The First VA Scandal

Post date: Jun 22, 2014 8:58:03 PM

Herbert Hoover

Executive Order 5398 - Establishing the Veterans' Administration

July 21, 1930

Consolidation and Coordination of Governmental Activities Affecting Veterans

Whereas section 1 of the act of Congress entitled "An act to authorize the President to consolidate and coordinate governmental activities affecting war veterans", approved July 3, 1930, provides:

(a) That the President is authorized, by Executive order, to consolidate and coordinate any hospitals and executive and administrative bureaus, agencies, or offices, especially created for or concerned in the administration of the laws relating to the relief and other benefits provided by law for former members of the Military and Naval Establishments of the United States, including the Bureau of Pensions, the National Home for Disabled Volunteer Solders, and the United States Veterans' Bureau, into an establishment to be knows as the Veterans' Administration and to transfer the duties, powers, and functions now vested by law in the hospitals, bureaus, agencies, or offices so consolidated and coordinated, including the personnel thereof, and the whole or any part of the records and public property belonging thereto the Veterans' Administration.

(b) Under the direction of the President the Administrator of Veterans' Affairs shall have the power, by order or regulation, to consolidate, eliminate, or redistribute the functions of the bureaus, agencies, offices, or activities in the Veterans' Administration and to create new ones therein, and, by rules and regulations not inconsistent with law, shall fix the functions thereof and the duties and powers of their respective executive heads.

Now, therefore, by virtue of the authority vested in me by said law, the United States Veterans' Bureau, the Bureau of Pensions, and the National Home for Disabled Volunteer Solders are hereby consolidated and coordinated into an establishment to be knows as the Veterans' Administration, and the duties, powers, and functions vested by law in the United States Veterans' Bureau, the National Home for Disabled Volunteer Solders, and in the Bureau of Pensions, and the personnel of the United States Veterans' Bureau, the Bureau of Pensions, and the National Home for Disabled Volunteer Soldiers, and the records and papers pertaining to the work thereof, and the public property belonging thereto, are hereby transferred to the Veterans' Administration.


The White House,

July 21, 1930.

Citation: Herbert Hoover: "Executive Order 5398 - Establishing the Veterans' Administration," July 21, 1930. Online by Gerhard Peters and John T. Woolley, The American Presidency Project.

Warren G. Harding

President-elect Warren G. Harding appointed to his cabinet a mixture of outstanding leaders and unscrupulous politicians waiting for an opportunity to line their pockets. In the first category were Secretary of State Charles Evans Hughes and Secretary of Commerce Herbert Hoover; in the second were Attorney General Harry Daugherty and Secretary of the Interior Albert B. Fall. Harding was a notoriously poor judge of character who expected his appointees to repay his trust with integrity. He was to be deeply disappointed.

The administration got off to a good start when Congress completed an initiative begun in the Wilson administration and established a budget system for the federal government; Charles G. Dawes was appointed first director of the budget. Then in 1921–22, the United States hosted the Washington Naval Disarmament Conference. Under the leadership of Secretary Hughes, the conference succeeded in getting the world’s major powers to agree to halt the arms race in production of large naval vessels.

It was by far the most important achievement of the Harding presidency. Other achievements were more in keeping with the Old Guard Republican views with which Harding had long been associated: a higher protective tariff (Fordney-McCumber), lower taxes on business, and a sharp reduction in the number of immigrants allowed to enter the United States from southern and eastern Europe.

Early in 1923, Attorney General Daugherty disclosed to Harding that Charles Forbes, director of the Veterans Bureau, had been illegally selling government medical supplies to private contractors. After violently berating Forbes in the White House, Harding allowed him to leave the country to escape prosecution. Shortly thereafter Charles Cranmer, general counsel of the Veterans Bureau, committed suicide. Ten weeks later Jesse Smith, Daugherty’s private secretary, also committed suicide—one day after a long conversation with Harding in the White House. Rumors had been circulating that Smith and a group known as the “Ohio Gang” had been profiting from a variety of corrupt activities.

By the spring of 1923, Harding was visibly distraught at what he regarded as the betrayal of his friends who were taking advantage of his kindliness and lax administration. He sought escape from Washington in mid-June by taking a trip to Alaska with his wife and a large entourage. On his way home at the end of July, the president complained of abdominal pain, but he seemed to rally as he rested at a San Francisco hotel. On the evening of August 2, however, as his wife read to him from a magazine, Harding suddenly died from either a heart attack or stroke.

The nation plunged into mourning, little suspecting that the beloved leader they eulogized as “an ideal American” would soon be revealed to be head of the most corrupt administration in the nation’s history. Senate investigations uncovered Forbes’s illegal financial dealings at the Veterans Bureau and pointed to Daugherty’s collusion with the Ohio Gang. Far more serious was the unfolding of the Teapot Dome Scandal. In 1921 Interior Secretary Albert Fall had persuaded Harding to transfer authority over two of the nation’s most important oil reserves—Elk Hills in California and Teapot Dome in Wyoming—from the Navy Department to the Department of the Interior. Fall then leased these reserves to private oil companies, netting for himself several hundreds of thousands of dollars in gifts and loans. Fall and Forbes later received jail sentences for their crimes; Daugherty twice went on trial, the first resulting in a hung jury and the second in a not guilty verdict.

