The “boss” of Signal Hil - Part 1: Signal Hill’s Checkered Past

 

Congressman Craig Hosmer, Signal Hill Mayor Tom Denham,
Councilmember Bill Mendenhall, Gertrude Beebe,
Councilmember Paul Kemner and Kathleen Brady 

           Up until the mid 1980s, Signal Hill was described by many as the last frontier in this part of the Old West.  The 2.2 square mile town was an oil town whose inhabitants included roughnecks, gamblers, prostitutes and those ready for a fight. The city was a gun-toting town, where police handed out pistol permits regularly. It was a place where some made it quite clear that blacks and Jews were not entirely welcome.  It sat on the edge of what many called the “Black Ghetto,” an area to its south where Long Beach African American were allowed to live.  It had its own form of politics, where recall elections were frequent, and where drifters were brought in for municipal elections. They lived in tents for the 45-day residency period and then voted and moved on. Both sides in a hot issue hired these tent voters, and the outcome of a city election in Signal Hill often depended on which faction had the most tents. 

            In 1981, Los Angeles Times reporters Mike Goodman and Richard E. Meyer wrote that up until his death in March 1979 the city was controlled by Thomas Webster Denham, Sr., a Southerner with a gracious, soft-spoken accent. He sold his land and dairy in Florida in 1945 and headed west to Signal Hill with his wife Carribelle, and three sons. By 1962 oil production revenue had dropped off to a point where the surface property for the first time in the city’s history was more valuable than the subsurface wealth. The city sought other avenues of revenue in order to compensate for the loss and encourage further improvement. By 1967, 96 substandard houses had been demolished, of 1300 old oil derricks only 50 were left and 50 open oil sumps cleaned up. Real estate was now becoming the “black gold” of the city. One of the major players in the real estate marker was Thomas Denham, who developed an interest in politics.

            Denham was a trusted, even revered by man in Signal Hill. They called him Mr. Tom. He secured a seat on the Signal Hill City Council, a position he held from 1962-1974. He was also mayor from 1964-1965 and again in 1967-79. He took steps to secure his influence. He and other businessmen began subsidizing the Signal Hill Tribune, the town’s only newspaper by purchasing block subscriptions from publisher H. Fred Harris. Signal Hill began publishing its ordinances in the Tribune in type so large it cost the city extra newspaper space. David Caretto, future city manager of Signal Hill told the Times “The city was subsidizing the newspaper.”

            With his father’s backing, Richard Denham was promoted to police captain. Richard Denham was a graduate of Hamilton Junior High, attended Poly and graduated from high school in Georgia. On his return to Signal Hill, he attended LBCC where he took special classes in law enforcement including USC and California State College, Long Beach where he secured his teaching credential. He was the first member of the Signal Hill Police Department to graduate from the Los Angeles County sheriff’s training academy. He joined the department as a patrol officer in 1954, but resigned after 6 months to enter the contracting business. In July 1957, he rejoined as a patrol officer, promoted to sergeant in October 1960 and captain September 1, 1966. When Chief William F. Stovall Sr. retired January 1, 1968, Captain Denham succeeded Chief Stovall in the job.  

            Richard Denham hired a number of new officers, most with no police experience. At least four had been fired or forced to resign from other departments, according to the Times. “They were losers or men he could control,” said John Jameson, city manager at the time. “Denham would give them one more chance. That’s what he’d tell him.” Among those hired was his brother Tom Denham Jr. Richard Denham said he wanted his officers to be tough. Businessmen applauded the toughness. They saw themselves as a special target, surrounded by the larger urban area of Long Beach and abutting the Long Beach ghetto. Toughness meant security for their property. At the same time, it meant security for Denham property.

            Since 1968, when Richard Denham became police chief, forty-two of those arrested by Signal Hill police formally accused them of beatings without justification.  Several suffered broken ribs, another a punctured lung, several were crippled and one was partially blinded. Two died.  Most accusations of police beatings were hardly noticed. Few, if any, were reported in the Tribune. When anyone filed a claim for damages, the City Council routinely rejected it and turned it over to the insurance carrier.

            Most of those arrested and brutalized by police were transients, some black, some white. Nobody even knew them, but in August 1976, local resident Clifford Holzhauer got into an argument with his wife Susan and asked her to leave the house. She had – and Holzhauer took their 7-month old baby to family members in Sacramento. Susan wanted to see the baby, but Clifford would not tell her where the youngster was.  Susan called police and they arrived along with Susan. Signal Hill officers, with their guns drawn, told Holzhauer to produce the baby. He told them the baby was OK but was not in the house. Police then pushed Susan out the front door, stepped in, and began beating Holzhauer 30 to 50 times. He pleaded with his wife, locked out of the house, to help him because they were “killing me.” She couldn’t do a thing. He lost consciousness and was taken to USC Medical Center where he had neck and groin injuries, three broken ribs and a punctured lung. Police charged Holzhauer with battery. A jury acquitted him.  He sued Signal Hill and agreed to an $8,500 ($39,000 today) settlement.

            When Holzhauer complained to his neighbor who was on the city council he was told not to get involved and to let the insurance company take care of matters. What did attract the attention of others on the council, however, was absenteeism. The Denham brothers were mixing work on family enterprises with police work, and police work was getting short ended. Several on the council staged a small revolt, denying Richard Denham a raise. The Denham’s fought back, also targeting city manager John Jameson who had supported the council’s action. But Jameson was in trouble for another reason – he was interested in putting some blacks on the police force. But Richard Denham told him “no.” Something Denham denied. Jameson said the city’s attitude toward blacks was best demonstrated by an industrial buffer zone it created between its residential area and the city limits, which touched the Long Beach ghetto. Others said Signal Hill racism was typified by its American Legion post, which had its charter revoked in 1964 for calling Jews “a mongrel race” and preaching “niggers don’t want integration and the Jews are pushing integration.”Those that had opposed the Denham’s were voted off the council and Jameson fired.

