Friday, August 10, 2012

Albert B. Fall: tempest in a teapot

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Though President Warren G. Harding was never implicated in any of the scandals befalling his administration, his preference for giving his Cabinet unregulated control over their departments helped contribute to their abuse of power. Of his Secretary of the Interior, Albert Bacon Fall, Harding once said, "If Albert Fall isn't an honest man, I'm not fit to be President of the United States." Harding died unexpectedly in August of 1923, just a couple of months shy of the scandal that would show how he had misplaced his trust.

Fall was born in November of 1861 into a hardscrabble life in Frankfort, Kentucky. He worked at a cotton mill in his youth to help support his family, and later became a drugstore clerk and teacher. From an early age, Fall suffered from respiratory problems. He moved to Mexico in the hope that the climate would be more tolerable for this health issue and worked in the mining industry before returning to the United States, studying law in Texas. He moved to Las Cruces in New Mexico, then a U.S. territory, where he pursued employment in real estate, mining, and livestock interests while also opening a bookstore. Fall began practicing law after he was admitted to the bar in 1891, choosing Mexican law as his area of expertise.

By the time he got into the legal field, Fall had already started on a political career. After unsuccessfully running for the territory's house of representatives in 1888, he won a seat in the body in 1890; the year before, he was elected the irrigation commissioner of Dona Ana County. In 1893, he was appointed judge of the third judicial district in 1893. However, he soon left to return to private practice after an accusation that he deliberately discounted returns in an election in order to favor the Democratic candidate. He became the territorial attorney general in 1897 and 1907, the terms bookending another term in the legislature which Fall managed to serve despite opening a new law practice in El Paso, Texas. He was in a different party in 1904, having switched to join the Republicans. When the Spanish-American War broke out in 1898, Fall served as a captain in Company H of the First Territorial Infantry.

When New Mexico was admitted as a state, the legislature named Fall as one of the first people to represent the state in the Senate. It was a contentious choice; 32 were in favor, but a coalition of Democrats, progressive Republicans, and one other Republican did not cast a vote. The legislature's chairman argued that the choice was not valid because 37 votes were needed, but the Republicans said the decision stood because it was made with a majority of those present. Governor William C. McDonald, a Democrat, did not sign Fall's credentials. However, Fall was re-elected without incident in January of 1913 for a term commencing in March. In 1918, with the Senate electoral process changed from legislatures to popular vote, Fall won a second term.

Fall quickly became a controversial figure for his role in the relations between the United States and Mexico. Samuel Gompers, president of the American Federation of Labor, said Fall's demands amounted to an ultimatum which could lead to war. These included Fall's contention that the country was not doing enough to collect from Mexico for damages done to American property in skirmishes with rebels along the border. There was a minor scandal in 1913 when Fall denounced provisional Mexican president General Victoriano Huerta as a "traitorous and treacherous assassin" and demanded the repeal of a joint resolution allowing the President to authorize arms shipments to Mexico. The Mexican government in turn accused Fall of fomenting revolution and providing the rebellion with $200,000 to protect his property interests in the country. Fall denied the charge, saying, "The whole trouble is that I know the Mexican people, that I am thoroughly in sympathy with the great masses of the Mexican people and that I am not in sympathy with traitors nor assassins of any race. Huerta and his associates know these facts and they fear my statements concerning them, and they are driven to desperation when they threaten any exposé of myself or my facts."

When Harding was elected President in 1920, Fall accepted an offer to join his Cabinet as Secretary of the Interior and resigned from the Senate in March of 1921. He would become known as one of the members of the "Ohio gang," the members of the Harding Administration who achieved the most autonomy only to abuse this power. A rumor arose that Fall would resign at the end of his first year in the job due to irreconcilable disagreements with Harding over the issues of soldiers' bonuses and farm legislation. Fall said this was not true, and also denied suggestions that he had received offers to become affiliated with oil companies. It was an early hint of the scandal that would rock the country for several years. Though Fall did not resign in 1922, he did leave the post on his two-year anniversary. The reported reason for his departure was similar to the 1922 rumor: he and Harding remained friends, but disagreed over a variety of issues including U.S. intervention in Mexico and policies involving Alaska and conservation. Harding named the Postmaster General, Hubert Work, to take Fall's place.

