A Law Unto Itself: The Untold Story of the Law Firm of Sullivan and Cromwell [1 ed.] 0688048889, 9780688048884

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___

A LAW UNTO ITSELF THE UNTOLD STORY OF THE LAW FIRM SULLIVAN & CROMWELL 100 Years of Creating

Power & Wealth M

A

most interesting look behind normally closed doors...

—

Professor John

Kenneth Galbraith

Nancy isagor & Frank I

I

ipsius

91

AIAW

UNTO

ITSELF THE UNTOLD STORY OF THE LAW FIRM SULLIVAN & CROMWELL Nancy Lisagor & Frank

A Law

Unto

Itself is

the

major American law

first

Lipsius

social history of a

firm.

Researched and written by impartial authors, this

book peers down

the corridors of Sullivan

&

Cromwell, one of the nation's few remaining secret repositories of power.

the firm's partners have

had

It

describes

a crucial

impact on

American business, government, and tional relations for

A tive

Law Unto

Itself

on American

direct

more than

It

interna-

century

a

gives a wholly history.

how

new

perspec-

details the firm's

and potent influence on world

affairs.

These include the building of the Panama Canal, the Great Depression, assistance to a controversial

World War

II,

German government

the post- World

War

II

prior to

recovery

period (especially in Japan), and the reorganization of America's business in the 1980s

by

arranging mergers and acquisitions on an un-

precedented

scale.

Here

is

an eye-opening ex-

cursion into the American past

(Would John

Foster Dulles have been confirmed as secretary of state

after

business,

publication of this book?) History,

and

ences—and

legal buffs will

marvel at the

differ-

the similarities— in the legal meth-

ods of the 1980s

as

compared

to the 1880s,

(continued on back flap)

I

A LAW UNTO ITSELF

Digitized by the Internet Archive in

2012

http://archive.org/details/lawuntoitselfuOOIisa

A LAW UNTO ITSELF THE UNTOLD STORY OF THE LAW FIRM SULLIVAN & CROMWELL Nancy Lisagor and Frank Lipsius

WILLIAM MORROW AND COMPANY, INC New

York

©

Copyright

1988 by Nancy Lisagor and Frank Lipsius

No

All rights reserved.

part of this

book may be reproduced or

any form or by any means, electronic or mechanical,

utilized in

including photocopying, recording or by any information storage

and

system,

retrieval

without permission

in

writing from the

Publisher. Inquiries should be addressed to Permissions Depart-

Morrow and Company,

ment, William

New

Inc.,

105 Madison Ave.,

York, N.Y. 10016.

Library of Congress Cataloging-in-Publication Data Lisagor, Nancy.

A

law unto

Cromwell p.

/

itself

:

the untold story of the law firm Sullivan

Nancy Lisagor

&

&

Frank Lipsius.

cm.

ISBN 0-688-04888-9 1.

Sullivan

Biography. I.

&

3.

Lipsius, Frank.

KF355.N4L57 1988 338.V6134973— dc

—

— New York partnership — New York (N.Y.) —

Cromwell

Law

History.

2.

Lawyers

(N.Y.)-

History.

II.

Title.

19

1338.7613473]

87-35490

CIP Printed in the United States of

America

First Edition

123456789 BOOK DESIGN BY RICHARD ORIOLO

10

—

AUTHORS' PREFACE

The Supreme Court's 1977 decision to the "thirty-second

to

allow lawyers to advertise led

soap operas,'' the commercials for nationwide

law firms that portray death, injury, divorce, bankruptcy, and crime

human drama and tragedy on which the legal profession thrives Subways in New York show off the chilling frankness that makes lawyers so beloved with ads that begin in large type: "Had an

the

accident?"

Wall Street lawyers do the same thing public contact, since their work

dealing with the Securities

&

own way. The)

their

avoid

invokes corporate problems,

Exchange Commission and

Trade Commission and lighting takeovers, advertise on television, but the lawyers

they

do not

to get their

message

lor

this,

know how

like

the Federal

across.

Increasing numbers hire public relations consultants to

names more specialties.

the

visible

be seen

to

in legal

newspapers about broad changes

clobber other lawyers, as Sullivan the

more widely associated with

and

They want

&

in the

said,

"They know

just don't apply to

Over Sullivan

in

particular

publications and quoted

And

the law.

in the

partner

at

the rules, but

summer

o\

in

they want to

another big

sometimes

1987, which cited

New York

the) act as

if

law firm the rules

them''

the course oi four years oi writing this book,

&

their

front-page Wall Street Journal stor\ on

Cromwell's troubles

anonymous managing

who

make

Cromwell change

its

mind about

we have

seen

the role o\ publicity in

its

practice.

Nancy, a sociologist of law, terra incognita of

purposes:

started the project to explore the vasl

business-law firms that serve two

lighting

the

government

vital but

for their clients

unexplored

and making

a

AUTHORS' PREFACE

6

network among clients that could seem a blatant violation of the antitrust laws.

The

greatest of

untouched subjects was Sullivan

had not even written

own history,

its

as

many

& Cromwell, which

firms do.

Its

combination

It

was not so

of secrecy and important clients was unmatched.

surprising that the firm with the least to say publicly represented a large

percentage of Wall Street's investment banks, plus banks,

Exxon,

oil giants like

British Petroleum,

many commercial and Gulf Oil, and

Daiwa Bank, and Sony. and stuffiness, in American Lawyer

Japanese companies like Nippon Steel, Despite

its

old-line dignity

magazine's annual Corporate Scorecard, which ranks the biggest dealmakers, Sullivan

& Cromwell continues

to

come

out on top in the

company of young, aggressive firms that have specialized, where Sullivan & Cromwell never did. With a secretary of state, director of the Central Intelligence Agency, Supreme Court justice, and test-ban negotiator

among

its

distinguished alumni, the firm ranked high

among

unexplored but worthy subjects in the law. Anticipating an uncooperative response from the firm,

two years doing without

its

library research before

cooperation, the firm

Nancy spent

making an approach. Even

was accessible through

the John

Foster Dulles Archive at Princeton University. This contains a treasure trove of information about Dulles 's

Sullivan

income

&

Cromwell

in the

life

for twenty years,

as

down

the

senior partner of

to his

$300,000 annual

1930s in the midst of the Depression (the equivalent of

$12 million a year

fifty

years later). His brother, Allen

Welsh Dulles,

donated a companion library to Princeton. Though more sanitized than Foster's,

it

is

of equal interest on the subject of Allen's twenty-year

& Cromwell before he went to the CIA. Between them, supplemented by the National Archives, the libraries legal career at Sullivan

expose the firm's cooperation with Hitler over almost ten years, ending only after America entered the war, an example of just what could be hidden under the capacious mantle of client-lawyer privilege.

When Nancy Angeles

office

with

New

approached the firm, she started

at its

Los

on the analogy of Kafka's vast and poorly connected

Chinese empire

The partner

finally

in

which "battles

that are old history are

in charge, Stanley Farrar,

York, he was the

first

new

to

us."

was most cordial; after checking

partner to be interviewed.

AUTHORS' PREFACE With much higher hopes, but the retired partners in the

When

the firm's history.

no.

Most were

particularly

being cautious, Nancy wrote to

still

New York office,

asking to talk to them about

she followed up with phone calls they but Richard Salter Storrs

polite,

wanted

7

— with

all

said

whom

she

speak because his great-uncle might have

to

originally introduced Sullivan and

disapproves of the book."

Cromwell

He denied

—

that

blurted out,

"The

firm

memo

had issued a

it

instructing the lawyers not to cooperate, though in fact just such a

memo At

had been circulated

that point,

Nancy

logic,

when

in the office.

the project

recruited Frank,

seemed

be falling into Kafka-like

to

a journalist for

The Economist and

Financial Times of London; as her husband he had been a sidelines cheerleader through the frustrating years of isolated research. To-

we combed

gether,

where we found, on a

the National Archives,

microfilm that was threaded backward, the Justice Department investigations that confirmed

John Foster Dulles's wartime collaboration

with the Germans.

We made hoping

it

what we thought would be a

had changed

its

him on

make

consensus the phone,

the

in

we

man

with the remarkable

confrontational negotiations. tried to explain

book more accurate,

if

why

the lawyer

who

at least

nothing else. He repeated

and

each of

Bill Willis.

he would see us.

Willis said

to us but central to getting a full

that

We

were unclear or

understanding of the firm

operation.

its

On

to

would

heads the firm's administration as pad of the most

prepared a detailed questionnaire of points

unknown

ability

spoke to

to cooperate.*'

suggest discussing the matter with

management committee.

senior

When we

the input of the firm

our arguments, "I just don't think we'll be able

Stevenson did

contact the firm,

mind. John R. Stevenson, the chairman of

the firm, had been described to us as a to bring

last effort to

a

sunny summer day, we went

Manhattan feeling we were courtly

finally

to the firm's office at the toot of

getting

somewhere. Willis

gentleman with a West Virginia twang

that

is

added more

informality to his short sleeves and habit of talking across his desk w his

head cradled

We

in his

&

ith

arm.

pulled out our questionnaires as he mentioned the large

of former Sullivan

a

Cromwell lawyers who had

number

called, asking about

AUTHORS' PREFACE

8

these people

who were

that the firm

was not cooperating with

writing about the firm.

We

said he advised

were

to

so inclined.

did not get to ask a single question on our

forty-five minutes repeating the reasons

them

book but would not want

the

interfere with their talking to us, if they

He

We

spent

the firm

would

list.

why we hoped

cooperate. Willis said the firm just did not cooperate with the press

because

to reveal client confidences or the firm's

would not want

it

We asked how the American Lawyer Guide to Law Firms

confidences.

had gotten

its list

& Cromwell clients.

of Sullivan

Willis said the firm

had submitted

had been forced into cooperating because the compilers a preliminary

list

was

that

full

of errors.

We

pointed out the same

might be true of our book, with equal inadvertence.

He

said,

"We will

not be suckered into that again." Willis said

it

soliciting press that

was a firm

political

called

by The

He laughed because Cromwell than he

We

York Times

&

practice of

pointed out

men, one of

retinue of public relations

New

department of Sullivan

1905, "head of the

in

Cromwell."

many respects we knew more about Sullivan He agreed to take our arguments up with his

in

did.

Over

partners and get back to us.

was boxed

modern

coverage and that went for our book.

Cromwell himself kept a

whom was

&

tradition to avoid the

in scaffolding,

his shoulder, the Statue of Liberty

which struck us as perfectly symbolic of the

firm's attitude.

Nancy's greatest disappointment of the whole project, probably,

was

that

assumed

he never called us back.

most

the

solid

was

Of

all

aspects of the firm,

its reliability. It

may

not win

we had

all its

cases

or have the best judgment, but from the very beginning in 1879, Sullivan

& Cromwell lawyers learned to follow through.

thing, but

who

it

The

Two weeks

stuck in Nancy's mind.

told us his partners

had decided not

firm's willingness to talk to us

Johnson

v.

Johnson

will contest, in

later

It

we

called Willis,

to cooperate with us.

grew out of

its

Sullivan

& Cromwell partners

a breakthrough, as

we

discussing the case.

we were

Johnson case because the firm

still

We

met our

Though

got to see eight litigators in action

in the halls during the trial,

role in the

which both sides of the case had

public relations consultants in court to deal with the press. first

was a small

who

it

was

kibitzed

confined to asking about the

would not

talk to us about itself.

AUTHORS' PREFACE

9

The situation altered a year later when the firm changed chairmen. The new man, John E. Merow, seemed from the outset far less interested

in

the

firm's

constricting

troubles and need to present

its

than in

traditions

present

its

side of the case. For his promotion

coincided with four embarrassing incidents in which firm lawyers,

had become the object of headline-

three of

them important

making

lawsuits, prosecutions, or investigations.

Merow and

partners,

his partners

were willing

prepared for us to draw our

own

to talk with us

and entirely

conclusions, with no conditions

attached to the interviews. Afterward

we

speculated on

how

the

might have turned out had we had the firm's cooperation beginning of the project nearly

five years before.

at

the

We realized the result

much more on

would have been quite

different, relying

persuasive opinion of

own accomplishments and

its

book

less

the firm's

on the public

record.

We

thank the partners for their interviews and assure them that the

process of writing the

book has enhanced our respect

intelligence and devotion to their clients and work. If

wider issues of those loyalties, we do so

in part

effectiveness of their professional achievements.

we

for

their

raise the

because of the very

CONTENTS

Authors' Preface

part

I:

THE LAW BENDER Cromwell

1.

Sullivan versus

2.

Nothing but a Paid Attorney

25

39

3.

Cromwell

4.

Changing of

5.

Partners for Peace

6.

Dulles's Private Foreign Policy

part

II:

the Revolutionary the

Guard

THE LAWBREAKER

The Rise and Rise of John Poster Dulles

8.

Nazi Clients

9.

The Dulles War Machine

11.

The

III:

99 1

Outside Man/Inside

part

s3

.

69

7.

10.

15

Man

19

143 161

THE LAWMAKERS

Profits of

Blame

173 1S3

12.

Trust in Antitrust

13.

The Government As

14.

Counter Counterculture

15.

The Power of Tradition

233

16.

The Tradition of Power The Trials of Sullivan & Cromwell

247

17.

Client

199

213

259

CONTENTS

12

epilogue: 18.

How

to

LEGAL ADVICE Make

Partner

What They Don't Teach You at Harvard Law School What a Sullivan & Cromwell Client Gets

283

Notes

291

or 19.

277

Appendices

313

Acknowledgments

341

Index

345

PART

I

fc^S

THE LAW BENDER

1 ^

SULLIVAN VERSUS

CROMWELL The corporation is the cuckoo egg in the commercial be cracked. -Algernon Sydney sullivan

nest

and must

William Nelson Cromwell barely noticed the parade even though partner,

Algernon Sydney Sullivan,

under their office window

was loud enough, with

a

at

led the procession as

Broad and Wall

streets in

it

New

York.

It

red-uniformed band oompahing enthusiasti-

cally. The marching songs echoed through the canyon

o\

tour-story

buildings in a loud celebration of capitalism, which hundreds

parade thought would spread actually

his

passed

making money labored

its

in the

beneficence to them while those

at their

desks.

The parade passed Broad and Wall, up Broadway to Exchange Place. Sullivan, as tireless a public speaker

the corner o\ as he

courtroom advocate, mounted the makeshift wooden platform

was

laid

a

over

NANCY LISAGOR AND FRANK LIPSIUS

16

the foundation of the

new Consolidated Petroleum and Stock Exchange wind of a

Building, where bunting and streamers blew in the

September day

A tall,

chilly

in 1887.

erect figure with a bald pate

and a dignified white moustache,

Sullivan had not been able to resist the last-minute invitation to replace

U.S. Senator William Evarts

dedication of this

at the

and wealth. After a minister had offered a prayer and the

to progress

glee club had sung

"America," Sullivan harangued

audience, which included the mayors of

admitted that the

new

New York and Jersey City,

building "is one

He had

amazing increase in corporations."

own

his distinguished

on

Should corporations be outlawed?

the great controversy of the day:

He

new monument

more monument

long been

at

to the

odds with his

partner over the issue of corporations, and he did not hesitate to

offend his listeners.

He argued

eloquently in favor of outlawing

organizations that "live indefinitely long, without change of tenure, that distribution of estates

and without

was desirable

power swell

as often as the death of every individual.

in the possession of corporations as

the North Pole raises

and

lift

which our ancestors thought

mountain tops

up your voice against

Cromwell had no more time

this

Money and

accumulating snow

at

... Set your face

to cloud land.

dangerous contrivance."

for Sullivan's views

on the subject than

he did for parades. Sullivan brought in business clients, went to court

and public events. Cromwell stayed the

in the office,

closed the

wind and Sullivan's opinions, and forced the

staff to

window on follow his

demanding work schedule. Still,

the

two partners got along famously. Cromwell had a head

figures, disguised

by a rosy complexion, bright blue eyes, and a

mane of hair cascading

for full

dramatically over his collar. His sound advice,

boundless energy, and innovative means for clients to grow, prosper,

and avoid bankruptcy made

their

own

contribution to the firm's

established reputation based on Sullivan's courtroom work.

Sullivan did not interfere with Cromwell, the country's creditors

and scheming

political conflict

who

was

to

just

never disagreed and

Cromwell

who worked

most notorious robber barons, keeping

into

one of

New

build their empires.

with some of

their assets

from

The fundamental

one more contrast between two opposites

who

in eight years

had

built Sullivan

&

York's most successful law firms. Sullivan

A

was happy clients.

clients,

He

to let

LAW UNTO ITSELF

Cromwell continue

Cromwell, knowing

was too

work, which brought

his

practical to criticize him.

enormously respected the older lawyer, who had sent him

also

was

compliment lawyer,

more

in

principles appealed to

that Sullivan's

law school when he had been just a bookkeeper Sullivan

17

associated.

to

in the firm

with which

The older lawyer had paid him

the highest

in offering to start a practice with the twenty-five-year-old

who had

when

only recently graduated from law school

Sullivan's previous firm dissolved.

own

Sullivan had to wrestle with his against a major part of the

exchange crowd. But

was nothing new

this

and order

came from

to the

trails to settle in

to a

who had

father,

Jeremiah Sullivan, was

crossed western Pennsylvania on Indian

some denomination they could

picked Presbyterianism, converted to

it

years after the territory had

become

He

clients'

Washington, he took

his bride to

in

New

to

New York

who had

countersigned

to start

George

over again.

War, Sullivan represented southern

He built his own project to

former President James Monroe from a rebury them in Virginia.

in a

quote from Sophocles in

Sullivan,

York.

connections, combined with his

men

the capital

loans. Just married to a descendant of

In the years before the Civil

business interests

great

named

learned the law by clerking for his father

The Panic of 1857 bankrupted and

he

Supreme Court.

and got enough of a classical education

friends'

in,

1826, Algernon Sydney Sullivan was the second son

family of eleven children.

court.

believe

1820, less than four

a state, he

Indianapolis and served on the Indiana

all

all

himself, and organized the

local church. Sent to the Indiana legislature in

in

spent a

Madison, Indiana. After discussing religion with

his neighbors to find

Born

man who had

the tradition of frontier justice that brought law

Wild West. Algernon's

a Virginia lawyer

before the petroleum

and a constant need of cash.

lifetime balancing principles

Sullivan

conscience about talking

practice

firm's

Long before

practice on his wife's disinter the remains of

New York

pauper's grave and

Presidents acquired the status of

deserving state funerals, Sullivan arranged for Monroe's

casket to be paraded

down

to

New York

Harbor drawn by eight white

horses draped in black. Thousands watched the casket being delivered

NANCY LISAGOR AND FRANK LIPSIUS

18

harbor and

to the

The

Civil

He was

War

its

slow, majestic departure by steamer to Virginia.

destroyed Sullivan's practice, and almost his health. to support the

no position

in

Union

since, according to a

war began, "his wife who met the Sullivans soon was a Virginia woman who influenced him. She was a genuine Confederate, very pretty and very smart. When we talked together after the

Confederate

about the South and about the Yankees her eyes just blazed and neither of us could stop talking." If

Sullivan

was

silent in that conversation,

he moved quickly against

South

the advice of other lawyers to defend the

in a highly

emotional

case. In June 1861 soon after the outbreak of the Civil War, the

Savannah, one of the

first

Confederate warships, disguised

northern vessel to capture the warship

overwhelmed

and

it,

its

The men "were dragged through

who heaped abuse on Savannah's

first

USS

crew was delivered

itself as

a

Perry. But the Perry

to

the streets, a

USS

New York

show

in chains.

for the populace,

us of every description," according to the

mate, John Harleston,

who

survived to write about the

ordeal after the war.

Because the United States had not recognized the Confederacy, the

government treated the crew as

pirates,

carried an automatic death sentence. case, but Sullivan did.

when

whose conviction

as such

lawyers would take on the

The warnings he ignored caught up with him

Secretary of State William H.

Fort Lafayette in

Few

New York

Seward had Sullivan locked up

in

Harbor, calling his defense of the crew

"treasonous." While in prison Sullivan got a severe case of dysentery that

permanently affected his health.

He was courtroom

released with only

two days

more on

style relied

the depths of his research.

A

to prepare his case.

Luckily his

the flamboyance of the orator than

contemporary admirer admitted, "As a

lawyer he was not given to profound study of any particular case. " associate noticed that Sullivan

"was

a lawyer of details." But at the it

was impossible

The

trial

for

him

started in

Samuel Nelson, Chief

on

An

not by temperament or experience

same time, "other things being equal,

to lose a

New York

case."

on October 23, 1861,

Justice of the

in front

Supreme Court, who heard

of the

case in the United States Circuit Court (which combined the functions later

divided between the federal district and circuit courts).

A

The complete

LAW UNTO ITSELF

19

disruption of communication with the South prevented

Sullivan's getting witnesses or documents to attest to the creation of the Confederate

government

of war,

prisoners

to

show

On

not pirates.

Savannah's crew were

that the

the

day of the

third

trial,

a

Philadelphia jury delivered a guilty verdict in a similar case, and the

marshal hastily prepared death cells in

New York was

in the

Tombs

(as the federal prison

already known), in anticipation of a guilty verdict.

Sullivan relied on his oratorical skills, exhorting the jurors, "Tell

your Government to wage manly, open, chivalric war on the ocean, and thus or not

at

dishonor

that

all;

disunion," even though he represented sailors the high seas.

him on

The judge

and

worse even than violated the laws of

called Sullivan to the bench to congratulate

the "ability, fearlessness and fairness in the conduct of the

case." The jury returned a sailors

is

who

field

were returned

split verdict, the

to the

South

in

case was dropped, and the

an exchange of prisoners

After the war, Sullivan was remembered as a southern-sympathizing

copperhead, though he sponsored the

first

New York

ring as a reform

bar and fought the

Tweed

black to be admitted to the

Democrat and

assistant district attorney

(working alongside Tweed's son). Because of

his stance in the Civil

War, he was blackballed by

founding the Association of the Bar of the City of once-prosperous southern clients,

begged him

to take care of

the

committee

New

York. His

who were now immigrating

north,

them.

in The New York limes for being an honest was proposed as a mayoral candidate in New York

Ultimately praised politician, Sullivan in

1873 and was mentioned as a possible Democratic presidential

nominee

in

1883, but he was always more interested

in

causes than

offices.

For a crusader, Sullivan had an extraordinarily mild and affable

manner. His speech was slow, precise, and very York Graphic wrote of him, "Manful clear headed, literature,

big brained,

in all his

and widely read

in

distinct.

The New

ways and methods. all

the

realms of

he was as tender hearted as a child and as gentle as a

woman." In

1870,

at the

age of forty-four, Sullivan went back into private

practice in the firm of Sullivan,

who

previously worked

Kobbe

&

in a railroad office

Fowler, where Cromwell, ,

had been hired as

a

young

NANCY LISAGOR AND FRANK LIPSIUS

20

bookkeeper. Spotting Cromwell's talents, Sullivan offered to send him to Columbia Law School in the last class that accepted students who

had no undergraduate degree. Cromwell eagerly accepted. He kept his daytime bookkeeping job and went part time to Columbia Law School, after

which Sullivan offered him a place

When

in the firm.

Robert Ludlow Fowler became a surrogate court judge and into practice with his brother, Sullivan

Herman Kobbe went Cromwell

new

to start a

firm.

Sullivan

was

fifty-three,

asked

Cromwell

twenty-five and only three years out of law school.

The firm was successful from criminal defense and,

month

it

if

it

the beginning.

lost the case,

$250

for the appeal. Its

of Colorado, a million-dollar gold-prospecting

do the work twice because of mistakes Sullivan

worked hard

first

outfit. It

had

in its original filing.

to attract clients, using that period's favorite

—

method of advertising beliefs

charged $950 for

handled the incorporation of the Union Tunnel and Mining

Company to

It

speaking.

public

His outspoken political

and reputation as a reformer got him a wide variety of speaking

engagements. In 1879, the

first

year of the firm's existence, he

dedicated the memorial to General George Armstrong Custer at

West

Point, a delicate assignment since Mrs. Custer thought the statue of her

husband,

who had

—with

desperado

died

at the

age of thirty-nine, looked like an aging

a craggy face and

two guns blazing. The same year

Sullivan dedicated the Egyptian obelisk that

Metropolitan

Museum

of Art in

New York

stands behind the

still

and presided over public

dinners, like the one for Ferdinand de Lesseps, the old French engineer

who was

raising

money

would make Sullivan

&

to build a canal in

Panama

(a project that

Cromwell famous two decades

later).

Sullivan also served on the committee, which former President

Ulysses S. Grant headed, to bring a world's Central Park.

He

theater in

New

rejected).

He

to

Duke Alexis

New

addressed the annual Christmas concert

York's new at the largest

York, where a new national anthem was proposed (and

toasted

Edwin Booth,

the

Barnum and

visited

his

way

Delmonico's

that

American tragedian on

Europe, before a Sunday farewell breakfast

included P. T.

the

fair to

industrialist

at

Cyrus W.

Field.

from Russia, Sullivan was on hand

welcoming speeches.

to

When Grand make one of

LAW UNTO ITSELF

A

Mary, did her share

Sullivan's wife, the great-niece of

to

21

promote the firm as well. As

George Washington, she gained entree

Four Hundred and revived the annual charity

ball for the

to the city's

Nursery and

Child's Hospital. During the forty years she was active in organizing it,

the ball

became

the high point of the

New York

The

social season.

Sullivans conducted a weekly Sunday salon, with high tea served amid

discussions of

art, politics,

and

literature. Sullivan

read the Bible in

Latin and led hymns, accompanying himself on the piano.

him

Social contacts brought

a spinster

who died

in

1882

Lenox, who

the estate of Henrietta A.

had one of the choicest and biggest at the

real estate plots in the city.

age of eighty-two, caused resentment

by her choice of favorite nieces, nephews, and servants

to inherit her

property. Sullivan had written the will, and he defended

where he drew a huge chart of how the

Avenue acreage were thrown

estate,

The

it

in court,

which included

would be divided

fronting on Central Park,

out.

Lenox,

if

Fifth

the will

jury, asserting the injustice of any change to

accommodate disgruntled

voted for Sullivan's client, the

relatives,

major beneficiary, Rachel Lenox Kennedy, Lenox's favorite niece.

The

firm

was so busy

to California

Curtis. Curtis

in its first

years that

when Cromwell was

sent

on business, Sullivan recruited a stand-in, William

was one of

trator's office, a political

his

young

assistants in the public adminis-

appointment

that paid Sullivan

in addition to his private practice. Curtis liked

"a quasi junior partner"

J.

who

to Sullivan,

$5,000 a year

thinking of himself as

clearly

made

the important

decisions for the firm.

A

few months

later,

Curtis

suggested he join Sullivan

&

was offered a

Cromwell

position of a second firm lawyer

who

city job, but Sullivan

instead. Curtis accepted the

could go to court, usually alone

but sometimes as Sullivan's assistant, but he also gradually took over

Cromwell's chores of running the

By

office.

1881, the firm was busy enough to hire a

Jaretzki,

who

new

clerk, Alfred

relieved Curtis of the office work. In 1884

agreed to hire Sullivan's son George,

who soon became

Cromwell

a partner even

though he lacked the conscientiousness and sharp legal mind of the others. Since the original partnership thirds for Sullivan

agreement divided the

profits

two

and one third for Cromwell, George Sullivan could

be paid from his father's share.

NANCY LISAGOR AND FRANK LIPSIUS

22

All

the

including

lawyers worked extremely hard,

nights

and

Sundays. Trials forced the small staff to stay at the office until three or four in the morning, then have to get up to start again at seven the next day. Despite the tensions of overwork and constant courtroom preparation, not

intrude

In

even the petroleum exchange speech caused an argument to

on the firm's congenial prosperity.

December 1887,

months

three

change speech, Sullivan caught a to

his

after giving his

chill at the office.

petroleum ex-

He was

carried out

home. His severe cold developed "a

carriage and driven

typhoid-pneumonia complication," and on December 4 he died

at the

was a shock. Cromwell, who

rarely

age of sixty-one. His sudden death

acknowledged any emotion, withdrew

New York in Sullivan's

in seclusion.

City flags flew at half-staff, and the courts closed a day

memory,

the last time they ever

honored a lawyer

way. Obituaries appeared across the country. The

Picayune commented,

"No

public occasion

unless heightened by his eloquence. His politan genius."

The

Western emigrant

in

St.

New

in that

Orleans

was considered complete

was

a universal and

cosmo-

Louis Republican observed, "Perhaps no

New York

ever succeeded in making such a

Even the gossipy Town Topics "The announcement of the death of Algernon S. caused many a grande dame, even on the threshold of a

pleasing impression on the natives."

paused

to note,

Sullivan

season of unusual

festivities, to stop

and give utterance

to

words of

deep regret." Pallbearers from the most distinguished Wall Street financial houses carried Sullivan's casket

from

his

Greenwich Village town house down

the street to the First Presbyterian

would have been proud of Sunday morning.

A rare

his last

mix of

Church on

They represented

all

Avenue. Sullivan

the city's elite and the city's poor, the

mourners trudged through the snow-covered Village.

Fifth

crowd, gathered on a bone-chilling

streets

of Greenwich

the groups Sullivan had belonged to,

including the Arcadian Club, the

New York

School of Music, the

Presbyterian Club, the Literary Club, the Ohio Society of

New

York,

and the Southern Society. Bowery bums came from the Five Points Mission, where Sullivan had preached against the gang fights that

plagued the Lower East Side.

ALAWUNTOITSELF The mourners sang

Sullivan's favorite

Thou Languid?" The man, remembered for activities,

a

room with

emulation

was

hymn, "Art Thou Weary, Art

effusive in his praise of the public

a lifetime career,

who, among

his other civic

had headed the church's Bible school. The church dedicated

memorial window

school

pastor

23

in

memory and hung a portrait in the Sunday legend "As a reminder of a life worthy of

in his

the

every way." Cromwell might have agreed with the

admiration for his partner, but he also considered Sullivan's death a

chance

to point the firm in another direction.

2

NOTHING BUT A PAID ATTORNEY I

could not carry you and your

without catching

nelson cromwell

fire

(to

Henry

William Nelson Cromwell rant,

composing

word

to

ever

affairs

my mind

in

and becoming so interested

sat

for a year,

them.-wii

i

iwi

Villard)

gluml)

a letter to Sullivan's

any human being, not

in

at

the Astor Place Hotel restau-

widow. "Not an unkind or harsh

a falsehood, not a bitter thing, not a pro-

fane or indelicate thought ever passed those lips," he wrote effusively

When

he saw his dinner companion arriving, Cromwell quickl) put

the eulogy in an inside jacket pocket and

glass of

champagne. With

J.

Curtis,

who had

Trinity Church cemetery from Sullivan

the corner of

Wall and Broad

temporarily, having

left its

to his habitual

his light blue eyes as cold as the weather,

Cromwell formally greeted William

snowy

went back

streets.

employ

Curtis

&

trudged across

Cromwell's

was

the year before,

at

the

office at

firm onl\

when he had

not

NANCY LISAGOR AND FRANK LIPSIUS

26

been made partner. But he had readily returned Sullivan's death,

in the

which had devastated Cromwell more than he would

admit. Curtis thought

Cromwell was nervous and

physical collapse, but

Cromwell

insisted

for Sullivan in

of almost

on hearing news of the

the half-composed eulogy, but a

Cromwell's

in a state

office.

Cromwell pulled out a piece of paper.

In the midst of small talk,

was not

emergency of

firm. Curtis,

list

It

of possible replacements

who was used

Cromwell's

to

devotion to business, was startled by his timing and his interest in Curtis 's opinion.

After looking over the F. Tracy, a

was an

list,

Curtis

recommended General Benjamin

An

former court of appeals judge.

member of the Bar who knew

old, distinguished

the

New York

was

available.

courts. Curtis thought

Cromwell glowered

eloquent

him he had no

following his advice. Curtis, a burly six-footer with a beard,

his

full

he

way around

Cromwell was lucky

Curtis and told

at

litigator,

that

Tracy

intention of

chest-length

would have been imposing had he not seemed so intimidated by

the slight and short

Cromwell. He did not find Cromwell's grief an

excuse for rudeness but, as usual, said nothing. Cromwell declared that he had already made up his mind.

He had picked

Curtis to be his partner.

to play with Curtis, just as

it

was

It

was

typical of

typical of Curtis to

Cromwell

swallow

his pride

and accept the offer with no reproach for Cromwell's rudeness. The deal

from

was struck with a handshake, subject his

own

struggling firm, Larned

&

to Curtis 's

Curtis.

Cromwell had chosen Curtis not because he was in the firm

the second litigator

under Sullivan, but because he was a good subordinate.

Cromwell intended

to train Curtis as a business lawyer,

turn train others to build a

be called "factory law";

new kind of practice fifty

years later,

respectable "institutional firm." Curtis his way He had brought

worked

amicable parting

through

it

was

who would

that in the

in

1930s would

turned into the wholly a

good choice, having

Bowdoin College with ingenious enterprises: campus to make speeches, for which he

ministers on

charged admission; he had bought large quantities of discounted railway tickets and resold them

at full price,

a "substantial profit in the course of the

a business that earned

summer."

him

ALAWUNTOITSELF Cromwell

1

Henry

S. Ives, the

rescue

"Napoleon of Wall Street"

in

890s, Cromwell had to get a mandatory injunction served on Ives's

Meyer. Meyer had avoided

creditor, Christopher

treating to his Fifth

who, prepped with

a detective agency

an intimate friend of Meyer's, got past the butler. supplied by Curtis, she forced her

quickly handed him the papers.

wife refused to

let

way

into

her go. The intruder

do not come back

state's

Curtis

name of

with a layout

Meyer's bedroom, where she

made

my

her escape by claiming,

return, with instructions that

minutes to break

after Sullivan's death,

get that

resident,

in five

Armed

flu.

the

When the woman turned to flee, Meyer's

"I have detectives outside waiting for

The year

strangers by re-

all

Avenue mansion with a reported bout of

woman from

hired a

if I

To

started Curtis' s lessons with a lot of footwork.

the railroad empire of the

27

down

Cromwell had

legislature

to

the door."

Curtis, a

change

New

laws

its

Jerse\ attract

to

corporations. Curtis operated behind the scenes with a fast-talking

promoter, James B. Dill, to convince the governor that a

law would strengthen the

New

Cromwell's package gave a

new

corporate

Jersey budget. lot

more

to

companies than

to the state

with measures that set incorporation fees six times lower and a tax rate ten times lower than the

power

let

it

York's. The

to prevent shareholders

from interfering tant,

New

in

By

Jersey law gave directors

from inspecting company books or

any way with company management Most impor-

corporations

own

shares

credence to Reform Democrats' tears trusts.

New

the time the

government

other companies,

in

that

lending

corporations were just legal

tried to thwart

Cromwell and

his ilk

with the Sherman Antitrust Act of 1890, he had ahead) sidestepped the issue by finding a hospitable

At the turn of the century.

home

New

for

Jersey vvas the address lor more than

700 corporations worth together $1

The

first

two companies

corporate law were Sullivan Oil

Company

oil trust,

trust

conglomerates and monopolies.

billion.

to incorporate

&

Cromwell

under

New

clients, the

Jerse\'s

new

Southern Cotton

and the North American Company. For the cotton

Cromwell locked himself

in

with the client

at

6:00 p.m.. drew

up 175 agreements, and had them signed and registered by morning. His fee was $50,000 for one night's work.

Ten years

later

the

Clayton Antitrust Act and Supreme Court

decisions restored the teeth to the

Sherman Act by

redefining trusts to

NANCY LISAGOR AND FRANK LIPSIUS

28

Cromwell had bought a decade of freedom

include corporations. But

for corporations to bypass the country's concern that they

the nation's wealth and stood

Once Cromwell pioneered clients. In

had usurped

above the law.

a procedure, Curtis repeated

it

for other

1889 the Louisiana Supreme Court outlawed the American

Cotton Oil Trust because

was "an

it

illegal

and invalid association

.

.

.

guilty of usurping, intruding into and unlawfully holding and exercis-

ing the franchise and privileges of a corporation without being duly

incorporated.

..."

Cromwell went down

to

Louisiana and hired the best local counsel

to fight the decision in court.

win the appeal; so he

left

Island

them

to

while he chased around the state

it

members of

in tugboats to get the

Rhode

The lawyers assured Cromwell they could the trust to sell their shares to a

company.

The new company was exactly like the trust but registered in Rhode Island, which tolerated trusts. The day the appeal was to be heard, Cromwell walked

into court

had been dissolved and

was necessary. The throw Cromwell

Cromwell trust.

When

that therefore

local officials

in jail.

more was heard of

He

that the

companies

no action of the attorney general

were so angry they threatened

was

do the same

in

in

Texas for the

local cotton oil

Texas, he read in the state charter that the

attorney general had to be informed of the dissolution of a

Local counsel said there was no

way around

have

all

the

companies amend

the following month.

He went

certificates of incorporation

Rhode

Island

company on

to all the

to reuse

He

companies

filed

his organizational

rubber bands and paper clips.

when

change

the trust

Cromwell had

ran the office like a skinflint.

turning off the light in a closet;

to

their

with the secretary of state

The ruse worked, and

the pattern

Meanwhile, Cromwell applied to the firm itself.

He arranged

their charters to expire simultaneously

and had them

a day before they took effect.

company.

the law. Curtis sat in a

Galveston hotel room on a hot April night, devising a plan. to

to

the city that afternoon, and nothing

left

the case.

told Curtis to

Curtis

and told the justices

and business

He

skills

expected the

He rebuked

the clerk said

became a

set.

it

staff

a clerk for not

turned itself off,

ALAWUNTOITSELF Cromwell did not believe him and had

work

29

be shut in the closet to see

to

it

for himself.

He was

a penny-pincher by habit, not necessity.

traditional lawyers

were the

The rewards

intellectual gratification of

making

for

the best

arguments and convincing juries; the rewards for Cromwell's work were

made $260,000 for rescuing the prominent stockbrokerage Decker, Howell & Company from bankruptcy. Even though the client ended up with only $2,000, he was so extraordinary fees. In 1891 Cromwell

gave Cromwell a

grateful to be solvent that he

The year

after Sullivan

Brooklyn boardinghouse in the center

died,

to a

silver Tiffany tea service.

Cromwell moved from a modest

town house

12

at

West Forty-ninth

Street

of Manhattan, off Fifth Avenue adjacent to the Columbia

University botanical gardens. After walking up an imposing staircase to a

double front door, visitors found the house dark, especially

because Cromwell's heavy furnishings made the place look

museum

to his

newfound eminence. The

front hallway

like a

had a gold

organ, used for public occasions- Cromwell relaxed by playing a more

modest organ on the

third floor.

The house contained marble, mahogany,

ivory, and bronze fash-

ioned into urns, pedestals, statues, and carved furniture. The

powdered wigs surrounded

paintings and tapestries depicted ladies in

by cupids and doves. The

floors, including those in the

expensive red oriental rugs

oil

bathrooms, had

designs, while the shelves

in rich curlicue

of the china closet sagged with complete sets of the most expensive

monogram.

tableware. Everything imaginable bore a

The house

reflected

Osgood Cromwell, in

a

Cromwell's

widow

the firm, though he spent

whom Cromwell

He was master more time

Mrs. Cromwell preferred to rear her son, in

his time

up

(with a son)

had married

1878. Taller and older than her husband, she shared few of his

enthusiasms or intimacies.

to

of his wife, Jennie

taste, not that

in

at the latter

took

upstairs,

his obscure childhood.

teenager,

women

interest.

little

Born

friends and

Cromwell spent

one of the few in

Brooklyn. His father was a Union officer

Grant's

than the former.

to play cards with her

whom Cromwell

working or playing the organ

remind him of

of the house, as he was of

activities

1854, he had grown

who was

killed in

march on Vicksburg when Cromwell was seven.

Cromwell went

to

work

for

a

railroad.

As He moved

a to

NANCY LISAGOR AND FRANK LIPSIUS

30

Sullivan's law firm at the

recommendation of the pastor of the Church

of the Pilgrims, Reverend Richard Salter Storrs, for

whom Cromwell

played the organ. (Storrs's great-nephew and namesake joined Sullivan

&

Cromwell

1935 and was a partner until his retirement in 1980.)

in

Another childhood habit Cromwell never

He

hard work.

had

He

was

his capacity for

rose at five to start the day, dressed himself after a valet

laid out his clothes,

nine.

lost

and was taken by limousine

to the office at

home, but he

eventually shifted to working almost entirely at

kept his expansive corner office at the firm while his associates were increasingly squeezed into the library and bullpens

In a period of violent swings in

on the

floors below.

economic conditions,

it

paid to do

bankruptcy work, which Cromwell started while Sullivan was alive. In

still

1884 he had kept Henry Villard, the German aristocrat and

American

railroad magnate,

from losing

beloved home, which

his

stood across from St. Patrick's Cathedral in

New York

City,

when

his

railroad went bankrupt. To save the property, Cromwell had Villard

sign a note to his wife with Villard

House

would

as collateral. This

prevent creditors from taking the house while Cromwell worked out a sale to

newspaper publisher Whitelaw Reid.

After that success,

Villard

Northern Pacific Railroad,

tremendous

involved Cromwell in rescuing his

which

the

financier

had

built

at

of ten miles of track a day. Villard 's downfall

rate

the

came

only after the railway was finished and he had taken a crowd of investors and celebrities to the western terminus to celebrate the event.

When

the visitors

Portland,

saw how deserted

Oregon, was, they rushed

precipitous

the vast stretch of country to to

sell

of his stock, Villard turned

fall

Cromwell, who spent three years threatening they hesitated to

their

all his

shares.

In

the

business over to

to give creditors less if

settle.

Cromwell was developing an extraordinarily mature and suave manner that flattered clients while getting what he wanted. He had the calculating instincts of a master manipulator. Writing to Villard, he said, "Frankly,

for the past, as

be

my

aim

my it

thought was not so

was of making a

to continue to

another do for

me."

much

of meeting any

future possible to you.

do for you precisely what

I

liabilities

...

