Organized large-scale black market activities which in themselves are criminal and which have additional criminal amplifications have reached a point where a major scandal seems imminent due to the fact that American correspondents in the Theater have initiated investigations of their own recently, after becoming impatient with what they call the ‘do-nothing attitude of the Army’.
The Garmisch case is probably the most important because of the huge amounts involved, the extent of the criminal activities and criminal conspiracy, the danger of its ‘breaking’ soon and the possible ensuing criticism of the Army, the nature of the crimes committed, allegations of inefficiency in the investigation and tardiness or failure in bringing the culprits to justice. The Garmisch Army Recreation Area, with its luxurious facilities and high living, has been the focus of much talk and allegations of grave irregularities allegedly indulged in by Army and government personnel ever since May 1945. A number of investigations were conducted but somehow were always killed or failed to produce prosecutions because of alleged lack of evidence.
On 22 May 1947, Lt-Colonel Harold Smith, General Clay’s personal Inspector General, arrived in the Garmisch area on a Top Secret mission to investigate what by then had become almost a certainty of widespread irregularities such as embezzlement of several hundred thousand dollars in cash and in jewellery of German Government, Nazi Party and German Army funds and property; misappropriation of US Government funds; bribes given and accepted by Army personnel, large-scale organized black-market ventures of US Army and War Department personnel; large-scale trafficking in narcotics; large-scale trading with the enemy; etc. etc.
Selected personnel from CID and Regional CIC worked with Colonel Smith under conditions of extreme secrecy and this writer conferred several times with Colonel Smith at the latter’s secret headquarters in Garmisch. By the middle of July, Colonel Smith had prepared his preliminary report to General Clay which showed sufficient preliminary evidence to warrant a full-scale investigation, and he consequently recommended to General Clay that a strong force of highly qualified and specially selected CID, CIC and CCD personnel be assigned to prepare a series of criminal prosecutions.
Reinhardt recounted in his memorandum to Assistant Secretary of the Army, Gordon Gray, his version of how Colonel Smith’s investigation was hampered and interfered with by the Garmisch ‘gang’, then went on to describe how the follow-up CID investigation under Peccarelli and Benzell was meted much the same treatment.
The CID investigation by a special team recommended by Col. Smith got under way early in August 1947, but it was soon apparent to this writer that it did not proceed as well as it should. The team was headed by CID Agent Peccarelli and on 26 August 1947 it was learned that Peccarelli had been ‘bought off’. Through the machinations of the gang he had been offered the position as head of the Belgium Branch of the ‘5th Avenue Shop’, a big New York export firm, with a guaranteed annual salary of $25,000 a year. When verifying this information on the same day, it was established that a Chief of the Munich CID was no more than lukewarm towards the investigation and privately expressed the opinion that it was ‘not worth pressing this thing too much because the gang was too powerful and had too much influence in Military Government’. He also stated in this confidential conversation that ‘it did not pay to fight this thing as a number of people who became too nosey had suddenly found themselves back in the United States’. Peccarelli’s chief assistant in the Garmisch investigation, CID Agent Benzell, also gave the impression of either having been discouraged by the obstructions placed in the way of the investigation or of losing interest.
Guenther Reinhardt then came to the centrepiece of his allegation. A ‘gang’ of American conspirators and their German associates were involved in a wide range of criminal activities and wielded incredible power in Garmisch. The head of the American group was the Chief of the Investigation and Enforcement Branch of the Finance Division, OMGB, John McCarthy (now civilianised after leaving the Army with the rank of Lieutenant-Colonel), and the chief German confederate of this group was a certain notorious doctor. Reinhardt’s memorandum continued:
It was established that one of the headquarters from which criminal activities had been conducted in the past and at present, was a house at Garmisch occupied jointly by Mr McCarthy and his German girlfriend. The same group also occupied a house in Munich which was and still is being used for black-market activities. The chief German confederate of the American group is ‘the doctor’, who frequently lives at the two addresses given above and also maintains a residence in the city of Munich. ‘The doctor’ owns and runs five different automobiles which are also regularly used by McCarthy and other Americans associated with him. Some of these automobiles have been traced as having been used in narcotics shipments. The investigation has also established that the association between McCarthy and ‘the doctor’ dated back to April 1945, when McCarthy moved into Innsbruck with the 103rd Division and found ‘the doctor’ there. The latter had been a notorious racketeer and active Nazi storm trooper. On the strength of Nazi atrocities committed by him in Innsbruck ‘the doctor’ is still on the Austrian wanted list as a Nazi criminal. Subsequently, McCarthy had ‘the doctor’ denazified before a German Denazification Tribunal at Garmisch on the strength of a letter in which he stated that ‘the doctor’, by a certain action, the nature and details of which could not be divulged for military reasons, had saved the lives of thousands of American soldiers during the combat phase.
