Goaded by George Norris and Chantland, Attorney General Wickersham gradually came to the conclusion that he should prosecute Sielcken and the coffee trust, and he leaked such rumors to the press. The affair split the new National Coffee Roasters Association at its first convention in November 1911, where roaster Thomas J. Webb excoriated valorization as “the greatest grafting scheme the world has ever seen.” Keynote speaker Hermann Sielcken defended valorization, asserting that there was no coffee trust, no corner. He claimed that he had only bought goods with his own capital, then resold them legitimately. “The newspapers never consider anything to be natural; they must make it mysterious, and they love to talk about millions and millions, and impress upon your mind the wicked New Yorkers and the capitalists.”
Sielcken Snaps His Fingers
On May 16, 1912, Hermann Sielcken appeared as the first witness before the “Money Trust Investigation” congressional subcommittee. Arrogant and unrepentant, he did not back down an inch, claiming that the valorized coffee had no effect whatsoever on the price.
During these hearings Sielcken and committee lawyer Samuel Untermyer crossed swords repeatedly. Untermyer asked Sielcken, “The idea was to keep that surplus [of coffee] off the market, was it not?” Sielcken answered, incredibly: “No; I was always trying to sell it. It was not kept off the market.” When the coffee baron made such brazenly false statements, it was obvious that Untermyer could barely keep his lawyerly composure. He elicited from Sielcken that there were some 4 million bags of valorized coffee sitting in warehouses in the United States and Europe.
UNTERMYER: And coffee is selling at nearly 14 cents a pound, is it not?
SIELCKEN: Yes.
UNTERMYER: More than twice what it was selling at when the scheme went into effect?
SIELCKEN: Yes.
UNTERMYER: And you gentlemen were so anxious to sell that coffee that you have still got it, have you not?
SIELCKEN: We are anxious to sell it.
“I suppose the purpose of making these elaborate provisions [to valorize coffee] had nothing to do with an attempt to limit the supply of coffee, had it?” the lawyer asked. “It had only to do with the equalization of the supply; not with the control,” Sielcken parried. He meant that it would “equalize” the supply by transferring the large surplus of one crop into the next, but he was clearly engaging in semantic subterfuge.
Sielcken then made an outrageous statement: “If the amount of coffee held by this valorization in the United States today was sold tomorrow, it would not make that much difference in the market,” he said, snapping his fingers.
“Then the fact that the price of coffee has gone from 5 cents a pound to 14 cents a pound has not anything to do with the fact that you gentlemen kept these millions of bags off the market?”
“Not that much,” Sielcken replied, snapping his fingers again.
Later the coffee king actually lectured the committee. “I will not criticize or give an opinion upon what the Brazilian Government did, nor do I think it proper that this committee should . . . express themselves upon the action of another government, upon which we have no right to express an opinion.” Untermyer replied between clenched teeth, “I think this committee will take care of itself, and so will the Government.”
Despite his prevarications, Sielcken ultimately appeared much more knowledgeable and reasonable than his interrogator. He explained that without the valorization scheme “there would have been a revolution in São Paulo.” Untermyer responded with astounding insensitivity: “Do you think that would have been a worse condition than that we should pay 14 cents a pound for coffee?”
Sielcken finally was allowed to make a long statement. His review of Brazilian coffee prices and history was cogent and convincing. Historically, coffee had cost over 20 cents a pound back in the 1870s and averaged 15 cents from 1886 to 1896, before the years of overproduction. He pointed out that even with valorization the price had not materially risen for nearly four years, until 1910. Then, he asserted, the price went up due to smaller crops, not valorized coffee. (The price indeed went up precisely when Assis-Brasil had predicted back in 1902; it peaked in 1912.)
Sielcken asserted that without valorization the price of coffee would have been higher in 1912. He reasoned that in 1906 and 1907 the prices would have dropped to such disastrous levels that planters would have been driven out of business, and subsequent crops would have been smaller and smaller. “In case the plantations had been neglected, we might have had crops of two, three, and four million bags, and a price for coffee of 25 cents.”
