Nazi Gold

by Douglas Botting

  Two former American Army officers are believed to be implicated, according to the CID. The German industrialist’s daughter is said to have been the friend of an American captain while he was assigned to duty with the Military Government for Bavaria. He has since returned to the United States.

  The other officer, a former major, is reported to be hiding in Switzerland, where he fled when Army investigators began to look for $750,000 in gold bullion and $2,000,000 in American currency which the Army found in Bavaria toward the end of the war but which afterward disappeared.

  The Provost Marshal’s office said some of the clues in the ‘Garmisch case’ extend as far as America.

  The press exposure of the Garmisch affair, already unwelcome to the US occupation authorities, began to assume deepening political significance when the story was picked up by the East European Communist press and recycled as propaganda against the US Forces of Occupation. A Soviet-run East German newspaper wrote scurrilously of ‘an international underworld worthy of the best that Chicago could produce’ and spoke of the murdered and mutilated ‘Titian-red Queen of the Underworld’ as the link . . .

  between the German and American gangsters who had jointly engaged in narcotics smuggling and white slavery financed by gold bullion and currency stolen from the financial reserves of the Third Reich. Involved in this gangster-dance for warm flesh and cold gold – amounting to millions – are the highest heads of the SS and Nazi Wehrmacht, Fascist displaced persons (who in their turn took away the Nazi gold), industrialists and their daughters, and a number of American officers who are not fit to belong to an army created by Roosevelt. ‘We have closed the mouth of the Titian-redhead for good – it’s a pity about her nice legs,’ say the gangsters – and they are still at large.

  On 20 January 1948, only a week after Hartrich and Agoston had first filed, the official Czech Communist Party organ, Rude Pravo, published its own inflammatory version under the headline:

  AMERICAN GANGSTERS’ AND GERMAN NAZIS’ ACTIVITIES IN GIRL AND COCAINE TRADE

  Neither the American nor the German police seem to have a clue for the mysterious murder of a young German girl, whose body was found in the renowned Bavarian winter sport centre, Garmisch-Partenkirchen.

  As ascertained by an autopsy, the victim was drugged before being murdered. Several symptoms prove the girl was a cocaine addict. Apparently, the girl was either a member or victim of a big gang of white flesh dealers engaging in large-scale recruiting of German girls for brothels in South America, smuggling simultaneously various drugs, mostly morphine, cocaine and opium from American and French sources.

  One part of the gang is comprised of Germans, particularly of members of the Nazi underground.

  Another branch of the gang, being on particularly good terms with the US Forces of Occupation, deals in confiscated property of Nazis, such as gold, jewels and furniture. Their racketeering activities total for the past quarter of a year over 3 million dollars.

  The American Embassy in Prague immediately protested to the Czech Foreign Office. The article – which they described as ‘one of the opening shots in the Czechoslovak election campaign’ – was ‘abusive’ and ‘vicious’ and contrary to the Czech Prime Minister’s undertaking to discontinue ‘abusive articles’ (as distinct from ‘legitimate criticism of the United States’) in the Czechoslovak press. But the damage had been done. The affairs of Garmisch now not only served deeply to embarrass the honour and authority of the American role in Germany in American eyes at home, but provided ammunition for the nation’s critics and enemies abroad. Garmisch was no longer a parochial issue, but a domestic and international one as well. Something would have to be done about it.

  20. The Cober-Up

  To say that the American Army in Germany did not like the Reinhardt memorandum would be to understate the case. They abhorred it. But they did not abhor it half as much as they abhorred its author, who in the season of good cheer and good will to all men continued to sit in his Pentagon office next to Assistant Secretary of the Army, Gordon Gray, content that he had done the decent thing for American civilisation in Germany. Yet even as Reinhardt sat in the Pentagon during Christmas week 1947 he received from a senior CIC colleague and friend in Germany, Major James Hill, a letter which gave him his first early warning of the approaching shock waves that would blast him from official favour and ruin his life for ever.

