by Edwin Black
Although the arrangement to pay Heidinger bonuses on losses originated in 1935, the small print of any agreement with the Dehomag founder consumed months of wrangling. During that time, IBM was astonished to learn that Heidinger had never quite filed all the many merger papers from 1934, thus preserving some or all of his original corporate compensation rights. More than that, the language in some of the merger documents Heidinger drew up was so convoluted, no IBM translator could understand it. At the end of 1935, an IBM manager confessed to New York, “the translation is still very confusing and actually it is hard to tell exactly what it means. Also you will be interested to know that both Mr. Rottke and Mr. Zimmerman of the German company are unable to determine the exact meaning of the German original.”75
Pure and simple, Heidinger would not finalize the merger papers until his bonus was rectified. The matter had been dragging on since late 1933. IBM was operating companies that arguably did not quite legally exist for lack of the proper paperwork.
Once and for all, IBM wanted to straighten out its contractual messes with Heidinger. Both sides, in spring 1936, agreed to new bonus language. Heidinger visited New York in early 1936 to attend the Hundred Percent Club, the international IBM celebration of those executives meeting or exceeding their annual sales quota. Dehomag was always the number one foreign revenue producer. While Heidinger was in New York, there was plenty of face-to-face time for him and Watson to work out the smallest details of the final agreement governing the merger and bonus. A special letter was crafted by a Berlin attorney confirming that the contract was just a private undertaking between two stockholders with Dehomag, not with Watson in his capacity as chairman of IBM. This continued the fiction that Dehomag was not under foreign influence.76
So little trust remained that each side secured its own attorney. IBM Vice President Braitmayer sent a letter to a European manager in Geneva, and in a postscript asserted, “You will understand that I wish to avoid any unnecessary legal expenses, yet it is essential that IBM interests be fully protected and that you avoid any such complications as were involved in the 1934 contract drawn by Mr. Heidinger.” Braitmayer added, “I am depending upon you to use some tact and judgment in handling this situation. And I hope you will understand that this letter is [only] for the perusal of yourself.”77
Finally, on June 10, 1936, with numerous translations, multiple translated copies, attorneys in abundance, and signatures inked everywhere, an extensive array of eight document sets was executed, thus finalizing the Dehomag merger of 1933 and securing Heidinger’s bonuses. To further bolster the image of German ownership, IBM ultimately arranged so-called “loans” for directors Hermann Rottke and Karl Hummel so they could purchase nominal shares of Dehomag. The loans were collateralized by the shares themselves and neither individual enjoyed “the right to sell or transfer to any third parties” any of their shares. No money changed hands. In consequence, it appeared to Reich authorities that three Germans owned Dehomag, even if in fact it was controlled 100 percent by IBM NY.78
As Watson reviewed a passel of final signed, notarized, sealed, and registered documents, America’s most powerful businessman undoubtedly hoped that the war for profits in Germany was over. Heidinger might now be pacified. Watson was wrong.
* * *
GERMAN JEWRY did not understand how, but the Reich seemed to be all-knowing as it identified and encircled them, and then systematically wrung the dignity from their lives. Indeed, it was clear to the world that somehow the Reich always knew the names even if no one quite understood how it knew the names.
