Nazi Gold

by Douglas Botting

  By such generally unfounded and fanatical allegations as those contained in this document the prestige of the European Command has been damaged considerably. Open resentment on the part of witnesses was encountered throughout the course of this investigation. Such resentment was based upon their lack of faith In Mr Reinhardt’s sincerity of purpose, his unsavoury reputation in the Theater and his obvious disregard for the truth.

  Major Hensley followed this with his ‘General Conclusion’ which stated:

  That the allegations sent to the Secretary of the Army by Mr Reinhardt as contained in this report, with minor exceptions, consist of gross mis-statement of facts, misleading excerpts of reports, and exaggerations of incidents. From these, erroneous and sometimes vicious conclusions have been drawn by the writer for the evident purposes of selfish and sensational publicity, in an effort to discredit the European Command as reprisal for his discharge from his position in the CIC and to create further employment for himself.

  The Major then concluded – somewhat piously, given the circumstances:

  That the matters contained in the allegations have been and are under constant surveillance and study by those in authority in the European Command and progressive steps and sincere efforts are being made constantly to bring about elimination of undesirable conditions.

  Hensley’s report is unsatisfactory on a number of counts and certain things have to be said about it. For one thing, it avoids the main issue. For another, it is both platitudinous and evasive. It discusses relatively trivial aspects of the allegations (and dismisses most of them out of hand) but almost totally ignores infinitely more serious charges which we know to have had a solid basis in fact. The bulk of the ‘General Discussion’ is devoted to petty black-marketeering, which is excused on the grounds of the ‘grossly abnormal’ conditions in Germany, but glosses over the very grave allegations involving German military personnel ranking from captain to general in large-scale robbery and embezzlement, misappropriation of US Government funds and property, international narcotics trafficking, murder and flagrant interference in the processes of law and justice. Reinhardt’s allegations, according to the ‘General Conclusion’, consisted of gross mis-statements of fact, misleading excerpts of reports and exaggerations of incidents – ‘with minor exceptions’.

  One is bound to ask: was the theft of more than $404,000 – described by the FBI as ‘this huge sum’ and actually acknowledged as missing from US custody in Hensley’s report – a ‘minor exception’? Was proof of narcotics trafficking in Garmisch ‘minor’, or Colonel Smith’s testimony that his investigation had been interfered with, or the fact of Zenta Hausner’s murder, or the evidence of misappropriation of US Government property, or the acknowledged suspicion that the Garmisch Post Inspector was a member of a criminal gang, or the established conclusion that Major McCarthy had, quite apart from anything else, presented false testimony before a de-nazification court and destroyed evidence in the Finance Division? In reality, far from making ‘gross mis-statements of fact’ Reinhardt was meticulously precise about verifiable names, dates and incidents, and it is remarkable that very few factual data were corrected by Hensley.

  Instead of answering Reinhardt’s most important allegations, or even taking into consideration the fact that some of them were actually upheld in the evidence presented within the text of Hensley’s own report, a violent attack was launched on Reinhardt’s character and motives. He was described variously as a liar, a fanatic, an opportunist, a place-seeker and a black-marketeer, and his motives were ascribed to selfish ambition and a desire for revenge. In fact, the motives behind the allegations are strictly irrelevant, for the allegations stand or fall on their own account. On the other hand, the motives behind the Army’s response to the allegations, as embodied in the Inspector General’s report, are highly relevant. At stake, Major Hensley averred, was the prestige of the European Command, and everything possible would have to be done to preserve that prestige intact. This certainly did not include the ‘constant surveillance’ and ‘progressive steps and sincere efforts’ that Hensley contended were being made ‘to bring about elimination of undesirable conditions’. Quite the contrary, as we shall see. To the Army’s everlasting shame, no further action was ever taken to deal with the issues which remained outstanding in the Reinhardt memorandum. Instead, Major Hensley appended his ‘Recommendation’ to his IG report. It baldly proposed: ‘That no further action be taken and this case considered closed.’

