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TRADING WITH THE ENEMY:  AN EXPOSE OF THE NAZI-AMERICAN MONEY PLOT 1933-1949

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Chapter 4:  The Mexican Connection

Even the supposed enemies of The Fraternity were connected to it by almost invisible threads. One of Jersey Standard's most powerful rivals in the field of petroleum supplies to Germany, William Rhodes Davis's Davis Oil Company, was connected to Goring and Himmler.  Davis was linked to Hermann Schmitz and I.G. Farben through the Americans Werner and Karl von Clemm, New York diamond merchants (who were first cousins to Nazi Foreign Minister Joachim von Ribbentrop by marriage), and through the National City Bank.

The von Clemms were fanatical devotees of Germany, even though both had become American residents in 1932. They used a device typical in Nazi circles: a device copied, ironically, from the Rothschilds. One brother stayed in Berlin, the other remained in New York.  They were connected to the Schroder banks through interlocking directorships, and on the board of a company that helped finance General Motors in Germany along with I.G. Farben.

In 1931 they financed the Gestapo with funds supplementing those supplied by Schroder's Stein Bank. Yet another Fraternity link was their involvement with the First National Bank of Boston, an associate of the Bank for International Settlements. They conceived the idea of unblocking First National's blocked German marks to build a vast oil refinery for Goring's air force and for Farben and Eurotank near Hamburg, with Karl von Clemm in charge. This oil refinery  would bypass the terms of the Versailles Convention and supply Goring's so-called Black Luftwaffe, which was secretly being prepared for world conquest. 

In order to secure the oil for the refinery, the von Clemm brothers had to find an American who would aid and abet them. The choice was easy. From 1926 to 1932, Werner von Clemm had financially sustained a largely unsuccessful oil prospector and confidence trickster named William Rhodes Davis.

Davis was on the face of it unprepossessing. He was short, not much over five feet, with a solid-gold left front molar and a badly bowed left leg that contained a silver plate put there after he was  njured in a train wreck in 1918. His head was too large for his body, and his face sported a broken nose. Yet despite his lack of good looks he had the one indispensable quality needed for success. He had the gift of gab. He was capable of talking anyone into the ground. He spoke in superlatives. He never took no for an answer, and he would shaft anyone when the chips were down.

Davis was born in Montgomery, Alabama, in 1889. Poorly educated, he left school at sixteen and jumped a freight car. A kindly porter gave him a job as candy butcher, selling chocolate and ice cream from a tray. Railroad crazy, he graduated to brakeman, fireman, and engineer in the Southwestern states until the collision put him out of commission. Emerging from the hospital with a gimpy leg, he used his plight to his own advantage by working as a comedian on the Keith vaudeville circuit, making audiences laugh as he wiggled his distorted member in a dance. When his popularity ran out, he shipped off on tramp steamers as stoker, fireman, and engineer.

Back in the United States, he dabbled in the oil business but consistently went broke. He was under frequent investigation for a variety of swindles. People were fascinated, even hypnotized, by him; but disillusionment would always set in, followed by the inevitable lawsuit. He sold dry wells, manipulated stocks, and set up and collapsed small companies, carrying the shareholders with him.

In 1926 he was penniless. The von Clemm twins stepped into the picture in 1933. Their support of him saved him from ruin and imprisonment. As a result of this he became deeply committed to Nazism. He was fascinated by the opulence of a Germany heavily financed by American bank loans, the handsome, healthy men in black uniforms, the pretty blond women. It all seemed a far cry from the breadlines and pinched faces of America in the Depression.

After the deal with the German government over Eurotank, Davis saw the way to make his fortune at last. He owned a few wells through the von Clemms' good graces. With German money he could certainly start pumping.

He traveled to Berlin in 1933. He had to have the personal approval of Hitler before he could go ahead. He arrived at the Adlon Hotel, where Karl von Clemm arranged a reception for him to meet Hermann Schmitz of Farben, Kurt von Schroder, and other German members of The Fraternity. He was welcome at once when he gave the group the Nazi salute as he entered the room.

