California Rich

by Birmingham, Stephen;

  One of Pa D.’s cronies from his prospecting days was a young man from Kentucky named Albert Bacon Fall. Like Doheny, Fall had had almost no formal education and had behind him a checkered career after heading west as a youth. He had worked as a cowboy, a farmhand, a prospector, and a miner, and had wound up in New Mexico when it was still a territory. There, after studying law in his spare time, he had passed the rather relaxed requirements for admission to the bar and had gone into politics. Fall had supported Grover Cleveland for the presidency and had been rewarded by him with a judgeship on the Supreme Court of the Territory of New Mexico. It was here that Fall first displayed a tendency to take the law into his own hands, as happened one day when he leaped down from his judge’s bench to lead a posse of gunmen that was out to lynch a bandit. When word of this incident reached President Cleveland’s ears Fall was summarily relieved of his judicial post.

  Unlike his friend Doheny, Albert Fall never had the luck to strike it rich. With the outbreak of the Spanish-American War, Fall joined the infantry, reached the modest rank of captain, and at the end of the war came back to New Mexico, where he announced that he had switched political parties, from the Democratic to the Republican. When New Mexico was admitted to the Union in 1912, Albert Fall ran for the Senate and was elected New Mexico’s first United States senator.

  As a senator, Albert Fall provided Washington with almost a caricature of the western hombre. He had cold blue eyes and thin lips, from which there usually drooped an unlit, well-chewed cigar. He spoke with a heavy western drawl and wore wide-brimmed hats, even on the floor of the Senate, and shoestring ties. His appearance alarmed some observers. One Washington newspaperman wrote of him: “With a long drooping moustache, he looks like a stage sheriff of the Far West in the movies. His voice is always loud and angry. He has the frontiersman’s impatience. From his kind lynch law springs.” Though Fall and Doheny were now on opposite sides of the political fence, the two men shared a number of beliefs. Both were strong advocates—Doheny with particularly good reasons—of armed intervention in Mexico to protect American investments there. Both were also ardently in favor of the immediate and complete exploitation by private interests (such as Doheny’s) of the nation’s natural resources (such as oil). Doheny, in fact, had a grand plan that was as ambitious as any in a James Bond novel. He knew that the pools of oil that lay beneath the American subcontinent would not last forever. What he wanted to do was to pump it all out as quickly as possible; then he planned to store his oil, to keep the price up, and dole it out at his own rate of speed to an oil-thirsty country.

  In the Senate, because he spoke a little Spanish, Albert Fall represented himself as an expert on Mexican affairs; because he was a friend of Ed Doheny’s, he represented himself as an expert on the petroleum industry. In Washington, Fall became a card-playing chum of another senator, the easygoing Warren Gamaliel Harding from Ohio. When, in 1920, Harding became one of the most unlikely candidates for President in American history, Albert Fall was one of his staunchest supporters. So, at Fall’s urging, was Ed Doheny, who contributed twenty-five thousand dollars to the Harding campaign. Doheny also paid for a controversial national newspaper advertising campaign that featured full-page photographs of Harding’s parents. The point of this was to counteract rumors that Warren Harding had “Negro blood.” The ads showed Harding’s parents to be unmistakably white.

  When Harding was elected to office by an overwhelming majority—carrying thirty-seven of the forty-eight states—Harding asked Fall if he would like to be his Secretary of the Interior. It was said at the time that Harding had at first considered making Albert Fall Seceretary of State but had been persuaded by his advisors that the Senate would never accept a southwesterner for the top Cabinet post. In offering Interior to Fall, Harding is supposed to have apologized for not giving him the juicier plum. But in view of what was to happen, he needn’t have bothered. As Secretary of the Interior, Fall would be in a position to be of great assistance to Doheny; as Secretary of State, he would have been of no use at all. What is more likely, and characteristic of Harding, is that Harding asked Fall to take his pick of Cabinet posts and that Fall, after consulting with Doheny, selected Interior. Interior was known as one of the government departments most susceptible to graft, where important money could be made on the side. It was also already rumored that Interior was “owned” by the big oil interests.