  And it was.

  Major Hensley’s report on the Garmisch allegations (and related matters) reached General Clay’s desk on about 1 March 1948. Other reports by other officers of the IGD were still being compiled and it was not until April that the findings of the Inspector General’s investigation were complete and had been finally digested. On 22 April Colonel F.J. Pearson, the Inspector General, submitted to the Commander-in-Chief nine Reports of Investigation and one CIC dossier on Guenther Reinhardt, together with a letter summarising the Inspector General’s final views on the matter.

  Of the 134 definite allegations identified by the IGD, only 11 were sustained. Most of these were held to be the products of administrative error rather than misdemeanours requiring disciplinary action. The one recommendation for disciplinary action (against a lieutenant-colonel not involved in the Garmisch case) was disapproved by the reviewing authority. The letter reinforced the views already advanced by Major Hensley and added some new ones of its own:

  The vast majority of Mr Reinhardt’s allegations have not been sustained [Colonel Pearson reported to General Clay]. It was the combined opinion of the investigative officers in this case that for a command of this nature, scattered over a wide area in relatively small sub-divisions and in a foreign country where the indigenous population has suffered an almost complete breakdown of economy and morals, there have been remarkably few cases where the conduct of American personnel has reflected adversely upon the integrity of the Occupation Forces and, likewise, upon the integrity of the US Government. It appears particularly well established that, when such instances have come to the attention of those in command, prompt and efficient corrective action has been taken.

  The author of the Reinhardt memorandum, the Inspector General maintained, was guilty of untactful handling of arrests (including, it should be remembered, the notorious ringleader of the German element of the Garmisch ‘gang’). He was guilty of using CIC credentials to impress authority to which he was not entitled. He appeared to be temperamentally unsuited to work with the Army. His disregard for orders suggested psychopathic tendencies. His judgement was unsound. He was a bigmouth, a scandalmonger and a purveyor of rumours and hearsay. He could not be trusted with a secret.

  The Inspector General was not finished with Guenther Reinhardt. ‘While serving in Munich until sometime early in November,’ wrote Pearson, ‘Mr Reinhardt repeatedly displayed an utter lack of sound judgement, as well as a marked emotional instability. He was unable to bring the simplest case of investigation to a successful ending, weaving into the matter involved fantastic plot, wild conjectures, unwarranted insinuations and unsupported conclusions.

  ‘Early in June 1947,’ Pearson revealed, ‘Reinhardt’s superior officers became convinced that he was mentally ill and in need of psychiatric treatment . . . Mr Reinhardt was persuaded to seek psychiatric advice and made visits to an experienced psychiatrist at the 98th General Hospital during the first two weeks in June 1947. This psychiatrist expressed the professional opinion, following these visits, that Mr Reinhardt’s mental disturbance was such that he would soon be unable to carry on satisfactorily, unless improvement were experienced.’

  It seemed that Reinhardt was not only wrong, in the Inspector General’s view, but he was mad; and not only was he mad, he was bad as well. For example, he had a girlfriend in Germany at the same time as he had a wife in the United States, and – horror of horrors – he traded cigarettes on the black market! There were, Pearson suggested, ‘ample reasons’ for
terminating Reinhardt’s CIC career – ‘to wit: immorality, inefficiency, black-market operations, and breaches of security’.

  Guenther Reinhardt always maintained that he had only done his job and that as a Control Investigator of the CIC it was his sworn duty to observe and investigate irregularities and recommend action. As far as the US Army was concerned, however, Guenther Reinhardt was a dead man. He had, in a manner of speaking, been executed long before he had been sentenced. He was never called before the Inspector General to defend or explain his allegations and he was given no opportunity to defend his name or his integrity which (unknown to him at the time) was becoming increasingly impugned. He was topped without a trial. Long before the first IG report on Reinhardt’s allegations had been completed, the European Command and the Department of the Army had begun to exact their revenge on him. In a letter to his old newspaper friend, Tom Agoston, written from his New York apartment, this embittered target of the military establishment outlined what befell him while the IG inquiry was still in progress in Germany:

