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What the Teapot Dome Scandal Has to Do With Trump’s Tax Returns

A 1920s scandal led to a Supreme Court ruling that still applies today.

There have been a lot of compar­is­ons between Pres­id­ent Donald Trump and Pres­id­ent Richard Nixon, but Warren G. Hard­ing’s 1920s admin­is­tra­tion — and the Teapot Dome scan­dal that tain­ted his pres­id­ency — may actu­ally be a better guide to what’s going on right now. The scan­dal also helps address the ques­tion of whether Chair­man of the House Ways and Means Commit­tee Richard Neal (D-MA) can lawfully request Trump’s tax returns from the IRS. 

This request takes on extra urgency in light of the news that Trump’s sister Judge Mary­anne Trump Barry recently retired from the federal bench, thereby ending an inquiry into her taxes. Both siblings stand accused by the New York Times of allegedly viol­at­ing tax laws for years.

On April 3, Chair­man Neal asked the IRS to provide Trump’s personal tax returns and the tax returns of several of his busi­ness entit­ies. As the debate unfolds over whether Congress has the author­ity to obtain the pres­id­ent’s tax returns, it’s worth consid­er­ing two outcomes of Teapot Dome: (1) Congress has the author­ity to obtain the pres­id­ent’s tax returns and (2) Congress can compel testi­mony from hostile witnesses.

Chair­man Neal’s request for Trump’s taxes came after the pres­id­ent’s ex-lawyer Michael Cohen test­i­fied before Congress on Febru­ary 27 that as a busi­ness­man, Trump allegedly inflated the value of assets to apply for bank loans and deflated the same assets to avoid paying taxes.

In his testi­mony before Congress on April 9, a visibly shak­ing IRS Commis­sioner Charles Rettig bobbed and weaved around ques­tions of how his agency has handled Congress’ request for the pres­id­ent’s tax returns. Rettig also test­i­fied that Treas­ury Secret­ary Steven Mnuchin had been involved in the debate over releas­ing the pres­id­ent’s tax returns. On April 13, Neal sent a second letter reit­er­at­ing his demand and setting April 23, 2019 as the dead­line for the IRS to comply.  

The fight over the pres­id­ent’s tax returns may turn into an inter­branch brawl, but it should­n’t have to because the issue is clearly covered by a 1924 federal stat­ute. In the mean­time, if Congress cannot get the IRS to comply with their request, they can call on witnesses with personal know­ledge of the tax returns to testify.

Often considered the greatest scan­dal in U.S. polit­ics before Water­gate, the Teapot Dome scan­dal involved Secret­ary of the Interior Albert B. Fall’s no-bid contract to lease federal oil fields in Teapot Dome, Wyom­ing to a private company on April 7, 1922. Congress’ invest­ig­a­tion of the scan­dal centered on the ques­tion, “How did Interior Secret­ary Albert Fall get so rich so quickly?” Fall was even­tu­ally convicted of taking a $100,000 bribe.

The Teapot Dome scan­dal also embroiled Hard­ing’s attor­ney general Harry M. Daugh­erty, who was lambasted for not invest­ig­at­ing Secret­ary of the Interior Fall more rigor­ously. Two special coun­sels—one Repub­lican and one Demo­crat—were appoin­ted by Pres­id­ent Coolidge to invest­ig­ate Fall. (Coolidge had become pres­id­ent after Hard­ing abruptly died in 1923). The kerfuffle over the attor­ney general Daugh­er­ty’s actions led to a fight over Congress’s subpoena power, which was ulti­mately resolved by the Supreme Court. That ruling could be newly relev­ant if Congress wishes to compel testi­mony on the contents of Trump’s taxes and busi­ness records.

Congress’ invest­ig­a­tion into the Teapot Dome scan­dal escal­ated when a Senate commit­tee subpoenaed Mally S. Daugh­erty, the brother of the then-former Hard­ing Attor­ney General Harry M. Daugh­erty. When Mally Daugh­erty refused to show up to testify before Congress, the Senate Sergeant at Arms David S. Barry depu­tized John J. McGrain to arrest him and bring him to Wash­ing­ton to testify. Daugh­er­ty’s lawyer got him released from deten­tion after he convinced a judge that Congress did not have the power to compel Daugh­erty to testify or to arrest him for not comply­ing. The case ended up in the Supreme Court, which affirmed the power of Congress to compel testi­mony (and to arrest people who refused a lawful Congres­sional subpoena to testify).

As the Justice Willis Van Devanter wrote in the opin­ion for a unan­im­ous Court in McGrain v. Daugh­erty, 273 U.S. 135 (1927), “[a] legis­lat­ive body cannot legis­late wisely or effect­ively in the absence of inform­a­tion respect­ing the condi­tions which the legis­la­tion is inten­ded to affect or change, and where the legis­lat­ive body does not itself possess the requis­ite inform­a­tion — which not infre­quently is true — recourse must be had to others who do possess it.”

The Teapot Dome scan­dal inspired addi­tional federal reforms such as the Federal Corrupt Prac­tices Act of 1925, which expan­ded federal campaign finance disclos­ure require­ments and included expendit­ure caps for congres­sional candid­ates. Another reform was the Revenue Act of 1924, which provided the chairs of the House Ways and Means and Senate Finance Commit­tees with the abil­ity to demand tax returns from the IRS.

The chair­man of the Ways and Means Commit­tee is well within his stat­utory rights today under the Revenue Act of 1924 to obtain the pres­id­ent’s personal and busi­ness tax returns. And if Congress wanted to subpoena people to testify about the pres­id­ent’s busi­nesses — includ­ing family — McGrain v. Daugh­erty gives them that power too.

The views expressed are the author’s own and not neces­sar­ily those of the Bren­nan Center for Justice.

(Image: MPI/Getty)