It

shall

would have

LAW UNTO ITSELF

A

Cromwell developed

in

Cromwell how

membering

how

to

1893 he showed

all

to

rob."

bankruptcy law, Cromwell had to Pacific

In

Northern Pacific

the

ten lawyers then at Sullivan

To

handle receiverships.

the railroad, at a time

where the Northern

"who

the reputation of being a clever lawyer

taught the robber barons

bankruptcy

31

when

file

stop creditors from dis-

there

was

He

sent

every state

in

lawyers across the

country to prepare papers for the local courts.

When

them simultaneously,

performed

had

no federal

as yet

bankruptcy papers

operated.

&

he telegraphed

"File,"

they

to

against a separate jurisdiction and

all

their

first

bankruptcy work.

Cromwell

also

had

fight

different receivers for the western part of the railroad. Curtis argued

before the

Supreme Court

to

keep the railroad

which established the principle

intact,

and won the case,

that federal courts are units of

one

whole. Where a federal court already had jurisdiction, another could not claim a separate one.

He

called

though

his

bankruptcy procedure the "Cromwell Plan," as

were a patented product of Sullivan

it

premise of the Cromwell Plan was

&

Cromwell. The

hold off creditors for as long as

to

possible while awaiting an economic upturn.

Cromwell handed out

promises to pay creditors more than they would get drastic

liquidations.

Cromwell

The plan

inspired, but

it

in

immediate.

on the confidence

relied completely

was well placed because

a panic

was

the

worst time to liquidate.

During the Panic of 1893, caused by

a shortage of dollars,

Cromwell

spread his bankruptcy work around the office. Alfred Jaretzki, a young

who had been

proved adept

at

reassuring the market.

The New York Tribune quoted him saying,

in

reference to Sullivan

&

associate

H.

I.

Nicholas

&

is

the

Cromwell's

&

sell

since

client,

1881,

insolvent

it

out,

I

it

stockbroker

could not

sell its

Terre Haute Railroad, "1 think that the

splendid paper and

frightened and

firm

Co., which had failed because

shares in the Evansville collateral

at

am

if

the creditors

will

not

become

sure that they will receive 100 cents on

every dollar which the firm owes them."

Success bred success:

Cromwell got plunged

in

Having rescued the broker, Sullivan

the Evansville

&

Terre Haute as a client

value from $125 to $75 a share.

when

its

&

stock

NANCY LISAGOR AND FRANK LIPSIUS

32

after Sullivan died,

The year

Cromwell moved

the firm out of

four-room office on the fourth floor of the Drexel Building

crammed

of Broad and Wall streets. Having

from a

library (bought

embosser of

States Trust

Company

Cromwell had grown

wills, a

45-47 Wall

at

bullpens surrounding the library.

The firm had

one of the most modern offices

Wall

in

By 1900

Street.

United

Sullivan

&

room

in

lawyers working four to a

to fourteen

had more partners than associates

Street.

in the style

two

bookkeeper, clerks, and

started over in spacious quarters in the

Cromwell

office boys,

a 1,000- volume law

retired judge) into the space, along with the

partners, an associate, an

its

at the corner

a reputation for having

Under

Sullivan, the firm

of litigation practices, in

which juniors supported the work of the partner

Under

in court.

Cromwell, three associates worked for each partner, establishing a ratio that prevails a century later in

major corporate law firms.

Paul Cravath, of Cravath, Henderson

& Moore),

Swaine

is

Take top Ivy League graduates, pay them

that has lasted ever since:

work them night and day.

well, and status

make

to

& de GersdorfT (now Cravath,

credited with instituting the legal training system

A

meritocracy supplanted social

Cromwell went

partners.

associate independence and client contact practically in the office.

wanting

was a perfect match of

It

to feel important

from

his first

day

the law school graduates'

and the firm's wanting

out of them as possible. Sullivan

He gave each

further.

to get as

much work

& Cromwell acquired a reputation for

being the best firm to work for despite the long hours and hard work; in turn, clients

came

to trust the firm's lawyers,

even the most junior,

because they were the best graduates.

Not

that they

worked alone. Cromwell prowled

night and day, supervising associates. chests and grilled

desks, he

made

them about

work.

sure they were in the office

who

considered anyone

man,"

their

He poked

the lowest

fooled him,

form of

life.

When

the halls of the firm

a finger into their

they were not

by checking the hatrack. He

who was known

as a "two-hat

-

Neither did he trust the newfangled invention the telephone. a

phone

installed in 1881 but left

arrived in

at their

it

in the outer office until

He had

desk phones

1889. Clerks were not allowed to use the phone, and

Cromwell avoided

it

because

all

the city's 140 law firms and

600

'

ALAWUNTOITSELF LAW,

lawyers used the same exchange, firm got

its

own

private line,

33

on a party

line.

Even when

the

Cromwell followed up conversations with

written confirmation. After airplanes started carrying mail, he sent

regular letters chasing airmailed ones and filed papers by train, mail,

and personal messenger

Once, when a

to ensure delivery.

was

train

delayed by floods, an airplane grounded, and only the messenger got through, Cromwell remarked,

permitted to happen by fools

Cromwell's methods took nervous breakdown doctor

—

take no thought of misadventure.'

their toll

in court in

on the lawyers. Curtis suffered a

1902 but kept going

he had finished the

until

obviously

"Accidents don't happen, they are

who

rankled twenty-five years later

still

to the trial

— with

a

The unrelenting pressure

final plea.

when he

wrote, "I did not

recover from this breakdown, and was compelled a few months after-

wards six

to

go

months

"The

to

Europe

off

in the

hope of recovering

my health

.

" He got only

and so "did not recover for some years." He concluded,

was, the previous twenty or twenty-five years of intense and

fact

unremitting labor, had resulted in a nervous attack which was more serious than

remembered

at the

I

moment

realized."

If

Cromwell was destined

to

be

as the founder of the firm, Curtis set the dubious precedent

for a Sullivan

&

Cromwell underling, whether

associate or partner, to

be overworked, underre warded, pushed to his limits and beyond.

Having organized himself to the clients as

the firm so meticulously,

who

interested

him

Cromwell could devote

the most.

They were

not

all,

one might have expected, the most eminent or lucrative ones.

Cromwell acted

him

for eight Pittsburgh bishops

who had

to bring "daylight out of [P. J.] Kiernan's

was over a

fast-talking Irishman

who had

lent

darkness." This case

money

to

parishes in return for powers of attorney and for big policies

on the nuns and

priests.

written asking

poor Catholic life

insurance

Cromwell negotiated with Kiernan

to

give back the control he had taken in return for not being prosecuted.

Cromwell

instructed executives

the president of the Cotton Oil

on how

Company

to attract investors, telling

that the

"annual Reports do

not give a clear, nor convincing idea of the variety and value of our properties

—

volved. In

the extent of operations

my

judgment,

this

—

the

magnitude of

interests in-

accounts for the lack of interest by the

investing public in our securities."

NANCY LISAGOR AND FRANK LIPSIUS

34

sent the executive copies of the annual report of the National

He

"you

will

betrayed no secret of our business, nor anything

that

Tube Company, of which Cromwell was notice

.

.

.

[it]

a director, because

would give a competitor advantage; but we which

that in the first

year of our existence our stockholders are nearly

3,000 and the securities daily growing

confidence without any

in

methods."

fictitious

P.

upon

and with the conse-

intelligent investors desired information,

quence

J.

stated significant facts

Morgan

called

on Cromwell's business acumen

to organize the

Company, the first American corporation capitalized at more than $1 billion. Cromwell may have even given Morgan the idea United States Steel

to consolidate the steel industry into

U.

S. Steel, as

Morgan's public-

relations man, Ivy Lee, averred. But others also claimed the original idea

Andrew

because instead of just admitting his desire to

sell

out and retire,

Carnegie spread rumors that he would

up

in competition to

set

two

Morgan-backed businesses, the Pennsylvania Railroad and the National

Tube Company. Morgan was forced avert these challenges. million, he

had the

last

to

buy out

the wily

Scotsman

But even though Morgan paid Carnegie $500 laugh a few years later

when Carnegie

confided,

"I should have asked you for a hundred million more," and replied,

"Well, you would have got

it if

in

Its

Company

with

1899, he was the logical choice for putting

together the steel company. for U. S. Steel.

Morgan

you had."

Since Cromwell had organized the National Tube

Morgan's backing

to

The tube company was more than

a dry run

consolidation of twenty-one companies created an

$80 million corporation which was the

largest consolidation to that

time, and controlled 90 percent of the country's pipe manufacturing.

National Tube was also one of the eight components of U. S. Steel

when

it

was formed

in

1901

in the steel industry (the interests)

was Cromwell's

.

The

first

step in creating a near

one major holdout being the Rockefeller U. S. Steel Corporation with the

starting

modest capitalization of $3,000. Cromwell had Curtis,

put up

company's

first

$1,000;

monopoly

in

return

his partner,

he became,

for

a

William

J.

month, the

president.

Cromwell exchanged most of companies on a one-for-one

basis,

the shares in the

component

though his original

client,

steel

National

Tube, got one and one-quarter shares for each share of their company's

ALAWUNTOITSELF The

stock.

and the

contributors

last

received U. S. Steel certificates of deposit

first

dividends of their old companies in the spring of 1901.

Meantime, Cromwell oversaw and $550 million

in

bonds

The bonds represented shares

its

profit potential.

insiders, including

the issuance of

$550 million

in stock

new company. of the new company, and

to capitalize the

the asset value

Bonds were considered

the

a safe investment,

on the company's growth. Three hundred

the shares a risk based

Cromwell, got $200 million of the new company's

stock for $25 million. Within the as the price of steel rails, to

35

first

month

$16.50 a ton, rebounded over the next

Cromwell himself got $2 million $250,000. He and

the stock rose 10 percent

which over twenty years had dropped down fifteen years to

shares,

in

for

$28 a

ton.

which he paid

the other insiders were paid back with a special

dividend of three times their original investment, and despite periodic sales of shares, U.S. Steel stock

when he

estate

In

remained a major part of Cromwell's

died nearly half a century

1906 Cromwell attracted as a

railroad

robber barons,

E.

H.

later.

client

one of the most notorious

Harriman.

Described by President

Theodore Roosevelt as a "malefactor of great wealth" and an "enemy of the Republic," Harriman controlled 12 percent of the railroad track in

America, an empire

large as U. S. Steel's. fights for

him

—proxy

that

earned $300 million a year with assets as

Harriman wanted Cromwell

to

win two tough

battles to gain control of the Illinois Central

Railroad and to retain control of the Wells, Fargo

Company

against

dissident shareholders

The

connected the Great Lakes with the Gult of

Illinois Central

Mexico and would add

a north-south route to Harriman's holdings.

which stretched from the Union

West

Pacific

to his recently acquired Baltimore

and Southern Pacific

&

Ohio

in the East.

in the

Knowing

the value of his franchise, Stuyvesant Fish, the cagey president of the Illinois Central,

had

tried to insulate the railroad

from a takeover by

accepting tax exemptions from the state of Illinois in return for giving the governor a seat

on

the

company's board of

directors. Fish

had also

encouraged a wide shareholding among small investors, who, he had hoped, rallied round the

company

stock.

when Harriman accumulated 20

just as

percent of

NANCY LISAGOR AND FRANK LIPSIUS

36

Fish tried to outsmart Harriman by soliciting proxies for the next

annual meeting in his

own name

Cromwell threatened

send out his

to

rather than

own

After

board's.

the

proxies on behalf of the

board, Fish agreed in a compromise to vote the proxies with a majority

of the board.

Cromwell forged an

alliance with

Astor and Charles A. Peabody, Fish

for

starting

an

two board members, John Jacob

who were

investigation

already angry at Stuyvesant

Mutual Life Insurance

of the

When Cromwell

Company, of which Peabody was president.

one vote for a board majority, he offered to make railroad's general

In a battle

manager, president

if

J.

at the

T. Harahan, the

he cooperated to oust Fish.

recounted on the front page of The

Cromwell stood

lacked

New

York Times,

annual meeting and demanded that Fish cast his

proxies according to the

new Cromwell

majority.

Fish declared, "I will never under any circumstances vote [that

The

way].

Company

issue

today

is

whether the

shall or shall not continue to

Central

Illinois

Railroad

be an independent corpora-

tion."

While Cromwell attacked, supporters on the

floor

defended Fish, and

Cromwell, "nothing but a paid attorney." Cromwell made a

called

spectacle of the meeting, shouting and threatening from the floor

before Fish cast the votes and defeated Cromwell 600,000 to 21,000.

At the end of the meeting, Cromwell called a press conference "There

will be a

meeting of the board, probably

in

warn,

to

November. This

You can draw your own

board will elect the officers of the railroad. conclusions."

Cromwell and Harriman nursed

their

wounds

before calling the special board meeting in election day, and Illinois

York

it

was chosen

for only three

New

specifically to

weeks

York. The date was

keep the governor of

from attending. Reluctantly, the governor traveled

for the meeting, but he could not help Fish,

to

New

who, behind closed

doors and out of the glare of publicity, was replaced as president by

Harahan.

The day

after the Fish ouster

Cromwell disingenuously

composed of gentlemen of strong

that the

"board

and

ridiculous to suppose that three or four of their

it

is

[is]

control the destinies of the Illinois Central."

told the press

individuality,

number would

ALAWUNTOITSELF He added

"All that

later,

is

wanted

is

between the two roads, through which

37

a close working agreement the advantages that might

all

accrue from a lease could be obtained without any of the possible legal

complications." Despite Cromwell's reassurances, Harriman's takeover of the nois Central

was universally condemned

as a ruthless abuse of proxies

The

to take control without a majority of the stock.

Times could say about Harriman was

Illi-

best

The

New

York

was no hemming and

that "there

hawing, no indirection, no concealment, none of those hesitations and timidities that

men weaker

than Mr. Harriman often exhibit upon such

occasions." The Richmond Times-Dispatch remarked that "Mr. E. H.

Harriman has again raised the black the Philadelphia Press called

it

flag

of piratical high finance," and

"one of those

ruthless exercises of the

power of sheer millions which diminish public confidence investments and

make

no adequate defense

no security,

the small investor feel that he has

for his rights,

and no

efficient

in railroad

way

to exercise

power." Fish shifted the fight to the courts, where he argued that a majority

of the board of directors had to live in Illinois according to the

company

charter.

Illinois for

Cromwell

more than

At the same time

replied that a majority had not lived in

a decade, including Fish's tenure.

that

Cromwell waged

masterminded a four-month

effort to

the Illinois Central fight, he

defend Harriman's control of

Wells, Fargo. Small shareholders wanted the

dividend to reflect

its

company

to increase

its

fabulous profits. Led by a former Harriman

business associate and friend,

W.

C. Stokes, the dissident group

knew

of Harriman's abuses; whether they could get redress was another question.

Cromwell stopped It

was

all

legal,

accountants,

the dissidents with deceit, bribery, and trickery.

insofar as the deceit

who concealed

was perpetrated through

company. The bribery

the real value of the

was conducted by buying out small shareholders stock market price.

through could.

New

The

Cromwell

sent a Sullivan

England with $198,000

associate,

to

buy

Hjalmar H. Boyesen, a

the

at a

premium over

the

&

Cromwell associate

as

many

tall,

shares as he

good-looking athlete

of Norwegian descent, went house to house sweet-talking and offering $90-a-share premiums for Wells, Fargo stock that, the dissident leader

NANCY LISAGOR AND FRANK LIPSIUS

38

pointed out, proved the stock was worth

much more

than anyone

realized.

New York

Curtis got a

court to agree that stockholders had to apply

company books

to see the

But because the charter had been drawn up while

incorporated.

Colorado was

Colorado, where the company was

in

still

a territory,

it

could keep

its

books

in

any

state in the

Union. So even a favorable ruling by a Colorado judge would not gain access to the books, which were actually held in

Cromwell called

in a claustrophobic space at

day

Street area.

horses,

New

the Wells, Fargo annual meeting

The room was

right

York.

on a hot August

company headquarters

in the

above the din and smell of trolleys and

which could be eliminated only by closing the windows.

Cromwell

insisted that every vote

go through an elaborate counting

procedure, which dragged the meeting through the whole day.

down

New

Wall

He wore

the opposition, and with 4,000 shares bought door to door in

England, kept Wells, Fargo in Harriman's control.

Cromwell capped

campaign with the

the

typical

lavished on his clients, saying of Harriman, "It

acumen of the

must

the shareholders

continue.

He

on

officers, but

his

hyperbole he

not on the business

is

wonderful executive genius on which

rely if the prosperity of the

company

is

to

cannot be replaced for he moves in a higher world into

which we may not enter."

The age of playing Monopoly on

a life-size scale

came

an end

to

with the Supreme Court's decision in the Northern Securities case in 1904. Instead of confining the the

Supreme Court applied

Sherman

Antitrust legislation to trusts,

the

Northern Securities holding

it

to

company. Reflecting the populist sentiments ushered getic

young President, Theodore Roosevelt,

in

by the ener-

the government's case

against Northern Securities put monopolists on notice that they

no longer have a

free

hand

The new President had riding roughshod over the

who

to transform finally

American economy and

Cromwell had a new

the United States.

in their own interests. men who seemed to be

America

thwarted the

entrusted their investments to them.

to assert itself,

would

With

client in

the

the gullible people

government

mind

—

starting

the President of

3

CROMWELL THE REVOLUTIONARY No

other great

work now being

carried

on throughout the world

of such far-reaching and lasting importance as the

is

Panama Canal.

Never before has a work of this kind on so colossal a scale been attempted. Never has any work of the kind, of anything approaching the size, been done with such efficiency, with such serious devotion to the well-being of the innumerable workmen, and with a purpose at once so lofty and so practical. -theodore roosevelt

The completion of

the

Suez Canal

in

1869 represented the pinnacle of

engineering achievement for Ferdinand de Lesseps and his daring

and talented French builders. But when the same team went bankrupt trying to repeat

its

success with a

French national tragedy. The history, an

Panama

failure

canal, they precipitated a

marked

a watershed in French

embarrassment on a monumental scale

that

bankrupted

more than two hundred thousand French people who had staked their

personal

engineering

fortunes

skill

as

well

associated with

as

the

their Eiffel

national

pride

Tower and

on

the

the

Suez

Canal.

But there remained the assets which the Paris-based

New Panama

NANCY LISAGOR AND FRANK LIPSIUS

40

Canal

Company

Cromwell

hired

to sell to the

United States for

its

projected canal. Besides an excavation of 19 million cubic yards, the

French Panama Canal

Company had

left

the remnants of a civilization

Their $260 million investment included roads, housing,

in the jungle.

and hospitals rusting along with the rotting, hastily buried corpses of

who had died of yellow fever. The French failure made Americans all the more determined to dig their own canal in Nicaragua. The site had been selected as far back as

4,000 Frenchmen

the 1850s,

and

it

had the support of the southern

Because a

states.

Nicaragua canal was closer than Panama to the ports of Galveston,

New

Orleans, and Biloxi, southern senators

made

it

an understandable

obsession.

Cromwell took went

Washington

to

Panama

the entrenched opposition as a challenge. Before he

lease, "there

was scarcely a person

willingly espouse the cause of

admitted. But

to take in either

Panama," William

Cromwell and Curtis went down

much work had been done investors

Congress

to persuade

would buy

in

Panama

over his client's

house J.

who would

Curtis ruefully

there to argue that too

just to

abandon

the French lease, finish the canal,

it.

Other

and create

competition for the American project, they contended. Cromwell and Curtis tried to

show

as

many

legislators as possible the statistics,

maps,

that the canal

was

Thinking he could disarm the opposition, Cromwell made the

first

and cost estimates backing the French assertion already 40 percent finished.

presentation to the Democratic senator from

Alabama, John Tyler

Morgan, the chief proponent of the Nicaragua thirty-year Senate veteran

War and saw

who had

site.

He was

a

fought for the South in the Civil

the Nicaragua canal as the culmination of his life's work.

Though he listened politely, he used the information Cromwell gave him to make "a most vigorous and vicious attack against the Panama Canal project," Curtis noted.

Having taken the measure of up

in the

Birdcage Bar

champagne with

at the

a growing

his competition,

Cromwell

set

himself

elegant Willard Hotel, where he sipped

list

of Washington contacts. Curtis sought

an interview with the Speaker of the House, Republican Thomas B.

Reed,

who

invited the lawyer to his apartment at the

After Curtis presented the case for

Panama

Shoreham Hotel.

in great detail,

Reed,

like

LAW UNTO ITSELF

A

man from Maine,

Curtis a plain-speaking

Company

41

"What

asked,

is it

that

your

wants, Mr. Curtis, an appropriation?"

Curtis said, no,

he asked was "that you investigate before you

all

act."

"That It

is

was a

Reed agreed.

a perfectly fair proposition,"

Morgan tacked

crucial conversation. Senator

onto the Senate version of the 1899 rivers and harbors

$2 million

to start building the

Nicaragua canal. The

the Senate, but as an addition to the original it

had

be reconciled

to

in a

a simple rider

bill,

bill

asking for

easily passed

House appropriations

bill,

conference committee of the House and

Senate.

Reed appointed

to the

conference committee three House members

sympathetic to Panama. Not until the

last frantic

sional session did the Senate understand that

whole

rivers

and harbors

House version

bill

if

it

hour of the congres-

Reed would block

the

had the Nicaragua provision. The

finally passed, giving

$2 million for an investigation of

both routes.

With

the investigating

Cromwell

commission

to

be appointed by the President,

ingratiated himself with President William

his right-hand

McKinley and

man, Republican Senator Mark Hanna of Ohio. Crom-

well got an introduction to

Hanna through Hanna' s banker, Edward

Simmons, who was an old acquaintance of Cromwell's and president

Panama Railroad, which was owned by the New Panama Canal Company. Meeting Hanna in Simmons's office, Cromwell explained the benefits of the Panama route and donated $60,000 of the New Panama Canal Company's money to the Republican party. The effect was immediate: The 1900 Republican platform abandoned its previous endorsement of of the

Nicaragua and advocated a canal chosen by the experts.

Of the

nine

members of

the

commission, which was named

after

its

chairman, Admiral John G. Walker, three were Cromwell's choices.

Cromwell persuaded to Paris to

meet with

Cromwell spent Paris.

the group to

six

go

his client, the

first

not to Central America, but

New Panama

months preparing

for the

Canal Company.

commission's

visit to

Taking advantage of the French company's ten years' experience

NANCY LISAGOR AND FRANK LIPSIUS

42

Panama, he gathered

far

more information than any American had

ever considered before.

He

set

in

up a press bureau of three writers run

by Roger Farnham, a former journalist.

& Cromwell's

was

the beginning of a

Farnham eventually being

called the head of

"political department." For

Panama, Farnham

lifelong association with

Sullivan

It

prepared releases for the general press, the scientific press, and the

He accompanied Cromwell

international press.

appointments, and found out

produced

whom Cromwell

a three- volume study of

Farnham' s

efforts

to meetings, arranged

He

also

Panama. Cromwell made sure

that

had

to impress.

were not ignored, writing bluntly

at

one point

to

President McKiniey, "Advise the Congress of the facts in the case."

He

then got the Senate to pass a resolution forcing the President to

transmit

all

Cromwell arrival,

the

documents relevant

sailed

ahead

presenting

to

to

Panama

to

Congress.

France and met the commission on

them with a detailed

its

covering their

itinerary

business and social activities for their five- week stay.

Cromwell

scheduled the key company personnel to explain the work that was done, the work that remained, and the geology of the area. Each

commissioner well's

of 340 documents with Sullivan

sat in front

name embossed on

dam and

equipment and property, a complete

elevations, and detailed graphs of the

The second week, Henry Abbot,

commission

told the

if

set

whole Panama

a highly respected

over the Panama route

Crom-

the covers; they included engineers' reports,

geological studies, plans for everything from

usable

&

lock

of scale

sites to

maps,

enterprise.

American engineer, General

that another country

the United States did not.

He

would take

considered the

canal feasible and already past phase one of what he defined as a

three-phase operation.

At a

final

eight-course "breakfast" at the Pavilion Paillard on the

Champs-Ely sees, Cromwell tous, guiding, attentive

—

—

until then a

finally spoke.

produced during the commission's

stay.

hovering presence,

He summed up

solici-

the evidence

Eloquent and flowery in his

He used notes to recall all the facts and figures that showed just how advanced the Panama project was. He told the commissioners that a German consortium was thinking of taking over Panama. He thanked them for private conversation, he spoke effusively in public.

their visit

and toasted

their

voyage and deliberations. Admiral Walker

ALAWUNTOITSELF

43

stood to toast his hosts and especially Cromwell,

much

Cromwell stayed the

so

them about Panama.

to enlighten

He

the Americans.

who had done

in Paris to

told the

convince his clients to

French company

that

sell the

canal to

on financial grounds

commission would pick Panama, but not unless the French were no

longer involved.

Company

was not a businessman but an

president Maurice Hutin

engineer whose pride overwhelmed his pocketbook on the subject of

Panama. He

let

make America

Cromwell speak, but he

said nothing, determined to

build the canal on his terms, with the French at least

partners in the project.

Cromwell rushed back

to

America

to stop another bill

pushing

Nicaragua even before the investigative commission had had a chance to report.

won by

Cromwell and Curtis lobbied

a narrow margin.

An

infuriated Senator

against Cromwell's "interference,' direct,

constant,

intelligence of

the Senate to delay

vote and

railed publicly

which he found "repulsive

'

and offensive."

Morgan

its

Cromwell

Congress," but, worst of

all,

.

...

"insult[ed]

.

.

the

won.

Senator Morgan should not have worried. The commission's pre-

recommended Nicaragua

liminary report

for

one reason:

only route the United States could "control,

Panama had issue.

It

was

the

own and manage."

advantages, but complete control was the overriding

its

Before submitting the

final report.

Admiral Walker called on

Cromwell. The admiral had been on a previous commission

recommended Nicaragua, so Cromwell assumed he had

to

that

work

around him.

But Cromwell had underestimated the old admiral, the French

company were

$40 million price final report,

due

to

to accept the

for the canal lease

who

said that

if

commission's recommended

and

all

remaining property, the

be released the next month, would opt for Panama.

The commission valued

the excavation at $27,474,033; the

Panama

$6,850,000; the maps, drawings, and records, $2

Railroad stock

at

million; and an

added 10 percent for contingencies. Though the French

had sunk $260 million into Panama, the

was

capitalized at only

income of 60 percent

New Panama

Canal

Company

$12 million, with an agreed division of any

to the original

Panama Canal Company and 40

NANCY LISAGOR AND FRANK LIPSIUS

44

percent to for

it.

A

$40 million

Cromwell's

sale

would represent a

profit of

$4 million

company

to take the

client.

Cromwell cabled

Paris the

same day, urging

the

$40 million as a reasonable settlement. Instead of French consent, Cromwell got back a letter firing him. When Hutin arrived in America insisting

on $109 million for the canal, the

overwhelmingly supported the Nicaragua

final

Walker report

American newspapers

site.

called the French arrogant and obstinate, an appraisal with

Cromwell had

to

agree (but only privately).

accompany Cromwell involved

at all.

to

Curtis,

Washington, regretted

He pleaded with Cromwell

which

who had

was

that the firm

to take the firing as a

to

chance

to escape this client, whose national pride was tragically and fatally

blinded by

its

overblown expectations.

Cromwell continued

to follow the issue

Panama Canal Company

fired

on

his

own

them

first

to accept the

the riot,

which

New

Bo

of Societe

shareholders' meeting as president,

Bo pushed

and major creditor of the canal company, Marius Generate. At his

while the

Hutin and replaced him with a banker

$40 million American

offer. Police

had

to

break up

pitted the thousands of small stockholders of the

Panama Canal Company who faced major losses against the financiers who had picked up the bankrupt company and could make a

original

killing

on even a $40 million

sale.

When the dust settled,

the angry

and

disappointed stockholders agreed to accept $40 million.

But the offer came treaty with

after the

United States had already negotiated a

Nicaragua and after congressional

bills to

appropriate the

needed funds had easily cleared the necessary committees. Congress awaited only the end of the Christmas holiday to vote in the

and Senate.

A

full

House

Nicaragua canal was almost a foregone conclusion.

Philippe Bunau-Varilla, a former engineer in Panama,

who had

a

$200,000 investment riding on the canal, cabled Bo from America; "FAILURE TO REHIRE CROMWELL WILL ALIENATE SYMPATHIES INDISPENSABLE TO SAVING THE SITUATION."

On

January 4, 1902, Bo cabled Admiral Walker to inform him that company was willing to accept the $40 million while reinstating Cromwell to negotiate the sale. He added the insulting conditions that Cromwell accept a fee set by the company, subject to arbitration, and the

— ALAWUNTOITSELF

45

Cromwell not spend any more company money on

that

political

contributions.

Three days before the debate on the Nicaragua

the opening

bill at

session of the Fifty-seventh Congress, Wisconsin Senator John C.

Spooner, one of the most powerful Republicans, submitted a simple

amendment canal

substituting the

word "Panama"

for

"Nicaragua"

in the

Spooner was Cromwell's secret weapon, a leader of the most

bill.

conservative Republican faction and a staunch admirer of Cromwell's.

When

the Northern Pacific

went bankrupt

in

1893, Cromwell had used

Spooner' s Milwaukee firm as local counsel, and wrote admiringly of Cromwell,

"He

is

at that

wonderful

in his

time, Spooner

energy, in his

quickness of comprehension, his mastery of details, his power of rapid generalization, his fertility of resources, etc. etc. and with

generous,

full

to his other

wants

to,

of good impulses and altogether a lovable

accomplishments, he can bulldoze

and

I

like

issue literally exploded

so

killed, but the

is

In addition

damnation when he

when

close to call until the

a volcano erupted in Nicaragua.

damage went

ones

in the region, active

No

one

perilously close to the canal site, or

Cromwell contended. He had Farnham prepare

volcanoes

.

he

all

have seen him when he wanted to."

The vote on Spooner's amendment was too was

man

it

in red, extinct

a

map

ones

of

all

major

in black.

The

Nicaragua route showed almost a solid band of red dots from the Atlantic to the Pacific;

Panama had none

within 200 miles of the canal

site.

Hanna gave an impassioned speech

In the final debate, Senator

for

Panama with notes Cromwell had prepared for him. He spoke for hours, and when he was too exhausted to go on, he stopped, only to start again the next day. Though no orator, he brought out the salient factors, like the fact that it would take half the time to cross the Panama Canal than the canal in Nicaragua; Panama needed fewer locks and was the only site that could be built at sea level.

Under Cromwell's "It

is

influence,

rose to eloquence, declaiming,

American policy

the great, broad, liberal

the building of a world canal.

Hanna

I

sympathize with

for

which we stand

all

those

who

in

in other

days, laboring for an isthmian canal, had but one star to guide them

—and who must now

Nicaragua

friend to pass

it

naturally feel like giving

up an old

by. But in an age of progress and development, Mr.

NANCY LISAGOR AND FRANK LIPSIUS

46

President, the

American people are looking

Congress

to

Considered his referring to the

of 42 to

finest speech,

"Hannama

who had assumed

after the assassination of

almost violent Senator bray, "I trace this

...

He

have

I

was so convincing

canal." The Spooner

to

bill

that

some

started

passed by a vote

34 and was signed, June 28, 1902 by President Theodore

Roosevelt,

business.

it

answer

to

..."

them on this question without regard to sentiment.

the presidency the previous

A

William McKinley.

Morgan got up on

man Cromwell back

September

bitter, defiant,

and

the floor of the Senate to

to the

beginning of the whole

has not failed to appear anywhere in this whole

affair;

and

Mr. Cromwell wrote pretty nigh the

dreadful fears that

whole [Commission] report."

Though

Morgan,

a defeat for Senator

it

was not

yet a victory for

Cromwell. By the end of the 1902 Congressional session, Colombia,

which owned Panama, had

to endorse the sale of the

New Panama

Canal Company's lease to the United States or the President would turn

once again

to Nicaragua.

Colombia wanted

The United

to

be paid to transfer the concession to America.

States refused,

and the President threatened

to take

up the

Nicaragua route. The next day, January 23, 1903, Tomas Herran, the

Colombian charge

d'affaires

Secretary of State John Hay's

in

home on

Cromwell, who had drafted the Senator

Morgan submitted

Treaty, hoping to prevent

Washington, signed the

treaty, the

sixty

.

.

.

pen used

amendments

its ratification.

of French jailbirds cleverly advised by a [to]

Lafayette Square. to sign

to the

treaty

at

Hay gave it.

Hay-Herran

He raged about the ''crowd 'New York railroad wrecker'

unload an otherwise worthless property on the United States

for an exorbitant

sum ...

to build a canal

over a poor route, infested

with disease, in conjunction with a depraved, pest-ridden people

whose

constitutional

Once again

government was a myth."

ignoring Morgan, the Senate ratified the Hay-Herran

Treaty, but the Colombian Senate refused to ratify lapse of the French concession to get the

was expecting. revert to

If they

it,

gambling on the

$40 million Cromwell's

could hold out until 1910,

all

client

French rights would

Colombia, a delay harmful primarily to the interests represented

by Cromwell He was lucky to have in the White House an activist whose .

ALAWUNTOITSELF

47

impatience matched his own. Roosevelt called the Colombian senators "foolish and homicidal corruptionists"

who

should not be allowed to

"bar one of the future highways of civilization."

On

June 13, 1903, Cromwell met twice with President Roosevelt

discuss the

Colombian impasse. The next day,

the

ran an unsigned "special report" predicting that the treaty,

Panama would secede and

if

to

New York World Colombia

get quick recognition

rejected

from the

United States. Roosevelt and Cromwell hoped that the story, which

Farnham had delivered ratifying the

World, would scare Colombia into

to the

Hay-Herran Treaty.

But the Colombian Senate remained adamant. The only way around Colombia's obstinacy, Cromwell decided, was a revolution

He was

the conduit

were led by client.

Panama.

between Washington and the revolutionaries, who

officials

Panama Railroad Company, Cromwell's of the revolution, who later became the top

of the

The organizers

officials in the

in

Panamanian government, included

the railroad's general

superintendent, assistant superintendent, freight agent, land agent, and

even company surgeon.

Cromwell summoned

New to

the railroad's freight agent,

James Beers,

to

York, promising to "go the limit" for revolution. Beers returned

Panama with

a cable

codebook containing

special instructions

from

Cromwell.

Panama Railroad Company, Dr. Manuel from Panama to New York to talk with Cromwell.

The physician Amador,

sailed

for the

Amador, though seventy years

old,

was ready

to fight, as long as the

United States government supported the revolution with arms and

prompt diplomatic recognition. Cromwell gave Amador

full

assurances

of help and money.

Amador brought another conspirator, J. Gabriel Duque, the proprietor of the Panama newspaper and the local lottery. Cromwell suggested that if Duque financed the rebellion The same

ship that docked with

with $100,000, he could become the

Cromwell telephoned Secretary of to see

The

him

State

first

president

of Panama.

Hay and arranged

for

Duque

the next day.

Duque to stop Colombian troops from landing to protect the Panama Railroad, as permitted by the Treaty of 1846. But the plan backfired when Duque went from secretary of state promised

NANCY LISAGOR AND FRANK LIPSIUS

48

Secretary of State

him

that if the

Colombia would

Hay

Colombian charge

to the

d'affaires,

was not signed, Panama would

treaty

warning

and

revolt

lose everything.

Herran wired Cromwell that

if

were a revolution

there

in

Panama,

Colombia would hold him and the New Panama Canal Company responsible. Cromwell bombarded Secretary of State Hay with letters and telegrams disavowing any role

The next day, when Amador came refused to see

him. Amador

Cromwell appeared and

all

him

Cromwell's

to leave at

office,

Cromwell

once and not return.

the superintendent of the

Cromwell telegraphed avoid

to

cross.

hours with the receptionist until

sat for

told

Duque's double

in

Panama Railroad

to

connection with the revolution. But Cromwell's refusal to see

Panama Railroad

officials did

Farnham from receiving a

full

on the pretext of conferring with

his

not stop

briefing as the plot unfolded.

Cromwell escaped clients.

to Paris

His place in the revolution was taken by Bunau-Varilla, whose

$200,000 investment

in the canal represented

an emotional, as well as

The Frenchman, who was

a financial, commitment.

first

mesmerized

by de Lesseps's Panama scheme as a schoolboy twenty years before, set

up a one-man central headquarters

arrangements originally promised

in

New York

to

assume the

Amador by Cromwell.

Bunau-Varilla underwrote the revolution with a $100,000 loan and

provided a declaration of independence, a constitution, and a flag designed by his wife.

In

diplomatic representative of after seeing Secretary

7

return,

he demanded to be made the

Panama

in

Washington. Bunau-Varilla,

of State Hay, wired the conspirators

isthmus that American warships were ready, signaling the

start

at the

of the

revolution.

With

American warships Nashville and Dixie protecting the

the

Panamanian harbor, the bloodless coup occurred on the night of

November

3,

1903.

The

revolutionaries arrested the governor and

bribed the Colombian officers to flee into the jungle. The Panamanians declared their independence, and seventy-two hours later the United States recognized the

A York

new

republic.

contingent from Panama, including Dr. Amador, waited in for

Cromwell's return from

Washington

to negotiate

Paris.

New

They went together

an American-Panama treaty.

to

ALAWUNTOITSELF

49

But Bunau-Varilla and Roosevelt had already signed a behalf of Panama and pushed

it

on

treaty

through Congress. Guided by the

Hay-Herran Treaty, which Cromwell had written for the deal with Colombia, Bunau-Varilla made changes even more beneficial United States, which were

to the

rescinded only under the Carter adminis-

tration in 1978.

Cromwell had negotiated with

Instead of the ninety-nine year lease

Herran, the treaty granted the United States a ten-mile- wide canal zone 4

perpetuity as

'in

if it

were the sovereign of the

entire exclusion of the exercise

...

territory

to the

by the Republic of Panama of any such

sovereign rights, power or authority." In return, the United States

guaranteed Panama's independence and promised to pay an

$10

initial

million and $250,000 a year after completion of the canal. Bunau-

Panama

Varilla sent the treaty to the

Panama Railroad

for quick ratification

one of

to delay

and

tried to get

boats so that the signed treaty

its

could be quickly returned to Washington.

But Cromwell instructed the company not

was incensed

treaty because he

Panama. He cabled Panama

that

at

to wait for the signed

Bunau-Varilla' s hasty swindle of

Bunau-Varilla was compromising the

country's interests and a Panamanian should be appointed in his place.

The provisional government States Senate approved

Cromwell fed

the

it

anyway, and the United

ratified the treaty

on February 23, 1904.

New York World

a

news

Varilla as the head of a group of French and

who

Panama

financed the

Panama Canal Company

revolution and

story attacking

New York

made $4

Bunau-

speculators

million on

New

stock. Bunau-Varilla immediately suspected

Cromwell since he was excluded from

the

accusations.

Indeed,

Bunau-Varilla eventually found out that the World had paid one of

Cromwell's press agents, Jonas Whitley, $100 for the scoop.

A

month

later the

Amador became hosted a

Hay-Bunau-Varilla treaty was

the country's

New York celebration

first

flag

raised

in

the

republic

The new

and Dr.

president's son

Waldorf-Astoria for four Panama

at the

Railroad officials and ^vq Sullivan first

president.

ratified,

& to

Cromwell lawyers. He gave Cromwell

for

presentation

the to

President Roosevelt. J.

to

P.

Morgan

& Company,

pay $40 million

in

fiscal

agents for the transaction, arranged

gold bullion and currency directly into the Bank

NANCY LISAGOR AND FRANK LIPSIUS

50

of France for the

New Panama

the old de Lesseps

company

Canal

Company and

the liquidator of

company. The liquidator of the

distributed an average

$156

to

original

226,296 of

its

Panama

bondholders;

stockholders got par value plus a 3 percent annual dividend on their ten-year investment in the reorganized

New Panama

Canal Company.

was another successful Sullivan & Cromwell liquidation, even confined to the $40 million price set by the Isthmian Canal Commission It

in early 1900.

Not

quite satisfied,

client that the canal

years

it

Cromwell submitted a claim on behalf of

company

get an extra $2 million to cover the four

had spent holding on to the concession.

to President Roosevelt,

who

his

He

appealed directly

agreed to be the sole arbiter. Roosevelt

ruled against any further compensation on the ground that the original calculation had given a

10 percent margin to preserve the canal

concession. Cromwell was extremely disappointed, but

some people

thought that the $40 million was already too much, and Senator

Morgan had not given up his attacks on the choice. Cromwell submitted to his client a bill for $800,000, amounting to 2 percent of a tough transaction. The company rejected it and brought the payment before a French arbitrator. To represent it, Sullivan & Cromwell picked Raymond Poincare, a French senator, lawyer (avocat),

and, a decade later, the president of the country,

who

received Curtis at his apartment on the Champs-Ely sees. "It was the practice then, as

I

suppose

it

desire to consult avocats to

is

now,"

go

Curtis reported, "for those

to their

homes and wait

who

in the parlor

adjoining the library, each taking his or her turn in regular order.

who called

mattered not

wait their turn."

$200,000 for

its

or

how

It

important the business, they must each

However Poincare

failed to get the firm

eight years' work, and Curtis complained,

more than

"We

were

very inadequately paid."

Cromwell fiscal agent.

at least

He

got appointed Panamanian general counsel and

invested the $10 million

Panama

got and arranged to

repay Bunau-Varilla $100,000 through a loan from the Bowling Green Trust

Company,

of directors he

With

a

bank Cromwell had reorganized and on whose board

sat.

the construction of the canal about to begin, the United States

wanted complete control of the Panama Railroad

to avoid obstruction

LAW UNTO ITSELF

A

by minority shareholders. Secretary of

51

War William Howard

Taft, as

overseer of the canal, empowered Cromwell to acquire the 2 percent of the shares the

government did not already own. Cromwell paid three

times the government's offer for one block of shares but told Taft he

would give

pay the higher

When among

government an irrevocable proxy

the

the

if it

decided not to

price.

Panama Railroad The

the group,

New

elected

new

directors in April

1905,

York Times reported, was "Roger L.

