Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-01-05
D0HENY OIL LEASE
|NVAL|D|TY UPHELD
U. S. Appeals Court Also De-
MES Any Compensation for
Money Expended.
By the Associated Press.

By the Associated Press.
SAN FRANCISCO, January 6.-A
decision which If upheld by the
United States Supreme Court will
strip the Edward l.. Doheny interests
of all their protested leaseholds IN
naval oil reserve No. l in California
and deny them any relief for work
performed in such reserves and at
the Pearl Harbor oil station at Homo
lulu, was handed down here yesterday
10y the United States Circuit Court OF
Appeals.
The court upheld the action of the
United States District Court In Los
Angeles in ordering the cancellation OF
the leaseholds in question on the
ground that they were obtained
through conspiracy and collision.
The court, however, reversed the
finding of the trial court that the Pan
American Petroleum and Transport
Co. should be compensated by $11, 1885,
92S for work done in establishing the
Pearl Harbor oil base and for explora,
ton and drilling work in the Elk Hills
fields, the focal point of the contro-
versy.
In effect the court held that if the
leases themselves were obtained
through an illegal exchange of any
not entitled to the return of any
moneys expended as an outgrowth of
such illegal act.
The Government s SUIT against +. l..
Doheny oil interests was the first case
, investigated by the United States Sen
ate committee to come to trial. Dur-
Ing the Senate investigation Doheny
testified that he expected TO realze
500 900 900 on the leases ana con-
tracts involving the Elk Hills naval
oil reserve, Germ County, Calf, 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 Cancelled on
two grounds-first, that they were
against public policy, because the ac-
ton of the then Secretary of the In
terror Albert p. Fall, in making them
was fraudulent, and, second, because
the executive order under which the
! Instruments We're executed was In
| valid.
loan" Called "Bribe."
! In its complaint the Government
| charged that a fraudulent conspiracy
between Fall and Doheny entered into
negotiations surrounding the leases
! Government counsel charged specifi'
| cally that the 100000 loan" Doheny
made to Fall in November. 1921, was a
| bribe and constituted a fraud on the
! United States.
Counsel for Doheny defended the
500 900 transaction as 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
During the trial at Los Angeles the
Government introduced a mass of evi
dence designed to show that through
out the negotiations Fall and Doheny
were the chief factors in all important
matters leading up to the letting OF
the leases. Other evidence tended &c
show that secrecy surrounded the
negotiations, and that the leases were
made without competitive bidding.
Secrecy Charged.
Countering this contention the OF
magnate's counsel through evidence
and argument held that Edwin DENLY
at that time Secretary of the Nav!
and in charge Of naval oil matters
was always informed of the Variou:
steps in making the leases, and thai
the secrecy was ordered by the Navy
Department because the Pearl Harbol
project was included in the Navy:
war plans.
! In arguing before the Circuit Cour
of Appeals the defense contended thai
Judge McCormick's finding that Score
tary DENLY was passive" Throughout
the negotiations, that he took no &C
tive part" in them and was withou
| knowledge of the contents Of the docu
ments he signed. was directly con
trary to evidence in the lower court.
Defense counsel pointed specifi
cally to testimony of Admiral J. h
| Robson, in charge of oil matter:
under Secretary DENLY. who testi
| fed that II never did one thing II
this oil business without it's being
approved by Secretary DENLY first.
Through this and other evidence
the defense sought to show that The
! stamp of legality was placed on al
| leases and contracts In suit.
Decision Cited.
Attorneys for Doheny called tn,
attention OF the appellate court t
the decision of Federal Judge Ken
nedy at Cheyenne, who declined t.
cancel leases held by the Mammoth
Oil Co, executed at about the same
time as the Dohney leases, ane
quoted that part of the decision
which said that ito hold that it wa.
not Denby's official act Is, 1t seems t.
us, little short of branding him as al
imbecile.'
| The leases to Doheny were ex
ecuted under the executive order o.
May 81, 1921, signed by Presiden
! Harding, delegating power to lease
naval OIL lands to the Secretary of tn,
! Nd -
congressional act of June 4, 1920
known as the naval oil reserve act
which authorized the Secretary of thu
| Navy to lease and operate these land.
'in his discretion" and "for the benefi
of the United States"
| The Government charged the leas
| ing of virtually all of naval oil reserve
| No. l was contrary to the policy out
| lined by Congress, since the lands
were to be held as reserves except fol
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.
Frank J. Hogan, chief counsel TO,
! Edward L. Doheny, today declared
that in proper time an application
would be made to the United States
| Supreme Court to review the decision
of the Circuit Court of Appeals, which
| yesterday declared invalid the lease
| to the Elk Hills Naval Reserve
Until that court acts" said Mr.
| Hogan, I'VE shall have nothing tt