  Fall’s appointment was greeted with cheers and applause on both sides of the Senate floor, and Fall went sailing into the job without the usual formality of having the appointment sent to committee for approval. This was, after all, the dawn of the carefree decade of the 1920s. At the time, Harding announced that it was his policy to pick “the best man” for each government position. The New York Times commented editorially that Harding was not appointing the best men so much as his best friends.

  About three years before Harding’s election Ed Doheny had had a meeting that would prove pivotal in the series of events that was to come. His son, Edward L. Doheny, Jr., had been serving as a lieutenant in the navy aboard the U.S.S. Huntington (named after another wealthy Californian), and while the Huntington was docked in Pensacola the elder Doheny, vacationing in Florida, came aboard for a paternal visit. The presence of the famous oil millionaire did not go unnoticed by the crew, and Ed Doheny was invited to meet with the ship’s commanding officer, Captain John Keeler Robison. Doheny’s meeting with Robison lasted a full two hours, and the topic of conversation was, quite understandably, oil. Oil had become tremendously important to the navy. Nearly all of its fleet had been converted from coal to oil burning, and to be sure that the navy would have an ample supply of fuel—and at a price considerably lower than it would have to pay on the open market—the Department of the Navy, under President Taft, had been given some 78,791 acres of oil lands. These were situated in three principal locations: at Elk Hills and Buena Vista Hills, in Kern County, California, and at a place in Wyoming quaintly named Teapot Dome. Ever since the Taft order, the private oil interests, including Doheny’s, had been trying to obtain leases to drill and exploit this rich acreage of oil reserves, but thus far their pleas had been successfully resisted by the Naval Fuel Oil Board, which maintained that the land should be kept by the navy for navy use.

  Captain Robison was an Annapolis graduate and a career navy officer, so he cannot have been expected to know much about the oil business. But he was devoted to the navy, and in his conversation with Doheny, Robison commented proudly on how well the navy was maintaining its oil reserves. Doheny responded with the sort of indulgent smile that a parent bestows on a child who has asked if the moon is made of green cheese. “Well, it is being handled very well for the people you have for neighbors,” he said, “but you are not going to have any property there in a very few years.” Captain Robison asked him what he meant by that, and Doheny explained that, while the navy was jealously guarding its untapped oil reserves, other drillers, on the periphery of the navy lands, were pumping oil out of the ground and systematically “draining” away all the oil from under the land the navy owned. Doheny pictured the oil situation underground as a series of large bathtubs with interconnecting canals. Empty one tub of oil and oil from the next one would simply flow into it. The navy, Doheny said, would be far wiser to get its oil out of the ground while it still had a chance.

  The question of drainage from one well into another was not a new one to oilmen or to the navy’s petroleum engineers. It had been studied by Woodrow Wilson’s Secretary of the Navy, Josephus Daniels, with inconclusive results. Oil, it was decided, might occur in isolated pockets or it might also occur in connected pools, where some drainage might take place. But the science of geology in oil exploration was still in a fairly primitive state, and the fact was that, lacking a subterranean telescope, no one really knew for sure what was going on beneath the earth’s crust. Still, Captain Robison was appalled by Doheny’s information and by the vision of the navy’s precious oil being sucked away by neighb
oring drilling companies. It opened his eyes, he said later, to a problem he had never dreamed existed. Testifying before a Senate investigating committee, Robison said that Mr. Doheny’s words carried particular weight because they had not come “from some $2,500 clerk,” but from a man “who had made millions knowing how.” He assured the senators, “That is the kind of information I believe.” Doheny’s warning, of course, was based as much on guesswork as on expert knowledge, but, more than that, it was part of his plan. He had planted the seeds of doubt in the mind of a high-ranking naval officer about the security of the navy’s precious oil reserves.

