Teapot Dome: A Scandal Full of Big Oil In the 1920s

The USA has always been attached to scandal. Even the wish of the colonists to break away from English Crown was considered a scandal by British Loyalists. Thus, being a scandalous nation from the start, the USA continued to bathe in scandalous waters – scandalous to someone, somewhere in the world, anyway.  No nation can please everyone.

After Industrialization, scandal became easier to produce in America, because this trend provided more and better methods and a greater number of technologies with which to do so.

One of the first scandals of the American 20^th century involved the western states. Large American oil reserves were found at Elk Hills, California and at the town known as Teapot Dome, Wyoming. In 1912, the current US President, William Taft, declared that this government owned land in California and Wyoming, with its oil reserves, should all be held separate for the sole benefit of the US Navy. Elk Hills and Teapot Dome were given part and parcel to the Navy, along with everything underneath the land (i.e., oil). Oil was a sea of scandal at the beginning of the 20^th century, just as it has been at the beginning of the 21^st century.

The US Congress passed a bill on June 4, 1920 that permitted US Secretary of the Navy to have sole power "to conserve, develop, use and operate the same in his discretion, directly or by contract, lease, or otherwise, and to use, store, exchange, or sell the oil and gas products thereof, and those from all royalty oil from lands in the naval reserves, for the benefit of the United States." This meant that the Secretary of the Navy could do anything he pleased with the land and whatever was underneath it at Elk Hills and Teapot Dome. The related decisions were supposed to benefit the US.

This ripened the atmosphere with opportunity for scandal.

Nine months later, the new US President, Warren Harding, appointed Mr. Albert Fall to the office of Secretary of the Interior in March 1921. Harding then talked Edwin Denby (Secretary of the Navy) to take power over the Naval Reserves at Elk Hills and Teapot Dome.

Soon, Albert Fall chose two of his personal friends (that’s scandal right there), Mr. Harry F. Sinclair of the Mammoth Oil Corporation and Mr. Edward L. Doheny of Pan-American Petroleum and Transport Company to lease portions of the Naval Reserves at both sites. This was a case of personal friends in private business leasing government controlled lands and oil rights. A scandal was brewing.

All concern tried to keep this arrangement a secret, but word escaped and rumours flew, because Albert Fall suddenly began spending large amounts of money. Where did he get it? On 14th April, 1922, the Wall Street Journal printed the story that Albert Fall had leased Teapot Dome to Sinclair. President Warren Harding responded that this was perfectly within the law of the related Congressional Bill of 1920.

Not satisfied with this situation, the US Senate mounted and investigation of Mr. Fall and the Naval Reserves he appropriated. President Harding died at the beginning of August of 1923, while VP Calvin Coolidge took over and kept an eye on the investigation. Two months later, the US Senate Committee on Public Lands and Surveys began hearing on the Teapot Dome Scandal (as it is now known) in mid-October of 1923.

The investigation leader of the committee was the Senator Thomas J. Walsh, (D – Montana). After over three months, at the end of January of 1924, Edward Doheny of Pan-American finally admitted that he had given Albert Fall $100,000. He called it a “loan.” On January 31, the US Senate passed a resolution that leases to the Mammoth Oil Company and the Pan American Petroleum Company were fraudulent and corrupt. Albert Fall and Edwin Denby resigned from office.

Later, in October, 1927, Harry F. Sinclair was tried for conspiracy to defraud the United States. A mistrial was declared, because Sinclair hired a detective agency to follow the jury. He then was tried for criminal contempt, found guilty, and sentenced to 6 months prison time.

Albert Fall was charged with accepting a bribe and in October 1928, he was tried before the US Supreme Court. The judges further permitted additional testimony that showed financial relationships between Sinclair and Fall. At the end, Albert Fall was found guilty and sentenced to one year in prison, with a $100,000 fine.

One of our nation’s first scandals was over Big Oil and this apparently set a trend throughout the 20^th century and into the 21^st.