Date of Graduation

2010

Document Type

Dissertation/Thesis

Abstract

In 1898, Ernst Behrend arrived in America controlling approximately Z1,000,000 to build a paper mill. He and his father, Moritz Behrend, had secured investments from a small pool of German entrepreneurs who owned other paper mills in Prussia. The Behrend family had been among the pioneers in producing sulphite paper made from wood pulp rather than cotton rag, and they wanted to transfer the technology to America. Starting Hammermill Paper Company in America proved to be more demanding than planning had foretold. The sulphite process was successful, but the Behrends faced numerous challenges in their new business venture. Ernst Behrend, as president of the company, overcame all demands to make Hammermill so profitable that the German investment group undertook a hostile stock takeover of the company in 1909, leaving Behrend a paid employee in the business he had founded. By 1916, the business was consistently profitable, though, allowing Behrend to secure an American financier who would underwrite purchasing Hammermill from the German owners. However, the purchase was fraught with obstacles. The German owners would not agree on a price that Behrend and his banker considered reasonable until after the First World War was raging in Europe. Although America was still a neutral, Behrend had to engage in extraordinary measures to consummate the deal. The German investors had moved the stock shares out of Germany before the war, for example, and they were inaccessible in England, compelling Behrend to purchase the plant and company assets rather than company stock. But this required an exchange of documents and payment in gold between Germany and the U.S. at a time when normal international business activities were out of the question. Behrend took advantage of an offer by the German parties to the transaction to use a submarine to carry proxy votes from Europe, and payment from America, in order to avoid an Allied blockade of Germany. In the meantime, U.S. Justice Department investigators suspected that Behrend was acting as an agent for the German government, and that the Hammermill purchase had been fraudulent, meant to give the impression of a legitimate transaction while Germans still controlled the company. The situation culminated in 1919 when Behrend defended his patriotism and the credibility his company at a hearing conducted by the Alien Property Custodian.s office of the Justice Department. By 1920, Behrend and the Hammermill purchase stood vindicated.

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