DuPont Dynasty
Behind the Nylon Curtain
Gerard Colby
Sixteen(3 of 3)
A DYNASTY IN TRANSITION
9.
A QUESTION OF CREDIBILITY
Holding the line against any further governmental interferences of these hard-working
leaders of free enterprise was Irving Shapiro, the recipient in 1974 of a paltry $216,300
salary, another $85,000 in incentive compensation, and a $25,278 bonus on dividend
units awarded previously. “Only a small mind would suggest” that he was motivated in
the DuPont-Christiana negotiations by a desire to protect and prolong his position with
DuPont, Shapiro testified in May, 1975, during Lewis Murtaugh’s court suit against the
merger. “I can’t conceive of anything else I could possibly have done as one of the
architects of this transaction.”
202
Many—on both sides of the dispute—agreed with him, and Shapiro acted indignant
with those who did not. “I assume they’re calling Mr. McCoy and myself liars,” he said.
Shapiro had learned that the best way to deal with any impugning of one’s motives was
to confront it directly, with feeling, if possible. During his 75-minute testimony at the
week-long trial before Judge Murray Schwartz, Shapiro acted as if he was hurt,
insulted, outraged; but he was always fully in charge, rattling the plaintiffs attorney,
Joseph A. Rosenthal, early in his cross-examination by challenging, “Are you suggesting
we tried to deceive the Securities and Exchange Commission?”
203
If so, the lawyer was
“wrong.” Case ended. In December, Judge Schwartz made it official, approving the
merger.
“The single overriding demand is credibility,” Shapiro explained years later. “People
won’t follow you if you’re not credible or they don’t understand what you’re doing and
why you’re doing it. You can’t make anything happen unless people believe you are
someone who speaks the truth.”
204
DuPont lawyers were apparently not so successful when it came to their legal fight
against government charges of discrimination. In June, 1975, their motion for dismissal
against claims brought by the Equal Employment Opportunities Commission (EEOC)
was rejected. The EEOC had found that a pattern of discrimination based on sex, race,
and national origin existed in the higher job levels at the Chestnut Run and Christiana
Laboratories. After two years of trying to reach an out-of-court settlement with DuPont
officials, the EEOC filed suit in November, 1972, charging DuPont had violated the
1964 Civil Rights Act.
To hear DuPont’s public relations officers tell it, the mere presence of Shapiro, a
Jew, in the chairman’s seat at DuPont seemed to provide enough of an answer to the
charge. Irv Shapiro, after all, was a lawyer, an officer of the court, who studied the finer
points of the law with a respect bordering on devotion. “To me,” he would say later of
the Supreme Court, “the justices were the great wise men.” And the Supreme Court’s
rulings and the Civil Rights Act were the law of the land.
Irv Shapiro was also an honorable man. “When you ask Irv a question, you’d better
be ready for a truthful, down-to-earth response,” Bernard B. Isaacson once remarked.
“He doesn’t sugarcoat anything and his word is his bond.” Isaacson, a director of the
Northern Delaware Industrial Development Corporation which sought to stop New
Castle County Executive Melvin Slawik’s attempt to tax industrial and commercial
fixtures, should have known. He was Shapiro’s closest friend. As a homeowner in
exclusive Greenville, Shapiro, of course, had his own reasons for opposing Slawik’s
plan to reassess the homes and estates of chateau country.
Yet, when a woman who was exposed to a DuPont toxic gas leak wanted answers to
what were the possible effects of exposure to the gases, how harmful the gas was to
public health, and whether the company had paid the medical costs of any of the other
gas leak victims, her queries were viewed as “irrelevant,” “vague and unspecific.” She had to take Shapiro’s lawyers to court to get her answers. DuPont countered that
the $2000 fine it paid for violating Delaware’s clean air laws was irrelevant to her
personal injury suit. The woman, Jacqueline Evans, was one of 21 people rushed to
Wilmington area hospitals on the night of April 22, 1975.
A month earlier, the independent union at the Edgemoor plant had warned DuPont
officials about a chlorine leak. The workers were so concerned they filed a formal
complaint with the federal Occupational Safety and Health Administration (OSHA),
charging an immediate threat of death or serious physical harm. “The company has been
disregarding safety precautions.”
206 On March 2, according to the complaint, a
pipefitter, James Bradley, was forced by DuPont management to work for three days in
the area where the gas was leaking, an “abnormally dangerous condition.” On April 3
and 4, an OSHA inspector, one of seven working out of the local Wilmington office to
inspect an estimated 12,000 places of business, visited the facility but issued no
citation. On April 14, another worker was rushed to the plant hospital because of a gas
leak and given oxygen for 20 minutes.
Then, at around 8 p.m. on April 22, a poisonous gas was released for a half an hour
from the plant. Slowly, a cloud of titanium tetrachloride and chlorine gas, both listed by
the federal government as Toxic Substances causing death in laboratory animals and/or
man, passed over areas north and east of the city of Wilmington. Police rushed in to
evacuate a movie theatre and seal off the area, while ambulances raced to hospitals
carrying people vomiting, choking and coughing.
When questioned by newsmen about reports that companies are tipped off of pending
“surprise” visits, OSHA officials denied such was the case and stated that their lack of
staff did not hurt the quality of inspections. “What we do, we do thoroughly,” said local
OSHA director Alonzo Griffin. As for the small $140-$160 average fine rate levied
since 1972, “We’re not here to issue heavy fines against the employer or drive him out
of business,” Griffin said. “The main thing is to see that action is taken.”
207 Then what
happened with the April 3 and 4 inspections of the DuPont Edgemoor leaks? Why were
there no citations? Mark Durham, another OSHA official, asked the press to put the
questions in writing. OSHA claimed its concern was balancing requirements of the
federal freedom of information laws with its desire to maintain confidentiality with DuPont.
DuPont’s response to what it had done about the employee warnings and complaint
to OSHA completed the neat circle of argument: “There was no citation issued,”
208
explained Don Kasha, Edgemoor’s employee relations officer. Apparently OSHA
eventually overcame its fear of driving Du Pont out of business and fined the company
$2000. Nevertheless, Shapiro’s Legal Department rejected Ms. Evans’s claim for
$300,000 in damages, asserting a “mechanical defect” was not “gross negligence” and
even if there was negligence, it was not a public nuisance.
209 [These people are scum DC]
It was precisely such arrogance that sparked a new interest in national unions by Du
Pont workers. Gathering in Philadelphia in June, 1975, 36 representatives from three
independent Du Pont unions, including workers from Delaware’s Edgemoor and
Newport plants and Christina Laboratories, shared common tales of harassment by
company officials. The harassment, they claimed, was a deliberate effort to stop the
organizing drive of the United Steelworkers of America.
Out of some 84,000 DuPont workers, there were only 32 independent unions of more
than 100 members each; most of the plants had no union at all. The Steelworkers’ drive,
led by Elmer Chatak, had been successful in getting the endorsement of the executive
boards of 13 of the independent unions, and DuPont Headquarters was clearly getting
worried. The rave reviews the Steelworkers paper, Steel Labor, gave Behind the Nylon
Curtain and the Nader Report, The Company State, in September, 1975, was equally
unwelcome, as was the publicity given in October to charges that DuPont’s laying off of
two union officials in Richmond, Virginia, who had been critical of company policies
was, according to one of the leaders, George Cobb, “a political move to try to stop the
biggest movement against the DuPont Company in the last 20 years.”
210
But what really concerned Shapiro and other managers were the growing ties
between DuPont workers and consumer/community advocates like Ralph Nader. In
January, 1976, over 300 dissident DuPont workers representing 30 to 40 plants rallied
in Richmond under the chairmanship of a laid-off worker, Frank H. Eastman. The rally
was an attempt to get workers to use their ownership of stock to vote for a proxy
resolution which asked for improved pension benefits for DuPont’s blue-collar
workers. At the previous annual meeting, Chairman Shapiro had ruled an employee
pension proposal out of order, insisting that pensions were not an issue for a national DuPont decision but should be worked out at local plants. The workers, who argued that
the current pension plan allowed management to raise benefits for white-collar workers
while offering a token and unequal raise for blue-collar pensioners, knew that Shapiro’s
ruling was an attempt to shatter the negotiating strength of the workers into scores of
different local plant fragments. When the Richmond local union took the lead in
organizing nationwide Du Pont workers’ opposition, Wilmington headquarters handed
the Richmond workers an unusual Christmas message: their plant was to be closed
down, allegedly because of declining cellophane sales.
Undeterred, the Richmond workers the following month hosted representatives from
Du Pont plants as far away as Indiana, Iowa, Alabama and Massachusetts in what one
organizer called “the biggest movement in the labor field since John L. Lewis led them
out of the coal mines.”
211 Ralph Nader gave a two-and-one-half hour speech and
question-and-answer session, charging Delaware with being “a political and corporate
plantation. They got the whole system rigged against you,” he said. “To call it
paternalism is to be too charitable.” Delaware law protected the DuPonts from
reforms, and he urged the workers to lobby for new laws that would guarantee
stockholder rights, more worker control over company practices and policies which
affected them, and strict disclosure requirements that would reveal how managers and
directors of large corporations use depreciation and investment credits to hide their real
profits from workers and stockholders. “It’s ridiculous that an international corporation
like DuPont is chartered by the State of Delaware.”
212
Nader encouraged the workers to resist “divide and rule” tactics that separate one
plant’s workers from another’s and workers from their natural allies among consumers,
environmentalists, students and other people being exploited by DuPont. “You can’t
possibly represent your interests by yourselves.” To avoid DuPont’s ability to
“brainwash” local media and use unfair labor practices against local plants, contract
negotiations should be moved to a “central location of high visibility.” He scored DuPont’s alleged control of inventions by employees on their own time outside of work as
“suppression of freedom of speech.” He warned against “a spate of lies” by top
management that told workers that stricter consumer safety and environmental controls
will endanger jobs. The company knows workers are really consumers, he said, and that
the high prices DuPont hopes can be sustained actually exploit consumers. As for DuPont’s propaganda about helping the environment, “the worst pollution in the country is
in the plants.”
213
Dr. Sidney Wolfe also spoke, warning that a disproportionate number of the over
100,000 deaths from job-related diseases each year were those of DuPont employees,
and he condemned DuPont for conducting “human experimentation” rather than stop a
chemical’s use when it first becomes suspicious. Nader also charged that DuPont and
other large corporations, instead of fighting reforms, were large enough and had the
financial resources and technical capability to make blue-collar jobs safe “rather than
breeding places for lung disease and cancer.” It was criminal to force a worker to have
to choose between having a livelihood and working at certain risk to his health.
Nader suggested Irving Shapiro work as a $300,000 a year neoprene worker. “It’s
clear he might have an added sensitivity, despite the salary.”
214
An unlikely scenario. “The plain fact is that I can’t do anything with my hands,”
215
Shapiro once confessed. Talking, rather, was his expertise, and while spokesman Jack
Conmy played a subdued role before reporters inquiring about the Richmond rally
—“We feel fine … if that’s what they want to do”
216—Irv Shapiro began to prepare for
the Cobb resolution at the April 12 annual meeting, and for what he did best.
“We have to convince the American people they ought to be satisfied with what’s
going on,” he told John Gates of the purged and reborn News-Journal. “You do that by
going public and asking to be judged on the merits.… Industry has traditionally played
its cards close to the chest and treated the public as an outsider. The public doesn’t
know the facts.”
217
Irving Shapiro did, or at least enough facts to “show that you’re making tough choices
and making them in a rational way.” But what values lay behind the logic, the “rational”
arguments? Logic, like computers, can be taught to serve many different masters. Here,
too, Shapiro had an answer. “History says the profit system works better than any other
that’s been devised so far.” But there must be civil responsibility, since corporations
owe their existence to public tolerance. “Corporations are a useful way to bring
together people and capital for getting a job done.… They exist,” he claimed, “because
they serve the public interest.”
It was as if money and power had nothing to do with it. Instead, in Shapiro’s view,
enormous corporate power came about by consent of the public it served. And it was a
premise the News-Journal no longer questioned. Only once, after commenting on the
luncheon as being “subtly impressive, elegant without being lavish,” did Gates the
student venture forth once again as Gates the reporter, noting that Shapiro’s “off-the record answer to a question”—complete with a direction to close the service kitchen
door “to foil eavesdroppers”—was “nothing extraordinary, but the impression of
confidentiality has been made.” Shapiro, the reporter seemed to be hinting, was
extremely skilled at public relations, the master propagandist.
Then Shapiro made a rare gaffe. After assuring Gates that all political contributions
by DuPont officials were open to public inspection, the chairman made it clear that DuPont forbids the giving of bribes to foreign sources to promote business. It was a
statement that would soon return to haunt Shapiro. Just a little over a month later, a
House subcommittee staff report would disclose that DuPont Company subsidiaries
between 1973 and 1975 had made $337,000 in illegal foreign payments. DuPont
officials in Wilmington would be charged with “serious shortcomings” in the voluntary disclosure program of the Securities and Exchange Commission.
218
It was perhaps in anticipation of this report that Shapiro raised the issue at the April
12 annual meeting but downplayed it as “nothing of such substance to warrant detailed
discussion. Considering the risk that this matter could be misunderstood in foreign
countries, we intend to say nothing more.”
219
But the likelihood was that it was not “foreign countries” whose “misunderstanding”
would be at risk, since their governments already had knowledge of what they had
received and, in the Middle East at least, had greater control over the press. What was
really of concern were other listeners: the American public.
A DuPont annual meeting is always a sight to behold. Some 2,000 shareholders, Du
Ponts and critics alike, pack themselves in the Playhouse of the Du Pont Hotel to hear
the report of the chairman and, occasionally, complaints. The April, 1976, meeting,
however, was extraordinary on many counts. There was a paradoxical blend of
confidence and apprehension in the air. It was evident in the picket lines set up outside
the hotel by Du Pont blue-collar workers that Du Pont family members were obliged to
cross to get into the meeting. It was evident also in Irving Shapiro’s joyful report that net
income had risen from 39 cents per share from 1975’s first quarter to $2.80 a share.
And it was evident in the fact that it was not Shapiro’s financial report that drew most of
the comment, but the Cobb proposal to amend the company’s pension plan.
This was understandable—and unfortunate. For buried within Shapiro’s finances was
an extraordinary story that would ultimately affect everyone in the United States,
including Du Pont’s workforce.
Ever since the Arab oil embargo that was the Arab world’s answer to U.S. support
for Israel’s seizure of the West Bank during the 1973 Middle East war, DuPont had
been both beneficiary and victim of fluctuating oil supplies. At first, in 1974, when fears
ran high that curtailed oil feedstocks for the production of synthetic fibers would mean a
polyester shortage, DuPont’s sales soared; for nine months after Shapiro took
command, DuPont enjoyed both inflated prices and such demand that its stock ran short.
To meet what was expected to be continued large demand in the immediate future,
Shapiro authorized capital expenditures to expand Du Pont’s plant capacity.
It was a huge mistake. In 1975, as fears declined with renewed oil supplies and a
slump occurred in the fibers market which accounted for 40 percent of the company’s
sales and earnings, Du Pont’s earnings fell 33 percent, plunging profits from 1973’s $12
a share to $4.50. “The guts of our business simply came to an end one day,” Shapiro
said of September 15. “After that, we couldn’t give a pound of product away.”
220 Plants
that had been running at full capacity for months suddenly were idle over 50 percent of
the time. It was a disaster, since Shapiro had departed from the DuPont family’s
tradition of financing expansion from internal company funds and had gone to New York
banks for loans. This meant that the company’s “after-break-even” profit margin was
much higher than before. In an attempt to meet those margins through an increase in the
volume of sales, Shapiro cut prices; but the market was already glutted with fibers.
Sales dropped by $200 million and earnings by 72 percent from $2.43 a share to 67
cents. Two more quarters of losses followed. The company, according to DuPont
economist Charles Reeder, “hit percentages of decline that people here simply couldn’t
believe.”
221 Competition was keen as prices tumbled with not only the economic slump,
but also technological improvements that had reduced labor costs.
By September, DuPont common was selling 30 times above its actual earnings, with
a growth stock multiple lower than other blue chip shares such as Eastman Kodak,
Xerox or IBM. John M. McCarthy of the $1.4 billion Affiliated Fund shook the market
when, predicting a fall in DuPont earnings and stock prices, he sold 16,000 shares in
1975. Other large investors, such as Dallas’s First National Bank and Republic
National Bank as well as Chicago’s First National Bank, also unloaded shares.
The volatility of DuPont’s stock may not have been deserved, but it scared wealthy
individual and institutional investors. The deteriorating economic situation gave them
little hope for a fibers comeback, and while cyclical stocks like Du Pont do sell more
on future earnings than current earnings, there was a question about fibers’ future. The
excuse of being a seasonal stock simply didn’t explain DuPont’s decline.
DuPont’s top economist, Charles B. Reeder, tried to provide a plausible answer.
“There’s a simple two-word answer to why chemical company earnings vary all over
the lot. The words are product mix.”
222 Perhaps, but the decline in the industry was
broadly affecting plastics and film as well as fiber. Product mix may protect earnings by
diversifying markets a company produces for, but it will not protect any firm from the
crushing weight on prices that technological improvement bequeaths in a competitive
market. Shapiro’s executive committee was gripped in crisis. It was fibers, in fact, not
film or plastics, that saved Shapiro’s head. In mid-1975, fibers began their seasonal
rally and by the third quarter there was enough improvement to allow Shapiro in
December to admit, “I got my first good night’s sleep all year.”
223
Shapiro by then had made a fateful decision, one that would shape Du Pont’s future
forever. He had decided to move toward backward integration and secure Du Pont’s
supply of raw materials. He was convinced that oil supplies would steadily decline in
the years ahead.
In November, 1975, two deals were struck. The first was with National Distillers and
Chemical Corporation, a New York-headquartered firm which had Nelson
Rockefeller’s distant cousin, Hulbert Aldrich, on its board and was well within the
orbit of Morgan banking interests, with Morrow and Co. as its proxy solicitation firm.
The selection of National, then, for a deal Shapiro described as “made in heaven,”
224
was not outside Du Pont’s traditional reliance on Morgan alliances. The arrangement
called for a joint-venture $100-million plant to produce synthetic gas and carbon
monoxide, essential for making two key ingredients in plastics and synthetic fibers:
methanol and acetic acid. Shapiro was gambling on a shortage of both by 1979.
The second deal, with Atlantic Richfield Oil Company (ARCO), was more of a
departure from tradition. Atlantic Refining of Philadelphia had been part of the
Rockefeller's Standard Oil Trust when it was set loose by the 1911 Supreme Court
dissolution. An eastern company always short of crude, Atlantic Refining was given a
new shot of adrenaline when Robert Anderson, son of a Chicago banker, sold his New
Mexico oil holdings to it in 1962 and came on board as chairman in 1965. In 1966,
Anderson steered Atlantic into a merger with a West Coast company, Richfield Oil, and
in 1968 ARCO discovered the largest oil field yet found in North America, in Prudhoe
Bay off Alaska. In 1970, ARCO absorbed Sinclair Oil of Teapot Dome infamy, and two
years later Anderson moved his headquarters from New York’s financial wellspring to
Los Angeles, closer to his 100,000-acre New Mexico ranch. It was with this man, a
self-proclaimed liberal, graduate of the Rockefeller-endowed University of Chicago
and benefactor of the Aspen Institute for Humanistic Studies at Aspen, Colorado, that
the ultra-conservative DuPonts, thanks to Irving Shapiro, found themselves in alliance.
Shapiro’s 50-50 deal with Anderson called for a $500-million refinery to produce
100,000 barrels of oil per day for raw material for petrochemicals. Unfortunately, Du
Pont had cancelled a similar project before the oil crisis. “Our suppliers were making
more on the feedstocks they sold us than we were getting from the products we made
with them,” Shapiro explained. “We are spreading our bets.… We will continue to bring
in new technology, but now we know that we must also have assured sources of
supply.”
225
It did not seem a major diversion of capital from DuPont’s traditional business, just a backward integration to assure feedstock for that business. No one, except perhaps Du Pont family members who were quietly building their oil stock portfolios, could have anticipated that it was a serious harbinger of new directions in the future.
DuPont’s board of directors turned out en masse to listen to Shapiro’s report at the 1976 annual meeting and offer the chairman a united bloc of support. Sales, they heard happily, were up over 30 percent from the previous year’s first quarter of $1.6 billion, and almost a fifth of this $500 million increase was from sales in Europe. There, a 50 percent drop in fibers prices had led to plant closings by European competitors, protests by French workers, and charges that DuPont was not only dumping its surplus on the market, but also driving natural fibers such as cotton and wool off the market entirely. 226
“Most of our product lines are doing very well,” 227 Shapiro said to the audience overflowing the Playhouse, and he predicted an increase of textile fiber shipments during 1976 by 15 percent over 1975, and an “even better year” in 1977. Sales of fluorocarbons had been “impacted” by adverse publicity about the ozone layer’s destruction, he admitted, and there were still “pockets of weakness” in fibers, but he exuded confidence in the future.
