Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1925-11-07
REVIEW COVT,,S
SUIT AGAINST
!. DOHENY INTERESTS

The governments suit against the
e. L. Doheny oil interests was the
first case investigated by the United
States Senate committee to come to
trial. During the senate investiga-
ton Doheny testified that he expect
ed to realize S100,OOO,000 on the
leases and contracts involving the
Elk Hills naval oil reserve. Kern
county, California and construction
Of the navy oil base at Pearl Harbor,
Hawaii.
Federal Judge Paul J. Mccormick
at Los Angeles, after hearing the
case, which opened in October. 1924,
ordered the leases and contracts can
celled on two grounds. First, that
they were against public policy be-
cause the action Of the then Secre-
tary of the Interior, Albert B. Fall. in
making them was fraudulent, and
second, because the executive order
under which the instruments were
executed was invalid.
In its complaint the government
charged that a fraudulent conspiracy
between Fall and Doheny entered
into negotiations surrounding the
leases. Government counsel charged
specifically that the 100000 loan"
Doheny made to Fall in November,
1921 was a bride and constituted a
fraud on the United States.
Counsel for Doheny defended the
100000 transaction as a personal
loan between friends Of lifelong
standing and held that it played no
part in. securing the leases since the
tender took place more than a year
previous to the letting Of the major
lease in suit.
tx,l- %A1~ H.
government introduced a mass of
evidence designed to show that
throughout the negotiations Fall and
Doheny were the chief factors in all
important matters leading up to the
letting Of the leases, Other evil
dence tended to show that secrecy
surrounded the negotiations and that
the leases were made without COM
petitive bidding.
Countering this contention the oil
magnate's counsel through evidence
and argument, held that Edwin
DENLY, at that time Secretary Of the
Navy and in charge Of naval oil
matters, was always informed Of the
various steps in making the leases
and that secrecy was ordered by the
navy department. because the Pearl
Harbor project was included in the
navy war plans.
In arguing before the circuit court
of appeals the defense contended that
Judge McCormicks finding that
throughout the negotiations. that he
took no active part" in them and
bwas without knowledge of the con-
tents of the documents he signed was
directly contrary to evidence in the
lower court.
Defense counsel pointed specific
ally to testimony Of Admiral j. K.
Robson, in charge of oil matters
under Secretary DENLY, who testified
that Il never did one thing in this
oil business without its being ap-
proved by Secretary DENLY first"
Through this and other evidence
the defense sought to show that the
stamp of legality was placed on all
leases and contracts in suit.
During the arguments on the ap-
peals attorneys for Doheny called the
attention of the court to the decision
of Federal Judge Kennedy at
Cheyenne. who declined to cancel
leases held by the Mammoth OIL
Company, executed at about the
quoted that part of the decision
which said that ito hold that 1t was
not Denby's official act is. it seems
to us, little short of branding him as
an imbecile."
The leases to Doheny were execut-
ed under the executive order of
May 81, 1921, signed by President
Harding. delegating power to lease
| naval oil lands to the secretary of
the navy. Preceding this order was
the congressional act Of June a,
| 1920, known as the naval oil reserve
act, which authorized the secretary
of the navy to lease and operate
these lands Gin his discretion" and
''for the benefit of the United States"
The government charged the leas-
| ing of virtually all of naval oil re-
serve No. 1 was contrary to- the
| policy outlined by congress since the
| lands were to be held as reserves ex
cept for protection against drainage.
The contracts entered into between
| the government and Doheny provided
| for the construction of a naval OIL
base at Pearl Harbor and to supply
| a total of 100000 barrels of fuel oil
at the Hawaiian base. The govern
ment agreed to exchange royalty
crude oil accruing from the leases for
| fuel oil and the tankage facilities.
| This exchange was attacked and de-
| Tended.