Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion

by George M. Taber

  Thirty British gold shipments took place in the year between King George VI’s visit to Canada and the May 1940 Nazi invasion of the Low Countries. All of them went to Canada, and most were valued at only £2 million or £3 million. But more—much, much more—was soon heading that way.16

  Only two weeks after the Nazi invasion of Western Europe, the situation for Britain looked ominous. Dutch, Belgian, and French defenses had quickly crumbled, and the Germans were marching toward Paris. A British cabinet meeting on May 21 was realistic and pessimistic. On May 21, Sir Alex Cadogan, the Permanent Undersecretary for Foreign Affairs, wrote in his diary, “A miracle may save us: otherwise we’re done.”17

  That same day, Undersecretary Phillips sent Sir RVN (Hoppy) Hopkins, the second treasury secretary, a terse, hand-written, one-page memo outlining the country’s gold situation. The report, which was soon in Churchill’s hands, stated that the country had £80 million in Ottawa, £25 million in South Africa, £6 million in India, and £40 million in transit. In addition, Britain had £280 million more in London and was holding another £200 million in bullion for a variety of central banks. Total British gold holdings: 1,600 tons, and it had to be evacuated as soon as possible. The report noted that the best temporary storage facility outside London was in Southampton on Britain’s south coast, but Hopkins wrote that was “unsuitable” in view of the threat of an attack from German-controlled coastal areas of France and Belgium. The Nazis were already assembling a fleet to invade Britain.18

  The following day, Cadogan wrote in his diary in an almost throwaway line, “Cabinet this morning discussed legislation for this afternoon giving Government full powers over property and persons. This ought to have been done twelve months ago.”19 The war measure was certainly late, but it was the most sweeping grant of authority ever given to an elected government in British history. It passed Parliament without any discussion. The press did not understand the implications of the legislation, which basically changed the rules of Britain’s private economy. According to an old British saw, Parliament can do anything except turn a man into a woman. The Churchill cabinet was doing something almost as historic. In addition to shipping all of the nation’s gold out of the country, the government was going to send stocks and bonds to Canada. During meetings in the director’s parlour at the Bank of England, a small team of officials from the British Treasury, the Bank of England, and the Admiralty began drawing up a plan to evacuate the country’s wealth.20

  On May 25, Basil Catterns, the deputy governor of the Bank of England, sent Sir Frederick Phillips a two-page memo on “the steps that could be taken to protect the assets of this country.” Based on talks with the Admiralty, officials knew the navy could ship £300 million in gold to Canada by the end of the month and perhaps £350 million later. Catterns added that the government had to deal not only with privately held gold in Britain but also that of its “customers,” referring to foreign governments such as Holland or Belgium. He recommended that all the country’s stock certificates be collected and “shipped to Canada by a vessel specifically chartered for the purpose.” Catterns thought that could be done “within a couple of weeks.” Phillips further suggested that £300 million in British currency notes be “put on board a boat under military guard and kept either in dry dock or, say, somewhere in the Mersey so that, if necessary, the boat could be taken out to sea and sunk.” The objective of all the proposed measures was to make sure that if Hitler did successfully invade Britain, the Nazis would not find any gold, currencies, or securities to further finance their war.21

  That same day, top Treasury and Bank of England officials met to work out details for shipments to Canada that were to take place in June. The size of the gold movements now increased dramatically. In a convoy of three vessels due to leave on May 30, two merchant ships would each carry £10 million and a battleship would take £30 to £40 million. Going forward, battleships were to haul a maximum of £50 million. The British navy in June 1940 moved £200 million in gold, while commercial vessels transferred £100 million.

  Government officials also drew up a plan for putting any securities that the Nazis could market abroad “out of reach of the Germans if they were to gain a foothold in this country.” Since London was the world’s financial capital, many foreign investors kept large sums of stocks and currency there. All those stock certificates and bearer bonds had to get out of Britain. Shares held by foreign residents from countries ranging from Argentina to the United States, would also be shipped to Canada without their knowledge.

