Uphill All the Way: The Fortunes of Progressivism, 1919-1929
By Kevin C. Murphy, Copyright 2013. All Rights Reserved.

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Chapter Five:
The Politics of Normalcy

Progressives and the Fight for Good Government

V. The Harding Scandals

I. The Harding White House.
II. Organizing in Opposition
III. Lobbies Pestiferous
IV. The Taint of Newberryism
V. The Harding Scandals
VI. Tempest From a Teapot

The Newberry and Smith-Vare cases may have riled the feathers of congressional progressives, but they were but bookends to the corruption scandals that emerged from the misdeeds of the Harding administration. Before all was said and done, the malfeasance within the Harding White House would result in several prolonged Senate investigations, jaw-dropping testimony, multiple resignations, a handful of suicides, the first conviction of a Cabinet member in American history, the gradual unveiling of an even grander conspiracy that drenched the entire Republican Party in oil, and a shadow over an otherwise extremely popular president and his legacy that would heretofore be impossible to shake. And yet, while newspapers and onlookers would cover the scandals like they were the Greatest Show on Earth, progressives, try as they might, were never very successful in making political hay from the sordid revelations. To a cynical generation who had seen the idealism of the Great War devolve into a sad joke, who had begun the decade witnessing even the national pastime being fixed, and who had to break the law with regularity just to indulge in a drink, the Harding scandals were less a shocking blow to good, clean government and more just another good, old-fashioned entertainment.

While hints of the darkest scandal, Teapot Dome, began to leak out as early as April 1922, the first of the illegalities to come to full flower was the Veterans Bureau Scandal perpetrated by one Charles R. Forbes. Forbes was a charismatic huckster who had first met the Hardings in 1915, when the Senator and the Duchess were visiting Hawaii and he - only fifteen years after deserting the army for four years - was now in charge of building a naval base at Pearl Harbor. With poker skills and charming words, Forbes was able to woo his way into the hearts of both Hardings on that trip. Five years later, after Forbes had served with distinction in France and won a Distinguished Service Medal, he reconnected with Warren Harding, and helped to swing the Washington delegation at the 1920 convention to his side. On the advice of his wife, the president appointed Forbes head of the Bureau of War Risk Insurance, which after the passage of an August 1921 consolidation bill (yet another of the items Harding had asked for in his April address to Congress) became the Veteran's Bureau.1

In keeping with the sheer number of veterans now out and about two years after the World War, the Bureau was granted the biggest budget of any federal department in 1921 - close to half a billion dollars a year. Forbes set himself to grifting as much as of this as he possibly could -- according to a later Senate investigation, as much as $2 million. Given control of the Army's surplus warehouses in Perryville, Maryland, he began to sell all of the equipment and supplies therein below-cost to private firms (or, in the case of the alcohol and drugs on storage, to less savory entities), taking a percentage of the cut each time. (One Boston firm paid Forbes $600,000 for an estimated $5 to $7 million of supplies.) Granted the authority to determine where future veteran's hospitals would be built, Forbes first set up a dummy architectural department that overcharged the government for shoddy proposals, then awarded the contracts only to those private contractors who gave him massive kickbacks. He also gave imaginary jobs on the Bureau's payroll to friends and cronies. And when he wasn't on extended, profligate junkets to tour fake hospital sites, he cut a playboy swath through Washington, publicly spending and gambling far more than his modest $10,000 salary should ever be able to withstand. Meanwhile, thousands of legitimate veterans' claims went unprocessed.2

Given the scale of Forbes' graft, and the sheer audacity with which he flouted the law, it was likely only a matter of time before he got caught. As it was, the president's surgeon general and personal physician, Charles Sawyer, got wind of the corruption and informed Harding in February, 1923. When the president asked his old friend for an explanation of why he was apparently liquidating the army's reserves in Perryville, Forbes first gave the dubious explanation that it simply cost too much to store supplies there. But this time, the charm offensive failed. A few days later, Harding called Forbes to the White House again, where, as noted before, he was seen by a visitor shaking him by the throat. In the end, the president allowed Forbes to resign and hide out in Europe, but the abrupt resignation - phoned in from Paris - caught the eye of Congress. Soon thereafter, the Senate called for a formal inquiry into dirty dealings at the Veteran's Bureau. Twelve days later, Forbes' general counsel, Charles Cramer, killed himself in the bathroom of his home - the same Wyoming Avenue home, it so happened, where Warren and Florence Harding had resided before the White House. The Harding scandals were on.3