John Toland, an employee from the Philadelphia plant, decided to take Shapiro at his word and mounted the podium during the question period. Shapiro took a look at Toland’s jacket and noticed it bore the insignia of the United Steelworkers of America. Earlier, the chairman had stated that the shareholders gathering was “not the place for employees or their representatives … to make statements about their employee relationships, and had used his control over the sound system of the speaker’s microphone to enforce his decree.” 228 Anticipating that Toland was about to speak in favor of the Cobb blue-collar pension proposal, Shapiro sought to point out the worker’s allegiance to the Steelworkers’ organizing drive in order to discredit his statements before the conservative Du Ponts.
“I don’t recognize that symbol on your jacket,” Shapiro said.
Toland recognized immediately that he was being baited.
“That’s what will be representing the workers in the future if you keep shutting us off,” he shot back. But Shapiro, the experienced veteran of earlier post-war witch hunts, had scored with the DuPonts. The proponents of the change in the pension fund sensed it, and their pleas reflected their desperation. Sponsor Cobb said that pensioners did not receive enough money to keep up with inflation. His proposal would provide a pension based on the number of years of employment times 1.5 percent of the average annual salary of the highest salary of five years, usually the last five years of employment. June Doble argued for the justice of another part of the proposal which would permit retirement with full benefits after 30 years of service to DuPont. Her job, she explained, was scheduled to be eliminated with a shutdown of an operation at the DuPont plant in Spruance, Virginia. She had served DuPont for 31 years, yet, because she had started work at the tender age of 16, she would be deprived of immediate collection of benefits if and when she was laid off. Ted Keller, a DuPont employee and Chairman of Delaware’s Tax Reform Coalition, said the current pension plan discriminated against lower-paid workers who could not afford the current option involving subtraction of 50 percent of Social Security benefits, and suggested a cut in executives’ fringe benefits to remedy the problem. And Cobb’s co-worker, Frank Eastman, warned that if the pension plan wasn’t improved soon, the company’s local unions, like the 13 colonies before the American Revolution, would have to “form a strong union” to fight the pension plan’s “taxation without representation.”
DuPont executives controlled the $2.5 billion pension fund, one of the largest in the country, with $802 million invested in DuPont stock and a total 66 percent invested in other common stocks, including huge holdings in such predominantly non-unionized companies as IBM, General Mills, Exxon, Standard Oil of Ohio, Digital Equipment, KMart, and Halliburton, the last being also an equal employment and OSHA violator. Among companies doing business in apartheid South Africa that DuPont executives directed pensioners’ money into were IBM, General Electric, Exxon, Ford, Deere, Caterpillar, Texaco, Amax, United Technologies (General Al Haig’s firm), Owens/Illinois, National Cash Register, and two old friends of the DuPonts, General Motors and J.P. Morgan Company. 230
Through its control over the money due to its employees, the DuPont Company was able to use the pension fund as a giant $2.5 billion holding company, investing in companies it favored. DuPont had always disclaimed getting any benefit out of the fund, arguing its selection of stocks was made only on the basis of a return on investment for the fund. But neither this argument nor the public relations boon of priding itself as an innovator of private employee pensions in America could explain why such a huge (47 percent) investment of the fund had been concentrated in DuPont Company stock rather than more safely diversified in other securities. In fact, the employees pension fund owned 5.2 percent of DuPont’s entire common stock, making the employees plan the largest single stockholder; yet the employees had no representative of their own on DuPont’s board of directors, reflecting the separation between their ownership and the company’s control of their own pension fund.
Nor were many DuPont workers ever to live long enough to collect what had been put in the fund for their retirement. This was especially true of blue-collar workers who were forced to endure hazardous work conditions while being exposed to toxic chemicals, fumes, or low-level radiation. The DuPonts had insisted that workers must wait until the age of 50 to get even reduced benefits, and even then 15 years of service was required. To receive a full pension, 27 years of service and 58 years of age were demanded.
It came as no great shock, then, that President Edward Kane, speaking for management, rose to the podium to voice his opposition to the Cobb pension proposal, just as he had earlier rejected Ted Keller’s proposal to include blue collar workers in the Company’s profit-sharing plan (which Du Pont admitted using as a “competitive compensation” for managers and white collar employees to improve products, efficiency, and productivity, including that of blue-collar workers). What was surprising was his inadvertent admission that workers who waited until the age of 65 to retire after serving Du Pont for 35 or more years “typically received net retirement income equal to no more than 85 percent of their net working income,” 231 rather than a full 100 percent. Kane also boasted that 11 percent of the waged employees who had retired as of the end of 1975 were able to take advantage of the pension plan option which involved subtraction of part of their Social Security benefits. But that only proved Keller’s point: 89 percent of the retirees were not able to do so. Not realizing enough had been said already, Kane added that the Cobb proposal would increase the company’s costs by $65 million at 1975 levels, and he asserted that would mean pensions much higher than those offered by Du Pont’s competitors.
It was a terribly odd way for Kane to try to prove his point. The March, 1976, proxy report given out to stockholders before the meeting confirmed that the salaries and fees Du Pont paid its top officers and directors alone totalled almost $4 million in 1976; another $1.2 million were received by the same men as dividend units. (In March, 1974, C.B. McCoy exercised his option for 4,000 shares. As a result, the company was forced to sell him the stock at a loss of almost 50 percent, cancelling 3000 dividend units. McCoy made a profit of over $270,000 on this one transaction.) The 1975 Annual Report showed another $40 million had been paid in bonuses, mostly to managers and white collar employees. Christiana Securities common stockholders got an even larger chunk in the form of common stock dividends: $70 million. 232
None of these figures included the $71 million in annual interest and principal payments on the $1.2 billion long-term debt Shapiro had recently accumulated in loans from mostly New York banks. And the myriad ways that large transnational corporations like DuPont hide their real profits, including depreciation and investment credits and even financial transfers and overcharges to and by subsidiaries, would have to await disclosure by Washington and the United Nations in the future. In 1975, DuPont reported generating a $51.9 million investment tax credit, for a total deferred investment tax credit of $152 million, and deferred income taxes of another $126.3 million, both listed as liabilities on DuPont’s balance sheet.
DuPont workers, however, saw none of the money earned by their 5.2 percent holding of DuPont, and would not until they retired with pensions that Kane had unintentionally acknowledged were only par for the industry. Meanwhile, their pension fund would be used by the company to provide DuPont with capital that, in turn, would help finance the construction of more plants in the non-unionized Sunbelt. In other words, through company control over their pension fund, DuPont workers in the North were (and are) financing the loss of their own jobs and the destruction of their own communities. 233 Later, when the Steelworkers’ organizing drive reached the final voting stage, DuPont’s northern workers would feel the full impact of this process as DuPont non-unionized workers in the South cast their ballots with the company.
Nor was this phenomenon of the DuPonts utilizing workers’ pension monies for their own ends limited to the DuPont Pension and Retirement Plan. Because of its blue-chip reputation, DuPont Company also attracted investments by other pension funds as well. In 1976 ten pension funds in the private sector controlled either by other companies, including Ford and AT&T, or such unions as the Teamsters, the International Longshoremen’s Association or the International Brotherhood of Electrical Workers, invested $25.6 million in DuPont stock. Fourteen other unions of workers in the public sector, including New York, Texas, and Pennsylvania teachers, invested another $182 million in Du Pont. 234
Such a huge pool of capital gave the DuPonts reason enough to oppose any change in how the pension fund operated. Cobb’s proposal was quickly drowned by a tidal wave of millions of shares owned by the family.
Ultimately, then, the resolution of all disputes turned on the power of the DuPont family over the giant company which bore their name.
In a speech in Boston a little over a week later, Irving Shapiro did not contest this. Indeed, he answered the call of Ralph Nader’s Corporate Accountability Research Group for federal chartering of big companies with limits on size, diversity and share of market permitted to any one corporation as “a phony issue.” The real issue, he explained, “is power.” 235 He correctly described Nader’s proposal for federal chartering as an attempt at “displacing the states.” But he did not explain exactly what it was about Delaware’s General Corporation Law, for instance, that he wanted to protect or that Nader wanted to replace. Delaware’s law was certainly the corporation law par excellence, a classic case of a law drafted by and for a single rich family (in this case the DuPonts, to permit easy and relatively tax-free incorporation of their monopoly trust of captured gunpowder companies into a single combined corporation). After New Jersey’s notoriously liberal governor, Woodrow Wilson, tightened his own state’s corporation law in 1911, the sweet legal waters of the Delaware were enjoyed by most of the other large corporations in America as well.
Shapiro, however, wisely chose to avoid details, opting instead to hide the concrete behind an abstract argument for states rights and a warning about the dread of “more centralization, less freedom all around.” 236
Shapiro’s words were characteristic of the aggressive advocate of a client, on the one hand stripping away the facade of compromise that made such proposed “restrictions” on corporate size look attractive as a non-confrontational reform and on the other throwing a veil over exactly what it was he was defending in state chartering of corporations. In many ways, his argument had an historical parallel to those which defended another “American way of life” in an earlier era of the country: In the 1850’s the South also discerned the motive behind the seemingly compromising argument of an Illinois politician who likewise called only for restrictions on the size of their mode of production, slavery. Then, too, the proposal to restrict slavery’s expansion and prevent it from entering into the new territories of the Western frontier seemed reasonable. But the Southern slaveholder knew it would be the death of his way of life. The Southern plantation system, like the modern large corporation, relied heavily on loans to carry out the extensive cultivation of the system’s basic crops, cotton and tobacco, for export; both crops, however, quickly eroded the soil and made expansion into virgin land absolutely vital. The Illinois politician’s compromise, while appealing to his Midwestern farmer constituency who wanted to avoid war but also feared losing the western territories to the South’s slave labor, would actually throttle the plantation system. That is why the South opposed Abraham Lincoln, laid bare the motive behind his seeming non-confrontational approach, and could never peacefully accept its implementation with his election to the White House.
Whether Shapiro saw the historical parallel is unknown but it is unlikely. It is more probable that he was simply doing his narrow job as an advocate for a client, in this case DuPont and corporations in general. He probably never dreamed that his exposure of the struggle for power behind Nader’s proposal for restrictions and his defense of state rights echoed so loudly down the halls of American history.
The rest of Shapiro’s speech repeated the standard homilies of “letting constituent democracy exercise its voice in the marketplace” where citizens are reduced to consumers who can only passively react to others’ decisions on products and how they are made, not initiate or take part in those decisions. The ticket of admission to this marketplace was, of course, the dollar. Without it, no admission. Therefore, even participation on this passive level depended on the good will of the owners of the corporation who controlled access to a wage or salary.
The alternative, whether West Germany’s co-determination with labor union representatives on corporate boards, or Harvard Professor George Lodge’s nationally chartered “community-oriented collectives,” would, according to Shapiro, “be a fundamental break with America’s past.” The absurdity of arguing that there has been no American history but corporate history, no other means of economic organization but that of the corporation, did not disturb Shapiro’s line of reasoning. Nor did the obvious impact of highly political biases of the DuPonts or other conservative corporate leaders on business decisions faze his assertion that “We do not need to remodel and in effect politicize the economic system” or “put miniature governmental structure into the boardrooms of the 500 largest corporations.” Americans have a right to criticize and seek governmental action, he said; “none of that, though, constitutes a right to a seat on a board.” That was solely the prerogative of the wealthy who could afford to own large blocs of stock. “How many of (these) investors,” he asked, “would continue to risk their capital in these ‘community-oriented collectives’?… Could they run a chemical business? Could such a board recognize a successful management strategy reaching five to 10 years into the future?” Could they ever learn? Could the Du Ponts ever be interested in teaching them, as they teach their own sons and daughters?
Shapiro did score points in contending against the “smaller is always better” line of reformers who would attempt to return America to an earlier, simpler laissez-faire age of smaller enterprises. Would consumers be better off, he asked, if the auto industry were to become the Big Eight or the Big 16? “Economic theory as well as the history of that industry suggest the opposite. The relative price of automobiles has come down as the size of the manufacturer has gone up. It takes fewer hours of work for a typical person to earn enough money to buy a car now than it did in 1950 or 1920.” And, he might have added, thanks to technology that only large enterprise could afford, fewer hours of labor on the assembly line, a basic ingredient in operating costs and thereby price.
But it was when he came to the issue of codes of conduct for executives that Irving again stumbled. “Everyone ought to include prohibitions of certain kinds of conduct which cannot be justified regardless of circumstance,” he declared. “Thus, for example, secret bribery of government officials, whether at home or abroad, subverts the governmental process. Similarly, one could not justify shipping to another nation a product that is inherently unsafe regardless of whether that nation has had the wit to preclude such a product.” 237
Yet, DuPont under Shapiro’s captaining did both.
Merely a month later came the embarrassing report from a subcommittee of the House Commerce Committee that between 1973 and 1975 DuPont officers paid at least $337,000 to foreign government employees. In addition, the report charged, one DuPont foreign subsidiary acted as a conduit for the payment of $155,000 by a foreign government to a New York export agent. “This payment was a kickback over and above the standard price for supplying a product to a foreign government.” 238 The report criticized the SEC for not requiring disclosure of the DuPont payments despite the conclusion of its own staff that they might “constitute bribery under the laws of the U.S.” 239 Shapiro denied that the staff got the facts straight, claiming that the money went to the exporter, not the foreign government, but refused to disclose any more information than to confirm that the payments actually totalled $400,000 and that none of its employees had been penalized. SEC Chairman Roderick Hills criticized the subcommittee’s releasing the information, claiming “at Du Pont, the chief officer and the directors knew nothing about it.” Yet Shapiro had confirmed at the annual meeting that an audit had turned up such payments; and he had not disclosed full details to the shareholders.
“It seems to me that secrecy in government or corporate operations is to hide incompetence, privilege or corruption,” claimed committee member Rep. Henry Waxman of California. “And I think they are not entitled to it.” Subcommittee chairman Rep. John Moss of California agreed. “There would have been no disclosure if I hadn’t made the determination to disclose it.” 240
He rejected DuPont and the SEC’s claim that $400,000 were, as Shapiro put it at the annual meeting, “nothing of substance.”
Over sixty other companies had also admitted “questionable payments” with the understanding that by doing so there was less likelihood of enforcement fines or public disclosure by the SEC. “If trust and respect are lacking,” Shapiro had told his Boston audience, “it is not just because of recent, well-publicized misbehavior by some companies; it is also because for years we in business have not taken the public into our confidence.… Going public is not painful and it helps dispel the aura of suspicion.” 241
For people in Latin America, on the other hand, DuPont’s not going public could be very painful, even deadly.
DuPont, through its pharmaceutical subsidiary Endo Laboratories, sells “Valpirone,” DuPont’s market name for dipyrone, a pain reliever and fever reducer. Valpirone is sold in Latin America, but not in the United States. And for a good reason. Valpirone may cause fatal blood diseases, including agranulocytosis, a severe depression of the marrow of the bone.
Dipyrone has already been taken off the market in Australia, and may no longer be sold in the U.S. as a routine treatment for pain, arthritis or fever. According to the Federal Drug Administration, dipyrone “should be restricted to use for … antipyretic effect in serious life-threatening situations where salicylates or similar drugs are known to be ineffective or are contraindicated or not tolerated.” 242
According to the American Medical Association’s Drug Evaluations, “no dosage (of dipyrone) for analgesia is justified.” The “only justifiable use is as a last resort to reduce fever when safer measures have failed.” In Latin America, however, DuPont does not post such warnings about its Valpirone product, and it is often a first, not last, resort to reduce fever. As stated, DuPont does not market Valpirone in the United States. But where does that leave Chairman Shapiro’s claim that “one could not justify shipping to another nation a product that is inherently unsafe?”
“I’ve learned that integrity and credibility are the name of the game in this job,” 243 the chairman once said. But for residents of Barrio La Boca on the northwestern coast of Puerto Rico, credibility was becoming more difficult to lend to Du Pont.
There, on the banks of the Manati River that flows placidly into the Caribbean, cows and chickens belonging to local farmers began to die, and the 100 fishermen who knew little else in life but to fish began noticing that the once clear green color of the river was turning black. Fish were dying in mounds. When red sores began showing up on the fishermen’s skins, they took their case to the EPA to protest a permit it had given DuPont’s $65 million textile and paper dyes plant upstream to discharge wastes in the river.
DuPont, which had been attracted to the area by its rich underground spring of pure mineral water, responded with Shapiro Tactic Number One, claiming that it had installed the most modern technology in the world at the plant. “We have tried very diligently to serve the community,” said plant manager N.J. Irsch, “yet we are the guys who have gotten into trouble.” 244 When local public interest lawyers pointed out that all that technology promised Puerto Rico 76 million gallons of contaminated water rather than purification devices, Shapiro Tactic Number Two was implemented: DuPont, taking advantage of employment fears while the island was going through a severe economic depression, threatened to shut down and throw 350 residents out of work.
Local officials quickly, and helplessly, charged “blackmail,” the bitter fruit of thirty years of intensive industrialization by American corporations celebrated as “Operation Bootstrap.” Efforts by the Secretary of Natural Resources, Cruz Matos, to question further reckless projects such as open pit mining of copper reserves and a nuclear power plant were rewarded with firings, while officials in the capital, San Juan, wanted Puerto Rico removed altogether from the “inapplicable” and “costly” EPA’s regulatory umbrella. The Puerto Rico Lung Association, the Episcopal Church, and labor unions such as the Amalgamated Meat Cutters were opposed. They held that America’s concern about health as a human right had just recently dawned. They were not anxious to return to the dark.
The front was broad. It included resistance against the Food and Drug Administration’s efforts to ban fluorocarbons because of their damage to the ozone layer; against the EPA’s efforts to protect the air from polluting lead-added gasoline; against the Justice Department’s charges of price-fixing of DuPont’s Lucite paint; against the United Steelworkers’ attempt to organize DuPont’s workers; and against the Oil, Chemical and Atomic Workers’ and Natural Resources Defense Council’s warnings about the danger of extended exposure to low-level radiation by nuclear power workers and atomic workers at DuPont’s Savannah River Plant.
Against the National Cancer Institute’s warning that New Jersey had the highest incidence of cancer among white males in the nation, and Salem County, the site of DuPont’s Chambers Works, the highest incidence of bladder cancer, DuPont and other chemical firms fielded a lobbying front, the Chemicals Industry Council. At hearings before a New Jersey senate investigating committee, CIC’s vice-chairman, Christian Housen, Jr., simply dismissed the warnings as “scare tactics” and the statistics they were based upon as “highly questionable.”
The state’s 120,000 chemical workers “are healthier than the general populace,” Housen claimed, “and have longer life expectancies and lower rates of cancer than the general population. This fact indicates a good job is being done to protect chemical workers.” As for the EPA’s tests that showed cancer-producing chemicals in the air of seven chemical plant sites, Housen stonewalled it. “We don’t think the chemical industry has any uncontrolled or unknown emissions which might be causing the problem.… However, there are many different sources of emissions, from cars, from planes, from power plants, vaporization painting, and so on and on.…” Housen asserted that “the number of cancers caused by chemical manufacturing is very small,” and while lauding the industry as a “valuable tool in curing and eliminating disease,” held that “the contribution of the chemical industry to the overall cancer rate in New Jersey is minute.” 245 [That shit is knee deep DC]
The New Jersey senators were astounded at Housen’s audacity. “I want to see the basis of those statistics,” demanded State Senator John Shevin. “Our figures show that New Jersey has a cancer rate that is 14 percent higher than the national average.… There is no question about the intensity of the problem in New Jersey.” 246
Against the Justice Department’s price fixing suit, DuPont Headquarters expressed a tone bordering on contempt: “I presume the government will be kind enough to send it to us after it released the information in a press conference yesterday.” 247 The company defended as “fair and legal” its prohibition against retailers selling Lucite below the price fixed by DuPont if they wished to participate in a rebate program for advertising they paid for.
Against a “severe personal injuries” suit brought by eight Cyanamid workers and their wives alleging DuPont’s failure to properly warn them of the carcinogenic hazards of alpha-naphthylamine in the pigments and dyes they handled, DuPont Headquarters simply denied that alpha was carcinogenic. 248
Against the urging of the National Academy of Sciences that uses of fluorocarbon gases be curtailed, and the proposals of Dr. Alexander Schmidt that non-essential uses in spray cans be phased out, DuPont headquarters argued for a delay until still more tests it had funded at universities could be completed.
