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TO
HISTORIANS OF THE NAZI SS, 1943's SIGNIFICANT events were the
surrender of Stalingrad, the ending of hostilities in North Africa, the
appointment of Heinrich Himmler by Hitler as minister of the interior,
the capitulation of Italy, and the rescue of Mussolini by SS
Brigadefuehrer Otto Skorzeny from an Italian mountaintop fortress.
Historians with a broader focus on the European war would include: the
round-the-clock bombing by RAF and U.S. Air Force planes of German
cities and other key targets, the Battle for the Atlantic in climax and
conclusion, the massacre of Polish Jews in the Warsaw ghetto by SS
troops (to be repeated with even greater ferocity in 1944 as Russian
divisions stood idly outside the Polish capital, on orders from
Stalin), the formation in Algiers of the French Committee of National
Liberation, at first under generals Giraud and de Gaulle, later under
de Gaulle alone, the Allied landing in Sicily, the casting down from
power of Mussolini by vote of the Fascist Grand Council, the Allied
crossing of the Mediterranean to mainland Italy, the new Italian
government under Marshal Badoglio that shifted its support from Germany
to the Allies, and the meeting of Churchill, Stalin, and Roosevelt at
Teheran to coordinate plans for a final attack on Ger- many.
But to Bormann the most
telling event of 1943 was the appointment
of Himmler, Reichsfuehrer of the SS and chief of
63
police, to the additional
position of minister of the interior of the Third Reich. This was seen
by Bormann as a threat to his control of the 42 Gaue, or
districts, whose leaders reported directly to him. Albert Speer also
perceived it as a potential dissolution of Bormann's domestic power
base, so he looked anew to Himmler as the one who could accomplish what
he had failed to do - win out over Bormann in the political infighting
for control of the domestic economy. Himmler attempted to pull the
Gauleiters into line by sending them orders through district SS
commanders. The Gauleiters complained to Bormann, who had Hitler
prohibit any more such steps. Himmler immediately pulled out, and the
Himmler-Speer alliance came to an end.
Martin Bormann was now sole
leader on the domestic front, and he went further to strengthen his
hold over the economy. The aging, old-line Gauleiters were replaced
with his new breed of administrators, typically with legal training, to
handle the complex matters of an economy that, since the fall of
Stalingrad on February 1, was moving rapidly into full war production.
Each district leader had committees constantly surveying the entire
spectrum of his regional economy. There were committees on insurance,
electric power, steel, coal, and industry in general. Their reports
went directly to Bormann, who dictated the directives that kept the
economy in tune with his thinking. Whenever Albert Speer would try to
expand his area of armament production, he would receive a curt
memorandum from Martin Bormann to desist. Speer attempted to bring into
his ministry's jurisdiction the Peenemünde rocketry production,
and
sent Hitler a request to this effect. The reply was negative and
bristling, and came not from Hitler but from Reichsleiter Bormann.
In 1943 Bormann moved to
control banking by expanding regional economic committees into the
financial field under his department III-B, a unit covering finance and
special fiscal projects of a highly confidential nature to which his
district economic advisors belonged.
Reichsleiter Bormann's move
to place the banking structure of the Third Reich in his domain was
understandable, for without the banks he couldn't exercise full control
of industry and the economy. In the last years of the war, big banks
had nearly all German industry under their control. This was done
64
in several ways: through
ownership of stock and the right to vote stock owned by others; through
bank officers and stockholders sitting on the boards of the big
corporations, and, in turn, including representatives of the largest
corporations on their boards. Then, when limitations to the size of the
boards were mandated, they continued to extend their sway over German
industry by setting up regional committees, Landes. ausschuesse to
which leading industrialists in the various regions would be invited to
belong. It was considered a great honor to do so, with the opportunity
to attend two or three meetings a year at large dinners, to which
officers of big banks would journey from Berlin.
Thus, the big Berlin banks
maintained their influence over all parts of German industrial life.
When a law was passed limiting the number of directorships any one man
could hold, it put the small bankers at a disadvantage because the big
banks could divide their directorships among the many members of their
management. Also, by putting officials of leading industries on the
regional committees, which were not limited in number, and which in the
case of the Deutsche Bank listed several hundred members, they were
able to spread their influence even further.
By inviting the local
industrialists to serve on these committees, they, of course, obtained
the business of such companies and would extend credit to the
companies, when needed. They obtained further control over industry
through their ability to call in the money due under the credits they
extended to the local industrialists. By these means, the big banks
continued to an increasing extent to capture the customers of the small
private banks.
For these reasons, the
district economic advisors of the party urged Bormann to assume control
of the big banks. The smaller regional banks and their customers were
unhappy over the domination exercised by the large Berlin banks, and
resented having all their banking decisions now referred by regional
private banks to head offices in Berlin. Bormann was agreeable to such
a move: it would give him greater influence with all major banks, and
he foresaw needing at a later date their good will and assistance in
moving capital around the world.
The major corporations did
not mind Bormann applying addi-
65
tional checks on the banks, which
they thought had become too domineering and cavalier toward their own
needs. They were aware that German banks administered 70 percent of the
capital of all German stock companies.
At the same time, many large
corporations held large blocks of stock in the very banks that served
them. Siemens & Halske A.G. of Berlin, a giant electronics firm
with many subsidiaries and extended worldwide (the General Electric of
Germany), had bought into Deutsche Bank in 1930 during the economic
crisis. It held 1 million marks of Deutsche Bank stock until selling it
in 1942. It was a quiet deal, Siemens & Halske not wanting its
competitors to know about its insider position. At annual meetings the
firm always had “neutral parties,” a notary public, a lawyer, or some
friend of the bank vote its stock.
A like situation prevailed
with H.F. & Ph.F. Reemtsma, an international tobacco firm located
in Hamburg. It had acquired 5 million Reichsmarks of Deutsche Bank
stock during the same banking crisis of 1930, but held on to it through
the years. In later days, the bank asked Reemtsma to buy several
million more shares of its stock that was floating in the market,
inasmuch as Deutsche Bank was not permitted to buy its own shares. In
appreciation, the bank extended guarantee facilities to Reemtsma to
cover cigarette tax stamps of 25 million marks. Again, the stock was
voted anonymously for Reemtsma by neutral parties.
I.G. Farben, however, was of
such size and generated so much cash flow of its own that it didn't
need to hold bank stock to extract favorable treatment. It could tell
its prime bank what to do and how to do it at any time. Hermann
Schmitz, president of the management of I.G. Farben during twelve years
of the Third Reich and an early Hitler supporter, once told Nuremberg
investigators how Deutsche Bank functioned for I.G.
“The banking transactions
performed by Deutsche Bank were mostly in collection of money from
customers. They always led the syndicate of banks when increases of
capital and issue of debentures were necessary. Generally I tried not
to arrange loans with banks. I made one exception when I arranged a
revolving credit of something like RM 170 million in 1942 for General
Motors which could be repaid and taken up again over a period of time.
This credit was intended to be used in the beginning of
66
1945 but
because of the difficulties of that
year it could not be used.”
Schmitz
said that Deutsche had become their primary bank because it "was the
bank with the old relations with the Badische Anilin and Soda-Fabrik
and Farbwerke vorm. Friedr. Bayer & Co., and when I.G. Farben was
created in 1925 it was natural that the Deutsche Bank continue
relations. It is also the reason that I.G. Farben always asked one
member of the Deutsche Bank to come on the board of I.G. Farben. First
it was Schlieper, then Schlitter, Mosler, and later on Abs.
All banks, in all countries,
work together. Bankers relate to each other, even if they often to fail
to understand what motivates their customers and the public in general.
In Germany, the big banks were the money machines that insured the
silent financing of the war Hitler was planning. In order of fiscal
strength and importance, Deutsche Bank led the Big Three, followed by
Dresdner and Commerzbank (the standing of the three still today in the
Federal Republic of Germany; Fortune magazine places these
among the 50 largest commercial banks in the world outside the United
States).
