Teapot Dome Scandal
– continued 2
In 1922, the
reserves were still under the jurisdiction of Edwin C. Denby, the United States Secretary
of the Navy. Fall convinced Denby to give jurisdiction over the reserves to the Department of the
Interior. Fall then leased the rights of the oil to Harry F. Sinclair of the original Sinclair Oil, then known as Mammoth Oil, without competitive
bidding. Contrary to popular belief, this manner of leasing was legal
under the General Leasing Act of 1920. Concurrently, Fall
also leased the Naval oil reserves at Elk Hills, California, to Edward L. Doheny of Pan American Petroleum in exchange for personal loans at no interest. In return for leasing
these oil fields to the respective oil magnates, Fall
received gifts from the oilmen totaling about $404,000 [equivalent
to $4 million in the year 2000]. It was this money changing hands that was
illegal not the lease itself. Fall attempted to keep his actions secret, but the "sudden"
improvement in his standard of living prompted speculation. On April 14, 1922, the Wall Street Journal reported a secret arrangement in which Fall had leased the petroleum reserves to a private oil company without competitive
bidding. Fall denied the claims, and the leases to the oil
companies seemed legal enough on the surface.