Farnham, who has long been employed by William Nelson Cromwell in

connection with the political department of the law firm Sullivan

Cromwell." Cromwell's

Bank and Cromwell Despite

It

was

&

the beginning of a stellar business career for

publicist,

who became

vice-president of National City

president of the Haiti Railroad (the latter a Sullivan

&

client).

&

Sullivan

controversy, Cromwell

Cromwell's paltry

was bursting with

fee,

all

the

work and

pride over his part on the

world stage. In reply to the government's effusive praise, he grandil-

"my

oquently claimed he worked so hard so that

may

in

country and mankind

our day and generation secure the inestimable blessings which

from the reshaping of the globe and thus bringing closer

will flow

together the family of nations."

Panama had occupied Cromwell marking the end of a

New York

his regular presence at the

newspaper described him as

as he did Senator epithet

Morgan's

would color

intriguing as he

There

is

nearly full-time for four years,

was

New York

office.

a shyster, he laughed

When it

off,

persistent criticisms, not realizing the

his reputation.

The

writer

made him sound

as

roguish:

nothing theatrical about his methods.

He can

dig deeper and

do big things more quietly than almost anyone downtown. His eyes are a brilliant light blue, as clear as a baby's and as innocent looking as a girl's. His complexion also would not shame a maiden. He can smile as sweetly as a society belle and at the same time deal a blow at a business foe that ties him into a hopeless tangle of financial knots. A wizard with figures ... he is one of the readiest talkers in town.

No

life

insurance agent could beat him.

when he wishes

to,

never to the point.

.

.

.

He

talks fast

and

Mr. Cromwell has an

NANCY LISA G OR AND FRANK LIPSIUS

52

intellect that

works

like a flash

of lightning and

it

swings about with

the agility of an acrobat.

Cromwell never

"We

that

Panama work, but Curtis recognized somewhat in reputation, due to the

regretted the

possibly

suffered

scandalous and malicious libels and unfounded attacks and suggestions in

the newspapers.

Personally

identification with the

reward commensurate

Panama

I

have never ceased

to

regret our

business, which did not result in any

with the cost, time, labor, strength,

and energy

involved, and which possibly affected our reputation in the minds of strangers."

Cromwell time to

because he was in Washington

felt differently

see

the

blossom

capital

a

as

lobbyists'

at a perfect

where

delight,

determination and contacts could do wonders for clients.

He was half He advised

a century ahead of his time, and so had the field to himself. the President,

negotiated both with and for the government, and

interceded for the Panamanian revolutionaries.

Cromwell

In contrast with Curtis,

relished every

moment and

the rest of his semiretired life recounting his exploits to

&

Cromwell lawyers. People assumed

him in

rich;

it

did not. But

it

America, and Sullivan

American law

As

did

that the

make Cromwell

Morgan,

Panama Canal made

the

most famous lawyer

& Cromwell the only household name among

firms.

a lasting tribute to his work, in 1908,

was secure,

spent

young Sullivan

the

when

the

Panama

victory

Bar Association of Alabama, home of Senator

instituted the first

canon of professional

on and reform of Cromwell's use of unlawyerly conduct

in fighting for the

ethics, a direct attack

publicists,

Panama Canal.

lobbying,

and

—

—

4

i

CHANGING OF THE GUARD Darling Mother: Spend there

is

plenty

more

to

money and give away all that you wish, for come as fast as you want it.-wiLLiAM nelson

CROMWELL

Cromwell had stayed

&

in

Washington too long.

Cromwell made only one

twenty-eight

lawyers.

paralyzed without him.

The

In his absence Sullivan

partner, though the firm had staff

He was

grown

to

was demoralized and somewhat

constantly drawn away, as

1906 Senator Morgan used his interoceanic subcommittee

to

when

in

conduct

an investigation meant primarily to discredit Cromwell.

During the hearings, Pennsylvania Senator Philander C. Knox asked

Cromwell whether "the only compensation you have received or expect to receive or have contracted to receive has been from the

New

Panama Canal Company." Cromwell responded, "Absolutely,

correctly, solely, completely,

NANCY LISAGOR AND FRANK LIPSIUS

54

and truly." He did not mention

company

percent of the electric

But

that revelation

Panama.

in

had no bearing on Senator Morgan's contention

French had just gone broke, the United States could have

that if the

from Colombia

bought the lapsed concession

He had

way he had bought 22

that along the

down

whittled his complaint

Cromwell had made a bad deal

to the

at a fraction

of the cost.

unprovable charge that

for the country.

The weeks of Cromwell's testimony produced front-page headlines like CROMWELL DODGES, MORGAN LEARNS LITTLE and STILL AT MR. CROMWELL,

"a REMARKABLE CASE OF LOCKJAW." "The assets and franchises were held

MR. MORGAN BAFFLED, SAYS WITNESS HAS

Morgan to

asserted preposterously,

be worthless;

officers paid

its

stockholders

schemers

to

little

better than

common

thieves;

be trusted under no conditions."

Morgan's vindictiveness ultimately turned against him. The York Times editorialized

its

New

he behaved like a "farm dog that has

that

once chased a woodchuck into his hole, and cherishes thereafter the imperishable belief that to

go and bark

at that

his duty

it is

whenever he has an afternoon

off

hole."

Impressed by Cromwell's tranquillity throughout the examination, the Times credited

him with

'

'the patience

suggested that

if

as

much energy were

into this investigation,

some

of Father Time, as persistent

and smarter than chain lightning."

as the attraction of gravity,

It

put into building the canal as

real progress

would be made. Morgan's

constant badgering only seemed to confirm that without Cromwell,

America would have made an

entirely different choice.

Cromwell stayed even longer

War William Howard excavation,

Taft,

Washington

in

who was

to help Secretary of

overseeing the

Panama Canal

1908 presidential race.

President

Roosevelt warned Taft that Cromwell's "past reputation in

New York

in

his

bid for the

has been such that, as was said to

judgment

I

have entire

trust, I

me

by a businessman

in

whose

can never be sure that some day he will

not be working for a big fee in connection with this very matter, while

you and

I

are entirely ignorant of

Senator Philander C.

Knox

scandal of an unpleasant type to

us."

what he

said, if

he

is

"We are is

doing." in

grave danger of public

permitted to appear as too close

ALAWUNTOITSELF Still,

Taft asked

Cromwell

to

55

be his campaign treasurer. Cromwell

chose instead to remain behind the scenes while recommending "a [J.

P.]

Morgan man," George R. Sheldon, who took

Cromwell assured generous business support

for Taft

the official

by giving him a

$50,000 campaign contribution. Though Taft admitted, need of money," he urged Cromwell

greatly in

back.

It

"We

to take the

are

money

"will be misunderstood and the inference drawn from

not be just or kind either to you or to me. "

title.

will

it

Cromwell refused, he

said,

because of "the blessings to the whole land which will come from the selection of such a great, wise, and Ironically,

good man

as President."

Cromwell's enormous contribution allayed the suspicions

of the President,

who

told Taft to take the

donation to the one he got from another

money. He compared

New York

the

lawyer, Elihu Root.

Not only had Roosevelt taken Root's money, but he had made him secretary of state, a job

many thought Cromwell wanted from

Taft.

Roosevelt told Taft to put Cromwell on the candidate's public advisory group.

Cromwell on any public

Taft kept the contribution but refused to put

body of support. He explained connections and Cromwell's

Cromwell

to

to

ties

that

Harriman made the Republicans too vulnerable

Sheldon's corporate

robber baron E.

railroad

to

H.

charges of being the

party of special corporate interests.

Cromwell stayed behind

the scenes, arranging details and trouble-

shooting organizational problems, like the fights between campaign

He

workers.

regulation,

also prepared position papers

two

on railroads and

utility

issues close to his heart that needed the look of reform

without jeopardizing business interests.

During Taft's campaign, blackmailers,

Cromwell, publicly claimed

that

Cromwell, had made enormous

failing to get a payoff

from

an American syndicate, including

illegal profits

from the

Canal Company. Cromwell decided to sue, surmising

New Panama

that the extortion

claims might be part of a Democratic plot to smear Taft. Curtis discussed the subject with the attorney,

who

New York

agreed to collect evidence quietly until the election was

over. Curtis stressed the confidentiality of the subject.

New York World ran a front-page Cromwell

in

assistant district

connection with

story asserting that

M. Bunau-Varilla,

The next day

the

"William Nelson

a French speculator.

NANCY LISAGOR AND FRANK LIPSIUS

56

had formed a syndicate Taft, brother of

.

.

that included

.

among

William H. Taft, and Douglas Robinson, brother-in-

law of President Roosevelt." Other prominent

were also mentioned. According a

to the

financiers

World, the syndicate parlayed

Government

knowledge

of the intention of the

property

a price of about $40 million."

at

New York

$40 million "because of a

investment into

million

$3.5

others Charles P.

full

French

to acquire the

Cromwell issued an immediate denial and defended his alleged accomplices. "No member of the Taft family or Mr. Douglas Robinson ever had the remotest connection with Panama Canal matters either directly or indirectly.

.

.

.

The names of Caesar and Napoleon

might as well have been used."

The World had gotten

from one of Crom-

the story inadvertently

well's three press representatives, Jonas Whitley,

who had

called the

paper to make a denial after the story had been dropped for lack of

A

information.

whole story

good newsman on the World got Whitley

in the process of

Cromwell drew Taft.

it.

attention to himself in order to

The controversy continued through

decisive victory, which elated policies. If

denying

The

district attorney

keep

dropped the

Cromwell had harbored hopes

to

Panama controversy scotched Senator Knox. As eloquent in defeat

away from

it

election day, but Taft

Cromwell and vindicated

final

to tell the

their

become idea,

as he

was

a

of evidence.

suit for lack

the

won

Panama

secretary of state, the

and Taft appointed in victory,

Cromwell

wrote Taft that Knox's "recognized position and preeminent qualifications fitted

him

for the premiership of your Cabinet as

no other man

in public life."

Before leaving

him

a complete

a certified

office, President

list

of

Roosevelt asked Cromwell to send

New Panama

copy of the

final

Canal

Company

stockholders and

liquidation report of the de Lesseps

company. The documents showed there was no American syndicate involved in the canal purchase. Roosevelt forwarded the papers to

Congress and

charges against the

World

December 1908 Roosevelt brought criminal libel New York World and the Indianapolis News. The

in early

sent investigators and lawyers to Paris,

Panama, and Bogota

collect evidence but in court successfully filed for dismissal

ground

that the suit should

have been brought before a

state,

to

on the not a

ALAWUNTOITSELF federal, court. Far left

from vindicating Roosevelt and Cromwell, the

finally returned to

November

elected in

1908. To

established the Sullivan It

&

New York

room

The

make amends

at the

dinner was held on

first

the office wall,

December

let

drawn and

them take

their

29, 1908, in a private

The twenty lawyers

renown assured when home, hung them on

the pictures

his

mind

to rebuilding the firm.

was

partners, for though the firm

dominated by

and

old associates,

recruits,

where they stayed for many years.

Cromwell put

make new

for his long absence, he

high-society restaurant Delmonico's.

there had their caricatures

Cromwell, rather than

had been safely

after Taft

Cromwell Society with a $10,000 donation.

funded an annual dinner for new

partners.

suit

newspaper accusations were well founded.

the impression that the

Cromwell

57

its

first-generation partners

He was determined

thirty years old,

—Cromwell,

was

it

George

Curtis,

was only one young

Sullivan, and Alfred Jaretzki. There

to

partner,

Francis Pollak, in an office of more than two dozen lawyers.

With Cromwell away,

was run by

the office

Jaretzki,

partner able to take on the work. Curtis had had a nervous

and gone deaf just

Panama hung

at the point in

in the

balance.

the only

breakdown

1902 when the issue of Nicaragua or

Though

the

same age

as

Cromwell,

at the

age of forty-eight he suddenly seemed like an old man, burdened with a three-foot ear horn around his neck.

between 1898 and 1908 was Pollak, a 1906

at the

young age of

The only new partner made

litigator

who became

partner in

thirty-one, but died unexpectedly ten years

later.

The next new

partner,

made

in

1911, was Royall Victor, a tough

corporate lawyer capable of supervising the firm's dull but lucrative practice

raising

money

for

utilities.

The job of writing endless

indentures and contracts for a continuous process of tedious and routine, a task for associates

eighteen lawyers in instituted train

its

them

1898 to twenty-eight

who in

money

raising

built the firm

1908.

It

was

from

had not yet

policy of taking young lawyers just out of law school to

in the Sullivan

&

Cromwell way.

Instead, associates

and went haphazardly, reflecting no policy except

that they

came

could not

expect to become partners.

The lawyers who joined Sullivan

& Cromwell just out of law

school

NANCY LISAGOR AND FRANK LIPSIUS

58

hoping

to

make

their careers there

found instead

that they

remained

Boyesen stayed

associates for an unconscionably long time. Hjalmar

an associate for twenty years before he decided to quit to fulfill a

Emery Sykes worked at the firm for many as William Corliss's fifty. But

lifelong ambition to live in Paris.

forty-seven years, nearly as neither

became

associates

In contrast with them,

a partner.

came and stayed

a succession of

for extremely short times, including the

who

eventual Chief Justice of the United States, Harlan Fiske Stone, spent less than a year

at the

firm in 1898 and 1899, but

was always

&

proudly claimed as one of the most illustrious Sullivan

Cromwell

alumni.

Royall Victor became the managing partner in 1915, thirty-eight. Despite his

comparative youth, he was a

opinions and habits. Associates

knew

they had to

four o'clock on Saturdays because that

Known

a regular tour of the office.

at the

man

work

age of

of definite

until at least

was when "Mr. Victor" made

for his severity, he liked to

keep a

garden and was greatly trusted by clients, like the American Agricultural

Chemical Company, a major conglomerate

business, of which he

was

the

in

a director and vice-president.

a director of Detroit Edison and the

chemical

He was

also

Gold Dust Corporation, a popular

soapmaker. Tall,

handsome, and self-assured, with

new

middle, Victor ushered in a

He

started recruiting lawyers

era to

fill

jet

black hair parted in the

the middle ranks of the firm.

from law schools

to establish a pool

from

which future partners would be chosen. He also began the practice of farming out rejected associates to clients, which, like the firm, were just beginning to build

To overcome

up

their staffs.

the entrenched position of the existing partners, Victor

appointed partners in pairs. For every one the firm, he

made

who worked

his

way up

in

a partner of an existing partner's relative. Victor's

strategy encouraged his partners to accept additions to their ranks

more

own

share

readily,

even when promotions entailed reductions

in their

of firm profits. The two partners Pierce, Curtis 's son-in-law,

Two

made after Victor were Henry Hill and Edward H. Green, Jaretzki's cousin.

of the next five partners were also Jaretzki relatives, his son

Alfred Jaretzki,

Jr.,

and his son-in-law Eustace Seligman, both of

ALAWUNTOITSELF whom They

59

played an important part in the firm over the next four decades.

constituted an unusually large Jewish contingent for a Wall Street

firm of that era, though, as one former Sullivan

pointed out,

'They were

Jaretzki, Sr.,

well's, figuresx

relied not

Harvard with

to

Cromwell's original partner. Jaretzki

the son of

was

that social standing

which

Cromwell lawyer

had been a poor Jewish boy who went

George Sullivan,

showed

&

relatives."

all

irrelevant to a practice like

Crom-

on contacts as much as on a good head for

Cromwell established

the

liberality

of the firm not from

high-mindedness but because efficiency and prejudice don't mix.

The young

partners were also not practicing Jews. Jaretzki, Sr.,

made no attempt to hide his background, generously supporting such charities as the Hebrew Immigrant Aid Society, the Baron de Hirsch Trade School, and the Jewish Agricultural and Industrial Aid Society.

As

president of the agricultural aid society, Jaretzki provided loans for

Jewish farmers and underwrote the Jewish Farmer, an agricultural

monthly

in

But Seligman, son of the famous Columbia

Yiddish.

University economist, E.R.A. Seligman, was a leader of the Ethical

Edward Green took an

Culture Society and his cousin

active part in the

Riverside Church. Seligman, whose relatives considered him violently anti-Semitic, divided his active social

life,

giving Jewish and non-

Jewish cocktail parties, both of which his relatives found stuffy and stopped attending.

Under Victor, Sullivan utilities clients.

&

Cromwell made

most powerful force

utilities

same time

needed massive amounts of capital

Cromwell had pioneered Villard,

and financial

were replacing railroads as the

economy. They benefited from increasing

in the

efficiency to cut costs at the

Henry

most of Cromwell's

In the forefront of both technological

advances, by the early 1900s the

client

the

that they raised rates

to

the utilities

who had

because they

fund their expansion.

work

returned to

in the

New York

1890s for his old after the

Northern

largest bank, the

Deutsche

Pacific bankruptcy to represent

Germany's

Bank, and the Siemens

company. Cromwell got Villard

out

electric

Thomas Edison, who wanted

to

go back

to

working on

to

buy

his next

batch of inventions, including "ink for the blind" and "artificial silk."

NANCY LISAGOR AND FRANK LIPSIUS

60

Cromwell encouraged Villard to start a new enterprise to pick up electric companies and trolley car franchises in industrial cities throughout the Midwest, like Cleveland, Milwaukee, Cincinnati, and Pittsburgh. In 1890 they created the North

survived

strictly as

Sullivan

&

owners

utility after the trolleys

Cromwell represented

until

Sullivan

an electric

it

&

was broken up

in

American Company, which disappeared.

the giant utility under different

New

Deal legislation forty years

Cromwell lawyers helped manipulative

utility

later.

owners

place the rising profits into holding companies that by the 1920s gave three quarters of the country's electric business to ten companies. For its

client

Union

&

Sullivan

Electric,

1,000 subsidiaries.

These companies

individuals. Instead of issuing

Cromwell created more than

in turn

common

were dominated by a few

management

stock, the

preferred shares and bonds that did not carry voting rights.

money

&

Cromwell pioneered

issued

To make

the

open end

mortgage with which companies could borrow on corporate

assets; so

raising easier, Sullivan

borrowing grew automatically with

assets.

"Never had

the architects

of corporate finance built with such craft and mystification," noted historian Arthur

M.

Schlesinger,

Jr.

The holding companies themselves were interlocked through board members,

like the

&

two Sullivan

Cromwell lawyers William

Nelson Cromwell and Henry Hill Pierce, each of boards of nine

utilities.

their

whom

served on the

Alfred Jaretzki was on even more electric

—

company boards of directors which he was a vice-president.

sixteen

Detroit Edison, of

utilities,

Edward Green helped

Company become

a nationwide milk and

Using techniques developed for the the National Dairy Products

—including

cheese company. Taking advantage of advances in refrigeration and dairy processing, National Dairy acquired a string of regional dairies

and provided them with economies of scale and new products. In 1930 it

acquired the Kraft-Phoenix Cheese

large

international

corporate

name

Company, which was

already a

company, with a brand name (eventually

Kraftco) and a

transformed a perishable,

new

localized

the

product, processed cheese, that service

into

an international

conglomerate.

Green specialized

in the financial side

of innovation.

He drew up

the

LAW UNTO ITSELF

A

Warner Brothers

contracts that allowed

under contract from Western Electric.

61

make

to

He

the

first

talkie films

established the patents for

Sanforizing fabric to prevent shrinkage and oversaw the merger of

Merck

&

Company

&

with Sharpe

own

financial skills to the firm's

also applied his

many

practice, acting as treasurer for

years and taking care of clients'

department was established

Dohme. He needs

tax

a separate

until

tax

in 1934.

John Foster Dulles, ultimately the most important lawyer of the new

&

generation, joined Sullivan

Spooner

Even

&

Cromwell

&

Cotton (the predecessor of Cahill, Gordon

to get into Sullivan

&

down by

after being turned

Cromwell, he had

to rely

Reindel).

on the influence

of his grandfather, former Secretary of State John Watson Foster,

who

had known both founding partners. Cromwell had hired the elder Foster to

work on in

Sydney Sullivan

in

Washington. Foster had also clerked for Algernon

Ohio

in 1855.

The young Dulles was swagger

New Panama

the initial stages of representing the

Company

Canal

a lanky bon vivant with a pipe-smoking

that belied his intellect.

He

got an academic prize at his

Princeton graduation, which provided him with a year's study

Sorbonne

in Paris.

after Paris,

Instead of going to Harvard or Yale

he wanted

to stay in Washington,

Law

at the

School

where he could attend

George Washington University Law School and take advantage of grandfather's political clout and

social

socializing as seriously as the law school. His diary

about White House parties,

which he

at

He took

connections.

sat

was

full

his

the

of entries

next to the President's

daughter, Helen Taft, while his law school notebooks contained only

when he was

doodles even Still,

the

required to

show them

most

brilliant

ambitious.

Any

man

firm he

Starting in 1911 at

I

have ever taught and, moreover, he is

with

is

likely to

do very

things

coming

summer

of the office.

easily to him, he

at the firm not to I

was

"He is

is

very

well."'

$12.50 a week, the twenty-three-year-old Dulles

found the routine of a new associate boring and

first

to the professor.

he got top grades, causing one of his teachers to remark,

needed

frustrating.

his grandfather's

allow himself "to

tire

janitor and char- woman, having to

Used

to

reminder his

of the drudgery

open the

office

NANCY LISAGOR AND FRANK LIPSIUS

62

in the

morning, sweep the room and get everything

in

shape for the

day's work."

Grandfather Foster passed through

remind Cromwell

to look after the

New York new man.

summer

later that

to

Dulles soon brought

himself to Cromwell's notice by writing a pamphlet

on the debate over

whether American ships should have free passage through the Panama Canal when other countries' vessels did not. Dulles contended that trips

between American coasts through the canal should be considered

domestic

and free of

traffic

Cromwell wrote Dulles

tolls.

that the

American secretary of

him

contradicted his argument, but Dulles 's pamphlet got

state

had

invited to

speak before the American Society of International Law, of which, not coincidentally, his uncle Robert Lansing

was chairman. When

his

speech was included in the organization's proceedings, Dulles had 100 extra copies printed to pass around to his well-placed contacts in

New

Washington and

York, and

at

Sullivan

&

Cromwell.

After a trip to Trinidad to scout out Caribbean trading possibilities for

Dulles

clients,

practiced

avocadoes. "I

the

company

unfortunate shipping

made

art

of verbal

that delivered

him

a trip through the British

who

assault

with the

a crate of rotten

West

Indies as the

representative of large

American

made of trade

between the United States and the British West

Indies

.

.

however,

relations

,"

.

he arrogantly lectured.

...

that

it

country for tropical

During the quinine, lost.

left

Among

the

is

fruits.

in this

him

to excess tearing

to take a nurse as

and a

tic

he never

chaperone on his

summer of 1912. compound in upstate New

he had married Janet Avery in the

York was long-term admitted to the

market

state,

..."

also forced

200 guests

gift certificate

"I can emphatically

folly to attempt to create a

one of his eyes subject

after

desired a study to be

he contracted malaria. The cure, massive doses of

trip,

The malaria

honeymoon,

interests,

at

Grandpa Foster's

Emery Sykes, bearing

associate

on behalf of the

New York

In 1913 Robert Lansing

months

$200 Tiffany

later,

Dulles was

bar.

wanted

mission to Britain. Lansing,

Department career

firm. Six

a

his

nephew

who owed

to his father-in-law,

his

to join a diplomatic

own blossoming

State

John Watson Foster, assured

ALAWUNTOITSELF President

Woodrow

63

Wilson, "there was no nepotism involved"

picking Dulles. Lansing,

known

as

"Uncle Bert,"

lived with his wife

in the Fosters'

Washington house, even when he was secretary of

during World

War

But Sullivan Dulles,

who

&

Cromwell considered

the offer too unimportant for

wrote his uncle, "It did not seem to Mr. Victor that for

me

to absent

myself entirely from

when I am just beginning to get more work of the office and with its clients."

touch with the firm,

however, was impressed with

Dulles write his uncle to ask a lawyer in Peru.

As soon

if

the State

intimately

and soon had

Department could recommend

war broke out

as

his contacts,

it

my work here

for a year, at this time

The

state

I.

would be advisable

in

in

in

Europe

in

August 1914,

Dulles wrote to his uncle asking the State Department to locate people

on behalf of firm

clients.

When

ing in a Japanese prison

one German was discovered languish-

camp, Dulles had

department "in some way to parole

young man so

where Mr. Merck

return to the United States, responsibility for

this

the audacity to ask the

will

that

he could

assume personal

him."

Dulles asked such favors with no qualms or apology. His younger

was more appreciative of

brother, Allen,

influence and the privileges

round-the-world relations.

am

I

trip,

"It

it

is

the family's extraordinary

afforded him. Allen wrote a great thing

certainly profiting by

to

home from

have had

a

illustrious

what others have been."

when the United Fruit get Panama to remove

Foster Dulles put even Cromwell in his debt

Company and Cromwell

a

New York

banker

tried to

as the country's fiscal agent. After secret correspondence

with Panama, the State Department solicitor (none other than Robert

Lansing) lobbied heavily for Panama to keep Cromwell because "he

was appointed with

the approval of the

Department of

State, he has

served with ability and generosity, and a change does not appear desirable."

Not content

just to save

Office abandoned

its

Cromwell, the State Department

customary reserve and attacked Cromwell's

enemies, claiming that "the Fruit

dominion

into

have happy

Panama, which

results.

Solicitor's

Company

[is

trying] to extend

effort, if successful,

Judged by the

results

its

might or might not

which have obtained from

the

NANCY LISAGOR AND FRANK LIPSIUS

64

Fruit that

Company's

one

result of

efforts in Central

its

competition in the

World War Sullivan

& Cromwell.

Europe

to

war

get

it

would seem

American countries

is

to stifle

business."

fruit

when Dulles was

started

I

Costa Rica and Honduras,

activities in

To

take advantage of

a third-year associate at it,

insurance for the

risk

he volunteered to go to

American Cotton Oil

Company's European shipments. Dulles was working on such

short

notice that, without a birth certificate, he wrote his uncle, "I trust

can

put through

still

my

application and secure a passport."

you

Along

with the passport, Lansing sent Dulles letters of introduction to the

American ambassadors Rotterdam. All the 4

'that

to Britain

letters,

in

Dulles 's request, included assurances

at

they [the ambassadors]

and France and the consul general

may

rely

on the

truth of

any representa-

tions" Dulles might make.

Dulles traveled as a one-man commercial envoy, scouring Europe for business. His

main job was

do business

to continue to

in

to get

war

Europe. In Holland Dulles advised the

Holland- American Line about placing

though he admitted right."

deliberation the Rijks

eerily

full

its

Museum

own war

risk insurance,

he was not sure he was "telling them

for the results of the insurance

on American Cotton Oil's war

from the Dutch were

to his wife

While waiting

risk insurance for his clients

company's

risk policy, Dulles visited

and played golf and tennis. After getting approval

insurers, Dulles

headed for England, where the

of French refugees during the day and

streets

at night searchlights

broke the blackout looking for Zeppelin bombers.

He wrote

his wife

one

letter

on the back of an advertisement for

intimate apparel with the slogan

pyjamas nowadays for sanctity of the

if

the 'Zepps'

come and one had

house one wouldn't

refugee as in a nighty.

expressed his shock other people

"Every common sense Eve wears

"German

in Ladies'

of a

so

Lingerie."

He

policy of attempting to terrorize

by ruthless murdering and torturing (mentally and

otherwise) noncombatants

—women,

children and neutrals."

ized that the constant barrage of recruitment posters soldiers

from the

— —much

feel quite so

The Last Word

at the

to flee

were dying as

be hard to put one's

fast as they

life to

a

more

shipped out and

He

real-

meant English

felt that "it

would

useful service than to help wipe out

ALAWUNTOITSELF

65

German military systems which make all this horror possible." He relished the role of a neutral in the midst of battle. As a student

the

at the

ward

Sorbonne

after Princeton,

he had stuffed paper in his bowler to

off gendarmes' truncheons while

He was an

rioters.

adventurer but not a fighter. In Liverpool he also did

some business arranging war Dulles had to rush back to

who had

firm client

wandering among the student

risk insurance.

London

to take care of

Mrs. Bilicke, a

survived the Lusitania sinking but lost her

husband. Dulles arranged for another passport for her, wrote a new

husband's estate, and booked her onto a crowded

will including her

ship back to America.

Dulles returned

maps out on

home consumed

with interest in the war.

He

spread

the floor of the study in his East Side apartment and used

German advances and German victories.

colored pins to show the

He fumed

retreats.

He

finally

at

the French

and Belgian

had a chance to do something about the war when his

uncle Robert Lansing became secretary of state in June 1915. William

Jennings Bryan had resigned after the Lusitania sinking because he thought President Wilson,

purposely provoked

German

who had vowed

to

stay

neutral,

had

aggression to get America into the war.

Since the Lusitania was an armed British ship, the Germans had advised the United States not to

let its

citizens

go on board. Wilson

ignored the warning, in part, Bryan suspected, to arouse American

anger

Germans.

at the

Lansing recruited Dulles

Panama on leaders

would support

was cruising wireless,

to

go

to

Nicaragua, Costa Rica, and

the pretext of firm business but really to find out the United States against the

to Central

when on

which

Germans. Dulles

America, playing bridge and listening

to the

April 6, 1917, he heard America's declaration of

war on Germany.

He

advised Washington to support the vicious dictator Federico

Tinoco

in

Costa Rica because he was anti-German and ran "a

Government and people with more other

Central

American

state."

sincere friendliness to us than any

Dulles

got

the

dictator

General

Emiliano Chamorro, president of Nicaragua, to issue a proclamation suspending diplomatic relations with Germany.

NANCY LISAGOR AND FRANK LIPSIUS

66

Chamorro was

particularly cooperative because the year before,

Dulles had played a major role in Chamorro 's election by introducing

American

the Central

to

his

During the election, Lansing

uncle.

assured Dulles that the State Department had found "the best means of

Of course you realize," interfere in any way with the

advancing the interests of General Chamorro. he added, "it franchise

is

a delicate question to

and your policy must be very carefully

Nicaragua,

in

considered." In

Panama,

his last stop, Dulles offered

secretaries of state

and the treasury

annual $250,000 canal fee tax-free as

Germany and income tax,

protected the canal for

tax law

on behalf of the American

Panama continue to get its long as Panama declared war on Allied shipping. The new 1913

to let

would have made these payments subject

a sticky issue

Washington was glad

to resolve to

advantage as long as the country was an American

Dulles' s trip

was a complete success and

Panama's

ally.

qualified

him

as a captain for a position in military intelligence,

War Trade

for the

American

to

work

Washington during the war. Dulles got a

closer to his uncle in

commission

to

working

Board. Arranging to keep goods out of enemy

hands, he got Spain to provide mules and minerals exclusively to the Allies in return for cotton and oil.

scheme

to secure thirty-seven

compromising Holland's

He worked

Dutch ships

neutrality.

He

in

out an intricate legal

American harbors without

dictated the confiscation order

for the President to sign.

With

his brother, Allen, an

worked "very hard

lately

American envoy

on getting grain

in Switzerland, Foster

to Switzerland.

.

.

.

We now

have the grain and the ships, but as you know the safe conduct from

Germany tennis

is

not forthcoming," he told his brother.

balls,

which he wanted "both for

propaganda among

my

When

week

did send Allen

use

and as

Swiss friends." The propaganda proved so

successful Allen needed "as

indeed, "every

He

my own

many good

until further notice

tennis balls as possible"

one dozen balls."

Dulles talked about war policy with his grandfather and uncle

over breakfast, they constituted a formidable foreign-policy contingent,

as

a former, present,

and future secretary of

mentioned the problem of important Sullivan

&

state.

Cromwell

Dulles

clients, the

ALAWUNTOITSELF

67

major Cuban sugar plantation owners. They were worried about a rebellion

by the Liberals, who had

maintained a stronghold

memorandum

in the area

lost

but

recent election

the

of the sugar

fields.

Dulles wrote a

urging the State Department to recognize the Liberal

He

claims that the election was stolen by the incumbent Conservatives.

&

cited as his authority Sullivan

Cromwell's "unusual and diversified

means of obtaining information,"

as well as

its

"special representative

Havana who has interviewed and obtained

[in]

prominent

in

men

the views of

banking, railroads, insurance, tobacco and sugar busi-

nesses." Sullivan

&

Cromwell concluded

that the rebellion

could not

be suppressed and recommended "appointment of commission of three .

.

.

[to] investigate election

troubles immediately."

Dulles's overriding concern

was not

the Liberals but

American

property interests in territory controlled by the Liberals.

A Cuban Liberal New York

representative huddled with Alfred Jaretzki, Sr., in

and wrote a four-page

letter

to

the

State

Department

emphasizing "electoral fraud perpetrated by the government" and "calling on the United States to install a leader

more favorable

to

American business."

&

Sullivan

Cromwell wrote

its

own

letter

asking the government to

"protect American property," especially the firm's thirteen clients

who owned $170 alone,

million worth of Cuban sugar fields. One of them Cuban Cane Sugar (organized by Sullivan & Cromwell two

years earlier in 1915), accounted for 15 percent of the country's sugar output.

Lansing sided with Dulles's support for the Liberals, but

President Wilson decided that the

government should be given

While the President refused

American

interests

"strong moral support of

to the established to

this

Cuban government."

help the Liberals,

he did protect

by sending 1,600 troops for "training purposes"

and "as a protection for the sugar industry." They remained

in

Cuba

until 1922.

Sullivan

& Cromwell's New York office had more prosaic

problems

but contributed to the war effort by reorganizing the Aetna Explosives

Company in 1918. Companies and rich people had to be extricated from German involvements, like Antoinette Converse, the hapless daughter of the National Tube Company and U.S. Steel organizer

NANCY LISAGOR AND FRANK LIPSIUS

68

E. C. Converse. She

final

decree had not

to write to Sullivan

come through and

the State

& Cromwell

"the Government

properly assist her in

With America

Company,

a

in love. Though she was German count when war broke out the

was repeatedly unlucky

in the process of divorcing a

in

any the

that

official

war,

Department was forced

Mumm

Champagne

German-owned company, faced

Property Custodian.

In

deceptively called the

a letter to

U.S.

its

.

could not

.

the

State

importer for

&

Importation

seizure by the Alien

Department, Dulles

Mumm

corporation [with an] extensive organization which

can in

.

capacity."

is

a

"New York

entirely

Ameri-

character."

The Alien Property Custodian found gave Sullivan

&

Cromwell

the instructions the

to "sell" the

company

management with Mumm's money but hold on

to its

Germans American

to the stock while

pretending the

company was American. The

company

evade the Alien Property Custodian, but luckily the war

try to

ended only a year and a half casualties to Sullivan

&

after the

firm willingly helped the

United States entered

Cromwell personnel or

reputation.

it,

with no

.

5

PARTNERS FOR PEACE atmosphere and daily witnessed the magnificent would feel as I do that mere personal gain is unworthy and that nothing now counts but humanity and the Allied cause. -william nelson cromwell

you lived

If

in this

universal sacrifices, sufferings, sorrow, you

Living

in

Paris

during the war, Cromwell

suffering of the French.

meals delivered sacrifices, as A YEAR

"THIS

to

his

Though he stayed room, he

he described to his partners

AND EACH YEAR HAS THE SIGNIFICANCE OF IS

PROBABLY THE LAST GREAT EPOCH

IN

in \

shared the

Hotel Ritz and had his

at the

the

felt

vicariously

heroic

New

spirit,

if

not the

York, "each day

is

vs

HUNDRED," he Cabled them

WHICH Wl OF MATURITY WILL EVER

BE PARTICIPANTS."

Cromwell

lived in an upstairs suite, while

bookkeeper worked out of

a

room below. Only

two

his principal secretary,

Jane Renard, ever went up to his apartment. For

assumed by

the

New York

secretaries and a

this reason,

she was

partners to be Cromwell's mistress.

The

NANCY LISAGOR AND FRANK LIPSIUS

70

other secretary

was Madeleine Regnier, a small,

remembered Cromwell

as a rotund but jolly old

delicate

man

woman who

with flashing blue

eyes and a resemblance to British Premier David Lloyd George. "But

he got so

stopped him in the street to ask to take his

mad when anyone

photograph as Lloyd George," she recalled sixty years

later.

Cromwell devoted himself to the French cause by helping the finance minister borrow

money, and subscribing

to 2.5 million francs

($500,000) of French war bonds, which were not a secure investment while the war hung in the balance. Cromwell explained by telegram to

New York:

it is

not how much i can gain but how much can give of service i

AND FORTUNE [TO WHICH] ...

WAR

INTEND TO DEVOTE THE

I

PERIOD IN AMERICA

and europe. As the war produced more casualties, he endowed a

workshop

for the

wounded

Grand

at the

Palais in Paris, a school for

400 war-orphaned children, and, when America joined the war, a club for

American

officers in

Cromwell's devotion

young lawyer from

Le Mans. to the

war made him

the firm join the

the happier to see a

all

American negotiators of

the

Versailles Treaty. Dulles participated in redrawing the world's boundaries in the in

peace of World

making him a Sullivan

had lived

in Paris,

War

&

I,

but the work's greatest impact was

Cromwell

he was studying

The

partner.

at the

last

time Dulles

Sorbonne, absorbing Henri

Bergson's views on intuition and the supreme role of creatures to adapt to reality. to the Paris

As

a

member

reality

went

to Paris as the Reparations

He

he had already

later,

he was.

War Trade

Dulles latched on to the delegation from the

counsel.

is

Board.

It

Committee, for which Dulles became

arrived late in Paris and

was shocked

at all the

jealousy, wire-pulling and lack of accomplishment.

coming

living

of the American delegation

Peace Conference just ten years

proved what an apt student of

all

"confusion,

Any one new

regarded as an interloper and has to meet the united efforts

of the 'already established' to 'absorb' him." Idealism was being

reduced to petty bickering within the American delegation housed together in the Hotel Crillon, and

it

had not even

started dealing with

the Europeans.

Dulles avoided the bickering and stuck to his the delegation. His uncle Robert Lansing bore

own

personal allies in

no resentment when

LAW UNTO ITSELF

A

own way

Dulles found his turned his

down

state against

to the Crillon after the secretary of state

go with him. Lansing had wanted

his request to

nephew from

71

had already

the infighting that

there, too, as a State

Dulles used the

M. House.

Department repre-

European boundaries.

sentative handling the redrawing of central

month of jockeying and stock taking

first

luncheons for his colleagues.

He

had

keep

pitted the secretary of

Wilson's personal adviser, Colonel Edward

Younger brother Allen was

to

to host

held a lunch at the Ritz for two

members of the Reparations Committee, Norman Davis and Vance McCormick, and George Sheldon, the "Morgan man" whom Cromwell had chosen as Taft's campaign treasurer in 1908. Sheldon, the to

War Trade

now

Board's European representative, remained a useful link

Cromwell. Dulles found

awfully exciting."

month's salary,

He

his distinguished guests

me

blithely noted that the lunch "will cost

suppose, for the Ritz

I

"nice though not

is

a

hardly cheap these days."

Dulles asked Sheldon "to hustle around and pick up gossip and

extend Uncle Bert's sphere of influence" the way, he found out,

Gordon Auchincloss was doing Over

tea in the delegates'

for his father-in-law, Colonel

House.

rooms, Dulles and Sheldon discussed

whom

Colonel House was seeing and what the colonel said about Lansing, the President, or the Europeans.

Dulles indulged Cromwell's interest in the proceedings and patiently listened to his opinions. After

Dulles concluded,

On

the

"He

is

one afternoon-long

visit

with Cromwell,

certainly verbose."

day of the organizational meeting of the Inter-Allied

down with the mumps. Since this commission would determine how much the Germans had to pay the victors, every country put its top men on it, including John Maynard Keynes, the young Treasury man from Britain, and Louis Loucheur, a member of the French cabinet. Besides being disgusted at Reparations Commission, Dulles came

missing the meeting, Dulles was worried that he might have given the

mumps

to

Cromwell, who was the

last

person he saw before getting

sick.

Forced to stay

in his

room, Dulles wrote up a memorandum on how

Commission should proceed. The next day Dulles memo in front of the American reparations committee.

the Reparations

discussed the

He

incorporated their suggestions

in

his

memo

while,

he noted

NANCY LISAGOR AND FRANK LIPSIUS

72

gleefully, third

"haranguing

this distinguished

group

day he got dressed and presented the

in

memo

my

bath robe."

to the international

commission on behalf of the U.S. members. He showed

mumps

The

that

even

can be a blessing to an ambitious man.

Dulles entertained the Chinese minister of foreign affairs, Tsengtsiang Lou, at dinner at the Ritz, to

which he invited Cromwell along

with Lansing and William Graves Sharp, the American ambassador to France. Sharp was also the father of an eventual Sullivan

George Sharp, who met Dulles then, as

partner,

The

dinner cost Dulles $110. "Still

he wrote his wife, Janet, for

it

it

was worth

showed

&

Cromwell

his father's secretary. it,

don't you think?"

even Cromwell

off contacts

could admire.

So join to

an

had the peace conference become

social

him art

in

that Dulles

had

his wife

March. She elevated the entertaining side of the conference

form, spending her days shopping and sightseeing in the

Trade Board

Once

car.

Janet

Dulles

War

had arrived, the Dulleses

entertained in the secretary of state's suite with

its

high ceilings, red

brocade drapes, and dignified portraits of French nobility. They drank

When

with twelve guests in front of a huge fireplace.

them

to dinner, he pulled

away

the waiter called

a screen hiding the table in another

corner of the room. Between social engagements, Janet Dulles went to

Cromwell's reception for Queen Marie of Romania, who had arrived with an entourage that took twenty-two rooms Janet Dulles

She reported proudly

mother, "Messrs McCormick, Baruch,

to her

Lamont and Norman Davis

think this

all sorts

it

Committee] seem

[of the Reparations

depend on Foster for every step they take others

at the Ritz.

was not completely sheltered from her husband's work.

—and

I

of wonderful things about Foster's ability and work.

was a most fortunate thing

him

for

that

—

aren't

I

he got over here and had

chance as counsel for the Reparations Committee.

important

to

hear from them and

It is

really very

you proud of him?"

