U.S. attorney general Harry M. Daugherty brought his personal and political confidant, Jesse W. Smith, into the Justice Department upon assuming office in 1921. In 1923, Daugherty informed Smith that he was under suspicion for fraud and influence peddling. Stunned and depressed, Smith committed suicide. His death led to public scrutiny and investigations that revealed the scandals of the Warren G. Harding administration.
When Warren G. Harding became president in 1921, he brought into his administration members of his political machine known as the Ohio Gang. Chief among the Gang was his friend, political adviser, and newly appointed U.S. attorney general Harry M. Daugherty. Daugherty, in turn, brought close friend Jesse W. Smith into the U.S. Department of Justice, where he became Daugherty’s spokesperson and deal maker.
Smith had full access to department records and to personnel and privileges. At the Justice Department, Smith wrote letters, gave orders, and requested department funds, all in Daugherty’s name. He had free access to official cars and department railroad passes. Daugherty required Smith to travel with him on all political trips, sleeping in the same hotel suite with the door between them open. Daugherty became so dependent upon Smith that he moved him into his own apartment. Smith became Daugherty’s valet, secretary, bookkeeper, and errand boy. He also shared Daugherty’s access to the White House, visiting at least twice weekly for White House poker sessions. He often accompanied the president’s party on weekend excursions.
Smith and other members of the Ohio Gang rented a house at 1615 K Street, which became known as the Little Green House, from which they would run their fraudulent schemes. The house became a private club, in which Smith and other politicians met with those seeking favors and willing to pay for influence. Among these persons were organized crime figures, convicts seeking pardons, indicted persons wanting charges against them dropped, bootleggers seeking liquor permits, and foreigners trying to recover properties seized by the government during World
A major scandal of the Harding administration involved Smith and Thomas W. Miller, the U.S. alien property custodian. Miller had control of thirty-one thousand active trusts and several thousand real estate properties that the government had confiscated from German owners during World War I. One such case involved 49 percent of the American Metal Company’s shares, valued at six million dollars, which were taken in 1917 from the German Metallgesellschaft & Metall Bank. The shares were sold by the alien property custodian, A. Mitchell Palmer, who invested the proceeds in liberty bonds.
In September, 1921, the Moses family, German owners of the Metall Bank, sought to recover its property, now worth seven million dollars. Richard Merton, of the Moses family, claimed that a Swiss corporation, Societe Suisse, also controlled by the Moses family, had purchased the American shares in March, 1917, before the United States entered the war. However, the transfer was not in writing. Seeking a favorable decision, Merton contacted Smith through a lobbyist-politician,
The next day, Miller, acting head of the U.S. Alien Property Bureau, formally agreed to honor Merton’s claim. Two days later, Attorney General Daugherty’s office approved payment on the claim. Miller drew two checks on the U.S. Treasury totaling $6,453,979.97, along with liberty bonds valued at $514.350, and took them to Merton in New York. In gratitude, Merton gave a celebration dinner for Miller, King, and Smith, and presented each of them with expensive cigarette cases as mementos. Merton also paid King a service fee of $391,300 in bonds and $50,000 cash. In turn, King gave $224,000 to Smith and $50,000 to Miller for expediting payment of the claim. Smith deposited $50,000 in bonds to the “Jess Smith Extra No. 3” account, a political account in Daugherty’s brother’s bank (Midland National at the Washington Court House, Ohio). Daugherty later claimed that Smith deposited the bonds as partial payment of $60,000 in campaign
Another scheme perpetrated by Smith was the sale of illegal liquor permits after the 1919 passage of the Eighteenth Amendment to the U.S. Constitution, which outlawed the sale and transport of liquor beginning in 1920. Government-seized liquor was stored in warehouses until legal permits could be issued for its sale and transport. Sometimes, shipments consigned to buyers in foreign countries were diverted to the Little Green House on K Street, and from there they were distributed to the White House, family friends, and cronies in the Ohio Gang.
After passage of the Volstead Act
Another scam from which Smith profited was the nationwide showing of the 1921 Jack Dempsey-Georges Carpentier
In 1923, Harding voiced growing suspicion about his attorney general and his Ohio friends. Daugherty alerted Smith that he was under suspicion and would not be welcome on the president’s planned trip to Alaska. Smith was in poor health, often moody, and increasingly paranoid. He suffered from diabetes and had never healed from appendicitis surgery in 1922. Upon learning that Harding was displeased with him, Smith returned to the Washington apartment and made a new will, leaving his estate to Daugherty; his brother, Roxy Stinson; and two of Smith’s cousins. He gathered all his accounts and correspondence with Daugherty and files that he had taken from the Justice Department and burned everything in a wastebasket.
Daugherty, who was worried about Smith, sent a Justice Department assistant to the shared apartment to check on him. On May 30 the assistant found Smith in pajamas and dressing gown on the floor with a gun in his hand. He had shot himself in the left temple; the bullet had exited his forehead and was lodged in the doorjamb. Smith was dead of an apparent self-inflicted gunshot.
Smith’s suicide was widely publicized, and it focused public attention on the Harding administration. Though published reports attributed Smith’s suicide to ill health, rumors persisted linking the Ohio Gang to corruption. Harding’s public statement that his friends had betrayed his administration, combined with evidence of burned and missing papers, aroused further suspicions and led to U.S. Senate investigations, which revealed the scandals. Smith’s former wife, Roxy Stinson, in whom he had confided, became the government’s primary witness in the investigation of fraudulent activities by Smith and Daugherty.
President Harding died on August 2, 1923, before investigations were complete, but no evidence surfaced that pointed to the president’s direct involvement in corruption. Daugherty was later tried but not convicted. In 1927, Miller was convicted and imprisoned for conspiracy to defraud the government. He was paroled in 1929 and pardoned by President Herbert
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Allen, Frederick Lewis. Only Yesterday: An Informal History of the Nineteen Twenties. Rev. ed. New York: HarperCollins, 2000. Chapter six focuses on the Harding administration’s scandals and discusses Smith’s involvement in those scandals. -
Murray, Robert K. The Harding Era: Warren G. Harding and His Administration. Edited by Katherine Spiers. Newton, Conn.: American Political Biography Press, 2000. Originally published in 1969, this work refutes reports that Harding was a major player in the scandals and points out the positive achievements of his administration. -
Noggle, Burl. Teapot Dome: Oil and Politics in the 1920’s. Baton Rouge: Louisiana State University Press, 1962. Well-documented research on the Harding-era scandals. Includes a bibliographical essay. -
Russell, Frances. The Shadow of Blooming Grove: Warren G. Harding in His Times. New York: McGraw Hill, 1968. Relates Smith’s role as facilitator of fraud in Harding’s administration.
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