The man to whose campaign the contributions had been made had trouble, too. Charges involving contributions to his campaign—or even the revelation that charges were being considered—would result in highly damaging publicity. Revelation of the astonishing sums involved—hundreds of thousands of dollars when the Corrupt Practices Act limited the permissible expenditure by a candidate to $25,000—could result in a scandal of dimensions that could end a politician’s career.
For about four months after the investigation began, all concerned felt it could be deflected because of Johnson’s White House connections. Brown & Root retained Alvin Wirtz as its attorney on the matter, but even a former Under Secretary of the Interior might have trouble winning this case; it was Johnson on whom the firm was depending. “They hired Wirtz for the IRS thing because they knew Johnson would be associate counsel on the case,” Clark says.
Johnson did not shrink from the role; he was developing a line of strategy to solve the problem. The first step was to convince James H. Rowe, Jr., who was Johnson’s liaison to the President, that the Internal Revenue Service investigation of Brown & Root was politically inspired by IRS officials in Texas loyal to the Garner-Jesse Jones group—and was aimed at cutting off vital Texas financial support for the New Deal. Although this was not true, it was not difficult for so persuasive a talker as Lyndon Johnson to convince men who knew nothing about Texas politics that it was. Rowe, who admired Johnson and believed in him, was thoroughly convinced. During the Summer of 1942, he was to recall,
I sent to the President a memorandum telling that Internal Revenue agents were going all through Texas stirring up political trouble for “our crowd.” …
I sent to the President this memorandum saying that they were after the “third term crowd,” who had done the job in Texas, that they were going to all the banks and to the lawyers checking up on political contributions and that if it wasn’t stopped we wouldn’t have a friend left in Texas.
Rowe was later to tell Grace Tully that the President had responded to the memorandum: “So far as I can determine, and I think it is with accuracy, the President spoke to Marvin McIntyre about it. Mac called John Sullivan [Assistant Commissioner of the Bureau of Internal Revenue]. …” Rowe assumed that the matter had been closed.
But it hadn’t. The contributions to the Johnson campaign that were being investigated were too large, the manner in which they had allegedly been concealed too blatant.
The next attempt was made with Sullivan’s superior, Internal Revenue Commissioner Guy T. Helvering, known to Washington insiders as “the President’s man at IRS.” Johnson made the attempt himself; he went to Helvering, told him the same story, and asked him to kill the investigation. But this attempt foundered on the invincible integrity of Helvering’s superior. Internal Revenue was a bureau in the Department of the Treasury, and the Secretary of the Treasury was Henry Morgenthau, Jr., a man detested by the young wheelers and dealers of the New Deal for his unshakable adherence to the law. The investigation would go right ahead, Morgenthau declared.
Now, Rowe recalls, “the Browns were worried … and so was Johnson.” Johnson, he says, “was in trouble,” and he knew it. In October, 1942, Wirtz and George Brown came to Washington and discussed the situation with Johnson. Then Johnson and Brown talked to Rowe. Johnson and Rowe both realized how thin was the ice they were treading on now. Rowe had been invited to the Washington town house Brown & Root maintained at Sheridan Circle. When Rowe learned what the subject of the discussion was to be, he recalls, “I said, ‘I’ll talk to you outside on the street. The IRS probably has this house bugged.’” And that is where they talked—three tall young men, the newly made millionaire, the advisor to Presidents, and the future President, standing on a street in Washington.
“Johnson was worried,” Rowe recalls. Reiterating that the investigation was a form of political persecution, a reprisal for his support of Roosevelt, he asked Rowe to take further steps to kill it. Rowe tried. He went to see Helvering himself, and they discussed the matter: “just the two of us—no, no, that’s not right; he had a witness like those fellows always do. But I said, ‘What the hell, I’ll talk anyway.’ He said Johnson had been to see him to ask him to kill it. ‘Well, I can’t. I would, but the Secretary [Morgenthau] won’t let me.’”
