" just how much stock one should take in the Great Society fantasy was suggested at the annual get-together of the American Political Science
Association
in 1965, as reported by the New York Times:
Although a high proportion of them unquestionably voted for Mr.
Although a high proportion of them unquestionably voted for Mr.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
Saxon's estimate was somewhat exaggerated but that a substantial number of Congressmen were indeed connected with savings and loan groups.
He said that of the 1,200 or so inquiries which the Controller's office receives annually regarding bank charters and branch applications, at least half come from Congressmen. Most of the inquiries, the aid said, were simple requests for information without any suggestion of pressure.
But as pointed out by George B. Gallaway, author and government expert, "A telephone call from a Senator or Congressman can paralyze the will of a government executive and alter the course of national policy.
In other cases, Sen. Jennings Randolph, D. , W. Va. , an insurance company director, has taken an active role in debate on proposed medical insurance legislation. His deciding vote killed medicare in the Senate in 1962.
Rep. Multer, chairman of the subcommittee on bank supervision, is privately associated with banking operations. 51
Senator B. Everett Jordan, Democrat of North Carolina, is chairman of the strategic Rules Committee and frequently has argued on the Senate floor against allowing increases in competing foreign textile imports as recommended by the Tariff Commission. Increasing such imports is part of a supposed national policy of knitting together a raveled world.
The senator is himself a domestic textile man, an officer and director of the Sellers Manufacturing Company of North Carolina.
It was before his committee that the case of Bobby Baker, hired secretary to the Senate Majority, was brought for investigation. Baker was accused of improperly using his position in personal out-of-bounds windfall moneymaking schemes. And it was Senator Jordan who abruptly closed the inquiry as the trail grew hot with the historic remark: "We're not investigating senators. "
"Would Bobby Baker have been able to engage in shadowy business deals if his Senate bosses had been above reproach? " the Herald Tribune asked rhetorically. 52 Baker, in the view of sophisticates, merely paralleled the operations of his masters, from whom as a very young man he had learned everything he knew about anti-public skulduggery.
Alluding to the Bobby Baker case, the Herald Tribune said it "raised doubts about the moral fiber of the government right up to the steps of the White House. " 53 It was, indeed, precisely as attention was directed toward the Senate group of which Lyndon B. Johnson had been a rabidly prayerful member that Senator Jordan abruptly closed off the tepid Baker investigation.
The television industry embraces many congressmen. It has been estimated that 75 per cent of congressmen have interests in television-radio broadcasting franchises. The Herald Tribune found that nine senators and fourteen representatives had direct or family-related interests in broadcasting stations. "While he was in the Senate, the family of Lyndon B. Johnson held the only television broadcasting license in Austin, Tex. "
The Case of Lyndon Johnson: A Paradigm
According to the Wall Street Journal, Mr. Johnson's large-scale property-dealing
activities began when be was a representative back in the 1930's. 54
"Unofficial estimates," said the Herald Tribune, "pegged the President's fortune, accrued mostly through his radio-TV holdings, from nine to 14 million. Last August in a public statement he listed his net assets at $3,484,098. A month later, Mr. Humphrey, who sometimes refers to himself as an 'unemployed druggist,' reported his net worth as totaling $171,396. " 55
Earlier Barry Goldwater, Republican presidential candidate, disclosed that he and his wife were worth $1. 7 million mostly in stocks, all of it inherited money.
Johnson, by contrast, was a poor boy who made good-in politics. Back in the 1920's he worked on Texas road gangs as a laborer and was variously employed in catch-as- catch-can jobs until he went to Congress in 1934 after a brief stint as state director of the depression-born National Youth Administration. Those were lean days but, as the Democratic song promised, happy days were returning and soon everything would again be as it was before the dismal crash of 1929. Once on the government payroll Johnson, like many of his colleagues, was never pried loose.
The Johnson fortune, and the miracle of its growth despite the monkish immersion of its architect in steamy affairs of state, came in for a great deal of sudden press attention. What figures are available on it were unprecedentedly disclosed during the presidential campaign of 1964. This revelation resulted from many rumors of the vast magnitude of the Johnson holdings and particularly from a cold-eyed 7,000-word analysis in the Wall Street Journal of August 11, 1964. The editors of this elite feuilleton had assigned a three-man assault team of ace reporters to invade Texas and find out what caused all the aroma. Their report heightened the worst fears abroad in the land, leading to the later
somewhat perfumed self-disclosure reported in the New York Times on August 20, 1964.
The Journal led off its findings with the following rollicking heading:
LYNDON'S PALS
HIS HOMETOWN COTERIE WHEELS AND DEALS IN
LAND AND BROADCASTING THEY BUY INTO AUSTIN BANKS, TRADE PROPERTY WITH LBJ
AND PLAY SOME POLITICS TOO DIRECT LINE TO THE WHITE HOUSE
What engages our attention here is not what might interest a political partisan: the fact that this was about the holder of the highest competitive office in the land. It would be a grave mistake to look upon Mr. Johnson's financial affairs as rarely exceptional. They are, rather, a baroque pattern of a Congressional Establishment man's affairs. I remarked earlier that none of these men operate alone. One man could not juggle all this stuff. Behind practically each Establishment figure is organization: a standard political organization of the Republican or Democratic variety and a personal political-financial organization of long-time cronies.
This area of our politics has not been studied, as far as I am aware, by our political scientists. What shows on the surface in Washington is only the tips of the various icebergs. These personal political-financial networks show what politics are about to most of their successful professional practitioners: chiefly a way of self-enrichment. The pubpols are trying to become junior finpols.
So, taking what the Journal found out as a paradigm of approximately what would be found in practically every Establishment case, there was disclosed the following:
The Johnson affairs revolved around the hitherto obscure Austin law firm of Clark, Thomas, Harris, Denius and Winters, "patronized by giant national corporations. " A separate lawyer, A. W. Moursund of Johnson City, was found to be Mr. Johnson's personal attorney, realty partner and a key figure in his affairs. He was "linked by private telephone circuit to the LBJ Ranch and the White House. " All the lawyers interviewed talked themselves down, jocosely. "I'm just a country lawyer," said Moursund. "I'm just a poor boy, born and raised in East Texas, trying to make an honest buck," said Don Thomas of the law firm. Said Mr. Ed Clark: "Spell my name right--I need the business. "
Mr. Johnson, the Johnson family, these lawyers and other cronies, the Journal found, held parallel or interlocking interests in television-radio properties, vast tracts of land made valuable by federal electrification and Johnson-sponsored dam projects over the years and shares in clusters of Texas banks that gave the group enormous credit resources. Said the Journal: "According to experts of the American Bar Association it is unusual for law firms to invest substantially in bank stocks, but perfectly legitimate. "
There was, first, the Texas Broadcasting Company, a name substituted for The LBJ Company when Mr. Johnson unexpectedly became president of the United States. This outfit owned the various radio and exclusive television stations of the Johnsons. A "competing" radio station, working out of the same address, had been long before set up by Johnson associates and employees: John Connally, now governor of Texas, Walter Jenkins, Merrill Connally, Willard Deason, Melvin Winters (the Johnson City contractor who is a trustee of the Johnson foundation), Robert L. Phinney (an old Johnson college roommate who became Austin's postmaster and more recently director
of the Internal Revenue Service for the region), and various other Johnson employees or associates.
The Journal was piqued by two contrasting strands it found in Johnson affairs: the pattern of monopoly as in the television broadcasting station and concentrated bank holdings, and the pattern of apparent competition within the group itself.
The broadcasting enterprises are housed in a modern office building at Tenth and Brazos Street in Austin owned by the Brazos-Tenth Street Corporation, a holding company held in the name of Don Thomas of the law firm. Mr. Thomas denied point- blank that he was just a "front man" for LBJ. Yet he is also the secretary and a director of the broadcasting company, and a trustee of The LBJ Company Profit-Sharing and Incentive Plan and of the Johnson City Foundation, an LBJ creation.
The Brazos-Tenth Street Corporation, the Journal found, figures in baffling big land deals with Mr. Johnson. Court records showed that it bought property from The LBJ Company and resold it the same day to Lyndon B. Johnson in person. It engaged in a series of such land deals with the then vice president, as local records showed, and in some cases acted as the buyerseller in deals between Mr. and Mrs. Johnson. The Journal explained them as possible tax maneuvers through a "conduit agency. "
Other deals were recounted in which parcels of land were sold over the years in a circle extending through Johnson companies and employees and then winding up again in the hands of the original owner, Donald Thomas of the law firm.