Harding was never personally implicated in the scandals, but he was aware of the actions of Forbes, Smith, and the Ohio Gang and failed to bring their corruption to light. By the mid-1920s, the public began to regard Harding as a man who simply did not measure up to the responsibilities of his high office. Rumors of his heavy drinking in the White House (at a time when Prohibition was the law of the land) and of his involvement in extramarital affairs further degraded his reputation. In 1927 Nan Britton published The President’s Daughter, in which she claimed that in 1919 she had given birth to a child fathered by the future president. While historians have challenged the veracity of this and other allegations made against Harding, most of them agree that he was the least capable of the nation’s chief executives.

By: John W. Dean Date: November 2 , 2011 CP Note: November 2, 1865 marked the birth date of President Warren Harding.

Harding’s presidency was scarred by scandal, much of which came to light during investigations following Harding’s death. None of these investigations, however, implicated Warren Harding in any corrupt activity or wrongdoing. Nonetheless, Harding was blamed for much that had gone wrong.

His work on veterans-related issues is an example of the good and bad that occurred during his presidency.

In 1921, President Harding created the Department of Veterans Affairs. In 1922 the president vetoed the bonus bill that would benefit soldiers. Harding explained that the bonus would be a “disaster to the Nation’s finances.” He wanted to pay down the nation’s war debt first.

Then in 1923, Harding discovered corruption within the Veterans Bureau. The piece below shares the details of the scandal and Harding’s efforts to clear the mess.

Harding’s health was already failing when he got the first whiff of potential scandal. Dr. Sawyer had learned that Charles Forbes, head of the Veterans Bureau, was abusing his position. Sawyer had an interest in Forbes because his patient, Florence Harding, was deeply involved with the well-being of veterans. Sawyer had regular dealings with Forbes, who owed his job to the first lady. Her biographer, Carl Anthony, explains: “Forbes had been a frequent guest at her home and worked hard for Warren’s election. She considered his credentials impeccable: He had been a commissioned Signal Corps major, earning the Croix de Guerre and the Distinguished Service Medal in the war. Besides this, he teased and flirted with her, ‘making frequent passes,’ which one observer rather harshly thought ‘may have been a unique experience for her.’” President Harding appointed Forbes to head the War Risk Insurance Bureau, which later became the Veterans Bureau. Will Hays and Harry Daugherty had opposed the Forbes appointment. “On having Charlie look after her boys [the wounded veterans], however, the Duchess ruled.”

While Florence was recuperating, Sawyer learned from the surgeon general, H. S. Cummings, that Forbes was selling warehouses filled with hospital supplies that Cummings said belonged to the Public Health Service. Sawyer informed Daugherty, who investigated and found that Forbes was indeed selling surplus supplies (sheets, towels, soap, gauze, winter pajamas, and the like), and at absurdly low prices, to private contractors in private deals. Daugherty suspected, but had no proof, that Forbes was taking kickbacks. When Daugherty informed Harding, the president summoned Forbes to the White House and demanded an explanation. Forbes lied to the president and told him the surplus materials were being sold because the annual storage cost was $650,000, which was too expensive. When Harding asked for an appraisal of the goods being sold, Forbes produced phony information. Apparently still suspicious, Harding ordered Forbes to stop his sales, and Forbes agreed in writing to do so. But Forbes continued his dubious activity. A very angry president summoned Forbes to the White House again, where Harding refused to accept his lame excuses and demanded his resignation for insubordination. Forbes pleaded innocence and begged that he be permitted to resign after he left town, claiming to have personal business in Europe. Harding granted him that, and a few days later, on February 15, 1923, the resignation arrived. By that time, word was out that Forbes had been removed because of questionable behavior, which was sufficient to get the attention of Congress.

On March 2, 1923, the U.S. Senate began investigating Forbes’s activities at the Veterans Bureau. But not until after Harding’s death was the extent of Forbes’s criminal activity discovered. Clearly he was a crook—a foolish one to boot. Forbes had not only stolen from the government; he had stolen the young wife of one of his partners in crime. Elias H. Mortimer decided to end Forbes’s affair with his wife and their European vacation by sending Forbes to jail. Mortimer provided devastating testimony about his schemes with Forbes for kickbacks on the purchases of land, and building contracts, for new veterans hospitals. Seeing the handwriting on the wall, twelve days after the Senate inquiry had started, Charles F. Cramer, another Forbes co-conspirator and the legal adviser to the Veterans Bureau, committed suicide in the bathroom of his home. In an ironic twist, Cramer had purchased the Harding home on Wyoming Avenue.

Years later, 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. One widely accepted report, which Ferrell corroborates, indicates that a reporter from the New York Times accidentally happened upon a portion of Harding’s last encounter with Forbes. It was a memorable moment, for the six-foot-plus president had his hands on Forbes’s neck and was shaking him “as a dog would a rat,” while shouting, “You double-crossing bastard.” Harding did not live to see Forbes indicted and convicted of looting perhaps as much as $2 million from the Veterans Bureau. Journalist William Allen White claimed, during an interview shortly after Forbes’s departure, that Harding lamented, “I have no trouble with my enemies, I can take care of my enemies all right. But my damn friends . . . they’re the ones that keep me walking the floor nights.”

Excerpted from Warren G. Harding

by John W. Dean.

Copyright © 2004 by John W. Dean.