Part 6 of Land and Loot

Lamar Hotel in Houston, since demolished

In 1978 Houston was in the center of a real estate boom. At the same time that the corporation created by a consortium of Suite 8F Crowd interests and Dillon Read investors (TexasEastern Transmission Corp. which in 1947 had bought the government-constructed pipelines carrying natural gas from Texas to the northeast) was making plans with Canadians to build a commercial real estate project in downtown Houston, called the Houston Center, the stock of a local construction company, General Homes, was sold under a purchase agreement to CFGH-Texas, Inc., a wholly owned Texas subsidiary of a Delaware corporation, Cadillac Fairview U.S., Inc., whose ultimate parent was Cadillac Fairview Corp., Limited, an Ontario, Canada corporation.   

On January 7, 1981 the new General Homes, now a public corporation, executed a loan agreement to secure $50 million of financing from Bank of Nova Scotia and Toronto-Dominion Bank, both Canadian chartered banks, and Capital Bank, N.A. of Houston (later called MBank, then BankOne, before it became insolvent) [Harris County File No. J615338].[1]   

As part of the IPO that occurred, various transactions took place. On December 17, 1982 the Canadian banks transferred their rights in the notes and liens to American Savings and Loan Assn. of Florida [Harris County File No. J645338].[2]  In January 1983 the purchase agreement with Cadillac Fairview was cancelled by means of the following transactions described in the Notes to Consolidated Financial Statements contained in General Homes’ SEC filing:

In January 1983, GHMC [General Homes Management Corporation] acquired 545,104 shares of the Company’s redeemable Preferred Stock and all of its outstanding Common Stock for $5,000,000 from CFUS [Cadillac Fairview U.S.].  GHMC contributed the redeemable Preferred Stock to the Company, and it was retired.  The Company repaid loans due CFUS in the amount of $15,000,000 plus accrued interest of $5,078,000 and redeemed 714,646 shares of its redeemable Preferred Stock for $6,431,000, $1 per share less than its par value.  Also the Company’s $15,132,000 current tax liability to CFUS was forgiven.  The Company and GHMC agreed to indemnify CFUS and its parent for any liabilities arising from agreements consummated while it was a stockholder.

In 1979-80 General Homes sold $25 million in mortgage loans, payable to its subsidiary, FGMC, Inc. [abbreviation for “First General Mortgage Corp.”], to American Savings & Loan Assn. of Florida (“ASLA”) and retained a 20% participation interest.  These notes were transferred by FGMC, Inc. to American Southern Mortgage and then to ASLA.  In January 1983 General Homes entered into a revolving credit agreement with Bankers Trust Co. of New York for a $24.5 million line of credit with payment due by January 1988, said debt secured by $28 million in U.S. Treasury notes pledged by American Savings & Loan Association.  General Homes gave ASLA a security interest in life insurance policies and a 75% participation interest in the Bankers Trust line of credit.  With this new credit arrangement, General Homes stock was reissued, with all stock owned by Cadillac Fairview being transferred to General Homes and ASLA.  Cadillac Fairview, in return, on January 5, 1983, executed a release of lien on a $4 million note retained in a July 25, 1979 sale of land to General Homes [H796081],[3] and by corporate resolution attached thereto, Cadillac agreed to use other proceeds from the stock sale to “repay indebtedness of General Homes to The First National Bank of Chicago pursuant to that certain Loan Agreement dated as of August 31, 1978.”[4]

Shearson Lehman was the managing underwriter of the public offerings of stock and also purchased secured notes from General Homes which were used in some form of derivative securities backed by mortgages.[5]  Until 1983 ASLA was controlled by Shepard Broad and his son, Morris Broad, in Miami, but in December 1982 the Broads signed a voting trust agreement relative to control of ASLA with Marvin Leon Warner, a Cincinnati businessman, allowing Warner to purchase $13 million of the stock.  Warner's Warner-Kanter Construction Co in Cincinnati had been investigated by the FBI in 1954 for suspicious FHA loan transactions in Canterbury Gardens in suburban University City outside St. Louis.

Warner had been a large donor and fun-raiser for Jimmy Carter in his presidential campaign in 1976 and was appointed in January of 1977 as Ambassador to Switzerland. After serving two years in that post, he resigned and returned to Ohio in May 1979 to marry a well-known beauty, the former wife of Barry Goldwater, Jr.  According to other news items, however, it appears they were married no more than a year.

 One month later, ASLA acquired 43% of General Homes stock.  In January 1984 Warner took over as chairman of the board and CEO of ASLA.[6]  Jeffrey Payson, whose Houston construction company had just been taken public, served on ASLA’s board, and Morris Broad joined GH’s board.

