Tower of Basel: The Shadowy History of the Secret Bank That Runs the World (25 page)

At one stage it seemed justice might be done. In 1947, twenty-four IG Farben executives, including Schmitz, were put on trial at Nuremberg. Twelve were found guilty. The sentences were derisory. Schmitz was sentenced to four years. Georg von Schnitzler, the commercial chief, who had apparently used the BIS to contact the Allies, received five years. Otto Ambros, a senior manager of IG Auschwitz, received eight years. Ambrus testified that the prisoners at IG Auschwitz were fortunate to “have been spared all that which happened” in the main concentration camp. The IG managers had also saved them a commute. The slave laborers could live on-site and no longer had to march fourteen kilometers a day to and from the main camp. “There was no stinting when Monowitz was built. It was heated and hygienic,” Ambrus explained, although Rudy Kennedy, who worked as a slave laborer for IG Farben when he was a teenage boy, remembered conditions rather differently. The slave laborers were served soup at lunchtime, soup with a “higher calorific content” than most Germans enjoyed in the immediate postwar years. “I believe that IG Farben and its officials deserve not a reproach, but due recognition,” Ambrus later wrote, and they would soon get it.
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IG Farben was broken up into four successor companies: BASF, Bayer, Hoechst, and Cassella. The dismantling was no punishment. The shareholders asked the occupation authorities to transfer the conglomerate’s assets to the successor firms, and they agreed. BASF, Bayer and Hoechst immediately reconstituted themselves, with the same staff working in the same offices and factories. A new holding company was created to deal with the legal fallout and consequences of the breakup. The legacy firms said they had no obligations for IG Farben’s sins, as they had not legally existed during the war. It was a shameless and completely successful legal maneuver.

In 1949 John McCloy left the World Bank and started work as US High Commissioner for West Germany. McCloy, the former partner in the Cravath law firm that had represented GAF, the American wing of IG Farben, did not forget his former business partners. Hermann Schmitz was released from prison in 1950, and by February 1951 all of the IG Farben executives were free. McCloy also freed Alfried Krupp. The Krupp industrial empire had worked about eighty thousand slave laborers to death in a network of fifty-seven labor camps guarded by the SS. Krupp was sentenced to twelve years imprisonment, but he served less than three.

Otto Ohlendorf, the former commander of Einsatzgruppe D and protector of Ludwig Erhard, was an exception. He was hanged. But McCloy ordered that Nazi camp doctors who had conducted experiments on inmates, Nazi judges who had dispensed Gestapo justice, and SS officers who had organized mass killings be freed or have their sentences drastically reduced.
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Seventy-four of the 104 defendants convicted at Nuremberg had their sentences substantially reduced, and ten death sentences were commuted.
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Heinz Hermann Schubert, Ohlendorf’s adjutant, who had personally supervised a mass execution of seven hundred people at Simferopol, had his death sentence commuted and was sentenced to ten years in prison.

The IG Farben managers were swiftly welcomed back into the German business community. Hermann Schmitz joined the supervisory board of the Deutsche Bank. Otto Ambros, provider of soup to slave laborers, joined numerous company boards and set up as an economic consultant. His clients included Konrad Adenauer, the federal chancellor. Kurt von Schröder, the banker and BIS director who had brokered Hitler’s rise to power, was found disguised as an SS corporal in a POW camp in France. He was tried by a German court for crimes against humanity and was sentenced to three months in prison. Walther Funk, the dissolute Reichsbank president and BIS director, was found guilty of war crimes and sentenced to life imprisonment. The trial established how Funk had worked with Himmler, the SS chief, to ensure that gold and valuables from camp victims were credited to a special account at the Reichsbank
in the name of “Max Heiliger” for the SS. Funk was released from Spandau prison for health reasons in 1957 and died three years later. Emil Puhl, Funk’s deputy, BIS director, and friend of Thomas McKittrick, was also convicted of war crimes. Sentenced to five years, he was released in 1949.

Ironically, it seems the Warburgs were also instrumental in the reconstruction of German industry, thanks to the family’s friendship with McCloy. Freddie Warburg had persuaded McCloy to take the position of president of the World Bank. The two men had known each other since the 1920s when McCloy had done legal work for Kuhn, Loeb, a branch of the Warburg empire. When Eric Warburg and McCloy dined together in August 1949, Warburg pleaded with McCloy to stop the dismantling and destruction of German industrial plants. Soon after, Warburg gave McCloy a list of ten steel, gas, and synthetic rubber concerns, including the Thyssen steel works and the Krupp gas works, to be saved. All were spared.
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McCloy occasionally took a moral stand—he repeatedly told Germany to return Jewish property. When he was informed that Germans who served on de-Nazification boards were being shunned as traitors, he ordered state governments to guarantee such people civil service jobs.

