Oil businessman Edward L. Doheny (second from right, at table) testifying before the Senate Committee investigating the Teapot Dome oil leases in 1924

Teapot Dome around the time of the scandal

Warren G. Harding. Secretary of the Interior Albert B. Fall leased Navy petroleum reserves at Teapot Dome in Wyoming and two other locations inCalifornia to private oil companies at low rates without competitive bidding. In 1922 and 1923, the leases became the subject of a sensational investigation by Senator Thomas J. Walsh. Fall was later convicted of accepting bribes from the oil companies.

Before the Watergate scandal, Teapot Dome was regarded as the "greatest and most sensational scandal in the history of American politics".[1] The scandal also was a key factor in posthumously further destroying the public reputation of the Harding administration, which was already unpopular due to its poor handling of the Great Railroad Strike of 1922 and the President's veto of the Bonus Bill in 1922.[2]

History
In the early 20th century, the U.S. Navy largely converted from coal to oil fuel. To ensure the Navy would always have enough fuel available, several oil-producing areas were designated as Naval Oil Reserves by President Taft. In 1921, President Harding issued an executive order which transferred control of Teapot Dome Oil Field in Natrona County, Wyoming, and the Elk Hills and Buena Vista Oil Fields in Kern County, Californiafrom the Navy Department to the Department of the Interior. This was not implemented until 1922, when Interior Secretary Fall persuaded Navy Secretary Edwin C. Denby to transfer control.

Later in 1922, Albert Fall leased the oil production rights at Teapot Dome to Harry F. Sinclair of Mammoth Oil, a subsidiary of Sinclair Oil. He also leased the Elk Hills reserve to Edward L. Doheny of Pan American Petroleum. Both leases were issued without competitive bidding. This manner of leasing was legal under the Mineral Leasing Act of 1920.[3]

The lease terms were very favorable to the oil companies, which secretly made Fall a rich man. Fall had received a no-interest loan from Doheny of $100,000 (about $1.29 million today[4]) in November 1921. He received other gifts from Doheny and Sinclair totaling about $404,000 (about $5.2 million today[4]). It was this money changing hands that was illegal — not the leases. Fall attempted to keep his actions secret, but the sudden improvement in his standard of living prompted speculation.

Investigation and outcome

 
 
Senator Albert B. Fall, the first former U.S. cabinet official sentenced to prison

In April 1922, a small Wyoming oil operator wrote to Senator John B. Kendrick, angered that Sinclair had been given a contract to the lands in a secret deal. Kendrick did not respond, but two days later on the 15th, he introduced a resolution calling for an investigation of the deal.[5]

Republican Senator Robert M. La Follette, Sr. ofWisconsin led an investigation by the Senate Committee on Public Lands. At first, La Follette believed Fall was innocent. However, his suspicions deepened after his own office in the Senate Office Building was ransacked.[6]

Democrat Thomas J. Walsh of Montana, the most junior minority member, led a lengthy inquiry. For two years, Walsh pushed forward while Fall stepped backward, covering his tracks as he went. No evidence of wrongdoing was initially uncovered as the leases were legal enough, but records kept disappearing mysteriously. Fall had made the leases appear legitimate, but his acceptance of the money was his undoing. By 1924, the remaining unanswered question was how Fall had become so rich so quickly and easily.

Money from the bribes had gone to Fall's cattle ranch and investments in his business. Finally, as the investigation was winding down with Fall apparently innocent, Walsh uncovered a piece of evidence Fall had forgotten to cover up: Doheny's $100,000 loan to Fall.

This discovery broke the scandal open. Civil and criminal suits related to the scandal continued throughout the 1920s. In 1927 the Supreme Court ruled that the oil leases had been corruptly (fraudulently) obtained. The Court invalidated the Elk Hills lease in February 1927 and the Teapot Dome lease in October. Both reserves were returned to the Navy.

Albert Fall was found guilty of bribery in 1929; he was fined $100,000 and sentenced to one year in prison, making him the first Presidential cabinet member to go to prison for his actions in office. Harry Sinclair, who refused to cooperate with the government investigators, was charged with contempt, fined $100,000, and received a short sentence of 6.5 months for jury tampering. Edward Doheny was acquitted of bribery in 1930.

Another significant outcome was the Supreme Court's ruling in McGrain v. Daugherty (1927) which, for the first time, explicitly established that Congress had the power to compel testimony.