            On March 22, 1979, Thomas W. Denham, Sr. died leaving an estate worth approximately $1 million ($3.5 million today) and a smoothly running political machine. Before the year was out Police Chief Richard Denham decided to quit. There was a hitch. He was only 47 – three years away from early retirement. He threatened the city with a very substantial stress related disability claim that he would drop in return for a three-year leave of absence, which would keep his city insurance in force. He agreed to pick up the premiums during the leave. Denham claimed the stress was caused by the loss of his raise and criticism of absenteeism. His doctor confirmed the stress and Denham was granted a deferred retirement.

            The Council needed to find a successor. Ten years before, Denham had granted Gaylord (Red) Wert, a police dispatcher, an unusually dramatic promotion. Wert had no other police experience and Denham made him the department’s only lieutenant – his second in command. Now the City Council, without seeking any other candidate, appointed Wert chief of police. He had never been a patrol officer and had never taken a chief’s exam.

           

            In 1981, Signal Hill gained national notoriety because of the jailhouse death of African American football player Ron Settles.  As mentioned in my earlier article on Settles' death,  Settles was stopped for speeding on June 2, 1981, taken to jail and repeatedly struck with fists and billy clubs. The police said he resisted arrest.  Two hours after his arrest, he was found hanged from his cell bars. A coroner’s jury said the death was a homicide. Police and a grand jury said he committed suicide. Following Settles death, Douglas Miller, who lived in the black area of Long Beach at the bottom of Signal Hill said he stayed out of the town and so did his neighbors. “Things always were rough up there. But now it’s worse. They’ve got killers up there.”
            In May 1982, Signal Hill Police Chief, Gaylord (Red) Wert was fired after a new city council took over the governing of the city. A new city was born. Some believe it was Settles’ death and the attendant publicity and looking into past history that changed the city so radically. 

           

Councilmember Wilson

In 1997, a city that once closed its eyes to racial injustice and allowed certain officials to display their disdain for people of African descent elected one of these persons to head their government – Edward H. J. Wilson.  A native of Ventura, California, Wilson was reared across the United States and Europe. His father was a career military man. Wilson graduated from high school in Holland and came back to the US to attend college.  He served five terms as Mayor and in 2013 ran unsuccessfully for the 70^th State Assembly seat. He still serves on the Signal Hill City Council.

Sources:

Cheatham, Charles, “T.R. Philosophy is good enough for Denham” Independent Press Telegram, 23 June 1968.

Goodman, Mike & Meyer, Richard. “Brutality Charges. Signal Hill: Power to the Police.” Los Angeles Times. 11 October 1981.

Robeson, George. “Politics gets sticky up on Signal Hill.” Independent Press Telegram, 15 March 1968.

The “New Deal”

  As we look ahead to an uncertain economic future brought on by the Coronavirus pandemic, let's look back at what steps government took to propel the Depression economy forward.          


On March 4, 1933, a huge crowd gathered around radios on Pine Avenue to listen to the inauguration of a new President, Franklin D. Roosevelt. 

This new invention, the radio, brought the ceremonies in Washington to life.  To many, it felt as if they were actually witnessing the event, listening to the music, the cheers, the vows taken and the inaugural address itself.  Some thought it was actually better than being there, for how else could you get a first-hand, detailed report of things as they happened?  It was definitely preferable to being part of the crowding, milling mass in Washington.

            Later that evening there was a gathering in the Municipal Auditorium to celebrate the new Democratic regime. Various speakers, the Municipal Band, and the American Legion Drum Corps helped celebrate the new leadership that most hoped would pilot the country to a more prosperous era.

            Roosevelt was quick to act.  On March 6, 1933, in order to keep the banking system of the country from collapsing, FDR used the powers given by the Trading With the Enemy Act of 1917 and suspended all transactions in the Federal Reserve and other banks and financial institutions.  On March 9, Congress met in a special session and passed the Emergency Banking Relief Act.  This gave the president the power to reorganize all insolvent banks and provided the means by which sound banks could reopen their doors without long delay.  As Roosevelt was "shaking up" the financial community, Long Beach experienced a "shaking up" of its own.

           

Earthquake

          

  In late February 1933, demolition work on the picturesque old Hotel Virginia began.  It was estimated that it would require fifty men over a period of sixty days to complete the work   Huge fifteen ton air compressors operating 18 compressed air hammers were brought in and huge steel chutes running from the building to a continuous line of trucks  were employed.  However, the demolition crew got some help they weren’t expecting---at 5:54 p.m. on the evening of March 10, 1933, an earthquake struck.

         Memories for thousands were flash frozen --- preserved for a lifetime --- when the ground around Long Beach shook for 11 seemingly never ending seconds.  The killer force quake, measuring 6.3 on the Richter scale, occurred at the optimum time to save lives.  Most people were home for dinner, off the streets and away from the schools that would face almost total destruction.  Still, 51 people were killed in Long Beach and an additional 91 in surrounding areas.