Money for the various deals, said the Journal, was supplied by banks in which the "members of the Johnson inner circle have an interest and a voice. "
Mr. Moursund himself was found to be a big dealer in land tracts, held fifty-fifty with The LBJ Company. According to Mr. Thomas, the president owned about 5,000 acres of land, most of it ranch land but 27 acres of it bought back in the 1930's for about $300 an acre and now worth about $20,000 an acre, a rise from $8,100 to $540,000. In addition to being a partner of LBJ in big land deals Mr. Moursund was a trustee of the broadcasting company stock and of the Johnson City Foundation, the philanthropic distributions in one year of which were found to total $8,000 out of $11,000 income and an increase of $89,000 in asset value.
Both Mr. Moursund and the law firm were found to be extensively interested in regional banks, and the Journal reporters found the belief strong in the muted region that Mr. Johnson was an eminence grise in the background. Mr. Moursund, his mother, his law partner, Mr. Thomas of Austin and the Brazos-Tenth Street Corporation acquired control of the Moore State Bank of Llano, Texas, soon after Messrs. Moursund and Johnson had paid it a visit.
"Lyndon's associates own or manage stock in all eight of Austin's banks," said the Journal. "Here in Johnson City, at about the time Lyndon Johnson was being inaugurated as Vice President, Brazos-Tenth acquired four-fifths of the stock of the town's only bank, Citizens State (resources: about $3 million). On the board sit Mr. Thomas, Mr. Moursund and another key member of the inner circle, Jesse Kellam, president of the Johnson broadcasting company. " Kellam is a college chum of Johnson's, succeeded him in 1934 as Youth Administration director, helped him with his first congressional campaign, now owns stock in four Austin banks and is a director of one of the biggest, the Capital National.
But the big man at Capital National was Ed Clark of the law firm, a former Texas secretary of state, lobbyist and political and legal troubleshooter for Mr. Johnson. Clark and his partners are big stockholders in Capital National.
Mr. Moursund is a director of the American National, another big Austin bank of which the Johnson Profit-Sharing Plan and the Johnson City Foundation are also stockholders. "The Johnson foundation also has holdings in three other Austin banks; its total of bank stock comes to roughly $137,000. "
In Austin National, the biggest bank in the region, Brazos-Tenth has a stockholding foothold.
John Connally served as the first president of the ostensibly competing radio outfit, KVET. Connally had been secretary to Representative Johnson prior to 1948 and was manager of the presidential bid of LBJ in 1960. As governor of Texas he is now conceded to have complete Establishment control of the state, having routed the liberals. Connally originally subscribed to half of the new radio station's stock for $25,000, which he borrowed from Ed Clark's Capital National Bank. Mr. Clark was also a founder of the radio company that entered the field against the Johnsons' KTBC, headed by Mrs. Johnson.
The Federal Communications Commission, the Journal noted, apparently did not notice KVET had the same address as KTBC and numbered among its founders KTBC personnel. It is illegal for the owner of one station to hold even minority interest in a competing station in the same town. Walter Jenkins, later an administrative aid to President Johnson, was an early stockholder in the Connally station.
Difficulties in Washington connected with the new station were quickly cleared. Its bid for a wavelength held by a San Antonio station, seventy miles away, was quickly resolved by the FCC; KVET got the desired wavelength. "Then the Civil Aeronautics Administration complained erection of the 210-foot broadcasting tower would 'present an undue hazard for the safe operation of aircraft. ' But two weeks later it changed its mind.
"KVET, like Lady Bird's KTBC, had no trouble getting network affiliation, signing up with Mutual. To this day these two remain the only network outlets in Austin, though the city now has seven radio stations. "
Connally in 1955 became attorney for Sid Richardson, the multimillionaire Fort Worth oilman, thus cementing the relations of the group with the inner-circle depletion- allowance crowd, of which Mr. Johnson in the Senate was always an ardent supporter. At this time Mr. Connally turned over his control in KVET to Willard Deason, old Johnson school chum.
"Those who drop in to visit station president Deason nowadays can hear his cheerful view of competing with the Johnsons and his cozy recollections of how it all came about. They can see two pictures adorning his office. One is a brown-tone photo taken in 1932, of schoolmate Lyndon. The other is a large autographed portrait of the President of the United States. "
It was hard on the heels of this instructive report that Mr. Johnson took an unprecedented step for a president of the United States by disclosing figures on his financial position. The principal, assets shown consisted of the Texas Broadcasting Corporation and real estate. The total valuation placed on them was $3,484,098. Ownership titles were split among the family so that the president apparently held $378,081 of assets, his wife $2,126,298 and the two minor daughters close to $500,000 each. No mention was made of the Johnson City Foundation.
As the Times pointed out, original ground-floor costs were used in arriving at valuations and the auditors themselves noted that the method used was "not intended to indicate the values that might be realized if the investments were sold. "
Unfeeling and obviously partisan Republicans called the valuations "incredibly low" and charged that the method used was "like the city of New York listing the value of Manhattan Island at $24," the original price supposed to have been paid to the Indians.
Financial analysts in general contended that merely the holdings shown were worth up to $15 million or more.
There were internal discrepancies in the report as published. Texas ranch properties listed among total balance-sheet assets were set at $502,478, a figure carried forward from an erroneous computation that on the basis of the itemization given should have added up to $1,445,822. Either the total given is wrong or the items composing it are erroneously stated, as anyone may ascertain by consulting the Times.
In the preceding decade the family had received admitted cash income exceeding $1. 8 million, irrespective of the pro forma quadrupling in value of assets. The original cost of the broadcasting enterprise was $24,850 in the period 1944-47. Undistributed profits of $2,445,830 after the deduction of purely potential capital gain taxes were solely used to bring its valuation to $2,470,680. Capital gain tax will never be paid unless the broadcasting enterprise is sold.
The broadcasting company, it was shown, is wholly owned by Mrs. Johnson and her two daughters. It owned or had an interest in broadcasting facilities in Austin, Waco, Bryan and Victoria in Texas, and in Ardmore, Oklahoma.
Both in type of personal holdings and those distributed among kin there was nothing to differentiate the statement from that of any Wall Street tycoon except the numerical details. The president and his wife held respectively $159,270 and $239,270 of tax- exempt state and local government bonds. Each held ranch properties valued at $227,114 and minor amounts of "other assets. "
Properties owned by Mr. and Mrs. Johnson were placed in trust in November, 1963, immediately after he assumed the presidency. They will be so held until he no longer holds federal office. Yet, he held high federal office before the creation of this trusteeship, which has the sole effect of placing the properties under the management of nominees. It does not represent a divorce.
Knowing he is the beneficiary under this trusteeship, is the president's mind so free of property influence that he is likely to come out for, say, strict government regulation of television advertising or the end of tax-free oil? Is he likely to agree with Kennedy appointee Newton Minow that television is a "wasteland"?
Said the New York Times editorially on September 25, 1964, about this arrangement:
The property has been placed in trust while the President is in office, and Mr. Johnson will unquestionably take special pains to avoid any charge of improper influence over the F. C. C. But a conflict of interest remains as long as the nation's chief officeholder possesses a stake, direct or indirect, in a property he is charged with regulating.
This property was acquired when Mr. Johnson was in Congress. He was doing what many other Congressmen . . . have done. There is, unfortunately, no law against Congressmen owning television and radio facilities or having a financial interest in other franchises or businesses that are either regulated by Federal agencies or dependent on Government contracts. But the very fact that Mr. Johnson set up a trust when he assumed the Presidency indicates that ownership of Government-regulated business suggests a conflict--for members of Congress as well as for the occupant of the White House.
The Times suggested "divestiture" of the property as a way out, without suggesting the nature of such legerdemain. If it were sold the president would realize a handsome
profit. If it were given away for charity it would defeat the intended purpose from the beginning.
The insight given by the Johnson financial statement, as far as it went, into the affairs of a big Establishmentarian and career politician who thirty years before was as poor as the proverbial church mouse enabled reflective observers to see where rhetoric leaves off and substance begins in the thinking of the Establishment. The energy devoted to putting together from scratch and sheltering these properties should be some guide to personal motivation. What was disclosed bore none of the earmarks of a part-time hobby.
What is even more strange is that even as president Mr. Johnson has continued large- scale land and cattle purchases through agents, paralleling value-bringing state highway and bridge-building projects, according to the New York Times in an extensive report of December 26, 1966 (23:2-3). This report of total holdings more recently of 14,000 acres in five separate ranches led Washington wits to say that Mr. Johnson has been the biggest real estate operator as president of the United States since President Jefferson's "Louisiana Purchase. "
Despite his single-handed involvement of the United States in a big Asiatic land war, long held by the Chiefs of Staff as something to be avoided at all costs, Mr. Johnson is nevertheless hailed by many as the architect of "The Great Society," an apparition that is due to materialize no doubt at about the same time as grass-roots communism appears in Russia and the Soviet state "withers away.
