Office of Alien Property Custodian

The seal of the United States Office of Alien Property Custodian

TheOffice of Alien Property Custodianwas an office within the government of theUnited StatesduringWorld War Iand again duringWorld War II,serving as acustodianto property that belonged to US enemies. The office was created in 1917 by Executive Order 2729-A under theTrading with the Enemy Act of 1917(TWEA) in order to "assume control and dispose of enemy-owned property in the United States and its possessions."

History

Sec. 6 ofTWEAauthorized thepresidentto appoint an official known as the "alien property custodian" (APC) who is responsible for "receiv[ing,]... hold[ing], administer[ing], and account[ing] for" "all money and property in the United States due or belonging to an enemy, or ally of enemy...."TWEAwas originally enacted during World War I "to permit, under careful safeguards and restrictions, certain kinds of business to be carried on" among warring nations, and to "provid[e] for the care and administration of the property and property rights of enemies and their allies in this country pending the war."

Created in October 1917 within theUnited States Department of Justice,theOffice of Alien Property Custodian(OAPC) ceased to exist in 1934 and its functions were delegated to theAlien Property Bureau(APB) in the Claims Division of the Department of Justice. On December 9, 1941, the APB was superseded in the Justice Department by theAlien Property Division(APD). The APD was abolished in 1942 and its functions were passed along to theOffice of Alien Property Custodian(APC) within the Office of Emergency Management. APC was abolished in 1946 and its functions were transferred to theOffice of Alien Property,Department of Justice. It was abolished in 1966 and most of the functions related to foreign assets control were passed to theOffice of Foreign Assets Control(OFAC) in theUnited States Department of the Treasury.

Lineage of successive agencies

• Office of Alien Property Custodian, Department of Justice (1917–1934)
• Alien Property Bureau, Department of Justice (1934–1941)
• Alien Property Division, Department of Justice (1941–1942)
• Office of Alien Property Custodian, Department of Justice (1942–1946)
• Office of Alien Property, Department of Justice (1946–1966)
• Office of Foreign Assets Control, Treasury Department (1966–present)

World War I

President Wilson with Mitchell Palmer, the first Alien Property Custodian

Alien Property Custodian sale ad

Alien Property Custodian sale of the plant of A. W. Faber Pencil Co., Newark, N.J.

PresidentWoodrow WilsonappointedA. Mitchell Palmer,a political ally and former Congressman, Alien Property Custodian in October 1917. Palmer held the position from October 22, 1917 until March 4, 1919. A wartime government official, the Custodian had responsibility for the seizure, administration, and sometimes the sale of enemy property in the United States. Palmer was also allowed to take control of property that might hinder the war effort, including all property belonging to interned immigrants, whether they had been charged with a crime or not.Palmer's background in law and banking qualified him for the position, along with his party loyalty and intimate knowledge of political patronage.Under Palmer's leadership, the Custodian employed hundreds of officials.

Seized assets

The size of the assets the Custodian controlled only became clear over the next year. In January 1918,The New York Timeswrote that Palmer's organization turned into "the biggest trust institution in the world, a director of vast business enterprises of varied nature, a detective agency, and acourt of equity."

Late in 1918, Palmer reported he was managing almost 30,000 trusts with assets worth half a billion dollars. He estimated that another 9,000 trusts worth $300,000,000 awaited evaluation.Many of the enterprises in question produced materials significant to the war effort, such as medicines,glycerinfor explosives,charcoalfor gas masks. Others included mines, brewing, and newspaper publishing. Palmer built a team of professionals with banking expertise as well as an investigative bureau to track down well-hidden assets. Below the top-level positions, he distributed jobs aspatronage.For example, he appointed one of his fellow members of theDemocratic National Committeeto serve as counsel for a textile company and another the vice-president of a shipping line.

In September 1918, Palmer testified at hearings held by the U.S. Senate'sOverman Committeethat theUnited States Brewers Association(USBA) and the rest of the overwhelmingly German liquor industry harbored pro-German sentiments.He stated that "German brewers of America, in association with the United States Brewers' Association" had attempted "to buy a great newspaper" and "control the government of State and Nation", had generally been "unpatriotic", and had "pro-German sympathies".Palmer wanted to seize the estate of the lateAdolphus Busch,whose wife was stranded in Europe during the war, and succeeded in seizing the property of another brewer, George Ehret.

The assets of theOrenstein & Koppel Company,the Bosch Magneto Company, theHamburg-American Shipping Line,the German-American Lumber Company, theNew York Evening Mail,as well as twenty German insurance companies, were seized.Among other significant seizures, the United States assets of the chemical companyBayerwere auctioned off and it lost itsU.S. patentforAspirin.In April 1919, the president of the Chemical Foundation, Inc. and Palmer's successorFrancis Patrick Garvantransferred 4,500 German chemical patents valued at $8 million to the Chemical Foundation, paying only $250,000; the Chemical Foundation in its turn licensed patents to American companies.