            Bricks and debris rained down on the streets, loosened by the powerful movement of the earth.  Buildings crumbled, streets buckled and fires erupted in several spots. Telephone poles swayed and snapped, putting the city's 32,052 phones out of service.  Electricity was gone but an alert gas company worker turned off the city's gas lines during the temblor preventing further fires.

            Fortunately, the city had a disaster plan, and the help of the Pacific Fleet anchored off the Long Beach coast. Electricity was restored to the downtown area by 7:30 p.m., but outlining hospitals were without power.  The city disaster center got on their portable radio and called on anyone with access to bootleg liquor to bring it to the command center.  From here they took it to hospitals to use in sterilizing surgical instruments.  Within an hour after the first jolt, all roads leading into the city were patrolled with the help of 2000 Navy men who came ashore with loads of blankets and supplies immediately after the first shock.  They stayed for almost a week, helping anywhere they could.

            In the area affected by the earthquake, 4,883 people were injured; 1,893 homes were destroyed, 31,495 damaged; 207 buildings were declared uninhabitable, 1,550 were deemed repairable.  All of the Long Beach schools suffered considerably, as did the city's churches.  On March 13, the State Legislature voted $50,000 ($996,000 today)for emergency relief in the way of food and clothing.  Later $150,000 ($3 million today) was appropriated for rehabilitation work in the quake struck area.  On March 14, the Senate passed a bill appropriating $5,000,000 ($100 million) as an outright gift for relief.  Long Beach, however, declined to accept any of this money, advising Washington authorities it did not desire charity, but rather an opportunity to borrow the money needed to carry on the work of rehabilitation.  Acting on this, Congress amended the act permitting loans from the funds.

            Long Beach bounced back quickly.  Rebuilding operations began the day after the quake.  By March 16, more than 5000 men were employed at removing debris and putting the town back together. Business activities resumed as quickly as possible.  By March 15, 75 stores had reopened.

            Tourists flocked to Long Beach to see the damage.  On March 20, over 200,000 cars and one million sightseers were in town.  By April, Long Beach was more or less back to normal. 

The Economy in 1934

            1934 marked the turning point in Long Beach's economic decline; after all, it would be hard to sink any further after the disasters of 1933.  Things were getting better. Long Beach was recovering from the effects of the earthquake; the Pacific Coast Club reopened in January with a week-long celebration; the renovated, redecorated and refurbished Imperial Theater opened its doors in August.  On June 30, 1934, beachgoers had a treat in store for them when a new $400,000 ($7.7 million), 37-acre state park on Alamitos Bay Peninsula opened. On September 1, 1934, five thousand attended the opening of the new Long Beach post office. The seven-story steel and concrete building was a far cry from the original one-story frame structure at Pine and Ocean which housed the first Long Beach Post Office forty-nine years earlier. 

            Gradually the Depression was lessening, but conditions in Long Beach were not as rosy as they seemed. In 1934, the finances of the city were at the lowest ebb in years.  In January, a petition was filed to recall all nine members of the City Council, the City Manager and the City Attorney.  Failure to prosecute the oil companies, who owed the city large sums of money on royalties, was given as the major reason for the recall.  Other charges cited were: incompetence, mismanagement, misuse of public funds, carelessness and a disregard for the rights of the citizens of Long Beach.  On July 10, voters ousted all City Council members and the City Attorney.

  

          It was an interesting time for Long Beach.  How was the city to run when there were no elected officials?  The City Charter stated recalled officials had to leave office at once. City Attorney Reid complied and George Trammell was appointed by the Council to fill the vacancy.  But what to do without a City Council?  There were two options:  the governor could intervene and appoint a temporary Council until the vacancies were filled, or, based on State law, the recalled Council could continue to hold sessions and transact business until the election of their successors.  Since State law superseded local laws, the second option was instituted, but not for long -- an election for new officials was called for August 17, 1934.

            It was a fascinating election.  There were more than 130 candidates for the nine offices and when election records were checked it was found that a vast throng of men and women registered to vote were not qualified to do so.  Despite these problems, Frank Barnes, Clarence Wagner, John Schimmer, Benjamin Kirkland, Thomas Eaton, Carl Fletcher, Melvin Campbell, Leroy Cederberg and Virgil Spongberg were voted into office.  The new Council members pledged to institute strict economic measures in running city government and balancing the budget.  It would be up to them, according to the City Charter, to either keep the current City Manager and City Attorney or seek new ones.

            The new regime faced the immediate problem of balancing the budget.  On August 24, 1934, trying to live up to their campaign pledges, the Council voted an eighteen per cent salary cut for all city employees. By doing this, they balanced the budget and avoided raising tax or gas rates or abolishing free trash collection. City employees were outraged, having already taken cuts ranging from 13 to 30 per cent during the past three years.  The firemen, with their wages fixed by city ordinance, flatly refused to accept a wage reduction.  The Council quickly backed down coming up with an indefinite plan for slashing here, pinching there and raising the gas rate.  The Council needed help and help was to come in the form of a new City Manager -- Randall Dorton.

  

12/12/1938

          On September 13, the City Council agreed on the selection of Randall M. Dorton, City Manager of Monterey for nine years, as the new City Manager of Long Beach.  Dorton was a graduate of the University of California, holding a master's degree in political science.  This was the first time since the appointment of Charles E. Hewes in 1921 that Long Beach had selected a candidate from outside the city to fill the important administrative role.  Hewes had tried to be an impartial manager, abiding by the City Charter, not the political machinations of the city.  He had been recalled the following year, and a "Long Beach man" appointed in his stead.  Would another "outsider" fall victim to the Long Beach political machine?  Amazingly, Dorton set a record for time in office.  The average time spent in the role of City Manager by his eight predecessors (Charles Hewes, Charles Windham, Charles Henderson, H.S. Callahan, George Buck, C.C. Lewis, E.S. Dobbin, James Bonner) was eighteen months, Dorton, who began serving on October 1, 1934 left office on August 31, 1939.