Against accusations before a Congressional committee by top union officials at the Belle, West Virginia, DuPont plant that working conditions had produced an abnormally high cancer rate among workers, DuPont released a statement admitting 206 fatal cancers of the eye, throat, skin, brain and face since 1954, higher than 157 cases it expected using company-wide averages; but the company blamed the rate on where the workers lived, Kanawha County, instead of where they worked. 249
But Ernest A. Woodacre, Du Pont’s own director of environmental affairs, called to testify after his presence was identified by Du Pont workers at the Congressional hearing in May, 1976, two months before Du Pont’s statement was released with updated figures, admitted that even the 144 cancer cases he knew of was higher than the cancer death rate for the entire Kanawha River Valley. 250
One of the problems, according to Earl McCune, the local union’s safety chairman, was that Du Pont dumped its wastes in the river just 500 feet from where it took water for drinking by its employees. “The plant is the only place along the Great Kanawha River that still takes its drinking water from the river.” 251 A month after that statement was quoted by the Philadelphia Bulletin, the News-Journal assigned Wallace C. Judd, Jr., to report on the plant. Judd wrote on the loyalty Belle Workers felt for DuPont and how “offended” DuPont managers were that McCune and his union “chose to make the charges in a national forum instead of working it out in-house.” 252 The article, titled EYE CANCER SCARE DOESN’T BOTHER MOST DUPONTERS IN PLANT, quoted one 61-year-old veteran worker, Ozzie Hill, as saying, “I have complete trust with our management, and I’ll leave this [cancer controversy] to people more knowledgeable than I. The amount of cash they [Du Pont] have put here merits our trust. They wouldn’t be stumbling around with any stupid mistakes.” Judd quoted a chemist at the nearby Union Carbide plant who expressed envy at the pride and loyalty of DuPont workers, and then zeroed in on “the real issue”: “A new morality” emerging from “a small but distinct group of workers” who favored a strong union that rejected DuPont’s paternalism. Judd then followed this piece up with an article titled DUPONT BLAMES CANCER RATE ON LOCALE, NOT COMPANY. 253 (Judd has since moved on to the public relations office of Delmarva Power and Light Company, where the company’s Salem nuclear plants are likewise vigorously defended.)
The Philadelphia Bulletin remained unimpressed. When DuPont headquarters released a report on August 20 claiming that the cancer rate among its male employees was 21 percent lower than the general U.S. population between 1954 and 1974, the Bulletin investigated and found problems. “The report is too well done to attribute its errors to incompetent statistics,” Dr. Michael Shimkin of the University of California concluded in a letter to the U.S. House subcommittee after studying the DuPont report. “Therefore, it is reasonable to surmise that there was a deliberate attempt to mislead. I would classify it as a public relations snow job.” 254 Shimkin, 64, a health expert, had been asked to do an independent review of the report by the subcommittee on oversight and investigation of the House Interstate and Foreign Commerce Committee. Two other experts at the National Cancer Institute and the National Institute of Occupational Safety and Health concurred; DuPont was concocting a “healthy worker” fallacy. DuPont’s failure to use a “cohort” approach—following up on workers, for 15 to 20 years, regardless of whether they retire or leave the company—tended “to minimize or obscure the true cancer rate” at DuPont’s Belle plant, Dr. John F. Finklea, director of the National Cancer Institute, also told the subcommittee. New Jersey’s Congressman Andrew Maguire criticized “the faulty methodology employed by DuPont in its cancer registry” and charged that use of its registry “to publicly congratulate itself on its low cancer rate is not merited, is misleading to the public and is a disservice to workers.” 255 He also pointed out that further studies of Chambers Works employees would be difficult. Du Pont had destroyed medical records of workers terminated before 1960.
Dr. Bruce Karrh, Assistant Medical Director for DuPont, attacked criticisms as “very unfair … They are just looking for a reason to be critical when they make that statement.” He defended the report as “the best that could be done” in a short period. 256
When it came to ocean dumping, however, DuPont did not have the excuse of a short period to reflect on the effects. Since 1968 it had been dumping off the coast of New Jersey two million gallons of waste every week, and EPA studies had detected higher concentrations of certain metals in clams and scallops near the dump site, 35 miles off the coast. In September, 1976, the EPA held hearings and Ocean City, New Jersey, mayor Harry Kelly objected to DuPont’s earning profits at the possible expense of his townspeople. If DuPont couldn’t find anything better to do with its waste, he suggested the company “send its poisons to its stockholders with their dividend checks.” 257
DuPont requested a two-year extension on its sea dumping to develop a process of making the wastes into a product it could sell for the treatment of sewage. Otherwise, it warned, landfills would have to be used. The EPA at first refused, then gave in. “We feel very good about the ruling,” 258 said a DuPont spokesman.
It was not that DuPont officials felt good about dumping or workplace hazards; it was just the question of cost that probably dictated most of their resistance to reform. And costs were on everyone’s minds at DuPont Headquarters. Irving Shapiro was determined to pull the company out of its slump and restore the high earnings of the 1950’s. His strategy was that if demand increased from 75 percent of capacity ($8.5 billion in 1976) to 90 percent ($10 billion) and DuPont could earn 8 percent on those sales as it did before the post-Vietnam recession, DuPont could make $800 million, or $15 a share on its 48 million share capitalization. With an improved operating rate and an investment base (capital spending) growing much more slowly, that would mean that Irving could reach the 20 percent return on stock equity that once made DuPont a legend among American corporations.
In July, 1976, Shapiro was again confronted with a decline in profits for the second quarter. Investors were selling their stock holdings of DuPont and other chemicals, producing a 15 percent average drop of issues. A decade of doubled sales had generated hardly any increase in demand for nylon and Dacron, the staples of DuPont’s fibers division. Lucite, Freon and Teflon also lagged, shaking the traditional DuPont confidence. “There was a smugness, a feeling that we’re just a little better than anyone else,” 259 Shapiro confessed. He responded by slashing spending for research and development, Du Pont’s greatest strength in the past, putting out fewer new products and concentrating on existing products, finding new ways, for example, that manufacturers could use polyester fibers than just for double-knitting materials. “No doubt about it,” Shapiro boasted, “we’re mean, tough S.O.B.’s” 260
In October, he announced more of the same for 1977, a second year of cuts in capital spending projecting only $2.5 billion for the years 1977-1980, down from $3 billion from 1973 to 1976. He dismissed worries about new products, DuPont’s greatest winners in the past. “We started our spending earlier than others and therefore we did it at lower construction costs. Now we are peeling off the spending.” President Kane, a true team player, chimed in: “We’ve got a good reservoir of low-cost plant capacity. Now we can live off the hump awhile.” 261
Still, Shapiro could not let go of his hopes for fibers. He dared not. With so much of the company’s plant still tied to artificial fibers, he had no choice but to feign optimism in his public stance. “Despite all the pain and agony of the moment, we think the industry will have a shakeout,” he insisted. “Long-term, man-made fibers will become the major fiber because they are more economical.” 262
But Shapiro knew better, and his investment plans for the future showed it: a greater emphasis on value-added specialty products, particularly in the photo and pharmaceutical divisions. Agricultural chemicals, industrial chemicals and plastics could also be expected to hold their own. The non-fibers industry had shown a return on sales above 9 percent throughout the first three quarters of 1976. But not fibers. Fibers had again showed a loss in the third quarter. Kevlar, the new lightweight super strong polyester fiber billed as having five times the strength of steel, was the only exception, its future looking bright for its use in belted tires and even bullet-proof vests.
President Jerry Ford was its most prominent model. The DuPont family’s favorite in the 1976 presidential race had donned Kevlar after a series of assassination attempts in 1975. Shapiro, too, had been threatened, letter bombs having been sent to his office, along with scores of others to top corporate officials, in June of 1976, but he was loathe to wear a vest.
He was opposed to insular attitudes that muffled an ear to public criticism and hurt effective responses. “The chief executive has the same problem Nixon had in the White House,” he explained, “if you get yourself closed off in your office, you get cut off from the real world.” 263
Shapiro’s “real world” easily slipped into Realpolitik when it came to law and power. “You’re dealing with events all over the world, and American law can’t really enforce it.” Prohibiting American corporations from bribing foreign nations was therefore “foolishness.” The same applied to fluorocarbons, which gave Du Pont a full 1 percent of its profits and 3 percent of its $7.5 billion sales. “You’re not just talking about “banning a product,” he warned, “you’re talking about putting people out of work.” 264 As for “public input” into corporate decision-making, citizens groups could always have close contact with management, but public participation in business decisions was out. This applied as well to suggestions for public representatives on corporate boards. “You don’t want to turn industry,” he said with a straight face, “into a political instrument.” 265
Du Pont family and management donations that year went mostly to Jerry Ford, although to many it looked like a losing cause from the beginning. The nation, after eight years of Republican rule from Richard Nixon, Spiro Agnew, Nelson Rockefeller and Jerry Ford, wanted a fresh start, one which Democrat Jimmy Carter promised them.
Carter was not an unknown among DuPonts. William Roth, a DuPont relative, had known Carter as a fellow member of David Rockefeller’s Trilateral Commission, an organization of leaders from the corporate and political establishments of Europe, the United States, and Japan. Both men had endorsed the Commission’s report, “Crisis of Democracy,” and its call for fiscal austerity in social services spending to meet the economic recession that the decline of American corporations in an increasingly competitive world market had, with armaments spending and the rise in the price of oil, bequeathed to the American people. It was these pressures, both external and internal, that inspired the Trilateralists to assume that “the United States is more likely to face serious military or diplomatic reversal during the coming years than at any moment in its history. If this does occur, it could pose a traumatic shock to American democracy.” Most worrisome, was the “adversary culture” among intellectuals “who assert their disgust with the corruption, materialism and inefficiency of democracy and with the subservience of democratic government to ‘monopoly capitalism.” Such intellectuals have an “absence of direct responsibility for practical affairs” and hold values which “tend to be privatistic in their impact and import.” It is these “oppositionist intellectuals and privatistic youth” that manifest a “decay in the social base of democracy,” and “the imbalances stemming from the actual operations of democracy itself which make the governability of democracy a vital, and indeed, an urgent issue for the Trilateral societies.” 266
The Commission’s report on the United States, actually drafted by Samuel P. Huntington, a member of the intelligence community and a top liaison between the academic community and the CIA, identified the problem in Americans taking democracy too seriously. The substantial increase in governmental activity for the goals of equality and freedom, exemplified by the civil rights movement, was accompanied by “a substantial increase in governmental authority.” At the same time nondefense expenditures by the government, mostly social services, rose as a percentage of the Gross National Product while defense spending as a GNP percentage declined after the end of the Vietnam War, reflecting a dramatic change not only in attitudes, but also the volume of products with a marketable value. To the Trilateralists, the “Defense Shift” of the 1950’s was replaced by the “Welfare Shift” of the 1960’s and 1970’s. 267
This was not a theory of the New Right. It was a seriously argued thesis of some of the most respected members of the corporate establishment, a view held widely among members of the Commission’s United States counterpart, the Council of Foreign Relations, including the DuPonts and Irving Shapiro.
Here, to the Trilateralists, was the origin of inflation. 268 Here also was a democracy based philosophically and legally on the sanctity and precepts of private property and ruled by a corporate class that had by the date of the Commission’s report used those laws and precepts to accumulate control over most of the industry and financial institutions in the United States and some 80 percent of the nation’s wealth; it was predictably also a democracy that showed a marked inability to meet the needs or expectations of all its people. This the Commission readily defined as a “decline in public confidence and trust,” 269 and was behind “the decline in party identification” and “the decay of the party system” 270 that had been dominated since the Civil War by the Republican and Democratic party organizations. “In part, this was the result of what were perceived to be significant party failures: the failure to ‘win’ the war in Indochina; the failure of the Great Society’s social programs to achieve their anticipated results; and the intractability of inflation.” 271 Doubts set in among the established leaders, including “doubts about the morality of their rule.”
It was to this theme of morality in politics and America that the presidential campaigns of both major candidates repeatedly turned in 1976. Both Ford and Carter understood the yearning of the American people for decency and morality in government. Both, after all, were members of the Trilateral Commission and grasped the meaning behind the Commission’s warning that “probably no development of the 1960’s and 1970’s has greater import for the future of American politics than the decline in the authority, status, influence and effectiveness of the presidency.” 272
And any occupant of the White House, the Commission warned, would have to deal with “the democratic distemper,” 273 manifested by strikes, tax protests, and all the unrest caused by “the democratic surge of the 1960’s”. 274 “The public develops expectations which it is impossible for government to meet.” 275 Education adds fuel to the fire by being “the single most important status variable affecting political participation and attitudes.” 276 “The increase in ideological thinking is primarily the result of the increased salience which citizens perceive politics to have for their own immediate concerns: The political events of the last decade, and the crisis atmosphere which has attended them, have caused citizens to perceive politics as increasingly central to their lives.” 277 In 1940, less than 40 percent of the American people were educated beyond elementary school; in 1970 the figure was 75 percent; 35 percent had gone to college. “The more educated a person is, the more likely he is to participate in politics, to have a more consistent and more ideological outlook on political issues, and to hold more ‘enlightened’ or ‘liberal’ or ‘change-oriented’ views on social, cultural and foreign policy issues. Consequently, the democratic surge could be simply the reflection of a more highly educated populace.” 278
The problem for the Trilateralists was authority. “A government which lacks authority and which is committed to substantial domestic programs will have little ability, short of a cataclysmic crisis, to impose on its people the sacrifices which may be necessary to deal with foreign policy problems and defense.” 279 Property concentrations, while never directly dealt with in the Commission report, also required authority for protection. All this, in turn, necessitated a “moderation in democracy.”
“Al Smith once remarked that ‘the only cure for the evils of democracy is more democracy.’ Our analysis,” the Commission countered in its conclusion, “suggests that applying that cure at the present time could well be adding fuel to the flames. Instead, some of the problems of government in the United States today stem from an excess of democracy—an ‘excess of democracy’ in much the same sense in which David Donald used the term to refer to the consequences of the Jacksonian revolution which helped to precipitate the Civil War.”
The analogy to the Jacksonian revolution precipitating the Civil War was accurate. Then, too, farmers, “the common man,” had taken democracy so seriously that they challenged vested propertied interests in the name of the people and democracy. Then, too, such populist agrarian laborers called themselves “democrats,” and dared to confront the hold that the Southern slavocracy and their allied merchant bankers in the Northeast had on the federal government and their lives. What was not so accurate but equally revealing in the Trilateralist analogy, however, was the blame the Commission put on the “democratic distemper” of the common citizen, and not the intransigence of the large property owners, for the tragedy of the Civil War. It is as if the Trilateralists could not perceive any necessary reason to have to fight to end slavery. Henry Clay and John Bell could both have been Trilateralists.
The appearance of Irving Shapiro on the national political arena, then, came as no great surprise to those who understood the role he had chosen for himself years before. He was the reasonable, lawyerly spokesman for vested corporate interests, and the DuPonts, historically the self-appointed “guardians of the republic” during such times of crises as these, fully supported his election as chairman of the powerful Business Roundtable that year. Nor, then, did many wonder why he sought a meeting in September, just two months before election day, with the front-running candidate, Jimmy Carter. “Sacrifice” and less democracy were the two top items on the corporate agenda for America. Could Carter muster the courage to carry them out?
Carter begged off Shapiro’s invitation to address the Business Roundtable, but he did suggest he join 16 other businessmen, bankers and trade association executives in Atlanta for a four-hour luncheon. When Shapiro arrived, he immediately took a seat near Carter. “I wanted to watch him in operation close up,” he later recalled, “judge how he functioned, and come up with a gut reaction.” Each participant was given three to four minutes to speak. “I wanted to find out if he was really paying attention. I was very impressed. I came away with a feeling that here was a man of considerable intellect, a careful and precise person. He asked a lot of questions, took copious notes and wanted to understand problems. When he disagreed, he was explicit. On some issues he was inexperienced, and said so.” 280
Some of those issues were those Shapiro himself raised. “I was asked to turn in papers on nine subjects and told to keep them short.” 281 He did. The subjects he picked became major issues in the Carter Administration:
1) Capital formation and jobs;
2) Common situs picketing or expansion of the striking authority of building trade locals to an entire construction site;
3) Consumer Protection Agency;
4) Energy problems;
5) Environmental issues;
6) National health insurance;
7) Standby wage and price controls;
8) Taxation of foreign source income;
9) Unemployment.
To Shapiro, Carter “was making a mistake in favoring the Consumer Protection Agency”; environmental issues involved questions of priorities, costs, and a timetable for water quality upgrading. But unemployment, Shapiro knew, was at the heart of any Democratic candidate’s concern because it involved his labor constituency. After the election, Shapiro correctly called it the number one issue for the new president. But he tried to temper the Democrat’s concern by reminding him of the number one concern of corporation executives who controlled hiring in the private sector and saw employment as a labor cost, and then only within the context of being able to arrange bank loans at favorable interest rates that would finance industrial expansion: “Inflation,” he warned, “goes right along with it [unemployment], and we have to deal with both together.” 282
Shapiro’s remark was both ominous and accurate. It meant that big business would lower unemployment only when it was profitable for itself to do so. Shapiro was setting the terms for the corporate sector’s cooperation with the Democratic administration: if you wish to lower labor’s unemployment, you must lower inflation that is eroding the dollar’s value and driving up the interest rates for our industrial and commercial loans.
Shapiro was aware that wages did not actually cause inflation, and said so; wages, rather, were an effect of inflation and usually ran after it, trying to keep up with prices. Inflation had a deeper cause rooted in the productivity of American industry and its position in a world marketplace of competing producers; productivity, in turn, rested more on the technological tools labor was given than on the ability or willingness of human labor to simply work harder, faster or longer hours. The latter could be increased, of course, and such an increase could generate more profits that could be used to buy more modern technology. But there was a limit on how far you could push workers, a human limit, if not a political limit. With a Democratic administration, Shapiro knew, the political threshold would be lower and corporate leaders would have to take that into account if they were to really influence the president.
A month before the election, as Ford seemed unable to overtake Carter’s lead, Shapiro publicly began to hedge his bets. “Mr. Ford is a better president than he is given credit for,” he told the press, “and Governor Carter is a far superior candidate than McGovern. I am reasonably relaxed and feel comfortable with either candidate.” Then he added that it was no longer possible for corporate leaders to concentrate solely on producing profits. “We must also produce jobs,” he told the New York Times, “and products that people need.” 283 It was the kind of remark that Democrats more than Republicans needed to hear.
In November, President Gerald Ford, the man who had earlier led the campaign in Congress to impeach Chief Justice Earl Warren, was defeated. The DuPonts may have been impressed by his conservatism and his naming of Victorine DuPont Homsey to the White House Commission on Fine Arts, but the majority of American voters were not. Ford had received wide DuPont family support, particularly from Reynolds DuPont. But perhaps Mrs. Rose Hayward MacDonald, mother of Nathan Hayward III, and Crawford Greenewalt more clearly saw the Republican future. They donated to the primary campaign of California’s arch-conservative, Ronald Reagan. 284
Alexis I DuPont Bayward remained the family maverick, contributing to the Carter campaign.
Right after Carter’s election, Shapiro spoke on the Democrat’s major concern: unemployment. He stated his belief that a stronger economy would take care of male heads of households and female non-heads of households who tended to go in and out of the work force. Then he turned to a deeper structural unemployment problem in American capitalism, one that was to worsen precisely as corporations invested in labor-saving technology that would improve the economy but leave millions of untrained American workers behind. “The third category of joblessness,” he explained to the press, “is the most serious. It consists of youth under 20, from the center cities, who are not educated or not equipped to hold a job.… Even with a good economy, none of those youngsters will be employed unless special steps are taken to help them.” 285
This represented a new phenomenon, unprecedented in American history in its scale and qualitative impact on society and politics. In the past, jobs expanded with the economy. Now, for the first time, the opposite was the case: As the economy expanded, the total number of jobs would contract.
Shapiro insisted that government subsidies were needed to aid private companies to educate and train youths. Additionally, a public works program would have to be set up to absorb those not able to get into private programs. Shapiro, however, put the training subsidies within the context of private profit for the companies. “The government ought to subsidize their education and their training for jobs in business, while the business world should pay them only for the work performed.” 286 The public taxpayer, in other words, not private corporations, should bear the load of work-time that was not profitable.
He was also opposed to the government paying less than the normal wage. “I don’t think you can hire anyone at a marginal rate of pay and satisfy him. You’ve got to bring these youngsters in and convince them they can do something with their lives. Show them they can earn money to support themselves and be useful in society.” Only as “a last resort,” should a Civilian Conservation Corps be set up as in the Thirties, and then only with “meaningful tasks, not leaf-raking.”