" just how much stock one should take in the Great Society fantasy was suggested at the annual get-together of the American Political Science Association in 1965, as reported by the New York Times:
Although a high proportion of them unquestionably voted for Mr. Johnson last fall, the comments of the political scientists indicated a shocking skepticism about Washington's earnest belief that this President has introduced--through his Great Society programs, his style of vigorous personal leadership and his invocation of the virtues of one "great big party"--a dramatic new element in American politics.
Nelson Polsby of Wesleyan University captured the prevailing view when he remarked:
"There's nothing new about all this. All you really have is a swollen Congressional majority, that Barry Goldwater handed the Democrats, passing programs that have been kicking around since New Deal and Fair Deal days. "
A colleague from Wesleyan, Clement E. Vose, compounded the heresy, saying that the Johnson record "is not one of innovation, but of ratification of ideas that have been germinating since the time of Henry Wallace. " 56
So much for "The Great Society. "
Other Political Horatio Algers
Before closing the books on the Horatio Algers in politics, some further nuggets from the valuable Herald Tribune series, Put together by ace reporter Dom Bonafede, should be exhibited:
"Civic participation" by applicants is one of the yardsticks used by the Federal Communications Commission in granting TV licenses, and being a congressman is interpreted as "civic participation" given weight in licensing--a doctrine that Democratic Senator William J. Proxmire of Wisconsin called "an amazing proposition. " 57
Representative William E. Miller, Republican candidate for vice president in 1964, was on the payroll of the Lockport Felt Company while in Congress, where he had
"openly promoted legislation favorable to the company on the floor. " He was made a vice president of the company two weeks after leaving Congress. 58
Senators Spessard Holland and George Smathers of Florida and B. Everett Jordan and Samuel J. Ervin, Jr. , of North Carolina were co-sponsors of a bill in which the Florida Power and Light Company was "the prime mover" to exempt from federal regulation private utilities not directly linked with outof-state transmission networks. 59
Until he recently sold the bulk of his holdings, Sen. Warren G. Magnuson, D. , Wash. , the Commerce Committee chairman, was part owner of a Seattle broadcasting station. One of the committee's functions is to oversee operations of the FCC.
Sen. John L. McClellan, D. , Ark. , the famed rackets-buster, is chairman of the subcommittee investigating the Federal banking system, even though he is a bank director in private life. Another subcommittee member, Sen. Sam J. Ervin, D. , N. C. , also holds a bank directorship.
Rep. William C. Cramer, R. , Fla. , spoke against the Administration's war [sic! ] on poverty almost from the program's inception. But his protests appear to have been muted ever since a laundry service he heads in St. Petersburg was awarded a contract with Women's job Corps. 60
Although the Corrupt Practices Act of 1925 requires congressmen to report campaign contributions and expenditures, limiting what can be spent to $5,000 for representatives and $25,000 for senators, large numbers of members of both Houses report "none" on the required forms after each election. 61
Yet carloads of money are nevertheless spent, or at least collected, in congressional campaigns. Only $18. 5 million was formally reported as collected for the 1962 "off year" campaigns, but an expertly estimated $100 million was collected. 62
Political money is really tossed about in a large way.
"Newly elected Rep. Richard L. Ottinger, D. , N. Y. , a multi-millionaire in private life, spent almost $200,000 through 34 committees to win his seat. Yet, his campaign report lists expenditures of $4,500 and no contributions. " 63
Although there are criminal penalties prescribed for negligent failure to file a report or to file a false report, there has never been a prosecution under the Act of 1925.
"Ingenious methods of raising campaign funds are developed. . . . Card games are held in which a portion of the pot from each hand is set aside for a campaign committee. For many years, Rep. Michael J. Kirwan, of Ohio, House Democratic Campaign Committee Chairman, staged a St. Patrick's Day party for the purpose of soliciting campaign funds. " 64
Cocktail parties are a standard fixture where lobbyists are panhandled for handouts to support democracy. One lobbyist told the Herald Tribune that it usually cost him $100 for a single drink "and a "cold shrimp on a toothpick," which was perhaps cheap.
A generally favored swindle is to run $100- to $1,000-a-plate testimonial dinners, production cost about $10 apiece, and to send twenty-five to a hundred tickets to various corporate people, who generally grab them like manna and distribute them to the office help. If the corporate boys fail to remit they suspect an undeserved demerit may be entered against their names in some little black book.
While a direct gift of money in excess of $3,000, except (as the courts have percipiently ruled) expensive presents to a lady friend, are subject to tax, a gift in recognition of "public service' is not so taxable. Although such gifts are not lavished on low-paid scientists, artists, military officers and profound cogitators, who may be
supposed to have rendered some public service, they are rife in the case of officials, especially congressmen. It is not necessary to pass them money in some back alley. What is done is to stage a glittering public affair, with hundreds of well-heeled customers present, and to present the modest recipient with a large certified check as the cameras flash the scene for posterity. What results are photographs reminiscent of Renaissance paintings titled "Adoration of the Infanta. " Diners leave with the vague semi-alcoholic feeling that they have participated in a religious ceremony, have at least paid homage to a glorious Republic once sadly betrayed by wicked, wicked, wicked Benedict Arnold.
Lest any strait-laced, dyspeptic methodologist charge that I am drawing my data from only two sources which, although highly orthodox, could be wrong or wrong-headed, let the future historian know that among many other sources on congressional skulduggery there are the nationally syndicated Washington columns of Drew Pearson, a practitioner of the journalistic craft for more than forty years.
Not only do we encounter many members of the cast we already are familiar with in the Pearson columns but a host of new names ooze into view week after week.
"Any pressure group that is rich and powerful enough can find a champion in Everett Dirksen," said Pearson. "It is his conviction that the special interests are entitled to a voice in the Senate. His office has been headquarters for almost every major group--the drug industry, gas and oil combine, food packagers, etc. --that has had a legislative problem.
"To no one's particular surprise, Dirksen's law firm in faraway Peoria, Ill. , has collected retainers from many a giant corporation whose interests the Senator has served in Washington. " 65
A few other nuggets from the Pearson columns--the nuggets alone would fill a book-- are as follows:
Representative William H. Harsha, Jr. , Republican of Ohio, has been a strong opponent of the Federal Mass Transportation Act, designed to develop rail and commuter services for clogged cities. His law firm represents the Greyhound Bus Lines. The congressman favors limiting imports of residual fuel oil. His firm represents Phillips Petroleum and Ashland Refining Company. 66
Representative Charles Chamberlain, Republican of Michigan, introduced a bill to repeal the manufacturers' excise tax on cars and trucks. His law firm represented the United Trucking Service and the Detroit Automobile Inter-Insurance Exchange as well as the Panhandle Eastern Pipeline Company of Texas, which like other companies appears to make use of many congressional law firms. 67
In the 1940's Representative Victor Wickersham, Democrat of Oklahoma, asserting "I am a poor man," advocated increased congressional salaries. Despite still moderate congressional salaries, he was more recently set on getting back into office. In an application filed with the Federal Communications Commission to buy radio station KREK in Sapulpa, he stated his current net worth at $1,579,789, placing him among some 90,000 millionaires. Pearson traced various typical flourishes in the financial efflorescence of Wickersham over the years. 68
Upon the impending retirement of Representative Oren Harris, chairman of the House Commerce Committee, to accept a presidential appointment as a United States judge, Pearson noted that Harris was a stockholder in Station KRBB of El Dorado, Arkansas, and as a close associate of Ham Moses of the Arkansas Power and Light Company "had introduced more special-interest legislation than any member of Congress. "
Because of the inability to find a suitable replacement for Harris, said Pearson, the lobbyists asked Senator McClellan to intervene and hold up at the White House Harris's appointment for the stated reason of a "ticklish" election in Arkansas. The president obliged.
"This will help Madison Avenue, but it puts the President in a bad light in regard to his family radio-TV property in Texas. He has claimed that he has kept aloof from influencing the Federal Communications Commission; but now he continues in power the congressional chairman who has slapped down the commission on behalf of the big networks.
"Note--It's significant that Mr. Johnson has been very chummy with the big networks, as witness the repeated White House dinner invitations to network executives. . . . " 69
How it may work out when anyone drives a high-placed official into a tight corner was shown in the case of Senator Thomas J. Dodd of Connecticut, as reported by Pearson. The FBI had been informed of documentary data in Pearson's hands and photographed and rephotographed it.
[Pearson's subaltern had] been working with half a dozen prospective witnesses, all former Dodd employees. . . . These were young people who had been shocked at what was happening in Dodd's office and departed. They felt under moral obligation to report what was happening.
