COMMERCIAL VENTURES
German law in America--Waetzoldt's reports--The British
blockade--A report from Washington--Stopping the
chlorine supply--Speculation in wool--Dyestuffs and the
_Deutschland_--Purchasing phenol--The Bridgeport Projectile
Company--The lost portfolio--The recall of the attachés--A summary
of Dr. Albert's efforts.
In addition to the exercise of its diplomatic functions, now more
important than they had ever been before, the German Embassy had
assumed the burden of large commercial enterprises. Their execution
was entrusted to Dr. Albert, the privy councillor and fiscal agent
for the Empire. There was apparently no limit, either financial or
territorial, to the scope of his efforts, and the fact that he was able
to administrate such a volume of work is no small tribute to his zeal.
But that very zeal outran his regard for American law, so in one of his
earlier ventures he set out to substitute the law of the Empire for
that of the nation to which he was accredited.
Dr. Albert was informed on March 10, 1915, by a German lawyer,
S. Walter Kaufmann of 60 Wall Street, that his clients, the
Orenstein-Arthur Keppel Company, had an order for 9,000 tons of
steel rails to be shipped to Russia, despite instructions from the
company's home office in Berlin that "no orders should be accepted for
shipment to any country at war with Germany, because of Paragraph 89
of the Gesetz Buch." The Gesetz Buch is the German Penal Code. (One
of Kaufmann's law partners was Norvin R. Lindheim, legal adviser to
Germany's agents in the United States.) The manufacturers begged the
permission of the Embassy to accept the order and pass the actual
manufacture on to the United States Steel Company, in order to evade
the letter of Paragraph 89, and in order "to delay the order, if
that would in any way be desirable." The matter was neglected in the
Embassy, and on July 13 the Orenstein-Arthur Keppel Company wrote from
Keppel, Pa., to the German consul, Philadelphia, Dr. George Stobbe,
again asking permission to accept the order. The consul replied,
denying permission, on the ground that the shipment would facilitate
the Russian transport of troops, and that such action would be within
the meaning of Paragraph 89 of the Gesetz Buch. "That you are in
position to delay the delivery of the order, to the prejudice of the
hostile country ordering, in no way makes you less punishable," he
continued. He forwarded a copy of his ruling to the Ambassador for
approval, and it in turn was forwarded to Dr. Albert. The order was
not taken; the fear of punishment by Germany was greater than the
protection afforded by American Law.
The foregoing episode reveals the nature of Dr. Albert's chief
problem--the financial blocking of supplies for the Allies. Let Boy-Ed
destroy the ships, von Papen dynamite the factories and railways,
Rintelen run his mad course of indiscriminate violence--the smooth
financial agent would undertake only those great business ventures in
which his shrewdness and experience could have play. He was receiving
reports constantly on the economic status, and the following extract
from a report from G. D. Waetzoldt, a trade investigator in the
Consulate in New York, will illustrate the German frame of mind about
midsummer of 1915:
"The large war orders, as the professional journals also print, have
become the great means of saving American business institutions from
idleness and financial ruin.
"The fact that institutions of the size and international influence
of those mentioned could not find sufficient regular business to keep
them to some extent occupied, half at least, throws a harsh light upon
the sad condition in which American business would have found itself
had it not been for the war orders. The ground which induced these
large interests to accept war orders rests entirely upon an economical
basis and can be explained by the above-mentioned conditions which were
produced by the lack of regular business. These difficulties, resulting
from the dividing up of the contracts, are held to have been augmented,
as stated in business circles, by the fact that certain agents working
in the German interest succeeded in further delaying and disturbing
American deliveries....
"So many contracts for the production of picric acid have been placed
that they can only be filled to a very small part."
Dr. Albert also received a report from another trade expert, who had
had a long conference with ex-Senator John C. Spooner of Wisconsin
as to whether or not there could be prosecutions under the Sherman
Anti-Trust Law against British representatives because of the
restrictions placed by the British Government upon dealings by
Americans in certain copper, cotton and rubber.
Naturally one of the most vital problems that stirred Dr. Albert was
the British Orders in Council blockading Germany, from which resulted
the seizure of meat and food supplies and cotton by British war
vessels. He was always on the alert for information of the attitude
of the Administration and the people of the United States toward the
blockade. In another report dated June 3, 1915, Waetzoldt said:
"There can be no doubt that the British Government will bring into play
all power and pressure possible in order to complete the total blockade
of Germany from her foreign markets, and that the Government of the
United States will not make a strenuous effort to maintain its trade
with Germany....