Confiscation and Aryanization escalated throughout 1936, as did physical brutality. On September 8, 1936, a New York Times report headlined “Reich Seizing 25% of Fortune of Jews” reported: “The order served on Jews by local tax authorities demands that they deposit within eight days ‘security’ equal to the Reich escape tax… one-fourth their total assets. Jews on whom the order was served were frank in stating that sudden withdrawal of 25 percent of their capital meant ruin to their business and nothing was left except to shut down.”79
On September 17, 1936, a New York Times report headlined “Nazi Penalties Heavier” reported: “The Sturmer, Julius Streicher’s anti-Semitic weekly, announces that the Reich Justice Ministry has instructed public prosecutors to demand more severe punishment for Jewish race defilers—Jews convicted of having had relations with German women. The Sturmer, which regularly prints a list of Jews sentenced during the week throughout Germany, has long complained that German courts are too lenient.”80
The day before, the New York Times was one of many publications that printed Streicher’s explicit remarks to newspapermen. The article, sub-headlined “The Way to Solve Problem Is to Exterminate Them,” reported: “The Nuremberg high-priest of anti-Semitism… announced that in the last analysis, extermination is the only real solution to the Jewish problem. Mr. Streicher made it clear in his address that he was not discussing the question in regard to Germany alone… but of a world problem. He declared there were some who believed the Jewish question could be solved ‘without blood,’ but… they were seriously mistaken…. if a final solution was to be reached ‘one must go to the bloody path.’ Such measures would be justified, Mr. Streicher declared, ‘because the Jews always attained their ends through wholesale murder and have been responsible for wars and massacres. To secure the safety of the whole world, they must be exterminated,’ he said.”81
The world could not help but know the dismal result of Nazism. What they did not read, they saw. Refugees were everywhere.
Trains screeched into Paris, Prague, Warsaw, Brussels, Geneva, and Madrid. Ships lowered their gangplanks at Boston, New York, Mexico City, London, and Johannesburg. On every arrival, refugees were an unmistakable sight. Emerging as a family group, wearing their finest, towing suitcases and footlockers filled with clothes and memories, they stepped with hard-summoned pride and irrepressible confusion into the dim of displacement. Many were professors toting books bundled with cord. Some were doctors and lawyers lugging well-worn briefcases. A number were merchants stowing precious leather ledger books. Not all of them were Jewish. Some didn’t even believe they were Jewish. Many were intellectuals or dissidents of various religions. Children were told stories about sudden vacations. Parents wondered what the night would bring. Not all had papers. Some carried smuggled gold and jewels to re-establish themselves. But most had little to defray their existence. The machinery of confiscation had sent them out virtually penniless or with their dwindled assets trapped in a hostile Reich.
An amalgam of disorganized rescue and relief was underway. The League of Nations, Jewish organizations, Zionist bodies, church groups, governmental committees, labor unions, and ad-hoc municipal agencies struggled to find housing, jobs, and moment-to-moment succor for the refugees. But all of the several dozen helping drew upon money and resources that fundamentally did not exist at a time when all nations were suffering from the weight of their own domestic depression. The world’s brittle ability to assist was cracking. By late 1935, more than 125,000 had escaped Germany. In Holland, more than 5,000 had arrived. Czechoslovakia also extended asylum to more than 5,000. Poland absorbed 30,000. France had received 30,000 refugees but transferred 20,000 to other countries. Nearly 37,000 had escaped to the United States, Palestine, and Latin America.82
So global was the crisis that the League of Nations appointed James G. McDonald a special High Commissioner for German Refugees. McDonald’s compelling report on the mounting catastrophe, issued as he resigned in frustration, declared, “Perhaps at no time in history have conditions been less favorable to the settlement of such a difficult international problem.” The gates were closing. Zionist leader Chaim Weizmann declared the world was divided between places where Jews could not stay, and places where Jews could not go.83
It was against a backdrop of human misery everywhere that Watson proved that he was a special friend of the Nazi Reich. More than just his investments in Germany,
and his strategic socializing with German diplomats and industrialists, Germany felt Watson was an ally in the Nazi battle for economic recovery and conquest. Watson never spoke a word of criticism against his customer Nazi Germany. But more than that, he worked to breach the gorge of isolation surrounding the Reich. One of his main venues was the International Chamber of Commerce and its U.S. affiliate, the United States Chamber of Commerce.
The American Chamber of Commerce, comprised of the nation’s most powerful magnates and corporate executives, was a powerful political influence in America. Its Foreign Department functioned as the American Section of the International Chamber of Commerce. The ICC was a non-governmental organization created by the League of Nations to promote world trade and study the hard mechanics of treaties governing such international commerce as postal, shipping, currency, banking, and patent rules.
