Another Big Story the Mainstream Media Missed: GE-Krupp Conspiracy Trial of ’47

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Lest anyone imagine that corporate crimes being unreported by the mainstream media and punished with a wristslap are anything new, legendary labor reporter James Lerner’s account of the GE – Krupp conspiracy trial of 1947 is an eye-opener.

Masonry drill bit tip with a tungsten carbide insert brazed to the steel drill body. (Photo: Mendaliv / Wikimedia)Course of Action: A Journalist’s Account from Inside the American League Against War and Fascism and the United Electrical Workers Union (UE) 1933-1978 is a posthumous memoir of James Lerner, who was a prominent labor activist during World War II and until the 1970s. Course of Action, not published until September 26, 2012, details Lerner’s involvement as a youth organizer with the American League Against War and Fascism and his reporting about major strikes, the changes effected by the passage of the anti-union Taft-Hartley Act of 1947 and his role as managing editor of the UE News until his retirement in 1984.

The following excerpt is a particularly compelling account covering the GE-Krupp Conspiracy Trial in 1947. It details how GE and German manufacturer Krupp colluded during WWII to maintain a worldwide monopoly on the valuable war material tungsten carbide. It reveals the depth of GE’s Nazi past. Lerner was the only journalist to cover the trial in 1947. As Lerner told union members through a story in the UE News: “If you don’t see anything about the GE-Krupp cartel trial in your local newspaper, don’t be surprised. There’s no one at most sessions of the trial to report it. One day there were two commercial newspapers and UE News; the next day, one commercial newspaper and UE News. Today only UE News was left.”

A discussion with Anna Marie Taylor, coeditor of the book and long-term partner of Lerner’s son, follows the excerpt.

“I Cover the GE-Krupp Conspiracy Trial”

A brief item in UE News of September 7, 1940, a few weeks after I joined the paper’s staff, reported that two federal indictments were returned against the General Electric Corporation and the Krupp Armaments Works of Germany for conspiring to maintain a worldwide monopoly in production and sale of carboloy, a trade name for tungsten carbide. The government suspended its prosecution of the case at the outbreak of World War II. It was only seven years later at the war’s end, that I began to understand the full significance of these indictments.

After the war in 1947, I spent months covering the trial of U.S. v. General Electric Company, Fried, Krupp Aktiengesellschaft, E. T. I heard both the testimony presented by the government and GE’s defense arguments. The Krupp Corporation, whose offices were now temporarily under the control of the United States denazification authorities, was not called to testify. I told union members through a story in UE News:

If you don’t see anything about the GE-Krupp cartel trial in your local newspaper, don’t be surprised. There’s no one at most sessions of the trial to report it. One day there were two commercial newspapers and UE News; the next day, one commercial newspaper and UE News. Today only UE News was left.I thereby sat there as the only reporter remaining to hear the full story of the partnership between GE and Krupp, its German partner. I could not help thinking what a field day the press would have had if union leaders were under criminal indictment instead of corporations.

After the opening days of the trial, I was also the only person in the courtroom who was not directly related in some way to the proceedings. I must have been conspicuous for my diligent presence, especially since I took extensive notes day after day. The defendants tended to ignore me even when I sat directly behind them to catch their comments. However, GE did not ignore what UE News would say about the case. Shortly before the trial was to begin, we ran a full-page story on the salient facts of the case based on the 160-page indictment. The company accused the union of printing “unproved charges of the indictments as facts” and of being antilabor because we were harming this great benefactor of the working man by printing such charges. This condemnation of UE News was distributed to all GE workers in the corporation’s own newsletter, Work News (February 7, 1947).

Far from innuendos, the facts that appeared in UE News came directly out of the hearings of the Senate Patents Committee held in April 1942 after the government obtained the indictments. At those hearings, GE was accused of being responsible for a “drastic shortage” of an essential material needed for manufacturing tools in the United States. This, the senators found, was in contrast with the situation in Germany, where the Nazis had an abundance of tungsten carbide. It was at these Senate committee hearings that one of the defendants, William G. Robbins, president of the Carboloy Company, a GE subsidiary, leaped to his feet and exclaimed, “I refuse to be called un-American or that our company is un-American.”

“One of the government witnesses at the trial explained how a tool edged with tungsten carbide could be used 1,000 times before it had to be reground compared to only 100 operations using other tools. The indictment also cited tungsten carbide’s superiority in parts for lathes, drills, saws, and other devices used in the production of military equipment and automobiles.

