Nazi Gold

by Bower, Tom

  Initially, the Compensation Office had denied Otto Mendelssohn-Bartholdy his money because his incarceration in a German concentration camp proved that he was “a German resident in Germany.” Hugo was also trapped. Between 1940 and 1946, he had lived in Austria, which the Compensation Office, having unquestioningly accepted the Nazis’ rather than the Allies’ definition, had deemed to be part of the German Reich. So he too was “a German resident in Germany.” By chance, in 1951 Mendelssohn-Bartholdy discovered that three years earlier the Compensation Office had finally accepted the Allies’ version of history: that Austria had been militarily occupied by the Nazis. Mendelssohn-Bartholdy was after all entitled to his assets and would have saved his one million francs if only the Compensation Office’s officials or Frölicher had cared to tell him earlier.

  Frölicher’s concern was to care only for the assets of Aryan Germans. Finding an old violin abandoned in the deserted German embassy in 1946, he had made considerable efforts over the years to find its owner, Paul Sachs. His hunt, with the help of former embassy employees and German diplomats across Europe, followed Sachs’s travels via a convent in Florence and a hotel in Milan to the home of Baroness Münchenhausen, where he discovered that Sachs was a Jew who had died either of a heart attack in 1944 or during deportation to a death camp. Had Frölicher realized at the outset that the violin belonged to a stateless Jew rather than a German, he would not have pursued the owner. But by then his very office had become academic. German diplomats and bankers, with the Swiss government in tow, had established the framework for the final settlement of the Washington Accord. German and Swiss satisfaction with the terms inevitably implied the dissatisfaction of others, including the Jews.

  The agreed intermediary in the settlement of the triangular dispute was Hermann Abs, Germany’s most prominent banker, the managing director of the Deutsche Bank, who had been arrested in 1945 as a suspected war criminal for plundering foreign corporations and for sanctioning, as a director, IG Farben’s investment in collaboration with the SS in a factory sited in Auschwitz. Protected by British officers against the Treasury crusaders, Abs had become an architect of West Germany’s economic regeneration.

  Over twelve months, Abs, a consummate diplomat, shuttled between the European capitals brokering a deal to match German interests against Switzerland’s refusal to dilute its claims against Germany, all the while soothing the Americans’ suspicions of Stucki. The State Department had tried to have the venue moved to Washington, because “we are on unfavorable ground in Bern,” where Stucki could be subjected to “the influence of those Swiss who are closely linked with Germany”; but the attempt failed. “The Swiss,” commented Robert Swann, a British diplomat in Bern, “appear far more ready to cooperate with the Germans than they were with us.” In Stucki’s opinion, he was capitulating rather than cooperating. Although his continuing refusal to advance the promised SF30 million ($7 million), or even a reduced sum of SF17 million, for the refugees until the Washington Accord was satisfactorily completed suggested that he was continuing to protect German property, in private he was enraged.

  “We’re in a grotesque situation,” cried Stucki. He was objecting to Bonn’s “sabotage” in forbidding the Swiss to use the German property in Switzerland to pay reparations to the Allies, or to repay Switzerland’s wartime loans to Germany, or as compensation for the $58 million paid to the Allies for the looted gold. The Germans should “do something about their debt” to Switzerland, he shouted. Sidelined, the Allies could now read the awful truth about the previous decade in Der Bund, an influential Swiss newspaper: “Switzerland stood up for a just handling of German interests after the signing of the Washington Accord.… We have always protected German interests, and it has not always been easy.”

  Protecting Germany’s looted gold had certainly been fraught with difficulty. During 1947, investigators in Germany had discovered that the real amount of Dutch gold being shipped to Switzerland had been $161 million rather than $100 million. Dutch anger was shared by the State Department. Although the accord was a final, legal settlement, Rubin had appealed to Charles Bruggmann, the Swiss ambassador, more in embarrassment than anger, hoping that the Swiss would not take advantage of the disarray in Holland after the war. “On grounds of morality, Mr. Ambassador,” Rubin had urged, “surely you can see from the documentary evidence that the Dutch case is watertight.” Rubin was being polite. The evidence suggested that officials at Switzerland’s National Bank must have seen Dutch markings on the ingots. Corroboration was provided by the Reichsbank’s delivery of 722 bars of Dutch gold to Sweden. Because the Germans had been pressed for time, 217 of those bars had arrived in their original Dutch wrappers, with documents showing their history and true ownership. Rubin had every reason to believe that the German shipments of Dutch gold to Switzerland were similarly mixed, not least because other unsmelted Dutch ingots had been sent to Portugal from Bern. During the Washington negotiations, Hirs had concealed that knowledge.