Meeting with President Wilson, Dulles argued against including pensions in Germany's war debt. pensions costs.

would

involve

..." Wilson

He was

admitting

against

afraid that

the

replied that he "did not feel

ations of logic and that

...

the agreed terms of peace."

it

"to accept

enemy

all

war

bound by consider-

was a proper subject of reparation under

The American

legation put the reparations

— ALAWUNTOITSELF demand

$30

at

compared

billion

demands

to British

for

Colonel House concluded,

France's $200 billion.

$90

billion

and

"I thought the

were as crazy as the French but they seem only half as crazy

British

which

73

leaves them a good margin of lunacy."

still

had the greatest impact on the reparations debate by

Dulles

proposing a permanent Reparations Commission, which the British

and French prime ministers embraced

to shelve the issue. Janet Dulles

was able

"Foster has a copy of the treaty

to write her mother-in-law,

and a great deal of the Reparation and Indemnity clauses

in

it

are

exactly as Foster wrote them!"

Taking time out from the deliberations, Dulles had lunch with

Cromwell

which Cromwell was reorga-

to discuss Brazilian railroads,

nizing after bankruptcy. While

Cromwell was

trying to get a share-

holders' group together to prevent an immediate forced liquidation,

Dulles reported that he had met with the president of Brazil, with

whom coffee.

he had discussed reparations and the prospects for Brazilian

Although the topics did not bear directly on Sullivan

Cromwell business,

the Brazilians

of Dulles and his law firm.

It

was not

in

New York

Alfred Jaretzki, Sr.: we are

insisting

HIS

FIND THAT

PRESENCE HERE

IS

to

Negotiate Peace cabled

that dulles shall not go quite yet

BECAUSE OF THE FACT THAT WE CONSIDER

...

Cromwell

with his wife and Mr. and Mrs.

Cromwell, but the American Commission

... WE

&

it.

Dulles hoped to return to

IMPORTANCE.

Cromwell and

surprising that

Dulles got around to discussing the future of Sullivan

and Dulles's role

&

were impressed with the importance

HIS

WE CANNOT

PRESENCE HERE OF THE UTMOST DISPENSE WITH DULLES

'

SERVICES.

OF SUCH IMPORTANCE TO THE PUBLIC INTEREST THAT WE

HAVE UNDERTAKEN PERSONALLY TO SEE TO

IT

THAT

HIS

FORTUNES JX> NOT SUFFER BY

REASON OF THIS COMPARATIVELY BRIEF EXTENSION OF THE NOTABLE SERVICE THAT HE IS

RENDERING TO

HIS

COUNTRY AND THE CAUSE OF PEACE.

Jaretzki wired back:

in

response to your kind message we are GLAr they

WILL HAVE DULLES MAKE EXTENSION CONTRIBUTION HIS SERVICES. OF COURSE YOU

CAN ASSURE HIM Janet Dulles write her,

HIS INTERESTS left

A

month

later,

Dulles had to

"McCormick, Baruch, Lamont and Davis ...

President that they I

WILL NOT BE PREJUDICED BY DOING SO.

with the Cromwells.

would have complete confidence

stayed and that he might also.

all

told the

in the situation if

At the same time

it

is

a bitter

NANCY LISAGOR AND FRANK LIPSIUS

74

now was

disappointment" to postpone his return home. The subject financial

the

and reparation clauses of the

Hungary, Bulgaria, and Turkey,

American

with Austria,

treaties

which Dulles acted

in

as principal

negotiator.

Dulles proved himself indispensable as a negotiator with no point of

view of

his

own. Some of the other young American delegates

quit

because, as one of them, William C. Bullitt, wrote, "our Government

has consented to

—

ments

new

a

.

.

.

new

oppressions, subjections and dismember-

century of war." Dulles, on the other hand, deferred

whom

respectfully to his elders, to

he made himself useful.

Besides, he had the confidence of his uncle the secretary of state. President Wilson,

who knew

Dulles as a fellow Princeton man, wrote

him, "I hope that you will not feel that or too unwelcome duty upon you

if I

I

am

imposing a too onerous

beg very earnestly

that

you make

arrangements to remain in Europe for the present to handle the very important and difficult matters with which you have

and which you have so materially assisted Dulles sent a copy of the President's

you

will see," he noted,

the signature of the

"has made

it

become so

handling."

in

letter to

Cromwell, "which, as

impossible for

me to return upon

German Treaty today." a member of

The French government made Dulles

Honor

in a

familiar

the

Legion of

ceremonial dinner on Bastille Day, July 14, 1919, which he

celebrated by wandering around Montmartre with his brother, Allen, until

4:00 a.m.

Wanting

to get

back

to

the permanent Reparations

nervously, "I hope very definite plans are interest

which

I

made

New

York, Dulles faced a further obstacle,

Commission. He wrote

much for

that

you

will let

to

Cromwell a

little

me know whenever any

any reorganization. You know the deep

take in the firm." Dulles

was lucky

that the Senate

Foreign Relations Committee refused to appoint an American representative to the Reparations the treaty

had not yet been

Commission. ratified,

Its

argument was

that since

no permanent representative was

required.

Dulles stayed on in Paris for almost another month, mediating a

German dyestuffs held by the Allies. The British did not want the German goods flooding the European market and suggested the United States take them. As reparations dispute over what to do with 800 tons of

ALAWUNTOITSELF Dulles pointed out to a

American member on seriously affected."

New York World

the commission, our

He

75

reporter,

own dye

"Without an

industry

Dulles relinquished the world's burdens on August 28 finally set sail for

England.

He

when he

spent a few days there relaxing with

American Ambassador John W. Davis, playing golf and taking before he returned

home

dinarily fruitful trip that future.

may be

got the material distributed in Europe.

in early

September.

had guaranteed Dulles

It

it

easy,

had been an extraor-

(if

not Europe) a secure

6

DULLES'S PRIVATE FOREIGN POLICY The

reparation creditors had built up within

Germany enabled Germany to wage

which was intended which, of

in fact,

to enable

John Foster Dulles's role

little

a machinery pay reparations, but the most destructive war

time. -john foster dulles

all

ued long

Germany

to

in the Versailles negotiations,

after the senior delegates

Americans cared, with

hostilities

and

instability in

which contin-

had gone home, was a sign of how

the result that the peace only perpetuated

Europe. But Cromwell, impressed with his

made

thirty-year-old underling's role as an international negotiator,

Dulles a partner as soon as he arrived back in

Cromwell recognized

men were

in his

young protege

New

York.

a kindred spirit. Both

passionately concerned about international affairs, with

access and ability to charm world leaders. For Cromwell, Dulles was the perfect link

between

his

own

interests

but prosaic practice of the firm. For Dulles,

and the otherwise lucrative

Cromwell provided

a

Wall

NANCY LISAGOR AND FRANK LIPSIUS

78

Street legal career outside the

made

humdrum

Cromwell could

a perfect pair.

life

live

have news of the office through regular

of most lawyers. They

comfortably

visits

in Paris

and

from Dulles.

Dulles got to travel and avoid the hostility from fellow lawyers for his

charmed

which they resented

life,

as they slaved eighteen hours a

day and weekends on boring contracts and bond else,

issues.

For everyone

even a partnership was no guarantee of being above the drudgery

of ordinary work, but for Dulles his partnership was the confirmation that

he would never have to look

at routine again.

Cromwell and Dulles shared an urge

to rehabilitate

Europe. Crom-

well followed his French war relief with imaginative programs for

recovery and rebuilding the devastated country. Though he returned to

New York twice

a year, in 1924 he

when he moved

to a

Bois de Boulogne.

made

his Paris life

more permanent

huge Gothic apartment on the fashionable avenue

He

hired a household staff of six, including a

American decorator

waiter, and brought over his

to fix

up the place

with fancy seventeenth-century Belgian tapestries and an American electric

organ (the

France).

first in

Besides his two secretaries, he wrote Dulles, "In truth had, from the beginning,

some one of

is

should have

my side, as I am by my own hand)

the juniors at

kept working from 5 a.m. (whence this until

I

is

drafted

9 p.m. to bed and do not go out once a month in the evening.

the only

way

He donated

I

can conserve

fruit

trees,

villages throughout France.

my

It

health and energy."

chickens, and fountains to farmers and

He gave 100,000

francs to reestablish the

lace industry of Valenciennes, a district near

completely destroyed in the

Belgium which was

German advance on

Paris.

Working

through an organization called Le Retour au Foyer ("Return to the

Hearth"), Cromwell sent livestock and equipment by truckfuls to

needy farmers. Newspapers carried photos of the trucks with cromwell written across the side

gift of

to broadcast the generosity of this

eccentric American.

Cromwell had books printed the

Permanent Blind

president. In one

War

month

in Braille in several

Relief Fund,

in the

summer of

Inc.,

languages through of which he

was

1924, he gave away more

than 200,000 francs to a variety of causes. Cultivating important

ALAWUNTOITSELF

79

French politicians by asking their advice on where to make donations,

Cromwell gave 100,000 francs

each of ten

to

scientists, a total gift

of

about $200,000 to further their research. In 1923 he endowed the town of Bailleul with a lace-making school and, following the advice of

former French Prime Minister Andre Tardieu, gave $20,000

to the top

325 lace-makers.

When one newspaperman,

using Cromwell's secretaries as inter-

why he was so generous, he answered, "Because it is France. Does one know why one loves one woman above all others? Well, France is like a woman I admire and cherish. Her serenity is

preters, asked

never indifferent, her grace haughty.

would

I

like her to

never fatuous, her pride

is

never

is

be happy after having paid so dearly for

her honor."

He gave more

than half a million francs to build the

Legion of Honor

in Paris

willingness to match his

Museum

of the

and deeply resented another American's

gift.

A jealous

suitor to his adopted country,

he tried unsuccessfully to have the Legion of Honor return the other donor's money.

American

fliers

He

also paid

$125,000

to build a

of the Lafayette Escadrille

who were

monument

to the

killed fighting for

France before the United States entered the war.

Cromwell's Paris philanthropy did not stop legal

work.

He made

his getting lucrative

$1 million handling the litigation over robber

baron Jay Gould's estate on behalf of his daughter Anna Gould. The of the American

first

European nobility

"million-heiresses"

to

marry impoverished

soon caught on), Anna Gould stopped

(a fashion that

her brother George Gould from bankrupting the $93 million estate in his

attempt to outdo their father. Cromwell worked with another

prominent lawyer, Samuel Seabury, against

to

win a $40 million judgment

the

amount was halved on

final

part of the

Gould household because

"my

George Gould, though

settlement.

Cromwell soon became

mother had complete confidence trust

very

many people,"

in

him. She trusted him and she didn't

recalled Violette Palewski, the daughter of

Anna Gould and the due de Talleyrand. But "I don't know if my father liked it too much," she said of Cromwell's habit of slapping her father on the back with the greeting "Hi, Duke." She remembered Cromwell as a charming old man who arrived promptly for Sunday lunch and sat

NANCY LISAGOR AND FRANK LIPSIUS

80

with her, a five-year-old leather gift boxes said.

"Even

necklaces,

from

He

girl.

uncurled her hair and handed her red

"He

Cartier.

covered

me

he brought precious jewels

to a small girl

kinds, which he picked out himself.

all

with jewels," she

—

bracelets,

They were very well

chosen."

Germany

Dulles wanted to help

He had never

France.

way Cromwell was

the

helping

lived there, but he felt responsible for the

country's shabby treatment at the Versailles negotiations, even publicly he claimed the treaty did the best that could be done. the honorable

and imaginative idea of using trade

its

He had postwar

to initiate

government had turned

revival after the United States

if

back on

He provided an American commercial presence in Europe at when most Americans had little interest in the economically

Europe. a time

depressed, war-ravaged continent.

But two differences separated the philanthropy of Cromwell and Dulles.

Cromwell used

his

devising, while Dulles

Cromwell ments

own money

to fulfill a

was dependent on

own

his clients' participation.

realistic

he found in Germany or the potential of his Part of the difference

lack of scrupulousness in.

his

also recognized the limits of his ambitions and accomplish-

France while Dulles was never

in

scheme of

was Dulles 's wishful

shown

in a small

about the conditions

efforts.

thinking, but part

was a

matter Cromwell was involved

Despite Prohibition, which started in 1920, Cromwell tried to get

crates of

champagne shipped

to

New York

to satisfy his

consumption

of a daily pint of bubbly. Cromwell and Dulles corresponded on the subject for

more than a

year, at the

end of which Cromwell had

to

warn

who had offered to deal with high State Department officials, "Above all, we must not do anything which would subject us to

Dulles,

criticism or

even of serious doubt as

Cromwell ultimately succeeded because they had been incident

showed another

in

in

to the course of

getting

transit before

difference:

two

crates

conduct."

legitimately

Prohibition started.

Cromwell offered

to

(The

reward Dulles

with one of the crates, but Dulles preferred gin, which he quietly

smuggled York.)

in

from Canada through

his brother-in-law in upstate

New

A

LAW UNTO ITSELF

81

Dulles returned to Europe only three months after leaving Paris.

boarded the

RMS

Mauretania

in

He

February 1920, despite Cromwell's

advice not to tax himself. Convinced that individuals could succeed in securing peace where governments had failed, Dulles went to Czechoslovakia, Poland, and

Germany

not visit Paris because he

was embarrassed

scheme

new

He

did

to see old colleagues after

various of the firm's clients to go along with a

Europeans raw materials on

to give the

opportunities.

League of Nations.

the Senate had rejected the

He had persuaded

to scout

They would pay

credit.

once they had sold the finished goods, a no-risk deal for the Europeans. His

first

business stop was Frankfurt to meet the Merton brothers,

whose Metallgesellschaft needed copper. Dulles was with Richard Merton,

who had been

German

a

particularly taken

delegate in Paris, where

Dulles jumped to the conclusion that "he was doing in

what

I

was doing

for the

Dulles was always drawn to foreigners like Merton English. After spending so to

Germany about

U.S."

much time

in

who spoke

Europe, Dulles was assumed

speak foreign languages, especially French from his year

Sorbonne. But when he was asked

rearmament

is

a

at the

"Do you think German answered, "I am sorry she isn't

in

good thing?" he

fluent

French,

here." Unfortunately, knowing English did not thy as Dulles assumed.

He arranged to & Company

through Goldman, Sachs

make

get the

a person as trustwor-

Mertons a large loan

to import

American copper.

Dulles found the Mertons perfectly agreeable trading partners, but several years later they embroiled

him

in a

headline-grabbing court

case in which the United States attorney general Harry

was caught taking

a bribe

relationship with them,

from them. Dulles had

M. Daugherty

to testify to his

which was innocent because Goldman, Sachs

ultimately backed out of the copper deal.

From

Frankfurt Dulles hired a chauffeur to drive

where he represented four American

textile

him

to Prague,

companies working

consortium called the European Textile Corporation.

Dulles

sympathetic to the feisty Czechs, especially to Eduard Benes, helped establish his country

week Dulles had arranged

at the Paris

a $15

in a

was

who had

Peace Conference. Within a

million deal

for the

export of

NANCY LISAGOR AND FRANK LIPSIUS

82

while Benes introduced him to the country's

American

textiles,

president,

Thomas Masaryk, and

European

central

On to tell

escorted

him around

first

the beautiful

capital.

Sunday, March 14, 1920, the hotel operator rang Dulles 's room

him

that a military putsch

had taken over Berlin. With boy scout

enthusiasm, he got an American legation officer to produce, as he put it,

"a magnificent

the Legation

and Diplomatic courier

were requested a special

letter stating that I

to give

me

was

to

go

the special representative of to Berlin

and

assistance and protection. "

that all persons

Benes gave him

Czech government pass, and by Sunday evening Dulles was

Germany with an American who spoke fluent German. When German frontier officials stopped Dulles for not having a visa, he told them he "hadn't known what Government to get one from." They didn't either, and let him go. With Dresden in the midst of a on a

train to

general strike, Dulles rented a car and a chauffeur for a pittance in

ransom in German marks. He hired a made Dulles walk ahead of him so it would not look as

dollars but a king's

porter

who

he were

if

carrying Dulles 's luggage. In Berlin he found milling battalions of the

Kapp

putsch,

led

by a rough group of right-wing junior

officers

wearing ominous-looking helmets and brandishing hand grenades. Dulles picked his

way

carefully past the barbed wire,

and machine-gun- wielding troops Allen Dulles, an embassy

to the

official,

barriers,

American embassy.

had just arrived from Poland on

The two brothers wandered

the last train that got into Berlin. streets,

cement

watching the revolution unfold around them. Crowds

the

filled the

and day. Foster noticed the "anti- Jewish propaganda

streets night

which met with considerable response." During the Kapp putsch, he detected "very bitter feeling against the Jews which into

Germany

in great

[sic]

have come

numbers from Russia and Poland, and they

are

popularly blamed for the shortage in food and lodgings and with being profiteers.

Many

approval of the

of the hand

bills

which were given out by, or with

Kapp people were most

the real dangers

was a 'pogrom.'

'

bitterly anti-Jewish

He was

far

the

and one of

more conscious of

anti-Semitism in 1920 than he would be after Adolf Hitler came to

power.

As

for business, Dulles admitted, "Practically

[sic] offices,

no one was

at their

however, as there were no means of getting there, and

if

ALAWUNTOITSELF

without clerks, mail or

they got there [they had] nothing to do, telegraph. " Allen Dulles had his brother

economist to his

Born

at the

beginning of a

83

meet Dr. Hjalmar Schacht, an

stellar career that

would ultimately lead

Nuremberg

after

World War

and raised to the age of twelve in Brooklyn,

New

York, Schacht

being tried as a war criminal

was one of those beguiling

figures

at

who spoke

II.

perfect English. (His full

name was Hjalmar Horace Greeley Schacht.) But he also considered himself a true German patriot. In 1920 Schacht helped found the Democratic party before supporting Hitler a decade this

—and,

after

meeting, taking Dulles along with him.

"Of all

that

I

met

in

Berlin," Dulles recalled in 1930, "Dr. Schacht

alone looked forward with hope to the future and

do something, everyone else the

later

tall,

it

worthwhile to

something out of the wreckage which

to try to save felt

felt

was permanent." Dulles had

ramrod-erect economist

who wore

a lot in

a high,

common

stiff

squeezed his throat and made his crew-cut head look as

if

with

collar that

were

it

set

on a pedestal. Both had originally thought of becoming Protestant ministers. Dulles flattered himself that he

knew something about economics,

a

conceit Schacht encouraged in discussing "plans for financing the

importation of essential raw materials into

"which would again put industry

into

Germany,"

as Dulles put

it,

motion."

Dulles and Schacht talked while machine-gun

fire

from the Kapp

putsch echoed in the street below. In Dulles, Schacht had the perfect instrument for luring America into Germany's problems. Their relationship

would

last

more than

a decade and cost

Americans

dollars because Schacht seduced Dulles into supporting

a billion

Germany

for

far too long.

The putsch vacated

who

marauding troops,

put the city into a panic. People offered Dulles fabulous

his car,

day

Berlin, leaving the streets to

one of the few

in the

whole

city.

after the putsch dispersed, returned

sums

But he kept the car it

to

for

until the

Dresden, and took the

overnight train back to Prague.

He wrote

his wife that he

had seen "a remarkable testimonial

to the

fundamental orderliness of the German people, as during the whole period there was no strong central government, and even regular police service

was wholly disorganized." Dulles might have wanted

to

keep

NANCY LISAGOR AND FRANK LIPSIUS

84

poor Janet from worrying about her adventurous hubby, but even

to

Prague he reported, "The failure of the

American legation

officials in

Socialists to seize

Government shows

that the great majority of

are moderate in their views and that the extreme radicals are

them

weak."

Dulles was not concerned about conditions in Germany, but his clients were. Just as

he was concluding $15 million of cotton sales

in

Prague, the client cabled to cancel the deal. Dulles cabled back that

was too

it

late.

Wanting

to reassure his clients, Dulles

begged

his brother, Allen, to

send encouraging reports to Washington from the embassy In the effort to tether clients to his

you can do

there nothing that

men

through the newspaper

own

in Berlin.

agenda, Foster asked Allen, "Is

either through the State to give a

more

Department or

truthful picture of the

situation?" Allen Dulles refused. Clients pursued Dulles to Frankfurt, where he went to finalize the

He

copper sales to Metallgesellschaft.

wrote with exasperation to his

"Today we have long cables from New York stating that it be impossible for many months to make the public sale of

brother, will

securities

must

call

which it

is

necessary to finance our copper transaction.

off or hold

it

in

We

abeyance."

Rather than admit defeat, Dulles arranged to meet his clients in

Cologne

to

review the deals. But when their ship was delayed, he

out on an adventure that confirmed just stability

Ruhr

region. This

Germany to

Kapp putsch had

was. The

that

was

how

set

German

precarious

inspired a left-wing takeover of the

the beginning of a progressive polarization in

culminated in Hitler's

rise to

power

as a safer alternative

Communists, though the Ruhr Reds struck Dulles Claiming his right "to confer with

as merely comic.

their leaders," Dulles bribed a

chauffeur with chocolate and went to Duisburg, where the revolutionary government the hordes of

was holed up

in the city hall. Dulles

pushed through

hungry people waiting for food rations

to explain to a

guard the importance of his mission. The guard used a

rifle to

poke

his

way through the crowd. "The sight was really

pathetic," Dulles recounted, looking at this

band of what he

"uneducated workmen chiefly jews

called,

should say, looking as one pictures Trotzky

[sic],

[sic], I

unshaven for days,

ALAWUNTOITSELF dirty

and

I

imagine not having gotten

much

85

sleep since they started to

govern!" Dulles explained to someone all this

way

who spoke

English that he had

for a safe-conduct to get out again.

A

come

commissar pored

over a typewriter for ten minutes, tapping out twenty-five words.

Handing the pass "not guarantee ary region

he explained apologetically that he could

to Dulles,

how good

would be," confessing, "The revolution-

it

was so divided and

their differences

were so acute

that their

pass might not be generally recognized."

Dulles 's chauffeur, impressed with his rider's importance, picked a fight with

some

Dulles extricated

wasted no time

soldiers

who

him and

fled to

telling

him

did not

show

the proper respect. But

Cologne, where his impatient clients

were

the deals

off.

Dulles would have preferred to get some business out of the

he was content to watch the country reassuringly:

"Taking

into

fall

trip,

but

apart while concluding

account that here was a concentrated

who had been long time and who

population of a rough class, miners, steel workers, etc., underfed, only partly employed and underpaid for a

were not, through red guards who had the only arms,

unopposed control of the which was

[sic]

As Dulles Ruhr

revolt,

left

situation, the order

in entire

displayed was remarkable."

Germany,

the right-wing

and two months

later the

army

brutally put

democratic

Weimar

down

Weimar Republic

started to

retaliation as peacekeeping.

But Dulles had had his adventure and was off

to

new

hotels, clients,

and deals with no thought for the implications of what he

Having completed no work had served on the

for the firm, Dulles

book on

left

managed

behind.

to

make

way home. Bernard Baruch, with whom Dulles

War Trade Board and who had

Versailles negotiations, approached

write a

The

crumble as the country's judges prosecuted

wing while justifying right-wing

himself $10,000 on the

the

coalition

collapsed as the moderate Social Democrats lost their power.

the left

and

and respect for property

attended the

him through Cromwell

to ghost-

the Versailles Treaty, which, Baruch assured him,

would take only about two weeks. Baruch was a speculator who used

his fortune to

buy influence and

NANCY LISAGOR AND FRANK LIPSIUS

86

Having made a stock market

reputation.

had destroyed the Spanish

fleet to

killing

on a

tip that

America

win the Spanish- American War, he

hovered around the powerful with the look of a do-gooder while hiding the manipulative skill he learned in smoked-filled back rooms.

Dorothy

Parker once said that two things confused her: "the theory of the zipper

and the exact function of Bernard Baruch."

As

member of

a

the

Reparations Committee

at

the Versailles

negotiations, Baruch felt compelled to counter the devastating criticism

of John Maynard Keynes, the brilliant British economist Versailles because of

way

punitive provisions against

Dulles had read Keynes's

Europe,

to

its

new

who had

Germany. best

quit

On

seller

his

The

Economic Consequences of the Peace, which disturbed him as much as it did Baruch. While still in London before going to the Continent, Dulles had written a in nearly

In

two

answer

full

to

letter to

The Times of London which published

columns of the paper.

Keynes's complaint that Wilson had betrayed the

on which he promised Germany peace, Dulles replied

principles

it

that

Wilson should not have been faced with a choice. The French were unreasonable.

It

was

that the Reparations

their fault. In

The Times

letter

Dulles argued

Commission could make amends. "The whole

akin to that of a settlement in which the creditors recognize

operation

is

that their

own

vitality

all

interest lies in preserving

and enhancing the economic

of their debtor." But he ignored Keynes's point that unlike

relations

between a creditor and debtor, France wanted

Germany

in

War

revenge for World

Franco-Prussian

I

to destroy

and the humiliating loss

in the

War of 1 870-7 1 Making of the Reparation and Baruch 's name as an elaboration of

Dulles anonymously wrote The

Economic Sections of the Treaty the letter.

By merely

in

justifying America's actions, Dulles ignored

Keynes's major concern about the Versailles.

instability

caused by the Treaty of

The Baruch book looks an impressive 353 pages,

prodigious achievement on Dulles 's cruise back to really only text

New

York; but

a

it is

124 pages of new material, followed by a lightly annotated

of the reparation and economic

sections

of the treaty and

appendices of speeches of delegates in Paris, including Dulles 's.

Having rationalized the peace with Baruch that Dulles

confessed in 1945,

"The

in 1922,

it

was

to

him

reparation creditors had built up

ALAWUNTOITSELF Germany

within to

a machinery

which was intended

pay reparations, but which,

most destructive war of

in fact,

Germany wage the

to enable

enabled Germany to

time."

all

Witnessing two revolts

87

Germany

in

in

Dulles's opinion that "the Reparation

two weeks

in

Commission

no way changed

in the

process of

enforcement might become a flexible instrument of wisdom and justice."

He had no second

been through

—

the hunger, the anti-Semitism, the violent swings of

and left-wing

right-

thoughts about the adventures he had just

politics.

Dulles's partners could not have been too happy to see

show

the office with nothing to

Cromwell approved, writing effective

C.

It is

and

reaching

far

return to

two months of adventure. But

for

to Dulles,

'This kind of work

in the future (as

only a matter of time

him

when you

is

the

most

well as the present) of S

will be called to take a

&

more

active part in these great questions."

Though Dulles had

Cromwell's confidence was well-founded.

New York he immediately attracted problems. The New York Life Insurance

gotten nowhere in Europe, in clients

with

European

Company, which had $525

million in policies outstanding abroad,

asked Dulles to sort out the immensely complicated results of the war

on

its

New York

business.

Life had increased

its

coverage

in

Europe

while other American companies had withdrawn, so that by 1913

more than Its

half of

policies varied

all

the United States'

from standard

which Russians took out In

at a

life

it

did

European insurance business.

insurance to

endowment

policies,

daughter's birth to guarantee her a dowry.

1885 the clever Russian court adviser Count S. Y. Witte had

forced American insurance companies to invest their Russian premi-

ums in

in Russia.

New York

Life had 20,000 policies worth

Russian insurance and a comparable investment

and property.

New York

In

$40 million

Russian bonds

in

1918 the Soviets annulled the bonds and confiscated

Life's property, while claiming

payment on

the policies

on

behalf of the 20,000 policy holders.

The Soviets won court, getting a

made New York

a landmark case on the policies in

judgment amounting

to millions

New York

state

of dollars. Dulles

Life settle with the Russians, but the Equitable Life

Assurance Society appealed and

won

a reversal.

Those cases took

six

NANCY LISAGOR AND FRANK LIPSIUS

88

years, nothing

compared

New York

to

Life's counterclaim for

its

property confiscated in 1918. In 1931 the Litvinov Accord set aside $9 million of Russian property in the United States for

New York

occurred twenty-five years 4

was

'It

The

Life to divide proportionately. later, in

claimants like

all

actual distribution

1956.

wonderful legal exercise but economically a

a

total

disaster," according to Frederick Seibold,

who rummaged around

New York

looking for prerevolution-

ary Russian documents; firm.

Company's

Life Insurance

"But

it

was

attic

fascinating as his

the firm lost a lot of

money on

'

it.

'

first

assignment

in

at the

New York Life's claims

Europe and Russia were a nagging reminder of the Old

in central

World which Dulles had helped

to

bury without necessarily creating a

satisfactory replacement.

When

in

1920 the American Bankers Association

trade organization with

$100 million

to bankroll exports to

Reparations Commission and an American

Member

Europe,

Member

Dulles claimed a special expertise "as [an] American

Economic Council. " He added,

up a foreign

set

of the

of the Supreme

in a letter to the president

of the

ABA,

"I had, perhaps, exceptional opportunities to study the financial

problems involved

He

in

Europe securing

did not mention his failures

its

when he

necessary commodities."

also wrote about his "recent

private trip to Europe, including Central Europe, studying particularly the

problem involved

States." in

in the nations' financing

The bankers were impressed and

imports from the United

invited Dulles to a meeting

Chicago.

Reviving Europe through private industry was an idea whose time

had not yet come. Cautious businessmen would not lend while

German

billion

marks

inflation reached, at

to the dollar,

its

to

Europeans

height in 1923, a rate of 4.2

compared with eight marks

to the dollar in

1919. In 1923 France invaded the Ruhr Valley on the pretext of

Germany's

refusal to deliver coal under the Versailles Treaty while

Germany embarked on

a general strike. Dulles could do

the bankers then, but their taking notice of

dividends In the

him would

little

work

for

yield the firm

later.

biggest industrialists in

Germany

after their arrest for refusing to

send coal

summer of 1923 some of the

invited Dulles to defend

them

ALAWUNTOITSELF to France.

89

Besides having a good reputation as a lawyer (though he had

never tried a case in court), Dulles was useful to the Germans by being

He met

his potential clients

in the elegant executive quarters adjacent to the

Krupp steelworks,

able to publicize their predicament abroad.

known

locally as the

"Krupp

Private Hotel" near Essen.

After an elegant and hearty lunch that surprised Dulles for

refinement in the midst of

crisis,

its

he asked to see some of the

proceedings of the French military tribunal before deciding whether to

defend the executives.

A

mine manager who had transported coal

without a French permit had received a fine and a one-year sentence.

A a

army of occupation room next to his had gotten

professor accused of propaganda against the

because of a newspaper clipping found

heavy

in a

and a five-year sentence.

fine

A

carelessly killed another French soldier but

gotten a one-year sentence.

"summary certain

...

It

is

blamed

a

Dulles concluded that the

the circumstances he declined the work, even though, he told

German

chancellor, "there were admittedly

liked to help

remedy." For

opinion of his not permit of

own

many

individual cases

work of

chancellor,

America shipping

"The

a really professional character and

should have

I

situation did

doubted

that

,,

Wilhelm Cuno, who was head of line

I

a lawyer with no experience he had a high

worth, adding to the chancellor,

could accomplish any real good.

The

were

part of the general policy to sentence a

of grave injustice which, under other circumstances,

I

trials

number every day."

Under the

affairs.

who had German had

French soldier

(which Sullivan

&

Cromwell

the

Hamburg-

later represented),

pleaded with Dulles to find "a solution to the whole matter."

He

assured Dulles of the reasonable attitude of his government. Dulles conducted a private round of negotiations

mans, French, and Belgians

to try to resolve the

among

the Ger-

impasse over the Ruhr

occupation. Dulles found French Cabinet Minister Louis Loucheur,

whom regards

knew from the Reparations Commission, "very bitter as the Germans." He told Dulles that the Germans had played

he

"into the hands of extremists like Poincare and had

in fact

proved

that

when they had said that the moderates were indulging in false illusions." The Belgian prime minister had railed that "only a more socialistic government can make the necessary

these extremists were right

NANCY LISAGOR AND FRANK LIPSIUS

90

sacrifices

and take the necessary action against the great

among

Besides passing messages

warned them

all

of "disintegration"

problems which would disturb strongly

the

'

industrialists.

European leaders, Dulles

Germany and

in

"political

Europe for years." He devised the

all

pro-German solution of paying reparations with a

tax

on beer,

He German consumers paid German demands but did

wine, and tobacco instead of delivering valuable coal to the French.

wanted the Germans

to reindustrialize while

the country's reparations. His ideas satisfied

nothing to placate the concerns of the other Europeans. Dulles also suggested that the

money

collected for reparations be

Germany "for internal use ... [as long as] the Reparations Commission shall be satisfied that Germany is loyally seeking to carry In return Germany out her fiscal reforms and make deliveries in kind. applied in

'

'

would

try to get

reduced

no

to normal, as long as the occupation troops

were

number.

in

Dulles

back

made

a constructive effort to break the impasse, but he had

official standing,

his wife that the trip

and so he sailed home a week

was "an

later,

concluding to

interesting but not financially profitable

time." The profits were to follow.

Dulles' s proposals of the year before were revived in April 1924,

with

Germany

still

occupying the Ruhr. The Inter-Allied Reparations Commission

sent Charles stabilize the

faltering

on

its

Reparations payments and French troops

Dawes and Owen Young to an international committee to the German budget. With Dulles as his

mark and balance

special counsel,

Dawes, chairman of

the committee, arranged for the

United States to rehabilitate Germany by using Dulles 's suggestion of a

"trustee"

(calling

it

a

"transfer agent")

to

apply reparations

payments within the country. The levy was pared from $55 $33

billion

and made payable

further boost to

German

in

billion to

marks, not foreign currency. As a

stabilization, the

J.

P.

Morgan bank

spear-

headed a $200 million international private loan.

Keynes had recommended rebuilding

Germany, but

the

that the

much on private of government aid. From 1924 to

Dawes Plan

loans rather than on Keynes's idea

United States participate in relied far too

1931 Dulles arranged more than $1 billion in loans, which he liked to

LAW UNTO ITSELF

A

Dawes

say were issued under the forced

him

to

When

Plan.

the control of the organization set

but that

was

contained

Department

the State

be more accurate, he revised his statement: "I do not

mean under it

91

in the

up by the Dawes Plan,

accordance with the general recommendation

in

Dawes

Plan that capital should be supplied to

German

manufacturing interests." Unless pressed, he always preferred his original formulation,

money was being

lent

The Dawes Plan

which made the bond-buying public believe under some

official

an era of

initiated

when

sanction

German

its

never was.

it

prosperity based on

American lending, a disastrous formula which Sullivan vigorously promoted. The firm organized the very

first

&

Cromwell

American bond

German company, the Krupp steel company, "one of the best known and most important steel works in the world," as the prospectus put it. The bottom of the Krupp prospectus, as prepared for the bond issuer, J. & W. Seligman & Company, read "This offering is made in for a

all

respects

when, as and

if

issued and accepted by us and subject to the

approval of Messrs. Sullivan

&

Cromwell, of

New York."

For the Krupp loan, Dulles called Leland Harrison, the assistant secretary of state on a Saturday in 4

'If

you

felt

you could,

anything to soft-pedal

in

this

and Germany. He added next.

December 1924, asking

casually,

your talks with the newspaper men, do

talk" of renewed dissension between France that the issue

was coming out

the

day

after

Harrison was incensed because the department had issued a

circular asking to see

approved

to

foreign loan applications before they were

monitor the export of American funds. But as Dulles

knew, the department had no authority

to stop the transactions.

Dulles claimed he thought the circular applied only to governmental loans. Harrison

reminded him, "Several members of the syndicate

were well aware of the Department's desire

to

be consulted

in

such

matters." Dulles offered to go to Washington on the midnight train but was told he could not get a reply

on Sunday.

On Sunday

Dulles changed

tack and tried to get around Harrison by calling the department's

economic adviser.

After being

very

apologetic,

he admitted the

bankers wanted State Department approval because "they

felt that

the

NANCY LISAGOR AND FRANK LIPSIUS

92

disagreement between the Allies and Germany as to evacuation of

occupied territory would injure the sale of the notes." But they

still

planned to go ahead on Monday.

The Krupp bond was successfully issued on the Monday without State Department approval. Ten days later the department sent Sullivan

& 4

Cromwell a copy of

'Inasmuch

the year-old circular with the tart

as the financing in question

of the Department

.

.

this

.

was not brought

Department does not

express any views on the matter

at this

comment

to the attention

feel in a position to

time."

Dulles wanted to avoid State Department scrutiny of whether the

German

factories

were producing military hardware

Versailles Treaty. Sullivan

&

in violation of the

Cromwell had accepted Krupp' s own

pallid assurances that "all special

equipment for the manufacture of

war materiel has been destroyed, except

for certain pieces of

machin-

ery."

A

year later Dulles wrote in Foreign Affairs magazine,

bankers would wish,

and fewer

would

still

dare,

expressed desire of the State Department that

However, by avoiding

was a

telling start to

to

ignore the

be consulted."

Department he had already ushered

the State

the era of private loans to rebuild It

it

"Few

in

Germany.

when

an incredible era

Sullivan

& Cromwell

dominated a major segment of American investment. Banks competed with each other to get the firm to find them first

year,

Americans

lent

$150 million

even the German government.

German

of

loans in the

It

to

German

loans. Within the

Germany, a sum

that worried

warned against "indiscriminate placing

American market,

particularly

when

the bor-

rowers are German nationalities and the purposes are not productive."

The concern was well founded. The prospectus loan approved by Sullivan .

.

.

are to be applied

for a Prussian state

& Cromwell noted that "the entire proceeds

by the State

for revenue producing purposes,"

though a third of the money was being used to improve harbors, which are hardly a revenue producer for paying

When "a

the State

back loans.

Department issued more warnings, Dulles called

pretty poor effort" that "ties

up several matters upon which

I

it

have

been working." He wasted no time neutralizing the department by ingratiating himself with

its

loan supervisors, starting with Robert E.

Olds, the undersecretary. Using the Council on Foreign Relations, a

ALAWUNTOITSELF prestigious

New York club of businessmen

93

and academics interested

foreign policy, Dulles invited Olds to a dinner in three years, Olds had joined Sullivan the Paris office in

what The

New

& Cromwell

New

in

York. Within

as a partner to

head

York Times called "a significant

increase in the ranks of 'American Ministers of Foreign Finance.'

While the State Department privately

alerted bankers

and lawyers of

concern over the growing levels of German indebtedness, Dulles

its

publicly

promoted the loans. His speeches were covered

newspapers, especially the

Dawes

when he

known ...

financial

the

Plan and the "financial and economic revival which

perhaps, the most notable achievement of

ever

in

praised himself and his colleagues for

its

kind that the world has

a wise and constructive and firm

power of

this

employment of

admitted to a Sullivan

Street' attitude of

the

nation."

After one of his Foreign Affairs articles had appeared,

& Cromwell

a tendency to criticize

is,

my

k

Tn some

partner,

article as representing too

wanting to get

rid

Dulles

quarters there

much

is

the 'Wall

of any sort of restriction with

reference to financial matters." Sullivan

&

Cromwell supervised endless

They came so

fast that errors the firm

tolerated proliferated. carefully,

German bonds.

theoretically have never

prospectuses had just not been proofread

which was probably not surprising, considering how

the efforts

deceptive.

Some

series of

would

to

A

acquire

new

loans became.

frantic

Others were purposely

1926 Bavarian bond prospectus began, "Bavaria has an

excellent financial history," discussing the period prior to 1914 when, the year before, in 1925, the state had defaulted

on

its

debts.

Candler Cobb, a garrulous American with a veneer of cosmopolitan

manners covering a base of sheer persistence, worked Cromwell's Paris

office,

at

Sullivan

&

looking for loans to pass along to bankers.

Not himself a lawyer, he roamed Eastern Europe from Frankfurt Budapest, scouting prospects

in

to

an increasingly competitive market,

where, for instance, "36 houses, most of them American, competed for a city of

A

Budapest loan and 14 for a loan

to the city of Belgrade.

Bavarian hamlet, discovered by American agents to be

in

need of

about $125,000, was urged and finally persuaded to borrow 3 million dollars in the

American market."

Even Dulles chased customers. The

director of the Dresdner

Bank

in

NANCY LISAGOR AND FRANK LIPSIUS

94

Hamburg wrote him

in 1925,

mortgages this

at

''You encouraged

American

the possibilities for placing

from 5-10 years.

It is

me

to

remind you of

capital here, secured

by

first

the only object of this letter to bring

matter once more before your eyes, and

I

shall

much

be very

interested to hear from you in due time whether you have been able to

promote

interest at

Cromwell got

proper quarters."

mixed motives. He hosted a one of the most beautiful successful

showmanship and

into the act once, with his typical visit to

women

Romanian debt

America

queen of Romania,

for the

in the world,

who came

issue in October 1926.

As

to launch a

president of the

Society of the Friends of Romania, an organization he had founded

under the queen's spell in Paris, Cromwell sponsored a

after falling

dinner for

1

,000

had published

&

Waldorf, with a glittering guest

at the

in its entirety in the

Cromwell associates were put

list

that

he had

Herald Tribune. Handsome Sullivan trimmed

into blue satin uniforms

in

gold and taught to whisper to entering guests, "There shall be no

—

Queen

curtsy to the

was

fully

just a slight handclasp." After the ball,

which

covered in the society columns, Cromwell escorted the

queen, with

whom

he had a purported romance, on a cross-country

tour in a seven-car private train donated by the railroads.

Cromwell never revealed solicitation of

his

attitude

toward the firm's active

bonds, but his support of the Romanian effort implied no

more enthusiasm

for the

whole practice than

his defense of

Mrs. Frank

women's suffrage success of the movement

Leslie's will had implied personal support for the

movement. Yet he was instrumental

when he made

in the

sure that the estate of Mrs. Leslie,

who had

inherited a

magazine empire from her husband and had greatly enhanced to is

it,

went

"my friend, Mrs. Carrie Chapman Catt of the City of New York. It my expectation and wish that she turn all of my said residuary estate

into cash

...

to the furtherance of the

cause of women's suffrage, to

which she has so worthily devoted so many years of her

Cromwell had written

the clause in the will that "should any

beneficiary or next of kin of that

life."

mine contest

this will,

he or she shall thereupon be deprived of

...

I

.

.

.

hereby direct

all interest in

my

estate."

