June 11, 1999

More on the Pioneer Fund
New York Press Counterpoint (June 30, 1999)

Silent Partner: How the South's Fight To Uphold Segregation Was Funded Up North

New York Millionaire Secretly Sent Cash to Mississippi Via His Morgan Account 'Wall Street Gang' Pitches In

By DOUGLAS A. BLACKMON
Staff Reporter of THE WALL STREET JOURNAL

JACKSON, Miss. - On the afternoon of Sept. 12, 1963, a vice president of Morgan Guaranty Trust Co. sent a telegram to the Mississippi State Sovereignty Commission, the agency created by local politicians to fight the civil-rights movement and preserve racial segregation.

A Morgan client, the telegram said, was "setting aside as an anonymous gift" stock valued at $100,000. There was one condition: "Donor would like the fact and amount of the gift to be kept confidential."

The matter was referred directly to Mississippi Gov. Ross Barnett, who agreed to the terms and, that same day, sent Morgan instructions on where to send the cash.

Once the money arrived in Mississippi, it was funneled to an account in Washington, D.C., where segregationists were launching a fierce campaign to defeat landmark civil-rights legislation abolishing segregation in most public facilities. And in the ensuing months, the mystery contributor would follow up with additional, substantial gifts to help the cause.

For nearly four decades, the role of that donor remained concealed in the files of the now-defunct Sovereignty Commission. But last year, a federal judge ordered the unsealing of more than 130,000 commission files. The documents triggered a painful examination of some of the South's most heinous racial crimes. Little explored, though, was the trove of ledgers, invoices and correspondence recording the commission's finances.

Those records show large transfers of money by Morgan on behalf of a client who turns out be a wealthy and reclusive New Yorker named Wickliffe Preston Draper. Mr. Draper used his private banker to transfer nearly $215,000 in stock and cash to the Sovereignty Commission for use in its fight against the Civil Rights Act. The entire budget for the effort amounted to about $300,000. Adjusted for inflation, Mr. Draper's contributions would be worth more than $1.1 million today.

The Sovereignty Commission files do more than simply document one man's role. They show that some of the most virulent resistance to civil-rights progress in the 1960s was supported and funded from the North, not just the South. The files also highlight the ethical issues that confront an institution like Morgan Guaranty, the private-banking unit of J.P.Morgan & Co., when it is drawn, even unwittingly, into a client's support for repugnant causes.

Since the 1930s, Mr. Draper had been a client of Guaranty Trust, which became Morgan Guaranty when it merged with J.P. Morgan in 1959. It isn't clear whether he used Guaranty to help with funding some of his earlier race related efforts, such as a program in the 1930s to encourage white military pilots to have more children, or research in the 1950s to prove the superiority of whites and the dangers of mixed-race marriages.

When Mr. Draper died in 1972, Morgan was an executor of his estate, overseeing distributions totaling about $5 million to two race-oriented foundations. The primary beneficiary was the Pioneer Fund, an organization Mr. Draper helped found and which became known in recent years for funding research cited in "The Bell Curve," a book arguing that blacks are genetically inclined to be less intelligent than whites or Asians. In his will, Mr. Draper instructed that after his death, the Pioneer Fund use Morgan for financial advice; the fund did so for two decades.

Morgan today says that "racism is deplorable" and that the bank doesn't "support institutions that further racist causes." Moreover, the bank notes that it has been a consistent donor to African American causes, giving more than $3.3 million of its own money to civil-rights-related groups since the late 1960s.

Morgan insists that the Sovereignty Commission transactions it processed for Mr. Draper were routine procedures carried out on behalf of a client, over which the bank had no influence or control.

"A thousand times a day, somebody sends money to an organization that 30 years later looks really terrible," says Morgan spokesman Joe Evangelisti. "We can't tell our customers how to spend their money."

Mr. Evangelisti says the role Morgan played was no different from the way Wall Street banks today facilitate gifts to organizations that could be equally controversial. He cites donations made to Planned Parenthood (often criticized for its pro-choice stance), or to the Boy Scouts of America (which prohibits gays from becoming troop leaders), Morgan's policy, he says, is to pass no judgment on any client's / Please Turn to Page A8, Column 1/ activities, except in the "rare situation" when "the wishes of a client ... conflict with the principles that we stand for as a firm." In those cases, the firm may close a client's account, Mr. Evangelisti says.

Since the Sovereignty Commission was a legal, state-created entity, says Hildy J. Simmons, a managing director at Morgan Guaranty, the bank had no choice but to follow its client's wishes. It would be no different today. "As long as the receiving party is legal, we have no discretion," says Ms. Simmons.

