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Goldfinger Buys a Library

DIRTY MONEY

By Jonathan D. Ratner

"The policy of South Africa as expressed by the new Prime Minister [John Vorster] is as much in the interests of South Africa as anything I can think of or suggest. I am not a South African, but there is nothing I would do better or differently." --U.S. multinational businessman Charles W. Engelhard, 1967

"...the library in the new building will be named the Charles Engelhart Public Affairs Library, in recognition of a gift of one million dollars from the Charles Engelhard Foundation."   --JFK School of Government Spring 1978 Bulletin.

WHEN THE RICH and the powerful of the land converge on Cambridge next weekend to dedicate the new facilities of the John F. Kennedy School of Government, Harvard hopes it will be inaugurating a new era in the training of American public servants. Harvard will also be honoring Charles W. Engelhard, the man who for two decades served as the United States' largest corporate backer of the apartheid regime in South Africa. Not just any small-time mogul who has run roughshod over the political and economic rights of 18 million people, but the very epitome of U.S. corporate complicity in apartheid. It is a situation that demonstrates philanthropy at its self-serving worst.

Without any consumer products that bear his name, Charles Engelhard has never attracted much publicity or fame in the U.S. In black Africa, however, the man whose money built the Charles Engelhard Public Affairs Library at the Kennedy School was notorious. In less than 20 years, Engelhard built an inherited $20 million dollars into a global empire worth more than a quarter billion dollars at the time of his death in 1971.

South African investments were the lynch pin, the growth point of his global empire. "American and European millions are cigarette money to Engelhard's operation; the real money comes from South Africa," Paul Jacobs wrote for Ramparts magazine in 1966. It is difficult to know exactly how large the Engelhard family's interests in South Africa were and continue to be. Charles Engelhard was a master of the secret stock deal, the creation of the paper corporation. He owned companies that were subsidiaries of subsidiaries of subsidiaries. Through a wide range of company chairmanships and directorships, and minority and majority stock participation, Engelhard is believed to have controlled at one time no fewer than 23 different South African enterprises, in fields ranging from chemicals to timber to plastics. The center of the network was Engelhard Hanovia, the family holding company that started the foundation in 1940.

By far the largest of Engelhard's stakes, however, was in the South African gold mining industry, which for decades has mined sub-economic gold by employing Africans at wages half the poverty datum level. Largely through his chairmanship and stock holdings in Rand Mines, Engelhard's interests controlled an estimated 15 per cent of South African gold mining industry during the '60s. Indeed, it was through his entry into the South African gold industry during the early '50s that Engelhard first started to turn his father's relatively modest metals business into a global powerhouse. Setting himself up as a bullion dealer in South Africa, Engelhard beat restrictions on the export of newly mined gold by manufacturing solid gold art items--solid gold pulpit tops, dishes, bracelets. Once legally exported in this manner, they would be melted down into bullion again.

Perhaps just as signifigant as the huge direct economic holdings of the Engelhard empire is the role Engelhard played as the leader of the U.S. business community in South Africa. Wrote Forbes, "Success in South Africa has imposed its obligations, and Engelhard has dutifully fulfilled them." In 1958, Engelhard founded the American-South African Investment Co., Limited, a closed end trust designed to stimulate portfolio investment by Americans in South African enterprises. Throughout the '60s, Engelhard served as chairman of this trust, which was hugely successful.

In the aftermath of the 1961 Sharpville massacre in which South African police killed 67 unarmed African demonstrators, foreign capital took flight, bringing the white minority regime perilously close to collapse. Ever true to his friends, Charles Engelhard engineered the American bank loans that helped refloat the South African economy and its instruments of repression.

In her book The South African Connection, the anti-apartheid author Ruth First writes that "by many South Africans Engelhard is regarded as the savior of the post-Sharpville economy." Individuals of somewhat different political sensibilities hold exactly the same view. Anglo-American, the multibillion dollar conglomerate the dominates the South African economy, offers this official word on Charles Engelhard: "In difficult times, when South Africa was badly in need of capital, Engelhard played a vital and signifigant role in helping to bring it from abroad. He thus not only restored confidence in the country's economy, but actively assisted in boosting it."

ENGELHARD had his own self-serving arguments to explain his lack of criticism of the white minority regime. In 1966, Engelhard received a "brotherhood" award from a New Jersey religious council while hundreds outside the banquet hotel protested Engelhard's support for apartheid, chanting "Brotherhood can't be bought." Inside the hotel, Engelhard tried to justify his activities to the guests assembled to honor him: "You have certain obligations as a guest in the country in which you do business. One of these obligations consists of not criticizing what they do at home, since you don't want them to criticize what we do at home. Perhaps if we were perfect, we could criticize people. But we are not perfect, and I think perhaps that is my argument with people outside tonight."

A more self-serving argument has perhaps never been made by an American earning millions off the slave-wage labor of black South African gold miners. But upon closer examination, one finds it was not even simply a matter of "make your money and keep quiet" for Charlie Engelhard. More than any other American, Charles Engelhard gave direct political support to the Nationalist government. Engelhard sat on the boards of Witwatersrand Native Labor Association and Native Recruiting Agency, two South African government agencies which recruit cheap African labor to work in the mines.

Engelhard also served as a leading officer of the South African Foundation, a South African government businessmen's public relations front on which no other American would agree to serve. This foundation was set up in the words of its leaders "because there is a systematic, well-organized, well-financed attack on South Africa, conducted on a world scale by a number of organizations supported by Afro-Asian and Communist interests." And while Engelhard was busy telling American detractors that U.S. corporate involvement could play a constructive role in helping bring South Africa's black majority toward full political participation, his foundation's book, South Africa in the Sixties, was arguing that "in regard to overall direction, white hegemony is to prevail."

