by Kai Bird
For those not initiated into the double-sided logic of the intelligence business, his faith in the case now seemed a matter of sheer stubbornness. The situation looked hopelessly muddled. “It was hard to keep all the crisscrosses of the case in mind,” McCloy later admitted. “You met yourself coming back; it was a maze.” He now understood that, if the Germans were responsible for Black Tom, it was only to be expected that they would protect their subterfuge with another layer of subterfuge. Covert operations launched by a nation in the midst of war had nothing to do with the law; they were a matter of national security. It was possible that otherwise honorable men might now use dishonorable methods to cover up for their country’s misdeeds.
His law partners had good reason to be skeptical. For one thing, Adolf Hitler’s rise to power in Germany in early 1933 made it seem unlikely that the Germans would ever honor a successful award to the American claimants. Franz von Papen, the man who McCloy believed had organized Germany’s initial sabotage operations, was now Hitler’s vice-chancellor. Ben Shute, a young summer intern in the Cravath office that year, recalls, “Jack suffered from only one thing in the office, and that was that he had the Black Tom thing for so long that it just looked hopeless to so many. Swaine was getting discouraged. . . . I suspect that Ellen was the only one who believed in him at one point. . . . If Jack had wanted to drop it, I think they [the senior partners] would have agreed in a minute.”15
But by now, Black Tom had become his personal hobby, a welcome respite from the usual run of corporate law. Early in 1933, he went to Washington to plead his case before Stimson. It was a cold January morning when he walked into Stimson’s office, next door to the White House. The acerbic sixty-five-year-old secretary of state gave him a halfhour just before lunch to make his argument. He failed. Stimson flatly refused even to review the sabotage claims again, let alone to urge the Mixed Claims Commission to reopen the case. In his first documented encounter with the crusty old man who would later have so much to do with his career, McCloy seemed to make no impression; Stimson even misspelled McCloy’s name in his diary for the day.16
Not even this rebuff dampened McCloy’s determination to reopen the case. Gradually, his persistence began to pay off. After Roosevelt’s inauguration in the spring of 1933, McCloy discovered “evidence of collusion of a most extraordinary nature.” The Germans had bribed one of McCloy’s own handwriting experts to discredit his own expert testimony. In addition, he learned that some of Germany’s witnesses had been paid large sums to testify to falsehoods.
On the basis of this evidence of German fraud, the Commission umpire, Justice Owen Roberts, decided on December 15, 1933, almost exactly a year after his first decision, to reopen the sabotage cases. It was the first real victory achieved by the American claimants.
The day the decision was announced, McCloy boarded a ship bound for Ireland, where he hoped to track down yet another long-lost witness to the German sabotage rings. From British intelligence files, McCloy had learned that James Larkin, an Irish nationalist and labor-union organizer, might know a great deal about German sabotage operations. British intelligence agents had kept Larkin under surveillance when the Irish radical fled to the United States in 1914. Moreover, Larkin freely admitted that during the war he had had personal knowledge of von Papen’s sabotage operations in New York. This had been enough to send McCloy on his way to Dublin, where Larkin, the general secretary of the Workers’ Union of Ireland, now lived.
For shipboard reading, he took a batch of documents on Larkin dug out from the War Department’s archives. Born in 1875, Larkin came to New York in November 1914, and did not return to Ireland until early 1923. In the interlude, he became a good friend of Bill Haywood, the colorful chief of Industrial Workers of the World, and an active IWW organizer himself. In November 1919, he was indicted for “preaching anarchy,” and the New York courts sentenced him to five years in prison. His cause was taken up by Roger Baldwin, founder of the American Civil Liberties Union, and in January 1923 he was pardoned by Governor Alfred Smith.17 In short, the man McCloy was about to interview was a legendary radical on both sides of the Atlantic Ocean.
