THE CRUSADE
Sam Klaus, a passionate gumshoe, an outstanding lawyer and a fervent Nazi hunter, shone among the American crusaders. An intelligent man, dynamic and resourceful, Klaus boiled with anger as he learned of Germany’s treatment of the Jews, and he was determined to do all he could to prevent, for all time, any renewal of Germany’s threat to world peace. He was no less driven by an invincible urge to find the Nazis’ loot. To Klaus, Switzerland epitomized the enemy. For their part, the Swiss regarded Klaus—principled, powerful and Jewish—as their preeminent foe.
Klaus was born in Brooklyn in 1904. His father, a successful and cultivated tailor working on lower Madison Avenue, died shortly afterward of cancer. Klaus’s mother remarried a grocer, and the family moved into a poor neighborhood, “redolent,” according to Klaus’s sister, “of Dickensian habits.” A victim of diabetes and of misery at home, Klaus could in later years recall from his childhood only one benediction: his stepfather’s insistence on a Hebraic education and a commitment to Jewish causes, especially the development of Palestine. Hard work eased his exit from that ghetto. Graduating at the top of his class from Columbia Law School and rising to become one of New York’s best lawyers, Klaus enjoyed a well-established reputation by the outbreak of war. Automatically disqualified from military service in 1942 for health reasons, he joined others with a similar background in the Treasury who, in later years, affectionately recalled “Sammy” Klaus as a small, dark, intense bachelor with a passion for collecting rugs, always straining after perfection, who marched in the vanguard of an unusual crusade.
The mastermind of the crusade was Henry Morgenthau, the secretary of the Treasury since 1934, an affable, ardent New Dealer, a friend and neighbor of the president, who was driven by a credo that Europe’s peace could be secured only by permanently destroying Germany’s industrial might, reducing the warmongering nation to manufacturers of cuckoo clocks. Armed with ideas, guile and tenacity, Morgenthau’s crusaders were a group of outstanding economists and lawyers, graduates of Harvard and Columbia, many of whom had risen from poor Jewish communities through their ambition, intelligence and industry. United by their desire to cripple Nazi Germany and by their concern for Europe’s abandoned and destitute Jews, they were influenced by a variety of sources, prominent among them Israel Sieff, a British Zionist, who hosted weekly dinners in Washington to discuss the fate of Europe’s Jews.
The most senior of Morgenthau’s crusaders was Harry Dexter White, a New Dealer empowered as an assistant Treasury secretary to direct American policy across Europe. Inside the White House, Morgenthau’s standard-bearer was Isador Lubin, a member of the president’s “brain trust.” Officially ranking as a government statistician, Lubin was one of those confidants of President Roosevelt who, like Colonel Bernard Bernstein (a Treasury representative assigned to General Eisenhower’s headquarters to plan the occupation of Germany), had become uneasy about the collaboration by Europe’s neutral countries with Nazi Germany.
Klaus was assigned within the Treasury to the Foreign Economic Administration (FEA) division, tracking and controlling Germany’s foreign trade. Just as in the bygone era when the imperial navies and armies of warring nations laid siege to castles and blockaded ports, the Treasury in Washington, which relied heavily on the Ministry of Economic Warfare in London, had plotted an economic offensive against Germany and occupied Europe to prevent crucial supplies from reaching the Nazis. During that first year, 1942, immersed in constant discussion with other innovative lawyers and economists, Klaus toyed with the problem of how eventually to seize the increasing flow of Nazi loot deposited in the neutral countries.
Since 1940, a trickle of intelligence reports from London had suggested that German bankers, industrialists, politicians and Nazi functionaries were accumulating technology and money, particularly in Switzerland, estimated to be worth $1 billion (over $10 billion in today’s values). Reading those reports, Morgenthau’s men suspected that after Germany’s defeat the remnants of the Nazi leadership would use the secret funds deposited in the neutral countries as the seed money to establish the Fourth Reich. To forestall that resurgence of Nazism, Sam Klaus’s own plan, set out on May 11, 1944, less than a month before the Normandy landings, was to launch a worldwide hunt to uncover and prevent the sale and disappearance of German property and loot after the war. Code-naming it the Safehaven program, Klaus recommended that Allied governments persuade the neutrals to seize all the German property deposited in their countries.
In July 1944, Sam Klaus was jubilant, convinced that he had won a major battle. Forty-four nations had met at Bretton Woods, a resort in New Hampshire, under the banner of the United Nations’ Monetary and Financial Conference, to plan the world’s postwar economy. On Klaus’s initiative, the FEA representative persuaded the conference to adopt Safehaven as Allied policy. To the crusaders, Resolution VI, which demanded that the neutrals prevent the Nazis from hiding funds and loot in their countries, was a weapon that would shackle the enemy and their collaborators.
The preamble of the resolution stated: “Anticipating defeat, enemy leaders and their nationals are transferring assets to and through neutral countries in order to conceal them and to perpetuate their influence and power.…” The resolution called upon the neutrals to “take immediate measures to prevent any disposition or transfer … of looted gold, currency, art objects, securities and financial or business enterprises [and] to take immediate measures to prevent the concealment by fraudulent means or otherwise” of stolen assets or assets belonging to enemy leaders and their associates. The loot, the resolution demanded, should be returned by the neutrals to the Allies.