It would be misleading, however, to paint a picture of a Charles Engelhard who only palled around with the South African officials whose policies made it possible to build his empire. Engelhard had friends in high political places in the U.S. as well. A generous contributor to the Democratic party, Engelhard was confidante to both Presidents Kennedy and Johnson. Often, Engelhard's cultivation of American politicos caused embarassment for the U.S. Johnson, especially, made a habit of sending Engelhard as a U.S. representative to African state ceremonies. In 1964, for instance, Engelhard asked the president to send him as U.S. representative to Zambia's independence ceremonies. Johnson agreed, and throughout black Africa, where Engelhard was universally viewed as a persona non grata, African leaders reacted with shock and indignation.

BUDDING technocrats at the Kennedy School may find cause to admire the fiscal prudence with which Engelhard built his father's $20 million nest egg into a quarter-billion dollar empire. In his non-corporate life, however, Engelhard was not exactly the thrifty sort. His expenditures on life's luxuries make his philanthropic pittances pall by comparison. Before he died, Engelhard owned nine homes on four continents, including a hunting lodge in the Transvaal, and a mansion outside Johannesburg.

Engelhard stabled race horses in North Carolina, England and South Africa, $15 million worth of race horses -- about the same amount that the Engelhard Foundation has in assets. He needed three private jets and a helicopter to transport him to his international business and pleasure appointments.

A 1965 Forbes magazine article suggested that Engelhard even served as the model for Ian Fleming's notorious character, Goldfinger, who attempted to monopolize the world's gold reserves. (Fleming and Engelhard had some business dealings in London during the late '40s, just when Engelhard was starting to build his gold empire.) Engelhard never denied this possibility, and often seemed to delight in the suggestion.

KENNEDY School officials approached the Engelhards with its gift application last year after Charles' daughter, Sophie Engelhard, a 1977 Kennedy School graduate, suggested the family foundation as a possible source of funding. Kennedy School Associate Dean Ira Jackson, the Kennedy School classmate of Sophie who drafted the gift proposal, said his knowledge of Engelhard business operations at that time "was virtually nil, and still is. There was no research or probing, no background effort was made to study Engelhard's corporate activity," he said. "There never is when we're approaching a legitimate foundation that has made large gifts before. We're more concerned with the projects and orientation of the foundation, not the source of the money they give." Needless to say, the proposal Jackson drafted, requesting $1 million to build a library to be named for Charles Engelhard, won the quick approval of the family foundation, and by spring, the Kennedy School was graciously thanking the Engelhard Foundation for the gift in its alumni bulletin.

The Charles Engelhard Public Affairs Library is now a reality. Within a matter of months, its now-empty shelves will be filled with books. All that's left for Harvard to do is sing the praises of Engelhard's family at next week's dedication ceremony and to fasten the sign on the wall of the library that will make it hard for anyone to fail to recognize, however unconciously, the charity of Charles Engelhard.

With all this understood, there is no doubt a large element of moral catharsis involved in an exposition of Engelhard's misdeeds. Nevertheless, the question -- now clearly moot -- must be asked: Should Harvard have accepted this gift?

Some may argue that very little of the clean stuff circulates among the foundations that offer such gifts, so to start singling out the gifts of some as unnacceptable is hypocritical. A Kennedy School official, attempting to explain his approach to gifts such as the Engelhard million, said he found some validity in the argument President Lowell used to make, that "to reject one gift on moral grounds would be to certify the moral validity and rectitude of past gifts." This argument seems as much an abdication of social responsibility as Engelhard's explanation of why he chose not to criticize the South African government.

The moral calculus that determines whether individuals or institutions should accept money they feel is tainted is ultimately a subjective, individual one. There are certainly no hard and fast rules to invoke in making the determination. But criteria can be employed, distinctions can be made.

The argument that universities should always accept "no strings attached money" no matter how objectionable the source is a fairly forceful one. But here the standard definition of "no strings attached money" is in need of revision. A gift must not only have no conditions placed on its use; it must also be agreed that the source of the gift remain anonymous. Harvard, by allowing the Charles Engelhard Foundation to be publicly associated with the new facility legitimizes, however subtly, Engelhard's business practices.

This leads one to a second criterion for evaluating gifts: the currency of the reprehensible business practice in question. Some will argue that time cleanses dirty money. In a sense, it does, for if a family no longer earns its money in questionable ways, the public gift does not have quite the same self-serving legitimating impact. But while the Cabots may now be hundreds of years removed from the wealth they earned in the slave trade, the Engelhard family South African connection lives on, albeit without Charles W.

SHORTLY before his death, Engelhard, in a complicated series of transactions, sold off much of his South African interests to Anglo-American and other companies. The current Engelhard family parent corporation, Engelhard Minerals and Chemicals, still has diversified holdings in South Africa, but in the recent climate of intensified criticism of U.S. operations there, the Engelhard company has refused to disclose the extent of the assets and activities of its privately held South African subsidiary. In October, 1976, the company refused to cooperate with Sen. Dick Clark's committee studying U.S. investments in Southern Africa.

Meanwhile, the Engelhard family has shifted much of its formerly South African capital into the manufacture of pollution control devices. But somehow it doesn't seem to make their money much cleaner.

"The key to the misery of these people is to let them get enough to eat, enough clothes, a car and some financial stability. I don't care what the college professors say, I know this is what the black people of Africa want."   --Charles W. Engelhard, 1966

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