The Devil's Chessboard Read online

  Foster still could not bring himself to cut off his former Berlin law partner, Gerhardt Westrick, when he showed up in New York in August 1940 to lobby on behalf of the Third Reich. Setting himself up in an opulent Westchester County estate, Westrick invited influential New York society types for weekend parties, taking the opportunity to subject them to his pro-Hitler charm offensive. Westrick’s guest lists were dominated by oil executives because he was particularly keen on ensuring the continued flow of fuel supplies to Germany, despite the British embargo. The lobbyist finally went too far—even by the hospitable standards of the New York society set—when he had the gall to throw a gala party at the Waldorf-Astoria on June 26, 1940, to celebrate the Nazi defeat of France. Westrick’s shameless audacity created an uproar in the New York press, but Foster rushed to the Nazi promoter’s defense, insisting he had “a high regard for his integrity.”

  Until late in the day, Foster harbored sympathy for the devil himself, Adolf Hitler. Even after the Nazi regime pushed through the anti-Semitic Nuremberg Laws of 1935 and unleashed waves of terror against Germany’s Jewish population, Foster clung to a sympathetic view of the Führer. He could not help being impressed by a man “who from humble beginnings . . . has attained the unquestioned leadership of a great nation,” Foster told a friend in 1937. By 1939, Eustace Seligman—a Jewish senior partner at Sullivan and Cromwell—had become so fed up with Foster’s position on Nazi Germany that he confronted his boss, telling Foster he was hurting the firm’s reputation by publicly suggesting “that Germany’s position is morally superior to that of the Allies.”

  Like his brother, Allen Dulles was slow to grasp the malevolence of Hitler’s regime. Dulles met face-to-face with Hitler in the Führer’s Berlin office in March 1933. He was ostensibly on a fact-finding mission to Europe for President Roosevelt, but Dulles was particularly interested in determining what Hitler’s rise meant for his law firm’s corporate clients in Germany and the United States. As Dulles subsequently informed Foster, he did not find Hitler particularly alarming. And he was “rather impressed” with Joseph Goebbels, remarking on the Nazi propaganda chief’s “sincerity and frankness.” After Dulles and fellow U.S. statesman Norman Davis returned to the Adlon, their luxury hotel across from the Brandenburg Gate, Davis was unnerved to find the word “Juden” scrawled crudely on the door of his room, even though he was not Jewish. “The conditions are not quite as bad” as anxious reports about Hitler would indicate, Dulles nonetheless wrote Foster from Germany.

  By the late 1930s, Dulles’s views finally shifted and he came to dismiss Nazi leaders as “those mad people in control in Germany.” He grew increasingly certain that the United States must prepare for an inevitable showdown with Hitler. But, out of deference to Foster, Allen was reluctant to make his opinions public. He also continued to do business with the Nazi financial and industrial network, joining the board of J. Henry Schroder Bank, the U.S. subsidiary of a London bank that Time magazine in 1939 called “an economic booster of the Rome-Berlin Axis.” And Allen and his wife, Clover, continued to socialize with the Lindberghs, who were their neighbors on Long Island’s Gold Coast shore. (Lindbergh, enamored of Hitler, noted in his diary that he and Dulles “have somewhat similar views in a number of instances.”)

  Even after Dulles was recruited into the OSS by Donovan in October 1941, his loyalties were still questioned by some administration officials, including Roosevelt himself. Dulles’s various financial connections to the Nazi regime prompted FDR to place the Wall Street lawyer under close surveillance when he began working in the OSS’s thirty-sixth-floor suite in Rockefeller Center. Monitoring Dulles proved an easy task since he shared office space with a massive British spy operation run by legendary Canadian secret agent William Stephenson, who would become famous as the “Man Called Intrepid.” At one point, Stephenson’s Rockefeller Center operation—which was tucked away under the colorless name British Security Coordination—grew to as many as three thousand employees. It was a remarkably ambitious covert enterprise, particularly considering that England was operating on friendly soil.

  Stephenson had been sent to the United States in 1940 by his enthusiastic patron, Winston Churchill—Britain’s newly elected prime minister—after the evacuation of British forces from the beaches of Dunkirk. With Hitler’s forces overrunning Europe and turning their gaze toward an increasingly isolated England, Churchill knew that his nation’s only hope was to maneuver the United States into the war. Roosevelt was a strong supporter of the British cause, but with as much as 80 percent of the American public against entering the European war and Congress equally opposed, both FDR and Churchill realized it would take a major propaganda offensive to sway the nation.