Back in Washington, on August 5, FEA representatives met officials from the State Department and Treasury to agree on their strategy to prevent the neutrals from frustrating the resolution. Using the threat of economic sanctions to compel the neutrals’ compliance was, Klaus argued, vital. But by the end of the meeting the lawyer recognized that his passion for an aggressive policy was not shared by the State Department. Tellingly, the diplomats were even unwilling to relinquish to the FEA their control of communications to the neutral governments. Safehaven’s success depended, Klaus knew, upon the attitude of the neutrals’ governments, and if the U.S. Treasury Department was denied direct access to Swiss government officials, the program would be handicapped. “Where voluntary cooperation proves insufficient,” urged Klaus, “we must be prepared to use direct pressure upon the neutral governments.” The diplomats disagreed. Continuing a blockade after the war, asserted the State Department officials, “would not be warranted.” The department’s cooperation would be restricted to approving a request to American diplomats in the neutral countries to “investigate and report any evidence that enemy capital has been or is being invested in those countries.”
Aggrieved by that disunity, Klaus flew to Europe on August 23 accompanied by Herbert Cummings, an equally zealous anti-Nazi employed in the State Department. Soon after their arrival in London, the secrecy of the mission evaporated. Seeking out journalists, Klaus spoke aggressively about Safehaven’s threat to the German conspiracy. The imminent arrival of American troops on the Swiss border—they had fought their way across southern France—galvanized the crusader into predicting dire consequences if Switzerland and the other neutrals did not cease their close collaboration with Germany. Flying from London to the neutral capitals—Stockholm, Madrid, Lisbon, Ankara—the two officials called at American embassies to brief and exhort their colleagues to investigate German activities, to identify the deposits of looted assets and to find out how the Germans had camouflaged or cloaked their property within local corporations. Their reception seemed friendly and the assurances of cooperation unconditional, yet by the time the two officials arrived by airplane in Switzerland, their confidence had dimmed.
Like all new visitors to Switzerland, Klaus was beguiled by the country’s civility and its sheer beauty: the snowcapped mountains, the rich green meadows and Bern’s stone buildings erected along cobbled roads centuries earlier—roads down which Napoleon Bonaparte had ridden his horse to visit his banker and possibly a mistress. To discount that facade required exceptional knowledge and experience that even the Allied diplomats, stationed in Bern, hardly possessed. Few outsiders had penetrated the minds of the rulers of the four-million-strong bourgeois-peasant community who had lived since 1848 in a confederation of three cultures and three languages—German, French and Italian.
Klaus was soon versed in the mythology and the boasts, which declared Switzerland to be Europe’s oldest democracy, long ruled by elected representatives rather than royalty. Switzerland, he was told by his hosts, could trace its roots back to 1291 and had survived as a nation since 1848 only because pervading tensions from neighboring countries could be defused by the nation’s resolute neutrality, which had been recognized by the Declaration of Paris in 1815 and reaffirmed by the Treaty of Versailles in 1919. Neutrality, the chorus endlessly repeated, was essential to Switzerland’s survival, because involvement in a European war would inevitably fracture the country’s delicate balance and precipitate its disintegration.
Although Switzerland’s leaders would in later years simultaneously lament and flaunt their country’s isolation during that era, Sir Clifford Norton, the unassuming British ambassador, had perceptively compared the Swiss to passengers sitting in the air-conditioned salon of a liner steaming through a hurricane in the tropics. The Swiss, he wrote to the Foreign Office, could see momentous events through the portholes but resisted going on deck to experience or understand the conditions. This self-induced blindness had become instinctive to a people denied any recent participation in the dramatic political and social changes beyond their borders. In fact, over recent years, the condition had been exacerbated. As Switzerland became increasingly dependent on foreign trade, Swiss assertions of independence resounded ever more shrilly. The Swiss, as John Ruskin, the art critic, had remarked sixty years earlier, were not heroes but stubborn, proud, avaricious folk lacking any subtlety, enthusiasm or wit, yet boasting a unique brand of common sense and obstinate rectitude.
Inevitably during that brief visit, there were limitations to Klaus’s understanding. He did not realize that Switzerland was not so much a country ruled by a central government as a collection of local communes separated by different cultures and united only by a legalistic confederation, by conservatism and by ambivalent history. The government, or Bundesrat, consisted of seven ministers, appointed for life or until they cared to retire, who annually rotated the nation’s presidency. Klaus and the economic warriors were negotiating with the servants of self-appointed interest groups, supremely knowledgeable about financial matters and bred, as Switzerland’s interests required, to present stubborn indifference toward the rest of the world. These policies had had stark and unpalatable consequences. Ever since Europe’s Thirty Year War in 1618–48, while its neighbors had suffered, Switzerland had reaped healthy profits from neutrality.
