China Matters: Herbert Hoover: Made in China: China Matters jumps into the wayback machine, sets the controls for Tianjin 1900—-the Boxer Rebellion--and revisits one of the great political coverups in 20th century US political history: Herbert Hoover’s suppression of his pivotal and deplorable role in the alienation of China’s Kaiping Coal Mines from Chinese ownership.... To the general public, Hoover is a punchline in jokes about the Great Depression. But for serious students of Hoover, the emphasis has always been on taking the moral measure of the financier and humanitarian who achieved remarkable wealth, power, and worldwide recognition long before he ascended to the Presidency. Was he a ruthless, unscrupulous profiteer or a misunderstood apostle of rational business administration, economic efficiency, and benevolent progressivism?
Remarkably, the best documented and most accurate picture of Hoover can be found at the beginning of his career, in China, in the case of the alienation of the vast Kaiping Coal Mines from Chinese control. Thanks to a notorious court case-—and Hoover’s determined attempts to obscure and distort revelations that reflected badly upon him-—we can form a relatively unambiguous judgment of the man and his methods. The story, briefly, is this:
Herbert Hoover came to China in 1899, a young man of 24, with a reputation earned in the Australian gold fields as a shrewd, capable, and energetic mine manager—-and as an ambitious, Machiavellian manipulator who had schemed unsuccessfully to supplant his boss. He was sent to China by the London mine management firm of Bewick, Moreing & Company, to expand a relationship it had developed with the Kaiping Coal Mines and their manager, Chang Yan-mao. Kaiping was one of the crown jewels of Li Hung-chang’s self-strengthening movement. Located above an immense coal reserve near the present-day city of Tangshan, the mines had flourished under the administration and financial management of Tang Ting-shu, an able comprador, and were producing almost 500,000 tons per annum by the turn of the century.
However, the general manager position passed to an apparently less capable individual: Manchu bannerman and court insider Chang Yan-mao, who was unable to introduce needed capital for the mine from either domestic private or government sources....[After] 1895... Chang began an awkward flirtation with Bewick, Moreing to gain capital and some measure of security for the enterprise.... Hoover was dispatched to China in furtherance of this strategy.... [T]he Boxer Rebellion in 1900. Chang Yan-mao and Hoover were both in Tianjin during the siege.... Russian troops occupied the Kaiping fields, creating anxiety in Chang’s mind that the mines might be confiscated without compensation as a war reparation.
Chang decided that the enterprise had to be placed under the protection of a benign foreign power, namely Great Britain... Bewick, Moreing & Co.... would ensure that the interests of the existing stockholders and, not least of all, Chang Yan-mao himself, would be protected. Therefore, Chang hurriedly deeded over the entire enterprise to Hoover as trustee, contingent that the enterprise be recapitalized with an additional 1,000,000 pounds and reconstituted as a joint Sino-British enterprise.
If the story ended here, Hoover would have probably received a well-earned attaboy from history for realizing this once-in-a-lifetime opportunity so perspicaciously and resolutely.... The agreement that Hoover took to London defined him as trustee for a Kaiping enterprise whose assets and ownership should be converted directly into the new Sino-British company. This left no provision for “promotional fees”, the distribution of shares without compensation to middlemen such as the Bewick, Moreing partners, their friends, and associates in return for their efforts in midwifing the new corporation.
Hoover was thereupon sent back to obtain a revised agreement which listed Hoover as the agent of Bewick, Moreing lead principal C.A. Moreing, thereby freeing Hoover from sole and explicit duty as trustee to protect the interests of Kaiping, and allowing the transaction to be structured to include benefits for Moreing and other promoters. To obtain Chang’s agreement to this significant revision, Hoover concluded a side agreement with Chang defining the new company as a joint Sino-British enterprise with equal say in management, a China board and a London board. Again, this could be regarded as an understandable, if awkward measure to ensure that Bewick, Moreing (or at least its partners) received the incentive and reward necessary for lining up the financing for this new venture.
However, Hoover spent the next seven months in China... placing his people in key positions inside the enterprise and... consolidating foreign control of Kaiping in violation of the agreement. The fatal piece of overreach by Bewick, Moreing, however, was its disregard of the requirement that the enterprise be recapitalized.... Bewick, Moreing did not arrange any significant new equity for Kaiping. Instead, it burdened the new enterprise with new debt, in the form of 500,000 pounds of debentures bearing 6% interest. By 1902, widespread dissatisfaction among the original shareholders of Kaiping (who now included many foreigners) was reported.
