Antony C. Sutton - WALL STREET AND THE BOLSHEVIK REVOLUTION-D
Following on the initial successes of the revolution, the Soviets wasted little time in attempting through former U.S. residents to establish diplomatic relations with and propaganda outlets in the United States. In June 1918 the American consul in Harbin cabled Washington:
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While collecting material for this book a single location and address in the Wall Street area came to the fore — 120 Broadway, New York City. Conceivably, this book could have been written incorporating only persons, firms, and organizations located at 120 Broadway in the year 1917. Although this research method would have been forced and unnatural, it would have excluded only a relatively small segment of the story.
The significance of this document is the hard revelation of direct intervention by an officer (executive secretary) of American International Corporation in behalf of a known Bolshevik. Ponder a few of Sands' statements about Reed: "He can be handled and controlled much better by other means than through the police"; and, "Can we not use him, instead of embittering him and making him an enemy? . . . he is, unless I am very much mistaken, susceptible to discreet guidance and might be quite useful." Quite obviously, the American International Corporation viewed John Reed as an agent or a potential agent who could be, and probably had already been, brought under its control. The fact that Sands was in a position to request editing a memorandum by Reed (for Bullitt) suggests some degree of control had already been established.
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In 1918 the Soviets faced a bewildering array of internal and external problems. They occupied a mere fraction of Russia. To subdue the remainder, they needed foreign arms, imported food, outside financial support, diplomatic recognition, and — above all — foreign trade. To gain diplomatic recognition and foreign trade, the Soviets first needed representation abroad, and representation in turn required financing through gold or foreign currencies. As we have already seen, the first step was to establish the Soviet Bureau in New York under Ludwig Martens. At the same time, efforts were made to transfer funds to the United States and Europe for purchases of needed goods. Then influence was exerted in the U.S. to gain recognition or to obtain the export licenses needed to ship goods to Russia.
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Chapter VI
THE BOLSHEVIKS RETURN TO NEW YORK
Martens is very much in the limelight. There appears to be no doubt about his connection with the Guarantee [sic] Trust Company, Though it is surprising that so large and influential an enterprise should have dealings with a Bolshevik concern.Scotland Yard Intelligence Report, London, 19191
Following on the initial successes of the revolution, the Soviets wasted little time in attempting through former U.S. residents to establish diplomatic relations with and propaganda outlets in the United States. In June 1918 the American consul in Harbin cabled Washington:
Albert R. Williams, bearer Department passport 52,913 May 15, 1917 proceeding United States to establish information bureau for Soviet Government for which he has written authority. Shall I visa?2
Washington denied the visa and so Williams was unsuccessful in his attempt to establish an information bureau here. Williams was followed by Alexander Nyberg (alias Santeri Nuorteva), a former Finnish immigrant to the United States in January 1912, who became the first operative Soviet representative in the United States. Nyberg was an activtive propagandist. In fact, in 1919 be was, according to J. Edgar Hoover (in a letter to the U.S. Committee on Foreign Affairs), "the forerunner of LCAK Martens anti with Gregory Weinstein the most active individual of official Bolshevik propaganda in the United States."3
Nyberg was none too successful as a diplomatic representative or, ultimately, as a propagandist. The State Departmment files record an interview with Nyberg by the counselors' office, dated January 29, 1919. Nyberg was accompanied by H. Kellogg, described as "an American citizen, graduate of Harvard," and, more surprisingly, by a Mr. McFarland, an attorney for the Hearst organization. The State Department records show that Nyberg made "many misstatements in regard to the attitude to the Bolshevik Government" and claimed that Peters, the Lett terrorist police chief in Petrograd, was merely a "kind-hearted poet." Nyberg requested the department to cable Lenin, "on the theory that it might be helpful in bringing about the conference proposed by the Allies at Paris."4 The proposed message, a rambling appeal to Lenin to gain international acceptance appearing at the Paris Conference, was not sent.5
Alexander Nyberg (Nuorteva) was then let go and replaced by the Soviet Bureau, which was established in early 1919 in the World Tower Building, 110 West 40 Street, New York City. The bureau was headed by a German citizen, Ludwig C. A. K. Martens, who is usually billed as the first ambassador of the Soviet Union in the United States, and who, up to that time, had been vice president of Weinberg & Posner, an engineering firm located at 120 Broadway, New York City. Why the "ambassador" and his offices were located in New York rather than in Washington, D.C. was not explained; it does suggest that trade rather than diplomacy was its primary objective. In any event, the bureau promptly issued a call lot Russian trade with the United States. Industry had collapsed and Russia direly needed machinery, railway goods, clothing, chemicals, drugs — indeed, everything utilized by a modern civilization. In exchange the Soviets offered gold and raw materials. The Soviet Bureau then proceeded to arrange contracts with American firms, ignoring the facts of the embargo and nonrecognition. At the same time it was providing financial support for the emerging Communist Party U.S.A.6
On May 7, 1919, the State Department slapped down business intervention in behalf of the bureau (noted elsewhere),7 and repudiated Ludwig Martens, the Soviet Bureau, and the Bolshevik government o1 Russia. This official rebuttal did not deter the eager order-hunters in American industry. When the Soviet Bureau offices were raided on June 12, 1919, by representatives of the Lusk Committee of the state of New York, files of letters to and from American businessmen, representing almost a thousand firms, were unearthed. The British Home Office Directorate of Intelligence "Special Report No. 5 (Secret)," issued from Scotland Yard, London, July 14, 1919, and written by Basil H. Thompson, was based on this seized material; the report noted:
. . . Every effort was made from the first by Martens and his associates to arouse the interest of American capitalists and there are grounds tot believing that the Bureau has received financial support from some Russian export firms, as well as from the Guarantee [sic] Trust Company, although this firm has denied the allegation that it is financing Martens' organisation.8
It was noted by Thompson that the monthly rent of the Soviet Bureau offices was $300 and the office salaries came to about $4,000. Martens' funds to pay these bills came partly from Soviet couriers — such as John Reed and Michael Gruzenberg — who brought diamonds from Russia for sale in the U.S., and partly from American business firms, including the Guaranty Trust Company of New York. The British reports summarized the files seized by the Lusk investigators from the bureau offices, and this summary is worth quoting in full:
(1) There was an intrigue afoot about the time the President first went to France to get the Administration to use Nuorteva as an intermediary with the Russian Soviet Government, with a view to bring about its recognition by America. Endeavour was made to bring Colonel House into it, and there is a long and interesting letter to Frederick C. Howe, on whose support and sympathy Nuorteva appeared to rely. There are other records connecting Howe with Martens and Nuorteva.(2) There is a file of correspondence with Eugene Debs.(3) A letter from Amos Pinchot to William Kent of the U.S. Tariff Commission in an envelope addressed to Senator Lenroot, introduces Evans Clark "now in the Bureau of the Russian Soviet Republic." "He wants to talk to you about the recognition of Kolchak and the raising of the blockade, etc."(4) A report to Felix Frankfurter, dated 27th May, 1919 speaks of the virulent campaign vilifying the Russian Government.(5) There is considerable correspondence between a Colonel and Mrs. Raymond Robbins [sic] and Nuorteva, both in 1918 and 1919. In July 1918 Mrs. Robbins asked Nuorteva for articles for "Life and Labour," the organ of the National Women's Trade League. In February and March, 1919, Nuorteva tried, through Robbins, to get invited to give evidence before the Overman Committee. He also wanted Robbins to denounce the Sisson documents.(6) In a letter from the Jansen Cloth Products Company, New York, to Nuorteva, dated March 30th, 1918, E. Werner Knudsen says that he understands that Nuorteva intends to make arrangements for the export of food-stuffs through Finland and he offers his services. We have a file on Knudsen, who passed information to and from Germany by way of Mexico with regard to British shipping.9
Ludwig Martens, the intelligence report continued, was in touch with all the leaders of "the left" in the United States, including John Reed, Ludwig Lore, and Harry J. Boland, the Irish rebel. A vigorous campaign against Aleksandr Kolchak in Siberia had been organized by Martens. The report concludes:
[Martens'] organization is a powerful weapon for supporting the Bolshevik cause in the United States and... he is in close touch with the promoters of political unrest throughout the whole American continent.
The Scotland Yard list of personnel employed by the Soviet Bureau in New York coincides quite closely with a similar list in the Lusk Committee files in Albany, New York, which are today open for public inspection.10 There is one essential difference between the two lists: the British analysis included the name "Julius Hammer" whereas Hammer was omitted from the Lusk Committee report.11 The British report characterizes Julius Hammer as follows:
In Julius Hammer, Martens has a real Bolshevik and ardent Left Wing adherent, who came not long ago from Russia. He was one of the organizers of the Left Wing movement in New York, and speaks at meetings on the same platform with such Left Wing leaders as Reed, Hourwich, Lore and Larkin.
There also exists other evidence of Hammer's work in behalf of the Soviets. A letter from National City Bank, New York, to the U.S. Treasury Department stated that documents received by the bank from Martens were "witnessed by a Dr. Julius Hammer for the Acting Director of the Financial Department" of the Soviet Bureau.12
The Hammer family has had close ties with Russia and the Soviet regime from 1917 to the present. Armand Hammer is today able to acquire the most lucrative of Soviet contracts. Jacob, grandfather of Armand Hammer, and Julius were born in Russia. Armand, Harry, and Victor, sons of Julius, were born in the United States and are U.S. citizens. Victor was a well-known artist; his son — also named Armand — and granddaughter are Soviet citizens and reside in the Soviet Union. Armand Hammer is chairman of Occidental Petroleum Corporation and has a son, Julian, who is director of advertising and publications for Occidental Petroleum.
Julius Hammer was a prominent member and financier of the left wing of the Socialist Party. At its 1919 convention Hammer served with Bertram D. Wolfe and Benjamin Gitlow on the steering committee that gave birth to the Communist Party of the U.S.
In 1920 Julius Hammer was given a sentence of three-and-one-half to fifteen years in Sing Sing for criminal abortion. Lenin suggested — with justification — that Julius was "imprisoned on the charge of practicing illegal abortions but in fact because of communism."13 Other U.S. Communist Party members were sentenced to jail for sedition or deported to the Soviet Union. Soviet representatives in the United States made strenuous but unsuccessful efforts to have Julius and his fellow party members released.
Another prominent member of the Soviet Bureau was the assistant secretary, Kenneth Durant, a former aide to Colonel House. In 1920 Durant was identified as a Soviet courier. Appendix 3 reproduces a letter to Kenneth Durant that was seized by the U.S. Department of Justice in 1920 and that describes Durant's close relationship with the Soviet hierarchy. It was inserted into the record of a House committee's hearings in 1920, with the following commentary:
MR. NEWTON: It is a mailer of interest to this committee to know what was the nature of that letter, and I have a copy of the letter that I Want inserted in the record in connection with the witness' testimony. MR. Mason: That letter has never been shown to the witness. He said that he never saw the letter, and had asked to see it, and that the department had refused to show it to him. We would not put any witness on the stand and ask him to testify to a letter without seeing it.MR. NEWTON: The witness testified that he has such a letter, and he testified that they found it in his coat in the trunk, I believe. That letter was addressed to a Mr. Kenneth Durant, and that letter had within it another envelope which was likewise sealed. They were opened by the Government officials and a photostatic copy made. The letter, I may say, is signed by a man by the name of "Bill." It refers specifically to soviet moneys on deposit in Christiania, Norway, a portion of which they waist turned over here to officials of the soviet government in this country.14
Kenneth Durant, who acted as Soviet courier in the transfer of funds, was treasurer lot the Soviet Bureau and press secretary and publisher of Soviet Russia, the official organ of the Soviet Bureau. Durant came from a well-to-do Philadelphia family. He spent most of his life in the service of the Soviets, first in charge of publicity work at the Soviet Bureau then from 1923 to 1944 as manager of the Soviet Tass bureau in the United States. J. Edgar Hoover described Durant as "at all times . . . particularly active in the interests of Martens and of the Soviet government."15
Felix Frankfurter — later justice of the Supreme Courts — was also prominent in the Soviet Bureau files. A letter from Frankfurter to Soviet agent Nuorteva is reproduced in Appendix 3 and suggests that Frankfurter had some influence with the bureau.
