by Kai Bird
When Ferencz turned his attention to the case of Krupp slave workers, he received a blunt refusal even to consider the question of compensation. Handed a fifteen-thousand-word legal brief that meticulously documented Alfried Krupp’s personal responsibility for the horrendous conditions under which his slave workers lived and died, Krupp’s chief aide, Berthold Beitz, turned white with anger, cried out, “Erpressung” (“blackmail”), and then stomped out of the room.125
At this point, Ferencz had Blaustein formally approach McCloy. Ferencz was confident that McCloy would intercede with the German industrialist. In all the years he had known McCloy, the lawyer had never said no: “Whatever I proposed, he said yes to. . . . I found him to be the kind of man who liked to say yes.”126
But though McCloy was willing to help Ferencz and Blaustein win what compensation they could for the surviving slave workers, he did not want it to appear that Krupp had relented only out of consideration for the man who had given him his freedom and restored his personal fortune. “He was very hesitant,” Ferencz later recalled, “about approaching Krupp directly. He didn’t want Krupp to feel [that he was saying], ‘I turned you loose, now you have to pay the Jews.’ ”127
So, when first asked to intercede with Krupp in the summer of 1958, McCloy let it be known through one of his German friends that he thought it wise for Krupp to settle the Jewish claims. There may have been the barest hint of a threat that he might be willing to issue a pointed public statement on the issue unless Krupp began negotiations in earnest.128 Within weeks, Beitz flew to New York and in a meeting with McCloy, asked to see a detailed proposal for such a settlement. Blaustein quickly messengered a document to McCloy’s Chase office which outlined a settlement modeled after the modest compensation paid by the I. G. Farben companies. But before real negotiations could begin, Beitz told McCloy that, though Krupp could be interested, any such settlement had to be seen as something voluntarily initiated by Krupp himself. Beitz then returned to Germany, and McCloy told Blaustein and Ferencz to give the Germans time to come up with a proposal of their own.129
Months went by with no word from Krupp. Finally, in June 1959, Beitz informed the Jewish Claims Conference that Krupp was breaking off all negotiations. Upon hearing of this, Ferencz decided to strike out at the heart of Krupp’s business assets. Krupp had one vulnerable point in 1959. When McCloy had restored Krupp’s fortune in 1951, he had stipulated that Krupp would have to divest himself of the massive steel plant at Rheinhausen. On top of this, in the “Krupp Treaty” of March 1953, Alfried Krupp himself had given his word of honor to divest himself of his coal and steel holdings by 1959. Since then, he had done anything but try to sell these holdings, and his manager, Beitz, had given his own pledge as early as 1954 that, as long as he was associated with the firm, “Not a stone shall be sold.” Each year thereafter, Alfried Krupp had managed to obtain an extension from the Mixed Commission empowered to enforce the Allied laws on industrial deconcentration. These laws were now being openly flouted, and by 1957 Adenauer himself formally requested that the Krupp Treaty be allowed to lapse without implementing its decartelization provisions. All this caused some annoyance to McCloy, who felt he had placed his own personal prestige behind the Krupp Treaty. “I’ve said, and I still say,” he told one reporter, “that he [Krupp] volunteered to sign it and he should stick to it. He says it was extorted from him under duress. That’s absolutely untrue.”130 Well aware of McCloy’s unhappiness with Krupp over this issue, Ferencz thought that he could use the threat of a divestment order to compel Krupp to pay what was, after all, a paltry sum of $2.38 million to the slave workers.
McCloy in any case thought it would be “good business” if Krupp settled the claims, and now told Blaustein that during his upcoming trip to Germany that summer he would investigate the matter. True to his word, once in Germany, McCloy discussed the issue with his old friend David Bruce, who was now serving as the U.S. ambassador to Bonn. A short time before McCloy’s arrival, Bruce had gone pheasant-hunting with Alfried Krupp and Berthold Beitz, and he encouraged McCloy to talk with Krupp directly. So it was that McCloy found himself being driven to Krupp’s Villa Hugel estate one day in July 1959.131
Over lunch, he tried to impress upon Krupp and Beitz that a settlement on purely humanitarian grounds would only enhance the company’s image and moral stature. The two Germans admitted that the amount of money involved was small indeed. But they told McCloy that they had promised other private companies, facing similar claims, that they would not prejudice their court battles by settling out of court. McCloy reported to Ferencz that Krupp needed more time.