            Dorton had a hard road ahead of him.  Within six months of their election, another recall attempt was aimed at the new City Council.  Proposition 17, on the ballot in 1935, was designed to stop what was called "recall racketeering."  It was common practice for hired people to take voters to City Hall to sign recall petitions.  Often those who signed were given monetary rewards.  Proposition 17 prohibited such practices and also increased the required number of recall petition signers from 10 to 25 percent of qualified voters.  It also exempted the City Manager from recall, making the Long Beach Charter conform to the general plan of the Council-Manager form of government, which stipulated Councilmen were responsible to the people, and the City Manager to the Council.  The charter amendment carried by a majority of 5150 and the anti-recall forces swept all but one of the 137 precincts in the City.

The WPA

            Long Beach survived an earthquake in 1933 and a recall election in 1934. Better times were to follow when, on May 6, 1935, Roosevelt established the Works Progress Administration by executive order, to organize "light" public works projects for those workers not employed by the "heavy" public works agencies such as the Public Works Administration (PWA) and the Tennessee Valley Authority (TVA). All were to work for their money because Roosevelt shared former President Herbert Hoover's aversion to the dole, calling it, “a narcotic, a subtle destroyer of the human spirit."

            In order to qualify as a WPA project, the projects could not compete with private enterprise and had to have a persuasive social value.  Where people had useful skills, the WPA eagerly used them.  Discovering that artists, musicians, and writers were hit hard by the economic times of the 1930s, the WPA organized projects to utilize their talents.

Naples Canal Walls After 1933 Earthquake

            Not all proposed WPA projects were approved, much to the dismay of Naples residents. Since the early 1930s, the canal walls of Naples, built in 1905, had been crumbling.  The 1933 earthquake was the final straw, collapsing the already fragile walls.  For four years, Naples residents petitioned the City and the federal government to repair them, even threatening to secede from Long Beach if their demands weren't met.  They were outraged when WPA Administration officials turned down funding saying the canals should be filled in.  The costs were too high in proportion to the number of people to benefit, the government claimed.  Eventually, with the aid of state, county and city funds, reconstruction work started.

            On August 26, 1939, Naples held a celebration and formally dedicated the new walls.  In attendance was Arthur M. Parsons, 81, known as the "father of Naples."  It was due to his efforts that the community had begun.  Adding a touch of pageantry to the afternoon's celebration was the appearance of King Neptune and his court, which floated down the Rivo Alto Canal.  Perhaps the most popular event was the men's bathing beauty contest, which brought lots of laughter from the on lookers.

            A few days after the Naples dedication, war broke out in Europe. On September 1, 1939, Germany invaded Poland. On September 3, Poland’s allies declared war on Germany. World War II had begun. The Great Depression was soon over as European nations looked to America and the country’s industrial strength to supply their economic and war needs. Industry and employment skyrocketed in the United States, especially in Southern California with the growth of shipyards, aviation and oil production.

The Great Depression Before the “New Deal”

What was America like in the early days of the Great Depression? What steps could the federal government take to help the American public? American life would be transformed forever as the country slipped further into an economic decline. 

            

As the 1920s neared an end, many were convinced that prosperous times would go on forever. On September 3, 1929, stock prices reached their highest level yet, but a slow decline began.  On October 24th, an abrupt dip led bankers to attempt stemming the tide.  On October 29th, Black Tuesday, a record 16,410,030 shares were traded as huge blocks of stock were dumped for whatever they would bring. 

By December 1st, stocks on the New York Stock Exchange had dropped in value by $26,000,000,000 ($391,770,000,000 today). The day after the crash President Herbert Hoover assured the public that the business of the country was on a sound and prosperous basis.  All that was needed was time. In November 1929, he had summoned business leaders to the White House and secured promises to maintain wages. He also received commitments  to spend $1.8 billion ($15 billion) for new construction and repairs to stimulate employment. 

     At first, Hoover was praised by the press for his actions, which allowed Long Beach and other parts of the nation to grow throughout most of 1930.  In Long Beach, the Ford Motor factory opened, ground was broken for the Procter & Gamble soap plant, a new wharf to allow bigger cargo ships access to the harbor was completed, and a $100,000 water plant was put into service.  Residential districts such as Bixby Knolls started selling new homes, and two new schools, Lindbergh and Naples, opened to meet the educational needs of the many families moving to Long Beach. Economic conditions improved somewhat in early 1931 until a series of bank collapses in Europe and the drought and dust hitting the Plains states sent another wave of terror through the American economy. Farmers were unable to sustain their crops and, as a result, some 2.5 million people would leave the Plains states, most headed to California.

            Long Beach did have oil, new industries, and a seemingly bright future, but it could not deal with all of the displaced workers from Dust Bowl states seeking employment in Long Beach.   In an attempt to remedy the downturn in the job market, the American Legion asked that only American citizens be employed by business firms, resulting in the repatriation of 120,000 Mexican laborers from California.  Going a bit further, the Long Beach City Council passed an ordinance mandating that only residents of the city could be hired to build the new municipal auditorium. 

