“Battle of the Century” in Whiting

Jerry Banik

October 2020

In the 1920s America was rocked by the most serious scandal in its 150-year history, and it involved “big oil” which, of course, has pretty much been Whiting’s lifeblood since 1890. The shocking events that were uncovered convulsed corporate America and the United States government, and led to a battle that ended in the Whiting Community Center.

To understand just what went on, it’s necessary to know about the two national scandals that led to the fight, and the men who were involved.

The Teapot Dome Scandal

Teapot Dome scandal was so named because of a U.S. Navy oil reserve in Wyoming that had on its site an ancient rock formation shaped like a teapot.

In his first year as president, Warren G. Harding appointed his poker playing partner, Albert B. Fall, to the position of Secretary of the Interior, and gave him control of America’s strategic oil reserves.  In 1922, Fall secretly accepted bribes in exchange for granting two of his good friends, prominent oil men Harry F. Sinclair and Edward L. Doheny, exclusive rights to drill for oil at Teapot Dome and at two Navy oil reserves in California.

It wasn’t long, though, before Fall’s chicanery was uncovered.  After a long and headline grabbing Senate investigation, Fall was tried and convicted for accepting bribes and was sent to federal prison, the first cabinet-level officer in American history to go to jail for crimes committed while serving in office. 

Somehow, though, Sinclair and Doheny were acquitted on charges of providing the bribes that Fall accepted.  President Harding died in office as the investigation played out, and Teapot Dome became a synonym for government corruption, to be taught in American schools for decades.

Below, left to right, are President Warren G. Harding, Interior Secretary Albert B. Fall, Harry F. Sinclair, Edward L. Doheny:

But in 1921, even before the oil bribes were handed over to Secretary Fall, another big oil swindle had taken place. 

The Continental Trading Company Affair

Four of America’s most respected oil barons were behind the Continental Trading fraud. They defrauded their stockholders of millions of dollars. When their scam was revealed, the facts of the case lit a fuse that burned until it reached Whiting in 1929.

In 1921 the four oil men, one of whom was Harry Sinclair, and each the head of their own companies, had quietly created a money laundering mechanism, a shell company they called the Continental Trading Company.  They then negotiated for Continental to buy millions of barrels of oil from a Canadian driller for $1.50 per barrel.  The four then purchased that same oil from Continental for their own companies for $1.75 per barrel, instantly resulting in a profit of more than eight million dollars for Continental.  The men distributed those profits to themselves in the form of World War I war bonds called Liberty Bonds, as part of an attempt to cover their tracks.

The Continental Trading Company was quietly dissolved before anyone but the four oil men knew anything about it.

Although it took place in 1921, the Continental Trading scam was not exposed until 1927, when the U.S. Senate discovered that Harry Sinclair had used Liberty Bonds, in part, to pay his Teapot Dome bribe to Interior Secretary Fall.  Investigators traced those bond numbers back to the Continental Trading Company.

What’s important to our Whiting story, and what the nation was shocked to learn, is that those bonds also revealed that the Chairman of the Board of the Standard Oil Company of Indiana, Colonel Robert W. Stewart, was one of the four Continental schemers.

Although Stewart was stained by his association with both scandals, he was never charged or prosecuted in connection with either.

The CEO of Standard Oil of Indiana, Colonel Robert W. Stewart

Colonel Robert W. Stewart, a physically imposing, combative, aggressive man, made himself one of the most respected and admired leaders in all of American business.  He had ridden with Theodore Roosevelt’s Rough Riders, commanding a battalion in the battle of San Juan Hill during the Spanish-American war.  A Yale law school graduate, he was hired by the Standard Oil Trust in 1907, and by 1918 was Chairman of the Board of Standard Oil of Indiana. 

Under Stewart’s leadership Standard Oil of Indiana grew to one of the largest, most profitable companies in the world, quadrupling its assets.  Among his many accomplishments, he arranged what was regarded at the time to be the most gigantic oil deal of the century, acquiring the vast holdings of Edward Doheny’s Pan-American Petroleum Company, after Doheny was caught up in the Teapot Dome scandal.