Morgan did close the asset-management account it maintained for the Pioneer Fund after the furor erupted over "The Bell Curve" in 1994, according to people familiar with the situation. The bank won't give details on why it did so.

That option is something banks should consider, says Thomas Donaldson, a business-ethics professor at the Wharton School of the University of Pennsylvania in Philadelphia. "Good bankers should have the words 'Know thy client' tattooed somewhere on their chests," Mr. Donaldson says. "When the activities of the client or customer reach the point where they offend vital, deeply held values of the institution, you have to say no."

But many banks aren't comfortable with that posture, and with good reason, says George J. Benston, a banking professor at the Goizueta Business School at Emory University in Atlanta. "One would like any institution to operate with its customers neutrally. You don't want some bank officer making a judgment on whether a customer's donations are moral."

Brahmin Roots

Wickliffe Draper was, in many ways, a typical Yankee aristocrat. He was born in Hopedale, Mass., in 1891. His father was a top executive in the textile-machinery giant Draper Corp. His mother was from a blue-blood Kentucky family. An uncle was a Massachusetts governor. His younger sister married a nephew of President William Howard Taft.

Mr. Draper reveled in adventure. At Harvard College, from which he graduated in 1913, he excelled in shooting. A volunteer in both world wars, he used the title "colonel" for most of his life. In 1924, he inherited about half of his father's estate, which was valued at the then-enormous sum of nearly $11 million. In 1938, he reported to his Harvard classmates that his diversions over the 25 years since college included "shooting jaguar in Matto Grosso and deer in Sonora, elephant in Uganda and chamois in Steiermark, ibex in Baltistan and antelope in Mongolia; pigsticking in India."

By the late 1930s, for reasons that still aren't clear, Mr. Draper had also developed a fascination with racial genetics. In 1937, he helped found the Pioneer Fund. The foundation was devoted to supporting eugenics, a school of thinking which held that races can be genetically "improved" through mating practices, such as encouraging intelligent people to marry, or sterilizing handicapped individuals. Many eugenicists of the day, including some Pioneer founders, believed that whites were superior to blacks in intellect and other attributes, says Barry Mehler, a historian at Michigan's Ferris State University, who has studied the fund extensively.

The charter of the Pioneer Fund said the organization would support research and programs aimed at "race betterment," Scholarship programs would give special consideration to "children who are deemed to be descended predominantly from white persons who settled in the original 13 states." (In 1985, Pioneer amended its charter, saying it supports programs aimed at "human race betterment," and also deleting the reference to "white persons.")

Today, officials of the fund deny that it seeks to prove the inferiority of any race and maintain that it funds only legitimate genetic research, regardless of its findings. The organization says its past and present leaders were not biased for or against any race.

One of the first major projects of the Pioneer Fund under Mr. Draper was a program to encourage officers of the all-white U.S. Army Air Corps, predecessor of the Air Force, to have more children. Mr. Draper and other directors of the foundation believed that the Pioneer Fund should encourage a higher birth rate among the best of the white race. So the fund offered to establish annuities to pay for the education of any child born in 1940 to a pilot who had already fathered at least three children.

Among the original Pioneer Fund directors who endorsed the plan was John Marshall Harlan II, a prominent New York attorney who would be appointed to the U.S. Supreme Court in 1957. President Franklin D. Roosevelt's secretary of war, Harry H. Woodring, personally approved the plan, according to Justice Harlan's papers, now stored at Princeton University.

Memos to Mr. Harlan make clear that the plans were fulfilled. "During the calendar year 1940 there were 12 children born to officers in the Army Air Corps ... eligible to receive scholarships," wrote a psychologist hired to oversee the program. Mr. Draper made arrangements, according to records kept by Mr. Harlan, for an annuity to be established for each of the children at Guaranty Trust, the predecessor to Morgan Guarantee.

After World War II, the never-married Mr. Draper became increasingly reclusive. He stopped submitting updates to his Harvard class and lived alone in Manhattan, in a spacious East 57th Street penthouse duplex, surrounded by hunting weapons and mounted animal heads. For several years, he paid young researchers to visit his apartment and teach him genetic theory.

"For $10 an hour, I tutored Draper ... every time I was in New York," says Bruce Wallace, a retired Virginia Polytechnic University professor who adds that he disagreed with Mr. Draper's views. "His contention was that the-geneticists had all the figures but they were afraid to add them all up.... He was quite set on the idea that there was superiority and inferiority. I don't think he would have placed blacks among the superior."