                By late November 1930, the veneer that everything was O.K. began to crumble.  Long Beach churches were asked to open their doors and give homeless men a night’s lodging.  Nearby Fort MacArthur furnished 100 cots and bedding for the itinerant men who had come to seemingly prosperous Long Beach looking for work.  Business sales were sagging. 

            In January 1931, those municipal employees not dependent on their salaries for a living, were asked to take a leave of absence so their jobs could be filed by men who had to support their families.  Married women were chiefly affected by this proposal.  At a county conference in Los Angeles, it was agreed that every possible dollar of county money should be spent in employing manpower.  Contractors doing public work were asked to abandon machines and use hand labor so far as possible.  One rule was that persons who refused to work, although able to do so, would not be carried on the charity list, and would have to "shift for themselves."

            In March 1931, $174,000  ($3 million) was appropriated by the Los Angeles County Board of Supervisors for Long Beach street projects. Men paid $4 ($68) a day were employed two days a week. Under this system as many as 1500 were put to work.

  

          The five-month period, which ended in May 1931, marked the heaviest drain ever on the social service organizations of the city.  The Social Welfare League, American Red Cross and Catholic Welfare Bureau went into 4,000 Long Beach homes, providing relief in the form of food, fuel and clothing.  Five thousand grocery orders were distributed by the agencies; 2000 pairs of shoes and 11,000 pieces of clothing were given out.  From December 1, 1930 to May 1, 1931, the Salvation Army served 10,473 meals and provided beds for 7100 men.  By mid-May 1931 the resources of these agencies were beginning to wear thin, agencies were forced to evaluate requests for aid based on need.

            The City Council looked at ways to cut expenditures.  Oil revenues were down and Long Beach was feeling severe financial pressures.  A cost-savings study recommended a ten percent reduction in all salaries.  Police and Fire wages could not be touched, however, since they were mandated under a city ordinance.  On June 11, 1931, the City Manager decided to set an example and announced plans to cut his own salary, even though the city charter said he should not be paid less than $7500 ($128,000) a year.  Establishment of a five-day work week (employees used to work 9-1 on Saturdays), with appropriate salary cuts to reflect the shortened work period, was also recommended.  City employee sick leave cost the city $28,000 ($475,000) per year; it was proposed employees receive no pay for the first three days of illness and that a nurse from the Health Department visit them to verify they were really sick.

            City Manager Claude C. Lewis worked on consolidating departments; when city managers retired they were not replaced, their duties assigned to another department head. Lewis, however, did create a new position, that of Assistant City Manager whose job duties included being director of personnel and looking into the efficiency of each city department. 

            New taxes were considered.  The city began to charge for the collection of garbage from business places, hotels, clubs and restaurants. Individual houses were still exempt.  A business and professional tax was also instituted--any member of any profession who maintained or occupied an office or place of business within the city was required to pay a license tax.

Ford Motor Co. Long Beach

            By year's end, the Ford Motor company had laid off 500 employees and trimmed their operations to a bare minimum. In February 1932, Seaside National Bank was forced to close its doors.  County funds were depleted, and money no longer available to cities to provide jobs for the unemployed.  In January 1932, the City Council put a public relief bond measure on the ballot.  It was the only way Long Beach could legally raise money for public relief.  The measure was overwhelmingly defeated.  People had lost confidence in city government; they didn't like the new taxes or the unemployment situation.  In 1932, a recall petition to oust the City Council, City Manager and City Attorney was instituted.

            The City Council told the public that a recall measure would bring disaster.  There was no provision in the City Charter to hold a special election to fill the vacancies should the recall prove successful.  The running of Long Beach would be turned over to the State.  The 1932 recall election was defeated, but in 1934 a recall was approved and eleven city officials were without a job.

            Public relief was something city, county, state and federal governments had never dealt with before.  It had always been handled by charitable institutions.  Now new rules and new players were getting into the game.  Long Beach had done what it legally could to raise money for public relief, and the measure had been defeated.  While they were looking into the legality of tapping into Gas Department revenues, the American Legion proposed holding a drive to raise $100,000 ($1.7 million) for employing out-of-work men in planting trees along Long Beach streets.

                By October 21, 1932, the County was giving aid to 151,628 people, or one-tenth of the county population.  On the charity rolls were an ex-brigadier general, working for $3.20 ($60) a day; an ex-State's attorney of a Midwestern State, an Austrian countess who formerly mingled with the crowned heads of Europe, a graduate of West Point and a former head of a newspaper publishers association who turned down the chance to become Governor of his home State eight years earlier in order to go into business in California.  Southern California was becoming the Mecca of transient families from all parts of the country.  Lured by the fine climate and promise of a better future, thousands left their homes for the sunshine of the Southland.  Such wanderings created untold problems for the areas they wanted to call home.

            Though a Republican town by tradition, Long Beach gave Franklin D. Roosevelt a majority of 7181 votes in the November election.  It was time for a change and new solutions to the economic woes of the nation.

            More about the Roosevelt’s “New Deal” in the 4^th and final part of this series.

How Oil Speculation Pauperized Thousands

                Prosperous times swept America following the discovery of oil on Signal Hill, helping end the Depression of 1920-1921. A new industry had been born. By 1924 oil surpassed agriculture as the leading industry in California.  In Southern California alone that year 230 million barrels of crude oil was pumped out of the ground. Everyone seemed to want to make a quick buck from all the oil flowing on and around Signal Hill.  Oil deals were being made every day, many of them by Long Beach businessmen like Willard C. Campbell, John McDuffie, Walter Lee Tully, Charles P. Knight and William R. Buck of the Bay Hills Oil and Land Company. 

