Bought Off by Big Oil

Big business. Influence peddling. Exploitation of natural resources. These hallmarks of political corruption have tarnished American government for decades. But in the modern era, political scandal has virtually no peer in the affair that grew out of a Wyoming oil field in the early 1920s. The Teapot Dome scandal takes its name from a U.S. Navy oil reserve distinguished by a rock formation that looked like a teapot. Beneath it were petroleum deposits potentially worth several hundred million dollars. Oil interests had helped elect the ill-equipped Warren G. Harding to the presidency, and in return, Harding installed friends of the industry in his cabinet.

The scandal badly soiled the administration of Harding.

One of them was Secretary of the Interior Albert Fall, a former senator from New Mexico who made no secret of his disdain for conservation. Fall leased the Teapot fields to Harry Sinclair of what was to become the Sinclair Oil Co. and reserves in Elk Hills, Calif., to Edward Doheny of Pan American Petroleum. In exchange, Doheny and Sinclair paid Fall upwards of $400,000 in cash and gifts. Fall was ultimately convicted of bribery and sentenced to prison; Sinclair was fined for contempt and jailed for jury tampering; and Doheny was acquitted of attempted bribery. It remains uncertain what Harding knew about the scandal. But the affair served to further expose him as among the weakest men ever to occupy the Oval Office.

In the following excerpt from The Teapot Dome Scandal: How Big Oil Bought the Harding White House and Tried to Steal the Country by Laton McCartney, J. Leo Stack, an oilman who feels he has been shortchanged in the Teapot lease deal, pays a visit to the owners of the Denver Post in hopes of exposing the scandal and, in turn, getting his cut.

Young Stack was abrim with righteous indignation. He needed allies who had what it took to stand up to some powerful, unscrupulous people. And of course, he would give his prospective partners a piece of what was owed him. He had come to the right place. The tall, mustachioed man at the table was Frederick Bonfils, 62, handsome, and rigorously fit. An outdoorsman and a gambler, he was also a world-class con man. In Kansas City, during and after the Oklahoma land rush, Bonfils had operated a crooked lottery and a newspaper blackmail scheme.

His partner, H. H. Tammen, had earned a reputation in Denver as the best bartender in the West. Short, blond, and built like a beer keg on sticks, Tammen had accumulated capital the old-fashioned way—by filching from the till. His first enterprise was a mail-order curio business selling "authenticated" headdresses from great Indian chiefs and scalps taken by Geronimo. Of course, his entire inventory was bogus. He was also among the first to sell "Navajo" blankets manufactured in eastern textile mills.

Together in 1895, Tammen and Bonfils acquired the Denver Post, then an afternoon rag with a dwindling circulation and a dubious future. They resuscitated it as a mix of populist politics, sensational features, and yellow journalism. Pledging to be "champions of the people," Bonfils and Tammen took on big money and political interests in the West, especially if the aforementioned didn't advertise in their paper. Often when a business failed to advertise, Bonfils and Tammen sent reporters to dig for dirt—the use of child labor, say. And Bonfils retained operatives especially to seek information that might be used for blackmail. These strong-arm tactics earned Bonfils and Tammen the enmity of the Denver establishment and a soaring readership.

Leo Stack needed Bonfils and Tammen to take on none other than Harry Sinclair. Before Teapot was leased to Sinclair interests, Stack had been one of numerous independent oil operators who had staked out preliminary claims on parts of the Teapot field. Harry Sinclair had bought up most of these claims, including those owned by Pioneer Oil Co. At the time, Stack had a contract with Pioneer calling for him to share in any profits realized from the field. Sinclair paid Pioneer $1 million to acquire its holdings. When Stack sought his cut, Pioneer offered him a mere $50,000. Even though he had only $187 to his name, Stack refused it, then headed over to the Post.