  ‘I see by tonite’s news flash,’ Hill wrote on December 21, ‘you have made good your promise to blow open the European Theater . . . My advice is to start getting statements in writing – or else your allegations will back-fire. If you are smart, you will burn this and not tell anyone I’ve written to you – as even today you have people near you who are reporting every word you say back over here. In other words, a thoroughly secret assist here would be of incalculable help to you and your case.’

  This word of warning reached Reinhardt too late. His memorandum was already being transmitted to General Clay by encoded cablegram page by page as it was written – with possibly fatal consequences for Zenta Hausner and several other German informants in distant Garmisch-Partenkirchen. The 55-page typescript of the main memorandum landed with a faint puff of brimstone on the C-in-C’s desk in Berlin immediately after the festive season, on about New Year’s Day 1948, and the original 48-page memorandum, dictated in Frankfurt in November, found its tortuous way through Army channels to Berlin some weeks afterwards – not too late to play its part in the ensuing storm. The 55-page memorandum was immediately turned over to the Inspector General of the European Command for investigation. Initially there was still a chance that the whole thing could be handled quietly within the confines of the US Army in Germany. The murder of Zenta Hausner and the resulting newspaper publicity, with its revelations of crime and scandal in Garmisch and OMGB as a whole, soon squashed that possibility. One way or another, the newspaper revelations and the Reinhardt allegations would have to be answered in public and in the glare of national and even international publicity. The Department of the Army and the United States Forces in the European Theater were thus faced with two broad options: they could clean up or cover up.

  In exercising this option their hands were to a large extent already tied by the scandal arising from an earlier case of major crime by Army personnel – the sensational Kronberg jewel robbery, Kronberg Castle was the seat of the former royal family of I lesse and after the war it had been turned into a US Army officers’ recreation club. In April 1946, shortly before the wedding of Princess Sophie of Hesse, youngest of the Duke of Edinburgh’s four sisters, it was discovered that a large portion of the Hesse Crown jewels, valued by the Army at $1,500,000 and by the Hesse family at more than twice that amount, were found to be missing. A team of CID investigators, including agent Philip Benzell, were put on to the case, and it was eventually proved that the valuables – rubies, pearls and jade torn from their settings, along with two quart jars of diamonds, a solid gold dinner service and nine volumes of letters from Queen Victoria – had been stolen by a former welfare officer at the Castle, Captain Kathleen Durant, and her husband Colonel James Durant, with the complicity of Colonel Durant’s former ADC, Captain David Watson. Since this was believed at the time to have been the greatest robbery in history, the ensuing court-martial attracted immense publicity – and inevitably an extremely unfavourable international view of the conduct of the US Occupation Forces in Germany. Though the culprits were duly found guilty and sentenced (Colonel Durant to 15 years’ hard labour, his wife to five years and Watson to three), it was inevitable that the Commander-in-Chief and Military Governor of the US Zone would look unfavourably on further criminal revelations of a similar magnitude in his territory. The Reinhardt allegations, however, indicated scandals even more scurrilous and demeaning than the Kronberg case. The Kronberg robbery had been the biggest in the world. Now Clay was threatened with the revelation of another robbery – the Reichsbank robbery – which was even bigger. The world’s greatest robbery and the
world’s second greatest robbery, both committed in the American Zone of Germany within a few months of each other – it was too much to contemplate! Clay’s choice between clean-up or cover-up was really made for him, given his well-known dislike of unsavoury incidents in his command.

  The Kronberg case had not been the only scandal to come to light in the US Zone since the end of the war. In March 1947 a 37-year-old Swiss-born American intelligence officer, Captain Victor J. Haig, was tried in Garmisch-Partenkirchen at a court-martial which disclosed misdemeanours of the most sensational kind. Posted to Garmisch in June 1945, Haig had shared a house with a fellow intelligence officer, and two girlfriends. His fellow officer’s girlfriend was a well-known Czech movie actress and one-time mistress of the Nazi Propaganda Minister Dr Joseph Goebbels. Haig’s girlfriend was a self-styled baroness who had been on ‘intimate terms’ with the Gestapo chief, Ernst Kaltenbrunner.