But Mr. Frank Leslie's son sued both the estate and Cromwell as an executor to throw out the will. The son tried to Leslie

was both

illegitimate

and

make

the case that Mrs.

the daughter of slaves.

He

failed

and

ALAWUNTOITSELF the suffrage in

movement

got the

money

95

helped get

that

women

the vote

1919. It

that

was not

that

Cromwell sold Romania

to the

Americans so much

&

he sold himself to the queen. Normally, Sullivan

found borrowers

to pass

supervise the loans.

It

on

who

to the bankers,

willingly put

its

prestige

Cromwell

then used the firm to

on the

with clauses

line

in the loans like the

one for the Saxon State Mortgage

which claimed, "It

believed that the adoption of the

is

as

Institution,

Dawes Plan

has

rendered extremely remote any attempt to enforce such charge against either the revenues or assets of the States."

Such reassurances helped build a huge

structure

on an increasingly

&

Cromwell handled

shaky foundation. From 1924 to 1931, Sullivan $1.15 billion to Latin

in loans to

Germany and Europe

America and $139 million

to

$250 million

as well as

Japan, a total of more than $1.5

billion.

To handle

its

accelerating

German spy

in the

volume of European work,

Heinrich Albert had been a

United States before

entered the war, buying up

it

industrial ceramics to cripple the United States'

attache case,

the firm started

— Albert & Westrick.

a law firm in Berlin

which he accidentally

left

chemical industry. His

on a

New York

Germany

revealed subversive activities, like smuggling rubber to coffee sacks and raising

subway, in

money from emigre Germans "to create an to wage political warfare against the

army of hyphenated voters

Government." Albert was deported amid loud objections

New

what The

York Times called "impudent activities." After the war he was

German

secretary of state and a key

borrowers.

work

To risk

to

As

to his

a high

young

means of access

German government

official,

to

major German

Albert

left

the legal

associate, Gerhard Westrick.

the bankers and to Sullivan

&

Cromwell, the loans produced no

once the banks had sold the loans

to

unsuspecting buyers

among

the general public. In the defense of his client bankers, Dulles claimed,

"It

is

the function of the bankers to pass

money and ble."

It

was

[they] should be held primarily

upon matters of lending and exclusively responsi-

a heavy responsibility, but as Dulles

not financial.

And

knew,

it

was moral,

since he himself had bought no bonds, he had

nothing to worry about.

PART

II

THE LAWBREAKER

7

THE RISE

AND

RISE OF

JOHN FOSTER DULLES The

real culprits [are]

some of the leading law

firms

who make

such

which brought the Securities Act into existence. They really want to do business at the old stand. [They] have come out of their storm cellars of fear not to improve but to chloroform the Act.-FELix frankfurter a fat killing out of the abuses

—

Sullivan

& Cromwell

managing partner Royall Victor was within

of the Oyster Bay Yacht Club on the second day of the season's regatta.

It

was

a beautiful, sunny day with a light breeze in

when he gasped and

fell

to the

deck of

his yacht, the

Another racer, noticing the boat buffeted in the wind,

With Victor lying on Victor's inert

the deck, a launch

body was carried

pronounced him dead. The in a front-page obituary in

old lawyer

was

l

called

practice in the city."

third

The

first

1926

Snookabuss.

came

towed the boat

into the clubhouse,

May

sight

alongside. to shore.

where a doctor

day of the regatta was canceled, and

New

York Times, the forty-eight-year-

'one of the ablest lawyers engaged in corporate

NANCY LISAGOR AND FRANK LIPSIUS

100

His death caused a succession it

crisis at Sullivan

& Cromwell because

quickly followed the loss of three other major partners. Columbia

Law

School Dean Harlan Fiske Stone,

to the firm, rejoined the firm in

group. At a time

when

the firm

who had

September 1923

sent his best students to

was making $1.2

head the

litigation

million, Stone

promised $100,000 a year. But he quit within a year

was

to accept the

appointment of U.S. attorney general from his Amherst classmate Calvin Coolidge in the

new Republican

had expected

to return to the firm,

Court

months

fifteen

heavy heart,"

this

Though Stone

he was appointed to the Supreme

Dulles wrote his congratulations "with a

later.

admitting

disappointment that

administration.

that

seems

"it

to

is

matter of great personal

a

postpone indefinitely the prospect of

your return here with us."

March 1925, Alfred

In

after a

two-month

was a leader

Jaretzki, Sr., died at the age of sixty-three

battle with

in utilities

stomach cancer. Henry

work and

Hill Pierce,

who

training associates, contracted an

unspecified illness called sleeping sickness at the time, which grew

worse as the decade drew on. He shuffled slowly, spoke with an increasing stutter, and finally resigned in 1928.

To

tide the firm over,

directorate

Cromwell decided

composed of John Foster Dulles, Wilbur

corporate law expert), and the two cousins

way

Seligman. Dulles had worked his

now

to appoint a

fully involved himself in

Cromwell such important

its

L.

four-man

Cummings

(a

Edward Green and Eustace

into the heart of the firm

and

domestic work by taking over from

clients as International Nickel,

American

Bank Note, Cuban Cane Sugar, and the Gold Dust Corp. He continued to conduct his European work through a number of associates who became important partners. They included Arthur H. Dean, Norris Darrell,

and George Sharp.

Handling recruitment and pay

ately offered a job to his brother,

"keeping

my

new regime, Dulles immediAllen. Allen, who worried about

in the

head above water financially," had attended Foster's

alma mater, George Washington University tinuing at the State Department.

He found

Law

School, while con-

Foster's overture

"more

flattering

than a neophyte in the law has a right to expect" but

hesitated.

To

placate him, Foster discussed his brother's belated legal

career (at the age of thirty-three) with John

W. Davis

of Davis, Polk,

s

ALAWUNTOITSELF Ward well, Gardiner

&

&

months

won him over

Reed, but gradually

Cromwell. Allen Dulles after Foster Dulles

101

started at the firm in

to Sullivan

October 1926,

five

had taken over recruiting.

Not everyone, not even a future Supreme Court justice, could expect

same treatment. William O. Douglas remembered being

the

viewed for a job

Sullivan

at

&

Cromwell

found Foster "pontifical. He made

it

He seemed

to exploit

pomposity

when he helped me on with my

someone. In

fact,

I

to

me

like a

high

was so struck by Dulles'

churchman out that

which time he

in 1926, at

appear that the greatest favor he

could do a young lawyer was to hire him.

his office,

inter-

coat, as

I

was leaving

turned and gave him a quarter tip."

I

became

In 1927 Dulles

ing deference to

sole

managing partner and, despite continu-

Cromwell, remolded the firm

in his

own image and

habits. His style reflected the aloofness of his personal relations

disregard of details. This

made Dulles easy

to

work

for,

and lax

according to

lawyers close to him, like George Sharp, the son of the American

ambassador

to

France when Dulles was

at

negotiations. Sharp said that Dulles "never this,'

that

Versailles Treaty

the

would

k

say,

You must do

or 'You mustn't do that,' but he would put up certain guideposts

he knew would be of help to me, and

going ahead and using

entire confidence in

I

always

felt that

I

my own judgment

had his

on the

spot." Not surprisingly, Sharp considered this "a great pleasure" and

"a welcome

who always

from the

relief

attitude of several other of

they had to, you know, dot the

felt that

i's

my

partners,

and cross the

by cablegram."

t's

Dulles leaned back in the chair in his spacious corner office as

lawyers paraded

in to

his suits at the annual

keep him abreast of

Brooks Brothers

clients' affairs.

He bought

sale after Christmas, preferring

those of a sickly green color that were always in stock during the

clearance sales.

From

jungle he retained a patted

down

tamping his

it,

own

smoked

thoughts. a cheap

To go

tic in

his hair.

making

his bout with malaria in the Central his

eye two decades

He sucked on

his lawyers

The pipe

new

and he constantly

a pipe as he listened, incessantly

nervous as he seemed to

routine

White Owl cigar

with his

later,

American

was

for

its

drift off into

altered after dinner,

when he

laxative effect.

position, he cultivated a dignified, reserved.

102

NANCY LISAGOR AND FRANK LIPSIUS

old-man

air.

If

he was asked for an opinion, he stood up, paced the

floor silently for about five minutes,

him

and recited

all

the facts given to

he had formulated his thoughts and had droned his opinion

until

a slow monotone.

He showed

that

the central points but he did not drill subordinates the did.

Dulles was relaxed, trusting, not a worrier.

made up

considered a matter,

his

mind,

home and

toss about

bed

in

it

way Cromwell "Once he had

don't think he ever gave

I

another thought," George Sharp believed. it

in

he had been listening by getting to

"He

it

certainly didn't carry

at night. I think that

he

felt that

he'd

done everything he could do, and that was that." Despite his forbidding great loyalty

colleagues

was

air

from those close

who saw an

him every time he

You

to him.

He had

a small coterie of

entirely different side of the

playful and engaging.

a larger hat.

and professional reserve, Dulles attracted

man. To them, he

The wife of banker George Murnane chided

visited them:

"For God's sake,

Foster, get yourself

Humpty Dumpty." And

look like

Dulles laughed

uproariously.

He was

considered more able to appreciate than

wrote an elaborate spoof

letter to

at

but he

Polly Dean, the jolly wife of Dulles's

make book

(be the

Henry L. Stimson's annual Columbus Day races

at his

young partner Art Dean. Having convinced Polly banker)

initiate a joke,

to

Huntington, Long Island farm, Dulles sent her a

letter

with the type-

written return address, "Office of Collector of Illegal Revenue, Bridge

of Sighs,

New York. The joke involved not only her untaxed racetrack '

'

earnings, but also the legalese used in their professional writing.

"Dear Madam:"

it

began, purporting to be from a tax inspector,

"Information has come to

me from

unimpeachable sources

that

you

some years past have been, in receipt of large sums as a result of bookmaking activities. A careful audit of your Federal Income Tax Returns shows that you have wholly failed to

currently are, and for

disclose this important source of revenue or to pay any tax thereon.

The

fact that this

income

is illegal

does not

held in the closely analogous case of U.S.

alter its taxable status as v.

Al Capone, of which

you have perhaps heard. In view of your sex, the Government

is

disposed to adopt a lenient attitude. The least that

is

immediate payment of the tax with

interest

it

can ask

and penalties.

If,

ALAWUNTOITSELF however,

this is

103

done, the Government will urge upon the court that

prison sentence be suspended, conditioned upon you[r] future good

Do

behavior.

not think you can minimize the amount of your gains,

Government

as the

field agents,

who customarily

attend

all

important

racing events, have full information which will be used to check the

adequacy of the belated

restitution

make. With high regard for your

which you are called upon to I am, Very truly yours,

ability,

Collector."

A

postscript noted,

"Do

not delude yourself with the vain hope

famous Wall Street law firm, the services of this firm can be obtained by you to extricate you from your present predicament. Doubtless they have given aid and comfort to many other malefactors of great wealth. But in the instant case, we learn that even this great firm, with all its reputation for sagacity, has become one of your victims and will act accordingly." that because your husband

Thinking in tears

When

it

was from

at

a partner in a

the Internal

meeting her husband

he laughed

is

Revenue Service, Polly Dean was

at the train station after getting the letter.

Foster's obvious joke (starting with "Illegal" for

"Internal"), she almost threw him out of the car. that

it

was a joke, and when she confronted

He convinced

Foster, he turned

it

her

into a

You wanted to make book. You were so determined and you were having so much fun. Now homily, warning her, "Well, you were so brash.

just let that be a lesson to

you." Dean called Dulles "a master

theologian."

The informal Dulles stirring

it

lawyers

at

home, drinking gin during Prohibition and

with his finger, would have been unrecognizable to most firm

who saw

the

managing partner

as a stern moralist with

humor. He rarely mixed business and home

life,

but

when he took

no his

children sailing, they stopped in at ports where clients had offices for factory tours he had arranged for them. the firm office

on Saturday

to type

He

To the only humor

printed by the firm's securities printer.

Sullivan

& Cromwell

associates, the

Foster Dulles occurred in 1957

with the song, "I

Made

when Carol

a Fool of

also

let his

son Avery use

up schoolwork, which Dulles had public and to most

associated with John

Burnett launched her career

Myself Over John Foster Dulles/'

which her subject got a copy of because he enjoyed

it

so much.

NANCY LISAGOR AND FRANK LIPSIUS

104

As managing

Dulles cast his

partner,

business, domestic and foreign.

A

influence

high priority,

it

over

firm

all

seemed, was to

make sure he did not miss the final surge of the stock market boom. Though he had not participated before, he jumped at the chance when former associate Waddill Catchings,

who had gone

Goldman,

to

Sachs, offered "to include you [Dulles] in the selling group which will give you the selling commission."

overblown

concoctions

financial

It

proved to be one of the most

replied to Catchings in the

two

letters

whole crazy

of the

Goldman Sachs Trading Company. The

1920s,

on the same day

in

asking for $50,000 in shares and the second to "raise

first

G.

participation in the

S.

Company

to

even reserved shares for

Dulles

good investment and for letting astute bankers,

me

my

$75,000." his

who

mother,

you very much

gratefully, "I certainly thank

the

when he November 1928,

frenzy hit Dulles

for getting

wrote him

me

such a

have the benefit of your price. "As

Goldman, Sachs had avoided

the

manic Wall

Street

craze of the 1920s until the very end. Then, throwing caution to the

winds, of the

it

not only put together an investment trust at the very last gasp

boom

which

but also

named

tied the reputation

Goldman Sachs Trading Company, of the bank to the fortunes of its new it

the

business.

The public was so eager to

double

its initial

$50 million.

money

until

It

to

buy shares

that

Goldman, Sachs decided

and raised $100 million instead of

capitalization

had a hard time deciding even where

to invest so

much

John Foster Dulles put the bankers together with

utilities client

Harrison Williams to

make

his

a speculative alliance of

fiendish magnitude.

Williams was the father of the

Abscam

New

Jersey senator jailed in the

scandals of the 1980s and a schemer of the

Goldman, Sachs, he created two

trusts, the

first

order.

With

Shenandoah Corporation

and the Blue Ridge Corporation. Williams paid $5 million for 40 percent of Shenandoah while the public paid $17 million for 20 percent.

He

then paid himself back out of the public subscription,

making an

overall profit (including his shares) of

the initial

public offering.

shares

jumped up

in eight

$40 million

just

on

The Goldman Sachs Trading Company months from an offering price of $100 a

ALAWUNTOITSELF share to $280.

Shenandoah and Blue Ridge, with

million, offered to

&

Telegraph, U.S. Steel, General

and Eastman Kodak. Williams was a paper

Electric,

wife, regularly voted America's best-dressed

&

Sullivan

when her

docked

private ship

New

in

woman, expected

a

York. first

crash on October 24, 1929, was relief.

whole

member

billionaire; his

Cromwell lawyer to take care of her seventy-four trunks

Despite his personal stake, Dulles 's

the

$200

assets of

buy twenty-one of America's leading companies,

including American Telephone

"On

105

I

think

it

is

reaction to the stock market

He wrote

London banker,

a

..." But

a healthy development.

as a

of the board of directors of Shenandoah and Blue Ridge,

Dulles faced numerous shareholders' lawsuits as the stocks plummeted in value v.

from $280

Williams, Sullivan

&

the statute of limitations

Dean slurs

finally

won

One Cromwell won in

$1.25 a share.

to

had run

on Foster's reputation and

appeals decision

came

the

out; another,

determined

after a

of the suits, Austrian et

the

fight

al.

Supreme Court because

Marco

Arthur

v. Dulles,

he waged "because of the

money involved." The

in 1968, forty years

court of

from those heady days of

carefree investing in 1929 and ten years after Dulles had died. His wife

never got any of his legacy because the case was not finally settled

But she lived comfortably, since Dulles had

after her death in 1969.

taken the precaution of putting most of the family so that his estate

until

money

in

her

name

was only $1 million compared with her $7 million

(which greatly surprised their children).

The market crash was healthy

for the firm, but not to clear the air for

further investment in Europe, as Dulles had assumed. This

mere "correction" but a

&

financial bloodbath.

Cromwell more work. There was,

As

usual

to start with, a

was no

gave Sullivan

it

huge volume of

stock trading, certificates of which lawyers in those days transferred for stockbroking clients. in the firm,

handled $20 million of securities

volume exploded

its

wake of the crash. Company, which dearly

in

sixty lawyers

one day as market

in the

Goldman, Sachs

name on

Lauson Stone, one of more than

&

investment

trust,

regretted putting

its

own

faced "suits on every conceivable

basis," according to the bank's partner Walter Sachs. "I mean, on the basis of the fact that people

had

lost

money. That's

charged us with neglect and with fraud and

this

the basis

and

that,

—they

you

see.

NANCY LISAGOR AND FRANK LIPSIUS

106

That's a long, long history. [To find the answers] you'd have to delve into the files of Sullivan

& Cromwell." Goldman,

Sachs

lost altogether

$13 million and settled with the biggest plaintiffs, while Sullivan

Cromwell made money from

&

At Sullivan ambition

Cromwell

1929 was best remembered for the

evidence of John Foster Dulles 's lavishness.

increasing

made him want

&

the suits of Dulles 's labor.

&

Sullivan

Cromwell

Dulles 's

have extensive

to

international connections, prestige, and domestic importance to reflect

well on

its

managing

He

partner.

quickly expanded the firm around the

world.

He opened offices

in Berlin

and Buenos Aires. In Paris the firm hired

half a dozen lawyers and moved out of Cromwell's one room

in the

New

Ritz into a whole floor of an office building behind the hotel. In

York time

the firm

when

moved

to opulent

new

At a

quarters at 48 Wall Street.

the existing standard of law office decor

was

rolltop desks

and cracked leather sofas, Dulles preferred the elegance of wall-to-wall

One of the Reed came over and

carpets and a winding staircase connecting the floors.

commented, nice;

I

implicitly

Sullivan

I

to a call house, "It's very

don't think

the time Dulles took over and for

&

Cromwell was

shoe" firms

like Sullivan

well, Gardiner

&

comparing the decor

might stay for a drink but

From

& Reed;

Webb; Cravath, de

&

Ward well, Gardiner

partners of Davis, Polk,

go upstairs."

two succeeding decades,

the largest law firm in the world.

&

&

Sterling;

Gersdorff, Swaine

&

"White

Cromwell included Davis, Polk, Ward-

Shearman

Cotton, Franklin, Wright

I'll

Milbank, Tweed, Hope

& Wood; White & Case; and

Gordon.

Dulles 's taking over as senior partner raised the firm's social standing; after

all,

he had had his

first

White House appointment

at the

age of four to attend the birthday party of President Benjamin Harrison's grandson while Dulles 's grandfather was secretary of state.

But other firms had great social Polk, for instance,

was

distinction.

Every partner of Davis,

in the social register.

According

to novelist

Louis Auchincloss, whose father was a Davis, Polk partner, "The firm

would have been shocked Jewish," as occurred aristocratic law,

in the

that

its

1980s.

senior partner

would ever be

Where Davis, Polk epitomized

which included most of the white shoe

firms, Sullivan

ALAWUNTOITSELF &

Cromwell, with

its

hard-working Jewish partners, epitomized and

anticipated the meritocracy that Street practices.

As

107

would ultimately overtake

&

the largest firm, Sullivan

Wall

all

Cromwell seemed

more than the others to have the archetypal big-business practice.

The term "legal factory" applied before

became

it

entering

class

Cromwell even

familiar in the 1930s. In 1929 the firm doubled

by

hiring

thirteen

lawyers to increase

The next year Dulles took on

sixty-three.

&

to Sullivan

the firm's

its

first

size

its

to

women

associates, four intrepid souls, to prove the progressiveness of the

senior partner while filling the ranks with lawyers to

become

One

partners.

who

did not expect

resigned within a year, but another, Lois

Rodgers, spent more than twenty-five years

at

Sullivan

&

Cromwell.

Half the new recruits stayed fewer than three years, forcing the firm to continue in

its

active recruitment policy; that

meant

six

new

associates

1931, four each in 1932 and 1933, and eight in 1934. Dulles was a

master

was not an administrator,

building up the firm but he

at

drawback

world got to know when he became secretary of

that the

a

state

in 1953.

At Sullivan

&

Cromwell

this failing

was hidden behind

authority of William Nelson Cromwell,

amount of time hounding into his seventies,

the

young lawyers

Cromwell roamed

though he were boss. He had a right but his questioning of them

Yet he

still

in

New York

New York

routine,

backup

Now

in the office.

well

the halls of the office, acting as to

approve prospective partners,

became desultory and sometimes vague.

at the different

Associate Joseph

environments

at

Sullivan

&

and Berlin, where the eighteen-hour day, a

was unknown. Though Dulles made Prendergast

something of a protege because he had played football mater, Princeton, Prendergast soon soured on Sullivan

When

the

spent a considerable

terrorized the lawyers in the office.

Prendergast was shocked

Cromwell

who

he got back to

New York

at their

&

alma

Cromwell.

after a year in Berlin, he noticed the

& Cromwell tic" on partners that seemed to go along with Avenue apartments and houses on Long Island. Even Dulles

"Sullivan the Park

had his habitual hair patting and squint. "They

all

had something,

only an ulcer," Prendergast noticed. "It did not seem worth

it

to

if

me,"

he decided.

Cromwell remained sharp

in

business

—and

controversial.

A

con-

NANCY LISAGOR AND FRANK LIPSIUS

108

gressional investigation revealed that he

was one of seventeen

Americans who had donated more than $10,000 each

to the

rich

Republican

party and arranged significant tax refunds for clients from Secretary of the Treasury

Mellon

Andrew Mellon. Over

dispensed

$222,652

$3.5

billion

eight years as treasury secretary,

in

Cromwell

refunds.

American Water Works

for clients

& Electric Company

Manati Sugar Company, on whose boards of directors he

Cromwell gained

when he

further notoriety

collected

and

sat.

refused to abandon his

house to make way for Rockefeller Center, even though the house was

owned by Columbia project.

University, which

was

Cromwell wanted John D. Rockefeller,

to leave;

when he

building of

Sullivan

1

Cromwell declared,

didn't,

You can

will die here.

talk to

my

new

participating in the Jr.

,

himself to ask him

"My

wife died here.

I

executors," thus preventing the

Rockefeller Center for nearly two decades.

&

Cromwell had a

strict

hierarchy

imposed by the

dominating share of income Cromwell controlled and the large number of associates compared with partners. At the time in 1934

when

the

firm employed sixty-eight lawyers, there were only sixteen partners, a ratio

of more than four to one. That year, besides constantly hiring

who had been

associates, the firm had eight senior associates

more than

fifteen years

and never expected

to

make

new

there

partner. This

holdover senior associate status from Cromwell's day enhanced the firm's profitability, especially in adding weight to the litigation trusts

and

estates groups,

and the

each of which had three senior associates

with only one partner in trusts and estates and two partners in litigation.

Despite the rigid hierarchy within, the firm expected the lowliest associate to be treated by the outside world with the

senior partner.

The

firm did not put lawyers'

The main reason was convenience, would be hard

to

habits, but

The lack of

status in the organization,

young

recruits

its

as the

letterhead.

since changes occurred so often

it

keep the stationery current. Dulles did not share

Cromwell's penurious not expensive.

same respect

names on

it

would have been cumbersome

individual

names

if

also blurred the lawyers'

and the practice of giving responsibility

to

allowed the firm to maintain the fiction that every

lawyer was an equal because of his Sullivan

&

Cromwell

label.

ALAWUNTOITSELF Within the firm, associates did not

They did

the firm.

much. For

was considerably more complicated. Senior

it

fit

109

the standard pattern of

work of

the

making partner or leaving

partners but did not have to be paid as

this reason, litigation

and

trusts

and estates could get away

with fewer partners because they had more senior associates, while the general practice, with thirty-six lawyers, had only two senior associ-

One was Walter G. Wiechmann,

ates.

the

nephew of conductor Walter

Damrosch, and appropriately an expert represented other, Paul

copyright law (the firm

in

ASCAP, the songwriters' and publishers' association); the W. McQuillen, a public utilities lawyer, eventually became

a partner in 1944, after twenty-six years as an associate.

Even when expand the

it

firm.

affected partners' income, Dulles did not hesitate to

He was

an issue only when,

prepared to spread the wealth, which became

in the

merging with Cotton

&

& Cromwell considered (previously known as Spooner &

mid- 1930s, Sullivan Franklin

Cotton), the firm that had rejected Dulles

job

in

Sullivan

Most

&

Cromwell's, scotching the deal.

partners approved of Dulles's policy.

described

it,

"Under Mr.

Dulles, Sullivan

almost further than any other firm,

men

when he first tried to find a made more money than

1911. But the other firm's partners

as

partners.

.

.

recognize the younger

.

Under

man and

financial rewards than they

in

&

As Eustace Seligman

Cromwell,

we always

recommend

a

new

on the division of a share of profits

to relinquish as his contribution to

two-pronged

ernization. Dulles turned the deliberations into a

mod-

effort to

give junior partners more of a share and to provide the firm with

own

capital base.

He accomplished

undistributed partners' shares "in an the

its

both by letting the juniors buy into

the firm to provide the capital. Until then,

if

to

might get."

Dulles headed a senior committee convened to

Cromwell was willing

tried

bring them in and give them greater

financial structure for the firm based that

went

think,

bringing in additional younger

leadership

his

I

working

capital

came from

amount (over $1 ,000,000) which,

demands were exercised, would leave

the

Firm wholly bereft of

working capital," Dulles explained. In

1934 he designed a new partnership agreement

pool of $750,000 provided by the junior partners

to give the firm a

who

"are

in a better

NANCY LISAGOR AND FRANK LIPSIUS

110

position to

do so than the seniors because

their

income tax

rates are

much lower." This was true, of course, only because their incomes were so much lower. Included in the new package of firm finances was a provision to withhold the shares of partners who quit and went to work for a competing firm within

five years. Dulles cabled the proposals to Paris,

where Cromwell mulled them over and January

1,

ratified

Dulles took the lead in limiting his

who

others like Seligman,

we

He was remarkably

own

(It

was no

in 1938,

accommodate

aberration. Dulles earned

$199,000

juniors,

$345,000

and $203,000

in 1939,

what

1936 Dulles' s share of firm

Still, in

income, despite the reduced percentage to

$249,000

on

which inspired

shares,

unselfish and unwilling to agree to

thought he should agree to."

$377,000.

for institution

"The only quarrels we ever had with that we never could get him to take

said,

Mr. Dulles on percentages were enough.

them

1935.

was

1937,

in

At

in 1940.)

the

time associates in the firm earned $2,100 a year. Robert T. Kimberlin,

who

joined Sullivan

&

Cromwell

in 1934, felt

damned good." 1934 William Nelson Cromwell bought

"in the middle of the

Depression, that $2,100 was In

coat and cabled her, short styles are

in this

Janet Dulles an ermine

year, not long and

if

you

WISH [YOU] COULD CUT COAT SO AS TO FURNISH ONE [FOR DAUGHTER] LILIAS ALSO! In 1935,

when

nearly half the

American lawyers were earning

less than

$2,000 a year, Janet Dulles got monthly allowances for household expenses that ranged from $2,000 to $5,000. Her Christmas present

from her husband, who took about the same amount as

his wife for

expenses, was $25,000. Until the mid- 1930s, the Dulleses had a chauffeur-driven Lincoln.

Avery Dulles would Sweeney, while

his

sit

in the front seat

mother

sat in the

chauffeur to get back in his lane.

with the chauffeur,

Thomas

back, ringing a bell to get the

"Sweeney would

get so

mad," Avery

Dulles recalled. Later, Herbert Green, the gardener, doubled as the chauffeur

when Dulles wanted

to look less ostentatious during the

worst of the Depression years. It is

hard to conceive just

how

stupendous Dulles 's income was in

the 1930s, but as one example, if associates at Sullivan

& Cromwell in

1987 were making $71 ,000, the senior partner would have had

to take

LAW UNTO ITSELF

A

home $12

million a year to

Dulles' s $377,000

hundred lawyers

in

make

as Dulles did in 1936.

1936 contrasts with the experience of

New York

in

much

as

who

City

thought that Dulles should have taken they were

The

firm

all

And Seligman even more, indicating just how

invest in

Cromwell

to put

&

Sullivan

making throughout

some of

$50,000

into the First

Cromwell helped put together

as the

investment-bank

Bank of Boston and Chase National six

months' negotiations,

new company ultimately decided to raise $9 million The relationship between First Boston and

corporation.

Cromwell has endured

&

Sullivan to

work

as a public

Sullivan

&

when

after an auspicious start

to this day,

Cromwell recommended former associate Robert Goldsby

there.

1934 Dulles asked Cromwell

In

suggested

Boston Corporation, which

Bank's investment arm, Harris Forbes. After the

Dulles

that

hard-up clients. Dulles arranged for

their

spin-off of the First National

relief.

the Depression.

was earning so much money

Cromwell

fifteen

same year were

in that

prepared to take a pauper's oath to get work

much

111

to invest in a partnership Dulles

himself concocted between two bankers he trusted, Jean Monnet and

George Murnane. Dulles wrote Cromwell met

at the Versailles negotiations,

that

I

many

know" and "an

that

whom

Monnet,

was "one of

the

most

he had

brilliant

men

intimate friend [who] has the full confidence of

of the most important financial people." Later to be the architect

Community and the founder of the European Economic Community, Monnet worked as an investment banker in France. Dulles teamed him up with Murnane, who had been a partner in Lee, Higginson & Company, a Boston investment bank that had

of the Iron and Steel

failed

because of one major mistake

Swedish match king, whose suicide

in

—backing

Ivar Kreuger,

the

1932 was one of the stunning

events of the Depression.

Dulles

Company

introduced

the

two men,

set

up Monnet, Murnane

as a private investment bank, put

money, and got Cromwell

to put

up $25,000 of

up another $25,000

his

&

own

to underwrite

its

activities.

Dulles convinced Cromwell to support the two bankers because they

"should produce a large amount of

legal business for

us," to which

NANCY LISAGOR AND FRANK LIPSIUS

112

Cromwell

replied in a long telegram, use your discretion as to precise

TERMS

[BUT]

.

.

DECLARED

.

IN

MUST BE STRICTLY ON LOAN BASIS ENFORCEABLE AS SUCH AND SO

DOCUMENTS [BECAUSE

i]

AM NOT

SO CONCERNED ABOUT A LOAN AS

THAT FORESEE THIS DANGER OF LAWSUITS BY CREDITORS I

IN

ALL NEW RESURRECTIONS

OR VENTURES.

With Monnet conducting business

in

France and China, Dulles

channeled Murnane toward the businesses he wanted to promote. The

two men were close

weekend houses

friends, both having

Spring Harbor, Long Island. In his role as senior partner

Cromwell, Dulles had

an annual firm

But

in the intimate setting

of his

and

less than a

included.

New

New

guessing where the

Dow

Sullivan

&

Year's cocktail party.

Year's Eve party for his family

dozen friends, Murnane and

The Dulleses and

Cold

numbers of firm

to entertain lavishly to large

clients as well as hosting

at

in

their guests

his wife

were invariably

performed an annual

ritual

of

Jones stock average would end the following

year and what would be the major events and personalities of the next year. Dulles kept the previous year's answers in his office safe

pulled them out on the

last

working day of the year

and

to present at the

party.

Dulles and

Murnane thought

alike,

having together helped the

Germany just ahead of his They arranged for him to hide in a

conservative Heinrich Bnining escape from

planned murder by Hitler's orders.

Long

Island monastery in Cold Spring Harbor, a testimonial to their

enduring financial and emotional support of Germany regardless of the

regime

in

power.

Both also shared the embarrassment of seeing investments they supported in Europe go bad. Murnane 's answers to inquiries indicated

Lee Higginson's carelessness

in the collapse of

Kreuger's empire. The

bankruptcy investigations after Kreuger's suicide revealed that the International Telephone and Telegraph

Company had warned Murnane

about fraud in Kreuger accounts, but Murnane admitted, "It never

occurred to Lee, Higginson

on hearing

IT&T

&

Co. [of which he was a partner], even

accuse Kreuger of falsifying a balance sheet, to

suspect the balance sheets that he had given them."

"the situation seemed serious only because

it

Murnane

might result

felt that

in a public

challenge to Kreuger's honesty, which might injure his prestige and his

companies." Such contempt for the public, another

characteristic he

ALAWUNTOITSELF

113

shared with Dulles, actually reflected a carelessness that Cromwell

recognized in cautioning Dulles over the Monnet, Murnane invest-

ment.

From

the incorporation of

tion in 1939,

the to

it

Monnet, Murnane

steadily repaid

in

1935 to

Nash automobile company's merger with Kelvinator

make Kelvinator-Nash,

&

remained a Sullivan introduced

whose

Murnane

interests

became

a precursor of

Cromwell

Solvay

&

refrigerators

American Motors, which

client

the

into

Dulles

1980s.

Cie, the Belgian chemical

the banker represented in America,

member

a

to

dissolu-

its

backers while engineering deals like

its

company,

and Murnane

&

of the board of Allied Chemical after Sullivan

Cromwell had fought

its

management

in 1933.

The Depression had its biggest impact on Sullivan & Cromwell when the Democratic administration of Franklin D. Roosevelt demanded new legislation to curb the excesses of the investment community. Democratic

Dulles

and Cromwell inveighed

bitterly

against

had endorsed President Herbert Hoover's optimistic belief

someone could

get off a

the

and the financial markets. Dulles

hostility to capitalism

good joke every

ten days,

I

that

"if

believe our

would be over."

troubles

&

Sullivan

Cromwell partners reacted angrily

to

the

securities

regulation proposed at the beginning of the Roosevelt administration

during the famous Hundred Days,

changed American

society.

The

when

fifteen statutes

fundamentally

draft of the Securities Act, written

first

by Huston Thompson, a former member of the Federal Trade

Com-

demand for "full publicity and ..." A young Sullivan & Cromwell partner, Arthur the Thompson bill a "hopeless confusion of ill-assorted

mission, went beyond the President's information.

Dean, called

provisions." Eustace Seligman objected that holding corporate directors responsible for the truth of registration statements

tionary

.

.

.

and without precedent

in

The chorus of objections prompted

Anglo-Saxon law." a revision supervised

Frankfurter, later a long-serving justice of the the time a professor at the Harvard

Roosevelt's Brain Trust. The limited

its

demands

to "full

new

and

by Felix

Supreme Court but

Law School and

draft

fair

was "revolu-

was made

a

member

in a single day.

at

of It

disclosure" and a waiting period

NANCY LISAGOR AND FRANK LIPSIUS

114

between registration and the

Texas

legislator

sale of a security.

who headed

the

Sam Rayburn,

House Committee on

Foreign Commerce, channeled the

bill to

the wily

Interstate

and

a subcommittee to prepare a

final draft.

Before the subcommittee sent the

Raymond Moley,

final draft to the full

the head of Roosevelt's Brain Trust,

Dean

raise their objections.

along

if

Dulles and

let

Rayburn was against the

Dean would meet with

committee, Dulles and

went

idea, but

the bill's drafters,

James

Landis, later head of the Securities and Exchange Commission (SEC),

and Benjamin V. Cohen, who knew Frankfurter from Harvard. Dulles agreed, but thoroughly alienated Rayburn 's Saturday morning subcommittee meeting with unsubstantiated and indiscriminate accusations. Rayburn, the deft, slow-drawling, political manipulator,

demanded

that the

"system

live

up

so violently opposed to the whole

Rayburn, claiming

undermine our

to its pretensions."

New

But Dulles was

Deal, he took out his rage on

he "was sponsoring legislation that would

that

system."

financial

While Dulles abandoned the reserved and dignified manner

that

underlay his talent for smoothing ruffled feathers, Dean concentrated

on

details.

effect

He showed

a

much

on business, staying

Dulles defiantly returned to

in

firmer grasp of the legislation and

Washington

New

to

work on

its

the bill while

York.

in

Though most Sullivan & Cromwell lawyers were heavily involved securities work required by the newly formulated acts (as discussed

in

Chapter

He

11), Dulles

continued his vendetta against the

New

Deal.

recruited clients to defy the 1935 legislation designed to break

the public utility holding companies.

features giving the

SEC

The

act

up

had several unique

wide powers, which Dulles decided

to fight in

the courts. Its "death sentence provision" in Section 11 gave the utilities three

years to cut back into single integrated systems with

natural geographic bases.

The SEC was

to supervise all service

and

construction contracts and the institution of a uniform accounting

system. Never before had a peacetime American government taken

such powers to restructure and control an industry.

The head of

the

new SEC, William O. Douglas, suggested

that

business people help draft the legislation. "[I] pointed out to them the

LAW UNTO ITSELF

A

who

great financial rewards available to those

115

took over the job of

new commented

redesigning and reorganizing these systems and floating the securities."

When

Dulles urged noncooperation, Douglas

wryly, 'Tor once principle transcended greed." Dulles gathered together the holding

room

at

promoted I

this

Supreme Court

gentlemen

is

to

it

was

conference

violates basic constitutional guarantees

will strike

do nothing.

Do

My

down.

it

all

that

all

your

right."

time that Dulles decided to

at this

and

strong advice to you

not comply; resist the law with

might, and soon everything will be It

in a

law obviously do not know the law or the Constitution.

can assure you that

the

company heads

48 Wall Street and fumed, "The men who drafted and

start

a litigation group.

Previously the firm had preferred the British system of considering

and hiring well-known "barristers"

itself "solicitors"

Evans Hughes, appear for

it

Jr.,

like

Charles

George Medalie, and Judge Joseph Proskauer

in court.

To

start its litigation

to

group, Dulles tried to lure

Harlan Fiske Stone away from the Supreme Court to return to Sullivan

&

Cromwell. Though

polite

and regretful

concerned that "steadily the best

skill

to

Stone was

Dulles,

and capacity of the profession

have been drawn into the exacting and highly specialized service of business and finance. At

command

technical skill. earlier

its

changed system has brought

best the

to the

of the business world loyalty and a superb proficiency and

At

its

worst

it

has

made

the learned profession of an

day the obsequious servant of business, and tainted

morals and manners of the market place

in

its

it

with the

most anti-social

manifestations."

When litigator,

that attempt failed,

Dulles hired a reputable West Coast

John Higgins, who arrived

at

the firm to fight the

securities legislation. Higgins tried harassing the Justice

new

Department

by postponing the substantive issues with a procedural case he took up to the

Supreme Court. He wanted

prosecute

all

the utility

case to be decided

companies

first,

at

to force the attorney general to

once, rather than

let

there be a test

which would save time and money.

Higgins established Sullivan

&

Cromwell's

tradition of inundating

the other side in paper as part of the tactics that gave the firm a

reputation for bullying with limitless resources and tireless work.

Higgins was extraordinarily hardworking.

He had no

regard for his

NANCY LISAGOR AND FRANK LIPSIUS

116

own time was

or anybody else's.

at the office

Day and

weekends and holidays, he

night,

and expected the same of others. Higgins won the

procedural case, so the Justice Department was

simultaneously

and convolutions.

intricacies

The

firm's extensive litigation against the

awkward dilemma Cromwell

swamped with work, in its own

each entrenched

filing all the utilities cases,

for Harlan Fiske Stone,

in Dulles 's

who

campaign against the

New

Deal created an

kept facing Sullivan

New

&

Deal. Stone was the

only Supreme Court justice to occupy every seat based on seniority,

him chief

before Franklin D. Roosevelt appointed

justice in 1941 to

cap a twenty-one-year career on the Court. Stone had a policy of not client or

sitting

on Sullivan

lawyer arguing the case had been

& Cromwell cases if the

at the

firm

when he was. But

because two other justices also disqualified themselves for their role

New

Deal legislation, Stone had

on the case brought

to sit

Harrison Williams's North American Utilities

"As

Company under

to break

the

in

up

Public

Holding Company Act of 1935, even though he admitted,

a youngster in the office,

Company]

.

It

was one of

I

ran errands for [the North American

the important clients after

I

became

a partner

inth. firm."

But he helped provide the majority utility

that

upheld the law, costing the

companies millions of dollars and resulting

Cyrus Eaton,

later

famous

who headed

for entertaining Nikita

in their

breakup.

Khrushchev

at his

&

Company, an important Cleveland investment house, concluded, "I came to distrust John Foster Dulles 's judgment completely. ... He was so wrong [about the constitutionality of the Public Utility Holding Co. Act]. ..." farm

in

Ohio,

Sullivan

&

Otis

Cromwell made money when Dulles 's

opinion was proved wrong and even more

break up the public

Now

the firm

utilities

it

later

by helping

had put together only the decade before.

was carving up

country's major regional

money

constitutional

the empires and creating

utilities.

some of

West Penn Power Company,

gheny Power Company, and Monongahela Power Company

Alle-

came

Works and Electric Company. The firm had represented the Union Electric Company of Missouri, subsidiary of the North American Company, which had bribed

out of one client, the American Water

a

all

the

LAW UNTO ITSELF

A

practically the

whole Missouri

117

legislature. Sullivan

&

Cromwell then

hired a former associate, Walter Lundgren, as independent counsel,

and he

tried to prevent

an

SEC

grand jury investigation. The firm also

Homer Cummings, soon

hired another independent counsel,

after

he

resigned as U.S. attorney general in 1939.

Cummings

to lunch at the

the

SEC

SEC,

invited Chester Travis Lane, general counsel to the

swank Metropolitan Club

lawyer,

Cummings "pulled

the

in

Washington. According to

heavy father on

me"

to deter

the grand jury investigation.

Lane refused

to cooperate. Sullivan

a confrontation and the

SEC

&

Cromwell backed away from

investigators uncovered the utility's

More

"slush fund" for paying off legislators. dollars

had been collected through

than half a million

an insurance

five sources, including

company, which kicked back premiums, and

local

who

lawyers,

kicked back fees.

The company allowed detailed confession

a vice-president, Albert Laun, to

showing the registered

Jefferson City legislators with small sums:

was

"It

Lane of

don't suppose that any law enforcement official

in

perjury over their

initial

the

SEC. "I

the

he concluded.

vice-president, went to prison for

first

testimony.

there.