  President Harding’s appointee as Secretary of the Navy, replacing the able Josephus Daniels, was a man named Edward Denby, whose principal qualification for the Cabinet post seemed to be that he had seen service as a marine in the First World War. Like Harding’s other appointees, Denby was one of Harding’s friends. There is no evidence to indicate that Edward Denby was a dishonest man, but he was lazy and not very bright. It became Denby’s task to appoint a new chief of the navy’s Bureau of Engineering, and the man he chose was none other than Captain John Keeler Robison, who was given the temporary rank of rear admiral. Whether Doheny or Fall had a hand in this appointment was never made clear in the subsequent investigation. But in retrospect it seemed likely. It fitted in so neatly with Doheny’s plan. Robison now was in complete charge of the naval petroleum reserves.

  There remained only a few loose ends to be tied together as Doheny and Fall closed ranks against the government of the United States of America. First, it was considered important to get the navy’s oil lands—and Robison, who supervised them—out of the control of the Department of the Navy and the unreliable Mr. Denby and under the jurisdiction of Fall’s Department of the Interior. Of course some explanation for the move would have to be given to Denby, and some persuasion would have to be exercised on the President to get him to authorize it. But Fall foresaw no problem on either front, and he was right.

  As a President, Warren G. Harding may not have been the worst, but at his best he was never clear about what the highest office in the land entailed. The most that could be said for him was that he looked like a President—tall, ruggedly handsome, a tobacco-chewing Main-Streeter from Marion, Ohio. Once, when a problem involving taxation had come to his desk, Harding complained to an aide, “John, I can’t make a damn thing out of this tax problem. I listen to one side and they seem right, and then—God!—I talk to the other side and they seem just as right, and here I am where I started. I know somewhere there is a book that will give me the truth, but, hell, I couldn’t read the book. I know somewhere there is an economist who knows the truth, but I don’t know where to find him, and haven’t the sense to know and trust him when I find him. God, what a job!” He also once said, “It’s a good thing I am not a woman. I would always be pregnant. I cannot say no.”* Most administrative decisions, he admitted, gave him a headache. He would much rather be playing poker or out on the golf course, and he eagerly delegated as much authority as he could to the members of his Cabinet, most of whom were his poker-playing cronies. At his nightly White House poker parties, meanwhile, he was extraordinarily lucky, and friends like Fall and Denby were more than happy to let the Chief Executive win.

  When Fall approached Denby about shifting the navy oil lands to Fall’s department, Denby—always pleased when a piece of work that was on his desk could be placed on someone else’s—was delighted. Not to have to run the oil lands gave him one less job to do. The only other person needed to approve the switch was the President. True to his word, he could not say no.

  Others in the Department of the Navy were less cheerful about what was about to happen. Admiral R. S. Griffin, who was a former chief of the Bureau of Engineering, reminded Denby that the navy had been struggling for over a decade to keep its oil, and said that if he “turned the administration over to the Interior Department we might just as well say good-by to our oil.” But Secretary Denby explained that the President had already approved the scheme, and within a few days Fall was able to write to his friend Ed Doheny in California:

  There will be no possibility of any further conflict with Navy officials and this Department, as I have notified Secretary Denby that I should conduct the matters of naval leases under 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 of his department but only with himself and such consultation will be confined strictly and entirely to matters of general policy.

  Originally Doheny had wanted the entire naval oil reserves for his own company. But Fall, it turned out, had other plans. Doheny was not Fall’s only friend in the oil business. Another was the eastern oil magnate Harry F. Sinclair, who headed the Mammoth Oil Company. Fall decided to split the pie two ways. He comforted Doheny with the reminder that, after all, if all the navy lands were turned over to Doheny for development, someone might think that something a little fishy was going on. And when one was doing something illegal, one had to be fair about it. The Teapot Dome acreage in Wyoming was turned over to Sinclair and the two big California tracts to Doheny.