In brief, the Soviet Bureau could not have been established without influential assistance from within the United States. Part of this assistance came from specific influential appointments to the Soviet Bureau staff and part came from business firms outside the bureau, firms that were reluctant to make their support publicly known.
On February 1, 1920, the front page of the New York Times carried a boxed notation stating that Martens was to be arrested and deported to Russia. At the same time Martens was being sought as a witness to appear before a subcommittee of the Senate Foreign Relations Committee investigating Soviet activity in the United States. After lying low for a few days Martens appeared before the committee, claimed diplomatic privilege, and refused to give up "official" papers in his possession. Then after a flurry of publicity, Martens "relented," handed over his papers, and admitted to revolutionary activities in the United States with the ultimate aim of overthrowing the capitalist system.
Martens boasted to the news media and Congress that big corporations, the Chicago packers among them, were aiding the Soviets:
Affording to Martens, instead of farthing on propaganda among the radicals and the proletariat he has addressed most of his efforts to winning to the side of Russia the big business and manufacturing interests of this country, the packers, the United States Steel Corporation, the Standard Oil Company and other big concerns engaged in international trade. Martens asserted that most of the big business houses of the country were aiding him in his effort to get the government to recognize the Soviet government.16
This claim was expanded by A. A. Heller, commercial attache at the Soviet Bureau:
"Among the people helping us to get recognition from the State Department are the big Chit ago packers, Armour, Swift, Nelson Morris and Cudahy ..... Among the other firms are . . . the American Steel Export Company, the Lehigh Machine Company, the Adrian Knitting Company, the International Harvester Company, the Aluminum Goods Manufacturing Company, the Aluminum Company of America, the American Car and Foundry Export Company, M.C.D. Borden & Sons."17
The New York Times followed up these claims and reported comments of the firms named. "I have never heard of this man [Martens] before in my life," declared G. F. Swift, Jr., in charge of the export department of Swift & Co. "Most certainly I am sure that we have never had any dealings with him of any kind."18 The Times added that O. H. Swift, the only other member of the firm that could be contacted, "also denied any knowledge whatever of Martens or his bureau in New York." The Swift statement was evasive at best. When the Lusk Committee investigators seized the Soviet Bureau files, they found correspondence between the bureau and almost all the firms named by Martens and Heller. The "list of firms that offered to do business with Russian Soviet Bureau," compiled from these files, included an entry (page 16), "Swift and Company, Union Stock Yards, Chicago, Ill." In other words, Swift had been in communication with Martens despite its denial to the New York Times.
The New York Times contacted United States Steel and reported, "Judge Elbert H. Gary said last night that there was no foundation for the statement with the Soviet representative here had had any dealings with the United States Steel Corporation." This is technically correct. The United States Steel Corporation is not listed in the Soviet files, but the list does contain (page 16) an affiliate, "United States Steel Products Co., 30 Church Street, New York City."
The Lusk Committee list records the following about other firms mentioned by Martens and Heller: Standard Oil — not listed. Armour 8c Co., meatpackers — listed as "Armour Leather" and "Armour & Co. Union Stock Yards, Chicago." Morris Go., meatpackers, is listed on page 13. Cudahy — listed on page 6. American Steel Export Co. — listed on page 2 as located at the Woolworth Building; it had offered to trade with the USSR. Lehigh Machine Co. — not listed. Adrian Knitting Co. — listed on page 1. International Harvester Co. — listed on page 11. Aluminum Goods Manufacturing Co. — listed on page 1. Aluminum Company of America — not listed. American Car and Foundry Export — the closest listing is "American Car Co. — Philadelphia." M.C.D. Borden 8c Sons — listed as located at 90 Worth Street, on page 4.
Then on Saturday, June 21, 1919, Santeri Nuorteva (Alexander Nyberg) confirmed in a press interview the role of International Harvester:
Q: [by New York Times reporter]: What is your business?A: Purchasing director tot Soviet Russia.Q: What did you do to accomplish this?A: Addressed myself to American manufacturers.Q: Name them.A: International Harvester Corporation is among them.Q: Whom did you see?A: Mr. Koenig.
Q: Did you go to see him?A: Yes.Q: Give more names.A: I went to see so many, about 500 people and I can't remember all the names. We have files in the office disclosing them.19
In brief, the claims by Heller and Martens relating to their widespread contacts among certain U.S. firms20 were substantiated by the office files of the Soviet Bureau. On the other hand, for their own good reasons, these firms appeared unwilling to confirm their activities.
In addition to Guaranty Trust and the private banker Boissevain in New York, some European bankers gave direct help to maintain and expand the Bolshevik hold on Russia. A 1918 State Department report from our Stockholm embassy details these financial transfers. The department commended its author, stating that his "reports on conditions in Russia, the spread of Bolshevism in Europe, and financial questions . . . have proved most helpful to the Department. Department is much gratified by your capable handling of the legation's business."21 According to this report, one of these "Bolshevik bankers" acting in behalf of the emerging Soviet regime was Dmitri Rubenstein, of the former Russo-French bank in Petrograd. Rubenstein, an associate of the notorious Grigori Rasputin, had been jailed in prerevolutionary Petrograd in connection with the sale of the Second Russian Life Insurance Company. The American manager and director of the Second Russian Life Insurance Company was John MacGregor Grant, who was located at 120 Broadway, New York City. Grant was also the New York representative of Putiloff's Banque Russo-Asiatique. In August 1918 Grant was (for unknown reasons) listed on the Military Intelligence Bureau "suspect list."22 This may have occurred because Olof Aschberg in early 1918 reported opening a foreign credit in Petrograd "with the John MacGregor Grant Co., export concern, which it [Aschberg] finances in Sweden and which is financed in America by the Guarantee [sic] Trust Co."23 After the revolution Dmitri Rubenstein moved to Stockholm and became financial agent for the Bolsheviks. The State Department noted that while Rubenstein was "not a Bolshevik, he has been unscrupulous in moneT' making, and it is suspected that he may be making the contemplated visit to America in Bolshevik interest and for Bolshevik pay.24
Another Stockholm "Bolshevik banker" was Abram Givatovzo, brother-in-law of Trotsky and Lev Kamenev. The State Department report asserted that while Givatovzo pretended to be "very anti-Bolshevik," he had in fact received "large sums" of moneT' from the Bolsheviks by courier for financing revolutionary operations. Givatovzo was part of a syndicate that included Denisoff of the former Siberian bank, Kamenka of the Asoff Don Bank, and Davidoff of the Bank of Foreign Commerce. This syndicate sold the assets of the former Siberian Bank to the British government.
Yet another tsarist private banker, Gregory Lessine, handled Bolshevik business through the firm of Dardel and Hagborg. Other "Bolshevik bankers" named in the report are stirrer and Jakob Berline, who previously controlled, through his wife, the Petrograd Nelkens Bank. Isidor Kon was used by these bankers as an agent.
The most interesting of these Europe-based bankers operating in behalf of the Bolsheviks was Gregory Benenson, formerly chairman in Petrograd of the Russian and English Bank — a bank which included on its board of directors Lord Balfour (secretary of state for foreign affairs in England) and Sir I. M. H. Amory, as well as S. H. Cripps and H. Guedalla. Benenson traveled to Petrograd after the revolution, then on to Stockholm. He came. said one State Department official, "bringing to my knowledge ten million rubles with him as he offered them to me at a high price for the use of our Embassy Archangel." Benenson had an arrangement with the Bolsheviks to exchange sixty million rubles for £1.5 million sterling.
In January 1919 the private bankers in Copenhagen that were associated with Bolshevik institutions became alarmed by rumors that the Danish political police had marked the Soviet legation and those persons in contact with the Bolsheviks for expulsion from Denmark. These bankers and the legation hastily attempted to remove their funds from Danish banks — in particular, seven million rubles from the Revisionsbanken.25 Also, confidential documents were hidden in the offices of the Martin Larsen Insurance Company.
Consequently, we can identify a pattern of assistance by capitalist bankers for the Soviet Union. Some of these were American bankers, some were tsarist bankers who were exiled and living in Europe, and some were European bankers. Their common objective was profit, not ideology.
The questionable aspects of the work of these "Bolshevik bankers," as they were called, arises from the framework of contemporary events in Russia. In 1919 French, British, and American troops were fighting Soviet troops in the Archangel region. In one clash in April 1919, for example, American casualties were one officer, .five men killed, and nine missing.26 Indeed, at one point in 1919 General Tasker H. Bliss, the U.S. commander in Archangel, affirmed the British statement that "Allied troops in the Murmansk and Archangel districts were in danger of extermination unless they were speedily reinforced."27 Reinforcements were then on the way under the command of Brigadier General W. P. Richardson.
In brief, while Guaranty Trust and first-rank American firms were assisting the formation of the Soviet Bureau in New York, American troops were in conflict with Soviet troops in North Russia. Moreover, these conflicts were daily reported in the New York Times, presumably read by these bankers and businessmen. Further, as we shall see in chapter ten, the financial circles that were supporting the Soviet Bureau in New York also formed in New York the "United Americans" — a virulently anti-Communist organization predicting bloody revolution, mass starvation, and panic in the streets of New York.
Footnotes:1Copy in U.S. State Dept. Decimal File, 316-22-656.2Ibid., 861.00/1970.3U.S., House, Committee on Foreign Affairs, Conditions in Russia, 66th Cong., 3d sess., 1921, p. 78.4U.S. State Dept. Decimal File, 316-19-1120.5Ibid.6See Benjamin Gitlow, [U.S., House, Un-American Propaganda Activities (Washington, 1939), vols. 7-8, p. 4539.7See p. 119.8Copy in [U.S. State Dept. Decimal File, 316-22-656. Confirmation of Guaranty Trust involvement tomes in later intelligence reports.9On Frederick C. Howe see pp. 16, 177, for an early statement of the manner in which financiers use society and its problems for their own ends; on Felix Frankfurter, later Supreme Court justice, see Appendix 3 for an early Frankfurter letter to Nuorteva; on Raymond Robins see p. 100.10The Lusk Committee list of personnel in the Soviet Bureau is printed in Appendix 3. The list includes Kenneth Durant, aide to Colonel House; Dudley Field Malone, appointed by President Wilson as collector of customs for the Port of New York; and Morris Hillquit, the financial intermediary between New York banker Eugene Boissevain on the one hand, and John Reed and Soviet agent Michael Gruzenberg on the other.11Julius Hammer was the father of Armand Hammer, who today is chairman of the Occidental Petroleum Corp. of Los Angeles.12See Appendix 3.13V. I. Lenin, Polnoe Sobranie Sochinenii, 5th ed. (Moscow, 1958), 53:267.14U.S., House, Committee. on Foreign Affairs, Conditions in Russia, 66th Cong., 3d sess., 1921, p. 75. "Bill" was William Bobroff, Soviet agent.15Ibid., p. 78.16New York Times, November 17, 1919.17Ibid.18Ibid.19New York Times, June 21, 1919.20See p. 119.21U.S. State Dept. Decimal File, 861.51/411, November 23, 1918.22Ibid., 316-125-1212.23U.S., Department of State, Foreign Relations o! the United States: 1918, Russia, 1:373.24U.S. State Dept. Decimal File, 861.00/4878, July,' 21, 1919.25Ibid., 316-21-115/21.26New York Times, April 5, 1919.27Ibid.