Next morning, two Gestapo officers delegated by Himmler arrived at the door of his suite. They carried with them a letter from the Fuhrer. The former brakeman and candy butcher was overwhelmed.  He could not believe he had received so signal an honor. The letter asked him to meet with Finance Minister Hjalmar Schacht at the Reichsbank. When he arrived, Schacht seemed cold and uninterested and brushed the whole matter aside. Schacht already had deals going with Walter Teagle and Sir Henri Deterding of Shell. What did he want with this small fry?

Furious, Davis returned to the Adlon empty-handed. He wrote to Hitler, insisting upon better treatment. Hitler replied immediately in person, asking him to return to the Reichsbank the following morning for another meeting .

Davis arrived in the boardroom at 11 A.M. As FBI records show, Schacht smiled faintly in a corner, obviously in no mood to talk. But a door flew open and thirty directors of the bank appeared, to greet Davis with warm handshakes. Hitler strode in. Everyone jumped to attention and gave the Nazi salute. Hitler said, "Gentlemen, I have reviewed Mr. Davis's proposition and it sounds feasible. I want the bank to finance it." Then he walked out.

It was clear to Davis that the directors of I.G. Farben, along with Kurt von Schroder, had exercised influence over the Fuhrer.

Davis traveled to England, where he resumed an earlier business relationship with Lord Inverforth's oil company. He obtained major concessions in Ireland and Mexico. He traded Mexican oil for German machinery when it proved impossible to export marks. Eurotank was built. By 1935, Davis was shipping thousands of barrels of oil a week from his wells in Texas and eastern Mexico.

Davis knew Senator Joseph F. Guffey of Pennsylvania, whose friend Pittsburgh oilman Walter A. Jones had major contacts in Washington. Through Guffey and Jones, Davis met with John L. Lewis, the labor leader of the CIO. Davis worked hard on Lewis, convincing him that national socialism was preferable to democracy  and that the German worker far exceeded in health, good humor and muscular prowess the American equivalent. In 1936, Davis tried to influence Roosevelt by pouring money into the election campaign.  From then on he was always able to telephone the Oval Office.

In 1937 he saw a major opportunity in Mexico. He was convinced President Lazaro Cardenas would nationalize the oil fields. He foresaw a way to corner all the oil in Mexico. In February 1938 he started bribing high-ranking officials in the Mexican government. He made a close friend of Nazi Vice-Consul Gerard Meier in Cuernavaca, who was allegedly encouraging Cardenas to invade and repossess California, Texas, Arizona, and New Mexico.

Davis obtained the Mexican government's cooperation. He was promised all the oil in Mexico when Cardenas expropriated it on March 18, 1938. Cardenas kept his promise. On April 18, John L. Lewis telephoned Cardenas's right-hand man Alejandro Carrillo.  Lewis told Carrillo that Davis would be making a deal with Germany and Italy immediately and that these two countries were the only two with which it would be safe for Mexico to deal.

Why did America's most famous labor leader support the arming of the Nazi war machine? Because Lewis had major territorial ambitions himself. He dreamed of a Pan-American federation of labor of which he would be the unchallenged leader. Through Davis, and through Cardenas, he would be able to consolidate the unions north and south of the border. In this he had the total collusion of Vincente Lombardo Toledano, head of the Mexican labor force.

By June 1938, Davis's first tanker was steaming to Germany with thousands of tons of Mexican oil. But by 1939 he was already running into trouble. On May 31 his chief geologist, Nazi Otto Probst, was found murdered in his hotel room in Mexico City. Probst had been strangled by a clothesline that was tied to the head of his bed.  The German Embassy intervened and prevented an autopsy. FBI investigators determined Probst had been poisoned. It turned out he had bribed government officials and stimulated action against communists. It was almost certainly a communist killing.

Communist cells infiltrated Davis's growing oil empire. He used strikebreakers to vanquish the opposition and shipped millions of barrels of oil until after World War II broke out in Europe.

Meanwhile, the von Clemm brothers profited enormously from his success. Goring gave them the German franchise in hops, putting them in virtual control of the beer business.