The G-men called on the witnesses all right, but didn't ask a single question about Dodd, his conduct, whether he had diverted funds from testimonial dinners to his own pocket or whether he had acted on behalf of an agent for a foreign power, Gen. Julius Klein.
Instead, the FBI crossexamined these young people about the alleged theft of Dodd's documents. They also heckled them about other stories Jack Anderson and I had written.
As fast as the FBI discovered the identity of the witnesses, they were bullied and badgered, hounded and harassed. One lost his job on a House committee; the news of his dismissal came from Dodd's office. Another . . . since submitting his resignation . . . has been unable to find another job. Others have had their jobs threatened. One woman, seven months pregnant, was grilled by agents for three hours.
Agents hauled some witnesses right into Dodd's office for cross-examination and behaved as if they were working for the Senator. Other witnesses were alternatively soft-soaped and threatened with Federal prosecution.
I have been around Washington a long time, but have never seen such an example of police state operation.
Such investigations, of course, do not happen by accident. They usually go beyond the Attorney General, Mr. Katzenbach, an awfully nice guy but a bit wishy-washy when it comes to standing up to the White House or the Senate Judiciary Committee, of which Tom Dodd is a member.
Such investigations usually go right up to the President himself. Johnson has on his desk a direct private phone to J. Edgar Hoover. They are very old friends, dating back to the days when I used to visit in Johnson's home when he was a gawky young Congressman from Texas living just across the street from Hoover's well-appointed bachelor abode.
Johnson is not only a friend of Hoover's but he is a friend of Dodd's. It takes a real friend to make the two trips he made to Connecticut to speak at testimonial dinners which raised $100,000 for Tom's personal bank account.
Johnson did all right for Tom. He hoisted him to a choice position on the Senate Foreign Relations Committee, ahead of other Senators, a vantage point from which he was able to work more effectively for Gen. Klein. And he almost picked Tom to run with him for Vice President. 70
While much more along the same line could be cited it is time to close the books on this phase of our quest for enlightenment. Suffice it to say that a majority of members in both Houses are tainted with what is euphemistically known as a "conflict of interest. " There is, however, as readily seen, really no conflict of interest involved. The line of interest is clearcut and unambiguously pointed in one direction--to personal nest- feathering at public expense. Nor are only overt Establishment people involved. Democratic Senator Thomas Dodd was never a recognized Establishment man, perhaps one reason he was made an object of gingerly inquiry by the Senate for actions little different from those of others except that he involved himself with a registered agent of unholy foreign interests and stepped into delicate areas subject to foreign policy and the jurisdiction of the Foreign Relations Committee under vigilant Chairman J. William Fulbright.
But where is the line to be drawn on congressional self-dealing? What difference does it make whether the havoc caused is international or domestic?
Some fairly feeble solutions have been proposed for this parasitism at the heart of the political system. One is that congressmen be required to disclose their personal financial holdings so that the public may evaluate their votes, thus determining whether they are cast on the merits of a case or for personal Profit. This proposal has been supported by Senators Clark, Wayne Morse, Paul Douglas, Clifford Case, Jacob Javits, Kenneth Keating, Maurine Neuberger and others--all non-Establishmentarians In the House it was supported by Edith Green, Ogden Reid and John V. Lindsay. Senators Clark, Hugh Scott of Pennsylvania, Stephen Young of Ohio, William Proxmire of Wisconsin, Morse of Oregon and Mike Mansfield of Montana have voluntarily disclosed their personal financial holdings and Paul Douglas rendered an annual public account of his income and expenditures. They have had few emulators.
Senator Dirksen predictably objected to the proposed law on the clownish ground that it would be "an invasion of privacy" and would make him a "second-class citizen" into whose private affairs every vagrant Peeping Tom could penetrate.
Apart from the fact that the Establishment, as a sovereign force effectively unchecked by any knowledgeable electorate, will never enact such a measure, if it did who would enforce it?
Hidden Holdings
Again, if congressmen disclosed their holdings, such disclosure would not portend much even if it was made annually. For the source of the poor-boy congressman's original stake consists in most cases obviously of under-the-counter gifts, ambiguous campaign contributions, legal retainers, public testimonial awards and benevolent bank loans. And all such, if subject to disclosure, could be kept in the names of wives, parents, daughters, sons, cousins and the like.
Actually, any man may have vast holdings with nothing set down anywhere in his name. A man can own a million shares in a big corporation without his name ever appearing on the books. The stock can be held by obscure paid nominees who have signed, in blank, stock transfer certificates allocating these shares to whoever holds and fills in the certificates.
Any person interested in concealing assets can do even better than this, as we are reminded by that old reliable, the Wall Street Journal, of recent decades a most
informative newspaper. Money can be transferred to one's own neutrally named holding company, a "shell" company, in any one of a number of places--Lichtenstein, Luxembourg, Panama, the Bahamas--and deposited in a numbered Swiss bank account, the owner of which the bankers are forbidden by strict Swiss law to disclose. The Swiss bank, conducting all operations in its own name, can buy or sell securities, realty or other titles in any market without anyone knowing for whom it acts. Profits are transferred to the owner direct or to the "shell" company, which cashes checks and turns money over to the true owner. The "shell" is in charge of low-paid employees, glad to perform this less than onerous occasional service. The money, if wanted in the United States, is simply carried home in one's wallet or is brought back by couriers.
This method, as a device for evading American income, capital gains and inheritance taxes, is already used by many American business and professional men, Las Vegas gamblers, racketeers, some millionaires and owners of at least 10 per cent of some corporations' shares among executives, according to the Wall Street Journal. It estimates that hundreds of millions of dollars are so involved, perhaps billions . 71
The stacking away of tax-shy assets abroad is not confined to marginal elements. As the New York Times informs in a special dispatch from Luxembourg: 72
Along the Grande Rue and the Boulevard Royal, companies like du Pont Europa Holdings and Amoco Oil Holdings have nestled their "sie`ges sociales" (head offices) in filing cabinets next to 2,000 other Luxembourg holding companies.
With a few exceptions, the head office is the street address of a bank or a law firm. The lawyer or the banker may be a director of more corporations than are most captains of industry anywhere.
Some Luxembourg holding companies date back to 1929, when Parliament passed a law making it easy and inexpensive for them to be established and kept here. Not a few were or are facades for family businesses in nearby countries, shells to make possible the investment of income hidden from the tax collector.
Since this is not such an easy contrivance anymore, the reasons for setting up Luxembourg holding companies nowadays are likely to stem primarily from difficulties in carrying on essential business operations elsewhere.
This indeed has been the basis for the recent stir of holding-company activity by American corporate giants in this quiet, 999-square-mile Grand Duchy. With direct dollar sources of capital restricted by the American balance-of-payments restraints, Luxembourg has become a strategic base for raising needed investment capital in Europe.
Apart from basic tax advantages, the Duchy also provides a singular freedom from business regulation.
A holding company can be formed within weeks--days, says one American lawyer. The company is exempt from income and capital-gains taxes. Most important, Luxembourg requires no tax withheld [on payments to foreigners].
Actually, the only chance for a significant change in Congress and the stripe of elected officials generally is to get an altogether different type of person into active politics, perhaps men of the type of the non-Establishmentarians. Considering all factors, including the fuzzy mentality of the electorate, this will be very hard if not impossible to accomplish. The fundamental difficulty is institutional: the universal equal franchise that gives the vote-to clods.
It is not for lack of precept that congressmen conduct themselves as they do while bringing a laudably strict set of standards to bear against appointees in the executive and
judicial branches. Thomas Jefferson laid down the rule in 1801 when he was vice president and Senate presiding officer that "Where the private interests of a member are concerned in a bill of question he is to withdraw. " This is just what a competent judge does if there is any question of his personal involvement in a case sub judice.
Such a rule assumes that the relevant body consists of gentlemen and, perhaps, scholars. The electorate, it is observable, does not usually support such when they appear.
For the latter-day comers up from bayous, swamps, gutters and sties the rule was broadened by House Speaker James G. Blaine of Maine, who in 1874 asserted astonishingly that a member might vote for his private interests if the measure was not for his exclusive benefit but for the benefit of a group. (Blaine was exposed in 1884 as a bribe taker in connection with the securing of land grants for the Little Rock and Fort Smith Railroad. )
Said the Herald Tribune significantly in concluding its valuable series:
"Frequently a Senator or Representative's outside income results directly from the fact
that he is a member of Congress. " 73
Political Sources of New Fortunes
That the transfer of moneys to congressmen is a long-term, standard affair is attested by the Wall Street Journal of May 11, 1966, which says that "dozens" of congressmen "allow wealthy supporters to set up office funds or let lobbyists for business and labor sponsor testimonials, anniversary celebrations, birthday parties and other occasions or excuses for fund-raising not necessarily related to campaign needs--namely, office, entertainment and travel expenses. "
Few legislators, the Journal noted, reject such helpful emoluments, which come under the heading of perquisites of office.