  Late in 1945 Captain Haig began a political investigation for the Frankfurt CIC into the conduct of a leading German industrialist by the name of Arnold Rechberg, the so-called ‘German Potash King’, who had been interned by the Nazis during the war. Rechberg had political ambitions to restore the old Bavarian monarchy and to form a separate Bavarian State backed by high Catholic officials and the Bavarian nobility. In due course Rechberg enmeshed both the baroness and Captain Haig in his illegal and subversive schemes, and before long they were both living in his various castles in the countryside north of Garmisch. Rechberg also involved Zenta Hausner’s lover, Captain Korner, in his activities. During the time that Korner was Commandant of the Civil Internment Camp for suspected Nazis in Garmisch, and later when Haig took over Korner’s job there, Rechberg joined in Korner’s fake release racket, securing the release of Nazi prisoners on phoney health grounds for the sum of 125,000RM ($12,500) per prisoner. This money Rechberg then used to bribe people to publish his political propaganda articles in Germany and the United States.

  Naturally none of this endeared him or his associates to the American authorities when they finally got wind of it. In January 1947 the Americans raided Rechberg’s castle at Eschenlohe. The baroness was arrested. A four-inch-thick bundle of classified American documents and a quantity of weapons were found in Captain Haig’s quarters in the castle. More weapons were found in his official quarters in Garmisch, bringing the total haul to 28 rifles and pistols, which it was believed Haig was supplying to an underground faction. The baroness was thrown into prison in Garmisch. Arnold Rechberg was detained, but soon died of a heart attack under American interrogation.

  Haig was accused of passing ‘Top Secret’ documents to the baroness, and evidence indicated a ‘sponsoring connection’ between Rechberg, the baroness, Haig, prominent German industrialists and profiteering Nazis. Haig’s court-martial revealed an unbelievably tortuous tale of skulduggery and double-dealing from which it emerged that Haig’s mistress, the baroness, was among other things a Communist agent who had been passing American secrets via her CIC lover, the nefarious Haig, to Communist Party contacts in Germany. To cut a long and extraordinarily complex story short, Captain Haig was found guilty on seven out of nine charges, sentenced to be reduced in rank to the foot of the list of officers in his grade, to be reprimanded and to pay a fine of $1,500. He was then packed off back to the States.

  On 13 January 1948, less than a fortnight after the Reinhardt memorandum had landed on Clay’s desk, the Director of Intelligence in Washington sent a ‘Secret’ message to the. European Command that Victor Haig was back in Europe, even though he was ‘an undesirable who should have been denied entrance’. The Haig case, Washington pointed out, indicated ‘possible gun-running, furnishing of information to German Communists from Secret reports, and extensive black market in Garmisch area with contacts in Switzerland’. The Haig case, following the Kronberg case, inevitably helped to reinforce the Army’s hostility to the Reinhardt memorandum and in all probability played a role in the final outcome.

  Nevertheless, Guenther Reinhardt’s allegations concerning personnel, policies and conditions in the European Theatre were treated with the utmost seriousness by the Inspector General’s Division. For the purposes of investigation they were carefully analysed and broken down into 134 separate incidents grouped into nine main categories. These were then ‘thoroughly’ investigated – so the Inspector General was to claim – utilising the combined efforts of seven experienced senior officers working over a period of two months.