Ohioan Marvin Warner’s history reveals a fascinating connection between his banks and the laundering of drug profits, according to certain evidence brought out in Pete Brewton’s book, The Mafia, CIA and George Bush, as well as Jonathan Kwitny’s book, The Crimes of Patriots.   

 ~~~~~~~~~~~

December 14, 1982  The New Mexican, Santa Fe, NM and also appeared in THE STARS AND STRIPES, December 16, 1982

MIAMI (AP) - A bank accused of laundering more than $97 million in drug profits
transferred funds by wire as far as Switzerland and disguised cashier's checks as nonexistent loans, a federal indictment charges More than 400 transactions to  launder proceeds from Colombian narcotics, in amounts ranging from $18,000 to
$837,530. were made by the Great American  Bank of Dade County over a 14-month period, according to the indictments revealed Monday. The defendants include the bank, former head teller Carlos Nunez; his former assistant, Elaine Kemp;
and a former vice president, Lionel Paytuvi of Hialeah. who is already in jail awaiting trial on unrelated federal charges of distributing methaqualone and filing false statements to the Internal Revenue Service. If convicted on all 21 counts of currency violations, the bank could be fined more than $7 million. 

Officials said it is the first time a south Florida bank has been charged with participating in a money-laundering operation in the billion-dollar drug market. Great American attorney Michael J Madigan said the bank was "extremely disappointed" by what he called an unwarranted  indictment, and said the Institution would demand "an immediate trial" to establish its innocence. "The truth of the matter is that the bank was a victim of what the government apparently alleges was a money-laundering scheme which occurred almost three years ago," Madigan said. But Assistant Treasury Secretary John Walker told a Washington press conference that money laundering "was, in effect, a bank practice .... not an isolated employee." The indictment alleges the deals took place in the 14 months before February 1981. The grand jury, working with information from an investigation called Operation Greenback, also indicted five Miami residents described as Colombian nationals, who worked with bank officers and allegedly sent $5.4 million through the institution to disguise its source. They were identified as Isaac Kattan, Jaime Escovar Balayar. Victor Tesone Kassin. Luis Viera and Jaime Diaz. Kattan is already serving in federal prison on a drug trafficking conviction. Kattan and other currency exchangers, including Interfil Inc. and Latina Export and Import Inc. acted as middlemen
between Colombian drug dealers and the bank, the indictment alleges.

~~~~~~~~~~~

Convicted Medellin cartel associate, Fernando Birbragher, a Russian Jew from Colombia, pled guilty to laundering money in 1980-81 through Warner’s Great American Bank in Miami. 

In addition to banking, Warner had made investments in race horses and sports teams in the late 1950s.  Shortly after Warner returned from Switzerland, the Great American Bank was hit by a money-laundering scandal.  Warner sold the bank to Barnett Banks just prior to December 1982, when Birbragher was indicted, the same month Warner and the Broads signed the voting trust agreement for General Homes.  Warner was himself convicted in 1987 in Ohio for fraud involving Home State Savings and E.S.M. Securities.[7]

While Warner was in Switzerland, he was replaced at Great American Bank by Donald E. Beazley, who had previously worked for Guillermo Hernandez-Cartaya, a banker who started at Citizens & Southern in Atlanta before organizing the Republic National Corporation (incorporated by CIA lawyer Walter Sterling Surrey), which later became World Finance Corp.   

According to an AP article carried December 16,1977 in various news outlets:

The Miami News reported in August that Hernandez-Cartaya's financial empire was threatened with collapse after the tiny Arab state of Ajman, a member of the United Arab Emirates, closed the Ajman Arab Bank, of which WFC owns 22 percent. Hernandez-Cartaya's tangled finances, according to the Times, affect dozens of banks in the United States and abroad as well as various foreign governments. The newspaper said his affairs also are under investigation by banking offiicials in Panama, Colombia and the United Arab Emirates.

The Times said the investigation was triggered in May when two Dade County policemen uncovered evidence while sifting through garbage of a suspected large-scale narcotics trafficker. The Times said the evidence reportedly showed financial transactions involving hundreds of thousands of dollars connected with WFC [WFC Group, Inc., a private holding company] corporate accounts.

During Beazley’s tenure at the Miami bank, he negotiated a deal with an individual from Nugan Hand Bank of Australia to sell a Great American subsidiary, Second National Bank, which had connections to Paul Helliwell. 

When Beazley left Great American after Warner’s return, he became CEO at Nugan Hand.  Warner’s undoing came about as a result of fraud involving his son-in-law, Stephen W. Arky, who had been a lawyer in the SEC under Stanley Sporkin, later general counsel for the CIA, who characterized Arky as “one of my finest young men.”[8]

Birbragher described how he engaged in drug smuggling and how Warner’s bank aided him in laundering his profits.  He set up a shell corporation called International Finance Company,[9] which had an account at the bank.  His partner in Colombia furnished him drugs, which were flown to Miami by pilots, Jack DeVoe, William Sundback and Warren Bullock, and delivered to Birbragher, who then sold them.  The cash was deposited directly into the bank.  DeVoe, who was convicted of cocaine smuggling, has stated that he flew into the Ocean Reef Club’s landing strip and Opa-Locka Airport (used as the CIA’s center of operations during the 1954 Guatemalan coup). The Ocean Reef Club is a subsidiary of Carl Lindner’s American Financial Corp., which also owns the banana company formerly called United Fruit, which served as a cover for the coup.  DeVoe is the pilot who was laundering his money through Lawrence Freeman’s bank in the Isle of Jersey being used by the Mike Adkinson group.

DeVoe had two attorneys during his legal battles—both with IRS and for drug smuggling.  One was Theodore Klein,[10] who had also represented arms dealer Ron Martin, an alleged casino partner of Robert Corson.  Another was Harvey Silets of Chicago, who represented Burton Kanter, a former associate of Paul Helliwell.  Another lawyer to whom DeVoe was introduced was Lawrence Freeman, a member of Helliwell’s law firm in 1970, which he left to become in-house counsel for Castle Bank & Trust, the Bahamian bank set up by Helliwell and Kanter.

