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A Pledge Betrayed
Part 7: The Control Council Of Germany

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The question of German remilitarization was first raised when, Chancellor Adenauer suggested a united Europe defended by an integrated European Army. In 1948, Adenauer submitted a request to US authorities in secret to rearm twenty-five divisions. The request was exposed on July 30, 1948 in an article in US News and World report.105

The outbreak of the Korean War in June 1950 brought about a total change. Provisions banning military groups were no longer enforced. West Germany was allowed to set up its own General Staff camouflaged under the name "Blank Office." Supported by Bonn and the United States a network of ex-Nazi officers was created to reactive Germany’s military. The man behind the plan for remilitarization was Dr. Werner Naumann. With his old party connection from the Propaganda Ministry, the SS, the Wehrmacht and the Bruderschaft, Naumann emerged in a position of power. Naumann however, was still a devoted Nazi and can be credited with the directing spirit behind almost every Nazi organization and publication that arouse in the 1950-1951 period.

One of the outgrowths of this rush to rearm Germany was the creation of the Bund Deutscher Jugend (Association of German Youth). Membership in the group rose to 22,000. However, behind this group laid a sinister secret division of trained saboteurs and assassination squads labeled the Technical Emergency Service. This guerrilla army was staffed by several thousand Wehrmacht and SS officers. They had been trained and equipped by US agencies, the Bonn government and a few German businesses.

This Nazi group would have remained lost in history among the hundreds of other Nazi groups in post war Germany if it had not been for President of the State of Hesse, August Zinn. In 1952, Zinn publicly charged that the group had drawn up a blacklist of prominent politicians to be assassinated in an emergency. Enough evidence was produced to the dismay of the US High Commissioner to show that a large-scale political assassination plot had been hatched in the style of the free corps. The October 10, 1952 edition of the New York Times carried the story. Similar plots and illegal activities were found behind other Nazi groups such as the Freikorps Deutschland, the Bewegung Reich and scores of other smaller groups.106

In 1952, five members of a secret Hitler Action group were sentenced for unconstitutional activities. The leader of the group Schroer had been a prominent officer in Hitler’s Munich headquarters. It was known at the time that Schroer had given the order "Act inconspicuously! Infiltrate all rightist organizations and make them ready for the final assault."107

American Occupation officials systematically sabotaged directive 1067. Even Eisenhower saw the systematic way in which the Directive was being violated and issued strong warnings against the officers guilty of such violations. Perhaps, the best summation of the systematic sabotage of Directive 1067 can be found in the Truman Library. The following quote comes from General Lucius D. Clay, who became Military Governor of Germany.

"JCS-1067 would have been extremely difficult to operate under. If you followed it literally, you couldn't have done anything to restore the German economy. If you couldn't restore the German economy, you could never hope to get paid for the food that they had to have. By virtue of these sort of things it was modified constantly; not officially, but by allowing this deviation and that deviation, et cetera. We began to slowly wipe out JCS-1067. When we were ordered to put in a currency reform this was in direct violation of a provision of JCS-1067 that prohibited us from doing anything to improve the German economy. It was an unworkable policy and it wasn't changed just without any discussion or anything by those of us who were in Germany. It was done by gradual changes in its provision and changes of cablegrams, conferences, and so on."47

The words of General Clay above are damning. They leave no doubt the general was willingly to ignore Roosevelt’s Directive and to twist its meaning into whatever was the most convenient for him at the time. Further, the General’s words clearly show he knowingly chipped away gradually at the directive until all of its provisions were voided.

This gradual eroding of the Directive is confirmed by another of the good general’s deeds. In 1948, General Clay commuted the life sentence of Ilse Koch to three years. Ilse Koch was known as the Bitch of Buchenwald and had lampshades made from the skin of inmates with distinctive tattoos. Forensics had proven there was no doubt the various items were made from human skin. However, in 1976 General Clay in a videotaped interview prepared for the George C. Marshall Research Foundation in Virginia made the following comments:

"We tried Ilse Koch. ...She was sentenced to life imprisonment, and I commuted it to three years. And our press really didn't like that. She had been destroyed by the fact that an enterprising reporter who first went into her house had given her the beautiful name, the "Bitch of Buchenwald," and he had found some white lampshades in there which he wrote up as being made out of human flesh.

