"Pan American welcomes the Inquiry."

CXXIX

When trouble came for Pan American, it came from a completely unexpected direction --- Republicans. 

“American Gothic”

Pan Am was, in reality, only a collateral target in the Republican attack launched to embarrass Postmaster General James A. Farley, the ultimate Democratic machine politician. The Republican Party in its entirety had taken a drubbing at the hustings in 1932. The Democrats had taken the White House by 472-59 Electoral votes and 23 million to 16 million popular votes. The Democrats gained 12 seats in the Senate for a total of 59-36 (plus one Independent); in the House, the Democrats gained 97 seats and the Republicans lost 101 for a balance of 313-117-5.

The Capitol in 1934

When the Air Mail Fiasco broke wide open, the Republicans saw it as a way of giving the Roosevelt Administration a hard knock. The attack was led by New York Republican Hamilton Fish.  Fish, like Juan Trippe, was a member of New York’s Four Hundred, and had little interest in humiliating his fellow Eastern Establishment clubman; but the remaining Republicans in Congress represented a smattering of Congressional Districts lying across the Midwest and the Far West, Congressional Districts populated by Depression-devastated farmers and small stockmen who had been reduced to feeding their children brown bread soaked in coffee for meals. Stubbornly independent, they mistrusted the “alphabet soup” pouring out of Washington, and, if it came to it, they distrusted Juan Trippe, whose fancy flying boats after all went to places where people did not speak English. 

They also mistrusted the fact that he was named Juan. Yes, he claimed to be an American, but what decent American mother would name her child Juan?*

 

 

 

They pressured Fish to push the attack. The grand irony was that the attack on Farley focused first on Cornelius Vanderbilt “Sonny” Whitney, who was described as “a prominent Democrat.” It was a laughable description. Sonny had been a Republican all his life except for the few weeks he ran for office in 1932, and had reverted to the GOP immediately upon losing his contest. Still, the argument was made that Pan American Airways and the Foreign Air Mail (FAM) routes had been excluded from any investigation because the Democrats were protecting Whitney (then the titular CEO of Pan Am).

Such a charge could not be swept away. Announcing that “Pan American welcomes any inquiry,” Juan Trippe expected (and received) a set of Black Committee Interrogatories on Pan American’s tax status which he completed with the assistance of his lawyers. 

 

 

Shortly after the Interrogatories came an extensive subpoena duces tecum asking for Pan Am’s corporate records virtually since its inception. When the Senate investigators began digging into Pan Am’s records they realized that had bitten off far more than they could chew.

Pan American Airways’ corporate structure was positively byzantine. The corporation, headquartered in New York, was made up of nine regional divisions in offices spread from Fairbanks, Alaska to Lima, Peru. Each Region was, in turn, divided into a number of Subregions. Each of these Subregions acted as quasi-independent satrapies, making decisions on the local level.  Each Subregion had its own budget which was folded into the Regional budget, which again in turn, made up part of the total corporate budget. There was no central repository of records or budgets. 

More trying yet was the fact that each Region and Subregion used its own accounting procedures; Pan Am had no uniform across-the-board standardized documents, no standardized reporting structure, and not even a single accounting system used by its men in the green eyeshades. Just as one example, in one Subregion, aircraft maintenance might be lumped under Flight Operations, in another under Ground Operations. 

An S-42 at the mooring. Flight Operations, Ground Operations, Maintenance or Passenger Services? It depended where you were

It was meant to be utterly bewildering to outsiders and it was.  Trippe had let his worst tendencies toward tenebrousity run wild when he’d drawn up the airline’s flow charts. It hadn’t been done to flummox Congress. It had been done to flummox anybody who wanted to root around inside Pan Am, especially anyone who was threatening the airline or Trippe’s own position within it. 

Despite being frustrated, the Senate investigators did turn up some irregularities. For one, Pan Am was charging the allowable maximum of $2.00 per mile to carry the mail anywhere, whether it was a route that stretched from Miami to Buenos Aires or a route that stretched from Fairbanks to Anchorage. Local conditions, the types of planes used, the relative ease or difficulty of the job --- nothing mattered. Pan Am was getting top dollar wherever it flew. 

 

Too, Pan Am had been allowed to charge on a “cost-plus” basis for wear and tear on its planes and other expenses. When the Senate investigators dug into the “costs” they struck pay dirt. Pan Am’s “general administrative expenses” turned out to be at least four times that of any domestic carrier. It soon came to light that Pan Am was not only charging “costs” to upkeep its planes but for Research & Development of new equipment, survey flights of new air routes, and even the “costs” of opening new Regional and Subregional offices. In all, the United States Post Office was paying Pan American more than six times what was agreed to by contract.**

The hardest blow came when Postmaster General Farley went into the archives and reviewed Postmaster General New’s and Postmaster General Brown’s Pan Am documentation. If Juan Trippe had been wise to erase evidence of collusion, the Postmasters General were not. Internal memoranda spelling out in detail New’s and Brown’s decisions to lock other airlines out of competition for the FAMs was everywhere.