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Chapter VIII
120 BROADWAY, NEW YORK CITY
William B. Thompson, who was in Petrograd from July until November last, has made a personal contribution of $1,000,000 to the Bolsheviki for the purpose of spreading their doctrine in Germany and Austria ....Washington Post, February 2, 1918
While collecting material for this book a single location and address in the Wall Street area came to the fore — 120 Broadway, New York City. Conceivably, this book could have been written incorporating only persons, firms, and organizations located at 120 Broadway in the year 1917. Although this research method would have been forced and unnatural, it would have excluded only a relatively small segment of the story.
The original building at 120 Broadway was destroyed by fire before World War I. Subsequently the site was sold to the Equitable Office Building Corporation, organized by General T. Coleman du Pont, president of du Pont de Nemours Powder Company.1 A new building was completed in 1915 and the Equitable Life Assurance Company moved back to its old site.2 In passing we should note an interesting interlock in Equitable history. In 1916 the cashier of the Berlin Equitable Life office was William Schacht, the father of Hjalmar Horace Greeley Schacht — later to become Hitler's banker, and financial genie. William Schacht was an American citizen, worked thirty years for Equitable in Germany, and owned a Berlin house known as "Equitable Villa." Before joining Hitler, young Hjalmar Schacht served as a member of the Workers and Soldiers Council (a soviet) of Zehlendoff; this he left in 1918 to join the board of the Nationalbank fur Deutschland. His codirector at DONAT was Emil Wittenberg, who, with Max May of Guaranty Trust Company of New York, was a director of the first Soviet international bank, Ruskombank.
In any event, the building at 120 Broadway was in 1917 known as the Equitable Life Building. A large building, although by no means the largest office building in New York City, it occupies a one-block area at Broadway and Pine, and has thirty-four floors. The Bankers Club was located on the thirty-fourth floor. The tenant list in 1917 in effect reflected American involvement in the Bolshevik Revolution and its aftermath. For example, the headquarters of the No. 2 District of the Federal Reserve System — the New York area — by far the most important of the Federal Reserve districts, was located at 120 Broadway. The offices of several individual directors of the Federal Reserve Bank of New York and, most important, the American International Corporation were also at 120 Broadway. By way of contrast, Ludwig Martens, appointed by the Soviets as the first Bolshevik "ambassador" to the United States and head of the Soviet Bureau, was in 1917 the vice president of Weinberg & Posner — and also had offices at 120 Broadway.*
Is this concentration an accident? Does the geographical contiguity have any significance? Before attempting to suggest an answer, we have to switch our frame of reference and abandon the left-right spectrum of political analysis.
With an almost unanimous lack of perception the academic world has described and analyzed international political relations in the context of an unrelenting conflict between capitalism and communism, and rigid adherence to this Marxian formula has distorted modern history. Tossed out from time to time are odd remarks to the effect that the polarity is indeed spurious, but these are quickly dispatched to limbo. For example, Carroll Quigley, professor of international relations at Georgetown University, made the following comment on the House of Morgan:
More than fifty years ago the Morgan firm decided to infiltrate the Left-wing political movements in the United States. This was relatively easy to do, since these groups were starved for funds and eager for a voice to reach the people. Wall Street supplied both. The purpose was not to destroy, dominate or take over...3
Professor Quigley's comment, apparently based on confidential documentation, has all the ingredients of an historical bombshell if it can be supported. We suggest that the Morgan firm infiltrated not only the domestic left, as noted by Quigley, but also the foreign left — that is, the Bolshevik movement and the Third International. Even further, through friends in the U.S. State Department, Morgan and allied financial interests, particularly the Rockefeller family, have exerted a powerful influence on U.S.-Russian relations from World War I to the present. The evidence presented in this chapter will suggest that two of the operational vehicles for infiltrating or influencing foreign revolutionary movements were located at 120 Broadway: the first, the Federal Reserve Bank of New York, heavily laced with Morgan appointees; the second, the Morgan-controlled American International Corporation. Further, there was an important interlock between the Federal Reserve Bank of New York and the American International Corporation — C. A. Stone, the president of American International, was also a director of the Federal Reserve Bank.
The tentative hypothesis then is that this unusual concentration at a single address was a reflection of purposeful actions by specific firms and persons and that these actions and events cannot be analyzed within the usual spectrum of left-right political antagonism.
The American International Corporation (AIC) was organized in New York on November 22, 1915, by the J.P. Morgan interests, with major participation by Stillman's National City Bank and the Rockefeller interests. The general office of AIC was at 120 Broadway. The company's charter authorized it to engage in any kind of business, except banking and public utilities, in any country in the world. The stated purpose of the corporation was to develop domestic and foreign enterprises, to extend American activities abroad, and to promote the interests of American and foreign bankers, business and engineering.
Frank A. Vanderlip has described in his memoirs how American International was formed and the excitement created on Wall Street over its business potential.4 The original idea was generated by a discussion between Stone & Webster — the international railroad contractors who "were convinced there was not much more railroad building to be done in the United States" — and Jim Perkins and Frank A. Vanderlip of National City Bank (NCB).5 The original capital authorization was $50 million and the board of directors represented the leading lights of the New York financial world. Vanderlip records that he wrote as follows to NCB president Stillman, enthusing over the enormous potential for American International Corporation:
James A. Farrell and Albert Wiggin have been invited [to be on the board] but had to consult their committees before accepting. I also have in mind asking Henry Walters and Myron T. Herrick. Mr. Herrick is objected to by Mr. Rockefeller quite strongly but Mr. Stone wants him and I feel strongly that he would be particularly desirable in France. The whole thing has gone along with a smoothness that has been gratifying and the reception of it has been marked by an enthusiasm which has been surprising to me even though I was so strongly convinced we were on the right track.I saw James J. Hill today, for example. He said at first that he could not possibly think of extending his responsibilities, but after I had finished telling him what we expected to do, he said he would be glad to go on the board, would take a large amount of stock and particularly wanted a substantial interest in the City Bank and commissioned me to buy him the stock at the market.I talked with Ogden Armour about the matter today for the first time. He sat in perfect silence while I went through the story, and, without asking a single question, he said he would go on the board and wanted $500,000 stock.Mr. Coffin [of General Electric] is another man who is retiring from everything, but has 'become so enthusiastic over this that he was willing to go on the board, and offers the most active cooperation.
I felt very good over getting Sabin. The Guaranty Trust is altogether the most active competitor we have in the field and it is of great value to get them into the fold in this way. They have been particularly enthusiastic at Kuhn, Loeb's. They want to take up to $2,500,000. There was really quite a little competition to see who should get on the board, but as I had happened to talk with Kahn and had invited him first, it was decided he should go on. He is perhaps the most enthusiastic of any one. They want half a million stock for Sir Ernest Castle** to whom they have cabled the plan and they have back from him approval of it.I explained the whole matter to the Board [of the City Bank] Tuesday and got nothing but favorable comments.6
Everybody coveted the AIC stock. Joe Grace (of W. R. Grace & Co.) wanted $600,000 in addition to his interest in National City Bank. Ambrose Monell wanted $500,000. George Baker wanted $250,000. And "William Rockefeller tried, vainly, to get me to put him down for $5,000,000 of the common."7
By 1916 AIC investments overseas amounted to more than $23 million and in 1917 to more than $27 million. The company established representation in London, Paris, Buenos Aires, and Peking as well as in Petrograd, Russia. Less than two years after its formation AIC was operating on a substantial scale in Australia, Argentina, Uruguay, Paraguay, Colombia, Brazil, Chile, China, Japan, India, Ceylon, Italy, Switzerland, France, Spain, Cuba, Mexico, and other countries in Central America.
American International owned several subsidiary companies outright, had substantial interests in yet other companies, and operated still other firms in the United States and abroad. The Allied Machinery Company of America was founded in February 1916 and the entire share capital taken up by American International Corporation. The vice president of American International Corporation was Frederick Holbrook, an engineer and formerly head of the Holbrook Cabot & Rollins Corporation. In January 1917 the Grace Russian Company was formed, the joint owners being W. R. Grace & Co. and the San Galli Trading Company of Petrograd. American International Corporation had a substantial investment in the Grace Russian Company and through Holbrook an interlocking directorship.
AIC also invested in United Fruit Company, which was involved in Central American revolutions in the 1920s. The American International Shipbuilding Corporation was wholly owned by AIC and signed substantial contracts for war vessels with the Emergency Fleet Corporation: one contract called for fifty vessels, followed by another contract for forty vessels, followed by yet another contract for sixty cargo vessels. American International Shipbuilding was the largest single recipient of contracts awarded by the U.S. government Emergency Fleet Corporation. Another company operated by AIC was G. Amsinck & Co., Inc. of New York; control of the company was acquired in November 1917. Amsinck was the source of financing for German espionage in the United States (see page 66). In November 1917 the American International Corporation formed and wholly owned the Symington Forge Corporation, a major government contractor for shell forgings. Consequently, American International Corporation had significant interest in war contracts within the United States and overseas. It had, in a word, a vested interest in the continuance of World War I.
The directors of American International and some of their associations were (in 1917):
J. OGDEN ARMOUR Meatpacker, of Armour & Company, Chicago; director of the National City Bank of New York; and mentioned by A. A. Heller in connection with the Soviet Bureau (see p. 119).GEORGE JOHNSON BALDWIN Of Stone & Webster, 120 Broadway. During World War I Baldwin was chairman of the board of American International Shipbuilding, senior vice president of American International Corporation, director of G. Amsinck (Von Pavenstedt of Amsinck was a German espionage paymaster in the U.S., see page 65), and a trustee of the Carnegie Foundation, which financed the Marburg Plan for international socialism to be controlled behind the scenes by world finance (see page 174-6).C. A. COFFIN Chairman of General Electric (executive office: 120 Broadway), chairman of cooperation committee of the American Red Cross.W. E. COREY (14 Wall Street) Director of American Bank Note Company, Mechanics and Metals Bank, Midvale Steel and Ordnance, and International Nickel Company; later director of National City Bank.ROBERT DOLLAR San Francisco shipping magnate, who attempted in behalf of the Soviets to import tsarist gold rubles into U.S. in 1920, in contravention of U.S. regulations.
