Chapter 9
GUARANTY
TRUST GOES TO RUSSIA
Soviet Government 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
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
prominent 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.
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
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.3
As 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
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,
Washington
Washington
Sir: 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 enclose 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 enclose herewith an envelope
addressed to Mr. Chadbourne, in which are enclosed 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
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
Ira N. Morris
* * * * *
Mr. I. N. Morris,
American Minister, Stockholm
Deal 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 Reserbureau
E. Molin
* * * * *
A. B. Nordisk Resebureau.
Stockholm
Gentlemen: 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
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.
William Phillips,
Acting Secretary of State.
Enclosure: Sealed letter addressed Mr. Thomas L.
Chadbourne, enclosed 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
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 meat packers, for fifty million pounds of food products,
valued at approximately $10 million. The Morris meat packing family was related
to the Swift family. Helen Swift, later connected with the Abraham Lincoln
Center "Unity," was married to Edward Morris (of the meat packing
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 pounds 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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