Not until shortly after Christmas was McCloy able to arrange an interview with Larkin in the presence of the Irishman’s solicitor. This first meeting between the Wall Street lawyer and the union leader got off to a cool start. Larkin said he was sorry that McCloy seemed to have gone to so much trouble to see him, but he was not interested in helping any “monied interests.” McCloy did not allow this refusal to end the matter; over the next few days, he patiently cultivated the charismatic Irishman, pointing out that, if his clients lost the case, other “monied interests,” such as the North German Lloyd Steamship Company, would benefit. Larkin agreed that this “would be most unjust,” since those German steamship interests “through their officers and employees were important instruments of sabotage utilized by the German government in America.”
“Then purely in the interests of justice,” McCloy said, “you should furnish me with whatever information you have.”
Larkin hesitated for a moment and then said he might be prepared to give him a “brief statement.” Several conversations and three days later, McCloy finally persuaded him to tell his whole story. The union leader began dictating from memory shortly before lunchtime and was not finished until 12:15 A.M. That same night, McCloy took him to the U.S. Consulate, where he had a sleepy consular officer notarize the document. After driving Larkin to his home on Wellington Road and saying good-bye, McCloy didn’t get to bed until 2:00 A.M. He rose early that morning and caught the 8:00 A.M. boat for London.18
Larkin’s affidavit was better than McCloy could have hoped. The Germans had been strongly attracted to Larkin’s forceful personality, recognized him as a leader of stature among Irish Americans, and accepted him informally into their innermost councils. He had been courted by German officials, including Captain Franz von Papen. Larkin said a Captain Karl Boy-Ed, a German naval officer who helped von Papen to direct the sabotage campaign, offered him $200 a week “to organize a group of men, non-Germans, to work along the waterfront, as the Germans were under too strict a surveillance.” He was even taken to a demonstration of an incendiary device made of white phosphorus. On one occasion, they discussed a plan to destroy the “Jersey City terminus,” otherwise known as Black Tom. His affidavit was filled with remarkable detail, including names, dates, and places of meetings. The only disappointment was that Larkin could give no firsthand corroboration of what actually happened at Black Tom or Kingsland. But his statement went very far to establish that von Papen and other high-ranking German officials had been involved in sabotage.
Back in New York, McCloy spent weeks verifying the facts contained in the Larkin affidavit. There was only one incident related in the affidavit that puzzled McCloy. Larkin said that the German saboteurs often used to meet in a New York art gallery on Fifth Avenue owned by someone named Unstengel. He had hesitated over pronunciation of the name, but he was quite certain about the location of the art store and described in detail the upstairs room in which the conspirators met.19
Through an anonymous tip, McCloy soon learned that the mysterious “Unstengel” was none other than Dr. Ernst Franz Hanfstaengl, then employed as Adolf Hitler’s foreign-press spokesman. Hanfstaengl—or “Putzi” as he had been known at Harvard—was a towering six-foot-fourinch German with an American mother. His family owned a publishing business in Munich and a high-class art store on Fifth Avenue in New York City. Educated in the United States, Putzi had society connections that allowed him to meet men like Pierpont Morgan and Henry Ford. At Harvard he had known Walter Lippmann, T. S. Eliot, and John Reed. While running the family art store in New York, Putzi took most of his meals at the Harvard Club, and there he formed a passing friendship with a rising young state senator, Franklin Roosevelt.
For all these connections, Putzi remained a staunch German nationalist, and during the war he had only avoided internment by hiring as
his attorney former Secretary of State Elihu Root. After the war, he went back to Munich, where he was introduced to Adolf Hitler and participated in the 1923 Munich Beer Hall Putsch. Thereafter, his wit and love of practical jokes made him a bit of the court jester in Hitler’s inner circle. His vigorous piano playing, particularly of Hitler’s favorite Wagnerian themes, seemed to soothe the Nazi leader’s nerves.