The U.S. government charged that in 1938 the American and German firms agreed to divide up the world market for carboloy. Before the agreement, the product sold for $48 a pound in the United States. After the agreement, GE set the price at $453 a pound or one dollar per gram. The prosecution showed that under the agreement, Krupp would control the sale of carboloy everywhere in the world except the United States and Canada, which were GE’s turf. Government prosecutors refuted GE’s claim that its expertise and patents were the sole reason this valuable material was available to American industry. The government brought to the witness stand a parade of businessmen who testified that they had been producing and selling tungsten carbide before the GE-German agreement went into effect.

Trial testimony showed that smaller competitors were either driven out of business or forced to go along with the price set by the monopoly. Methods used to accomplish this, according to witnesses, such as the president of the Union Wire Die Company, included forced buy-out of competitors. The head of American Cutting Alloys testified that he begged GE not to drive him out of business.

I was in the courtroom when a young man dressed in “army pinks” dragged in a heavy leather bag. For two days before being called to the witness stand, he guarded it carefully, even lugging it with him when he went to the men’s room. The bag, it turned out, contained 13 folders from the secret files of the Krupp firm at Essen, Germany. Here was the actual record of the conspiracy dovetailing the documents the government found in GE’s files. Company counsel had fought unsuccessfully to keep these records out of the trial. Charles H. Collison, chief of the metals section of the U.S. Office of Decartelization in Berlin, had previously informed the court that seven folders were missing. He told the court he believed these records were destroyed by the allied bombing of the Krupp Works.

General Electric defendants were visibly shaken when the witness opened the lock on his leather bag and began pulling out file folders. U.S. Attorney Malcolm A. Hoffman, who was in charge of the government’s case, let me examine those documents in his office several floors above the courtroom. The memory of the war’s horrors was still vivid in my mind as I read letter after letter from Krupp to GE officials ending with the phrase “Heil Hitler.” I thought of concentration camp scenes that Allied armies had found in Germany, of the millions of people, including my own relatives, who disappeared forever into Hitler’s death camps. By this time, the world knew that Krupp had run some of the camps where slave laborers produced goods for Nazi armies. In defense of its arrangements with Krupp, GE claimed that its tungsten carbide deal helped create jobs for American workers. Evidence showed, however, that the cartel arrangement actually resulted in job losses.

The government introduced the following documented message from Krupp to GE: “Understand that you are offering carboloy for export to Russia stop We point out you are prohibited from doing so. Krupp.” When GE failed to satisfy its cartel partner, a harsher letter followed, concluding with an unspecified threat to GE (October 29, 1931). The threat had its desired effect, and in January, 1932, GE decided not to sell hard metal composition to The Amtorg Company, a Soviet purchasing agency. All this took place during the Great Depression when American workers were desperate for work. When Amtorg had advertised for 6,000 skilled American workers willing to take jobs in the Soviet Union, 100,000 people applied (Business Week, October 7, 1931).

Krupp was one of the German companies that notoriously financed Hitler’s political career when he pledged to crush the labor movement before launching his drive across Europe. I was aware from trial evidence that even before Hitler came to power in 1933, Krupp had made its sympathies known with its “Heil Hitler” letters. Another letter from GE to a prospective customer, found in the files of both companies, dated April 18, 1940, read: “We are not permitted to sell tungsten carbide to China; you’ll have to take your business to Germany.” Rather than promoting employment as claimed at the trial, the cartel was in fact giving away American job opportunities to foreign workers.

GE’s attempt to monopolize patent rights for tungsten carbide was undercut by a document found in its Schenectady files and presented as evidence. This consisted of a letter that was dropped into the company’s suggestion box at its Schenectady, New York, plant by W. L. Merrill, an engineer in charge of the production of tungsten carbide. Merrill proposed that the material be sold for $50 a pound instead of the $453 set by the company. He wrote in the letter:

… a great deal of mystery has surrounded the production of this material since its inception. As a matter of fact, it is just about as complicated as making a good grade of concrete for a sidewalk. Grind up material, pass it through a mesh, put a certain percentage of binder with it, press it into a cake, and bake it.

Merrill went on to suggest that since the current actual cost of producing the product was $8 a pound it could be sold at his suggested price of $50 a pound, and still “give us approximately a 7 to 1 markup over manufacturing cost which should be a satisfactory profit.” It started to become clear at the trial that while the company was boasting of its great patriotic service to the nation, it was charging an exorbitant markup for a strategic war material.

