War Business

RAYMOND CLAPPER November 1 1934

War Business

RAYMOND CLAPPER November 1 1934

War Business


ONE FACT has thrust itself like a warning finger out of the investigation which a special committee of the United States Senate is making into the traffic in arms. It is that the manufacture and

sale of war weapons is a commercial business, conducted for profit.

Its salesmen of death rove the world. They are like other good salesmen who seek customers for life insurance, automobiles, radios or fur coats. They have just two objects. One is to stimulate demand for their wares. The other is to increase the volume of their sales.

Making and selling rifles, machine guns, powder, submarines, poison gas, is at present a commercial business, just like making and selling toys and men’s neckties. The fact that one article may be intended to kill a human being or help annihilate a nation, while the other is designed to delight a child, is purely an accidental circumstance. The object is to sell them and make money. Sometimes devious methods are deemed advisable to get the business. Maybe the prospective . buyer has to be frightened by being tipped off that his competitor is putting in a new line of the latest thing in ladies' coats or submarines. Or possibly the buyer is looking for a little side inducement, and in such case he may be taken out to dinner and treated to champagne; or if he be a government official buying naval equipment, it may be expedient to "grease” the way to clinch the sale.

Some of this no doubt has been dimly perceived by all who have given any thought to the matter. But the contribution which the Senate committee has made has been to haul some of these manufacturers and salesmen of war weapons before it, and from their own lips broadcast to the public a perfectly astounding deluge of factual detail, with names and circumstances, showing exactly how an ace munitions agent softens up his customers and makes his sales.

It is inconceivable that these disclosures, which as yet have barely scratched the surface, will not have a profound effect. For one thing, it may set people of all countries—for literally thousands of words of the proceedings have been cabled to the press of all nations—to wondering if the effort to curb wars which has taken place since Versailles has not been energy spent mostly at the wrong end of the problem. What is the use of prolonged disarmament discussions at Geneva when private munitions manufacturers behind the various governments find it to their interest to block an agreement? How successfully can a Secretary of State at Washington mediate to bring peace between two South American countries when officials of those governments are accepting secret “commissions” for giving war orders to munition makers in the United States? Of what effect are arms embargoes when a munitions manufacturer in the

United States, with his South American market cut off, diverts his orders to a foreign ally and continues to receive a fat share of the profits for throwing the business?

These are questions raised by the evidence produced by the Senate committee, and they all point to the central fact that uncontrolled private manufacture of war equipment for profit sets up influences which run contrary to the endeavors of statesmen to prevent wars. It is like the futile attempts of the United States Government to suppress crime while allowing any thug to walk into a store and buy a gun with no questions asked.

The curse of the munitions business is not so much that it makes big profits in time of war. Wheat farmers, shipyard workers, and all manner of men made more money during the last war, so far as the United States was concerned. A good deal of the profit was confiscated by high taxes. And

when war actually is on, who is to say that the concern which makes shells is contributing any more than the Southern farmer who raises the cotton which goes into the explosive?

Of more immediate significance is the means that arms makers use to stimulate peace-time sales. Here the record of the Senate investigation is prolific with sordid detail.

Take the matter of “greasing the way” with government officials in numerous countries to induce them to give the order which the arms salesman is after. Bribery is a legal term to be used sparingly and not promiscuously. Sometimes the facts indicate possible bribery, sometimes not. They will have to speak for themselves. One company paid “commissions.” Another used “grease” to get orders. In South America “palm oil” was spread. In China they called it “squeeze money,” and in Turkey “baksheesh.”

To be more specific, Sir Basil Zaharoff, that roving mystery man and master arms pedlar writes the Electric Boat Company, the only private American manufacturer of submarines, acknowledging receipt of 391,497 pesos “with which I am doing the needful.” He was trying to sell the American company’s submarines to the Spanish Government. The vice-president of this concern writes to an official of Vickers, Ltd., the British company to which South American business was being thrown, because he “did not think it would look well” for the Electric Boat Company to be selling submarines to Chile when it had contracts with Peru, and gives him this friendly tip on how to do business:

“This is an appropriate time for me to tell you that none of us here have ever met our Chilean representative, and consequently we cannot in any way vouch for his reliability. We all know, however, that the real foundation of all South American business is graft, and it may very well be that he knows the proper people to pay in Santiago.”