PIERRE S. DU PONT Of the du Pont family.PHILIP A. S. FRANKLIN Director of National City Bank.J.P. GRACE Director of National City Bank.R. F. HERRICK Director, New York Life Insurance; former president of the American Bankers Association; trustee of Carnegie Foundation.OTTO H. KAHN Partner in Kuhn, Loeb. Kahn's father came to America in 1948, "having taken part in the unsuccessful German revolution of that year." According to J. H. Thomas (British socialist, financed by the Soviets), "Otto Kahn's face is towards the light."H. W. PRITCHETT Trustee of Carnegie Foundation.PERCY A. ROCKEFELLER Son of John D. Rockefeller; married to Isabel, daughter of J. A. Stillman of National City Bank.JOHN D. RYAN Director of copper-mining companies, National City Bank, and Mechanics and Metals Bank. (See frontispiece to this book.)W. L. SAUNDERS Director the Federal Reserve Bank of New York, 120 Broadway, and chairman of Ingersoll-Rand. According to the National Cyclopaedia (26:81): "Throughout the war he was one of the President's most trusted advisers." See page 15 for his views on the Soviets.J. A. STILLMAN President of National City Bank, after his father (J. Stillman, chairman of NCB) died in March 1918.C. A. STONE Director (1920-22) of Federal Reserve Bank of New York, 120 Broadway; chairman of Stone & Webster, 120 Broadway; president (1916-23) of American International Corporation, 120 Broadway.T. N. VAIL President of National City Bank of Troy, New YorkF. A. VANDERLIP President of National City Bank.E. S. WEBSTER Of Stone & Webster, 120 Broadway.A. H. WIGGIN Director of Federal Reserve Bank of New York in the early 1930s.BECKMAN WINTHROPE Director of National City Bank.WILLIAM WOODWARD Director of Federal Reserve Bank of New York, 120 Broadway, and Hanover National Bank.
The interlock of the twenty-two directors of American International Corporation with other institutions is significant. The National City Bank had no fewer than ten directors on the board of AIC; Stillman of NCB was at that time an intermediary between the Rockefeller and Morgan interests, and both the Morgan and the Rockefeller interests were represented directly on AIC. Kuhn, Loeb and the du Ponts each had one director. Stone & Webster had three directors. No fewer than four directors of AIC (Saunders, Stone, Wiggin, Woodward) either were directors of or were later to join the Federal Reserve Bank of New York. We have noted in an earlier chapter that William Boyce Thompson, who contributed funds and his considerable prestige to the Bolshevik Revolution, was also a director of the Federal Reserve Bank of New York — the directorate of the FRB of New York comprised only nine members.
Having identified the directors of AIC we now have to identify their revolutionary influence.
As the Bolshevik Revolution took hold in central Russia, Secretary of State Robert Lansing requested the views of American International Corporation on the policy to be pursued towards the Soviet regime. On January 16, 1918 — barely two months after the takeover in Petrograd and Moscow, and before a fraction of Russia had come under Bolshevik control — William Franklin Sands, executive secretary of American International Corporation, submitted the requested memorandum on the Russian political situation to Secretary Lansing. Sands covering letter, headed 120 Broadway, began:
To the Honourable January 16, 1918
Secretary of State
Washington D.C.
Sir
I have the honor to enclose herewith the memorandum which you requested me to make for you on my view of the political situation in Russia.I have separated it into three parts; an explanation of the historical causes of the Revolution, told as briefly as possible; a suggestion as to policy and a recital of the various branches of American activity at work now in Russia ....8
Although the Bolsheviks had only precarious control in Russia — and indeed were to come near to losing even this in the spring of 1918 — Sands wrote that already (January 1918) the United States had delayed too long in recognizing "Trotzky." He added, "Whatever ground may have been lost, should be regained now, even at the cost of a slight personal triumph for Trotzky."9
Firms located at, or near, 120 Broadway:
American International Corp 120 Broadway
National City Bank 55 Wall Street
Bankers Trust Co Bldg 14 Wall Street
New York Stock Exchange 13 Wall Street/12 Broad
Morgan Building corner Wall & Broad
Federal Reserve Bank of NY 120 Broadway
Equitable Building 120 Broadway
Bankers Club 120 Broadway
Simpson, Thather & Bartlett 62 Cedar St
William Boyce Thompson 14 Wall Street
Hazen, Whipple & Fuller 42nd Street Building
Chase National Bank 57 Broadway
McCann Co 61 Broadway
Stetson, Jennings & Russell 15 Broad Street
Guggenheim Exploration 120 Broadway
Weinberg & Posner 120 Broadway
Soviet Bureau 110 West 40th Street
John MacGregor Grant Co 120 Broadway
Stone & Webster 120 Broadway
General Electric Co 120 Broadway
Morris Plan of NY 120 Broadway
Sinclair Gulf Corp 120 Broadway
Guaranty Securities 120 Broadway
Guaranty Trust 140 Broadway
Map of Wall Street Area Showing Office Locations
Sands then elaborates the manner in which the U.S. could make up for lost time, parallels the Bolshevik Revolution to "our own revolution," and concludes: "I have every reason to believe that the Administration plans for Russia will receive all possible support from Congress, and the hearty endorsement of public opinion in the United States."
In brief, Sands, as executive secretary of a corporation whose directors were the most prestigious on Wall Street, provided an emphatic endorsement of the Bolsheviks and the Bolshevik Revolution, and within a matter of weeks after the revolution started. And as a director of the Federal Reserve Bank of New York, Sands had just contributed $1 million to the Bolsheviks — such endorsement of the Bolsheviks by banking interests is at least consistent.
Moreover, William Sands of American International was a man with truly uncommon connections and influence in the State Department.
Sands' career had alternated between the State Department and Wall Street, In the late nineteenth and early twentieth century he held various U.S. diplomatic posts. In 1910 he left the department to join the banking firm of James Speyer to negotiate an Ecuadorian loan, and for the next two years represented the Central Aguirre Sugar Company in Puerto Rico. In 1916 he was in Russia on "Red Cross work" — actually a two-man "Special Mission" with Basil Miles — and returned to join the American International Corporation in New York.10
In early 1918 Sands became the known and intended recipient of certain Russian "secret treaties." If the State Department files are to be believed, it appears that Sands was also a courier, and that he had some prior access to official documents — prior, that is, to U.S. government officials. On January 14, 1918, just two days before Sands wrote his memo on policy towards the Bolsheviks, Secretary Lansing caused the following cable to be sent in Green Cipher to the American legation in Stockholm: "Important official papers for Sands to bring here were left at Legation. Have you forwarded them? Lansing." The reply of January 16 from Morris in Stockholm reads: "Your 460 January 14, 5 pm. Said documents forwarded Department in pouch number 34 on December 28th." To these documents is attached another memo, signed "BM" (Basil Miles, an associate of Sands): "Mr. Phillips. They failed to give Sands 1st installment of secret treaties wh. [which] he brought from Petrograd to Stockholm."11
Putting aside the question why a private citizen would be carrying Russian secret treaties and the question of the content of such secret treaties (probably an early version of the so-called Sisson Documents), we can at least deduce that the AIC executive secretary traveled from Petrograd to Stockholm in late 1917 and must indeed have been a privileged and influential citizen to have access to secret treaties.12
A few months later, on July 1, 1918, Sands wrote to Treasury Secretary McAdoo suggesting a commission for "economic assistance to Russia." He urged that since it would be difficult for a government commission to "provide the machinery" for any such assistance, "it seems, therefore, necessary to call in the financial, commercial and manufacturing interest of the United States to provide such machinery under the control of the Chief Commissioner or whatever official is selected by the President for this purpose."13 In other words, Sands obviously intended that any commercial exploitation of Bolshevik Russia was going to include 120 Broadway.
The certification of incorporation of the Federal Reserve Bank of New York was filed May 18, 1914. It provided for three Class A directors representing member banks in the district, three Class B directors representing commerce, agriculture, and industry, and three Class C directors representing the Federal Reserve Board. The original directors were elected in 1914; they proceeded to generate an energetic program. In the first year of organization the Federal Reserve Bank of New York held no fewer than 50 meetings.
From our viewpoint what is interesting is the association between, on the one hand, the directors of the Federal Reserve Bank (in the New York district) and of American International Corporation, and, on the other, the emerging Soviet Russia.
In 1917 the three Class A directors were Franklin D. Locke, William Woodward, and Robert H. Treman. William Woodward was a director of American International Corporation (120 Broadway) and of the Rockefeller-controlled Hanover National Bank. Neither Locke nor Treman enters our story. The three Class B directors in 1917 were William Boyce Thompson, Henry R. Towne, and Leslie R. Palmer. We have already noted William B. Thompson's substantial cash contribution to the Bolshevik cause. Henry R. Towne was chairman of the board of directors of the Morris Plan of New York, located at 120 Broadway; his seat was later taken by Charles A. Stone of American International Corporation (120 Broadway) and of Stone & Webster (120 Broadway). Leslie R. Palmer does not come into our story. The three Class C directors were Pierre Jay, W. L. Saunders, and George Foster Peabody. Nothing is known about Pierre Jay, except that his office was at 120 Broadway and he appeared to be significant only as the owner of Brearley School, Ltd. William Lawrence Saunders was also a director of American International Corporation; he openly avowed, as we have seen, pro-Bolshevik sympathies, disclosing them in a letter to President Woodrow Wilson (see page 15). George Foster Peabody was an active socialist (see page 99-100).
In brief, of the nine directors of the Federal Reserve Bank of New York, four were physically located at 120 Broadway and two were then connected with American International Corporation. And at least four members of AIC's board were at one time or another directors of the FRB of New York. We could term all of this significant, but regard it not necessarily as a dominant interest.
William Franklin Sands' proposal for an economic commission to Russia was not adopted. Instead, a private vehicle was put together to exploit Russian markets and the earlier support given the Bolsheviks. A group of industrialists from 120 Broadway formed the American-Russian Industrial Syndicate Inc. to develop and foster these opportunities. The financial backing for the new firm came from the Guggenheim Brothers, 120 Broadway, previously associated with William Boyce Thompson (Guggenheim controlled American Smelting and Refining, and the Kennecott and Utah copper companies); from Harry F. Sinclair, president of Sinclair Gulf Corp., also 120 Broadway; and from James G. White of J. G. White Engineering Corp. of 43 Exchange Place — the address of the American-Russian Industrial Syndicate.
In the fall of 1919 the U.S. embassy in London cabled Washington about Messrs. Lubovitch and Rossi "representing American-Russian Industrial Syndicate Incorporated What is the reputation and the attitude of the Department toward the syndicate and the individuals?"14
To this cable State Department officer Basil Miles, a former associate of Sands, replied:
. . . Gentlemen mentioned together with their corporation are of good standing being backed financially by the White, Sinclair and Guggenheim interests for the purpose of opening up business relations with Russia.15
So we may conclude that Wall Street interests had quite definite ideas of the manner in which the new Russian market was to be exploited. The assistance and advice proffered in behalf of the Bolsheviks by interested parties in Washington and elsewhere were not to remain unrewarded.
Quite apart from American International's influence in the State Department is its intimate relationship — which AIC itself called "control" — with a known Bolshevik: John Reed. Reed was a prolific, widely read author of the World War I era who contributed to the Bolshevik-oriented Masses.16 and to the Morgan-controlled journal Metropolitan. Reed's book on the Bolshevik Revolution, Ten Days That Shook the World, sports an introduction by Nikolai Lenin, and became Reed's best-known and most widely read literary effort. Today the book reads like a superficial commentary on current events, is interspersed with Bolshevik proclamations and decrees, and is permeated with that mystic fervor the Bolsheviks know will arouse foreign sympathizers. After the revolution Reed became an American member of the executive committee of the Third International. He died of typhus in Russia in 1920.
The crucial issue that presents itself here is not Reed's known pro-Bolshevik tenor and activities, but how Reed who had the entire confidence of Lenin ("Here is a book I should like to see published in millions of copies and translated into all languages," commented Lenin in Ten Days), who was a member of the Third International, and who possessed a Military Revolutionary Committee pass (No. 955, issued November 16, 1917) giving him entry into the Smolny Institute (the revolutionary headquarters) at any time as the representative of the "American Socialist press," was also — despite these things — a puppet under the "control" of the Morgan financial interests through the American International Corporation. Documentary evidence exists for this seeming conflict (see below and Appendix 3).