"It has been positively demonstrated during this time that the falling
off of imports caused by the war in Europe will in the future be
principally covered by American industry....
"The complete stopping importation of German products will, in truth,
to a limited extent, especially in the first part of the blockade, help
the sale of English or French products, but the damage which will be
done to us in this way will not be great....
"The _Lusitania_ case did, in fact, give the English efforts in this
direction a new and powerful impetus, and at first the vehemence with
which the Anti-German movement began anew awakened serious misgivings,
but this case also will have a lasting effect, which, unless fresh
complications arise, we may be able to turn to the advantage of the
sales of German goods....
"The war will certainly have this effect, that the American business
world will devote all its energy toward making itself independent of
the importation of foreign products as far as possible....
"If the decision is again brought home to German industry it should
not be forgotten what position the United States took with reference
to Germany in this war. Above all, it should not be forgotten that
the 'ultimate ratio' of the United States is not the war with arms,
but a complete prohibition of trade with Germany, and in fact,
through legislation. That was brought out very clearly and sharply
in connection with the still pending negotiations regarding the
_Lusitania_ case."
That Dr. Albert used secret and perhaps devious means to secure his
information is revealed by an unsigned confidential report which he
received under most mysterious circumstances concerning an interview
by a man referred to as "M. P." with President Wilson and Secretary
Lansing. The person who wrote of "the conversation" on July 23, 1915,
with "Legal Agent" Levy and Mr. John Simon does not give his name. A
striking part of this conversation follows:
"Levy advises regarding a conference with M. P. Thereafter M. P. saw
Lansing as well as Wilson. He informed both of them that an American
syndicate had approached him which had strong German relations. This
syndicate wishes to buy up cotton for Germany in great style, thereby
to relieve the cotton situation, and at the same time to provide
Germany with cotton." (Dr. Albert attempted, with a suitable campaign
of press and political propaganda, to inflame the Southern planters
over the British embargo on cotton.) "The relations of the American
syndicate with Germany are very strong, so that they might even
possibly be able to influence the position of Germany in the general
political question. M. P. therefore asked for a candid, confidential
statement in order to make clear not only his own position, but also
necessarily the political opportunity. The result of the conversation
was as follows:
"1. The note of protest to England will go in any event whether Germany
answers satisfactorily or not.
"2. Should it be possible to settle satisfactorily the _Lusitania_
case, the President will bind himself to carry the protest against
England through to the uttermost.
"3. The continuance of the difference with Germany over the _Lusitania_
case is 'embarrassing' for the President in carrying out the protest
against England....
"4. A contemplated English proposal to buy cotton in great style and
invest the proceeds in America would not satisfy the President as an
answer to the protest....
"5. The President, in order to ascertain from Mr. M. P. how strong the
German influence of this syndicate is, would like to have the trend
of the German note before the note is officially sent, and declares
himself ready, before the answer is drafted, to discuss it with M. P.,
and eventually to so influence it that there will be an agreement for
its reception, and also to be ready to influence the press through a
wink.
"6. As far as the note itself is concerned, which he awaits, so he
awaits another expression of regret, which was not followed in the last
note. Regret together with the statement that nobody had expected that
human lives would be lost and that the ship would sink so quickly.
"7. The President is said to have openly declared that he could hardly
hope for a positive statement that the submarine warfare would be
discontinued."
Dr. Albert conferred with Captains Boy-Ed and von Papen on all military
and naval matters having a commercial phase. Captain von Papen, on July
7, 1915, submitted to Dr. Albert a memorandum for his consideration and
further recommendation, headed "Steps Taken to Prevent the Exportation
of Liquid Chlorine." He told of the efforts made by England and France
to buy that chemical in America, estimated the output here, and cited
the manufacturers. He also enclosed a plan for checkmating the Allies
and concluded with the following paragraph:
"It will be impossible, however, for this to go on any length of time,
as the shareholders wish the profits to be derived therefrom. Dr.
Orenstein therefore suggests that an agreement be consummated with the
Electro Bleaching Company, through the President, Kingsley, whereby the
delivery of liquid chlorine by this country to France and England will
be stopped. A suggested plan is enclosed herewith.
"From a military standpoint I deem it very desirable to consummate such
an agreement, in order to stop thereby the further exportation of about
fifty-two tons of liquid chlorine monthly, especially in view of the
fact that in France there is only one factory (Rouen) which can produce
this stuff in small amounts, while it is only produced in very small
quantities, in England."