Even though Freeman left Castle Bank and then Helliwell’s firm, he kept in close touch with Kanter.  They and their associates were involved in at least 21 companies incorporated in Florida.  Almost all of them were registered in the late 1970s or early 1980s, and some are still active.  Kanter also had a law office next to Freeman’s in Miami for about a year, and when Florida state prosecutors and investigators raided Freeman’s office in November 1985, they found Kanter’s name on several documents.

One was a disbursement of $27,500 to Kanter from a $50,000 receipt from the Bank of New England.  Freeman got $10,000 of this, while his law firm received $6,000.  In a letter to me [Brewton] at the Houston Post, Kanter said the $27,500 was a “reportable fee and was, in fact, reported on my personal income tax return.”[11]

The Texas counsel for the Bank of New England was Trevor William Rees-Jones at Locke, Purnell in Dallas, who served as trustee for MONY in Mel Powers’ loans [E426559].  This firm included Eugene Locke, who ran for governor of Texas after he had managed John Connally’s gubernatorial campaigns.  Rees-Jones has served as trustee on deeds of trust for Mutual of New York (MONY), New England Mutual Life in Massachusetts and the Bank of New England.  The Bank of New England, incidentally, refinanced Enron Cogeneration’s loan with Morgan Guaranty in 1988.[12]  Further research needs to be done on the history of these institutions.  

NOTES:

---

[1]  According to Brewton (p. 137) Capital Bank merged with Paravicini Bank in 1969 to start a new Swiss bank, Bank for Investment and Credit Berne, which included among its investors, Seagrams [both Seagrams and Cadillac Fairview are owned by the Bronfmans].  William Stamps Farish III of Underwood Neuhaus and J. Hugh Liedtke of Zapata were directors.  Not long after the merger, the bank was involved in fraudulent stock transfers with Billy Mellon Hitchcock, heir to Gulf Oil [Liedtke's father had been general counsel to Gulf for many years] and was caught laundering $67 million of Hitchcock's money, which, according to a 1985 book by Martin A. Lee and Bruce Shlain, included proceeds from the manufacture and sale of LSD [Acid Dreams:  The CIA, LSD and the Sixties Rebellion (New York:  Grove Press, 1985)].  Hitchcock and his friend and attorney, Seymour Lazar, both owned shares in Resorts International, the successor to Mary Carter Paint, and had accounts in the Castle Bank & Trust in the Bahamas.   

Because Castle Bank was created by attorneys, like Paul Helliwell, who laundered money for the CIA, it is highly likely that Lazar's LSD activities were related to the CIA's MK-Ultra operations in California.  Lazar also knew Bernie Cornfeld, owner of IOS mutual funds.  Robert Vesco, who took over IOS from Cornfeld, is said to have created Global Holdings and Global Natural Resources in order to acquire Resorts International stock.  See Arthur Herzog, Vesco, p. 151.  Lazar's name also came up in 1977 as the bankroller of Harold Rhoden, "the shrewd Los Angeles lawyer" who attempted to probate the "Mormon will" which would have given Rice Institute 1/4 of 1/8 of the estate, 1/32 to "Ella Rice of Houston," 1/16 to William R. Lummis and which appointed Noah Dietrich as executor.

[2]  Both Canadian banks executed the documents in Atlanta, where they were operating in the First National Bank Tower (2 Peachtree Northwest) [G926576], although their Houston address was Two Houston Center.  Trotter, Bondurant, etc., the attorneys representing Citizens & Southern Realty Investors (later Southmark), was located in Peachtree Northwest [F660925].   Another address for the Toronto Dominion Bank in Atlanta is 225 Peachtree Street, N.W., #1600 Peachtree Center South.  This is shown on a Financing Statement Assignment of a lien from Albert Lum filed October 1990 by his attorneys, Schlanger, Cook, Cohn, Mills & Grossberg located in the same building with Charles Hurwitz, 5847 San Felipe.  This lien was assigned to Guaranty Properties (U.S.), Inc. in Toronto [M886850].  Another assignment was made from Toronto Dominion to Guaranty Properties of a lien from Raintree Village, Ltd. [M886849].  Raintree Village, Ltd. was located c/o Jim M. Reinders, Ronto Development Corp. at 277 N. Collier Blvd. in Marco Island, Florida.  Raintree was assigning the net proceeds it would receive under a contract with A. Jack Solomon and Harry L. Solomon [M886846].  The new address for Toronto-Dominion Bank on that assignment is Two Houston Center #1700.  Shell Oil, in 1968, had an address of 230 Peachtree, N.W. [C791165], and the law firm that represented Cadillac Fairview in the suit filed by Odom--Chamberlain, Hrdlicka, White, Williams & Martin--now has an Atlanta office at 233 Peachtree, N.W. (according to their letterhead).  [Peachtree Center Tower was owned 100% by Trizec in 1980, according to Susan Goldenberg, Men of Property:  The Canadian Developers Who Are Buying America (Personal Library Publishers:  Toronto, 1981, in Appendix B).]  Michael H. Trotter was also a named trustee of the C&S investment trust, the Houston attorneys of which were Baker & Botts.

[3] The release was signed by  Gerald Sheff in New York, who was one of Cadillac Fairview U.S., Inc.'s executive vice-presidents.

[4] General Homes 10-K filed with SEC 1980.

[5] according to a class-action lawsuit filed against General Homes in the Dallas Division of U.S. District Court in CA 3-88-2509-H.

[6] Brewton, p. 283.

[7] Brewton, p. 280.

[8] Brewton, p. 281.

[9] Strange how similar this is to the International Financial Society set up by the consortium of London investment bankers in 1886 set up to buy the bonds of the Canadian Pacific Railroad.

[10] Could this be a descendant of Julius Klein, who had been instrumental in the Zionist movement for the Rothschilds and for British Intelligence in the decades between the two world wars?

[11] Brewton, p. 296.

[12] According to Brewton, Robert Corson's mother, B.J. Garman, took two trips with Mel Powers in 1987 to Belize "to discuss a business deal with some New York insurance people.  At least one eyewitness, and officials who have seen Customs' records, state that Walter Mischer accompanied them." (p. 115)

Part 5 of Land and Loot

CONNECTION BETWEEN SCOTTISH MERCHANTS AND COLONIAL BANKING

These questions and the other intriguing connections between George Smith, Northwestern Mutual and Aberdeen and Banff Scotland lead one to wonder about the history of Scottish emigration during the 18^th century.  Many Scots came to America in a wave which began after the 1746 battle at Culloden, where the Stuart loyalists (called Jacobites from the French word for “James”) were crushed, resulting in the Disarming Act of 1746 by which Scots were forbidden to have weapons, render military service or wear their Highland plaid kilts.  Many of the estates of the clan chiefs were confiscated, breaking feudal ties and replacing it with a landlord/tenant relationship.  The first wave of emigrants from the Highlands were the clan chiefs and tacksmen—middlemen or brokers between the landlords and tenants.  They were relatively wealthy, often Catholic or Episcopal, with a tradition of Jacobitism.[1]

According to Duane Meyer,

... the British in the 18^th century were remarkably successful in pacifying former enemies.  The two prime examples of this facility are their relations with the French Canadians and with the Scottish Highlanders. In 1755, at the outset of the French and Indian War, the British were so suspicious of the French settlers of Nova Scotia that thousands of Cajuns were abruptly scattered to other English colonies, thereby bringing great hardship on the people and also creating the historical background for Longfellow’s “Evangeline.”  Only twenty years later, the French Canadians were sufficiently loyal to the British government that they refused all invitations to join the American rebellion, even after France entered the conflict on the American side.  Not even the clever appeals of America’s best diplomat, French-speaking Ben Franklin, could persuade them to attack the forces of George III.  According to Canadian historians, the Quebec Act played a major role in pacifying the French Canadians.  By establishing the Catholic Church, the British government secured the friendship and support of the clergy....

Similarly, the British had effected a conciliation with the Scottish Highlanders during approximately the same period of time....

In Virginia, Loyalists were referred to as “the Scotch party.”...John Witherspoon of Princeton, who gave dedicated support to the revolutionary cause, included in a sermon of May, 1776, an appeal to Scottish-born Americans to support the rebellion.  He observed that so many Scottish people were faithful to the King that the word Scotch was becoming a term of reproach in America.[2]

In addition the Board of Trade in 1775 adopted a policy to encourage enlistment in the Royal Regiment of Highland Emigrants.  If the revolution were quelled, they would receive 200 acres of land for each family man plus an extra 50 acres for each additional family member—free, based on a contract with Duncan McArthur in Boston in December 1775.  This contract attracted recruits from New York and Nova Scotia.[3]

Most of the Scots in America arrived in the Carolinas, which was named after the Stuart King Charles, and became merchants and administrators such as colonial agents.  Others settled in Virginia, such as Neil Jamieson, a Lowlander from Glasgow, who:

... owned a network of stores and warehouses on the Virginia rivers, where he exchanged European goods for tobacco, crying on the trade in his own vessels.  In partnership with various Scottish merchants, he owned the ships which carried the tobacco of Virginia to Glasgow and the naval stores and foodstuffs of North Carolina to London and the West Indies.  Jamieson was independent only in the sense that he was the possessor of considerable real property in Virginia on his own account.  But in trade he was the fourth partner in the Glasgow firm of Glassford, Gordon, and Monteath....He also possessed a partner’s share in some warehouses at Richmond belonging to the Glasgow firm of Henderson, McCall, and Company.[4]

Other Glasgow firms mentioned by author Ian Graham are John Hamilton and Company, “one of the largest businesses in the Albemarle region of North Carolina, if not the entire South”; James Brown and Company; Jamieson, Johnstone and Company; and John Glassford, Shortridge and Gordon.  This region was a “commercial appendage” of Virginia where the Glasgow merchants also “succeeded in absorbing the cream of the profits.”  According to ads appearing in the Virginia Gazette in the five years before the revolution, approximately two dozen Glasgow firms operated more than 60 retail stores in Virginia alone.  There were 20 Glasgow-owned stores in Maryland and the Albermarle area.

According to Graham:

The Scots, especially the Lowlanders, showed amazing energy and enthusiasm in taking advantage of that section of the Treaty of union which opened the colonies to their commercial enterprise.  In the first seventy years thereafter, they developed a trading empire stretching from the West Indies and Florida to Quebec and Nova Scotia.  Their shipping routes stretched out from Glasgow like the ribs of a fan....Trade and immigration went hand in hand.  The settlement of emigrants was in itself a commercial enterprise.

When the American Revolution began, few of these Scottish merchant class were considered to be patriots of the new nation.  Most either returned to Britain, emigrated to Canada (Nova Scotia, Montreal or Toronto primarily), or left the Carolinas where they were treated with great suspicion.  Many even fought for the Loyalist cause.  Those Scots who were patriots were primarily of the tenant class, usually called “Scotch-Irish” or “Ulster Scots.”  Nevertheless, because of the overwhelming association between the “greedy” Scottish merchants and their propensity for loyalty to the mother country, many other Scots were suspected of disloyalty if not treason.  For example, on December 18, 1776, the Virginia House of Delegates passed a resolution instructing Governor Patrick Henry to require “natives of Great Britain who were partners with, agents, storekeepers, assistant storekeepers, or clerks for any merchant in Great Britain” except those who could prove themselves loyal, to leave Virginia within 40 days.  Many of the Tories who left opened stores in New York or Pennsylvania, but they were unable to sell their property prior to departure.  Some tried to return several years later to collect debts or liquidate real estate interests.

When Scottish emigration resumed after the American Revolution, the destination switched from the Carolinas and New York to Canada, especially Ontario and Nova Scotia.  Prince Edward Island received the discharged Royal Highland Emigrants who had fought for the Crown against the Americans.  “The prewar Highland immigrants to Nova Scotia were intensely loyal to the Crown.”   

What impact, if any, did Scottish investment have in other parts of the United States, specifically in Houston, Texas?

---

[1] A good account can be found in Duane Meyer's book, The Highland Scots of North Carolina (Chapel Hill:  Univ. of North Carolina Press, 1961).

[2] Graham, Colonists, p. 150.

[3] Graham, Colonists, p. 153.

[4] Ian Charles Cargill Graham, Colonists from Scotland:  Emigration to North America, 1707-1783 (Ithaca, N.Y.: Cornell University Press, 1956), pp. 121-22.

Part 4 of Land and Loot

History of Northwestern Mutual Life and its Creators

Who exactly has been involved in the Northwestern Mutual Life Insurance Co.?   

There is more than one version of its history.  According to Hoover’s Handbook of American Business, 1993, John Johnston (at age 75), along with 36 leading Wisconsin citizens, founded Mutual Life Insurance Co. in 1857, and it became Northwestern Mutual Life Insurance Co. in 1865. 

According to Anton Chaitkin, the company was founded in 1858 by Henry L. Palmer, who was its president from 1874 to 1908.  During those years Palmer was also the Grand Commander of the Scottish Rite, Northern Jurisdiction.[1]  Chaitkin says that “[Alexander] Mitchell had been sent to Wisconsin from Britain by a Scottish investment trust which owned the Northwestern Mutual Fire Insurance Company, of which Mitchell became the president.  By the 1870s Mitchell had used his insurance company, allied to Palmer’s, as a 'bank' to consolidate Wisconsin’s railroads and control all of the state’s grain silos.”  Mitchell owned all the railroads in Wisconsin at that time.[2]

How did this “bank” work?  Historically, there had been a national bank created during George Washington’s administration, under the supervision of Alexander Hamilton.  It had been re-established in Philadelphia in 1816, after Hamilton’s death at the hand of Aaron Burr, and placed under management of Nicolas Biddle.  The bank had a monopoly on issuance of bank notes in order to balance the nation’s need for credit against its need for a stable currency.  This bank was abolished by Andrew Jackson, who placed U.S. government deposits into a number of “pet banks,” allowing speculation into risky ventures such as western real estate and railroads to proceed unabated—and leading to the Panic of 1837.

During the post-Jacksonian era, when there was no national monetary currency, a group of incorporators could establish a bank in the Wisconsin Territory by obtaining a charter from the territory, approval from Congress, and raising a small amount of capital in the form of gold, silver and notes of other banks.  Then the bank could issue its own bank notes based on those assets and lend it out at interest.  If the bank achieved a measure of confidence in repaying the notes on presentment, the notes would circulate in the economy just as money.  If more notes were returned for payment than the bank had on deposit, the bank could call the notes due.  During economic instability, a prudent bank would be more cautious in issuing credit and thus limit the monetary supply.

In 1837 three Wisconsin charters were approved by Congress, the stock in two of which charters was controlled by the following: 

1. Henry T. Stringham of Detroit; 
2. Morgan Martin; 
3. John A. Welles (cashier of the Farmers and Mechanics Bank of Detroit, one of that city’s two pet banks); 
4. James D. Doty; and 
5. three other Michigan bankers.   

Stringham traveled to New York and Philadelphia in November 1837 attempting to sell the charters of the Bank of Wisconsin and the Bank of Mineral Point—both of which were suffering from the Panic of 1837—to Nicolas Biddle, who was not interested. 

Alice E. Smith reported the banks’ outcome in Volume I of The History of Wisconsin:  From Exploration to Statehood:

Some months later still another opportunity to escape the burden of debt and reach safety appeared; George Smith of Chicago expressed interest in the two Wisconsin charters.  The Scot Smith was agent for a group of his countrymen who had set up the Illinois Investment Company in the American city.  Welles, with whom Smith conferred in Detroit, was wildly enthusiastic over the prospect.  Smith and his associates Patrick Strachan and William D. Scott were, he declared, “shrewd, safe, and money making men—close managers.”  They would connect the banks with an insurance company in Chicago, establish agencies in New York and St. Louis, take perhaps three-fourths of the stock of the two Wisconsin banks, and manage the business—and, he concluded, “no doubt realize for us all of the golden day dreams in which we have indulged.”

