CHAPTER XIV 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.