  Finally, the government set out a plan to collect British paper currency from around the country that could be destroyed quickly in case of an emergency. New bills for distribution in London alone weighed about 115 tons, and it would take an estimated twenty-three five-ton trucks fifteen hours to remove the money from vaults and load it onto vehicles. Officials hoped that they would not have to take this step, but they had to be prepared for every eventuality.22

  On May 26, Phillips gave Sir Kingsley Wood, the Chancellor of the Exchequer, a status report on the evacuation of the country’s wealth. At the top of the first page of the three-page, hand-written memo were the words “Highly Secret.” It stated that there was £630 million in British gold to be shipped out. In addition, London was holding bullion worth £70 million for France, £85 million for Belgium, £10 million for Norway, £25 for Holland, £8 million for Czechoslovakia, plus a few smaller accounts. Foreign deposits, wrote Phillips: “Say £203 million.” He added, “All the gold in the Bank of England is being packed and this process will be completed in a week.” The goal was to “break the back of the whole job by end-July.”23

  Sir Fredrick also pointed out that unexpected problems were developing with the financial security plan. One example: “Newly printed bank notes tightly packed are unfortunately terribly hard to destroy in a hurry.” Ominously he concluded, “This involves taking fearful risk which we would not contemplate for a moment in normal times: we shall for instance be sending £50 million on one battleship. . . . We must assume also I think that the risks will increase as time goes on.”

  He concluded his report with the simple question, “Shall we go ahead?”24

  Chancellor Wood scribbled at the bottom: “Let us do nothing at the moment about [telling] the other countries as we do not wish to give them the impression that we have got the wind up. Let us renew that side of the question from day to day.” The British government did not inform foreign gold holders that their shipments might be at risk. On May 30, Jacques Rueff, the deputy governor of the French National Bank, replied to his counterpart B. C. Catterns, “I know the difficulties of these transfers and the responsibility they impose on those who undertake them. Permit me, in thanking you for your proposals, merely to say that any increase in the percentage which might seem possible to you in the near future would be welcomed here.”25

  The three days of May 26, 27, and 28, 1940 were perhaps the most crucial period of World War II. The British war cabinet met several times a day, as the situation on the battlefield continued to deteriorate. Churchill asked the king to declare Sunday the 26th a day of national prayer, and Britons across the country turned out at churches as if the king had given a royal command.

  A growing split over war strategy between Churchill and his foreign secretary Lord Halifax was becoming more obvious at every cabinet session. Halifax wanted to send out diplomatic feelers to see if Mussolini might act as an intermediary for some kind of an agreement between London and Berlin. Churchill considered that a dangerous step on the slippery slope toward surrender. Halifax wrote in his diary that the prime minister “talked the most frightful rot.”26

  On Monday May 27, the British put out the order for Operation Dynamo, the evacuation of Allied forces from Dunkirk. That evening King Leopold III of Belgium asked Berlin for an armistice, leaving a giant hole in the Allied lines. At a cabinet meeting Halifax confronted Churchill, pressing him to declare whether he would consider any peace terms at any
time. Most of the members thought the answer was no. Halifax had already told Cadogan that he could no longer work with the prime minister. In perhaps the most dramatic moment in British history, Halifax interrupted the second of three cabinet meetings that day to ask Churchill to join him for a walk in the garden. Neither man ever revealed what was said during their stroll. The two men returned, and the meeting continued. Britain, though, did not ask for peace conditions.27

  It was without a doubt the worst possible moment to be moving billions of dollars of valuables across the Atlantic. From July to October 1940, German U-boats were at their most deadly. Admiral Karl Dönitz told Allied interrogators after the war that at the time, “Conditions were made particularly favorable for the U-boat war against shipping in the Atlantic.” The German navy was at peak capacity, and it could use the Spanish Bay of Biscay ports for repairs and refueling instead of having to make long sea trips back to Germany. Submarines went out into the waters near Britain, fired at will, and then quickly returned to be refitted in northern Spain. “The sea routes were now, so to speak, at the front door,” Dönitz later explained. “The U-boat losses were exceptionally small,” and it led the Germans, according to Dönitz “to entertain the idea of deciding the war in our favor by a rapid invasion of England.”28