  The first report covered the allegation that THERE EXISTS A HIGH LEVEL POLICY OF SUPRESSION AND DISTORTION IN THE PRESENTATION OF INTELLIGENCE AND RELATED TOPICS TO THE DEPARTMENT OF THE ARMY. According to Reinhardt, reports to Washington on intelligence, political conditions, occupation frictions and criminal incidents were variously suppressed or toned down on the direction of the Theater Commander, General Clay, in order to avoid criticism or restraint from Departments in Washington. In view of what was to happen to the Reinhardt memorandum, this first report was a highly relevant one. The investigation on which it was based was initiated on the verbal orders of General Clay and undertaken by Major General Louis A. Craig of the IGD between 2 and 29 January 1948. It was not an impartial investigation. Given the set-up, there was no way that it could have been. General Craig limited his investigation to asking the people allegedly involved whether or not they had done what Reinhardt claimed they had done. Not surprisingly they all seem to have said no. It is difficult to see how an independent investigation into allegations made principally against General Clay could be undertaken by a senior member of his own IGD who had not only launched the enquiry in pursuance of General Clay’s verbal order but also filed his report with him on completion of his investigation. All the personnel questioned were key members of Clay’s staff and unlikely to risk demotion or worse by criticising the actions or policies of their chief. Thorny issues such as the withholding of information from the press were avoided. Thus there was no mention of the Army ‘exerting all possible influence’ and ‘prevailing upon’ newspapermen like Ed Hartrich and Hal Foust to withhold or radically alter their news stories on the Garmisch affair. ‘There is no factual basis for the allegations,’ concluded Craig. ‘Testimony is unequivocally negative and completely in contradiction to the allegations made.’

  The other investigative reports by Clay’s IGD – on loot, black-marketeering in the PX, CIC inefficiency, and so on – were written in much the same vein and drew much the same negative conclusions. The report containing Reinhardt’s allegations about the Garmisch affair, based on an investigation by Major R.B. Hensley, Assistant Inspector General, was no exception. But in the light of our accumulated knowledge on this subject, drawn from contemporary American documents and other sources, it is possible to evaluate the accuracy or otherwise of Reinhardt’s statements and the impartiality or otherwise of the Inspector General’s assessment of those statements. The result is interesting.

  Major Hensley’s investigation, the fifth of the nine investigations by the Inspector General’s Division into the allegations contained in the Reinhardt memorandum, lasted from 6 January to 25 February 1948 and necessitated enquiries in Berlin, Frankfurt, Bad Homburg, Bremen, Munich, Weilheim, Stuttgart, Starnberg, Bremerhaven and Garmisch-Partenkirchen. Evidence specifically relating to the Garmisch affair, including the IG investigation of the previous summer and the Garpeck investigation which followed it, was given by Lieutenant-Colonel Smith (of the IGD), Lieutenant David Gallant (Chief Agent of the Munich CID), and Chief Agent Philip Benzell (Provost Marshal’s office).

  At the end of his detailed examination of Reinhardt’s allegations about the Garmisch affair, Major Hensley added two summary sections entitled ‘General Discussion’ and ‘General Conclusion’. Both were shrill in tone and characterised by the very qualities which they accused Reinhardt himself of displaying. Reinhardt’s allegations, wrote Hensley, were ‘broad’ and ‘malicious’. ‘It is evident,’ he contended, ‘that the writer completely distorted the facts intentionally, or
took parts of incidents in which there was a thread of truth, grossly exaggerated it in proportion to its true worth, and proceeded to reap a field of conclusions that would make sensational and outstanding reading against the Department of the Army.’

  Everything, wrote Hensley, must be seen and understood – and, by implication, forgiven – against the ruinous state of post-war Germany. ‘Germany, as well as the entire European Continent, still is in the backwash of World War II . . . It is an economic fact, based upon the law of supply and demand that, following all great wars, both victors and vanquished alike are in most cases war-ravaged people forced of necessity to barter their luxury possessions for a mere existence.’ The conditions in Germany, observed Hensley, were ‘grossly abnormal’, but the Americans were ‘making every effort to do their part in a situation that is monotonous at best’. Hensley continued: ‘It is realised that some individuals take literally and practise assiduously the precept of “To the victor belong the spoils” . . . Nevertheless, it is dangerous to generalise from such examples, since they do not represent the true overall picture.’ The detective forces were doing their best, Hensley maintained, but black-market operations and illegal barter could never be stamped out entirely until Germany was restored to a normal healthy economy again.

  Major Hensley then turned to the question of Guenther Reinhardt himself. Reinhardt made his allegations, Hensley suggested, simply in order to secure for himself a high-powered job in Germany as a Washington-based troubleshooter. Furthermore, he was himself guilty of being a ‘big-time operator’ on the German black market. Major Hensley concluded his ‘General Discussion’ with a punishing envoie: