by Damon Runyon
Johnson drew attention to testimony, by Fred Ries, former associate manager of a Cicero gambling resort. Ries, he said, admitted that after taking out running expenses he bought cashier’s checks for Bobby Barton. Johnson went on:
“And Bobby Barton bought money orders transmitting $77,000 to Capone in Florida. Defense counsel was strangely silent about this. Even the master mind who plans the perfect crime—and this was intended to be the perfect tax crime—slips sometimes.
“Capone went to Florida, where he had occasion to spend a lot of money on his home in Palm Island. Again the master mind who attempted the perfect crime slipped when he gave his financial secretary, Jack Gusick, checks to pay his bills.”
He scoffed at the testimony of defense witnesses that Capone lost $327,000 betting on the horses. He referred to them as “so shifty they couldn’t look you in the eye.”
Johnson reminded the jurors the defense lawyers had talked to them for four hours, but made no reference to the money orders sent from Capone’s headquarters in the Lexington Hotel in Chicago to Capone in Florida.
He declared the records showed $77,000 was sent and received between Chicago and Florida.
Johnson warned the jury to remember the men and women who pay a tax on incomes over $1,500 a year. He contrasted them with Capone, whom he flayed for evading taxes during “this time of national deficit.”
MORGAN THE MIGHTY
Washington, May 23, 1933
Morgan, the mighty, is on the spot!
We wait, anxiously, for the earth to rock.
Nothing happens, except a slight tremor of excitement, as the world gets up on tiptoe to look and listen.
It turns out to be an income tax inquiry, something like Al Capone’s or any of the other boys.
Morgan, the mighty, one of the richest men on the face of the globe, pays no income tax in 1931 or 1932. He does not remember about 1930.
His twenty partners in the J. Pierpont Morgan firm, many of them supposed to be very wealthy, pay an aggregated income tax of $48,000 in 1930, and none whatever in 1931 and 1932. That’s all of them, understand. Losses, you know, losses, losses, losses.
Morgan, the mighty, appears as he sits at a table with some of our noted Senators in a room foggy with cigar and cigarette smoke, not the fabled giant of world financial history, not the titan who juggles nations like Bill Fields juggles cigar boxes, but a benign old gentleman somewhat harassed by questions popped at him by a person with a jutting jaw and a horribly legal mind, named Ferdinand Pecora.
A nice old gentleman who is trying to make answer to these questions with all the patience that he might exercise in telling a small child just how high is up. A kind old gentleman who seems slightly bewildered at times by the insatiate curiosity of this Pecora person, and whose memory wabbles occasionally, as the memories of old gentlemen will do.
Surely, surely, this is not the Great Morgan who has been pictured as a pirate of the financial high seas, and at whose slightest frown the biggest moguls of the money marts shake and shiver in their boots!
Why, you say, he would make a lovely Santa Claus, with his build and all, if he had white whiskers.
But it is none the less Morgan—Morgan, the Mighty—son of Morgan, the Magnificent, to whom the old gentleman refers with fond intonation in his voice several times during the day.
Master of wealth, and even human destiny. Overlord of commercial realms, and far-flung financial kingdoms—this is undeniably Morgan undergoing a prying into his affairs as a private banker that may yet produce the earthquake we have been anticipating.
This is Morgan, the mighty, being examined by a busy, keen-eyed New York lawyer, and a bunch of eagerly listening country bankers, and merchants, and small business and professional men, representatives of 120,000,000 people.
Slowly, painstakingly, and with a wealth of detail—his lawyers and his business associates banked behind him—he answers Mr. Pecora’s questions, telling how his concern has deposits of over $300,000,000 and how it functions in all its personnel and capacity, until Pecora gets down to income tax questions.
Then he does not remember. He knows nothing whatever about income tax matters connected with his firm. But before the Senate committee adjourns to go into executive session, Morgan, the mighty, makes a request that his income tax expert be examined that no suspicion or wrong impression may be left from Pecora’s questions and his own answers as to these matters.
So the expert appears, and there is in Pecora’s questions to him, over and beyond the questions dealing with the individual returns of Morgan, the mighty, and his partners, the inference that a loss of over $21,000,000 was written into a Morgan House return by the expedient of taking in a new partner.
At times during Morgan’s examination you rather feel sorry for him. It is warm. He perspires. He mops his face frequently with a large handkerchief. Toward late afternoon he looks tired. You say to yourself, “That jutty-jawed fellow oughta let this old gentleman be. He’s got him plumb worn out.”
Possibly Senator Carter Glass, of Virginia, has this humane feeling. He endeavors to spare Morgan some of the Pecoran insistence in asking again and again about income tax matters. It is amazing how curious Pecora is about income tax, but Morgan can give him no help. He says, “I don’t know.”
Senator Glass says he himself does not know much about his income tax matters, leaving them to experts, and he sees no use in hectoring Morgan.
This develops into a slight spat between Senator Glass and Senator Couzens, of Michigan, who says he resents some one witness being treated any differently from another in the august presence of the committee that is digging into the banking affairs of the community.
Pecora handles Morgan about the same as he would handle a witness in the case of the People of the State of New York versus Robert Roe.
He seems cold, implacable. Even when Morgan smiles at him with great geniality Pecora does not smile back, though one good smile always deserves another.
The session ends with the feeling among those who listen that Pecora is trying to clean all the windows in the great House of Morgan so he can get a good peek inside.
When the investigation began this morning we were in a big high-ceilinged room on the third floor of the great white Senate Office Building, where the noble Senators have their offices. The ceiling of the room is tinted a nice baby-blue. There are models of sailing ships on the shelves just under the ceiling at either end of the room.
The walls are of white marble. Three great glass chandeliers that must have cost a pretty penny hang from the ceiling. This is the official hearing room of the Senate Banking and Currency Committee.
The long corridor leading to the doors of the committee room is crowded with men and women unable to gain admittance but waiting there for a peek at the great Morgan. They struggle at the doors, arguing with the door tenders. They are struggling long after the hearing starts. They struggle so audibly that members of the committee complain they cannot hear a word. Streetcars grinding along in the street outside the open windows add to the din.
In a front row sits young Junius Morgan, a fine-looking chap, with all the striking Morgan characteristics in his features. Beside him sits Martin Egan, publicity man of the Morgan forces, and once a famous war correspondent.
Now here comes J. Pierpont Morgan himself through a rear door. He is preceded by his attorney, John W. Davis, Democratic candidate for the Presidency in 1924, a gray, immaculate-looking man. There is great confusion as Morgan advances through the crowd of spectators. It is said he arrived in Washington with a stout bodyguard. This is not in evidence today.
He is a powerful-looking man, easily six feet tall, with much meat on his huge frame. He weighs well over 200 pounds. He is sixty-six years old, but looks older. His face is ruddy, his features heavy. He has a big, predatory-looking nose.
He is dressed in a dark blue suit with a faint pin stripe. His shirt is starched white linen.
His tie is black with white fingers. A huge O
riental pearl adorns the tie. He wears a heavy, old-fashioned watch chain of gold across his vest, the middle hooked in a buttonhole by a crossbar. A green-stone crest ring is on the little finger of his left hand. A pair of eye-glasses dangle by a cord alongside his watch chain.
He is a well-kept, well-groomed-looking man. His head is bald and shiny. He has a huge, bristly moustache now quite white. His eyebrows are black and bushy. He looks like a most benign old gentleman as he enters the court room, carrying a battered Panama hat in one hand, and smiling gently on all the world, but later on you see the lightning behind the brows, and sense the thunder in the voice.
He is surrounded by his partners and aides as he enters. There is Thomas W. Lamont, George Whitney, and other members of the Morgan firm, very rich men, all. Mr. Morgan takes a chair at one end of the room, and the photographers surround him with a temerity they have never before displayed. He poses for them with astounding amiability, his huge hands resting on his knees. He even conjures up a placid beam for the camera men.
Not in the memory of man has a Morgan submitted so tamely to a public photographing. Mr. Morgan gazed about with apparent interest. Indeed, he seemed to be getting something of a kick out of the proceedings, now that he was well into this untoward experience. He posed over and over again for the photographers until somebody in authority came along and said, “That’ll do, boys.”
He chatted easily with those around him. Then he was asked to take a seat at the committee table, right in the center on one side with Costigan of Colorado to his left and Bulkley of Ohio to his right. He says something to Bulkley as he sits down, and smiles broadly.
Now Pecora enters, swarthy, brisk, and smiling, with a pack of nimble young assistants at his back. Two boys enter lugging a big black trunk between them. This is some of Pecora’s evidence. It certainly looks ominous. Pecora wears a suit of “pepper-and-salt” design, and white linen. He has curly iron-gray hair and a jutting jaw and is very clean-looking and business like.
Senator Fletcher, of Florida, in a morning coat with black braid, an elderly man of slow movement and speech, opens the proceedings by calling the committee to order. A number of Senators who are members of the State Banking and Currency Committee but not members of the subcommittee come in and take chairs at the table, including the tall, stately-looking McAdoo of California, his lean neck surrounded by his characteristic white linen collar that would choke the average man. Senator Fletcher asks of Pecora, “Who is your first witness?”
Mr. Pecora, without rising from his chair, replies briefly, “J. P. Morgan.”
And the examination is under way.
Pecora does not rise from his chair as he interrogates Morgan. His voice is very calm as he goes through a long preamble of questioning which is designed to establish who Mr. Morgan is. As if everybody didn’t know.
Well, it seems that he is senior partner of the firm of J. P. Morgan and Co., of Wall Street, with twenty partners in the New York concern, and that they do a private banking business up in so many millions it makes your head swim to think of them. The Morgan deposits alone are $340,000,000.
As Morgan concludes he leans back in his chair and looks placidly at the committee as much as to say, “There, now boys, I have cleared everything up for you.”
Pecora does not look at Morgan while questioning him, but Morgan looks at Pecora in answering and frequently smiles. Perhaps he feels it might be well to conciliate this gentleman until he finds out what is up his sleeve.
When he finally learns this, Morgan ceases to smile. The angry blood comes into his face. The veins in his neck thicken. He is biting his back teeth together so hard the muscles of his neck twitch.
When Pecora finally gets down to the matter nearest and dearest his investigatorial heart, the income tax, Morgan seems to get very nervous. He hauls a white handkerchief out of his breast pocket and mops his face.
An income tax return covering the two days, January 1 and January 2, 1930, inclusive, which return is separate unto itself, is the subject of much inquiry by Pecora. Says Morgan uneasily, “I don’t know anything about income tax returns.”
Pecora asks, “Do you know that deductions for losses of $21,071,862 are claimed in the returns for those two days?”
Morgan replies, “I don’t know.”
Then Morgan says he thinks that in view of the fact that the various income tax matters Pecora asked about had been left unexplained and might be wrongly construed, he thinks Mr. Leonard Keyes, his general manager and income tax expert, ought to be heard.
Keyes says he prepares all the returns for J. P. Morgan & Co. and all the individual partners, and in 1930 the aggregate amount paid by the twenty partners was $48,000. In 1931 it was nothing, and ditto 1932.
He says the two returns for 1930 were due to a change in the Morgan partners. S. Parker Gilbert was admitted January 2, 1931, and although no business was transacted on January 1, a holiday, the return showed profits of nearly $2,225,000 for only one day, in brokers’ commissions and the like. But it was this two-day return that shows a loss of over $21,000,000.
May 24, 1933
There sit the great J. Pierpont Morgan, proud overlord of the financial world, and his faithful henchmen, all damp with perspiration—the great Morgan who admits he pays Great Britain income taxes in the same years he pays nothing to his own United States.
And there the swarthy Ferdinand Pecora, son of Italian immigrant parents, patiently beats his way through a weird jungle of high finance until the twisting trails around him are alive with all manner of strange things in the form of disclosures that will astound this nation.
