The number of lawyers with Italian surnames didn’t get much larger over the next decade. Even as late as the 1930s, Italian American lawyers still numbered in the hundreds in New York, the U.S. city with the largest Italian population. So it was faint praise indeed when, in early 1933, a few weeks after his trip to Wall Street, Time would call Pecora the “most brilliant lawyer of Italian extraction in the U.S.” Pecora’s emergence, first on the metropolitan stage as a prosecutor and now on the national stage in the Wall Street investigation, made him a pioneer. He wasn’t the first Italian American lawyer, but he was the most visible, and he practiced his craft on a pinnacle that no Italian American lawyer had yet attained. Thanks to a phone call from a South Dakota senator who really had no business chairing the Banking and Currency Committee, Pecora was back on Wall Street, just down the block from where his legal career began.13
The Greek Revival building at 55 Wall Street radiated money and power with its imposing two-tiered façade of columns, each carved out of a single block of Quincy granite. Successively the home of the New York Merchants’ Exchange, the New York Stock Exchange, and the Custom House, the building now housed City Bank’s main branch office. Pecora crossed the immense banking room, his heels reverberating off the gray marble floor. The lawyer didn’t walk so much as march—his head and shoulders back and his arms swinging confidently at his sides. He strode under the soaring coffered ceiling and the central, Pantheon-inspired dome, past the tellers in their bronze cages, the clattering typewriters, the secretaries taking dictation, the clerks checking the ticker tape, and made his way to the offices of the bank’s primary outside law firm, Shearman & Sterling.14
Founded in 1873, the law firm was one of the most prestigious and largest in the city—the polar opposite of Hands’s tiny practice and precisely the kind of firm that would never dream of hiring an immigrant lawyer from a night law school. Like the handful of other large firms that had flourished over the previous sixty years, Shearman specialized in corporate work. It had prospered representing Jay Gould, Henry Ford, and the Rockefeller family. James Stillman, the former chairman and president of City Bank, retained his personal lawyer, John Sterling, for the bank in the 1890s. Sterling quickly became Stillman’s most important adviser and, although the lawyer had died fifteen years earlier, at the time of Pecora’s investigation the bank remained Shearman’s single largest and most important client.15
As soon as Pecora sat down in Cary’s office, the investigator explained that he wanted to review the minute books for all board meetings for both the bank and its securities affiliate starting in October 1929 and going back five years. “There are quite a number of minute books you’d have to examine,” Cary replied dryly. Pecora was unconcerned: “If you’ll kindly make them available to me, I’ll proceed to do it.” Pecora stared in shocked silence when a few minutes later Cary’s assistants hauled in stacks of large books that stood “about a yard from the floor.” Pecora was “appalled by the magnitude” of information he had to review in just a few short days.16
Cary led Pecora to Shearman’s spacious library, where he could review the books, and then Cary made what Pecora considered a puzzling request—that only Pecora review them. Perhaps Cary’s goal was to make it more difficult to get through the material before the upcoming hearing. Cary, after all, knew better than almost anyone what Pecora would find there. Of course, he said none of that, but instead aimed right at the investigator’s vanity: “Well, Mr. Pecora, we know about you. You’re a figure in the public life of this community, from the district attorney’s office, and so forth, and you can well appreciate the confidential nature of these books. We wouldn’t want to have any eyes read them but those of persons whom we know something about.”