He said that of the 1,200 or so inquiries which the Controller's office receives annually regarding bank charters and branch applications, at least half come from Congressmen. Most of the inquiries, the aid said, were simple requests for information without any suggestion of pressure.
But as pointed out by George B. Gallaway, author and government expert, "A telephone call from a Senator or Congressman can paralyze the will of a government executive and alter the course of national policy.
In other cases, Sen. Jennings Randolph, D. , W. Va. , an insurance company director, has taken an active role in debate on proposed medical insurance legislation. His deciding vote killed medicare in the Senate in 1962.
Rep. Multer, chairman of the subcommittee on bank supervision, is privately associated with banking operations. 51
Senator B. Everett Jordan, Democrat of North Carolina, is chairman of the strategic Rules Committee and frequently has argued on the Senate floor against allowing increases in competing foreign textile imports as recommended by the Tariff Commission. Increasing such imports is part of a supposed national policy of knitting together a raveled world.
The senator is himself a domestic textile man, an officer and director of the Sellers Manufacturing Company of North Carolina.
It was before his committee that the case of Bobby Baker, hired secretary to the Senate Majority, was brought for investigation. Baker was accused of improperly using his position in personal out-of-bounds windfall moneymaking schemes. And it was Senator Jordan who abruptly closed the inquiry as the trail grew hot with the historic remark: "We're not investigating senators. "
"Would Bobby Baker have been able to engage in shadowy business deals if his Senate bosses had been above reproach? " the Herald Tribune asked rhetorically. 52 Baker, in the view of sophisticates, merely paralleled the operations of his masters, from whom as a very young man he had learned everything he knew about anti-public skulduggery.
Alluding to the Bobby Baker case, the Herald Tribune said it "raised doubts about the moral fiber of the government right up to the steps of the White House. " 53 It was, indeed, precisely as attention was directed toward the Senate group of which Lyndon B. Johnson had been a rabidly prayerful member that Senator Jordan abruptly closed off the tepid Baker investigation.
The television industry embraces many congressmen. It has been estimated that 75 per cent of congressmen have interests in television-radio broadcasting franchises. The Herald Tribune found that nine senators and fourteen representatives had direct or family-related interests in broadcasting stations. "While he was in the Senate, the family of Lyndon B. Johnson held the only television broadcasting license in Austin, Tex. "
The Case of Lyndon Johnson: A Paradigm
According to the Wall Street Journal, Mr. Johnson's large-scale property-dealing
activities began when be was a representative back in the 1930's. 54
"Unofficial estimates," said the Herald Tribune, "pegged the President's fortune, accrued mostly through his radio-TV holdings, from nine to 14 million. Last August in a public statement he listed his net assets at $3,484,098. A month later, Mr. Humphrey, who sometimes refers to himself as an 'unemployed druggist,' reported his net worth as totaling $171,396. " 55
Earlier Barry Goldwater, Republican presidential candidate, disclosed that he and his wife were worth $1. 7 million mostly in stocks, all of it inherited money.
Johnson, by contrast, was a poor boy who made good-in politics. Back in the 1920's he worked on Texas road gangs as a laborer and was variously employed in catch-as- catch-can jobs until he went to Congress in 1934 after a brief stint as state director of the depression-born National Youth Administration. Those were lean days but, as the Democratic song promised, happy days were returning and soon everything would again be as it was before the dismal crash of 1929. Once on the government payroll Johnson, like many of his colleagues, was never pried loose.
The Johnson fortune, and the miracle of its growth despite the monkish immersion of its architect in steamy affairs of state, came in for a great deal of sudden press attention. What figures are available on it were unprecedentedly disclosed during the presidential campaign of 1964. This revelation resulted from many rumors of the vast magnitude of the Johnson holdings and particularly from a cold-eyed 7,000-word analysis in the Wall Street Journal of August 11, 1964. The editors of this elite feuilleton had assigned a three-man assault team of ace reporters to invade Texas and find out what caused all the aroma. Their report heightened the worst fears abroad in the land, leading to the later
somewhat perfumed self-disclosure reported in the New York Times on August 20, 1964.
The Journal led off its findings with the following rollicking heading:
LYNDON'S PALS
HIS HOMETOWN COTERIE WHEELS AND DEALS IN
LAND AND BROADCASTING THEY BUY INTO AUSTIN BANKS, TRADE PROPERTY WITH LBJ
AND PLAY SOME POLITICS TOO DIRECT LINE TO THE WHITE HOUSE
What engages our attention here is not what might interest a political partisan: the fact that this was about the holder of the highest competitive office in the land. It would be a grave mistake to look upon Mr. Johnson's financial affairs as rarely exceptional. They are, rather, a baroque pattern of a Congressional Establishment man's affairs. I remarked earlier that none of these men operate alone. One man could not juggle all this stuff. Behind practically each Establishment figure is organization: a standard political organization of the Republican or Democratic variety and a personal political-financial organization of long-time cronies.
This area of our politics has not been studied, as far as I am aware, by our political scientists. What shows on the surface in Washington is only the tips of the various icebergs. These personal political-financial networks show what politics are about to most of their successful professional practitioners: chiefly a way of self-enrichment. The pubpols are trying to become junior finpols.
So, taking what the Journal found out as a paradigm of approximately what would be found in practically every Establishment case, there was disclosed the following:
The Johnson affairs revolved around the hitherto obscure Austin law firm of Clark, Thomas, Harris, Denius and Winters, "patronized by giant national corporations. " A separate lawyer, A. W. Moursund of Johnson City, was found to be Mr. Johnson's personal attorney, realty partner and a key figure in his affairs. He was "linked by private telephone circuit to the LBJ Ranch and the White House. " All the lawyers interviewed talked themselves down, jocosely. "I'm just a country lawyer," said Moursund. "I'm just a poor boy, born and raised in East Texas, trying to make an honest buck," said Don Thomas of the law firm. Said Mr. Ed Clark: "Spell my name right--I need the business. "
Mr. Johnson, the Johnson family, these lawyers and other cronies, the Journal found, held parallel or interlocking interests in television-radio properties, vast tracts of land made valuable by federal electrification and Johnson-sponsored dam projects over the years and shares in clusters of Texas banks that gave the group enormous credit resources. Said the Journal: "According to experts of the American Bar Association it is unusual for law firms to invest substantially in bank stocks, but perfectly legitimate. "
There was, first, the Texas Broadcasting Company, a name substituted for The LBJ Company when Mr. Johnson unexpectedly became president of the United States. This outfit owned the various radio and exclusive television stations of the Johnsons. A "competing" radio station, working out of the same address, had been long before set up by Johnson associates and employees: John Connally, now governor of Texas, Walter Jenkins, Merrill Connally, Willard Deason, Melvin Winters (the Johnson City contractor who is a trustee of the Johnson foundation), Robert L. Phinney (an old Johnson college roommate who became Austin's postmaster and more recently director
of the Internal Revenue Service for the region), and various other Johnson employees or associates.
The Journal was piqued by two contrasting strands it found in Johnson affairs: the pattern of monopoly as in the television broadcasting station and concentrated bank holdings, and the pattern of apparent competition within the group itself.
The broadcasting enterprises are housed in a modern office building at Tenth and Brazos Street in Austin owned by the Brazos-Tenth Street Corporation, a holding company held in the name of Don Thomas of the law firm. Mr. Thomas denied point- blank that he was just a "front man" for LBJ. Yet he is also the secretary and a director of the broadcasting company, and a trustee of The LBJ Company Profit-Sharing and Incentive Plan and of the Johnson City Foundation, an LBJ creation.
The Brazos-Tenth Street Corporation, the Journal found, figures in baffling big land deals with Mr. Johnson. Court records showed that it bought property from The LBJ Company and resold it the same day to Lyndon B. Johnson in person. It engaged in a series of such land deals with the then vice president, as local records showed, and in some cases acted as the buyerseller in deals between Mr. and Mrs. Johnson. The Journal explained them as possible tax maneuvers through a "conduit agency. "
Other deals were recounted in which parcels of land were sold over the years in a circle extending through Johnson companies and employees and then winding up again in the hands of the original owner, Donald Thomas of the law firm.
Money for the various deals, said the Journal, was supplied by banks in which the "members of the Johnson inner circle have an interest and a voice. "
Mr. Moursund himself was found to be a big dealer in land tracts, held fifty-fifty with The LBJ Company. According to Mr. Thomas, the president owned about 5,000 acres of land, most of it ranch land but 27 acres of it bought back in the 1930's for about $300 an acre and now worth about $20,000 an acre, a rise from $8,100 to $540,000. In addition to being a partner of LBJ in big land deals Mr. Moursund was a trustee of the broadcasting company stock and of the Johnson City Foundation, the philanthropic distributions in one year of which were found to total $8,000 out of $11,000 income and an increase of $89,000 in asset value.