But Ferencz could brook no further delays. If McCloy’s “velvet glove” could not produce results immediately, Ferencz had decided it was time to file a case in New York, suing Krupp for $100,000 for each slave worker, and attaching Krupp’s accounts in Chase Manhattan Bank. Just before the case was filed, some of the more incriminating documents were shown to Beitz by Eric Warburg. Warburg told the Krupp manager that things were getting out of hand. He again urged Beitz to fly at once to New York and settle the claims before a torrent of bad publicity jeopardized Krupp’s standing with the U.S. government.
Warburg’s arguments—and the documents proving Krupp’s guilt—finally persuaded Beitz that he had to act. At the same time, Krupp had been waiting for the claims commission to recommend a cancellation of the divestiture order concerning his coal and Rheinhausen steel holdings. The claims commission did this during the autumn of 1959, so, by the time Krupp agreed to reopen negotiations on the Jewish slave-worker claims in November, all that remained was for the State Department to approve the recommendation.
Obviously, the timing was such that Krupp’s willingness, finally, to talk compensation payments for the Jews was intimately tied to whether the U.S. government agreed to waive the divestiture order. Whether McCloy played any direct role in this trade-off is not clear. But it is known that Beitz first flew to Washington, where he met with State Department officials. Then, on Thanksgiving Day, he flew to New York, where McCloy had reserved a conference room in Chase’s midtown office. There Beitz offered Blaustein the following deal: Krupp would pay up to $2.38 million, enough, it was thought, to give each surviving slave worker $1,250 in compensation. In return, the Jewish Claims Conference had to pledge that Krupp would no longer be subject to any further claims by Jewish survivors of the Holocaust. The slave workers would receive a paltry sum, and Krupp would be allowed to retain his coal and steel holdings. But after so much haggling, Blaustein felt it was all they could hope for, and so quickly initialed a preliminary agreement. A little more than a month later, on the day before Christmas, a final document was released to the press. The New York Times reported that Krupp had rejected any legal liability and was only paying the compensation in order to help “heal the wounds suffered during World War II.” In London, the Sunday Dispatch noted how little the surviving slave workers were to be compensated and called the settlement “mean-spirited and tawdry.”132
In the end, everyone had greatly underestimated the number of surviving Krupp slave workers. Consequently, instead of the $1,250 Ferencz had budgeted for each survivor, most claimants received no more than $500.133 Still, in retrospect, Ferencz believed his efforts were worthwhile, and he always credited McCloy for whatever meager compensation was extracted from Krupp in behalf of the former slave workers. So too did prominent Jewish leaders like Nahum Goldmann. Because of his role in the restitution of these Jewish slave workers, the following year the American Jewish Committee and the B’nai B’rith singled him out for a Human Rights Award.134 Just a few short years before, he had angered many of these same Jewish leaders for giving Krupp his freedom. But that was ancient history.
During these sunset years of the Eisenhower administration, McCloy’s counsel was sought by a remarkably broad range of influential and powerful men in and out of government. Journalists like “Scotty” Reston and Joe Alsop used him for background information in their
widely read columns. From time to time, he still received summonses to appear in Washington for one of Frankfurter’s “tête-à-tête dinner[s].” Typically, the justice’s invitations explained only that a “matter that is, I think, of as much concern to you as it is to me makes me anxious to see you. . . .”135 Once—in a reference to his Harvard years, when Frankfurter never called on him in class—McCloy joked, “I am impressed that at long last (some thirty-nine years) you have gotten around to calling on me.”136
He seemed to be everywhere—in Washington, New York, Bonn, London, and Paris—and to know everything. When Eisenhower was contemplating a round-the-world trip that summer, McCloy advised him that it would be a mistake to pass up the Philippines, for he had heard from one of his contacts that this would cause serious injury to America’s political allies there. As the country’s foremost banker, he regularly served on the Federal Advisory Council of the Federal Reserve Board. His responsibilities now included the chairmanship of the Chase Manhattan Bank, the Ford Foundation, and the Council on Foreign Relations. Among his charitable activities during the late 1950s he and the Rockefellers raised money for the Metropolitan Opera and its new home in the modernistic Lincoln Center on the West Side of Manhattan. In addition, he sat on the board of directors of such major American corporations as Westinghouse, United Fruit, AT&T, Metropolitan Life Insurance Co., Squibb Corporation, and a half-dozen other corporations. College students across the country were just then beginning to know him as one of those named in C. Wright Mills’s best-selling book, The Power Elite. The “inner core of the power elite,” wrote Mills, “consists, first, of those who interchange commanding roles at the top of one dominant institutional order with those in another. . . .”137 The professor couldn’t have cited a better example of this phenomenon than John J. McCloy.