What Leo Stack didn't know was that Tammen and Bonfils had already gotten wind that something wasn't entirely kosher in the oil fields of Wyoming. One of Secretary of the Interior Albert Fall's secretaries had been hospitalized after working day and night to further her boss's oversize ambitions. Fall hadn't bothered to send her flowers or even a get-well card. She complained to a friend in Denver, noting that Fall was also giving away oil leases to his friends like "kisses at a wedding." As it happened, the Denver woman was married to a Post editor.

Bonfils wanted to sit on the story and in the meantime sent one of his star reporters, D. F. Stackelback, to New Mexico [where Fall had a ranch]. It didn't take Stackelback long to discover that Fall's finances had taken a significant turn for the better. Stackelback learned about a racehorse, cattle, and other livestock Sinclair had sent Fall. He also heard that the formerly broke interior secretary was suddenly spending large sums to improve his ranch. It was enough to convince Bonfils and Tammen that a number of important people would pay significant money to ensure that the newspaper didn't publish what it had learned.

Satisfied Stack had a legitimate claim, the Post's owners offered to help him collect—not from Pioneer but from Sinclair. They wanted $1 million. Of that, Stack was to get slightly less than half. The agreement was signed on April 14, 1922. The next day, the Post ran a front-page editorial asserting, "If carried out [the Teapot deal] will consummate one of the baldest public-land grabs in history." Bonfils and Tammen now believed they had enough leverage to make Sinclair amenable to their demands. But at a July 5 meeting, Sinclair took a hard line, insisting he'd bought out Pioneer knowing nothing of Stack's deal with Pioneer. If anyone owed Stack money, it was Pioneer, not him. He had no intention of paying anybody anything.

At the White House, meanwhile, President Warren G. Harding was contending with a railroad and mining strike, which threatened to paralyze the nation. And now came the uproar over Teapot Dome. No sooner had Harding managed to still some of the criticism over the leases when his interior secretary marched into his office demanding to send the U.S. Marines to Teapot. Fall wanted the Marines to eject a political backer of Harding's, Col. James G. Darden, who held claims on part of the Teapot field that predated the Sinclair lease and had started drilling on it. The demand put Harding in one of those quandaries from which he was continually trying to extricate himself: Deploy the Marines and alienate a friend and backer, or reject Fall's demands and God only knows what.

Harding ultimately granted Fall's request. At Teapot, Marine Capt. George Schuler faced off with the rig foreman, who said he had orders to keep all trespassers out. The marines had carbines, pistols, and enough ammunition to take on a small army of oilmen. After much macho posturing and Schuler threatening force, the foreman finally gave in, asking the marines to lunch after Schuler's men slapped "no trespassing" signs all over the rig and barbed-wire fence.

The Post couldn't have asked for a better story if Bonfils and Tammen had dreamed it up themselves. On August 7, they ran an editorial attacking the motives for leasing Teapot Dome as well as the Harding administration for sending in the Marines to protect Sinclair.

Since their meeting with Sinclair, the Post owners had "been looking everywhere for ammunition" to use in the blackmail scheme, Tammen said. If Sinclair thought he could give them the bum's rush, he had made a costly mistake. On August 18, M. D. McEniry [Interior's man in Denver] alerted Fall that Bonfils had sent two men to New Mexico "endeavoring to find something in your long residence in that State to your disparagement." They had discovered that Sinclair, Robert Stewart [chairman of Standard Oil Co. of Indiana], and Harry Blackmer [chairman of Midwest Refining, a subsidiary of Standard] had visited Fall at his ranch; that Fall cleared the obstacles preventing Standard from buying out Midwest and had granted Sinclair and Stewart a pipeline franchise connecting the Teapot and Salt Creek fields to a Standard refinery. Worse, they said they had a witness who had seen Fall collecting a payoff from Sinclair.