Stewart’s Chicago office was just a few miles from the company’s crown jewel, Standard’s Whiting refinery, and locally he was well known as an occasional Whiting visitor.  He brought progressive ideas to the oil industry, promoting popular ownership of Standard by its employees and other non-traditional stockholders.  More than 15,000 employees, many of them Whiting and Robertsdale residents, bought Standard Oil stock and shared in Standard’s profits.  The voting rights of these and thousands of other individual stockholders were going to loom large in Colonel Stewart’s future.

The Rockefellers

John D. Rockefeller, Sr. was the founder of Standard Oil, the first great U.S. business trust.  It made him the richest man in the world, but a villain to many Americans.  He was already in his eighties during the decade of the 1920s, and by then his son, John D. Rockefeller, Jr., was carrying the mantle for Standard Oil of Indiana, a successor company of his father’s Standard Oil Trust.

John D. Rockefeller, Jr. was said to be a shy, serious, reclusive man.  Never a real “oil man”, he saw himself as a man of honesty and integrity, a philanthropist and a reformer.

The War Begins

Having been connected to the now exposed Continental Trading scandal, Colonel Stewart slipped off to Cuba, hoping to avoid having to testify in front of the Senate.  Rockefeller, Jr. pressured him to step down from his position as Standard’s Chairman, "to remove any just ground for criticism”, but Stewart would not cooperate.

Stewart eventually returned to the States, and under oath he denied any involvement in either scandal.

When questioned by the Senate about the Continental Trading Liberty Bonds that he eventually acknowledged holding, he responded, “That is none of your business, Senator, nor is it the business of this committee."  Then, when asked what his boss, John D. Rockefeller, Jr., might think of Stewart defrauding stockholders, Stewart committed what might have been his fatal mistake, replying, "I don't know, and I don't care."

All the while the press salivated over the mudslinging, making it front page news all across the country.

Rockefeller declared war, and no longer requested, but now demanded that Stewart step down, and he pledged to forcibly remove him at Standard’s next annual stockholders’ meeting, to be held in Whiting.  Stewart dug in his heels, declaring, "It seems to me that I owe fully as much to the person holding ten shares of Standard Oil of Indiana. . . as I may owe to one who has so much wealth that he has to hire experts to spend his income for him”. He vowed,  “If the Rockefellers want to fight, I'll show them how to fight."

And fight they did, because the winner was going to walk away from Whiting with control of a billion dollar corporation.

Battle Plans

To lead his cadre of lawyers, Rockefeller retained Charles Evans Hughes.  Hughes was one of America’s most powerful, well-known attorneys, and at various points in his career was the Governor of New York, the U.S. Secretary of State, the Chief Justice of the U. S. Supreme Court and the Republican party’s U.S. presidential candidate.

Stewart retained Frank J. Hogan, the man who, for a reported $1,000,000, had successfully defended oilman Edward L. Doheny in the Teapot Dome conspiracy trial. In the photo to the left, Hogan is on our left, Doheny is on the right.

The two sides worked for months trying to line up the votes of Standard’s stockholders, for and against.

Hughes and his legal staff prepared and made public a 69-page document, stating Rockefeller’s case.  In it he detailed his assessment of Colonel Stewart’s flaws, telling how he had lost confidence in Stewart's leadership; how he had asked for his resignation ten months earlier and how Stewart continued to ignore him.  Stewart shot back that Rockefeller’s allegations were “cowardly and dastardly libel.”

Meanwhile, a confident Colonel Stewart received reporters and photographers, speaking freely and posing for cameramen, pointing out that under his leadership Standard Oil of Indiana had grown from a $175,000,000 company to a $900,000,000 corporation.

Both privately and publicly, Rockefeller argued that Stewart had to be removed, based on “ethics over profits.”  Stewart and his board countered by declaring a stunning, last minute distribution of 332 million dollars in dividends to the stockholders, “thus calling attention to their ability to put fat profits into the hands of the stockholders,” according to Time Magazine.

All the while John D. Rockefeller, Sr. had supported his son’s mission, using his powerful influence to steer large blocks of stock into the effort to oust Stewart.  Most metropolitan newspapers supported Rockefeller. Stewart’s supporters argued there was not enough soap in the world to wash away the past dirty dealings of the Rockefeller family, who had no business claiming the moral high ground.  Standard’s board of directors and most of its individual stockholders held out for Stewart.