Missouri would

to prosecute the entire state legislature,"

Laun and Frank Boehm,

a

to the

$50 here, $100, $500

that kind of thing," recalled Chester

have cared

make

went

that

letters

The SEC found

"fairly substantial

indications" that similar bribery systems were operating in Williams's

companies

Lane

set

in

Iowa and

Illinois.

up a grand jury

top officials of the

the

in Springfield, Illinois, to find

North American

Company

out whether

itself

and

its

attorneys, "including Mr. John Foster Dulles," had participated in the

scheme. "It pressure .

.

.

is

only

There were

whom

I

fair to

say," Lane concluded, "that a great deal of

was brought on me not visits

knew much

to press for the indictment of Dulles.

from lawyers

better than

in

New

York, partners of his

knew him,

I

to tell

me

their

own

personal views of his integrity and of the impossibility of his having

taken part in any such scheme as was involved here."

Lane claimed, "It seemed well-known intelligence and

to

me

ability

that

a

man

of Mr.

Dulles's

could hardly be supposed not to

have known what was going on and approve

it

tacitly." But the grand

NANCY LISAGOR AND FRANK LIPSIUS

118

jury did not return an indictment,

that

such a nice

Remarkably, the firm was able

the celebrated case in distributor.

showing

the

who convinced the prosecutor "that man could have been involved."

with in the 1930s. But

it

also

had

charm of other of

was impossible

it

share of bankruptcies, including

& Robbins,

1939 of McKesson

falsifying

its

a pharmaceutical

books for years by

Canadian inventories, which the auditors had never

checked. The president, F. Donald Coster, needed the stolen

pay blackmailers

work

to find prospering clients to its

The company had been

fictitious

Lane somewhat

failure

"Mr. Dulles's charm and

cynically attributed to his associates"

which

who had known him under

money

to

name, Philip

his real

Musica, when he was a "bootlegger, stool-pigeon and jail-bird," as the press put

&

Sullivan late

it.

one night

Robbins'

Malcolm Maclntyre was working when Arthur Dean came in with three of McKesson & Cromwell

bonds,

associate

which Sidney Weinberg, the senior partner of

Goldman, Sachs, had given him. Dean associates, telling

them

distributed the

bonds

to three

bankruptcy."

to "petition for involuntary

By

midnight they had prepared the papers and found a judge to put the

company

As

into bankruptcy.

the scandal unfolded, Coster shot himself, having earned a place

one of the most notorious swindlers of the century. Sullivan

as

&

Cromwell showed complete sangfroid. "The accountants were very embarrassed. Sullivan

&

Cromwell was very embarrassed too

—

for

twenty-four hours. But then the firm very skillfully switched sides to

show the

that

it

was representing

the directors and that

crooked president as anyone else,"

Fleming,

at the

it

was

recalled

as angry with

Judge Macklin

time a young associate in the firm. "It hadn't hurt them

at all."

For Sullivan

&

Cromwell, the Great Depression was

just a healthy

bout of deflation, which sent prices lower for young lawyers but gave great investment opportunities to those

constant stream of business.

still

flush with cash

and a

8

NAZI CLIENTS The statement

that

I

have been legal representative of Nazi financial dulles

interests is literally without foundation. -john foster

&

The Sullivan

Cromwell headquarters

Esplanade Hotel, was decorated

and a huge bathroom

was meant

to

tiled in

in

Berlin,

rise

a

suite

at

the

gold with carved bronze bedsteads

marble. Established in 1929, the office

produce prospectuses for bonds. But

market crash, three Sullivan watching the

in

&

after the stock

Cromwell associates spent

of Hitler and waiting for the semiannual

their time visits

from

John Foster Dulles. Their surfeit of free time allowed associate Joseph Prendergast to attend street demonstrations, where once, caught between Nazis and

Communists, he was beaten up. Norris

Darrell, the head of the Berlin

NANCY LISAGOR AND FRANK LIPSIUS

120

warned him,

office,

lawyer killed in

"We

street brawl.'

But Dulles continued 1931

,

"

the conservative Briining

aim was

it

was

the

In

prop up

final effort to

government with a $285 million

To

loan.

"most constructive loan ever made. The

keep Europe afloat."

to

But even some Germans were reluctant

to

Once again

the

economic

When

go along.

old friend Schacht heard about the Briining loan he

true

Germany.

to disregard the dire conditions in

along with George Murnane, he arranged a

Dulles partisans,

& Cromwell

don't want headlines, 'Sullivan

"was

German government was endeavoring situation

especially disturbed

by

piling

Dulles 's

horrified.

to conceal the

up fresh debts abroad." He was

by America's high

tariffs,

which kept Germany

indigent.

1930 Schacht quit

In January

Reichsbank

in protest at the

Young

position as president of the

his

Plan, which lowered reparations to

payment period

a manageable level but extended the

Brandenburg farm

retired to his

to raise pigs

to

1988.

He

and prepare lectures for

a speaking tour of the United States. After writing twelve speeches, precise

man

that

he was, he asked his

dozen engagements.

When

New York

the agency

Schacht made four dozen speeches in

fifty

agency

to arrange a

was inundated with days, sometimes as

offers,

many

as

three a day. In October

1930 Schacht appeared with John Foster Dulles

dinner meeting of the Foreign Policy Association

at the

at a

Astor Hotel in

New York.

Speaking from carefully prepared notes, Dulles gave a rosy

picture of

Germany's economy, contending

that reparations repre-

sented only 3 percent of the national budget because of economic

expansion in the 1920s. Germany's exports Britain's

finally

exceeded Great

and gave the country a net balance of trade favoring exports

over imports. Dulles minimized the elections held the month before,

when

the Nazis

and declared

had become the second

largest party in the Reichstag,

that the "difficulties are of a character

which are largely

psychological and consequently subject to ready reversal."

This theme of the superficiality of Germany's problems echoed Dulles 's assessment of the Depression. Dulles told his

listeners, that

"the underlying conditions are far more satisfactory and favorable than they have been during any preceding period of like crisis." Consid-

LAW UNTO ITSELF

A

ering the tenor of his remarks, the

of 600,

who had come

firsthand

word "crisis" surprised

crowd

the

to see Dulles as an international figure with a

knowledge of Europe. They did not know of his own

interests

sanguine view after having just raised $285 million to

in fostering a

Germany

lend to

121

prop up the Briining government.

to

"My friend Dulles will

forgive

me

if I

follow him only in part of his

statement," Hjalmar Schacht began as a prelude to shattering Dulles'

cozy picture of Germany's recovery. He countered Dulles 's numbers with his to

own

make

to

prove that the country was desperately poor and unable

Germany's export

reparation payments.

"We

tended, was no sign of prosperity; on the contrary,

home market

depression, forced to export and

we

he con-

surplus,

under

are,

obtain a surplus only

by decreasing our imports." In an appraisal that became more familiar as the decade

wore on, Schacht declared, "The middle classes have

entirely disappeared.

They have become extremely poor, and

that part of the country that Hitlerism received

Though much of

his

its

to

Young

"Don't you think

He asked

was worthwhile

it

Plan in order to get rid of the occupation? has

still

years after the

From

some self-respect war?"

the speakers'

table

listened to his reproaches with cigar, while Schacht

defending

Germany

"You must

it

why Germany

could not afford

his bullet-headed stiffness,

could recite poetry with great feeling.

which

from

main backing."

Plan, even though he contended

pay further reparations. Despite

plaintively,

is

had the impersonality of economic

talk

calculations, he dealt emotionally with the question of

accepted the

it

his

—occupied by

audience almost

to sign the

Can you

Schacht

Young

think of a people

foreign troops fifteen

Dulles stared intently

at

Schacht and

no emotion. He contentedly puffed

won over to attacking

the audience. Schacht its

his

moved from

creditors, declaring ominously,

not say that the responsibility

is

entirely with

Germany."

Schacht projected the rigid authority of his military bearing as Dulles slouched in his seat and nervously patted his hair. Dulles acted as though Schacht that

were merely debating, rather than voicing the

Germany was prepared

to repudiate its international debts.

threat

Schacht

impressed the audience by overwhelming Dulles's optimism with a sobering appraisal that they enthusiastically applauded.

The next day The New York Times

carried the front-page headline

NANCY LISAGOR AND FRANK LIPSIUS

122

SCHACHT PREDICTS GERMANY WILL STOP PAYING REPARATIONS, reflecting the

alarm that Dulles had ignored. let

If

he knew more, he did not appear to

bother him. In public Schacht said, "All the credits given to

it

Germany by

private people certainly

privately during the

same

visit,

Germany

.

.

will

.

pay," but

Schacht slyly told George Murnane,

"You'll certainly get your money back, Murnane; whether precisely

on the dates agreed upon may be open

The whole of Schacht 's tired of nearly four

his point that

obligations.

trip

was

to

it

will

be

doubt."

a great success, for though he soon

dozen chicken-and-ice-cream dinners, he got across

Germany would

not long live up to

international

its

Americans seemed grateful more than resentful about the

warning, which Schacht was glad to provide as a forecast of his future

Germany.

role in

Usually

it is

the creditor

who

puts a stop to a deteriorating financial

relationship. This time the debtor

particularly

awkward

sounded the alarm, a role reversal

for the far too optimistic Dulles.

He made

Schacht look disarmingly honest, while Dulles was obviously putting the interests of

done

it

Americans second

since 1924,

when he

to those of the

issued the

Germans. He had

Krupp loan without

State

Department approval. Schacht realized that Dulles had more of a position to defend than he, a

German who had been

—and would be again—

responsible for his

country's economy. Schacht spoke frankly in a forum meant to teach

Americans more about international

affairs.

Dulles merely

made

excuses for the superficial, self-serving foreign policy he had devised for his clients

The

and himself.

relationship

between Schacht and Dulles grew

in the

close collaboration. Schacht recognized the value of an his

own

Sullivan

reasons to promote

&

German

Cromwell from

interests,

1930s to a

American with

and he used Dulles and

the time the Nazis took

power

to the

Second World War. Within months of Schacht' s speaking tour

European economy collapsed

just as he

in the

United States, the

had predicted.

1931 Credit Anstalt, an Austrian bank for which Sullivan ,

On May

11,

& Cromwell

prepared a share issue in America in 1927, declared bankruptcy, precipitating bankruptcies throughout central Europe. In

December

ALAWUNTOITSELF 1931

Germany

which, as a

reduced interest on some bonds to 6 percent,

arbitrarily

from Sullivan

letter

123

&

Cromwell

to the State

Department

complained, "is not a mere moratorium postponing the payment of interest or principal but actually reduces the interest rates."

did the

same

More

month.

later in the

than $1

Hungary

billion

in

bonds

&

Sullivan

that

Cromwell had

arranged in Europe were merely paper by the time Hitler took power in

January 1933. In truth, a series of repayment postponements,

moratoriums, and suspensions had rendered them virtually worthless

even before

But

Hitler.

bank president

it

was Hjalmar Schacht, reappointed Reichs-

March 1933, who

in

delivered the coup de grace. At the

end of May, he summoned a debtors' conference within the week.

The American banks

make

ask for an extra day to Dulles,

would get

there

Bremen on May 20 and

that

to

meet

in Berlin

had issued the bonds had

to

sure their representative, John Foster

on time. He

sailed

arrived in Berlin on

from

May

New York

29.

The

on the

firm's three

associates in Berlin set Dulles up in a suite at the Esplanade while he

hurried off to the classically formal Reichsbank for the opening of the debtors' conference.

Schacht started the meeting with the threat "Consider the problem

on the hypothesis transfer

that

Germany would

moratorium." Schacht

let

declare a virtually complete

other European countries and the United States, look at the

Reichsbank

to

"prove"

that

Throughout the proceedings,

most

the delegates, representing

Germany could

Schacht

pulled

at

books prepared

not repay

delegates

its

debts.

aside

for

one-on-one pleas.

Three years before, talking

York

to the Foreign Policy Association in

City, Schacht had complained that

consumption

to boost exports

Germany had had

New

to cut

and gain a trade surplus. That surplus

prevented Schacht from defaulting on loans to countries that

owed

Germany money since they could seize German assets in their countries. As a result, all of Europe was saved from a German refusal to

service

its

debts,

while the American creditors suffered from

Dulles' s failure to assure that there

was

collateral for the loans he

had

arranged.

Dulles was humiliated by Schacht's deal for

all

the creditors except

Dulles's clients, the long-term dollar bondholders.

Dulles reacted

NANCY LISAGOR AND FRANK LIPSIUS

124

angrily to Schacht's "precipitate and drastic action" suspending

repayments, which, he noted

"came on

in

bond

his only reference to the matter,

top of intolerant treatment of the Jews."

Privately Dulles and Schacht to discuss other business.

The

met over dinner

results

at the

Esplanade Hotel

were soon evident when the only

debt Dulles represented that continued to be paid was the Briining loan

arranged by George Murnane and Dulles. Murnane boasted

"by and

we

large

did very well, about ninety percent" on the 1931

loan that had "horrified" Schacht

Three days

after Dulles

Cromwell mounted

later that

a

when he

first

heard about

it.

and Schacht's dinner meeting, Sullivan

campaign

to unseat the

&

management of the Allied

Chemical and Dye Corporation, which had defied the German-led chemical cartel and secretly built a nitrogen factory in Hopewell, Virginia.

more than quintupled American

It

28,630 tons

in

1930

185,000 tons

to

&

major stockholder, Solvay

owned

(I.

G. Farben

exports from

1933 and infuriated Allied's

company that also German I. G. Farbenin-

Cie., the Belgian

part of the cartel leader, the notorious

dustrie.

camp

in

nitrate

later ran part

of the Auschwitz concentration

as a private chemical factory.)

Sullivan

&

Cromwell had

fight against Allied

middle of an

company

the perfect pretext for

because the

effort to force

New York

mounting a proxy

Stock Exchange was in the

more information out of the company. The

president, Orlando F.

Weber,

justified his secrecy as a

means

of keeping information from "those foreign-subsidized cartels which are

now engaged

in a bitter struggle

with your

Company

in the

markets

of the world." Sullivan the

firm's

& Cromwell

associate Rogers

for Allied

was assigned

in

"secretary"

of the

Chemical and Dye Corporation." In a

letter to

Berlin office,

"Committee

Lamont, who had worked to

be

Allied shareholders he claimed to represent the "right of stockholders to receive

adequate company reports." But one shareholder, James

W.

many when he contended, "Much as I company in withholding information from its would deplore even more a successful campaign of a

Gerard, voiced the concern of deplore the attitude of the stockholders,

I

committee which might

result in the election to the

board of directors

of interests representing a large foreign competitor."

On

behalf of Solvay's 20 percent holding in Allied, Sullivan

&

ALAWUNTOITSELF Cromwell got a resolution

to

125

convene a special shareholders' meeting

new board members. When Weber and Allied 's management agreed to provide more information, Lamont dropped the demand to elect four

for the special meeting

years until the irascible

and an uneasy truce prevailed for the three

Weber

retired.

His successor, H. F. Atherton, proved more pliant. In 1936 George

Murnane was

elected to Allied 's board of directors; the

joined a chemical

cartel

with

and Solvay. Sullivan

Industries,

G.

I.

&

Farben,

Cromwell became

company Chemical

Imperial the

company

counsel.

&

Sullivan

new Nazi

Cromwell thrived on

On August

regime.

its

and collusion with the

cartels

2, 1933, the

day

that President Paul

von

Hindenburg died and Hitler seized the presidency of Germany, Schacht

became economics minister

Though

as well as president of the Reichsbank.

Hitler did not like the outspoken Schacht, he recognized his

economic genius and made him responsible

knew

Hitler also

for rearming the country.

independence made him

that Schacht' s apparent

He seemed to be an foreigners who either were

invaluable as a representative to the outside world. anti-Nazi Nazi, capable of reassuring

wanted an excuse

gullible or

for justifying their relations with the

Hitler regime.

Schacht could make the worst extremes of the Nazi government palatable.

He never denied

the persecution of the

Jews but claimed

that

be a "tower of justice."

his ministry should

Dulles celebrated Schacht's appointment as economics minister by

promoting a crucial

cartel

arrangement with Inco, the International

Nickel Company. Without Dulles,

Germany would have lacked any

negotiating strength with Inco, which controlled the world's supply of nickel, a crucial ingredient in stainless steel

played up nickel

I.

from

extraction

G. Farben 's patent for an ore.

was

The

and armor

efficient

cartel's control of the ore

irrelevant, but Dulles

plate. Dulles

method of extracting meant

convinced Inco

that efficient

that

I.

G. Farben

could get nickel from previously unusable ore.

He

spent

many hours

officials in his

Nazis

in

in the

1930s negotiating with

New York office. The original

on Inco's

agreement

I.

in

G. Farben 1934 cut the

ore. In return for an exclusive right to share

I.

G.

NANCY LISAGOR AND FRANK LIPSIUS

126

Farben's patent, Inco guaranteed to supply unrefined nickel to the

German company, and

G. Farben promised

I.

to sell refined nickel

"through distributing organizations utilized by Inco, Ltd ... fixed

by Inco Ltd."

In 1937 Inco

expanded

Germans "proposed creased

I.

clearly

agreement with

its

A

threat.

G. Farben because the

supplemental agreement

in-

G. Farben's quota of unrefined ore for domestic use so that

had no purpose other than

Under the agreement, moreover, Inco the

I.

to erect an additional refinery." Dulles helped

Germans' empty

the

inflate

it

at prices

German

to let Hitler stockpile officials

weapons.

were "to cooperate with

authorities in developing the use of nickel in

Germany,"

according to a United States government complaint against Inco. Dulles 's influence over Inco went far beyond the normal lawyerclient relationship.

He was

a director and

member

of the executive

committee. Since William Nelson Cromwell had organized the com-

pany

in 1902, a steady stream of Sullivan

become company S.

executives.

Among

the

&

Cromwell lawyers had

most prominent was Henry

Wingate, who, not coincidentally, joined Inco in 1935

of the machinations with

I.

midst

G. Farben. Wingate rose from assistant to

the president to chief executive officer in turn, hired a

in the

phalanx of Sullivan

vice-presidents and secretaries,

&

and chairman of the board. He,

Cromwell lawyers

making Inco one of

as corporate

the firm's very

closest clients.

Dulles worked with the resisting

company throughout

Canadian and British government

the interwar period,

efforts

shipment of nickel for military use. In a Foreign Affairs

had argued

that the

nickel as a strategic

war

material.

The Canadian government,

of

yielding

the contention that "it

to control the ultimate destination of the mate-

The company argued

buying only a

much

article,

the

Dulles

effort to restrict the export

company's influence, accepted

would be impossible rial."

curtail

United States always supported free movement in

arms and led the assault on Canada's

to the nickel

to

nickel

little

that Germany, Italy, and Japan were more than a $1 million worth, while ignoring how

was going

to

them through

prohibiting Canadian export of nickel

assured the

Germans of

intermediaries. Legislation

was never enacted, and Dulles

a steady supply of nickel.

Disdaining the perceived national interest,

Dulles justified his

ALAWUNTOITSELF McGowan, chairman

cartel-making to Lord

127

of Imperial Chemical

Industries and a fellow cartel participant.

"The word

assumed the stigma of a bogeyman which

the politicians are constantly

attacking.

The

fact of the matter is that

has here

'cartel'

most of these

politicians are

highly insular and nationalistic and because the political organization

of the world has under such influence been so backward, business

people

who have had

have had

to

ways

to find

cope

realistically

with international problems

for getting through

and around stupid

political

barriers."

As

international monopolies, cartels, in Dulles' s mind,

step better than the domestic monopolies that Sullivan

were one

& Cromwell had

always promoted. The only drawback, but a major one, was that the

Germans

insisted

on controlling the

cartels; still,

Dulles helped them

achieve their goal.

Even more

insidious than the major cartel arrangements were the

small everyday interactions that were unnoticed yet infiltrated and

compromised a

variety of

American

interests. In

1933, for example,

Dulles helped Berlin attorney Heinrich F.

Albert reschedule $17

German Lloyd

shipping company, even

million of bonds for the North

though Sullivan initial

&

Cromwell had represented

the bondholders in the

offering in 1927.

While European bonds were being repaid on schedule, Dulles secured an agreement to lower the interest on the dollar-denominated

North German Lloyd bonds by 50 percent, from 6 to 4 percent, a reduction applied retroactively by six months.

depended on earnings, but is,

of course, always considerable latitude

lating the existence of earnings." Dulles

negotiation

Loeb

&

was "most

Co.,

are

Future repayments

as Dulles noted privately to Schacht, "there

difficult"

in the

Company

mentioned

to

in calcu-

Schacht that the

because "the leading bankers, Kuhn,

somewhat prejudiced

in

their

attitude

toward

Germany." Dulles was proud to fixed

bond

commend

this

"plan for radically reducing

interest" to Schacht because "there will,

more ready acceptance of

the bondholders as a

I

think, be far

whole of the general

regime established by the Reichsbank." Dulles also tried to mislead the State Department about the nation-

NANCY LISAGOR AND FRANK LIPSIUS

128

ality

of the Possehl

Works

in Poland, in

Company held a 20 Department, "we are advised .

as a Russian

company

which

Overseas

his client the

percent stake. Dulles told the State

Securities

.

that Possehl

.

was established

for the manufacture of scythes."

in

The

1920 State

Department, however, learned through confidential sources in Warsaw that

"the consortium

now owning

the shares

merely a blind under

is

which the German Government has attempted interest in the factory;

which

them

to the present holders,

German Government State Department for

was

in such transactions."

to protect Possehl

being

real

its

and that the Montan A.G., a Swiss company

war and eventually

dealt in the shares of the factory after the

distributed

cation

to conceal

German,

the usual agency of the

When

Dulles pressed the

from Polish government

confis-

department wanted more explicit

the

information, but, "over the space of several years, Dulles proved reluctant to provide the State

The Germans were in using

far

Department with

more successful

this

information."

in using Dulles than

he was

them. In the 1930s one of the wealthiest Czech families, the

Petscheks, wanted to

sell

Silesian coal mines before they

its

known

seized by the Nazis. Dulles had efforts in the early

were

the Petscheks since his trading

1920s and he had visited them in their elegant

Prague home, which after World (another of their houses

became

War

the

II

became

the Soviet

embassy

American embassy).

Dulles arranged for George Murnane to

"buy"

the

mines

to hide the

Petscheks' ownership and then offer them to Schacht. But the Nazi

economics minister asked Murnane,

"Why

should

buy them now

I

when I can confiscate them later?" When Murnane explained that he owned the mines, Schacht bought them, and Murnane made a commission of about $100,000. But

him

the

American government charged

a huge tax based on the sale price (as though he really did

them) and Murnane had

to liquidate assets to

pay

own

it.

Despite Dulles' s expensive miscalculation, Murnane blamed the

United States secretary of the treasury, Henry Morgenthau, for the loss. Fifty years later, his son, at the

mention of Morgenthau,

a dictator

Petscheks.

and a hindrance

George Murnane,

Jr.,

became

whom he compared with

to the effort to

furious

Hitler in being

help Europeans

like the

ALAWUNTOITSELF

129

After arranging the mine sale for the Petscheks, Dulles became a director of the Consolidated Silesian Steel

Company.

Its

sole asset

a one-third interest in Poland's largest industrial concern, the

was

Upper

Company. After the removal of the Petscheks, company was owned by one of Hitler's main business

Silesian Coal and Steel

two

thirds of the

who was

supporters, Friedrich Flick, at

Nuremberg. Through the coal

Flick, an

changes

in

war criminal

interests, Dulles established ties to

example of the Sullivan

clients through

ultimately tried as a

&

Cromwell

practice of retaining

ownership, whoever the buyers and sellers

were.

Dulles was not alone in pursuing his European activities.

most members of the firm had stopped commuting Paris office

no longer had a partner

Olds died unexpectedly its

European

became

at the

charge after 1932 (when Robert

age of fifty-seven), the firm maintained

which Dulles's brother, Allen, increasingly

offices, to

the emissary

in

Though

Europe, and the

to

New

from

York.

made a partner in the remarkably short time of four years. He became in many respects his brother's eyes and ears around the world, a role that earned him the nickname "the little minister." He was envied but not resented because he came to Sullivan & Cromwell with such a rich and useful background. He had German contacts going back to his State Department posting in Berlin in the 1920s, when he introduced Foster to After joining the firm in 1926 Allen was

Hjalmar Schacht.

It

was

permanent envy

a source of

to his older

brother that Allen had met Hitler but Foster never did.

While Foster Dulles met foreigners bordered on state

as a fixer,

to Sullivan

&

conference table settings that

Allen was a practical problem-solver with a

visits,

canny knowledge of the world. Even

known

in

which was a

in the State

Department he was

lucrative reputation for a lawyer to take

Cromwell.

His talents had

many

applications.

The Mellon family

example, to convince the Colombian government not $1.5 million investment concession.

in the rich oil

He succeeded by

helping to rig the

fields

its

of the Barco

1932 Colombian

who flew to New York to pick up and who recognized the Mellons' Barco

presidential election of a candidate

a $1 million personal loan

and mineral

hired him, for

to confiscate

NANCY LISAGOR AND FRANK LIPSIUS

130

claims as soon as he was elected. Allen Dulles did not to

know how much

charge his client until he was in a plane that suddenly plunged 2,400

feet.

When

the plane stabilized, Allen ordered a scotch and decided on

$2,400 as the

fee.

Allen regularly went to Paris where he flattered and indulged

Cromwell

who was

in place of Foster,

man. He arranged

the old

to take

busy

far too

to

spend time with

Cromwell and two women

Trianon Palace in Versailles, where they "gave the

at the

time" and stopped for races

Longchamps on

at

the

to lunch

girls a

good

way home. He

reported back to Foster that Cromwell "hasn't touched a drop for

weeks

.

way

with the

A

and was not only

.

.

in fine

the Paris office

mental shape but seemed delighted

was going."

committed womanizer, Allen Dulles had become a lawyer

to

assuage his guilt over his affairs by buying jewels for his wife, or so the Sullivan

&

Cromwell

scuttlebutt

had

She found out about them

it.

from her husband himself, who wrote her during one European

visit,

"I dined with the Shoops and played bridge. The fourth was an

Scheherazade where

somewhat

to the

we

Amidst

the

stayed until

is

socializing,

early

the

annoyance of her husband, "

on the party. Her name

I

financing

the

took to

I

hours as usual

learned, as he

was not

there

was plenty of work. W. Averell

electrification

of

&

Cromwell

Poland.

for his pet

Harriman

had

agents in Poland, but Norris Darrell, the head of the Sullivan

Cromwell

office in Berlin, traveled there twice a

the terms and help pass the necessary legislation.

had nothing but contempt for Dulles personally, well

was

the

perfect

choice

for

this

month

the

first

work Dulles created

public

bond

issue ever

&

to negotiate

Though Harriman Sullivan & Crom-

work because Dulles had

negotiated the loan that stabilized the Polish currency in 1927. part of that

in

'Gregoire.'

Harriman, then a banker, hired Sullivan project:

whom

(but not beautiful) Irish-French female

attractive

As

a Polish federal reserve system for

made

in the country.

played golf in Poland on a course that was a

cow

For relaxation he

pasture in which the

farmer held the flag over holes in the ground. But Darrell 's

Poland ceased when he returned to

New York

in the

summer

visits to

of 1930

and General Jozef Pilsudski, the Polish premier, refused

to

let

LAW UNTO ITSELF

A

131

Harriman control such an important domestic industry, making a deal with the French instead. Sullivan

&

Cromwell

million in Kreuger

&

American holders of $50

also represented

Toll bonds that defaulted with Swedish match

king Ivar Kreuger 's suicide in

1932.

Negotiations to obtain the

backing the bonds followed a tortuous path. Creditors of

collateral

Kreuger' s operating company, the Swedish Match Company, did not

want

to share their assets with the bondholders,

government objected Sullivan to

&

Cromwell

Swedish

to

until

holders (while Sullivan

&

Stockholm from Berlin

Dulles paid former American peace

Norman Davis $75,000

negotiator

being dispersed abroad.

assets'

associates trekked up to

attend negotiations,

and the Swedish

American bond-

to represent the

Cromwell earned $540,000).

The negotiations ended

in

New York

bondholders got only $2.5 million

in

April

1935 when the

settlement of

more than $100

in

million in bonds from poor central European governments like Latvia

and Serbia local

to

which Kreuger

lent

money

exchange for getting the

in

match monopoly. He then used those bonds

Candler Cobb, the persuasive and suave American

&

millions of dollars of bonds for Sullivan

spent the 1930s trying to collect on them. the Paris office, relied

where the debtors met

willing

is

his capacity to

in

his

in the

to

own.

placed 1920s,

work out of

to discuss their obligations.

out of an unwilling debtor, and the

is

Cromwell

on the advice of Cromwell, who coached him,

come down

back

who had

He continued

money

to

to

your demands

way

to

to

He

"You

cannot get

make

the debtor

what you are convinced

pay."

With Cromwell peering over

his shoulder,

Cobb made "the

fatal

mistake of asking [the Romanians] for some figures on their tobacco

monopoly, having say, 'Oh,

go back

we

to

in

mind

the old idea of capacity to pay

haven't got those figures but

if

you want them

Bucharest and get them.' So we'd

all

and they'd .

.

.

we'll

adjourn for a couple

of months while they went back to Bucharest to get those figures,"

Cobb

related.

Cobb went

to

Yugoslavia to ask the head of the national bank "to consider

if

After getting an agreement on the debts in Romania,

Yugoslavia couldn't do the same." The banker answered, "The day

you get a payment from Romania,

let

me know."

NANCY LISAGOR AND FRANK LIPSIUS

132

The

April 1936,

company

&

of the Kreuger

rest

when Dulles

that

started Kreutoll Realization, an

bought the bonds

when

lasted to the 1980s,

America

Toll business switched to

to hold until

Sullivan

&

repayment. The wait

Cromwell partners continued

have Hungarian land reform bonds. In 1985 George Murnane,

whose

father had originally issued the

Kreuger

in

American

&

was

Toll bonds

to

Jr., still

holding on to his certificates.

Once

the Nazis

came

Cromwell's Berlin

to

power

1933 cables from Sullivan

in

office bore the salutation

demanded by German

regulations, but

Lauson Stone who received the correspondence ties to the

was like

in

New

York. Dulles 's

Nazis were making his partners uneasy. There were the

frequent appointments with representatives of et Cie.

It

shocked lawyers

"Heil Hitler."

still

it

&

They were

I.

G. Farben and Solvay

perfectly civilized businessmen, Dulles

would

say.

Others were not sure, even though the visitors were polite and deferential to the secretary, to Dulles' s office at the

who came down to

head of the

were just another name

them up

To any

the steps

outsider, they

appointment book, but their

in a lawyer's

growing familiarity with the

escort

staircase.

was a reminder of Dulles 's

office routine

cooperation with the Nazi-run cartels in Europe.

By 1934

Dulles was publicly supporting Hitler with a philosophy

that rationalized

Nazi brutality as being the spontaneous outbursts of an

energetic people. the Atlantic fatalistic

He

wrote a long

"The Road

article,

Monthly of October 1935

Peace," for

that

began with the ridiculous

we

recognize to be inevitable

claim that "the changes which

over a hundred years must begin sometime." secret

to

rearmament because "Germany, by

He excused Germany's now

unilateral action, has

taken back her freedom of action."

Knowing what he weapons

did about Nazi agreements with Inco and

stockpiling,

Dulles

German

was purposely misleading when he

maintained, "If other countries like Germany, Japan, and Italy adhere

only reluctantly

if at all to

such projects [for perpetual peace]

,

it

is

not

because these nations are inherently warlike or bloodthirsty. They too

want peace, but they undoubtedly

which

are repressed

feel within

and they desire

to

themselves potentialities

keep open the avenues of

change, "as though Hitler were a misunderstood progressive.

LAW UNTO ITSELF

A

To most

133

people, Dulles's article was just another part of his abject

appeasement of the Axis powers

in a

campaign

culminated in his

that

1939 book War, Peace, and Change. His law partners, however, were shocked

that

to justify

he could so easily disregard law and international treaties

Nazi repression he saw more intimately than most. Cromwell

"You

chided Dulles:

be the

will

first

to recognize the

inevitable

application of this principle by nations for revision of territorial

expansion and treaty provisions Italy,

Hungary, Austria,

—

as in the cases of

Doubtless your

etc.

Germany, Japan,

article will

be quoted

in

support of such national claims."

Even

if

Dulles acted as though

&

the Sullivan

clients,

German companies were

Cromwell Berlin

admission of the firm's support for Hitler. did not want to give

it

He would

up.

office It

had

not be

like other

remained a glaring little

use, but Dulles

cowed by

his partners'

qualms. In June

1935 Allen took a whirlwind tour of Europe, visiting

London and Budapest commercial

flight.

&

of the Sullivan

well as Berlin in a pioneering Clipper

as

He was met Cromwell

foreign ministry and

at the

office

Berlin airport by Joseph Grazier

and then spent a day seeing some tk

embassy people and

our lawyer friends Albert,

Westrick, etc."

When office. It

he returned

Allen told his brother to get rid of the Berlin

was clerking

son, Christian, It

home

was an awkward time, Foster

was hard

Sullivan

at

at

Sullivan

&

Cromwell

Cromwell except

agement and sponsorship. And on

&

because Heinrich Albert'

for Allen to fight his brother. After

even have been

father,

said,

his

deathbed, had

all

the

the

down an

offer

York.

Allen would not

all,

went deep. Their

children take an oath

accepting Foster as the head of the family. In the turned

New

for Foster's encour-

their family ties

made

in

late

1940s Allen

from the Democratic Truman administration

American ambassador

to

to

be

who Republican Dewey

France to avoid embarrassing Foster,

would have become secretary of

state

in

a

administration.

But

this

was not

future of the

firm.

just a dispute

between brothers.

Louis Auchincloss,

who knew

It

entailed the

both brothers,

considered Allen cold and calculating, despite his apparent warmth, while Foster was

much more capable of kindness despite

his formidable

134

NANCY LISAGOR AND FRANK LIPSIUS

reserve.

The

difference, according to Auchincloss,

was

that Allen

could anticipate others' reactions and Foster could not, a difference apparent in the conflict over Sullivan

When

&

Cromwell's Berlin

Allen got nowhere privately with Foster, he brought the

subject before a partners' meeting. Foster his partners' objection. to if

office.

He

was stunned by

the affront of

resisted, using the loss of potential profits

defend his position. Allen argued that the firm "would suffer more they didn't abandon" the Berlin office.

there," he recounted. "People

law, not

much

how

came

to respect the law.

to

"You

couldn't practice law

you asking how

When

that

to

evade the

happens, you can't be

of a lawyer."

Arthur Dean added, "In view of the fact that Edward Green, Eustace Seligman and Art Jaretzki, better to

me

we

if

didn't represent in any

"Finally," one version has tears.'

No

Jr.,

it,

were Jews,

it

would seem

way any German

Foster Dulles

clients."

"capitulated,

'in

" partners' meeting has ever been so acrimonious and divisive

or so subject to revision after the fact. Arthur

"There was no argument, no confrontation, no

Dean

insisted later,

threat to take action if

Foster didn't agree." Foster Dulles soon obfuscated the date of the office's actual closing

The rebuff over

—conveniently moving

the Berlin office did not

it

back

to 1934.

change Foster Dulles 's

modus operandi. The firm's European business continued. Candler Cobb was still chasing after debts in central Europe. "I got the story from someone in the Hungarian Foreign Office," Cobb proudly wrote Foster Dulles in 1936, "that I collected more money from Hungary than any other creditor. The strange part of it was that the attitudes or

Hungarians rather liked

Succumbing

it."

to a revolt led

leadership. In fact, the

by

his brother did not

harm

Foster's

two brothers recognized the value of Allen's

insurrection in limiting the repercussions so that the office returned to

normal and the defeat was passed over as almost a display of democracy. Foster soon

came

to see his brother's value as a safety valve.

At the

next dinner for partners and associates of the firm, Allen had the

unpleasant task of discussing the firm's decade of disastrous foreign

A

LAW UNTO ITSELF

loans, a policy pursued with full enthusiasm

speak about after

it

was

135

by Foster. But Allen could

impersonally since he had become a partner in 1930,

it

virtually over.

In the cozy clubhouse atmosphere of the

Down Town

Association

next to the firm's office on Wall Street, Allen Dulles provided the

excuses to deflect criticism of the firm's support of lending in Europe. In better times,

"Thank God

another one of

same. In

fact,

Arthur Dean would raise the good-natured toast

the sun has set and the statute of limitations run out

my

errors." Allen Dulles

would have

he had to admit, the sun had not yet

on

liked to say the

set

on the loans the

firm had promoted.

He

securities issues

bond that

&

detailed Sullivan

from 1924

issues but also

many

[are]

Cromwell's work on ninety-four foreign

in

to 1931, involving

$1.15

mostly

billion,

American shares of foreign companies. The "fact default

[is]

no reflection on

work

legal

[the]

involved. [The firm provided the] finest legal protection. [There

safeguard against economic conditions such as during the

years," he said. "Generally foreign held loans [are the defaulted] since maintenance of internal credit

[is]

is]

last

first

no

few

to

be

essential to contin-

ued national economy."

He

did admit that the firm "permitted debt to pile up too fast and too

high and took bad moral risk." brother

when he conceded

in

He came

closest to criticizing his

a lecturing tone,

"bonds of foreign

borrower[s] are only payable out of excess revenues of debtors after

meeting his internal costs of administration and

political exigencies;

default has moral and not legal consequence[s] as the obligor effective

is

without

remedy."

The mounted

antlers

and

rustic

wooden

walls of the

Down Town

Association were an appropriate setting for this demonstration of the hunters' fear of

becoming

the hunted. "In the foreign

bond situation,"

Allen Dulles conceded, "there was the added risk from currency

problems and

[payments to bondholders];

in fact,

the foreign bond, except in being a promise to pay [a] certain

amount

inability to transfer

of money, has few of the attributes of a bond."

Never had a Sullivan like a

law school

class.

&

Cromwell Society dinner sounded so much

"In future foreign financing

of revenues should be eliminated."

He reminded

[the] bare

pledge

the group of the

NANCY LISAGOR AND FRANK

136

of agreement

"desirability

among

something Foster Dulles had failed

lenders

LIPSIUS equal

for

treatment,"

from Schacht.

to get

Despite the continuing flow of drink and supply of cigars, the

lawyers found the speech sobering.

was

reliable about the firm,

had been

lost.

its

came

It

judgment, perhaps even

They walked out

and the country without a scratch.

ever acknowledging

cold night of

in the

its

York,

crisis

of

its

had almost escaped without

It

$10

role in the devastating loss of

its

that

integrity,

New

had glided through the deepening

realizing that the firm clients

Something

as a blow.

billion

caused by irresponsible foreign lending. Allen Dulles gave another, similar speech two years

American

million in South set

up

[in]

bond

revolutions."

loans.

He

reiterated that

economic

issues proof against

He

later

about $250

"lawyers cannot

disaster or political

again admitted as the "chief hindsight criticism [an]

emphasis on pledges which

[are]

of

value unless collected by

little

outside agents." This time he had suggestions about getting govern-

ment support and establishing a fund

role in the

prosperous years to guarantee

But he confined his remarks

repayment.

unprepared

in

to risk

drawing public attention

the lawyers present,

to

to Sullivan

&

Cromwell's

economic debacle of the 1930s.

If the firm

had put

its

decade-long

German

lending policy behind

it,

Foster Dulles' s collaboration with the Hitler government was far from over. His actions

Sullivan in the

&

Cromwell represented

discreet and secretive. I.

G. Farben's biggest subsidiary

Western Hemisphere, the General Aniline

which had been

With

became only more

assets

set

&

up originally as the American

by the mid- 1940s of $80 million,

it

Film Corporation, I.

G. Corporation.

was among

the largest

dyestuffs and film manufacturers in the country.

The company

evade confiscation as enemy property during

tried to

Chemie of

Basel,

Switzerland. Investigators in the United States determined that

Chemie

the

was

War

war by having in fact controlled II

stock

its

by

I.

held by

G. Farben

President Roosevelt ordered

Property Custodian.

however, cloaked gation reported,

"The

in its

I.

G.

Germany, and during World stock seized by the Alien

facts regarding the control of

in the greatest of secrecy," a

"and

Chemie were,

government

investi-

the Swiss have refused to concede that the

LAW UNTO ITSELF

A

company was

in fact controlled

137

by Farben." Throughout the war, "the

fog around the ownership of General Aniline was never dissipated."

According

to

Chester T. Lane, the general counsel of the

1930s, Sullivan

&

the Nazis occurred in 1938.

acting through attorneys,

its

who,

Lane

recalled:

representatives here,

as

SEC

in the

Cromwell's closest and most brazen dealing with

I

its

"The German government, financial counselors

remember, were Sullivan and Cromwell,

and

filed a

registration statement with us looking towards the refunding of

of

its

securities held in the United States.

To

a public relations gesture."

It

indirect taxes,

and

Ultimately the

all its

its

many

was obviously designed

complete blueprint of his

indirect assessments through party dues,

whole

as

Germans, Lane required

deter the

Hitler's registration statement "to give us a

economy, including

its

its

financial structure."

Germans withdrew

the effort, barely leaving a trace

behind, but Lane concluded: "If Hitler had succeeded in establishing

new refunding issue and had met its terms, it would have meant we would have had large numbers of individual investors in

a

country, as well as large numbers of institutional investors,

that this

whose

personal interests would have depended, to the extent of their holdings,

upon

the maintenance of the solvency of Hitler's

government and on

maintenance of satisfactory relations between the United States and Nazi Germany, which might have had a very profound effect on our attitude after Hitler started in

On

the rare occasions

behind clients, acting as

when if

Poland

in

1939."

his activities

became

public, Dulles hid

he was just doing them favors.

He

helped

organize the America First campaign to keep the country out of

European entanglements for a banking a partner of Kidder,

Peabody.

claimed, even though on

It

client,

Edwin

S.

Webster,

Jr.,

was merely a courtesy, Dulles

November

5,

1941, a month before Pearl

Harbor, Dulles donated $500 to America First and Janet Dulles

pledged to match another donor's large

gift.