Here is an explanation of the
type of industrial funding by the big banks to produce the
behind-the-scenes financing of the war, related by a participant of the
management of Deutsche Bank. It is fairly representative of loans
continually made to the munitions industry throughout the war by all
big banks:
Loans to the aircraft industry in 1943 amounted to some 150 million
Reichsmarks. Of the long term Government guaranteed loans, some 22
million went to Bavarian Motor Works and about 10 million to
Daimler-Benz. Dornier received six million RM (of a syndicate credit of
60 million) without Government guarantee, covered by assignment of
Government orders in 1943. A similar loan of 15 million Reichsmarks was
given to BMW in 1944. Daimler-Benz also had a 15 million loan of the
latter type, but did not draw on it until the closing months of the
war. There was a large loan to the Frankfurt affiliate of. the Verein
Deutscher Metallwerke for aircraft purposes. I do not recall the
amount, but it was substantial.
The Martin Bormann Nazi Party Committee on
Banking consisted of ten district industrialists and bankers. The
chairman of the committee was Hellmut Boernicke, who was
67
general manager of the
Brandenburger Provincial Bank and on the board of Deutsche Bank.
Another member was Heinrich Huncke, who was president of the Chamber of
Commerce in Berlin, on the management committee of Deutsche Bank, and
an economic advisor of the Berlin district of the National Socialist
Party. Another was Wilhelm Avieny of Frankfurt, where he was also
economic advisor to the party and a management member of the
Metallgesellschaft. There was Walter Jander of Dessau, who was with the
Junkers Werke; he was on the board of Commerzbank and was economic
advisor of Dessau. Walter Rafelsberger of Vienna was party economic
advisor for Vienna. He was an engineer, but had a seat on the board of
Creditanstalt-Bankverein of Vienna (owned by Reichs and Deutsche Bank),
Wolfgang Richter, an economic advisor for the Sudetenland and manager
of the Braunkohlen Syndicate of Mitteldeutschland. Julius Maier served
as economic advisor of Hanover. He owned the private bank of Hanover,
Julius Maier & Company. There was Dr. Walter Schieber, economic
advisor for Thuringia. He lived in Weimar and was manager of an
artificial wool company in Schwarza, and a member of the board of
directors of the Dresdner Bank during the final months of the war.
Christian Franke, economic advisor for Muenster and Westphalia, North,
was also president of the Muenster Chamber of Commerce and head of a
large lumber company. Karl Heinz Heuser served as an alternate to
Huncke on the Bormann Nazi banking committee, and also served as an alternate economic advisor for Berlin.
This
banking committee not only had government access to all German bank
operations and a degree of control, but it also placed representatives
on the boards of each bank. The big banks did not object, merely
insisting that these men not be party hacks but party professionals who
had a feel for and understanding of finance. The bankers of Germany
have always looked to the seat of their government for guidelines, and
if this was what Bormann wanted they would go along. From the Fuggers
of the sixteenth century or the Rothschilds of the eighteenth century,
bankers in Germany could make or break governments, and did. But during
the era of the Third Reich, their period of enormous power, they had
become virtually a second government. Bank chairmen were consulted by
the Nazi
68
Party on every economic and
financial question that arose. Baron Kurt von Schroeder, a well-known
banker of Cologne during these years and an economic advisor to
Bormann's economic committee, commented that Dr. Hermann Josef Abs,
chairman of Deutsche Bank, was particularly important to the government
of the Third Reich.
“His influence was mainly
with the Reichsbank and with the Ministry of Economics. Abs proved very
valuable to the party and to the government by using his bank to assist
the government in doing business in the occupied countries and in other
foreign countries. Abs enjoyed excellent relations with Walther Funk,
who was both president of the Reichsbank and head of the Ministry of
Economics.”
Walther Funk stated that the
bankers and banks of greatest importance in German financial affairs
abroad were “Abs (Deutsche Bank), Goetz or Rasche (Dresdner Bank),
Rodewald (Reichskreditgesellschaft ), Radort (Aerobank) .” Funk added
that this last-named bank, the Bank der Luftfahrt (Aerobank), “confined
its activities largely to the monetary affairs of France and Norway.
But Deutsche Bank and the Dresdner Bank had few limitations on their
activities, due to their world-wide associations and prestige in
finance.” Even within their own organization, much of their personnel
reflected the Nazi Party. Branch managers of Deutsche Bank were to a
man members of the party; of course, management insisted that all be
first-class bankers, men who had come up through the Deutsche Bank
ranks to positions of authority.
While the Big Three of German banking were
vital to the funding of the German war machine, both before and during
the war, Deutsche Bank was much
more so, for it was the lead bank in establishing economic authority
over the banks and corporations of the occupied countries. When the
German armies were preparing to invade the Lowlands and France, Deutsche Bank submitted to the Ministry of
Economics its plan for insuring
economic control over nations about to be overrun by the Wehrmacht.
Like I.G. Farben and its “New Order” for the European chemical
business, Deutsche Bank's plan was also named Neuordnung. It
was approved by the Ministry of Economics and the Reichsbank, and when
German armies moved Deutsche Bank followed.
69
In Belgium, control was assumed by
establishing banking subsidiaries of the big German ones, which also
bought majority control of existing Belgian banks. The Deutsche Bank
already had its own branch in Brussels and was doing business as usual
on May 19, 1940, when German troops marched into the city and proceeded
to give a band concert in the Grande Place - it being a sunny
afternoon. Dresdner Bank bought majority interest in Banque
Continentale of Brussels and Antwerp; the Bank der Deutschen Arbeit
bought into Banque de l'Ouest in Brussels; Commerzbank moved in on
Banque Hanséatique of Brussels. In Holland, German banking
exploitation
was achieved simply by having the Deutsche Bank, which had long been
interested in Handelmaatsschappj, increase its holdings in H. Albert de
Bary & Co., Inc. The Berliner Handelsgesellschaft increased its
holdings in the Hollandsche Koopmansbank. The Bank der Deutschen
Luftfahrt acquired all shares in N.V. Hollandsche Buitenland Bank,
while several other German financial institutions secured majority
shares in Rodius Koenigs Handel Maatschappin. Three subsidiaries were
established by Dresdner Bank.
Deutsche Bank bought majority
control of Bohmische Union Bank of Prague and the Banca Commerciale
Romana of Bucharest and 30 percent ownership of the Banque
Générale de
Luxembourg. It purchased controlling shares from banks in Belgium and
Paris, which up to that time had owned these banks of Prague,
Bucharest, and Luxembourg. The Société
Générale de Belgique of Brussels
and the Banque de l'Union Parisien of Paris, which owned these banks,
sold their shares to Deutsche Bank. In much the same way, this German
bank bought majority stock from Belgian and French majority
share-owners of Columbia Oil and Concordia Oil, both Romanian joint
stock companies operating these oil-producing plants of Romania.
These economic penetration
specialists of the Third Reich handled France similarly, with but a
slight difference. In the years before the war the German businessmen,
industrialists, and bankers had established. close ties with their
counterparts in France. After the blitzkrieg and invasion, the same
Frenchmen in many cases went on working with their German peers. They
didn't have much choice, to be sure, and the occupation being
instituted, very few in the high echelons of commerce and
70
finance failed to collaborate.
The Third Republic's business elite was virtually unchanged after 1940.
Jewish businessmen, of course, were penalized for being just that,
along with those who joined de Gaulle. The Vichy government, and the
occupation government under German domination, was run by “notables,”
people who had already made it in public administration, commerce,
finance, and the professions. They regarded the war and Hitler as an
unfortunate diversion from their chief mission of preventing a
communist revolution in France. Antibolshevism was a common denominator
linking these Frenchmen to Germans, and it accounted for a volunteer
French division on the Eastern Front, which in actuality was useful
only as propaganda for the Germans. Hitler never thought much of
the volunteer divisions of
occupied Europe, dismissing their existence with, “We will rise by
ourselves.”