Battlefield Whiting

Stewart was to be tried by a jury composed of some 58,000 holders of Standard Oil stock at the company’s March 7, 1929 annual meeting in the Community Center.

Newspapers, magazines and radio stations across the country and even overseas breathlessly reported every detail, calling it “the battle of the century”.

The United Press wrote that, “never before in the history of big business has there been staged such a spectacle as the one the oil tank town of Whiting will witness when the stockholders of Standard Oil meet to decide who shall rule their company.”

More than nine million shares had been issued, and it would take a 51% majority of those shares for either side to win out. Early in February it had been estimated that Rockefeller directly controlled only 15% of the stock.  But then, days before the March meeting, the Rockefeller group claimed control of 57% of the proxy votes.  Stewart answered that Rockefeller was either amazingly ignorant of the state of affairs at Standard, or he was disseminating false information.

As the final showdown drew near, The Times of Hammond wrote, “Arrangements were being made today to accommodate 2,500 shareholders or persons carrying proxies in the Community Memorial Center.  Telegraph instruments were being installed behind the stage and loudspeakers were being strung through the billiard rooms and gymnasium so that those that cannot crowd into the auditorium may hear the proceedings.”

Colonel Stewart came to Whiting in person. Unexpectedly, Rockefeller had headed off to Egypt on the eve of the biggest battle of his life and did not appear at the meeting.  He sent his brother-in-law, prominent and socially connected attorney Winthrop W. Aldrich, pictured on the right, to represent him, along with a delegation of approximately 200 big eastern stockholders.

The press said, “a corps of newspapermen worthy of a championship prize fight” were in Whiting.  They reported that the president of the United Press purchased five shares of Standard Oil stock just to assure himself of a ringside seat.  About the Community Center they wrote, “Policemen stood at every entrance to subject all comers to preliminary examination, and firemen were stationed at strategic points about the building.  Once past the bluecoats stockholders presented their credentials to a force of beribboned ushers and were given seats in the main auditorium.”

The United Press reported, “In the shadow of oil refineries and steel mills, belching their acrid fumes over this industrial center, two titans of the oil industry met by proxy today to settle the greatest financial battle of the age.”

The Outcome

On the morning of March 7, the meeting began “with all the solemnity of a church gathering,” according to the Associated Press.  Stewart’s position was that the large blocks of shares held by Rockefeller’s relatively few wealthy supporters should not outweigh the wishes of the overwhelming majority of smaller shareholders. Many small stockholders, particularly from Whiting and neighboring areas, rewarded Stewart with their votes.  But as the votes were being tallied, Stewart acknowledged that he knew he could no longer hope to win, saying,  “I’m afraid, my friends, that the ‘noes’ have it, if the vote is taken by shares.”  The number of shareholders supporting Stewart outnumbered those who favored Rockefeller roughly two-to-one, but the number of shares held in large blocks by the Rockefeller faction won out. Rockefeller’s victory headlined hundreds of newspapers across America.

The Gary Times reflected the opinion held by most locals: “Before a spontaneous crowd of his own partisans, who stood with him to the last, and an ominous group of silent, moneyed men who had been gunning for him for months and now were about to bag their game, the affable but battling Col. Robert W. Stewart was plucked out of the chairmanship of the giant Standard Oil of Indiana.”

And so ended one of Whiting’s and Standard Oil’s most intriguing times in the national spotlight.

One final interesting, if not particularly useful, bit of information, your reward for reading all this way:  Fraudster Edward Doheny’s family had grown extremely wealthy on oil, and owned considerable coastal land in Dana Point, California, which they donated to the State of California for Doheny State Beach as a memorial to Edward's son, Ned.  Ned had been indicted with his father in the Teapot Dome scandal and later died in a mysterious murder/suicide.  Today Doheny Beach is a popular surfing spot, and there is a reference to it in the Beach Boys 1962 song, "Surfin' USA". "...all over Manhattan and down Doheny way, everybody's gone surfin', surfin' USA.”