President Roosevelt had not forgotten his German friend, and soon after his assumption of the presidency, he sent a private emissary to Hanfstaengl. Roosevelt hoped that, in view of their long acquaintance, Putzi would do his best with Hitler to prevent any “rashness and hotheadedness.” The president was quoted as saying, “Think of your piano playing and try and use the soft pedal if things get too loud.”20
McCloy was unaware at this time of Hanfstaengl’s back channel to the president. All he knew was that now both Hitler’s vice-chancellor, von Papen, and his foreign-press chief, “Putzi” Hanfstaengl, were implicated in the Black Tom conspiracy. When Hanfstaengl visited America briefly in 1934, McCloy tried to obtain an affidavit from him on Black Tom. Hanfstaengl brushed him off. At this stage in his career, the Nazi official had every reason to keep his silence about those mysterious meetings in his art shop on Fifth Avenue.
By 1936, McCloy was beginning to feel that he finally had his “ducks all lined up.” New facts had begun to turn the case around. He had learned that, if he was to defeat the Germans at this game of intrigue, he had to be willing to use a bit of guile and deception. Among other things, he helped smuggle a historian into an Austrian archive where a batch of military documents were found reporting on sabotage operations in America. He also hired detectives to shadow German officials affiliated with the case, and once he asked the phone company to trace their telephone calls.
The Germans could not help suspecting that in the next hearing before the Mixed Claims Commission their case might not prevail. That summer, Hermann Goering, Ministerpräsident of the Third Reich, indicated that Germany was now amenable to an out-of-court settlement. Hitler delegated a top aide to Minister Without Portfolio Rudolf Hess, Hauptmann von Pfeffer, to be his personal representative in the negotiations.
Soon afterward, the American claimants sent a delegation to Munich to begin the discussions. McCloy, accompanied by Ellen, arrived late on the evening of June 28, 1936, and checked into the luxurious Reginapalast Hotel. The next day, Monday, June 29, the lawyers were told that Hitler’s representative, von Pfeffer, was in town and meeting with the Führer to discuss the sabotage cases. For the period of the negotiations, July 1-10, von Pfeffer was the Americans’ primary contact with the Nazi government. Only once during their stay in Munich did McCloy meet with a high-ranking Nazi official, and even then his appointment with Rudolf Hess was brief and perfunctory.
In retrospect, McCloy would always say that from this experience in dealing with Nazi officialdom he had come to expect the future conflagration. “It was terrifying. All those goose-stepping soldiers. I could feel war in the air. . . . I knew then that they were a bunch of thugs.” While they were in Munich, the Nazis celebrated the tenth anniversary of their first party congress, and Hitler proclaimed Nazi rule eternal.21 The decidedly martial atmosphere made such an impression on Ellen that years later her dreams were sometimes haunted by images of Nazi Germany.
Despite the oppressive atmosphere, McCloy’s negotiations with the Germans went surprisingly well. Von Pfeffer made an offer which the claimants found to be more or less satisfactory. Over the next few days, McCloy was frequently on the phone to New York, consulting with his clients and other lawyers about the German conditions.
When a settlement had been reached, the Germans hosted a celebratory dinner in a Munich restaurant. At the end of the meal, McCloy’s host suddenly stood up and requested that a phonograph be placed on the table. A record was placed on the turntable, and McCloy, expecting music, was suddenly dumbfounded to hear his own voice talking by phone to his Cravath colleagues in New York. All his transatlantic phone calls had been recorded. The Germans, not a bit embarrassed to demonstrate that they had tapped his phone, roared with laughter at his obvious discomfort.22
While waiting for the Germans to ratify the final agreement, the McCloys and the other lawyers went to Berlin to attend what the Nazis were advertising as the “biggest show on the earth,” the 1936 Summer Olympics. As a courtesy, the German Foreign Office arranged for the McCloys to sit next to Goering in Hitler’s private box at the new Olympics stadium. He felt as if he had been given a “window on the center of the Nazi regime.”23 Amid the sporting events, the Nazis put on a dazzling military spectacle with thousands of goose-stepping soldiers and a band blaring the overture of Wagner’s opera Rienzi. 24
Upon his return to Munich, McCloy discovered that the agreement he had negotiated with von Pfeffer seemed to be coming unstuck. The German authorities still had not ratified the settlement. McCloy waited in Munich, hoping that the Nazis would sign the accords and end the case. Finally, after two weeks, his patience gave out and he left Germany empty-handed.