Then he made his appeal to Carter and the nation for a partnership with corporate rule over the economy: “I hope for a state of mind that recognizes no administration can be successful unless the economy of the United States is working well. There is a great need for industry and government to work together to make the economy work that way. We wouldn’t then be adversaries.” 287
It was a new image for DuPont, one of social responsibility, and the press was not used to dealing with Shapiro’s shift in gears. “The head of DuPont has always been a powerful influence in American industry by virtue of the company’s vast operations in the industrial, chemical, fiber, fabric, photographic, plastic and other fields,” noted the New York Times. But the DuPont chairman was now even a bigger power. He also headed the blue-ribbon Business Roundtable of 160 corporate executives. As such, he was probably “the one person who might be considered the principal spokesman for private business.” 288
Never in 50 years had the DuPonts wielded such political clout, not since the late Twenties when their treasurer, John J. Raskob, was head of the Democratic National Committee. Norman Isaacs and Dixie Sanger celebrated the event in the News-Journal. DuPONT’S SHAPIRO EMERGES AS KEY BUSINESS SPOKESMAN ran the headline, and the article below recounted the chairman’s rise to national prominence through his speeches before Boston’s Commercial Club, New York’s Conference Board, and the Business Roundtable. “Is it a bird, a plane, or Superman?” asked the News-Journal. “No, it’s Irving Shapiro, spokesman for U.S. private industry.” 289
That Shapiro was also the spokesman for the DuPonts was obvious. “Perhaps one third of my time is occupied with issues not directly related to decisions” involving running the chemical company, but “in my definition, everything I do is company business.” Public opinion affects regulations, he explained, which affects DuPont’s sales and earnings. “Industry exists with the concurrence of the American public; you ignore it at your own cost.” Shapiro ignored nothing, and favored chief executives pounding the marbled halls of Washington over company lobbyists. He was convinced from his own experience that congressmen and senators took a company’s view more seriously when they were confronted by the powerful head of a corporation rather than hired lobbyists. He was right. Elected politicians know what large corporations can do for campaign coffers—their own or their opponent’s. And a chief executive, more than a lobbyist, is a man not to cross without peril, a man who can indeed speak for all the power he represents. Only the previous year, Shapiro recalled, the Business Roundtable mobilized 70 chief executives to confront elected politicians in Washington over a measure. One congressman, he noted, could not help but remark, “I’ve never seen so many $300 suits.” 290 The congressman was revealing more his own lower standards of wealth than any accurate appraisal of clothing; $700 suits, rather, were more common among corporate leaders. Shapiro apparently was wise enough, however, not to correct him.
By December, the chairman was settled into his new role. “A society which thinks poorly of its businessmen and deeply distrusts their motives is not a great society,” he had argued two years earlier, “but a society in trouble. We are in danger of demolishing our own house and hanging the carpenter.” 291 In April, 1976, he had answered Nader and Professor George Lodge’s call for public representatives on corporate boards by accepting that “The burden of proof now falls on us in business and the jury we must convince is some 220 million Americans, not self-appointed pressure groups and not a small number of theoreticians, however erudite they may be, who wish to restructure the economic system to suit biases the public does not share.” 292 Now, as chairman of the Business Roundtable and with rumors that he was being considered for Secretary of the Treasury by Carter, Shapiro tempered his remarks, calling for an improvement in communications between business, the people, and government.
But there was no doubt about his sense of mission: in the years ahead he would launch a wide offense against regulatory safeguards passed since the New Deal; at the same time he would mount a public relations campaign to “educate the people.”
His targets were those of Spiro Agnew: the media and liberal activists. In December, he delivered a speech in Los Angeles criticizing the media for failing to educate the American people as to the business point of view. “One reason why the public doesn’t understand economic issues,” he told the Philadelphia Inquirer a week before, “is that they’re not getting much of an education—from businessmen, from the media or from government.…” 293
He also laid into people, “various activist groups particularly,” who would like the government to “seize” a lot of the power that corporations enjoyed. “I don’t think that in government itself there is, at this point in time, the state of mind that would contemplate seizing power from corporate boards, for example, and all the rest of it. There are people who are advocating that point of view, and unless they’re met head-on with facts, the odds can be that at a future point in time their argument will carry the day because there is no response.”
Shapiro was not only apprehensive about the future under the new Democratic administration; he was also worried about how his own efforts would be interpreted; it would be “the kiss of death,” he warned, “when you say it’s a PR campaign. I go at it a different way and say that, as a practical matter, the objectives of business and society are not different. The problem is that the public doesn’t perceive some of this, and so it’s necessary first for business to carry its story to the public, second for business to carry its story to the government, because the government ultimately will be responding to what it thinks the public wants.
“Now you may think that’s PR, but I think it’s more substantial than puffery. What it’s saying really, I think, is that the world ahead is a different world than the one we’ve lived in in the past. Business has a role to play in that world, but it has to get out of its offices and go to the public in the same way that public officeholders go to the public … the intelligent businessman is going to see himself much like a United States Senator, who’s got a constituency that he has to satisfy and he has to communicate with. So I can go at this as a strictly self-interest proposition, and say a man in my kind of job in industry today can’t be successful if he simply stays in his office and tends to the production quotas, the sales quotas, hiring and that sort of thing.”
It went without saying that most U.S. Senators were businessmen already; what was significant in Shapiro’s remarks was its design of a mobilized corporate class directly confronting liberal reformers. It required making corporate officers into publicized political activists.
“You’re considered a little bit unique in this belief,” questioned Charles Layton of the Philadelphia Inquirer. “I don’t think that there is yet a great uprising among your colleagues to get together and do this.”
But there would be.
In his advocacy of the politically active corporate official, Shapiro was also careful to protect the sovereignty of corporation boards from the public. “I think business has to draw a very careful line so that it doesn’t overstep its role and start assuming political responsibilities,” he strategized. “Because once it does that, then it really is part of the state. And then the arguments for public elections and all the rest have substance. So business has to recognize a sharp distinction between people who hold public office in the public interest and the role of business. But within those limits there’s plenty of room for activity.”
Was there a model toward which America’s corporate leaders could point and emulate?
Yes, there was.
The DuPonts.
Using Wilmington as his example, Shapiro concluded that “it’s in business’s self interest to create something like the GWDC (Greater Wilmington Development Council) to help do the planning, to help some of the things come into being.” 294
Forbes magazine, perhaps not understanding what was at stake, trivialized Murtaugh’s case as well as the DuPont’s motives. “Those five million words are the best legal thought that money can buy. But their whole purpose is ultimately to obscure the basic issue, to disguise the fact that it is a simple feud between two greedy families over the price to be charged for the use of the can opener [DuPont Company]. Who’s right? In spite of the unevenly matched antagonists, the case could be decided either way.” 295
Hardly. The high court’s decision was predictable. This might have been clearer to Forbes had it known that the authorized legend of the origins of Christiana which DuPont now revived (and Forbes, like the New York Times, repeated) had been used in an earlier but similar financial ruse some 60 years before by the same wing of the DuPont family. Pierre DuPont, the story goes, had been upset over rumors in 1915 that his cousin T. Coleman DuPont was thinking of selling his $14 million interest in the chemical firm, and the German war machine, acting through Kuhn Loeb, was feared to be making a move to grab the stock. Pierre, prompted by concern expressed by the British, did the only patriotic thing and bought Coleman out and locked the stock up in a “tin can” called Christiana Securities, in the process of cutting out his erratic cousin Alfred, whose loyalty to Pierre, at least, was questionable. Now, 60 years later, Pierre’s nephew, Irénée du Pont, Jr., had told C.B. McCoy that it was time to open the can, now worth $1.7 billion; DuPont Company would provide the can opener: Its own stock.
A quaint legend, based on stories told by Pierre’s side of the family. The fact that it was a rationale for Pierre’s seizing control of the firm (he did not buy the stock for the company, but himself and his allies) and that Pierre used unfounded fears by the British to hurry Coleman out the door, and then Alfred, has been buried by DuPont’s public relations office. Nevertheless, that the legend was being repeated now, at the same time that Irving Shapiro was offering a new revised updated version about mysterious “black sheep DuPonts” and strange visitations in Wilmington by robed apparitions said to resemble Arab sheiks, made Forbes’s gullibility all the more intriguing.
Chairman Shapiro, according to Forbes, “comes close to implying that one reason [for the SEC support for the merger] is the fear that a yet unborn black sheep DuPont scion might get his hands on Christiana and wreck the chemical company. Black sheep DuPonts are not exactly in short supply; Lammot DuPont Copeland, Jr., has recently filed the largest personal bankruptcy in history, for example. The SEC’s imagination is stimulated.” 296
Perhaps. But if that most imaginative use yet of an individual’s fiscal disaster was the basis for the SEC’s decision to okay the merger, it did not explain why an ostensibly neutral government agency so aggressively took on an advocacy role in favor of Christiana and DuPont and against Lewis Murtaugh, especially when it was clear Murtaugh’s figures about how much Christiana stockholders were gaining were virtually incontestable. McCoy and Shapiro, by accepting DuPont’s low 2.5 percent discount of Christiana stock instead of the normal 10 percent minimum it was usually discounted for, were costing Du Pont shareholders a million shares of DuPont, or some $200 million. Murtaugh’s fears may have been wrong that the value of DuPont stock would decline because Du Pont, by giving its own stock for Christiana’s, would effectively be increasing the total number of its shares on the market; but his fears about the discount rate were right on the mark and should have elicited SEC concern.
It did not, perhaps because there were other, larger fears. Shapiro had used fear once before to win a big case, in the 1940’s, when in the midst of a national hysteria he perfected the legal argument that American Communists were not members of a legitimate political party but agents and spies of a foreign power. Now, once again, he offered the same spectre of foreign intrigue to sell the Christiana merger, speaking of Arab investors who were said to have shown an interest in buying into DuPont. “Anyone who gets control of Christiana Securities gets control of DuPont.” After the 1974 oil price hike, he warned darkly, “we had some fellows who said they represented Saudi Arabian interests nosing around Christiana.” 297 There were no Saudi buyers, however, and apparently no DuPonts willing to sell, although there were a few eyes cast furtively at the look-alike grandson of Pierre’s arch enemy “rebel” cousin, Alfred DuPont Dent, who had recently launched his own struggle to wrest control over his grandfather’s estate’s 702,000 DuPont shares from Ed Ball. Dent has never claimed being approached, and suggestions that he may have been the “black sheep DuPont” was no doubt a continuation of the smear his grandfather also suffered at the hands of his family.
Another line taken by Shapiro, if not as misleading, was at least as presumptuous: that the DuPonts were poor managers. 298 But if his negotiations with the Christiana leaders should have proved anything, it was that the DuPonts who had guided DuPont for 170 years through eleven generations were very good managers indeed, and very shrewd bargainers. Shapiro’s 7.4 percent return on shareholders’ equity had still to match the DuPonts’ 20 percent return in the 1950’s or even their 12 percent in the 1960’s. It was as unfair for Shapiro to claim poor management as it would have been to charge all the problems now confronting DuPont as a result of accumulated internal problems and external interferences (the loss of GM dividends, the post-Vietnam recession, the Arab oil price hike, technology’s depression on prices, revived European and Japanese competition) on Shapiro.
The family was probably not angry with Shapiro. Undoubtedly, they saw some merit in what he was saying about them and publicly, at least, agreed with him. “I would have been terribly surprised if anyone had asked me to be president,” Irénée said in 1973. “I know my limitations. Besides, I as a stockholder would have objected to me as president.” 299 Such self-effacing illusions of incompetence served the family’s immediate interests. It helped to diffuse the clan’s formidable political reputation and made them seem less important and therefore less of a threat to any possible public interest. Shapiro’s claim, then, that “The Du Ponts have run out of managerial talent. Irénée is the last of the old breed,” 300 while totally inaccurate (a number of DuPont's held managerial positions, including H.R. Sharp III, who headed the company’s Computer System Section of the Finance Department, and Pierre Coleman du Pont, a supervisor in the fast-growing photo-products plant at Glasgow, Delaware) was not contested.
Christiana was contested, but not by Shapiro or the SEC. Richard J. Collins, a St. Louis attorney, and Lewis Murtaugh representing themselves and other DuPont shareholders, defended their case against the SEC’s approval before the Supreme Court. Before 8 of the 9 Justices (William Rehnquist was absent because of a back injury), Collins and Murtaugh argued that the SEC should have considered the Christiana shares’ fair market value as well as the firm’s net asset value in deciding if there was indeed an “exchange of equivalents” as DuPont and Christiana held. If it had, the SEC would have been forced to concede that the 10 percent discount would have been far more fair than the proposed 2.5 percent. Instead, the SEC evaluated the holding company solely on the basis of net asset value, and held that the effect on DuPont shareholders was not relevant. The 8th Circuit Court in St. Louis had disagreed and reversed the SEC. Now it was up to the Supreme Court.
Representing DuPont, Daniel Gribbon spoke more in his 15 allotted minutes, but said less. His argument boiled down to emphasizing the fairness and reasonableness of the merger, rather than defending it as the best Shapiro and McCoy could have gotten. While conceding that Christiana shares normally sold for 20 to 25 percent below that of DuPont common stock, he praised the executives for getting what they did get, saying that some DuPont's had even tried to get a premium on their Christiana stock. It was quite an admission and one that should have added weight to Collins’s claims. But Gribbon had an ace, a political ace. The merger, he explained, removed any threat that Christiana’s shareholders could control or harm the chemical giant. Again, fear of unknown and nonexistent parties became the issue.
The SEC, represented by David Farber, also admitted that the St. Louis court had used fair market value in determining the value of Christiana, but in his 20 minutes Farber reminded the Justices that federal law dictates the use of net asset value in order to prevent a diluting of the holding company’s “intrinsic value.” “No one has been injured by this merger.” 301 He denied there was any “overreaching” by either party.
The questions by the Justices, who often left the bench amid proceedings and followed Chief Justice Burger to lunch in the middle of an argument, were few, so few, in fact, that Murtaugh was surprised. Collins was not. Justice Lewis Powell had singed Collins’s feathers midflight when he asked him if he would object if Christiana would merge with IBM. Collins answered “no”; his arguments, he said, had been based on Christiana using its power over the Du Pont executives to get ultra-generous terms. Then he realized his mistake. His negative answer had undermined his whole previous argument about valuation methods. He quickly tried to escape by saying he would also insist on getting a price above IBM’s net asset value, but Powell had sprung the trap. “The betting in Wall Street,” the New York Times reported, “appeared to be that the court would allow the merger to go through.” 302
The decision came rolling down heavy and fast only three months later. Chief Justice Warren Burger, delivering the majority opinion, backed the SEC and said the 8th Circuit Court had exceeded its authority. The decision was 7 to 1. Only Justice William J. Brennan, Jr., dissented. DuPont’s directors were in a classic “conflict of interest situation,” because of Christiana’s position as “controlling shareholder” of DuPont, he protested. They had entered a transaction that “handsomely benefited Christiana without extracting the price for DuPont that an arms-length negotiator would have demanded and received.” 303 Both Shapiro and C.B. McCoy, the Appeals Court had noted, were appointed as DuPont’s negotiators by the DuPont board, which was controlled by Christiana.
Shapiro was “very pleased.” The DuPonts were “pleased.” Murtaugh was not, but there was little else he could do. Delaware’s Federal Judge Murray Schwartz had also decided against him. He could have appealed that also if Schwartz’s final order had not been held in abeyance. All that was left to Murtaugh was to wonder why the Supreme Court’s dissenting vote was not larger. His argument that Du Pont shares would be depressed in value by putting onto the open market more DuPont stock to exchange for Christiana’s assets was rejected by Chief Justice Burger. There was no evidence, Burger held, that the DuPonts in Christiana, who for so long had been indirect investors in DuPont, would now change the essential nature of their investment.
On the previous Friday, DuPont’s stock had fallen ⅜khs to $116.25. On the following Wednesday, it was down to $114.50. “Obviously,” said John E. Baynum, manager of the Wilmington branch of White, Weld and Co. investment firm, “the feeling on the street was that DuPont had a pretty good case.” 304 Which, ironically, was why investors had sold Du Pont but not Christiana, which remained unchanged at $116.50. The market had spoken louder than the Court as to who the real winner was.
In the hills north of Wilmington, glasses were lifted in quiet toast to victory. All that remained was the convening of a special meeting of the stockholders of DuPont and Christiana. The DuPont meeting had been deliberately postponed because the company was, Shapiro admitted, “reluctant to ask stockholders to deal with this subject while the integrity of its management was under attack.” 305 Now both were scheduled for October.
One “crossing of the creek” had been expected, that of 88-year-old Walter Carpenter, Jr. To his last day in March, 1976, Carpenter enjoyed the odd genealogical distinction of being a DuPont in-law still incorrectly trumpeted by the press as “the first person outside the DuPont family to be elected president.” (C.B. McCoy was, and is, another such public relations phenomenon). He had been a titan in family lore, the youngest man (at 32 years of age) to be elected a director; a General Motors director for 32 years, the captain who had guided Du Pont through the lucrative waters of World War II toward its rising atomic star over Japan as the principal contractor of the Manhattan Project) and one of the few honorary chairmen in the company’s history, a true Du Pont laureate. He had also been a recipient of the Order of Alphonso the Wise, in recognition of his outstanding cultural and charitable support for Franco’s fascist Spain.
The death of Henry B. DuPont III, elder brother of Edward du Pont, in September, 1976, on the other hand, sent shock waves through the family. The great-great-great grandson of the founder of DuPont Company, Henry had a long thin face that, with the exception of his eyes, resembled more his grand-uncle, Lammot DuPont, than his father, Henry B. DuPont II. He lived in Westport, Connecticut, near the Bridgeport plant of DuPont’s subsidiary, Remington Arms, where he served as a top executive. At 44, Henry was considered a rising power in the family when his life was suddenly cut down in a freak accident. He had just arrived at Block Island airport in a private single-engine Beechcraft Bonanza airplane with his father-in-law and co-pilot, Dan Wheeler, planning to meet a family sailboat en route from Newport, Rhode Island. Both men were guilty of the serious safety violations of leaving the engine idle while Henry disembarked and Wheeler left the controls to climb into the back seat. Wheeler was handing suitcases to Henry, who was standing on the wing, when the passenger door swung shut. Wheeler leaned forward to reopen the door and the front seat fell forward against the power controls. The propeller churned and the plane shot forward and began circling wildly in front of the airport’s terminal, threatening at one point to smash right through the window of the terminal’s restaurant. Henry clung desperately to the door handle, but it broke away and he was hurled into the air. As he tumbled some 20 feet, he struck his head. Bleeding profusely, Henry was rushed to Lawrence and Memorial Hospital, where he died three days later. He left behind a wife, Joan, and a nine-year-old son, Henry B. IV. The following Tuesday, a shocked and bereaved family once again gathered at Christ Church above the Brandywine where so many had been baptized and married and, like Henry, sent to the grave.
But undoubtedly the most bizarre and frightening demise was that of Christiana Securities’ long-time treasurer, Theodore E. House, in the summer of 1977. Only the year before, House had been elected to join Irénée du Pont on the board of trustees of Wilmington College. Ted House, 56, was a friend of Irénée as well as his personal financial secretary; as Christiana’s only full-time employee and treasurer for 24 years, he handled Christiana’s taxes and other financial matters and knew the inner workings of the family’s fortune like no one else. House, however, maintained an air of mystery about himself. Irénée was one of the few DuPonts on Christiana’s board who actually knew House well. “He took care of all the routine financial problems,” was all that Lammot du Pont Copeland could offer later. “I know very little about him myself” 306 Ellason Downs, a Du Pont in-law on the Christiana board, likewise described having “a very fine business relationship” with House, “not a close personal relationship.” 307 House, most agreed, was a very private fellow.
On Thursday, September 1, Irénée du Pont’s normally tranquil morning at Granogue was interrupted by a phone call. It was from Nadine, House’s slim, attractive 41-year old wife. Ted had not returned home to their apartment last night or reported for work that morning at Christiana’s small office. She was worried. Could Irénée check in to see if he was alright? Irénée said he would and drove over to the two-story, brick house in the fashionable suburb of Alapocas shortly after noon. He was totally unprepared for what he found. There, lying face down on the floor on the screened porch, was Ted House, his skull fractured by repeated blows.
The police immediately found discrepancies in stories surrounding the murdered man. There were no signs of a burglary, nothing missing, no forced entry, although Nadine reported that burglars broke in the previous year and they had never repaired the back door where the robbers got in. There were no signs of struggle, although House had been struck many times, probably with a heavy wine bottle used as art decor on the porch. A burned out cigarette on an ashtray indicated he was not dozing when he was attacked and was probably sitting in a chair when struck from behind. He was a reformed alcoholic and director of the Limen House for Men, a rehabilitation program for alcoholics; yet he had been drinking a cocktail when he was killed. His house was in an affluent suburb and filled with antiques; but his financial records showed he had little money. Police first reported he was separated from Nadine; she said he was living with her at the apartment. She had seen him last the night of his death, at the house. He was playing old records on the porch when she left about 6 p.m. The record player had been turned off when the police arrived.
Why was he drinking again? No one knew. The neighbors were of little help. “Especially around here,” one said. “You don’t get to know your neighbors that well.” 308 But someone anonymously offered a $1000 reward for information. Irénée denied it was he.
As the investigation into clues proceeded, police found themselves in two worlds, one of high finance, the other of Wilmington’s underworld of sex and crime. House, it seems, had kept records of the financial and sexual dealings of his business and social contacts. It was these notes that led detectives to both mansions and the seamier streets of Wilmington’s inner city. Why should Christiana’s treasurer keep such records? No one knew or was willing to say. But on October 7 Nadine filed a legal petition demanding that the police return the records and a cashier’s check for $3646, claiming House’s safety deposit box had been seized illegally without a court order.