By 1944, Klaus and many other Allied officials were pondering the question of profits earned by Switzerland from the massacre of millions on the other side of its frontiers. In Switzerland, unlike the rest of Europe, copious supplies of food, alcohol, chocolates and medicine were still available for a population that had experienced little change in its self-satisfied, enviable lifestyle. The country’s economy, limited only by the severe rationing of fuel and coal, was undamaged. There was a large surplus of foreign exchange and, while the Swiss had been spared the torment of bombed homes, severed limbs and lost savings, their country’s powerbrokers contentedly awaited the inevitable turn of history when new fortunes could be earned resupplying the war-ravaged continent.
Recent protests to Bern from London and Washington about Switzerland’s close relations with the Germans and about the secretive assistance provided by Swiss banks to the Nazis had been rebuffed, albeit politely. Reports about discussions between Leland Harrison, the long-serving American ambassador, and Swiss officials revealed that Klaus was dealing with people who, while apparently sympathetic to Allied ambitions, politely acknowledging the virtues of Allied policies and offering their assistance, seemed immune to the reality that their profitable and eager dalliance with the Nazis would soon end.
The Allied armies had just liberated Paris (August 25, 1944), and were expected to cross the Rhine within weeks; meanwhile 300 divisions of the Red Army were remorselessly driving the Germans into retreat along the eastern front. As a neutral, Switzerland was theoretically uninterested in the fate of the Third Reich, but the destiny of Swiss investments in Germany, worth approximately $2 billion, and Swiss possessions in the United States, worth $1.9 billion and frozen by presidential order since June 14, 1941, would soon be determined by Allied diktat. The reality was the imminence of Allied control over Switzerland’s very survival. All the country’s imports from the port of Genoa—fuel, fodder and raw materials transiting across newly liberated France—would depend upon the Allies’ goodwill, and recently that had been sorely strained. Like so many other Jews, Klaus had been emotionally affected by the new, vivid reports of the Holocaust and had been appalled by the unceasing reports that Switzerland was eagerly cooperating with the Nazis while turning a blind eye to the monstrosities. The enemy was just seventy miles away from the capital, Bern, and Klaus was not disposed to look favorably upon those willfully overlooking the mass murder of the Jews. The moment was approaching when Switzerland would have to account for its behavior since 1939, and the Allies possessed the power to insist on Switzerland’s compliance with Safehaven.
Success for the crusaders—to discover the German loot and Jewish assets and to thwart those influential Swiss bankers and industrialists closely associated with the Germans who determined Switzerland’s policy toward the Allies—required informants within the clan. By 1944, Switzerland’s Trappist silence had proven hard but not impossible to violate.
Monitoring Switzerland’s relationship with Germany was the responsibility of Allied diplomats and their intelligence services. At the outbreak of war, Frederick “Fanny” van den Heuvel, the head of MI6’s station in Switzerland, had established a network of informants and sympathizers in government departments, banks and telegraph and telephone centers, and among those Swiss army, police, immigration, customs and intelligence officers who were defiantly hostile to the Germans. In unison, MI6 officers reported Switzerland’s pride in achieving a brilliant balancing act that despite the country’s collaboration with the Germans, appeared to guarantee its national independence. To deflect criticism of partiality, Switzerland’s rulers created a myth to exalt the nation’s bravery in protecting its neutrality. The hero of that myth was General Henri Guisan, a popular gentleman farmer elected as the army’s commander-in-chief against a pro-German candidate. Under Guisan’s plan of national defense, in the event of a German invasion there was to be nominal resistance along Switzerland’s frontiers while the army retreated to the Alps, abandoning the bulk of the population and industry. Based in that natural fortress, the Swiss would repel the enemy. When the German invasion did not materialize, Switzerland’s rulers referred repeatedly to a “miracle”: the miracle of General Guisan, the brave commander whose bold strategy had outfaced the mighty Nazis and saved the nation.
British intercepts and decoding of secret German messages in the Ultra operation had soon exposed the myth. There was no evidence that Hitler had planned an invasion of Switzerland. On the contrary, the evidence revealed Germany’s appreciation that most pro-Nazi Swiss opposed German occupation. Berlin acknowledged, according to the intercepts, the advantages of nurturing and exploiting Switzerland’s German population to create a haven for German interests.
Under the direction of Amtgruppe D/13h, an SS department in Berlin responsible for Swiss affairs, Germany’s infiltration and recruitment of sympathetic Swiss was masterminded through the embassy in Bern and through consulates in Switzerland’s major towns. Thousands of Swiss nationals had been recruited to disseminate Nazi propaganda in the theaters, cinemas and newspapers in order to capture Switzerland’s sympathy. The country’s predominant German-speaking community had welcomed a colony of about 72,000 German nationals, of whom 24,000 were considered by the Allies to be suspect. Allied intelligence reports had noted blatant pro-Nazi activities in Davos, the Alpine resort, where certain banks and three Catholic sanatoria had been identified as centers of German espionage and the repository of huge sums forwarded by German diplomats and Nazi leaders. Even the Red Cross, a private organization based in Geneva, Allied intelligence had discovered later, was used with the knowledge of the Swiss government as cover by German intelligence officers to spy on Allied activities across Europe and North Africa. A five-page report drawn up by the OSS (forerunner of the CIA) and entitled “Enemy Agents and the Red Cross” named twenty-eight suspected officials as “either German agents or associates of German agents, who are using the Red Cross organization as a cover for securing and transmitting military information.”
