Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-02-28

plete disagreement between the two
sides on all Of the essential facts at
issue. For Doheny it was contended
that Congress by the act of June 4,
1920, had given the Secretary OF the
Navy authority to use. store, exchange
or sell the Oil and gas on the naval
reserves. in his discretion, directly or
by contract, and that Edwin DENLY.
having determined as Secretary of
the Navy the oil could not be held in
reserve in the ground, decided that
as much of 1t as possible should be
taken out and the crude royalty oil
received by the Government. about
eighth of the total produced,
should be exchanged for fuel oil to
be placed in storage tanks. IL was
argued that DENLY decided to use his
authority to exchange some OF that
royalty oil for storage facilities, d.
recting contracts to be made to that
end. Secretary of Interior Fall
throughout the whole proceedings act
ed in an advisory capacity, Doheny's
counsel contended. the leases and con-
tracts being made by DENLY.
Famous 500, 900 Incident.
During the negotiations Doheny sent
Fall 100000 in the celebrated little
black satchel," but poheny's counsel
contended this was a loan entirely
apart from the leases or contracts,
merely the act of one friend in re.
lieving the financial distress Of TN.
other.
Doheny's counsel asserted that. the
trial court was in error in holding that
the contracts and leases had been
made by Fall through an unlawful
delegation of authority by President
Harding, who signed an order trans
ferring the administration of the re-
serves from the Navy to the Interior
Department, and that fraud in the
form of a bride had also vitiated the
transaction.
The Government argued that in the
act of 1920. Congress directed the Sec
rotary Of the Navy to conserve" the
oil IN the reserves. and insisted that
its permission to use, store. exchange
or sell referred only to such royalty
oil as the Government received from
offset wells operated to prevent drain
age. The whole purpose of naval re-
serve legislation had been destroyed,
it declared. when, under the leader
ship of Admiral J. X. Robson, the
Navy adopted a policy of exploiting
the reserves to provide fuel for stor-
age stations. for which Congress had
refused to appropriate. Robson was
described as having obtained the con.
sent of DENLY. .
Fall had taken over completely the
naval oil reserves, Government coun.
sci declared. had received a bride of
100000 from Doheny. and delivered
the contracts and leases to him in
secret in violation of the laws requir-
ing advertising and competition in
the awarding Of bids. DENLY was pic
fs,v hxy ~ tyS> hot
was going on and with actually sign.
ing papers without knowledge Of their
contents. They claimed that all appre-
hension Of the drainage of the re-
serves by privately owned wells on ad-
jacent property had been dispelled,
and that Navy officers knew as we'll
as officials of the Interior Department
at the time the contracts and
leases were made that the oil could
be retained in the ground intact for
an indefinite time.
Doheny Held Trespasser.
Congress had for time appropr1
ated for naval fuel stations, but ow-
ing to abuses the Government coun-
sci said, had for several years refused
to make further appropriations. Then
they said Admiral Robson convinced
Secretary DENLY that the installation
OF such stations could be obtained by
the use Of the naval reserve oil, not
withstanding the position taken by
Congress.
Doheny was declared by Govern
ment counsel to have been a tres
passer upon the Elk Hills Reserve,
with full knowledge Of the illegality
of his presence there. as we'll as the
unlawfulness of the contracts for the
construction work. Under we'll es-
tablished law he was not entitled,
they claimed, to any compensation
whatever for construction work or
other expenses incident to the con.
tracts and leases.
The Government asked the court
for a sweeping decision which would
not only hold the leases and contracts
void, because made by Fall and tine
tured with fraud, but to lay down
the definite ruling that until Con-
gress provided to the contrary the
naval reserves should be conserved
and not exploited, and that no execu-
Of the Navy. could throw them open
to exhaustive drilling.
The Governments counsel engaged
in sarcastic reference to the patriot
ism" of Fall and Doheny, under
which storage tanks were to be con- |
structed for the Government at cost, |
that Fall had gotten his |
pay when Doheny's son handed him |
100000 out Of the little black bag, |
and that Doheny had himself stated |
that he expected to make a profit of |
500 100000 out OF the oil he would |
receive under the contracts and
leases.
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