The murder of Christiana’s treasurer hung like a pall over the firm’s name as its last shareholder’s meeting, scheduled for Oct. 17, approached. House’s name continued to haunt the headlines as a series of events struck, one by one, in the week before the meeting. The first occurred on the night of October 13. A security guard at the Brandy wine 100 luxury apartments off Faulke Road where the Houses had a penthouse suite heard a horn blowing in the basement garage. When he got there, he found Nadine visibly shaken. She had just returned from visiting the House home at Apolacas which was being fixed up for sale, “the first time I’ve been out at night since Ted’s death,” she said, and had parked her green-grey Continental Mark IV in the regular space when she heard a “popping sound,” like a car backfiring. “I felt a jolt … then it dawned on me that someone was shooting at me.” 309 Terrorized, she had sounded the horn.
The guard and a neighbor quickly took Nadine to her penthouse suite on the 7th floor and called police. By the time her attorney arrived, police had roped off the area. Heel marks had been found in the ground some feet outside the garage and a dent had been found notched in the vinyl roof of Nadine’s car less than three inches above the windshield, but police acted skeptical. “We’re not even positive there was a shooting,” Capt. Edward Mowdas told the press. “The damage to the roof could have been done by something else.… She’s the only one who saw or heard anything.” 310 The police left Nadine in the care of her two sons by a previous marriage, Mark, 22, and Scott, 17. “I’m really scared,” Nadine, shaking, whispered. “Someone must think I have information about Ted’s death.… Not at all.… Don’t you think I would have told [the police] by now? I wish to hell they’d find him.” 311 She said she was hiring a bodyguard because the police didn’t have the money to pay for her protection. Questioned by the press, the police disputed Nadine’s statement, claiming, “She doesn’t even want to talk to us much … She doesn’t want anything to do with us.” 312
The next day, October 15, the News-Journal reported that a police source had stated that Nadine had also reported being fired at on September 30, two weeks before, and that five .22 caliber shell casings had been found the next day in a small stream about 25 feet from her parking spot and a few feet from where the heel marks had been found the night of October 13. It was also reported that Nadine and House had been separated but had recently reconciled, and that House periodically spent the night at the couple’s old home nearby where he was murdered. Nadine, the Journal stated, had continued to refuse to take a lie detector test.
Nadine was furious. She charged that the police had manufactured this latest story and denied ever saying there was a shooting two weeks ago. The detectives under chief prosecutor Charles M. Oberly III had “lied and committed illegal acts,” 313 while bumbling the investigation. She had voluntarily submitted to questioning four times and had declined to allow the police to use their polygraph only because her doctor had advised her not to because of a severe adrenal ailment that caused her blood pressure to rise under strain, often causing black-outs. When she had herself tested anyway by an out-of-state polygraph expert, “they asked me my name, and, zip, it went off the chart.” Now, she said in tears, the police were pointing at her, and smearing House’s name. “They asked me if I thought he was a bisexual. They asked me did he have any dealings with Puerto Ricans or Blacks.” She sighed. “I know he made love to me every night. What else he did I couldn’t tell you.” She knew nothing of any other sexual encounters. The police had also questioned her about her own private life during her six-year marriage; she had never dated, except during her one-year separation, and “they were simple two-date things.” House had started drinking again two years ago, after Christiana’s dissolution was approved by the SEC. “When Ted was drinking he did some very unreal things,” she conceded, but insisted that the motive for his murder was probably robbery. He had had a wallet “stuffed with cash” that she had seen the night of his death when he gave her some money, and he also carried a pistol, and she had told police of this. She believed someone had frightened him enough to make him carry the gun.
The next day, Sgt. Wayne Merritt admitted Nadine had not said anything to police about an earlier September 30th shooting. But he disputed her claim of denied police protection, and said she had not wanted bodyguards. The police had found no wallet with cash and no pistol. Although they had taken the safe deposit box under a subpoena signed by the Attorney General, they denied removing anything from it.
About the same time, the most powerful DuPonts gathered to hold their last meeting as Christiana Securities. DuPont Company had just held its own special meeting and officially approved the merger, the DuPonts, of course, voting their millions of shares in favor of the deal despite an obvious conflict of interest. Now, as Irénée, Lammot DuPont Copeland, Sr., and Crawford Greenewalt stood together in the back of the room, watching, the last cast of the die was made, loaded, no doubt, but no less satisfying. The merger was now legal.
Irénée, accompanied by Ellason Downs, met Irving Shapiro at the 9th floor of DuPont Headquarters. There, as DuPont ancestors peered down from portraits on the walls, Irénée and Shapiro signed the historic documents that opened “the tin can,” freeing the richest family in the world from its tethers to the chemical firm of their forebears. Only years later would it be clear that what had been opened was a Pandora’s box.
And what of Nadine House? As the weeks went by, her life was plunged deeper into the bizarre. The police had turned to mysticism for a solution to the murder. They had contacted Peter Hurkos, the mystic involved in the Boston Strangler case. When he reportedly asked for an $8000 fee for three days, they balked. Whereupon the anonymous donor raised his reward to $5000.
On October 19, two days after Irénée had officially dissolved Christiana Securities, News-Journal reporter Ralph Moyed joined a friend of Nadine’s, two detectives, and four of House’s children at the House home to hold hands in an effort to contact the murdered man. A white-haired spiritualist had phoned the family after hearing of the shooting incident at Nadine’s car and reported having a vision of a man standing by a bike outside the house the night of the shooting. The family and police were startled. They had known, but not released to the press, that a bicyclist had been seen driving between House’s home and Nadine’s apartment about 15 minutes before the alleged shooting.
The spiritualist, who asked not to be identified, held the seance for no money. Just a few feet from the French doors to the porch where House’s body was found, the participants gathered in a circle, bathed in the red glow of a single light bulb suspended from a movie screen stand, and heard the mystic eerily describe how a young six-foot man named “John” had accidentally killed House with a single blow for rejecting his demand for over $75,000. The children were excited, but it all predictably came to naught. And the police kept looking at Nadine.
Two weeks later Nadine reported being attacked in her apartment by a man. Rushed by county police to a hospital, she was treated for an inch-long gash in her head and neck injuries. “Police wouldn’t say whether Mrs. House might have gotten her injuries as a result of a fainting spell,” reported the News-Journal. 314 But Nadine immediately agreed to undergo hypnosis for the police. “I want to clear this up,” she said. “I’m not going to spend the rest of my life getting choked and hit over the head.… I can’t believe he was trying to kill me. If he wanted to, he could have.” She explained that she had volunteered for hypnosis because “They say I might know some things that I am blocking out.” 315 At Delaware State Hospital, Nadine went through a two-hour session. “She was not faking,” said psychologist Cono Galliani. 316 She freely answered questions. The police were still not satisfied.
“There was a great deal of harassment,” 317 reported Cheryl Fetkenher, sales representative at the Brandywine Hilton, where Nadine worked. She reported that House and Nadine had been getting along; he used to call her at work. Since the murder, Nadine was losing weight and suffering blackouts from her high blood pressure. “She was so thin and worn-looking.” The police, Ms. Fetkenher said, were again at the hotel asking personal questions. “It seemed they weren’t trying to find out anything but were just harassing her.” 318
Nadine apparently agreed. Taking her doctor’s advice, she took a leave of absence a few days later after collapsing in the Wilmington office of the Delaware Department of Justice just before another scheduled interrogation. Although two witnesses placed her in the apartment at the time House was killed, “the police were saying she did it but couldn’t prove it,” said her son, Mark. “I can’t see her coming back. She has very few friends here.”
Nadine fled Delaware. The next month, the News-Journal reported the police were “winding down” their probe.
Theodore House’s murderer has never been found.
Whatever Irénée felt about all this, he did not express it publicly. He was by nature a very personal man, like his slain friend, and he did not easily share grief in front of prying reporters. But House’s murder, including the discovery of his body, deeply shook Irénée, who had once unsuccessfully attempted to open a rehabilitation center for alcoholics in Wilmington with House slated to be director; local residents had unfairly rejected it as a “drunk tank for the rich.” 319
House’s death had a symbolic meaning also, for with him went the only non-DuPont in the inner circle of Christiana Securities. Now, with both the corporate shell and House gone, all that was left was what, after all, it had always really been: the family. Signing the dissolution documents with Irénée, Irving Shapiro spoke for the future as well as the past. “It is the end of an era,” he said, “and the beginning of a new one.” 320
With the homefront secure, and freed of all but voluntary ties to the chemical giant which bore their name, the DuPonts could now stretch their wings and venture forth beyond Delaware into the most serious political quest of their 180-year adventure in America. They were about to embark on what some would call the most dangerous experiment with American democracy since the New Deal. They would ultimately join Ronald Reagan in calling it “New Federalism”. But while Reagan’s strong opposition had prevented him from implementing his philosophy of austerity while governor in California, no such restraints existed in Delaware by 1976. The DuPonts, in fact, would anticipate Reagan’s presidential efforts to strike down New Deal safeguards and reforms by at least four years in their state. Led by Governor Pete DuPont in Delaware and assisted on the national level by the able Irving Shapiro, the DuPonts would now begin to mobilize their allies to remold America in their own ultra-conservative image.
Next
A DYNASTY REBORN
footnotes
http://www.dupontasbestosdocuments.com/Du%20Pont%20Dynasty%20%20Behind%20the%20Nylon%20Curtain%20%28Forbidden%20Bookshelf%29_nodrm.pdf
It did not seem a major diversion of capital from DuPont’s traditional business, just a backward integration to assure feedstock for that business. No one, except perhaps Du Pont family members who were quietly building their oil stock portfolios, could have anticipated that it was a serious harbinger of new directions in the future.
DuPont’s board of directors turned out en masse to listen to Shapiro’s report at the 1976 annual meeting and offer the chairman a united bloc of support. Sales, they heard happily, were up over 30 percent from the previous year’s first quarter of $1.6 billion, and almost a fifth of this $500 million increase was from sales in Europe. There, a 50 percent drop in fibers prices had led to plant closings by European competitors, protests by French workers, and charges that DuPont was not only dumping its surplus on the market, but also driving natural fibers such as cotton and wool off the market entirely. 226
“Most of our product lines are doing very well,” 227 Shapiro said to the audience overflowing the Playhouse, and he predicted an increase of textile fiber shipments during 1976 by 15 percent over 1975, and an “even better year” in 1977. Sales of fluorocarbons had been “impacted” by adverse publicity about the ozone layer’s destruction, he admitted, and there were still “pockets of weakness” in fibers, but he exuded confidence in the future.
John Toland, an employee from the Philadelphia plant, decided to take Shapiro at his word and mounted the podium during the question period. Shapiro took a look at Toland’s jacket and noticed it bore the insignia of the United Steelworkers of America. Earlier, the chairman had stated that the shareholders gathering was “not the place for employees or their representatives … to make statements about their employee relationships, and had used his control over the sound system of the speaker’s microphone to enforce his decree.” 228 Anticipating that Toland was about to speak in favor of the Cobb blue-collar pension proposal, Shapiro sought to point out the worker’s allegiance to the Steelworkers’ organizing drive in order to discredit his statements before the conservative Du Ponts.
“I don’t recognize that symbol on your jacket,” Shapiro said.
Toland recognized immediately that he was being baited.
“That’s what will be representing the workers in the future if you keep shutting us off,” he shot back. But Shapiro, the experienced veteran of earlier post-war witch hunts, had scored with the DuPonts. The proponents of the change in the pension fund sensed it, and their pleas reflected their desperation. Sponsor Cobb said that pensioners did not receive enough money to keep up with inflation. His proposal would provide a pension based on the number of years of employment times 1.5 percent of the average annual salary of the highest salary of five years, usually the last five years of employment. June Doble argued for the justice of another part of the proposal which would permit retirement with full benefits after 30 years of service to DuPont. Her job, she explained, was scheduled to be eliminated with a shutdown of an operation at the DuPont plant in Spruance, Virginia. She had served DuPont for 31 years, yet, because she had started work at the tender age of 16, she would be deprived of immediate collection of benefits if and when she was laid off. Ted Keller, a DuPont employee and Chairman of Delaware’s Tax Reform Coalition, said the current pension plan discriminated against lower-paid workers who could not afford the current option involving subtraction of 50 percent of Social Security benefits, and suggested a cut in executives’ fringe benefits to remedy the problem. And Cobb’s co-worker, Frank Eastman, warned that if the pension plan wasn’t improved soon, the company’s local unions, like the 13 colonies before the American Revolution, would have to “form a strong union” to fight the pension plan’s “taxation without representation.”
DuPont executives controlled the $2.5 billion pension fund, one of the largest in the country, with $802 million invested in DuPont stock and a total 66 percent invested in other common stocks, including huge holdings in such predominantly non-unionized companies as IBM, General Mills, Exxon, Standard Oil of Ohio, Digital Equipment, KMart, and Halliburton, the last being also an equal employment and OSHA violator. Among companies doing business in apartheid South Africa that DuPont executives directed pensioners’ money into were IBM, General Electric, Exxon, Ford, Deere, Caterpillar, Texaco, Amax, United Technologies (General Al Haig’s firm), Owens/Illinois, National Cash Register, and two old friends of the DuPonts, General Motors and J.P. Morgan Company. 230
Through its control over the money due to its employees, the DuPont Company was able to use the pension fund as a giant $2.5 billion holding company, investing in companies it favored. DuPont had always disclaimed getting any benefit out of the fund, arguing its selection of stocks was made only on the basis of a return on investment for the fund. But neither this argument nor the public relations boon of priding itself as an innovator of private employee pensions in America could explain why such a huge (47 percent) investment of the fund had been concentrated in DuPont Company stock rather than more safely diversified in other securities. In fact, the employees pension fund owned 5.2 percent of DuPont’s entire common stock, making the employees plan the largest single stockholder; yet the employees had no representative of their own on DuPont’s board of directors, reflecting the separation between their ownership and the company’s control of their own pension fund.
Nor were many DuPont workers ever to live long enough to collect what had been put in the fund for their retirement. This was especially true of blue-collar workers who were forced to endure hazardous work conditions while being exposed to toxic chemicals, fumes, or low-level radiation. The DuPonts had insisted that workers must wait until the age of 50 to get even reduced benefits, and even then 15 years of service was required. To receive a full pension, 27 years of service and 58 years of age were demanded.
It came as no great shock, then, that President Edward Kane, speaking for management, rose to the podium to voice his opposition to the Cobb pension proposal, just as he had earlier rejected Ted Keller’s proposal to include blue collar workers in the Company’s profit-sharing plan (which Du Pont admitted using as a “competitive compensation” for managers and white collar employees to improve products, efficiency, and productivity, including that of blue-collar workers). What was surprising was his inadvertent admission that workers who waited until the age of 65 to retire after serving Du Pont for 35 or more years “typically received net retirement income equal to no more than 85 percent of their net working income,” 231 rather than a full 100 percent. Kane also boasted that 11 percent of the waged employees who had retired as of the end of 1975 were able to take advantage of the pension plan option which involved subtraction of part of their Social Security benefits. But that only proved Keller’s point: 89 percent of the retirees were not able to do so. Not realizing enough had been said already, Kane added that the Cobb proposal would increase the company’s costs by $65 million at 1975 levels, and he asserted that would mean pensions much higher than those offered by Du Pont’s competitors.
It was a terribly odd way for Kane to try to prove his point. The March, 1976, proxy report given out to stockholders before the meeting confirmed that the salaries and fees Du Pont paid its top officers and directors alone totalled almost $4 million in 1976; another $1.2 million were received by the same men as dividend units. (In March, 1974, C.B. McCoy exercised his option for 4,000 shares. As a result, the company was forced to sell him the stock at a loss of almost 50 percent, cancelling 3000 dividend units. McCoy made a profit of over $270,000 on this one transaction.) The 1975 Annual Report showed another $40 million had been paid in bonuses, mostly to managers and white collar employees. Christiana Securities common stockholders got an even larger chunk in the form of common stock dividends: $70 million. 232
None of these figures included the $71 million in annual interest and principal payments on the $1.2 billion long-term debt Shapiro had recently accumulated in loans from mostly New York banks. And the myriad ways that large transnational corporations like DuPont hide their real profits, including depreciation and investment credits and even financial transfers and overcharges to and by subsidiaries, would have to await disclosure by Washington and the United Nations in the future. In 1975, DuPont reported generating a $51.9 million investment tax credit, for a total deferred investment tax credit of $152 million, and deferred income taxes of another $126.3 million, both listed as liabilities on DuPont’s balance sheet.
DuPont workers, however, saw none of the money earned by their 5.2 percent holding of DuPont, and would not until they retired with pensions that Kane had unintentionally acknowledged were only par for the industry. Meanwhile, their pension fund would be used by the company to provide DuPont with capital that, in turn, would help finance the construction of more plants in the non-unionized Sunbelt. In other words, through company control over their pension fund, DuPont workers in the North were (and are) financing the loss of their own jobs and the destruction of their own communities. 233 Later, when the Steelworkers’ organizing drive reached the final voting stage, DuPont’s northern workers would feel the full impact of this process as DuPont non-unionized workers in the South cast their ballots with the company.
Nor was this phenomenon of the DuPonts utilizing workers’ pension monies for their own ends limited to the DuPont Pension and Retirement Plan. Because of its blue-chip reputation, DuPont Company also attracted investments by other pension funds as well. In 1976 ten pension funds in the private sector controlled either by other companies, including Ford and AT&T, or such unions as the Teamsters, the International Longshoremen’s Association or the International Brotherhood of Electrical Workers, invested $25.6 million in DuPont stock. Fourteen other unions of workers in the public sector, including New York, Texas, and Pennsylvania teachers, invested another $182 million in Du Pont. 234
Such a huge pool of capital gave the DuPonts reason enough to oppose any change in how the pension fund operated. Cobb’s proposal was quickly drowned by a tidal wave of millions of shares owned by the family.
Ultimately, then, the resolution of all disputes turned on the power of the DuPont family over the giant company which bore their name.
In a speech in Boston a little over a week later, Irving Shapiro did not contest this. Indeed, he answered the call of Ralph Nader’s Corporate Accountability Research Group for federal chartering of big companies with limits on size, diversity and share of market permitted to any one corporation as “a phony issue.” The real issue, he explained, “is power.” 235 He correctly described Nader’s proposal for federal chartering as an attempt at “displacing the states.” But he did not explain exactly what it was about Delaware’s General Corporation Law, for instance, that he wanted to protect or that Nader wanted to replace. Delaware’s law was certainly the corporation law par excellence, a classic case of a law drafted by and for a single rich family (in this case the DuPonts, to permit easy and relatively tax-free incorporation of their monopoly trust of captured gunpowder companies into a single combined corporation). After New Jersey’s notoriously liberal governor, Woodrow Wilson, tightened his own state’s corporation law in 1911, the sweet legal waters of the Delaware were enjoyed by most of the other large corporations in America as well.
Shapiro, however, wisely chose to avoid details, opting instead to hide the concrete behind an abstract argument for states rights and a warning about the dread of “more centralization, less freedom all around.” 236
Shapiro’s words were characteristic of the aggressive advocate of a client, on the one hand stripping away the facade of compromise that made such proposed “restrictions” on corporate size look attractive as a non-confrontational reform and on the other throwing a veil over exactly what it was he was defending in state chartering of corporations. In many ways, his argument had an historical parallel to those which defended another “American way of life” in an earlier era of the country: In the 1850’s the South also discerned the motive behind the seemingly compromising argument of an Illinois politician who likewise called only for restrictions on the size of their mode of production, slavery. Then, too, the proposal to restrict slavery’s expansion and prevent it from entering into the new territories of the Western frontier seemed reasonable. But the Southern slaveholder knew it would be the death of his way of life. The Southern plantation system, like the modern large corporation, relied heavily on loans to carry out the extensive cultivation of the system’s basic crops, cotton and tobacco, for export; both crops, however, quickly eroded the soil and made expansion into virgin land absolutely vital. The Illinois politician’s compromise, while appealing to his Midwestern farmer constituency who wanted to avoid war but also feared losing the western territories to the South’s slave labor, would actually throttle the plantation system. That is why the South opposed Abraham Lincoln, laid bare the motive behind his seeming non-confrontational approach, and could never peacefully accept its implementation with his election to the White House.
Whether Shapiro saw the historical parallel is unknown but it is unlikely. It is more probable that he was simply doing his narrow job as an advocate for a client, in this case DuPont and corporations in general. He probably never dreamed that his exposure of the struggle for power behind Nader’s proposal for restrictions and his defense of state rights echoed so loudly down the halls of American history.
The rest of Shapiro’s speech repeated the standard homilies of “letting constituent democracy exercise its voice in the marketplace” where citizens are reduced to consumers who can only passively react to others’ decisions on products and how they are made, not initiate or take part in those decisions. The ticket of admission to this marketplace was, of course, the dollar. Without it, no admission. Therefore, even participation on this passive level depended on the good will of the owners of the corporation who controlled access to a wage or salary.