Along with Davis, they became multimillionaires. In one of his frequent visits to Germany, Davis became close to a bespectacled, bulbous-foreheaded youth named Dr. Joachim G. A. Hertslet. Hertslet worked with Helmuth Wohlthat on Goring's economic staff and he also worked on Emil Puhl's staff with Hans-Joachim Caesar. In a series of urgent meetings with Goring, Admiral Erich Raeder, and various army chiefs, these young economists arranged for Davis to fuel the German navy, while Standard Oil fueled the air force. Davis  and Joachim Hertslet arranged a German credit of $50 million to Cardenas to be used for the reconstruction of the broken-down national railroad system, the building of irrigation and hydroelectric power projects, and the setting up of new oil-field equipment and construction. Hertslet opened the German Import-Export Corporation in Mexico City, which was to aid Mexico in stabilizing its currency.  It was Goring's plan to render Mexico a debtor republic that could be relied upon to be an ally in time of war.

In meetings in Mexico City at the end of August 1939, Davis told Hertslet of his concern about what might happen to his oil shipments if Germany was involved in war. The papers were full of forebodings. Davis saw his newfound empire crumbling. Whatever happened, he had to secure permanent peace. He cabled Berlin on  September 1, 1939, asking Goring if he could see Roosevelt to stave off the conflict. Needless to say, Goring's reply was enthusiastic.  That same day he had sent Electrolux's Axel Wenner-Gren on a similar mission to Roosevelt. 

Hitler's attack on Poland and Britain's subsequent declaration of war threw Davis into panic. He had his colleague, the beautiful secretary Erna Wehrle, help him prepare a secret code, to be approved by Himmler, which would allow him to keep in touch with Hitler and evade British censorship in Bermuda. The code designated Erna as Chrysanthemum, Hitler as Heron, and surprisingly, John L. Lewis as Dung. Roosevelt, Goring, and all other figures had their code names.

Next, Davis rushed Hertslet to Berlin to insure Goring's complete support in the future. On September 5 he had an urgent conference with Lewis, who called Roosevelt and insisted the President see the anxious oilman.

Roosevelt dared not offend Lewis because of Lewis's power over the work force on the brink of the 1940 election. However, he was afraid of what he called "entry or plot": J. Edgar Hoover and the State Department's Adolf A. Berle had handed him massive dossiers showing Davis's Nazi connections.

Like Ickes and Morgenthau, Berle was a fierce opponent of Nazi Germany. Morgenthau and Ickes were very happy to have him deal directly with the Davis matter. Busy fighting Standard Oil, they needed his assistance badly. Berle worked against Dean Acheson, whom he disliked intensely; the feeling was mutual. Berle was a maverick in the State Department, a thin, fierce, driven man who completely lacked the smooth gift of compromise normally required in Department dealings. Roosevelt trusted him completely. Indeed, he placed  Berle over Hoover, preferring to have all of Hoover's reports siphoned through Berle and analyzed by him before they reached the desk of Major General Edwin M. ("Pa") Watson, the presidential secretary.

On September 13, Davis called Roosevelt for an appointment. The moment he was off the phone, Roosevelt summoned Berle to the Oval Office. He asked Berle to sit in on the meeting with Davis scheduled for the following afternoon; he was to take minutes and to give him his personal comments as soon as Davis left.

At two o'clock the following day Davis limped into the office with all of his bantam cock's outrageous arrogance. He paced about the room, spouting his line of peace with Hitler and suggesting he should go to see Goring to convey Roosevelt's peace message. He was irritated by Berle's presence in the room. He asked Roosevelt twice if Berle could leave. Roosevelt refused to accede to his request. Davis shrugged and sat down.

While Roosevelt listened through a cloud of cigarette smoke Davis unraveled a great deal of specious nonsense. Knowing Roosevelt had no time for Hitler, he tried to sell him Goring, promising that Goring would soon take over the German government and saying that Hitler had been "moved away from the main Council." He asked the President's authority to enter into peace talks with Goring on the President's behalf.