Preliminary investigation, Reinhardt continued, also pointed to highly irregular deals between McCarthy and his gang and a Public Safety Officer working in Munich and several other adjacent counties.
Also implicated were three colonels . . . and a former American officer who at present resides as an American citizen in Switzerland and who apparently lives on his share of the proceeds of black-market deals and embezzlements and who, according to substantial leads, has repeatedly acted as middle man in transmitting and depositing individual sums of as much as $10,000 each.
‘The effect of activities as described above in the United States,’ Reinhardt warned at the conclusion to the Garmisch section of his memorandum, ‘when, as and if they break, does not need any further elaboration.’ And he recommended that, in view of the failure of Theater agencies properly to investigate cases like this, ‘special personnel be dispatched from Washington to handle such cases’.
Such was the main tenor of the Reinhardt memorandum, extruded in a white-hot fury of indignation and self-righteousness in a high-level office of the United States’ central military complex at the Pentagon, Washington, in the week before Christmas 1947. ‘I dictated everything,’ Reinhardt explained in his letter to Torn Agoston, ‘with all the evidence, names of witnesses, black-market purveyors to high-ranking personnel in Germany, dates and details of transactions etc. etc. I went into the fullest details on your Garmisch deal: gave everything on the fake and phoney investigations of 1946 and 1947, who had made which witnesses disappear, etc., etc. Among the remaining witnesses whom I urged be guarded and protected was the girl who (after my written report!) was murdered.’
The ‘girl’ was Zenta Hausner. Suspecting cause and effect, Reinhardt added: ‘What I did not know at that time was that each section of my report was sent to Clay personally in special code after I handed it in.’
So the Reinhardt memorandum, like a bomb primed and set, was delivered to its target. The American Army in Germany reacted violently to its receipt, first diving for cover, then shooting back with all the weapons it could muster. There were bound to be casualties, though not the ones intended. Zenta Hausner, in all probability, was one. Guenther Reinhardt would, in due course, be another.
19. Death of a Red Princess
Zenta Hausner’s complicity in black-marketeering, international smuggling and narcotics trafficking was an open secret in Garmisch-Partenkirchen. Her cafe-nightclub, the Weisses Rössl or White Horse, was notorious as a meeting-place for the local underw
orld, and her name was on every informant’s lips and perpetuated in report after report by the CIC and CID during the first two years after the war. And yet Frau Hausner continued to survive and prosper.
In 1946 she survived investigations by the local CIC, the Military Governor and the Special Branch. When it was reported that she was ferrying dope from Munich to Garmisch (for onward shipment over the border into Switzerland) for 20,000 marks each trip, nothing happened. When she was on the point of being arrested by a German investigator working for the Garmisch Military Government, the investigator was prematurely thrown off the case and held incommunicado in the Garmisch CIE for two days on the orders of her American-German lover, Captain Korner. Nothing happened when it was discovered that she was allowing the White Horse to be used for clandestine meetings of the local Communist Party. Nothing happened when Charlie, the notorious racketeer, became Zenta’s manager at the White Horse. And nothing happened when the Inspector General, Colonel Smith, began yet another American probe into the Garmisch way of life in the summer of 1947. Nothing untoward ever happened to ‘Garmisch Nell’. For one thing she enjoyed the protection of her well-placed boyfriend, US Army Captain Korner. For another, two of her associates in the dope trade included the German Chief of Police in Garmisch, Ernst Ellinghaus, and the Chief of the Garmisch Criminal Police, Hoffmann. And for another, as a double agent reporting directly to the Military Governor, she was more useful to the Americans out of prison than in it. So Zenta Hausner did as she pleased and graduated by easy stages from paltry deals to big business in the free-wheeling world of the Garmisch black market.