  But Bruggmann had been unmoved by Rubin’s appeal. The Dutch government had also formally asked Petitpierre to consider reopening negotiations. Bern had scoffed at the suggestion, repeating old excuses: “Switzerland has already paid a very considerable amount under the 1946 accord in the absence of any legal obligation.” The government had added that “only a negligible fraction” of the gold received from Germany “bore a Dutch marking.”

  Observing the State Department’s similar inability to recover looted gold from Portugal (Lisbon had offered to return 9 tons of looted gold despite having received 32 tons) and from Sweden (which returned only 7 tons of looted Dutch gold and eventually offered 301 bars as a settlement for a further looted 722 bars—16 tons), the Swiss saw that there would be no reprisals if they likewise protected other German loot. Included in that loot were the bags of gold coins worth $1.5 million found in the German embassy’s safe in May 1945, which, although plainly stolen, were declared by the Political Department to be “state property” belonging to Germany. Yet, despite all those efforts, neither Abs nor any other West German offered his country’s gratitude to Stucki.

  “It’s time for the Germans to make a sacrifice,” Stucki told Homberger. Serenely, the industrialist sought to pacify the official: “The accord took us dangerously near to illegality. The Allies were threatening us, but today we don’t need to be intimidated. We’ve got to make sure that in one hundred years’ time, history will justify what we’ve done as proper for a neutral, law-abiding country.” Stucki was not easily assuaged. Implementing the accord would complete his official service to Switzerland, yet reports from everywhere threatened that ambition. Swiss nationalists were demanding that all the money be used to repay the wartime loans; Swiss industrialists, who had earned fortunes by collaborating with the Germans, were submitting arrogant complaints full of lies to Petitpierre; while German industrialists and bankers were badgering Switzerland not to pay any compensation.

  “They say the accord is dead,” Ott, his deputy, told Stucki, “and their Swiss lawyers and trustees are telling them just to be patient.” Ott deplored the widespread ingratitude. Neither the Germans nor even the Swiss realized how effectively Compensation Office employees had used the freeze and delaying tactics to protect German interests. Instead they were attacked for obeying the law. Stucki agreed. Though he had not been acting “on behalf of Bahnhofstrasse,” he flattered himself, deriding the Swiss bankers he so much distrusted, “American suspicions about Switzerland’s attitude toward the accord were not completely unjustified.”

  In parallel agreements initiated on August 28, 1952, symbolizing West Germany’s status as an accepted European power: The Allies, grateful to receive anything, signed a new agreement with Switzerland, while the Swiss concluded a separate arrangement with the new West German government. The Allies, abandoning their original demand for SF250 million, accepted Switzerland’s “final” offer of SF121.5 million, minus a 10 percent deduction for payment in cash, and minus SF17 million (negotiat
ed down by the Swiss from SF30 million) to be paid to the International Refugee Organization. Under the latter agreement, Germany undertook to pay SF121.5 million to Switzerland and SF121.5 million to the Allies to cover Allied claims under the accord. No German assets in Switzerland were sold. In total, Switzerland recovered SF650 million of its loans to Germany, including the SF121.5 million. Homberger hailed the settlement as a victory for Switzerland. “It was a triumph for justice,” he told Stucki. Switzerland had retained all its assets in Germany, had recovered half the debt owed by Nazi Germany that seven years earlier had been written off, and had proved that its bankers cared for their clients’ interests regardless of pressure. “We saved what we could,” replied Stucki. “The Germans will be grateful to us.” André François-Poncet, the French high commissioner in Germany, concurred. The agreement, he wrote to Paris, would secure German “gratitude” toward Switzerland, “whose epithet as a ‘safe haven country’ is thus, as ever, well deserved.”