Two years were taken up by an investigation of the legislature into the operations of another of Stringham’s banks in Green Bay.  Fraud was found to exist, and by late 1839, the depression brought on the failure of other banks.  The Bank of Mineral Point, however, somehow continued to operate—which can only be surmised to be due to the fact that it was located in a mining community with a commodity that enabled its borrowers to repay their loans and to the fact that the U.S. Attorney General ruled that the U.S. Treasury had no authority to inspect banks of the territory.

Amidst this turmoil, the legislature issued a charter to the Wisconsin Marine and Fire Insurance Company for 20 years in May 1839, with power to insure ships and buildings, receive deposits, make loans, purchase and receive stock, mortgages and real estate.  Almost all the stock was purchased by George Smith, and the first board of directors included Hans Crocker and William Brown, of Milwaukee, and Patrick Strachan, William D. Scott and George Smith of Chicago.  According to Alice Smith, since Smith arrived in 1834 from Scotland he had been using Scottish capital to make speculative land purchases of village lots in Chicago, Milwaukee and port settlements along the lake front, and on farm loans on both sides of the Illinois-Wisconsin border.

Strachan and Scott, whose names appeared among the five original directors, had been transferred from Chicago to New York City, where for the next twenty years they operated as brokers, commission merchants, and bankers.  Other of Smith’s countrymen took up location in Buffalo and rising cities of the present Midwest—St. Louis, Galena, Cincinnati, Detroit.  At these centers they established commission houses dealing in produce to be shipped to market, besides turning their hands to miscellaneous enterprises in response to local needs.  Although they probably operated independently, they were loosely affiliated with Smith and, together with his agents Strachan and Scott in New York, formed a huge network of co-operating agencies.  Smith himself remained in Chicago, and directed his expanding commercial empire from his office in the heart of the city.  Some acceptable medium of exchange was needed, and to supply this want, the Wisconsin Marine and Fire Insurance Company was created....

During the summer of 1839 shares in the Wisconsin Marine and Fire Insurance Company were advertised in Aberdeen, Scotland, at $25 a share, and by the end of the year 2,425 shares had been sold, virtually all of them Scottish owned.

Very little about these or other operations of the uncommunicative George Smith was known in Chicago. The insurance firm that had been quietly established in Milwaukee during the summer of 1839 was placed under the management of Alexander Mitchell, who was made secretary of the company at the annual salary of $1,100.  The 22-year-old farmer’s son, who had had two years’ apprenticeship under the law firm of Adam and Anderson in Aberdeenshire, assumed the varied responsibilities of a financial concern on the Wisconsin frontier.  He ran a substantial real estate business, sold insurance on vessels and on land property, negotiated loans, advanced money on produce being shipped to market, and furnished exchange service with the East and the British Isles.  On all these services the company exacted charges, which in time netted it substantial amounts.  But it was around one further service, accepting money on deposit and lending certificates of deposit, that the business revolved, and which actually became the basis of the Milwaukee and all the allied George Smith operations.

To evidence deposits received, the company issued certificates of deposit, but records reflect that the amount of CD’s issued more than doubled every year until 1846.  The reason for this increase in a city with a limited population seems to be that the notes were backed by funds raised by “subscription in Scotland.  Not only Mitchell, but also Smith and his affiliates in the West and in Buffalo and New York paid out and accepted the notes, thereby increasing their circulation and familiarizing the new West with what became known as ‘George Smith’s Money.’”[3]

The use was so widespread that the Wisconsin legislature began an investigation in 1843, which resulted in revoking the charter early in 1846, primarily because of the fact that the stockholders were foreigners “not amenable to the laws of the United States,” who could recall their officers and renege on the notes.  Nevertheless, the company continued its business unimpeded, having been advised that the only way to stop their operations was through a quo warranto proceeding.  Smith allegedly bought up most of the Scottish investors’ subscriptions and became one of Chicago’s wealthiest men.  Mitchell, joined by David Ferguson, another Scot from Aberdeen, continued to run the company in Milwaukee.  Between 1846 and 1852 the CD issues jumped from $95,000 to over $1 million.[4]

It is possible that Houston, Texas acquired its own affiliate when Strachan Shipping Company, established by a Captain Frank Garden Strachan and Captain George P. Walker in October 1886 in Savannah, Georgia,[5] set up a branch in Houston.  Houston's Strachan was a Scot from Banffshire who was involved in the London-China trade and had traveled from Scotland to New York in 1886 to discuss business opportunities in the South with Spence and Company.  Captain Walker was in the Chatham Artillery.  Strachan Shipping does not own ships, but acts as shipping agent and provides stevedores for persons wanting to ship cargoes (exactly as Smith’s agents from the same area of Scotland had done).

Another emigrant from Banff, Scotland at about the same time was a man named George Stephen, who became a director of the Bank of Montreal in 1871 and its president in 1876.  Stephen was a cousin of Donald A. Smith, resident governor of Hudson’s Bay Company, who, with railroad tycoon James J. Hill, obtained financing from George Stephen in order to buy out the Dutch bondholders of the bankrupt St. Paul & Pacific Railroad in 1878 that would later become the Canadian Pacific.  This information is contained in a biography of James J. Hill, published in 1955,[6] in which the author states:

Just where Stephen got the money is still something of a mystery.  It was even charged that he “borrowed” it from the Bank of Montreal, but this was never proved, and it is well to say only that he produced the major portion of the purchase price, the sale was made, and the properties and land-grant agreement of the St. Paul & Pacific Railroad were presently taken over by the newly incorporated St. Paul, Minneapolis & Manitoba Railroad Company.  The incorporators were George Stephen, Donald A. Smith (later Lord Strathcona--founder of British Petroleum), Norman W. Kittson, James J. Hill, and John S. Barnes, the last representing the New York firm of J.S. Kennedy & Company, which represented, after a fashion, the Dutch bondholders.[7]  Hill was to manage the railroad.