If Senator Hugo Black was looking for evidence of “fraud and collusion” here it was. The interesting part was that little paperwork existed connecting Juan Trippe to New’s and Brown’s decisions. The airline mogul had clean hands as far as the investigators could tell.  It was unbelievable. But there was no evidence to the contrary.

Dinner Key, 1934

 

When it had become clear that Pan American was going to be under intensive government investigation Juan had immediately called R.W. Moore (whom he did not call “Cuz”). The Assistant Secretary of State quickly called for closed door hearings on the Pan American matter. 

This wasn’t just a chess move. Juan Trippe feared that if Pan American’s operations were discussed publicly then the airline’s ongoing covert activities in Latin America might become known. This could cause a total collapse of U.S.-Latin American relations, might lead to the ejection of U.S. businesses and the loss of hundreds of millions of dollars of revenues, and it might put U.S. citizens’ lives at risk, not least of all the airline’s covert agents. At the very least, the worldwide U.S. Intelligence network would be devastatingly compromised. 

How New Yorkers see non-New Yorkers

Trippe’s fears weren’t just born of paranoia. He didn’t know Hugo Black, except that the man was an Alabamian. Trippe had a Northerner’s disdain for a Southerner, a New Yorker’s disdain for anyone not a New Yorker, and a Clubhouse Republican’s disdain for a country Democrat. For all he knew, Black might be wearing a straw hat and working a chaw, and if he wasn’t, somebody in Congress was. Unbeknownst to most of Congress they had waded into the deep end of the pool where they were never meant to see the bottom. 

As disclosures were made, Postmaster Farley prematurely announced that he was planning on voiding the airline’s FAM contracts. 

This led to discussion of the U.S. Navy flying the overseas mails, an idea the Secretary of the Navy quashed immediately.  It wasn’t practical anyway. Pan Am had its own contracts with foreign nations that could not be abrogated. Were Pan Am to be effectively grounded, that would mean that U.S. military planes would have to overfly foreign lands to deliver the mail. Not many sovereign nations would permit that.  

Cordell Hull served longer as Secretary of State than any other person

The Hearings were closed-door at the suggestion of Secretary of State Cordell Hull.***  What was discussed still remains largely classified. But the outcome deflated Jim Farley. After it all, he announced that Pan American Airways had “agreed to a reduction from $2.00 per mile for air mail transport to $1.75.” 

It was a censure of Pan Am, and it satisfied those who were calling for Juan Trippe’s head.  But what Farley didn’t add (likely because he didn’t know) was that the Federal Government had offered, for the foreseeable future, to pay for Pan American’s development of new landing fields and airport facilities. 

FDR knew that, whatever had or hadn’t been found, that Juan Trippe’s hands were not so spotless. But he needed those hands. And in 1934 he was willing to pay for them.  

Pax Pacifica

 

*Throughout his professional life Juan Trippe would be attacked by xenophobes for being a ‘foreigner running a foreign airline’. Most of the attacks were tentative since those making them were unsure of Trippe’s background. Nothing irritated Trippe more than such remarks. The “American Gothic” constituency of 1934 would become the great mass of 1939’s anti-interventionist “America Firsters” led by Charles Lindbergh. Even though Trippe and Lindbergh were friends and Juan was a Republican, the people in the heartland never would trust him. Pan Am would remain too sophisticated and international an operation to be easily digested by small-town Americans.


**It wasn't all grubby sleight-of-hand. Some of these "costs" included Special Projects undertaken on behalf of the United States government like the installation of meteorological stations and radio beacons both within and outside the borders. Airplane engines developed "for" the airline could be used in Clippers, but they could also be used in warplanes, and the government paid to make them so.


*** Cordell Hull was FDR’s Secretary of State for eleven of the twelve years of Roosevelt’s four-term prematurely-ended Presidency. Hull, a Tennesseean by birth and a Southern gentleman of much refinement, had a mixed record on Human Rights. Despite being married to a Jewish woman, Hull sent the SS St. Louis, passengered by Jews fleeing the Nazis, back to Germany in 1939, where most died in the concentration camps. When other opportunities arose to save Jews during the war, he delayed despite having the President’s approval of rescue plans. On the other hand, Hull was central to creating the United Nations. He was also the chief architect of the Good Neighbor Policy which normalized relations between the U.S. and its Latin American neighbors. Hull had a difficult relationship with Pan American Airways. As Secretary of State, he naturally wanted to neuter Pan Am’s role as The Other State Department, especially because so many of Pan Am’s past actions were inimical to the Good Neighbor Policy. On the other hand, he greatly relied on Pan Am’s Intelligence network in Latin America, especially during the Second World War.