  On May 30, the battleship HMS Revenge undertook the first major gold shipment across the Atlantic. Vessels would now carry bullion worth more than $150 million (£40 million). Two speedy steamships, the SS Antonia, a Cunard vessel that previously brought emigrants across the Atlantic, and the SS Duchess of Liverpool, another passenger boat that was evacuating children to Canada, accompanied the Revenge. Each of them carried $40 million (£10 million) in gold. It was a risky undertaking even with the best of planning. In June, fifty-seven Allied ships went to the bottom of the Atlantic Ocean.29

  An even bigger convoy was ready to depart near the end of that month. One afternoon in the middle of June, five Bank of England executives were called to the director’s parlour and asked if they would undertake a totally secret mission abroad. That was all they were told. Everyone said yes and then rushed to pick up their passports and tell their wives to get ready to leave the country. The men knew only that they would be departing on a ship from Greenock, Scotland, while their wives would be on a separate ship sailing from Liverpool. Each staffer was allowed to take just one suitcase. Alexander Craig of the bank’s Foreign Exchange Control department was the group’s senior official.

  The SS Emerald, which had earlier escorted King George VI to North America, was to be the lead ship in the convoy. Captain Agar was no longer its commander because he had been reassigned to Operation Lucid to create the plan for a last ditch effort to protect the country if the Germans invaded. Berlin was already assembling landing craft. Agar was going to set the English Channel on fire by directing a fleet of burning ships at the invaders. The plan was modeled after Drake’s never-used strategy to stop the Spanish Armada in the sixteenth century, which appealed to Churchill’s love of history. Fortunately, the plan never had to be implemented this time, either.

  Captain Francis Cyril Flynn was now captain of the Emerald. Four destroyers were assigned as escorts. Philip Vian aboard HMS Cossack led the group. Only two months earlier, the Norwegian government had turned over to him that country’s gold as well as its entire merchant fleet.

  The Emerald carried 2,229 boxes of gold worth £30 billion plus nearly five hundred boxes of securities with a nominal value of at least £200 billion. The gold was stored in the ammunition lockers, while the stocks and bonds were tucked into every nook and cranny on the ship. The crew learned what the ship was carrying during the loading, when a few containers of ingots crashed to the floor and broke open. Because of the wartime dangers, this shipment, and all those to follow, could not be insured.30

  The weather forecast for the voyage was as bad as it could be: heavy rain and fog were predicted for the first several days. Sailors loaded the Emerald on June 22 and 23. Then an hour before midnight on June 24, the ship pulled away in deep fog. Visibility was still poor when the ship passed Northern Ireland and entered the Atlantic. Shortly after the departure, the Bank of England’s Alexander Craig chatted with one of the officers, who told him that Flynn had just received a message from the Admiralty that “a couple of German U-boats” were waiting for them. The British vessels were among the Royal Navy’s best and could travel at high speeds, but gale winds forced them to slow down. Vial’s destroyer led the convoy, and he stayed in a zigzag course for safety reasons. Eventually the officer sent a message that it would be safer for the Emerald to travel alone so that it could travel at a higher speed. The escorts then turned around and returned to base. As they pulled away, the Cossack flashed a signal-lamp message: Godspeed.31

  The five Bank of England officials, who were unaccustomed to foul ocean travel, were dreadfully seasick for the first three days out. Finally on the fourth day, the storm subsided, and they played darts and bridge or read. Once he was free of the escorts, Captain Flynn increased his speed to a brisk twenty-eight knots, and early in the morning of July 1 the crew and bank officials saw Canadian destroyers off in the distance coming out to bring them to shore. The Emerald docked at 7:30 A.M. A Canadian National train as well as officials from the Bank of Canada greeted them. It took twelve hours to unload the vessel, but at 7:00 P.M. the train left on an overnight trip to Montreal.