Well, it turned out actually that it was goat flesh. But at the trial it was still human flesh. It was almost impossible for her to have gotten a fair trial."48

The General’s later comments on Frau Koch reveals much about where the sympathies of the general was. The reader should note that Ilse Koch and her lawyers never challenged the fact that the lampshades and other items had been made from human skin. Such irresponsible comments as the General's have become labeled as Holocaust Denials. Further, the Koch case shows that while the general first started out circumventing Roosevelt’s Directive by chipping away at the economic provisions he soon escalated his sympathies to pardoning Nazi war criminals. The reader should note that while General Clay publicly stated that Koch could not get a fair trial in an American Military court, a civilian German court later tried Frau Koch and sentenced her to life in prison. In 1976, while still interned in prison the Bitch of Buchenwald committed suicide.

Once hostilities ceased in Europe, General Clay was appointed as Eisenhower’s deputy military governor in charge of the Control Council. Following Eisenhower’s retirement on March 15, 1947, Clay became the military governor of Germany. Eisenhower was reportedly disturbed to see his orders countermanded and expressed concern over seeing Nazis that his troops had arrested set free. Eisenhower didn’t need to look any further than his deputy governor for an explanation.

Before looking at the Control Council it should be noted that Secretary of the Army, Kenneth Royall opposed the denazification and decartelization plans. Royall was open in his support for rebuilding a strong Germany and a vigorous opponent of the 4Ds program. In secret testimony before the House Appropriations Committee in April 1948, he told congressmen that he had wanted to end the war crimes trials much earlier. He claimed his major obstacle was General Clay. Royall was the official responsible for halting all executions of war criminals after a false story of torture of prisoners emerged in the Malmedy Massacre trial. Royall also opposed the integration of the military after the war.

As deputy governor in charge of the Control Council, Clay was free to hire and staff the council as he pleased. The Control Council was divided into three general divisions: political, finance and economic divisions. See figure below

 
  

 

 
 

General Motors was particularly well represented on the Control Council. Besides Louis Douglas heading up the Finance Division, Edwar Zdunke, a prewar head of General Motors Antwerp was appointed to supervise the Engineering Section. Colonel Grame Howard former General Motors representative in Germany and the author of a book that praised totalitarian practices and justified German aggression was placed in charge of personnel selection.

The stacking of the Control Council with Wall Street and corporate executives deeply disturbed Treasury Secretary Morenthau. Many of the firms were guilty of willingly trading with the Nazis during the war and supported pro-fascist groups at home. General Motor’s Opel division was one of the largest tank manufacturers for Hitler. Dillon and Reed was one of the Wall Street firms that helped finance and build the Third Reich. Perhaps, the best summary of how the Control Council was sabotaged comes from Morgenthau’s memorandum of May 29, 1945. It is reproduced below.

MEMORANDUM

May 29, 1945

Lieutenant-General Lucius D. Clay, as Deputy to General Eisenhower, actively runs the American element of the Control council for Germany. General Clay's three principal advisers on the Control Council staff are:

1. Ambassador Robert D. Murphy, who is in charge of the Political Division.

2. Louis Douglas, whom General Clay describes' as my personal adviser on economical, financial and governmental matters." Douglas resigned as Director of the Budget in 1934; and for the following eight years he attacked the government's fiscal policies. Since 1940, Douglas has been president of the Mutual Life Insurance Company, and since December 1944, he has been a director of the General Motors Corporation.

3. Brigadier-General William Draper, who is the director of the Economics Division of the Control Council. General Draper is a partner of the banking firm of Dillon, Read and Company.

