1920 (32 page)

In addition, Forbes and his most trusted companion in wrongdoing, the Bureau's chief counsel Charles F. Cramer, knowing that more hospitals were going to be built to house the afflicted, purchased the land for them at grossly inflated prices. Two examples will suffice: The Veterans' Bureau paid $90,000 for a site worth $35,000, and $105,000 for a site worth a mere $19,000. Once again, a large portion of the overpayment went into the private caches of Forbes, Cramer, and the other crooks in charge of health care for veterans, so much so that critics charged there was not enough money left over for the state-of-the-art medical treatment that had been planned. And, in fact, there wasn't.

It has been estimated that the Veterans' Bureau lost at least $200 million because of Forbes's chicanery, a total made all the more appalling when one considers that it was amassed by adding to the pain of men who were already suffering the wounds of the world's most technologically excruciating war. The normally functioning human conscience reels at such heartlessness.

It did not take long for the Justice Department to learn of Forbes's activities and begin an investigation. Nor did the investigation itself take long. When Attorney General Daugherty reached the point at which he was certain of the truth, he told Harding what was happening and provided documents backing up his charges. The president summoned the Veterans'
Bureau chief immediately. It took a lot to arouse Harding's ire. This was a lot. Daugherty resisted the impulse to tell the Chief Executive “I told you so.”

But Forbes was ready for the confrontation. Perhaps believing that his relationship with the Hardings would protect him from outsiders, he decided to be casual instead of contrite. Instead of admitting his transgressions, he claimed that the materials being sold truly
were
worthless, and that the cost of storing them was more than half a million dollars a year. The government, Forbes insisted, could simply not afford to spend that much money for that inconsequential a reason.

Harding did not believe him, looking at him with disappointment more than disgust. He had been prepared with too much paperwork by Daugherty, paperwork that seemed at first glance to be irrefutable proof, but later seemed too hastily gathered and thoughtlessly organized. Still, the president's friend was a crook, a thief, the openness with which he committed his crimes an insult that Harding could not help but take personally. That was on the one hand.

On the other was the fact that for many years the man
had
been a friend of the Hardings, had gone out of his way to do favors for them, had offered gifts, hospitality and more—and Harding simply did not have the heart to fire him. His weaknesses toward those close to him, already legendary and soon to be put to further, even more egregious trials, interceded on Forbes's behalf. Instead of firing his Veterans' Bureau head, Harding simply ordered him to stop his illegal practices immediately. Forbes agreed in writing that, thenceforth, he would put no more surplus government goods on the market. The meeting ended with accord, but one of which the president was dubious.

As he should have been. Forbes wasted no time in returning to work—i.e., continuing to peddle government property and stash away the gains. Harding, however, not trusting him, had assigned government agents to monitor Veterans' Bureau activities, and Forbes was ordered to pay a return visit to the president's office, where he foolishly tried to bend the truth again. This time, Harding would have none of it. This time, the friendship didn't matter. According to one witness, Harding grabbed Forbes by the shoulders and shook him while shouting in his face, “You yellow rat! You double-crossing bastard.”

Harding told Forbes to submit his letter of resignation immediately. Forbes agreed. Sort of. He gave Harding his usually worthless word that he would give up his position, but begged to be permitted to flee to Europe first. He would write the letter from across the Atlantic. It would be his first action once safely abroad; he swore it.

On the surface, it sounded preposterous, chutzpah without so much as a shred of justification behind it. But the more Harding thought about it, the more he liked the idea. The effects of the scandal would be muted if Forbes were out of the country when the story broke, and since he would be unavailable to reporters, his criminal activities would drop from the front pages much more quickly than they would if he were nearby and available to the press. The president would seem, as was true, the victim of a duplicitous colleague rather than a miscreant himself. That he had waited too long to fire that colleague might not even be known. Harding told Forbes to get out of his sight and start packing. And not to forget his stationery.

