IBM and the Holocaust

by Edwin Black

  Certainly scores of American firms used international connections to trade with the enemy. None of them needed more than their own profit motive to pursue such deals. Many of them were proud members of the International Chamber of Commerce, which, during Watson’s tenure, espoused an official enthusiasm for trade with the Hitler regime.

  Ironically, none of IBM’s subsidiaries were on the Proclaimed List because they fell into a double-edged corporate identity as “American-owned property.” The same applied to all American-owned subsidiaries in Axis-controlled lands. So even though corporate parents, such as IBM, were not permitted to communicate with their own subsidiaries because they were in Axis territory, these companies were deemed American property to be protected. In fact, since IBM only leased the machines, every Dehomag machine, whether deployed at the Waffen-SS office in Dachau or an insurance office in Rome, was considered American property to be protected.10

  Hence, Dehomag could simultaneously exist as a U.S. interest and a tool of the Nazis doing business with the same Farben and Siemens entities that brought other American companies utter denunciation and often prosecution.

  The confusion and inconsistency inherent in the classification of IBM subsidiaries as “friend or foe” was evident virtually every time the matter was raised. For example, on June 16, 1942, the American Consul in Bern asked that IBM’s Swiss subsidiary, Watson A.G., not be blacklisted. “This is an American firm,” wrote the Consul, “and American interests would probably suffer should it be listed. Axis firms would profit by the listing because it is believed that they have in stock a substantial number of office machines manufactured in Germany and exported to countries later occupied by Germany and Italy…. Such machines have already reached the Swiss markets carrying instructions for assembly, use, etc. in the Spanish, Yugoslav, Rumanian, etc., languages…. This Consulate General concurs… that Watson A.G. should not be listed.”11

  No wonder the British Foreign Office was increasingly disturbed at America’s blacklisting inconsistencies. One confidential memo from the British Embassy regarding the blacklist evoked a handwritten marginal note: “It is only too clear that where U.S. trade interests are involved, these are being allowed to take precedence over ‘hemispheric defense,’ and… over cooperation with us.”12

  Because the legalities were so gray, and IBM so stellar an American concern, Carter was not permitted to work with much speed. Alleging treacherous business when the firm was as prominent as IBM, and its leader as well connected to the White House as Watson, was not to be undertaken lightly by any branch of the U.S. government.

  So Carter was unable to obtain a subpoena. But he was allowed to visit IBM headquarters and conduct interviews in mid-July 1943. To prepare for his visit, Carter typed an outline with nine topics. His emphasis was how IBM could not just lease products but actually control its customers. Topic 1 on Carter’s typed outline: “Importance of the [Dehomag] plant for the efficient management of the German war machine.” Topic 2: “Cards imported from the United States per year.” Topic 3, with a checkmark: “The source of raw materials with particular emphasis on the possible bottleneck in supplying paper pulp for the manufacture of cards.” Topic 7: “Control exercised by IBM over their customers through the policy of renting equipment and the sale of cards.”13

  A second list of ten typed questions focused strictly on Dehomag factories in Sindelfingen and Lichterfelde. Carter wanted to know about “alphabetical printers… why the sudden interest now.” He also wanted the “name of railroads” Dehomag worked with, and the volume of cards it produced and had imported from IBM NY over the years.14

  Carter began June 14, 1943, by interviewing Jurriaan W. Schotte, IBM’s New York-based General Manager for Europe, in the company’s headquarters. Although Schotte, a Dutch national, was the firm’s European General Manager, he was permanently stationed in New York. From his office at IBM NY headquarters, Schotte continued to regularly maintain communication with IBM subsidiaries in Nazi territory, such as his native Holland and Belgium.15

  Carter found Schotte a font of information. The interview lasted three days. During that time, Carter scribbled copious notes about IBM customers, uses for Hollerith machines, paper suppliers, biographies of leading IBM and Dehomag personalities, and terms of use. Since Carter represented the Justice Department, his request to examine hundreds of pages of material was complied with.16

  Carter perused collections of documents, allowing him to piece together an extraordinary global enterprise, one that in Europe centered on Nazi Germany. It was all micro-managed from IBM’s world headquarters. He saw correspondence, typed and sometimes handwritten, detailing sales, installations, Dehomag’s revolt, and IBM’s struggle to retain its position in the Axis. Machine tool orders were itemized by factory, order date, and anticipated delivery date. Quarterly financial reports and monthly narratives from subsidiaries in enemy territory, received even after Pearl Harbor, relayed the latest business developments and the vicissitudes of competitor information. Up-to-date customer account information enumerated long lists of machines and rental prices, as well as specific war applications. Card consumption figures summarized the volume both by country of manufacture and country of import, all organized by year. Most of all, anyone could discern the ease and frequency of contact IBM maintained with foreign branches.17

  Clearly, IBM NY possessed a wealth of detailed information about its overseas operations, from CEC to Dehomag to the units peppered throughout the Balkans. Carter was able to type twenty-five pages of notes based just on his three days of interviews with Schotte. A significant portion of those notes centered on two aspects: IBM’s ability to manage all aspects of the railroads of Europe, from identification of freight to scheduling, and IBM’s incontrovertible control of punch cards.