The theories embraced by Mr. Draper fell out of favor after the war, and as the horrors of the Nazi regime became apparent, many of his old allies distanced themselves from their previous work. But through the 1950s, Mr. Draper continued to push for research to demonstrate white superiority; he also espoused sending American blacks, on a voluntary basis, to live in Africa, says the Pioneer Fund.

In 1957, the state of Mississippi created the Sovereignty Commission. Operating on an appropriation of about $100,000 a year, the commission penetrated most of the major civil-rights organizations in Mississippi, even planting clerical workers in the offices of activist attorneys. It informed police about planned marches or boycotts and encouraged police harassment! of African Americans who cooperated with civil rights groups. Its agents obstructed voter registration by blacks and harassed African Americans seeking to attend white schools. On occasion, the commission also took steps to discourage violence by the Ku Klux Man and other extremist groups.

Precisely how Mr. Draper became connected to the commission isn't clear. But the relationship appears to have blossomed shortly after a national address by President John F. Kennedy in June 1963. The president proposed wide-reaching legislation to outlaw segregation in public facilities. Mississippi leaders scrambled to mount a vigorous fight.

They turned to John C. Satterfield, a brilliant litigator from Yazoo City, Miss., and the immediate past president of the American Bar Association. By the end of the 1960s, Time magazine would label him "the most prominent segregationist lawyer in the country."

Within days of President Kennedy's speech, Mr. Satterfield headed to Washington to meet with top politicians and leaders of major trade organizations and business groups. The response was encouraging. "We in the South now have new and important allies who never before seemed seriously concerned," wrote Erle Johnston Jr., director of the Sovereignty Commission. "It was a thrill to me to see how the gentlemen at these meetings looked to Mississippi for leadership."

The result was a new national lobbying organization, called the Coordinating Committee for Fundamental American Freedoms. The Sovereignty Commission provided money to rent a Washington office and hire staff, and largely controlled the group from Mississippi.

On July 22, 1963, Mr. Satterfield received the first private contribution to the cause, a $10,000 Morgan Guaranty cashier's check drawn from Mr. Draper's accounts. It was deposited into a special account in the Mississippi state treasury and logged into Sovereignty Commission records with a simple notation: "Morgan Guaranty Trust Co."

Over the next year, Mississippi leaders repeatedly claimed that the campaign was being financed by broad grass-roots support in Mississippi and across the U.S. In truth, contributions from Mississippi citizens never topped $30,000. A surviving partner of Mr. Satterfield's law firm says the attorney obliquely referred to the source of the big money simply as "the Wall Street gang."

On Sept. 12, Mississippi Gov. Barnett received the telegram in which Morgan Vice President Arthur W. Rossiter Jr. said $100,000 in stock had been earmarked for the Mississippi commission. After the shares were sold, the gift totaled $98,612. It was entered into Sovereignty Commission records as "Donation from Morgan Guaranty Trust Company." Four months later, another telegram arrived from Mr. Rossiter, this time signaling the impending arrival of an additional $105,000 from Mr. Draper.

The money was derived from Mr. Draper's shares of Reynolds Tobacco, General Motors, Standard Oil of New Jersey and Addressograph-Multigraph. Morgan sold the stock at Mr. Draper's direction, collected commissions on the sales, and moved the proceeds into what it calls a temporary Sovereignty Commission account at Morgan Guaranty. The Sovereignty Commission eventually forwarded the funds to Washington.

Throughout, Mr. Rossiter insisted that the source of the money never be disclosed. "This represents an anonymous gift to your Commission and the donor has specifically requested that the fact and the amount of the gift be kept strictly confidential," he wrote in one letter.

Mr. Draper's money buoyed a sweeping attack on the civil-rights bill. The Sovereignty Commission's Washington arm coordinated opposition efforts among less-organized groups, pushed trade associations to fight the bill and lobbied Congress. It sent ghost-written editorials to newspapers around the country and bought ads in 500 daily and weekly papers. By April 1964, the group had distributed 1.4 million pamphlets and mailings, Sovereignty Commission records indicate.

The opposition effort was swathed in the issues of protecting states' rights and . reining in an overreaching federal government. The advertisements said the bill would create an "omnipotent president" and a "dictatorial attorney general."

But commission records make clear that the effort co-financed by Mr. Draper was grounded on bitterly racist notions. Citing several white-supremacist tracts, an internal memorandum by Mr. Satterfield said Americans had to be shown that the conditions of blacks in the U.S. were the result of "heredity ... not discrimination." At the heart of the matter, the memo said, were "the intelligence, criminality and immorality of the Negro."