Unhindered by Swiss security police, the rival German intelligence agencies, the Sicherheitsdienst (SD) and the Abwehr, had recruited Swiss volunteers for a special Waffen SS unit and an SS battalion and had created a network of informers. Clandestinely, agents directed from an intelligence center in Dijon, France, had targeted Swiss and Allied personalities. After the war, Swiss counterintelligence acknowledged that the Germans had successfully developed a “finely developed net over the whole country”; this was confirmed by the eventual arrest of 1,389 Swiss accused of treachery. That cozy relationship was rooted in the natural bonds developed over the centuries between neighboring countries, but MI6 officers, joined in 1942 by Allen Dulles, the chief of the OSS station, noted sinister aspects of that union, which sparked the interest of officials in London and Washington and inspired Sam Klaus to propose the Safehaven program to prevent Germany from profiting from the war.
The clues appeared in the intercepts. To finance intelligence operations, the German Foreign Office and the SD were depositing in Swiss banks funds extorted by the Gestapo from Jews or from sales of stolen diamonds and gold. Glad to receive a generous fee, the bankers asked no questions, and when the clients required help, the bankers provided advice. Among the clatter of telegraphic traffic from Berlin to Switzerland intercepted by the British was a telegram dispatched by the Reichsbank on February 21, 1941, to the German consulate in Zurich, Switzerland’s banking capital. The diplomats were asked to discover from the Swiss Bankers Association whether the Reichsbank could depend upon the Lombard Bank “as thoroughly reliable and suitable for very confidential special transactions.” Reichsbank officials wanted to use Lombard’s well-established overseas relationships as a cover for imports to Europe and clearly relied upon the Bankers Association for honest advice. The reply on March 5 was negative: “Because of Jewish involvement and ties with England, Lombard Bank cannot be recommended.” Those traces were symptoms of what Klaus and all other economic warriors in London and Washington regarded as a pernicious conspiracy.
Fearful of Allied interference or seizure of their foreign interests, German bankers and industrialists managing the giants—Siemens, AEG, Bosch, Mercedes, IG Farben and Telefunken—had seduced Switzerland’s lawyers and financial institutions into organizing illegal transactions to camouflage German corporations as pristine, neutral entities. The Germans hoped that their legal ruse would protect their companies from appearing on an Allied blacklist or, in the event of a Nazi defeat, from being subjected to Allied seizure, while still enabling them to serve the German war economy.
The headquarters of that special effort, opened on September 8, 1939, was the Foreign Exchange Control division, the Devisenstellen, within the Ministry of the Economy in Berlin. Specialists sworn to unusual secrecy had created and supervised the camouflage or “cloaking” of German property abroad as independent non-German enterprises. Switzerland was the foreign center of that operation. Germany’s leading corporations hired Swiss trustees to organize the legal framework that concealed a German company’s ownership, while accumulating and hiding its funds during the war. To protect those transactions, the Swiss and German partners either concocted fake sales or simply exchanged oral understandings based upon trust. The only trace of those transactions spotted by MI6 officers was frequent journeys to Germany by Swiss lawyers visiting their clients.
Dr. Walter Keller-Staub at 5 Bahnhofstrasse in Zurich was typical of those Swiss lawyers noted by MI6 as chosen by the Nazis to protect their interests against the Allies. Among Keller-Staub’s German clients owning interests in oil, shipping and manufacturing across the world were the Reichsbank and Alfred Krupp, Germany’s giant armaments manufacturer. The Swiss lawyer was the front, approved by the Swiss government, designed to conceal German activities and collect royalties in Allied countries.
IG Farben, the world’s biggest chemical manufacturer, used the services of Felix Iselin, an outspoken pro-Nazi lawyer based in Basel. Iselin’s activities were personally controlled by Hermann Schmitz, the corporation’s brilliant chairman in Berlin, who had sanctioned the production of poison gases to murder the Jews as a “patriotic duty,” according to the corporation’s directors. Anticipating the need for camouflage, Schmitz had created in 1929 IG Chemie, Farben’s subsidiary in Switzerland, to be responsible for the empire’s foreign interests, although he retained direct control in Berlin. In June 1940, rightly fearing that the company’s colossal industrial power would prompt its seizure by the Allies, Schmitz appointed Iselin as IG Chemie’s chairman to pretend that all of IG Farben’s foreign subsidiaries were owned by a Swiss rather than a German company. Thereafter, Iselin was regularly monitored by MI6 as he scurried to Berlin to consult Schmitz, returning to Basel to transfer German funds to neutral countries or telephoning New York to issue orders as if he were in charge of a Swiss company. In London and Washington, the economic warriors such as Sam Klaus had collected files of data in the expectation that after Germany’s defeat Switzerland would cooperate in seizing those assets.
