CHAPTER I. GENERAL. The office of Alien Property Custodian was created by an act of Congress known as the trading-with-the-enemy act, approved October 6, 1917. Under this law and Executive orders issued in pursuance thereof, it became the duty of all persons in this country having the custody or control of any property of whatsover nature belonging to, held for, or owing to an enemy person, to make report thereof to the Alien Property Custodian, by whom it was to be administered with all the powers of a common-law trustee. The act in defining enemy persons, following existing precedents, makes residence and not nationality the test of enemy character. All persons of whatever nationality, including partnerships and corporations, residing or doing business in the territory of enemy nations, or in the territory occupied by the armed forces of the enemy, are enemy persons. The act also puts allies of enemies in the same class with enemies, so that the Alien Property Custodian was empowered to demand and take over all property located or having its situs within this country which is owned by, held for, or owing to persons, partnerships or corporations resident or doing business in Germany, Austria-Hungary, Bulgaria, and Turkey, and in those portions of Belgium, France, Russia, and the Balkans which were occupied by the armed forces of the enemy at the time the property was reported to the Alien Property Custodian. The right to demand and take over such enemy property is primarily vested in the President and need only be conveyed, transferred, assigned, delivered, or paid over to the Alien Property Custodian when the President, after investigation, shall determine it is enemy-owned, and then only "if the President shall so require"; thus giving to the Executive the fullest discretion as to what enemy property shall be taken and what shall be left in the hands of its private custodians. The power and discretion vested in the President by the section of the act just referred to were delegated by Executive order to the Alien Property Custodian, and he has exercised the discretion lodged in him through various general rules and regulations, rather than in 7 individual cases. Thus, the property of subjects of Bulgaria and Turkey, which countries are in the class of allies of the enemy, has not been demanded at all, except in a few cases of Bulgarian property whose particular circumstances seemed to demand its sequestration. It was felt that the likelihood of unfair and even barbarous reprisal upon American citizens and American property which would have been inflicted by Turkey, if we had interfered with the Turkish property in this country, was sufficient reason for not disturbing the small amount of such property here. The property of American citizens resident in enemy territory was demanded only when the American's residence there had been so long continued, or his social and business relations with Germany were such as to indicate a preference on his part for living in Germany, rather than in his home country. Generally speaking, none of the property of American citizens has been taken over where such Americans were detained in Germany by circumstances or conditions beyond their control, preventing a reasonable exercise of their duty to return to their home country upon the outbreak of the war. The right to take property of persons resident or doing business in the territory of allied nations occupied by the enemy has been sparingly exercised, and, so far as possible, only in the case of persons whose loyalty to the allied nations has been doubted. Doubtless there will be found cases where the property of persons in occupied territory, whose loyalty to the allied cause can not be questioned, has been taken over because of our inability to determine the facts. But this will cause no loss or expense and very little inconvenience to the owner, for when a person has lost his enemy character by reason of the enemy forces evacuating the territory of his residence, he may file a claim under the act and have his property restored to him. Similarly, American citizens may divest themselves of their technical enemy character by removing from enemy territory into neutral countries, or into the United States, and thereupon the Department of Justice, to which has been delegated the right to pass upon claims of non enemy persons, will take jurisdiction of their claims and upon a proper showing order their property to be released. No property belonging to persons who were adjudged to be enemies solely on account of residence has been sold or authorized to be sold. The property of American citizens taken over because they were residents of enemy territory or territory occupied by the enemy, and the property of allied citizens and subjects demanded and received because they were resident or doing business in occupied territory, is being conserved and administered without thought or intention of sale or other disposition thereof. The office of Alien Property Custodian was filled by the appointment of the President on October 22, 1917, so that the office has been in operation about 16 months. At the close of business on February 15, 1919, 35,400 reports of enemy property had been received. The property of each enemy person is treated in the office as a trust and administered by an organization which is built upon the general lines of a trust company. The number of separate trusts now being administered amounts to 32,296, and have an aggregate value of $502,945,724.75. About 9,000 of these cases are covered by reports in which the administration has not yet reached the stage of valuation. When the entire number of trusts reported shall have been finally opened on the books and the readjustment of values consequent upon appraisal shall have been completed, it is safe to say that the total value of the enemy property in the hands of the Alien Property Custodian will reach $700,000,000. The total amount of Government funds expended by the office of the Alien Property Custodian from the time of its organization to February 15, 1919, is about $1,000,000. Thus, it will be seen that the cost to the Government of administering nearly 33,000 trust estates of a total value of $700,000,000, located in every State in the Union. and in every insular possession, is only about one-seventh of 1 per cent of the principal of the trust estates for a period of 16 months; a record of economical administration which has never been approached by any trust company in the world. In