During 1914 and 1915 German speculation in wool was active. Early
in the war von Bernstorff summoned a German-American wool merchant
recommended by a business friend in Berlin and directed him to buy all
the wool he could secure. He did so, using Deutsches Bank credits for
the purchases made for Germany, and making his purchases of wool for
Germany even in Cape Town and Australia. The German-American, after
following this practice for some months, decided that his financial
allegiance belonged to America, so he tried, through Hugo Schmidt, to
induce the German interests in his firm to sell out to him. On August
9, 1915, Schmidt wrote to Keswig, the Berlin principal:
"Your friend here has inquired in London, and he offers no matter what
price may be realizable in London at that time to take over the wool
from you at the original price, in which case you would naturally pay
all the expenses, which are estimated to be about 6 per cent. As you
see, it is not so simple to deal with your friends."
The German-American's offer meant a good profit to him, as the London
price of wool at that time had advanced nearly 15 per cent. Yet he
apparently fell into no ill favor with Berlin, for in June, 1916, the
German Foreign office wrote von Bernstorff:
"Interested parties here have repeatedly made representations for
preferential treatment of the firm of Forstmann & Huffman in Passaic,
N. J., in connection with shipment of coal tar dyes to the United
States of America. Since this pure German firm, as is well known
on your side, undertook last year the wool supply for Germany, and
therefore claim it has been especially badly treated by England, it
is most respectfully recommended to Your Excellency, should there
be no reason to the contrary, to arrange for the greatest possible
consideration for this firm in the later distribution of the shipments
to consumers which now are in prospect."
Necessity, the mother of invention, had forced America's production
of coal-tar derivatives and dyestuffs upward enormously during the
first year of war. As the British blockade tightened, the German
supply, which had long constituted the world supply, was cut off
completely. The value of dyestuffs in America increased enormously
from 1914 to 1915. Germany witnessed this growth with apprehension,
and realized gravely that export expansion would follow increased
and perfected production in America, which it promptly did. German
chemical interests involved in a drug house familiar with the German
market, have testified that their firm "paid three times the value"
of a cargo of dyestuffs shipped from Bremen to Baltimore in 1916 in
the huge undersea-boat _Deutschland_, "which paid for the ship and
cargo." Her sister ship, the _Bremen_, which set forth for America, but
never arrived, was also "built with money furnished by the dyestuff
manufacturers," according to Ambassador Gerard.
The _Deutschland_ herself was 300 feet long, with a cargo capacity of
some 800 tons. She docked at the North German Lloyd piers in Baltimore,
and after loading a cargo of rubber and nickel, took an opportune
moment one foggy twilight to cast off and slip out to sea. She not only
returned safely to Germany but made another round trip to America,
putting in the second time at New London. She was at sea about three
weeks on each crossing of the Atlantic.
Dr. Albert made plans for buying up carbolic acid to prevent it from
reaching the Allies. Dr. Hugo Schweitzer, a German-American chemist
of New York, paid down $100,000 cash on June 3, 1915, to the American
Oil & Supply Company in New Jersey as part payment of $1,400,000 for
1,212,000 pounds of carbolic acid, of which the American Oil & Supply
Company had directed the purchase from Thomas A. Edison. Dr. Schweitzer
said that he bought the liquid not to prevent it from falling into the
hands of the Allies but to use in the manufacture of medical supplies.
Not the least interesting of Dr. Albert's financial experiences is
that which conceived and bore the Bridgeport Projectile Company. In a
conference early in 1915 in the offices of G. Amsinck & Co., in New
York, Count von Bernstorff came to the conclusion that one way to
prevent the shipment of munitions to the enemy was to monopolize the
industry, or at least to control it financially as far as possible. Dr.
Albert made an unsuccessful attempt to buy the Union Metallic Cartridge
plant for $17,000,000. He chose as his lieutenants for his next task
Hugo Schmidt, the New York representative of the Deutsches Bank, and
Karl Heynen, whose past record had been auspicious, as agent for Mexico
of the Hamburg-American Line. Heynen it was who had smuggled a cargo
of arms ashore for Huerta at Vera Cruz, under the nose of the American
fleet; he had received some 40,000 pesos (Mexican) for the coup, and he
was regarded as a capable individual. On March 31, 1915, the Bridgeport
Projectile Company was incorporated for $2,000,000, paid in, with
Walter Knight as president, Heynen as treasurer, and Karl Foster as
secretary and counsel.