Another account is found in a history of Canada, which says that in 1876 Stephen went to Chicago with fellow banker R.B. Angus to attend legal proceedings involving the failure of a steel company in which the Bank of Montreal was an investor.  During a break in the litigation, the bankers went to St. Paul to see James J. Hill, and somehow all parties who were to participate in forming the International & Great Northern Railroad Co. made contact:

In brief, [Jesse P.] Farley [of Dubuque, Iowa], the official receiver in bankruptcy, and Kennedy, the New York agent of the Dutch bondholders, were taken into the picture.  Farley, in fact, later brought suit against Smith and his associates for a share of the loot, which he claimed had been promised him for his help in persuading the Dutch to sell out; but the suit was thrown out of court because of Farley’s fiduciary position.  Meanwhile, Stephen made a trip to Holland to meet the Dutch bondholders.  The final result was that the Dutch sold out an equity of some $28,000,000 in principal and interest for $6,000,000 while agreeing to wait for their money until the tangle was resolved.

The partners (Stephen, Smith, Kittson, Angus, and Kennedy) signed a joint note for the amount to the Canadian Bank, of which Smith and Stephen were directors, and included an extra $780,000 for contingencies.  Money still had to be found to build enough road to secure the valuable land grants.  The four Canadians put up $300,000, Hill and Kittson flinging into the pot everything they owned...[8]

It was also in 1876 that Donald A. Smith made a trip to London, where his superiors in the Hudson’s Bay Co. made him chief commissioner for the company in Canada, “a position that gave him power to act in most if not all matters without the approval of the distant Board of Governors in London.”  With that power he began to encourage the immigration of Scots to Canada, as well as America, to land which his investors would acquire through land grants in exchange for building railroads.  In 1879 the partners in the new company divided up $15 million of stock in the St. Paul, Minneapolis and Manitoba Railroad, while selling $16 million in bonds to pay for the track. 

By 1880 the old St. Paul & Pacific company, now defunct, was reincorporated into the Canadian Pacific with George Stephen as president, Duncan McIntyre as vice-president and Richard Angus as general manager.  James J. Hill, William Kennedy and Norman Kittson (who later "owned" what became the Burlington and Missouri Pacific railroads) also had a share.  Though not an officer, Donald Smith owned 5,000 shares.  Other shareholders included the banking firms of Morton, Rose & Co., and Morton, Bliss & Co.; Kohn, Reinach & Co. of Frankfort (which included the SGI of France).[9] 

These investment bankers were all fronts for the Rothschilds and Warburgs who, in 1913, consolidated all their power in the United States by passage of the Internal Revenue Act and Federal Reserve Act.  They put the seal on the consolidation in 1932 with the acquisition of the Washington Post by Lazard Freres/Rothschild lackey, Eugene Meyer.

But back in the 1880s, when the Canadian railroad ran into difficulties in construction, James J. Hill and Kennedy withdrew from the company. The syndicate headed by George Stephen, who controlled the Bank of Montreal, kept receiving more and more stock at no cost, and issuing more bonds sold to the public, secured by the land grants, to pay the costs. In 1882 $30 million in stock was turned over to a New York firm, but no more stock could be sold the next year because of a recession, and the New York creditors pressed for payment.  Somehow a bill was passed for the Canadian government to make a loan to the railroad to pay off the creditors. 

By the next year, however, they again needed money.  They raised a small loan in Edinburgh.  Coincidentally, when that money was almost gone, there was an Indian uprising which was quelled because the government was able to send troops to aid the settlers because the railroad was in place.  As a result, in 1885 the $35 million of unissued stock for which there were no buyers was canceled, replaced by 50-year first mortgage 4% bonds, and the government forgave the previous mortgage, taking new bonds in place of the old.  Stephen took the remaining bonds to England and sold all of them to Baring Brothers’ Lord Revelstoke.[10]

When the railroad was completed in 1885, Baring Brothers bought the bonds held by the Canadian government for $20 million, and the railroad company paid the balance of the loan to the government by returning 6 million acres of land.  George Stephen continued to be a large investor in the railroads, but also in related industries such as steel and tank cars.  The first through train took 137 hours to cross the continent.  In 1894, after Great Britain “woke up to realize the value of a quick route to the Orient,” William Cornelius Van Horne, who later became president of the Canadian Pacific, was appointed Honorary Knight Commander of the Order of St. Michael and St. George.[11]  In 1897, at the age of 76, Donald Smith became Canada’s new high commissioner in London and was raised to the peerage to become Lord Strathcona.   Charles Stephen became Lord Mount Stephen. Two years later the Boer War began, at the height of the British Empire, and Lord Strathcona raised funds to send a special regiment of hand-picked Canadians to South Africa.