Roosevelt replied that he had often been approached to intervene in the European conflict but he could only do so through official channels. He pointed out that he had sent a message just before the war suggesting peace talks but had not received an answer until the war had begun, "which, of course, got no one anywhere."

Roosevelt did not authorize Davis to act on the American government's behalf. Indeed, as soon as Davis left, he ordered Berle to contact J. Edgar Hoover and instruct the FBI chief to report directly to Berle on Davis's movements and contacts. On no account was Hoover to report to the Attorney General Robert H. Jackson or to Cordell Hull.

Davis left the meeting with Roosevelt in a state of drastic unease. Hertslet cabled him on Goring's instruction that he and Lewis must influence Roosevelt to suppress any revision of the Neutrality Act. In his cable of September 18 he reminded Davis, who scarcely needed reminding, "selling to belligerent nations means destroying cargo boats."

Davis, afraid of falling out of favor with Goring, cabled Berlin the next day that the President wanted him to negotiate the peace. He pretended that Roosevelt had agreed Germany should keep Danzig, the Polish Corridor, Czechoslovakia, all former provinces ceded to Poland by the Versailles Treaty, and all African and other colonies that Germany had had before 1918. He asserted that Roosevelt had appointed him ambassador without portfolio. He left for Lisbon and Rome on September 20. His plane was forced down by storms in  Bermuda. British Intelligence men came to the airport and questioned him closely. He refused to answer them and proceeded to Lisbon.

In Rome, Himmler sent several Gestapo men to meet Davis's plane. The oilman had a quick meeting with Mussolini, who proved welcoming. Accompanied by the SS men, he was given a special aerial tour of the German and Polish fronts.

Goring received him at the Air Ministry in Berlin on October 1, 1939. Among those present were Hertslet and Wohlthat. Goring opened the conference by expressing his admiration for Davis's efforts in providing petroleum to Germany for almost seven years through Eurotank. He asked for Roosevelt's sentiments and Davis insisted that Roosevelt was pro-German. Goring was understandably surprised. He said that he expected Davis to help secure permanent peace at the conference table, with Hitler and Roosevelt presiding.

J. Edgar Hoover and military intelligence determined that Hertslet would be returning with Davis to the United States. When Davis and Hertslet arrived in Lisbon on their way home, the local consul refused Hertslet a visa. Davis made a tremendous fuss, citing his "friendship" with Roosevelt and shouting that Hertslet was "a director of his European company." The consul cabled Berle in Washington, asking him whether he should shut his eyes to the fact that Hertslet was a high-ranking figure in the Nazi government.

In Washington, Berle had an urgent meeting with Assistant Secretary of State George S. Messersmith. They agreed Hertslet was dangerous. They cabled the consul in Lisbon to refuse Hertslet the visa.  Hertslet returned to Berlin to obtain a diplomatic passport.

Back in Washington, Davis checked into the Mayflower Hotel. FBI men had difficulty in bugging his conversations and movements. A post office convention filled the hotel and the G-men were unable to find a single room from which to operate. They had to use corners, closets, fire escapes, and even the roof as bases of their operations. It was only by engaging waiters and maids to help them that they discovered the import of meetings between Davis and his reliable secretary. These indicated commitment to the Nazis whether America  came into the war or not -- at least on Davis's side.

Davis tried to arrange another meeting with Roosevelt. While he waited for a decision, he changed his tankers to Panamanian registry to slip them through the British blockade to Lisbon, Hamburg, and other ports of Europe. He kept up a constant flow of petroleum and vital materials to Japan, again using Panamanian registry rather than Japanese tankers because British Intelligence was boarding Japanese ships at sea and arresting their German crews. Davis entered into collaboration with a former U-boat captain who was one of the harbor staff of Brownsville, Texas, and could aid him in his blockade running. 

Meanwhile, the von Clemm brothers were running into trouble. Morgenthau's Treasury agents were in Berlin, dodging the Gestapo to investigate the Davis-von Clemm deals through the Hardy Bank.  Karl von Clemm cabled Davis frantically on October 11, 1940, that  he saw "execution" coming, and he reminded Davis of his six and a half years of protection of the oilman. What could Davis do? Davis arranged with Goring for von Clemm to be transferred to Rome. Von Clemm and his brother diversified their company into diamond smuggling.

