Nazi Gold

by Douglas Botting

  According to the unofficial report of an officer with an ear close to the heart of the investigation: ‘The preliminary evidence alone was sufficient to implicate a dozen or so officers ranking from captains to brigadier-generals who at some time or another between 1945 and 1947 have been connected with the administration of Garmisch or military organisations there or Military Government units both in Garmisch and on the Bavarian State level. Also in the preliminary evidence there seemed to be sufficient grounds to believe that at least two dozen German nationals ranging from the German mistresses of various officers to German building contractors and former Nazi politicians would go to jail for as long as life terms.’

  By the middle of July 1947 Colonel Smith had finished his preliminary report and despatched it to the Governor and Commander-in-Chief, General Clay. The report indicated that there was sufficient evidence to warrant a full-scale investigation and recommended that a strong force of highly qualified and specially selected CID, CIC and CCD personnel be assigned to prepare a series of criminal prosecutions. On 18 July General Clay expressed an order to the effect that he desired the Garmisch Military Post to be given a thorough shake-up and all the old-timers removed, along with any individuals specifically mentioned as questionable in the report. On 24 July 1947 the IGD investigation under Colonel Leonard H. Smith Jr was officially concluded. ‘I had reasonable concern for my own life,’ Colonel Smith recalled afterwards, ‘and when this operation was finished I just decided to terminate. I knew that any protection I had was gone, so I promptly made a request to get transferred. I got transferred back to Berlin, and so I was totally out of the way and totally unaware of what developed afterwards.’

  What developed afterwards was indeed curious. Some of the immediate consequences of the investigation were not entirely unexpected. Four colonels were banished from Garmisch-Partenkirchen. The Military Governor and the Post Commander were shipped back to the States. One of the Post Commander’s executive officers was transferred to Vienna, and the Post Inspector sloped off to Italy, dragging Colonel Smith’s civilian secretary, an attractive American girl, with him. A week or so after the end of the investigation, Frank Gammache was arrested and placed in confinement to await court-martial on charges of misappropriation of US military property and disorderly and discreditable conduct. A special CID unit was sent down to Garmisch by the Theater Provost Marshal to clean up the town and arraign other miscreants. All this was as it should be. But there were other consequences of the IGD investigation which were quite unexpected – and some of them were distinctly sinister.

  The first untoward incident came to the attention of Lieutenant Kulka. According to Kulka, the IGD investigation was not terminated by Colonel Smith but suddenly called off on the orders of higher authority. ‘The entire story got awfully hot,’ Kulka has stated, ‘because it started involving more and more people. I was asked to keep my mouth shut because there were too many people involved in the CIC and Military Government. Some very high-ranking people were involved in this and their palms had been greased somewhere along the line. If one of these people had ever been caught or grilled, then half of the US Command would have been in very serious trouble.’ In a letter from San Francisco, dated 18 April 1978, Leo Kulka enlarged on this. ‘General Lucius Clay was in command at the time of the investigation and it was his Command which had ordered the sudden stop of the investigation. I specifically remember a remark made by Colonel Smith of the IG at the time that we “must have gotten too close to home” . . . This might explain why the entire investigation came to a sudden standstill and why the files were burned in the house which served as our HQ.’

  According to Kulka, the destruction of the investigative records occurred in this manner: ‘When Colonel Smith and I were ordered back to our stations, overnight, there was an officer that came from the USAF or USFET headquarters and demanded all the files, which was about two filing cabinets full, and he told Colonel Smith that they were going to be forwarded to Frankfurt. However, when I returned unexpectedly I found him sitting there putting them all in the fireplace.’ For the authors of this book the image of an American Army colonel feeding an open fire with the precious documentation on the Garmisch affair is one of the most melancholy of the entire story. Though three preliminary reports by Colonel Smith were eventually located in the US archives, these bore no mention of such contentious aspects of his investigation as gold and currency, and no reports on these aspects have yet been traced.