Experience had, however, shown that Switzerland, reluctant to help the Allies, succumbed only to irresistible pressure. In 1939, London’s declaration of worldwide economic warfare against Germany had evoked no more than smiles in Bern. The announcement that those Swiss who assisted the Germans would be blacklisted while those who suffered while helping the Allies would be rewarded had hardly been noticed. Since Britain relied upon Switzerland to protect British prisoners of war in Germany and to provide a base for the British intelligence services in Switzerland, London deemed even a protest to be incautious, despite the accumulating evidence of Switzerland’s steadfast tolerance of Nazi crime.
The attitude in Washington was markedly different. By early 1941, to protect their growing deposits from the Germans, Swiss banks and some of their richest clients had prudently transferred millions of dollars, suitably cloaked within omnibus accounts, to their branches in New York, accompanied by sealed envelopes containing the depositors’ instructions. Unexpectedly, at the behest of the U.S. Chiefs of Staff, who were outraged by Switzerland’s cooperation with Germany, President Roosevelt froze the Swiss bank deposits on June 14 (along with those of Germans and other neutrals), forcibly exposing their activities and cautioning the Swiss government against completely ignoring Allied interests—even though, in the event, the United States was not to enter the war for another six months. The effect of the warning was short-lived.
On July 1, 1941, after Germany, as a show of force, had halted for three weeks the transit of all Swiss imports through its territories and stopped supplies of coal, iron and steel, Switzerland had consolidated Berlin’s goodwill in an unusual pact: the Swiss-German clearing agreement. Since Germany had spent all its foreign exchange and gold, the Swiss government agreed to provide massive loans to the Nazis. Dressed up as credits to pay Swiss exporters pending payment from Germany, the clearing account was meant to be balanced by the year’s end. Instead, the Swiss approved a mounting deficit: SF7 million every month. By December 31, 1942, Germany had borrowed SF850 million to buy Swiss-manufactured weapons to fight the war.
With Switzerland established as a trusted contributor to Germany’s war economy and protected from Allied bombing, Swiss precision engineers produced and exported to Germany ammunition, antiaircraft shells, guns, fuses, aircraft parts, radio equipment, machine tools, turbines, engines, locomotives, machinery and chemicals. As the war went on, Swiss contractors undertook research for new radio transmitters, antiaircraft instruments, machinery and improved metals, and supplied parts for the V-1 and V-2 rockets, jet sprays for diesel motors, clutch couplings for tanks and safety caps for artillery shells. On a more mundane level, Dr. Waldo Gerber, a well-known Swiss Nazi sympathizer and director of Mercedes, arranged for German cars to be repaired in Switzerland while Maschinenbau Hilti in Liechtenstein contracted to install new machinery in Germany. Symbolic of Switzerland’s incorporation within the Nazi economy, German trains regularly traveled across Switzerland transporting war supplies to Italy, and German towns along the frontier drew electricity from Swiss power stations. By the end of 1941, Swiss exports of chemicals to Germany had increased by 250 percent, exports of vehicles by 450 percent, and exports of metals by 500 percent. In return, Switzerland imported gold, oil, iron and coal produced by slave labor.
Conveniently, those relationships and profits were protected by hypocrisy. For, while Switzerland’s industrialists supplied weapons to the Nazis, the Swiss government had prosecuted an insignificant Swiss soldier for treason for selling his rifle to a German agent and, after his conviction, unhesitatingly approved his execution.
Protests by Allied ambassadors about the loans and the trade were countered by the Swiss with lectures about their principles, their convictions and the risks they took to preserve their sovereignty. Neutrality, Swiss officials told Sir Clifford Norton, meant only military neutrality. Economic neutrality was an unknown legal concept. Since only Germany could supply coal and iron, Germany was given freedom to choose what it required in return. Not only did Switzerland “feel aggrieved” by the Allies’ “unreasonable” demands that it should limit its trade with Germany, Norton was told, but it demanded a similar right to trade with Japan, claiming that right as a neutral. In London, the demand was classified as a crude desire to earn extra profits out of the war. In Bern, the bankers complained that trading with both sides had become “unpleasant” and “a difficult task.”
The focus of Sam Klaus’s anger was the Bahnhofstrasse, a pleasant, narrow, tree-lined road leading from Zurich’s main railway station into the city center. Above and between the expensive shops selling fashion and watches were the offices of over one hundred banks, lawyers and notaries who could guide the wary or uninitiated foreigner into the mysteries of numbered accounts and the discreet disappearance of their savings. Marked occasionally by small brass plates, these offices traded in an ostentatious tact.
At the outbreak of war, most of Switzerland’s leading banks had existed for less than a century. The Crédit Suisse was founded in 1856 when Switzerland, still hampered by its ethnic disparity, had only just begun, unlike the rest of Europe, to industrialize and build railways. Benefiting from the absence of government influence or even interest in their affairs, the country’s bankers, by seemingly divine edict, established their own rules, their own code of morality, and their freedom to conduct themselves exclusively in their own cause. Although this was still unknown to Klaus or even to the Swiss government, Switzerland’s banks, in 1937, without need for legal authority, had unilaterally and without any announcement ceased paying interest on foreign deposits. Their subsequent explanation—that excessive “hot money” was pouring into their coffers—patently disguised their ruse to extract extra profits from captive clients. Profiting from incomparable secrecy, Switzerland’s small breed of bankers had become greedier and more immoral than most, enjoying the special status bestowed upon those who simultaneously were senior officers in the country’s citizen army and regularly undertook diplomatic missions abroad on behalf of the government. The proof of that prestigious status, certainly an incentive for foreign clients seeking special services and discretion, was the laws guaranteeing depositors anonymity and protection from inquisitive governments.
