Article
When Eliot Ness ran Diebold
Ness's successful crimefighting career gave him the confidence to pursue big business as Diebold's chairman of the board. by Donna Russell, contributing writer
March 20, 2003
During the 1930s, Diebold and the Lake Erie Chemical Company developed a system to discharge tear gas into bank lobbies. Their goal was to stop John Dillinger and his gang, who, in a career lasting only 13 months, killed ten men, wounded seven others, robbed banks and police arsenals and staged three jail breaks.
No bank in the American Midwest felt safe as long as Dillinger remained on the FBI's "Most Wanted" list. It was Diebold's mission to protect those banks as long as Dillinger was on the loose.
It seems natural, then, that the nation's most celebrated crime fighter served as chairman of Diebold's board for nearly seven years. May 5, 1944 was the day Eliot Ness of "The Untouchables" took over the company's helm.
Ness was not actively recruited by Diebold. Instead, his election as chairman of the board was due to patronage. Ness was a close friend of the Rex family, who, at that time, owned 40 percent of Diebold's stock. In a 1987 article published by The Repository of Canton, Ohio, Raymond Koontz, vice president and treasurer of the safe and lock company during Ness' tenure, describes how it came about: "The way he came into the company was through a family in Canton named Rex that had a brokerage house downtown on Court Street. The family came into possession of a controlling interest of Diebold stock. . . ."
The Rex family met Ness when they moved from Canton to Chagrin Falls. At that time, Ness was living in Cleveland and became a friend of the family. When Ralph Rex, chairman of Diebold's board, died, he left his shares to his wife and daughter Jane. Jane, whom Koontz characterized as having "a little leaning toward him (Ness)," asked Ness to replace her father as the chairman of the company.
The Ness who took over the company's reins was not the same man who battled gangster Al Capone. He was 14 years older and much more experienced.
After leaving the federal government's employment in 1935, Ness served as the Public Safety Director of Cleveland, Ohio for seven years. There he successfully fought police corruption, gangsters, labor racketeers and traffic fatalities.
More importantly, he was no longer the "Boy Scout," a nickname used behind his back by the Cleveland police force. His first wife, Edna, had divorced him in 1938 after years of sitting at home alone while Eliot was out working.
Ness, who already had a reputation for partying, began drinking and womanizing.
In 1939 he married the attractive and much younger Evaline McAndrew. The two hobnobbed with the wealthy, threw lavish parties and attended many social engagements. The lawman was blasted for spending more time on his personal interests than on the city of Cleveland's. The press characterized him as complacent in his job.
Then, in 1942, Ness made a politically fatal mistake when he left the scene of an automobile accident after his car skidded and slammed into an oncoming vehicle. He had been drinking heavily that night with his wife and friends at the Hollenden Hotel. This was the last in a series of events that tarnished Ness' image as a straight laced, clean-cut lawman.
Ness was forced to resign his office.
When Jane Rex asked Ness to serve on Diebold's board, he was a man without a career direction. Although he was employed by the National Security Agency in Washington, D.C., the war was winding down. Civil service was not making him rich. The Diebold directorship was his ticket to the lucrative world of big business.
Drawing on his University of Chicago degree, Ness reorganized the company's management, completed a merger with the York Safe and Lock Company, Diebold's biggest competitor, and helped Diebold diversify into plastics and microfilming equipment.
He also developed two businesses of his own. The Middle East Company was an import-export firm. The Far East Company specialized in importing silk fabrics from China.
His reputation as a savvy businessman grew. Articles about him appeared in both Fortune and Newsweek. Unfortunately, his success was not to last.
The Far East Company folded when the U.S. banned trade with Mainland China. Trade restrictions also threatened the Middle East Company.
Ness's personal life again interfered with his business interests. His second wife left him and moved back to New York. He then met and married his third wife, Betty Anderson Seaver.
In 1947, Ness decided to run as an independent candidate for mayor of Cleveland against the popular Democratic incumbent, Thomas A. Burke.
But the spotlight didn't shine like Ness expected.
According to a story written by Stephen Nickel for the October 1987 issue of American History Illustrated, "Ness was not a politician. Those who recalled the glib, confident young lawman who attracted hero worship were frankly startled by the man now seeking the office of mayor. His once-boyish face was deeply lined, his shoulders were slouched, and a noticeable paunch has appeared at his waist. In public appearances Ness seemed nervous and stiff. . . ."
Ness lost the election with only 85,990 votes, about half of what Burke received in his landslide victory. His defeat was not only humiliating, it also left him deeply in debt.
In The Repository article, Koontz recalls the lack of interest Ness showed in Diebold's affairs, "He just wasn't at home in the business world. . . . He never really worked here. He didn't have an office here. Meetings he held were in conference rooms. He came here a couple of times a week, then maybe he'd miss a week. He didn't fraternize too much down here, and he wasn't really involved in the executive decision making. He just represented those ladies' stock interests."
Soon after his mayoral defeat, Ness's business life began to deteriorate. The Rex family sold their stock and on April 2, 1951, he was not re-elected to the Diebold board. Koontz notes that Ness's failure to be re-elected was "not because of the dislike of the other directors . . . there was never any unpleasantness over it."
Marilyn Bardsley, author of the online biography Eliot Ness: The Man Behind The Myth takes a different view. She writes that Ness's re-engineering efforts early in his tenure with the company resulted in grudges which eventually led to his downfall.
Nearly a half century later, it is difficult to find the real truth.
But one thing is obvious: Ness was a more successful as a lawman than a businessman. Perhaps the business world didn't provide the excitement and danger he craved. After all, this is the man who, when asked why he took on Al Capone at the tender age of 26, said, "Unquestionably, it was going to be highly dangerous. Yet I felt it was quite natural to jump at the task. After all, if you don't like action and excitement, you don't go into police work. And, what the hell, I figured, nobody lives forever."
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