  Things began to happen. On 21 January 1948 I was notified that my job in Berlin had been cancelled by the Theater Commander. On 27 January I was called to Washington and informed that I had been discredited. The boys in the theater had manufactured the damnedest file on me you ever saw – after I left and after the investigations got going. I also learned that during a one- or two-day stay in Washington around 26 January Clay had raised hell at the Pentagon about his command being investigated. Well, what they had concocted about me had no resemblance whatsoever to my personnel file that I had seen in Frankfurt the day I left. My commendations seemed to have disappeared. Nothing was said about my good efficiency ratings. Derogatory statements about me by the dozen had been added. The one speeding ticket I got in my life – for doing 40 miles [per hour] in a jeep on the autobahn – had been blown up into a major disciplinary action. The day in April 1947 when I wore the wrong shade uniform (civilian US) jacket at the Casino and was apprehended by one of Huebner’s lieutenants was made into a formal arrest for insubordination against a commissioned officer and grave misconduct, and dozens of statements added – (mostly from persons against whom I had filed charges!) from ‘associates and co-workers’ describing my ‘unreliability’, ‘inefficiency’, ‘emotional unstableness’, ‘immorality’, ‘irresponsibility’, ‘immaturity’, ‘lack of judgement’, ‘violations of security’, ‘sex mania’, etc. etc.

  During the ensuing weeks I got letters and word from CIC people on the methods used to get these statements – the official orders given, threats, persuasion, etc.

  I wrote the Secretary a formal letter apprising him of my knowledge of the derogatory dossier, the phoney way it had been manufactured, and called his attention that both under the law and constitution I had a right to see it and to answer every statement. I pointed out to him that in one of his letters to me he had rejected my argument for protection of the identity of informants and witnesses in the preliminary phase of our investigation with the counterargument that under our American system anybody accused of anything derogatory must be permitted to see the exact charges and be informed of the identity of the person who makes them. I further volunteered to submit myself to the jurisdiction of the US Civil Service Commission, the Dept. of the Army, and even to a court-martial in Germany. But I wanted this file to be brought out in the open, even If it meant preferring charges against me. Failing that I demanded that a formal investigation of me be launched by the Inspector General and that I be examined under oath. I also said that I did not seek reinstatement in my job although my contract, which had had still nine months to run, had been cancelled in violation of and disregard of six different specific provisions of law and regulations – but all I wanted was to have my name cleared.

  The Assistant Secretary wrote me back that in view of the fact that I was not under investigation and that no charges had been filed against me there was no reason for any action!

  The Inspector General’s investigation was not the only reaction to Reinhardt’s bombshell. A day or two after the 55-page memorandum had landed on General Clay’s desk, the special CID investigation in Garmisch, code named ‘Operation Garpeck’, was abruptly terminated, ostensibly on the order of the Theater Provost General, General George Weems, and allegedly because ‘it wasn’t getting anywhere’. At a time when Garpeck’s services might have been even more in demand by the High Command than ever, Chief Agent Philip Benzell and his team were called off, much to Benzell’s disgust. ‘I always felt that Peccarelli and his team were wasting their time in Garmisch, living off the fat of the land, chasing women, etc. etc.,’ Lieutenant-Colonel Lester J. Zucker, Executive Officer of the European Command CID, wrote to the authors in 1979. ‘Apparently General Weems thought so too and cut it all short . . . Whatever they were investigating, and it may well have been the gold and currency, nothing ever came of it. No recovery was ever made, no one was ever charged.’ All there was to show for months of toil and frustration were two reports on narcotics trafficking in Upper Bavaria – one dated 2 December 1947 signed by Victor Peccarelli, and the other, dated 10 January 1948, written by Philip Benzell. Of the results of the probes into the gold and currency cases there was no trace – they were simply missing. Much of the most relevant material from the narcotics reports, relating to the more nefarious activities of some of the more nefarious American and German inhabitants of Garmisch-Partenkirchen, has already been cited in earlier chapters. The two reports in their entirety were submitted as exhibits in the IG investigation into the Reinhardt memorandum. The concluding paragraph of the concluding report barely concealed the concern of its author at the information he must have been reluctant to convey: ‘In view of the withdrawal of this Agency from the investigation of illegal trafficking in narcotics, all informant nets in that field have been withdrawn and the operation, originally established for such type of investigation, has been discontinued.’

