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The American Axis

by Max Wallace ( © Saint Martin's Press, 2003)

Excerpt from chapter nine

Henry Ford's fixer Harry Bennett had long been close to the FBI's Detroit Bureau Chief John Bugas, who, in an FBI field report, once described Bennett as "a friend of the Bureau." In early 1944, Bennett made Bugas an offer he couldn't refuse, luring him away from the FBI as his assistant at a salary more than three times what the veteran agent had been earning at the Bureau. As his first task, Bugas was asked to write a memorandum detailing his inside knowledge of Ernest Liebold's activities. For nearly thirty years, Liebold was Ford's closest confidante, the man responsible for fuelling his infamous anti-Semitic crusade of the 1920's while working as a spy for the German government, the man most responsible for introducing Americans to the forged hate tract, The Protocols of the Elders of Zion, the man who maintained close ties to Hitler's movement during the earliest days of the Nazis' ascendancy, the man who once exercised enormous power in the company and still held considerable sway over his employer. Yet nothing had ever been done to curb his powers. Now, Harry Bennett sensed a chance to remove his only real rival for the old man's ear. John Bugas would finally help him exorcise his long-time enemy from the company, and the former FBI chief's memo would be the vehicle.

To this day, the three-page memo, entitled "re: Ernest Liebold," sits in a file at the Ford Motor Company's archives. When the company donated its corporate papers to an independent Museum repository in 1964 — supposedly in the interest of opening up its history to the public — it chose to keep the Liebold memo where it lay, far from the prying eyes of historians. I came across the memo by accident in 2002.

Bugas's memo tells an astonishing story. It reveals that on the day after Pearl Harbor, December 8, 1941, a federal warrant had been issued for Liebold's arrest "along with several hundred other dangerous individuals." But while the subsequent FBI sweep had taken countless Nazi agents and other potential national security threats into custody, the Liebold arrest warrant was never served. It was eventually countermanded, the memo reveals "due principally to Liebold's affiliation with Ford." Bugas implies that Ford himself intervened to save his trusted secretary from arrest but provides no further details.

Though Liebold escaped detention, the FBI continued to keep close tabs on his activities. By 1944, reveals Bugas, Liebold had "for four years been very suspiciously regarded by federal law enforcement agencies." The memo goes on to describe how, at a time when the Ford Motor Company was working on a number of highly classified military contracts, Liebold met frequently with a man named Edmund G. Heine who he had befriended in the early 30's when Heine was manager at the Ford-Werke plant in Cologne. In 1941, years after Heine stopped working for Ford, he was living in the United States when he was apprehended by the FBI for sending information about the American aviation industry to Nazi Germany. He was convicted on two counts of espionage and sentenced to eighteen years imprisonment.

Details of the Heine-Liebold relationship are troubling. In the months leading up to his arrest, according to the Bugas memo, Heine's movements were being monitored 24 hours a day at a time that "he was intensively engaged in espionage activities, which the FBI was observing unknown to him." During this period, he "visited the office of Liebold frequently and was in constant communication with him." After Heine's arrest, Liebold attempted to procure the services of a Ford attorney to represent the accused spy. According to a separate FBI report, Liebold had mysteriously advised Heine in September 1940 that he had gone to Washington "to get the data". Around the same time, Heine approached Liebold asking for his help to secure a US passport to return to Germany. Liebold informed his friend that the Ford Motor Company could probably "send him on a mission" as a pretext for securing the passport. Later, Liebold asked Heine to help him obtain a first edition of Mein Kampf.

After Pearl Harbor, the Bugas memo continues, Liebold had "continuous contact with several Nazi organizations such as the German American Bund, the German Relief Fund and a number of agencies that have since the war been outlawed." In addition, Liebold "was a recipient of considerable and various expert and effective German propaganda, and actually disseminated same."

In the memo, Bugas also establishes a direct connection between Liebold and the Reverend Gerald Smith. "He was a fairly frequent visitor with Gerald L K Smith who had, over a period of years, until fairly recently, almost open access to Liebold's office." It is this finding that Bennett hoped would persuade Henry Ford to fire Liebold because of the fear that the Smith association could trigger punitive action by the Roosevelt Administration.

As Bennett almost surely intended when he asked Bugas to write the memo, the former FBI agent concluded with an unequivocal recommendation: "The purpose of this is to tell you, in so far as I know, the type of man Liebold is, which in itself thoroughly justifies, in my opinion, severance of this man's employment with the company and with Mr. Ford."