The resignation came about five months before the lid blew off in a corrupt bargain that would come to be known as the Teapot Dome Scandal. This issue had its roots in the U.S. Navy's conversion from coal to diesel to fuel its ships. In order to ensure an adequate supply of fuel for the vessels, the administrations of William Howard Taft and Woodrow Wilson had set aside reserves at Teapot Dome in Wyoming and Elk Hills in California. During his time as Secretary of the Interior, Fall convinced Harding that the jurisdiction of the reserves should fall under his department rather than the Navy. He argued that neighboring private companies were inadvertently draining the reserves, and that it would make more sense to lease the fields to these companies and have them give the government a portion of the tapped oil. With Secretary of the Navy Edwin Denby agreeing with the recommendation, Harding acquiesced.

In April of 1922, Fall leased the Teapot Dome reserve to the Mammoth Oil Company, owned by Harry F. Sinclar. Sinclair gained control of the Teapot Dome reserve without ever going to bid; the 20-year lease promised to pay government between 12.5 to 50 percent of proceeds, depending on production. These funds would be paid in certificates that could be exchanged for fuel or Mammoth's services in constructing oil storage factories. Edward Doheny, a close friend of Fall's and owner of the Pan American Petroleum Company, won control over most of the Elk Hills reserve. He also submitted a successful bid for the construction of oil storage facilities at Pearl Harbor in Hawaii.

Congress investigated the transactions in 1922, but it wasn't until October of 1923 that a Senate inquiry began to uncover the seedy details of the leases. A Wyoming congressman questioned why they had not gone out to bid, and the St. Louis Post-Dispatch published an exposé alleging corruption in the deals. The Senate Public Lands Committee called in witnesses to see if any criminal activity had taken place, and eventually uncovered gifts and loans made to Fall by Sinclair and Doheny. Sinclair admitted that Fall had been his personal guest on several occasions, and the committee later determined that he gave Fall $260,000 in Liberty bonds as well as a herd of cattle and other gifts in exchange for control of the Teapot Dome reserve. Fall claimed that an additional $100,000 loan uncovered by the committee was given to him by Washington newspaper publisher E.B. McLean to purchase additional ranch properties in New Mexico. But in January of 1924, Doheny admitted that he had given this money to Fall in a black satchel during the lease negotiations. Further investigation determined that Fall was suffering from significant financial difficulties when he joined the Harding Administration, and that he had used the money to pay off his debts, renovate his ranch, and purchase adjoining property.

The blatant disregard for the public office horrified the American public, and the scandal sent shock waves through the Cabinet. Though not implicated in any criminal wrongdoing, Denby was heavily criticized for ceding control of the reserves to Fall and resigned under fire. Attorney General Harry Daugherty was also not found to be personally culpable, but resigned in 1924 amid accusations that he dealt in Sinclair stock and should have caught the misconduct. The leases were quickly annulled, and the Supreme Court upheld the decisions in two separate cases in 1927.

An indictment came down against Sinclair in March of 1924, and others were issued against Fall and Doheny three months later. The government charged that the men conspired to get control of the reserves between July of 1921 and December of 1922. However, the court quashed the indictments in April of 1925 since the assistant attorney general was present during the grand jury proceedings. The relief for Fall and the oil men was short-lived; all were re-indicted a month later. However, Fall and Doheny were acquitted of the conspiracy charges in December of 1926.

The legal proceedings continued to grind slowly forward, as both Fall and Doheny still faced bribery charges. Sinclair avoided these charges, but his refusal to cooperate with investigators earned him a conviction for contempt of both the Senate and Supreme Court in March of 1927; he was sentenced to serve three months in jail and pay a $500 fine. In the autumn of this year, the government tried to finally bring Fall's case to trial only to run into troubles with securing witnesses and other factors. Moreover, Fall was then 66 years old and "near death" with serious congestion in his right lung. The trial was put on hold. In the spring of 1928, Fall said that Harding had insisted upon leasing the oil fields and that Denby had been the person to request it. The transaction was above board and not done in secret, he asserted.

