The American Guild had planned the literary prize competition since its inception, as shown by the eleven page Plan of Action from April 1936. The actual implementation started at the beginning of 1937. The aim was to reward literary work in exile with prize money – at first to the amount of USD 2,500 which then turned into USD 4,520. On behalf of the Guild, exiled literary agent Barthold Fles contacted publishers. He managed to win over the Little, Brown & Company publishing house as a commercial partner. At a festive dinner on April 20, 1937, Thomas Mann announced that they were looking for the best exile literature. In addition to Mann as the chairman, the jury consisted of: Richard A. Bermann, Rudolf Olden, Alfred Neumann, Lion Feuchtwanger and Bruno Frank. Writers could submit their literary manuscripts until the deadline on 1 October 1938.

The manuscripts submitted included texts by Hannah Arendt, Bertolt Brecht, Soma Morgenstern and Jo Mihaly. To avoid influencing the judges, the manuscripts had to be submitted under a pseudonym. A total of 177 manuscripts were received, 35 of which were rejected because they failed to meet the formal criteria – including a manuscript by Bertolt Brecht, which accidentally revealed his identity.

The publisher had protected itself with a clause in the contract: If the selected manuscript was not likely to appeal to a wide audience, it could refuse to publish it. The publisher did not see an opportunity for the award-winning manuscript by Arnold Bender Es ist später denn ihr wißt on the American market. It was only published in 1943 as The farm by the lake by another English publisher who was involved – Collins in London.

The competition had failed. This resulted in perplexity, disappointment and public anger about the process of the prize competition. Thomas Mann and his daughter Erika Mann left the Board of Directors. In the New York Neue Volkszeitung,  Bruno Frank voiced his anger on December 23, 1939 and the Aufbau also reported on the affair at the end of 1939.