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CHAPTER XXXIV

ALIEN PROPERTY SEIZED

N important phase of the operation of the government during the war was the treatment of alien enemies residing in this country. In 1917 two acts of Congress were passed dealing with this question. One known as the Espionage Act, approved June 15th, and the other the Trading with the Enemy Act, approved October 6th. Each of these acts covers a variety of subjects. The Trading with the Enemy Act, in dealing with subjects of Germany who are residents of the United States, authorized the appointment of an Alien Property Custodian, for the custody and control of enemy property within the United States, and on October 22d, A. Mitchell Palmer was appointed to the office, which he filled until March 5, 1919, when he became Attorney-General of the United States, and was succeeded by Francis P. Garvan, of the New York Bar, who had been his main assistant.

Mr. Palmer had been a member of Congress from the Twenty-sixth District of Pennsylvania for several years and had become a Democratic leader in Congress and in Pennsylvania. By common report, a report not denied, he had been offered the position of Secretary of War in President Wilson's first cabinet, but had refused the position because of his Quaker origin and associations. Yet Mr. Palmer had shown in politics that he had plenty of good fighting blood, and he emphasized this characteristic as Alien Property Custodian.

It has now become plain that long before the beginning of the great war Germany had been laying the foundation for the industrial conquest of America. Her powerful financial interests had invaded this country, and had acquired an immense degree of power and influence in the business affairs of America. The German Government was undoubtedly of the opinion that the German power in America would be

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easily able to keep America out of the war, or if we should in to paralyze our efforts. It is not alone that thousands of German citizens in the natural course of business had invested their earnings in American corporations or other enterprises, it was also discovered that an immense amount of capital was invested in America by interests closely associated with the German political and military powers. Such investors were already controlling many of the greatest industrial and commercial enterprises. These investors were aided by the German Government, and were hostile to the United States. They were secret allies of the German Government.

Years before the war the Germans had been coming to America and settling and becoming citizens of the new country. Yet by German law, they still retained their German citizenship. They held fast to their German language, they established German schools and newspapers and organized themselves into great German societies which kept constantly in touch with the Fatherland. They were good citizens, peaceful, industrious and educated, yet they did not assimilate readily with their fellow American citizens. Their love for the old country was kept alive by deliberate German propaganda.

They sympathized with Germany, and expressed their sympathy with great frankness. When America entered into the war such Germans and their children, born perhaps in America but German at heart, were in a most difficult position, and it is much to their credit that a very great majority of them preferred to stand by the country that they had adopted rather than the country of their birth. But a minority, strong in intelligence and wealth, became active enemies. It was with this class of men that the Alien Property Custodian had mainly to deal.

When Mr. Palmer began his duties he found that the act creating his office gave him very limited power, and he describes himself as at first being merely a "benevolent conservator of the property of our enemies." He was only to

act as a sort of guardian of the interests of others who could not look after their own property. He at once went before Congress to obtain greater power, and after some delay

obtained the adoption of three amendments to the Trading with the Enemy Act-first, the power to dispose of enemy property which might come into his possession; second, the power to seize and dispose of patents owned by Germans which were being protected by the American Government; and third, the power of requiring a corporation, a portion of whose stock was owned by enemies to issue new certificates in the name of the Alien Property Custodian for shares held in enemy territory. Each of these amendments was highly necessary, and it was not until they had passed that the Alien Property Custodian was able to turn over into American hands the important industries owned by the Germans.

On February 5, 1919, 35,400 reports of enemy property had been filed in the office of the Alien Property Custodian. For each verified case a separate trust was created. The number of those trusts when Mr. Palmer became AttorneyGeneral was 32,296 with an aggregate book value of $502,945,724. Nine thousand other cases had not at that date reached the stage of valuation. This, of course, was only a small part of the German investment in this country. During the winter before America entered the war German investors, foreseeing the certainty of war, dumped on America millions of dollars' worth of securities, which were thus, of course, owned by American citizens, when America entered the war.

The German property seized by the Alien Property Custodian is more than sufficient to repay American citizens for their losses by German submarines, before the war began, and will probably be used for that purpose. A great majority of the 32,000 trust estates were simply held by the Alien Property Custodian as being private investments of individual Germans with no connection with the political powers of Germany, and such trust estates may easily be restored to the individual owners if that policy is thought wise. But these were in most cases comparatively small investments.

Big corporations which were German controlled were not only using their power against America, but in some cases turned out to be centers of German propaganda or even for German spies. An illustration of this was found in the Bayer Company owned by great German chemical inter

ests.

This corporation endeavored to continue business under the camouflage of American ownership and finally, when Mr. Palmer was able to obtain control, he discovered, in the first place, more than a million dollars of concealed government taxes, and in the second place, government agents found in the cellar of the company's warehouse twenty-three trunks containing letters and documents from private files of Bernstorff, Dernberg and other leaders of the German spy system in America.

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Another interesting German company was the OrensteinArthur Koppel Company which manufactured certain railroad supplies and machinery used in large industrial plants. the beginning of the World War this company contracted to supply these railway supplies to Russia. This was contrary to German law, but in a communication sent to the German Embassy at Washington they expressed the hope that they would be pardoned, as they really had rendered a great service to the Fatherland by making the contract and failing to deliver the goods. This same company, as well as eighteen branches of German insurance companies in this country, obtained ostensibly for their own use floor plans and specifications of the various industrial plants with which they did business, and the fact that in many of these plants explosions later on occurred at vulnerable points, seemed to government agents an extraordinary coincidence.

Another interesting bit of information was brought to light by the Alien Property Custodian in connection with the harbor of St. Thomas. Germany for a long time had prevented Denmark from selling these islands to America. In January, 1917, the United States purchased the islands. When the Alien Property Custodians seized the HamburgAmerican line he investigated the ownership of the great terminal of that line at St. Thomas. He found that the plant was fitted up as a naval base, that the principal building commanding the harbor was of reinforced concrete, that the plaza in front of it had an eight-foot foundation of concrete such as is used for gun emplacements. It would have been easily possible for a ship of the Hamburg-American line, in which the Kaiser was a stockholder, to have unloaded long-range

guns from its hold and made the port a fortification of tremendous strength. The owner of the property was a Danish lawyer, by name Jorgensen, who claimed to have purchased it from the agent of the Hamburg-American, five days after the United States had purchased the islands, for $210,000, for which he had given his note, a note payable in three months without interest, with the provision that it should be renewed every three months until after the war. The Hamburg-American agent, who had been the German Consul to St. Thomas, was still in charge. The Germans were caught in their own trap. Jorgensen was forced to transfer his title to the Alien Property Custodian and the property was sold to the Government of the United States for the nominal sum which the Hamburg-American line itself had fixed as its price in the sale to Jorgensen.

This company's office in New York was a meeting place for all German agents in America before America entered the war. After the seizure of this property and the transfer of its ownership to the United States Government Herr Ballin, the head of the Hamburg-American line, seeing his dream of world-wide commercial empire dissolved, committed suicide.

One of the most important weapons employed by the Alien Property Custodian was the seizure of German-owned patents, especially of those connected with the dye-stuff industry. German chemists had a practical monopoly of dyestuff and chemical business in American markets on account of their patents of processes and products. This industry was almost a German state institution. Some 4,500 German patents were seized by the Alien Property Custodian and a corporation was formed known as the Chemical Foundation, with a capital stock of $400,000 and a common stock of $100,000 to acquire these patents. Under this company the use of the processes and products covered by the patents was granted to the entire chemical industry, and thus an important impulse has been given to the upbuilding of industrial chemistry in America.

This is but one of the great American industries which has been freed from German control as a result of the war.