The details of what happened next are still sketchy. In his memoirs, Harry Bennett makes no reference to the Bugas memo but appears to allude to it when he writes, "In the spring of 1944, I learned some things I hadn't known about Liebold". Armed with this information, Bennett "finally got a chance to fire Liebold — the only executive I ever did fire."

Bennett claims that when he took up the matter of Liebold's unsavory activities with Ford, the old man responded, "Oh, it isn't that bad." Bennett then attempted a different tactic. Because Liebold held Ford's personal power-of-attorney, he explained, the secretary could give away all Ford's money if he so desired. Ford appears to have never before grasped this legal concept. A few phone calls to his lawyers confirmed it. Bennett describes what happened next:

"He then spoke the words I had been waiting to hear for so long: 'Well, you just get him out of here'."

Bennett immediately asked Ford's executive secretary Frank Campsall to revoke the power-of-attorney. Liebold, explains Bennett, had always been paid directly by Henry Ford, rather than the company, meaning that Bennett had no official power to dismiss him. To get around this complication, he claims he took the necessary steps to place Liebold, who was in Mexico on vacation, on the company payroll: "Once that was accomplished, it put him under my jurisdiction, and I fired him."

Bennett's account, repeated by a number of biographers, implies Liebold's disturbing activities over the years were those of a private individual working for Henry Ford. They were thus completely removed from the Ford Motor Company itself. But, according to personnel records found in the company's industrial archives, this claim was simply not true. The records reveal that, although Liebold worked privately for Ford from 1911-1915, he was added to the company payroll on October 1, 1915 and his substantial salary was paid by the Ford Motor Company for nearly thirty years. This proves that Bennett's account is likely a fabrication. Like many Ford loyalists, he appears to be deliberately seeking to distance Liebold's actions from the corporation, thus protecting the reputation of both Henry Ford and the company.

Nevertheless, Bennett's version of the story contained some truth. Liebold returned from his Mexican vacation in May 1944, only to be informed by Campsall that his power-of-attorney over the finances of Henry and Clara Ford had been revoked. Stunned at losing this last vestige of influence over the company founder, he tried in vain to change Ford's mind. The decision was final, but Henry never told him the reason for the abrupt revocation. Years later, in his oral history, Liebold was still apparently bewildered by his fall from grace. While he was away in Mexico, he recalled, "I found that Gerald L K Smith had been at my office. I always believed it was Gerald Smith's visit to my office which apparently aroused Mr. Ford." Until his death twelve years later, Liebold would frequently claim that Harry Bennett had deliberately turned Ford against him and that Bennett, not himself, was disloyal to the United States.

The Detroit Free Press and the New York Times carried prominent stories marking "the end of an era" at Ford. Both papers quoted Liebold as saying he had been dismissed, an assertion that has been generally accepted over the years. However, according to company personnel records, Ford never actually fired his long-time confidante — even after learning that he was probably a Nazi spy. This lenience is hardly surprising, considering that Ford had apparently intervened to prevent the government from arresting his secretary as a threat to national security after Pearl Harbor three years earlier.

Instead, Liebold was offered another position at the company's Rouge River facility. But the prospect of losing precious access to Ford's inner sanctum, only to take a meaningless office job, was more than Liebold could bear and he left in a huff, not even bothering to clean out his office.

The personal effects he left behind offer a revealing insight into the man who had at one time occupied a position of unrivaled power within the company. Among the boxes of documents and files found in Liebold's office were copies of a speech by Adolf Hitler, a number of publications issued by the Nazi propaganda agency Deutsche Fickte Bund and a letter from the German Consul General thanking Liebold for a donation he had made to the German Winter Relief Fund, a well-known Nazi financial front.

For almost three years after the United States entered the war, at a time when the Allies were relying on the Ford Motor Company to manufacture some of its most important weapons delivery systems, Liebold had all but unrestricted access to every phase of company operations, including sensitive military systems. During this same period, a Senate committee accused Ford of seriously mismanaging the most important of these systems, the B-24 bomber — dealing a staggering setback to the Allied war effort. However, there is no conclusive evidence proving that Liebold sabotaged the bomber program. Although Ford's B-24 production increased significantly after Liebold left the company, the bomber had already become a reliable mainstay of the US Air Corps, its once frequent glitches a thing of the past.

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