Webster effusively

thanked Janet Dulles for helping pay the cost of a

rally

honoring

Charles A. Lindbergh, a major America First proponent.

When

criticized for contributing to such a cause, Dulles said

his wife's

was

money, though she had never shown any independence of

mind before about the

it

(or after). Dulles 's partner Arthur

firm's

role

in

America

First.

Dean was more candid

Webster had originally

NANCY LISAGOR AND FRANK LIPSIUS

138

approached Dean

to set

up the organization

refused, Webster got Dulles to have a

up the papers

Dean was

to establish the

furious and

standpoint a tragic mistake, and standpoint

it

New York

remembered I

in

New

draw

in the office

chapter of America First.

was from

telling Dulles, "It

thought from Sullivan

was something we ought

When Dean

York.

young lawyer

& Cromwell's

of the office and get

to get out

out fast." Ultimately, Dulles agreed and told Dean, "I think

wrong

to

have allowed

it

to

be incorporated in the

his

'

office.

was

I

Later Dulles

'

denied having had any contact with the organization.

To

the degree that

America First was

isolationist, Dulles legitimately

claimed that he did not agree with

it.

He remained

internationalist, but his extensive dealings in

his

judgment, as when he wrote in 1937,

with

many

a

staunch

Europe did not improve

"One may

of Hitler's policies and methods, but

.

.

disagree, as .

I

do,

[Mussolini and

involve more serious threats to the general peace than any act of

Italy]

Hitler's." In

contrast,

Allen

defense of Hitler.

Dulles

bridled

at

his

convoluted

brother's

To his wife, Clover, he referred to "those mad Germany" and recalled that when he had met

people in control in

Hitler in the spring of 1933, Hitler

was already making ominous

threats about Poland. Allen Dulles ran unsuccessfully for

Congress

1938 on a platform of trying to get America prepared to face up Nazis. While Foster

Change about unsound Italy

was formulating

his thoughts in

in

to the

War, Peace, and

the "excessive external restraints [that] have created

internal conditions" to justify the repression in

Germany,

and Japan, Allen Dulles collaborated with Hamilton Armstrong,

the editor of Foreign Affairs, in writing

and France: Can

We Be

two books defending Britain

Neutral? in 1936 and

Can America

Stay

Neutral? in 1939.

Soon

after the first collaboration

Armstrong discovered

that his wife,

Helen, was having an affair with columnist Walter Lippmann. Allen Dulles discreetly arranged for the Armstrongs' divorce in Nevada,

"was a writer of note and editor of a non-commercial publication so we hope you could keep the fees on an economical basis." The Nevada lawyer charged writing to a

Reno

attorney that his client Armstrong

$200.

The

brothers' political disagreements ultimately affected their per-

ALAWUNTOITSELF "They had heated

sonal relations.

139

debates, and there were tensions

about it," Avery Dulles recalled, "because they were both writing

The

to

letters

New

York Times and were often confused when

something Allie said was attributed Still, as

to Foster, or vice versa."

&

part of his responsibilities at Sullivan

Cromwell, Allen

Dulles continued to do business with the Germans. In 1937 he joined the board of directors of

subsidiary of the

J.

London bank

Henry Schroder Bank, that

Time magazine

in

the

American

1939 called "an

economic booster of the Rome-Berlin Axis." In 1938 and 1939 he

Germans buy out American Potash and Chemical company that had developed a way to extract potash from

tried to help the

Corp., a

When

bauxite, a plentiful mineral in America. lost a

monopoly on potash,

a crucial

the effort failed, Hitler

component of glass,

fertilizer,

and

photography. The price of the mineral plummeted, and Germany was deprived of a major source of hard currency

World War

prior to

In the

summer of

in the

period immediately

II.

1938, Foster Dulles represented the

in its effort to collect

Bank of Spain

$15 million on behalf of the Franco government

from the Federal Reserve Bank. The case revolved around the question of whether the anti-Franco Barcelona bank could

He

bullion independent of the Spanish central bank.

summer, reading

all

the

first

it

Though Dulles was

it

prepared his case

as a

fifty

years old,

it

&

Cromwell

major event, watching Dulles face

his friend

case he had ever argued

lawyers treated

Henry

holdings of

over and asking for comments from his family,

including his teenage children.

was

sell its

in court.

Sullivan

L. Stimson, the former secretary of state

who

represented the

Federal Reserve.

Even Dulles's children showed up

to see their father in action.

Avery, a college student, was surprised

that his usually meticulously

dressed father had his shirttails sticking out of his trousers as he spoke to the

judge with his back to the gallery.

courtroom manner: "His speaking

seemed legalese and on "It

that

occasion."

his general

A

Sullivan

He

ability

also criticized his father's

could be improved.

It

all

manner of speaking was not impressive

&

Cromwell associate was more

was a big disappointment. Dulles droned

blunt:

for twenty or thirty

minutes, and what he said was incomprehensible."

NANCY LISAGOR AND FRANK LIPSIUS

140

Dulles established that the anti-Franco Barcelona government had

no

right to sell the bullion to the Federal

said

we

can't

go behind the principles of international comity," noted

Glen McDaniel, a Sullivan

&

Cromwell associate who acted

Dulles's assistant on the case. "It

So you

Reserve Bank, but "the court

was

as

similar to sovereign immunity.

your money." McDaniel admired Dulles because he

just lost

"fought and fought and fought. Even when the ship was going

down"

—

the firm appealed unsuccessfully to the

— "he

Supreme Court

never stopped fighting."

In a three-way dinner debate at the

Economics Club

in

March

1939, Dulles boldly asserted, "Only hysteria entertains the idea that

Germany, between

or Japan

Italy

the

Burton

Senator

isolationist,

interventionist, a flatly

contemplates war upon us."

Wheeler,

and

the

banker named James Warburg, Dulles "came down

on Wheeler's side," Warburg remembered. He "took a curious

kind of metaphysical position that as decent peace,

make

K.

Standing

a

we

we were

incapable of making a

we would just

mustn't get involved in a war because

mess of the peace again." Warburg concluded, "Dulles has

been called an elder statesmen, but

I

think he's elder without being a

statesman."

Wendell Willkie, the Republican presidential candidate told Dulles, "Foster, that

side of a subject

When start

I

is

the

1940,

most persuasive speech on the wrong

ever heard."

Hitler's Blitzkrieg overran

World War

in

II,

Poland on September

1,

1939, to

Dulles's long defense of Hitler crumbled along

with the once beautiful buildings on the fabled Danzig waterfront. Dulles had to abandon the remarkable self-deception that

Germany

did

not threaten world peace and retreat to his fallback argument that the

Axis could not help being aggressors Treaty of Versailles following World

caused by the

after the suffering

War

I.

This position sounded like blaming the victims for Germany's attacks, as a disillusioned Eustace

Seligman told Dulles

October 1939. Such wishful thinking was

in a

finally shattered

war began and Seligman wrote Dulles, you "apparently take that

Germany's position

Seligman,

who

is

memo when the

in

the

view

morally superior to that of the Allies."

often argued by example, pointed out

how

ludicrous

LAW UNTO ITSELF

A

Dulles 's excuses for Hitler had become. is

in a

fair

analogy

a

is

man who

who finds that he has been cheated of $100 by He immediately grabs $100 from the pot and then shoots

poker game and

marked all

"A

141

cards.

the players and also the bystanders." (The full text of Seligman's

memo

appears as Appendix 2.)

Rogers Lamont, who was closely associated with the firm's German

worked

policy, having into the

I.

in the Berlin office

G. Farben chemical

and eased Allied Chemical

cartel, resigned his partnership,

went

to

Canada, and volunteered for the British Army. He fought with the toward Dunkirk; on

British troops retreating

observing

enemy

close range by a

He was

the

American

first

officer to die in the

in

war and Sullivan

&

two world wars. Lamont's colonel

member

which characterized

Why Lamont

the life" of

whom

Company

December 1939, "Is

in

Germany

it

true that

order to fight us?

in

in

I

him and

liked

awarded

who

has

addition has exhibited

Rogers Lamont.

after

I

am

&

Albert

Westrick was

& Cromwell business, Lamont has gone I

wrote Dulles

as volonteer [sic]

have not grown old without an

understanding for the most unbelievable actions of

because

still

the Nazis chose in 1936 to head the

disbanded with the loss of Sullivan

England

action."

resigned from the firm to fight the war will never be

known. Heinrich Albert, Ford Motor

is

in

of the sophomore or junior class

maintained good scholastic standing and

to

at

firm established a scholarship at Princeton that

annually "to that

in

he was killed

car,

was "extremely daring and cool-headed

reported that he

qualities

1940, while

27,

tank shell.

Cromwell's only casualty

The

from an armored

artillery fire

German

May

afraid he

men

but

I

would not have done

would not hate Germany very much notwithstanding

the

am

sorry

that if

he

good friends

he has got here [sic]/'

To

Albert

and

Lamont's death,

it

Dulles,

who

seemed

a betrayal of a long and close relation-

waited

ship with the Germans. But Lamont, in Berlin

six

months

who had been

to

announce

particularly

happy

because of his love of Wagner and beer-hall revelry, was

well aware of the Nazi policies and intentions that had captured

Germany. As

a

member

of Sullivan

&

Cromwell he had known more

than most Americans about the Nazi schemes for nearly a decade.

NANCY LISAGOR AND FRANK LIPSIUS

142

And where

Dulles

wanted

to

appease them,

Lamont could not

stomach them.

To Joe

Prendergast,

worked with him

who had known Lamont

in Berlin before sharing a

at

Princeton and

house with him

in

New

York, Lamont 's fervor about the war had resulted from disappointment in his partnership, to

be."

It is

"which was probably not

possible that

Lamont wanted

to

all that

was cracked up

assuage the guilt he

about the role he and the firm played before the war.

was

it

felt

If so, his sacrifice

a high price to pay to camouflage John Foster Dulles' s Nazi

collaboration.

9

THE DULLES WAR

MACHINE I

am

generally accused of being too sympathetic to

Germany. -john

FOSTER DULLES

John Foster Dulles knew war was coming Robert Bosch

from

its

Company

subsidiaries in

which Germany might

to

America. In 1940 the

of Stuttgart suspended licensing payments

"any country of in the

the

meantime be

represented American Bosch, he

knew

the

Western hemisphere with at

war." Because Dulles

Germans were

anticipating

war with America. Dulles began to hedge his bets.

He had helped Thomas

Childs, an

associate in the Paris office in 1937 and 1938, get a job as general

counsel to the British Purchasing Commission.

marching

When

the Nazis

were

into Paris, Childs arranged for the British to take over the

French contracts to buy American arms and planes. The British

NANCY LISAGOR AND FRANK LIPSIUS

144

purchasing commissioner, Arthur Purvis, got authorization from the

permanent head of the British treasury

buy any French equipment or

to

obligations in America. Purvis asked Childs

was

rization

sufficient to satisfy

American

contractors. Childs said yes

who was

but offered to check his answer with Dulles, retreat in alert

Cold Spring Harbor. "The

and agreed

come

to

call

woke

it.

was

midnight," Childs

and with signatures

hand Childs spent

before the Nazis got

it

—

in

and getting the French

the next day frantically switching the deals

money

asleep at his

Foster up, but he

right over, arriving after

recalled. Dulles concurred,

use up their

the telegraphed autho-

if

to

or Washington confiscated

Childs gave Dulles credit for getting the telegram accepted, even

though they had no legal standing, as both lawyers knew.

When

1940 the British were forced

in

money

holdings to raise

&

Sullivan

mentioned

met with

Cromwell that Dulles

Hitler's

to

to

sell

pay for armaments, Childs wanted

newspapers as having

in the

representative, Gerhard Westrick (former

partner in Albert

& Westrick).

as Childs put

"to declare blindly that the war was over

it,

nothing more to fight about Westrick,

who was

to use

government. Childs

to represent the British

had recently been

American

American

their

—

Westrick had come to America

—

let's get

back

in 1940,

was

there

normal relations."

to

run out of the country, brought into disrepute the

people willing to meet with him. Childs claimed Westrick "called uninvited on Foster Dulles,

the

press

tailed

Westrick and made

headlines of the event." In fact, Dulles met willingly with Westrick, as

Dulles 's

did

son Avery, then a Harvard undergraduate,

remembered, "I saw him an absolute disaster

hoping

The

if

at his suite at the Plaza.

the

phony war

He

said

it

who

would be

war and he was

led into real

to arrive at a peaceful settlement."

British, Childs reported with regret,

ploy then, and thought

it

serious

enough

"recalled the Westrick

to turn

away from

Sullivan

&

Cromwell."

When

the Japanese attacked Pearl Harbor, Dulles

had

to create firm

who left to fight. Would they be promised places on their return? He spent two days deliberating, writing draft after draft of his memo, trying to mollify the lawyers, though the policy about the lawyers

message was their

clear.

government

"[We] cannot service

[that

assure ... at the termination of associates

will]

resume

their

ALAWUNTOITSELF relationship with us

problem

where they

saluting the boys off to

The

off."

left

145

patriotic firms

had no

war with a promise of jobs when they

got back.

& Cromwell

At Sullivan

the associates

had

"envy

to

Glen McDaniel admitted, because they had not

lost their jobs. Dulles'

who worked

decision was deeply resented. Franklin O. Canfield, Sullivan

&

Cromwell

American Firster."

more than

all fronts,

that earned

Inzer Wyatt, a

the attitude of an

—

They served

enlisted.

some branch

usually as officers and often for

of intelligence. Sullivan

honor

&

Cromwell was, despite Dulles,

them places

young

for

four partners and thirty-five associates

Still,

half the firm's sixty-six lawyers

honorably on

"had

in Paris, said Dulles

the crippled,"

a

badge of

of the war.

at the heart

went

litigation partner,

to Bletchley Park,

England, to learn about Ultra, the penetration of the German and Japanese secret codes.

He headed

the group responsible for keeping the

secrets

while applying the information to the China-Burma-India

theater.

He

picked Sullivan

which included lieutenants If the

&

Cromwell lawyers

like Karl

Germans had wanted

to identify crucial spots in the

war machinery, they could have done worse than

&

Cromwell lawyers were

for the delicate task,

Harr briefing brigadier generals.

stationed.

William

intelligence reports in the Pentagon for use

American

to see

where Sullivan

Piel, Jr.,

prepared daily

by the President and Joint

Chiefs of Staff. Glen McDaniel worked on aircraft procurement with

Undersecretary of the

Navy James

Forrestal, later the

defense. In Europe Franklin O. Canfield

was

(OSS) and

the

Office of Strategic Services

Allied European Forces

(SHAEF)

secretary of

first

between the

the liaison

Supreme Headquarters

FORWARD.

Lieutenant Colonel

Arthur Roseborough was the chief of Secret Intelligence It

came back

to

haunt Dulles that he had been so uncharitable to the

associates (the partners had their places guaranteed and their

the

wives throughout the war). Senate

associate,

in

in Algiers.

1950,

managed

Joseph

When

money

paid to

Dulles ran as a Republican for

Broderick,

a

Sullivan

the Democrats' downstate

&

Cromwell

campaign, which

cused on Dulles 's refusal to guarantee the fighting

men

fo-

jobs on their

return.

Dulles looked as though he was spending the war years paying public penance for his prewar support of

Germany.

In fact, he found

NANCY LISAGOR AND FRANK

146

new

collaborators from neutral countries,

LIPSIUS

who emerged

extremely

wealthy and influential from the war, and continued to use Sullivan

Cromwell long At

the

German

after its

same time,

collaboration

was

war marked a watershed

the

forgotten. for the firm.

the cohesiveness of autocratic rule because Dulles

sented his partners.

He

&

It

lost

no longer repre-

destroyed his effectiveness within the firm by

isolating himself with unsympathetic clients

While they fought from Europe

and questionable actions.

to India, Dulles stayed

home and used

sanctimonious pronouncements and politics to rehabilitate his image

German

without giving up his secret

most

Dulles 's

ties.

wartime

significant

hindered

activity

America's

manufacture of diesel-fuel injection motors that the army, navy, and air

forces

needed for trucks,

all

Economic Warfare Unit of "there diesel

is

no known

plants

it

manufacturing more

a vital

the

&

that

equipment

in

product above mere commercial plotted to

bomb

Germans prevented America from

efficient fuel injected diesel

maneuvers of Sullivan

The

aircraft.

Department lamented

Economic Warfare Unit

Germany,

in

Justice

and

substitute for direct fuel injection

motors," making

consideration. While the diesel

the

submarines,

motors with the legal

Cromwell.

Dulles had this power through a convoluted scheme he had hatched for the

Germans

after their experience in

World War

I

when enemy

property was seized by the Alien Property Custodian. Dulles handled the legal

end of the arrangement, and George Murnane the opera-

Company sold its international subsidiaries to Mendelssohn & Company of Amsterdam with a right to repurchase them; it was a way around Nazi leader Hermann Goring 's demand that German companies borrow money to secure 1934 the Robert Bosch

tional end. In

hard currency for prosecuting the war. The

an

inability

to

confiscation of

repay

its

assets.

loans

in

the

company was afraid that would mean foreign

future

The "sale" had

the advantage of satisfying

Goring without ultimately losing the company,

in return for

which

Bosch paid Mendelssohn a $100,000 "bonus or commisssion

for

acquiring the shares." Mendelssohn accumulated dividends for the

German company Mendelssohn.

to offset

management

fees and interest

Bosch owed

ALAWUNTOITSELF Murnane joined

In 1935

Bosch Company,

147

owner of one of Germany's most valuable

the

American

the board of directors of the

the exclusive licensee of the Robert

Bosch Company, patents

The head of Mendelssohn,

injection in diesel motors.

—

for fuel

Mann-

Fritz

heimer, admitted he was an agent of the Germans. But Murnane told

Mannheimer "he was going to see to as to how the Bosch shares came into because he always wanted as he

knew

the shares

be

to

it

that

he never made any inquiry

the hands of

in a position to

Mendelssohn

& Co.

say honestly that so far

were the property of Mendelssohn

&

Co.,"

according to the Amsterdam banker. In 1937

Murnane became

anti-German feeling spread

the chairman of

American Bosch and,

September 1938, ordered

in

as

new

that all

employees of American Bosch be Americans. After assuming

office,

Murnane urged Dr. Otto

charge

Fischer, the Robert

Bosch executive

in

of the company's worldwide subsidiaries, to deal with him instead of

American Bosch. Murnane wrote, "In these

the president of

times on matters having to do with the whole Bosch structure

be well to

initiate

that point

is

matters through me.

I

am

delicate it

would

sure our understanding on

adequate and no more need be said about it."

In this period,

American Bosch

reduce the 5 percent royalty

it

German company to German patents because

tried to get the

paid on

the

"the high United States prices of pumps and nozzles, due to the royalties,

many

In

were retarding the use of diesel engines

cases the diesel engine

is

in this

country.

.

.

.

three or four times the cost of similar

gasoline engines."

Cutting the royalty had to be approved by the

To

German government.

induce the Germans to agree, American Bosch volunteered infor-

mation about costs, selling prices, and other competitive data

that

revealed a great deal about American engine manufacturing. American

Bosch went so

far as to

send Albert Zimmerman, the company's director

of inventory and production planning, to Stuttgart.

"Mr. Fellmeth, who has an for about

as

I

two hours about

was able

to

answer

He proudly reported,

excellent head indeed, cross

the all

whole

examined me

diesel business in the U.S. A.

,

and

of his questions very thoroughly and

apparently to his entire satisfaction, he turned

me

over to Mr. Durst,

whom know very well, for further investigations, particularly in regard I

to

our production times for pumps, nozzles and nozzle holders."

NANCY LISAGOR AND FRANK LIPSIUS

148

The German government, which was delighted with intelligence, refused to give the company permission royalty rate.

One of the only German companies

Bosch gave

the Nazis a stranglehold

the industrial to

lower the

operating in America,

on American engine production

comparable with the better-known, highly resented agreement

New

G. Farben manipulated Standard Oil of

I.

in

which

Jersey over

Buna

rubber patents and almost created a crippling shortage of rubber in the

United States. The Germans were happy with American Bosch just the

way

it

was.

Then

in

August 1939,

Fritz

Mannheimer of Mendelssohn

&

Com-

pany committed suicide, precipitating the collapse of the Dutch bank.

The Germans had

to find a

remain subservient to the

new owner for American Bosch that would German parent company. When General

Motors and Chrysler both expressed a strong

interest

Mendelssohn's shares, Murnane had

them, telling them

to dissuade

in

buying

"the attitude of Stuttgart toward any potential American buyer will

that

be absolutely decisive as to whether or not the of real substance in the purchase.

'

He claimed

'

obtained anything

latter

that

Bosch had

the right

approve the transfer of the German patents and would disqualify

to

American bidders for

that

might "be destructive of the world's structure

Bosch products."

It

was

a delicate predicament for

American buyers were

Murnane and

the

Germans.

disqualified because of their unwillingness to

abide by Bosch's international cartel, but potential European buyers

were either Nazi

allies or

enemies, the former unsuited as a cloak for

Germans and the latter unwilling to be their cloak. One possible buyer was an English company with blocked assets in Germany that the

Bosch could take

in return for the

company, but

its

future friendliness

was by no means guaranteed. So important was

the future of

American Bosch

to

Germany

that

Hjalmar Schacht, the German economics minister and Reichsbank president, sent a

German banker

to

Sweden

to ask the

Stockholms

Enskilda Bank to help dispose of the American company. Enskilda

Bank

Wallenbergs,

was

owned

by

whom both Murnane

& Toll bankruptcy.

Sweden's

richest

family,

The the

and Dulles knew from the Kreuger

The Wallenbergs bought

the major Kreuger assets

ALAWUNTOITSELF out of bankruptcy, including Swedish

Company,

phone company

a

that

149

Match and

was

the L.

M.

Ericsson

the only major international

competitor of American Telephone and Telegraph and International

Telephone and Telegraph.

The German government was already doing business with Marcus Wallenberg, who, between September 1939 and April 1941 bought $2 ,

German bonds

million of

New York

in

for only $520,000, acting

"with a free hand" from the Reichsbank. Since Sweden was neutral,

the

Wallenberg was an appropriate buyer of American Bosch, but

Swedes drove a hard bargain.

Wallenberg more than half a million dollars for which, the less than

to take

to

1934, Bosch paid

over the company,

Stockholms Enskilda Bank paid $2,297,351 (30 percent

an American company was willing to pay).

was a

particularly

recognized that

company

$100,000 paid

In contrast with the

& Company to buy American Bosch in

Mendelssohn

It

officially

it

good deal

for the

Wallenbergs because Murnane

might be necessary to

sell

more than

Americans for "qualifying American Bosch with

to

government

in the

negotiations.

United States," as he wrote

They were

in a position to realize

in the

half the its

own

midst of the

an immediate profit by

company in America, so with great confidence, the Wallenbergs bought the company on July 22, 1940. The contract of sale excluded Robert Bosch's right of first refusal to buy the company back, but a secret agreement of the same date "provided for Wallenberg's definite obligation to sell more than a selling half the

majority of price."

all

The

outstanding capital stock of American Bosch

at a stated

secret agreement also included the Germans' right

to

dividends, to be held by the Wallenbergs until the end of the war.

Dulles stepped in to handle the sale of half the shares to Americans.

This was obviously impossible while keeping the Germans

in control,

but Bosch was desperate to be taken for American. After American

Bosch had been confiscated by

World War

I,

the

company

got detailed information about the United

States' extensive research into

waves.

the Alien Property Custodian during

When German Bosch

shortwave and high-frequency sound rebought the company after the stock

market crash of 1929, that information became the basis of "the lightweight

'walkie talkies'

of the

intertank and ground-air radio

German parachute

troops,

the

communication systems and the short

NANCY LISAGOR AND FRANK LIPSIUS

150

wave

with which every twelfth

sets

American

To

soldier

equipped,"

is

intelligence reported during the war.

Bosch shares but make

get around the sale of

American, Dulles devised an

seemed American without

transferring

had

company look that

power out of Germany. He had

Delaware company, Providentia,

which Dulles was the sole voting

the irrevocable trusts, Dulles

the

network of companies

intricate

the Wallenbergs put their shares in a

Ltd., of

German

trustee.

full authority to

Under

the terms of

handle or dispose of

the shares.

Murnane and Dulles thought they had evaded government

control

under the pretense of making American Bosch American. They also renegotiated the licensing arrangement with the

sum of $150,000

pany, paying a lump

German

for all royalty

parent

com-

payments "for a

period terminating with the conclusion of peace," an eerie anticipation

of American entry into the war

Donald

P. Hess,

Bosch, noted defensively 1941

,

in the

American Bosch

Company's

in 1940.

company's annual report

that

"in May,

its

"But when

present rights.

Navy Department wrote

entirely willing to

is .

.

.

However,

and

it

desired rights on Caterpillar Tractor

May

the

intention to manufacture fuel injection equipment,

ration's rights are indivisible

it

re-

modify the exclusive

as pointed out, this

Corpo-

therefore cannot itself confer the

Company."

1942, five months after the United States entered the war,

American Bosch was dian.

was signed

in July 1941, supporting the Caterpillar Tractor

sponded, "American Bosch nature of

In

it

appointed president of American

the Corporation arranged complete suspension of the agreements

for the full duration of the war. to

when

whom Murnane

finally confiscated

by the Alien Property Custo-

Lacking absolute proof of the German ownership of the company,

the investigative unit of the Alien Property Custodian contended there

was "a very strong presumption of an pattern."

It

cited the

despite a higher

overall German-controlled

Wallenberg takeover of the company's shares

American

bid,

American bidders and "the

Murnane 's discouragement

fact that in the

to potential

postwar period

(in the

absence of contrary action by the Custodian) the various agreements with

RBAG

[the

German

parent] will automatically

become

once again. Such agreements, even though suspended, of considerable potential importance."

effective

are, therefore,

LAW UNTO ITSELF

A

151

The Wallenbergs and Germans had heated discussions about who should bear the loss of the seizure by the Alien Property Custodian.

They to

initially

divided the loss one third to Wallenberg and two thirds

Robert Bosch; then the Wallenbergs insisted that the Germans

which indicated

take the total loss,

actual

that

ownership lay

in

Stuttgart.

The ownership

issue

German Bosch lawyers

was

told

still

not fully resolved. In

May

1943

in a

Swiss

Wallenberg they had deposited

German

account the amount required to buy back American Bosch.

Bosch wanted

to eliminate the high interest

was paying on

it

the shares

held by Wallenberg, an open acknowledgment that the shares were

never sold

to the

Swedes. Wallenberg agreed

to eliminate the interest

but refused to turn over the shares because, he claimed, he could not

make use of said

the funds deposited in Switzerland.

Wallenberg could surely get the money

in

The German lawyer

Switzerland since both

numerous

countries were neutral and the Wallenbergs had had

trans-

actions there.

But taking the money would have been an admission

that

Wallen-

berg had previously lied in claiming there was no further

German

interest

in

American Bosch when

Wallenberg told the Germans not that if

he could hold on to the

there

to

it

profits in

control,

.3

the

Murnane would have

ABC

first

its

production

million on an almost doubling of sales from $3

million in 1942 to $50 million in 1943.

all

On December 29,

1942, a court

Bosch patents "to American manufacturers without

secret

company

agreements with the German parent company and license

duration of the war.

A

written

time in twenty years and tripled

order in an antitrust suit against American Bosch forced the to cancel the

shares.

shares."

American Bosch increased

paid dividends for the

1943 to $1

Swedes took

worry because he "had confidence

shares.

were a new proceeding against

Under American so that

ABC

the

royalties for the

'

government document dated October

11,

1944, noted

Dulles's collaboration with the conclusion "Dulles, as attorney for

Wallenberg, and with considerable experience certainly

must have known

German owned."

that the

in the international field

American Bosch Company was

NANCY LISAGOR AND FRANK LIPSIUS

152

The

&

Justice Department's antitrust lawyers found that other Sullivan

Cromwell war

in the

many

clients

effort.

were prominent among the causes of bottlenecks

But

antitrust prosecutions of Allied

war because,

others had to await the end of the

War Henry

L. Stimson wrote to the attorney general,

must inevitably

Chemical and as Secretary of

"war production

suffer if executive or production personnel

is

required

devote any substantial amount of time to activities other than the

to

conduct of the munitions business of the respective corporations and

may

such comparatively small amount of commercial business as

still

be carried on."

The chemical company defendants signed paying a minimal $5,000

fine.

faced and lost (or signed consent decrees the

a consent decree in 1946,

Other Sullivan

& Cromwell clients who

in) antitrust actions

American Agricultural Chemical Company,

the

included

Merck Company,

which was accused of illegally dividing world drug production with the

German Merck Company, and

Sofina, a

European public

utility

with

extensive international holdings.

These

activities contrasted sharply

during

tions

the

He

war.

with Dulles 's public representa-

ostentatiously

represented

European

governments-in-exile in widely reported cases. Dulles brought the

Bank of France case on behalf of

the exiled Belgian and Polish

governments, which had had almost $300 million deposited in France for safekeeping against

structed the French

explained, to

New

'

German

government

to

invasion.

send the

Belgium and Poland

money

to

America. Dulles

'Although the Bank of France shipped most of

York,

Africa where

it

it

in-

its

own

gold

shipped the Belgian and Polish gold to French West

was

lost to

both institutions. " The Germans repatriated

the gold to Berlin after they invaded

and occupied France and

its

possessions.

Dulles asked the federal court to have the Poles and Belgians paid

back

in

French gold held

in

New

having what he never had with the

decade

—

collectible assets at

He won the suit, thanks to German loans in the previous

York.

home.

Cloaking himself in the pious raiment of a good Christian, he did not shrink from the arrogance of speaking for

all

Protestant churches

through his Commission on a Just and Durable Peace, which was

ALAWUNTOITSELF sponsored by the Federal Council of Churches.

him, supposedly traceable to a conversion

153

It

was a new

role for

when he

attended

in 1937,

a religious convocation in Oxford, England.

Dulles 's son Avery,

came

who

himself converted to Catholicism and be-

a priest, attested to his father's enduring pragmatism. Applied to

religion,

it

would allow a calculated use of piety

to hide other activities.

Dulles' s sanctimonious unlegal phrases sounded like cosmic faith healing, not the Bible:

"Let them rather draw the world unto them, knowing

that as they in truth

form part of Christ's church, then they are .

of Life whereof the leaves serve the healing of the nations "

money from John D.

Rockefeller,

nously reprint his statements. rivaling the circulation of

Jr., to

Tree

He collected

buy radio time and volumi-

He made 700,000 copies of some of them,

The

New

York Times.

Dulles had the International Nickel

Company conduct

an advertising

"A just

campaign with the slogan of

his

peace," which appeared

250 magazines and newspapers

in

that

pronouncements,

and durable in 1943.

Inco and Dulles shared the guilty secret of their collaboration, which

ended for Inco when the Nazis confiscated

The Inco

effort served its

its

was

"The ities

striking for

its

Norway.

purpose when the Ottawa Journal, desperate

for advertising during the war, endorsed the that

nickel mines in

campaign with an

editorial

self-serving piety, not unlike Dulles's

own:

great corporations of this country are meeting their responsibil-

with loyal and realistic appreciation of

stake in this

all that is at

war, and such advertising as that sponsored by International Nickel

bound

to

is

be of real service to the country."

Allen Dulles's war showed the alternative course for a Sullivan

&

Cromwell partner closely connected with high-ranking Germans but also loyal to the Allies.

He

spent a year heading the

COI

(the Office of

the Coordinator of Information) out of headquarters he rented after

evicting the existing tenants in Rockefeller Center in

New

York.

He

then went to Switzerland, in an outpost of the Office of Strategic Services (OSS), the precursor of the Central Intelligence Agency. In

Bern he found a neutral spot close

to

Germany from which he could

eavesdrop safely on the Nazis.

On

the day that the

Dulles arrived

at

Germans took over unoccupied France, Allen

the French border with Switzerland.

The Vichy

NANCY LISAGOR AND FRANK LIPSIUS

154

government had just issued an order

to detain all

them

trying to cross the border and report the 4

I

Americans and

British

Marshal Petain,

directly to

head of the French government collaborating with the Nazis. Allen

gendarme aside and made

'took the

most eloquent speech

believe,

him

to

that

the

most impassioned, and

had ever made

I

in

reported.

"Evoking shades of Lafayette and Pershing,

upon him

the importance of letting

The gendarme did not seem

me

French," he I

impressed

pass."

be listening, and Allen Dulles

to

contemplated escaping across the border. But as soon as the Gestapo agent

left his

post for lunch, the gendarme put Allen back on the train

and within minutes he entered Switzerland, "one of the to

do so

until after the liberation

Just getting in

last

Americans

of France," he boasted.

made Allen Dulles famous. "One of

Swiss journals produced the story that

I

was coming

the leading

there as a secret

and special envoy of President Franklin D. Roosevelt," he reported.

"Offhand one might have thought

would have hampered

Always

knew who was

able to put a

my

that this

unsought advertisement

work. Quite the contrary was the case."

good face on

things, he explained that

the British intelligence agent

there for the United States."

"nobody

was but everyone knew who

He claimed "that was why certain enemy countries came to

information about what was going on in the

me." When,

after the

director of the

CIA, young American

war, he became deputy director and later spies learned the precept Dulles

derived from his experience: "Never try to conceal what cannot or

need not be concealed."

The lawyers Hitler's troops in a

Bordeaux

three

in

the Paris office,

who escaped two days

marched down the Champs-Ely sees, reopened hotel.

Taking as many

months when they

files as

"left France

before

the office

they could, they stayed

on the

last

American ship

crowded with European refugees," recalled Franklin O. Canfield, an associate

who had

joined the French office only the year before.

Cromwell had departed

Paris in

1937, never to return. But his

possessions, which were kept in a room-size vault at the Chase in the Place

Vendome,

tapestries, paintings,

interested the Nazis.

Bank

They inventoried

and silverware while Cromwell kept

in

the

touch

with old friends by sending them woolly pajamas and words of

encouragement throughout the war.

ALAWUNTOITSELF Monod,

Philippe

&

a French lawyer in Sullivan

office, quit to join the

He

155

French Army on

collected French intelligence in

the

Cromwell's Paris

day war broke out

Lyons and

to Switzerland to confer with Allen Dulles

in

and

1943 made his way

Max

& Cromwell office in Paris.

lawyer from the Sullivan

in 1939.

Shoop, another

Behind the

lines,

Monod 's group collected a surfeit of information but had no way of getting it out. He persuaded Allen Dulles to give him the American code so any transmitter could pick up the messages, making the Sullivan

&

Cromwell old boy network

the link for

America

to get

information about conditions inside German-occupied France.

The war ended

1945 with Foster Dulles getting his feet wet

in

politics, as twenty-five

of the firm's lawyers

who had

left to fight in

in

the

war, including the four prewar partners, returned. Only one, Rogers

Lamont, had been

When

killed in action.

Dulles had

first

embarked on

his public career as a foreign

policy expert, he failed to impress President Roosevelt and the 1940

Republican presidential candidate, Wendell Willkie,

who

politely

returned Dulles's position paper, "Statement of an American Foreign

Policy." But Dulles did not give up and was able to ride the coattails of

Thomas Dewey,

tial

nominee

the

New York

governor and Republican presiden-

in 1944.

As foreign policy adviser and prospective secretary of state, Dulles was treated to respectful press coverage during the 1944 presidential campaign, including a long Life magazine his desk, pipe stuck in his

profile

which showed him

at

mouth, over the caption 'The world's

highest-paid lawyer, Senior Partner Dulles presides over Manhattan's

immense law at

factory, Sullivan

48 Wall St." The

article

you might think he had and

to listen to

him on

& Cromwell,

from

his

penthouse office

began with the comment "To look

just finished contact with a green

the subject of his business (he

partner in the Wall Street firm of Sullivan

only begin to guess that he can

distil the

&

at

him

persimmon; is

top senior

Cromwell) you would

poetry of action as well as a

big income out of such things as reshuffling the corporate structure of the International Nickel Politics

keep

made

Company."

Dulles's bad judgment public, even

when he

tried to

quiet. President Roosevelt, in formulating policy for the prospec-

NANCY LISAGOR AND FRANK LIPSIUS

156

tive

world body

that

became

American

the United Nations, promised

would be deployed under U.N. command. Dulles advised

troops

Dewey to reject the compromise

of sovereignty, which caused a breach

with the Allies while the war was extremist remark

Dewey used

weakened and corrupted readily subject to capture

being fought. Dulles drafted the

still

in the

campaign: "Mr. Roosevelt has so

the so-called Democratic Party that .

.

.

[by] the forces of

it

is

Communism."

Dulles also wanted to charge the Democrats with unpreparedness

because they had not anticipated Pearl Harbor. The claim might have

opened a debate over the Japanese

on the Asian

which was

still

in use

Cooler heads recognized the subject was far too

front.

sensitive to debate,

secret code,

and

was dropped.

it

In the middle of the campaign, Dulles found himself subject to a

comic chase scene dulles, there's a

that generated the

man to

see

you in the

mocking headline yoohoo, mr.

New York Post. The

cause was

a suit by a former employee of Harrison Williams's Union Electric

Company who claimed

he had been forced to take the rap (and a

that

two-year jail sentence) for the corruption scandal that was actually the

company board, gumshoe detective's

was so incensed

fault of the

including Dulles. Dulles

by the

stakeout in front of his Manhattan town

house (which produced a subpoena and the offensive front-page photo in the

was

New York Post)

filed

No

suit suit.

way

into

Besides his close

A

he wanted to sue the liberal paper.

and Dulles evaded the substance of the Union Electric

Republican berg.

that

politics

ties

to

Dewey, Dulles

inveigled his

by befriending Michigan Senator Arthur Vanden-

classic isolationist

who became

a decisive internationalist

under Dulles 's tutelage, Vandenberg collaborated with Dulles on the foreign

policy

portion

of the

When

1944 Republican platform.

President Roosevelt wanted the senator to go to the organizing meeting for the

new United

pany him

to the

The President

Nations, Vandenberg insisted that Dulles accom-

San Francisco parley

in

September 1944.

resisted, telling Secretary of State

'T won't have Foster Dulles.

He

will play

things; he will be a disruptive force.

I

it

his

Edward way; he

Stettinius,

will leak

don't like Foster Dulles.

I

won't

have him there." Vandenberg persisted, and Dulles went. But Roosevelt's reluctance tion about the

proved well founded when Dulles leaked informa-

American delegation, undermining

the agreed-upon

ALAWUNTOITSELF bipartisan protocol. According to one delegate,

157

"Whenever you had

Foster in on bipartisan policy, you had to have a Democrat with a

Democratic leak

to counterbalance the

Republican leak which Foster

would already have made; otherwise you would be cheated out of

the

next day's headlines."

The end of World War that

and leaders the

II

marked

the

first

time in thirty-five years

John Foster Dulles was not among the Americans closest

Germany. This time he was among

in

American Army swarmed over

the people Dulles

knew and had

to events

the investigated as

the occupied territory, interrogating

dealt with for all those years.

Long

armored convoys, protected by airplanes overhead, streamed across

now

Hitler's prized, but

looted gold. salt

One

otherwise deserted, autobahns, bringing back

investigator, digging behind false walls in a Stuttgart

mine, found the secret agreements between the Wallenbergs and

Robert Bosch, detailing Bosch's right to repurchase American Bosch,

which had supposedly been renounced.

The

revelation did not alter the Wallenbergs' determination to claim

American Bosch, but

it

made

the job harder for Sullivan

& Cromwell.

Dulles cleverly turned the case over to his brother, Allen,

emerged from

the

war with

who had

his reputation enhanced. Allen Dulles

negotiated Operation Sunrise, the surrender of the Nazi

had

army under

Supreme Waffen SS General Karl Wolff. The surrender prevented northern Italy from suffering a

Operation Sunrise

is

German

scorched-earth retreat; but

credited with starting the discord between the

United States and Soviet Union that resulted

in the

Cold War as

Stalin

suspected Allen Dulles of negotiating a separate peace to gain an

advantage over the Red Army. Historian Arthur M. Schlesinger, called Operation Sunrise "the episode

which provoked

Jr.,

Stalin to charge

Roosevelt with seeking a separate peace and provoked Roosevelt to

denounce the

'vile misrepresentation'

of Stalin's informants."

Operation Sunrise became public knowledge almost immediately

from an

article in

The Saturday Evening Post

in

September 1945, by

which time Allen Dulles had taken a leave of absence from Sullivan

Cromwell

to recruit

&

former Nazi spies for a new American anti-Soviet

spying unit that would be incorporated into the Central Intelligence

Agency.

In six

months he

instituted the

postwar policy

that the Soviet

NANCY LISAGOR AND FRANK LIPSIUS

158

Union, not Germany, was the enemy before returning

Cromwell

When

in

New

Dulles applied to the Wallenbergs his

strategy of claiming that his effort,

German

contacts helped the Allied

own war

suggesting to Marcus Wallenberg in February 1946, "Talk to

your brother and get from him a report with regard Goerdeler and the July 20th group along fairly rapidly in collecting

something

in the near future.

do no harm

if it

were known

on the other side of the affair,

&

York.

home Allen

he got

to Sullivan

.

[to assassinate Hitler]

my material

.

to his contacts with

What

.

I

and hope

have

that the contacts

to

mind

in

.

is

I

am moving

begin writing that

it

would

which your brother had

lines were, in instances

such as the July 20th

put to uses which benefitted the Allied cause."

Allen Dulles wrote in his 1947 book Germany's Underground,

"The German underground's most

valuable contact in Stockholm was

with the Wallenberg family, the well-known Swedish bankers." This public vindication of his client contrasted with an American govern-

ment report

in

1945 that had found that the Wallenbergs' "Enskilda

Bank has been, in the past, an implement of Axis policy, Japanese as well as German, to an extent which should eliminate it from considerations of trust."

The

fact that

Marcus Wallenberg operated

West while brother Jacob consorted with

Nazis

the

expression of neutrality," the report concluded,

in the

not an

"is

"as much as an

evidence of power with no assurance that between the two members of the family there does not exist a tacit 'playing of both ends.' In the midst of the wrangle,

Marcus Wallenberg wrote a

letter to

Foster Dulles 's personal secretary, Florence Snell, asking for her "efficient cooperation in getting

me

the desired

measurements as

quickly as possible" for him to "arrange with an English gunbuilder to build a

gun so

it

suits

Mr. Dulles perfectly. As

am

sure that he will also

I

know

that

Mr.

marksman of the highest quality, I earn that same reputation with a shotgun."