  In the case of the railroads, Carter learned that the Nazis could not schedule cargo or locate a boxcar or locomotive without Hollerith cards. “The German government,” Carter wrote, “is at present partly subsidizing freight shipments… dependent upon IBM machines in such a way that if the card system were not permitted to function, the railroads would be unable to ascertain that portion of the expense which the government had contracted to bear…. Statistics as to the expense to the railroad of freight running between certain points depends upon the card system. In allocating freight charges between railroad systems in different countries, the cards are invaluable.”18

  Carter continued, “the location of the number of trains available in a particular territory can be ascertained, which record would only be about two days late. The only other method would be a spot check which would be two weeks late and, of course, in any system such as a railroad with the tremendous flux of traffic, a two-week gap would be worthless.”19

  Regarding punch cards, Carter noted, “In the manufacture of cards, special machinery is needed. No one but an IBM affiliate can make IBM cards because in Germany the contracts contain a clause that the German customer cannot use cards except those of IBM manufacture…. At present, with paper shortages, stockpiles are probably not permitted for more than one month. The replacement requirements of cards are tremendous.”20

  Carter was even able to comprehend IBM’s controversial “royalty” agreement. “A peculiar situation arises with regard to the Dehomag company,” recorded Carter, “in that here is an almost completely owned subsidiary which, in addition to paying the usual stock dividend, is also required to pay royalties to the American company…. However, probably, the true explanation is that the legal limits of stock dividends prevented IBM from getting the return it wanted from the German company, and hence this is a method devised for additional returns.”21

  Clearly, if he could reconstruct as much as he did with a simple request, a full search was called for. Carter returned, this time for a systematic “file search.” But he was still hobbled by the lack of a subpoena; his superiors would still not approve one. As such, he was dependent upon the voluntary cooperation of the very people he was in
vestigating.22

  In IBM’s warehouse, at 75 Murray Street in Manhattan, Carter found ten file drawers. Files were arranged alphabetically by country covering the years 1934 to 1940. They contained correspondence relating to punch card production, machine and parts inventories, tariff files, repair records, customer complaints, lists of international fairs and visitors entertained.23

  But where were the key European files listing “the customer, location, type of business, ownership… card consumption and name of salesman” for each machine? Most importantly, where were the “application studies,” that is, the specific analysis of each machine’s purpose, how well it performed its task, and how it could improve? Schotte’s answer: all those records were located in the offices of IBM Geneva.24

  Where were the records for 1933? Schotte’s answer: destroyed.25

  At IBM World Headquarters, 590 Madison Avenue, Carter first asked for Schotte’s files. But now, cooperation had substantially narrowed. Carter was not permitted to examine the actual file drawers. Instead, Schotte brought the folders into his office for Carter’s review. Again, all the files were arranged alphabetically by country. The covered years spanned 1940 to IBM’s most recent correspondence, containing monthly narrative reports by subsidiary, the details of the IBM machine installations, and “in many instances, applications of the machines.” But no “application studies” were found for Germany, France, or Japan.26

  Where were the copies of Schotte’s personal correspondence with the subsidiaries? Schotte’s answer: none were in America—they were all kept in the files of the various subsidiaries.27

  Hence, to examine Schotte’s instructions, Carter would have to travel to all the capitals of Europe.

  Second, Carter asked for the files of Fred Nichol, executive vice president and general manager of IBM. Nichol was second-in-command to Watson, continuously in touch with Harrison K. Chauncey, W. C. Lier, and others in Europe, and had for years maintained daily scrutiny over foreign operations. Nichol’s files were arranged chronologically from 1936 to 1942, but again Carter could not review the entire file. Carter noted, “I was not permitted to take the material from the general file, but the material was chosen for me.” Schotte explained that whatever was brought out “comprises the entire file on the foreign subsidiaries.”28

  Nichol’s files contained analyses of sales performance and quotas, personnel problems, operating efficiencies at overseas branches, general records of business volume, and details of foreign visitors including “Good Will Ambassadors.” Nothing was available on operations in Germany, France, or Italy that was not shown on Carter’s previous visits.29

  Third, Carter wanted to see Watson’s files. Again, Carter was not permitted to examine the actual file location. Instead, twenty-six folders covering the years from 1938 to 1942 were brought into Schotte’s office. Schotte presented the folders as “the complete file.” They included details of Watson’s tour as ICC president, lists of top sales achievers, copies of overseas information previously given, correspondence involving tax rates and subsidiary voting shares, letters from and about friends moving from Europe to the Americas, and exchanges of Season’s Greetings.30

  Where was all of Watson’s business correspondence? Schotte’s answer: Since Watson traveled in Europe extensively, “much of the business was transacted orally.” If written materials did exist, then they would be in Geneva.31

  Carter left IBM’s offices with little. He typed a note to file:

  Because of the meager information contained in the files, especially on the European subsidiaries, it is reasonable to assume that either the important files are in the offices of the European headquarters in Geneva, Switzerland, or IBM has not made full disclosure.32