Disposal of confiscated property

Palmersaid that the alien property custodian kept "the biggest general store in the country."Altogether, the United States Government confiscated close to $500 million of foreign assets during WWI.In 1921, the Congress while adopting theJoint Resolution Terminating the State of War Between the Imperial German Government and the United States of America and Between the Imperial and Royal Austro-Hungarian Government and the United States of Americaspecified that all seized property had remained in the United States ownership; also, theTrading with the Enemy Act of 1917was not terminated.It stayed dormant until March 1933, whenFranklin D. Rooseveltinvoked it to enforce a week-longBank Holiday of 1933.In 1925, the Office of Alien Property Custodian still controlled $300 million worth of alien property, with half of that amount in cash.

Criticism and response

Later criticism of Palmer's and his successors performance, especiallyThomas W. Miller's, focused less on legality of their appointments or the fees earned by political cronies but on sales of enemy assets. There were safeguards in place, but competitive bidding meant nothing when an auction was rigged by withholding information from all participants. More revelations took years to surface and the connections between Palmer and direct profits proved too tenuous to support his indictment. However, Thomas W. Miller was caught in the act and served jail time for taking a $50,000 bribe.

Palmer successfully campaigned to keep the powers to sell confiscated assets within the office of custodian. He promised to hinder Germany's industrial expansion after the war. Even when Germany was facing an inevitable defeat, Palmer insisted on continuing his crusade to make American industry independent of German investment, with major sales of the seized assets in the metals industry in the spring of 1919, for example.He offered his rationale in a speech to an audience of lawyers: "The war power is of necessity an inherent power in every sovereign nation. It is the power of self-preservation and that power has no limits other than the extent of the emergency."

World War II-era

On 11 March 1942, PresidentFranklin D. RooseveltissuedExecutive Order 9095establishing the Office of the Alien Property Custodianwithin the Office for Emergency Management under authority of the Trading with the Enemy Act of 1917 and the First War Powers Act of December 18, 1941. On April 21, 1942 an Executive order subsequently transferred to it the functions, personnel, and property of the Alien Property Division of the Department of Justice.He appointedLeo Crowley,a former banker and chair of theFederal Deposit Insurance Corporationas APC. During the war the APC amassed a vast portfolio of enemy property including real estate, business enterprises, ships and intellectual property in the form oftrademarks,copyrights,patentsand pending patent applications. FollowingNikola Tesla's death at theNew Yorker Hotelin 1943, the Custodian seized much of Tesla's work from his hotel room even though Tesla was an American citizen.

In 1947, Assistant Attorney GeneralDavid L. Bazelontook over as head of the Office of Alien Property,as a result of the reorganization inExecutive Order 9788.He remained in this post until he received arecess appointmentfrom PresidentHarry S. Trumanon October 21, 1949, to a new seat on theUnited States Court of Appeals for the District of Columbia Circuit.Before he was seated on the bench,Harold L. Ickes,a key figure in theRoosevelt administration,indicated that Bazelon's activities as head of the Office of Alien Property warranted a Senate investigation but predicted none would be forthcoming.

Among the assets held by the Alien Property Custodian in WWII was the copyright forAdolf Hitler's bookMein Kampf,meaning that Hitler got none of the royalties from the book's sales in the United States, totaling $20,580 by 1945.

1950s

In 1953, PresidentDwight EisenhowerappointedDallas Townsend Sr.Assistant United States Attorney General, heading the Justice Department's Alien Property Office, an office he held until 1960. Townsend supervised the seizure of enemy property and assets that had been seized during World War II.

Testifying before a U.S. Subcommittee in 1957, Townsend argued that a return of 10% of seized enemy property was a sufficient amount. "One of the most unfair aspects of a general return of all German and Japanese property is that it would donate huge windfalls to large enemy corporations, industrialists and their agents, many of whom were strong supporters of the militaristic and aggressive policies of the former Governments of Germany and Japan," he told Senators.

Townsend seized $329 million in proceeds ofInterhandel,a Swiss holding company, saying that it was a front for the real owner,IG Farben,the German chemical cartel.

Abolition

On May 13, 1966, PresidentLyndon B. JohnsonissuedExecutive Order 11281which abolished the office, effective June 30 of that year.

External links

• 1922 Report of the Alien Property Custodian
• Office of Alien Property Custodian: Annual report for the period March 11, 1942 to June 30, 1943
• Annual reports - Office of Alien Property, 1947-1979,Hathi Trust
• Records of the Office of Alien Property,NARA