The Sovereignty Commission campaign triggered thousands of letters. Despite that, Congress approved the Civil Rights Act of 1964, and President Lyndon B. Johnson signed it into law.

Frustrated by the defeat, Mr. Satterfield pressed Mississippi's new governor, Paul Johnson, to help start a new national organization, designed to demonstrate that the plight of blacks in the South was the result not of "mistreatment and discrimination" but the "completely different nature of Negro citizens and white citizens," he wrote the governor.

"Certain groups in the east who prefer anonymity" were ready to back the effort with $200,000, Mr. Satterfield wrote, if the state would match the contribution. As a gesture of seriousness, an unnamed northern benefactor had sent $50,000.

The donor was, again, Mr. Draper. His gift arrived via Morgan on June 2, 1964. Gov. Johnson endorsed the plan, and the Legislature quickly appropriated $200,000.

But the segregationists suffered another setback, this time at the hands of their most rabid elements. Klan members abducted civil-rights workers Michael Schwerner, Andrew Goodman and James Chaney in the town of Philadelphia, Miss. The three were beaten, shot to death and buried in an earthen dam. Six weeks later, the workers' 1963 Ford station wagon was found burned along an isolated road, still bearing Mississippi license tag H 25503, a number logged into Sovereignty Commission files by an informant a few weeks earlier.

The national outcry brought an end to the new alliance between Mississippi officials and Mr. Draper. Gov. Johnson's office was flooded with telegrams, many simply repeating the words "justice, justice, justice." Increasingly isolated, Mississippi leaders took at least symbolic steps to halt violence. The state's own $200,000 appropriation was quietly returned to the Mississippi treasury.

Later, the $50,000 from Mr. Draper was returned to his attorney in New York, Harry F. Weyher, who deposited it into the escrow account of his firm, records show. Mr. Weyher, who has been president of the Pioneer Fund for more than 40 years, says he doesn't recall the flow of funds, though he did remember meeting with Mr. Satterfield in the 1960s.

Mr. Draper maintained his interest in the fight to preserve segregation in the South. In the late 1960s and 1970s, he sent dozens of checks to private academies that had opened up to accommodate white families fleeing newly integrated public schools, estate records show.

After Mr. Draper died in 1972, Morgan continued to manage his holdings while the will was being sorted out. Five years later, his assets were distributed according to Mr. Draper's wishes.

He gave about $1 million to family members, and also bequeathed $3.3 million to the Pioneer Fund and $1.7 million to the Puritan Foundation. (The Pioneer Fund isn't related to the mutual fund of the same name.) The Puritan Foundation listed as its address the law firm of Mr. Satterfield, the Mississippi lawyer. In 1978, the fund was merged into another nonprofit called the Council School Foundation, according to Rutgers University Prof. William Tucker, who is researching Mr. Draper's activities. That Mississippi group was created to support private schools that catered to white students.

A State's Stigima

Citing bank policy, executives at Morgan won't discuss whether the bankers who worked with Mr. Draper knew of his racial leanings or the true nature of the Sovereignty Commission.

Still, Morgan was dealing with prominent Mississippi segregationists at a time when the national media were focused on the state, and when some on Wall Street and in New York's political community were concerned about maintaining business ties there. Mr. Barnett, the governor of Mississippi, had been pictured on the front page of the New York Times in 1962 during a bloody standoff with federal troops forcing the integration of the University of Mississippi.

The Mississippi state treasurer at the time, William F. Winter, said that Wall Street firms charged higher interest rates on the state's bonds, due to the stigma of having ties to Mississippi. In 1965, one such issue was canceled due to a lack of bids on Wall Street.

Morgan says none of that is relevant. The bank likely had clients supporting the civil-rights movement as well, executives say. And, adds Mr. Evangelisti, "doing business with a particular client doesn't mean that we endorse that client's beliefs of actions." It would be "offensive" for a bank to police how its clients conduct their affairs.

"That's a privilege of being rich in America," says Ms. Simmons at Morgan. "You can spend your money the way you want to."

Douglas A. Blackmon, "Silent Partner: How the South's Fight To Uphold Segregation Was Funded Up North," Wall Street Journal (Friday June 11, 1999) p. 1; A8.

Blackmon, Douglas A. "Silent partner: How the South's fight to uphold segregation was funded up North." Wall Street Journal. 11 Jun. 1999.