In the summer of 1959, just before McCloy took his family for an extended trip to Europe, C. D. Jackson wrote to remind McCloy that later that summer a World Youth Festival was scheduled to take place in Vienna. Jackson asked McCloy to contribute an article, perhaps on the “benign and constructive aspects” of the U.S. occupation of Germany. The piece would appear in a daily newspaper to be published in Vienna in conjunction with the festival. McCloy agreed, and the article was published (in five languages) in a newspaper distributed by a twenty-five-year-old Smith graduate named Gloria Steinem.138
McCloy’s connection to Steinem went beyond contributing an article to the propaganda operation of which she was an editor in Vienna. Late in 1958, he and Jackson had discussed how the United States should respond to the expected Soviet propaganda blitz in Vienna. Previous gatherings of this kind had always been held in Moscow, East Berlin, or other cities in Eastern Europe. These events were major propaganda circuses, and the CIA was determined, in the words of Cord Meyer, a career CIA officer, “to compete more effectively with this obviously successful Communist apparatus.”139
Washington expected some twenty thousand students and young scholars from all over the world to converge on Vienna that summer for the three-week festival. Consequently, the CIA wanted an organized student presence in Vienna in order to counter Soviet propaganda.
C. D. Jackson recognized the Vienna Youth Festival as “an extremely important event in the Great Game.” He explained, “This is the first time commies have held one of these shindigs on our side of the iron curtain; and what goes on, how it goes on, and what the follow-up will be is, I think, extremely important.”140
By the time Jackson first approached McCloy, in the autumn of 1958, he and Cord Meyer, head of the CIA’s International Organizations division (IO), had a plan. The Agency would provide discreet funding to an “informal group of activists” who would constitute themselves as an alternative American delegation to the festival. The CIA would not only pay their way but also assist them to distribute books and publish a newspaper in Vienna. Among other individuals, Jackson and Meyer hired Gloria Steinem to work with them. Steinem had recently returned from a two-year stint in India, where she had been a Chester Bowles Asian Fellow.
“I came home in 1958,” Steinem later explained, “full of idealism and activism, to discover that very little was being done. . . . Private money receded at the mention of a Communist youth festival.”141 Convinced that a contingent of liberal but anticommunist American students should go to Vienna, she heard through her contacts at the National Student Association that there might be funding available to finance American participation in the festival. Working through C. D. Jackson and Cord Meyer, Steinem then set up an organization in Cambridge, Massachusetts called the Independent Service for Information on the Vienna Youth Festival. She obtained tax-exempt status, and Jackson helped her raise contributions from various American corporations, including the American Express Company. But most of the money came from the CIA, to be managed by Jackson in a “special account.” The entire operation cost in the range of $85,000, a not inconsiderable sum in those years.142 (Steinem’s organization, later renamed the Independent Research Service, continued to receive support from the CIA through 1962, when it financed an American delegation to the Helsinki Youth Festival.143)
Steinem ended up working closely with Samuel S. Walker, Jr., vice-president of the CIA-funded Free Europe Committee. Because the Austrians did not want to be associated with the Free Europe Committee, the Agency set up a commercial front called the Publications Development Corporation (PDC). Walker was made president of this dummy corporation, funded in part by “a confidential one-year contract” worth $273,000 from the Free Europe Committee.144 His job was to supervise the book-and-newspaper operation at the Youth Festival.145
McCloy was brought into the entire operation when Jackson needed to arrange a procedure for paying expenses in Vienna. As Jackson explained it to Cord Meyer, “I have been in touch with Jack McCloy on handling of funds, on a non-attributable basis. He told me that the Chase Bank had done it in the past and gave me the name of the man in Chase who knew all about such things.”146
McCloy told Jackson that the “money would have to do quite a lot of traveling—from Chase to Switzerland in one of the numbered accounts; from Switzerland to Breisach & Co. in Liechtenstein. . . .” From there, Jackson arranged to have Time reporter Klaus Dohrn pick up the Liechtenstein funds in cash, stuff them into a suitcase, and drive to Vienna.