As for Schacht, charged with organizing Germany for war, he still had powerful friends in London and Washington. Green Hackworth, the legal adviser to the State Department, was working behind the scenes to help the former Reichsbank president. During the war, Hackworth had repeatedly sabotaged attempts to publicize Nazi war crimes and bring their perpetrators to justice, arguing that such moves would endanger American POWs.
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Breckinridge Long, the assistant secretary of state, who had once praised Mussolini, supported Hackworth. Long and his aides had prevented Jewish refugees from obtaining visas, suppressed news of the Holocaust, and derailed attempts to document Nazi war crimes. In 1944 Henry Morgenthau’s staff wrote a detailed paper that documented the State Department’s wartime record. Its title was “Report to the Secretary on the Acquiescence of this Government in the Murder of Jews.”
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Once again the Dulles connection came to the fore. In late 1945 Schacht requested that Hans Bernd Gisevius be summoned as a defense witness to testify on his behalf. Gisevius, the wartime German consul in Zürich, was also an officer in the Abwehr, German military intelligence, a member of the anti-Hitler resistance, and one of Allen Dulles’s most important agents, known as OSS source 512. Declassified US intelligence documents show that Gisevius was expected to testify that Schacht had attempted to overthrow Hitler in 1938 and to talk about Schacht’s difficult relationship with the Nazi party, so that Schacht could present himself as a member of the resistance.

The documents reveal how much effort the State Department made to get Gisevius, who was living near Geneva in Switzerland, to Nuremberg to aid Schacht. A telegram from US diplomats in Berlin to the State Department, on December 10, 1945, requests that the “necessary arrangements be made to bring him to Nuremberg on ten days’ notice and that Tribunal be kept fully advised through this office.”
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Three days later, Leland Harrison, the US ambassador to Switzerland, cabled Washington that Gisevius was willing to appear as a defense witness for Schacht and could depart for Nuremberg any time in January on forty-eight hours’ notice. Harrison asked the State Department to alert him when Gisevius should arrive in Nuremberg.
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The US government, was, in effect, acting as an aide to Schacht’s defense lawyer, arranging for Gisevius’s transport and logistics, and coordinating his appearance with the Nuremberg Tribunal.

The US team at Nuremberg was split over Schacht. Robert Jackson, the chief US prosecutor, wanted to prosecute him. But his deputy, William Donovan, the former OSS chief, was opposed. Donovan argued that Schacht had been sympathetic to the Allies in the early years of the war. And there was the postwar German economy to consider, always a crucial factor in US policy calculations. A harsh cross-examination of Schacht would alienate the important German businessmen and financiers who favored good relations with the United States.
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There was consternation in Washington when Schacht’s lawyer told the press that Sam Woods, the US Consul General in
Zürich, had offered the Reichsbank president a deal in 1939—that if he resigned from Hitler’s government, he would be returned to power after the war. Considering all we now know about the secret back channels between the United States and Nazi businessmen, this seems highly plausible. Woods had long been a conduit between the US government and the Axis powers. After Admiral Horthy, Hungary’s wartime leader who had permitted 430,000 of his own citizens to be deported to Auschwitz, was released from custody in 1946, Woods invited him to his wedding.
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The State Department’s efforts on Schacht’s behalf worked. He was initially found guilty but was then acquitted, to the fury of the Soviet judge. There were also suspicions that Montagu Norman had somehow managed to influence the proceedings through Sir Geoffrey Lawrence, the British judge. The British obsession with class seemed to play a part. Francis Biddle, the American judge, recorded in his diary that Lawrence had claimed Schacht was a “man of character” while other defendants were “ruffians.”
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Norman was immensely relieved when Schacht was not hanged at Nuremberg, recalled his stepson, the writer Peregrine Worsthorne. “He did not think Schacht was guilty for the crimes of the war, but obviously being on speaking terms with any prominent Nazi made you a pariah after the war. He had made his mind up about Schacht before the war and the horrors.” (In later years Priscilla Norman angrily denied that her husband had tried to influence the outcome of Schacht’s trial.)
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Intriguingly, Worsthorne believes that Norman and Schacht managed to stay in communication during the war—if they did, the BIS would have been the natural channel. “Norman kept up this strange relationship that he had with Schacht, even during the war. Both during the First and Second World Wars the capitalist world was not at war. The bankers kept the system in cold storage. I am sure that there would have been absolutely no record of their contacts and that Norman kept in touch with him without the government knowing.”
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After several more years of legal travails with the German authorities, Schacht was finally cleared of all charges. He started a lucrative second career
as an investment adviser to countries in the developing world and set up his own bank, Schacht & Co. Schacht even visited Israel, albeit inadvertently when his airplane stopped briefly at Lydda airport in 1951. Schacht and his second wife, Manci, wanted to stay on board but were taken to the airport cafeteria to have breakfast. The Schachts handed their passports to the Israeli police and were photographed by reporters. His wife was too nervous to eat, so Schacht ate her breakfast as well. A waiter asked in German how “Herr President” had enjoyed his breakfast, using Schacht’s Reichsbank honorific. The waiter told Schacht that he was from Frankfurt and missed his hometown. He asked for Schacht’s autograph, which Schacht provided. The Schachts left Israel with no problems, although a furor erupted in the Knesset, the Israeli parliament, when the news broke that Hitler’s banker had passed through the Jewish state without being arrested.
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Four of the world’s most powerful central bankers gather in New York in 1927: Hjalmar Schacht (Reichsbank), Benjamin Strong (New York Federal Reserve), Montagu Norman (Bank of England), and Charles Rist (Bank of France). (Courtesy BIS)

The first informal meeting of the Board of Directors of the Bank for International Settlements, in April 1930. The gatherings were so secretive that the room remained closed to outsiders, even after the central bankers had departed. (Courtesy BIS)