Both Mr. Moursund and the law firm were found to be extensively interested in regional banks, and the Journal reporters found the belief strong in the muted region that Mr. Johnson was an eminence grise in the background. Mr. Moursund, his mother, his law partner, Mr. Thomas of Austin and the Brazos-Tenth Street Corporation acquired control of the Moore State Bank of Llano, Texas, soon after Messrs. Moursund and Johnson had paid it a visit.
"Lyndon's associates own or manage stock in all eight of Austin's banks," said the Journal. "Here in Johnson City, at about the time Lyndon Johnson was being inaugurated as Vice President, Brazos-Tenth acquired four-fifths of the stock of the town's only bank, Citizens State (resources: about $3 million). On the board sit Mr. Thomas, Mr. Moursund and another key member of the inner circle, Jesse Kellam, president of the Johnson broadcasting company. " Kellam is a college chum of Johnson's, succeeded him in 1934 as Youth Administration director, helped him with his first congressional campaign, now owns stock in four Austin banks and is a director of one of the biggest, the Capital National.
But the big man at Capital National was Ed Clark of the law firm, a former Texas secretary of state, lobbyist and political and legal troubleshooter for Mr. Johnson. Clark and his partners are big stockholders in Capital National.
Mr. Moursund is a director of the American National, another big Austin bank of which the Johnson Profit-Sharing Plan and the Johnson City Foundation are also stockholders. "The Johnson foundation also has holdings in three other Austin banks; its total of bank stock comes to roughly $137,000. "
In Austin National, the biggest bank in the region, Brazos-Tenth has a stockholding foothold.
John Connally served as the first president of the ostensibly competing radio outfit, KVET. Connally had been secretary to Representative Johnson prior to 1948 and was manager of the presidential bid of LBJ in 1960. As governor of Texas he is now conceded to have complete Establishment control of the state, having routed the liberals. Connally originally subscribed to half of the new radio station's stock for $25,000, which he borrowed from Ed Clark's Capital National Bank. Mr. Clark was also a founder of the radio company that entered the field against the Johnsons' KTBC, headed by Mrs. Johnson.
The Federal Communications Commission, the Journal noted, apparently did not notice KVET had the same address as KTBC and numbered among its founders KTBC personnel. It is illegal for the owner of one station to hold even minority interest in a competing station in the same town. Walter Jenkins, later an administrative aid to President Johnson, was an early stockholder in the Connally station.
Difficulties in Washington connected with the new station were quickly cleared. Its bid for a wavelength held by a San Antonio station, seventy miles away, was quickly resolved by the FCC; KVET got the desired wavelength. "Then the Civil Aeronautics Administration complained erection of the 210-foot broadcasting tower would 'present an undue hazard for the safe operation of aircraft. ' But two weeks later it changed its mind.
"KVET, like Lady Bird's KTBC, had no trouble getting network affiliation, signing up with Mutual. To this day these two remain the only network outlets in Austin, though the city now has seven radio stations. "
Connally in 1955 became attorney for Sid Richardson, the multimillionaire Fort Worth oilman, thus cementing the relations of the group with the inner-circle depletion- allowance crowd, of which Mr. Johnson in the Senate was always an ardent supporter. At this time Mr. Connally turned over his control in KVET to Willard Deason, old Johnson school chum.
"Those who drop in to visit station president Deason nowadays can hear his cheerful view of competing with the Johnsons and his cozy recollections of how it all came about. They can see two pictures adorning his office. One is a brown-tone photo taken in 1932, of schoolmate Lyndon. The other is a large autographed portrait of the President of the United States. "
It was hard on the heels of this instructive report that Mr. Johnson took an unprecedented step for a president of the United States by disclosing figures on his financial position. The principal, assets shown consisted of the Texas Broadcasting Corporation and real estate. The total valuation placed on them was $3,484,098. Ownership titles were split among the family so that the president apparently held $378,081 of assets, his wife $2,126,298 and the two minor daughters close to $500,000 each. No mention was made of the Johnson City Foundation.
As the Times pointed out, original ground-floor costs were used in arriving at valuations and the auditors themselves noted that the method used was "not intended to indicate the values that might be realized if the investments were sold. "
Unfeeling and obviously partisan Republicans called the valuations "incredibly low" and charged that the method used was "like the city of New York listing the value of Manhattan Island at $24," the original price supposed to have been paid to the Indians.
Financial analysts in general contended that merely the holdings shown were worth up to $15 million or more.
There were internal discrepancies in the report as published. Texas ranch properties listed among total balance-sheet assets were set at $502,478, a figure carried forward from an erroneous computation that on the basis of the itemization given should have added up to $1,445,822. Either the total given is wrong or the items composing it are erroneously stated, as anyone may ascertain by consulting the Times.
In the preceding decade the family had received admitted cash income exceeding $1. 8 million, irrespective of the pro forma quadrupling in value of assets. The original cost of the broadcasting enterprise was $24,850 in the period 1944-47. Undistributed profits of $2,445,830 after the deduction of purely potential capital gain taxes were solely used to bring its valuation to $2,470,680. Capital gain tax will never be paid unless the broadcasting enterprise is sold.
The broadcasting company, it was shown, is wholly owned by Mrs. Johnson and her two daughters. It owned or had an interest in broadcasting facilities in Austin, Waco, Bryan and Victoria in Texas, and in Ardmore, Oklahoma.
Both in type of personal holdings and those distributed among kin there was nothing to differentiate the statement from that of any Wall Street tycoon except the numerical details. The president and his wife held respectively $159,270 and $239,270 of tax- exempt state and local government bonds. Each held ranch properties valued at $227,114 and minor amounts of "other assets. "
Properties owned by Mr. and Mrs. Johnson were placed in trust in November, 1963, immediately after he assumed the presidency. They will be so held until he no longer holds federal office. Yet, he held high federal office before the creation of this trusteeship, which has the sole effect of placing the properties under the management of nominees. It does not represent a divorce.
Knowing he is the beneficiary under this trusteeship, is the president's mind so free of property influence that he is likely to come out for, say, strict government regulation of television advertising or the end of tax-free oil? Is he likely to agree with Kennedy appointee Newton Minow that television is a "wasteland"?
Said the New York Times editorially on September 25, 1964, about this arrangement:
The property has been placed in trust while the President is in office, and Mr. Johnson will unquestionably take special pains to avoid any charge of improper influence over the F. C. C. But a conflict of interest remains as long as the nation's chief officeholder possesses a stake, direct or indirect, in a property he is charged with regulating.
This property was acquired when Mr. Johnson was in Congress. He was doing what many other Congressmen . . . have done. There is, unfortunately, no law against Congressmen owning television and radio facilities or having a financial interest in other franchises or businesses that are either regulated by Federal agencies or dependent on Government contracts. But the very fact that Mr. Johnson set up a trust when he assumed the Presidency indicates that ownership of Government-regulated business suggests a conflict--for members of Congress as well as for the occupant of the White House.
The Times suggested "divestiture" of the property as a way out, without suggesting the nature of such legerdemain. If it were sold the president would realize a handsome
profit. If it were given away for charity it would defeat the intended purpose from the beginning.
The insight given by the Johnson financial statement, as far as it went, into the affairs of a big Establishmentarian and career politician who thirty years before was as poor as the proverbial church mouse enabled reflective observers to see where rhetoric leaves off and substance begins in the thinking of the Establishment. The energy devoted to putting together from scratch and sheltering these properties should be some guide to personal motivation. What was disclosed bore none of the earmarks of a part-time hobby.
What is even more strange is that even as president Mr. Johnson has continued large- scale land and cattle purchases through agents, paralleling value-bringing state highway and bridge-building projects, according to the New York Times in an extensive report of December 26, 1966 (23:2-3). This report of total holdings more recently of 14,000 acres in five separate ranches led Washington wits to say that Mr. Johnson has been the biggest real estate operator as president of the United States since President Jefferson's "Louisiana Purchase. "
Despite his single-handed involvement of the United States in a big Asiatic land war, long held by the Chiefs of Staff as something to be avoided at all costs, Mr. Johnson is nevertheless hailed by many as the architect of "The Great Society," an apparition that is due to materialize no doubt at about the same time as grass-roots communism appears in Russia and the Soviet state "withers away.