                In the fall of 1922, the five original promoters of the Bay Hills Oil and Land Company contributed $5000 ($77,000) each to begin their corporation.  Their first course of business was to buy five town lots on Signal Hill for $20,000 ($308,500). John McDuffie made the purchase in his name, taking title and later transferring title to the company for $35,000 ($540,000)--- the five investors pocketing the $15,000 ($231,375) profit.  With actual land in their possession, they quickly lured backers into purchasing 2250 units of stock for $100 ($1545) per unit, telling investors they would drill one oil well when $225,000 ($3,471,000) was raised.  Fifty percent of those encouraged by “oily” talks of promoters were women over 60 years of age, who invested their life savings in the company. The promoters promised their shareholders they themselves would derive no money from the sale of any unit until the investors had received all their money back.  This was an out and out lie, for Campbell, McDuffie, Tully, Knight and Buck were drawing monthly salaries ranging from $1000 ($15450) to $1500 ($23,137) each.

                Other transgressions followed.  After the original stock was sold, the five set up another company, the Special Delivery Oil Syndicate, which they opened to investors.  Questionable practices included purchasing an oil lease for $12,500 ($193,000) and then selling it to the Special Delivery Oil Syndicate for $15,000 ($231,375) , splitting the profit between them.

                 On October 14, 1924, Willard C. Campbell, who had become one of the most prominent and respected oil stock salesmen in Long Beach, was arrested for mail fraud along with John McDuffie, Walter Lee Tully, Charles P. Knight, William R. Buck and their attorney Joseph G. Richardson.  Mail fraud was one of the few legal ways to pursue the sharks who fed off the hopes of the small investor. Long Beach folk were shocked that such noteworthy members of the community had been scam artists.

                John H. McDuffie, president of the Bay Hills Land and Oil Company of Long Beach and its subsidiary the Special Delivery Oil Syndicate, denied the company ever did any business through the mails.  Instead, he claimed, they hired passenger buses to bring the public to the oil fields.  It was common practice among oil promoters.  Every morning the buses lined the streets in Los Angeles and other Southern California communities advertising free lunches, and band concerts as well as a chance to see the gushers first hand.  McDuffie neglected to mention that along the way salesmen made their pitch.  As they motored past the mansions of business tycoons, movie stars and especially oil moguls, oil promoters made sure to point out that anyone could live a life of leisure if they invested in oil development. The passengers, primed by the promotion, responded emotionally, rather than rationally, and lined up eagerly to purchase shares in not only Bay Hills Land and Oil, but other oil companies as well. 

Prospective investors

                McDuffie told the press that the trouble with his oil firm was brought about not through any intent to defraud anyone, but by poor management.  Somehow, McDuffie said, the bills began to pile up and creditors began to demand payment until investors began to get worried.  Shareholders weren’t buying his sob story.

                On July 6, 1925, the Bay Hills Oil partners and the company’s attorney Joseph Richardson went on trial for mail fraud, having delayed the legal action as long as they could. Investors wanted their money.

                “The law is full of loopholes,” Los Angeles Times writer Walter V. Woehlke later wrote about another fraud, the Julian Pete scandal. “To the layman it is perfectly clear that a criminal fraud of vast proportions has been committed, that tens of thousands of innocent people have been bunked out of an unknown number of millions, but the way to legal proof and conviction lies through a jungle of technicalities in which it is easy to get lost.” (Los Angeles Times, 10/17/1927)

                Woehlke was right. Though Willard C. Campbell, John McDuffie, Walter Lee Tully, Charles P. Knight, Joseph G. Richardson and William R. Buck had defrauded 5000 investors of $750,000 ($11.6 million) , they merely got a slap on the hand, fined $2500 ($38,500) each and given ten months suspended jail sentences.  However, the story has a happy ending.

                In February 1929, “Special Delivery No. 1,” located at Locust and 31^st Street, which had been taken over by the Cypress Petroleum Company, hit pay dirt, with promises of over 2,000 barrels of oil a day. The property that was nearly lost for taxes and given up as hopeless, had now became a valuable asset. However, few had recorded their deeds to the well and over half of the “unit holders” could not be found. Those that had recorded their deeds were entitled to a portion of the earnings. For those that couldn’t verify a legal filing, the funds accrued would revert to the state in five years.  Many were lucky to recover their original investment, but little else. The Great Depression would see the price of oil fall to an all-time low.

                Though this story had a happy ending, this was just the tip of the iceberg, the first of several local oil scandals to follow.

             

 

C.C. Julian

  The biggest Ponzi scheme of all involved Courtenay Chauncey Julian---“C.C.” as he was known to millions---who appeared so folksy and down to earth that investors believed his sales pitch and that he really cared for the little guy. Born in Manitoba, Canada, son of an impoverished farmer, Julian had worked in the Texas oil fields before drifting to Southern California.  He soon began to speculate in oil leases, and from his point of view his luck was phenomenal.  On a four-acre lease he drilled five wells and all five came in, producing gushers.  Now, as a successful independent operator, he decided to form a production, refining, and distributing company to compete with the major oil companies, and open his company to small investors.  Soon he was acquiring more leases, and opening gas stations which sold his appropriately named gasoline, “Defiance.”