The government’s attitude was unfair and ethnocentric, Sielcken asserted. “I question the propriety of the United States criticizing or going into the details of the action of another country. Supposing that in this country we had a deal on cotton in the South, and Brazil should say, ‘Well, we want to look into that.’” As he pointed out, “Any foreign government or any foreign party that would act in that way would be thrown out of this country.” He said that the American attitude amounted to saying to the Brazilians, “You shall sell your products always at the lowest, and we ours at the highest [price]. You must not make any combination of any nature or form. That is a conspiracy if you try to protect yourselves. . . . I challenge the Attorney General in this country and every lawyer in this country to tell me that as a coffee merchant it is illegal for me to accept consignments.”
In the end Sielcken emerged virtually unscathed from the hearings. It was clear that he had made fabulous amounts of money from the valorized coffee, however. As a broker he could buy it himself, then resell it, making a profit at every stage. When coffee was at its highest point in April 1911, at 12.75 cents, he said, “I bought it and sold it.” Untermyer asked, “Do you mean that you sold it for the committee or bought it yourself?” Sielcken refused to divulge the details, answering simply: “I made a profit on that deal.”
The Lawsuit Against Sielcken
On May 17, 1912, the day after Sielcken’s testimony, Attorney General George Wickersham proceeded with his plans for a lawsuit. Shortly thereafter the attorney general petitioned for a temporary restraining order, enjoining the removal of the 900,000 bags of valorized coffee held in New York, and levying formal charges against Sielcken, the New York Dock Company, and the foreign members of the valorization committee.
The U.S. secretary of state, Philander Knox, found himself caught between the attorney general and the Brazilian government, which protested that the coffee warehoused in New York was the property of the State of São Paulo, security for a loan, and that the United States had no right to confiscate it. On May 29 William Chantland wrote to an assistant U.S. attorney that “the Attorney General is very much interested and [is] in the fight to the finish.” Two days later Wickersham wrote a not-for-publication letter to a New York newspaper editor, stating his case. He objected to “a foreign government [going] into partnership with a group of international bankers,” noting that “an increase of one cent a pound in the price of coffee means ten million dollars on the amount used in the United States. . . . They practically took from seventy to eighty million dollars out of the pockets of the American people.” Wickersham also wrote a long memo to President Taft justifying the case.
The court nevertheless refused to sanction a preliminary injunction to confiscate the coffee. The government then narrowed its suit, focusing on Hermann Sielcken. Negotiations between Sielcken, his lawyer, Crammond Kennedy, and Attorney General Wickersham commenced. Wickersham wanted Sielcken to release all 900,000 bags of coffee in return for dropping the suit; Sielcken promised to release only 700,000 bags, the amount held in the United States at the beginning of the suit. In a telegram to his lawyer the coffee king pointed out that it was in his own best interest to sell as much as possible—he was only trying to protect the Brazilian government’s interest by limiting the amount sold. In June, Sielcken warned that if a settlement were delayed, it “may force Brazil to measures totally destroying all good will and comm
erce between the two countries.”
The fight over 700,000 versus 900,000 bags continued throughout the summer of 1912. Sielcken promised to sell the 700,000 bags by April 1913. Apparently some compromise was reached, but when Wickersham returned from a September camping vacation, he exploded when he found that “the Brazilians are unwilling to enter into the arrangement suggested.” He insisted that “the Department is prepared to submit the facts in the case to a grand jury, and I have no doubt that the indictment of Mr. Sielcken, and possibly some others, would follow.”