Let's fill in the background. Articles for the Metropolitan and the Masses gave John Reed a wide audience for reporting the Mexican and the Russian Bolshevik revolutions. Reed's biographer Granville Hicks has suggested, in John Reed, that "he was . . . the spokesman of the Bolsheviks in the United States." On the other hand, Reed's financial support from 1913 to 1918 came heavily from the Metropolitan — owned by Harry Payne Whitney, a director of the Guaranty Trust, an institution cited in every chapter of this book — and also' from the New York private banker and merchant Eugene Boissevain, who channeled funds to Reed both directly and through the pro-Bolshevik Masses. In other words, John Reed's financial support came from two supposedly competing elements in the political spectrum. These funds were for writing and may be classified as: payments from Metropolitan from 1913 onwards for articles; payments from Masses from 1913 onwards, which income at least in part originated with Eugene Boissevain. A third category should be mentioned: Reed received some minor and apparently unconnected payments from Red Cross commissioner Raymond Robins in Petrograd. Presumably he also received smaller sums for articles written for other journals, and book royalties; but no evidence has been found giving the amounts of such payments.
The Metropolitan supported contemporary establishment causes including, for example, war preparedness. The magazine was owned by Harry Payne Whitney (1872-1930), who founded the Navy League and was partner in the J.P. Morgan firm. In the late 1890s Whitney became a director of American Smelting and Refining and of Guggenheim Exploration. Upon his father's death in 1908, he became a director of numerous other companies, including Guaranty Trust Company. Reed began writing for Whitney's Metropolitan in July 1913 and contributed a half-dozen articles on the Mexican revolutions: "With Villa in Mexico," "The Causes Behind/Mexico's Revolution," "If We Enter Mexico," "With Villa on the March," etc. Reed's sympathies were with revolutionist Pancho Villa. You will recall the link (see page 65) between Guaranty Trust and Villa's ammunition supplies.
In any event, Metropolitan was Reed's main source of income. In the words of biographer Granville Hicks, "Money meant primarily work for the Metropolitan and incidentally articles and stories for other paying magazines." But employment by Metropolitan did not inhibit Reed from writing articles critical of the Morgan and Rockefeller interests. One such piece, "At the Throat of the Republic" (Masses, July 1916), traced the relationship between munitions industries, the national security-preparedness lobby, the interlocking directorates of the Morgan-Rockefeller interest, "and showed that they dominated both the preparedness societies and the newly formed American International Corporation, organized for the exploitation of backward countries."17
In 1915 John Reed was arrested in Russia by tsarist authorities, and the Metropolitan intervened with the State Department in Reed's behalf. On June 21, 1915, H. J. Whigham wrote Secretary of State Robert Lansing informing him that John Reed and Boardman Robinson (also arrested and also a contributor to the Masses) were in Russia "with commission from the Metropolitan magazine to write articles and to make illustrations in the Eastern field of the War." Whigham pointed out that neither had "any desire or authority from us to interfere with the operations of any belligerent powers that be." Whigham's letter continues:
If Mr. Reed carried letters of introduction from Bucharest to people in Galicia of an anti-Russian frame of mind I am sure that it was done innocently with the simple intention of meeting as many people as possible ....
Whigham points out to Secretary Lansing that John Reed was known at the White House and had given "some assistance" to the administration on Mexican affairs; he concludes: "We have the highest regard for Reed's great qualities as a writer and thinker and we are very anxious as regards his safety."18 The Whigham letter is not, let it be noted, from an establishment journal in support of a Bolshevik writer; it is from an establishment journal in support of a Bolshevik writer for theMasses and similar revolutionary sheets, a writer who was also the author of trenchant attacks ("The Involuntary Ethics of Big Business: A Fable for Pessimists," for example) on the same Morgan interests that owned Metropolitan.
The evidence of finance by the private banker Boissevain is incontrovertible. On February 23, 1918, the American legation at Christiania, Norway, sent a cable to Washington in behalf of John Reed for delivery to Socialist Party leader Morris Hillquit. The cable stated in part: "Tell Boissevain must draw on him but carefully." A cryptic note by Basil Miles in the State Department files, dated April 3, 1918, states, "If Reed is coming home he might as well have money. I understand alternatives are ejection by Norway or polite return. If this so latter seems preferable." This protective note is followed by a cable dated April 1, 1918, and again from the American legation at Christiania: "John Reed urgently request Eugene Boissevain, 29 Williams Street, New York, telegraph care legation $300.00."19 This cable was relayed to Eugene Boissevain by the State Department on April 3, 1918.
Reed apparently received his funds and arrived safely back in the United States. The next document in the State Department files is a letter to William Franklin Sands from John Reed, dated June 4, 1918, and written from Crotonon-Hudson, New York. In the letter Reed asserts that he has drawn up a memorandum for the State Department, and appeals to Sands to use his influence to get release of the boxes of papers brought back from Russia. Reed concludes, "Forgive me for bothering you, but I don't know where else to turn, and I can't afford another trip to Washington." Subsequently, Frank Polk, acting secretary of state, received a letter from Sands regarding the release of John Reed's papers. Sands' letter, dated June 5, 1918, from 120 Broadway, is here reproduced in full; it makes quite explicit statements about control of Reed:
120 BROADWAY NEW YORK
June fifth, 1918My dear Mr. Polk:I take the liberty of enclosing to you an appeal from John ("Jack") Reed to help him, if possible, to secure the release of the papers which he brought into the country with him from Russia.I had a conversation with Mr. Reed when he first arrived, in which he sketched certain attempts by the Soviet Government to initiate constructive development, and expressed the desire to place whatever observations he had made or information he had obtained through his connection with Leon Trotzky, at the disposal of our Government. I suggested that he write a memorandum on this subject for you, and promised to telephone to Washington to ask you to give him an interview for this purpose. He brought home with him a mass of papers which were taken from him for examination, and on this subject also he wished to speak to someone in authority, in order to voluntarily offer an>, information they might contain to the Government, and to ask for the release of those which he needed for his newspaper and magazine work.I do not believe that Mr. Reed is either a "Bolshevik" or a "dangerous anarchist," as I have heard him described. He is a sensational journalist, without doubt, but that is all. He is not trying to embarrass our Government, and for this reason refused the "protection" which I understand was offered to him by Trotzky, when he returned to New York to face the indictment against him in the "Masses" trial. He is liked by the Petrograd Bolsheviki, however, and, therefore, anything which our police may do which looks like "persecution" will be resented in Petrograd, which I believe to be undesirable because unnecessary. He can be handled and controlled much better by other means than through the police.I have not seen the memorandum he gave to Mr. Bullitt — I wanted him to let me see it first and perhaps to edit it, but he had not the opportunity to do so.I hope that you will not consider me to be intrusive in this matter or meddling with matters which do not concern me. I believe it to be wise not to offend the Bolshevik leaders unless and until it may become necessary to do so — if it should become necessary — and it is unwise to look on every one as a suspicious or even dangerous character, who has had friendly relations with the Bolsheviki in Russia. I think it better policy to attempt to use such people for our own purposes in developing our policy toward Russia, if it is possible to do so. The lecture which Reed was prevented by the police from delivering in Philadelphia (he lost his head, came into conflict with the police and was arrested) is the only lecture on Russia which I would have paid to hear, if I had not already seen his notes on the subject. It covered a subject which we might quite possibly find to be a point of contact with the Soviet Government, from which to begin constructive work!Can we not use him, instead of embittering him and making him an enemy? He is not well balanced, but he is, unless I am very much mistaken, susceptible to discreet guidance and might be quite useful.Sincerely yours,
William Franklin SandsThe Honourable
Frank Lyon Polk
Counselor for the Department of State
Washington, D.C.WFS:AO
Enclosure20
The significance of this document is the hard revelation of direct intervention by an officer (executive secretary) of American International Corporation in behalf of a known Bolshevik. Ponder a few of Sands' statements about Reed: "He can be handled and controlled much better by other means than through the police"; and, "Can we not use him, instead of embittering him and making him an enemy? . . . he is, unless I am very much mistaken, susceptible to discreet guidance and might be quite useful." Quite obviously, the American International Corporation viewed John Reed as an agent or a potential agent who could be, and probably had already been, brought under its control. The fact that Sands was in a position to request editing a memorandum by Reed (for Bullitt) suggests some degree of control had already been established.
Then note Sands' potentially hostile attitude towards — and barely veiled intent to provoke — the Bolsheviks: "I believe it to be wise not to offend the Bolshevik leaders unless and until it may become necessary to do so — if it should become necessary . . ." (italics added).
This is an extraordinary letter in behalf of a Soviet agent from a private U.S. citizen whose counsel the State Department had sought, and continued to seek.
A later memorandum, March 19, 1920, in the State files reported the arrest of John Reed by the Finnish authorities at Abo, and Reed's possession of English, American and German passports. Reed, traveling under the alias of Casgormlich, carried diamonds, a large sum of money, Soviet propaganda literature, and film. On April 21, 1920, the American legation at Helsingfors cabled the State Department:
Am forwarding by the next pouch certified copies of letters from Emma Goldman, Trotsky, Lenin and Sirola found in Reed's possession. Foreign Office has promised to furnish complete record of the Court proceedings.
Once again Sands intervened: "I knew Mr. Reed personally."21 And, as in 1915, Metropolitan magazine also came to Reed's aid. H. J. Whigham wrote on April 15, 1920, to Bainbridge Colby in the State Department: "Have heard John Reed in danger of being executed in Finland. Hope the State Dept. can take immediate steps to see that he gets proper trial. Urgently request prompt action."22 This was in addition to an April 13, 1920 telegram from Harry Hopkins, who was destined for fame under President Roosevelt:
Understand State Dept. has information Jack Reed arrested Finland, will be executed. As one of his friends and yours and on his wife's behalf urge you take prompt action prevent execution and secure release. Feel sure can rely your immediate and effective intervention.23
John Reed was subsequently released by the Finnish authorities.
This paradoxical account on intervention in behalf of a Soviet agent can have several explanations. One hypothesis that fits other evidence concerning Wall Street and the Bolshevik Revolution is that John Reed was in effect an agent of the Morgan interests — perhaps only half aware of his double role — that his anticapitalist writing maintained the valuable myth that all capitalists are in perpetual warfare with all socialist revolutionaries. Carroll Quigley, as we have already noted, reported that the Morgan interests financially supported domestic revolutionary organizations and anticapitalist writings.24 And we have presented in this chapter irrefutable documentary evidence that the Morgan interests were also effecting control of a Soviet agent, interceding on his behalf and, more important, generally intervening in behalf of Soviet interests with the U.S. government. These activities centered at a single address: 120 Broadway, New York City.
Footnotes:1By a quirk the papers of incorporation for the Equitable Office Building were drawn up by Dwight W. Morrow, later a Morgan partner, but then a member of the law firm of Simpson, Thacher & Bartlett. The Thacher firm contributed two members to the 1917 American Red Cross Mission to Russia (see chapter five).3Carroll Quigley, Tragedy and Hope (New York: Macmillan, 1966), p. 938. Quigley was writing in 1965, so this places the start of the infiltration at about 1915, a date consistent with the evidence here presented.4Frank A. Vanderlip, From Farm Boy to Financier (New York: A. Appleton-Century, 1935).5Ibid., p. 267.6Ibid., pp. 268-69. It should be noted that several names mentioned by Vanderlip turn up elsewhere in this book: Rockefeller, Armour, Guaranty Trust, and (Otto) Kahn all had some connection more or less with the Bolshevik Revolution and its aftermath.7Ibid., p. 269.8U.S. Stale Dept. Decimal File, 861.00/961.9Sands memorandum to Lansing, p. 9.10William Franklin Sands wrote several books, including Undiplomatic Memoirs (New York: McGraw-Hill, 1930), a biography covering the years to 1904. Later he wrote Our .Jungle Diplomacy (Chapel Hill: University of North Carolina Press, 1941), an unremarkable treatise on imperialism in Latin America. The latter work is notable only for a minor point on page 102: the willingness to blame a particularly unsavory imperialistic adventure on Adolf Stahl, a New York banker, while pointing oust quite unnecessarily that Stahl was of "German-Jewish origin." In August 1918 he published an article, "Salvaging Russia," in Asia, to explain support of the Bolshevik regime.11All the above in U.S. State Dept. Decimal File, 861.00/969.12The author cannot forbear comparing the treatment of academic researchers. In 1973, for example, the writer was still denied access to some State Department files dated 1919.13U.S. State Dept. Decimal File, 861.51/333.14U.S. State Dept. Decimal File, 861.516 84, September 2, 1919.15Ibid.16Other contributors to the Masses mentioned in this book were journalist Robert Minor, chairman of the, U.S. Public Info, marion Committee; George Creel; Carl Sandburg, poet-historian; and Boardman Robinson, an artist.17Granville Hicks, John Reed, 1887-1920 (New York: Macmillan, 1936), p. 215.18U.S. State Dept. Decimal File, 860d.1121 R 25/4.19Ibid., 360d.1121/R25/18. According to Granville Hicks in John Reed, "Masses could not pay his [Reed's] expenses. Finally, friends of the magazine, notably Eugene Boissevain, raised the money" (p. 249).20U.S. State Dept. Decimal File, 360. D. II21.R/20/221/2, /R25 (John Reed). The letter was transferred by Mr. Polk to the State Department archives on May 2, 1935. All italics added.21Ibid., 360d.1121 R 25/72.22Ibid.23This was addressed to Bainbridge Colby, ibid., 360d.1121 R 25/30. Another letter, dated April 14, 1920, and addressed to the secretary of state from 100 Broadway, New York, was from W. Bourke Cochrane; it also pleaded for the release of John Reed.24Quigley, op. cit.*The John MacGregor Grant Co., agent for the Russo-Asiatic Bank (involved in financing the Bolsheviks), was at 120 Broadway — and financed by Guaranty Trust Company.**Sir Ernest Cassel, prominent British financier.
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Chapter IV
GUARANTY TRUST GOES TO RUSSIA
Soviet Govemment desire Guarantee [sic] Trust Company to become fiscal agent in United States for all Soviet operations and contemplates American purchase Eestibank with a view to complete linking of Soviet fortunes with American financial interests.William H. Coombs, reporting to the U.S. embassy in London, June 1, 1920 (U.S. State Dept. Decimal File, 861.51/752). ("Eestibank" was an Estonian bank)
In 1918 the Soviets faced a bewildering array of internal and external problems. They occupied a mere fraction of Russia. To subdue the remainder, they needed foreign arms, imported food, outside financial support, diplomatic recognition, and — above all — foreign trade. To gain diplomatic recognition and foreign trade, the Soviets first needed representation abroad, and representation in turn required financing through gold or foreign currencies. As we have already seen, the first step was to establish the Soviet Bureau in New York under Ludwig Martens. At the same time, efforts were made to transfer funds to the United States and Europe for purchases of needed goods. Then influence was exerted in the U.S. to gain recognition or to obtain the export licenses needed to ship goods to Russia.
New York bankers and lawyers provided significant — in some cases, critical — assistance for each of these tasks. When Professor George V. Lomonossoff, the Russian technical expert in the Soviet Bureau, needed to transfer funds from the chief Soviet agent in Scandinavia, a prominant Wall Street attorney came to his assistance — using official State Department channels and the acting secretary of state as an intermediary. When gold had to be transferred to the United States, it was American International Corporation, Kuhn, Loeb & Co., and Guaranty Trust that requested the facilities and used their influence in Washington to smooth the way. And when it came to recognition, we find American firms pleading .with Congress and with the public to endorse the Soviet regime.
Lest the reader should deduce — too hastily — from these assertions that Wall Street was indeed tinged with Red, or that Red flags were flying in the street (see frontispiece), we also in a later chapter present evidence that the J.P. Morgan firm financed Admiral Kolchak in Siberia. Aleksandr Kolchak was fighting the Bolsheviks, to install his own brand of authoritarian rule. The firm also contributed to the anti-Communist United Americans organization.
The case of Professor Lomonossoff is a detailed case history of Wall Street assistance to the early Soviet regime. In late 1918 George V. Lomonossoff, member of the Soviet Bureau in New York and later first Soviet commissar of railroads, found himself stranded in the United States without funds. At this time Bolshevik funds were denied entry into the United States; indeed, there was no official recognition of the regime at all. Lomonossoff was the subject of a letter of October 24, 1918, from the U.S. Department of Justice to the Department of State.1 The letter referred to Lomonossoff's Bolshevik attributes and pro-Bolshevik speeches. The investigator concluded, "Prof. Lomonossoff is not a Bolshevik although his speeches constitute unequivocal support for the Bolshevik cause." Yet Lomonossoff was able to pull strings at the highest levels of the administration to have $25,000 transferred from the Soviet Union through a Soviet espionage agent in Scandinavia (who was himself later to become confidential assistant to Reeve Schley, a vice president of Chase Bank). All this with the assistance of a member of a prominent Wall Street firm of attorneys!2
The evidence is presented in detail because the details themselves point up the close relationship between certain interests that up to now have been thought of as bitter enemies. The first indication of Lornonossoff's problem is a letter dated January 7, 1919, from Thomas L. Chadbourne of Chadbourne, Babbitt 8e Wall of 14 Wall Street (same Address as William Boyce Thompson's) to Frank Polk, acting secretary of state. Note the friendly salutation and casual reference to Michael Gruzenberg, alias Alexander Gumberg, chief Soviet agent in Scandinavia and later Lomonossoff's assistant:
Dear Frank: You were kind enough to say that if I could inform you of the status of the $25,000 item of personal funds belonging to Mr. & Mrs. Lomonossoff you would set in motion the machinery necessary to obtain it here for them.I have communicated with Mr. Lomonossoff with respect to it, and he tells me that Mr. Michael Gruzenberg, who went to Russia for Mr. Lomonossoff prior to the difficulties between Ambassador Bakhmeteff and Mr. Lomonossoff, transmitted the information to him respecting this money through three Russians who recently arrived from Sweden, and Mr. Lomonossoff believes that the money is held at the Russian embassy in Stockholm, Milmskilnad Gaten 37. If inquiry from the State Department should develop this to be not the place where the money is on deposit, then the Russian embassy in Stockholm can give the exact address of Mr. Gruzenberg, who can give the proper information respecting it. Mr. Lomonossoff does not receive letters from Mr. Gruzenberg, although he is informed that they have been written: nor have any of his letters to Mr. Gruzenberg been delivered, he is also informed. For this reason it is impossible to be more definite than I have been, but I hope something can be done to relieve his and his wife's embarrassment for lack of funds, and it only needs a little help to secure this money which belongs to them to aid them on this side of the water.Thanking you in advance for anything you can do, I beg to remain, as ever,Yours sincerely,
Thomas L. Chadbourne.
In 1919, at the time this letter was written, Chadbourne was a dollar-a-year man in Washington, counsel and director of the U.S. War Trade Board, and a director of the U.S. Russian Bureau Inc., an official front company of the U.S. government. Previously, in 1915, Chadbourne organized Midvale Steel and Ordnance to take advantage of war business. In 1916 he became chairman of the Democratic Finance Committee and later a director of Wright Aeronautical and o[ Mack Trucks.
The reason Lomonossoff was not receiving letters from Gruzenberg is that they were, in all probability, being intercepted by one of several governments taking a keen interest in the latter's activities.
On January 11, 1919, Frank Polk cabled the American legation in Stockholm:
Department is in receipt of information that $25,000, personal funds of .... Kindly inquire of the Russian Legation informally and personally if such funds are held thus. Ascertain, if not, address of Mr. Michael Gruzenberg, reported to be in possession of information on this subject. Department not concerned officially, merely undertaking inquiries on behalf of a former Russian official in this country.Polk, Acting
Polk appears in this letter to be unaware of Lomonossoff's Bolshevik connections, and refers to him as "a former Russian official in this country." Be that as it may, within three days Polk received a reply from Morris at the U.S. Legation in Stockholm:
January 14, 3 p.m. 3492. Your January 12, 3 p.m., No. 1443.Sum of $25,000 of former president of Russian commission of ways of communication in United States not known to Russian legation; neither can address of Mr. Michael Gruzenberg be obtained.Morris
Apparently Frank Polk then wrote to Chadbourne (the letter is not included in the source) and indicated that State could find neither Lomonossoff nor Michael Gruzenberg. Chadbourne replied on January 21, 1919:
Dear Frank: Many thanks for your letter of January 17. I understand that there are two Russian legations in Sweden, one being the soviet and the other the Kerensky, and I presume your inquiry was directed to the soviet legation as that was the address I gave you in my letter, namely, Milmskilnad Gaten 37, Stockholm.
Michael Gruzenberg's address is, Holmenkollen Sanitarium, Christiania, Norway, and I think the soviet legation could find out all about the funds through Gruzenberg if they will communicate with him.Thanking you for taking this trouble and assuring you of my deep appreciation, I remain,Sincerely yours,
Thomas L. Chadbourne
We should note that a Wall Street lawyer had the address of Gruzenberg, chief Bolshevik agent in Scandinavia, at a time when the acting secretary of state and the U.S. Stockholm legation had no record of the address; nor could the legation track it down. Chadbourne also presumed that the Soviets were the official government of Russia, although that government was not recognized by the United States, and Chadbourne's official government position on the War Trade Board would require him to know that.
Frank Polk then cabled the American legation at Christiania, Norway, with the address of Michael Gruzenberg. It is not known whether Polk knew he was passing on the address of an espionage agent, but his message was as follows:
To American Legation, Christiania. January 25, 1919. It is reported that Michael Gruzenberg is at Holmenkollen Sanitarium. Is it possible for you to locate him and inquire if he has any knowledge respecting disposition of $25,000 fund belonging to former president of Russian mission of ways of communication in the United States, Professor Lomonossoff.Polk, Acting
The U.S. representative (Schmedeman) at Christiania knew Gruzenberg well. Indeed, the name had figured in reports from Schmedeman to Washington concerning Gruzenberg's pro-Soviet activities in Norway. Schmedeman replied:
January 29, 8 p.m. 1543. Important. Your January 25, telegram No. 650.Before departing to-day for Russia, Michael Gruzenberg informed our naval attache that when in Russia some few months ago he had received, at Lomonossoff's request, $25,000 from the Russian Railway Experimental Institute, of which Prof. Lomonossoff was president. Gruzenberg claims that to-day he cabled attorney for Lomonossoff in New York, Morris Hillquitt [sic], that he, Gruzenberg, is in possession of the money, and before forwarding it is awaiting further instructions from the United States, requesting in the cablegram that Lomonossoff be furnished with living expenses for himself and family by Hillquitt pending the receipt of the money.3As Minister Morris was traveling to Stockholm on the same train as Gruzenberg, the latter stated that he would advise further with Morris in reference to this subject.Schmedeman
The U.S. minister traveled with Gruzenberg to Stockholm where he received the following cable from Polk:
It is reported by legation at Christiania that Michael Gruzenberg, has for Prof. G. Lomonossoff, the . . . sum of $25,000, received from Russian Railway Experimental Institute. If you can do so without being involved with Bolshevik authorities, department will be glad for you to facilitate transfer of this money to Prof. Lomonossoff in this country. Kindly reply.Polk, Acting
This cable produced results, for on February 5, 1919, Frank Polk wrote to Chadbourne about a "dangerous bolshevik agitator," Gruzenberg:
My Dear Tom: I have a telegram from Christiania indicating that Michael Gruzenberg has the $25,000 of Prof. Lomonossoff, and received it from the Russian Railway Experimental Institute, and that he had cabled Morris Hillquitt [sic], at New York, to furnish Prof. Lomonossoff money for living expenses until the fund in question can be transmitted to him. As Gruzenberg has just been deported from Norway as a dangerous bolshevik agitator, he may have had difficulties in telegraphing from that country. I understand he has now gone to Christiania, and while it is somewhat out of the department's line of action, I shall be glad, if you wish, to see if I can have Mr. Gruzenberg remit the money to Prof. Lomonossoff from Stockholm, and am telegraphing our minister there to find out if that can be done.Very sincerely, yours,
Frank L. Polk
The telegram from Christiania referred to in Polk's letter reads as follows:
February 3, 6 p.m., 3580. Important. Referring department's january 12, No. 1443, $10,000 has now been deposited in Stockholm to my order to be forwarded to Prof. Lomonossoff by Michael Gruzenberg, one of the former representatives of the bolsheviks in Norway. I informed him before accepting this money that I would communicate with you and inquire if it is your wish that this money be forwarded to Lomonossoff. Therefore I request instructions as to my course of action.Morris
Subsequently Morris, in Stockholm, requested disposal instructions for a $10,000 draft deposited in a Stockholm bank. His phrase "[this] has been my only connection with the affair" suggests that Morris was aware that the Soviets could, and probably would, claim this as an officially expedited monetary transfer, since this action implied approval by the U.S. of such monetary transfers. Up to this time the Soviets had been required to smuggle money into the U.S.
Four p.m. February 12, 3610, Routine.With reference to my February 3, 6 p.m., No. 3580, and your February 8, 7 p.m., No. 1501. It is not clear to me whether it is your wish for me to transfer through you the $10,000 referred to Prof. Lomonossoff. Being advised by Gruzenberg that he had deposited this money to the order of Lomonossoff in a Stockholm bank and has advised the bank that this draft could be sent to America through me, provided I so ordered, has been my only connection with the affair. Kindly wire instructions.Morris
Then follows a series of letters on the transfer of the $10,000 from A/B Nordisk Resebureau to Thomas L. Chadbourne at 520 Park Avenue, New York City, through the medium of the State Department. The first letter contains instructions from Polk, on the mechanics of the transfer; the second, from Morris to Polk, contains $10,000; the third, from Morris to A/B Nordisk Resebureau, requesting a draft; the fourth is a reply from the bank with a check; and the fifth is the acknowledgment.
Your February 12, 4 p.m., No. 3610.Money may be transmitted direct to Thomas L. Chadbourne, 520 Park Avenue, New York City,Polk, Acting
* * * * *
Dispatch, No. 1600, March 6, 1919:The Honorable the Secretary of State, WashingtonSir: Referring to my telegram, No. 3610 of February 12, and to the department's reply, No. 1524 of February 19 in regard to the sum of $10,000 for Professor Lomonossoff, I have the honor herewith to inclose a copy of a letter which I addressed on February 25 to A. B. Nordisk Resebureau, the bankers with whom this money was deposited; a copy of the reply of A. B. Nordisk Resebureau, dated February 26; and a copy of my letter to the A. B. Nordisk Resebureau, dated February 27.It will be seen from this correspondence that the bank was desirous of having this money forwarded to Professor Lomonossoff. I explained to them, however, as will be seen from my letter of February 27, that I had received authorization to forward it directly to Mr. Thomas L. Chadbourne, 520 Park Avenue, New York City. I also inclose herewith an envelope addressed to Mr. Chadbourne, in which are inclosed a letter to him, together with a check on the National City Bank of New York for $10,000.I have the honor to be,
sir, Your obedient servant,
Ira N. Morris
* * * * *
A. B. Nordisk Reserbureau,No. 4 Vestra Tradgardsgatan, Stockholm.Gentlemen: Upon receipt of your letter of January 30, stating that you had received $10,000 to be paid out to Prof. G. V. Lomonossoff, upon my request, I immediately telegraphed to my Government asking whether they wished this money forwarded to Prof. Lomonossoff. I am to-day in receipt of a reply authorizing me to forward the money direct to Mr. Thomas L. Chadbourne, payable to Prof. Lomonossoff. I shall be glad to forward it as instructed by my Government.I am, gentlemen,Very truly, yours,
Ira N. Morris
* * * * *
Mr. I. N. Morris,American Minister, StockholmDeal Sir: We beg to acknowledge the receipt of your favor of yesterday regarding payment of dollars 10,000 — to Professor G. V. Lomonossoff, and we hereby have the pleasure to inclose a check for said amount to the order of Professor G. V. Lomonossoff, which we understand that you are kindly forwarding to this gentleman. We shall be glad to have your receipt for same, arid beg to remain,Yours, respectfully,
A. B. Nordisk Reserbureau
E. Molin
* * * * *
A. B. Nordisk Resebureau.StockholmGentlemen: I beg to acknowledge receipt of your letter of February 26, inclosing a check for $10,000 payable to Professor G. V. Lomonossoff. As I advised you in my letter of February 25, I have been authorized to forward this check to Mr. Thomas L. Chadbourne, 520 Park Avenue, New York City, and I shall forward it to this gentleman within the next few days, unless you indicate a wish to the contrary.Very truly, yours,
Ira N. Morris
Then follow an internal State Department memorandum and Chadbourne's acknowledgment:
Mr. Phillips to Mr. Chadbourne, April 3, 1919.Sir: Referring to previous correspondence regarding a remittance of ten thousand dollars from A. B. Norsdisk Resebureau to Professor G. V. Lomonossoff, which you requested to be transmitted through the American Legation at Stockholm, the department informs you that it is in receipt of a dispatch from the American minister at Stockholm dated March 6, 1919, covering the enclosed letter addressed to you, together with a check for the amount referred to, drawn to the order to Professor Lomonossoff.I am, sir, your obedient servant
William Phillips,
Acting Secretary of State.Inclosure: Sealed letter addressed Mr. Thomas L. Chadbourne, inclosed with 1,600 from Sweden.
* * * * *
Reply of Mr. Chadbourne, April 5, 1919.
Sir: I beg to acknowledge receipt of your letter of April 3, enclosing letter addressed to me, containing check for $10,000 drawn to the order of Professor Lomonossoff, which check I have to-day delivered.
I beg to remain, with great respect,
Very truly, yours,
Thomas L. Chadbourne
Subsequently the Stockholm legation enquired concerning Lomonossoff's address in the U.S. and was informed by the State Department that "as far as the department is aware Professor George V. Lomonossoff can be reached in care of Mr. Thomas L. Chadbourne, 520 Park Avenue, New York City."
It is evident that the State Department, for the reason either of personal friendship between Polk and Chadbourne or of political influence, felt it had to go along and act as bagman for a Bolshevik agent — just ejected from Norway. But why would a prestigious establishment law firm be so intimately interested in the health and welfare of a Bolshevik emissary? Perhaps a contemporary State Department report gives the clue:
Martens, the Bolshevik representative, and Professor Lomonossoff are banking on the fact that Bullitt and his party will make a favorable report to the Mission and the President regarding conditions in Soviet Russia and that on the basis of this report the Government of the United States will favor dealing with the Soviet Government as, proposed by Martens. March 29, 1919.4
It was commercial exploitation of Russia that excited Wall Street, and Wall Street had lost no time in preparing its program. On May 1, 1918 — an auspicious date for Red revolutionaries — the American League to Aid and Cooperate with Russia was established, and its program approved in a conference held in the Senate Office Building, Washington, D.C. The officers and executive committee of the league represented some superficially dissimilar factions. Its president was Dr. Frank J. Goodnow, president of Johns Hopkins University. Vice presidents were the ever active William Boyce Thompson, Oscar S. Straus, James Duncan, and Frederick C. Howe, who wrote Confessions of a Monopolist, the rule book by which monopolists could control society. The Treasurer was George P. Whalen, vice president of Vacuum Oil Company. Congress was represented by Senator William Edgar Borah and Senator John Sharp Williams, of the Senate Foreign Relations Committee; Senator William N. Calder; and Senator Robert L. Owen, chairman of the Banking and Currency Committee. House members were Henry R. Cooper and Henry D. Flood, chairman of the House Foreign Affairs Committee. American business was represented by Henry Ford; Charles A. Coffin, chairman of the board of General Electric Company; and M. A. Oudin, then foreign manager of General Electric. George P. Whalen represented Vacuum Oil Company, and Daniel Willard was president of the Baltimore & Ohio Railroad. The more overtly revolutionary element was represented by Mrs. Raymond Robins, whose name was later found to be prominent in the Soviet Bureau files and in the Lusk Committee hearings; Henry L. Slobodin, described as a "prominent patriotic socialist"; and Lincoln Steffens, a domestic Communist of note.
In other words, this was a hybrid executive committee; it represented domestic revolutionary elements, the Congress of the United States, and financial interests prominently involved with Russian affairs.
Approved by the executive committee was a program that emphasized the establishment of an official Russian division in the U.S. government "directed by strong men." This division would enlist the aid of universities, scientific organizations, and other institutions to study the "Russian question," would coordinate and unite organizations within the United States "for the safeguarding of Russia," would arrange for a "special intelligence committee for the investigation of the Russian matter," and, generally, would itself study and investigate what was deemed to be the "Russian question." The executive committee then passed a resolution supporting President Woodrow Wilson's message to the Soviet congress in Moscow and the league affirmed its own support for the new Soviet Russia.
A few weeks later, on May 20, 1918, Frank J. Goodnow and Herbert A. Carpenter, representing the league, called upon Assistant Secretary of State William Phillips and impressed upon him the necessity for establishing an "official Russian Division of the Government to coordinate all Russian matters. They asked me [wrote Phillips] whether they should take this matter up with the President."5
Phillips reported this directly to the secretary of state and on the next day wrote Charles R. Crane in New York City requesting his views on the American League to Aid and Cooperate with Russia. Phillips besought Crane, "I really want your advice as to how we should treat the league .... We do not want to stir up trouble by refusing to cooperate with them. On the other hand it is a queer committee and I don't quite 'get it.'"6
In early June there arrived at the State Department a letter from William Franklin Sands of American International Corporation for Secretary of State Robert Lansing. Sands proposed that the United States appoint an administrator in Russia rather than a commission, and opined that "the suggestion of an allied military force in Russia at the present moment seems to me to be a very dangerous one."7 Sands emphasized the possibility of trade with Russia and that this possibility could be advanced "by a well chosen administrator enjoying the full confidence of the government"; he indicated that "Mr. Hoover" might fit the role.8 The letter was passed to Phillips by Basil Miles, a former associate of Sands, with the expression, "I think the Secretary would find it worthwhile to look through."
In early June the War Trade Board, subordinate to the State Department, passed a resolution, and a committee of the board comprising Thomas L. Chadbourne (Professor Lomonossoff's contact), Clarence M. Woolley, and John Foster Dulles submitted a memorandum to the Department of State, urging consideration of ways and means "to bring about closer and more friendly commercial relations between the United States and Russia." The board recommended a mission to Russia and reopened the question whether this should result from an invitation from the Soviet government.
Then on June 10, M. A. Oudin, foreign manager of General Electric Company, expressed his views on Russia and clearly favored a "constructive plan for the economic assistance" of Russia.9 In August 1918 Cyrus M. McCormick of International Harvester wrote to Basil Miles at the State Department and praised the President's program for Russia, which McCormick thought would be "a golden opportunity."10
Consequently, we find in mid-1918 a concerted effort by a segment of American business — obviously prepared to open up trade — to take advantage of its own preferred position regarding the Soviets.
In 1918 such assistance to the embryonic Bolshevik regime was justified on the grounds of defeating Germany and inhibiting German exploitation of Russia. This was the argument used by W. B. Thompson and Raymond Robins in sending Bolshevik revolutionaries and propaganda teams into Germany in 1918. The argument was also employed by Thompson in 1917 when conferring with Prime Minister Lloyd George about obtaining British support for the emerging Bolshevik regime. In June 1918 Ambassador Francis and his staff returned from Russia and urged President Wilson "to recognize and aid the Soviet government of Russia."11 These reports made by the embassy staff to the State Department were leaked to the press and widely printed. Above all, it was claimed that delay in recognizing the Soviet Union would aid Germany "and helps the German plan to foster reaction and counter-revolution."12 Exaggerated statistics were cited to support the proposal — for example, that the Soviet government represented ninety percent of the Russian people "and the other ten percent is the former propertied and governing class .... Naturally they are displeased."13 A former American official was quoted as saying, "If we do nothing — that is, if we just let things drift — we help weaken the Russian Soviet Government. And that plays Germany's game."14 So, it was recommended that "a commission armed with credit and good business advice could help much."
Meanwhile, inside Russia the economic situation had become critical and the inevitability of an embrace with capitalism dawned on the Communist Party and its planners. Lenin crystallized this awareness before the Tenth Congress of the Russian Communist Party:
Without the assistance of capital it will be impossible for us to retain proletarian power in an incredibly ruined country in which the peasantry, also ruined, constitutes the overwhelming majority — and, of course, for this assistance capital will squeeze hundreds per cent out of us. This is what we have to understand. Hence, either this type of economic relations or nothing ....15
Then Leon Trotsky was quoted as saying, "What we need here is an organizer like Bernard M. Baruch."16
Soviet awareness of its impending economic doom suggests that American and German business was attracted by the opportunity of exploiting the Russian market for needed goods; the Germans, in fact, made an early start in 1918. The first deals made by the Soviet Bureau in New York indicate that earlier American financial and moral support of the Bolsheviks was paying off in the form of contracts.
The largest order in 1919-20 was contracted to Morris & Co., Chicago meatpackers, for fifty million pounds of food products, valued at approximately $10 million. The Morris meatpacking family was related to the Swift family. Helen Swift, later connected with the Abraham Lincoln Center "Unity," was married to Edward Morris (of the meatpacking firm) and was also the brother of Harold H. Swift, a "major" in the 1917 Thompson Red Cross Mission to Russia.
Ludwig Martens was formerly vice president of Weinberg & Posner, located at 120 Broadway, New York City, and this firm was given a $3 million order.
Gold was the only practical means by which the Soviet Union could pay for its foreign purchases and the international bankers were quite willing to facilitate Soviet gold shipments. Russian gold exports, primarily imperial gold coins, started in early 1920, to Norway and Sweden. These were transshipped to Holland and Germany for other world destinations, including the United States.
In August 1920, a shipment of Russian gold coins was received at the Den Norske Handelsbank in Norway as a guarantee for payment of 3,000 tons of coal by Niels Juul and Company in the U.S. in behalf of the Soviet government. These coins were transferred to the Norges Bank for safekeeping. The coins were examined and weighed, were found to have been minted before the outbreak of war in 1914, and were therefore genuine imperial Russian coins.17
Shortly after this initial episode, the Robert Dollar Company of San Francisco received gold bars, valued at thirty-nine million Swedish kroner, in its Stockholm account; the gold "bore the stamp of the old Czar Government of Russia." The Dollar Company agent in Stockholm applied to the American Express Company for facilities to ship the gold to the United States. American Express refused to handle the shipment. Robert Dollar, it should be noted, was a director of American International Company; thus AIC was linked to the first attempt at shipping gold direct to America.18
Simultaneously it was reported that three ships had left Reval on the Baltic Sea with Soviet gold destined for the U.S. The S.S. Gauthod loaded 216 boxes of gold under the supervision of Professor Lomonossoff — now returning to the United States. The S.S. Carl Line loaded 216 boxes of gold under the supervision of three Russian agents. The S.S. Ruheleva was laden with 108 boxes of gold. Each box contained three poods of gold valued at sixty thousand gold rubles each. This was followed by a shipment on the S.S. Wheeling Mold.
Kuhn, Loeb & Company, apparently acting in behalf of Guaranty Trust Company, then inquired of the State Department concerning the official attitude towards the receipt of Soviet gold. In a report the department expressed concern because if acceptance was refused, then "the gold [would] probably come back on the hands of the War Department, causing thereby direct governmental responsibility and increased embarrassment."19 The report, written by Merle Smith in conference with Kelley and Gilbert, argues that unless the possessor has definite knowledge as to imperfect title, it would be impossible to refuse acceptance. It was anticipated that the U.S. would be requested to melt the gold in the assay office, and it was thereupon decided to telegraph Kuhn, Loeb & Company that no restrictions would be imposed on the importation of Soviet gold into the United States.
The gold arrived at the New York Assay Office and was deposited not by Kuhn, Loeb & Company — but by Guaranty Trust Company of New York City. Guaranty Trust then inquired of the Federal Reserve Board, which in turn inquired of the U.S. Treasury, concerning acceptance and payment. The superintendent of the New York Assay Office informed the Treasury that the approximately seven million dollars of gold had no identifying marks and that "the bars deposited have already been melted in United States mint bars." The Treasury suggested that the Federal Reserve Board determine whether Guaranty Trust Company had acted "for its own account, or the account of another in presenting the gold," and particularly "whether or not any transfer of credit or exchange transaction has resulted from the importation or deposit of the gold."20
On November 10, 1920, A. Breton, a vice president of the Guaranty Trust, wrote to Assistant Secretary Gilbert of the Treasury Department complaining that Guaranty had not received from the assay office the usual immediate advance against deposits of "yellow metal left with them for reduction." The letter states that Guaranty Trust had received satisfactory assurances that the bars were the product of melting French and Belgium coins, although it had purchased the metal in Holland. The letter requested that the Treasury expedite payment for the gold. In reply the Treasury argued that it "does not purchase gold tendered to the United States mint or assay offices which is known or suspected to be of Soviet origin," and in view of known Soviet sales of gold in Holland, the gold submitted by Guaranty Trust Company was held to be a "doubtful case, with suggestions of Soviet origin." It suggested that the Guaranty Trust Company could withdraw the gold from the assay office at any time it wished or could "present such further evidence to the Treasury, the Federal Reserve Bank of New York or the Department of State as may be necessary to clear the gold of any suspicion of Soviet origin."21
There is no file record concerning final disposition of this case but presumably the Guaranty Trust Company was paid for the shipment. Obviously this gold deposit was to implement the mid-1920 fiscal agreement between Guaranty Trust and the Soviet government under which the company became the Soviet agent in the United States (see epigraph to this chapter).
It was determined at a later date that Soviet gold was also being sent to the Swedish mint. The Swedish mint "melts Russian gold, assays it and affixes the Swedish mint stamp at the request of Swedish banks or other Swedish subjects owing the gold."22 And at the same time Olof Aschberg, head of Svenska Ekonomie A/B (the Soviet intermediary and affiliate of Guaranty Trust), was offering "unlimited quantities of Russian gold" through Swedish banks.23
In brief, we can tie American International Corporation, the influential Professor Lomonossoff, Guaranty Trust, and Olof Aschberg (whom we've previously identified) to the first attempts to import Soviet gold into the United States.
Guaranty Trust's interest in Soviet Russia was renewed in 1920 in the form of a letter from Henry C. Emery, assistant manager of the Foreign Department of Guaranty Trust, to De Witt C. Poole in the State Department. The letter was dated January 21, 1920, just a few weeks before Allen Walker, the manager of the Foreign Department, became active in forming the virulent anti-Soviet organization United Americans (see page 165). Emery posed numerous questions about the legal basis of the Soviet government and banking in Russia and inquired whether the Soviet government was the de facto government in Russia.24 "Revolt before 1922 planned by Reds," claimed United Americans in 1920, but Guaranty Trust had started negotiations with these same Reds and was acting as the Soviet agent in the U.S. in mid-1920.
In January 1922 Secretary of Commerce Herbert Hoover, interceded with the State Department in behalf of a Guaranty Trust scheme to set up exchange relations with the "New State Bank at Moscow." This scheme, wrote Herbert Hoover, "would not be objectionable if a stipulation were made that all monies coming into their possession should be used for the purchase of civilian commodities in the United States"; and after asserting that such relations appeared to be in line with general policy, Hoover added, "It might be advantageous to have these transactions organized in such a manner that we know what the movement is instead of disintegrated operations now current."25 Of course, such "disintegrated operations" are consistent with the operations of a free market, but this approach Herbert Hoover rejected in favor of channeling the exchange through specified and controllable sources in New York. Secretary of State Charles E. Hughes expressed dislike of the Hoover-Guaranty Trust scheme, which he thought could be regarded as de facto recognition of the Soviets while the foreign credits acquired might be used to the disadvantage of the United States.26 A noncommittal reply was sent by State to Guaranty Trust. However, Guaranty went ahead (with Herbert Hoover's support),27 participated in formation of the first Soviet international bank, and Max May of Guaranty Trust became head of the foreign department of the new Ruskombank.28
Footnotes:1U.S. State Dept. Decimal File, 861.00/3094.2This section is from U.S., Senate, Russian Propaganda, hearings before a subcommittee of the Committee on Foreign Relations, 66th Cong., 2d sess., 1920.3Morris Hillquit was the intermediary between New York banker Eugene Boissevain and John Reed in Petrograd.4U.S. State Dept. Decimal File, 861.00/4214a.5Ibid., 861.00/1938.6Ibid.7Ibid., 861.00/2003.8Ibid.9Ibid., 861.00/2002.10Ibid.11Ibid., M 316-18-1306.12Ibid.13Ibid.14Ibid.15V. 1. Lenin, Report to the Tenth Congress of the Russian Communist Party, (Bolshevik), March 15, 1921.16William Reswick, I Dreamt Revolution (Chicago: Henry Regnery, 1952), p. 78.17U.S. State Dept. Decimal File, 861.51/815.18Ibid., 861.51/836.19Ibid., 861.51,/837, October 4, 1920.20Ibid., 861.51/837, October 24, 1920.21Ibid., 861.51/853, November 11, 1920.22Ibid., 316-119, 1132.23Ibid., 316-119-785. This report has more data on transfers of Russian gold through other countries and intermediaries. See also 316-119-846.24Ibid., 861.516/86.
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