Nazi Gold

by Douglas Botting

  The search for the bullion and the former Military Governor took Purcell and Gardiner all over Europe. ‘We went up into Sweden, we went on into Denmark, France and on into Switzerland. I think the colonel was located in Switzerland and we tried to extradite him and we were unsuccessful because of the extradition law in Switzerland. We did a lot of work with the Swiss Police – the Canton Police in Switzerland. We relayed the information back to the CID in Frankfurt but what action the CID took I don’t know.’

  There was not much action the CID could take. Elmer Pralle was to recall later: ‘It was in Switzerland that we lost control on that. We could not get any information out of Switzerland because of the accounts and the secrecy. I wrote letters down there and we called down there but they would not reveal anything at all on that.’ A check on the ‘colonel’s’ background and bank account in his home town in the USA by investigators sent in by the Provost Marshal General at Peccarelli’s request also drew a blank.

  Even Colonel Franz Pfeiffer, the Gebirgsjäger commander who had originally been responsible for the burial of the Reichsbank gold near Mittenwald in the last days of the war, was recalled from obscurity in Austria, where he was instructing French troops in German Alpine warfare techniques, to answer fresh questions about the gold from Philip Benzell. It was Captain Sauteau, the French Intelligence agent, who had arranged the rendezvous. But Pfeiffer declared – as he has continued to declare ever since – that he was sick to death of the whole business and could add nothing new, and Benzell was obliged to leave empty-handed.

  The ripples eddying out from Garmisch washed even farther afield than Austria, Switzerland and Scandinavia and eventually reached as far as the West Coast of California on the other side of the world. Dollars as well as gold came under the scrutiny of the investigators, and the mysterious business of the $404,000 taken from the von Blüchers’ garden and the receipt for it signed by Captain Fred Neumann was looked at afresh. Early investigators had never been satisfied with Neumann’s explanations as to what happened to the money and after he had returned to the States and left the Army suspicion still lingered in his direction. Now, in September 1947, Operation Garpeck reopened the enquiry. It was decided to send one of their US-based agents to California, where Neumann was working as the western representative of a coin-operated cigarette vending machine company in San Francisco, and the Internal Revenue Service was requested to keep a check on Neumann and his former Master Sergeant for signs of conspicuous spending.

  In the second half of September CID Agent Howard Hyatt arrived in California and contacted the San Francisco Office of the FBI. On 19 September 1946 the San Francisco FBI wrote to the Director of the FBI in Washington DC:

  Subject: Frederick Siegfried Neumann

  Theft of Government Property

  A Special Project of CID has been established in Garmisch-Partenkirchen, Bavaria, to determine among other matters the ultimate disposition of some $404,840 and £405, allegedly receipted for on 24 August 1945 by one Captain Neumann, GIB, Third Army.

  In this connection investigation has been undertaken by CID to determine if Neumann may have misappropriated funds turned over to the Army by captured prisoners of war. Agent Hyatt of CID was in possession of a photostatic copy of the purported receipt obtained from Gaptain Neumann. As of 27 August 1945 [sic], however, Finance records of Headquarters, European Command, failed to disclose such an amount of money had been received by the US Army from Captain Neumann.

  Upon completion of this investigation Neumann is to be interviewed by CID to determine the validity of the receipt and if valid what disposition was made to the funds involved, following which a report is to be forwarded to the Office of the Provost Marshal General, War Department, Washington DC.

  Agent Hyatt advised that his investigation is proceeding and at the appropriate time the CBI would be notified in the event it became necessary for this Bureau to undertake investigation. It appears that should Neumann exhibit a receipt regarding the disposition he made of this large sum of money he will be temporarily in the clear and further efforts made by CID to trace these funds.

  In view of the huge sum of money involved, and because the Bureau may be called upon to undertake investigation, the above is being furnished to the Bureau at this time for its information.

  All, it seemed, in vain. Whatever the outcome of the enquiry in California, Neumann remained at large, the FBI were never called in, and the mystery of the $404,000 was never solved. In all probability Neumann was not the man, but whatever explanations he might have been able to give, he took them with him to the grave. For in June 1970 Fred Neumann, one of the prime suspects in the great Reichsbank robbery, died of TB in the National Jewish Hospital in Denver, Colorado.