                In June 1924 his new company, the Julian Petroleum Corporation, purchased the holdings of the Grump-Steele Company of Long Beach, including contracts on the production of twenty Signal Hill oil wells for $75,000  ($1.13 million today).  Julian also had interests in the Alamitos Heights oil field with wells near Colorado Avenue and Ultimo Avenue. This was but a small portion of Julian’s supposed massive oil investments.

                Julian bypassed the usual techniques used by oil promoters who laid siege to Pershing Square in downtown Los Angeles each morning.  Impressive buses heading for the oil fields filled the streets advertising free lunches, band concerts as well as a chance to see the wells up close.  Julian’s approach was different.  He didn’t rely on bus rides to entice people.  Instead, he wrote his own ads which encapsulated the hopes and dispelled the fears of the small investor. He charmed many into putting money into his oil syndicate, despite warnings from the California Corporations Department and Harry Chandler of the Los Angeles Times who finally caught on to Julian’s schemes and refused to print his ads.  Penniless when he began, Julian managed to raise a lot of money from those he conned. C.C. Julian was the Bernie Madoff of his day.  It was not long before 40,000 folks had invested $11 million ($166 million)  in the stock of Julian Petroleum. His appeals for funds were so successful that one particular stock issue was oversubscribed by $75,000 ($1.13 million).   However, the law eventually caught up with him.

                Bribes and high salaries to bankers and government officials hid what was really happening---more Julian stock was being traded than was supposed to exist.  But the Ponzi scheme, where early investors are paid off with the money of later investors, began to spin faster and faster, demanding more and more cash.  As the “little guy” investors began to get a putrid whiff of what was really happening panic spread.  The “Average Joe” saw his money in Julian vaporize.

               The Julian fiasco was merely the prelude to the devastation that came after 1929.  When the Richfield Oil Company went into receivership in 1931, an audit revealed an operating loss of $54 million ($920 million).  Items such as alimony, hotel rooms, purchases of jewelry, repair of speedboats and so forth had been blithely charged to the company.  Then the Guaranty Building and Loan Association failed (its president had embezzled $8 million), then the American Mortgage Company failed for $18 million ($306 million).  Nearly every major financial debacle involved some political figure, a judge, public official or some well know fixer, Carey McWilliams wrote in Southern California Country. McWilliams also pointed out that in earlier times investors had purchased something physical, such as property (at whatever inflated price), but with Julian stock certificates all they had were pieces of paper.

                The Julian scandal, coinciding with the onslaught of the Depression, pauperized at least 500,000 Southern Californians. Its consequences would ripple on and on, gaining force until in 1930 the region led the nation in the number of bankruptcies and in the amount of net losses in bankruptcy proceedings. The scandal contributed to the collapse of the First National Bank, the election of former Ku Klux Klansman John Porter as mayor of Los Angeles, and the defeat of California Governor C.C. Young in his bid for re-election.

              As a librarian, I feel obliged to tell you to read Oil by Upton Sinclair, if you want to learn Prohibition Madness).  Sinclair wrote the book while living in Belmont Shore, in it he described the transformation of Paradise (Long Beach), from “a quiet little seaside village where retired Iowa farmers pitched horseshoes,” into a bustling boom town porcupined with derricks.  The road into Paradise, Sinclair wrote, was “lined with placards big and little, oil lands for sale or lease, and shacks and tents in which the selling and leasing was done.  Somebody would buy a lot and build a house and move in, and the following week they would sell the house, and the purchaser would move it away, and start an oil derrick.  A great many never got any further than the derrick---for subdividers of real estate had made the discovery that all the advertising in the world was not equal to the presence of one such structure on the tract.”
More about this time in my book Prohibition Madness.

Did Signal Hill Oil Save the Country from Economic Collapse?

                What was the world like after World War I and the influenza pandemic? Time, not medicine, had lessened the deaths from influenza. There was no prevention and no treatment. Isolation, quarantine, good personal hygiene, and limits on public gatherings were used to control the spread…sound familiar?  But what were the effects of the disease economically?  Here is a look at the economic depression that struck soon after the war and the influenza pandemic ended.

               

We all have heard of the Great Depression that encompassed the world in the 1930s. A little talked about Depression brought economic collapse and massive job losses in the years following World War I and the influenza pandemic.  Those were the days when there was no government aid available to businesses and individuals, no Social Security or welfare. People had to fend for themselves.

               

According to today’s economists, the Depression lasted from January 1920 to July 1921, but there were signs of things to come months earlier.  In November 1919, panic conditions threw Wall Street into turmoil and interfered with the operation of the whole Federal Reserve System. Restless speculation forced “call money” up to 25 percent overnight. This “unnatural” demand for cash affected not only the business world; it affected all other parts of the economy. Farmers who wished to raise money on prospective crops found it more difficult to do so; small town merchants were inconvenienced in restocking their stores and builders were kept from purchasing their building supplies.  Unemployment rose sharply. Automobile production declined by 60% and total industrial production by 30%. Southern California, however, escaped the economic crisis because of a major discovery – oil.

                Gas emanations, seepages of oil and asphaltum deposits had long been known throughout Southern California.  Native Americans as well as mission fathers used these substances as roofing materials, natural lubricants and as liniments.  The first oil boom actually occurred in 1859 when it was found that petroleum could be used to make kerosene lamp oil, an inexpensive alternative to whale and coal oil in use at the time. With California gold production diminishing, oil speculation seized the minds of many still eager to make their fortune.  By 1865, sixty-five California oil companies had sprung into existence, though many never got further than just issuing stock certificates and pocketing investors’ money.  Those that did get around to drilling didn’t have enough capital to bore the wells very deep, and only a small amount of oil was obtained.  The modest quantity that was pumped was found to have little value. It wasn’t the same grade as eastern oil, which was perfect for kerosene production and at the time the only valuable use for petroleum.  Oil investors became discouraged and by 1884 there were only four California companies remaining that were actually producing oil.