The alternative, whether West Germany’s co-determination with labor union representatives on corporate boards, or Harvard Professor George Lodge’s nationally chartered “community-oriented collectives,” would, according to Shapiro, “be a fundamental break with America’s past.” The absurdity of arguing that there has been no American history but corporate history, no other means of economic organization but that of the corporation, did not disturb Shapiro’s line of reasoning. Nor did the obvious impact of highly political biases of the DuPonts or other conservative corporate leaders on business decisions faze his assertion that “We do not need to remodel and in effect politicize the economic system” or “put miniature governmental structure into the boardrooms of the 500 largest corporations.” Americans have a right to criticize and seek governmental action, he said; “none of that, though, constitutes a right to a seat on a board.” That was solely the prerogative of the wealthy who could afford to own large blocs of stock. “How many of (these) investors,” he asked, “would continue to risk their capital in these ‘community-oriented collectives’?… Could they run a chemical business? Could such a board recognize a successful management strategy reaching five to 10 years into the future?” Could they ever learn? Could the Du Ponts ever be interested in teaching them, as they teach their own sons and daughters?
Shapiro did score points in contending against the “smaller is always better” line of reformers who would attempt to return America to an earlier, simpler laissez-faire age of smaller enterprises. Would consumers be better off, he asked, if the auto industry were to become the Big Eight or the Big 16? “Economic theory as well as the history of that industry suggest the opposite. The relative price of automobiles has come down as the size of the manufacturer has gone up. It takes fewer hours of work for a typical person to earn enough money to buy a car now than it did in 1950 or 1920.” And, he might have added, thanks to technology that only large enterprise could afford, fewer hours of labor on the assembly line, a basic ingredient in operating costs and thereby price.
But it was when he came to the issue of codes of conduct for executives that Irving again stumbled. “Everyone ought to include prohibitions of certain kinds of conduct which cannot be justified regardless of circumstance,” he declared. “Thus, for example, secret bribery of government officials, whether at home or abroad, subverts the governmental process. Similarly, one could not justify shipping to another nation a product that is inherently unsafe regardless of whether that nation has had the wit to preclude such a product.” 237
Yet, DuPont under Shapiro’s captaining did both.
Merely a month later came the embarrassing report from a subcommittee of the House Commerce Committee that between 1973 and 1975 DuPont officers paid at least $337,000 to foreign government employees. In addition, the report charged, one DuPont foreign subsidiary acted as a conduit for the payment of $155,000 by a foreign government to a New York export agent. “This payment was a kickback over and above the standard price for supplying a product to a foreign government.” 238 The report criticized the SEC for not requiring disclosure of the DuPont payments despite the conclusion of its own staff that they might “constitute bribery under the laws of the U.S.” 239 Shapiro denied that the staff got the facts straight, claiming that the money went to the exporter, not the foreign government, but refused to disclose any more information than to confirm that the payments actually totalled $400,000 and that none of its employees had been penalized. SEC Chairman Roderick Hills criticized the subcommittee’s releasing the information, claiming “at Du Pont, the chief officer and the directors knew nothing about it.” Yet Shapiro had confirmed at the annual meeting that an audit had turned up such payments; and he had not disclosed full details to the shareholders.
“It seems to me that secrecy in government or corporate operations is to hide incompetence, privilege or corruption,” claimed committee member Rep. Henry Waxman of California. “And I think they are not entitled to it.” Subcommittee chairman Rep. John Moss of California agreed. “There would have been no disclosure if I hadn’t made the determination to disclose it.” 240
He rejected DuPont and the SEC’s claim that $400,000 were, as Shapiro put it at the annual meeting, “nothing of substance.”
Over sixty other companies had also admitted “questionable payments” with the understanding that by doing so there was less likelihood of enforcement fines or public disclosure by the SEC. “If trust and respect are lacking,” Shapiro had told his Boston audience, “it is not just because of recent, well-publicized misbehavior by some companies; it is also because for years we in business have not taken the public into our confidence.… Going public is not painful and it helps dispel the aura of suspicion.” 241
For people in Latin America, on the other hand, DuPont’s not going public could be very painful, even deadly.
DuPont, through its pharmaceutical subsidiary Endo Laboratories, sells “Valpirone,” DuPont’s market name for dipyrone, a pain reliever and fever reducer. Valpirone is sold in Latin America, but not in the United States. And for a good reason. Valpirone may cause fatal blood diseases, including agranulocytosis, a severe depression of the marrow of the bone.
Dipyrone has already been taken off the market in Australia, and may no longer be sold in the U.S. as a routine treatment for pain, arthritis or fever. According to the Federal Drug Administration, dipyrone “should be restricted to use for … antipyretic effect in serious life-threatening situations where salicylates or similar drugs are known to be ineffective or are contraindicated or not tolerated.” 242
According to the American Medical Association’s Drug Evaluations, “no dosage (of dipyrone) for analgesia is justified.” The “only justifiable use is as a last resort to reduce fever when safer measures have failed.” In Latin America, however, DuPont does not post such warnings about its Valpirone product, and it is often a first, not last, resort to reduce fever. As stated, DuPont does not market Valpirone in the United States. But where does that leave Chairman Shapiro’s claim that “one could not justify shipping to another nation a product that is inherently unsafe?”
“I’ve learned that integrity and credibility are the name of the game in this job,” 243 the chairman once said. But for residents of Barrio La Boca on the northwestern coast of Puerto Rico, credibility was becoming more difficult to lend to Du Pont.
There, on the banks of the Manati River that flows placidly into the Caribbean, cows and chickens belonging to local farmers began to die, and the 100 fishermen who knew little else in life but to fish began noticing that the once clear green color of the river was turning black. Fish were dying in mounds. When red sores began showing up on the fishermen’s skins, they took their case to the EPA to protest a permit it had given DuPont’s $65 million textile and paper dyes plant upstream to discharge wastes in the river.
DuPont, which had been attracted to the area by its rich underground spring of pure mineral water, responded with Shapiro Tactic Number One, claiming that it had installed the most modern technology in the world at the plant. “We have tried very diligently to serve the community,” said plant manager N.J. Irsch, “yet we are the guys who have gotten into trouble.” 244 When local public interest lawyers pointed out that all that technology promised Puerto Rico 76 million gallons of contaminated water rather than purification devices, Shapiro Tactic Number Two was implemented: DuPont, taking advantage of employment fears while the island was going through a severe economic depression, threatened to shut down and throw 350 residents out of work.
Local officials quickly, and helplessly, charged “blackmail,” the bitter fruit of thirty years of intensive industrialization by American corporations celebrated as “Operation Bootstrap.” Efforts by the Secretary of Natural Resources, Cruz Matos, to question further reckless projects such as open pit mining of copper reserves and a nuclear power plant were rewarded with firings, while officials in the capital, San Juan, wanted Puerto Rico removed altogether from the “inapplicable” and “costly” EPA’s regulatory umbrella. The Puerto Rico Lung Association, the Episcopal Church, and labor unions such as the Amalgamated Meat Cutters were opposed. They held that America’s concern about health as a human right had just recently dawned. They were not anxious to return to the dark.
10.
ATTACK AT DAWN
(Earning the Flagship)
The corporate offensive against the EPA which began in 1974 in Puerto Rico was
mirrored in the United States by 1976. DuPont was at the front lines of this attack, led
by Irving Shapiro. In June, DuPont challenged the legal power of the EPA to order
reductions in the lead content of gasoline; a lower federal court had already upheld the
EPA and the Supreme Court had refused to review the case, but that was not enough for
DuPont. Delay, a key objective in Shapiro Tactic Number One, was the object pursued
in continued litigation. The front was broad. It included resistance against the Food and Drug Administration’s efforts to ban fluorocarbons because of their damage to the ozone layer; against the EPA’s efforts to protect the air from polluting lead-added gasoline; against the Justice Department’s charges of price-fixing of DuPont’s Lucite paint; against the United Steelworkers’ attempt to organize DuPont’s workers; and against the Oil, Chemical and Atomic Workers’ and Natural Resources Defense Council’s warnings about the danger of extended exposure to low-level radiation by nuclear power workers and atomic workers at DuPont’s Savannah River Plant.
Against the National Cancer Institute’s warning that New Jersey had the highest incidence of cancer among white males in the nation, and Salem County, the site of DuPont’s Chambers Works, the highest incidence of bladder cancer, DuPont and other chemical firms fielded a lobbying front, the Chemicals Industry Council. At hearings before a New Jersey senate investigating committee, CIC’s vice-chairman, Christian Housen, Jr., simply dismissed the warnings as “scare tactics” and the statistics they were based upon as “highly questionable.”
The state’s 120,000 chemical workers “are healthier than the general populace,” Housen claimed, “and have longer life expectancies and lower rates of cancer than the general population. This fact indicates a good job is being done to protect chemical workers.” As for the EPA’s tests that showed cancer-producing chemicals in the air of seven chemical plant sites, Housen stonewalled it. “We don’t think the chemical industry has any uncontrolled or unknown emissions which might be causing the problem.… However, there are many different sources of emissions, from cars, from planes, from power plants, vaporization painting, and so on and on.…” Housen asserted that “the number of cancers caused by chemical manufacturing is very small,” and while lauding the industry as a “valuable tool in curing and eliminating disease,” held that “the contribution of the chemical industry to the overall cancer rate in New Jersey is minute.” 245 [That shit is knee deep DC]
The New Jersey senators were astounded at Housen’s audacity. “I want to see the basis of those statistics,” demanded State Senator John Shevin. “Our figures show that New Jersey has a cancer rate that is 14 percent higher than the national average.… There is no question about the intensity of the problem in New Jersey.” 246
Against the Justice Department’s price fixing suit, DuPont Headquarters expressed a tone bordering on contempt: “I presume the government will be kind enough to send it to us after it released the information in a press conference yesterday.” 247 The company defended as “fair and legal” its prohibition against retailers selling Lucite below the price fixed by DuPont if they wished to participate in a rebate program for advertising they paid for.
Against a “severe personal injuries” suit brought by eight Cyanamid workers and their wives alleging DuPont’s failure to properly warn them of the carcinogenic hazards of alpha-naphthylamine in the pigments and dyes they handled, DuPont Headquarters simply denied that alpha was carcinogenic. 248
Against the urging of the National Academy of Sciences that uses of fluorocarbon gases be curtailed, and the proposals of Dr. Alexander Schmidt that non-essential uses in spray cans be phased out, DuPont headquarters argued for a delay until still more tests it had funded at universities could be completed.
Against accusations before a Congressional committee by top union officials at the Belle, West Virginia, DuPont plant that working conditions had produced an abnormally high cancer rate among workers, DuPont released a statement admitting 206 fatal cancers of the eye, throat, skin, brain and face since 1954, higher than 157 cases it expected using company-wide averages; but the company blamed the rate on where the workers lived, Kanawha County, instead of where they worked. 249
But Ernest A. Woodacre, Du Pont’s own director of environmental affairs, called to testify after his presence was identified by Du Pont workers at the Congressional hearing in May, 1976, two months before Du Pont’s statement was released with updated figures, admitted that even the 144 cancer cases he knew of was higher than the cancer death rate for the entire Kanawha River Valley. 250
One of the problems, according to Earl McCune, the local union’s safety chairman, was that Du Pont dumped its wastes in the river just 500 feet from where it took water for drinking by its employees. “The plant is the only place along the Great Kanawha River that still takes its drinking water from the river.” 251 A month after that statement was quoted by the Philadelphia Bulletin, the News-Journal assigned Wallace C. Judd, Jr., to report on the plant. Judd wrote on the loyalty Belle Workers felt for DuPont and how “offended” DuPont managers were that McCune and his union “chose to make the charges in a national forum instead of working it out in-house.” 252 The article, titled EYE CANCER SCARE DOESN’T BOTHER MOST DUPONTERS IN PLANT, quoted one 61-year-old veteran worker, Ozzie Hill, as saying, “I have complete trust with our management, and I’ll leave this [cancer controversy] to people more knowledgeable than I. The amount of cash they [Du Pont] have put here merits our trust. They wouldn’t be stumbling around with any stupid mistakes.” Judd quoted a chemist at the nearby Union Carbide plant who expressed envy at the pride and loyalty of DuPont workers, and then zeroed in on “the real issue”: “A new morality” emerging from “a small but distinct group of workers” who favored a strong union that rejected DuPont’s paternalism. Judd then followed this piece up with an article titled DUPONT BLAMES CANCER RATE ON LOCALE, NOT COMPANY. 253 (Judd has since moved on to the public relations office of Delmarva Power and Light Company, where the company’s Salem nuclear plants are likewise vigorously defended.)
The Philadelphia Bulletin remained unimpressed. When DuPont headquarters released a report on August 20 claiming that the cancer rate among its male employees was 21 percent lower than the general U.S. population between 1954 and 1974, the Bulletin investigated and found problems. “The report is too well done to attribute its errors to incompetent statistics,” Dr. Michael Shimkin of the University of California concluded in a letter to the U.S. House subcommittee after studying the DuPont report. “Therefore, it is reasonable to surmise that there was a deliberate attempt to mislead. I would classify it as a public relations snow job.” 254 Shimkin, 64, a health expert, had been asked to do an independent review of the report by the subcommittee on oversight and investigation of the House Interstate and Foreign Commerce Committee. Two other experts at the National Cancer Institute and the National Institute of Occupational Safety and Health concurred; DuPont was concocting a “healthy worker” fallacy. DuPont’s failure to use a “cohort” approach—following up on workers, for 15 to 20 years, regardless of whether they retire or leave the company—tended “to minimize or obscure the true cancer rate” at DuPont’s Belle plant, Dr. John F. Finklea, director of the National Cancer Institute, also told the subcommittee. New Jersey’s Congressman Andrew Maguire criticized “the faulty methodology employed by DuPont in its cancer registry” and charged that use of its registry “to publicly congratulate itself on its low cancer rate is not merited, is misleading to the public and is a disservice to workers.” 255 He also pointed out that further studies of Chambers Works employees would be difficult. Du Pont had destroyed medical records of workers terminated before 1960.
Dr. Bruce Karrh, Assistant Medical Director for DuPont, attacked criticisms as “very unfair … They are just looking for a reason to be critical when they make that statement.” He defended the report as “the best that could be done” in a short period. 256
When it came to ocean dumping, however, DuPont did not have the excuse of a short period to reflect on the effects. Since 1968 it had been dumping off the coast of New Jersey two million gallons of waste every week, and EPA studies had detected higher concentrations of certain metals in clams and scallops near the dump site, 35 miles off the coast. In September, 1976, the EPA held hearings and Ocean City, New Jersey, mayor Harry Kelly objected to DuPont’s earning profits at the possible expense of his townspeople. If DuPont couldn’t find anything better to do with its waste, he suggested the company “send its poisons to its stockholders with their dividend checks.” 257
DuPont requested a two-year extension on its sea dumping to develop a process of making the wastes into a product it could sell for the treatment of sewage. Otherwise, it warned, landfills would have to be used. The EPA at first refused, then gave in. “We feel very good about the ruling,” 258 said a DuPont spokesman.
It was not that DuPont officials felt good about dumping or workplace hazards; it was just the question of cost that probably dictated most of their resistance to reform. And costs were on everyone’s minds at DuPont Headquarters. Irving Shapiro was determined to pull the company out of its slump and restore the high earnings of the 1950’s. His strategy was that if demand increased from 75 percent of capacity ($8.5 billion in 1976) to 90 percent ($10 billion) and DuPont could earn 8 percent on those sales as it did before the post-Vietnam recession, DuPont could make $800 million, or $15 a share on its 48 million share capitalization. With an improved operating rate and an investment base (capital spending) growing much more slowly, that would mean that Irving could reach the 20 percent return on stock equity that once made DuPont a legend among American corporations.
In July, 1976, Shapiro was again confronted with a decline in profits for the second quarter. Investors were selling their stock holdings of DuPont and other chemicals, producing a 15 percent average drop of issues. A decade of doubled sales had generated hardly any increase in demand for nylon and Dacron, the staples of DuPont’s fibers division. Lucite, Freon and Teflon also lagged, shaking the traditional DuPont confidence. “There was a smugness, a feeling that we’re just a little better than anyone else,” 259 Shapiro confessed. He responded by slashing spending for research and development, Du Pont’s greatest strength in the past, putting out fewer new products and concentrating on existing products, finding new ways, for example, that manufacturers could use polyester fibers than just for double-knitting materials. “No doubt about it,” Shapiro boasted, “we’re mean, tough S.O.B.’s” 260
In October, he announced more of the same for 1977, a second year of cuts in capital spending projecting only $2.5 billion for the years 1977-1980, down from $3 billion from 1973 to 1976. He dismissed worries about new products, DuPont’s greatest winners in the past. “We started our spending earlier than others and therefore we did it at lower construction costs. Now we are peeling off the spending.” President Kane, a true team player, chimed in: “We’ve got a good reservoir of low-cost plant capacity. Now we can live off the hump awhile.” 261
Still, Shapiro could not let go of his hopes for fibers. He dared not. With so much of the company’s plant still tied to artificial fibers, he had no choice but to feign optimism in his public stance. “Despite all the pain and agony of the moment, we think the industry will have a shakeout,” he insisted. “Long-term, man-made fibers will become the major fiber because they are more economical.” 262
But Shapiro knew better, and his investment plans for the future showed it: a greater emphasis on value-added specialty products, particularly in the photo and pharmaceutical divisions. Agricultural chemicals, industrial chemicals and plastics could also be expected to hold their own. The non-fibers industry had shown a return on sales above 9 percent throughout the first three quarters of 1976. But not fibers. Fibers had again showed a loss in the third quarter. Kevlar, the new lightweight super strong polyester fiber billed as having five times the strength of steel, was the only exception, its future looking bright for its use in belted tires and even bullet-proof vests.
President Jerry Ford was its most prominent model. The DuPont family’s favorite in the 1976 presidential race had donned Kevlar after a series of assassination attempts in 1975. Shapiro, too, had been threatened, letter bombs having been sent to his office, along with scores of others to top corporate officials, in June of 1976, but he was loathe to wear a vest.
He was opposed to insular attitudes that muffled an ear to public criticism and hurt effective responses. “The chief executive has the same problem Nixon had in the White House,” he explained, “if you get yourself closed off in your office, you get cut off from the real world.” 263
Shapiro’s “real world” easily slipped into Realpolitik when it came to law and power. “You’re dealing with events all over the world, and American law can’t really enforce it.” Prohibiting American corporations from bribing foreign nations was therefore “foolishness.” The same applied to fluorocarbons, which gave Du Pont a full 1 percent of its profits and 3 percent of its $7.5 billion sales. “You’re not just talking about “banning a product,” he warned, “you’re talking about putting people out of work.” 264 As for “public input” into corporate decision-making, citizens groups could always have close contact with management, but public participation in business decisions was out. This applied as well to suggestions for public representatives on corporate boards. “You don’t want to turn industry,” he said with a straight face, “into a political instrument.” 265
Du Pont family and management donations that year went mostly to Jerry Ford, although to many it looked like a losing cause from the beginning. The nation, after eight years of Republican rule from Richard Nixon, Spiro Agnew, Nelson Rockefeller and Jerry Ford, wanted a fresh start, one which Democrat Jimmy Carter promised them.
Carter was not an unknown among DuPonts. William Roth, a DuPont relative, had known Carter as a fellow member of David Rockefeller’s Trilateral Commission, an organization of leaders from the corporate and political establishments of Europe, the United States, and Japan. Both men had endorsed the Commission’s report, “Crisis of Democracy,” and its call for fiscal austerity in social services spending to meet the economic recession that the decline of American corporations in an increasingly competitive world market had, with armaments spending and the rise in the price of oil, bequeathed to the American people. It was these pressures, both external and internal, that inspired the Trilateralists to assume that “the United States is more likely to face serious military or diplomatic reversal during the coming years than at any moment in its history. If this does occur, it could pose a traumatic shock to American democracy.” Most worrisome, was the “adversary culture” among intellectuals “who assert their disgust with the corruption, materialism and inefficiency of democracy and with the subservience of democratic government to ‘monopoly capitalism.” Such intellectuals have an “absence of direct responsibility for practical affairs” and hold values which “tend to be privatistic in their impact and import.” It is these “oppositionist intellectuals and privatistic youth” that manifest a “decay in the social base of democracy,” and “the imbalances stemming from the actual operations of democracy itself which make the governability of democracy a vital, and indeed, an urgent issue for the Trilateral societies.” 266
The Commission’s report on the United States, actually drafted by Samuel P. Huntington, a member of the intelligence community and a top liaison between the academic community and the CIA, identified the problem in Americans taking democracy too seriously. The substantial increase in governmental activity for the goals of equality and freedom, exemplified by the civil rights movement, was accompanied by “a substantial increase in governmental authority.” At the same time nondefense expenditures by the government, mostly social services, rose as a percentage of the Gross National Product while defense spending as a GNP percentage declined after the end of the Vietnam War, reflecting a dramatic change not only in attitudes, but also the volume of products with a marketable value. To the Trilateralists, the “Defense Shift” of the 1950’s was replaced by the “Welfare Shift” of the 1960’s and 1970’s. 267
This was not a theory of the New Right. It was a seriously argued thesis of some of the most respected members of the corporate establishment, a view held widely among members of the Commission’s United States counterpart, the Council of Foreign Relations, including the DuPonts and Irving Shapiro.
