investigation. No step could be taken which would precipitate a run on this bank as such a run would inevitably affect other banks. My Bureau of Investigation, working with the directors whom I first installed in the trust company, went into the operations of the company at great length and found conditions which eventually warranted the military authorities of the United States (who acted also on further information obtained by them on other lines) in putting under arrest as dangerous enemy aliens Julius Pirnitzer, president of the trust company, and several of the minor agents.

Pirnitzer had been selected as president in Budapest and had come to America to organize the company. He had declared his intention. to become a United States citizen, but, as he later stated to one of the American directors, he had done that merely for business convenience and without any intention to surrender his Hungarian nationality. It had been especially necessary that he should have the appearance of an American citizen at a time when the bank was attacked soon after its foundation by reason of its alien character. Pirnitzer had an arrangement with the foreign banks to receive a salary which was far in excess of the amount which could be justified by the business done by the trust company and, while he apparently acceded to the changes in his contract made by the American directors, he was nevertheless receiving his additional compensation from the foreign banks.

The correspondence of Pirnitzer with his superiors in Budapest shows that the organization of the trust company was primarily political. He was sending monthly reports of conditions and movements among the immigrants, and he immediately undertook the organization of a corps of agents who were designed to put the trust company in direct touch with every Austro-Hungarian colony in the United States and through the trust company to keep the home Government informed.

Ministers of religion (especially those whose salaries were in part paid by the home churches abroad) were relied upon to reach their flocks locally, Hungarians of prominence were brought into the corps of agents, and men were employed as travelers by the trust company, whose duty it was to go about from colony to colony to dine and to fete the important and active men and to bring them into contact with and active support of the trust company. In this manner, a corps of about 1,000 agents had been created at the time I seized the trust company, and the company had deposits from about 13,000 immigrants and had done business with or for over 60,000.

The company liberally advertised in all the Hungarian newspapers and also in papers in other languages which reached Austro-Hungarian colonies. As the business grew, the advertisements grew

bolder, until finally the trust company announced itself as "The bank for Hungarians in America," and also certified that it was the official agent of the German and the Austro-Hungarian Governments. The close connection between the trust company and Germany must have been evidenced to the immigrant mind when Pirnitzer announced days before the first visit of the Deutschland to America that his company would be able to transmit messages and money by submarine to the other side, despite the British blockade. This announcement amazed the banking and business world, but Pirnitzer's announcement was soon justified by the appearance of the Deutschland.

Beginning at the period of the general war, the advertisements of the company printed in foreign languages appealed to and sought to keep alive the spirit of foreign nationality and was wholly unAmerican, if not anti-American. The trust company vigorously pushed the sale of the war bonds of the Central Powers. It printed certificates of authority executed by consular officials of Germany and Austria-Hungary and justified the statement made by Pirnitzer in a letter to one of the officials of the Austrian Embassy at Washington that he, Pirnitzer "had placed the trust company solely at the service of the Central Powers."

The money transmission business of the trust company went up by leaps and bounds and, in the year prior to the war between Germany and the United States, reached immense totals. Similarly, the activities of the trust company in the sale of war loans increased as time went by, and the company was of very efficient aid in the financing of the war for the Central Powers. Sporadic instances were found of its agents engaged in definitely anti-American activities in the Hungarian colonies, and the whole effort of the trust company propaganda was designed to keep a cohesive body of aliens sympathetic with the Central Empires and indifferent, if not openly opposed, to American institutions.

The notorious von Rintelen was permitted freely to use the trust company as his headquarters. Bernstorff and Dumba had their accounts in the bank. Pirnitzer helped to finance the minor officials in the embassy, and the correspondence found by the Bureau of Investigation discloses a most intimate correspondence between Pirnitzer and the representatives of the Central Empires. Correspondence shows that he was depended upon by the embassy officials for aid in acquiring information as well as for financial aid.

After full consideration of the matter, I determined that the trust company should be dissolved. My representatives carried on its business until the long-term loans had been retired and the assets were in a liquid condition. They found that the trust company was entirely solvent and, under the terms of the banking law of the State of

New York, an application has been made to dissolve the trust company. Under date of February 17, 1919, an order to this effect was signed and has been served upon the banking department, as required by law. Under my directions, the depositors have been invited to withdraw their deposits. Those who had deposits in dollar accounts have, of course, been paid the face value of their deposits. A somewhat more difficult question arose in respect of depositors who had been induced by the old management to purchase foreign currency and to open a deposit in that currency. In respect of these deposits, the directors have adopted the generous policy of paying to the depositors the highest sum which they found warranted by exchange conditions. Substantially three-fourths of the deposits of the bank have been liquidated at this date and the work is proceeding satisfactorily. The complete liquidation will not be possible until the resumption of commercial relations with the Central Empires by reason of the fact that there are bank balances to be reconciled and incomplete transactions to be checked up.