Rowe had made this approach “on my own.” Now he knew that a stronger hand was needed. On November 20, he attempted to bring the subject to the attention of Morgenthau’s superior, by sending a memo ostensibly addressed to Grace Tully. “Helvering has indicated that he can take care of this Texas situation without any trouble, and fairly, but he won’t do it if Morgenthau is going to interfere at the last minute. If Helvering gets told by the President to handle it, and if he is backed up, he will do it.” Apparently Morgenthau’s superior took an interest in the case. Says Rowe: “Then I—and this I would not have done without Roosevelt’s clearance—I went in to see Morgenthau and I got to thinking, ‘Rowe, you’d better be tactful.’ Morgenthau taped everything—everyone knew that. And I just mentioned it—vaguely; just brought it up; I mentioned it to see what he’d say, and he didn’t say much. And I just faded out.”
Morgenthau may not have said much to Rowe, but the Secretary may have issued instructions nonetheless. The IRS agents had, some weeks earlier, been ordered by one of Morgenthau’s aides to stop working on the Brown & Root case until further notice. On December 17, 1942, shortly after Rowe’s approach to Morgenthau, the agent coordinating the case, E. C. Werner, was told to send the Brown & Root file to Washington, which he did by special delivery. Shortly thereafter, Werner and James M. Cooner, special agent in charge of Texas and Louisiana for the IRS, were summoned to Washington to meet with top IRS officials, who, Werner was to write in his diary, “had me explain in detail the fraudulent items and suspicious items.” The next day, they called him back, and gave him his instructions: in Werner’s words,
that the investigation was to continue; that it was to be expeditiously but thoroughly conducted; that no outside persons were to be interviewed but that the investigation was to be conducted from within; that suspicious items found should be brought to his attention and that we were to be diplomatic in our investigation. [Deputy IRS Commissioner Norman D. Cann] said that no criticism was being made of any of us.
And in 1943, the Internal Revenue Service began to close in on the truth behind the financing of Lyndon Johnson’s senatorial race.
On January 22, the six agents involved held a conference in Dallas, and decided on their tactics. Some moved right into the Houston offices of Brown & Root and began checking through the firm’s records. Others went to banks and began checking the deposits and withdrawals of some Brown & Root officials. Still others began interviewing these officials and began checking their stories against the records.
The largest sums of money the agents were investigating at this point were the “bonuses” totaling $150,800 that had been paid to Brown & Root’s treasurer and to four of the corporation’s vice presidents. These bonuses had, according to an entry in the company’s books dated December 27, 1940, been authorized at a meeting on that date. But now the federal agents tracked down a former Brown & Root bookkeeper, Robert C. Home, and interviewed him at McAllen, Texas. Home told the interviewers that, despite the date in the books, the bonuses had actually been authorized not in 1940 but in 1941. The agents investigated further; as a result, Werner was to write in a report to his superiors: “Sufficient evidence is on hand, it is believed, to show minutes authorizing above bonuses to be fraudulent.” Other, smaller, bonuses totaling $24,000 had been paid to lower-ranking Brown & Root executives, the agents found. They obtained transcripts and photostats of the executives’ bank accounts, and Werner reported that he and his men were tracing the disposition of this money; that they had already found, and taken possession of, one check by which $2,500 had been transferred to the Johnson campaign’s bank account; and that a substantial portion of the rest of the $24,000 “is believed to ha
ve been used for [Johnson’s] Senatorial campaign.”
The more they worked on the case—Case No. S.I. 19267-F in Internal Revenue Service files—the more questionable transactions they uncovered. Some of the routes by which, the IRS agents believed, the Brown & Root money had reached Lyndon Johnson’s headquarters were extremely circuitous. Some of them, in fact, led not from Brown & Root but from one of its subsidiaries, the Victoria Gravel Company. It had been not Brown & Root but Victoria Gravel, for example, that had paid a total of $12,500 in “attorneys fees” to Edgar Monteith, a Houston lawyer. And further steps, they believed, had then been taken to cloud the ultimate destination of the money. Ten thousand dollars of it was given by Monteith to his partner, A. W. Baring, as a “profit distribution.” Then Baring had transferred the $10,000 back to Monteith. And the checks Monteith wrote were not to the Johnson campaign directly, but to pay bills owed by the campaign to radio stations and printers. The remaining $2,500 of the “fee” paid to Monteith was passed on by him to another attorney, and it was through this attorney that the money reached the campaign. The trail of some of the money was made harder to follow because while it may have started out as checks, it was soon converted into cash. When, for example, J. O. Corwin, Jr., was given a Victoria Gravel check for $5,000, he cashed it, stuck half the bills in an envelope, and mailed the currency to Johnson headquarters. And, the agents believed, some of the money didn’t even start out as checks; it was cash from the start—large expenditures being made from a “petty cash” fund under the control of Brown & Root Vice President J. M. Dellinger.