  Now all that remained to do was for Fall to arrange compensation for what he had accomplished. In this connection, it seemed that Sinclair was not as close a friend as was Doheny, because Sinclair’s bill was considerably higher. For a smaller number of acres Sinclair paid Fall close to four hundred thousand dollars in cash and bonds. He also gave Fall six prize Holstein heifers, a yearling bull, two six-month-old boars, four sows, and an English thoroughbred horse for the Secretary’s New Mexico ranch. Doheny, meanwhile, somewhat mollified navy officials, who were horrified over the transfer, by promising to build the navy some oil-storage tanks in Pearl Harbor, Hawaii, tanks that the navy had long wanted but had been unable to get from Congress. Now it was time for Doheny to pay Fall for his good services or, as Fall put it in a telephone call to Doheny, “I am now prepared to receive that loan.”

  Doheny sent for his only son, Edward L. (Ned) Doheny, Jr., and instructed him to go to the offices of Blair & Company in New York (where both father and son had brokerage accounts, and in which the former owned a considerable interest) and to withdraw from the younger Doheny’s account a hundred thousand dollars in cash, giving two checks for the money. Doheny told his son to take the bills, wrap them in paper, put them in a small black valise, and carry them personally to Secretary Fall in Washington. In November 1921 Edward Doheny, Jr., carried out his mission and arrived with his little black bag full of banknotes at Secretary Fall’s apartment in the Wardman Park Hotel. The younger Doheny, with his male secretary, Robert Plunkett, as witness, watched as Fall counted out the money and then—or so he claimed later—received Fall’s note for the amount. At the time, Doheny said, he pointed out to Fall that no interest rate had been placed on the note. Fall airily replied that his old friend Ed Doheny could insert any rate he wished to.

  Within days Secretary Fall was back home in New Mexico, where he paid cash for a large piece of property adjoining his Three Rivers Ranch. During this visit, his daughter testified later, she walked into her father’s room and saw large piles of money lying on his desk. She snatched up one of the piles and cried, “Here’s my trip to Mexico!” and started out of the room with the cash. But her father ordered her to come back and return the money, saying that it was reserved for paying off the mortgage on their house. Secretary Fall’s New Mexico neighbors were somewhat surprised by the Fall family’s sudden affluence; a relatively hardscrabble ranch was suddenly transformed into something of a showplace, with prize cattle and thoroughbred horses. But, then, it was known that Albert Fall had many rich friends and occupied a high position in the government.

  On January 9, 1923, after completing all his various deals, Fall announced his intention to retire from his life of “tireless public servi
ce.” To the press President Harding expressed profound sorrow at Fall’s decision and said that, to keep him in Washington to continue to serve the nation’s needs, he had offered to appoint Albert Fall to the United States Supreme Court. But Fall had turned down even this lofty post, saying that he wished to return to the land and to the humble life of tending his little southwestern ranch. And well he might have wished to get out of Washington, where various busybodies in the press were trying to figure out why and how the U.S. Navy’s oil lands had made their way from the Department of the Navy to the Department of the Interior and, finally, into the hands of Doheny & Company, in a matter of months. Already there were dark mutterings about corruption, and though he did not show it, Fall may have been one of the most frightened men in America. He had collected some half a million dollars in payoffs and bribes, and he may have begun to wonder whether or not he had sold himself too cheaply. At the time, when for a mere hundred thousand dollars Doheny had acquired roughly 30,000 acres of oil lands, whose contents were estimated to be between 75 and 250 million barrels of oil, Doheny had commented, “We will be in bad luck if we do not get one hundred million in profit. But that will depend on the price of gasoline.”

  There were other indications that Fall may have been frightened that his machinations could be exposed and his bubble burst. There had been a curious meeting between Mrs. Fall and the President when Harding was passing through Kansas City. Mrs. Fall had appeared at Harding’s hotel, unannounced, and asked to see him; she looked distraught and agitated. She was admitted to the President’s suite, and after a private conversation that lasted about an hour she emerged looking even more troubled, red-eyed as though from weeping. When the President himself emerged he looked haggard and grim. What they talked about was never disclosed, but it cannot have been pleasant, and one might speculate that a presidential pardon for her husband might have been one of the topics. The next day, in an interview with William Allen White, the celebrated editor of the Emporia, Kansas, Gazette, Harding remarked to White, “In this job, I am not worried about my enemies. I can take care of them. It’s my friends who are giving me trouble.”