Then... in November 1902, local Chinese managers raised the dragon flag... to honor the empress dowager’s birthday... foreign management... took down the Chinese flag.... This incident concentrated the baleful attention of Yuan Shih-kai, the major power not only in North China but in the empire by virtue of his command of the Beiyang Army and his position as commissioner for Chihli and Jehol.... Chang Yan-mao had tardily and incompletely memorialized the throne on the deal, the details of which, when they became known to Yuan Shih-kai, incensed him. Yuan demanded that Chang recover the properties for the empire. Remarkably, the throne accepted that the case be argued in the British courts.
The case went to trial in London in 1905 and apparently caused quite a sensation.... The trial revealed that the reconstitution of the company had left it gutted. Only 375,000 shares remained in the hands of the original shareholders. Most if not all of the balance of 625,000 shares had been distributed without compensation as promotional fees or as bonuses for the buyers of the new debentures.... The corporation, instead of being recapitalized, was encumbered with new debt. Little if any of the money from the debenture issue had actually reached Kaiping. On top of this, Hoover’s activities in violation of the joint management agreement he had concluded were fully aired, including some indiscreet remarks denigrating the China board.
Bewick, Moreing lost the case and was subjected to some pointed words from the bench. Hoover, both as partner in Bewick, Moreing and as the individual executing the skullduggery firsthand, was undeniably culpable.... Although the judge felt there were clear grounds for pursuing a criminal case against the individuals involved, in a piece of good news for Bewick, Moreing and Hoover, the Chinese government apparently had had enough of Western litigation....
For Hoover and Bewick, Moreing, the deleterious effects of the Kaiping debacle were minimal. Hoover left China, aged 27, as a partner in Bewick, Moreing, purportedly already wealthy, with a pocketful of Kaiping shares, and his career launched as a global financier involved in virtually every resource industry from tin to gold to petroleum. During the First World War he burnished his image as a benevolent, progressive, and supremely capable and honest captain of industry by orchestrating Belgian relief and the postwar food program....
When he entered political life, he employed sophisticated public relations efforts to achieve favorable coverage in the press. When he learned that anti-Hoover books were in preparation, Hoover did not limit himself to outraged rebuttals. He unleashed the FBI to perform background checks on the authors. His secretary, Lewis Strauss (later the spearhead in efforts to revoke Robert Oppenheimer’s security clearance) organized a burglary of one author’s office.... [Hoover's] agent went to England to secure all copies of the trial transcript to deny its contents to his enemies (at least one copy survives, in the library at Oxford). He concocted a story in which he himself was the protector of Chang Yanmao and Kaiping appearing in the case as a neutral witness, while in truth he had been instrumental in efforts to sideline Chang and the Chinese management, and had provided information useful to the prosecution only under cross-examination....
Last but not least, a campaign of denigration was launched against the spate of anti-Hoover books published in the early 1930s, which included The Rise of Herbert Hoover by Walter Liggett and The Strange Career of Mr. Hoover by John Hamill. These books are significant for how much they got right in the Kaiping case.... The case itself was mindnumbingly complex... addressed commercial matters and corporate obligations more than individual liability, [and] did not provide an easily identifiable "smoking gun"....
I came across The Rise of Herbert Hoover, by pioneering muckraker Walter Liggett, in a New England inn, courtesy of an interior decorator who bought used books by the case in order to give the lobby the look of a cozy library.... [Ellsworth] Carlson’s Harvard monograph, The Kaiping Mines (1877-1912), describes the events in detail, unravels the twisted financial machinations as much as possible, and concludes that “the greed and bad faith of Moreing and his associates in 1901 and 1902 [were] indisputable”. Nash... was recruited by the Herbert Hoover Presidential Library.... In a four-page footnote(pp. 656-9) in his “The Life of Herbert Hoover: The Engineer 1874-1914, Nash details Hoover’s efforts to secure all copies of the trial transcript and elicit testimonials.... Nash remarks that:
Hoover’s later explanations of his conduct in China often diverged from the account provided by the trial transcript and by documents entered in evidence at the trial.... Hoover’s role... was scarcely a peripheral or ‘accidental’ one.... As a key participant in the 1900-1901 transfer negotiations, his conduct was under severe scrutiny at the trial.... Nor did Hoover’s testimony really win the case for Chang Yen-mao.... Hoover’s later defenses also contained significant omissions.... In the 1920s... [t]he effort to block [Hoover's presidential] aspirations by ‘exposing’ his past is a largely untold story that came to involve some prominent members of both political parties. Under the circumstances it is not surprising that Hoover and his associates devised a defense that fit the requirements of political survival...