Success Story
Teapot
Dome Controversy Involves Sinclair Indirectly
During the decade of the 1920's, the Sinclair
organization became involved in the Teapot Dome
controversy. A contract to develop naval oil
reserve lands in Wyoming was awarded in 1922 to
Mammoth Oil Company, a structure organized by
Mr. Sinclair to operate in Teapot Dome. Sinclair
Consolidated Oil Corporation, as the holding
company was known then, traded 250,000 of its
common shares for a 25 percent interest in
Mammoth, with an option on sufficient additional
stock to assure ultimate control. In 1924,
Sinclair Pipe Line Company (50 percent owned by
Sinclair Consolidated Oil Corporation) extended
its system 700 miles to Wyoming, at a cost of
about $21 million. Under Mammoth's obligation to
the government, oil terminal facilities were
constructed at the Portsmouth, New Hampshire,
Navy Yard costing $1,340,000.Alleging
fraud in the award of the Teapot Dome contract,
the government sued in 1924 to cancel the
arrangement with Mammoth. The trial court held
the lease legal and dismissed the complaint; but
in 1927 the U.S. Supreme Court, on appeal,
voided the contract on technical grounds, though
finding "no direct evidence of fraud."
A jury which deliberated only forty minutes
acquitted Mr. Sinclair of a criminal charge of
conspiracy to defraud. The use by Mr. Sinclair
of private detectives to keep the jury under
observation during the trial drew a sentence for
contempt of court. During the long controversy,
Mr. Sinclair gave 175,000 words of testimony
before twelve legislative committees, disdaining
the fifth amendment; but for refusing to answer
one question which his counsel considered not to
be pertinent to the legislative inquiry, Mr.
Sinclair was held to be in contempt of the
Senate. On the contempt citations, he spent six
and one half months in the Washington, D.C.
House of Detention in 1929.
Both Mr. Sinclair
and Mammoth Oil Company lost heavily in the
Teapot Dome venture, the naval reserves being
unprofitable. In 1928, Mr. Sinclair voluntarily
returned to Sinclair Consolidated the 250,000
shares it had invested in Mammoth, plus $400,000
paid in dividends. During the entire seven years
of the Teapot Dome-Mammoth Oil Company dispute,
Mr. Sinclair continued as chairman and chief
executive officer of Sinclair Consolidated, with
the unanimous support of his directors, who
tendered him a public vote of confidence as he
left New York to serve his sentence.
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