Watson was elected chairman of the Foreign Department, which also made him the chairman of the American Section of the ICC. This, in essence, made Watson America’s official businessman to the world.84
In his new capacity, Watson seized the opportunity to rapidly organize the Eighth Biennial Congress of the International Chamber of Commerce to be held in Paris in June 1935. Quickly, he secured the U.S. Government’s imprimatur for the event, thus elevating its status and glitter. To that end, numerous letters were exchanged with Secretary of State Cordell Hull and his subordinates. State Department officers were invited to sail on the same ship with Watson and his ICC co-delegates as a cohesive entourage. American ambassadors, consuls, and attaches from across Europe were beckoned to attend. Hull himself was importuned by Watson for a message of congratulations for the ICC’s related Council meeting and referring to “world peace.” Such a greeting from Hull, prominently printed in program notes and shown to key contacts, would reinforce the image of Watson as a political dynamo within the Roosevelt Administration.85
After a flurry of minute revisions, Hull strung together a sequence of inconsequential words that Watson could publish to show the American government’s seeming approval of the Paris event and, more importantly, of Watson’s leadership of it. “I take this means,” cabled Hull, “of expressing my interest in the purpose of the meeting which you will attend to discuss ways in which business organizations can cooperate most effectively to secure a more adequate and practical economic approach to world peace. The meeting is timely and I shall be glad to learn its results on your return.”86
In the bright glare of the international media, Watson assembled the world’s leading corporate leaders, including those from the Third Reich, to discuss the most pressing economic problems of the day. The topics debated: avoidance of competitive currency depreciation; uniform treatment of foreign corporations; payment of international debts; and international protection of inventions, trademarks, patents, and models.87 Grandiloquent speeches before the plenary, debates among working groups, elaborate communiques to government leaders, and hastily organized press dispatches spotlighted the official agenda of the Congress.88
But one pressing economic topic was never raised during the eminent conclaves. The issue was not an abstruse fiscal machination that dwelled in the unnoticed realms of international economic theory. It was the one financial crisis that threatened to overwhelm civilized governments throughout the Western world by the sheer crush of its tragic sorrow and economic implication. Refugees were never mentioned.
Indeed, the whole issue of the Hitler menace was sidestepped as Watson encouraged all to assume a “business as usual” posture with Germany. Hitler’s Reich craved respite from the torrent of international criticism battering its economy. Watson did what he could to help. Germany believed that if it could just export its products and be left alone to pursue its militancy, the Third Reich would prevail. In the Nazi mindset, whenever it could function routinely in world commerce, it won fleeting validation for its course.
During the Paris Congress, Watson was elected the next president of the entire ICC. He was now the undisputed paragon of world trade. He would be installed as president at the next ICC Congress scheduled for June 1937. As such, he was proud to announce his personal selection for the host site. The world may have been isolating Germany. All Western nations were suffering the financial burden of Nazi oppression. Refugees flowed to their cities. Tension arising from Hitler’s threats of invasion and exported Fascism spurred an expensive arms race. But Watson staunchly urged all to join him in what he promised would be the biggest and most grandiose Congress yet.
“We are going… to Berlin,” he told his Chamber colleagues. “We are free from those particular antagonisms which strong political feelings have caused so much to break nations apart.”89
Watson would not criticize Hitler. On the contrary, in his countless interviews and public speeches, Watson somehow seemed to emphasize ideas the Reich found profoundly supportive. At any other time in history, Watson’s words might have been received as visionary gems. But in the tenor of the times, they struck a chord of grateful resonance with the Reich.