  The British government and the Roosevelt White House faced not only a deeply wary American public with understandable concerns about the costs of war, but a well-financed appeasement lobby with strong links to Nazi Germany. With the fate of nations at stake, the shadow war in America grew increasingly ruthless. Churchill made it clear that he was quite willing to engage in what he euphemistically called “ungentlemanly warfare” to save his nation—and he enjoyed Roosevelt’s firm support.

  Stephenson—Britain’s point man in the underground war against Nazi Germany on American soil—was a suave operator, with a flair for hosting lively cocktail parties at his penthouse suite in midtown Manhattan’s Dorset Hotel. But, like James Bond—the fictional spy partly modeled on Stephenson by his colleague Ian Fleming—Stephenson was also willing to do the dirty work of espionage. The slim, slight Stephenson, who arrived in New York at the age of forty-four, had the springy step of the boxer he once was—and the smooth self-assurance of the self-made millionaire he had become. He proved an adept practitioner of the black arts of espionage, working his far-flung press contacts in America to expose Nazi front companies—including some of the Dulles brothers’ corporate clients—and pressuring Washington to deport Nazi lobbyists. Stephenson’s operatives also undertook a variety of black-bag operations, such as breaking into the Spanish embassy in Washington, where they stole the secret codes for diplomatic messages flowing between General Francisco Franco’s fascist government and Berlin.

  Stephenson was even authorized to kill members of the Nazi network in the United States—including German agents and pro-Hitler American businessmen—using British assassination teams. One of the men considered for elimination was none other than Dulles business partner Gerhardt Westrick. (The big-spending Hitler lobbyist was eventually simply deported.) It was this decidedly ungentlemanly Stephenson tactic that inspired Fleming to grant his hero “the license to kill.”

  Fleming was a great admirer of Stephenson, whom he called “a magnetic personality” and “one of the great secret agents” of World War II. The novelist, who worked with Stephenson’s operation as a British naval intelligence agent in Washington, also praised the spymaster’s martinis—which he served in quart glasses—as “the most powerful in America.” But as Fleming himself observed, even his fictional hero James Bond was “not in fact a hero—but an efficient and not very attractive blunt instrument in the hands of government.”

  Years later, when James Jesus Angleton and William K. Harvey—two legends of U.S. counterintelligence—were searching for assassins to kill Cuban leader Fidel Castro, they sought advice from a British colleague named Peter Wright. “Have you thought of approaching Stephenson?” Wright suggested. “A lot of the old-timers say he ran this kind of thing in New York during the war.”

  President Roosevelt was well aware that the Dulleses were at the center of Wall Street and Republican Party opposition to his presidency. The brothers, as top legal advisers to America’s business royalty, were the very symbols of the “plutocracy” that the president railed against when giving vent to his populist passions. The fact that they were also linked to Nazi financial interests only deepened Roosevelt’s suspicions.

  While FDR himself was adept at hiding his true political feelings behind a mask of c
harm, there were some New Deal loyalists who openly expressed the deep enmity between the Roosevelt and Dulles camps. One such firebrand was William O. Douglas, the progressive young lawyer President Roosevelt put in charge of the Securities and Exchange Commission, the newly formed Wall Street watchdog agency, and later appointed a justice of the Supreme Court. As FDR’s top Wall Street regulator, Douglas had more than one occasion to cross swords with Foster. Years later, Douglas’s hatred for the “unctuous and self-righteous” senior Dulles brother still reverberated in the New Dealer’s memoir. Foster carried himself like a “high churchman,” observed Douglas. But in reality, he was the kind of “predatory” Wall Street shill “who for a fee would stand for almost anything.” If the John Foster Dulleses of America were destined for heaven—as men of his ilk were always utterly certain—then Douglas would rather end up in hell. “I could perhaps endure [men like Foster] for an evening. But to sit on a cloud with [them] through eternity would be to exact too great a price.”