  But there were other key suspects. As Operation Garpeck progressed the name of John McCarthy, the 31-year-old, $7,000 per annum Chief of the Investigation and Enforcement Branch of the Finance Division, recurred time and time again in the course of the inquiries into narcotics, finance and numerous other matters conducted by both the local and theatre CID. But McCarthy was a difficult and apparently dangerous man to get to. Files and other information which had a vital bearing upon certain of his activities mysteriously disappeared from the Finance Division on a number of occasions when the investigators came to examine them. A witness who, in Philip Benzell’s words, ‘could give us the absolute rock-bottom factual information on McCarthy,’ refused to do so while he was still in Germany. ‘This reluctance,’ Benzell stated at a later enquiry, ‘was attributed to fear of bodily injury or harm in this theatre.’ According to one witness, some of the CCD wire-tappers were in with the Munich ‘bunch’, and when Benzell requested that a tap be put on McCarthy’s civilian phone McCarthy soon got wind of it. ‘McCarthy suddenly moved out of such quarters as he was occupying in Munich,’ Benzell testified, ‘and was living in a residence along the banks of the Isar, and CCD was having a difficult time in determining precisely where he lived in order to tap his phone.’ But McCarthy was nothing if not resilient. Even while he was being hounded by the CID and going to ground along the Isar, he bounced back into the limelight with a sensational announcement to the press which could do nothing but help refurbish his tarnished image. The subject of the announcement – McCarthy’s continuing hunt for missing treasure – was the height of irony under the circumstances. ‘MG PRESSING WIDE SEARCH FOR HIDDEN NAZI TREASURE’, the Army newspaper Stars and Stripes reported from Munich in December:

  Military Government officials here revealed that an extensive search is being pressed throughout Bavaria in an effort to find the hidden treasures of Hermann Goering and other prominent Nazis whose loot was buried or stored away before the capitulation of Germany.

  J.R. McCarthy, chief of the investigation and enforcement branch of the finance division Bavaria MG, said millions of dollars in gold, silver, diamonds, and paintings already have been recovered. He asserted there still remain hidden somewhere in Bavaria treasures estimated to be worth millions.

  Faced with so many difficulties, Operation Garpeck investigations into gold, dollars, narcotics, embezzlement and other chicanery, began to bog down. It should have had everything going for it – even a new Military Governor who was on their side. Colonel Kenneth E. Van Buskirk, whose avowed mission was ‘to clean up Garmisch’, was a thick-set, square-headed, balding man from Special Services, who had once been General Patton’s ‘housekeeper’ and (it was said) his ‘favourite court jester’. He was, mirabile dictu, straight as a die and honest as a saint, and that should have helped. But somehow the investigation just did not go as it should. Victor Peccarelli reported: ‘The progress of this investigation has often been materially impeded by the reluctance of informants to supply information. Informants have met with threats on their lives. Furthermore, there has been a definite reluctance to identify or supply information about American or Allied personnel in connection with the illegal activities in this area for fear of reprisal which in some instances has been demonstrat
ed.’

  Victor Peccarelli and Philip Benzell, hitherto the closest of friends, even fell out over the conduct of the operation, and when Peccarelli was reassigned in early December, Benzell took his place as Chief of Garpeck. Why, people began to ask, after the concentration of so much talent and ingenuity and the expenditure of so much time and effort, were there still no charges made, no arrests, no seizure of tangible evidence? Even the narcotics side of the case, which had produced plenty of leads, fouled up at critical moments. When they tried to buy morphine and cocaine from the narcotics rings as criminal evidence, something usually went wrong. Five hundred grams of cocaine which they bought from the Garmisch ring for a dollar a gram through a Chinese pusher called Leo turned out to be fake, and they had to forego the purchase of a kilo of cocaine from a Polish ring when the money to clinch the deal failed to turn up in time from the CID cashier. Benzell did succeed in buying 250 grams of morphine, of a type only used by the former Wehrmacht, for 12 cartons of cigarettes, but for some reason the pusher, a well-known figure in Garmisch, was not detained and nothing came of the transaction. And when they tried to obtain the services of Zenta Hausner at the notorious White Horse Inn, they eventually arrived too late.