Somewhere, close at hand, the dark-browed Pecora believes, lies the lair of the most powerful influences on the public and commercial life of the United States that have existed in all its history, but as he presses on you will read (and perhaps weep), as he shows today how scores of distinguished citizens were “preferred clients” of the House of Morgan.
How they were “given the opportunity” of buying at $20 per share a stock that was sold on the market at all the way from $34 to $50. They were given this “opportunity” before the stock was handed out to the public. They were “on the inside,” so to speak, perhaps because in each case it was the same as with William Woodin, to whom a member of the firm of J. P. Morgan & Co. wrote coyly:
“We just want you to know that we are thinking of you.”
You will read how Norman H. Davis got a loan, amount unknown, but still unpaid, from the House of Morgan.
You will read, also, how the House of Morgan distributed its deposits of millions over a wide area of banks and trust companies in New York, Boston, Pittsburgh, Philadelphia and Chicago, so that its influence was necessarily woven into the very fabric of the banking system of the country.
Morgan himself sits nearly all day in the witness chair, with a big fat book of typewritten pages in his pudgy hands. It contains records of his firm. When he is asked a question by Pecora he thumbs the pages somewhat helplessly, as if saying to himself, “Now what in Sam Hill is all this I’ve got here, anyway?”
Then he generally turns and gets a line on the matter in question from those behind him, usually George Whitney. The great Morgan frankly admits he does not know a whole lot about the details of his business, just as he is in the dark on his income tax matters—except those relating to Great Britain.
Only once in the long history of the House of Morgan has there ever been a public statement of its policy and procedures, he says, in the course of his examination. This was made by “father.” Morgan never says “my father.” Just “father.” You can see that this old gentleman, who somehow doesn’t look so benign as he did yesterday in the light of the day’s revelations, adores the memory of his distinguished sire.
“You refer to the time some twenty years ago when he testified at a public inquiry?” asks Pecora.
“The only time,” replies Morgan softly.
He perhaps wishes it still remains the only time
there have been disclosures bearing upon the Morgan firm.
It is George Whitney, one of the younger Morgan partners, who is finally pushed forward to bear the brunt of the more startling revelations of the day, when Morgan says he thinks Whitney will know more about the matter of the financing of the Alleghany Corporation by the Morgan company than anyone else.
It is this corporation in which the eminent gentlemen, including Colonel Charles A. Lindbergh, were the favored of the Morgans in the matter of buying stock.
Whitney is said to be called “Icicle” Whitney in Wall Street, because of his cold, dispassionate demeanor, though Pecora has the ice thawing and running all over the premises when he finally gets to examining Whitney about his income tax return, which shows that he netted a nice profit himself on Alleghany.
Whitney is in his early forties, tall, slim, good-looking, pincenezed, well-groomed and faintly supercilious in his attitude toward Pecora. By the way, Pecora is Italian for “lamb,” I am told. This is no lamb, however, this round-headed scion of sunny It’. This is a lion of the law.
He has a curious way of sitting silent in his chair when the members of the committee start asking questions and engaging in windy debates. Pecora lets them exhaust themselves, then goes on quietly with his witness, as if never interrupted.
He asks seemingly irrelevant questions for a time, then, suddenly bang! Out pops a shot that makes you realize he has been aiming at this target all along.
Whitney gets into the proceedings in the morning and becomes spokesman for the Morgan clan when it is expected that next to Morgan himself this role will be filled by Thomas W. Lamont, one of the older members of the crowd, who is present. Whitney rises voluntarily at the morning session to explain something a member of the committee wishes to know, while Morgan is still on the stand, and then he remains standing half an hour while Pecora questions him.
Whitney seems slightly contemptuous in tone as he answers Pecora when he is asked at the morning session if it is not a fact that after paying $11,000,000 in income taxes in 1929 the combined Morgan partners paid an aggregate of only $48,000 the following year, and nothing whatever the next three years.