Attempting to trace the trail of the various Brown & Root contributions, the Internal Revenue Service agents found themselves encountering evasions and denials from Brown & Root officials and from some of the attorneys involved. Lyndon Johnson himself was not questioned at the time, apparently because of the directive from Washington that “no outside persons” be interviewed. (Years later, when the matter threatened to come to light in a series of columns by columnist Drew Pearson, Johnson was asked about campaign contributions made by Monteith, and he flatly denied that he had received any financial help from him. He also said that he had never even heard of Monteith, although, as Pearson noted, “Monteith’s father was the former Mayor of Houston and a well-known personage” in Texas political circles.) But the agents, digging through corporation and bank records, finding—and photostating—checks and campaign bills, were able to uncover facts that contradicted the denials by the Brown & Root officials and the attorneys.
The agents found the checks involved in the various transfers of money revolving around Monteith’s “attorneys fees”—including the checks to pay the campaign expenses. As for Corwin, he was interviewed by an Internal Revenue Service agent about his $5,000 bonus. Did you use any of it for political donations? the agent asked him. “Yes, I did,” Corwin replied. To whom? the agent asked. “Oh, I probably contributed half of it to one of the Lyndon Johnson clubs,” Corwin said. In what form? Corwin replied that he had mailed it to a Johnson club in Houston—“in currency [cash].” And the balance of $2,500? the agent asked. Corwin replied, “Oh, I spent it.” But the agents were tracing checks. The $2,500 balance, the agents said, had actually gone to another Brown & Root official, D. G. Young, who was reputedly the corporation’s principal “contact man” with politicians. The money had been transferred by, in agent Werner’s words, a “circuitous route. Both Corwin and Young gave false testimony on above item.” Another bonus—$2,500—had been paid by Victoria Gravel to Randolph T. Mills. Questioned by Werner, Mills was, Werner reported, “very evasive,” but Werner finally pinned him down.
Q 118. Did you keep them [the money]? “Yes, I put them in my account.”
Q 119. And retained them? “Well, I didn’t retain them very long, no; that is, I paid out of course.”
• • • • • •
Q 125. Well, you, in other words, the bonus was used by you in connection with your living expenses or obligations, etc.? “Well, I wouldn’t say all of it was. It was in connection with my living—I gave $2500 to the Campaign, Democratic Campaign of 1941.”
Mills finally told Werner that he had made out a check—either “to Chairman, committee, or Johnson”—“shortly after time of receipt of bonus.” He told Werner that he was “pretty sure” he no longer had the check, but Werner wasn’t concerned with that; he had a facsimile of it, made out to one of the campaign’s finance directors.