one sense, indeed, this office has cost the Government less than nothing, for through the efforts of the Alien Property Custodian unreported and concealed income and excess profits taxes have been collected from corporations and other taxpayers controlled by the enemy during the same period to the amount of $1,604,539.76. Without the activities of this office and the careful scrutiny and examination made of the affairs of all corporations with which the enemy had any connection, it is most likely that none of these taxes would have been revealed to the Government or collected by it. The amount thus collected through the efforts of the Alien Property Custodian is over 60 per cent greater than the entire cost of operating the office. And, furthermore, after taking over enemy-owned corporations the Alien Property Custodian has endeavored, wherever he could consistently do so, to make them a part of America's great fighting machine. He instructed his representatives to give the Government the first call on the products of these enemy-owned corporations with the result that he soon found himself supplying the Government with many of the most important things used in the war. It is indeed a suggestive thought that the principal German investments in this country were found to be in the production of the essentials of warfare. When the armistice was signed the Alien Property Custodian was supplying the Government with magnetos for aeroplane and automobile motors, with cloth to make uniforms for the soldiers and the dyes with which the cloth was dyed, with medicines, surgical instruments and dressings, with musical instruments, with ball bearings, telescopes, optical instruments and engineering instruments, with coconut charcoal for the making of gas masks, with glycerin for the making of high explosives, and a large number of other and varied products. In some instances the enemy-owned corporations under the Alien Property Custodian's supervision were running 100 per cent of their capacity on Government business. In addition to enemy-owned corporations, the Alien Property Custodian took over a large amount of enemy-owned commodities which were in warehouses and various other places in this country. Whereever possible these commodities were turned over to the Government. More than 1,500,000 pounds of nickel and several hundred thousand pounds of ferrovanadium were turned over to the Ordnance Department, 98,000 bags of coffee and 10,000 bags of rice were sent to the Food Administration, while chronometers, binoculars, and various astronomical instruments were turned over to the Navy Department. A few of the things supplied to the Government by enemy-owned corporations under the Alien Property Custodian's supervision follow: Bosch Magneto Co.,. magnetos to Army and Navy aeroplanes and autos. Botany Worsted Mills, cloth, shirting, and yarn.. New Jersey Worsted Spinning Co., yarn, etc. Passaic Worsted Spinning Co--- Gera Mills... Norma Co., ball bearings___ Bayer Co., aspirin tablets, dyes, etc.... Heyden Chemical Works, acids, etc_ $2,561, 492 5,950, 669 8, 651, 130 1, 851, 114 8,003, 492 1,100,000 1, 160, 000 753, 423 431, 376 Werner & Pfeiderer Co., machines for mixing powder, etc.. The magnitude of the work in building up an organization and accumulating within a year's time a trust business of these proportions can hardly be appreciated by any other than experienced trust company officials. No trust company in the world handles so many trusts as the Alien Property Custodian, and none has been compelled to handle even a fraction of the number while in the process of building an organization to take care of the work. Starting without a single clerk or a foot of office space, only a little more than a year ago, the organization rapidly thrown together for the purpose of providing for the torrent of business which flowed into it, has grown until 549 persons are now upon its pay roll at its two offices in Washington and New York, and agents, representatives, and depositaries are serving it in every State in the Union and in every insular possession. The most careful and painstaking investigation has been required to disclose the fact of enemy ownership in thousands of cases. The commonest device resorted to by the enemy owners was the transfer of their property to their friends or agents in this country without valid consideration or upon consideration to be fixed after the war, and payable out of the business itself at a time when the parties conceived that normal business conditions would be restored. Businesses individually owned were frequently transferred to hastily formed corporations; the transfer often being made by the American agent of the German owner under his general powers. Not infrequently the agent undertook to sell the property of his principal to corporations whose stock was held by himself or his friends, the corporation converting the enemy ownership into a liability to the enemy for a fraction of its value, payable after the war, or in 1920, and in one case as late as 1937. In many cases shares of stock enemy owned, whose certificates were in the enemy country, were treated as lost and new certificates issued to the American friends of the enemy owner, thus making this stock record of the corporation bear the appearance of American ownership. In some instances enemy owners of stock, whose certificates had been sequestered by the public trustee of Great Britain, undertook to sell their interest in the corporation to friends in America, to whom new certificates were issued, leaving the public trustee of Great Britain high and dry with only a piece of paper as the result of his operations under the British trading-with-the-enemy act. If we had permitted these fake transfers to stand, and if the American purchasers had been able after the war to maintain the validity of the transactions in a contest with the enemy owners, some Americans would have picked up bargains which would have yielded fabulous profits obviously never contemplated. Cases were not uncommon where American purchasers seriously contended they had bought stock at $100 per share whose book value ran into thousands of dollars. Property, whose sale or exchange in times of peace would have required months of negotiation and reams of paper on which to write the instruments necessary to protect the parties in their contracts, was sold under stress of the imminent war conditions about the time Von Bernstorff received his passports, by the mere exchange of 10 |