Ironically, none of IBM’s subsidiaries were on the Proclaimed List because they fell into a double-edged corporate identity as “American-owned property.” The same applied to all American-owned subsidiaries in Axis-controlled lands. So even though corporate parents, such as IBM, were not permitted to communicate with their own subsidiaries because they were in Axis territory, these companies were deemed American property to be protected. In fact, since IBM only leased the machines, every Dehomag machine, whether deployed at the Waffen-SS office in Dachau or an insurance office in Rome, was considered American property to be protected.10
Hence, Dehomag could simultaneously exist as a U.S. interest and a tool of the Nazis doing business with the same Farben and Siemens entities that brought other American companies utter denunciation and often prosecution.
The confusion and inconsistency inherent in the classification of IBM subsidiaries as “friend or foe” was evident virtually every time the matter was raised. For example, on June 16, 1942, the American Consul in Bern asked that IBM’s Swiss subsidiary, Watson A.G., not be blacklisted. “This is an American firm,” wrote the Consul, “and American interests would probably suffer should it be listed. Axis firms would profit by the listing because it is believed that they have in stock a substantial number of office machines manufactured in Germany and exported to countries later occupied by Germany and Italy…. Such machines have already reached the Swiss markets carrying instructions for assembly, use, etc. in the Spanish, Yugoslav, Rumanian, etc., languages…. This Consulate General concurs… that Watson A.G. should not be listed.”11
No wonder the British Foreign Office was increasingly disturbed at America’s blacklisting inconsistencies. One confidential memo from the British Embassy regarding the blacklist evoked a handwritten marginal note: “It is only too clear that where U.S. trade interests are involved, these are being allowed to take precedence over ‘hemispheric defense,’ and… over cooperation with us.”12
Because the legalities were so gray, and IBM so stellar an American concern, Carter was not permitted to work with much speed. Alleging treacherous business when the firm was as prominent as IBM, and its leader as well connected to the White House as Watson, was not to be undertaken lightly by any branch of the U.S. government.
So Carter was unable to obtain a subpoena. But he was allowed to visit IBM headquarters and conduct interviews in mid-July 1943. To prepare for his visit, Carter typed an outline with nine topics. His emphasis was how IBM could not just lease products but actually control its customers. Topic 1 on Carter’s typed outline: “Importance of the [Dehomag] plant for the efficient management of the German war machine.” Topic 2: “Cards imported from the United States per year.” Topic 3, with a checkmark: “The source of raw materials with particular emphasis on the possible bottleneck in supplying paper pulp for the manufacture of cards.” Topic 7: “Control exercised by IBM over their customers through the policy of renting equipment and the sale of cards.”13
A second list of ten typed questions focused strictly on Dehomag factories in Sindelfingen and Lichterfelde. Carter wanted to know about “alphabetical printers… why the sudden interest now.” He also wanted the “name of railroads” Dehomag worked with, and the volume of cards it produced and had imported from IBM NY over the years.14
Carter began June 14, 1943, by interviewing Jurriaan W. Schotte, IBM’s New York-based General Manager for Europe, in the company’s headquarters. Although Schotte, a Dutch national, was the firm’s European General Manager, he was permanently stationed in New York. From his office at IBM NY headquarters, Schotte continued to regularly maintain communication with IBM subsidiaries in Nazi territory, such as his native Holland and Belgium.15
Carter found Schotte a font of information. The interview lasted three days. During that time, Carter scribbled copious notes about IBM customers, uses for Hollerith machines, paper suppliers, biographies of leading IBM and Dehomag personalities, and terms of use. Since Carter represented the Justice Department, his request to examine hundreds of pages of material was complied with.16
Carter perused collections of documents, allowing him to piece together an extraordinary global enterprise, one that in Europe centered on Nazi Germany. It was all micro-managed from IBM’s world headquarters. He saw correspondence, typed and sometimes handwritten, detailing sales, installations, Dehomag’s revolt, and IBM’s struggle to retain its position in the Axis. Machine tool orders were itemized by factory, order date, and anticipated delivery date. Quarterly financial reports and monthly narratives from subsidiaries in enemy territory, received even after Pearl Harbor, relayed the latest business developments and the vicissitudes of competitor information. Up-to-date customer account information enumerated long lists of machines and rental prices, as well as specific war applications. Card consumption figures summarized the volume both by country of manufacture and country of import, all organized by year. Most of all, anyone could discern the ease and frequency of contact IBM maintained with foreign branches.17
Clearly, IBM NY possessed a wealth of detailed information about its overseas operations, from CEC to Dehomag to the units peppered throughout the Balkans. Carter was able to type twenty-five pages of notes based just on his three days of interviews with Schotte. A significant portion of those notes centered on two aspects: IBM’s ability to manage all aspects of the railroads of Europe, from identification of freight to scheduling, and IBM’s incontrovertible control of punch cards.
In the case of the railroads, Carter learned that the Nazis could not schedule cargo or locate a boxcar or locomotive without Hollerith cards. “The German government,” Carter wrote, “is at present partly subsidizing freight shipments… dependent upon IBM machines in such a way that if the card system were not permitted to function, the railroads would be unable to ascertain that portion of the expense which the government had contracted to bear…. Statistics as to the expense to the railroad of freight running between certain points depends upon the card system. In allocating freight charges between railroad systems in different countries, the cards are invaluable.”18
Carter continued, “the location of the number of trains available in a particular territory can be ascertained, which record would only be about two days late. The only other method would be a spot check which would be two weeks late and, of course, in any system such as a railroad with the tremendous flux of traffic, a two-week gap would be worthless.”19
Regarding punch cards, Carter noted, “In the manufacture of cards, special machinery is needed. No one but an IBM affiliate can make IBM cards because in Germany the contracts contain a clause that the German customer cannot use cards except those of IBM manufacture…. At present, with paper shortages, stockpiles are probably not permitted for more than one month. The replacement requirements of cards are tremendous.”20
Carter was even able to comprehend IBM’s controversial “royalty” agreement. “A peculiar situation arises with regard to the Dehomag company,” recorded Carter, “in that here is an almost completely owned subsidiary which, in addition to paying the usual stock dividend, is also required to pay royalties to the American company…. However, probably, the true explanation is that the legal limits of stock dividends prevented IBM from getting the return it wanted from the German company, and hence this is a method devised for additional returns.”21