Dulles in most arts and sports

is

a

Their murky politics kept the Wallenbergs from attempting to rescue their

famous cousin, Raoul Wallenberg, who helped Jews escape from

Hungary under

the Nazis

and was arrested by the Soviet Army. In 1947

Marcus Wallenberg turned down President Harry Truman's help locate Raoul with an offhanded remark:

now."

"He

is

offer to

probably dead by

ALAWUNTOITSELF when

In 1948 to

the Alien Property Custodian

keep the proceeds of

Sullivan

owned

&

the

its

sale of

Cromwell took

announced

American Bosch

as

its

intention

enemy

property,

the agency to court, arguing that

company, not Germans. The firm

which was won by

159

New York

Swedes

failed to stop the auction,

investment bank Allen

&

Company

for

$6 million, twice the Wallenbergs' investment. The government specified

that

the

company be owned by Americans because

its

products were essential to American defense.

The Wallenbergs pursued

their suit to get the

proceeds of the sale,

a case that turned, as United States Attorney General

Tom

C. Clark

wrote to Secretary of State George C. Marshall, "for technical legal reasons, [on] the question of whether the

and honesty

in

disclosing

its

went

from

his

that

it

Ultimately Sullivan

&

An

had. John Foster Dulles gave

town house and Sullivan

to court to prevent the

faith

agreement with the Germans."

employee of the bank contended a deposition

Bank acted with good

&

Cromwell lawyers

Wallenbergs from having

to testify.

Cromwell worked out a settlement

for the

Wallenbergs to get $2.6 million of the sale price, practically reimbursing

them

$420,000

for their original investment, though they also agreed to in legal fees.

the United States

The

rest

pay

of the proceeds of the shares went to

War Claims Commission

to

pay Americans with

who had to share the money with the Wallenbergs. Janet Dulles, who knew the Swedes socially, wrote to her brother-in-law Allen Dulles, "I am glad "unusual hardships" during the war, deserving benefactors

to

have the Wallenbergs straightened out."

10

OUTSIDE MAN/INSIDE

MAN You can spend many

of your evenings uptown attending the Foreign

Relations Council and having dinners with people and talking about big affairs, but none of that gets into the ledger as revenue for the Office.

DAVID

R.

HAWKINS, SULLIVAN

& CROMWELL PARTNER

John Foster Dulles periodically ventured uptown

to polish off a bottle

of champagne over lunch with William Nelson Cromwell and give the old

man

nineties,

a perfunctory account of firm activities.

Cromwell

could not remember

The

Now

well into his

still

approved new partners, though he usually

who

they were even while he was talking to them.

firm devoted several partners' meetings to discussing funeral

arrangements for the founding father, only to see him survive a few

more the

years. But he finally died, aged ninety-four,

relief of

Rockefeller Center,

thirty-three-story office building

marked

on July

19, 1948, to

which promptly erected a new

on the

site

of his house. His death

the beginning of an era for Rockefeller Center but the

end of

NANCY LISAGOR AND FRANK LIPSIUS

162

&

More

Cromwell.

than

two dozen honorary

pallbearers included the firm's partners and

George Sullivan, the

one for Sullivan

who had

eighty-eight-year-old son of Cromwell's original partner,

A blanket of red roses covered the casket lying

joined the firm in 1882. in state in the

domed

Bartholemew's Church on Park

silence of St.

Avenue, which was steeped

in floral arrangements,

replica of the cross of the Legion of

More

Honor

in red

among them

a

and gold flowers.

than five hundred people attended the funeral.

Like an old dowager, Cromwell had spent his declining years proposing changes in his will that he ultimately never made. Even after

$18 million legacy occupied lawyers' time

his death, his

in court

because he gave money to law societies that needed to prove their eligibility for tax deductions.

Russian

War

also

The executors

Relief.

Green, and Eustace Seligman ciary

He

—

made

—John

a $300,000 bequest to

was no longer functioning. Charles G. Rodman,

who worked on

Edward

Foster Dulles,

successfully claimed that the benefithe associate

the estate, learned the valuable lesson he called "the

Rule of Construction

—

that

the

of the testator

intent

the

is

one

perceived by the executor." Green was chairman of the gifts committee for

Columbia University where Seligman 's

famous economist. They to the

shifted the

Columbia University law

father

had been a

money from Russian War which

library,

thereafter bore

Relief

Crom-

well's name.

Cromwell's

largest individual bequest

Jane Renard, his reputed mistress, ciary (of $10,000)

Permanent Blind

was Helen

War

who

Keller,

went

to his Paris secretary,

got $35,000. Another benefi-

whom Cromwell knew

from the

Relief Foundation he established during his

years in Paris.

John Foster Dulles stayed

at

the firm for only a year longer,

resigning on July 7, 1949, to accept an appointment as United States senator to

fill

the unexpired term

on the death of Robert Wagner. The

appointment was a consolation prize from

Thomas Dewey been expected

for Dulles 's not

after the

New York

becoming secretary of

Governor

state, as

had

1948 election.

Dulles had been Dewey's faithful foreign policy adviser through two unsuccessful presidential campaigns, the second of which was thought to

be a

Dewey

shoo-in until the votes were actually counted.

ALAWUNTOITSELF By

much

1948,

163

of the previous controversy, like Dulles 's support

was

forgotten. James Reston wrote in The Saturday " Because he stubbornly persists in the old-fashioned Evening Post: for

America

First,

habit of thinking before he opens his mouth,

speech] seems

[his

sensible and dependable. During office hours such pronouncements

&

from a senior partner of Sullivan

Cromwell would probably cost

Dewey

about three times what you figured, but Mr.

got

them

free,

and

he evidently was impressed."

A

full-page photo of Dulles

caption

accompanying the

'The man who may succeed

article

Secretary Marshall has a lawyer's

mind, a philosopher's outlook and a diplomat's training." Dulles in a three-piece suit grasping his just a faint hint of fat

covered

had the

own

in a patina

lapels, his

It

shows

jowls showing

of suntan. Less formal than

Wall Street lawyer, he looked more formal than the

the average

average politician, just the note to strike for his emerging political career. In fact, he scribbled his signature across the

photo and sent

it

bottom of the 1950

out as a postcard during his unsuccessful

senatorial campaign.

Both Dulles brothers were pursuing outside the law firm.

their internationalist interests

The kind of work they had done

the initiative in foreign policy had, since the war,

as lawyers taking

become

the concern

of politicians and the prerogatives of the government.

While older brother Foster worked on the American presidential campaign, Allen took a leave of absence

Communist propaganda during

the

to

work

Italian

for the

CIA

to counter

national elections.

The

headline in the Boston Globe, dulles masterminds new 'cold war' plan

under secret agents, described the country's

new

role in foreign affairs.

for

propaganda and for

The CIA gave Allen Dulles $20 million

supporting the Christian Democrats and right-wing parties, which

produced a

stirring

anti-Communist victory

Johnson called the 1948

Italian vote

post-war European elections, for Italy for a

While

it

"one of

in Italy.

Historian Paul

the

most important of the

set a pattern

of relative stability in

generation."

still

a partner at Sullivan

&

Cromwell, Allen Dulles helped

formulate postwar intelligence through the Jackson-Dulles-Corea mittee,

was

Com-

which made recommendations for the future of the CIA. He

part of the

group

that

founded Radio Free Europe as a private

NANCY LISAGOR AND FRANK LIPSIUS

164

corporation before

He was

was taken over by

it

the

government

in the 1960s.

among the competing intellimake the director of the CIA the

also instrumental in negotiating

gence factions

in the

government

to

preeminent head of American intelligence. This achievement was

by a National Security Council

ratified

Both brothers were destined

be

to

intelligence directive in 1956.

Washington, as

in

their foreign

policy for clients was overtaken by the government's foreign policy. If

they wanted to continue to promote their private agenda, they to

do

as

it

government policy, not dictated by private

now had

interests as

it

had

been before the war.

Few people who knew

Foster Dulles doubted that he aspired from an

early age to the job held

secretary of state. John F.

by

and grandfather

his uncle

— United

Thompson, an executive of the

Nickel Company, a principal client of the firm,

States

International

who had known

Dulles

for forty years, considered his lawyer "really an internationalist with legal

background,

and liked his life to

it,

who in his youth was introduced into diplomatic life, naturally to him. He enjoyed doing it. He devoted

came

it. It

and everything

that

he did was touched by

this interna-

tionalism, this connection with diplomatic affairs so that he tended to

think of things,

became

I

think, the

way

Dulles' s grandfather

a diplomat would.

.

.

.

And when

was exactly what he wanted

secretary of state, that

knew from

entree to the State Department

his

was

own

to

he

be."

experience that the best

a legal career, not the Foreign

Service. Throughout his period heading Sullivan

&

Cromwell, Dulles

took advantage of the State Department's being "a quaint place," according to George F. Kennan,

become

secretary of state.

whom

Dulles fired

when he

did

Kennan, whose Foreign Service career

whims of political maneuverers like Dulles, thought the department "embodied kindliness and generosity in the approach to all who were weaker and more dependent, which subjected

him

to the

.

constitutes,

human

it

seems

to

me, our

It

.

finest contribution to the variety

species in the world and

national ideal and genius."

.

comes

was not

closest to

of the

embodying our

the Dulles approach to foreign

policy.

This foreign policy heritage of Dulles 's maternal side potion

when combined with

made

a strong

his father's Protestant ministry to create a

uniquely self-righteous, self-confident, and self-promoting world view.

ALAWUNTOITSELF At the end of the war, he was ready and focusing

to latch his vision onto the

He

in President

war with

view

a cohesive

negotiated the peace treaty with Japan, which excused

enemy with

the former

power

as a representative of a bipartisan foreign

policy meant to bring the country out of the

of the world.

He worked

interests of the country itself.

Truman's administration

165

the

same leniency

that

he advocated for

Germany.

He used

bipartisanship to gain a foothold in government, but

he became secretary of course.

state,

when

he was ready for a more independent

The anticommunism of Joseph McCarthy gave Dulles

a

convenient means to undermine the bipartisanship which had benefited

him when he was out of power. Despite

own

his

toward the Soviets, which he expressed intimates, he used

Department Sullivan

&

anticommunism

to suit his

personal ambivalence

to his

brother and other

and reorganize the State

to gut

own demands. He was no

Cromwell, and he continued

administrator at

his disregard of details as

secretary of state.

But under the cloak of anticommunism, he the

way he had

tried to rebuild

Germany

West Germany

rebuilt

World War

after

I.

He equated

the national interest with the interests of private enterprise, using the

State

Department

to thwart Justice

Department

antitrust investigations,

particularly of the oil business (as discussed in Chapter

virulent

anticommunism

reflected a fear of losing markets for

exports, a shrinking of the realm in which operate. This, too,

came from

his

at

Sullivan

was

the culmination

of a lifetime of international work for his law firm and to

for the firm as well as for Dulles. Sullivan

& Cromwell.

practically begin with his

secretary of state years, even though the position

That he moved his base of operations

His

American business could

background

Most biographies of John Foster Dulles

13).

American

its

clients.

Washington meant changes

&

Cromwell was no longer

divided between foreign and domestic work. Securities registrations, to

which Dulles had objected so strongly, were now becoming the

backbone of the postwar Sullivan

& Cromwell

and allowed the firm to

transcend the mixed legacy of the Dulles stewardship.

Dulles' s successor, Arthur H. Dean, had actually run the firm for

most of Dulles 's tenure. The hours Arthur Dean put

in at the office

NANCY LISAGOR AND FRANK LIPSIUS

166

made him, able about

unlike his predecessor, fully knowledgeable and approach-

by not leaving his

One lawyer tried to impress Dean he went home. As Dean departed one night, he stuck

of the firm's business.

all

till

head around the door and asked, "What's the matter? Can't you get

your work done on time?"

Dean

had a pedagogic streak

also

that

became

part of firm tradition.

Before the war, partners marked up associates' work like schoolmasters,

them what they had missed and making them redo

telling

assignments. "There was no cost-containment rush," according to

William

Piel, Jr.

,

who became the

firm's primary litigator after the war.

"Training was a conscious effort and there was time to do it."

During the war, the work remained but the manpower diminished, so

Dean "speeded up

who

spent the

war

the process of producing legal product."

at the office, relieved

by

stints in the

supervised the acceleration and maintained noted,

"Never again was

it

thereafter.

there the wonderful, relaxed,

Dean,

Coast Guard, Piel sadly

ample time for

everything." Instead,

Dean spent more time with

associates outside the office.

While Dulles was senior partner, most firm events,

like the

annual

alumni cocktail party, took place en masse

at the

Dulles town house on

East Ninety-third Street in Manhattan, but

Dean

started taking lawyers

out individually to his Oyster Bay,

New

York, house. They would

have long leisurely weekend walks and ruminate about the law a philosophical appreciation of

what they were doing.

Lawyers who could not get home

for Christmas joined his family for

the holiday. After a formal Christmas dinner

next morning to to

make

to get

Dean himself

got up the

breakfast, a display of humility that never failed

impress the young associates.

The

difference between Dulles and Dean, the former an "outside

man" and

the

latter

the

firm's ultimate

"inside

man," was

that

Dulles 's philosophical streak was exposed only to the clients, not the associates. Dulles instructed each

he was general counsel that

if

new head

there

of a corporation for which

were ever a

conflict

between the

executive and the company, Dulles would have to side with the

company. He

cited the

"law of harmony" when he advised

something he could not justify on legal grounds. Sullivan

clients

on

& Cromwell

lawyers got to see the ruminative side of Dulles only as a faraway

ALAWUNTOITSELF made him

forbidding look that for

whom Dean was

The

transition

away from

Hawkins was known

was eased considerably by

Dulles' s tenure

David Hawkins, who played a

would be taken by

firm that in later years

as a

statistics

with

ruthless results.

got his start in running the

when he

role in the

a computer. In the firm,

"super abacus." He compiled

dogged determination and firm in 1921,

a cold, calculating, and distant figure

the intermediary.

the administrative talents of

He

167

back

soon

office

after his arrival at the

told Royall Victor that the stenographic pool

could be better organized. Victor assigned Hawkins to do

who was

launching pad for the young lawyer

become

to

it; it

was

the

a partner in the

short period of six years and enjoy a stellar career that lasted until

&

1964. For forty-three years he applied to Sullivan detailed statistical and financial

Cromwell

methods associated, especially

era, only with public corporations. His administrative talents

grow

the firm to

World War

after

II

beyond

the

the

in that

allowed

bounds any law firm

had ever contemplated.

He knew

everything,

broken down into detailed records kept

relentlessly year after year, year

the

compared with

year, hour by hour, on

recorded hours, caseloads, numbers of matters and cases by

subject, fees earned,

junior lawyers.

It

was

Hawkins had, but devastating

effect

and proportions put clinical

by senior, middle, and

and exact, a function of the kind of mind

Confidential

the

in

on careers when

Statistical it

was

Report also had a

circulated

among

the

management committee. His work almost automatically put Hawkins on the management

committee. His heyday working with clients was the 1930s, when he helped the public

Holding

utilities resist registration

Company Act

under the Public

Utilities

of 1935, but his clients gradually took up less

of his time as his administrative responsibilities grew.

Besides keeping partners apprised of their worth to the firm,

Hawkins took

control of recruitment and the nonlegal

months the partners received a confidential

marked

"Do

in the firm

not file."

It

discussed

new

recruits

office

and

Every

six

memorandum

listed all

by department. Associates had the dates of

the firm next to their names; partners did not.

staff.

lawyers

their entries into

Hawkins had

a definite

NANCY LISAGOR AND FRANK LIPSIUS

168

man

idea of the kind of

now

of mind

we

[the early 1960s]

person of

call a

he was looking

a probationary

—which seems My

thirty a youth.

by 21, and he should

man,

you

idea

gotten in a state

me

ridiculous to

is

a

man

—where

should be a

young man around 18 or

quit being a if

"We've

for:

19,

man

and be

between those years and 21 or 22."

will,

His judgments on individuals were quick and harsh. His semiannual

on prospective new associates were peppered with

reports

— "best analyses

around

all

man

available for

New

instant

York"; "good

good mind "somewhat negative personality." Richard M. Nixon applied for a place at Sullivan & Cromwell in 1937, when Hawkins noted his "shifty-eyed" manner in comments that were read to an annual Sullivan & Cromwell dinner during the Watergate scandal likeable Irishman of the litigation type"; "exceptionally

but has not over worked";

in the 1970s.

Hawkins had

made people

a gruff

fear

manner

that,

along with his

statistical tables,

and dislike him. To him a joke was seeing how

he could make his signature on Sullivan

different

&

Cromwell

paychecks before the banks would bounce them. Even his secretary, Phyllis as

Macomber, who enjoyed

anyone

decided, "I had been doing is

another part of

life I

she quit, she went to until

him

to

tables for so long that there

should see." She also did his tax returns. After

work

A generation later the But he

of the relentless routine. She

Dave Hawkins'

at the

public relations firm Hill

Dulles hired her to work for him

qualified

Hawkins

as easy a relationship with

in the office, finally got tired

when he was

secretary of state.

work Hawkins did would not

be a partner,

let

& Knowlton

necessarily have

alone one of the most senior partners.

started the field of legal administration

and became a consultant

throughout the profession. With his close supervision of personnel and finances, he did the in corporations

work

that

was usually assigned

but that in partnerships was

to chief executives

left

to volunteers

or

open

to

subordinate employees.

He gave

Sullivan

&

Cromwell

the advantage of being

recruiting throughout the year in contrast to firms like Davis, Polk

Ward well and only

at

Cravath, Swaine

&

Moore, where

recruiting

&

was done

Christmastime. Until recently law school students went to the

firms to get their jobs rather than wait for

Sullivan

&

Cromwell

campus

recruiters.

associates and partners had their

Numerous

first

contact

ALAWUNTOITSELF with the firm

when

169

they dared look for a job outside the normal

Christmas hiring time. Despite rebuffs elsewhere, Sullivan well had

He its

someone

for

them

& Cromwell

also gave Sullivan

He

employees.

&

Crom-

—Dave Hawkins.

to talk to

the reputation for taking care of

instituted health

insurance and

made

sure that

everyone took a designated four- week vacation because he "figured everyone worked hard so they should get a good vacation." provided a lunchroom

at the firm

Christmas party, though

Hawkins organized Sullivan

it

was

He

and made sure the secretaries had a

from

different

the lawyers'.

the firm so that "the doors never closed at

& Cromwell,"

having the phones manned twenty-four hours

made $37.50 a week just after women's hotel, including two meals

a day, seven days a week. Secretaries

World War a day on

II,

when

a

room

at a

weekdays and three a day on weekends, cost $18.95 a week.

Stenographers could work their

way up

though some

to secretary,

preferred the stenographic pool, where the pay included allowances for dinner, time and a half for overtime, and double time on after midnight. Later they

were given allowances for

Sunday and

taxis

home

after

hours. Dulles had two secretaries in an office adjoining his, but most partners' secretaries shared an office near, though not adjoining, their

bosses.

The turnover

good-guy, bad-guy they would not

elsewhere.

He

had something

in associates role.

make told

He

did not hesitate to

partner in order to give

tell

them

associates

when

a chance to look

woman to join the make headway as a woman in New

Ruth Austin Hall, the fourth

firm, that she could not expect to

York and ought

do with Hawkins's

to

to return to her

hometown, Kansas

City, to realize her

ambitions. She did.

To most

secretaries

Hawkins had a benevolent countenance com-

pared with that of Jesse Sansom,

manager. She made the secretarial office (hats

Mrs.

the

were eventually abandoned).

Macomber made

Phyliis and that

Dulles repeat her

was not

at Sullivan

no-nonsense office

stern,

wear gloves and hats

staff

First

name when he

&

to the

names were never used; first

Cromwell but

called her

at the

State

Department.

The elli,

Amalya C. SartorThe stunning, dark-

firm's Spanish and French staff interpreter,

had three associates courting her

in

1932.

NANCY LISAGOR AND FRANK LIPSIUS

170

woman

haired

eventually married associate Joseph Prendergast. But

when

they had to keep the marriage secret firm; she left their

they both were

still at

the

Washington Square apartment half an hour before he

did to prevent detection by two associates living across the square.

Prendergast quit the firm six months in the office as a respectably

Cromwell associate of the 1950s were

in different worlds;

later,

and she could then appear

married woman.

now

said, all

"In

One former

my day the

Sullivan

lawyers and

&

staff

the lawyers are chasing the para-

legals."

The a

strict,

more open,

woman

proper environment changed abruptly in the 1960s flagrant era hit Sullivan

associate because of his

&

own

Cromwell.

A

when

partner hired a

personal social designs, and

several partners divorced their wives to marry paralegals. But such

behavior was not countenanced under Dave Hawkins's

strict

control of

the staff in the long period that straddled the eras of Royall Victor,

John Foster Dulles, and Arthur Dean.

It

was a time

in

which Sullivan

&

Cromwell had no

rivals in

maximum amount of work out of associates. One former associate, who ultimately became a lawyer in Washington, said with admiration, "One thing about Sullivan and Cromwell is that they knew how to drive the young lawyers and make applying a system that got a

money

off of [sic] them.

Not everybody can do

they have," which Hawkins

of the firm.

made

that. It's a skill that

sure functioned

whoever was head

PART

III

THE LAWMAKERS

11

THE PROFITS OF BLAME The expense of preparing

the

materially to the cost of raising

The modern Sullivan

&

registration

money.

statement

arthur

h.

will

add

dean

Cromwell was founded on

a hot Saturday

afternoon in the early spring of 1933. Arthur Dean, a thirty-five-yearold partner,

was

an airless room in a modest Georgetown

sitting in

house with members of President Roosevelt's Brain Trust to draft the Securities Act of

1933.

As previously

Washington with John Foster Dulles and

its

stayed.

restrictions

on business.

to

noted,

Dean had gone

When

Dulles

left

in

William Nelson Cromwell had chosen him

Dulles because the younger securities system.

to

argue against the proposed act

man had much

a huff, to

Dean

accompany

less invested in the existing

Dulles could not admit that the activities he had

supported and promoted in the 1920s should be regulated.

NANCY LISAGOR AND FRANK LIPSIUS

174

Dean, who had been made partner

1930, projected the image of

in

a reasonable adversary with advice that could

He

past the

"A

admitted,

the act workable.

fair-minded man, cognizant of the revelations in the

few years, [cannot] say the Securities Act

same time

make

unnecessary." But

is

at

the act, he said, presented practical problems, in fact a

host of practical problems that were "so complex and difficult to

understand that the commonplace transactions of business and the

marketplace could not be carried on."

Dean had not come

like Dulles, as the senior

major law firm, prepared

in the country's

Above

opposition.

Washington,

to

Dean advocated

all,

to lecture

lawyer

and browbeat the

conciliation.

The

act should

not perpetuate a climate hostile to business, since the country was

already suffering from a lack of confidence and investment in the stock

markets.

He

said that the

was "seriously

when

it

is

sorely needed. "

by matching penalties to erode

new

act,

even before

passage by Congress,

its

interfering with the flow of capital to industry at a time

The

act

had the chance

to restore confidence

to offenses, but in its present

form

even further the public's and even the bankers'

He

future of capitalism.

claimed,

impending maturities are finding

it

it

threatened

interest in the

"Officials of corporations with

difficult to get

commitments, and those seeking new

bankers to undertake

capital

are

by the

baffled

complexities of the Act."

Dean was

the age of the

proteges of Harvard

Washington

Professor Felix Frankfurter

to put President Roosevelt's

Washington

for a single

The front-desk

sweeping

P.

J.

weekend

Morgan,

Jr.,

who was

who went

legislative

him

a

to

program

thirty-four,

to write the Securities

clerk at the Carleton Hotel gave

dog boys,"

the "hot

James Landis, a Harvard teacher aged

into words.

the suite of

Law

men around him,

went

to

Act of 1933.

room just under

testifying before the relentless

Ferdinand Pecora, counsel to the Senate Banking and Currency

Committee, which was investigating bankers' excesses. Landis was

amused

to note that while

Morgan was

testifying that despite his multimillion-dollar

had arranged, quite

legally, to

Morgan's testimony to

be prepared

Cambridge

he was reforming the securities industry,

in

income, he

evade taxes for the previous three years.

lasted weeks, but the securities legislation

one weekend because Landis had a class

the following

Monday morning. He was convinced

had in

the bill

ALAWUNTOITSELF could be thrashed out in two days, and present

to

it

Congress forced him

to

it

175

was (though

the need to

postpone his return to Harvard by

a day).

Landis worked with Benjamin Cohen, thirty-nine, an employee of

Works Administration and another Harvard protege of Frankfurter's. The third member of the group, Thomas Corcoran, was the Public

Later famous

only thirty-three. lobbyist, he intrigue.

had a quick

He was

Irish smile

New

a key

for his

a

as

talents

Washington

and a nose for backroom

Deal legislative draftsman, said

political

to run the

"fourth branch" of government out of the Georgetown town house he shared with

Ben Cohen.

The young men had

Dean got showing

to it

written the Securities Act by the time Dulles and

Sam Rayburn

Washington, and though

to representatives of

Trust adviser

Raymond Moley

Wall

strongly resisted

Street, Roosevelt's close Brain

insisted.

Dulles 's ill-informed and

emotional attack confirmed Rayburn 's doubts, but Dean showed an entirely different side of the opposition.

He was

reasonable, thoughtful,

and modest. Short, inelegant, and informal, he had the face of a bulldog and the manner of a country farmer, peppering insightful and detailed analysis with

went too

far,

homespun aphorisms. When

he nudged them back

down

hardly necessary to burn

He

in line

his adversaries

comment

with the

the house to exterminate the

k

Tt seems

vermin/'

admitted that "issuing corporations and their lawyers have

attempted to

make

the registration requirements look ridiculous." But

he just wanted the drafters to understand the challenges he as a

"One who

corporate lawyer faced.

has never prepared a registration

company cannot

statement for a large

realize the

enormous amount of

time, energy and effort that goes into such a statement," he contended.

He came

with a long

list

of items that seemed to

make

the legislation

unworkable.

The group broke

for lunch

and then reconvened

house," Corcoran and Cohen's Georgetown home

at the "little

that

red

had become an

information and networking center frequented by journalists, business-

men, and government

officials.

Dean spent

Corcoran, and Landis, endlessly picking

the

day with Cohen,

at details.

Dean deftly couched specific advice in generalities to describe what was wrong with the highly detailed registration requirements:

NANCY LISAGOR AND FRANK LIPSIUS

176

•

"Undue emphasis on

may

the historical aspect of a situation

serve to

distort the present situation." •

"Frequently the information most

difficult to obtain is

of the least

value." •

"Highly pertinent and important

facts

may be

buried in a mass of

irrelevant detail."

His listeners responded. They confined their law to a more orderly and regulated environment for issuing stocks and bonds to the public.

Dean

guided the drafters away from passing on the merits of investments and confined them to the truthfulness of the presentation to the public, as set

preamble

forth in the

to the act:

"to provide

full

and

fair disclosure

the character of securities sold in interstate and foreign

of

commerce, and

through the mails, and to prevent frauds in the sale thereof."

Buried

in the bill, the twenty-ninth

ments for a

registration,

was a

of thirty-two scheduled require-

short clause

demanding "a copy of

the

opinion or opinions of counsel in respect to the legality of the issue."

The

future of Sullivan

profession

&

was embodied

Cromwell and in this

the

whole Wall

Street legal

one phrase.

Despite Dean's advice, the Securities Act as passed on

May

27,

1933, did not dispel the harsh climate for investment. Washington

assumed Wall

was purposely holding back new

Street

refusing to take the responsibility ascribed by the

blamed lawyers.

the banks;

The

truth,

new

issues

law.

and

Some

some, including Felix Frankfurter, blamed the however, was that the environment

in

1933 for

investment was growing worse. So was the economy. Other Sullivan

& Cromwell lawyers took part in criticizing the act. a contemporary particularly

bothered by one provision in the law:

responsibility for cies.

He

Eustace Seligman,

of Dulles' s with a penchant for analogies,

all

the

was

bankers'

the registration statement's faults and inaccura-

vigorously argued to limit responsibility to what could be

proved as their

man's having

fault.

his car

He

considered the provision comparable to a

demolished by a

tree

and getting the whole car

replaced because the dealer claimed the windshield was shatterproof. "It

is

a material misrepresentation," Seligman noted in an article in

Atlantic Monthly, which

was quoted

in

The

New

York Times, "and so

LAW UNTO ITSELF

A

new Truth

under the

amount

I

Automobiles Act,

in

can get back the whole

I

paid for the car."

Dean was Securities

called to

Washington

to confer in the drafting of the

Exchange Act of 1934, which regulated

and put modifying amendments into the 1933

new

of the

177

act

was a reduction

in

act.

the stock exchanges

Among the provisions

bankers' responsibility from the whole

of an issue to their proportionate share, as Seligman had advocated.

Dean took

particular pride in instituting a voluntary self-regulating

system for the over-the-counter market to be supervised by the National Association of Securities Dealers. The act also sanctioned combined dealers and brokers, as well. This

who could bring stocks to the market and trade them

was a major

victory for Wall Street, which had been

soundly criticized for the high-pressure tactics of the 1920s, when banks

promoted new stocks and bonds through extensive Twenty-five years broker-dealers,

Dean claimed

later,

carried

out

through the

that

sales networks.

"self-regulation by

medium

of the

National

Association of Securities Dealers, has been a conspicuous success."

But twenty-five years

after that, these provisions

the scandals of the mid-1980s,

when

became

the basis of

arbitrageurs took insider infor-

mation from their stock-issuing colleagues for insider trading. Prominent

among

Commission and

officials

those accused of offenses by the Securities and Exchange in the

1980s were one Sullivan

of Sullivan

&

Cromwell

&

clients

Cromwell employee

Goldman, Sachs

&

Company and Kidder Peabody. Dean had obviously convinced Washington Street

was hurting

that

economy. Besides

the national

punishing Wall the

amendments

new

limiting the liability of each underwriter to his portion of a

issue,

he got the bank's responsibility reduced from that of a "person

occupying a fiduciary relationship"

management of

Dean helped

his

own

to that of a

"prudent

man

in the

property."

the banking industry in tough but informal negotiating

sessions he conducted over months of

Author Martin Mayer noted

in

his

commuting

to

Washington.

thorough study The Lawyers,

''Probably the greatest compliment a lawyer can receive from his profession (a compliment never publicized)

major law"; but Dean managed

work through two

articles

to get

is

an assignment to draft a

tremendous mileage out of the

he wrote for Fortune about the

new

law.

NANCY LISAGOR AND FRANK LIPSIUS

178

Billed as

"one of the foremost experts on

York," Dean and Sullivan

&

securities legislation in

Cromwell were prominently noted

New

in the

each of which was given more than a dozen pages

articles' headlines,

in the prestigious business publication.

The

first article, in

new warning "What

August 1933, was a dense, almost impenetrable

The magazine

analysis of the

legislation.

the

here follows

not easy reading. Those

It is

is

who

editors prefaced

A but

a stern and technical legal analysis.

by defining terms major points got

they would an

as

made

it

easier going,

proved as off-putting as Dean's prose, which started

forty items

like

lost.

"through the mails" so extensively

Dean's

whose elegant

Frankfurter,

it

Mass Energy Equation."

half-page outline of the article should have

its

with

are not concerned with the problems

presented by the Act are advised to avoid explanation of the

it

article

style,

that the

was accompanied by one by Felix

with sweeping historical references

and penetrating analysis, made Dean sound pretentious and evasive. Frankfurter infused his prose with pithy statements like "Legislation not anticipation.

It is

is

response." After putting the securities acts into

perspective, Frankfurter focused on their logic with the contention

"Many public.

practices safely pursued in private lose their justification in

Thus

selves as

social standards

new

newly defined gradually establish them-

business habits."

Dean's public writing career did not encouraged by John Foster Dulles, whose

by

articles that

Cromwell.

arise

by accident.

and develop assistants so I

that

I

at

&

him

to "train

it

was

the

spirit, if

not the

modus operandi

Cromwell.

Dean never succeeded again did with his

&

could to establish the firm's tax reputation." Though such

of American Bar Association canons,

Sullivan

Sullivan

could find time to write, lecture and do

an aggressive effort to get publicity went against the letter,

at

Dulles appointed Norris Darrell as head of the firm's

tax department, Darrell recalled, the senior partner told

whatever

was

own career had been boosted

he started writing to impress his superiors

When

It

first efforts

in reaching

an audience as large as he

about the securities acts in Fortune. Subsequent

pieces appeared in law journals.

He

also wrote a biography of William

Nelson Cromwell, which was privately printed and for twenty years given to

new

associates at the firm.

ALAWUNTOITSELF Dulles always wrote his

he

that

filled

own

articles

179

on long yellow

method, as explained by Lawrence McQuade, president of W. R. Grace

&

as a Sullivan in

and say,

He'd

tell

to add,

'I

me

& Company,

Cromwell

want

fix

later a senior vice-

ghostwrote Dean's articles

associate in the 1950s.

to write about

Japan and say

and send

details. I'd write a draft

and I'd

who

up the syntax. The

legal notepads

Dean had another

with doodles along the margins.

it

call

and

this, this,

me

this.'

He'd mark things

in.

draft

first

"He would

was always

the best

because you say what you think. Every word after that must be negotiated with

Dean." McQuade did not

were his rather than Dean's. opinions.

was

role

The

ideas were his and so

it

was

their

McQuade 's

his article."

as the "architect of the piece."

The new lawyers

think that meant the articles

"Senior partners are hired for

much

to write about. Dulles,

with the law and

its

to write for

&

Cromwell

who would have

nothing to do

"The

Securities Act

enactment, found a subject

and Foreign Lending"

was meant

gave the Sullivan

legislation

securities

Foreign

in

Affairs.

While the

to justify his previous foreign lending policies,

confirmed their

folly.

tration certificate"

He complained about

its

article

illogic

the "complicated regis-

and the "difficulty of qualifying the transaction

under the Securities Act" while asserting,

in his

own

feeble defense,

foreign "defaults are not normally attributable to a debtor's insolvency

but rather to a national shortage of foreign exchange." Dulles's continual self-justification indicates

though no improvement their

work on

Dean

his articles, Dulles

as

his

editors.

wrote his

own and

print

are inclined to

used his

Dulles wisely followed Allen's

suggestion to remove the third sentence of the piece:

we

which

debts, except in a foreign currency

an international standard of value. Where Dean edited

that provides

brother and

inkling of guilt,

in his reasoning, since countries,

own money, can always pay

associates'

some

swing from one extreme

"As

a people

to another with a volatility

we

which

prefer to ascribe to the southern races." Dean's advice corrected

Dulles's imprecise understanding of the act and

Seligman contributed

its

impact. Eustace

to the securities act debate with

an article that

began "Is the fundamental purpose of the Securities Act sound? The

answer

is

clearly 'yes,' " a proposition Dulles never accepted.

NANCY LISAGOR AND FRANK

180

Dean was not

was worth, both

it

could be done by lowly associates behalf of clients Arthur

Dean

with the issue and sale of securities

was boring,

it

handsome

at

ready to milk the

time and authority

in the

lawyers to exact from clients. Even better,

On

He was

as shortsighted as Dulles.

legislation for all

LIPSIUS

gave

it

work

that

rates of pay.

'The work

noted,

rote

in

connection

increased by the act fivefold and

is

Though it sounded like a bargain that five times only twice as much, that expense to the corporations

the expense twofold."

the

work

went

cost

that

and investment bankers. The

directly into the pockets of lawyers

registration questionnaire,

which was only 6 pages,

were often 140 pages, benefiting the

output, fully

and best-organized

largest

young associates

firms that could assign teams of

Moreover, few

elicited responses

to

do the work.

complained publicly about the lawyers' hours or

clients

however excessive they were,

for fear of appearing less than

compliant with the requirements of the

acts.

After the acts were instituted William Curtis Pierce, the son of

Henry

partner

Cromwell's

Hill

Pierce

and the grandson of William Curtis,

partner after Sullivan's death (in the only three-

first

generation family in the firm), spent nine months in Chicago working

on a refinancing issue for securities acts

"new and

client

terrifying.

First

Boston.

The forms

be

to

Pierce found the filled

vast quantities of even less relevant detail than are

"Back

in those

&

Cromwell on Dean's retirement

1972, "every registration statement was a into

now required." who became

days," recalled William Ward Foshay,

the senior partner of Sullivan

you ran

out required

first

time. Every question

had never been answered. The amount of midnight

monumental, you never got home for dinner. lawyers today; registration statements

now

It's

in

oil

was

too bad for the young

are just updating."

From

then on, the general practice group, which handles this work, has

employed half

The

the lawyers in the firm. acts

securities

own

held authority jointly with the states'

blue-sky laws against misrepresentation in the sale of securities, forcing a Sullivan

&

states as well as the

demands of the SEC.

that time

Over

onward

first

the years the

Cromwell lawyer

to

check the laws of

the routinization of securities work,

the

New lawyers in the firm from

worked on blue-sky and

work became more

all

securities registrations.

routine and

what the firm

more

lucrative.

lost in

With

complexity

it

Algernon Sydney Sullivan (left) and William Nelson Cromwell in 1879 at the founding of the firm. Its office was on the fourth floor of the Drexel Building, J. P. Morgan's headquarters at Broad and Wall streets. Cromwell's first partners after Sullivan's death in 1887 were (from left) William J. Curtis, Alfred Jaretzki, Sr., and Royall Victor, all of whom served terms as managing partner.

LE RETOURanFOTER *«ri»

:B"*

Arroodissemeet)

Don William Nelson Cromwell

100.000 fr, POUR LA DENTEIXE hU

0UV8ISMS DENTELUEMS I

After

World War

I,

Cromwell made considerable donations

in

DO

OOO

France, including

(from left) the memorial to the Lafayette Escadrille, a poster announcing a lace-making prize, and a lace-making school in Bailleul, France, with Cromwell's bust in the

overgrown courtyard.

V"*.

4*

The 1914 Sullivan

& Cromwell

Society dinner

in

Cromwell's house. Seated

left

surrounding a portrait of Sullivan are John Foster Dulles, George H. Sullivan, Edward H. Green, William J. Curtis, William Nelson Cromwell.

to right

Waddill Catchings, Hjalmar Boyesen, Eustace Seligman, Ralph Royall, Reuben B. Crispell, Alfred Jaretzki, Sr., William F. Corliss, Francis D. Pollak. Standing left to right are Ralph L. Collett, Donald D. Dodge, Royall Victor. Roger Farnham, Robert McC. Marsh, Edward B. Hill. Emery H. Sykes. Clarke M. Rosencrantz, Max Shoop, and Albert S. Ridlev.

jBg^CAFLTtRli^^^Bi

Cromwell Cromwell's houses at 10 and 12 West Forty-ninth Street. New York City. He owned the one on the left and rented the one on the right from Columbia University.

returns to

New York

in

1925, after dedicating the Legion o\~

Honor Museum

which he endowed.

in Paris.

France,

SI 0,000,000

Krupp, Ltd.

Fried.

FRIED KRUPP AK.TIE*GE=E1LSCHAFT>

Five-Year Mercliandise Secured Gold Dollar Notes To be dJU'J

D.'i'fmh.'i

Dcvcmbcr

15.

15.

1921

for the transfer to a Trustee, at These? Notes will be issued under an Indenture which will provide at all timet a value at •ecunty for the Notes, of m.-rch.ind.sc ..nd r,w material in salable form having of the amount of the outstanding Notet. cott or market, whichever is lower, equal to at least 150 .

Agreement of August 9, 1 924 are advised by our counsel that the Treaty of Versailles and the London between the German Government a.iJ the Keparation Com.nission providing for carrying into effect for reparation upon propthe Experts' Plan 'Dawes Plan' do not .mpo>e any charge or lien Note», and do not restrict these tecunly tor erty of the character agreed to be provided as the right of the Company directly to acquire the foreign exchange necessary to meet tU external obligations evidenced by these Note*.

We

& Co

Sachs

Goldrr

.

,

Fiscal Agents for the

Loan

Description of Notes Principal and interest will be payable ot the

standard of weight and fineness.

New

The Company

below 1% per annum, and that net payments by m of any German taxes, present or future, wh-ch *hole. eicept foe unking The Notes may be redeemed only I

i

The Notes

will

The Company

will

covenant to

Sullivan

&

the

private loan under the

Krupp

for the

works in 1924. John Foster Dulles

Downey Winter

interest or called for

redemption at 103 and accrued interest.

(left)

steel

walks

Berlin alongside Sullivan

Cromwell

and accrued

1

I

Cromwell approves

Dawes Plan

in

>

retire $7jv

to 1928. inclusive. Notes to be purchased at not

first

agreement with the National Bank of Commerce in New York, defining Drtsdner Dank. Germany, as Trustee of Pledged Assets. al amount of Notes on or before December 15th In each of the years 1925

be issued pursu.int to th
% in weight of the Since 1919. the Company has been e iron and steel output of the concern. engaged kfl the production of mduitnal aitic ,h as. among many other things, rail*, locomotive* and rolling stock, forging motor* and motor truck*, iirurtni.d iteel. agricultural machinery and implements. Diesel engines and cash registers. The Company's business hoi been thoro i^My Adjusted to a peace-time basis. With the return of stable condition* in Germany and improving business conditions throughout the worl.i. Uie Company looks forward to a renewed penod of prosperity. did not rtpresent lively

and

steel castings,

the

Company pay

Relation to "Dawes Plan" The

obligation* of the

Company

(' Dawes Plan") will take the form of a sum which has not yet been definitely No payment whatever is required for the

with respect tn the payment of reparation

annually an amount not eiceed>ng

(,">

upon

a capital

August

For the second year the rate tuation of pn nopal As there is no provision 31. 192 i

.-.

|jj*»:

far

the third year. SfJ. For the fuurth year,

accelerating the

foe

matunty

that