The more the Internal Revenue Service team searched, it seemed, the more they found. The transactions of which they were suspicious became larger; previously, the largest single questionable transaction had been the $45,000 bonus paid to Brown & Root Vice President W. A. Woolsey; now Werner, checking the account of Brown & Root Treasurer J. T. Duke at the Austin National Bank, came across another check—and this check, made out to Duke by the W. S. Bellows Construction Company, a firm that was part of the Brown & Root-headed consortium building the Corpus Christi Naval Air Station, was for $100,000. And there were increasing indications that cash as well as checks had been involved in large amounts in Brown & Root’s expenditures that the agents believed had found their way into Johnson’s election efforts. Durst, a Brown & Root official, for example, told an IRS agent that he had cashed his $5,500 bonus checks, and kept the money on his person, or hidden it in a drawer of his desk, until it was spent on personal expenditures. The IRS, as its investigation continued, was becoming less convinced of the veracity of this account—although Durst insisted that the only donation he might have made to the Johnson campaign was “chicken feed, ten or fifteen dollars, etc.” Then the IRS started asking questions about Vice President Dellinger’s “petty cash” account. Vice President W. A. Woolsey was asked if he would normally receive monies from Dellinger in checks; “No, he would [give] me the cash,” Woolsey replied. “Did he [Dellinger] have some sort of fund? Cash fund?” the agent asked. Woolsey first said, “Well, I don’t know,” but later said, “When the Naval Air Station was first started, I am sure he kept considerable cash”—which, Woolsey said, was “used” by top Brown & Root officials. In the margin of his notes on this interview, Werner wrote his conclusion about what he was hearing: “Slush fund.”
In July, the IRS agents began to focus on the $150,800 in bonuses. They arranged interviews with Brown & Root’s top officials—and with Herman and George Brown themselves. At these interviews, as many as three agents would be present, in addition to a stenographer to take down the witnesses’ replies. Some witnesses were defiant. Asked if he had donated any of his $17,000 “bonus” to the Johnson campaign, Treasurer Duke replied: “No, we didn’t make any—do you think we want to go to the penitentiary by making donations when we have all of these Federal contracts?” Any such allegations, Duke said, were “just plain bullshit.” But clues as to the disposition of the “bonuses” were growing nonetheless. On October 23, Vice President L. T. Bolin admitted that he had made a cash contribution to Johnson’s campaign, although he wasn’t sure of the amount; it might have been $500, he said. But he admittted paying for, in an agent’s words, “some radio time and other things,” and the IRS agents determined that Bolin had written two personal checks—for $1,870 for cash, which they found had been given to Johnson headquarters, and for $1,150 to a printing firm for campaign printing. As for the Brown brothers themselves, their answers under questioning were consistent with their personalities. Asked if Brown & Root ever “directly or indirectly” made any political donations, suave George smoothly replied, “Insofar as I know, they haven’t.” Asked again about political donations, he replied: “We have certainly not directed anybody to give campaign funds. We knew it was not legal to give any political funds, and if anybody working for Brown & Root gave any political funds, it was without our knowledge. Certainly I don’t think it has been charged to Brown & Root. If it has, it certainly shouldn’t have been.” Of course, he said, since others had the authority to sign checks, he “wouldn’t make a sworn statement that nobody has d
one it.”* Werner was to write that George personally drew $2,500 from the company, and that, while the money was “believed paid to Johnson campaign,” it had not been traced. As for Herman, fierce and unyielding, who drew $5,000, no notes on his interview can be found, but he apparently made no bones about what had been done with money: “admittedly paid to Johnson campaign,” Werner wrote.
All through October, 1943, these interviews went on, and on November 1, Alvin Wirtz, telegraphing from Houston, asked Roosevelt for an appointment to discuss AN IMPORTANT MATTER … AT YOUR EARLIEST CONVENIENCE, supplementing the request with a telegram to Pa Watson: ONLY A MATTER WHICH I THINK IS IMPORTANT TO THE ADMINISTRATION, AS WELL AS MYSELF, WOULD IMPEL ME TO MAKE THIS REQUEST. When he was given an appointment, for November 8, Wirtz specified to Watson that it be “off the record.”
The matter was apparently being raised with Morgenthau again—with the same result as before. On November 2, Werner was told by Cooner that he had just received a telephone call from Assistant Secretary of the Treasury Elmer L. Irey in Washington. Irey, Cooner said, had relayed a message from Morgenthau: that “the case was to be handled like any other case.” And, Cooner said, Irey had added a message of his own: “that it appeared fraud was present in the Brown & Root, Inc. case,” and that “if prosecution was in order, then the Government would prosecute.” Wirtz was unable, for all his persuasiveness, and for all the compelling political reasons on his side, to get Morgenthau’s decision overruled by the only man who could overrule it. The most the President would agree to do was, in Wirtz’s words, to leave the matter “open for further discussion.”
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