IBM and the Holocaust (54 page)

In his candid remarks, Ross predicted that England would be forced into an armistice within two weeks, thereby abandoning Europe. Moreover, he openly revealed his approval of and cooperation with the Hitler regime. "He [Ross] . . . has first-hand knowledge, having lived in the same building as the German Minister . . . On reaching these shores, the Captain was 'simply terrified and appalled' by the ultra-frank outbursts of American officials against Hitler and Mussolini, which, he opines, were in the manner of 'spindly boys tweaking the neighborhood bullies' noses.' . . . 'I am an American,' he sums up, 'but I say that before you start calling names be sure you're prepared: This country thinks it's going to spend a lot of money and make soldiers overnight. You can't do it. Germany worked at it for five years' . . . The Germans, he contends, had better trained soldiers, superior equipment and streamlined generals." Ross also declared he had conceived a plan in which Watson could use his channels to funnel money to destitute civilians in Europe.
¹⁶

The seemingly inconsequential article did not escape the attention of those in Washington on the lookout for Nazi sympathizers. Assistant Secretary of State Adolf Berle sent a clipping to J. Edgar Hoover at the FBI declaring, "the remarks . . . follow the same pattern used in all German propaganda." Copies of the article made the rounds at the State Department and IBM. Quickly, Watson learned of the embarrassment. In an example of how Watson, if so moved, could act with swift corporate wrath to protect the company's interest, Watson immediately turned on Ross. In an instant, Ross' decades of colorful accomplishments for IBM were forgotten. He was summarily cut off.
¹⁷

On September 6, 1940, Watson wrote Ross a humiliating termination letter. "I have before me a clipping from the
Brooklyn Eagle
of August 28, 1940, in which you pretend to speak as a representative of our Company," Watson began. "You were our agent working on a commission basis in Spain for several years, until we arranged with you in Paris, in August 1939, for your retirement. . . .

"You used my name in connection with a plan which you state you have of sending monetary aid to refugees and destitute civilians in France, in which you say I am willing to cooperate. I have never discussed any such matter with you, and I am not interested in any plan you have in mind. I am already extending my cooperation through other channels approved by our Government.

"You have no right to involve our Company, my name, or any of the Company representatives in any statements. Furthermore, you made statements in regard to the countries at war, and criticized our country's policies, for which you must accept sole responsibilities as an individual. I demand that you inform the
Brooklyn Eagle
that the statement attributed to you was an expression of your own opinion and not made as a representative of International Business Machines Corporation, any of its officers or members of the organization; and that your statement was made without the knowledge or consent of anyone connected with our Company. . . .

"This matter is so serious from the standpoint of our Company that it is necessary to advise you that effective immediately we must sever all relations between us. We had discussed the possibility of making use of you in some other capacity in our business, but the statement you made in the article referred to makes it impossible for us to do so. I am attaching to this letter the regular cancellation notice of your contract."
¹⁸

On September 6, 1940, Ross indeed wrote the editor of the
Brooklyn
Eagle
a stultifying retraction that sounded as though it had been typed in Watson's office. The typewriter seemed to be the same as the one used for Watson's letter, and the typist's identifying initials, "LH," were at the bottom of both letters. Moreover, Ross' retraction used the nearly identical first sentence as Watson's letter of the same day. "I have before me a clipping from the
Brooklyn Daily Eagle
of August 28, 1940," Ross' retraction stated, "which purports to be an interview with one of your reporters at your office. I wish to correct an erroneous impression which this article has given to the public. In the first place, I am not a representative of the International Business Machines Corporation . . . and was only acting in an advisory capacity in Spain. For this reason, the name of the International Business Machines Corporation, and that of Mr. Watson, should not have appeared in your article. What I said to your reporter was my own personal opinion, and I did not speak on behalf of the International Business Machines Corporation, or any of its officers. I wish you would do me the favor of publishing this letter in your paper at your earliest convenience."
¹⁹

That same September 6, Watson personally dispatched copies of Ross' termination and his retraction to a number of senior State Department officials, including Secretary of State Cordell Hull.
²⁰
When the dust had settled on the brief but turbulent Ross episode, Watson had proved once again that when he wanted to control the people in his organization, he could be mercilessly blunt and ruthless.

In other instances, some IBMers pushed the State Department's diplomatic pouch to the limits of propriety. It was one thing to help an American company protect its investment in Germany, but using diplomatic channels to deepen IBM's Nazi relationships in occupied countries sometimes made the Department recoil. On October 2, 1940, IBM's man in occupied Denmark, Max Bodenhoff, sent Watson a letter through the American Legation suggesting the company hire a personal friend of German Foreign Minister von Ribbentrop as a special business agent to further the subsidiary's work with the Nazis there. America's interim charge in Copenhagen, Mahlon F. Perkins, was dubious about transmitting such a letter through official channels.
²¹

"Max Bodenhoff . . . represents Mr. Watson's organization in Copenhagen," wrote the rankled charge in a complaint sent in triplicate to Washington. "This letter is not transmitted in the manner prescribed by Diplomatic Serials 3267 and 3268 of August 9, 1940, since it is considered that the Department should decide upon the propriety of transmitting it. It will be noted that Mr. Bodenhoff suggests to Mr. Watson the employment of Dr. Orla Arntzen, who is a close friend of the German Foreign Minister, to act as a special representative of the International Business Machines Corporation. This procedure would appear to involve questions of policy and ethics which the Department may desire to consider."
²²