Following the occupation of Belgium and the Netherlands, the banks rushed their large holdings of diamonds into special vaults. But they were compelled to reveal the vaults' whereabouts. The von Clemms made a deal with the German government to obtain a corner in diamonds, importing them to North America to sell for desperately needed dollars with which to finance espionage rings and obtain industrial diamonds. Since the war was going on, these shipments were in direct contravention of the existing laws. So the von Clemms set up a complicated routing for their transactions.

The diamonds were shipped from Brussels and Amsterdam to Rome. They were put aboard the Nazi-controlled L.A.T.I. airline and flown via Lisbon and Dakar to Natal in Brazil and thence to Rio.  They came by diplomatic pouch from the German Embassy to the German consulate in New York.

In 1940, with no satisfaction from Roosevelt, Davis turned violently against the President and joined with the Nazis in a desire to destroy him in the elections. John L. Lewis agreed with Davis that Roosevelt must go or the entire oil deal with Hitler might be stopped.

Davis talked with Goring and the result was that Goring actually supplied $8 million to engineer the President's downfall. The Fraternity members decided to finance Burton K. Wheeler for accession to the White House. The perfect choice of a Nazi faction, Wheeler was ceaseless in his support of Hitler. He used his senatorial franking privileges to distribute Nazi propaganda through the mail. He opposed Lend-Lease, conscription, and aid to Britain in the form of warships and munitions.

The $8 million arrived in Washington via L.A.T.I. airlines and Pan American Airways. Davis spread the money through accounts in six different banks. His first investment was $160,000 to buy forty Pennsylvania delegates at the Chicago Democratic party convention to insure the defeat of his old friend Senator Guffey, who was threatening to expose The Fraternity. The forty Pennsylvania delegates  would also vote against Roosevelt. The deal did not work. Guffey won the nomination and so did Roosevelt. Wheeler lacked the common touch and had no chance against the President.

John L. Lewis did his best. He guaranteed ten million votes for Roosevelt's Republican opponent, Wendell Willkie. He gave a radio speech on October 25, denouncing Roosevelt as a warmonger and threatening to retire from the CIO if the President was reelected. But Roosevelt remained in power. While leaving the public in no doubt of his attitude to Hitler, he promised the electorate that no American boy would die on foreign soil. He thus united the isolationist factors and assured himself the election.

Davis overcame the setback by expanding his operation. He set up U-boat refueling bases through the Caribbean and South American coastlines. He split off Eurotank into an independent body under Goring and Karl von Clemm, his profits indirectly siphoned to him through the Bank for International Settlements via Lisbon and Buenos Aires. But as America drew closer to war, the von Clemm brothers grew more and more worried about their American operation. They had to be prepared for the flow of diamonds and oil to be stopped.

In May 1941, Karl von Clemm warned Werner in a cable encoded AUNT KATE DYING FAST that Hitler was about to declare war on the Soviet Union. When Hitler invaded Russia, Davis's shipments of oil via Vladivostok and the Trans-Siberian Railroad to Berlin abruptly stopped. Hastily, he increased his Compania Veracruzana deals with Japan, and arranged for $3 million in yen to be transferred to him via the White Russian millionaire Serge Rubinstein to buy foreign exchange and finance oil wells. He also became involved in business deals with Brazil and Argentina.

Davis gave financial support to the No Foreign Wars Committee. This was financed also directly from Berlin. Meanwhile, the von Clemm brothers financed the pro-Nazi America First movement. With Verne Marshall, isolationist editor and supporter of Hitler, Davis and Werner von Clemm became involved with Charles Lindbergh and his "pacifist" campaigns against Roosevelt. On January 2, 1941, Senator Josh Lee, a Democrat from Oklahoma, charged that the formation of the No Foreign Wars Committee with Davis's backing amounted to "the diabolically cunning betrayal of the American people." He added:

The record of this man Davis shows conclusively the great financial stake he has in a complete Nazi victory in the European war. Much of the gasoline sending showers of fiery death into the defenseless heart of London was sold to the German government by this man Davis.  ... He is still trying to promote a phony peace through the White House to pull Nazi Germany's chestnuts out of the fire. ... The No Foreign Wars Committee is a timely object lesson in the technique of  Nazi infiltration.