The evidence against GE became indisputable. As Judge Knox noted in his decision: “The defendants, by their counsel, have frankly admitted that they were monopolists and that they sought to prevent price competition.” He found the company guilty as charged. He then practically apologized for making the verdict and sentence by stressing that since the offenses of which GE was guilty were eight or nine years old, he personally had “a very strong indisposition not to punish stale crimes too severely.” The judge then turned down the government’s request that the defendants be given a six-month prison sentence. Judge Knox imposed fines totaling $56,000 against the corporation and the individual defendants. He stated that a failure to impose any punishment at all “would be misinterpreted by many people.” The government’s attorney, at one point, stated that the business community regards fines in antitrust cases as “a license fee, which may be charged off as part of the cost of doing business.”

In March, 1948, General Lucius Clay, United States military governor in Germany after the war, ordered a halt to the decartelizing of Germany’s trusts. According to the New York Times, this had the effect of sparing “German industry any change in its corporate structure.” (March 13, 1948). The following spring, Charles H. Collison, Deputy Chief of the U.S. decartelization branch in Germany, who provided the Krupp files to the carboloy trial in New York City, was fired. He claimed that he was being punished for giving an army investigating committee proof of the failure of American officials in Germany to carry out the antitrust programs that had been agreed upon by the United States, Great Britain, and the Soviet Union following the war.

Shortly before the tungsten carbide case had come to trial, the U.S. Atomic Energy Commission (AEC) began what it described as an investigation into the fitness of UE to represent GE employees at the corporation’s Knolls Nuclear Energy Laboratory near Schenectady, New York. On the very week that Judge Knox was practically absolving the corporation of its conspiracy with the Nazi firm Krupp, the AEC directed GE to deny Knolls workers the right to be represented by UE. It claimed that the union presented a risk to the security of the United States. If this coincidence had been arranged in the corporation’s public relations department to discredit the union, the timing could not have been more perfect. (UE News, October 11, 1948).

Having withheld the details of the GE-Krupp conspiracy throughout most of the trial, the New York Times carried on its front page a story about the AEC action against the union. The court verdict against GE, on the other hand, was reported on the entertainment page alongside advertisements. It was the height of irony that the very union that was praised by civilian and military leaders for its outstanding role in helping the United States and its allies defeat Nazism was now the enemy.

How did GE influence the press? One day at the carboloy trial, I saw defendant William G. Robbins reach into his pocket for his wallet and remove a clipping that he passed around to other defendants with obvious pleasure. Leaning forward, I could see that the clipping dealt with the indictment of Carl Marzani, who had made a film for UE called Deadline for Action (1946). The film offered an exposé of monopoly practices, including the tungsten carbide conspiracy. Marzani was tried and convicted on charges that he denied being a member of the Communist Party and had falsely signed a loyalty statement. He served 34 months in federal prison.

In the winter of 1957, I sat in for several days at another trial involving GE. This trial was in the same federal courthouse where I sat through the GE-Krupp case many years before. Now every seat was taken and all the trial details were extensively reported in the tabloids, with photographs and drawings. GE officials were accused of transporting prostitutes from New York City to Newark, New Jersey, to entertain prospective GE customers. At UE News we decided to ignore the story. The sordid activities of individual corporate executives seemed insignificant next to the great crimes of corporate monopolies during the war that were flagrantly ignored by the media and public leaders.

In 1961, GE and Westinghouse and some of their officials were found guilty of conspiring to rig bids on the sale of turbines. Following the verdict, attorney Malcolm A. Hoffman, who had handled the government’s case in the tungsten carbide suit 11 years earlier and who had permitted me to examine the Krupp letters, wrote to the New York Times. He described how his request for jail sentences in the GE-Krupps tungsten carbide case had been rejected by Judge Knox. Hoffman noted that following that case, the United States subsequently brought 36 anti-trust suits against GE. In 1985, the corporation pleaded guilty to defrauding the government on missile-warhead contracts. This time, the court imposed a fine of $100,000 and $2 million in criminal and civil penalties.

Q&A with Anna Marie Taylor, co-editor of Course of Action:

Peter Handel: How did you come to be involved with Course of Action?

Anna Marie Taylor: James Lerner, the author of this book, is the father of my partner of more than 30 years, Richard Lerner. We frequently traveled from California to Brooklyn, New York, to visit his parents, and I got to know them well. After Jim retired in his early 70’s, Richard encouraged him to write his memoir because of his involvement in some of the most critical events of the 20th century. These included the antifascist movement in the United States, of which little has been written, and the surge of the industrial labor movement during and after World War II.

