The Splendid Blond Beast

by Simpson, Christopher; Miller, Mark Crispin;

  The Allied leaders discussed prisoner repatriations at least twice, once at Churchill’s October 1944 conference with Stalin shortly before the first British shipments, and again at the February 1945 Yalta Conference.40 They reached several simple agreements: Each of the powers retained authority to deal with its own nationals; the USSR would help repatriate 50,000 to 100,000 Western prisoners it had liberated from the Germans; and the West would return all Soviet nationals who had found their way into Western hands. Each of the powers stressed that compliance with these terms would be viewed as an important test of the commitment of the parties to Allied wartime agreements.

  But the next three months brought Operation Sunrise, the Trieste crisis, and the breakdown of U.S.-Yugoslav cooperation in prosecuting alleged war criminals. By July 1945, Soviet suspicions that the Western Allies would not comply with agreements concerning POWs had reached center stage in East-West relations. Western powers had cooperated with the repatriations thus far, but they were now equivocating. The Soviets soon raised the issue in meetings with British officials and with U.S. Supreme Court Justice Robert Jackson, who was leading the U.S. negotiations toward establishment of the International Military Tribunal at Nuremberg.

  The ongoing Nuremberg planning discussions had become “complicated by Russian insistence that we incorporate agreement concerning turnover of prisoners wanted in other countries for trial,” Jackson reported back to Washington. “I have taken the position [that] all except the international cases are beyond the terms of my authority and, except to advise my own Govt whether we have objections in any case, the question of surrender[ing] prisoners is not before us.”

  Jackson was keenly aware of the political ramifications of the prisoner issue. “This is likely to become a very delicate problem as demands [are] probable for surrender [of] persons who are not war criminals but politically objectionable. You will heed to decide what terms to impose and what showing will be required of criminality.”41 The Czechs had already demanded the surrender for trial of Hans Frank and other Nazi occupation officials, Jackson noted, and the U.S. needed a uniform policy on the issue.

  Jackson—who was soon to be the chief U.S. prosecutor at the International Military Tribunal at Nuremberg—favored abandoning the international trials altogether if the Soviets insisted on U.S. conformity with the Moscow Declaration on prisoner transfers. The only alternative if the Soviets insisted on a public reaffirmation of existing agreements, Jackson wrote, would be for each of the Allies to “set up [its] own tribunal and try prisoners by its own system of procedure.” That approach would be “easier for me and faster,” he noted, “but [it would be] desirable [to] give [an] example of unity on the crime problem if possible.”42

  * For example, a fraternal organization, the Serbian National Federation in the U.S., split over the issue of war crimes trials for Serbian leader Draja Mihailovich, an anti-Communist Serbian nationalist leader who controlled parts of Yugoslavia for most of the war. Mihailovich had attempted to maintain some ties to the Western Allies, but as a practical matter his troops had cooperated closely with German occupation troops and with the Gestapo in joint efforts to suppress Tito’s partisans. By 1944, the Western Allies had disavowed Mihailovich as a Nazi collaborator. When the war ended, Tito tried and executed Mihailovich and much of his high command as traitors.

  The ethnic Serbian communities in the West became bitterly split over Tito’s revolution and over the Mihailovich trial. A substantial fraction of overseas Serbs embraced Tito’s government, but many emigré religious leaders and businessmen opposed it.

  Pro-Tito Yugoslavs protested the presence in the U.S. of Konstanin Fotich, Mihailovich’s chief foreign policy advisor. Fotich and his comrades took control of the U.S. fraternal group Serbian National Federation’s national leadership committee and of its newspaper, American Srbobran. When the Yugoslav trials convicted the Mihailovich government as traitors, pro-Tito Serbs saw it as their opportunity to expel Fotich from the U.S. and resume control of the federation and its newspaper. They sent their protest concerning Fotich’s presence in the U.S. to the State Department, as protocol demanded.