The rationale was more than a little odd. After all, Pecora’s assistant counsel, David Saperstein, and a “corps of accountants” had just that morning hauled a huge Photostat machine to the bank’s office on Exchange Place and were busy copying and reviewing other City Bank documents. Pecora and his staff were there to gather evidence for a public hearing to be held in less than two weeks in the Senate. A good part of the country was about to hear precisely what was in those books, and the committee had subpoenaed them, which meant that the bank would have to bring them to the hearing. No, it didn’t make much sense, but Pecora, perhaps realizing that with his staff immersed in the banks’ other documents there was no one else to read them anyway, acceded to Cary’s request.17
Pecora read all day, poring through the minute books for the bank and its securities affiliate, the summary of their activities during those boom years. They “were a mine of information,” he later recalled. At six o’clock, when the office was scheduled to close, Pecora asked politely if he could remain. He was sorry to put any of Cary’s employees to any inconvenience but he had very little time to do his work, he explained. Cary agreed, and Pecora remained at that table reviewing City Bank’s minute books until about one in the morning.18
He was back at Shearman the next morning and sat at the library table until well past midnight again. Still worried about the press of time, Pecora did not try to take notes on everything he learned. Instead, he tried to make a “quick selection of items” about which he wanted to question City Bank officers. As Pecora sat taking notes, Cary would occasionally wander back into the room and hover in the area. Pecora continued to scribble on his pad and Cary would peer over, clearly trying to see what had caught the investigator’s attention. Every once in a while, Cary would edge closer, until Pecora worried that he might see his notes. “So on those occasions I professed to be a little bit weary, and I closed the book and relaxed for a few minutes. And he would walk away.”
Pecora spent a third day with the minute books before leaving Saperstein and the accountants to comb through the bank’s other records. He had to get back to Washington to conduct the Insull hearings. Pecora knew that whatever he and the other investigators found in City Bank’s documents would constitute the bulk of what Pecora would be able to present in Washington. “I had no volunteers to give me information,” he later complained, although he did look for some.
Two years earlier, a former City Bank securities salesman named Julian Sherrod had written Scapegoats, a tell-all book about the company. It was a 1930s version of Michael Lewis’s Liar’s Poker, but it was far too general to be of any real help to Pecora in putting together a cross-examination. Pecora wired Sherrod and asked him to come to Washington, but Sherrod refused—the National City Company had laid him off a few years earlier and, in the midst of 25 percent unemployment, he had finally landed a job in Houston. He wasn’t about to leave it to help with the investigation. Pecora also tried to enlist a New York University finance professor to help in the effort. NYU, however, refused to make up the difference between the professor’s normal salary and what the committee could offer him. It wasn’t the money they objected to; NYU wanted nothing to do with the dangerous game that Norbeck and Pecora were playing. The deans there were unwilling “to be a party to any investigation that might result in the receivership of any company as important as the one in mind, under present economic conditions.” The economy was sliding toward the cliff. Many people believed that revelations of pervasive wrongdoing at City Bank might just push it over the edge.19
The long hours in Shearman’s library had another benefit for Pecora—they allowed him to maintain some distance from the rapidly deteriorating situation in Washington. When Pecora first went to Shearman’s offices, Norbeck confidently announced to the press that the committee “has now been given full access” to City Bank’s records “so our investigators are getting at the important facts.” He projected the image of an investigation moving forward surely and swiftly, but it didn’t last the day.
