After the Julius Petschek German brown-coal firms had been Aryanized, by early June 1938, the Ignaz Petschek heirs still retained control of their own family conglomerate, which was larger. But Friedrich Flick was ready to make a move on that too, and by any means necessary. However, from the company’s headquarters in Sudetenland’s Aussig on the Elbe, a twenty-minute drive from the German border, the message remained the same: a resounding no. The Petschek family refused to negotiate about the assets that Flick was eyeing, a vast range of brown-coal mining, production, and trading operations in central Germany valued at as much as a quarter billion reichsmarks. Karl Petschek, one of Ignaz’s sons, oversaw the family’s German brown-coal assets. “These people want to slaughter me . . . well they will not succeed,” he mused combatively. Karl argued that he wasn’t able to sell the family assets because his father had already “sold” them by securing stakes across holding companies in the tax havens of Monaco, Switzerland, and Luxembourg.
However, even foreign residency or business ownership no longer guaranteed safety from Nazi greed. With the Sudetenland crisis beginning to brew, Flick decided to turn up the heat on the Ignaz Petschek heirs. Over the course of June 1938, Flick’s legal counsel, Hugo Dietrich, dug up heaps of information on the Ignaz Petschek ownership interests in corporate registries, which Otto Steinbrinck provided to the relevant Nazi authorities. Steinbrinck complained to one Nazi bureaucrat that the Petscheks’ “attitude is completely indifferent.” But he considered the rumor that “J. P. Morgan [Jr.] is behind the Ignaz Petschek group improbable. Morgan has always been an anti-Semite, and even tempted by excellent business, will hardly be prepared to camouflage Jews.” Steinbrinck had Dietrich write a legal opinion arguing that the Petschek heirs actually ran their businesses from Berlin; therefore the companies could be taken over through “regular” Aryanization procedures. Dietrich also drafted a decree that provided for the state to appoint a trustee at any company that was classified as Jewish-owned. According to the draft, that trustee could then sell the business against the will of its owners. These ideas were subsequently fed to Walther Funk’s Ministry of Economic Affairs and Göring’s Four Year Plan office, in hopes that they would be adopted as official party policy. It was all that Flick could do. The Ignaz Petschek heirs still refused to negotiate with anyone, and all hopes of acquiring their German interests through the private sector had been dashed. Now it was the regime’s turn to step in.
In late July 1938, an interministerial working group was formed in Berlin, solely dedicated to “solving” the Ignaz Petschek “problem.” The Nazi bureaucrats soon landed on what had become a tried-and-true method of Aryanization: they imposed a gargantuan fictitious back tax on the conglomerate, allowing the regime to seize the Petschek coal assets as payment. Starting at 30 million reichsmarks in September, the claim eventually grew to 670 million, about three times higher than the actual value of the Petscheks’ German brown-coal assets. The heirs lost their leverage.
So had Flick. With the Aryanization preparations now firmly in the hands of the Reich Ministry of Finance, the tycoon suddenly faced stiff competition for the coal interests. Germany’s industrial firms were lining up to pick the conglomerate clean. Most prominent among these new players was the Nazi regime itself, via Reichswerke Hermann Göring, a state-owned industrial conglomerate upon which the megalomaniac minister had conferred his own name. Flick also had a powerful new adversary in Paul Pleiger, the state complex’s CEO and one of the Third Reich’s most important economic functionaries.
Pleiger had a problem to solve. The Reichswerke lacked a major source of energy. In late June 1938, he told Flick he was “very displeased” at having been left out of the spoils from the Aryanization of Julius Petschek’s German assets, which Flick had captured from Julius’s branch of the embattled family only weeks earlier. Flick’s advice to the director of the Reichswerke was to hop into the ring this time. Pleiger coyly responded that he could envision a swap of brown coal for hard coal. Pleiger desperately needed to secure a hard coal base for the Reichswerke in central Germany, which, unlike firms in the Ruhr area, didn’t have its own coal mines for making coke. Massive quantities of coke were needed to smelt ore and produce iron competitively. Having its own supply would lower the Reichswerke’s costs and free it from its current dependency on the Ruhr moguls for this source of energy.
As it happened, Flick had much more hard coal than he could process through his Harpener and Essener coal mines in the Ruhr area, and he wanted more brown coal. Pleiger was well aware of this. Whereas hard coal had a much greater value for heating, brown coal was more profitable. Pleiger needed energy; Flick wanted to corner a lucrative market.
Hitler occupied Sudetenland in early October 1938, and over the course of ten days the territory was ceded to Germany. On the first day of the invasion, the Nazis raided the offices of the Ignaz Petschek conglomerate. Documents that remained there were confiscated. At the same time, Pleiger returned to Flick with his idea for a coal swap, just after Göring promised him that the Reichswerke would have a stake in the Aryanization of the Petschek conglomerate. But Flick was in no hurry to settle. He knew a trustee would soon be appointed at Ignaz Petschek.
On December 3, 1938, just three weeks after Kristallnacht, Hermann Göring issued the “Decree Concerning the Utilization of Jewish Assets.” It had a premise similar to Hugo Dietrich’s draft law. Going forward, the state would appoint a trustee to any company classified as Jewish, and this trustee would be able to sell the business against the will of its owners. However, the decree would eventually expand in scope. The Nazi regime would use it to deprive Jews living within the territory of the Reich of all belongings of relative value: firms, houses, land, shares, art, jewelry, and gold. It robbed them of almost everything they owned, except for possessions that served their most basic needs. Theft of those items was still to come.
A trustee was appointed at the Ignaz Petschek conglomerate in January 1939. Although Flick’s mandate to serve as sole negotiator for all Petschek assets remained valid, it was losing its value. With competition mounting and the regime veering toward an outright expropriation of the assets, Flick saw that his best chance at getting any of the loot was to cut a deal with Pleiger. So he agreed to Pleiger’s proposition. The Reichswerke would receive its share of the Ignaz Petschek brown coal assets and then swap them for some of Flick’s hard coal mines. The regime soon signed off on the plan.
However, the negotiations between Flick and Pleiger in Berlin were contentious and protracted, lasting a year. The main issue was quantifying the valuations and volumes of the coal. In addition, Pleiger wanted much more hard coal than Flick was willing to give up. Neither side was initially willing to compromise. Pleiger, who was staking his position in the Reich on this deal, turned out to be a fickle negotiator. When Flick thought they had reached an agreement in early June 1939, Pleiger changed the terms. Flick then angrily withdrew from the negotiations. It was only in early December that both sides came to an agreement, but the execution of it would drag on until the end of the war.
Flick drew the short straw in the negotiations with the state conglomerate. He forced his prized Harpener mines in the Ruhr area to give up more than one-third of their employees, coke, and coal production. Pleiger secured 1.8 billion tons of hard coal, plus some potentially productive mines. Flick could manage the losses, but he would have to do some costly reinvestments. In return, Flick gained 890 million tons of lignite, making him the most powerful player in Nazi Germany’s brown coal industry.
Of course, the only people who truly lost out were the Ignaz Petschek heirs. Whereas their cousins had managed to sell their companies in the nick of time, Karl Petschek and his siblings received nothing for their family interests. The gargantuan tax claims against them were offset against their assets, and the family was ruthlessly expropriated by the Nazi regime, aided and abetted by Friedrich Flick.