The case finally came before a jury in October of 1929. Fall was present in a wheelchair, attended by a medical staff. The main witness in his defense was Doheny, who would later be acquitted at his own trial. Doheny characterized the $100,000 payment to Fall not as a bribe, but as a loan to a friend. He also made the rather clairvoyant assertion that the deal was also made in the interests of deterring Japanese power, as he felt it would help keep the Navy well-prepared against the threat of an attack by this country. Doheny claimed that a Navy officer had urged him to seek control over an oil reserve as part of a contract for the oil storage facilities at Pearl Harbor, so that a Pacific power could be kept in check. "That government was Japan and fortunately the [September 1923] earthquake in Japan destroyed the very thing that was the menace, thousands of barrels of oil," Doheny testified.

The jury was not moved by this passionate appeal, and found Fall guilty of bribery. Fall was the first member of a presidential cabinet to be convicted of a crime. Doheny, who felt the case had been significantly directed by the bench, angrily cried, "The jury didn't try the case, the judge tried it!" Nevertheless, the jury recommended leniency for Fall due to his age and illness. He was sentenced to a year and a day in prison and a $100,000 fine. After unsuccessfully appealing the verdict, Fall arrived at the prison by ambulance to begin serving his sentence in July of 1931. He was released in May of 1932. The scandal would have a major effect on conservation policy, notably leading to the creation of the Federal Oil Conservation Board.

Fall resumed his business pursuits in New Mexico, but the scandal and his illness prevented him from meeting with much success in these areas. The 750,000-acre ranch he lived on had been purchased at foreclosure auction by the Doheny-led Petroleum Securities Company in 1929, and in 1935 the company moved to evict him. Fall fought the action, and was able to hold onto the ranch house and 100 acres. Nearly broke, Fall spent the last two years of his life suffering from continued illness in a hospital. He died in November of 1944 in El Paso.

Sources: The Biographical Directory of the United States Congress, Ohio History Central, "Queer Tactics in New Mexico Senate" in The Day on June 6 1912, "Would Discipline Mexico" in the New York Times on July 23 1912, "U.S. Senator is Accused of Aiding Rebels" in the New York Times on June 29 1913, "Fall Denies Diaz Charge" in the New York Times on July 2 1913, "Gompers Sees War With Mexico If Sen. Fall's Program is Carried Out" in the Lewiston Daily Sun on June 4 1920, "Fall Denies Report That He Will Resign" in the New York Times on Feb. 11 1922, "Work Given Fall's Place" in the Evening Independent on Feb. 27 1923, "Sinclair Bares Oil Lease Facts" in the Miami News-Metropolis on Oct. 29 1923, "Fall is Under Fire" in the Prescott Evening Courier on Dec. 27 1923, "Technicality Knocks Out Fall-Doheny True Bill" in the Reading Eagle on Apr. 3 1925, "New Indictments Against Teapot Dome Celebrities Drop the Bribery Charges" in the Evening Independent on May 28 1925, The Oxford Companion to United States History edited by Paul S. Boyer, "Sinclair Oil Lease Annulled" in the Providence News on Oct. 10 1927, "Here's History of Naval Oil Lease Cases" in the San Jose Evening News on Oct. 18 1927, "Fall Near Death" in the Pittsburgh Press on Nov. 5 1927, "Fall Continues With Account of Oil Leases" in the San Jose News on Mar. 27 1928, "Doheny Weeps in Testifying at Fall Trial" in the Milwaukee Sentinel on Oct. 18 1929, "Convict Fall, Ask Mercy of Court" in the Pittsburgh Press on Oct. 25 1929, "Fall Arrives at Prison to Start Term" in the Schenectady Gazette on Jul. 21 1931, "Fall To Be Released From Prison Today" in the Reading Eagle on May 9 1932, "Albert B. Fall, 83, Dies in Hospital" in the Pittsburgh Press on Dec. 1 1944, Encyclopedia of White-Collar & Corporate Crime edited by Lawrence M. Salinger, The New Encyclopedia of American Scandal by George C. Kohn