Roaring Twenties

The Harding Administration Scandals: Teapot Dome and More

The Harding administration (1921–23) is best remembered for corruption so severe that biographer Robert K. Murray called it “the most corrupt presidential administration in the twentieth century.” The most famous scandal was Teapot Dome, but it was not the only one. The Veterans’ Bureau, the Daugherty affair, the suicide of Jess Smith, and the mental collapse of Ned McLean together destroyed the reputation of the Republican Party in the 1920s and helped shape the New Deal coalition of the 1930s.

The full political story is in the parent Harding, Coolidge, and Hoover cluster. Coolidge became president only because Harding died in office. The end of the story is told in Hoover’s response to the Depression.

The Ohio Gang

The Ohio Gang was the loose network of Warren G. Harding’s personal friends, political allies, and corrupt associates from his home state. The core included Jess Smith, a political fixer who lived at the Owl’s Nest, the Washington townhouse the Hardings shared with the Smith family. The “Gang” also included Attorney General Harry Daugherty, Secretary of the Interior Albert Fall, Secretary of the Navy Edwin Denby, Veterans’ Bureau Chief Charles Forbes, and the publisher Ned McLean. They used their positions to enrich themselves through kickbacks, fraud, and the sale of government contracts.

The Ohio Gang is a striking case study in the dangers of cronyism. Harding himself was not a thief — there is no evidence that he took money from the schemes — but he appointed people who were, and he tolerated behavior he should have known about. The most famous phrase about his presidency is from Harding himself, in a letter to a friend: “I have no trouble with my enemies. I can take care of my enemies all right. But my friends, my God-damned friends, they’re the ones that keep me walking the floor nights.”

Teapot Dome

The Teapot Dome scandal is the most famous presidential scandal between the Credit Mobilier affair of the 1870s and Watergate in the 1970s. In 1922, Albert Bacon Fall, the Secretary of the Interior, secretly leased the Teapot Dome oil reserve in Wyoming to the Mammoth Oil Company, owned by the Oklahoma oilman Harry Ford Sinclair, without competitive bidding. Fall also leased the Elk Hills reserve in California to the Pan American Petroleum and Transport Company, owned by Edward Doheny. Both leases were made at sweetheart rates in return for bribes — about $404,000 in cash and Liberty Bonds from Sinclair and $100,000 in cash from Doheny.

The leases were legal only because the reserves had been transferred from the Navy to the Interior Department by executive order — a transfer made by Secretary of the Navy Edwin Denby at Fall’s request, with the approval of Harding and Attorney General Daugherty. The Public Lands Committee, with Thomas J. Walsh of Montana and Simeon D. Fess of Ohio, ran the Senate investigation. The Supreme Court voided the leases in United States v. Sinclair (1927), ruling that the executive order transferring the reserves had been illegal. Sinclair was held in contempt of the Senate and briefly imprisoned. Fall was tried twice — in 1929 and 1931 — and convicted of bribery. He was sentenced to one year in prison and became the first Cabinet member in American history to be imprisoned for actions taken in office.

The Veterans’ Bureau Scandal

The Veterans’ Bureau had been created in 1921 to administer the World War Adjusted Compensation Act and to provide medical care to veterans of the First World War. Its first director, Colonel Charles R. Forbes, a friend of the Ohio Gang, defrauded the Bureau of millions through rigged contracts, kickbacks, and the sale of surplus government property. Forbes and his associates reportedly diverted as much as $200 million in hospital supplies and equipment. In 1923, Forbes was forced to resign and was eventually convicted in 1926 of conspiracy to defraud the United States and bribery, and sentenced to two years in Leavenworth federal penitentiary. The Forbes scandal was particularly damaging because it was made public while Harding was still alive; the president was reportedly “distraught” when he learned the details.

The Daugherty Affair

Harry M. Daugherty, the Attorney General, was the most political of Harding’s cabinet choices. A behind-the-scenes Ohio operator and architect of Harding’s nomination, he was deeply implicated in the various scandals. In 1922, the Bureau of Investigation (later the FBI) and the Internal Revenue Service began investigating his finances, and in 1924 the Senate launched a formal inquiry. Calvin Coolidge, who had become president in 1923, fired Daugherty on March 28, 1924, after he refused to resign. Daugherty was tried twice for conspiracy to defraud the United States — in 1926 and 1927 — and both trials ended in hung juries. He was never convicted, but the suspicion never lifted.

The Death of Jess Smith and the Mental Collapse of Ned McLean

Two personal episodes brought the human cost of the scandals into sharp focus. The first was the suicide of Jess Smith, a key member of the Ohio Gang. On May 30, 1923, Smith was found dead in his apartment at the Wardman Park Hotel, with a note that read, in part, “My Dear Wife and Son — Goodby [sic] I am awfully tired and want to rest. I have been sold out by the bunch and am through. God forgive me. Jess.” The note implicated Daugherty. The police ruled it a suicide, but rumors of murder circulated for years.

The second was the mental collapse of Edward Beale “Ned” McLean, the publisher of the Washington Post and Washington Herald and the owner of the Hope Diamond. McLean had become enmeshed in the Ohio Gang’s schemes. In 1924, he was found not guilty by reason of insanity and committed to a sanitarium, where he spent much of the rest of his life. The McLean case became a national symbol of the corruption of the era.

The Timing of the Scandals

One of the most important facts about the Harding scandals is the timing. Harding died on August 2, 1923, in San Francisco, of what was almost certainly a heart attack. Most of the most serious revelations came after his death. His reputation was therefore preserved, to a degree, by the calendar. His widow, Florence Kling Harding, destroyed most of his papers to spare him further scandal. Harding himself was never directly implicated in the financial crimes of his associates, but he was tarnished by the question of whether he had known and done nothing.

The coolidge administration was forced to deal with the political consequences. Coolidge took pains to distance himself from the Ohio Gang, appointed Atlee Pomerene as special counsel to prosecute the Teapot Dome case, and otherwise cooperated with the Senate investigation. His reputation for honesty was, in part, established by his willingness to confront the corruption of his predecessor.

The Long Political Shadow

The Harding scandals had long political consequences. The Republican Party of the 1920s was, for many voters, the party of Harding, Fall, Daugherty, and Forbes — a party of corruption. The Democrats exploited this in 1924, 1928, and 1932. The 1928 election of Herbert Hoover in a landslide obscured the issue, but the 1930 midterms and the 1932 election of Franklin Roosevelt brought it back. The scandals also established norms about presidential conduct — the special counsel, the Senate investigation, the criminal prosecutions — that became templates for the Nixon and Clinton presidencies. The 1920s were, in this sense, the first modern American scandal era.

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