By late 1947, however, it was clear that life was not working out entirely as she had hoped. Her plans to sell up and emigrate to sunnier climes and a freer, more secure life in Argentina – a country kindly to Germans and persecuted Nazis and favourable to the acquisition of emeralds, ranchers, colonels and furs – had fallen through and she was nervous and despondent. It was December now. Alpine winter, German austerity, foreign occupation, another Christmas looming as joyless as the last . . . Argentina, oh, Argentina! Her American lover did nothing to lighten the gloom. Captain Korner had been to America to spend his leave with his wife. He came back a changed man. Changed for the worse, if that were possible. His love had cooled, it seemed. One evening, she taxed him about it.
‘Was gescheht mit unserer Liebe?’ she asked him. ‘What is happening to our love?’
‘Das war nur ein Abenteuer,’ Korner is supposed to have replied. ‘That was just an adventure.’
For the Christmas of 1947 Zenta had planned to visit her family at Moosburg. She was not to know that in the week before Christmas Guenther Reinhardt had named her as a Military Government double agent in his coded report cabled from the Pentagon direct to General Clay in Berlin. Nor was she to know that this information had been passed down in clear from Berlin ‘thru channels’ to Garmisch and that as a consequence it was possible her life was in peril. On the evening of 22 December 1947, in her role as an American agent, she had paid a call on the Garmisch Military Governor, Colonel Van Buskirk. Van Buskirk had recently been sent (in his own words) ‘to clean up Garmisch, which was the worst concentration of international gangsters in post-war Europe’. One of his sources in Garmisch was Zenta Hausner, whose White Horse Inn, according to Van Buskirk, was ‘the headquarters of international illegal activities’. Hausner, Van Buskirk recorded, reported to him on the arrivals and departures of international hoodlums. On the evening in question he had strongly urged her not to come to see him. ‘She was just about to pull off a big Schnapps deal,’ the colonel related years later. ‘She’d visited me that night and told me all about it – how she reckoned she was going to corner the whole market. I reckon I must have been one of the last people to see her alive.’
In fact it was established that five other people had spent at least a part of the evening of 22 December in Zenta’s apartment over the White Horse. This was not particularly unusual. Zenta was well known for entertaining men friends in her flat long after the nightclub had closed. After the last of the visitors had left at about 3.30 a.m., Zenta got ready for bed. She put on her nightdress, switched on her bedside lamp and went to bed. At this point, it seems, there was nothing untoward. Her dog, Ali, was asleep in the sitting-room, the doors were securely locked and Zenta had settled down to read a magazine in bed. It was gone 3.30 a.m. and she was due to catch the 7 a.m. train from Garmisch to Munich later in the morning. The night was still, the footsteps of the passers-by in the street muffled by the soft cover of fresh snow; outside Zenta’s windows the river burbled loudly as it rushed over the boulders under Bahnhofstrasse bridge and plunged between ice-bound banks towards the Isar and the Danube. Later several people would testify that they had seen a man standing for a long time by the gateway of the White Horse. But nobody could tell who he was or what he was doing there and naturally nobody stopped to watch or ask. And so the eventful night passed.
It was still dark when the first visitors arrived at 6.45 next morning. Karl Roesen, 53 years old, was Zenta Hausner’s lawyer. He was also a CIC informant and a large-scale black-marketeer in his own right. During the previous spring he had been under the surveillance of the CCD telephone tappers for suspected illegal currency dealing. In the coming summer he would end up in Garmisch jail for falsification of documents. But early on the morning of 23 December 1947 Roesen was at the White Horse simply in the role of Frau Hausner’s friend and adviser. It had been planned that they would travel together on the 7 o’clock train to Munich, where they had legal matters to attend to. After that Frau Hausner would continue by car to Moosburg to join her family for Christmas. That at any rate was the plan. But when Karl Roesen and a friend of his tried to rouse Zenta there was no response. They banged on the door, they called up to her bedroom window, they tossed up snowballs against the panes. But still there was no response, and still the front door remained firmly closed and the curtains pulled. The men stood in the snow staring up at the silent apartment, their faces flushed pink with the wintry cold, breath rising in clouds. Behind them the river tirelessly chattered down under the bridge and over the boulders. The men had no way of knowing why Zenta refused to answer their call. Had they known they might not have given up so easily. But deciding that Zenta had changed her mind about going to Munich, or was sleeping it off after another late night, they eventually turned their steps and left without her.