  Having got Operation Garpeck – and the possibility of further embarrassing revelations – out of the way, the Army proceeded to get rid of another potential embarrassment to its threatened image. While Reinhardt had been producing his report in the Pentagon, the Secretary for the Army, Kenneth C. Royall – an important member of the American Government with personal access to the President of the United States – instructed his personal representative, Judge Earl Rives from North Carolina, who was in Germany at the time, to look into Reinhardt’s charges.

  ‘Rives came back on 18 January 1947,’ Reinhardt told Agoston . . .

  and there was a hell of a blow-up which reached the papers only in part. Rives told them that he found things even worse than I had charged. As he is a reserve officer and aspires to be a general, and as he is a close political associate of Royall in North Carolina State politics – where Royall wants to become governor and Rives the State political boss – he felt he could not handle the investigation without lousing himself up forever with the big Army boys and embarrassing his friend and associate Royall. On the other hand Rives would not lend himself to a whitewash. So he resigned ‘because of urgent personal matters in his personal affairs at home’. That put the boys on the spot . . .

  In the meantime they got an old guy, Orville Taylor – one of those typical ‘prominent citizens’, a lawyer from Chicago – to take up Rives’ job as special emissary of the Secretary to investigate the German situation. He sailed from N.Y. on 4 February 1948. They had not allowed me to see him. They did not give him the assistants from Washington whom I had named as honest and not subject to the EUCOM influence. On 14 April he returned and on 4 May they released his report. It was the most god-awful whitewash I had ever seen.

  It was indeed. The Taylor Report available to the public took the form of a Department of the Army press release issued by the Press Section of the Public Information Division – an organ of public relations intended to promote a favourable image of the US Army in the US media. Under the heading ‘FOR RELEASE IN A.M. PAPERS, THURSDAY, MAY 6
, 1948 – ARMY RELEASES TAYLOR REPORT,’ the release began:

  The Department of the Army today made public a report by Orville J. Taylor, Special Assistant to the Secretary of the Army, based on findings of his recently completed survey of personnel, policies and general conditions in the European Theater.

  The complete report submitted by Mr Taylor to Secretary Royall follows.

  What ‘follows’ was in fact the second of two reports by Orville Taylor, the first concerning itself with Reinhardt’s 48-page criticism of the CIC, the second with his 55-page memorandum on the general state of the US Zone.

  The first Taylor Report had been submitted to Secretary of the Army Royall at the end of March 1948. It was concerned solely with Taylor’s investigation into the allegations made against the CIC. Though Taylor conceded that the CIC ‘did not enjoy an unblemished reputation’ and that approximately 20% of the men were unqualified for counter intelligence duty’, he was of the opinion that Guenther Reinhardt’s allegations of widespread moral corruption, professional incompetence, indifference and laziness were no more than glittering generalisations emanating from the fantastic imagination of which the reporter must be possessed’. After attending conferences with General Clay (and other top brass) and CIC briefings with the CIC Chief and his regional commanders all over the US Zone and in Berlin, Orville Taylor – not surprisingly – became satisfied that ‘these excellent and efficient officers’ were doing ‘a magnificent job’ and that there had been a ‘week to week, and almost day to day improvement and correction, where necessary, of the organization’. The first Taylor Report was in effect another, last-minute IG report, and read like it. The so-called Taylor Report submitted to the press by the Department of the Army was something else again.