http://en.wikipedia.org/wiki/Warren_G._HardingUpon winning the election, Harding appointed many of his old allies to prominent political positions. Known as the "Ohio Gang" (a term used by Charles Mee, Jr., in his book of the same name), some of the appointees used their new powers to rob the government. It is unclear how much, if anything, Harding himself knew about his friends' illicit activities.
The most infamous scandal of the time was the Teapot Dome affair, which shook the nation for years after Harding's death. The scandal involved Secretary of the Interior Albert B. Fall, who was convicted of accepting bribes and illegal no-interest personal loans in exchange for the leasing of public oil fields to business associates. (Absent the bribes and personal loans, the leases themselves were quite legal.) In 1931, Fall became the first member of a Presidential Cabinet to be sent to prison.<10>
Thomas W. Miller, head of the Office of Alien Property, was convicted of accepting bribes. Jess Smith, personal aide to the Attorney General, destroyed papers and then committed suicide. Charles Forbes, Director of the Veterans Bureau, skimmed profits, earned large amounts of kickbacks, and directed underground alcohol and drug distribution. He was convicted of fraud and bribery and drew a two-year sentence. Charles Cramer, an aide to Charles Forbes, committed suicide.
No evidence to date suggests that Harding personally profited from these crimes, but he was apparently unable to stop them. "I have no trouble with my enemies," Harding told journalist William Allen White late in his presidency, "but my damn friends, they're the ones that keep me walking the floor nights!"<11>
Historian Wyn Craig Wade, in his 1987 book The Fiery Cross, suggests that Harding had ties with the Ku Klux Klan, perhaps even having been inducted into the organization in a private White House ceremony. Evidence includes the taped testimony of one of the members of the alleged induction team, however beyond that it is scant at best and the theory is generally discounted.<12>