The secretary of state’s office tried to convince Wickersham to moderate or delay his case in the interests of smoothing over international relations. Wickersham repeatedly delayed the hearing. As 1912 wound to a close, George Norris introduced a bill to force the sale of valorized coffee. In response the National Coffee Roasters Association (NCRA) passed a resolution denouncing the bill, which would create “an element of uncertainty and danger.” Other coffee men wrote to Wickersham to assure him that the meeting was “packed by Green Coffee interests” and did not represent the true feelings of the roasters.
William Ukers, the influential and well-informed editor of the Tea & Coffee Trade Journal (a competitor of the Spice Mill since 1901), wrote Wickersham to say that “the valorization interests organized the Coffee Roasters Association for the express purpose of throttling any movement calculated to interfere with their plans.” In his journal, Ukers editorialized that “just because the Brazilians were so stupid as to keep on year after year producing more coffee than the world needed,” why should the American consumer foot the bill? He added that Representative Norris might be jeopardizing his political future by fighting the big-money interests and “the Great Hermannus.”
After coffee spread from Ethiopia to Yemen, the Arabs adopted it as a way of life. This early-eighteenth-century engraving shows a cross-legged Arab sipping coffee that he poured from the ibrik on the floor.
By 1674, London coffeehouses had become such a craze that women—who where excluded from imbibing there—protested in this pamphlet, claiming that coffee made their men impotent. The men defended their drink, saying it made “the erection more vigorous.”
Nature has protected the coffee seed with several layers: the red outer skin, the sweet mucilage, sticky paper-like parchment, and fine silverskin. In the “wet method,” the mucilage is allowed to ferment in vats so that it washes off easily.
Entire families have always harvested coffee. This picture was taken in Guatemala in 1915.
French lieutenant Gabriel Mathieu de Clieu nursed his coffee seedling, sharing his own water ration, to bring it to Martinique in 1723. From that single plant, much of the world’s current coffee supply probably derives.
Sweating in a factory along the row of Carter Pull-Outs (invented in 1846) resembled labor in the lower range of Dante’s Inferno amidst smoke, stress, and burned beans.
In a marketing war, Lion Coffee claimed that its coffee imparted the strength of a lion, but an Arbuckle salesman insisted that angels were stronger.
Arbuckles’ Ariosa package and its floating angel became a universally recognized trademark in the late 19th century.
“Help us drive out of the market the poisonous Coffees that are now being so largely sold,” the text below this Arbuckle ad read, referring to the widespread use of poisonous coloring agents used on other coffees.
Pittsburgh grocer John Arbuckle revolutionized the nascent coffee industry by showing how branding and marketing could sell cheap goods. Gruff but good-hearted, Arbuckle funded philanthropies such as his “floating hotels.”
An illustration from the 1904 novel The Corner in Coffee: “The crowd of brokers heaved and surged and swayed like a human wave. The place was like a battle-field in the tense emotions in the air, the awful passions it evoked.”
The dreaded coffee leaf rust, hemileia vastatrix, appeared in Ceylon in 1870 and virtually wiped out the coffee industry of the East Indies within a few years. A hundred years later, it appeared in Latin America.
The Brazilian coffee industry was built on the backs of slaves imported from Africa.
This 1875 photograph of bare-breasted Mayan coffee workers revealed sullen aquiescence to forced labor.
Hermann Sielcken, the arrogant Coffee King who made millions through the Brazilian valorization scheme.
Joel Cheek, creator of Maxwell House, understood the virtues of snob appeal and advertising. He also treated his employees decently. “Put your arms around them and talk to them like you were not simply interested in them for the dollar you get out of them.”
In the United States, women performed the menial tasks in this 1911 coffee factory (top), just as Central American women sorted processed coffee beans in 1913 (bottom). Similar photographs could still be taken today throughout Asia, Africa, and Latin America.
Since the late nineteenth century, coffee “cuppers” have slurped, savored, and spat their favorite brew all day long—as in this 1909 scene—in an important ritual to assess body, aroma, and acidity.
