Great Phenol Plot



The Great Phenol Plot was a conspiracy during the early years of World War I to divert American-produced phenol away from the manufacture of high explosives, and instead use it to produce Aspirin and bring profits to the German-owned Bayer company.

Background
At the outbreak of World War I in 1914, most phenol used by American manufacturers was imported from the United Kingdom. It was used to produce, among other things, Thomas Edison's "Diamond Disc" phonograph records (which were not made from shellac like other disc records of the time), the salicylic acid used to make Aspirin, and the high explosive trinitrophenol. British phenol was soon being used almost exclusively for making explosives for the war effort, leaving little for export. By 1915, the price of phenol rose to the point that Bayer's aspirin plant was forced to drastically cut production; this was especially problematic because Bayer was instituting a new branding strategy in anticipation of the expiry of the aspirin patent in the United States. Counterfeiters and Canadian importers and smugglers were stepping up to meet demand for aspirin, and the war had disrupted the links between the American Bayer plant (in Rensselaer, New York) and the central Bayer headquarters in Germany. Thomas Edison was also facing phenol supply problems; in response, he built a factory near Johnstown, Pennsylvania capable of manufacturing twelve tons of phenol per day. Edison's excess phenol seemed destined for American trinitrophenol production, which would be used to support the British.

Plot
Although the United States remained officially neutral until April 1917, it was increasingly throwing its support to the Allies through trade, especially after the May 1915 sinking of the British ocean liner Lusitania (which conveyed American passengers as well as munitions) by a German U-boat. While many Americans, including President Woodrow Wilson, supported the British, there was also considerable pro-German sentiment (though considerably less after the Lusitania's sinking). German ambassador Johann Heinrich von Bernstorff and Interior Ministry official Heinrich Albert were tasked with undermining American industry and maintaining public support for Germany. One of their agents was a former Bayer employee, Hugo Schweitzer.

Schweitzer, with money funneled from Germany through Albert, set up a contract for a front company called the Chemical Exchange Association to buy all of Edison's excess phenol. Much of the phenol would go to the German-owned Chemische Fabrik von Heyden's American subsidiary; Heyden was the supplier of Bayer's salicylic acid for aspirin manufacture. By July 1915, Edison's plants were selling about three tons of phenol per day to Schweitzer; Heyden's salicylic acid production was soon back on line, and in turn Bayer's aspirin plant was running as well. Schweitzer sold the remainder of the phenol at a considerable profit, being careful to distribute it to only non-war-related industries.

Albert, however, was under investigation by the Secret Service because of his propaganda activities. On July 24, 1915, he accidentally left his briefcase on a train; it was recovered by a Secret Service agent who had been following him. The briefcase contained details about the phenol plot and other covert activities to indirectly aid the German war effort. Although it was not incriminating enough to bring charges against Albert or the other conspirators (since the United States was still officially neutral and trade with Germany was legal), the documents were soon leaked to the New York World, an anti-German newspaper. The World published an exposé on August 15, 1915, and the publicity soon forced Albert to stop funding the phenol purchases.

Schweitzer quickly sought other financial backers. By September, he had signed a deal (backdated to June to hide Albert's involvement) with Richard Kny, a relative of the Heyden plant's manager. This allowed the phenol plot to continue for a short while longer. By the time the plot was discontinued, it had succeeded in diverting enough phenol, according to Albert, to make about 4.5 million pounds of explosives. Schweitzer defended his actions on these grounds, arguing that making medicine and disinfectants was a better use of the phenol than making weapons. The public pressure soon forced Schweitzer and Edison to end the phenol deal, with the embarrassed Edison subsequently sending his excess phenol to the U.S. military, but by that time the deal had netted the plotters over two million dollars and there was already enough phenol to keep Bayer's Aspirin plant running. Bayer's reputation took a large hit, however, just as the company was preparing to launch an advertising campaign to secure the connection between aspirin and the Bayer brand.