Here, to the Trilateralists, was the origin of inflation. 268 Here also was a democracy based philosophically and legally on the sanctity and precepts of private property and ruled by a corporate class that had by the date of the Commission’s report used those laws and precepts to accumulate control over most of the industry and financial institutions in the United States and some 80 percent of the nation’s wealth; it was predictably also a democracy that showed a marked inability to meet the needs or expectations of all its people. This the Commission readily defined as a “decline in public confidence and trust,” 269 and was behind “the decline in party identification” and “the decay of the party system” 270 that had been dominated since the Civil War by the Republican and Democratic party organizations. “In part, this was the result of what were perceived to be significant party failures: the failure to ‘win’ the war in Indochina; the failure of the Great Society’s social programs to achieve their anticipated results; and the intractability of inflation.” 271 Doubts set in among the established leaders, including “doubts about the morality of their rule.”
It was to this theme of morality in politics and America that the presidential campaigns of both major candidates repeatedly turned in 1976. Both Ford and Carter understood the yearning of the American people for decency and morality in government. Both, after all, were members of the Trilateral Commission and grasped the meaning behind the Commission’s warning that “probably no development of the 1960’s and 1970’s has greater import for the future of American politics than the decline in the authority, status, influence and effectiveness of the presidency.” 272
And any occupant of the White House, the Commission warned, would have to deal with “the democratic distemper,” 273 manifested by strikes, tax protests, and all the unrest caused by “the democratic surge of the 1960’s”. 274 “The public develops expectations which it is impossible for government to meet.” 275 Education adds fuel to the fire by being “the single most important status variable affecting political participation and attitudes.” 276 “The increase in ideological thinking is primarily the result of the increased salience which citizens perceive politics to have for their own immediate concerns: The political events of the last decade, and the crisis atmosphere which has attended them, have caused citizens to perceive politics as increasingly central to their lives.” 277 In 1940, less than 40 percent of the American people were educated beyond elementary school; in 1970 the figure was 75 percent; 35 percent had gone to college. “The more educated a person is, the more likely he is to participate in politics, to have a more consistent and more ideological outlook on political issues, and to hold more ‘enlightened’ or ‘liberal’ or ‘change-oriented’ views on social, cultural and foreign policy issues. Consequently, the democratic surge could be simply the reflection of a more highly educated populace.” 278
The problem for the Trilateralists was authority. “A government which lacks authority and which is committed to substantial domestic programs will have little ability, short of a cataclysmic crisis, to impose on its people the sacrifices which may be necessary to deal with foreign policy problems and defense.” 279 Property concentrations, while never directly dealt with in the Commission report, also required authority for protection. All this, in turn, necessitated a “moderation in democracy.”
“Al Smith once remarked that ‘the only cure for the evils of democracy is more democracy.’ Our analysis,” the Commission countered in its conclusion, “suggests that applying that cure at the present time could well be adding fuel to the flames. Instead, some of the problems of government in the United States today stem from an excess of democracy—an ‘excess of democracy’ in much the same sense in which David Donald used the term to refer to the consequences of the Jacksonian revolution which helped to precipitate the Civil War.”
The analogy to the Jacksonian revolution precipitating the Civil War was accurate. Then, too, farmers, “the common man,” had taken democracy so seriously that they challenged vested propertied interests in the name of the people and democracy. Then, too, such populist agrarian laborers called themselves “democrats,” and dared to confront the hold that the Southern slavocracy and their allied merchant bankers in the Northeast had on the federal government and their lives. What was not so accurate but equally revealing in the Trilateralist analogy, however, was the blame the Commission put on the “democratic distemper” of the common citizen, and not the intransigence of the large property owners, for the tragedy of the Civil War. It is as if the Trilateralists could not perceive any necessary reason to have to fight to end slavery. Henry Clay and John Bell could both have been Trilateralists.
The appearance of Irving Shapiro on the national political arena, then, came as no great surprise to those who understood the role he had chosen for himself years before. He was the reasonable, lawyerly spokesman for vested corporate interests, and the DuPonts, historically the self-appointed “guardians of the republic” during such times of crises as these, fully supported his election as chairman of the powerful Business Roundtable that year. Nor, then, did many wonder why he sought a meeting in September, just two months before election day, with the front-running candidate, Jimmy Carter. “Sacrifice” and less democracy were the two top items on the corporate agenda for America. Could Carter muster the courage to carry them out?
Carter begged off Shapiro’s invitation to address the Business Roundtable, but he did suggest he join 16 other businessmen, bankers and trade association executives in Atlanta for a four-hour luncheon. When Shapiro arrived, he immediately took a seat near Carter. “I wanted to watch him in operation close up,” he later recalled, “judge how he functioned, and come up with a gut reaction.” Each participant was given three to four minutes to speak. “I wanted to find out if he was really paying attention. I was very impressed. I came away with a feeling that here was a man of considerable intellect, a careful and precise person. He asked a lot of questions, took copious notes and wanted to understand problems. When he disagreed, he was explicit. On some issues he was inexperienced, and said so.” 280
Some of those issues were those Shapiro himself raised. “I was asked to turn in papers on nine subjects and told to keep them short.” 281 He did. The subjects he picked became major issues in the Carter Administration:
1) Capital formation and jobs;
2) Common situs picketing or expansion of the striking authority of building trade locals to an entire construction site;
3) Consumer Protection Agency;
4) Energy problems;
5) Environmental issues;
6) National health insurance;
7) Standby wage and price controls;
8) Taxation of foreign source income;
9) Unemployment.
To Shapiro, Carter “was making a mistake in favoring the Consumer Protection Agency”; environmental issues involved questions of priorities, costs, and a timetable for water quality upgrading. But unemployment, Shapiro knew, was at the heart of any Democratic candidate’s concern because it involved his labor constituency. After the election, Shapiro correctly called it the number one issue for the new president. But he tried to temper the Democrat’s concern by reminding him of the number one concern of corporation executives who controlled hiring in the private sector and saw employment as a labor cost, and then only within the context of being able to arrange bank loans at favorable interest rates that would finance industrial expansion: “Inflation,” he warned, “goes right along with it [unemployment], and we have to deal with both together.” 282
Shapiro’s remark was both ominous and accurate. It meant that big business would lower unemployment only when it was profitable for itself to do so. Shapiro was setting the terms for the corporate sector’s cooperation with the Democratic administration: if you wish to lower labor’s unemployment, you must lower inflation that is eroding the dollar’s value and driving up the interest rates for our industrial and commercial loans.
Shapiro was aware that wages did not actually cause inflation, and said so; wages, rather, were an effect of inflation and usually ran after it, trying to keep up with prices. Inflation had a deeper cause rooted in the productivity of American industry and its position in a world marketplace of competing producers; productivity, in turn, rested more on the technological tools labor was given than on the ability or willingness of human labor to simply work harder, faster or longer hours. The latter could be increased, of course, and such an increase could generate more profits that could be used to buy more modern technology. But there was a limit on how far you could push workers, a human limit, if not a political limit. With a Democratic administration, Shapiro knew, the political threshold would be lower and corporate leaders would have to take that into account if they were to really influence the president.
A month before the election, as Ford seemed unable to overtake Carter’s lead, Shapiro publicly began to hedge his bets. “Mr. Ford is a better president than he is given credit for,” he told the press, “and Governor Carter is a far superior candidate than McGovern. I am reasonably relaxed and feel comfortable with either candidate.” Then he added that it was no longer possible for corporate leaders to concentrate solely on producing profits. “We must also produce jobs,” he told the New York Times, “and products that people need.” 283 It was the kind of remark that Democrats more than Republicans needed to hear.
In November, President Gerald Ford, the man who had earlier led the campaign in Congress to impeach Chief Justice Earl Warren, was defeated. The DuPonts may have been impressed by his conservatism and his naming of Victorine DuPont Homsey to the White House Commission on Fine Arts, but the majority of American voters were not. Ford had received wide DuPont family support, particularly from Reynolds DuPont. But perhaps Mrs. Rose Hayward MacDonald, mother of Nathan Hayward III, and Crawford Greenewalt more clearly saw the Republican future. They donated to the primary campaign of California’s arch-conservative, Ronald Reagan. 284
Alexis I DuPont Bayward remained the family maverick, contributing to the Carter campaign.
Right after Carter’s election, Shapiro spoke on the Democrat’s major concern: unemployment. He stated his belief that a stronger economy would take care of male heads of households and female non-heads of households who tended to go in and out of the work force. Then he turned to a deeper structural unemployment problem in American capitalism, one that was to worsen precisely as corporations invested in labor-saving technology that would improve the economy but leave millions of untrained American workers behind. “The third category of joblessness,” he explained to the press, “is the most serious. It consists of youth under 20, from the center cities, who are not educated or not equipped to hold a job.… Even with a good economy, none of those youngsters will be employed unless special steps are taken to help them.” 285
This represented a new phenomenon, unprecedented in American history in its scale and qualitative impact on society and politics. In the past, jobs expanded with the economy. Now, for the first time, the opposite was the case: As the economy expanded, the total number of jobs would contract.
Shapiro insisted that government subsidies were needed to aid private companies to educate and train youths. Additionally, a public works program would have to be set up to absorb those not able to get into private programs. Shapiro, however, put the training subsidies within the context of private profit for the companies. “The government ought to subsidize their education and their training for jobs in business, while the business world should pay them only for the work performed.” 286 The public taxpayer, in other words, not private corporations, should bear the load of work-time that was not profitable.
He was also opposed to the government paying less than the normal wage. “I don’t think you can hire anyone at a marginal rate of pay and satisfy him. You’ve got to bring these youngsters in and convince them they can do something with their lives. Show them they can earn money to support themselves and be useful in society.” Only as “a last resort,” should a Civilian Conservation Corps be set up as in the Thirties, and then only with “meaningful tasks, not leaf-raking.”
Then he made his appeal to Carter and the nation for a partnership with corporate rule over the economy: “I hope for a state of mind that recognizes no administration can be successful unless the economy of the United States is working well. There is a great need for industry and government to work together to make the economy work that way. We wouldn’t then be adversaries.” 287
It was a new image for DuPont, one of social responsibility, and the press was not used to dealing with Shapiro’s shift in gears. “The head of DuPont has always been a powerful influence in American industry by virtue of the company’s vast operations in the industrial, chemical, fiber, fabric, photographic, plastic and other fields,” noted the New York Times. But the DuPont chairman was now even a bigger power. He also headed the blue-ribbon Business Roundtable of 160 corporate executives. As such, he was probably “the one person who might be considered the principal spokesman for private business.” 288
Never in 50 years had the DuPonts wielded such political clout, not since the late Twenties when their treasurer, John J. Raskob, was head of the Democratic National Committee. Norman Isaacs and Dixie Sanger celebrated the event in the News-Journal. DuPONT’S SHAPIRO EMERGES AS KEY BUSINESS SPOKESMAN ran the headline, and the article below recounted the chairman’s rise to national prominence through his speeches before Boston’s Commercial Club, New York’s Conference Board, and the Business Roundtable. “Is it a bird, a plane, or Superman?” asked the News-Journal. “No, it’s Irving Shapiro, spokesman for U.S. private industry.” 289
That Shapiro was also the spokesman for the DuPonts was obvious. “Perhaps one third of my time is occupied with issues not directly related to decisions” involving running the chemical company, but “in my definition, everything I do is company business.” Public opinion affects regulations, he explained, which affects DuPont’s sales and earnings. “Industry exists with the concurrence of the American public; you ignore it at your own cost.” Shapiro ignored nothing, and favored chief executives pounding the marbled halls of Washington over company lobbyists. He was convinced from his own experience that congressmen and senators took a company’s view more seriously when they were confronted by the powerful head of a corporation rather than hired lobbyists. He was right. Elected politicians know what large corporations can do for campaign coffers—their own or their opponent’s. And a chief executive, more than a lobbyist, is a man not to cross without peril, a man who can indeed speak for all the power he represents. Only the previous year, Shapiro recalled, the Business Roundtable mobilized 70 chief executives to confront elected politicians in Washington over a measure. One congressman, he noted, could not help but remark, “I’ve never seen so many $300 suits.” 290 The congressman was revealing more his own lower standards of wealth than any accurate appraisal of clothing; $700 suits, rather, were more common among corporate leaders. Shapiro apparently was wise enough, however, not to correct him.
By December, the chairman was settled into his new role. “A society which thinks poorly of its businessmen and deeply distrusts their motives is not a great society,” he had argued two years earlier, “but a society in trouble. We are in danger of demolishing our own house and hanging the carpenter.” 291 In April, 1976, he had answered Nader and Professor George Lodge’s call for public representatives on corporate boards by accepting that “The burden of proof now falls on us in business and the jury we must convince is some 220 million Americans, not self-appointed pressure groups and not a small number of theoreticians, however erudite they may be, who wish to restructure the economic system to suit biases the public does not share.” 292 Now, as chairman of the Business Roundtable and with rumors that he was being considered for Secretary of the Treasury by Carter, Shapiro tempered his remarks, calling for an improvement in communications between business, the people, and government.
But there was no doubt about his sense of mission: in the years ahead he would launch a wide offense against regulatory safeguards passed since the New Deal; at the same time he would mount a public relations campaign to “educate the people.”
His targets were those of Spiro Agnew: the media and liberal activists. In December, he delivered a speech in Los Angeles criticizing the media for failing to educate the American people as to the business point of view. “One reason why the public doesn’t understand economic issues,” he told the Philadelphia Inquirer a week before, “is that they’re not getting much of an education—from businessmen, from the media or from government.…” 293
He also laid into people, “various activist groups particularly,” who would like the government to “seize” a lot of the power that corporations enjoyed. “I don’t think that in government itself there is, at this point in time, the state of mind that would contemplate seizing power from corporate boards, for example, and all the rest of it. There are people who are advocating that point of view, and unless they’re met head-on with facts, the odds can be that at a future point in time their argument will carry the day because there is no response.”
Shapiro was not only apprehensive about the future under the new Democratic administration; he was also worried about how his own efforts would be interpreted; it would be “the kiss of death,” he warned, “when you say it’s a PR campaign. I go at it a different way and say that, as a practical matter, the objectives of business and society are not different. The problem is that the public doesn’t perceive some of this, and so it’s necessary first for business to carry its story to the public, second for business to carry its story to the government, because the government ultimately will be responding to what it thinks the public wants.
“Now you may think that’s PR, but I think it’s more substantial than puffery. What it’s saying really, I think, is that the world ahead is a different world than the one we’ve lived in in the past. Business has a role to play in that world, but it has to get out of its offices and go to the public in the same way that public officeholders go to the public … the intelligent businessman is going to see himself much like a United States Senator, who’s got a constituency that he has to satisfy and he has to communicate with. So I can go at this as a strictly self-interest proposition, and say a man in my kind of job in industry today can’t be successful if he simply stays in his office and tends to the production quotas, the sales quotas, hiring and that sort of thing.”
It went without saying that most U.S. Senators were businessmen already; what was significant in Shapiro’s remarks was its design of a mobilized corporate class directly confronting liberal reformers. It required making corporate officers into publicized political activists.
“You’re considered a little bit unique in this belief,” questioned Charles Layton of the Philadelphia Inquirer. “I don’t think that there is yet a great uprising among your colleagues to get together and do this.”
But there would be.
In his advocacy of the politically active corporate official, Shapiro was also careful to protect the sovereignty of corporation boards from the public. “I think business has to draw a very careful line so that it doesn’t overstep its role and start assuming political responsibilities,” he strategized. “Because once it does that, then it really is part of the state. And then the arguments for public elections and all the rest have substance. So business has to recognize a sharp distinction between people who hold public office in the public interest and the role of business. But within those limits there’s plenty of room for activity.”
Was there a model toward which America’s corporate leaders could point and emulate?
Yes, there was.
The DuPonts.
Using Wilmington as his example, Shapiro concluded that “it’s in business’s self interest to create something like the GWDC (Greater Wilmington Development Council) to help do the planning, to help some of the things come into being.” 294
11.
SAFE HARBOR FOR CHRISTIANA
In Wilmington, GWDC chairman Irénée du Pont, Jr., was indeed doing some planning,
and one of the things that was finally coming into being was the merger of Christiana
Securities into Du Pont. There were still some sharp rocks to avoid, including Lewis
Murtaugh’s stubborn case that the company’s management, including Shapiro, was in
thrall to the Du Ponts. The Supreme Court had agreed to review in December, delaying
the scheduled hearing from January to early March. But the SEC was now on the side of
the Du Ponts. It was a sign of how far the federal government had come from the stormy
days of the New Deal, and, helped by some 50 lawyers and five million words of legal
argument, the clouds of contention broke by early spring. Forbes magazine, perhaps not understanding what was at stake, trivialized Murtaugh’s case as well as the DuPont’s motives. “Those five million words are the best legal thought that money can buy. But their whole purpose is ultimately to obscure the basic issue, to disguise the fact that it is a simple feud between two greedy families over the price to be charged for the use of the can opener [DuPont Company]. Who’s right? In spite of the unevenly matched antagonists, the case could be decided either way.” 295
Hardly. The high court’s decision was predictable. This might have been clearer to Forbes had it known that the authorized legend of the origins of Christiana which DuPont now revived (and Forbes, like the New York Times, repeated) had been used in an earlier but similar financial ruse some 60 years before by the same wing of the DuPont family. Pierre DuPont, the story goes, had been upset over rumors in 1915 that his cousin T. Coleman DuPont was thinking of selling his $14 million interest in the chemical firm, and the German war machine, acting through Kuhn Loeb, was feared to be making a move to grab the stock. Pierre, prompted by concern expressed by the British, did the only patriotic thing and bought Coleman out and locked the stock up in a “tin can” called Christiana Securities, in the process of cutting out his erratic cousin Alfred, whose loyalty to Pierre, at least, was questionable. Now, 60 years later, Pierre’s nephew, Irénée du Pont, Jr., had told C.B. McCoy that it was time to open the can, now worth $1.7 billion; DuPont Company would provide the can opener: Its own stock.
A quaint legend, based on stories told by Pierre’s side of the family. The fact that it was a rationale for Pierre’s seizing control of the firm (he did not buy the stock for the company, but himself and his allies) and that Pierre used unfounded fears by the British to hurry Coleman out the door, and then Alfred, has been buried by DuPont’s public relations office. Nevertheless, that the legend was being repeated now, at the same time that Irving Shapiro was offering a new revised updated version about mysterious “black sheep DuPonts” and strange visitations in Wilmington by robed apparitions said to resemble Arab sheiks, made Forbes’s gullibility all the more intriguing.
Chairman Shapiro, according to Forbes, “comes close to implying that one reason [for the SEC support for the merger] is the fear that a yet unborn black sheep DuPont scion might get his hands on Christiana and wreck the chemical company. Black sheep DuPonts are not exactly in short supply; Lammot DuPont Copeland, Jr., has recently filed the largest personal bankruptcy in history, for example. The SEC’s imagination is stimulated.” 296
Perhaps. But if that most imaginative use yet of an individual’s fiscal disaster was the basis for the SEC’s decision to okay the merger, it did not explain why an ostensibly neutral government agency so aggressively took on an advocacy role in favor of Christiana and DuPont and against Lewis Murtaugh, especially when it was clear Murtaugh’s figures about how much Christiana stockholders were gaining were virtually incontestable. McCoy and Shapiro, by accepting DuPont’s low 2.5 percent discount of Christiana stock instead of the normal 10 percent minimum it was usually discounted for, were costing Du Pont shareholders a million shares of DuPont, or some $200 million. Murtaugh’s fears may have been wrong that the value of DuPont stock would decline because Du Pont, by giving its own stock for Christiana’s, would effectively be increasing the total number of its shares on the market; but his fears about the discount rate were right on the mark and should have elicited SEC concern.
It did not, perhaps because there were other, larger fears. Shapiro had used fear once before to win a big case, in the 1940’s, when in the midst of a national hysteria he perfected the legal argument that American Communists were not members of a legitimate political party but agents and spies of a foreign power. Now, once again, he offered the same spectre of foreign intrigue to sell the Christiana merger, speaking of Arab investors who were said to have shown an interest in buying into DuPont. “Anyone who gets control of Christiana Securities gets control of DuPont.” After the 1974 oil price hike, he warned darkly, “we had some fellows who said they represented Saudi Arabian interests nosing around Christiana.” 297 There were no Saudi buyers, however, and apparently no DuPonts willing to sell, although there were a few eyes cast furtively at the look-alike grandson of Pierre’s arch enemy “rebel” cousin, Alfred DuPont Dent, who had recently launched his own struggle to wrest control over his grandfather’s estate’s 702,000 DuPont shares from Ed Ball. Dent has never claimed being approached, and suggestions that he may have been the “black sheep DuPont” was no doubt a continuation of the smear his grandfather also suffered at the hands of his family.