My determination to dissolve this bank was due not only to the fact that a considerable sum will be realized for the Treasury on the stock held by me, but chiefly because my investigation led me to the conclusion that the organization maintained by this trust company was primarily designed for political purposes and would remain a valuable instrument for such purposes until the central organization, the trust company, was destroyed. I believe that the business of the trust company was contrary to the best interests of the United States, for it had, by its advertisements and its agents, stimulated the transmission of savings out of the United States to foreign countries and thus had made it practically certain, not only that there would be a constant drain of money from this country, but that the active and industrious immigrant would eventually be induced to return to his native land instead of remaining in America and becoming a part of our citizenship. The maintenance in our country of large bodies of foreigners, who are taught to regard themselves as only temporarily here and as having interests entirely independent of America, is necessarily a menace to our peace and might become an active danger in time of war. The Transatlantic Trust Co. was the most active agent in maintaining this troublesome condition, and I therefore resolved upon and have carried through the dissolution.

CHAPTER X.

MISCELLANEOUS GERMAN ENTERPRISES.

THE DIECKERHOFF RAFFLOER GROUP.

An instance of the deliberate concealment of enemy property through a pretended sale engineered by American counsel was the Dieckerhoff Raffloer group, consisting of the importing house of Dieckerhoff, Raflloer & Co., of New York, and the cordage company of Rafloer, Erbsloh & Co., of New York and Cuba. These corporations were owned by the Dieckerhoff, Erbsloh, and Raffloer families, influential in German circles here and in Germany, and large contributors to German war funds and relief committees in both places. Rudolf Erbsloh, the president of Dieckerhoff, Raffloer & Co., and one of the leading spirits of Raffloer, Erbsloh & Co., was a German who has taken out letters of naturalization. Emil C. Dieckerhoff, the active man of Dieckerhoff, Raffloer & Co., is still a German subject, sojourning here. Ernest Rafloer, the head of Raffloer, Erbsloh & Co., is a German subject temporarily in Cuba. George Carlton Comstock, of New York City, was for many years the lawyer of these Germans and their corporations. His was the scheme by which it was attempted to transfer the enemy holdings in these enterprises beyond the reach of the Government.

The combined properties of the two companies aggregated upward of $3,000,000. Dieckerhoff, Raffloer & Co. was the leading notion house for the distribution of German goods in New York, and had large and important branches in Germany. Raffloer, Erbsloh & Co. had a monopoly of Cuban manufactured rope and twine. Twenty-one per cent of Rafloer, Erbsloh & Co., and 30 per cent of Dieckerhoff, Rafloer & Co., were owned by enemies, members of the German families I have mentioned, who resided in Germany. The certificates representing the shares of stock belonging to these Germans were largely held by them abroad. They owned and held in this country, however, stocks and bonds of other corporations of the market value of approximately $150,000.

After Bernstorff had received his passport and just before our actual declaration of war against Germany, Messrs. Erbsloh and Dieckerhoff, acting as attorneys in fact for the enemy, sold to Dieckerhoff, Rafloer & Co. the entire enemy stock therein, of the par

value of approximately $300,000, and the other enemy-held securities of the par value of approximately $150,000, agreeing to accept there for, three years hence, $100 a share for the Dieckerhoff, Raffloer & Co. stock and several thousand dollars less than the then market price of the other securities. Rafloer, Erbsloh & Co. could not purchase their own stock, so these representatives of the Germans disposed of the enemy held stock of this corporation by conveying the same to the Knickerbocker Building & Financing Co. (Inc.), which agreed to pay for the same, three years hence, $125 per share for the preferred stock and $25 per share for the common stock, or such larger amount as might be obtained from the sale of the stock in the meantime, then Raflloer, Erbsloh & Co. acquired all the stock of the Knickerbocker Co.

These transfers having been accomplished, no return was made to the Alien Property Custodian and the German interests in the corporations remained undisturbed until the Bureau of Investigation reached them in due course in its examination of New York corporations for possible German stockholdings. Upon the discovery of these facts the possibility of the bad faith of the transaction was suggested and its bona fides questioned, whereupon Messrs. Erbsloh and Dieckerhoff stoutly asserted the disinterestedness of the sales and filed in support of the transactions voluminous aflidavits, in which they swore that the stock was worth no more than they had paid for it, that the sales were made in pursuance of a long contemplated plan of the Germans to sell, and that the threeyear term of payment was necessitated by the financial conditions of the corporations. These affidavits were supported by a brief of George Carlton Conistock, a lawyer of apparent standing at the bar, who corroborated the statements of his clients and took full responsibility for the acquisition of the enemy stock.

Notwithstanding the fact that the alleged powers of attorney from the Germans to Dieckerhoff and Erbsloh were oral, it would have been difficult to have controverted their assertions had it not been for the fact that the Bureau of Military Intelligence, which was in close cooperation with the Bureau of Investigation of this office, procured and submitted to Mr. Garvan a letter which the attorney, Comstock, had written in contemplation of the enactment of the trading with the enemy act advising Dieckerhoff and Erbsloh to dispose of the enemy stock in order to preserve the same for the Germans, just as they had done, for the same three-year period, when, as he expressed it, "the war will probably be over." Armed with this letter the Bureau of Investigation was able to obtain admissions of the real purpose of the purported sale and to set aside the transfers and take possession of the corporations. Dieckerhoff, Raffloer & Co., the corporation which was paying $100 a share for the German stock, is