The Road to Columbus: The Money Trail and Franklin Olin

Villa's inability to pay for the desperately needed munitions for the Division of the North created an opening for German agents to support both sides in Mexico's civil war and thus extend it. Sommerfeld, Pancho Villa's chief arms supplier in the U.S. and German naval intelligence agent, began shipping on a $420,000 contract on April 1, 1915 for 12 million 7mm cartridges. This contract was with the Western Cartridge Company in Alton, Illinois. Sommerfeld had made this deal on behalf of Villa in February 1915. The Mexican general had provided a down-payment of $50,000. For this order only the initial deposit appears in the accounts of Lázaro De La Garza, who had financial control of all New York funds of Villa’s supply chain. This leads to the unanswered question, who paid for the balance of this contract? The entire order was produced, paid for, and shipped to Villa between April and August 1915. The price per thousand cartridges was an astonishingly low $35, while Remington and Winchester charged $50 for the same product, and Peters Cartridge Company between $55 and $60.

The standard Mexican 7mm Mauser cartridge of 1915

Sommerfeld closed another arms contract on May 14, 1915, this time for 15 million cartridges at the same price as his earlier contract, $35 per thousand, valued at $525,000 ($11 Million in today’s value). There are several astonishing aspects to Sommerfeld’s deal. First, the price Sommerfeld got for the munitions was, again, at least thirty percent below market value. How did he get such an outstanding deal? Second, he managed to occupy the entire capacity of Franklin W. Olin’s Western Cartridge Company factory in East Alton for the year 1915 with this second order. Sommerfeld was now on the hook for $945,000 ($20 Million in today’s value), as Villa’s fortunes declined, and the Villista fiat money was rapidly losing value. The German agent expected to make 2% commissions, $18,900 if both contracts were fulfilled ($400,000 in today’s value). All the while he managed these huge contracts as a German in the middle of a huge spy scare that had gripped the United States as a result of the German sabotage campaign against U.S. targets. 

Sommerfeld’s account at the Mississippi Valley Trust Company shows a total $381,000 flowing through it from April to December 1915.

Only days after closing on the second contract for the fifteen million cartridges, on May 17, 1915, he signed the contract over to Lázaro De La Garza. De La Garza provided the down-payment of $65,000, which went to the Western Cartridge Company. The money came from Francisco Madero's uncles Alberto, Alfonso and Ernesto in New York, probably profits from sales of goods from the area Villa controlled in Northern Mexico, such as bullion, cattle, rubber, or cotton. De La Garza also logged a deposit “en B[an]co St. Louis” in May for $30,000. This amount does not show up on Sommerfeld’s account.

The head of the Secret War Council, Heinrich F. Albert, withdrew that exact amount in May from his account at the St. Louis Union Bank. Obviously, not just Albert, but also Sommerfeld maintained accounts St. Louis and specifically in the St. Louis Union Bank. This account was connected with Albert's. Assuming that Sommerfeld paid for both contracts, his St. Louis Union Bank account showed transactions of roughly $400,000, similar to another account he maintained at the Mississippi Valley Trust account. Only $145,000 of the total $945,000 appeared in the books of De La Garza. The French government ended up buying $265,000 worth later in 1915. The Carranza faction took $150,000 of the munitions in September. The Western Cartridge Company refunded $65,000. This leaves $385,000, almost the exact sum of Sommerfeld’s Mississippi Valley Trust transactions and what the U.S. government alleged to have come from Heinrich Albert ($381,000). The $385,000 also matches the funds believed to have remained on Albert’s various accounts in Milwaukee, Cleveland, St. Louis, and Chicago.

Another question looms large as well: Why would Franklin W. Olin sell munitions to Sommerfeld thirty percent or more below market value? Even if Olin would have sympathized with the German cause to the point that he refused to produce munitions for the Entente, he still could have commanded a higher price from the various Mexican factions, even Villa’s. Incidentally, De La Garza’s accounts show payments to Peters Cartridge Company for the same type of ammunition in May 1915 priced at $55 per thousand. The answer to this riddle may have revealed itself in the spring of 1916 when, out of the blue, and, without much fanfare, F. W. Olin opened a brass casing factory next to Western Cartridge Company in Alton, Illinois.

Olin was a businessman who believed in vertical integration. He started his business in 1892 when he founded the Equitable Powder Manufacturing Company. The company’s blasting caps served mostly the coal industry in the Midwest. He expanded the production to include small arms ammunition in 1898, changing the name to Western Cartridge Company. He also founded a company that manufactured targets in the same year to better serve his sporting and hunting rifle customers. The Western Cartridge Company had managed to carve out a nice slice of the U.S. munitions market dominated by the large arms manufacturers such as Winchester Rifle Company and Remington by the early teens. Since the outbreak of the Mexican Revolution in 1910 the company thrived. The success resulted from the fact that Western was willing to produce 7mm Mauser cartridges widely used in Mexico. The Western Cartridge Company had sold millions of cases of ammunition through Sommerfeld to Madero, Carranza, and Villa over the years.