Schmidt drew up a contract with the new-born company calling for a
large order of shells. On May 17 Heynen reported to Albert that 534
hydraulic presses for making shells of calibres 2.95 to 4.8 had been
ordered, and would cost $417,550. These orders, with all others for
tools and machinery which the Bridgeport company placed, were so
well concealed about the business world that as late as August the
impression was current that Great Britain was financing the company.
On June 30 Heynen reported to Albert through Schmidt that the first
shell cases would be manufactured under United States government
inspection, in order to create the impression that the company was
anxious for American contracts, and so that immediate delivery could be
made in case such contracts were actually secured. "The most important
buildings, forges, and machine shops, are almost under roof; the other
buildings are fairly under way; presses, machinery and all other
materials are being promptly assembled, and there is every indication
that deliveries will commence as provided in the contract; i. e., on
Sept. 1st, 1915."
The Bridgeport Projectile Company contracted with the Ætna Powder
Company, one of the largest producers of explosives in America, for
its entire output up to January, 1916, and then turned round and
offered the Spanish government a million pounds of powder. The Spanish
representatives may have suspected the identity of the company, for
they raised certain objections to the contract, to which Heynen
refused to listen, and he also reported to his superiors that British
and Russian purchasing agents were going to call on him within a few
days. He made a contract with Henry Disston & Co. for two million
pieces of steel, most of them tools, for which Schmidt advanced the
money. He contracted with the Camden Iron Works of Camden, N. J., for
presses, and posted a forfeit of $165,000 in case the contract should
be cancelled; the contract was signed and cancelled the next day by
the Bridgeport company, causing the Camden concern great business
difficulty.
Thus, by the manipulation of contracts, Dr. Albert and his associates
were accomplishing the following ends:
1. Arranging to supply Germany with shells and powder (as soon as
smuggling could be effected) at a time when official Germany was
attempting to persuade the United States to place an embargo on the
shipment of war materials to the Allies.
2. Securing a monopoly on all powder available.
3. So tying up the machinery and tool manufacturers that all their
production for months to come was under contract to the Bridgeport
Projectile Company, yet so wielding the cancellation clauses in its
contracts that delivery could be delayed and the date further postponed
when the manufacturers of machinery and tools could be free to take
Allied orders.
4. Arranging to accept contracts for the United States and the Allies
under such provisions that there would be no impossible forfeit if the
contracts could not be fulfilled. This would have the effect of making
the Allies believe that they were going to receive supplies which the
Bridgeport Projectile Company had no intention of furnishing them.
5. Heynen, by the contract with the munitions industry, which his
work afforded, knew where Allied orders for shells were placed, and
he learned to his pleasure that the Allies were being forced to
contract for shrapnel which was forged--a less satisfactory process
than pressing. He also learned that the first two orders for forged
shrapnel placed by the Allies had been rejected because the product was
inferior.
6. Paying abnormal wages with the unlimited funds at its disposal,
stealing labor from the Union Metallic Cartridge Company in Bridgeport,
and generally unsettling the labor situation.
7. Offering powder to Spain, a neutral with strong German affiliations.
The project was glorious in its forecast. But we may well let a German
hand describe how it failed; among the papers captured by the British
on the war correspondent and secret messenger Archibald at Falmouth in
late August was a letter from Captain von Papen to his wife in Germany,
in which he said:
"Our good friend Albert has been robbed of a thick portfolio of papers
on the elevated road. English secret service men of course." (Papen
was not altogether correct in this statement.) "Unfortunately, some
very important matters from my report are among the papers, such as the
purchase of liquid chlorine, the correspondence with the Bridgeport
Projectile Company, as well as documents relating to the purchase of
phenol, from which explosives are manufactured, and the acquisition of
Wright's aeroplane patents. I send you also the reply of Albert, in
order that you may see how we protect ourselves. This we compounded
last night in collaboration."[4]
Dr. Albert could hardly have chosen a more unfortunate set of documents
to carry about with him and lose. "Pitiless publicity" was his reward,
and the statement which he and von Papen prepared in refutation and
denial was received by those in authority as precisely the sort of
denial which any unscrupulous and able master of intrigue might be
expected to issue under the circumstances--and no more. If there had
been any doubt of the perniciousness of his activities--and there was
none--it would have been dispelled by the seizure of the Archibald
letters, but the result of the exposures of German activity which
made the _New York World_, a newspaper worth watching during August
and September, 1915, was not the expulsion of Dr. Albert, but of the
military and naval attachés. Albert, while he had been magnificently
busy attempting to disturb America's calm, had been cunning enough
to keep his hands free of blood and powder smoke; Boy-Ed and von
Papen had to answer for the origination of so many crimes that it
is almost incredible in the light of later events that they escaped
with nothing more than a dismissal. On December 4, Secretary Lansing
demanded their recall on account of their connection "with the illegal
and questionable acts of certain persons within the United States";
Bernstorff made no reply for ten days, and received a sharp reminder
for his delay; he then replied that the Kaiser agreed to the recall.