Cloaking of bank accounts in Switzerland had started in 1922 after a threatened tax on Swiss capital instigated a massive transfer of money to London. To protect their business from the government and attract the return of customers, Swiss banks offered to depositors confidential numbered accounts and the promise of concealment. Posing as the depositors’ ally, Swiss bankers could legally protect accounts owned by foreign Jews from demands illegally made on their behalf in Switzerland by Gestapo agents; and subsequently the same bankers could cite that law to rebut condemnation of their collaboration with the Nazis and criticism of their conduct toward Jewish refugees who had fled the Gestapo. In reality, the banks had silently exploited the law for their own profit and in collaboration with the Nazis. In these matters, the Germans had discovered that Crédit Suisse’s discretion was particularly reliable. Among the victims of that understanding was Laura Mayer, a Belgian living in Malmédy. Soon after the German occupation, Mayer was forced to sign transfers of her wealth held in Swiss banks. Her letters, clearly written under duress, were accepted from German officials by Crédit Suisse without inquiry. The bankers could not imagine that a reversal of German fortunes would expose their perfidy. After the war, Mayer would encounter a smoke screen of secrecy barring her inquiries in a manner that was still not understood by Klaus or the other Allied officials.
Unlike Mayer’s, the deposits in Swiss banks by Germany’s leaders were protected. Franz von Papen, the former chancellor, was reported to have placed SF500,000 in a bank in the Reifessenkasse, St. Gall; Joachim von Ribbentrop, the foreign minister, and Hjalmar Schacht, the former Reichsbank president, had used a female employee at the German embassy to deposit money in banks near Zurich; even Hitler was suspected of having used at least three different accounts, including that of Max Amman, his loyal publisher, for the royalties from Mein Kampf. No one, however, was as active as Hermann Göring, whose Swiss agents, especially Andreas Hofer, arranged for looted valuables, particularly paintings stolen from galleries and private collections across Europe, to be stored in Swiss bank vaults.
The more sophisticated Germans were laundering stolen money through Swiss banks by offering their loot at discount prices in exchange for secure deposits either in current accounts established under the names of Swiss nationals in Switzerland or in existing Swiss bank accounts in the United States. Swiss bankers had also become specialist dealers in stolen shares and securities. German couriers, using diplomatic protection, crossed regularly from France to deliver bags of stolen certificates to a network of untroubled custodians. One batch, spotted by British intelligence, had been stolen in the Paris office of the Westminster Bank and was delivered to the “notorious” Ted Hoch of the Swiss Bank Corporation (SBC). Hoch was managing a lucrative trade, obtaining from obliging lawyers, at $100 a shot, false affidavits attesting that the stolen foreign shares and securities belonged to Swiss nationals. Those stolen securities, resold on the Zurich and Geneva stock exchanges, were so cheap that British diplomats had protested to the Swiss government about the blatant dishonesty. A Swiss investigation in 1942 had confirmed SBC’s falsifications, but in the face of political pressure, it was dropped “in the public interest.” Papering over the embarrassment, Swiss officials reassured the British that “a better system of control could not have been devised.”
Reviewing that history, Klaus concluded that Switzerland’s laws encouraged both the trade and the crime. According to Swiss law, if possession remained unchallenged for five years, the thief was guaranteed ownership of his loot. Instinctively attracted to healthy profits, the Swiss contemplated no change of their laws, although their country, since the consolidation of the German occupation of Europe, had become a depository of loot.
Regularly, Allied intelligence sources revealed that Crédit Suisse, the Union Bank of Switzerland and the Basler Handelsbank were receiving currencies and gold worth millions of dollars from Germany either to be credited to secret accounts or to be transferred to other European neutral countries, to Shanghai or to South America. Bührle and other prominent banks, noted as “terminal stations,” were being used by German industrialists to hoard foreign currency. The Reichsbank’s ledgers recorded that at least RM15 billion ($6 billion) would be transferred into Switzerland, although the Swiss would claim it was just RM1 billion. In the opinion of Walter Sholes, the American consul in Basel, Switzerland’s bankers had transformed themselves into “pro-Fascist financial operators … who have not hesitated to work hand in glove with National Socialist and Fascist business interests.” Walter Ostrow, the U.S. Treasury representative in Bern, reported that Switzerland, as Germany’s international banker, was damaging the Allies by financing Germany’s purchase of critical war supplies from neutral countries. Echoing Sholes and Ostrow, Klaus had drawn up a powerful indictment based upon intercepts and agents’ reports revealing the close collaboration between the Swiss banks and the Germans, although the full manifestation of the bankers’ prejudice was concealed even from the likes of Klaus by a carefully continued image of tactful modesty and discretion.
