The Price Is Right: Ethics in ‘20s, ‘80s : When Ethics Went Out of White House

Evidence suggests that the Reagan Administration may be among the most corrupt in U.S. history, ranked closely with Warren G. Harding’s Administration of the early 1920s. Atty. Gen. Edwin Meese III is in trouble again and being investigated by a special prosecutor looking into connections with Wedtech Corp., a New York-based company. The question is whether Meese--and others in the Administration with even closer ties to Wedtech--assisted the company in obtaining defense contracts worth millions. Lyn Nofziger, another long-time Reagan associate, is also under investigation because of activity in Wedtech’s behalf.

Many Administration officials have resigned under fire, including former Secretary of Labor Raymond J. Donovan and former National Security Adviser Richard V. Allen. Michael K. Deaver, former aide to the President and a close friend of the First Lady, could face a jail term if tried and found guilty of influence-peddling on a grand scale. W. Paul Thayer, a former deputy secretary of defense, did go to prison. So did Rita M. Lavelle of the Environmental Protection Agency, for lying to Congress; her boss, Anne Burford, resigned after making a botch of environmental programs. The list goes on. Well over 100 high- and middle-level Administration officials have run into trouble with government ethical standards and dozens have left their jobs in disgrace or under indictment.

Any comparison of the Harding and Reagan administrations must also recognize wide dissimilarities. The White House staff in 1921 numbered only a handful, compared with about 500 in the 1980s; scandals of the 1920s occurred not in a White House palace guard but in the regular departments and agencies.

In each era the President seemed personally innocent of wrongdoing. Both leaders made a number of unfortunate appointments, however, and both obviously set the tone for their own presidency. Perhaps a frank disdain for government, as compared with business and its methods, helped cause the problems created.

The scandals go back, respectively, to the elections in 1920 and 1980. In each instance the campaign resulted in a landslide and the winners could assume a “popular mandate.” The public was voting for a Republican ticket and against a Democratic Party leadership that had been widely discredited. Woodrow Wilson was not running for President in 1920 (James M. Cox was), but many were voting under an anti-Wilson influence. To cast a ballot for Harding was to vote against the recent past--some of its liberal ideas and apparent failures.

An opportunity existed, in this new atmosphere, for militant reactionaries to take decisive action. Albert D. Fall proceeded to do just that as the new secretary of the Interior. A veteran of ideological battles over public land policy, Fall had maintained that the federal government had no right to supervise development of timber lands, mineral lands, grazing lands, water power and other public resources in the Western states. He said the West ought to be developed as the East had, free from bureaucratic interference. As soon as possible, in fact, the Interior Department ought to be abolished.

Fall was reacting strongly against federal conservation programs developed under Theodore Roosevelt, William Howard Taft and Wilson. One is reminded of Reagan’s first secretary of the Interior, James G. Watt, who reacted powerfully against alleged extremes of the environmentalists. The urge under Reagan for free enterprise and private profits mirrors that of the Harding era.

At Interior, Fall granted favors as lavishly as he could. Fall’s biographer, David Stratton, has argued that the secretary did not take payoffs because he believed in the policy he was implementing. However, he fell into financial straits and accepted cash and gifts, totaling more than $400,000, from two oilmen after he gave them special leases of naval oil reserves. Harry Sinclair got the Teapot Dome in Wyoming, while E. L. Doheny took Elk Hills in California’s San Joaquin Valley. The Reagan Administration handling of natural resources should be a matter of profound concern, but no large-scale corruption has been apparent.

The great investigator of the 1920s who exposed Fall was Sen. Thomas J. Walsh of Montana, a lawyer of formidable skills and integrity. He ran his own probe in the Public Lands Committee--there was no team of lawyers and assistants. Walsh avoided any appearance of a conflict of interest; he would accept no fee for appearances and lectures although he was not a rich man. There are those in the Reagan Administration who surely adhere to similar high standards, but apparently not enough of them.

The Harding years in many areas look worse. The most outrageous corruption was in the Veterans Bureau and nothing comparable to it has been seen in recent years. Harding named one of his poker companions, Charles R. Forbes, a charming man of questionable past, to head this agency. Almost immediately, stories began to circulate that Forbes was arranging kickbacks from contractors and swindling veterans. Meanwhile, hospitals and medical supplies were badly needed in those years just after World War I. According to one story, Harding indignantly forced Forbes to resign. It remained for the Senate, however, to investigate Forbes and his confederates. One of his co-workers killed himself. Forbes served a short jail term.

Meanwhile, Harry Daugherty, the attorney general, was in other trouble. Daugherty, like Meese, was an old friend of the President and a controversial figure who sought and obtained one of the most important appointments in the Administration. As early as May, 1922, the New York Tribune, a staunchly Republican paper, called for his resignation. Jess Smith, another member of the “Ohio Gang,” also gravitated to Washington. He lived for a time with Daugherty and shared a bank account with him. He had a desk in the Justice Department--although he did not have a job there. Smith became a cheap fixer for the likes of bootleggers and income-tax evaders. When rumors of his activities finally reached Harding, the President tried to send him back to Ohio. In May, 1923, Smith killed himself.

One scandal involved Smith, Daugherty and the alien property custodian, Thomas W. Miller. Miller apparently was paid at least $50,000 to turn over control of a metal company, worth millions, to fraudulent claimants. Smith got a cut. Did Daugherty? Probably, but finding evidence was not easy and he escaped, after a vote of 11 to 1 against him, in a hung jury. Miller was convicted and went to prison.

A major revelation in the Teapot Dome scandal (the corrupt leases of oil lands) did not become public knowledge until 1928, five years after Harding’s death, when the Senate Public Lands Committee hearings revealed that Sinclair and other businessmen had formed a dummy corporation in 1921 through which they bought millions of barrels of oil at a low price. They then sold the oil to their respective companies at a higher price, defrauding their own stockholders. With the illicit profits, Sinclair bribed Fall, paid off blackmailers and helped reduce the Republican Party’s debt.

Comparing the scandals of the 1920s and the 1980s is inexact but in both cases many officials lacked a sense of social responsibility and were more than willing to apply business ethics to opportunities created by public roles.

Walsh once declared that if a congressional inquiry finds no governmental problem or corruption where it was suspected, then the American system is working well and there is reason to rejoice. By the same token, Americans can hope that the Reagan Administration will prove to have a better record than the current charges might indicate.