  To prove Switzerland’s reliability, Max Ott traveled to Bonn shortly after the treaty was signed to discuss the fate of the deposits of the German Jews. Anxious to win favor, Ott regaled Benninghaus, a German government official, with a flavored version of history. Boasting about the Compensation Office’s battle against the Allies to protect German interests, he proudly explained his tactics. While the Allies, he emphasized, had been concerned only about the Jews, “we opposed them saying that not only Jews were persecuted but others were too.” Then, remembering Bonn’s new version of history, Ott added that his staff had also keenly protected anti-Nazis. Not surprisingly, he forgot his own refusal to help the anti-Nazis during a conversation with bankers and industrialists on January 13, 1948. After all, as he well knew, history belongs to the victors—in this instance the Germans. Ott would later be employed by IG Chemie in Switzerland, as a reward for safeguarding its interests.

  On April 7, 1953, the Swiss government deposited SF101.5 million ($23.3 million) in a special account opened in the Swiss National Bank for the three Allied embassies. In London, Foreign Office officials complained that the Americans, having received $34 million from the sale of German property in the United States, “have done very well out of the reparation program and are bored with the whole business.” By contrast, the Europeans received very little. “Every effort,” ordered the Foreign Office, “should be made to minimize such deductions” especially of the money owed to the IRO. “As the United Kingdom’s entitlement to receipt from IARA is higher than [that of] any other country, we stand to lose more than anybody else by these deductions.” The most Britain would receive, it was calculated, would be SF34.5 million, but more likely SF22.5 million. France would receive half that amount. Both countries resolved to resist the Americans’ demand that SF17 million be handed over to the IRO, a decision that echoed the consistent antagonism toward the Jewish claims throughout the negotiations.

  On that issue, however, Britain’s and France’s defeat was swift. Under pressure from the Jewish organizations, the State Department demanded that the accord be implemented. After loans were deducted, SF12.8 million was to be deposited in the IRO account, of which the American Jewish Distribution Committee and the Jewish Agency were to receive $1.4 million each. For Rubin, the success was sweeter because some State Department officials had until the very last months proposed to “abandon entirely” negotiations with Switzerland. But his elation that his persistence on behalf of the Jews had been rewarded was dampened by a press release issued by the World Jewish Congress claiming credit for the settlement. “As usual the WJC in London is manufacturing press releases,” complained Eugene Hevesi. “One of those outrageous things the World Jewish Congress does,” agreed a colleague. But worse than this bitching was the crusaders’ failure in the final settlement to trounce Switzerland’s banks and insurance companies and extract the heirless assets. Both Swiss groups had successfully prevented encroachment on their secrecy. They still controlled the heirless assets and the unidentifiable bank deposits.

  On January 24, 1952, Max Oetterli had been spitting with fury. Despite his demand, Maurice Jaccard in the Political Department had given no forewarning about Petitpierre’s answer to Philip Schmid’s allegations nine weeks earlier in parliament about the heirless assets. Schmid had accused the Bankers Association of apparently intending to “retain” that money rather than transfer it to the rightful owners. Unwilling to sustain a complete deceit, Petitpierre had announced on January 22 that the government would order compulsory notification of heirless assets. “I am astonished,” Oetterli screeched at Jaccard, “that the government took this action without first consulting the Bankers Association.” The banker would not be calmed. “I want to meet Zehnder,” he demanded, referring to the senior official sympathetic to the bankers’ requirements. “Herr Alexander at the Ministry of Justice is responsible for the legislation,” replied Jaccard. But Oetterli’s relations with those officials were not as close.