  Ed Hartrich and Tom Agoston – whose newspaper stories on Garmisch, filed in May, were still being kept on ice by the Army High Command – grew so impatient with the progress of the Garpeck investigation that they decided to carry out their own private investigations using their own informants. It was at about this time that their paths fatally crossed with that of another ex-newsman, then a member of the same CIC Special Squad to which Lieutenant Kulka belonged, and a member of the Munich Press Club to which the newsmen belonged, by the name of Guenther Reinhardt. Both Hartrich and Agoston on the one hand and Kulka on the other had a lot to say about the Garmisch affair – and Reinhardt, agog and aghast, listened avidly. The consequences – the so-called Reinhardt memorandum – were to blow the lid off Garmisch and the OMGB together, once and for all.

  Like many of the Americans who have featured in this story, Guenther Reinhardt was a native of Germany. Born into a well-known German Jewish banking family at Mannheim in 1904, he had studied economics at Heidelberg University, been a member of the German ski team for the 1924 Olympics (which never in fact took place), and at the age of 21 emigrated to the US, where he continued his post-graduate studies at the University of Columbia. His first job had been in a New York bank, but in 1933 he became a freelance journalist and wrote a syndicated foreign affairs column for McClure Newspapers. Because of his preoccupation with the rise of Nazism in both Germany and the USA, Reinhardt was commissioned by his banking associates and a couple of large civic groups to carry out a private investigation into the question of Germany’s likely future international relations. The information he uncovered concerning Nazi activities in the USA was subsequently turned over to the House Committee on Immigration and Naturalisation, the forerunner of the McCormack Committee, a Congressional body investigating the spread of foreign subversive activities within the USA, and itself a predecessor of the House Committee on Un-American Activities.

  This led to Reinhardt’s early involvement with the American intelligence world. In 1934 he was appointed to act as a liaison link between the McCormack Committee and the FBI. In 1936, after a spell abroad as foreign correspondent for a Swiss newspaper, Reinhardt returned to New York and claimed to have been appointed a ‘Special Employee of the FBI’. In any event, he used his freelance journalistic work and his continuing undercover operations against Nazism, Fascism, Communism and other subversive movements in America as a cover for his FBI activities, which involved a confidential mission to Mexico and continued after America’s entry into the war. While working for the Foreign press Association Reinhardt was allegedly credited with a scoop predicting the Japanese attack on Pearl Harbor 13 days before it actually occurred. The item was published on 24 November 1941, but its warning went unheeded by the State Department.

  During 1942 and 1943 Reinhardt masqueraded as a Communist in order to infiltrate American Communist organisations and then passed on the results of his investigations to the authorities. In a routine Loyalty and Character Report at this time he was described as a ‘respected citizen with a good family background, and of good character’. But though personal references rated his character and integrity as ‘excellent’, his emotional stability was generally reckoned to be no more than ‘average’. Between 1944 and 1946 Reinhardt served as Adjutant to the Manhattan Squadron of the Civil Air Patrol (Auxiliary Army Air Forces). For a few months in 1946 he worked as a Foreign Correspondent on the European Staff of the International News Service (INS), and for a few more months as a reports officer in the Public Safety Branch of Military Government in Frankfurt. It was during this period that Reinhardt was involved in hunting down six Hungarian SS guards responsible for murdering downed American airmen and securing the evidence for their conviction at the Nuremberg War Crimes Trials. Then he re-entered the American intelligence world, to which he believed it was his destiny to belong, and joined the CIC in Germany.

