The Nazis definitely had organized plans for a comeback. At the center of the plan was Martin Bormann, the Reichsleiter. Bormann had risen through the ranks to Party Secretary, the number two spot in the Nazi hierarchy. Hitler had entrusted Bormann with ensuring the Reich would be able to stage a comeback once hostilities ceased. The meeting in the Red House was the beginnings of Bormann's effort to expand his plan to include industrialist and top ranking office. The meeting had been the result of Bormann’s order. However, Bormann did not attend the meeting. The Treasury Department has a transcript of the meeting from a captured document. The SS agent conducting the meeting told the group that all industrial material was to be evacuated to Germany immediately; admitting the battle for France was lost. He also assured the gathering the "Treason against the Nation Law" about foreign exchange was repealed. At a smaller conference that afternoon, Dr. Bosse of the German Armaments Ministry indicated the Nazi government would make huge sums available to industrialists to help secure bases in foreign countries. Dr. Bosse advised the industrialists that two main banks could be used for the export of capital: Schweizerische Kreditanstalt of Zurich and the Basler Handelsbank. He also advised the industrialists of Swiss cloaks that would buy Swiss property for a five-percent commission. A month later, Bormann countermanded Hitler’s scorched earth policy to preserve Germany’s industrial base.
Bormann knew the Nazis had lost the war once the allies landed in Normandy on D-Day. He gave himself nine months to place into operation his flight capital program to find a safe haven for the Nazis' liquid assets. Essentially, the Alsace-Lorraine area would serve as a microcosm for his plans. Germans owned the controlling interest in many of the French banks in the area. A German majority ownership also controlled many of the factories. In essence, Bormann would rely on Tarnung to hide German corporations. Bormann was close friends with Schmitz, a director of I.G Farben and studied I.G.’s method of Tarnung extensively. Bormann sorted his records and then shipped them to Argentina via Spain. Bormann began his flight capital, already having control of the Auslands-Organisation and the I.G. Verbindungsmänner. Both organizations placed spies in foreign countries disguised as technicians and directors of German corporations.
By the time, the Battle of the Bulge was raging; Bormann had already been very successful in moving assets out of Germany. In 1938, the number of patent registrations to German companies was 1,618 but after the Red House meeting it had risen to 3,377. Bormann had also created a two-price system with Germany’s trading partners. In it, the lower price was the price cleared or settled at the end of the banking day, the higher price was retained on the books of the neutral importer. The difference accumulated to a German account, becoming flight capital on deposit. Under this system Bormann amassed about $18 million kroner and $12 million Turkish lira. Balance sheets in Sweden showed Bormann acquired seven mines in central Sweden. Bormann created 750 new corporations. The corporations were scattered across the globe and represented a wide array of economic activity from steel and chemicals to electrical companies. The firms were located as follows: Portugal 58, Spain 112, Sweden 233, Switzerland 234, Turkey 35 and Argentina 98. All the corporations created by Bormann issued bearer bonds, so the real ownership was impossible to establish.
Bormann had several means of dispersing the Nazi assets. He used the diplomatic pouches of the Nazi’s foreign policy minister, von Ribbentrop, to send gold, diamonds, stocks and bonds to Sweden twice a month. A similar pattern was used to ferry more valuables to South America. In addition to Bormann’s Aktion Feuerland project, Bormann allowed other Nazis to transfer their own valuables through the same channels.
In Turkey, both the Deutsche Istanbul and the Deusche Orient banks were allowed to retain all their earnings rather than send them back to Berlin. The earnings were mere bookkeeping items that were ready to be transferred anywhere in the world.
In 1941, German investments in United States corporations held a voting majority in 170 corporations and minority ownership in another 108 American corporations. Many of these corporations were part of the I.G. Farben cartel. Additionally, American corporations had investments in Germany totaling $420 million. With his program for flight capital well on its way, Bormann gave permission for Nazis to once again buy American stocks.
The purchase of American stocks was usually done through a neutral country, typically Switzerland or Argentina. From foreign exchange funds on deposits in Switzerland and Argentina, large demand deposits were placed in such New York banks as National City, Chase, Manufacturers Hanover, Morgan Guaranty, and Irving Trust. Manning reports that over $5 billion dollars of American stocks was purchased in such a manner. These same banks were active in supporting Germany. In addition, every major Nazi corporation transferred assets and personnel to their foreign subsidiaries.