  Surveying the Bankers Association’s attitude over the previous years, Emil Alexander, the director of the Justice Division, noticed suspicious variations. In 1947 the association had reported that the identifiable heirless assets amounted to SF208,000. Two years later in Warsaw, the Polish assets were assessed to be SF2 million. Later that had fallen to SF600,000 and then to “less than SF500,000.” The department had proposed to issue a special decree to compel the banks to declare the true amount, but the bankers had successfully argued that the issue was not urgent and that any change in the law would damage Switzerland. In 1952, an uncompleted survey by the Bankers Association among twenty-one members had identified heirless assets worth SF36,580, with an overall total estimate of SF825,000. The insurance companies estimated a figure of SF29,000. Alexander’s dissatisfaction was mild compared with Rubin’s. After conversations with sympathetic Swiss bankers, he estimated the heirless assets to be worth at least SF14 million. Alexander and Rubin were agreed on one fact. Despite all the disparities, heirless assets certainly existed in Switzerland’s banks. That assessment had been unwelcome to the British and French governments.

  To secure more money for Britain, Neal Goodchild had sought to prevent heirless assets from contaminating the negotiations. In a visit to Bern, he had been persuaded that the amount of heirless assets and the money belonging to the persecutees was so small that the subject was not worth discussing. With little difficulty, he converted the Quai d’Orsay and the State Department to the same opinion. The subject, Rubin was told by Avery Paterson, was “a most difficult one to settle at this time.” There were more pressing issues. Rubin’s only success had been to inveigle the State Department into securing British and French support to prevent Switzerland from including the assets of persecutees as German property to be used for reparations. Germany’s bid during the negotiations for the final agreement to inherit the heirless assets of the German Jews had also been foiled—a victory dubiously shared with the Swiss banks. But in the months before the final settlement, the Jewish organizations had failed to prevent Germany from inheriting other heirless assets of the victims of Nazism.

  In the French zone of Germany, the military government had allowed the Germans to keep the heirless assets and deny the Jews any benefit and had even stipulated that any remaining money should be used for the benefit of France, despite the plight of destitute Jews in Germany. “Unfortunately,” commented a guilt-ridden official in the French Foreign Ministry, “the existing French zone law allows assets, the majority of which are of Jewish origin, to be used for the profit of groups of people who are mostly not Jewish.” Wanting to improve France’s image, Robert Schuman, the French foreign minister, had asked the German government to behave more benignly toward the Jews and Israel and suggested rebuilding synagogues in France. Reports from the French ambassador in Bonn confirmed that Germany, still anti-Semitic and mirroring France’s lack of interest, was searching for legal reasons to avoid paying reparations to Israel by arguing that the new government in Tel Aviv was not legally entitled
to represent the dead, who were not Israeli citizens when they were murdered. “While it is not surprising that the Germans themselves could resort to this kind of immoral and undignified duplicity,” Eli Rock of the Jewish Restitution Successor Organization wrote in a memorandum to Ross McClelland in the State Department, “the willingness of the French to go along with such a program … is beyond comprehension.” French complicity with the Germans, complained Rock, even in the midst of international tension, not only undermined the Allies’ position but represented an unacceptable “act of immorality and injustice,” overturning all the ideals and reasons for destroying Nazism. It was, he wrote, a “fraud” perpetuated by the Germans to evade all responsibility.

  McClelland had ignored Rock’s letter, but an inquiry by Israel on April 10, 1951, about progress in settling the issue of heirless assets required a personal response from the secretary of state. Drafting the answer, McClelland sought to defuse any protests: “The American delegation is under instruction to seek a solution to this question along the lines of the proposals advanced by the government of Israel on June 15, 1950.” McClelland added that while the negotiations in Bern were under way, the outcome was uncertain. His caution was advisable. The department’s negotiators in Bern had been instructed not to contest the Swiss on the subject. For their part, the Swiss had long anticipated the Allies’ attitude. Ever since Switzerland had rejected the Allies’ protest about the Polish agreement, Jaccard noted, “The Americans, British and French have not been very interested.” That assessment was vindicated at a preliminary meeting in Bern in April 1951. No diplomat representing the three Allied governments had challenged a memorandum submitted by the Swiss government to the Allies reporting that an investigation by the Bankers Association and the Swiss Association of Life Insurance Companies had “revealed no (rpt no) assets of heirless German victims of Nazi action.” The pertinent inclusion of the word “German” was not questioned and the fate of the non-German heirless assets remained undiscussed. The briefing paper on heirless assets for Sir Patrick Scrivener, the British delegate, instructed, “The memorandum … by the Swiss delegation suggests that the matter may now be dropped.”