COMMUNISTS: Money-Order Racket

Red China, hard up for dollars, got some very simply—by postal money order.

Pickup. In April 1950, Honolulu post-office officials began to notice that money orders made out by Filipinos in Hawaii and Guam were not being cashed in the Philippines, as they were supposed to be; instead, they were coming back with “chops” (post officialese for seals), showing that they were being handled by Hong Kong banks. U.S. post-office officials got suspicious, sent Inspector R. Frank Ogden, 53, to Hong Kong to investigate.

A Hong Kong money changer, who owed the police a little reward for past favors, talked. From Hong Kong the trail led to Manila, and grew hotter; once a jeep full of Tommy-gun-toting men ran Ogden to the curb and almost did him in. Finally, in the dusty villages outside Manila, he and Filipino intelligence agents discovered the grassroots base of the racket.

Agents for Red Chinese syndicates would hang around country post offices, and sidle up to Filipinos who had just received money orders from relatives in Hawaii, Guam or the U.S. The agents offered an irresistible bargain: they were ready to buy up the money orders, paying three pesos per dollar (the official exchange rate is only two, but the Reds did not mind spending pesos freely in order to get far scarcer dollars). Endorsed over to middlemen for the Chinese, the orders were then smuggled to Hong Kong by plane and deposited in U.S. banks.

Many of the money orders were small, and the amounts were often changed by clever forgers, e.g., $1.37 to $1,379.44. The Reds raked in $4,000,000 a month. Together with other gimmicks—completely forged postal orders, veterans’ checks bought up for pesos—the Reds made an estimated $32 million in less than a year, using the money to buy war materials.

Crackdown. When Ogden reported his findings, police and customs men moved fast. At Hong Kong, customs officers saw a Chinese sneak aboard a plane in the airport hangar and emerge carrying twelve fat envelopes. They grabbed him and recovered $142,000. At Philippine airfields, $171,000 more was confiscated. In Manila, an informer led Ogden to a man who offered to sell him 500 counterfeit money-order blanks at 25 pesos ($12.50) each, and obligingly showed him the printing plant where they were being turned out. Police nabbed the forgers.

Ogden’s eight months of plodding through Oriental back alleys was over. The Chinese Reds had to look for a new way to make a fast buck.