It was Lord Strathcona and the British Crown who sponsored Samuel Bronfman’s “rise to wealth in the bootlegging rackets” in the 1920s.[12]  Lord Strathcona was also the founder and first chairman of the Anglo-Persian Oil Co. formed in 1909 to operate the concession given to William Knox D'Arcy by the Shah of Persia in 1901 on which oil had been discovered by Burmah Oil Co., which owned  97% owned of the stock with 3% owned by Strathcona individually. Another of the founding directors was Sir Charles Greenway, who became managing director in 1910 and the second chairman in 1914, after Strathcona.  In 1914 51% of the stock was sold to the British Government which injected 2 million pounds into the company for the war effort.  Greenway retired in March 1927, and in 1935 the company became Anglo-Iranian Oil.  It became involved in petrochemicals and entered an agreement with the Distillers Company in 1947 (forming a joint company which later became British Hydrocarbon Chemicals).  In 1951 Iran expropriated the foreign oil company, precipitating three years of negotiations, resulting in the resumption of the Iranian oil development by a consortium of oil companies.  Anglo-Iranian then became British Petroleum and had a 40% share in the consortium.  The company was "privatised" in 1987 by Margaret Thatcher.[13]

In October 1879 the International & Great Northern Railroad gave a mortgage covering the assets of its railroad in Texas to John S. Kennedy and Samuel Sloan, as Trustees, in New York to secure the holders bonds issued for expansion of Hill’s railroad into Texas [8/765 Mortgage Records in Harris County].  Thomas M. Pearsall was president and Jacob Wetmore was assistant secretary who signed the mortgage in New York.

Once Canada’s railroads spanned from east to west, Hill concentrated on moving south into America, through Minnesota along Lake Superior, and he organized the Northern Steamship Company to carry products across the Great Lakes.  As a friend of John Murray Forbes of Boston, who headed the Chicago, Burlington & Quincy, Hill worked out a deal that allowed his lines to carry freight and passengers to Chicago.  Fifteen years later (1901) Hill bought the entire Burlington system.[14] 

In 1889 he organized the Great Northern Railway Company, which took over operation of the St. Paul, Minneapolis & Manitoba, and several years later put his roads under control of a holding company, Northern Securities Corporation.  Hill was chairman, and ten of the 15 board members were connected to Hill and J.P. Morgan.  This company was opposed by Theodore Roosevelt who called it a new trust and ordered prosecution under the Sherman Act. 

 

As a result, in 1904 the holding company was dissolved, and “Harriman forces received a paper profit of some $58 million.”[15]  Harriman died in 1909 and Hill in 1916, following decades of hostile rivalry.  Why did this rivalry exist?  Both J.P. Morgan and Harriman have acted as investor/ nominees for certain members of the British royal family.  Do they represent different factions which are themselves at odds with each other?  If not, why the pretense that they are competing?

NOTES:

[1] Anton Chaitkin, Treason in America:  From Aaron Burr to Averell Harriman (New York:  New Benjamin Franklin House, 1984), pp. 330-31.

[2] The story of this monopoly is an interesting one which begins after the reorganization of the Milwaukee & St. Paul railroad in 1861.  The bondholder/creditors formed an association through which they owned the common stock of the corporation.  In two years the value had increased from 12 cents to 90. [State Historical Society of Wisconsin Publications, pp. 291-96.].  Its chief rival, Milwaukee & Prairie du Chien (French for Prairie Dog), was the subject of great stock speculation in 1866 when the brokerage firm owned by Henry Stimson (a Skull and Bones member and Yale graduate who, as Secretary of War, recruited many other members of Skull and Bones to serve in the Administration of Franklin Roosevelt) quietly bought up all of Prairie Dog's common stock at low prices and loaned some to unsuspecting neighbors.  Then he called in the loans, but since he had cornered the market, the borrowers could not find any stock to buy, causing the price to quadruple in 10 days.  Stimson, however, had overlooked a clause in the charter which prohibited owners of common stock from voting for directors, so he had no control.  He remedied this by sneaking through a bill in the Wisconsin Assembly at the end of the session.  Then in April 1866 he sold his holdings to Milwaukee & St. Paul in exchange for almost 30,000 shares of preferred stock and 25% more of common.  Mitchell also obtained control over the McGregor & Western and the West Wisconsin.  When he returned to Scotland in 1868, he bought controlling interest in the Racine & Mississippi from the City Bank of Glasgow--thus giving him control of every through route from the shore of Lake Michigan to the Mississippi River.  By that time, the only other significant routes in the state were owned by the Chicago & Northwestern, which had similarly absorbed all its rivals.  All competition ceased for two years when the two railroads elected interlocking directorates, and by 1870 the consolidation was complete when Alexander Mitchell became president of both railroads.

[3] State Historical Society of Wisconsin Publications, p. 296.

[4] State Historical Society of Wisconsin Publications, p. 306.

[5] Houston:  A Profile of Its Business, Industry and Port.

[6] Stewart H. Holbrook, James J. Hill:  A Great Life in Brief (New York:  Alfred A. Knopf, 1955), pp. 49-50.

[7] J.S. Kennedy & Co. was correspondent of the Scottish American Investment Trust, which had been organized by Robert Fleming of Dundee in the 1870s.  The founder of Barings was originally from Bremen, German, and had immigrated to England in 1717.  The partners of the first Baring firm in New York—Baring, Magoun & Co.—included Alexander Baring who formerly worked for Kennedy, Tod & Co., which held the mortgage on the Atchison, Topeka and Santa Fe Railroadin Houston.

[8] W. G. Hardy, p. 275.

[9] Hardy,  p. 316.

[10] Hardy, pp. 364-65.

[11] Holbrook, p. 81.

[12] Anton Chaitkin, EIR, April 26, 1996, p. 43

[13] This information was obtained from http://www.bp.com

[14] Holbrook, p. 109.

[15] Holbrook, p. 144.

---

---