The White Horse housekeeper, Anni, had been woken up by the shouts of the two men outside. Fearing her mistress was late for her appointment, she got up hurriedly, put on her dressing-gown, pattered along to the door and banged on it in the hope of waking Zenta. She, too, found there was no reply, and when she tried to open the door she realised it was locked, which she found surprising. Anni had counted on having the day off and was vexed that her mistress had apparently overslept and missed the trip to Munich. She went back to bed, lay there for another hour or two, then got up at about 8.30 to prepare breakfast. She unlocked the door and went up the stairs to the kitchen, which was shared between Frau Hausner, the lessee of the White Horse, and the actual owner, Karl Wagner, who kept a pied-à-terre above the restaurant. For the sake of privacy a door separated the kitchen from the hallway leading to the bedroom and sitting-room of Zenta’s private accommodation. The curtains in the kitchen were drawn when Anni entered and only a dim half-light percolated through. For a few moments the girl busied herself with cups and spoons, then out of the corner of her eye she saw, on the floor near the window, the sprawled figure of her employer, clad in a striped dressing-gown.
Zenta’s back was towards her and at first Anni thought she must be unconscious. She knelt down at her side and bent to turn her over. Then, in the crepuscular gloom, she saw her mistress’ face and let out a piercing scream. The right-hand side of Zenta Hausner’s forehead had been smashed in and her face had been savagely and grotesquely mutilated by cuts and slashes with a carving knife so that she was virtually unrecognisable. The handle o
f the carving knife was sticking out of her neck and its blade pinned her head to the kitchen floor. Blood encrusted her shoulder-length red hair and was spattered on the wall by the cooker and had spread all over the linoleum. It had already darkened but was still tacky underfoot. The corpse of the woman they called ‘The Red Princess’ and ‘Garmisch Nell – the Queen of Hearts’ was cold but not yet completely stiff. Anni let go of it and rose, still screaming and fled the room, down the stairs and out through the door into the street, where she stood in her bedroom slippers in the last night’s snow and the morning’s icy rain and screamed again.
Neighbours were quickly on the scene. They jostled up the narrow stairs and stood fighting in the kitchen doorway for a peep at the grisly scene inside. There was nothing useful they could do. Someone called the German police, who arrived at about 9 a.m. By the time they got there the place was overrun by Americans. As police investigations go, this one was a shambles. Nobody had arranged to have the apartment cordoned off and a lot of people were wandering around the rooms without any kind of restriction. This meant that within an hour a lot of crucial evidence had been destroyed and positive fingerprinting of the apartment’s contents was no longer possible. The police did notice that the telephone in the hallway was off the hook and that a cake and several half-full cups of coffee stood on a table in the sitting-room. But in the crush nobody bothered to check how many pieces of cake had been eaten or exactly how many coffee cups had been drunk out of, if at all. These facts were not established during the initial inquiries and later attempts to reconstruct the crime showed that many investigative opportunities of a similar nature had been carelessly thrown away.
The death certificate indicated that Zenta had been killed by wounds administered by a blunt tool (probably an axe) and a kitchen knife. The time of death was given as approximately 4 o’clock in the morning. The door from the hallway at the top of the stairs to the corridor leading to Zenta’s bedroom and living-room was found to be locked when Zenta’s body was discovered. It seemed that Zenta must have got up and gone to the shared kitchen to prepare coffee and cake for herself or her visitor and that the door to her own private quarters had been locked behind her while she was in the kitchen, thereby cutting off her one line of retreat. The murderer must have taken the keys with him, since they were discovered later in a neighbouring garden.
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