Exploding myths and laws was integral to Klaus’s crusade. His ambition, to continue economic warfare into peacetime, threatened Switzerland’s tranquillity, although most Swiss were unaware of that plan. Uninhibited by any political opposition, Switzerland’s rulers had imposed total censorship and had carefully protected their people from foreign criticism and controversy. One among many unreported events was a petition signed in November 1940 by 200 Swiss leaders urging the government to observe stricter neutrality—which, considering the list of their complaints, implied a demand that Switzerland should display greater sympathy toward the Nazis. The signatories of the petition were representatives of Switzerland’s biggest banks, including Peter Vieli, director general of Crédit Suisse and chairman of the Bankers Association’s German Committee, and Paul Jaberg, director of the Union Bank of Switzerland, who also boasted a series of directorships among the nation’s insurance and manufacturing companies. Both banks controlled vast Swiss investments in Germany and in return offered a haven in Switzerland for German savings and a cloak for their customers’ nefarious activities.
Among those customers was Paul Schmidt-Branden, a former director of the Dresdner Bank in Berlin, resident during the war at the Park Hotel in Locarno, the beautiful lakeside resort in the canton of Tessin. Like other Germans enjoying the congenial atmosphere of the town, Schmidt-Branden discreetly brokered business for his Nazi clients—he helped Walter Funk, the Reichsbank president, transfer his private funds from the United States to the safety of Switzerland—but there were more sinister activities he undertook with Swiss bankers. In particular, he had recruited Swiss banking officials to reveal the accounts of Jews living in German-occupied countries.
Henry Löwinger, an Austrian Jew, was a victim of that arrangement. After his arrest in Vienna, he was visited by Gestapo officers with an offer based upon precise knowledge of his account at the Swiss Bank Corporation in Zurich. In return for his fortune, Löwinger was told, he would be allowed to cross into Switzerland. After agreeing, he and his wife, accompanied by Gestapo officers, drove to the Swiss border near Constance. Waiting on the border was his Swiss lawyer, who had arranged the SBC account. After signing the transfer of their fortune over to the Gestapo, the Löwingers walked into Switzerland, penniless but alive. “It was possible only because the Nazis had information from inside the Swiss banks,” complained Löwinger, suspecting that an official in the bank had been recruited or even planted by the Gestapo. Unknown to Löwinger, SBC’s relationship with the Nazis had been consolidated by its most senior managers and directors. Fifteen of the bank’s twenty-four directors were identified by the U.S. Treasury as pro-Nazi, closely involved in financing and easing the foreign transactions of Germany’s major industries. Investigators would conclude that the bank was “one of the principal accomplices of the Nazis.” Passing information to the Gestapo about a Jew’s secret account flowed naturally from that relationship.
Discreet conversations between British and American diplomats and Swiss officials in a bid to curtail Switzerland’s illegal trade with Nazi Germany had produced no response, even after the German defeat at Stalingrad in December 1942. On January 5, 1943, both governments issued a public warning that Switzerland’s ownership of looted property supplied by Germany would not be recognized. The Swiss government ignored the message.
On January 15, Switzerland’s trade agreement with Germany expired. The news that Swiss negotiators were traveling to Berlin to negotiate a revised agreement and were offering more loans to allow Germany to buy munitions and war supplies irritated the governments in London and Washington. Swiss nonchalance, Sir Clifford Norton reported to the Foreign Office, was based not merely on Switzerland’s need for German coal, ore and fuel but on the fact that ministers had been “over-persuaded [by] Swiss industrial interests … that Switzerland is in honor and self-interest bound to carry out the letter of the 1941 Agreement which suits these interests perfectly.” The Swiss, it appeared, were happy about their contribution to Germany’s policies.
In London, Dingle Foot, a junior minister at the Ministry of Economic Warfare, was instructed to persuade the Swiss to dampen their loyalty toward the Nazis, at least by reducing the number of Swiss specialists servicing Germany’s war machine. The threats available to Foot when he met Walther Thurnherr, the Swiss ambassador, on April 15, 1943, were unimpressive: a suspension of “navicerts,” which allowed safe passage across the sea for Swiss merchandise, and restrictions on imports of fodder and military supplies for the defense of Switzerland. Foot’s “severe warning” that Switzerland “had gone further than was necessary in meeting German demands” made such an imperceptible impression that Anthony Eden, the foreign secretary, personally intervened.