The upper-class men who had
been superbly trained in finance and
administration at one of the two grand corps schools
were referred to as France's
permanent “wall of money,” and as professionals they came into their
own in 1940. They agreed to the establishment of German
subsidiary firms in France and permitted a general buy-in to French
companies. In 1941, French banks sold a large part of their holdings in
the industrial and banking enterprises of central and southeastern
Europe; after all, they reasoned, the German armies were already there,
which secured French interests; and half a loaf is better than none.
In Paris the usual direct
penetration took place by shareowner control
of such as Worms et Cie. (now Banque Worms Group), the Banque de Paris
et des Pays-Bas, Banque Nationale pour le Commerce et l'Industrie (now
Banque Nationale de Paris), and Banque de l'Indo Chine (now Banque de
l'Indo Chine et de Suez Group).
On May 23, 1940, all French
banks operated under the German banking administration, and fiscal
operations came under the supervision of Berlin auditors. When the
Japanese bombed Pearl Harbor on December 7, 1941, and President
Roosevelt announced that the United States was at war with Japan and
Germany, the branches of American banks in France came under German
control and were closed, except for two American banks: Morgan et Cie.,
and Chase of New York. Both received
71
this special treatment through
the intercession of Dr. Hermann Josef Abs of Deutsche Bank, financial
advisor to the German government. According to U.S. Treasury agent
reports, the favorable treatment was due to an “understanding
relationship” between Lord Shawcross and Dr. Abs. Sort of an “old
school tie,” an unspoken understanding among international bankers that
wars may come and may go but the flux of wealth goes on forever. Lord
Shawcross was, and is, a British financial leader in the City of
London, a distinguished barrister, and a board member of many
international firms; he had also been serving as special advisor to
Morgan Guaranty Trust of New York, and to their French and Spanish
banks. Morgan et Cie. and Morgan et Cie. Internationale S.A. and Chase
of New York had their own ties to Abs. Lord Shawcross was later to
become chief prosecutor for the United Kingdom before the International
Military Tribunal at Nuremberg. He was to have many friendly
conversations with Dr. Abs, who was under house arrest for a time in
1945. Both Lord Shawcross and Dr. Abs were to work together again in
the 1950s in jointly sponsoring an international organization named
“Society for the Protection of Foreign Investments of World War II,”
with headquarters in Cologne, West Germany - all this according to
testimony and documents submitted to the U.S. Justice Department and a Senate committee in Washington.
Meanwhile, in 1940, Jewish banks in France
(such as Banque Transatlantique, Lazard Frères, and Rothschild
Frères)
and many a more modest Jewish firm engaged in the securities business
and in international operations were seized, but were all returned to
rightful ownership after 1945.
In both Belgium and France
control of banks gave the Germans control of industry because banks
could vote the shares they held in commercial firms, determining
management's collaboration in manufacturing products for use in
Germany. Control of both banking and industry in occupied countries was
therefore essential to continued effective domination of a nation.
People depended on factories and commercial establishments for their
livelihood; they needed banks to cash paychecks and for their savings,
as well as to lend them money for business expansion and home
mortgages. Those eliminated from this economic circle suffered
severely. With no jobs and no savings, they con-
72
stituted a minority society of
social and economic outcasts. Some turned to the Resistance - not too
many until Allied troops were at the gates. On the other hand, as part
of the “carrot,” compliant workers in factories and employees of banks
received part of an increased salary scale in food bonuses, so that
they and their families survived the occupation in better style.
Hitler could afford to strip
these countries of 153 divisions and send them to the Eastern Front in
1941. Thirty-eight divisions were enough for the Lowlands, Belgium, and
France: bank control and the police, both German state secret police
and the local police who worked for them, did the rest.
In Holland, because the big
local banks did not have stock ownership of the firms they financed,
Deutsche Bank specialists approached the industrial problem in a
different way. They bought into the key firms much as they would go
about negotiating a takeover in peacetime, except that their hole card
was the German army.
As one example, AKU
(Algemcene Kunstsijde Unie N.V., of
Arnheim, Holland) was a chemical firm, which had been formed in 1929.
It owned outright an important subsidiary, Vereignigte Glanzstoff,
among other properties. In Germany the Dutch-owned subsidiary was
Vereinigte Glanzstoff-Fabriken A.G., of Wuppertal-Elberfeld. The
Germans already held a minority, interest in AKU and V.G. But Deutsche
Bank and Reichsbank wanted majority control, not only
for the benefits it would
provide to German war production in Holland, but for the increased
profits that would flow to German shareowners. This is how the
transition was accomplished: AKU had common shares and preferred
shares; the latter, which had the bigger voting rights, were all in the hands of
members of the board of AKU. The
first move was to change the composition of the board. The German
Ministry of Economics, in the person of Hans Kehrl, asked a Cologne
banker, Kurt Freiherr von Schroeder, to join the board of AKU and of
Vereinigte Glanzstoff. Upon becoming a board member of AKU, Schroeder
received 6,000 florins of shares (6 shares of 1,000 florins each). He
received these as a trustee and as a member of the board. At the
beginning of the war there were eight members on the board of AKU:
three Germans and five Hollanders. The chairman of the board was Mr.
Fentner van Vlissingen; the vice chairman
73
was Dr. Abs of Deutsche Bank.
Deutsche Bank controlled many of the AKU shares and had a leading
position in the Vereinigte Glanzstoff. Liaison between the two
companies was carried on by Vaubel. The eight men holding the priority
shares were all now in a consortium. The Germans dominated this
consortium, although technically the Dutch had a 50 percent interest.
Before each meeting, when the shares had to be voted, it was decided
how they could vote. The shares of the trustees had to be voted the
same way. The German holders were trustees for the Vereinigte
Glanzstoff. The Germans, such as von Schroeder, who had received their
shares at no cost, were obligated to turn back their stock when they
left the board. They were merely trustees, and voted on order for V.G.,
as did the priority shareholders. Before board meetings, owners of the
priority shares received letters from the Deutsche Bank or V.G.
management telling them how they should vote. The eight priority
shareholders each held six priority shares valued at 48,000 florins.
Before each meeting Dr. Abs and Mr. van Vlissingen held a short
conference, at which time the course the voting should take was
outlined. The leading figure was Abs; van Vlissingen would deliver the
instructions as initiated by Abs.
Kurt von Schroeder said the
Dutch members did as the German government desired. “They never made
difficulties. Abs was the leading man because of the majority of the
shares he controlled in the consortium.”
There were three American
companies, North American Rayon Corporation, American Bemberg
Corporation, and American Enka, all subsidiaries of Vereinigte
Glanzstoff subsidiaries. American Bemberg was a subsidiary of J.P.
Bemberg A.G., itself a subsidiary of Vereinigte Glanzstoff. After the
war began, it was difficult to manage the three American companies from
Germany. An effort was made to have the American subsidiaries appear to
be under Dutch rather than German control. The consortium of V.G. and
AKU, however, continued receiving annual reports and the profits from
the American firms placed on deposit to accounts in Switzerland,
through Swiss subsidiaries. (In the 1950s, both AKU and Vereinigte
Glanzstoff were reshuffled and became part of a Dutch holding company,
AKZO NV. AKU today is AKU-Goodrich, and Vereinigte Glanzstoff has been
absorbed into the American Enka Company
74
of North Carolina. All continue
profitable for AKZO NV and the
Dutch and German shareholders.) The original move for control in 1941 was prompted by the German
need to increase the production of artificial wool and cellulose. To
fulfill this AKU needed more capital, for the construction of a new
plant for the artificial wool, and it had to found a new company, SOVE,
to produce increased cellulose. Deutsche Bank agreed to increase the
AKU capital by 10 million florins with nonvoting certificates in
Germany, retaining the original shares with its voting rights. Any who
bought the certificates received the same dividends and had the right
for one time only to change the certificates for original shares.
Deutsche Bank, with its 10 million florin shares of capital with voting
rights, was in command, but it was not until it bought additional
shares of AKU in Holland that it held a majority of the total shares.