To the surprise of many, Forbes's word was good on this occasion, and the White House received the letter of resignation within a month. The scandal was big news for a few days, but, as expected, Harding had been portrayed sympathetically, the victim of a trusted appointee who had turned on him once placed in a position of trust. When the press got tired of the story, as it did more quickly than it should have, the unconscionable behavior of Charles Forbes and company disappeared from public view, never to be seen in print again.

Nonetheless, it seemed to some in the Fourth Estate and many in Congress that the president had acted irresponsibly by not insisting that Forbes be brought back to the United States to face prosecution. “Years later,” however, “historian Robert H. Ferrell confirmed, with regard to the criminal activities at the Veterans' Bureau, that Harding acted quite appropriately and that those who criticized Harding for letting Forbes slip off to Europe to resign ignored the fact that Harding did not have any evidence of Forbes's criminal activity, only his insubordination. Ferrell also notes that Harding immediately appointed a new director for the Veterans' Bureau, who quickly cleaned up the mess Forbes had made and proved an able administrator.”

But Ferrell was writing about the immediate aftermath of the crime, defending Harding's original impulses. Eventually, Daugherty and the Justice Department were able to dig up even more proof of their charges against Forbes, this time presenting it more professionally, as a result of which his guilt was established beyond doubt—and it went far beyond just insubordination. Forbes was extradited from his overseas redoubt and tried in an American courtroom. The verdict was a fine of $10,000 and two years in a federal prison. Given the outrageousness of what he had done, and given what the victims of his chicanery had been through for their country, the punishment was not nearly severe enough for the crime. No one, however, seemed to complain, although from the vantage point of the present it is impossible to understand why. Certainly these days the punishment would have more closely suited the misdeeds.

About two weeks after the Senate began a hearing on the matter, Charles Cramer became the first of two suicides resulting from the Harding scandals. Cramer knew that, with Forbes being disposed of, he would be the next Veterans' Bureau figure called to the stand, and knew just as well he could not bear to be humiliated in a forum so public. Instead, he opted for holding a .45 pistol to the side of his head and, standing in front of a bathroom mirror, squeezing the trigger. The scene was too grisly for even the most tasteless of tabloids to publish. Cramer was removed from his house on a stretcher, covered by as many sheets as emergency workers carried. Even so, patches of blood seeped through and were visible to the onlookers who had formed a path from the front door of his house to the back door of the ambulance.

“In an ironic twist,” John Dean points out, “Cramer had purchased the Harding home on Wyoming Avenue.”

JESSE W. “JESS” SMITH WAS
the informal head of the Ohio Gang. It was through his connections that the White House was able to ignore the Eighteenth Amendment and keep its officials lubricated. Smith procured the finest distilled beverages available north of the Canadian border, had them shipped across the Detroit River from Windsor, Ontario, to Detroit, then transported by rail to Washington, D.C.

It was as the members of the Gang sipped, swigged, and dealt out the cards that they began to turn their attention to more overtly illegal deeds. Soon they were buying votes, selling votes, forging presidential approvals, granting other unscrupulous favors, making financial demands of those who sought the favors, and in other more subtle ways enriching their bank accounts at the expense of the American people. They were careful about it. Individually, none of their crimes approached the scale of Forbes's. But they made up for the lack of quality with what amounted to a surfeit of quantity. Charles Ponzi was in jail by this time, and surely never knew what was happening at the White House, but how he would have admired the Ohio Gang, how he would have pleaded for membership!

Smith, for example, unofficially the top aide to Attorney General Harry Daugherty, who had taken over for A. Mitchell Palmer after the election, managed to pocket $200,000 out of $441,000 that had been a bribe in the first place, disguised as a settlement for wrongdoing in a stock transaction during the war.

Smith's primary contribution to the Harding administration's historical rating, however, was his liquor purchases—not the liquor he bought for his mates and himself to drink at the poker table, but the liquor he purchased as a middleman and then sold to others; Smith was reputed to be a principal supplier of bonded liquor to Washington-area bootleggers. As such, of course, he was an important figure in the District of Columbia's world of organized crime, and his ties to the White House made him feel impervious to either discovery or punishment. They also made the White House into a depot for illegal activity.