Allied armies in North Africa were on the eve of launching a massive attack against Rommel, and Eden was preparing for a critical visit to Washington. Yet the following day, April 16, Eden believed it worthwhile to meet Walther Thurnherr himself. Initially, the foreign secretary’s manner was polite. “The measure of Germany’s present difficulties,” he told the ambassador, “is the measure of Swiss strength. The harder the Germans bluster, the greater Switzerland’s strength.” The ambassador nodded. Encouraged by the diplomat’s apparent agreement, Eden added, “Switzerland should do all it can not to prolong the war.” But it gradually dawned on Eden that the Swiss were treating his “serious concern” with incomprehension. After Thurnherr had declared that he too was “preoccupied by the information reaching him,” he launched into a self-eulogy about the problems Switzerland faced in fending off Germany’s demands and still remaining neutral. Clearly, the diplomat did not understand the issue: Nazi Germany was an evil that needed to be destroyed. Allied servicemen were dying, yet Switzerland was not only supplying the Nazi war machine but was actually accepting Nazi loot, which had little bearing upon neutrality. To explain the moral issue, Eden realized, was pointless. Despite witnessing the dislocation, rationing and bomb damage inflicted on London, Thurnherr evidently felt no shame about Switzerland’s relationship with Germany. Although, unlike his countrymen, he was not immune to the war, the diplomat knew that the Swiss, without television pictures and with no experience of warfare, could not imagine how their neighbors were suffering and scarcely cared. In truth, few Swiss, including Thurnherr, could envisage the defeat of Germany. Eden therefore bid the diplomat farewell with a threat: If the new Swiss-German agreement was damaging to British interests, “our action is likely to be unwelcome to you.” The Foreign Office’s only recourse was to seek Washington’s support.
Five days later, on April 21, the American government issued its sternest protest. Announcing its “profound concern,” the administration “expressed its most forceful objections” that the Swiss negotiations with Berlin would cause a “substantial rise” in Swiss exports to Germany, strengthening Germany’s military potential and prolonging the war. To emphasize its anger, navicerts (as noted earlier, these guaranteed the free passage of Switzerland’s imports across the seas) were suspended. That gesture was the Allies’ only weapon.
Switzerland’s reaction was immediately gauged by Sir Clifford Norton. Regularly, Norton met Marcel Pilet-Golaz, the arrogant foreign minister who hardly troubled to hide his sympathy for the Germans, a sentiment shared by the majority of the Federal Council. By 1943, even Norton, a timid character, had become exasperated by Pilet-Golaz’s use of the words “loyalty” and “neutrality.” Loyalty, to Pilet-Golaz, meant Switzerland’s right to “make agreements with both sides and keep them loyally.” Concerning neutrality, Pilet-Golaz compared his country’s neutrality to that of the United States until the attack on Pearl Harbor—a deliberate distortion that ignored Washington’s decisive support for Britain until the Japanese attack. To Norton’s irritation, the minister further boasted that preserving Switzerland’s neutrality was itself a victory and justified his country’s profiting from the war. Yet Norton was also mollified by the politician. Pleading that he was truly pro-Ally but was hampered by the Federal Council, Pilet-Golaz had pledged that Switzerland would guarantee a “marked decrease” of exports to Germany during 1943. “I do not like the position in which Switzerland finds itself,” Pilet-Golaz told Norton, apparently sympathizing with Britain’s complaint, “but it is not our fault.” An embargo, explained the minister, would reduce Switzerland’s food imports, causing unemployment and unrest. Since he had made an identical pledge to reduce trade in 1942, which had later been dishonored, the Foreign Office and the State Department were resigned to the fact that the Swiss would always choose the Germans in preference to the Allies unless, as occurred on May 8, 1943, there was an opportunity to drive a wedge between Switzerland and Germany.
Walther Thurnherr, the Swiss ambassador, informed Eden that Switzerland’s trade negotiations with Germany had broken down and asked whether the sanctions could therefore not be lifted. Since Switzerland was continuing to supply munitions while a new treaty was discussed, the Allies’ response was tough. Supplies of food and fodder were banned for three months. Stung, Switzerland agreed to reduce war exports to Germany, especially ball-bearings, by 60 percent for the remainder of the year. Allied sanctions were relaxed, but the goodwill proved to have been wasted. In October, ignoring the Allies’ concerns, the Swiss signed a new trade agreement in Berlin, granting the Nazis a further SF270 million loan to buy Swiss munitions. British ministers were furious. Switzerland’s repeated promises to reduce exports to Germany, it was clear, would never be honored. “The more we damage Germany,” Foot told Thurnherr, “the more the Germans need the Swiss.” Thurnherr was unimpressed. “HMG [His Majesty’s Government],” continued Foot, “take an extremely serious view of this arrangement.” After the war, he threatened, “Switzerland would not be allowed by the Allies to recover their huge loans to Germany.” The ambassador naturally cabled a report of that conversation to Bern. It was read, filed, ignored and soon forgotten. Warnings uttered in London and Washington were the echoes of ghosts, not credible to the burghers of Zurich and Bern, who regarded the likes of Sam Klaus as the enemy.
Contemplating in Switzerland’s summer sunshine the history of the Allies’ relations with the neutral country over the previous four years, Klaus understood that one trade between Bern and Berlin—the smooth passage of gold ingots across the frontier—was a cornerstone of their intrigue. Standing in Bern’s Bundesplatz, looking at the underwhelming portico of Switzerland’s parliament, Klaus glanced to the left and found himself gazing at bland features of Switzerland’s National Bank.
A nation’s morality is occasionally betrayed by its architecture, but the edifices of Switzerland’s democracy, he reflected, revealed little of the national character. Yet if a swastika had been chiseled into the stone under the National Bank’s portico, it would have offered a fair hint of Switzerland’s sentiment toward the Nazis.