  * * *

  ALTHOUGH WATSON had been America’s chief peace exponent during the Hitler years before Pearl Harbor, he had prepared for the day when the United States would enter the conflict. As early as August 1940, the War Department began speaking to Watson about converting IBM’s manufacturing muscle to war use—but not for Holleriths. The War Department wanted IBM to make machine guns.33

  On March 31, 1941, long before the U.S. was attacked, Watson had incorporated a new subsidiary, Munitions Manufacturing Corporation. The president of a long-time IBM supplier was designated president. Two small canning buildings were purchased for $201,546. Within sixty days of the December 1941 attack on Pearl Harbor, Watson unveiled a fully equipped 140,000-square-foot manufacturing facility, staffed by 250 employees. The first product was a 20mm anti-aircraft cannon. Eventually, Munitions Manufacturing Corporation produced approximately thirty-two different weapons and other military items, including Browning automatic rifles, gas masks, bomb-sights, 90mm anti-aircraft gun directors, and 345,500 units of the 30-caliber M1 carbine rifle. IBM logos were stamped on most of the products, including the carbine rifle butts. By 1943, eventually two-thirds of IBM’s entire factory capacity had shifted from tabulators to munitions.34

  More than just a manufacturer, IBM undertook sophisticated research on ninety-nine strategic military research projects, including ballistics trajectory studies, aircraft design, automated inventory control, transportation routing, aircraft fire control systems, and an advanced wireless, electronic messaging unit called Radiotype.35

  One special defense project involved an experimental system requested by the Army Air Corps. It needed a device that could read holes in telegraphic paper and translate the results to punch cards. Watson was ready for such a request because he had already produced a preliminary design for a company identified as “National Analine.” IBM did not complete the work for “National Analine” and instead transferred the project to the U.S. military.36

  IBM also developed powerful mobile Hollerith units transported in thirty-foot rubber-padded trailers pulled by 2.5-ton tractors. The first sixteen mo bile units were delivered by spring 1942 with more than 260 similar such units deployed throughout the war. In the Pacific, mobile Holleriths were hopscotched from one Pacific atoll to the next. In the European theatre, Hollerith vans were brought ashore in Tunisia and Sicily along with all other mobile equipment. Understanding their strategic value, the German High Command had issued priority orders to capture such a unit, with its crew, if possible. That never happened.37

  Machine Record Units [MRUs] were nothing less than IBM-trained military units specializing in deploying IBM-made equipment. They were also designated to help capture any Holleriths discovered in Europe or the Pacific theatre. A typical MRU detachment was staffed by twenty-nine enlisted men and three officers proficient in punch card operations. To churn out the MRUs, IBM’s school at Endicott was converted into a military academy where about 1,300 soldiers were trained to use Holleriths under war conditions. Many of these units were commanded and serviced by IBM employees on leave. They formed a cohesive group of troops, affectionately called “IBM Soldiers,” with distinct loyalties to their company and Watson.38 These IBM Soldiers would have special roles when they came upon IBM factories in Europe.

  To coordinate IBM’s dozens of war projects for the U.S., Watson created his own corporate “Department of Logistics.” This company bureau helped IBM focus its resources on some of America’s most sensitive military projects. Watson appointed IBM General Manager Nichol head of this department. Ironically, Nichol was at the same time overseeing IBM’s foreign operations in Nazi Europe. Watson explained that Nichol “is eminently fitted for this important work by reason of his broad executive experience… combined with military knowledge.” He added, “He has intimate knowledge of foreign industrial methods and resources.”39

  IBM and its technology were in fact involved in the Allies’ most top-secret operations. The Enigma code crackers at Bletchley Park in England used Hollerith machines supplied by IBM’s British licensee, the British Tabulating Machine Company. Hut 7 at Bletchley Park was known as the Tabulating Machine Section. As early as January 1941, the British Tabulating Machine Company was supplying machines and punch cards not
only to Bletchley Park, but to British intelligence units in Singapore and Cairo as well.40

  By May 1942, IBM employees had joined America’s own cryptographic service. A key man was Steve Dunwell, who left Endicott’s Commercial Research Department to join other code breakers in Washington, D.C. The group used a gamut of punch card machines made by IBM as well as Remington Rand to decipher intercepted Axis messages. Captured enemy code books were keyed into punch cards using overlapping strings of fifty digits. The punched cards were sorted. Each deciphered word was used to attack another word until a message’s context and meaning could laboriously be established. At one point, Dunwell needed a special machine with electro-mechanical relays that could calculate at high speed the collective probability of words that might appear in a theoretical message bit. Dunwell sought permission from Watson to ask that the device be assembled at IBM. Watson granted it. Later, Watson rewarded Dunwell for his service to the nation by allowing him to spend his honeymoon in Watson’s personal suite at the IBM Country Club.41

  It was an irony of the war that IBM equipment was used to encode and decode for both sides of the conflict.42

  IBM was there even when the Allies landed at Normandy on June 6, 1944. Hollerith machines were continuously used by the Weather Division of the Army Air Forces to monitor and predict the tempestuous storms afflicting the English Channel. When Allied troops finally landed at Normandy, MRUs went in soon after the beachhead was secured.43