Fall was appointed to the position of Secretary of the Interior by President Warren G. Harding in March 1921. Soon after his appointment, Harding convinced Edwin Denby, the Secretary of the Navy, that Fall’s department should take over responsibility for the Naval Reserves at .Teapot Dome, Wyoming.

The Wall Street Journal reported that Secretary Fall had decided that two of his friends, oilmen Harry F. Sinclair (Mammoth Oil Corporation) and Edward L. Doheny (Pan-American Petroleum and Transport Company), should be given leases to drill in parts of these Naval Reserves without open bidding…

His acceptance of bribes for the leases resulted in the Teapot Dome scandal.
The investigation found Fall guilty of conspiracy and bribery, $385,000 having been paid to him by Edward L. Doheny. Fall was jailed for one year as a result-the first former cabinet officer sentenced to prison as a result of misconduct in office.