U.S. Senator George Norris took on what he called the “Coffee Trust,” attacking Hermann Sielcken and the valorization scheme. Here, a contemporary cartoonist depicts Norris as a David against the coffee Goliath.
C. W. Post, the brilliant, irascible inventor of Postum, was a marketing genius who called coffee a “drug drink” and ended his ads with the slogan, “There’s a Reason.” After claiming that his products were cure-alls, Post committed suicide when in poor health.
Postum ads such as this 1910 effort, with its dramatic claim that “coffee wrecks some persons,” should have alerted coffee men to effective advertising techniques. Instead, they simply fumed.
Postum’s negative ads drove the coffee men wild. In this 1910 satirical cartoon, they fought back.
To combat health worries, coffee men loved to find consumers such as Mrs. Melinda P. Kyle, shown here in 1912 at 114 years old. She drank three cups of coffee every day, beginning at age fourteen.
Teddy Roosevelt supposedly proclaimed Maxwell House Coffee to be “good to the last drop”—used here in a 1921 ad—though Coca-Cola used the phrase first. It is likely that ad men made it up.
This cartoon from a Jewel Tea newsletter illustrates the lure of the “gift” percolator, a premium offered for coffee sales.
The “wagon men” of the Jewel Tea Company delivered coffee door-to-door, giving out “advanced premiums” to lock housewives into purchase plans.
Sielcken attacked the Norris bill as being “so ambiguous that I personally cannot understand it.” He scoffed at the politician’s interference with a legitimate business transaction. “If Mr. Norris means that he wishes to prevent the price of coffee from ever advancing, he must make laws to prevent droughts, frosts, and unseasonable weather of any kind.”
As the new year turned, Sielcken and the Brazilian government suddenly changed their proposed settlement. Rather than selling the valorized coffee by April, they now wanted the entire year. Wickersham accused them of “entirely lacking in good faith.” In a letter to Knox he proposed going forward with his lawsuit immediately. Knox once again wrote to beg that he accommodate the Brazilians.
Then, on January 21, Knox wrote that the minister of foreign affairs for Brazil had informed him that all of the valorized coffee in the United States had been sold to some eighty purchasers in several different states. Wickersham did not believe it. “I should be inclined to think that there was no truth in the statement, and that it was simply made for the purpose of diverting attention from the operations of the syndicate.” The attorney general could be forgiven for being skeptical, since the Brazilians refused to reveal who had bought the coffee. It is likely, however, that most of it truly had been sold.
On February 27 a very frustrated Wickersham wrote to George Norris at the House of Representatives. “I have several times felt very much like ordering a criminal prosecution of Hermann Sielcken, but the international questions involved have prevented [it]
, and I fear I shall not be able to do anything about it before I go out of office.”
In the meantime the Brazilians retaliated against the pending lawsuit by rescinding a 30 percent tariff preference for American flour, causing flour exporters to write their senators, complaining about the valorization suit. William Jennings Bryan also weighed in on the side of the Brazilian government.
By April the United States had a new attorney general, J. C. McReynolds. William Chantland, Wickersham’s special assistant, wrote a strong memo to McReynolds informing him that Hermann Sielcken was “manipulating the coffee situation to suit himself,” and urging McReynolds not to dismiss the suit until Sielcken or the Brazilian government provided details of precisely who had bought the valorized coffee. McReynolds ignored Chantland and wasted no time in dropping the controversial valorization suit in April. Sielcken was finally off the hook.
The first phase of valorization was nearly complete. Some 3.1 million bags of coffee remained in European warehouses, the last of which was sold in 1916. Nearly 2 million bags were sold after World War I commenced, the proceeds deposited with a Berlin banking house as the German government embargoed the funds. In the Versailles Treaty ending the war, the Brazilians successfully lobbied for restitution. In 1921 the Germans paid over 125 million marks to Brazil, and the books were finally closed on a highly effective price manipulation.
Uncommon Grounds: The History of Coffee and How It Transformed Our World Page 12