That afternoon, David Olson, a committee accountant, abruptly and noisily resigned, charging the senators with trying to cover up Wall Street misdeeds. The previous July, Norbeck had hired Olson, a former Price Waterhouse auditor, to investigate cer
tain income tax matters, and he had proved to be troublesome from the start. Olson focused mostly on making himself indispensable and trying to profit off whatever he uncovered. “Olson’s attitude,” Norbeck’s staffer James Stewart wrote the senator, “is still the same as before, namely he wants to handle the case himself and is trying to keep himself in a position so that no one else can present it to the committee.” Stewart was even forced to subpoena Olson when he refused the committee’s request to turn over documents from his investigation.20
While Olson was a major headache, what he claimed to have uncovered was potentially a huge political scandal for the Republican Party. According to Olson, the ambassador to Great Britain and former Treasury secretary Andrew Mellon, the current Treasury secretary Ogden Mills, and other government officials had hatched a scheme that permitted Gulf Oil (which was run by Mellon’s nephew) and various other companies to underpay their taxes by $220 million. Norbeck now had an enormous dilemma. Olson’s allegations went well beyond the scope of the committee’s authority to investigate Wall Street, but Mellon was one of the wealthiest men in the country and a major contributor to the Republican Party. If Norbeck didn’t pursue Olson’s claims, it would look like a cover-up. To make matters worse, it was not clear that Norbeck could trust Olson, who so far had proved to be a sloppy and unreliable investigator. After reviewing Olson’s work, Stewart concluded that it was impossible to substantiate Olson’s sensational claims. The documentation was “incomplete” and the investigation unfinished. “Whether the case represents an evasion, an avoidance, or whether there is no basis for the charge,” Stewart wrote the senator, “I am not prepared to say.” Eventually, when word of Olson’s accusations began to leak out, Norbeck convened the committee to hear the accountant’s evidence, and they ultimately determined not to pursue the matter.21
Olson promptly quit, accusing the committee of evasion and ineptitude. The committee’s inquiry, he claimed, was a “whitewash” designed to uphold Wall Street practices that he considered blameworthy. “I have been forced to conform,” he angrily told reporters, “to a standard of incompetence and procrastination which is entirely new in my experience and from which no definite result of any merit can possibly be expected.”22
Norbeck accepted Olson’s resignation and fired right back. He had “hoped that [Olson’s] services would be very useful to the committee,” but “these hopes have not been realized. Mr. Olson’s tendency to exaggerate and his inaccuracy as to facts have largely offset the value of his other services.” Norbeck assured reporters that the “committee has taken the tax matter seriously” and his assessment of Olson eventually proved correct. Olson filed his own whistle-blower suits against Mellon—it turned out that he made a tidy living filing such claims—and he stood to recover as much as 10 percent of any taxes paid in those actions. The lawsuits were promptly dismissed as baseless.23
The same day as Olson’s angry outburst, a group calling itself the New York Stock Exchange Reform Committee demanded that the entire Senate investigate Norbeck’s conduct of the stock exchange probe. Reportedly an arm of the Manhattan Board of Commerce, the group charged in a letter sent to every member of the Senate that Norbeck’s committee “has completely collapsed and is and has been doing nothing more than practicing a deception upon the people of the United States.” In what was clearly a jab at Pecora, the report lambasted the committee for refusing to employ attorneys who were skilled in financial matters. The committee was “sitting on the lid,” the report charged, and wanted only “to satisfy the public with a few headlines and with as much lethargy as the public will tolerate.” The Banking and Currency Committee, the report concluded, should “be relieved” of its investigatory efforts until after the Roosevelt administration took office.24
It was a scathing denunciation. There was only one problem—no one had ever heard of the New York Stock Exchange Reform Committee. It seemed clear enough that the group was not a front for the NYSE, but no one seemed to know precisely who they were. “I don’t know whether those who claim to be reformers are actually reformers,” Norbeck told the reporters when asked about these charges, “but I am suspicious because so many things have been thrown in our way lately.” He was right to be suspicious. The man behind the organization was a Bronx real estate developer named Logan Billingsley, brother of the Stork Club owner Sherman Billingsley. Logan Billingsley was a former bootlegger with a host of arrests and convictions who had now remade himself as a respectable Bronx businessman. Billingsley organized the Manhattan Board of Commerce in 1930, listing as members a score of prominent New Yorkers. The Better Business Bureau later became suspicious of those claims, and with just a few phone calls found out that most of the influential people the board had named had never even heard of it. When the Better Business Bureau discovered Billingsley’s criminal record, it labeled the Manhattan Board of Commerce a fraud.25
No one in Washington seemed to know any of this, but rumors were flying that the report was really the handiwork of Samuel Untermyer, the wizened securities reformer who had turned down Norbeck’s offer of the counsel job but who was still gunning to run the investigation once Roosevelt came into office. Although Untermyer told Norbeck that he had nothing to do with the Reform Committee, the coincidence was remarkable. The report advocated a plan that suited Untermyer’s ambitions perfectly—an immediate cessation of the hearings until Roosevelt came into office.