He also suggested that it would be well not to be “too modest about the price” for it was his experience “that at the last minute something extra is always needed to grease

the ways.”

The company’s agent in Peru frequently wrote his home office asking money for “special commissions” and “extra local commissions.” One request came while he was bargaining for an order in Argentina. “It was needed to pay some people in Buenos Aires,” the president of the Electric Boat Company told the Senate committee. The agent in another letter asked for $20,000 for a “J.L.” Senator Bennett Clark of Missouri, a member of the committee, asked Henry, RCarse, president of the Electric Boat Company, if the mysterious “J.L.” was Juan Leguia, son of the then President of Peru. The son figured in the Senate banking investigation some time ago for having accepted a large commission

Continued on page 15

Continued from page 10

from a New York house which desired to float Peruvian bonds. Mr. Carse said he did not know, although the son had done some work for the company.

When the American Armament Company was arranging a deal in Brazil last year, $50,000 was set aside to be given to an unnamed Cabinet adviser of the Brazilian Government. Senators questioned the president of the company, A. J. Miranda, about this.

“It is hard to understand here,” he replied, “but it is a certain way those people have down there of going about business.” Miranda received a letter from the Soley Armament Company, of Great Britain, advising him also that arms deals generally required “greasing” of officials.

Lawrence Leon, Mexican representative of the Curtiss-Wright Export Corporation, wrote his home office :

“I have never seen a country where graft is so freely taken for granted. I promised a sedan to the chief engineer in charge of the shops if he is successful in switching this initial order to us.” Comptroller General Lopez of Bolivia, was described as a “silent partner” in Webster and Ashton, Bolivian agents for Curtiss-Wright, and at the same time the letters referred to Lopez as “one of the few honest men” in that country

Selling to Both Sides

IN THIS connection, officials of the Curtiss-Wright Company, while testifying, charged that foreign competitors were using “grease” and unfair methods in seeking airplane orders, and declared they would not resort to such tactics. Incidentally, it is when these competitors begin revealing the methods of each other that the fuller story comes out. The head of the American Armament Company charged that Vickers, in one sales drive in South America, made use of women of questionable character. The Driggs Ordnance and Engineering Company, an American concern, was advised by its agent in Turkey that the Vickers crowd was providing the “dirtiest” competition. “They have almost an entire embassy working for them and use women of doubtful character

If the munitions makers let the sky be the limit in their methods of obtaining an order, they were equally enterprising in their quest for customers. Without hesitation they attempted to sell to both sides wherever trouble and war threatened. In fact they made a virtue of it by boasting that they were impartial in making their wares available to all who would buy. Wherever there were rumors of war, arms salesmen swooped down. The Electric Boat Company was active in trying to sell submarines to Peru when relations with Chile became strained. This concern’s Washington agent tried to persuade the Navy Department to send a fleet of submarines to Latin America on what Senators described as a “sales tour.” It bargained for contracts in Peru, Chile, Argentina and Brazil, though the efforts were not very profitable. Contracts were obtained only from Peru, which still owes the company, $1,000,000, its president says. This concern was charged with violating neutrality in 1916 by selling submarines to Italy through a dummy contractor who was actually the company’s Paris agent.

When the year’s armistice between Colombia and Peru expired last March, the American Armament Corporation began negotiating for several million dollars worth of war supplies.

The managing director of the Soley Armament Company wrote the American Armament Corporation, its agent in the United States, seeking to unload British surplus arms on the War Department to be furnished to China, and urged that the prospects would be improved by pointing out the danger of trouble in the Orient. This

letter is a good sample of how arms salesmen play upon war fears and stimulate them. It read in part:

“To place herself in a favorable position, Japan must either buy over the Soviet or fight them—and Japan will do one or the other before attending to some more of China.

