Diamonds to the Enemy

Shocking headlines announced last week that Chase National Bank, the nation's biggest, had been indicted under the 26-year-old Trading with the Enemy Act. The details were less appalling. In 1940, under authority of the act, President Roosevelt froze the U.S. funds of all citizens of nations invaded by the Axis. Chase's alleged offense was that it had allowed a refugee Dutch diamond merchant named Leonard J. A. Smit* to withdraw $264,000 from his accounts. Smit, it was charged, had then proceeded to buy industrial diamonds for sale to Japan and Axis-dominated countries.

The Department of Justice conceded that Chase had been persuaded to "unfreeze" Smit's funds on his representation that his companies were actually British, not Dutch. But the bank, said the Department, later had both time and opportunity to learn that Smit was not telling the truth. In reply, the bank cited the enormous job of meticulously checking the 45,500 applications it has received since April 1940 to unfreeze accounts. Cried Chase Chairman Winthrop W. Aldrich:

"The indictment makes no sense. . . . All the acts complained of happened before Pearl Harbor. . . . The indictment alleges that the bank conspired to aid the Axis. This is ridiculous. . . ." The bank pleaded not guilty, and prepared to fight.

Attorney General Francis Biddle hailed the indictment as "shutting off one of the worst leaks of strategic materials . . . to the enemy." But what mystified many a plain citizen, as well as financier, was: Why had the Justice Department waited two years to plug the "worst leak?"

* Not to be confused with J. K. Smit & Sons, Inc., one of the world's greatest industrial diamond companies. Leonard J. A. Smit is no relation, nor has he any connection with the company.

This file is automatically generated by a robot program, so reader's discretion is required.