Minor politician became opium king of West Coast

By Finn J.D. John
August 4, 2024

EDITOR’S NOTE: This article is a rewritten and re-researched version of a much shorter article published Feb. 26, 2012, which you can find here.

ONE OF THE most significant events in the history of the world took place in 1892, when a corrupt political hack named James Lotan managed to land a cushy government job as the head of the customs inspection service for the Port of Portland.

Believe it or not, Lotan’s landing that job led directly to Pearl Harbor and eventually Hiroshima and Nagasaki, and indirectly to the defeat of Nazi Germany in Europe.

Not bad for a small-time white-collar criminal in a tiny backwater seaport town on the far side of the world, eh?

I realize you may be a bit skeptical of this claim. Bear with me while I unpack it and prove it to you, along with the strong possibility that most of us owe our lives and the continued existence of human civilization to James Lotan and the sleazy little band of well-heeled drug smugglers and human traffickers who worked with and for him, on the Portland waterfront in the early 1890s.

We’ve talked about that sleazy little band of smugglers who Lotan worked with and provided political cover for (here's a link to the article about them); but now, let's talk about the big man himself.

JAMES LOTAN WAS, writes legendary Portland historian E. Kimbark MacColl, “a maverick businessman-politician” and the half owner of the Stark Street Ferry. He was a low-level member of the Portland political elite, but he must have been a fantastic networker, because by about 1890 he had worked his way all the way up to the position of President of the Oregon Republican Party.

Lotan had started his rise to prominence a couple decades earlier as a shop foreman at the Oregon Iron Works, a Portland manufacturing plant that specialized in steam engines and boilers. At some point he connected with state Senator Joseph Simon, who was basically the head of one of Portland’s two major Republican political factions. (The other was U.S. Senator John M. Hipple, who served in the Senate under the alias “John H. Mitchell,” which he adopted years earlier while hiding from law enforcement after embezzling $4,000 from his employer.)

By working as a fixer and odd-jobs man for Simon, Lotan worked his way to prominence, rising within the Republican Party with the fortunes of his faction. He was rewarded with a series of federal political-patronage positions — Portland Inspector of Shipping and Machinery, Boiler Inspector, and finally Customs Collector.

Along the way, his fortunes having risen nicely, he was able to join the exclusive Arlington Club and purchase a half-interest in the Stark Street Ferry.

By the time this happened, though, he had switched sides, and was now an avid Mitchell man.

And all these things came together with marvelous serendipity in about 1892 when Simon left the state to join the Republican National Committee in Washington. Into the power vacuum Lotan rushed, becoming the president of the Oregon Republican Party, with broad agenda-setting power over what got done in Salem.

He was just in time to start putting the brakes on all the pesky bridge-building projects that the city of Portland had been working on. Naturally, as part-owner of the ferry that they would be replacing, he didn’t think they should be built ... not, at least, unless he and his partners were, um, fairly compensated for it.

He was well on his way to losing this fight when the city came to the state Legislature to request bonding authority to build the Bull Run water project. Lotan wasn’t a Legislator himself, but he was in a position to set party priorities, and he told the city he’d be glad to put their request right at the top of the priority list, and help them get the bridges done ... if they’d agree to buy his ramshackle, dilapidated, obsolete ferry from him for $50,000 ($1.75 million in modern money, not bad for a boat on a rope!).

The Portland mayor and City Council members raged, but there was little they could do. The city needed the Legislature to approve the bonds, the Legislature was Republican, and Lotan, as head of the GOP, was in a position to lean on folks to keep the city’s request from reaching the floor.

In the end, they talked him all the way down to $40,000 — for a ferry that probably was worth less than $1,500 as it sat.

BUT LOTAN WAS not depending just on this little blackmail scheme to make him rich. Remember that plum government job he landed in 1892? Customs Collector for the Port of Portland? That was his golden ticket.

You see, “Customs Collector” was what the top local job in the customs department was called. Lotan was the big boss, the one person responsible for making sure nobody was smuggling anything through the Port of Portland. Stuff like, oh, I don’t know ... shiploads of illegal immigrants, steamer trunks packed with illegal drugs, things like that.

Which meant, of course, that James Lotan was in the best position of anyone in Portland to go into the illegal-immigrants-and-drugs business.

Which he promptly did by reaching out to a business friend, a recently widowed Scot named William Dunbar, probably through the Arlington Club.

The two of them soon had a good working plan, and it really did look like a good one. Dunbar was the owner of Turner Flouring Mills as well as a wholesale grocery business called Dunbar Produce and Grocery. He also co-owned the Merchants Steamship Company, a shipping firm with a fleet of two full-size blue-water steamships.

The Merchants Steamship vessels were then busy hauling Turner Mills wheat and flour across the Pacific Ocean to China — Dunbar really was the guy who opened that trade line for Oregon. But the ships were coming back from China in ballast, which bothered Dunbar a lot. Like a stereotypical Scot, he hated the waste of those empty journeys.

So the plan became to fill those empty steamships up with people — Chinese workers, who each paid a steep price for the chance to be smuggled into the U.S. to work on labor gangs.

THIS SCHEME MADE both Dunbar and Lotan a lot of money, and probably would have kept on doing so if Dunbar had not gotten greedy and decided to go into opium smuggling as well.

Well, actually, Dunbar probably wasn’t the one who decided to start smuggling opium. Most likely that innovation came from Dunbar’s business partner, the co-owner of Merchants Steamship — a flamboyant, morally flexible cigar merchant named Nat Blum.

The problem with opium was, although the stuff was still legal, it was taxed very heavily. That meant smuggling the stuff in without paying the tax was tantamount to stealing money from the government.

When Dunbar smuggled a Chinese guy into the country to work, that was illegal, but nobody really cared; it was a big country, and there was lots of work to be done. But when Dunbar smuggled a barrel of opium into the country, the government lost thousands of dollars in tax revenue.

Most likely, Lotan didn’t know about the opium until his partner’s steamships started getting raided. Reading between the lines (criminals tend not to leave very complete records) it appears the opium was Nat Blum’s idea.

In any case, Blum did most of the day-to-day management of the opium operations. The idea was that the drugs would be rolled off the deck of the steamship in a lonely stretch of the Willamette River, before they reached the port, and would be retrieved by some of Blum’s cronies later on.

Those cronies — guys like Bunco Kelley and Bob Garthorn, not to mention Nat Blum himself — would be the biggest weakness in the plan, at least when it came to the opium.

Put simply, they were just super incompetent. They lost nearly as much opium to theft, accident and seizure as they actually brought in. And they brought a lot in — this was an industrial-scale operation, probably totaling well over five tons of product.

BY NOVEMBER 1893, the jig was just about up. One of the Merchants Steamship Company’s two steamers had been seized by the federal government in Astoria, and the federal prosecutor in Portland was asking a grand jury to return indictments against Lotan, along with Dunbar and Blum and a number of their underworld cronies. Seid Back, the most prominent Chinese businessman in Portland, was also on the hook.

The ensuing trial held Portland spellbound. But Lotan hadn’t much need to worry. The roster of court officers at this trial reads like an excerpt from the Arlington Club directory. Lotan was represented by future Senator Charles W. Fulton. Joseph Simon himself (remember him?) came back home from his cushy Washington D.C. position on the Republican National Committee to represent another defendant. Perhaps most outrageously, federal prosecutor John Gearin — who had just been appointed by President Grover Cleveland as special prosecutor for opium frauds — was, in the case of this particular opium fraud, on the side of the defense.

Also, the judge was one of Simon’s  former law partners, and the jury foreman was fellow Arlington Club member Charles Ladd.

So the trial ended with a hung jury. The word on the street was that the vote was 11 to 1; jury foreman Ladd had refused to vote to convict his friend. A new trial would have to be scheduled.

The process dragged on for a couple years. Dunbar fled to China before he could be indicted. Blum, on the witness stand, got so “creative” in his testimony that by the end of the second trial, no one believed him any more. Eventually, Blum disappeared and the whole thing just sort of faded away.

As historian MacColl writes, “Lotan, supported throughout the ordeal by his Establishment and Arlington Club comrades, survived with his reputation more or less intact.”

It has to be noted, though, that Lotan didn’t stay president of the Oregon Republican Party for long after his indictment came down. No political party, even one as dominant as the GOP was in 1890s Oregon, can risk too much of that kind of publicity.

SO, THAT’S THE end of the story as far as James Lotan was concerned. But you may be wondering about my admittedly clickbaity introduction to this story. How, exactly, could a sleazy, venal crook like James Lotan be credited with saving the world from the Nazi menace and/or global thermonuclear destruction?

Those of you who are familiar with the story of Yosuke Matsuoka, the young Japanese lad who grew up on the Portland waterfront and afterward became the most important Imperial Japanese diplomat of the 20th century, know exactly where I’m going with this. (And here's a link to the Offbeat Oregon article about him, in case you don't!)

Yosuke Matsuoka was the son of a failed shipping magnate in Japan who came to the U.S. to try to mend his family’s fortunes for his widowed mother. He came to Vancouver when he was 12. There he met Dunbar, who was processing in another cohort of Chinese laborers to be smuggled into Portland.

Dunbar sort of informally adopted the gregarious young lad and brought him home to serve as a companion for his 14-year-old son, Lambert.

So young Yosuke grew up in the Dunbar home, kind of like the character of Hadji in the old Jonny Quest cartoons.

He grew up surrounded by all the players from top to bottom of what had to be the biggest and most well-connected drug-smuggling operation in American history. When he returned to Japan after graduating from the University of Oregon, he believed he knew America as well as he knew Japan ... based on having lived there for half his life.

Of course, his experience of America was basically from the perspective of a regional organized-crime family, like the Corleones in The Godfather.

And as a top-ranking Japanese diplomat, Matsuoka always thought of Americans as being like the waterfront toughs and cowboy-capitalists he palled around with in the 1890s — guys who respected guts and strength.

Which is why, in 1940, Matsuoka worked so hard to forge an alliance between Imperial Japan and Nazi Germany. He figured being an official ally of the most powerful country in Europe would give Japan the strength and credibility to stand up to the U.S.

The result was the Tripartite Pact, which turned Japan into an Axis power. After that, Japan was a tripwire that the Roosevelt Administration could tug on to get the U.S. into the war with Nazi Germany. Which, of course, is exactly what happened (whether the tugging was incidental or deliberate).

So, here’s the sequence: Dunbar starts smuggling operations — which leads to Dunbar meeting Matsuoka and adopting him — which leads to Matsuoka getting a very wrong impression of America and Americans — which leads to Matsuoka bringing Japan into an alliance with Nazi Germany — which leads to Pearl Harbor and World War II — which leads to Hiroshima and Nagasaki — which leads to the leaders and warlords of the entire world having seen with their own eyes what nuclear war looks like, before they’re ever entrusted with the power to unleash it.

But that whole sequence of events could never have happened without James Lotan, the small-time political crook, looking around to see who might be able to help him make some quick dirty money, and reaching out to his recently widowed friend William Dunbar.

(Sources: Merchants, Money and Power, a book by E. Kimbark MacColl published by Georgian Press in 1988; Agony of Choice: Matsuoka Yosuke and the Rise and Fall of the Japanese Empire, a book by David J. Lu published in 2002 by Lexington Books; archives of Portland Morning Oregonian and Portland Daily Telegraph, 1893)