The United States and Britain never could fully grasp the extent of the Nazi flight capital. John Pehle provides an interesting insight to why the United States was unable to stop Bormann and his movement of Nazi assets to neutral countries. Pehle was the original director of the Foreign Funds Control. Pehle’s reasoning is given below:
In 1944, emphasis in Washington shifted from overseas fiscal controls to assistance to Jewish war refugees. On presidential order I was made executive director of the War Refuge Board in January 1944. Orvis Schmidt became director of Foreign Funds Control. Some of the manpower he had was transferred, and while the Germans evidently were doing their best to avoid Allied seizure of assets, we were doing our best to extricate as many Jews as possible from Europe.
Pehle’s explanation seems overly simple. Additional personnel would have been useful and more could have been accomplished. However, the real problem was the rot and corruption within the United States. The leaders of America’s largest corporations were all in sympathy with the Nazis and almost all of them had invested heavily in Nazi Germany. Additionally, there were many in Congress that sympathized with the Nazi cause. The mood in Congress was one of "get the boys home and get on with business." When Orvis Schmidt testified before congress to the extent of the Nazi infiltration of neutral countries before the end of the war, it fell on deaf ears. An excerpt of his testimony is given below.
The danger does not lie so much in the fact that the German industrial giants have honeycombed the neutrals, Turkey and Argentina, with branches and affiliates which know how to subvert their commercial interest to the espionage and sabotage demands of their government. It is important and dangerous however, that many of these branches, subsidiaries and affiliates in the neutrals and much of the cash, securities, patents, contracts and so forth are ostensibly owned through the medium of secret numbered accounts or rubric accounts, trusts, loans, holding companies, bearer shares and the like by dummy persons and companies claiming neutral nationality and all of the alleged protection and privileges arising from such identities. The real problem is to break through the veil of secrecy and reach and eliminate the German ability to finance another world war. We must render useless the devices and cloaks which have been employed to hide German assets.
We have found an I.G. Farben list of its own companies abroad and at home--- a secret list hitherto unknown--- which names over 700 companies in which I.G. Farben has an interest.
The list referred to in the quote list does not include the 750 companies Bormann set up. Following the war Schmidt testified again to congress as follows:
They were inclined to be very indignant. Their general attitude and expectations was that the war was over and we ought now to be assisting them in helping to get I.G. Farben and German industry back on its feet. Some of them have outwardly said that this questioning and investigation was in their estimation, only a phenomenon of short duration, because as soon as things got a little settled they would expect their friends in the United States and England to be coming over. Their friends, so they say would put a stop to activities such as these investigations and would see that they got the treatment which they regarded as proper and the assistance would be given to them to help reestablish their industry.
Here again we see how the 4-D program was sabotaged. In fact, in every country liberated there was a great reluctance to disturb the machinery of money and industry connected to Germany through cartel agreements. The German presence was reduced but not eliminated. The cloaked ownership ensured continuity for the Nazis. Even the Grand Duchess, Charlotte of Luxembourg, had her own ideas. On returning home from exile, the Duchess dismissed the United States investigative team and ordered them out of the country. On June 26, 1945, chairman of the US Senate subcommittee on military affairs, Elbert D. Thomas, commented on Luxembourg. An excerpt of his comments follows.
We had a mission in Luxembourg which was obtaining quite a bit of information on the steel cartel until the Grand Duchess returned. Information was then blocked off from us and the mission had to retire with what information they had already collected. There was much to learn about the way in which small states like Luxembourg had been used by the cartels. The episode suggests that some rulers, whom we have befriended, may be expected to assist the cartelists in their postwar efforts to regain dominance.
What the Grand Duchess had learned from her finance minister was simple. Don’t tamper with the cartel. Luxembourg had made a vast amount of money and there was every indication that they stood to make a great deal more. All that Luxembourg needed to do was readjust the stock ownership to please the Allies. Powerful friends of the Bormann organization had understood what was at stake and planned accordingly. Scattered across the globe in various control points such as Wall Street, Washington, London and Paris was a group of bankers that were well aware of the financial benefits of cooperating with the Nazi underground.