 

One of Doheny's first wells

               In 1892, Edward Doheny was sitting on the porch of a Los Angeles hotel when he saw a decrepit wagon hauling chunks of a greasy, brown substance.  Curious as to what it was, the newly arrived miner ran after the wagon and asked the driver what he was hauling.  The driver replied “brea,” the Spanish word for pitch.  He told Doheny it came from a great hole oozing gobs of the sticky stuff in an area of the city called Westlake Park.  The driver was transporting it to a nearby ice factory where it would be used for fuel in place of coal.  A light bulb went off in Doheny’s head as he realized this was a new fuel which could become the new energy source of the nation.  The far seeing Doheny leased a three-lot parcel of land near the “great hole” at Patton and State streets in Los Angeles. It was swampland, bubbling with the tarry crude.  From this find, and convincing the Atchinson, Topeka and Santa Fe Railway to substitute oil for coal in their locomotives, the oil industry we know today came to be.

                It took a while for the use of oil to catch on, but as World War I got underway the need for petroleum increased. In 1916, oil wells began to dot Signal Hill. First it was Union Oil Company, then in 1917 St. Helen’s Petroleum Company and Kern River Oil Fields, Inc.  In 1920, Shell Oil Company arrived on the scene, leasing city owned land for oil drilling, but it wasn’t until 1921 that the speculation that Long Beach and Signal Hill was sitting on a vast oil reserve proved true.   On June 23, around 5 p.m. Shell Oil Company struck a huge deposit of oil at its well at Temple and Hill Street.

Oil - Signal Hill

                Oil fever quickly spread.  Sandberg Petroleum Company, with massive Signal Hill oil holdings, was swamped with people wanting to invest in their company.  Within 48 hours of the Shell discovery, Sandberg sold $112,000  ($1.6 million today) worth of stock.   Real estate promoters in the area on and surrounding Signal Hill could barely keep up with sales.  The City of Long Beach owned 36 acres of land between the Shell and Sandberg holdings and envisioned itself becoming the richest city in the world---a city that would end taxation.

                Shell well no. 2, Nesa, on the west slope of Signal Hill, struck oil at 12:45 a.m. on September 2.  It came in with such an explosion that everyone thought an earthquake had struck. People as far away as Los Angeles were awakened by the blast.  Other wells came in on October 26, November 17 and December 13.  On November 28, the city owned municipal oil well hit pay dirt, shooting two hundred barrels of fluid above the top of the derrick.  For many years afterwards this single well brought $360 ($5,200 today) a day into city coffers.

                Amid all of this oil, Signal Hill, which had been renowned for its scenic grandeur, productive soil and magnificent homes, was transformed.  Building restrictions, paved streets and walks and curbs were supplanted by oil leases, oil stocks, derricks and drills.  Palm trees and rose gardens were removed to make way for boilers and tool houses.   It was now dangerous living on the Hill, residents were regularly routed from their homes by blowouts from the oil wells.  Families escaped through the rain of greasy crude oil, leaving behind everything but the clothes they were wearing.  They would pile into their automobile, trying to drive to safety but finding it difficult to get through the oil that coated everything.  On returning home they found their once white home  now black, trees in their orchard destroyed, stripped of branches by the clinging oil, the contents of their homes worthless, and the building, soaked with highly flammable oil, a fire trap in which no one could safely live.  

  

Long Beach/Signal Hill oil field

              Because of oil, Long Beach and the rest of Southern California was able to escape the economic recession striking the rest of the United States in 1920.  Signal Hill was considered the greatest oil field in the United States.  A multitude of new industries associated with oil fields and interests were springing up.  Gas refineries, absorption plants, casing-head gasoline plants and several hundred miles of pipe lines were being built.  But all was not as rosy in the rest of America.  The United States was experiencing a severe, post-war recession due to industrial overproduction and elimination of defense related industries.  The result was widespread wage cuts and unemployment that reached 5.7 million in August 1921.  Thousands traveled west to Long Beach to take advantage of the jobs and other benefits accompanying the oil boom.  On October 7, 1921, Long Beach Mayor Charles Buffum spoke about the “propaganda” being spread through the east calling attention to the alleged employment advantages of Southern California.  "We can take care of the people we have here, but the continued invasion of the army of the unemployed will result most seriously for those who come", he said in an article in the Daily Telegram. "Keep the idle away from the City, Long Beach can take care of its own people, but the influx must stop."

                But the influx did not stop. In the decade 1920-1930, over 2,000,000 people moved into California, 72% of whom settled in Southern California.  The migration into Southern California in this decade was the largest internal migration in the history of the American people, according to author Carey McWilliams. In 1923, oil from Signal Hill alone caused ship traffic through the Panama Canal to double By 1924  (the same year Signal Hill decided to become its own city), oil surpassed agriculture as the leading industry in California.  In Southern California alone that year 230 million barrels of crude oil was pumped out of the ground. 

                The 1920s ---which brought Prohibition, rum runners, jazz, gambling ships and gangsters---also brought tremendous growth to the Southland. But speculation in the oil industry became rampant, with many swindlers out to make a quick buck.  More about this next time when I will tell of how this uncapped speculation pauperized at least 500,000 Southern Californians.