Speaking at both IBM and ICC events, Watson regularly pleaded for “an equitable redistribution of natural resources,” and expressed his support for a rearmed Germany. He voiced his oft-quoted opinions at a time when the Reich was daily violating the Versailles Treaty by rebuilding its war machine, and threatening to invade neighboring regions to acquire the very natural resources it felt it deserved.90
Watson was explicit at one key conference when he asked ICC colleagues to press their contacts in government for “some sound understanding in regard to limitation of armaments,” and then admitted, “we are not talking about disarmaments.” As usual, he added that progress was needed on one other point, “which is of the greatest of importance, a fairer distribution of raw materials.” Addressing the crippling boycott facing Germany, Watson repeated his mantra, “We believe that as soon as we can have the proper flow of trade both ways across the border, there will not be any need for soldiers crossing those boundaries.”91
Even when spoken to his face, Watson maintained aphasic disregard for any criticism of the Hitler regime. At an April 26, 1937, ICC banquet in Washington preparatory to the Berlin Congress, the guest speaker was John Foster Dulles, former American legal counsel to the Treaty at Versailles and one of the nation’s foremost international law experts. His presentation was en titled “The Fundamental Causes of War.” Watson was not happy about the topic. Before Dulles spoke, Watson even lobbied Dulles to change the title. Dulles openly quipped that Watson had complained: “Nobody wants to hear about war, let’s hear about peace.” To this, Dulles told the members, “I said, ‘Alright, you [Watson] can write the title if I can write the speech. Before I get through, I think you may wish that… I had written the title and he had written the speech.”92
Dulles tore into Germany, saying all the things Watson had considered impermissible. “Take the case of Germany,” said Dulles, with Watson standing next to him. “Inability to get foreign exchange [due to the anti-Nazi boycott] has blockaded Germany almost as effectively as she was blockaded during the war by fleets and the armies of the Allies. There is a shortage of food, a shortage of raw material, and the same sense of being circled by hostile forces…. It may be that in fact a country has all the facilities, which it requires to develop within its borders… It may be possible to prove all that as a matter of logic. But logic has never cured a mental disease.”93
Caustically declaring that the well-worn catchphrase of “peace” bandied by Germany and its intellectual allies was a fraud, Dulles forcefully insisted, “A state to remain peaceful, must afford its individual citizens an opportunity to work and to enjoy the fruits of their labor. There must be no undue repression of the individual… where such repression occurs on a large scale, peace is threatened. The outbreak, when it comes, may be civil war, but it may equally be international war.”94
When Dulles finished his long speech, Watson declined to even acknowledge it had taken place. Departing from hi
s usual toastmaster effusiveness, Watson simply introduced the next speaker, the American Secretary of Agriculture. Minutes later, Watson tried to counteract Dulles’ comments by exhorting his fellow entrepreneurs to support the ICC gathering in Germany. “At our meeting in Berlin,” urged Watson, “we hope to see as many of you people as possibly can get over because it is of great importance to your country that you be there and assist us in carrying on that meeting.”95
Watson reviled any detraction of Germany. One typical comment to the Associated Press, reported in the New York Times, used some of the same formulations Hitler defenders themselves had so frequently invoked. “Mr. Watson scoffed at the possibility of another world war,” said the Times. “‘World peace,’ he [Watson] declared, ‘will result when the nations of the world concentrate on their own problems and set their individual houses in order.’”96
When challenged, Watson would insist, “I’m an optimist.” Those among friends and family who knew him best later tried to excuse his behavior as “naive.”97 But there was none shrewder than Watson. He calculated his words like a carpenter: measure twice, cut once.
Watson confessed his feelings shortly thereafter in a draft letter to none other than Reich Economics Minister Schacht. “I have felt a deep personal concern over Germany’s fate,” Watson wrote, “and a growing attachment to the many Germans with whom I gained contact at home and abroad. This attitude has caused me to give public utterance to my impressions and convictions in favor of Germany at a time when public opinion in my country and elsewhere was predominantly unfavorable.”98
Moreover, Watson knew war was imminent. So did Heidinger. In October 1936, long before the intellectual showdown with Dulles, Heidinger sent a memo to IBM NY detailing plans to build bomb shelters for Dehomag in case war broke out. “The authorities have approached us,” reported Heidinger, “with demands that sufficient care should be taken to protect our plant and operations against air attack. In view of the fact that we are located close to a railway station, such demands seem justified… in the interest of the safety of the lives of the workers and employees… we believe we should recommend immediately the setting up of air raid shelters…. Something must surely be done immediately.”99