Four days before Christmas von Papen sailed for England and Holland.
On January 2 and 3, 1916, his effects were searched by the British at
Falmouth and two documents among others found may be cited here. Boy-Ed
sailed on New Year's Day, but with no incriminating documents, for he
had been warned.
The first document found on von Papen was a letter from President
Knight of the Bridgeport Projectile Company, dated Sept. 11, 1915,
addressed to Heynen at 60 Wall Street--the building in which von Papen
had his office--giving certain specifications for shells that were
being made in the new Bridgeport plant; the second was a memorandum of
an interview on December 21, between Papen, Heynen, G. W. Hoadley of
the affiliated American-British Manufacturing Company, and Captain
Hans Tauscher. The four men had discussed specifications for a time,
and had agreed that firing tests of the projectiles could be made "in
a bomb-proof place by electrical explosion." Delays in production at
Bridgeport are evident in the last sentence of the memorandum:
"It was agreed that Mr. Hoadley, till date, has complied with
all the conditions of the contracts of the 1st April, with the
exception of the commencement of the delivery of the shells, which
is due to _force majeure_, i. e., to failure to timely obtain
the delivery of machinery and tools occasioned by strikes in the
machine factories."
A letter to von Papen from Dr. Albert, then in San Francisco, undated
but obviously written in December, 1915, contained these farewell
sentiments:
"Dear Herr von Papen,
"Well, then! How I wish I were in New York and could discuss the
situation with you and B. E.... So we shall not see each other
for the present. Shall we at all before you leave? It would be
my most anxious wish; but my hope is small. From this time, I
suppose, matters will move more quickly than in Dumba's case.
I wonder whether our Government will respond in a suitable
manner! In my opinion it need no longer take public opinion so
much into consideration, in spite of it being artificially and
intentionally agitated by the press and the legal proceedings,
so that a somewhat 'stiffer' attitude would be desirable,
naturally quiet and dignified!... Please remember me to your chief
personally. I assume that he still remembers me from the time of
the 'experimental establishment for aircraft,' and give my best
wishes to Mr. Scheuch, and tell him that the struggle on the
American front is sometimes very hard.... When I think of your and
Boy-Ed's departure, and that I alone remain behind in New York, I
could--well, better not!"
Perhaps Dr. Albert would have accompanied the attachés had not the
submarine situation been so acute. For while the Government had in its
possession sufficient provocation for his dismissal, and that of Count
von Bernstorff as well, the Government's desire at that time was peace,
and stubbornly, patiently, it clung to its ideal in a dogged attempt to
preserve its neutrality. Dr. Albert had run the British blockade with
his supplies for Germany, and had roared protest when Great Britain
seized cargoes of meat intended for Germany, although she paid the
packers for them in full. He had floated a German loan through Chandler
& Company, a New York house of which Rudolph Hecht, one of his agents,
was a member; he had sold $500,000,000 worth of German securities; to
sum up his financial activities, he had played every trick he knew, and
his last year in America was unfruitful of result, for he was watched.
He returned to Germany personally enriched, for time and again,
prompted by stock tips from his German friends on stocks or "September
lard," and by diplomatic information which he knew would influence the
stock market, he made handsome winnings for von Bernstorff and himself.
FOOTNOTE:
[4] The captain added: "The sinking of the _Adriatic_" (by which he
meant the _Arabic_, which had been sunk without warning on August 19,
with a loss of sixteen lives, two of them American), "may be the last
straw for the sake of our cause. I hope the matter will blow over."
On October 5 the German Government, consistent with its assurance of
September 1 that no more ships would be sunk without warning, disavowed
the sinking of the _Arabic_, and offered to pay indemnities. So the
matter "blew over."