The AKU shares against which certificates were issued by the Deutsche
Bank were deposited with the Deutsche Bank Filiale Hamburg; in the amount of
27,762,900 florins with German stamp and 3,444,400
florins without German stamp were
the amounts exchanged for certificates by the Deutsche Bank at that
time, when AKU was reorganized in 1942.
If all this seems devious in a war of shot and shell, it is. But
such a form of control was necessary to the long haul of
occupation, in which the Third Reich envisioned a peaceful, prospering
community of nations within their Fortress Europe. Commerce and
industry had to go on, and profits had to flow with benefit to all
involved parties and shareholders, if a common market under German
direction were to succeed and communism
were to be held back.
Once Martin Bormann had the German banks
assume majority control of the fiscal apparatus of each overrun country
and of the corporations of special worth to them, the German “Four-Year
Plan” was the next step in total administration, determining precisely which individuals were
to direct these enterprises in
the occupied areas; also, into which German sphere of requirement such
should fall.
In Holland, the overall administrator of the
financial and economic plan was
Dr. Hans Fischbock. The Luftwaffe took charge of the electronics firm
of Phillips, which had become a prime supplier. Phillips of Eindhoven
was likewise used for
75
special wireless projects, thanks to its astounding capabilities in the
manufacture of electronic communications and radar equipment. One such
was to engineer equipment that would monitor the telephone
conversations between Prime Minister Churchill and President Roosevelt.
In 1940 AT&T and their Bell Laboratories
had developed a device for secret telephone transmissions between the
president of the United States and the prime minister of Great Britain.
This so-called X-System was the first speech encoding technique that
could be deciphered only at the point of intended reception. Churchill,
from his command post beneath Westminster, would speak into a specially
contrived handset; his words were encoded with electronic pulses called
“key signals” and transmitted by short-wave radio; received at AT&T
headquarters in New York City, they would then be transmitted to the
White House, where the key signals would be deleted; thus the listener,
the president, would hear only the perfectly clear, original message.
It was a giant leap forward in telephone confidentiality, developed by
Robert C. Mathes, Ralph K. Potter, and P.W. Blye, Ben engineers.
But this unique invention of
telephonic radio scrambling was about to lose its confidentiality. In
1941 a Gestapo agent within the
British intelligence structure sent a coded report to General Mueller in Berlin that top secret information
affecting the course and outcome of the war was being regularly
exchanged over the ether between Churchill and Roosevelt, Although it
is true that British intelligence had penetrated the German General
Staff, it is equally true that General Mueller had his mole inside
Britain's Secret Intelligence Service, a fact unknown to either the
British or Admiral Canaris of the Abwehr, who was leaking information
secretly to General Sir Stewart Graham Menzies, head of MI-6.
General Mueller's agent was
Charles Howard Ellis, a top-level British career intelligence officer
who also served as a Nazi double agent throughout World War II. At the
time of his tipoff to General Mueller, Ellis was in New York as second
in command to Sir William Stephenson (“A Man Called Intrepid”), who was
doing his best to move the U.S. into war against Germany with a
combined propaganda and British spy operation and who later assisted in
the formation and training
76
of the American OSS. Charles
Ellis learned of the Roosevelt-Churchill telephone conversations from
Stephenson, who was a frequent visitor to the White House. Ellis sent
his message to Mueller through Gestapo channels via Mexico City to
Buenos Aires, where it was beamed to Hamburg by one of the clandestine
German transmitters in that capital. The Ellis report was quickly taken
by General Mueller to Reichsleiter Bormann, who promptly told Hitler
about it. The Fuehrer ordered Bormann to do whatever was necessary to
unscramble these conversations and provide him with transcripts within
hours of their occurrence.
Under the direction of Group
III of the Berlin cipher section, Bormann instituted a hurry-up
program, and after many months of intensive work and many millions of
Reichsmarks spent by the research institute of the Deutsche Reichspost,
Dr. Ohnsorge, minister of postal services, informed Bormann that a
sophisticated installation would enable them to unscramble undetected
the telephone conversations between the two Allied leaders and place
them in clear, listenable context. The task was described by German
cryptologist Wilhelm F. Flicke: “Just imagine you are standing on the
edge of a seething volcano, with a dozen yelping dogs just behind you
and with a few wolves and lions howling, and roaring at the other side
of the crater. Add a gentle whistle to this sound mixture and you have
an idea of what scrambled speech is like and what German engineers had
to penetrate before they could extract words.”
The chief German electronics
engineer who developed this counterachievement of the Deutsch
Reichspost was Herr Vetterlein.
In September 1942, under his direction, the Dutch engineers of. the newly captive firm of
Phillips at Eindhoven constructed the necessary installation in a
monitoring station, on a spit of land close by The Hague.
Hitler was delighted each
time Reichsleiter Martin Bormann placed on his desk a transcript only
hours after the American president and the British prime minister had
held one of their transatlantic conversations. Bucked up by the
ingenuity and patriotism of his
German inventors, he expressed thanks to the Phillips engineers. “Their work alone in this
matter made the taking of Holland worthwhile,” he is said to have
remarked to Bormann. Indeed it did, for it gave Hitler a window into the
77
workings in London and provided
him with the certain knowledge that there would be no Second Front in
1943, leaving him free to shift further divisions from the Westwall to
the Eastern Front. The many hundreds of British and Allied agents
sacrificed by the British in France and in the Lowlands to convince the
Germans there would be a Second Front in 1943 makes a dismaying
footnote in the history of World War II. Not until February 1944,
months before D-Day, did British intelligence discover that its worst
security leak was at the top of the pyramid, and order the Royal Air
Force to destroy the Nazi monitoring station in Holland.
Bormann's Four-Year Plan
proceeded like clockwork in Western Europe, and the Germans made a
special effort to apply the same to the countries of southeastern
Europe. Before World War I they had large holdings in public loans,
railways, banks, mining, oil, and other industrial interests in this
part of the world. As a condition of the peace treaties following World
War I, Germany forfeited it all, and furthermore had to pay retributive
reparations to those countries that had taken the side of the Allies.
Part of the Austrian and Hungarian holdings, especially in the heavy
and armaments industries and in banking, were taken over lock, stock,
and barrel by France and Great Britain, as well as by Belgium,
Switzerland, and other nations.
Thus, up until 1934, what was left to Germany was minuscule; they
held only 1 percent of the total foreign investment in Yugoslav
industry and less than 1 percent of the total foreign investment in
Yugoslav banking.
With the advent of National
Socialism, perceived as a saving grace, and the concomitant era of
renewed German production, trade, and Reichsmark diplomacy, the
Fatherland once again became a force to be reckoned with in
southeastern Europe, drawing it into the Nazi orbit. In 1941, when
German armies slashed through the Balkans to the Aegean in five weeks,
the administrators of the Four-Year Plan moved to exploit this region
in a businesslike manner. They carried out the financing and
development of important raw materials in Yugoslavia, Romania, and
Bulgaria. For this they utilized the skills of German industrial firms
to extract maximum benefits from the mining, steel, and petroleum
industries. Deutsche Bank, Dresdner Bank, and Commerzbank had already
gained majority
78
control of the principal banks
and industrial corporations of these countries by buying sufficient
shares from their principal shareowners, French and Belgian banks.
A similar pattern was developed for
Luxembourg, a country smaller than Rhode Island, whose principal
industry is iron and steel. The Germans annexed Luxembourg, as they did
Alsace-Lorraine, and it became an administered territory, like Poland,
Belgium, and Holland, where local nationals did not serve as
government. Gustav Koenigs, chairman of Hamburg-Amerika shipping line
and a director of many companies, was appointed Reich trustee of ARBED,
an important Luxembourg steel cartel, by the German Ministry of
Economics. There were in ARBED 250,000 shares outstanding, the majority
held by Luxembourgers, Belgians, and French, in that order. German
share-holders, largely, through their banks, accounted for 54,747
shares. Some were held by British and Americans through their secret
accounts in Swiss banks. A shift in control was made when Gustav
Koenigs, as Reich trustee, also became trustee of the Belgian and
French held shares. On April 19, 1943, a share-holders meeting was held
in Luxembourg city, and the capital of the company was converted from
francs into Reichsmarks. ARBED was recapitalized at 300 million
Reichmarks ($120 million), and under German direction the cartel became
the third largest iron and steel company in Europe, ranking behind only
Germany's Vereinigte Stahlwerke and the Goering Steel Works. A sales
company was then formed under the name of Luxembourg Iron & Steel
Company to market all ARBED products throughout Europe. It was
capitalized at RM 1.5 million. To further tighten German control over
the iron and steel output of this small, mountainous country, all of
the iron mines in Luxembourg were combined and amalgamated into one
unified association under German direction. This association was named
“Luetzellurg,” and its advisory board was appointed by the chief of the
German civil administration. Gustav Koenigs, as Reich trustee of ARBED,
served as president of Luetzellurg.