President Franklin Olin and his son, John, liked doing business with Sommerfeld. His clout over the past years had made the transportation of shipments across the international border smooth. When the U.S. government instituted various embargos, Sommerfeld called on his friends in very high places, such as Lindley Garrison, Secretary of War, or William Jennings Bryan, Secretary of State, or Hugh Lenox Scott, the General in charge of border troops and later President Wilson’s Chief of Staff of the Army and received permission to export. Sommerfeld also stood by his word. He was very well organized, understood proper specification, had the customer contacts, and, most importantly, he always paid on time.

The savvy businessman chomped at the bit when Sommerfeld asked Olin to quote on the two largest munitions orders in the company’s history. An order of that size would allow Olin to install his own brass mill to produce the cartridge cups. However, where to get the all-important presses for such a production? Enter Carl Heynen and the Bridgeport Projectile Company. Heynen was a German naval intelligence agent and ran the sham munitions plant for his German superiors. Using the Bridgeport Projectile Company as a front, Heinrich Albert had signed contracts in the spring of 1915, locking up the entire capacity for smokeless powder and for hydraulic presses in the United States. Where did Olin get this equipment that allowed him to open a brass mill in the spring of 1916? The difference between the sales price and market price on twenty seven million cartridges that Sommerfeld contracted amounted to approximately $405,000 ($8.5 million in today’s value). Heynen accounted for the cost of hydraulic presses he had ordered and which were actually produced: “$417,550 for presses which had actually been produced.” A striking coincidence! If true, the German government supported Olin’s plans for a brass mill with the understanding that he would not produce for the Entente; hence, the contracts with Sommerfeld at a price far below market value. The new factory would prove to be a boon for Olin. He came out of the war with tremendous financial strength. In 1931 he bought Winchester. Olin Industries is one of the largest corporations in the United States to this day, partly thanks to Franklin Olin and the connections of his good friend, Felix A. Sommerfeld.

This blog series will trace the events that led to Villa's attack on Columbus, New Mexico on March 9, 1916 in weekly segments. On March 12, I will speak at Columbus for the Centennial Commemoration of the raid and reveal how Villa was made to believe that attacking the United States was a good idea. If you get impatient and do not want to wait for eight months to learn the facts behind Columbus, buy Felix A. Sommerfeld and the Mexican Front in the Great War now.

October 1914 -The U.S. and Mexico on Edge

On September 23, 1914, Pancho Villa declared war against Venustiano Carranza. Disagreements over the leadership of Mexico after the ouster of Victoriano Huerta in July precipitated the third, most violent phase of the Mexican Revolution.

A major front in this renewed civil war opened on the border between Arizona and Sonora in the tiny hamlet of Naco. The Villista governor Jose Maria Maytorena had pushed the forces of Carranza against the international border and besieged the town. The Carranzista commanders Benjamin Hill and Plutarco Elias Calles dug in as they were able to receive supplies from the American side of the border. Heavy fighting on the Mexican side caused stray bullets to pound the American side of the town.  As a result, the 10th U.S. Cavalry with reinforcements from the 9th took up positions on October 7. The 12th Infantry from Nogales, Arizona joined the cavalry units that had been dispatched from Fort Huachuca near Tucson and Fort Douglas. The commander of the Southern Department of the U.S. army at Fort Sam Houston, Brigadier General Tasker Howard Bliss, had overall command. The American units dug in and observed the fighting. Stray bullets - some were occasionally not so stray - pounded the American positions and American onlookers, some of whom came from as far as Bisbee to see the fighting. Naco, Arizona sustained heavy damages as a result of the continued shelling. “From their trenches and rifle pits, the men of the 10th and their comrades from the 9th Cavalry watched the fighting. It was a dangerous business; the Buffalo Soldier regiment [10th Cavalry] had eight men wounded while the Ninth ‘had some killed and wounded.’ They also lost a number of horses and mules from gunfire straying across the border.” Unlike the previous battles in Sonora, in which Maytorena consistently defeated the Constitutionalist opposition, Naco did not turn into a rout. In fierce combat General Benjamin Hill dug in along the border and supplied his troops from the American side. “Three lines of formidable trenches and earthen breastworks interspaced about 200 yards apart were thrown up around the entire perimeter to the border. Barbed wire and whatever other obstacles could be found were erected to impede the expected attack…the town [of Naco, Sonora] was transformed into a virtual fortress…”