  The State Department’s response was instructive: It took no action against Fotich, who had enjoyed friendly relations with the department throughout most of the war. Instead, it turned over the names of the protesters and copies of their letter to the FBI, the Office of Naval Intelligence, and other U.S. military intelligence agencies, with a suggestion that the security agencies take a new look into the affairs of the pro-Tito Yugoslavs in the U.S.

  15

  White Lists

  If Operation Sunrise and the collision over Trieste demonstrated the political factors that favored fugitive war criminals, Allen Dulles’s new assignment in Berlin was to exemplify some economic characteristics of the same problem. Dulles became one of Robert Murphy’s most strategically placed allies inside occupied Germany. Beginning in early 1945, Dulles provided clearances for senior German bankers and industrialists seeking permission to remain active in Germany’s postwar economy. As an OSS chief in Allied-occupied Berlin, he personally oversaw compilation of “white lists” of non-Nazi German executives believed to be useful for German reconstruction. He thus exercised considerable influence during the first months after the war over the day-to-day implementation of U.S. policy concerning German business leaders.

  Dulles usually favored amnesty for those whose class or economic status seemed to make them useful for postwar economic revival, and for people who had assisted him in intelligence gathering or covert operations. Culpability for Nazi crimes should be limited in most cases to German leaders who remained diehard Nazi enthusiasts, he concluded. In a striking memo to Washington in late 1944, Dulles erroneously reported that, with a “few notable exceptions, Berlin banking circles [are] secretly violently anti-Nazi.”1 He said that Oswald Roessler of the Deutsche Bank, Carl Goetz of the Dresdner Bank and the Krupp board, and key Nazi industrialist Herbert Goering (Hermann Goering’s brother) had been arrested as anti-Nazi resistance leaders before Hitler’s fall.

  Dulles was wrong on almost every count. It is true that by late 1944 many Berlin bankers were disillusioned with Hitler, but the claim that they were “violently anti-Nazi” had no foundation whatsoever.*2 Roessler, Goetz, and Goering were never in any sense anti-Nazi resistance leaders; each had made their careers over the previous fifteen years largely through services to the Nazi party and the SS.

  Dulles’s recently declassified OSS telegrams show that his principal sources of information on the German financial and industrial elite were officials of the Bank for International Settlements (BIS) in Basel, Switzerland, which had worked closely with Berlin banking circles since the first years of Hitler’s regime. The BIS provided sophisticated currency clearing services to a dozen industrial countries and served as a private policy council where representatives of central banks met to discuss monetary policy.3

  The Dulles family had played an important role in the bank from its inception, so it was not surprising that Allen Dulles would turn to his contacts there. The institution had been founded to carry out the international clearing necessary for the reparations programs John Foster Dulles had helped pioneer after World War I, and the bank’s first chronicler and most enthusiastic supporter was his sister, Eleanor Lansing Dulles.4 Both Allen and John Foster Dulles sat on the boards of New York and London affiliates of European companies led by men on the BIS board of directors,5 and an American with long social and business ties to the Dulleses, Thomas McKittrick, became president of the BIS in 1940.

  At least two senior BIS officers, McKittrick and Roger Auboin, worked for Dulles as underground contract agents. McKittrick was agent No. 644 on Dulles’s OSS payroll and regularly contributed information and services to the OSS station in Bern throughout the war.6 Roger Auboin, the general manager of the BIS, appears as agent No. 651 (code-named “General Manager B”) in Dulles’s messages to OSS headquarters.7

  Notwithstanding
the fact that McKittrick was its president, the BIS was thoroughly dominated by Axis interests due to bank bylaws that allocated votes on bank policy according to financial contributions. Axis powers had controlled a plurality of BIS votes throughout the 1930s, and as the blitzkrieg progressed, control of more central banks fell into German hands. By the end of 1942, Germany and the Axis controlled more than 75 percent of the votes on the BIS board.8