The two principal German banks, Deutsch Bank
and Dresdner Bank, had assumed 73 percent ownership of the Banque
Générale de Luxembourg and the Banque International de Luxembourg in May 1940.
They bought majority shares of the
79
two Luxembourg banks from the
Belgian and French banks, where they had increased their shareholdings
to a controlling interest. Both Commerzbank and the Deutschen Arbeit
banks established branches in Luxembourg.
In dealing with all other
aspects of the economy of occupied countries, the Germans were just as
thorough. In 1939, the British insurance companies held nearly half of
the French portfolios, amounting
to 90 billion francs, or about $1,800 million. When France fell, all British insurance
offices in both occupied and unoccupied France were closed and by
agreement with the French Insurance Department in Vichy, and the German
Central Organization of Insurance Carriers, a full concession was
issued by France to German insurance companies. The Munich Reinsurance
Company had already penetrated France before 1939 through the
Société
Anonyme de Réassurance of Paris. In 1940 Nordstern of Germany
acquired
most of the British business. The heavy industries of France were put
to work for Germany, as was the iron and steel industry in
Alsace-Lorraine. By 1941 there was great bitterness in France toward
the British, anyway. It appeared to the French now that most Allied
military successes seemed to involve French losses. First, there was
the British invasion of Syria in June 1941. Then the British blockade
of the Continent began, causing grievous food and fuel shortages in
France, although had the German occupation authorities not drained so
much food from the French economy and diverted it to Germany the
shortage would have been manageable. On March 3,
1942, the British bombed the Renault works in the
Paris suburb of Boulogne-Billancourt, which caused great damage and
civilian casualties. Also, the Vichy French were still smarting from
the seizure of two battleships, four light cruisers, two submarines,
and about two hundred small craft at anchor in Portsmouth and Plymouth.
But the shelling and bombing of
the battleships Bretagne, Dunkerque, and Provence at Oran, and the Richelieu at Dakar,
along with lesser vessels, turned Britain into an enemy of Vichy
France, although Churchill was wise to order the attacks to keep this
naval force from falling into German hands. If they had - and German
plans were being made to seize the ships and man them with German and
Italian crews - the battle for the Mediterranean and the Atlantic would
have swung in Germany's favor.
80
Against this background, and
with the schism between France and Britain, France looked to Germany
rather than to Britain.
The economic penetration of
the neutral nations was handled differently by German corporations and
banks. They continued to move in tandem, I.G. Farben and Friedrich
Krupp, A.G., to name only two major ones with worldwide interests, and
manufactured and sold their products while participating banks handled
the funding and the collection of money, according to terms of
contracts between manufacturer and principal.
Hermann Brombacher, manager
of the War Material Export Branch of Friedrich Krupp A.G. in these war
years, stated that all contracts for export had to be passed on by two
government agencies, A.G.K. (Ausfuhr Gemeinschaft. Kriegsgerat) and
O.I.W. (High Command of the armed forces). Brombacher said that foreign
business was handled in the following manner:
“All companies competing for
a foreign contract would notify A.G.K. of the facts of their bid.
A.G.K. had the power to determine if a particular company’s prices were
right. One company could not offer a price lower than that of another
German firm,
on the same product. The contract would usually go to the company
having the best name or the one preferred by the foreign government.
The companies who were then unsuccessful in the bidding would often be
licensed by the company securing the contract to fill part of the
order. The company receiving the order would be called the leader of
the syndicate or ‘consortium,’ and would often license the other
companies to aid them.”
Brombacher gave as one
example a 1937 Krupp contract with Brazil for the delivery of certain types of
war materials. “To secure this
contract and to introduce its products there, Krupp had several
representatives in Brazil (namely, Bromberg & Co.).
Rheinmetall-Borsig, Krupp's main competitor for the business, also had
representatives in Brazil. When Krupp secured the contract, Rheinmetall
was then ordered by A.G.K. not to compete with Krupp in Brazil. The
expenses of Rheinmetall's representatives were ordered paid by A.G.K.
out of the expense clause of the
new contract.”
As an insight into how Krupp
operated its vast armaments business during World War II (in contrast
to World War I, when it had to import precision instruments from
Switzerland),
81
Brombacher stated, “In the Second
World War we had our own German sources for the photoelectric and radar
fire controls used for our guns. We were supplied by the German firms
of Siemens & Halske, A.G. and Siemens-Schuchert-Werke A.G. All
optical devices were built by Carl Zeiss.”
He added that Krupp had also
shifted from being mass supplier of the German war machine to being
primarily a development and invention agency for weapons that were then
mass fabricated by other manufacturers.
While supplying weaponry to
other countries on the O.K.W. approved list, Brombacher said they
didn't let the war interfere with profits. He explained one gun
contract Krupp had with Holland. Krupp had not finished building the
border defense guns Holland wanted under terms of their contract, “so
Krupp loaned Holland some big defense guns on a cash rental basis.”
When the German army rolled over Holland in May 1940, although it
wasn't much of a roll-over because the borders were thinly patrolled
and the way had been smoothed by the German Citizens' Association (the
A-O), “the rented guns were repossessed by Krupp and later sold to the
Italians.”
The expansion of the German
economy despite war produced a new Reichsmark diplomacy that made a
profit for everyone involved: the corporations, the banks, their
shareholders, the Reichsbank, the government of the Third Reich; and in
countries where sales were made the business elite prospered, as did
the middlemen who handled the goods and the tradesmen who sold to
consumers. It was a golden circle of Reichsmark diplomacy, which had
its effect on foreign policy and the conduct of the war.
Consider Turkey, and the
reasons that it remained outside the Allied fold until the waning days
of the war. The Big Three, Roosevelt, Churchill, and Stalin, all agreed
it would be desirable to have Turkey in the war in 1943. But they
didn't have Reichsmark power; they didn't have the guns and aircraft
and diverse consumer products Turkey craved. In short supply
themselves, they were carefully
stockpiling any excess war equipment for 1944 and Operation Overlord. So they
attempted rhetorical diplomacy.
Winston Churchill had Anthony Eden meet with
a Turkish delegation on November 23, 1943,
the time of the Churchill-
82
Roosevelt Cairo Conference, which
took place on the eve of their meeting in Teheran with Josef Stalin.
Foreign Secretary Eden had persuaded a Turkish delegation to come to
Cairo. At the meeting he pointed out the urgent Allied need for Turkish
airbases, and the advantages that would accrue to both sides if Turkey
entered the war on the side of the Allies. The Turkish delegation sat
through this discourse unmoved. They said that granting of airbases to
the Allies would be an act of intervention, and that nothing could
prevent German air strikes on Constantinople, Ankara, and Smyrna.
Later, Eden privately
remarked to Churchill, “Considering what has been happening to us under
their eyes in the Aegean, the Turks can hardly be blamed for their
caution.”
What Eden did not know is
that the Turkish delegation had better reasons for being negative to
his proposals. They were locked up in Reichsmark diplomacy, and members
of the delegation did not want this golden thread broken.