  Though FDR shared the Dulles crowd’s privileged background, the president felt much more in tune with men like Douglas, the product of a hardscrabble childhood in Washington’s Yakima Valley, where he had grown up picking fruit to help support his family. Brilliant and hard-driven, Douglas worked his way through Columbia University Law School. One of the talented law school graduate’s first job interviews was with Foster Dulles at Sullivan and Cromwell. But Foster was so “pontifical” that Douglas decided against joining the firm. “In fact,” he recalled, “I was so struck by [Foster’s] pomposity that when he helped me on with my coat, as I was leaving his office, I turned and gave him a quarter tip.”

  After joining the Roosevelt administration at the age of thirty-five, Douglas quickly developed a reputation as a rising New Deal star, taking over as chairman of the Securities and Exchange Commission from Joseph P. Kennedy in 1937 and becoming a fixture in the president’s inner circle. A frequent weekend guest at Camp David, the presidential retreat that was widely known in those years as Shangri-la, Douglas solidified his position with the president by learning to perfect a dry martini, FDR’s favorite cocktail.

  Roosevelt grew so fond of Douglas that in 1944, while pondering running mates for his fourth presidential run, he briefly considered his young SEC chairman. Douglas was an energetic New Dealer, FDR reminded a group of Democratic Party bosses who had gathered in the White House to advise him on the decision. Besides, he noted, Douglas played a stimulating game of poker. But the political bosses were not as enamored of Douglas as the president. They were well aware that announcing a Roosevelt-Douglas ticket would set off a bombshell on Wall Street.

  While serving with the SEC, Douglas had become a scourge of the financial industry. Bankers and lawyers accustomed to the hushed privacy of wood-paneled suites and private dining rooms were yanked before public hearings presided over by Douglas and his sharp young staff and forced to account for their business practices. Even Robert Swaine of the white-shoe law firm Cravath—who had once been Douglas’s boss—got the full treatment. “You stood me on my head and shook all the fillings out of my teeth,” he later told Douglas.

  With his craggy Western good looks and lean, outdoorsman’s build, Douglas seemed cut out to be a populist hero—an everyman Gary Cooper taking on pompous big shots like the ones played by Edward Arnold in Frank Capra movies. And stuffed-shirt John Foster Dulles was his perfect nemesis. Douglas once put Foster on the witness stand for two full days, grilling him about the fortune that he had reaped for his law firm by managing a sketchy bankruptcy procedure that had fleeced a multitude of creditors. The high and mighty Foster had squirmed on the stand like a pontiff forced “to do business with the underworld,” recalled Douglas.

  By siccing men like William O. Douglas on men like John Foster Dulles, President Roosevelt drove the plutocracy mad. J. P. Morgan Jr. was so incensed by the “class traitor” FDR that his servants had to cut out the president’s picture from the Wall Street titan’s morning newspaper for fear that it would spike his blood pressure. The class hatred against Roosevelt even resulted in at least two abortive coups against his presidency. In 1934, a group of Wall Street plotters—financed by wealthy Roosevelt enemies (and Dulles clients) like the Du Ponts—tried to recruit Marine war hero General Smedley Butler to lead an armed march on Washington. In 1940, newspaperman and socialite Cornelius Vanderbilt Jr.—one of FDR’s few friends in the New York club set—tipped off Eleanor Roosevelt to another anti-Roosevelt plot he had heard being hatched in his Fifth Avenue circles, involving tycoons as well as army officers.

  The First Lady was among those who wondered about the wisdom of allowing someone like Allen Dulles to set up spy operations in war-torn Europe, where he was certain to open lines of communication to Nazi interests. But Dulles was not the only master chess player involved in this high-stakes game. FDR apparently had his own reason for allowing Dulles to establish himself in Bern. “He was a dangle,” said John Loftus, a former Nazi war crimes investigator for the U.S. Justice Department. “The White House wanted Dulles in clear contact with his Nazi clients so they could be easily identified.”

  One of Dulles’s most important contacts in Europe was Thomas McKittrick, an old Wall Street friend who was president of the Bank for International Settlements. BIS had been created by the world’s leading central banks to administer German reparations payments after World War I, but it soon took on a life of its own, transforming itself into a pillar of the emerging global financial system. Lodged in a former hotel next to a chocolate shop in Basel, Switzerland, BIS was so secretive that nobody was permitted to peer inside its boardroom, even when it was empty. By 1940, when McKittrick arrived in Switzerland to oversee the bank, it was effectively controlled by Hitler’s regime. Five of its directors would later be charged with war crimes, including Hermann Schmitz, the CEO of IG Farben, the chemical conglomerate that became notorious for its production of Zyklon B, the gas used in Hitler’s death camps, and for its extensive use of slave labor during the war.

