THE Julian Petroleum scandal stirs little recognition in Los Angeles today, but in the early years of the Great Depression, it was a matter of common knowledge, symbolizing not merely what President Franklin D. Roosevelt would later deplore as "a decade of debauchery and group selfishness," but also the failed hopes and dreams of the great boom of the 1920s. The scandal exposed the speculative mania that gripped the United States and offered a telling prelude for the stock market crash of 1929 and its devastating aftermath.
In the early 1920s, lucrative investment opportunities enticed Southern Californians. "Speculation is in the air," stated one banker, "because people think of [this] as the land of easy money, and because for so many it has proved these things." The real estate subdivision symbolized the speculative soul of Los Angeles, but oil discoveries in Huntington Beach, Long Beach and Santa Fe Springs in 1920 and 1921 drove local residents, in the words of an observer, "stark, staring, oil mad."
C.C. Julian arrived on the scene at the peak of the oil boom in 1922. A native Canadian with experience in real estate and oil promotions, he secured a lease to drill on five acres at Santa Fe Springs and began fishing for investors in a series of colorful advertisements in the Los Angeles Times and other newspapers. "Widows and Orphans, This Is No Investment for You!" boasted his most famous ad. Julian employed an appealing folksiness. If he should betray the "royal confidence" of his supporters, he warbled, let the "buzzards pick my bones and the wind whistle Star Spangled Banner through my ribs."
Julian portrayed himself as the champion of the independent oilman and the small investor, battling against big oil and the corporate moguls. Money came pouring in, especially after he hit gushers on each of his first five wells. In June 1923, he launched the Julian Petroleum Corp., a venture that he promised would supplant Standard Oil. In 56 days, he sold $5 million worth of stock in "Julian Pete."
During these years, Julian emerged as one of the most celebrated figures in Los Angeles. His life seemed an unending series of spectacles and escapades: his lavish mansion and fleet of luxury cars; his flamboyant wardrobe; his attractive female companions; and his well-publicized nightclub row with Charlie Chaplin. Suspecting fraudulent sales promotions, the California corporations commissioner launched several investigations into his activities. The mystery of C.C. Julian -- was he an unscrupulous con man milking a gullible public or the champion of the average man battling against an unseen and unfeeling power elite? -- lay at the core of his mystique.
In April 1925, Julian, by now under siege by regulatory agencies, turned his company over to Texas oilman S.C. Lewis, who sculpted two overlapping confidence games. The first, coordinated by his accomplice Jacob Berman, involved a massive over-issue of Julian Pete stock; the second, the creation of investment pools to prop up the price of Julian Petroleum on the Los Angeles Stock Exchange. The pools guaranteed substantial profits to their members, who were drawn from the leaders of banking, Hollywood, real estate and the city's political and underworld establishments.
The "Million Dollar Pool," for example, included banker Motley Flint, movie baron Louis B. Mayer, real estate men W.I. Hollingsworth and Joe Toplitsky, Alvin Frank (son of the founder of Harris and Frank Clothing) and Harry M. Haldeman, president of the arch-conservative Better America Federation (and grandfather of Watergate's H.R. Haldeman). These men considered themselves pillars of morality in the community. Many of them reportedly "could have lived a thousand years on their income." Yet the lure of fast, easy profits on a sure thing proved too tempting. Though aware of rumors of an over-issue and the irregularity of their arrangement with Lewis, they couldn't resist pocketing a 75% return on their investments.
On May 5, 1927, the Los Angeles Stock Exchange finally halted trading in Julian Petroleum. The company had been authorized to issue 159,000 shares of preferred stock. Almost 4 million shares had entered circulation. The fraud exceeded $150 million. Tens of thousands of stockholders lost their investments. Pool members, on the other hand, registered healthy profits. Brokerage houses, which had to have known about the over-issue, had earned millions of dollars in commissions.
The aftermath of the Julian Petroleum crash revealed an ever-deepening web of corruption. Although dozens of business leaders were indicted, most never faced trial. A 1928 jury found Lewis, Berman and other Julian Pete officials not guilty of conspiracy to defraud. Six months later, Southern Californians learned that Berman had bribed Los Angeles Dist. Atty. Asa Keyes to undermine the prosecution, while Lewis had bought off several jurors. The scandal contributed to the collapse of the First National Bank, the election of former Ku Klux Klansman John Porter as mayor, and the defeat of Governor C.C. Young in his bid for re-election. Other offshoots of the Julian affair included the courtroom assassination of banker Flint, a blackmail plot involving the city's best-known reporter and the double murder of gangster Charlie Crawford and a newspaper editor by a candidate for municipal court judge. C.C. Julian committed suicide in a Shanghai hotel room in 1934.
Before Los Angeles could fully absorb the effect of the Julian Pete debacle, the nation itself plunged into depression. Investigations would reveal that a similar pattern of stock manipulations and corporate corruption led to the collapse of the New York Stock Market in 1929. In 1933, a U.S. Senate special committee investigating business malfeasance in the pre-Crash era listened with rapt incredulity as Southern Californians outlined the sordid details of the Julian scandal. One year later, Congress created the Securities and Exchange Commission, hoping to ward off similar episodes in the future.
The decade of the 1920s, with its idealization of business, get-rich-quick mentality and the absence of government regulation and responsibility, bred speculation, corruption and corporate chaos throughout the nation. The excesses of Julian Petroleum proved but a dress rehearsal for a tragedy that would soon engulf the nation.
Jules Tygiel is a professor of history at San Francisco State University and the author of "The Great Los Angeles Swindle: Oil, Stocks, and Scandal During the Roaring Twenties."