Germany was having a field
day in Turkey. German assets totaled about $30 million and the
Turkish-German clearing account was $15.7 million, yet neither figure
tells the true story of German assets in Turkey at that time. Two
German bank branches, the Deutsche Bank in Istanbul and the Deutsche
Orient Bank (a Dresdner bank), were depositories for a steady flow of
bonds, cash, gold, bank deposits, and foreign exchange belonging to
German firms and individuals. Six German insurance companies with
branches in Turkey followed a standard policy of linking Turkish
insurance companies into their own operation with grants of German
investment capital, which automatically forced these firms to bow to
German policy. But it also generated large fluid assets, which were
invested in local real estate and other properties and business
ventures. More than sixty German
Then there was a 100-million
Reichsmark order for German war materials to Turkey. While the Eden
conference was taking
place in Cairo, Turkish and German businessmen and Govern-
83
ment leaders were discussing this
contract by a consortium of German firms. By terms of this sale, bonds
of the Turkish Treasury to the amount of RM 100 million were deposited
with the Deutsche Bank, to be redeemed in half-yearly installments from
1944 to 1949 in return for Deutsche Bank credits.
Deutsche Bank was handling
all the financial aspects of the Turkish order. This bank computed the
sums each German firm
was to receive in cash, and then formed a syndicate of several banks
for the funding, with the German firms receiving their money
immediately. To the German O.K.W., an important element of this
transaction was the resumption of chromium ore shipments from Turkey to
Germany. The Turks received their war materiel from Germany with
promptness, but were able to pay
only two installments on their war bonds, those due May 15 and November 15, 1945. In August 1944
Turkey had reluctantly cut its diplomatic and economic relations with
Germany. On February 23, 1945, four months before the German surrender
at Rheims, France (on May 7), Turkey declared war on the Axis.
In another neutral nation,
Spain, Reichsmark diplomacy worked equally well Although Franco
sympathized with Hitler and his war against communist Russia, even to
the extent of sending it volunteer division to the Eastern Front, he
became more neutral as the war went on. In 1943 he had been told during
a personal meeting with his old friend, Admiral Canaris, that Spain
should stay out of the war; that Hitler could not win. From this moment
on he became more even-handed in his treatment of German and British
diplomatic representatives who were quietly fighting for his attention
and for the other perks that go with a most-favored-nation relationship.
On the industrial front,
however, Germany was winning hands down. Almost all sections of the
Spanish chemical and pharmaceutical industry came under the control of
I.G. Farbenindustrie. It controlled many Spanish firms directly or
through Unicolor S.A. I.G. Farben owned 51 percent of the stock in
Sociedad Electro-Quimica de Flix whose manufacturing processes were
under license from I.G. Quimica Commercial y Farmaceutica S.A. was a
subsidiary of I.G. Farben and distributed the Bayer line of medical
products in Spain. Farben
84
Unicolor S.A. represented 16
German firms having interlocking directorates with several large
Spanish chemical companies.
There were Lipperheide and
Guzman S.A. (later to be renamed Industrias Reunida Minero Metalurgicas
S.A.), whose holdings included smelters and transportation facilities.
There were also in Spain two prominent German-owned banks.
The Spanish Civil War had
given Germany a strong foothold in Spain. Hitler had sent technical
aid, a Condor division, and dive bombers to Franco. The war also
enabled his new generation of army strategists to test new field and
air tactics and weapons. In return, General Franco later sent his Blue
Division to Russia, but by German accounts this did not square the Spanish debt.
In November 1943, an agreement was reached in
which Spain acknowledged a $1 billion debt to Germany. Several payments
were made, in free credits. One payment was of $60 million to be used
by the Germans to buy Spanish property, finance goods, and sustain the
German diplomatic staff in Spain. In July 1944
the balance due had been brought down to $40 million by Spain. By April
1945 Spain's debt was only $22 million, and it was being negotiated by
German interests.
German economic penetration of Portugal was
limited. In 1944 prewar
investments in mining gave way to the purchase of properties in the
cities of Portugal. I.G. Farben did not manufacture in Portugal, merely
marketing pharmaceutical specialties through their Bayer Ltda., in
Lisbon and Oporto. The most important German manufacturer in Portugal
was the electrical firm of Siemens Companhia de Electricidad S.A.R.L.,
a division of the Siemens group of Germany. No German banks were established in Portugal.
In their efforts to harness the economies of
Europe, administrators of the Four-Year Plan encountered resistance to
the proposed takeover of certain companies, such as the German branch
of the Ford Motor Company. The management of “Ford-Werke A.G.” wanted
to hold this company together as a
profit-making entity (“The war won't last forever and we have a good thing in Ford”). They believed that
once government bureaucracy laid its hand on their corporation it would
never be the same. Therefore, Dr. H.T. Albert, chairman of the board,
85
sent a memorandum to the
Four-Year Plan administrators from R.H. Schmidt, president of the board
of Ford-Werke A.G. They mustered the arguments on whether a complete
Germanization of Ford would be necessary or advisable. In part, Schmidt
wrote:
All vehicles and parts are being produced in
Germany by German workers using German materials; export into the
European and overseas sales territory of the United States and Great
Britain has amounted to many millions in the
last year of peace.
Foreign
raw materials were obtained through the American company (rubber,
nonferrous metals) to cover production needs of the German plant and in
part for the whole industry.
As soon as the American stock
majority in Ford-Werke A.G. is eliminated each Ford company in every
country will fight for its individual existence. Amsterdam, Antwerp,
Paris, Budapest, Bucharest, Copenhagen, etc. are concerned (about a
collapse of the general Ford organization in Europe).
A majority, even if it is
only a small one, of the Americans is essential for the actually
free-transmittal of the newest American models as well as for the
insight into the American production and sales methods. Since Americans
are without a doubt particularly progressive in this field, the
maintenance of this connection is in the German interest. Through
license fees or contractual stipulations this advantage, as well as the
importance of the company for the obtaining of raw materials and
exports, would be lost. The plant would practically only be worth its
own machine capacity.
The memorandum was dated November 25, 1941,
and the United States went to war two weeks later. While Mr. Schmidt's
and Dr. Albert's argument became moot, the German government did not
break up the Ford operation of Europe. They admired its efficiency,
placing the various motor companies in different countries into their
armament production scheme.
At the apex of this vast
financial and economic administrative structure was positioned
Reichsleiter Martin Bormann. He had retained his grip an the pulse of
German finance ever since the day be took charge of the finances of the
Fuehrer, and the vast funds of the Reich chancellery. His friendship
and association with Dr. Herman Josef Abs predated Abs's move into the
management of Deutsche Bank. Dr. Abs had been a partner in the
86
prestigious private bank of
Delbruck Schickler & Co. in Berlin. Recalling those days, Abs has
written:
The Reich Chancellery in Berlin was its largest
account, and it was through this account that Adolf Hitler received his
salary as Chancellor of the Reich.
Martin Bormann, whose control of the Reich
chancellery was absolute the moment he succeeded Rudolf Hess,
maintained a cordial relationship with the Berlin banker. Dr. Abs moved
to the Deutsche Bank on December 30, 1937, where he became first a
member of the board of management, later the chairman of the most
powerful bank in Germany, which was to tug the German financial
apparatus ever forward into new areas of financial expansion and power
throughout the world.
Reichsleiter Bormann knew
that his relationship with Abs would tighten as his own power grew.
Remaining on friendly terms with the Third Reich's leading banker was a
contentment. He knew in
1943 that with his Nazi banking committee well established, he had the means to ultimately
take the reins of finance unto himself. Through this committee and
through the power that flowed from Hitler to himself, he could set a
new Nazi state policy, when the time was ripe for the general transfer
of capital, gold, stocks, and bearer bonds to safety in neutral nations.
Bormann, like Hitler, had no
illusions that victory would be theirs on the field of battle. Hitler
had settled in his own mind that a sort of victory might accrue to
Germany only with a compromise peace with the adversaries. To Martin
Bormann, he had commented at Obersalzberg in 1943, “No one will make
peace with us now.” Yet he went on nurturing the hope of establishing a
holding line near Kursk in the Ukraine, then fighting the British and
the Americans to a standstill in the West.