" just how much stock one should take in the Great Society fantasy was suggested at the annual get-together of the American Political Science Association in 1965, as reported by the New York Times:
Although a high proportion of them unquestionably voted for Mr. Johnson last fall, the comments of the political scientists indicated a shocking skepticism about Washington's earnest belief that this President has introduced--through his Great Society programs, his style of vigorous personal leadership and his invocation of the virtues of one "great big party"--a dramatic new element in American politics.
Nelson Polsby of Wesleyan University captured the prevailing view when he remarked:
"There's nothing new about all this. All you really have is a swollen Congressional majority, that Barry Goldwater handed the Democrats, passing programs that have been kicking around since New Deal and Fair Deal days. "
A colleague from Wesleyan, Clement E. Vose, compounded the heresy, saying that the Johnson record "is not one of innovation, but of ratification of ideas that have been germinating since the time of Henry Wallace. " 56
So much for "The Great Society. "
Other Political Horatio Algers
Before closing the books on the Horatio Algers in politics, some further nuggets from the valuable Herald Tribune series, Put together by ace reporter Dom Bonafede, should be exhibited:
"Civic participation" by applicants is one of the yardsticks used by the Federal Communications Commission in granting TV licenses, and being a congressman is interpreted as "civic participation" given weight in licensing--a doctrine that Democratic Senator William J. Proxmire of Wisconsin called "an amazing proposition. " 57
Representative William E. Miller, Republican candidate for vice president in 1964, was on the payroll of the Lockport Felt Company while in Congress, where he had
"openly promoted legislation favorable to the company on the floor. " He was made a vice president of the company two weeks after leaving Congress. 58
Senators Spessard Holland and George Smathers of Florida and B. Everett Jordan and Samuel J. Ervin, Jr. , of North Carolina were co-sponsors of a bill in which the Florida Power and Light Company was "the prime mover" to exempt from federal regulation private utilities not directly linked with outof-state transmission networks. 59
Until he recently sold the bulk of his holdings, Sen. Warren G. Magnuson, D. , Wash. , the Commerce Committee chairman, was part owner of a Seattle broadcasting station. One of the committee's functions is to oversee operations of the FCC.
Sen. John L. McClellan, D. , Ark. , the famed rackets-buster, is chairman of the subcommittee investigating the Federal banking system, even though he is a bank director in private life. Another subcommittee member, Sen. Sam J. Ervin, D. , N. C. , also holds a bank directorship.
Rep. William C. Cramer, R. , Fla. , spoke against the Administration's war [sic! ] on poverty almost from the program's inception. But his protests appear to have been muted ever since a laundry service he heads in St. Petersburg was awarded a contract with Women's job Corps. 60
Although the Corrupt Practices Act of 1925 requires congressmen to report campaign contributions and expenditures, limiting what can be spent to $5,000 for representatives and $25,000 for senators, large numbers of members of both Houses report "none" on the required forms after each election. 61
Yet carloads of money are nevertheless spent, or at least collected, in congressional campaigns. Only $18. 5 million was formally reported as collected for the 1962 "off year" campaigns, but an expertly estimated $100 million was collected. 62
Political money is really tossed about in a large way.
"Newly elected Rep. Richard L. Ottinger, D. , N. Y. , a multi-millionaire in private life, spent almost $200,000 through 34 committees to win his seat. Yet, his campaign report lists expenditures of $4,500 and no contributions. " 63
Although there are criminal penalties prescribed for negligent failure to file a report or to file a false report, there has never been a prosecution under the Act of 1925.
"Ingenious methods of raising campaign funds are developed. . . . Card games are held in which a portion of the pot from each hand is set aside for a campaign committee. For many years, Rep. Michael J. Kirwan, of Ohio, House Democratic Campaign Committee Chairman, staged a St. Patrick's Day party for the purpose of soliciting campaign funds. " 64
Cocktail parties are a standard fixture where lobbyists are panhandled for handouts to support democracy. One lobbyist told the Herald Tribune that it usually cost him $100 for a single drink "and a "cold shrimp on a toothpick," which was perhaps cheap.
A generally favored swindle is to run $100- to $1,000-a-plate testimonial dinners, production cost about $10 apiece, and to send twenty-five to a hundred tickets to various corporate people, who generally grab them like manna and distribute them to the office help. If the corporate boys fail to remit they suspect an undeserved demerit may be entered against their names in some little black book.
While a direct gift of money in excess of $3,000, except (as the courts have percipiently ruled) expensive presents to a lady friend, are subject to tax, a gift in recognition of "public service' is not so taxable. Although such gifts are not lavished on low-paid scientists, artists, military officers and profound cogitators, who may be
supposed to have rendered some public service, they are rife in the case of officials, especially congressmen. It is not necessary to pass them money in some back alley. What is done is to stage a glittering public affair, with hundreds of well-heeled customers present, and to present the modest recipient with a large certified check as the cameras flash the scene for posterity. What results are photographs reminiscent of Renaissance paintings titled "Adoration of the Infanta. " Diners leave with the vague semi-alcoholic feeling that they have participated in a religious ceremony, have at least paid homage to a glorious Republic once sadly betrayed by wicked, wicked, wicked Benedict Arnold.
Lest any strait-laced, dyspeptic methodologist charge that I am drawing my data from only two sources which, although highly orthodox, could be wrong or wrong-headed, let the future historian know that among many other sources on congressional skulduggery there are the nationally syndicated Washington columns of Drew Pearson, a practitioner of the journalistic craft for more than forty years.
Not only do we encounter many members of the cast we already are familiar with in the Pearson columns but a host of new names ooze into view week after week.
"Any pressure group that is rich and powerful enough can find a champion in Everett Dirksen," said Pearson. "It is his conviction that the special interests are entitled to a voice in the Senate. His office has been headquarters for almost every major group--the drug industry, gas and oil combine, food packagers, etc. --that has had a legislative problem.
"To no one's particular surprise, Dirksen's law firm in faraway Peoria, Ill. , has collected retainers from many a giant corporation whose interests the Senator has served in Washington. " 65
A few other nuggets from the Pearson columns--the nuggets alone would fill a book-- are as follows:
Representative William H. Harsha, Jr. , Republican of Ohio, has been a strong opponent of the Federal Mass Transportation Act, designed to develop rail and commuter services for clogged cities. His law firm represents the Greyhound Bus Lines. The congressman favors limiting imports of residual fuel oil. His firm represents Phillips Petroleum and Ashland Refining Company. 66
Representative Charles Chamberlain, Republican of Michigan, introduced a bill to repeal the manufacturers' excise tax on cars and trucks. His law firm represented the United Trucking Service and the Detroit Automobile Inter-Insurance Exchange as well as the Panhandle Eastern Pipeline Company of Texas, which like other companies appears to make use of many congressional law firms. 67
In the 1940's Representative Victor Wickersham, Democrat of Oklahoma, asserting "I am a poor man," advocated increased congressional salaries. Despite still moderate congressional salaries, he was more recently set on getting back into office. In an application filed with the Federal Communications Commission to buy radio station KREK in Sapulpa, he stated his current net worth at $1,579,789, placing him among some 90,000 millionaires. Pearson traced various typical flourishes in the financial efflorescence of Wickersham over the years. 68
Upon the impending retirement of Representative Oren Harris, chairman of the House Commerce Committee, to accept a presidential appointment as a United States judge, Pearson noted that Harris was a stockholder in Station KRBB of El Dorado, Arkansas, and as a close associate of Ham Moses of the Arkansas Power and Light Company "had introduced more special-interest legislation than any member of Congress. "
Because of the inability to find a suitable replacement for Harris, said Pearson, the lobbyists asked Senator McClellan to intervene and hold up at the White House Harris's appointment for the stated reason of a "ticklish" election in Arkansas. The president obliged.
"This will help Madison Avenue, but it puts the President in a bad light in regard to his family radio-TV property in Texas. He has claimed that he has kept aloof from influencing the Federal Communications Commission; but now he continues in power the congressional chairman who has slapped down the commission on behalf of the big networks.
"Note--It's significant that Mr. Johnson has been very chummy with the big networks, as witness the repeated White House dinner invitations to network executives. . . . " 69
How it may work out when anyone drives a high-placed official into a tight corner was shown in the case of Senator Thomas J. Dodd of Connecticut, as reported by Pearson. The FBI had been informed of documentary data in Pearson's hands and photographed and rephotographed it.
[Pearson's subaltern had] been working with half a dozen prospective witnesses, all former Dodd employees. . . . These were young people who had been shocked at what was happening in Dodd's office and departed. They felt under moral obligation to report what was happening.
The G-men called on the witnesses all right, but didn't ask a single question about Dodd, his conduct, whether he had diverted funds from testimonial dinners to his own pocket or whether he had acted on behalf of an agent for a foreign power, Gen. Julius Klein.