Another line taken by Shapiro, if not as misleading, was at least as presumptuous: that the DuPonts were poor managers. 298 But if his negotiations with the Christiana leaders should have proved anything, it was that the DuPonts who had guided DuPont for 170 years through eleven generations were very good managers indeed, and very shrewd bargainers. Shapiro’s 7.4 percent return on shareholders’ equity had still to match the DuPonts’ 20 percent return in the 1950’s or even their 12 percent in the 1960’s. It was as unfair for Shapiro to claim poor management as it would have been to charge all the problems now confronting DuPont as a result of accumulated internal problems and external interferences (the loss of GM dividends, the post-Vietnam recession, the Arab oil price hike, technology’s depression on prices, revived European and Japanese competition) on Shapiro.
The family was probably not angry with Shapiro. Undoubtedly, they saw some merit in what he was saying about them and publicly, at least, agreed with him. “I would have been terribly surprised if anyone had asked me to be president,” Irénée said in 1973. “I know my limitations. Besides, I as a stockholder would have objected to me as president.” 299 Such self-effacing illusions of incompetence served the family’s immediate interests. It helped to diffuse the clan’s formidable political reputation and made them seem less important and therefore less of a threat to any possible public interest. Shapiro’s claim, then, that “The Du Ponts have run out of managerial talent. Irénée is the last of the old breed,” 300 while totally inaccurate (a number of DuPont's held managerial positions, including H.R. Sharp III, who headed the company’s Computer System Section of the Finance Department, and Pierre Coleman du Pont, a supervisor in the fast-growing photo-products plant at Glasgow, Delaware) was not contested.
Christiana was contested, but not by Shapiro or the SEC. Richard J. Collins, a St. Louis attorney, and Lewis Murtaugh representing themselves and other DuPont shareholders, defended their case against the SEC’s approval before the Supreme Court. Before 8 of the 9 Justices (William Rehnquist was absent because of a back injury), Collins and Murtaugh argued that the SEC should have considered the Christiana shares’ fair market value as well as the firm’s net asset value in deciding if there was indeed an “exchange of equivalents” as DuPont and Christiana held. If it had, the SEC would have been forced to concede that the 10 percent discount would have been far more fair than the proposed 2.5 percent. Instead, the SEC evaluated the holding company solely on the basis of net asset value, and held that the effect on DuPont shareholders was not relevant. The 8th Circuit Court in St. Louis had disagreed and reversed the SEC. Now it was up to the Supreme Court.
Representing DuPont, Daniel Gribbon spoke more in his 15 allotted minutes, but said less. His argument boiled down to emphasizing the fairness and reasonableness of the merger, rather than defending it as the best Shapiro and McCoy could have gotten. While conceding that Christiana shares normally sold for 20 to 25 percent below that of DuPont common stock, he praised the executives for getting what they did get, saying that some DuPont's had even tried to get a premium on their Christiana stock. It was quite an admission and one that should have added weight to Collins’s claims. But Gribbon had an ace, a political ace. The merger, he explained, removed any threat that Christiana’s shareholders could control or harm the chemical giant. Again, fear of unknown and nonexistent parties became the issue.
The SEC, represented by David Farber, also admitted that the St. Louis court had used fair market value in determining the value of Christiana, but in his 20 minutes Farber reminded the Justices that federal law dictates the use of net asset value in order to prevent a diluting of the holding company’s “intrinsic value.” “No one has been injured by this merger.” 301 He denied there was any “overreaching” by either party.
The questions by the Justices, who often left the bench amid proceedings and followed Chief Justice Burger to lunch in the middle of an argument, were few, so few, in fact, that Murtaugh was surprised. Collins was not. Justice Lewis Powell had singed Collins’s feathers midflight when he asked him if he would object if Christiana would merge with IBM. Collins answered “no”; his arguments, he said, had been based on Christiana using its power over the Du Pont executives to get ultra-generous terms. Then he realized his mistake. His negative answer had undermined his whole previous argument about valuation methods. He quickly tried to escape by saying he would also insist on getting a price above IBM’s net asset value, but Powell had sprung the trap. “The betting in Wall Street,” the New York Times reported, “appeared to be that the court would allow the merger to go through.” 302
The decision came rolling down heavy and fast only three months later. Chief Justice Warren Burger, delivering the majority opinion, backed the SEC and said the 8th Circuit Court had exceeded its authority. The decision was 7 to 1. Only Justice William J. Brennan, Jr., dissented. DuPont’s directors were in a classic “conflict of interest situation,” because of Christiana’s position as “controlling shareholder” of DuPont, he protested. They had entered a transaction that “handsomely benefited Christiana without extracting the price for DuPont that an arms-length negotiator would have demanded and received.” 303 Both Shapiro and C.B. McCoy, the Appeals Court had noted, were appointed as DuPont’s negotiators by the DuPont board, which was controlled by Christiana.
Shapiro was “very pleased.” The DuPonts were “pleased.” Murtaugh was not, but there was little else he could do. Delaware’s Federal Judge Murray Schwartz had also decided against him. He could have appealed that also if Schwartz’s final order had not been held in abeyance. All that was left to Murtaugh was to wonder why the Supreme Court’s dissenting vote was not larger. His argument that Du Pont shares would be depressed in value by putting onto the open market more DuPont stock to exchange for Christiana’s assets was rejected by Chief Justice Burger. There was no evidence, Burger held, that the DuPonts in Christiana, who for so long had been indirect investors in DuPont, would now change the essential nature of their investment.
On the previous Friday, DuPont’s stock had fallen ⅜khs to $116.25. On the following Wednesday, it was down to $114.50. “Obviously,” said John E. Baynum, manager of the Wilmington branch of White, Weld and Co. investment firm, “the feeling on the street was that DuPont had a pretty good case.” 304 Which, ironically, was why investors had sold Du Pont but not Christiana, which remained unchanged at $116.50. The market had spoken louder than the Court as to who the real winner was.
In the hills north of Wilmington, glasses were lifted in quiet toast to victory. All that remained was the convening of a special meeting of the stockholders of DuPont and Christiana. The DuPont meeting had been deliberately postponed because the company was, Shapiro admitted, “reluctant to ask stockholders to deal with this subject while the integrity of its management was under attack.” 305 Now both were scheduled for October.
12. MURDER ON THE BRANDYWINE
As the meetings approached, absences in the family roster became more painfully
noticeable, a result of that nagging reminder of the human condition, death, of which
some visitations were the normal end of the family’s characteristic longevity, while
others were disturbingly irregular. One “crossing of the creek” had been expected, that of 88-year-old Walter Carpenter, Jr. To his last day in March, 1976, Carpenter enjoyed the odd genealogical distinction of being a DuPont in-law still incorrectly trumpeted by the press as “the first person outside the DuPont family to be elected president.” (C.B. McCoy was, and is, another such public relations phenomenon). He had been a titan in family lore, the youngest man (at 32 years of age) to be elected a director; a General Motors director for 32 years, the captain who had guided Du Pont through the lucrative waters of World War II toward its rising atomic star over Japan as the principal contractor of the Manhattan Project) and one of the few honorary chairmen in the company’s history, a true Du Pont laureate. He had also been a recipient of the Order of Alphonso the Wise, in recognition of his outstanding cultural and charitable support for Franco’s fascist Spain.
The death of Henry B. DuPont III, elder brother of Edward du Pont, in September, 1976, on the other hand, sent shock waves through the family. The great-great-great grandson of the founder of DuPont Company, Henry had a long thin face that, with the exception of his eyes, resembled more his grand-uncle, Lammot DuPont, than his father, Henry B. DuPont II. He lived in Westport, Connecticut, near the Bridgeport plant of DuPont’s subsidiary, Remington Arms, where he served as a top executive. At 44, Henry was considered a rising power in the family when his life was suddenly cut down in a freak accident. He had just arrived at Block Island airport in a private single-engine Beechcraft Bonanza airplane with his father-in-law and co-pilot, Dan Wheeler, planning to meet a family sailboat en route from Newport, Rhode Island. Both men were guilty of the serious safety violations of leaving the engine idle while Henry disembarked and Wheeler left the controls to climb into the back seat. Wheeler was handing suitcases to Henry, who was standing on the wing, when the passenger door swung shut. Wheeler leaned forward to reopen the door and the front seat fell forward against the power controls. The propeller churned and the plane shot forward and began circling wildly in front of the airport’s terminal, threatening at one point to smash right through the window of the terminal’s restaurant. Henry clung desperately to the door handle, but it broke away and he was hurled into the air. As he tumbled some 20 feet, he struck his head. Bleeding profusely, Henry was rushed to Lawrence and Memorial Hospital, where he died three days later. He left behind a wife, Joan, and a nine-year-old son, Henry B. IV. The following Tuesday, a shocked and bereaved family once again gathered at Christ Church above the Brandywine where so many had been baptized and married and, like Henry, sent to the grave.
But undoubtedly the most bizarre and frightening demise was that of Christiana Securities’ long-time treasurer, Theodore E. House, in the summer of 1977. Only the year before, House had been elected to join Irénée du Pont on the board of trustees of Wilmington College. Ted House, 56, was a friend of Irénée as well as his personal financial secretary; as Christiana’s only full-time employee and treasurer for 24 years, he handled Christiana’s taxes and other financial matters and knew the inner workings of the family’s fortune like no one else. House, however, maintained an air of mystery about himself. Irénée was one of the few DuPonts on Christiana’s board who actually knew House well. “He took care of all the routine financial problems,” was all that Lammot du Pont Copeland could offer later. “I know very little about him myself” 306 Ellason Downs, a Du Pont in-law on the Christiana board, likewise described having “a very fine business relationship” with House, “not a close personal relationship.” 307 House, most agreed, was a very private fellow.
On Thursday, September 1, Irénée du Pont’s normally tranquil morning at Granogue was interrupted by a phone call. It was from Nadine, House’s slim, attractive 41-year old wife. Ted had not returned home to their apartment last night or reported for work that morning at Christiana’s small office. She was worried. Could Irénée check in to see if he was alright? Irénée said he would and drove over to the two-story, brick house in the fashionable suburb of Alapocas shortly after noon. He was totally unprepared for what he found. There, lying face down on the floor on the screened porch, was Ted House, his skull fractured by repeated blows.
The police immediately found discrepancies in stories surrounding the murdered man. There were no signs of a burglary, nothing missing, no forced entry, although Nadine reported that burglars broke in the previous year and they had never repaired the back door where the robbers got in. There were no signs of struggle, although House had been struck many times, probably with a heavy wine bottle used as art decor on the porch. A burned out cigarette on an ashtray indicated he was not dozing when he was attacked and was probably sitting in a chair when struck from behind. He was a reformed alcoholic and director of the Limen House for Men, a rehabilitation program for alcoholics; yet he had been drinking a cocktail when he was killed. His house was in an affluent suburb and filled with antiques; but his financial records showed he had little money. Police first reported he was separated from Nadine; she said he was living with her at the apartment. She had seen him last the night of his death, at the house. He was playing old records on the porch when she left about 6 p.m. The record player had been turned off when the police arrived.
Why was he drinking again? No one knew. The neighbors were of little help. “Especially around here,” one said. “You don’t get to know your neighbors that well.” 308 But someone anonymously offered a $1000 reward for information. Irénée denied it was he.
As the investigation into clues proceeded, police found themselves in two worlds, one of high finance, the other of Wilmington’s underworld of sex and crime. House, it seems, had kept records of the financial and sexual dealings of his business and social contacts. It was these notes that led detectives to both mansions and the seamier streets of Wilmington’s inner city. Why should Christiana’s treasurer keep such records? No one knew or was willing to say. But on October 7 Nadine filed a legal petition demanding that the police return the records and a cashier’s check for $3646, claiming House’s safety deposit box had been seized illegally without a court order.
The murder of Christiana’s treasurer hung like a pall over the firm’s name as its last shareholder’s meeting, scheduled for Oct. 17, approached. House’s name continued to haunt the headlines as a series of events struck, one by one, in the week before the meeting. The first occurred on the night of October 13. A security guard at the Brandy wine 100 luxury apartments off Faulke Road where the Houses had a penthouse suite heard a horn blowing in the basement garage. When he got there, he found Nadine visibly shaken. She had just returned from visiting the House home at Apolacas which was being fixed up for sale, “the first time I’ve been out at night since Ted’s death,” she said, and had parked her green-grey Continental Mark IV in the regular space when she heard a “popping sound,” like a car backfiring. “I felt a jolt … then it dawned on me that someone was shooting at me.” 309 Terrorized, she had sounded the horn.
The guard and a neighbor quickly took Nadine to her penthouse suite on the 7th floor and called police. By the time her attorney arrived, police had roped off the area. Heel marks had been found in the ground some feet outside the garage and a dent had been found notched in the vinyl roof of Nadine’s car less than three inches above the windshield, but police acted skeptical. “We’re not even positive there was a shooting,” Capt. Edward Mowdas told the press. “The damage to the roof could have been done by something else.… She’s the only one who saw or heard anything.” 310 The police left Nadine in the care of her two sons by a previous marriage, Mark, 22, and Scott, 17. “I’m really scared,” Nadine, shaking, whispered. “Someone must think I have information about Ted’s death.… Not at all.… Don’t you think I would have told [the police] by now? I wish to hell they’d find him.” 311 She said she was hiring a bodyguard because the police didn’t have the money to pay for her protection. Questioned by the press, the police disputed Nadine’s statement, claiming, “She doesn’t even want to talk to us much … She doesn’t want anything to do with us.” 312
The next day, October 15, the News-Journal reported that a police source had stated that Nadine had also reported being fired at on September 30, two weeks before, and that five .22 caliber shell casings had been found the next day in a small stream about 25 feet from her parking spot and a few feet from where the heel marks had been found the night of October 13. It was also reported that Nadine and House had been separated but had recently reconciled, and that House periodically spent the night at the couple’s old home nearby where he was murdered. Nadine, the Journal stated, had continued to refuse to take a lie detector test.
Nadine was furious. She charged that the police had manufactured this latest story and denied ever saying there was a shooting two weeks ago. The detectives under chief prosecutor Charles M. Oberly III had “lied and committed illegal acts,” 313 while bumbling the investigation. She had voluntarily submitted to questioning four times and had declined to allow the police to use their polygraph only because her doctor had advised her not to because of a severe adrenal ailment that caused her blood pressure to rise under strain, often causing black-outs. When she had herself tested anyway by an out-of-state polygraph expert, “they asked me my name, and, zip, it went off the chart.” Now, she said in tears, the police were pointing at her, and smearing House’s name. “They asked me if I thought he was a bisexual. They asked me did he have any dealings with Puerto Ricans or Blacks.” She sighed. “I know he made love to me every night. What else he did I couldn’t tell you.” She knew nothing of any other sexual encounters. The police had also questioned her about her own private life during her six-year marriage; she had never dated, except during her one-year separation, and “they were simple two-date things.” House had started drinking again two years ago, after Christiana’s dissolution was approved by the SEC. “When Ted was drinking he did some very unreal things,” she conceded, but insisted that the motive for his murder was probably robbery. He had had a wallet “stuffed with cash” that she had seen the night of his death when he gave her some money, and he also carried a pistol, and she had told police of this. She believed someone had frightened him enough to make him carry the gun.
The next day, Sgt. Wayne Merritt admitted Nadine had not said anything to police about an earlier September 30th shooting. But he disputed her claim of denied police protection, and said she had not wanted bodyguards. The police had found no wallet with cash and no pistol. Although they had taken the safe deposit box under a subpoena signed by the Attorney General, they denied removing anything from it.
About the same time, the most powerful DuPonts gathered to hold their last meeting as Christiana Securities. DuPont Company had just held its own special meeting and officially approved the merger, the DuPonts, of course, voting their millions of shares in favor of the deal despite an obvious conflict of interest. Now, as Irénée, Lammot DuPont Copeland, Sr., and Crawford Greenewalt stood together in the back of the room, watching, the last cast of the die was made, loaded, no doubt, but no less satisfying. The merger was now legal.
Irénée, accompanied by Ellason Downs, met Irving Shapiro at the 9th floor of DuPont Headquarters. There, as DuPont ancestors peered down from portraits on the walls, Irénée and Shapiro signed the historic documents that opened “the tin can,” freeing the richest family in the world from its tethers to the chemical firm of their forebears. Only years later would it be clear that what had been opened was a Pandora’s box.
And what of Nadine House? As the weeks went by, her life was plunged deeper into the bizarre. The police had turned to mysticism for a solution to the murder. They had contacted Peter Hurkos, the mystic involved in the Boston Strangler case. When he reportedly asked for an $8000 fee for three days, they balked. Whereupon the anonymous donor raised his reward to $5000.
On October 19, two days after Irénée had officially dissolved Christiana Securities, News-Journal reporter Ralph Moyed joined a friend of Nadine’s, two detectives, and four of House’s children at the House home to hold hands in an effort to contact the murdered man. A white-haired spiritualist had phoned the family after hearing of the shooting incident at Nadine’s car and reported having a vision of a man standing by a bike outside the house the night of the shooting. The family and police were startled. They had known, but not released to the press, that a bicyclist had been seen driving between House’s home and Nadine’s apartment about 15 minutes before the alleged shooting.
The spiritualist, who asked not to be identified, held the seance for no money. Just a few feet from the French doors to the porch where House’s body was found, the participants gathered in a circle, bathed in the red glow of a single light bulb suspended from a movie screen stand, and heard the mystic eerily describe how a young six-foot man named “John” had accidentally killed House with a single blow for rejecting his demand for over $75,000. The children were excited, but it all predictably came to naught. And the police kept looking at Nadine.
Two weeks later Nadine reported being attacked in her apartment by a man. Rushed by county police to a hospital, she was treated for an inch-long gash in her head and neck injuries. “Police wouldn’t say whether Mrs. House might have gotten her injuries as a result of a fainting spell,” reported the News-Journal. 314 But Nadine immediately agreed to undergo hypnosis for the police. “I want to clear this up,” she said. “I’m not going to spend the rest of my life getting choked and hit over the head.… I can’t believe he was trying to kill me. If he wanted to, he could have.” She explained that she had volunteered for hypnosis because “They say I might know some things that I am blocking out.” 315 At Delaware State Hospital, Nadine went through a two-hour session. “She was not faking,” said psychologist Cono Galliani. 316 She freely answered questions. The police were still not satisfied.
“There was a great deal of harassment,” 317 reported Cheryl Fetkenher, sales representative at the Brandywine Hilton, where Nadine worked. She reported that House and Nadine had been getting along; he used to call her at work. Since the murder, Nadine was losing weight and suffering blackouts from her high blood pressure. “She was so thin and worn-looking.” The police, Ms. Fetkenher said, were again at the hotel asking personal questions. “It seemed they weren’t trying to find out anything but were just harassing her.” 318
Nadine apparently agreed. Taking her doctor’s advice, she took a leave of absence a few days later after collapsing in the Wilmington office of the Delaware Department of Justice just before another scheduled interrogation. Although two witnesses placed her in the apartment at the time House was killed, “the police were saying she did it but couldn’t prove it,” said her son, Mark. “I can’t see her coming back. She has very few friends here.”
Nadine fled Delaware. The next month, the News-Journal reported the police were “winding down” their probe.
Theodore House’s murderer has never been found.
Whatever Irénée felt about all this, he did not express it publicly. He was by nature a very personal man, like his slain friend, and he did not easily share grief in front of prying reporters. But House’s murder, including the discovery of his body, deeply shook Irénée, who had once unsuccessfully attempted to open a rehabilitation center for alcoholics in Wilmington with House slated to be director; local residents had unfairly rejected it as a “drunk tank for the rich.” 319
House’s death had a symbolic meaning also, for with him went the only non-DuPont in the inner circle of Christiana Securities. Now, with both the corporate shell and House gone, all that was left was what, after all, it had always really been: the family. Signing the dissolution documents with Irénée, Irving Shapiro spoke for the future as well as the past. “It is the end of an era,” he said, “and the beginning of a new one.” 320
With the homefront secure, and freed of all but voluntary ties to the chemical giant which bore their name, the DuPonts could now stretch their wings and venture forth beyond Delaware into the most serious political quest of their 180-year adventure in America. They were about to embark on what some would call the most dangerous experiment with American democracy since the New Deal. They would ultimately join Ronald Reagan in calling it “New Federalism”. But while Reagan’s strong opposition had prevented him from implementing his philosophy of austerity while governor in California, no such restraints existed in Delaware by 1976. The DuPonts, in fact, would anticipate Reagan’s presidential efforts to strike down New Deal safeguards and reforms by at least four years in their state. Led by Governor Pete DuPont in Delaware and assisted on the national level by the able Irving Shapiro, the DuPonts would now begin to mobilize their allies to remold America in their own ultra-conservative image.
Next
A DYNASTY REBORN
footnotes
http://www.dupontasbestosdocuments.com/Du%20Pont%20Dynasty%20%20Behind%20the%20Nylon%20Curtain%20%28Forbidden%20Bookshelf%29_nodrm.pdf
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