  For 26-year-old Lieutenant Kulka worse was to follow. He alleges that he was sent back to Munich by the CIC, held incommunicado under house arrest for about three or four weeks and told never to write any further reports about the case. Then a variety of bizarre allegations were thrown at him. He was accused of gun running after it was found that he had sent three target pistols back to the States. He was accused of harbouring an alien in his quarters – to wit his 87-year-old grandmother, whom he had smuggled out of Czechoslovakia just before the Communist coup – and of wrongly collecting subsistence allowance from US Army funds on her behalf while she was awaiting emigration to the USA. Kulka’s security clearance was revoked, which effectively terminated his employment as a special agent. His German informant, one Anton Ditt, was arrested and later tried and sentenced to two years’ imprisonment for false representation as a CIC agent. When Kulka asked for a court-martial so that he could learn the real nature of the charges against him he was simply shipped off to the Zone of the Interior (i.e. the USA) as ‘unsuited for CIC duty’. The girl he was proposing to marry (and who is now his wife) was forbidden to accompany him. Though Kulka claimed she was a Jewish DP, it was ruled that she was a Sudeten German expelled from Czechoslovakia and therefore ineligible for marriage to a US citizen. When Kulka reported the affair to his Senator, so much pressure was put on his fiancée and grandmother that he decided it was prudent to keep his mouth shut. ‘Even while I was separated from the Service,’ Kulka commented bitterly recently, ‘my fiancée and her relatives were harassed by the American Military Government and the officers in my Corps. I was told in no uncertain terms that if I ever wanted to see my fiancée again I had better keep my mouth shut about the entire story. It wasn’t until about a year later that purely by accident my fiancée was able to get her exit permit and get to the United States.’

  Some time after Kulka’s bride-to-be left Germany for the States, Colonel Leonard H. Smith was posted from Berlin to distant Ecuador, in Latin America. The principal agents of the Inspector General’s investigation into the Garmisch affair were thus as far from Germany and from each other as it was possible for the Army to put them.

  The Garmisch affair was to continue to haunt Leo de Gar Kulka for years afterwards – even after he was recalled from the Reserves to serve in the Korean war. When friends and colleagues began to be killed or commit suicide he grew paranoiac about the whole business. ‘Just recently,’ he wrote from San Francisco on 14 April 1978, ‘a friend of mine, who was my CO in Japan and Korea and was with the Provost Marshal’s office in Garmisch, was mysteriously killed in Los Angeles. He was described as having suffered a heart attack following an attempted robbery, during which the contents of his filing cabinet were stolen – nothing else. He was writing something about the bullion incident. Coincidence? I consider myself lucky to be alive and able to talk about it since the Statute of Limitations is run out for everybody.’

  Kulka wrote again recently: ‘Though my first gut reaction was to let sleeping dogs lie, my present feeling is that this scandal has been hushed up far too long. Apparently Watergate is not the only matter to be hushed up.’ But then he had second thoughts. ‘I wonder if at my age helping you write a book is worth the risk of my personal safety and the undisturbed emotional tranquillity I have enjoyed. If you have found me, so could those who have enriched themselves. Do you want to know how much I know? Why? What then? Why should I trust you?’

  In the light of what was to follow in the Garmisch affair Leo Kulka’s suspicions were n
ot difficult to comprehend.

  18. The Reinhardt Memorandum

  The Inspector General’s team, after fighting off the Garmisch ‘gang’ for the best part of three months, finally staged a tactical retreat from that unholy town in the last week of July 1947. Their departure, unbloodied but bowed, did not mark the end of the hostilities. For shortly afterwards the Army returned to the attack with a two-pronged assault designed to regularise the irregularities which had been highlighted by the Inspector General’s investigation. First they moved in a CID Special Project Team inaugurated by General Clay, and then they sent poor Frank Gammache – small fry, fall guy and ingenious creator of the luxurious Casa Carioca nightclub – for trial by court-martial. Neither of these events, however, was to prove an outstanding triumph for the Army’s forces of law and order in Garmisch-Partenkirchen.