The Senate began its formal investigation into Forbes' activities in October 1923, during which his misdoings were exposed by one of his old partners-in-crime, Elias Mortimer, whose wife Kate had cleaned out the bank account and gone off to Europe with the defendant. In February 1924, Forbes was indicted for conspiracy to defraud the government. His trial in Chicago took place the following winter, with Mortimer the star witness, and Forbes was convicted and sentences to two years and a $10,000 fine. He served one year and eight months at Leavenworth.4

Another esteemed veteran turned ne'er-do-well in the Harding administration was Lt. Colonel Thomas W. Miller, a former Delaware Congressman, war hero, American Legion co-founder, and chairman of the Republican National Campaign Committee. In 1921, Miller was appointed the Alien Property Custodian, meaning the government official who oversaw all the property, trusts, and assets that had been confiscated from German nationals during the war. One of these assets was roughly 49% of the American Metal Company - worth $6 million - that had been owned by a German bank. Converted into bonds by an earlier Alien Property Custodian, A. Mitchell Palmer, these company's shares were now worth approximately $7 million.5

In September 1921, a Swiss national named Robert Merton came to America claiming that a corporation owned by his family had, in a verbal transaction, bought out the German's shares of the company in March 1917, one month before America entered the war. Through Wall Street connections, Merton was introduced to former Roosevelt and Wood campaign manager, John King, who brought him to meet the Alien Property Custodian and Harry Daugherty's #2, Jess Smith, in New York. Within a week, Miller had delivered the $7 million in assets to Merton, who then gave King $391,000 in bonds and $50,000 cash. This "finder's fee" very quickly looked to be a bribe when King subsequently gave $50,000 to Miller and $224,000 to Jess Smith "for expediting the claim," $50,000 of which eventually ended up in a joint bank account shared with Attorney General Harry Daugherty, and $40,000 (in bonds) of which went to Harry's brother Mal.6

By 1922, there were also rumors that a Massachusetts lawyer and good friend of Miller's, Edward Thurston, was the man to see in order to make similar such bribes to the Custodian for other confiscated property. In any case, in 1926, Lt. Col. Miller was indicted, along with John King and Harry Daugherty, with conspiracy to defraud the government. A year later, in a second trial he would be convicted and spend eighteen months in prison. Daugherty, for his part, managed to beat the rap both times despite pleading the fifth, but not before it came out that he just happened to have burned all of the records associated with the particular joint bank account in question in 1925. As for Jess Smith, he couldn't be indicted because, in the second suicide to rock Harding's administration, he had killed himself with a gunshot to the head in the early morning hours of May 30th, 1923.7

The question is still open as to exactly why Jess Smith killed himself, or even if he killed himself at all. (The first official on the scene was Bureau of Investigation head William "Billy" Burns, another member of the Ohio Gang, who promptly misplaced the murder weapon. In addition, while there was no autopsy conducted, the bullet apparently entered the left side of Smith's skull. Smith was right-handed.) Before his death, Smith had burned all of his personal papers, a strangely common occurrence among members of the Ohio Gang. It is clear that, as Harry Daugherty's roommate and friend since childhood (and, some rumored, lover), Smith knew of most of the misdeeds going on in the administration. Along with their H-Street abode, he and Daugherty also shared another property, what became notorious as the "Little Green House on K Street," where they purportedly sold pardons, paroles, and liquor permits and stashed much of their ill-gotten lucre. In a later Senate investigation, Smith's ex-wife, Roxy Stinson (with whom he had remained on friendly terms), would tell the world much of what she heard and knew about Smith and Daugherty's escapades, including the fears Smith had that he was being followed in his final days.8

On the other hand, Smith was apparently very sickly (he suffered from diabetes, and was recovering badly from an appendectomy) at the time of his death. He was also particularly depressed at the time - since, just before his death, Warren Harding had effectively banned him from the White House premises. Smith had always been a regular visitor in the past, poker parties and otherwise, and he had been a favorite companion of the First Lady's. But he was also indiscreet - "running with a gay crowd, attending all sorts of parties…using the Attorney General's car until all hours of the night," as the president put it to Harry Daugherty. And, after the Forbes scandal broke, Smith was a very visible symbol of the perhaps not-quite-kosher activities of the administration. As such, Harding told Daugherty to tell Smith he was not welcome to join the forthcoming presidential trip to Alaska, and in fact should probably leave Washington in all due haste. Upon hearing the ultimatum, Jess Smith - if it was in fact a suicide - instead chose to depart this mortal realm at the end of the month. (Alice Longworth thought the cause of death "Harding of the arteries.")9