Bonfils intended to reveal the whole story unless he got what he wanted. His target now encompassed all Sinclair's allies in the oil business as well as the Harding administration. He planned to have his lawyer reveal the whole "secret history" of Teapot and Salt Creek before the congressional investigative committee headed by Wisconsin Sen. Robert LaFollette. Blackmer, too, was to be a prime target. "We expect to lay out every intestine of Blackmer's on the table," Bonfils warned. Briefly, Bonfils became so caught up in the role of crusading newspaperman that he momentarily thought of dropping the blackmail scheme altogether. "If we were patriotic, we would blow this thing to hell instead of trying to make a settlement," he announced to Stack. Responded Stack: "If I had as much money as you, I could afford to be patriotic. But that is not my idea."

The president was preoccupied the summer of 1922 with the mining and railroad strikes. He was drinking heavily. At a meeting with the rail workers' union president, Harding had been so drunk, the union man said, he couldn't talk. But Harding had grown concerned about the publicity surrounding the Teapot leases. He'd received numerous letters questioning the administration's handling of the matter, including from the governor of Wyoming.

For a time, the White House could dismiss the Post's attacks as scurrilous exercises in partisan politics. But then the Hearst papers began reprinting the Post's editorials in all of their 28 newspapers around the country. A highly agitated Harding demanded that his interior secretary explain what was causing all the controversy. Stack had a legitimate claim, Fall is likely to have replied, but Bonfils and Tammen were "scoundrels" exploiting the situation for money.

Ultimately Bonfils, Tammen, and Stack got their money, the entire $1 million. According to the story at the time, the payoff resulted from a meeting between Sinclair and his lawyer and Bonfils and a Republican lawyer, Karl C. Schuyler, who represented Blackmer. At first, Sinclair offered $100,000. "One hundred thousand dollars is a lot of money, and Stack ought to be happy with it," he said. Schuyler responded: "Mr. Sinclair, if any man came to you and created a situation for you...to secure an oil property as valuable as Teapot...would you think of valuing his services for less than $1 million?" After some thought, Sinclair responded, "Well, it's big, and perhaps you are not asking too much." By the end of the talks, Sinclair added $900,000 to his offer.

That, at least, was Schuyler's account. But there is another, more sinister version of what happened—one that has never become public. According to several men privy to the negotiations, including Bonfil's son-in-law, C. V. Berryman, it was Harding who pressured Sinclair to pay up. Berryman claimed that when Bonfils was threatening to expose the Teapot gang, Harding summoned Bonfils and Tammen to the White House and demanded that they "let up on that oil business in Wyoming." Bonfils struck the desk, saying, "Not unless I get two quarter sections of land on Cat Creek [in the Teapot field] and $1 million in cash." Harding assured him he would get it and even invited Bonfils on an upcoming trip to Alaska.

Berryman was not the most reliable of sources; one investigator suspected he was a "hophead." Moreover, his tale didn't reach Teapot's chief investigator until after Harding's death. Still, several factors lend credibility to his account: Bonfils, who had savaged the Harding administration, did go to Alaska as the Hardings' guest, even presenting Mrs. Harding with a sealskin coat. And after Sinclair made the payoff, Bonfils suddenly became persona grata in Washington.

Albert Fall resigned in January 1923. Before he left Washington, though, he quietly gave Sinclair a contract to buy all the so-called royalty oil from the Teapot fields—close to 2 million barrels a year that he then sold at a profit. The deal had the full approval of Harding, who wrote Fall, "I have no concern about Wyoming oil matters. I am confident you have adopted the correct policy and will carry it through in a way altogether to be approved."

Schuyler and Bonfils got back to Denver on Sept. 22, 1922. After that, the Post's attacks on Sinclair, Fall, and the Teapot deal ceased entirely. And from then on, any mention of Harry Sinclair was effusively laudatory.

From The Teapot Dome Scandal by Laton McCartney. Copyright 2008 by Laton McCartney. Published by arrangement with Random House, an imprint of Random House Publishing Group, a division of Random House, Inc.