Instead, the FBI crossexamined these young people about the alleged theft of Dodd's documents. They also heckled them about other stories Jack Anderson and I had written.
As fast as the FBI discovered the identity of the witnesses, they were bullied and badgered, hounded and harassed. One lost his job on a House committee; the news of his dismissal came from Dodd's office. Another . . . since submitting his resignation . . . has been unable to find another job. Others have had their jobs threatened. One woman, seven months pregnant, was grilled by agents for three hours.
Agents hauled some witnesses right into Dodd's office for cross-examination and behaved as if they were working for the Senator. Other witnesses were alternatively soft-soaped and threatened with Federal prosecution.
I have been around Washington a long time, but have never seen such an example of police state operation.
Such investigations, of course, do not happen by accident. They usually go beyond the Attorney General, Mr. Katzenbach, an awfully nice guy but a bit wishy-washy when it comes to standing up to the White House or the Senate Judiciary Committee, of which Tom Dodd is a member.
Such investigations usually go right up to the President himself. Johnson has on his desk a direct private phone to J. Edgar Hoover. They are very old friends, dating back to the days when I used to visit in Johnson's home when he was a gawky young Congressman from Texas living just across the street from Hoover's well-appointed bachelor abode.
Johnson is not only a friend of Hoover's but he is a friend of Dodd's. It takes a real friend to make the two trips he made to Connecticut to speak at testimonial dinners which raised $100,000 for Tom's personal bank account.
Johnson did all right for Tom. He hoisted him to a choice position on the Senate Foreign Relations Committee, ahead of other Senators, a vantage point from which he was able to work more effectively for Gen. Klein. And he almost picked Tom to run with him for Vice President. 70
While much more along the same line could be cited it is time to close the books on this phase of our quest for enlightenment. Suffice it to say that a majority of members in both Houses are tainted with what is euphemistically known as a "conflict of interest. " There is, however, as readily seen, really no conflict of interest involved. The line of interest is clearcut and unambiguously pointed in one direction--to personal nest- feathering at public expense. Nor are only overt Establishment people involved. Democratic Senator Thomas Dodd was never a recognized Establishment man, perhaps one reason he was made an object of gingerly inquiry by the Senate for actions little different from those of others except that he involved himself with a registered agent of unholy foreign interests and stepped into delicate areas subject to foreign policy and the jurisdiction of the Foreign Relations Committee under vigilant Chairman J. William Fulbright.
But where is the line to be drawn on congressional self-dealing? What difference does it make whether the havoc caused is international or domestic?
Some fairly feeble solutions have been proposed for this parasitism at the heart of the political system. One is that congressmen be required to disclose their personal financial holdings so that the public may evaluate their votes, thus determining whether they are cast on the merits of a case or for personal Profit. This proposal has been supported by Senators Clark, Wayne Morse, Paul Douglas, Clifford Case, Jacob Javits, Kenneth Keating, Maurine Neuberger and others--all non-Establishmentarians In the House it was supported by Edith Green, Ogden Reid and John V. Lindsay. Senators Clark, Hugh Scott of Pennsylvania, Stephen Young of Ohio, William Proxmire of Wisconsin, Morse of Oregon and Mike Mansfield of Montana have voluntarily disclosed their personal financial holdings and Paul Douglas rendered an annual public account of his income and expenditures. They have had few emulators.
Senator Dirksen predictably objected to the proposed law on the clownish ground that it would be "an invasion of privacy" and would make him a "second-class citizen" into whose private affairs every vagrant Peeping Tom could penetrate.
Apart from the fact that the Establishment, as a sovereign force effectively unchecked by any knowledgeable electorate, will never enact such a measure, if it did who would enforce it?
Hidden Holdings
Again, if congressmen disclosed their holdings, such disclosure would not portend much even if it was made annually. For the source of the poor-boy congressman's original stake consists in most cases obviously of under-the-counter gifts, ambiguous campaign contributions, legal retainers, public testimonial awards and benevolent bank loans. And all such, if subject to disclosure, could be kept in the names of wives, parents, daughters, sons, cousins and the like.
Actually, any man may have vast holdings with nothing set down anywhere in his name. A man can own a million shares in a big corporation without his name ever appearing on the books. The stock can be held by obscure paid nominees who have signed, in blank, stock transfer certificates allocating these shares to whoever holds and fills in the certificates.
Any person interested in concealing assets can do even better than this, as we are reminded by that old reliable, the Wall Street Journal, of recent decades a most
informative newspaper. Money can be transferred to one's own neutrally named holding company, a "shell" company, in any one of a number of places--Lichtenstein, Luxembourg, Panama, the Bahamas--and deposited in a numbered Swiss bank account, the owner of which the bankers are forbidden by strict Swiss law to disclose. The Swiss bank, conducting all operations in its own name, can buy or sell securities, realty or other titles in any market without anyone knowing for whom it acts. Profits are transferred to the owner direct or to the "shell" company, which cashes checks and turns money over to the true owner. The "shell" is in charge of low-paid employees, glad to perform this less than onerous occasional service. The money, if wanted in the United States, is simply carried home in one's wallet or is brought back by couriers.
This method, as a device for evading American income, capital gains and inheritance taxes, is already used by many American business and professional men, Las Vegas gamblers, racketeers, some millionaires and owners of at least 10 per cent of some corporations' shares among executives, according to the Wall Street Journal. It estimates that hundreds of millions of dollars are so involved, perhaps billions . 71
The stacking away of tax-shy assets abroad is not confined to marginal elements. As the New York Times informs in a special dispatch from Luxembourg: 72
Along the Grande Rue and the Boulevard Royal, companies like du Pont Europa Holdings and Amoco Oil Holdings have nestled their "sie`ges sociales" (head offices) in filing cabinets next to 2,000 other Luxembourg holding companies.
With a few exceptions, the head office is the street address of a bank or a law firm. The lawyer or the banker may be a director of more corporations than are most captains of industry anywhere.
Some Luxembourg holding companies date back to 1929, when Parliament passed a law making it easy and inexpensive for them to be established and kept here. Not a few were or are facades for family businesses in nearby countries, shells to make possible the investment of income hidden from the tax collector.
Since this is not such an easy contrivance anymore, the reasons for setting up Luxembourg holding companies nowadays are likely to stem primarily from difficulties in carrying on essential business operations elsewhere.
This indeed has been the basis for the recent stir of holding-company activity by American corporate giants in this quiet, 999-square-mile Grand Duchy. With direct dollar sources of capital restricted by the American balance-of-payments restraints, Luxembourg has become a strategic base for raising needed investment capital in Europe.
Apart from basic tax advantages, the Duchy also provides a singular freedom from business regulation.
A holding company can be formed within weeks--days, says one American lawyer. The company is exempt from income and capital-gains taxes. Most important, Luxembourg requires no tax withheld [on payments to foreigners].
Actually, the only chance for a significant change in Congress and the stripe of elected officials generally is to get an altogether different type of person into active politics, perhaps men of the type of the non-Establishmentarians. Considering all factors, including the fuzzy mentality of the electorate, this will be very hard if not impossible to accomplish. The fundamental difficulty is institutional: the universal equal franchise that gives the vote-to clods.
It is not for lack of precept that congressmen conduct themselves as they do while bringing a laudably strict set of standards to bear against appointees in the executive and
judicial branches. Thomas Jefferson laid down the rule in 1801 when he was vice president and Senate presiding officer that "Where the private interests of a member are concerned in a bill of question he is to withdraw. " This is just what a competent judge does if there is any question of his personal involvement in a case sub judice.
Such a rule assumes that the relevant body consists of gentlemen and, perhaps, scholars. The electorate, it is observable, does not usually support such when they appear.
For the latter-day comers up from bayous, swamps, gutters and sties the rule was broadened by House Speaker James G. Blaine of Maine, who in 1874 asserted astonishingly that a member might vote for his private interests if the measure was not for his exclusive benefit but for the benefit of a group. (Blaine was exposed in 1884 as a bribe taker in connection with the securing of land grants for the Little Rock and Fort Smith Railroad. )
Said the Herald Tribune significantly in concluding its valuable series:
"Frequently a Senator or Representative's outside income results directly from the fact
that he is a member of Congress. " 73
Political Sources of New Fortunes
That the transfer of moneys to congressmen is a long-term, standard affair is attested by the Wall Street Journal of May 11, 1966, which says that "dozens" of congressmen "allow wealthy supporters to set up office funds or let lobbyists for business and labor sponsor testimonials, anniversary celebrations, birthday parties and other occasions or excuses for fund-raising not necessarily related to campaign needs--namely, office, entertainment and travel expenses. "
Few legislators, the Journal noted, reject such helpful emoluments, which come under the heading of perquisites of office.