The truth of Lee's words could be seen in the fact that the committee included Senator Rush D. Holt of Virginia, who was alleged to be in the direct pay of the Nazi government.

On January 5, at a press conference in his offices on the fifty-fourth floor of the RCA Building in Rockefeller Plaza, Davis denied he was financing the committee. He said he would like to appear before the Senate committee that had been formed to investigate his activities. The investigative committee was headed by Senator Burton K. Wheeler!

In an attempt to bolster his case, Davis said he had not shipped oil to Germany after war broke out, knew nothing about what was happening at Eurotank (despite the fact that he had received a letter from Karl von Clemm the day before), and stated he was a direct descendant of the South African empire builder Cecil Rhodes and of Jefferson Davis. The problem was that Cecil Rhodes had had no children and that Jefferson Davis's descendants had been disowning the oilman for the past twenty years.

By May, Senator Wheeler had "cleared" Davis of all connections with the Nazi government. But this help from a fellow Fraternity figure did not ease Davis's increasing sense of fear that Roosevelt would bring America into the war. On July 26 he appeared briefly on radio to support Wheeler's all-out attack on Lend-Lease. On August 1 he was in Houston when he was stricken with a fatal heart attack in his hotel room.

In his authorized biography, A Man Called Intrepid, Sir William Stephenson claims that Davis did not die from natural causes but was murdered by representatives of British Intelligence. According to the FBI files his demise was simply brought on by the terrible strain of the preceding months as his empire fell apart and his Nazi connections began to cause some of his shareholders to run for the hills.

After his death his secretary, the glamorous Erna Wehrle, became chairman of the giant corporation. Werner von Clemm became vice-president. The board was made up of Fraternity aide U.S. Secretary of Commerce Jesse H. Jones, Harry D. Collier of California Standard, and Hamilton Pell, partner of Leo T. Crowley in Standard Gas and Electric. The Fraternity had come full circle once more.

Throughout the early months of 1942, Morgenthau's team built a damning case against the von Clemm brothers. Meanwhile, they hastily sold the Davis Oil Company to Fraternity brothers Serge Rubinstein and Axel Wenner-Gren to insure its continued existence.

Werner von Clemm went on living a life of luxury on his ill-gotten gains. He became a pillar of society in the heart of the fox-hunting country at Syosset, Long Island. No one who enjoyed his company suspected that this handsome member of the local social set was on the brink of being arrested.

On September 26, 1942, a police car containing Treasury agents rolled up at the door of the von Clemm house. The visitors rang the doorbell. A maid came to the door. The elegant von Clemm was waiting in the living room to receive the visitors. The agents apologized for the inconvenience and politely placed handcuffs on Werner's delicate wrists.

The trial caused a great stir in Syosset. Werner lied and lied, trying to hide the details of the conspiracy. But it was useless. He was sentenced to five years in prison -- the only member of The Fraternity to suffer such a sentence. There is a curious footnote to the story.  On October 15, 1942, the German government sent an official message through the Swiss authorities to American minister Leland Harrison in Beme. They asked for a full transcript of von Clemm's trial to be sent from Washington to Berlin. It was, of course, supplied.

At war's end, O. John Rogge, Special Assistant to the Attorney General, collected a mass of evidence in Germany to show the Davis-Lewis connection. At a speech at Swarthmore College on October  26, 1946, he told the story of the association. He also showed other questionable connections, including the activities of Burton K. Wheeler on behalf of the Nazi government. The result was that Attorney General Tom Clark fired Rogge. When the author of this book asked him in 1981 why he had been dismissed, the dying Rogge replied succinctly. "Wheeler," he said, "was closer to President Truman than I was. "

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