In
the summer of 1943 Hitler requested Bormann to call a meeting of his SS
security chiefs. Present were Hitler, Bormann, Himmler, Heinrich
Mueller of the Gestapo, and Schellenberg, head of SS foreign
intelligence. Foreign Minister Ribbentrop also sat in on the conference
because his ministry was to supply
87
essential data in the game plan
now being devised. It was a new, cagy diplomacy, in which negotiations
were to be opened with the West, while simultaneously establishing
contact with Moscow.
It was decided at the conference that Himmler should make the
approach to the West, while Mueller would begin a “Funk-spiel,” a radio
game using captured communist wireless operators to send messages to
the intelligence gathering center in Moscow. This center, so-called,
controlled all Soviet agent activities outside Russia. It was the net
that pulled in all communications, which were then distributed to the
various intelligence chiefs in Moscow, according to priority and need.
Anything dealing with shifting strategy in Berlin, London, and
Washington went directly to Stalin. Mueller was very good at forcing captured “enemy”
wireless operators to work for the Germans, using their transmitters,
codes, and personnel to cause London or Moscow to believe it was their
own agent on the air still transmitting valid information.
At the time of this 1943
conference with the Fuehrer, the Abwehr had control of Leopold Trepper,
a Polish Jew who had run a brilliant network for the communists. It had
earned the nickname “Red Orchestra,” because its wireless operators in
Berlin, Amsterdam, Brussels, and Paris. appeared to transmit like an
orchestra as they followed one after the other each night with their
messages to the center in Moscow. It took the Abwehr and the Gestapo
two years to demolish the Red Orchestra. Then they learned that all
participants were militant Jews dedicated alike to communism and the
concomitant defeat of Nazism; thus, to the Nazis it was yet another
threat to contend with. By the end of 1943 the
Gestapo had entrapped more than 130 communist agents, most of them
workers for the Red Orchestra.
The Abwehr arrested Leopold
Trepper, the leader, in Paris. Shortly thereafter he was placed under
the control of the Gestapo, and rather than die he agreed to cooperate
by transmitting coded messages to the center in Moscow, material that
had been prepared by the Bormann-Mueller team in Berlin. This latter
was about to launch “Operation Bear,” under Hitler's direction, a
campaign of sly and false information they believed just might split
the Allies and lead into a separate peace with Russia.
88
Trepper was transported from prison to a
large and comfortable house in Neuilly, at the comer of the Boulevard
Victor Hugo and the rue de Rouvray. Well guarded, from this location
Trepper sent messages to Moscow; the Red Orchestra had become the Brown
Orchestra. But Trepper's hope was that some way along the line he could
inform Moscow that he had been captured, that his network had been
rolled up, and that he was transmitting under duress. Such an
opportunity did come after some months when he smuggled out a coded
account of his situation, which reached the Soviet Embassy in London
and was passed along to Moscow. Until that time, however, the center
was receiving streams of misinformation, from six transmitters, in five
countries, all run by Mueller's Gestapo, in addition to the Trepper one
in Paris. One of the more accomplished Red Orchestra members, who had
succumbed to working for Mueller under dire threats to his person, was
Johann Wenzel, an expert the center had shifted from Holland to
Brussels to coordinate air traffic of the Belgian network. Wenzel
stayed on the air for six months, only to be betrayed under duress by
Sophie Paznanska, a cipher expert promoted to station chief in Brussels
who had been seized by the Germans. Wenzel, who knew the new codes in
use by the center, returned to the air waves, now for the Germans,
unsuspected by the staff of the center. In January 1943 Wenzel, while
transmitting, leaped up suddenly, knocked his guard unconscious, and
fled. Reaching the Netherlands, and using a transmitter the Gestapo had
not found, he sent a full disclosure of Mueller's radio game. It was
evidently neither grasped nor comprehended in Moscow, for in his
memoirs of 1977 Leopold Trepper stated: “Judging by his answers the Director suspected nothing”.
By this time, Heinrich Mueller had dispatched
an assistant to Paris to handle
Trepper and, in general, the transmission of information to the Russian
leadership. Heinz Pannwitz was the individual, a Hauptsturmfuehrer SS,
who had served as aide to Heydrich in Prague when the German SS leader
was gunned down by Czech agents from London. In angry retaliation for
this, Pannwitz had ordered the execution of thousands of Czechs and the
burning of Lidice, becoming known to history as
the “butcher of Prague.” In Paris he was determined to make a name for himself, and he did so in a
predictable, unsavory
89
way. But during a full-scale
propaganda offensive by means of the Paris Red Orchestra unit, Leopold
Trepper had escaped and remained underground until the liberation of
the French capital in August 1944. He was to return to Moscow the following
year, but his misfortunes there are another story - he was incarcerated
ten years in Lubyanka prison waiting for his loyalty to the Soviet
Union to be investigated. Following the death of Stalin, he was cleared
and returned with his family to Warsaw. Captain Heinz Pannwitz had made
his way to Moscow believing he could get better treatment from the
Russians than from the English. He was also imprisoned for ten years,
then released. In 1977 he was managing director of a bank in
Ludwigsburg, in West Germany.
Back in 1943 at the start of
Operation Bear, with a peace approach to both sides agreed upon at the
above-mentioned conference, Himmler and Mueller locked horns. Himmler
was SS chief and minister of the interior; Mueller was SS
Oberstgruppenfuehrer and Generaloberst der Waffen SS - that is, SS
chief group leader and highest general of the SS force. They disliked
each other intensely. Himmler had been in chicken farming before the
war; Mueller had been inspector of detectives on the Munich police
force and had been taken into the Gestapo by Heydrich, who needed a
core of professionals to make the German Secret State Police more
efficient. Their open hostility to each other made Hitler angry too,
and he had ordered Bormann to be not only an arbitrator between Himmler
and Mueller but to be personally in charge of the wireless game
deceiving Moscow. This was fine with Mueller, who had cultivated
Bormann ever since the day the Reichsleiter had succeeded Rudolf Hess.
He perceived that this was a leader who knew what he was doing, and who
would go far.
Things developed, two against
one. Bormann didn't like Himmler either, and together they ultimately
cut Himmler down to size. Bormann and Mueller began transmitting
high-level information to the center in Moscow through their “turned”
wireless operators. Mixed in with the valid data was information on
Churchill and Roosevelt picked up from their transatlantic
conversations, purportedly stolen by communist agents from German
government files. Out of context, as they
90
were, some of the remarks could
be, and were, misinterpreted by Stalin.
Himmler made his peace
approaches to the West through emissaries he sent to Stockholm and
Berne, confirmed by Soviet agents in these cities. Himmler's men
carried documents, falsely drawn to show Stalin's eagerness for a
separate peace pact with Hitler. Himmler had a long talk with one
German resistance leader about the desirability of peace with the West,
and discussed how this could be accomplished. He knew the news would
travel swiftly to London because, if nothing else, German resistance
leaders were a talkative, hopeful lot. But the fellow sent to Berne
almost brought about Himmler's undoing. He carried a suitcase filled
with undeniably authentic documents provided by Ribbentrop's Foreign
Ministry. The man, Herr Langbehn, went first to the British Legation in
Berne and asked to see the British military attaché. He
explained he
was an official of the German Foreign Ministry and had brought with him
from Berlin a suitcase of Foreign Ministry documents. On hearing this
claim, the attaché presumed it false, and told him he was not
interested. The German then tried to see the head of the chancellery in
the British Embassy, but was rebuffed there.
So he went to the American Legation and repeated his story. A Legation secretary, deciding this
was cloak-and-dagger material, sent him on to Allen Dulles, head of the
OSS in Switzerland. He heard out the German's story, viewed the
documents, realized they were genuine, and reported them to Washington
immediately. “If only,” his message went, “you could see these documents in all their
pristine freshness.”