  The strange business of the Casa Carioca had been one of the Inspector General’s main preoccupations in Garmisch. It was known that it had cost a fortune to build, but it was not known where the fortune had come from, and the resulting investigation had led down many dark alleys and into many murky corners. There were those, like the newspapermen Ed Hartrich and Tom Agoston, who had some inkling of what was really going on in Garmisch and expected great things from Frank Gammache’s court-martial. They were to be greatly disappointed. When the charges were finally read out in court at Bad Tölz on 9 September 1947 they proved to be somewhat less than earth-shattering. Gammache was charged on a total of eight counts under the 94th Article of War (knowingly and wilfully misappropriating military property) and the 96th Article of War (disorderly and discreditable conduct). In sum, the builder of the most fabulous and costliest fun palace in the whole of Bavaria was charged with misappropriating 117/10 tons of coke, ½ cubic metre of gravel and some wood for building dog kennels valued at $5.26. He was further charged with wrongful use of labour intended for the military service (mending a German’s car) and wrongful occupation of a billet without proper authority (living with a German girlfriend). He was found guilty on account of the coke but not the gravel or the dog kennels, and guilty on account of the German car but not the German girlfriend. He was then fined $1,500, taken under escort to the nearest port of embarkation and shipped home to the USA.

  The charges against Frank Gammache were so trivial that Ed Hartrich, to whom Gammache had spoken at length in May about all the various goings-on in Garmisch, believed that something peculiar had happened. The US Army Judiciary’s Pre-Trial Report contained statements about ‘the scope of this investigation’ and ‘the aid of CID investigators, CCD team and so forth’ and stated: ‘The extensive investigations which preceded this pre-trial investigation have given it many unusual aspects.’ It hardly seems credible that these remarks could apply to a case where, in terms of monetary value, the loss to the US military authorities was less than a hundred dollars or so. Obviously there was more to it than that, but nowhere in the Record of Trial was there any further information on the deeper implications at stake. The matter had to be much more serious to involve the IG, CID, CCD and court-martial. But if it was much more serious, why did it not come out at the trial – unless there was a concentrated plot in existence, to prevent the whole truth from becoming known? And if that was the case, what was it that had caused the matter to be suppressed at the very highest level?

  According to a recent review of the case by the officer who acted as Frank Gammache’s defence counsel at the court-martial – Colonel Clifton H. Young – Gammache should not really have been on trial at all, even though what he had done was strictly speaking illegal. ‘I think it was General Eisenhower told Lucius Truscott to out-do the Nazis in fixing up a recreation centre at Garmisch for the occupation troops,’ Young related in 1978. ‘He wanted it better than anything the Nazis had built. So this gave Gammache, who was the nuts and bolts man, the authority to do exactly what he did do. What he did was illegal in one sense, but he had the privilege of doing it because he was ordered by his superiors. He wasn’t the one to be tried – they should have tried General Eisenhower.’

  It was against this background of uncertainty in the field and double standards at higher headquarters that the CID Special Project Team swung into action. Headed by Victor H. Peccarelli, who until then had been Chief Agent of the 32nd CID in Esslingen (a suburb of Stuttgart), the team had been set up on General Clay’s instructions as a criminal investigation to follow up the Inspector General’s preliminary investigation that had recently ended. Operating at the very highest level, Peccarelli was answerable only to the European Command Provost Marshal and reported direct to a selected high echelon of the European Command, cutting out all intermediaries in the chain of command. This not only made the CID Special Investigation a very high-powered operation, but a very hush-hush one as well. Its leading members – Victor Peccarelli and his assistant, Philip von Pfluge Benzell – were the crème de la crème of the American Army’s internal police force in Germany. According to one who knew them both Peccarelli was ‘a typical BTO (big time operator)’, an ex-detective who was attended by much noise and commotion wherever he went. His great friend, Benzell, was a ‘first-rate investigator’, a former District Attorney investigator in civilian life, who was now divorced and had ‘no steady girlfriend but played the field’.