  Schmitz was one of the many Dulles brothers’ law clients and business associates who were involved with BIS. It was a close-knit circle of men whose relationships smoothly weathered the storms of war. Even as his company was stockpiling poison for Hitler’s exterminators, Schmitz would send cheery Christmas and birthday greetings to his American business friends.

  The secretive BIS became a crucial financial partner for the Nazis. Emil Puhl—vice president of Hitler’s Reichsbank and a close associate of McKittrick—once called BIS the Reichsbank’s only “foreign branch.” BIS laundered hundreds of millions of dollars in Nazi gold looted from the treasuries of occupied countries. Some of the gold was torn from the mouths of concentration camp victims or melted down from Jewish families’ candleholders, cigarette cases, and other personal belongings.

  Dulles connected with McKittrick as soon as he set foot in Europe, meeting with the BIS president in Lisbon, even before he reached Switzerland. McKittrick, a well-tailored, pink-cheeked man with a high-domed forehead and prematurely snowy hair, later described the meeting as a happy coincidence. But both men were clearly eager to talk business. As soon as he walked into the lobby of his Lisbon hotel, the banker recalled, “Somebody grabbed me from behind and said, ‘Is that you Tom McKittrick? Well, my gosh, I’ve got to see you. You’re the first man I wanted to see in Switzerland.’ And it was Allen Dulles, on his way over [to his OSS station in Bern].” The two men stayed up all night at the hotel, in deep conversation, until McKittrick had to leave for his five o’clock plane.

  Dulles was eager to pump McKittrick for inside information about the Reich, since the banker had good connections in Berlin. But the two men also wanted to discuss another issue that was of paramount concern to both of them: how to protect the assets of their German and American corporate clients in the tumultuous war climate.

  Like Dulles, McKittrick was not popular with Roosevelt and his inner circle. FDR’s Treasury secretary, Henry Morgenthau Jr., developed a
deep loathing for McKittrick, whom Morgenthau’s aide, Harry Dexter White, called “an American [bank] president doing business with the Germans while our American boys are fighting the Germans.” The Roosevelt administration moved to block BIS funds in the United States, but McKittrick hired Foster Dulles as legal counsel, who successfully intervened on the bank’s behalf.

  Morgenthau was outraged when McKittrick made a business trip to the United States in winter 1942 and was warmly feted by Wall Street. Dozens of powerful financiers and industrialists—including the executives of several corporations, such as General Motors and Standard Oil, that had profited handsomely from doing business with the Nazis—gathered for a banquet in McKittrick’s honor at New York’s University Club on December 17.

  Morgenthau tried to prevent McKittrick from returning to BIS headquarters in Switzerland on the grounds that the bank was clearly aiding the Nazi war effort. The banker later sniffed about the “nasty crew in the Treasury at the time. . . . I was very suspect because I talked to Italians and talked to Germans—and I said that they had behaved very well. I [refused to denounce them as] villains of the worst sort.” Allen Dulles came to McKittrick’s rescue, deftly pulling strings on the banker’s behalf, and in April 1943 he finally boarded a transatlantic flight to Europe.

  Dulles and McKittrick continued to work closely together for the rest of the war. In the final months of the conflict, the two men collaborated against a Roosevelt operation called Project Safehaven that sought to track down and confiscate Nazi assets that were stashed in neutral countries. Administration officials feared that, by hiding their ill-gotten wealth, members of the German elite planned to bide their time after the war and would then try to regain power. Morgenthau’s Treasury Department team, which spearheaded Project Safehaven, reached out to the OSS and BIS for assistance. But Dulles and McKittrick were more inclined to protect their clients’ interests. Moreover, like many in the upper echelons of U.S. finance and national security, Dulles believed that a good number of these powerful German figures should be returned to postwar power, to ensure that Germany would be a strong bulwark against the Soviet Union. And during the Cold War, he would be more intent on using Nazi loot to finance covert anti-Soviet operations than on returning it to the families of Hitler’s victims.