Perkins' objection was reviewed by no fewer than eight officials. All concurred that his judgment should be vindicated by sending Bodenhoff's letter back to Copenhagen with the declaration: "The Department does not believe it would be advisable to transmit the letter mentioned and it is accordingly returned to the Legation."
²³

At one point, a State Department officer notified IBM NY: "The Department understands that commercial telegraphic facilities are available between the United States and Germany. Should you experience difficulty in communicating . . . the Department will be pleased to consider the transmission . . . through official channels at your expense provided you supply the full names of the persons or firms abroad whose interests are affected thereby, and inform the Department as to the nature of those interests, and whether such persons or firms have American nationality. I believe you will readily appreciate that the Department, especially in these extraordinary times, must reserve its facilities for the service of legitimate American interests."
²⁴

Despite the occasional realization that the State Department was becoming an all too indispensable player in the proliferation and protection of IBM's lucrative relations with the Nazis in Europe, its role would soon exceed the realm of postman. Soon, diplomats in Berlin would become IBM's special operatives in saving the company's niche in the Nazi Axis.

CHAUNCEY RETURNED
to Berlin to renew his excruciating negotiations with Heidinger. Ironically, as the United States edged closer to entering the war, Heidinger believed his options were becoming more limited. In the strange praxis of German law, once Dehomag became enemy property, the subsidiary would be seized by a receiver and all ownership frozen. In such a case, Heidinger's hope to cash out would also be frozen. If competition supplanted IBM, his stock holdings could soon become worthless.

By early March 1941, Heidinger agreed to a new settlement—RM 2.2 mil lion in exchange for giving up his preferential stockholder status. He would still own his shares, and those shares could still be sold only to IBM upon his departure from the company—but the price would be the book value.
²⁵

Reich economic bureaucrats approved because the transaction wasn't as much a sale as a reduction in status—and Heidinger was handsomely compensated for his various overdue bonuses.
²⁶

But Veesenmayer was still insistent that IBM relinquish its majority or face a newly created cartel. And now the cartel had a name: Wanderer-Werke. The old-line German motorcycle and toolmaker, Wanderer-Werke, was being primed by the Reich to host a merger of French Bull and Powers interests, allowing a new punch card enterprise to be forged. The Powers companies were now controlled by Hermann Goering Works under an overlapping board of directors. By now, Germany had realized that neither of the marginal firms, Bull or Powers, possessed the necessary production capacity. A completely new German-owned factory would be needed. Bull schematics and blueprints had already been brought to Berlin to launch a new machine series in case IBM would not yield. Germany could not afford an immediate separation from the IBM empire. But if Watson would not comply voluntarily, a steady combination of tactics from preferential business contracts for Wanderer-Werke to mandatory price reductions at Dehomag would compel an eventual sell-out. This approach is what Veesenmayer considered "no pressure."
²⁷

Opinions flagged from day to day on whether the Reich could proceed with out IBM. Even with a crash program to build new machines, it would take months before the first machine would roll off assembly lines. Without a source for punch cards, it would be like producing guns without bullets. Understandably, Veesenmayer's pressure was carefully applied. If IBM withdrew and suddenly stopped servicing the Reich, Nazi automation would soon rattle to a halt.

"We are threatened with possible elimination of Dehomag through competition," Chauncey reported to New York on March 10, 1941, "which may be sponsored by the authorities. We are also threatened with attack on the royalty agreement; and further threatened with a substantial reduction in prices if we do not give up the majority."
²⁸

Chauncey could only repeat, "Dr. Veesenmayer . . . stated that no pressure [would] be brought to bear to surrender the majority but that it was advisable to do so. He told me all that was wanted was a friendly agreement. . . . I asked Dr. Veesenmayer for some assurance of protection for our minority in the event we relinquished the majority. He replied . . . there could not be any writing of assurance."
²⁹

There was no pretense that Dehomag's management was still a group of independent-minded employees or executives. They were openly pawns of the Nazi Party. "Mr. Heidinger and several other members of the board are Nazi members," stressed Chauncey. "As nearly as I can learn, they have to follow any order issued by the Nazi Party."
³⁰

But a rebellious Chauncey still clung to his revulsion over what he called "blackmail threats." Giving up the majority would not protect the company's investment, he argued. "Upon giving up the majority," he asserted, "we can obtain no assurance that the next attack would not be against the [remaining IBM] minority and even against the payment of royalties." Chauncey had termed the German unhappiness as mere "growling." It was easy to talk about starting a new cartel. The reality was unchanged: "The government at the present time needs our machines. The army is using them presently for every conceivable purpose."
³¹

So while IBM came to believe they could not be dislodged from the Axis, they did fear the diminishment of profit that any attempted competition, howsoever tenuous or distant, might pose. The man who would not even tolerate competition from used cash registers would now only intensify his effort to block competition from diluting IBM profits. Ironically, the diligence of IBM auditors to certify and report that profit never paused during the entire Dehomag Revolt. Even as Watson expended maximum resources to protect his monopoly, the accountants were busy double-checking every penny.