Courtesy of the Journal of the West

The American troops were under orders not to return fire. As the siege dragged on, the restraint of the U.S. army turned into admirable acts of self-discipline. Colonel William C. Brown of the 10th Cavalry confided in a letter to a friend in October of 1914,

About 12:25 a.m., on the 17th [Maytorena] made the most determined attack yet made [sic]---first from the west, then from the east and lastly from the south, the direction which would send the high shots into our camp and of which he had previously been warned. On the night of the 10th four shots hit the little R.R. station where I had my headquarters; on the night of the 16th-17th, 14 shots hit the same building and I should say that the shots (probably several hundred) dropped in our camp in about the same proportion. Fortunately nearly all men and animals had been moved out for safety but notwithstanding this our casualty list was as follows: Four troopers wounded, one will probably die, and another lose his eye-sight [sic]. One horse and one mule killed one horse wounded besides at least two natives shot on the U.S. side of the line. It is a surprise here that the U.S. takes no notice of such an outrageous proceeding. Does the U.S. Government propose to sit complacently by and allow such deliberate firing perpendicular to the boundary that our soldiers are shot in their own camps? This after repeated warnings of the effect of such firing. If this be true I am having my eyes opened, and getting an entirely new idea of the protection afforded by the U.S. flag.

On December 11, General Tasker H. Bliss inspected the situation in Naco. According to the New York Times, Mexican rebels took potshots at the American general. “…Two bullets fired from the Mexican side of the boundary passed perilously near the General and his staff as he was examining a bomb-proof [shelter] near the immigration station, about 100 feet north of the international line. Soldiers guarding the immigration station are protected by three bomb proofs and by a line of loaded coal cars drawn before the American town and the border, but a break in the line of coal cars had been left to permit access to the border. Gen. Bliss was near this break when the bullets whistled.” Whether Mexican snipers targeted General Bliss on purpose or the incident was accidental, the Wilson administration’s decision to dispatch a larger military force was affirmed. The next day, the U.S. military moved heavy artillery from Fort Bliss, Texas into Naco.

On December 15, the entire 6th Brigade, with 4,750 soldiers headed from Galveston, Texas to Naco, bringing the total American troop strength there to 6,215 men. The American army had assembled a full invasion force, larger and with more firepower than the troops dispatched to Veracruz in April, complete with cavalry, infantry, and heavy artillery. With the blessing of the War Department General Bliss issued an ultimatum on December 16: “If for any reason a single shot falls on American soil after this ultimatum has reached you and has been translated, I will be forced to use extreme measures to end this useless danger to innocent lives in a neutral and well-intentioned country.” 

Villa as Commander-in-Chief of the Convention government not only rejected the ultimatum but also, to the alarm of President Wilson and his cabinet, proceeded to give U.S. Army Chief of Staff General Hugh Lenox Scott a taste of old fashioned Mexican machismo. He answered through Felix Sommerfeld: “I have mobilized eight thousand cavalrymen and they left yesterday under the command of General Cabral who will be in Casas Grandes within two days and they will proceed to Naco immediately period…if he [Scott] will permit us the time of eight hours Naco will be taken and the situation will be concluded…the assault will be rapid, uniform and effective period. Please cause General Scott to know this and ask him to have patience for four days…” While Villa’s chest thumping might appear just to be that, the situation could not have grown tenser. Villa threatened war! Moving eight thousand troops to northern Sonora, which was almost completely in the hands of his forces, clearly aimed at the American army, assembled on the other side of the line. The combined forces of Maytorena and Villa numbering approximately 9,500 would trump the assembled American army units.  

Generals Mitchie, Scott and Pancho Villa in a meeting in El Paso organized by Felix A. Sommerfeld

General Scott took Villa’s threat at face value and cabled to the Secretary of War Lindlay M. Garrison for permission to “…stop movement of Villa’s troops in this direction before leaving the railroad or failing this that all Americans be brought out of Mexico and General Bliss be instructed to protect the town of Naco by repelling the attack by force of arms. General Bliss desires that he receive his instructions in time to bring field hospital from San Antonio and make other necessary dispositions.” As between six and seven thousand American troops readied themselves for a military expedition into Mexico, Villa assembled two full cavalry brigades to assault the border town of Naco. Acting Secretary of War Breckenridge approved the field hospital to be moved in place on January 2, 1915. On January 9, Sommerfeld, who had the ungrateful task of shuttling between Villa and Maytorena, received the long awaited signature from the Sonoran strongman, in which he agreed to give up the siege. Already on the previous day General Hill had left Naco by train for Galveston, Texas to join up with Carrancista forces fighting in Veracruz. The situation was diffused. For now. Within a year the border erupted in violence again, causing virtually the entire regular U.S. army to be stationed in defense of the homeland.