The Zinsser girls had grown up in Hastings-on-Hudson, New York, in a well-to-do German-speaking household, and they were sent to Germany to complete their education. Their father, Frederick G. Zinsser, ran Zinsser & Company, a successful chemical manufacturing firm founded by his grandfather that was one of the establishments contracted to produce mustard gas for Uncle Sam in 1918. At the same time Zinsser had also served as assistant to the commander of Edgewood Arsenal, Colonel William Walker, during the Great War. Frederick Zinsser’s wife (and the girls’ mother), Emma Sharmann Zinsser, was also descended from German immigrants. Both Ellen and Peggy had attended elite preparatory schools and Smith College. McCloy married Ellen Zinsser in 1930, and from the time of their honeymoon they often traveled in Europe together as he pursued his career, operating from Cravath’s Paris office.
One of McCloy’s most demanding legal projects in those days was pursuing a high-stakes lawsuit against Germany in which he sought major civil damages in the infamous “Black Tom” case, stemming from a deadly blast at a munitions depot in Jersey City that had shaken Ellis Island and lower Manhattan on July 30, 1916. McCloy’s client, Bethlehem Steel, had suffered the biggest damage, losing fifty-two railcars full of shells and fuses. Many investigators attributed the explosion to German sabotage intended to disrupt the flow of ammunition to the front for America’s embattled allies, but the Germans had always denied any involvement. After the war, Black Tom was brought before the Mixed Claims Commission to enforce German government liability for the alleged sabotage. After several years of relentless investigation, McCloy uncovered evidence about the involvement of two prominent Germans in the conspiracy: Franz von Papen, a German army captain who would later become vice-chancellor to Hitler, and Ernst Hanfstaengl, the former classmate of Franklin Delano Roosevelt at Harvard who had been a close friend of Hitler from his Mein Kampf days and would later rise to become his foreign-press chief. McCloy’s intrigue-filled work took him deep into German and American industrial and military espionage. In one bizarre episode, he was interviewing a czarist Russian adventurer, Count Alexander Nelidoff, who said he had proof linking the German government to the Black Tom explosion. McCloy lifted a pencil from Nelidoff’s vest to take some notes, leading the anxious Russian to warn that the pencil was actually a tiny pistol loaded with poison gas. McCloy’s investigation took him and the twenty lawyers under his supervision to many exotic locations, where he got to know many top spies, including Franz von Rintelen, the former German espionage chief.3
Throughout the 1930s, as a member of the well-connected Cravath law firm, McCloy represented the financier Paul Warburg and the Rockefellers, among other clients.4 He also continued his work for J.P. Morgan. (One of his brothers-in-law, John Zinsser, would become a director of Morgan.) McCloy lived in Italy for almost a year, where he helped to raise money for Mussolini’s regime.5 Much of this work entailed huge loans to the German and Italian governments, which brought him into close connection with many fascist leaders.6
In addition to Morgan and Rockefeller, some other big American financial backers of the fascist regimes included DuPont, Ford, IBM, and General Motors. Many of these German investments involved financing for IG Farben, the all-powerful German oil, drug, and chemical concern. McCloy’s law firm represented the Farben affiliates in America, and McCloy was often their point man in Europe.7 Farben had spearheaded the development of insecticides and chemical weapons during World War I, and in the 1930s it was playing a central role in Germany’s quest for world domination. It was Hitler’s biggest source of political contributions and the biggest recipient of German defense spending, as well as the world’s most important developer and supplier of poison gases. Some of its customers included fascist Italy and Imperial Japan, both of which used chemical weapons in the 1930s. (Farben was also the principal sponsor of Japan’s chemical industry.) By 1934 Farben was closely associated with the Gestapo; many of its executives stationed abroad served as spies. Nevertheless, despite its shady background, Farben remained closely allied with several of America’s most powerful corporations and banks, at least well into the 1930s, and in some instances even during the war.8
The Rockefellers were closely tied to Farben through Standard Oil and other holdings. As a result, from 1929 onward, as the German combine came under increased criticism for its defense profiteering and fascist involvement, John D. Rockefeller assigned his public relations counsel, Ivy Ledbetter Lee, to help Farben clean up its image in America. In 1934 Lee testified to the House Un-American Activities Committee regarding his work for Farben. The congressional investigation revealed that the directors of American IG Chemical Corporation included some of the leading names in American finance and industry, such as Charles E. Mitchell, the director of the Federal Reserve Bank of New York and National City Bank, Paul M. Warburg, the first member of the Federal Reserve Bank of New York and the Bank of Manhattan, and Edsel B. Ford of Ford Motor Company, as well as at least three German executives who later would be convicted of war crimes at Nuremberg.9 McCloy had close ties to all of them.
Throughout the Nazi era, Farben and its American subsidiary were extensively involved in spying—so much so that many U.S. government investigators considered it an intelligence operation—and some of Farben’s competitors probably spied on them as well. By the late 1930s, McCloy’s legal work inside the shadowy world of espionage and fascist politics culminated when he conducted direct negotiations in the Black Tom munitions case with top leaders of the newly installed Third Reich, including Hermann Göring. (At the time, Göring, among various other positions, served as commissioner for raw materials and foreign exchange, and he also headed the Gestapo.) During the negotiations, in August 1936 McCloy attended the Berlin Olympics with Göring and Rudolf Hess as a guest in Hitler’s private box; McCloy and his wife also socialized with leading Nazis. McCloy later said that the connections had provided him “a window on the center of the Nazi régime.”10 His $50 million settlement with the German government, at the time one of the greatest civil awards in legal history, also represented a huge triumph that made McCloy a courthouse and boardroom celebrity, which would later lead to his appointment with the U.S. government.11
Meanwhile, McCloy’s old college friend, fishing partner, and brother-in-law, Lewis W. Douglas, also occupied several noteworthy positions during the 1930s. After leaving Congress in 1933, Douglas—a conservative Democrat—briefly served as President Franklin Roosevelt’s federal budget director. But Douglas quickly turned against the New Deal for its liberal economic policies. He said privately that FDR had come under too much “Hebraic influence,” adding that, “most of the bad things which it [the administration] has done can be traced to it. As a race [the Jews] seem to lack the quality of facing an issue squarely.”12 Douglas made little effort to conceal his anti-Semitism and became an outspoken opponent of the New Deal. Upon quitting the Roosevelt administration, he received several offers from like-minded organizations, including the bankers who controlled Paramount Pictures and James B. Conant, the former army gas-warfare officer who had gone on to become president of Harvard University.13