Only in New York did he learn what had happened. A few American attorneys whose corporate clients had something to lose by a settlement of the sabotage claims had undermined the Munich agreement. Prior to 1930, a number of U.S. banks and corporations had received compensation for war losses not contested by Germany from the Mixed Claims Commission. Actual payment was from a limited Special Deposit Fund of monies contributed by both Germany and the United States. These funds could not be fully distributed to the “award-holders” until all outstanding claims before the Commission were settled. Since there was a limited pot of money, the award-holders stood to gain a higher percentage of their awards if the sabotage cases were dismissed.
Award-holders included Chase National Bank (controlled by Rockefeller interests), Standard Oil, Guaranty Trust, Western Electric, Singer Manufacturing Co., and various insurance firms. Most of these companies had actually received 100 percent of their initial losses, or more. But they also insisted on receiving the full value of the interest payments due on their awards.25
McCloy was aware of the opposition by Chase Bank and other award-holders, but he was startled to learn that Chase had sent a lawyer to Germany to lobby against the agreement. Then, in the autumn of 1936, he heard of an incriminating letter addressed to Hitler’s treasurer, Reichsbank President Hjalmar Schacht. McCloy quickly managed to obtain a copy of the letter, signed by Joseph C. Rovensky, a vice-president of Chase National Bank.26
The letter urged Schacht to scuttle the negotiated agreement, and warned the German banker that “numerous institutions in America” were determined to “use every means at their command” to void the agreement. McCloy thought this language could make Rovensky or Chase Bank itself liable for prosecution under the Logan Act, which prohibits private citizens from interfering in the conduct of U.S. foreign policy.27 He contacted the FBI, but after a year and a half, Justice Department officials concluded they would have to get Schacht, von Pfeffer, and other high-ranking German Foreign Office officials to testify in American courts. That seemed out of the question, so the assistant attorney general recommended the case be dropped.
By the end of the 1930s, McCloy’s legal career was indelibly linked to one case. Friends on Wall Street inevitably described him to strangers as the Black Tom man, and they would tell the stories McCloy himself so frequently told, of spies, messages written with invisible ink, and intercepted radio ciphers. These were entertaining stories, but McCloy’s friends sometimes wondered if the case would ever amount to anything. With the collapse of the Munich accords in 1936, the Mixed Claims Commission resumed its deliberations, acting as if the near settlement at Munich had never happened. The Commission’s 1936 decision to reinstate the sabotage claims to where they stood prior to the 1930 Hague decision required a whole new set of briefs, reply briefs, and oral arguments. The Germans dragged their feet, and thus succeeded in stretching out the process for almost two years.
Carl Ahrendt, a German American employee of the Eastern Forwarding Co., had testified that he had no knowledge of Hilken’s or Herrmann’s sabotage activities. But in a letter dated January 19, 1917, eight days after the Kingsland fire, Ahrendt had written a damning postscript in an otherwise innocuous business letter to Hilken. As an afterthought, he congratulated Hilken:
Yours of the 18th just received and am delighted to learn that the von Hindenburg of Roland Park won another victory.
Had a note from March who is still at the McAlpin. Asks me to advise his brother that he is in urgent need of another set of glasses. He would like to see his brother as soon as possible on this account.29
It had already been established that Herrmann frequently used the alias March, that he was staying at the McAlpin Hotel in January 1917, and that the “glasses” he needed were the same glass incendiary tubes disguised as pencils that were used at Black Tom and Kingsland. Ironically, this sensational piece of evidence had always been within their grasp, and it was mere bad luck that it had not been discovered in 1933, when the Hilken papers were first subpoenaed. Had this occurred, the case might have been settled that year. But now there could no longer be any doubt as to the outcome. The Ahrendt postscript had been discovered just in time to be filed before the Commission’s final oral arguments, scheduled for the autumn of 1938.