In any case, however Jess Smith perished, the president himself would not be long in following. On June 20th, 1923, Harding left Union Station aboard the Superb for the start of what was to be a two-month "Voyage of Understanding" - part campaign tour, part chance to get out of Washington while the scandals simmered - up to Alaska and through the West. Along for much of the trip was Secretary of Commerce Herbert Hoover, Secretary of Agriculture Henry Wallace, the new Secretary of the Interior, Hubert Work, Speaker of the House Frederic Gillett, and William Allen White, who later reported the president seemed to be sickly and acting erratically. Hoover also thought the president "exceedingly nervous and distraught." One day, Hoover remembered, "Harding asked me to come to his cabin. He plumped at me the question: 'If you knew of a great scandal in our administration, would you for the good of the country and the party expose it publicly or would you bury it?"
My natural reply was "Publish it, and at least get credit for integrity on your side." He remarked that this method might be politically dangerous. I asked for more particulars. He said that he had received some rumors of irregularities, centering around [Jess] Smith, in connection with cases in the Department of Justice. After a painful session he told Smith that he would be arrested in the morning. Smith went home, burned all his papers, and committed suicide. Harding gave me no information about what Smith had been up to. I asked what Daugherty's relations to the affairs were. He abruptly dried up and never raised the question again.10
Harding, Hoover thought "grew more nervous as the trip continued." After touring the Alaska territory and western Canada, the president - in an eerie moment reminiscent of his predecessor's struggles through the West - faltered in the midst of a pro-conservation speech in Seattle, dropping his prepared remarks all over the floor. Hoover, who had written the speech give or take a few of Harding's "usual three-dollar words and sonorous phrases," also wondered why Harding kept saying "Nebraska" instead of "Alaska." It would be the president's last address. In San Francisco a few days later - August 2nd, 1923 - Harding died of what was thought to be a cerebral hemorrhage or apoplexy at the age of 57. (The First Lady refused to allow any autopsy, but later doctors believed the cause of death was a heart attack.)11

Late that night, in Plymouth Notch, New Hampshire, Vice-President Calvin Coolidge took the oath of office by candlelight, as administered by his father John Coolidge, the local notary public. The Voyage of Understanding had now become Warren Harding's funeral train. Millions of grieving Americans came out to see the Superb pass by as it wended its way back East to Marion, Ohio. There, before President Coolidge, Chief Justice Taft, and such luminaries as Thomas Edison and Henry Ford, the 29th President was laid to rest. A week later, on August 11th, Florence Harding returned to the White House, where, while Coolidge chivalrously gave her the space she needed, the Duchess spent the next five days sorting through and burning most of her husband's papers. A few short months after that, the biggest and most-defining of the Harding scandals would break wide open.12

Continue to Chapter 5, Pt. 6: Tempest from a Teapot.

Return to the Table of Contents.

1. Russell, 256, 425, 522. Dean, 139-140.
2. Russell, 522-525. Dean, 140-141.
3. Dean, 140-141. Russell, 554-558. Dean 140-141. Murray, Politics of Normalcy, 102-103.
4. Russell, 629. Anthony, 492-493. Allen, 129-130.
5. Russell, 440, 450, 511.
6. Ibid.
7. Arthur Altridge, "Sidelights on Alien Property," The Searchlight on Congress, June 30, 1922 (Vol. VII, No. 1), 20. Russell, 512-515, 568-569. Allen, 130-132.
8. McCartney, 71-73, 233-235. Dean, 144. Daugherty and Smith also made $180,000 by having an associate show illegal screenings of the "battle of the century," the July 1921 boxing match between Jack Dempsey and Georges Carpentier, around the country. Transporting films of prize fights across state lines had officially been made illegal in 1912, two years after Jack Johnson had defeated James J. Jeffries, a white man. Southerners in Congress had decided this was a film that should not travel around much. Ibid.
9. Anthony, 403-405. Murray, Politics of Normalcy, 104. McCartney, 144. Daugherty later complained that Smith's suicide "was the very worst thing he could have done to me, for it deprived me of a living refutation of the charges and innuendo leveled at me." Anthony, 407-408.
10. Russell, 574. Hoover, 49-50. According to Hoover, Harding spent the whole trip playing bridge from breakfast until after midnight. "There were only four bridge players in the party," said the Secretary of Commerce, "and we soon set up shifts so that one at a time had some relief. For some reason I developed a distaste for bridge on this journey and never played it again." Ibid.
11. Hoover, 51-52. McCartney, 146-150. Russell, 589-592.
12. McCartney, 155-157. David Greenberg, Calvin Coolidge (New York: Henry Holt, 2006), 44. Russell, 595-605.

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