“Such a move on Japan’s part would seriously affect the United States interests in China, and we think that the United States would, under the above circumstances, support the Chinese, supply them with arms, etc.

“In such an eventuality something might be done with the big stocks of rifles here, also machine guns, and we think it might be very advisable for you to approach the United States Department for Foreign Affairs and the War Department and hand them a list of what stocks there are over here, informing the departments at the same time that you are the sole representative for the United States.

“It is doubtful if your authorities are aware of the stocks here, for the United States does not ferret around with spies or ‘intelligence’ people to the extent that Europe does, and if some sudden emergency did arise in the Far East there would be a big rush for surplus materials for immediate delivery.”

This letter in describing the stocks on hand, referred to bullets of the incendiary or tracer type.

“As you know,” it added cynically, “incendiary bullets are prohibited, so they have become ‘tracers’ —what is in a name?” Committee investigators reported that the Curtiss-Wright Export Corporation sold fifty planes to Colombia and four more to its potential enemy, Peru, and that it sought sales in Paraguay while it was selling planes to hostile Bolivia in 1932 and 1933. Referring to efforts to develop a market in Paraguay, the company’s agent in South America wrote to his home office:

“If we are able to sell them anything, we will have to work very carefully and quietly and possibly through you as an individual, as the Bolivian Government would naturally raise ‘merry hell’ if they believed we were dealing with their enemies.”

Because of possible international complications which some members of the com mittee said might lead to bloodshed in a “certain” South American country, letters revealing efforts of the duPont interests to block construction of a powder factory in Argentina by German interests, was suppressed.

In at least one instance we find a missionary, doing a little munitions selling on the side. The Federal Laboratories, Inc., manufactures tear gas weapons including bombs and “billies.” The president of this company, John W. Young, has a brother, Paul, who went to Ecuador as a missionary, and gave demonstrations of tear gas bombs and gas-loaded billies to officials of the Ecuadorean government when he was not engaged in saving souls. After referring in a letter to his brother to “missionary work” in behalf of tear gas weapons, he wrote on April 21, 1932, to his brother a letter which speaks for itself:

“Since writing you last we have been in our Indian Station in Agito, Olavalo. We had a week of joyful simple life. Our visit was a blessing to us and we have reason to believe it was also a blessing to Miss Brown and Miss Robel,thetwo brave girls stationed there. Six or eight Indians showed a desire to follow the Lord and we prayed with them. Some of them had made previous beginnings but had been pulled down by sin. Indian work needs a great deal of prayer.

“Yesterday I saw the Minister of War again and made arrangements to demon-

strate today. The minister, two generals, the head of the police of Quito and a number of officers and soldiers were present. I used the ‘billy’ first, but I am sorry to say it did not prove a success. I shot it at two soldiers, but they were able to stand the gas and get me. I then shot the grenade in a room and asked the men to go in. This was a real success and helped to gain what I had lost through failure of the billies.”

The same letter asked John for quotations on 100 “billies” and 200 grenades for the Ecuadorean government!.

Getting Government Help

THE STORY is saturated with incidents of all kinds revealing attempts, some successful and some not, by munitions makers to obtain government help in their sales activities. It must be borne in mind that government officials, especially in the War and Navy Departments in the United States, and similar officials in other governments, naturally have frequent contact with representatives of munitions companies. They are constantly letting orders, and in the course of these negotiations the munitions salesmen, like all salesmen, attempt to cultivate friendly and intimate personal relations with their prospective customers.

I This provides the opportunity, which the munitions makers are not backward about utilizing, to angle for government help in closing a deal with some other government.

