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Show LEGAL ASPECTS OF MINERAL RESOURCES EXPLOITATION 747 with the government, to act as a team to bring suit to cancel the leases and to prosecute those responsible for the fraud. When Fall's activities were uncovered it was found that he had secretly and without competitive bidding leased all of Teapot Dome to Harry Sinclair, and large portions of the California reserves to E. L. Doheny.345 The legal authority to execute the leases was, of course, questionable in view of the statute referred to above giving the Secretary of the Navy jurisdiction over the reserves. But it was the details of the bribery which triggered off the biggest political scandal of the century. It touched leading figures in both political parties, ruined the careers of several who were accidentally involved with the major participants, and disenchanted a generation of Americans about the business of government as well as the oil industry. Although space does not permit a discussion of the details of the episode,346 it does not seem inappropriate'to spell out briefly the general terms of the contracts and leases with Sinclair and Doheny. In Doheny's contracts relating to Reserve No. 1, the government agreed to exchange its royalties in crude oil from leases on the reserve for a promise to construct storage tanks in Pearl Harbor, Hawaii. The contracts were actually with Pan American Petroleum and Transport Company, a corporation controlled by Doheny. The company also agreed to deliver oil for use by the Navy at Pearl Harbor and certain eastern ports. Leases subsequently executed on the reserve were assigned to an affiliate, Pan 345 For a reference to better days for Mr. Doheny, see Part 2. "The Petroleum Lands." 346 For a definitive treatment of the scandal, see Noggle, Teapot Dome: Oil and Politics in the 1920's (1963) . Werner and Starr, Teapot Dome (1959) is interesting and readable. For contemporary accounts, see Ravage, The Story of Teapot Dome (1924) ; Ise, The United States Oil Policy 356-88 (1926) . An interesting appraisal of the actual trials, sufficiency of evidence, etc., is Haglund, The Naval Reserves, 20 Geo. L. J. 293 (1932) . American Petroleum Company. Doheny was also involved in Reserve No. 2 in which drainage had in the past been regarded as a serious matter because of the numerous private holdings within the area.347 Earlier leases with other persons had been executed for drilling off-set wells and no impropriety had ever been suggested. In Pan-American Petroleum & Transport Co. v. United States,348 the Supreme Court cancelled two contracts with Transport and two leases in Reserve No. 1 with Pan American. Both corporations were controlled by Doheny, who had given Secretary Fall $100,000 in connection with the leases. The court found that there existed a corrupt conspiracy between Fall and Doheny to secure for the company leases of all unleased land in the reserve; that the leases were not authorized by the Naval Reserve Act since there was no evidence of possibility of loss of oil through drainage; and that the contracts to exchange oil royalty for facilities were beyond the powers of the Secretary under the act. The company was required to account for all oil illegally produced and was not credited with the cost of construction work performed, wells drilled, or fuel oil furnished at Pearl Harbor. The Sinclair leases in Teapot Dome were executed in much the same atmosphere. The 1920 statute giving the Secretary responsibility for the reserves did not authorize leasing where there were outstanding claims or applications for leases. It is said that a million dollars were spent by Sinclair to buy up claims which were virtually worthless. Secretary Fall even went so far as to call out the Marines to evict rival claimants for Sinclair's benefit. In the lease executed with Sinclair's Mammoth Oil Company, the government royalty, instead of being payable in cash, ¦''"See United States v. Belridge Oil Co., 13 F.2d 562 (9th Cir. 1926) cert. den. 273 U.S. 733 (1926) sustaining a drainage lease in Reserve No. 1. 348 273 U.S. 456 (1927). |