Politification

During the week the so-called "Oil Scandal" (TIME, Jan. 28et seq.) became more and more savory. Politicians immediately seized it as a means of ruining one another's reputations. The possibilities were so enlarged that political mud was spattered not only on those who figured in the case, but on those connected with those who figured in the case, and on those connected with those connected with those who figured in the case.

The Spatteration.

PRESIDENT COOLIDGE was attacked by Democrats and radicals in Congress for not having ordered investigations and prosecutions on the basis of earlier Senate disclosures. The Regular Republicans replied by asking why, if such action had really been warranted by previous evidence, the present critics had not demanded it previously.

THOMAS W. GREGORY, Attorney General in the Cabinet of President Wilson, had been selected by Mr. Coolidge to prosecute the oil cases. While he was on his way from Texas to the Capital, it was disclosed that he had, on occasion, acted as counsel for various oil companies, and at one time, after he left the Cabinet, had represented a group of oil companies, on affairs relating to Mexico, in an address to the Wilson Administration. Part of his fee $2,000) had been paid by one of Mr. Doheny's companies. The oil odium was so great that the President was obliged to withdraw his name as prosecutor.

SECRETARY OF THE NAVY DENBY'S resignation was demanded in Congress because he had approved the transfer of the control of the Naval Oil Reserves to the Department of the Interior.

ATTORNEY GENERAL DAUGHERTY'S resignation was demanded because he had not begun prosecution against Mr. Fall.

WILLIAM G. McADOO, ex-Secretary of the Treasury and aspirant for the Democratic Presidential nomination in 1924, was drawn into the case, because after his resignation from the Cabinet he had been employed to represent the Doheny interests, first at the Capital and then in Mexico, on matters relating to Mexican holdings. Mr. Doheny testified that Mr. McAdoo had received as salary for these services during the last four years about $250,000. It was generally believed that this contact with the oil odium had ruined Mr. McAdoo's chances for the Presidency.

THE LATE SECRETARY OF THE INTERIOR LANE, EX-SECRETARY OF WAR GARRISON, and GEORGE CREEL, former head of the Committee on Public In-formation--all of whom held office during the Wilson Administration--had, according to Mr. Doheny, been subsequently employed directly or indirectly by him or by companies in which he was interested.

GEORGE B. CHRISTIAN, JR., Secretary to President Harding, was referred to as having carried considerable blocks of oil stocks at about the time the oil leases were made. He denied this emphatically.

SECRETARY OF THE TREASURY ANDREW W. MELLON was attacked in the House because Harry F. Sinclair had claimed a deduction of $1,000,000 in his income tax return, on account of capital loss sustained in the sale of some stock "which had cost nothing."

The Denials.

WILLIAM G. McADOO telegraphed from California that he had had nothing to do with the leasing of Naval Oil Reserves, that his total receipts from the Doheny interests had been only $150,000, and that he was coming to Washington to testify.

SECRETARY OF THE NAVY DENBY announced that he would refuse to resign even if the Senate passed a resolution demanding his resignation, and added: "I am, of course, profoundly convinced of the legality of the action taken by the Navy and Interior Departments, and I am also profoundly convinced that it was for the best interests of the United States."

EX-SECRETARY OF WAR GARRISON denied that he had ever been engaged by the Doheny interests on any matter relating to oil.

GEORGE CREEL declared that he had been employed by an independent oil operator and when he learned that his services were being paid for by Mr. Doheny had quit at once.

SECRETARY OF STATE HUGHES, SECRETARY OF WAR WEEKS, SECRETARY OF COMMERCE HOOVER and SECRETARY OF LABOR DAVIS, and ATTORNEY GENERAL DAUGHERTY denied severally that the question of making the oil leases had ever been discussed by the Cabinet as a whole or had been referred to them individually for their opinions.

The Investigation.

P: The President appointed Silas H. Strawn, of Chicago, a Republican, and Thomas W. Gregory of Austin, Tex., a Democrat, to investigate and prosecute the alleged frauds. Mr. Strawn, although rated as a Republican, was a supporter of Grover Cleveland, and a partial supporter of Woodrow Wilson. He is a member of the Chicago law firm of Winston, Strawn and Shaw. Garrard Winston, one of his partners, is now Undersecretary of the Treasury. Mr. Strawn is Chairman of the Board of Montgomery Ward & Co. He is Chairman of the American Bar Asso- ciation's Committee on Legal Education. He is an ex-President of the Chicago Bar Association, the Illinois State Bar Association. He is chief counsel for the Chicago and Alton Railroad and his firm are general counsel for the Michigan Central, the Union Stock Yards and Transit Co., the Booth Fisheries.

Mr. Gregory's appointment was withdrawn when he reached Washington. Instead the President was expected to appoint former Senator Atlee Pomerene of Ohio, a Democrat. In political circles it is generally admitted that Mr. Pomerene would have been a strong contender for the Democratic Presidential nomination this year if he had not been defeated for reelection to the Senate in 1922.

P: The Senate passed a resolution, without a dissenting vote, stating that since the leases to Sinclair and Doheny "were execuled under circumstances indicating fraud and corruption," were executed "without authority," and were "in defiance of the settled policy of the Government," they were "against the public interest" and that therefore the President was authorized to order suits to be brought: 1) for cancellation of the leases; 2) for prosecution, civil and criminal, of such other actions and proceedings "as may be warranted." The President by the terms of the resolution would be further authorized to appoint special counsel for the prosecution "with the advice and consent of the Senate."

