Over the spring and summer of 1934, Friedrich Flick did the HWA, and himself, a massive favor by facilitating the expropriation of Donauwörth, a Bavarian arms firm on the Danube River that produced artillery ammo. Unfortunately for the company’s owner, Emil Loeffellad of Stuttgart, the HWA had labeled his factory indispensable to the rearmament effort. But since the Allies still strictly prohibited military weapons production in Germany, the army had to find a way to seize Donauwörth secretly and operate it under the guise of a normal business. Flick entered the picture through a former employee. One of Flick’s steel firms provided the HWA with a shell company called Montan (German for “mining”), which served as a front through which a legitimate transaction could take place. In May 1934, Loeffellad was arrested by the Gestapo, accused of corporate espionage, classified a “state pest,” and forced to sell his business to Montan. The HWA kept most of the purchase price as an “atonement sum” for Loeffellad’s alleged improper use of government funds.
In July 1934, the HWA-controlled Montan leased Donauwörth back to Flick’s steel firm, where it continued to produce artillery ammo. The so-called Montan scheme was beneficial to both parties. It enabled the HWA to buy arms firms in secret, invest in them, and ensure competent business leadership. At the same time, it let Flick secure a major customer with no costs involved. The solution was so convenient that Montan became a secret holding company for all army-owned weapons firms collaborating with German industry. When the war started, Montan controlled more than a hundred arms firms and employed some thirty-five thousand people. Flick soon joined its supervisory board.
The Montan scheme was a turning point in Flick’s tense relationship with the HWA. He now became one of the preferred partners for the army. Like Günther Quandt, who financed one of his weapons facilities through Montan, Flick could now build new factories, expand old ones, shift the costs to the army, and make his arms plants as modern as those of his Ruhr competitors, Krupp and Thyssen. It was a dream come true for the industrialist.
But Flick didn’t yet seize every opportunity to expand his business empire at the expense of others. In October 1934, the HWA general Kurt Liese asked Otto Steinbrinck whether his boss was interested in buying Simson, a machine-gun factory in Suhl, a city in Thuringia. The Simson family had a remarkable monopoly. At the time, they owned the only firm in Germany that the Allies allowed to produce light machine guns. But the Simsons were Jewish. Their arms monopoly was grist for the mill for the Nazi Party. The family had become a target of vitriolic anti-Semitic propaganda, particularly from Fritz Sauckel, Thuringia’s ambitious Gauleiter, a short, bald man with a Hitleresque mustache and a heavy rural accent. He wanted to expropriate the Simsons, bring their firm under his control, and turn it into an NSDAP-run weapons company.
The HWA generals had no problem with seizing a Jewish-owned firm. However, they wanted competent business leaders, not some Nazi hack with no entrepreneurial experience running a company in which the HWA had invested twenty-one million reichsmarks. And they were particularly concerned with the “smooth cooperation” of the factory owner, Arthur Simson. Steinbrinck euphemistically relayed Flick’s interest in the idea, “if for general national-political reasons the takeover of Simson by our group should be required.” But the initial negotiations quickly fell apart.
Seven months later, in early May 1935, Hitler’s economic adviser Wilhelm Keppler, backed by the SS leader Heinrich Himmler, offered the Simson firm to Flick once again. A few days later, Arthur Simson was arrested on Sauckel’s instructions; he was accused of “excess profits,” a practice of extortion; such accusations soon became commonplace as a means of forcing Jewish entrepreneurs to sell their companies. With his back against the wall, Simson signaled his “willingness” to sell his family’s firm. Steinbrinck reiterated Flick’s interest but now offered a lower price. “We as a private group can only buy, if Simson can meet us without coercion and in complete freedom. We would have to refuse an expropriation in favor of the Flick/Mittelstahl group,” Steinbrinck wrote in a memo in late May, coyly covering his boss’s hide. It was a textbook feint by Flick’s right-hand man. Steinbrinck did share Flick’s willingness to buy the Simson firm, but under one condition: the HWA had to first seize the arms business and then sell it on to the mogul. An expropriation was fine as long as Flick and his conglomerate did not directly have to dirty their hands. They wanted an intermediary to do the grunt work for them. Plus, Flick wasn’t planning on indiscriminately seizing companies. A takeover target had to add something of significant value to his conglomerate.
Sauckel soon prevailed over the HWA. The Gauleiter expropriated the Simson factory and made it a part of a Nazi-run conglomerate consisting of companies stolen from Jews. The Simson family, meanwhile, fled to America via Switzerland. Flick didn’t mind the outcome. The final negotiations for Simson took place just months before the Nuremberg Race Laws were enacted, in September 1935; they provided a legal basis for the expulsion of German Jews from their own society, along with the expropriation of their properties. The laws stripped them of citizenship and professional standing, and forbade them sex with and marriage to those deemed to be “of German blood.” But at this time, expropriations of Jewish firms were still rare. For the moment, Flick remained concerned about negative optics associated with buying such a factory, which might have consequences for his financial obligations abroad. He also did not want to make a powerful enemy of Sauckel, who would come to provide him with tens of thousands of people to do forced labor. Meanwhile, Flick and Steinbrinck were drawing closer to the man who would become the architect of the Holocaust. The duo had, quite literally, entered Himmler’s Circle of Friends.