  The BIS remained officially neutral, but as a practical matter its allegiances shifted with the fortunes of war. During McKittrick’s presidency, the BIS cooperated with the German Reichsbank’s efforts to launder gold stolen from the mouths of death camp victims, in part because German Finance Minister Walther Funk was first among equals on the BIS’s wartime board of directors. (After the war, McKittrick sold the concentration camp gold back to the Germans, stating, as the New York Times put it, that the BIS had purchased it “inadvertently.”9) The institution also joined in a complex Nazi scheme to use currency manipulation and bank clearing procedures to loot the economies of entire countries. Both programs led to charges of war crimes and crimes against humanity against the Germans involved in the scheme; McKittrick and other BIS executives, however, were never charged.10

  The bank clearing schemes deserve special notice because of their significant but little-known role in looting the equivalent of billions of dollars from Nazi-occupied territories. Importantly, this form of looting was for the most part organized and managed by ordinary German corporate executives and their foreign collaborators, not by the SS or diehard Nazis. Here again, the Nazis succeeded in harnessing the in-place, more-or-less conventional social machinery of trade to the tasks of the Hitler government. In this way, billions of Reichsmarks worth of wealth in the countries occupied by the Nazis shifted into German hands, often before the victimized country even understood what was happening.

  Germany had instituted basic monetary clearing procedures during the 1930s as a means of controlling the flow of foreign currencies in and out of the Reich. In its simplest form, a German company interested in trade with, say, Belgium would pay for Belgian goods in German currency to the German central bank, the Reichsbank in Berlin. The Reichsbank would send what amounted to an international IOU to the Belgian central bank for the amount it had been paid by the German company. The Belgian central bank would then pay the Belgian company the money for its goods in Belgian currency. Hundreds of other companies in many countries were involved in thousands of similar deals. Then, at regular intervals, the central banks would meet at the BIS, total up the credits and debits of all the business deals, and “clear” them by making a settlement between central banks that balanced their accounts.11

  The creation of this central channel for foreign exchange permitted Hitler’s government to monitor and license most transactions between Germans and foreigners. These procedures contributed significantly to the Aryanization of Jewish property, because they closed off opportunities to transfer assets abroad for all but a handful of the wealthiest and best-connected German Jews.

  During Germany’s wartime occupation of foreign countries, Hitler’s government took effective control of both sides of the clearing equation and thus could manipulate each contract to its advantage. German bankers took over most of the central banks in the occupied countries, staffing those institutions with German professionals and compliant foreigners.

  In Belgium, for example, the Nazi occupation government declared the German currency, the Reichsmark, to be worth 12.5 Belgian francs. This rate overvalued the mark by as much as 50 percent, making everything in Belgium extraordinarily cheap for Germans. Next, the puppet Belgian government decreed that all trade with Germany or with the occupation government was required to use a special currency designed for German use in the occupied countries. In effect, Germany created a new type of money in Belgium and throughout Nazi-occupied Europe that it could print and spend at will.12

  When it came time to settle up between the Reichsbank and the foreign central bank, the Reichsbank again enlisted the cooperation of the Bank for International Settlements in putting forward a variety of pretexts not to pay its debt. The occupied country was powerless to protest.

  The Germans confiscated Jewish property in the occupied territories by using related techniques. In Belgium, the Nazi-appointed government forced Jews to sell most of their possessions for a price set by the government and paid the new currency into special bank accounts. Later, when most Belgian Jews were deported to be murdered, the occupation government simply seized the accounts that it had earlier insisted on establishing.

  Soon, German banks and companies began buying up foreign companies, real estate, products, and raw materials all across Europe for a fraction of their value. Such transactions were usually completed “legally” with all of the contracts, deeds, and other documentation typical of conventional business. Meanwhile, those aspects of the economies in the occupied countries that were not dependent upon sales to Germany disintegrated. This was extremely profitable for the German companies, of course, and presented a major inducement for some businesspeople to collaborate with the occupation.