  A fellow CID Agent Bob Shaw remembered him as a ‘very very bombastic type. He could be a typical Colonel Blimp and he made enough noise that he kinda got his way in a lot of things because people didn’t want to outshout him.’ He must also have had (or needed) a sense of humour. A spoof ‘wanted’ notice, complete with mug shots, was produced by his CID colleagues at about the time of the Garmisch investigation. Headed WANTED! $2.50 REWARD, the spoof read:

  Apprehend and detain the following named man:

  PHILIP vP BENZELL

  Alias ‘Benny the Bum’, alias ‘Baldy-locks’, alias ‘That S.O.B., Benzell’.

  DESCRIPTION:

  Height: 5’ 10”

  Age: 34

  Weight: 190 lbs

  Eyes: Two

  Hair: Two

  Sex: About twice a week

  Has a very even disposition (mad all of the time), sometimes seen in the company of a tall dark man known as ‘That big Guinea Bastard’.

  WANTED FOR:

  Murder, arson, rape, sodomy, larceny, fornication, Highway mopery with intent to creep, and Impersonating a CID Agent.

  Several other enlisted men made up the CID team, which was known familiarly as ‘Peck’s Bad Boys’ and officially worked under the codename ‘Operation Garpeck’, a compound of the words Garmisch and Peccarelli. Since they were working undercover on this particular operation, all wore plain clothes.

  During August 1947 the team moved into a large and secluded Bavarian-style house called Haus Duisburg (formerly the property of the Bayer Company and known as the Bayer Hof), which was situated three miles out of Garmisch on the old Garmisch-Mittenwald road. The team’s mission was wide-ranging. Surviving documentation is incomplete and neither Peccarelli nor Benzell is now alive to tell the tale, but Peccarelli’s wife, Alice, who was working in the CCD in Germany at the same time as her husband was working in the CID, remembered the case clearly and was in no doubt that her husband had been assigned to investigate the disappearance of a large quantity of gold bullion which had been carried up into the hills in the Garmisch area on the backs of ‘donkeys’. Though it is known that Operation Garpeck was also investigating narcotics trafficking in the area, Alice Peccarelli had no recollection of her husband talking about that. ‘It was gold from the German National Treasury,’ she affirmed from Stockton, New Jersey, in 1980, ‘which they claimed had been melted down into bullion.’

  Frank Purcell, who was a key member of the Garpeck team, confirmed and enlarged on Mrs Peccarelli’s recollection in a telephone conversation from his home in California in 1982. ‘We were not investigating narcotics,’ Purcell stated; ‘we were investigating gold bullion and military records.’ With another CID col
league by the name of Thomas Gardiner, a fully qualified attorney, Purcell was specifically involved in the investigation of one man, a former Military Governor of Garmisch, whose rank he gave as colonel. ‘The investigation was directly against him. No one else was involved. He had absconded with a lot of military records, a lot of gold bullion out of Garmisch. I know that there was a lot of gold bullion involved – no one could even imagine how much, they talked about astronomical figures. But I know the colonel had access to a lot of wealth in the Garmisch area. I say I know – I suspect and I know. It was quite an important case. There was a lot of time expended on it. What I do know is it had to be a court case because Victor Peccarelli assigned Thomas Gardiner and myself to the case and I automatically assumed, well, I’m working with an Operations Agent who was extremely important to the organisation and it’s got to be a very important case.’

  Philip Benzell confirmed at a subsequent inquiry into the case that there was a ‘mass of information’ on the officer in question and that he was alleged to have ‘embezzled or converted to his own use, monies belonging to the German Government’ which had been deposited in Switzerland for safekeeping. ‘At the present time,’ Benzell stated, ‘Messrs Gardiner and Purcell of the 32nd CID are investigating in Switzerland.’ He made that statement on 3 February 1948 – some weeks after Garpeck had been called off. The matter was obviously taken very seriously.