Smith and Daugherty were from the same small town in Ohio, Washington Court House; and despite Daugherty's being eleven years older, the two had been friends since Smith's early years, when Daugherty acted as a kind of big brother to the younger, less-civilized lad. Daugherty had helped Smith get started in the department store business in Washington Court House, and during the 1920 presidential campaign, in which Daugherty served as Harding's campaign manager, Smith repaid the favor by working without pay as his assistant. “Given the fact that Daugherty's wife was ill and forced to remain in Columbus [Ohio],” writes John Dean, “Jesse Smith set up house for Daugherty in Washington and made himself
so valuable to the new Attorney General that Daugherty gave him an office near his on the sixth floor of the Department of Justice, although Smith was never on the government payroll.”

It was rumored, in fact, that Smith went further than just making Daugherty comfy in his new home, that his divorce from a beautiful redhead was due, at least in part, to his lack of suitable performances with her between the sheets, that he was much better when partnered with a member of his own sex—say, his roommate in Washington. No evidence supports the rumor, but Washington, D.C., then as now, was a city of whispers as well as bombast, and once Daugherty and Smith moved in together late in 1920, their relationship inspired all manner of whispers.

More to the point, the two men were close enough to make it a reasonable assumption that the nation's top law enforcer knew his friend was acting illegally by flouting the Eighteenth Amendment and dealing with bootleggers. No less reasonable an assumption is it that Daugherty was raking in his own share of the transactions, just as he raked in a healthy percentage of what Smith referred to as a $200,000 “fine.” After Daugherty, he was “without doubt the most controversial appointment made by Harding,” says Robert K. Murray, and later revelations that Smith was the prince of Capitol Hill bootleggers did nothing to dispel the charge. Murray is wrong in referring to Smith as an “appointment,” however, as he held no position to which he could have been appointed; he was simply the unofficial aide-de-camp, or tagalong, to the attorney general.

As for Harding, it was reported that he “definitely knew about some of Jesse Smith's actions and attempted to scare him away from Washington in order to forestall his arrest and imprisonment. [No one] will ever know how many specific details Harding uncovered about the house on K Street [where Daugherty and Smith lived], but it was enough to make him realize Smith's culpability.”

Nonetheless, Smith managed to hang on to his position at the Justice Department—whatever it was—until 1923, when Harding was planning a trip to Alaska from which he would never return. Daugherty prepared a list of people who would accompany the president on the journey, and Harding read it over in the attorney general's presence. He noticed that Smith's name was on it. Harding ordered it struck off, and furthermore, having
heard enough gossip about Smith in the past few years, most recently that he was running around Washington with “a gay crowd,” told Daugherty he wanted him out of the nation's capital as soon as possible. (The word “gay” did not then have its present connotation.)

The attorney general had no choice other than to agree but was frightened of the possible consequences. And not just to himself. Smith had been depressed after an operation on his appendix failed to heal as well as expected, and was further upset because the diabetes with which he had been plagued for several years was worsening. His exclusion from the Alaska trip would be yet another blow, proof that he was suddenly an outsider in a town where respects were paid only to insiders. His removal from the White House altogether, which Daugherty decided he would not tell Smith about until later, would be less a dismissal than an exile. Nonetheless, Daugherty assured Harding that he would deal with Smith as the president desired, but he did so with trepidation.

In fact, it might have been the most difficult thing ever asked of him. Both Daugherty and Smith's ex-wife were afraid that Smith might harm himself if left alone, might perhaps even follow Charles Cramer in taking his own life. So, after finally breaking the news to Smith that he was no longer on the Alaska list, that it wasn't so bad, that he could tend to other “business” more freely with the president and his retinue having departed, Daugherty asked his special assistant, Warren F. Martin, to start spending his nights with Smith. Pay close attention to him, his actions, and his mood, Daugherty cautioned.