  The postwar coalition government in Poland estimated that this type of theft had cost their country the equivalent of 20 billion marks between 1939 and 1945—equal to about 17 percent of Germany’s total annual war budget at the height of the conflict in Europe.13 While these numbers are an estimate, and the Polish government obviously had an interest in claiming a high level of damages, they nonetheless illustrate the effectiveness of this technique of draining wealth from occupied countries.

  A study by the British Ministry of Economic Warfare reported damages consistent with the Polish estimates and roughly proportionate figures for eight other countries occupied by Germany. In all, the British estimated that the Germans had extracted the equivalent of about $180 billion from occupied Europe as of 1943, including both direct levies for occupation costs and a variety of hidden techniques such as currency manipulation. These figures were based on financial statistics published by the Germans themselves and do not include estimates for wealth seized from the USSR and Greece. As such, even the $180 billion figure clearly underestimates the true total.14

  The BIS cooperated with and facilitated this scheme despite protests from exiled Allied governments. The bank recognized the Nazi-installed occupation governments, provided the clearing services essential to “legalizing” the operation, and even went so far as to help Nazi leaders such as Walther Funk unload looted gold in international markets.15

  Once the war was over, Dulles and the OSS turned to McKittrick, Auboin, the BIS, and to Dulles’s own prewar business contacts in Germany for advice on the political leanings of German bankers. This was an obvious and even defensible move. Theoretically, the prejudices latent in McKittrick’s recommendations to Dulles should have in time been sorted out by Dulles himself or by later OSS investigators. Each little bit of information is an improvement over having none at all, most intelligence agents will contend. In reality, however, Dulles passed on McKittrick’s evaluations of German bankers with only minimal checking in official OSS white-list clearances for German corporate and government personnel. The white list recommendations then tended to become institutionalized, only rarely to be critically reexamined later.

  In the summer of 1945, Dulles prepared a list of eight top German bankers, complete with biographies, whom he recommended “on the basis of [their] ability and record” for senior corporate posts in any German major enterprise.16 Dulles drew heavily on the protégés of Hjalmar Schacht—then already facing charges before the International Military Tribunal at Nuremberg—who had been the gray eminence of German international banking since the 1920s. At the top of Dulles’s list was Ernst Huelse, a former director general of the BIS and a key Schacht aide at the Reichsbank. Next came Karl Blessing—also a former Reichsbank director, BIS director, and Schacht protégé—and then a series of minor bankers, some of whom had in fact been hostile to the Nazis. The men
Dulles recommended usually ended up in senior positions in postwar Germany. Although they were not Nazi ideologues, most of them had made their peace with the Nazi party and served in trusted positions throughout the Hitler years.

  A closer look at Karl Blessing’s career illustrates not only the moral ambiguities of the German financial elite under Hitler, but also the role of U.S. intelligence in preserving that elite through the trauma of 1945–46. With Allen Dulles’s help, Karl Blessing cultivated a reputation after the war as an anti-Nazi who had once resigned a seat on the board of the powerful multinational company Unilever rather than cooperate with SS efforts to take over the company. Following this purported act of bravery, Blessing later told the New York Times, he was reassigned by Hitler to be a “lowly functionary in the Ministry of Mineral Oil Industry” [sic], where he spent the war years hiding out from the Gestapo.17

  This claim was remarkable, both in that Blessing should make it and in that the Times would swallow it. The truth is that Blessing served throughout the Hitler years as one of the most important liaisons between German big business and the Nazi party and SS. Karl Blessing represented Hjalmar Schacht and the Reichsbank at the meetings of the Himmlerkreis, the clandestine organization of bankers and industrialists who sought to curry favor with SS chief Himmler by secretly bankrolling some of his more exotic projects.18 Blessing was among the most enthusiastic attendees at Himmlerkreis gatherings for more than a decade, according to Fritz Kranefuss, who became Himmler’s adjutant and monitor for the meetings. During the war years, Blessing participated in thirty out of thirty-eight gatherings, a record of brown-nosing the SS leader comparable to Kranefuss’s own.19