P: Rear Admiral Julian L. Latimer told the House Naval Affairs Committee that Secretary of the Navy Denby, and not former Secretary of the Interior Fall, had originated the plan of transferring the control of the Oil Reserves from the Navy Department to the Department of the Interior. Both Rear Admiral Latimer and Rear Admiral Gregory testified that they believed the leases were advantageous to the Government.

P: Edward L. Doheny testified again before the Senate Public Lands Committee. He produced the note given him by Secretary Fall for the loan of $100,000, but its signature had been torn off. Mr. Doheny said that the signature had been torn off so that in case of his (Doheny's) sudden death, his executors might not press Mr. Fall, if Mr. Fall was at that time unable to pay. Mr. Doheny promised to try to produce the missing portion of the note, which he believed was in California.

P: The Senate Committee on Public Lands ordered three Washington physicians to examine Mr. Fall to find out whether he was too ill to testify. The physicians declared he was suffering from "severe nervous strain" but in their opinion was "in condition to appear before the Committee."

P: Mr. Fall then appeared before the Committee, looking worried, but apparently the same stern-faced man so well known in official Washington. One question was asked him--whether he had any statement to make. Thereupon he read an answer, declining to testify on the grounds:

1) That the investigating Committee had been authorized by the 67th (previous) Congress to sit "until the assembling of the 68th Congress" and therefore had no authority at the present time.

2) That the Committee had been discharged of the resolution dealing with the question, which had been subsequently passed by the Senate (above).

3) That since the resolution had declared that "the leases were executed under circumstances indicating fraud and corruption," his testimony might tend to incriminate him.

The Oratory.

The orators of both parties unleashed their tongues with the following representative results:

Senator Moses, Republican: "Here we shall continue to find the partisan pack in full bay--Bess, Tray and Sweetheart--all hot upon the scent. Here, I suppose, we shall continue to see, and the country will not fail to take notice of, a proceeding in which we find sick chambers invaded by a jazz band, a ghoulish dance performed on a cemetery and partisan snipers making a rifle pit of the grave of Warren Harding."

Senator Stanley, Democrat: "This Teapot Dome, sir, is a crucible in which the world will test the capacity of an Administration--or at least of three great departments of it--to discharge the high duties imposed upon it--yea, more, the peril of permitting a party to select men for such places. This Teapot Dome is a crucible in which a great political organization shall be tested, and it is found to be dross. That is the reason the elephant trembles from trunk to tail."

The Significance.

Aside from politics, there are really three questions involved in the naval oil leases:

1) Was there any fraud or bribery in the making of the leases? The evidence indicates as regards Naval Reserve No. 1 (Elk Hills, Calif.), Mr. Doheny lent Mr. Fall $100,000 about one year before the final contract with the Doheny interests was drawn (TIME, Feb. 4). As regards Naval Reserve No. 3 (Teapot Dome), Mr. Sinclair lent Mr. Fall $25,000 and employed him some two years after the Reserve was leased to Mr. Sinclair, and three or four months after Mr. Fall had left the Cabinet.

2) Are the leases in the best interests of the Government? Some authorities maintain that the oil should have been left in the ground. Others maintain that in the case of both Naval Reserve No. 1 and of Teapot Dome the oil was being drained from the Government Reserves by wells located on property nearby. If this was so, the course of wisdom was to lease the Reserves* and get the oil out as soon as possible. Experts contradict each other as to whether this drainage was taking place. Some plausibility is given to the theory of drainage by the fact that less oil has been found in both Reserves than was expected.

As to the terms of the leases, the Government receives a royalty in oil of about 17%. About two-thirds of this royalty is turned over to the Doheny and Sinclair companies for other services which they render. Thus of about 26,000,000 barrels of oil now estimated to be in Reserve No. 3 (Teapot Dome), the Government will receive about 1,666,666 barrels. The oil companies drill the wells, refine the oil, transport it (in the case of Sinclair and Teapot Dome, to the Coast; in the case of Doheny and Reserve No. 1, to Hawaii) and build oil storage tanks which are the property of the Government. It is a question of business whether the oil companies receive too much for these services. The two Admirals (above) and Secretary Denby (above) think the arrangement is reasonable. Others do not.

It seems certain that the leases will be canceled by political pressure. It is worth any politician's "life" to dare to defend them. In business circles, however, it is freely pointed out that the Government may lose by the cancellation. If the leases are advantageous, to cancel them is a loss. And some of the works, begun for the Government, notably those at Pearl Harbor, will, it is said, be destroyed by weather, tides, etc., 'if the Doheny companies are prevented from completing them rapidly. The result would be a loss of several million dollars of Government property.

3) Are the leases legally made? The act giving the Secretary of the Navy general powers over the Naval Oil Reserves was passed during the Wilson Administration. Its wording is admittedly loose and subject to dispute. Whether the Secretary of the Navy had power to delegate this control to the Secretary of the Interior, or the President had the power to do so by executive order--as was done before the leases in question were made--is a legal point which can be definitely decided by the courts alone.

*The alternative to this procedure would have been for the Government to go into the oil business--to do its own drilling, refining, transporting, and building of tanks--operations which have cost the oil companies already many millions of dollars.