  Upon arrival at the Bonaventure Station, guards jumped off coaches to set up a protection perimeter. David Mansur, acting secretary of the Bank of Canada, and Sidney Perkins of the country’s Foreign Exchange Board were the official greeters and immediately approached Alexander Craig. The Brit said casually, “Hope you won’t mind our dropping in unexpectedly like this, but we’ve brought along quite a large shipment of fish.” The British code name for the Canadian shipments was Operation Fish, although the Admiralty called the cargo “margarine.” He quickly added, “Actually, the fish are a very large portion of the liquid assets of Great Britain. We’re cleaning out our vaults. In case of invasion, you know. The rest will be coming over shortly.” The cargo was then split up, with the gold going on by train to the Bank of Canada vault in Ottawa, while the securities went to the Sun Life Assurance Company in Montreal.32

  Only a few days after the Emerald’s cargo was safely stored in Canada, five more ships left Britain in the biggest British convoy of the war. It was also the largest treasure shipment in history on either land or sea. Two British navy vessels, the battleship HMS Revenge and the cruiser HMS Bonaventure, departed from the River Clyde in Scotland. In the North Channel between Ireland and Scotland, they met up with three former cruise liners: the Monarch of Bermuda, Sobieski, and Batory. The last two ships belonged to the Free Poland navy. Four destroyers also joined as escorts. The commander of the entire operation was Admiral Ernest Archer, who had taken command of Revenge the year before. This would be his fourth bullion voyage. Between them the ships carried a cargo of £450 million. Also on board was a team of British officials on their way to a crucial financial meeting in Washington.

  The ship was so full that the captain sent back a message saying, “We are now in a stage where the ship’s chaplain is sleeping on his altar.” The ship carried twelve-inch and fifteen-inch guns as well as an anti-aircraft battery. Sailors slept near the weapons in case of emergency. Revenge joined the other vessels in the convoy at 7:00 P.M. The following day, it dropped a depth charge in hopes of hitting a German submarine. Sure enough, the ship’s crew soon saw a huge splash off the port bow.33

  Two-thirds of the way to Halifax, the Sobieski reported mechanical problems and had to slow down. Admiral Archer ordered Captain Jack Egerton Broome, who was now the commander of the Bonaventure, to leave the convoy and help the Polish ship. The vessels detoured to the closer landfall at St. John’s, Newfoundland. The three remaining ships stayed on course for Halifax, and tied up there at 1:45 P.M. on July 12. The gold and securities were offloaded to secure vehicles, and it took un
til 10:00 the next morning to finish the job. At one point, a box broke, and a heavy ingot dropped through a hatchway to the fourth deck. A sailor looked down and shouted, “Is that gold okay?” A middy barked back, “What about our bloody heads!”

  With the Bonaventure leading the way, the two laggard ships sailed through heavy fog and floating ice for more than two days toward St. John’s. The worried captains knew they would not see an iceberg until they were almost on top of it. The two vessels finally stopped dead for twelve hours and waited for better weather. Finally at 5:15 A.M. on July 12, they separated at the entrance to the St. John’s harbor. The Bonaventure headed for Halifax, arriving there the next morning, while the Sobieski landed in St. John’s. All five vessels—and their cargo—were now on the safe side of the Atlantic. When his ship docked, Commander Humphrey Jenkins, the executive officer on Revenge, told the Bank of Canada’s Sidney Perkins, “I’ll be glad to get rid of this margarine.”

  British officers were always watchful to make sure that nothing was lost to sticky fingers during the transport. When the Revenge arrived, it appeared that three cases of gold were missing. A bank official thought something might have happened during the loading. A mess steward, who was preparing a drink, overheard the bankers talking about it and said, “Perhaps I’ve got what you’re looking for. I’ve been tripping over something since we left.” He went into the kitchen area and found three boxes stored amid cases of Scotch whiskey. Nothing was missing!

  It took five special trains to transfer this mega shipment of bullion from Halifax to Ottawa. Each consisted of ten to fourteen wagons, and 150 cases were loaded on the floor of each coach. Two guards were locked in the cars and watched the valuables during four-hour shifts.34

  The securities were again sent to the three-story basement of the Sun Life building in Montreal. One hundred twenty retired bankers, brokers, and investment secretaries recorded the information about what they nicknamed “our bundles from Britain.” The Buttress Room on the third basement was quickly filled, and bank officials immediately started construction of a new vault that would be sixty feet square and eleven feet high. Officials used 870 old railway tracks to reinforce its three-foot cement walls. Two different keys were required to enter the vault, which trainloads of securities soon filled. It took 900 filing cabinets to store all the stock certificates.