formed. This contract provided for the ostensible manufacture of 2,000,000 shrapnel cases at a price of $2.50 each. The trust agreement also provided that Tauscher should hold in trust a note for $1,000,000, which the Bridgeport Projectile Co. had issued to Hoadley as a part of the consideration of the assignment to it of Hoadley's contract with Clynes.

Under the contract between Hoadley and Clynes the Bridgeport Projectile Co. was at all times the puppet of the German Government, because the agreement not only provided that Germany was to nominate the treasurer of the corporation, so that no payment of its funds could be made except upon vouchers countersigned by Carl Heynan, but because of the further fact that the by-laws of the company were so constructed as to remove all the powers of importance usually reposed in a board of directors and placed them in the hands of the stockholders, which by virtue of the trust agreement with Tauscher-he having the voting power of the stock-was to leave in the hands of the German Government the entire control of the corporation.

Upon the full and faithful performance of the contract of April 1, 1915, Hoadley was to become the owner of the capital stock. One of the conditions of the agreement was that no arms or ammunition were to be manufactured and shipped to France, England, or Russia, or to any person or corporation other than Germany or the United States without the written consent of the representative of Germany.

Mr. Hoadley insisted upon the right to manufacture for the United States Government. At this time there was no expectation that this country would be involved in the conflict and all Germany's plans were predicated on the thought that she would be victorious by the

end of 1915.

The company's plant was built and equipped in the fall of 1915 and manufacturing was begun on a small scale. The publication of Carl Heynen's memorandum to Dr. Albert in August, 1915, had seriously hampered the activities of the Bridgeport Projectile Co. Banks and manufacturers refused to deal with it and things went from bad to worse until late in March, 1916, when the German Government, for these reasons and because peace still seemed in the far distant future, determined to cancel the contract of April 1, 1915. This contract was canceled on April 17, 1916, but a substitute agreement was entered into on the same day between the company and Wolf von Igel. This contract has never been completed and now stands in the name of Von Igel.

Investigation disclosed the parties to these agreements had used every endeavor to conceal the interest of the German Government in the company. The contract of April 1, 1915, was recorded in the

record books of the corporation, but the assignment to Von Igel, the trust agreement, and the substituted contract of April 17, 1916, were not set forth. It was by the discovery of these documents that the true facts became known.

About the time the United States entered the war Hoadley organized the Liberty Ordnance Co., to which he transferred all of the assets of the Bridgeport Projectile Co. The entire plant was conmandeered by the Ordnance Department and used to manufacture arms and ammunitions for our Army.

HAMBURG-AMERICAN AND NORTH GERMAN LLOYD DOCKS.

Shortly after the outbreak of war between the United States and Germany, the United States Government commandeered the docks at Hoboken formerly used by the two German government-controlled steamship lines-the Hamburg-American Line and the North German Lloyd Line. These enemy-owned docks have been used as embarkation points by the United States in the prosecution of the war. These docks are the largest and best equipped docks for ocean liners not only in the port of New York but in the United States. As long as this strategic point remained in German control, the door was open to Germany the moment after the declaration of peace to renew its commercial warfare against the United States.

Therefore, the President, under the authority of an act of Congress approved March 28, 1918, took over the title and possession of these docks for the United States and by proclamation dated June 28, 1918, determined and declared the compensation for the docks of the North German Lloyd Line to be $4,831,705, and for the docks of the Hamburg-American Line $2,314,877. This compensation was based on a report made on a careful appraisal of the property by qualified

persons.

Neither the North German Lloyd nor the Hamburg-American Line directly owned the fee to the docks, but controlled them through two subsidiary corporations, the North German Lloyd Dock Co. and the Hamburg-American Line Terminal & Navigation Co., respectively, both New Jersey corporations.