Why is this book important? Isn’t it just old news by now?

This book is important if it is true that we can learn from our history. It is especially valuable because Jim documents how on-the-ground, persistent and fearless commitment by broad-based movements for social justice matter during times of great political change and conflict. Jim conveys this history with personal stories of everyday, often behind-the-scenes events. This history still has meaning today for social justice movements in the age of Occupy, Google, Facebook and Twitter.

When you came upon James Lerner’s manuscript, what kind of shape was it in? How did you pull together the narrative?

I saw Jim’s drafts in many forms over a number of years. We used to all sit around the kitchen table in Brooklyn for hours on end, reviewing the ongoing writing and listening to Jim embellish stories for our benefit. Dick especially would often ask probing questions and make suggestions. Jim was very aware that the work needed more editing and gladly accepted when I decided to offer to work directly with him as a coeditor with Dick. During his lifetime, at his request, I was able to organize and edit some specific chapters that he wanted to give to family and colleagues. My goals in editing the manuscript became defined over time. They were to keep the narrative accurate, flowing and readable without changing the feel of Jim’s wry commentary and sense of humor. This meant eventually reorganizing some of the material into fewer chapters and adding a certain amount of transitional writing. It also required moving some very detailed material into notes and adding an index.

Tell us a few of the (many) highlights of Lerner’s career.

Jim was one of the original students at the Experimental College at The University of Wisconsin, Madison. The college was known for its innovative teaching model.

In 1933, when he was 22 years old, Jim joined a new organization called the American League Against War and Fascism and became one of its principal organizers. He traveled throughout the US and Canada to form local chapters of the League.

In 1936, Jim was part of a US delegation of young people who attended the World Youth Conference in Geneva. He then clandestinely crossed over into Spain with a group who had been invited by fighters for the Spanish Republic to observe the front line against the Franco’s fascist army. As a journalist, he reported on the war for the US press and spoke at meetings and conferences held to support the Spanish Republic defenders.

Lerner reports on suspect and frequently criminal activity against workers by major corporate entities and groups such as The American Legion, RCA and GE – why were these misdeeds so underreported?

The mainstream media saw movements for change from the same perspective as the industrial corporations. Their coverage of peace and labor union organizing, court cases, etc. was therefore highly selective and clearly conformed to their own economic and political interests.

What do you feel are some of Lerner’s great achievements as a journalist? As an activist?

At UE News, Jim began by reporting on stories of interest to union members, often reporting on-the-ground at work actions and strikes or writing about people’s everyday lives. Jim also started the pithy and often humorous column called “It Happened This Way” that ran from 1948 to 1986. The column became well known for its barbs at corporate actions and misdeeds that affected workers.

Jim had the gift of crafting broad coalitions of people into the anti-war movement before the outbreak of World War II. This included bringing into one movement national organizations of all kinds, including political and religious organizations, student and youth groups, farm organizations and pacifists, who felt it was important to work in antiwar coalitions even though their philosophies differed.

What kind of a person was he in his private life?

Jim was a modest, down-to-earth person. Despite the fact that his work required a lot of travel, he was basically a homebody. He loved his hobbies, which included carpentry, and photography and raising bromeliad plants. He was married to his wife Gertrude Fisher for 65 years and kept in frequent touch with his parents, children and extended family. Above all, he loved to tell stories.

What are your favorite chapters in the book? Is there a particular one you feel exemplifies his life and work particularly?

For me personally, my favorite chapter is “I Cover the GE-Krupp Conspiracy Trial.” because it reveals an important trial in US History that was ignored by the mainstream press and whose lessons of profit over national security should never be lost.

I also love the last chapter, “Vietnam is Union Business” because it describes the courage that UE consistently showed to openly oppose the Vietnam War long before it was popular to do so.

What do you think James Lerner would think about the state of investigative and political reporting today?

He would have been encouraged by the proliferation of progressive news sources and the international access to communication that is now available to people all over the world through the internet. He would have thought that it would especially be of immeasurable value to youth activists, something close to his heart. He would have compared its effectiveness, often instantaneous, to how he traveled by ground from place to place as a young man, lucky to have access to a telephone.

Journalists supposedly try to be objective in their reporting – yet Lerner has a genuine political affinity with much of his subject matter. What do you think he would say about this issue?

Jim never thought of himself as “objective” in the sense of purporting to present all sides of an issue. He considered himself a labor journalist, whose job it was to truthfully provide and analyze local, national and international news in a way that would be relevant to working people and that would advance their welfare.