How often McCloy allowed the CIA to use Chase Manhattan Bank in this fashion is not known. He probably had fewer qualms about the Agency’s using Chase Bank facilities than he did about the much more delicate relationship between the Agency and the Ford Foundation. Chase’s accounts and its network of corresponding banks overseas were there for any client, private or governmental, to use. Given the tenor of the times, and McCloy’s close relationship to Allen Dulles, it would be surprising if Chase’s contacts with the CIA were not frequent and friendly. About the same time that McCloy helped the Agency with its covert operation at the Vienna Youth Festival, Cord Meyer began fundraising for the American Institute for Free Labor Development (AIFLD), a new organization designed to train labor-union officials from Latin America on how to combat communism. Chase Manhattan Bank, Standard Oil of New Jersey, and several other large corporations subsidized AIFLD’s activities.147
Upon his return from Europe in the summer of 1959, McCloy had his first chance to meet Nikita Khrushchev. Eisenhower had finally extended an invitation to the Soviet Communist Party chairman, who promptly accepted and announced that he would spend a full ten days in America. He wanted to see as much of the country as possible. When Khrushchev arrived in New York, Averell Harriman hosted an exclusive reception for him in the library of his New York town house at 16 East 81st St. The previous autumn, Harriman had been bitterly disappointed to lose his gubernatorial re-election race to Nelson Rockefeller. Finding himself essentially unemployed, Harriman had set off on a private visit to the Soviet Union, where he spent an extraordinary ten hours in conversation with Khrushchev. “I never realized,” he said later, “that you could learn so much about
a man in one long session.”148 He came away from Moscow highly impressed with the voluble Soviet premier.
When Khrushchev agreed to come to a reception, Harriman consulted McCloy on who should be invited. It was Harriman’s thought to introduce the Russian to “leading bankers and businessmen.”149 McCloy suggested a dozen names, including Frederick Ecker (Metropolitan Life Insurance Co.), Rogers Herod (International General Electric) and W. Alton “Pete” Jones, an oil man and a member of Eisenhower’s informal “kitchen Cabinet.” All together, twenty-nine corporate executives, foundation presidents, and politicians came to Harriman’s home on the evening of September 17, 1959. In addition to those whom McCloy had suggested, Harriman had invited such personalities as John D. Rockefeller III, David Sarnoff, Dean Rusk, Henry Heald, William C. Foster, and John Kenneth Galbraith. Afterward, Harriman calculated that the men assembled in his library controlled among themselves some $38.9 billion in corporate or foundation assets.150
Khrushchev was properly impressed when Harriman introduced him to this imposing assemblage of the capitalist world. “You rule America,” he quipped. “You are the ruling circle.” Indeed, like Stalin before him, Khrushchev always displayed a greater willingness to deal with recognized “capitalists” than with the politicians who represented them.151 In his memoirs, Khrushchev vividly recalled meeting Harriman’s guests, who looked to him “like typical capitalists, right out of the posters painted during our civil war—only they didn’t have the pigs’ snouts our artists always gave them.”152
In the presence of this “ruling circle,” Khrushchev tried to be blunt. The United States, he said, would be wise “not to be tough with the USSR” and “not to push the USSR around.” He tried to convey the confidence he felt in his country’s strength and the pride he felt for its accomplishments. But, though insisting that America treat his country as an equal, he also tried to convey his willingness to deal realistically with Washington. Most of the businessmen present came away rather frightened at the prospect of negotiating with such an intelligent adversary. Peter Jones thought him a “clever, cunning fellow.” General Electric’s Rogers Herod wrote Harriman afterward that the Russian impressed him as “a quick, shrewd thinker. . . . I came away with some misgivings as to the results of his visit to the USA if he impresses others as he did me.”153
