Forbes sought desperately to be appointed chairman of the
United States Shipping Board, an agency that controlled vast amounts of government shipping resources to private shippers. However, President Harding denied him the position and instead appointed Forbes to the
War Risk Bureau on April 28, 1921. On August 9, 1921, Harding signed an act of Congress consolidating the War Risk Bureau and several other agencies into the new
Veterans' Bureau. Forbes was confirmed by the Senate after a hastily organized nomination and vote that same day. The bureau was created to aid the thousands of World War I veterans in need of medical and employment services. Each of the bureau's 14 nationwide offices had the authority to act without awaiting approval from the main office. Forbes' wife Katherine had direct access to the
White House, having been given special privileges under Mrs. Harding's authority.
Veterans' Bureau tenure in Chicago, where Forbes took a $5,000 bribe.(1920 postcard) With a $500,000,000 () annual budget at his disposal at the Veterans' Bureau, Although 300,000 soldiers had been wounded in combat, Forbes had only allowed 47,000 claims for
disability insurance, while many were denied compensation for reasons that Congress called "split hairs." Even fewer veterans received any vocational training under Forbes' direction of the bureau. While on the numerous trips (called "joy rides") that Forbes took to inspect hospital construction sites, he and his contractor friends allegedly indulged in parties and drinking. The men developed a secret code in order to communicate insider information and ensure government contracts. According to congressional testimony, on an inspection trip to Chicago, Forbes gambled and accepted a $5,000 bribe from contractor J. W. Thompson and middleman E. H. Mortimer at the
Drake Hotel to secure $17,000,000 in veterans' hospital construction contracts. Forbes claimed that the $5,000 payment was a loan. Mortimer also accused Forbes of conducting an affair with Mortimer's wife while on the inspection tours. Forbes was suspected of receiving kickbacks from contractors. When President Harding ordered Forbes to stop, Forbes disobeyed and continued to sell supplies. On January 24, 1923, Forbes awarded Hurley-Mason Construction, his former company, a contract of $1,300,000 to construct a new veterans' hospital at American Lake, near Tacoma. By January 1923, rumors had spread indicating that Forbes would resign from the Veterans' Bureau in June. Forbes pleaded with Harding to allow him to tender his resignation from outside the country, and Forbes resigned on February 15, 1923, while in Paris. Among Forbes' final acts as chairman were numerous personnel changes at the bureau. In a searing attack on Forbes on the floor of the House of Representatives, Georgia congressman
William Washington Larsen accused Forbes of making the personnel changes to reward his "henchmen" and remove those who may have had knowledge of Forbes' malfeasance.
Congressional investigation On March 2, 1923, the U.S. Senate passed a resolution to investigate the conduct of the Veterans' Bureau under Forbes. A three-member committee led by Pennsylvania senator
David A. Reed In October 1923, Forbes divorced his wife Katherine, who had accused him of neglect and claimed that it had caused her to become ill. ==Trial, conviction, and prison sentence==