimony she received a letter from J. Edgar Hoover, then Acting Director of the Bureau of Investigation, peremptorily dismissing her from her job in the Justice Department.
7 Gaston B. Means died in 1938 in a federal penitentiary. He was then serving a term for defrauding Mrs. Edward B. McLean of $100,000 in 1932 on the pretext that this sum would enable him to get back the kidnapped child of Ann and Charles Lindbergh.