Untermyer was also sure to give Pecora rather halting praise, a tactic he frequently employed when another attorney dared step on his investigatory preserve. He told Norbeck, “I am an old friend of Mr. Pecora, about whose integrity of purpose in anything he undertakes there can be no question.” In other words, Pecora was well-meaning, but couldn’t get the job done. In a letter to a member of Roosevelt’s Brain Trust, Untermyer was a good deal more explicit in his criticism of his “old friend.” Writing near the end of the City Bank hearings, Untermyer dismissed the significance of what Pecora accomplished. “The mere exposure of Wall Street’s sins would produce sensational headlines but would serve no useful purpose in laying the basis for constructive reform,” he said. “Pecora unfortunately understands absolutely nothing about intricate exchange machinery and could not lay [a] foundation.”26
In hindsight, it is easy to see that the charges lodged against the Wall Street investigation were frivolous, but that was not how it seemed at the time. With the Olson and Reform Committee accusations coming on the heels of Irving Ben Cooper’s hasty resignation as counsel, it was beginning to look as if the committee really didn’t have any intention of conducting a meaningful investigation. One political cartoonist accused Norbeck of arming his investigators with only a tack hammer to attack Wall Street’s impregnable fortress.27
That was the way the public saw things as well. Letters rushed into Norbeck’s offices, accusing him of everything from mishandling the investigation to outright corruption. One writer informed Norbeck that his committee was “smitten, stricken and afflicted with incompetence and the dry rot of political imbecility.” He charged the committee with “official malfeasance, with a conspiracy to cover up public criminality on the part of men within the jurisdiction of Congress.” James Nue of Akron, Ohio, was sure he saw a conspiracy. “From the time you started your investigation of The New York Stock market [I] have been very much interested in how far you would go before some of the big ‘fellows’ would stop you, it would be interesting to know just what was done to silence you.”28
Editorial writers and columnists around the country were a bit less strident, but no less critical. As they saw it, despite all the time and expense, the investigation had, in the end, not amounted to very much. Mostly, they blamed Norbeck, who had turned out to be a “far more cautious crusader than might be inferred from his belligerent promises some months ago.” The papers saw no reason why they should expect anything of importance in the last few weeks. “The impression grows here,” wrote the syndicated columnist James McMullin, “that the stock ma
rket investigation will finish spending its $50,000 as rapidly as possible and shut up shop.” Real investigative action, wrote the editors at the New York World-Telegram, would have to wait for the next Congress, “when the Committee on Banking and Currency may be made up of more courageous men.”29
Part of the reason most outside observers had written off the investigation was because the infighting on the committee was now an open secret. “Behind the scenes it is known that the Senate committee has been driven by dissension,” the Christian Science Monitor wrote. “The group is sharply divided over the wisdom of the hearings, and some members are apathetic.” The most outspoken critic was Senator Frederic Walcott, the man Hoover had originally tapped to run the investigation. The former investment banker accused Norbeck of using the committee staff to write his campaign speeches and even went so far as to suggest that it was Norbeck who had interfered with his attempts to get the investigation up and running in the spring of 1932. Now Walcott sought to distance himself from the apparently collapsing effort, pointing out that he was no longer a member of the subcommittee.30
Walcott’s charges made no sense. When the hearings started, he wanted to focus solely on bear raids, while Norbeck and other committee members fought to broaden the investigation. Norbeck was a prairie well-driller with an almost preternatural antipathy to the eastern financial elite, while Walcott was a former investment banker with strong ties to Wall Street. It simply didn’t ring true that the conservative Walcott had tried to push the investigation hard while the progressive Norbeck held it back. But none of that seemed to matter to reporters, who were thrilled with the spectacle of such a pitched battle. Word had even leaked out that warring staff members had to be dispatched to separate cities, leading one writer to marvel, “If that committee gets to the March 4 deadline without any broken skulls it will be a miracle.”31
The Hellhound of Wall Street Page 13
