CORRUPTION: Trial

History. Onetime (Harding Cabinet) Attorney General Harry Micajah Daugherty and onetime (Harding Cabinet) Alien Property Custodian Thomas Woodnutt Miller are under indictment and undergoing trial in Manhattan before Federal Judge Julian W. Mack. Their alleged offense is defrauding the Government of their "unbiased and unprejudiced services" through sharing* (TIME, Sept. 13) in a $441,000 lubricant by which $7,000,000 was within 72 hours transferred from the Alien Property Custodian's custody to the Societe Suisse pour Valeurs de Metaux, This $7,000,000 constituted the German-owned stock (49%) of the American Metal Co. which was held, after seizure, by Alien Property Custodian A. Mitchell Palmer as "trustee." The stock was seized under the Trading with the Enemy Act passed in 1917, which provided that the President should appoint an Alien Property Custodian to hold property in this country owned by citizens of enemy countries. Likewise the Custodian was empowered to sell any of this property at public auction, and the proceeds from sale of the metal stock reached some $7,000,000.

The $7,000,000 was recovered by one Richard Merton, chairman of the board of the Metallbank and president of the Metallgesellschaft, two German Corporations, both allegedly† (TIME, Sept. 13) the original stockholders of the original 49% of seized American Metal Co. stock. He was in addition a stockholder of the Société Suisse pour Valeurs de Metaux. Hence the Government alleges that the Societe Suisse at the time of the claim was but a holding company for the Merton family interests, that that family retained majority control in it, and that through its recovery of the Merton equity in the U.S.-located American Metal Co. the seized 49% found its way circuitously back to the original Merton stockholders.

The Issues, as set forth last week by the Government, were:

1) Whether or not former custodian Thomas W. Miller (who succeeded Mr. Palmer as Alien Property Custodian) and former Attorney General Daugherty conspired to receive a portion of the $441,000 as a bribe, not simply as a fee. "Conspiracy" must be proved.

2) Whether or not the 49% stock had been transferred from the German Companies to the Societe Suisse prior to U. S. entrance into the War on April 6, 1917. The prosecution proceeded upon the hypothesis (later overruled) that if the transfer was made after April 6, 1917, the subsequent return of $7,000,000 was illegal.

The Trial. U.S. District Attorney Emory P. Buckner, in presenting a summary of what the Government would endeavor to prove, first took up the second point. Said he:

"In December, 1920, a representative of the Swiss company wrote an attorney in New York that it had acquired the control of the Metallbank and the Metallgesellschaft in the fall of 1919 and therefore it was entitled to the $7,000,000 held by the Alien Property Custodian.

"The attorney answered this letter by stating that the transfer of control after the War did not legalize a claim. That the Swiss company would have to prove ownership prior to April 6, 1917, our entrance into the war. . . .

"That was what brought Merton over here. When that letter was received, he came personally. . . .