  Reinhardt, it must be stressed, was not a mere lightweight in this particular world. He was a highly intelligent, educated and talented man, a substantial figure who ranked quite high in the OMGUS hierarchy, first as assistant to General Clay’s Chief Public Safety Officer, and later as press representative for General Clay’s Intelligence Chief of Staff in the European Theater. A confidential report on Reinhardt compiled by the Inspector General’s Division of the US Army in Germany in April 1948 as a consequence of events which form the main subject of this chapter, sums up his chequered career with the American occupation authorities in Germany as follows:

  The records reflect the fact that Mr Reinhardt was employed in the command on 7 September 1946, primarily to serve as press representative for the Deputy G-2 USFET. He appeared at that time to be unusually intelligent and energetic, at first displaying a great capacity for work, a prodigious memory, and a marked ability to gather information. It was necessary to relieve him of this assignment on 4 May 1947, however, because of a displayed lack of tact and common sense, plus a peculiar persistence in breaches of security involving discussions of classified military matters with unauthorised persons, and by unauthorised contacts with officials of State Department and Military Government, to whom he misrepresented his position and the scope of his authority. On 5 May 1947, Mr Reinhardt was employed by CIC, because of his linguistic ability, education, FBI experience and knowledge of Germany, he having been born and educated there.

  In fact, Reinhardt was never an actual member of the CIC. Though he was made available to the CIC in an agent capacity, he was really a civilian employee of the Office of the Director of Intelligence at European Command HQ. Initially based at CIC headquarters in Frankfurt, Reinhardt was assigned in June 1947 to the CIC regional office at Munich, first as an agent on the Special Squad – importantly, the outfit to which Lieutenant Kulka, then working on the IG investigation in Garmisch, belonged – then later as Case Officer (Communist Desk). In this latter capacity Guenther Reinhardt was acknowledged to be the top Communist investigator in the CIC. In his memoirs of his CIC career, published in New York in 1952 in a book called Crime Without Punishment, Reinhardt seems to have regarded his role in Germany as a kind of personal crusade against the forces of wickedness, in whatever form they appeared.

  ‘For two years after the end of the war,’ he wrote, ‘I was able to follow the trail of the Soviet secret terror against America in Europe as a Control Investigator of the US Counter Intelligence Corps. Part of that time was spent as a case officer directing intelligence agents in the field. In many respects it was fruitful work. During that period I was able to participate in the “breaking” of the cases of Ingeborg Petersen, the German girl who posed as a WAC, and of Siegfried Kabus, the young Nazi fanatic who had taken to planting time-bombs in the dead of night.’

  Guenther Reinhardt pursued subversion of American interests in Ger
many, whether from within or without, with the demonic energy and fanatical single-mindedness of a man possessed – the Don Quixote of the US Zone. He never let up. Even his holidays were used for the furtherance of the cause. ‘During my work in Germany,’ he was to write afterwards, ‘I had discovered an appalling penetration of American security agencies in Germany by Soviet agents. In all cases the agents engaged in the penetration were receiving their orders and relaying their information to Prague. I was, however, supposedly restricted at the time to investigations in Bavaria, and an intensely complicating atmosphere of inter-service jealousies made intrusion into the Prague area unpopular.’ Undaunted, Reinhardt decided to pursue his case and indulge his obsession by taking a holiday in Prague. But the tentacles of the forces of darkness had reached everywhere in Guenther Reinhardt’s life, or so it seemed. In Prague he discovered that the Czech Secret Police already had a copy of his personal file in their possession and that it was a girl working for the Civil Censorship Division of the US Occupation Forces in Germany who had transmitted it to them.

  Reinhardt was to bring the same obsession and paranoia to bear when he turned his attention to corruption in the American occupation of Germany. His enthusiasm was not always appreciated by his fellow Americans, for it sometimes transgressed not only the bounds of geography but the demarcations of his brief and protocol as well. Once he bearded Clay’s Chief-of-Staff, Brigadier-General Charles K. Gailey, about the record of a certain political suspect by the name of Markovitch. The next day his commanding officer carpeted him for it. ‘General Gailey told me you’d stuck your nose into something that didn’t concern you,’ his CO told him. ‘If you want to keep your job with me, forget about the whole thing and be glad General Gailey isn’t going after your scalp.’