The Nazi plans rested on American fears of communism. Free enterprise and property rights were to take center stage while morality was conveniently dismissed as superfluous. Such was the case in the four to one vote by the appeals board to free Richard Freudenberg, the largest shoemaker in Germany. Freudenberg was a regional economic adviser to Bormann and a die hard Nazi. He was in the automatic arrest category. Ambassador Murphy expressed the argument of free enterprise in his comments in defense of Freudenberg. This is the same Murphy that was part of the control council. His comments follow below.
"What we are doing here through denazification is nothing short of a social revolution. If the Russians want to Bolshevize their side of the Elbe that is their business, but it is not conformity with American standards to cut away the basis of private property. This man is an extremely capable industrialist, a kind of Henry Ford."24
In testimony given at Nuremberg, Herman Schmitz praised Bormann for the manner in which he spread German assets around the globe. Of particular interest was Schmitz's view of what lay in-store for the directors of I.G Farben once the war was over. The passage follows below.
We can continue. We have an operational plan. However, I don’t believe our board members will be detained long. Nor will I. But we must go through a procedure of investigation before release so I have been told by our N.W.7 people who have excellent contacts in Washington.
The last phrase in the quotation above, "who have excellent contacts in Washington," should have set off alarm bells of the U.S. prosecuting team at Nuremberg. Here is direct proof of people in power in Washington collaborating with an integral part of the Nazi war machine. Where was the follow up investigation determining who those contacts were? There are reasons why many files for WWII have not been released. Besides revealing the industrialists and congressional members mentioned in the previous chapters as traitors such files would reveal many career employees of the State Department and the military-intelligence community as traitors.
Instead of being investigated, like so many other productive leads, it was dropped. This attitude of top I.G. Farben directors was typical. They knew in advance that they would suffer only minor penalties. As George Seldes reminded us, there are people too powerful or too rich to be subjected to our laws, even when it involves treason. Schmitz's information was slightly wrong in that twelve I.G. Farben executives were tried at Nuremberg. Schmitz received a four-year sentence. However, all the sentences were later reduced to time served and all were returned to their previous positions.
At this point, we need to return to the Merkers hoard. Intelligence reports since 1940 indicated the Nazis were accumulating a fortunate of roughly one billion in 1940 dollars or ten billion in today’s dollars. The discovery of the Merkers hoard created an amazing complex set of problems. First, the find was only about half of the estimated Nazi treasure. While the Merker’s hoard was the bulk of the Reichsbank’s holdings, there were additional gold and currency left in Berlin. Second, dividing the treasure presented a myriad of problems, which still remains a controversy today.
Also troublesome were the accounts of Melmer and Max Heiliger. Interrogation of Nazi banking officials soon revealed the nature of these accounts. Albert Thoms explained the booty seized by the Wehrmacht went straight to the Reichshauptkasse, or Treasury. However, the Reichsbank exclusively handled the loot seized by the Schutzstaffeln (SS). The bank would first credit the loot to the Melmer account. After the bank had assessed the value the Reichsbank credited the amount to the Heiliger account. Only five people were privy to the Heiliger account: Reichsbank president Walter Funk, Reichsbank vice president Emil Puhl, chief cashier Kropf, and director Fronknecht, and Albert Thoms, Chief of the Precious Metals Department. The SS account held the earnings skimmed from the Action Reinhardt operation that began in 1943 to strip the concentration camp inmates systematically of all gold coins, jewelry and clothing. Puhl aided in this operation as besides his Reichsbank position he was also a director of the International Bank for Settlements. Thus he was in the perfect position to act as an international fence after the concentration gold was melted into gold bars.
The Melmer account was indicative that other private accounts might exist. Indeed many of the top ranking Nazis from colonel on up had gathered their own treasures. Some of these private treasures such as Göring’s were substantial treasures in their own right while others were more modest. The total value of these private treasure hoards is unknown, as is the fate of many of them.
There were additional finds in the Merkers area. In another mine, the allies found 400 tons of records from the German Patent Office, enough records to fill thirty railroad cars. Another finds included over two million books, the records of the German High Command, and much more material.