We find our ubiquitous old friend, Sir Basil, the master salesman of them all, while at Madrid attempting to sell submarines for the Electric Boat Company, writing back to the main office in New York urging that the State Department be persuaded to get in on the play. Sir Basil is a “smoothie” all right, and his letter to the vice-president of his company is well worth reading in full :

Paris, 3rd November, 1925. Coufidential My dear Spear:

The Germans are moving terribly in Spain, and unless we all combine against them, we may find them installed there one day, and action is necessary.

The United States Ambassador (the late Alex Moore) is a very clever gentleman and highly esteemed, and I think that you should arrange for instructions to be sent to him from your State Department, for him to tell the Spaniards that the United States Government work very harmoniously with the Electric Boat Company, with whom they exchange ideas, and that the United States hope that the Spanish Government is satisfied with the guarantee of the Electric Boat Company, combined with that of Vickers, and will not see any necessity for any other guarantee.

The English Government will be difficult to move in the same direction, but when you inform me that your government have given the necessary instructions to their ambassador in Madrid, I will have no difficulty in persuading the British to do ditto, ditto, ditto.

I hope you are well, and with my homage to Mrs. Spear, and my kind regards to Mr. Carse—for himself and family, I am, Sincerely yours,

Basil Zaharoff.

This concern was not backward on numerous other occasions. With the consent of the State Department, the American ambassador in Brazil, Edwin V. Morgan, helped the company in an undisclosed way. The company approached the State Department for help in collecting payment from Peru. Letters between officials of the company in 1928, mentioned an Admiral Howe, then head of the American Naval Mission to Peru. One letter said:

“We have today paid for the cabin accommodation for Mrs. Howe and son on the Leviathan, and note that the other outlay will not be called for until next month. Is the money we have just paid, part of the agreed outlay, or is that something extra?”

The circumstances have not been further explained up to the time of this writing. Two other admirals were alleged to have participated in negotiations with Turkish officials for orders from this company, although no business resulted from the discussions. The company’s Washington agent wrote in 1928 that prominent officials of the United States Government had been taken on a demonstration pleasure boat sent to Washington by the Electric Boat Company. He mentioned in the group an admiral, the Turkish and Japanese ambassadors, the chief of naval operations, and officials of the United States Shipping

^°arlt;^ Official Influence

THE NAVY “loaned” one of its officers to Colombia in 1932, and he drew up a plan of national defense for that country, with the Driggs Ordnance and Engineering Company not only “co-operating” but later using the information to promote sales. Giving detailed advice for the fortification of Cartagena, the United States naval officer stated: “The Driggs Ordnance and Engineering Co., who are furnishing quotations for the material involved, have given wholehearted support in working out these recommendations.” One official of this company handled a stock-market account for the naval officer. In 1929 the cruiser Raleigh was sent to Turkey, where it gave demonstrations of a particular concern’s guns. This provoked Senator Gerald P. Nye, chairman of the committee, to remark that “it looks to me like the Navy was used as a salesman’s sample case.”

When the American Armament Corporation wanted to have President Roosevelt’s arms embargo on Latin-American countries relaxed, they were accompanied to the State Department by Representative Fred. A. Britten, former chairman of the House Naval Affairs committee.

A letter from one arms official to another spoke gleefully of the visit of General Douglas MacArthur, chief of staff, to Turkey in 1932, saying he “apparently talked up American military equipment to the skies in discussions which he had with the Turkish general staff, and rather gather that your equipment and ours did not suffer from lack of praise.”

Members of the committee described the duPont companies as “semi-official,” a characterization which members of the famous munitions family did not dispute. Committee investigators found in their files a letter stamped “confidential” in which on August 8, General MacArthur asked the duPont Company not to “give away” any Army plans at the munitions investigation.

But when it comes to using official influence, apparently nobody has matched the success of the Vickers Company of Great Britain.

Now it might be supposed by those who wish to take the most charitable view of all these activities that, though they happen to be what some call “merchants of death,” these men were simply going about a disagreeable but necessary business with the thought that some time the human race would see its folly and stop trying to settle differences by warfare. In fact any number of times some of them have publicly stated that they wanted peace and hoped there would never be another war. Several years ago, after the activities of Shearer in throwing a monkey wrench into the Geneva arms conference of 1927 were exposed, Charles M. Schwab, of Bethlehem Steel, one of the largest manufacturers of armor plate and a large builder of warships, said that he hoped the world would never see another war. Certainly not all Army and Navy officers want war, even though it is their profession.

In the present state of the world, with governments prodded by their politicians, and often by their mass opinion, to arm to the hilt, the munitions salesman has a large ready-made market that beckons him. It is not fair to label him as an unvarnished culprit. Certainly, whatever may be said for the ethics of some European arms manufacturers, the duPont group in the United States has only a minor interest in

munitions. War goods constitute two per cent of their production, according to the company’s statements. Though it is the largest American munitions firm and stands to profit handsomely in wartime, its major profits now come from articles used for peaceful purposes—from General Motors in which it holds a fourth interest, from paint, transparent wrapping material, photographic film, chemicals.

Government Control is Likely

BUT, THOUGH all of this might be truthfully said of some in the industry, it cannot be said for all.

We find in the committee’s evidence a Vickers official, Charles W. Craven, writing to the Electric Boat Company, poking fun at disarmament proposals, alluding to the possibility of “Geneva or some other troublesome organization” upsetting some of Great Britain’s submarine plans.

We find in the committee’s papers a memorandum which the investigators said was carried to President Roosevelt last June by Thomas A. Morgan, president of the Aeronautical Chamber of Commerce, which said in part: “Congressional investigation, embargoes, pacifistic talk and propaganda will doubtless cause some of our present customers to buy abroad, due to the uncertainty of obtaining spare parts in the future.”

Major K. K. V. Casey, in charge of military sales for the duPonts, testified that his company’s representatives went to Washington and conferred with War and Navy officials on two occasions when embargo resolutions were pending in Congress. Aiken Simmons, a representative of the duPonts, called on Captain Gage, of the office of the Chief of Naval Operations, when the embargo resolution of Representative Hamilton Fish' of New York was favorably reported in 1932.

“Captain Gage will take appropriate action to have the bill opposed on the floor of the House,” Simmons wrote. Similar aid was solicited when the Borah embargo resolution, introduced at the request of Former President Hoover, was pending. In December, 1932, Simmons wrote that he thought the efforts of President Hoover and

State Department “cookie pushers” to invoke an arms embargo would come to nothing.

In the testimony was the charge that working agreements between the duPonts and the Imperial Chemical Industries, Ltd., of Great Britain, enabled the duPonts to collect commissions on Paraguayan and Bolivian war orders thrown to the English firm by a joint agent, in face of the embargo by the United States Government.

“You piously observed the embargo so far as America was concerned, but actually nullified its effect by giving the business to Great Britain,’’said Senator Arthur Vandenberg of Michigan, during the cross examination, which showed that the correspondence was signed on behalf of the company by its South American agent.

“There is no question about it,” said Irenee duPont, older partner in the firm. “I think the fellow made a bust.”

It is evident to most members of the Senate committee that some form of control over munitions manufacture and sale is desirable. Government ownership and production are not regarded as feasible. Munitions involve too many industrial processes. They are manufactured alongside of commercial products. But some form of license control, with reports to the Federal Government of all production, sales and shipments, is not unlikely.

However, the only real solution of the problems lies through international action. That is difficult when Germany, France and Great Britain as well as the United States, are influenced so deeply by the powerful munitions groups in those countries— groups which extend their tentacles out to many other nations and are in position to influence many officials in smaller countries.

It is the hope of members of the Senate committee that public opinion not only in the United States but in other nations will be sufficiently aroused by the current disclosures to insist upon and obtain action effectively to control munitions traffic.

Pending that day, which may or may not be so distant as some think, it is likely that the next Congress will attempt to establish a certain measure of control over the American end of the business.