In the case of the North German Lloyd piers, however, the North German Lloyd Dock Co. had made a lease for 999 years back to the North German Lloyd Steamship Co. at a rental sufficient only to cover the carrying charges, including the taxes, insurance, and interest on an outstanding mortgage. For this reason the value of the property lay in the enemy lessee's interest in the lease, the reversionary interest in the dock company being only of nominal value. The compensation awarded by the President for the North German Lloyd piers has therefore been paid directly to the Alien Property Custo

dian and deposited by him in the Treasury to be invested in liberty bonds.

In the case of the Hamburg-American piers, however, not only the title but the real value of the piers was owned by the HamburgAmerican Line Terminal & Navigation Co., the New Jersey corporation. The compensation awarded by the President for the Hamburg-American piers will, therefore, be paid directly to the dock company after the payment of all liens and other charges upon the property. As the Alien Property Custodian has taken into his possession, as the property of the Hamburg-American Line, all the outstanding capital stock of the dock company, the entire net proceeds of the enemy interest in the Hamburg-American piers will likewise come into the hands of the custodian and be invested in victory bonds.

CHAPTER VIII.

TEXTILES.

WOOLEN AND WORSTED MILLS.

One of the largest and most profitable investments of German capital in this country was found in and around Passaic, N. J., where six great worsted mills had been founded. At the time of the passage of the trading-with-the-enemy act, the enemy owned a majority interest in four of these properties, viz:

In fwo others the enemy apparently owned only a minority interest, namely:

It was perfectly clear that real American interests owned a majority of the capital stock of the Garfield Worsted Mills, which has been operated and is now operated by American citizens of undoubted loyalty. It was in every sense (despite the minority enemy ownership) an American mill, and since the sale of the minority stock to American citizens it is entirely American-owned.

The situation with respect to the Forstmann & Huffmann Co. is not so clear. The enemy admittedly owns 68.80 per cent, but it has so far been impossible to determine whether there is any further enemy interest. As hereinafter stated, a suit has been brought by the Alien· Property Custodian as a stockholder to determine the status of a considerable share of the capital stock of this company, and upon a

final decree in this case being entered the real enemy ownership therein will have been determined.

The Passaic mills are large, up-to-date establishments, employing approximately 15,000 persons and occupying a position in the trade of great prestige.

For many years prior to 1890 the superior products of German spinners and weavers found little or no competition in this country, where the textile industry was only beginning its great develop

ment.

Stoehr & Co., spinners of Leipzig, Germany, who had built up a profitable trade in this country, anticipating the effect of the McKinley tariff bill, determined to establish a plant here, and by October, 1890, the Botany Worsted Mills had been founded and put into operation at Passaic, N. J. The instant success of this venture encouraged other well-known German firms whose exportations were well known here to follow the example of Stoehr & Co. and during the next 20 years five more large mills were established with German capital. With the establishment of these plants Passaic was rapidly developed and is now the center in the United States of the manufacture of fine worsted yarns and high-quality dress goods. But these mills have always kept their distinctively German organization, both as to executives and employees. It may be said that German is the official language of the workmen. The discipline among the employees reflects the typical military spirit of Germany.

One of the most striking characteristics of the organization is the large bonus payment to managing executives, which range from 30 to 40 per cent of the net profits and approximated about $6,000,000 for the year 1917.

Close business relations with the German owners were maintained at all times, and after the great war began it was discovered that two of these German-controlled American corporations were attempting to aid the German Government in running the British blockade.

Through the agency of Hugo Schmidt, the managing director in this country of the Deutsche Bank, arrangements were made for the Botany Worsted Mills and the Forstmann & Huffmann Co., under the cloak of American corporations, to purchase South African and Australian wool to be reshipped into Germany for war purposes. In return for their services to the fatherland, these faithful servants were not only compensated in money but were further rewarded with shipments of dyestuffs which arrived on the German merchant submarine Deutschland.

In February and March, 1918, the Alien Property Custodian demanded and took over the majority stock interests which had been owned by the enemy in the Botany Worsted Mills, Gera Mills, New Jersey Worsted Spinning Co., and Passaic Worsted Spinning Co.,

107248-S. Doc. 435, 65-3- -9