The documents were duly copied and sent to
Washington with Dulles's opinion appended that all evidence pointed to
their being a genuine approach by the Germans for a peace with the
United States and Britain. Copies were also sent to the OSS in
London, which made them available to British intelligence. At this
point Kim Philby, the British traitor who later fled to Russia after
serving it for thirty years, took charge of the documents and of the Dulles memorandum, and
reported their contents and the
German peace feeler to his control in Moscow.
Moscow received an additional
confirming report from their man in William Donovan's OSS headquarters.
This communist
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agent was a chief of the desk staff in
the Washington office, and his
position gave him access to all incoming reports of OSS station chiefs
around the world, including those of Colonel David Bruce in London,
chief of the OSS in Europe. It also explained why many of Allen
Dulles's most secret memoranda were blocked on receipt in Washington,
never to reach the commander in chief, the president. After the war, I
visited Donovan in his Wall Street law office; he confirmed the story
and remarked sadly, “It was all too true.”
Himmler, however, made a
couple of mistakes. One was his rendezvous with a German resistance
leader, which was observed by two of Mueller's men. Another was sending
an emissary to Switzerland, whose information was too good and too
secret - and the man had opened up too much with Allen Dulles. Later, a
message from a British agent in Switzerland to London carried by a man
who had talked to Dulles, was intercepted by Mueller, who showed it to
Bormann, who in turn passed it on to Hitler, who hit the ceiling over
such detailed revelations. Himmler survived this only by arresting his
own emissary to Berne, and cutting off all further overtures to the
West. Everything was now in Bormann's hands, and he preferred dealing
with Stalin at this point in history. He thought that with German
armies pressing hard a better peace accommodation could be made with
Russia than with Britain or the United States.
Peace
was not to come to Europe through these initiatives in the summer and
fall of 1943. Many strategies of deception of both Churchill and Hitler
failed, but the suspicions fostered by Martin Bormann lingered. At the
Teheran Conference, Stalin was plainly distrustful of the British prime
minister. Two years had passed since Rudolf Hess's adventure to
Scotland to arrange a cessation of hostilities between Britain and
Germany, and this episode rankled the Russian leader, whose suspicion
and anger were reinforced now by this other information from the center
in Moscow. He questioned and needled Churchill repeatedly about the
purpose of Hess's flight. Finally, Churchill replied heatedly that he
was not accustomed to having his word challenged. “When I make a
statement I expect it to be accepted as fact,” he retorted to Stalin.
The Soviet deflected this with a
92
sly response: “But even my
intelligence services don't tell me everything.”
At Teheran, President
Roosevelt tried for Stalin's approval of his statement made at the
Casablanca Conference with Churchill, in which he called for the
unconditional surrender of the German nation. At the time, this took
Churchill by surprise, as it did the president's generals. The
president told his aide, Harry Hopkins, “Of course, it's just the thing
for the Russians. They couldn't want anything better. Unconditional
surrender. Uncle Joe might have made it up himself.” These remarks,
seemingly offhand, had been decided upon earlier in Washington,
following a meeting with one of the president's closest advisors,
Supreme Court Justice Felix Frankfurter, of whom it was written by Jay
Pierrepont Moffet of the State Department, “The power behind the throne
was Felix Frankfurter.” He wanted the German nation punished absolutely
and totally, and told the president he should insist on “unconditional
surrender.” Henry Morgenthau, another advisor, had urged the president
to “turn Germany in a howling wilderness.” President Roosevelt accepted
Frankfurter's proposal, but rejected that of Morgenthau.
But at Teheran, Stalin disapproved of
Roosevelt's unconditional
surrender position. He was not impressed with such superfluity; it
would only prolong the war, and Russia had suffered in actuality more
than the other nations. He commented, “This war is being fought with
British brains, American brawn, and Russian blood.”
After the Teheran Conference, early in 1944, Hitler terminated his wireless game with the Moscow
center, and Operation Bear was shut down. An official in the Foreign
Ministry in Berlin, who had been involved in the operation, said:
“Either Hitler did not want to turn the radio game into a diplomatic reality,
or he was not capable of doing so. And there was no Talleyrand in Berlin to take the matter in
hand,” he added sadly.
However, Hitler considered substantial the
gains from Operation Bear. He had, thanks to it, planted divisive
distrust among the Big Three. Because of it, too, he hoped they would
go ahead with an invasion of
Normandy, which Hitler was confident
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would be disastrous for the Allies in general and the political ruin of
President Roosevelt and Prime Minister Churchill. Then he would make
peace with Stalin, whose nation had been bled white; with 20 million
dead, and a failed invasion of France by the United States and Britain,
the upshot would be a peace conference between Hitler and Stalin.
Later, in
Washington, President Roosevelt recalled that the sole agreement at
Teheran was that each principal would move forward as quickly as
possible. FDR had informed Stalin that he could
not at the time make long-range agreements for his country because he faced an election. “Overlord,” the code
name for the invasion of Normandy, was to be made operational in May or
June of 1944, and the Big Three prepared to return to their respective
capitals. Sir Alec Cadogan, Britain's Permanent Under Secretary for
Foreign Affairs, noted in his diary: “The Great Men don't know what
they are talking about. . .” Still, they all knew June of 1944 would
determine the future of the war, not to mention the future of each
leader. FDR yearned for Overlord. Failure to launch a Second Front
could mean defeat for him in the November national elections, at least
Hitler thus wryly observed to Martin Bormann. Ninety percent of
America's war effort was going to Europe, but there was widespread and
influential sentiment for a shift in emphasis toward winning the
struggle in the Pacific. After all, the Japanese had actually and
without provocation attacked the United States at Pearl Harbor, said
these advocates, and this made it more America's war, rather than the
situation in Europe.
Roosevelt was fighting a
rearguard action against this movement. A Second Front was vital to his
plans of first defeating Germany before taking on Japan with full-scale
intensity. He was also increasingly handicapped by a whispered belief
that he had failed to alert the personnel at Pearl Harbor in time to
prevent the catastrophe. After all, U.S. Army Signal Corps cipher
experts had broken the Japanese diplomatic and military codes; the
imminence of the attack was known in the White House a full two weeks
before it happened. Roosevelt's detractors accused him of deliberately
sidetracking this information until it was too late for the defense
command in Hawaii to take protective action. If indeed true, and all
evidence now available indicates it is, it was the same High Command
philosophy that
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propelled Prime Minister
Churchill into approving the British raid on Dieppe, in August 1942, a
disaster that served to show the American General Staff that it was not
quite time for an invasion of France. At the time, Churchill explained,
“My general impression is that the results fully justified the heavy
cost.” (Of the Canadian 2nd division which took part in the Dieppe
raid, 18 percent of five thousand men lost their lives and nearly two
thousand more men were taken prisoner.) Sir Alan Brooke, chief of the
Imperial General Staff, added: “It is a lesson to the people who are clamouring for the invasion of France.”
So it was that in June 1944, as an outcome of
the Teheran Conference, there was set up one of the awesome military
gambles of history. On its outcome rested, among other things, the
personal future of the leaders who had guided the war but who now
regarded each other's motives with intractable suspicion. Operation
Bear had worked.
The people in the occupied
nations had meanwhile settled into the mold imposed on them by the
German army and the economic experts of the Third Reich. Their banks
and industries and agriculture had been brought into Bormann's
Four-Year Plan, for greater efficiency and prosperity. All nations on
the Continent, whether occupied or neutral, now looked to Germany for
economic leadership, as they were to resume doing in the years
following World War II, when the Common Market was formed by consenting
nations acknowledging that unity of purpose is the key to coprosperity
and that somehow the Ger mans had the answer originally in 1942 when
they were melding the economic institutions of the Continent into their
own design.
95
Bormann and Hitler at
Berchtesgaden.
Eva Braun when she was
secretary to Hitler's personal photographer.
A party celebrating
Hitler's birthday, April 20, 1938.
Four photographs of the
firebombing of London taken by the author.
Nazi Reich State
Security Bureau (Gestapo) SS General Heinrich Mueller.
Purported grave of
General Mueller in Berlin.
Fritz Thyssen, the Ruhr
industrialist and early Hitler supporter.
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