Sunday's New York Times contained the announcement of key personnel who have been appointed by General Clay and General Draper to the Economic Division of the Control Council. The appointments include the following:

1. R.J. Wysor is to be in charge of the metallurgical tatters. Wysor was president of the Republic Steel Corporation from 1937 until a recent date, and prior thereto, he was associated with the Bethlehem Steel, Jones and Laughlin Steel corporation and the Republic Steel Corporation.

2. Edward X. Zdunke is to supervise the engineering section. Prior to the war, Mr. Zdunke was head of General Motors at Antwerp.

3. Philip Gaethke is to be in charge of mining operations. Gaethke was formerly connected with Anaconda Copper and as manager of its smelters and mines in Upper Silesia before the war.

4. Philip P. Clover is to be in charge of handling oil matters. He was formerly a representative of the Socony Vacuum Oil Company in Germany.

5. Peter Hoglund is to deal with industrial production problems. Hoglund is on leave from General Motors and is said to be an expert on German production.

6. Calvin B. Hoover is to be in charge of the Intelligence Group on the Control Council and is also to be a special advisor to General Draper. In a letter to the Editor of the New York Times on October 9, 1944, Hoover wrote as follows:

The publication of Secretary Morgenthau's plan for dealing with Germany has disturbed me deeply. . . such a Carthaginian peace would leave a legacy of hate to poison international relations for generations to come. . . the void in the economy of Europe which would exist through the destruction of all German industry is something which is difficult to contemplate.

7. Laird Bell is to be Chief Counsel of the Economic Division. He is a well-known Chicago lawyer and in May 1944, was elected the president of the Chicago Daily News, after the death of Frank Knox.

One of the men who helped General Draper in the selection of personnel for the Economics Division was Colonel Graeme Howard, a vice-president of General Motors, who was in charge of their overseas business and who was a leading representative of General Motors in Germany prior to the war. Howard is the author of a book in which he praises totalitarian practices, justifies German aggression and the Munich policy of appeasement, and blames Roosevelt for precipitating the war.49

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Morgenthau’s concerns expressed in the memorandum above sheds light on how the denazification program was being systematically sabotaged by the military from the top down. All of the firms mentioned above willingly continued to trade with the Nazis during the war. Almost all of those firms took extraordinary measures to conceal their efforts from the United States government and to have their stateside offices remain in charge. In the previous chapter, similar concerns were voiced in Congress. This sabotage occurred despite clear directives from the Control Council. The relevant extracts from the Control Council follows below.

"You will search out, arrest and hold, pending receipt by you of further instructions as to their disposition, Adolph Hitler, his chief Nazi associates, other war criminals and all persons who have participated in planning or carrying out Nazi enterprises involving or resulting in atrocities or war crimes…

8. Nazis and Nazi sympathizers holding important and key positions in (a) National and Gau Civic and economic organizations: (b) corporations and other organizations in which the government has a major financial interest: (c) industry, commerce, agriculture and finance: (d) education: (e) the judiciary and (f) the press, publishing houses and other agencies disseminating news and propaganda."50

The excerpt from the directive from the Control Council is specific. It leaves no doubt as to who was to be arrested and detained. Further, the directive was explicit in that there was no authority to release anyone detained pending upon further instructions from Washington. General Clay’s quoted words above reveal that at the very least he was guilty of not following orders. The reader should note that under the directive above American businessmen were included.

While there were members like Morenthau in the Truman administration who carried on the fight for justice, the Nazis had powerful friends in the halls of Congress to protect them. One such congressman was John Rankin. Excerpts from his speech to the House of Representatives on November 27, 1947 follows below:

"What is taking place at Nuremberg, Germany, is a disgrace to the United States. Every other country has now washed its hands and withdrawn from this Saturalia of persecution. But a racial minority, two and half years after the war closed are in Nuremberg not only hanging German soldiers but trying German businessmen in the name of the United States."81

Note Rankin used the words racial minority to refer to Jews in the above quote. Rankin’s racism and pro-fascist allegiance was already presented in previous chapters. Rankin was not alone in Congress in opposing the trials. George Dondero, Republican representative from Michigan was another. Dondero was a former mayor of Royal Oak, Michigan before being elected to the House. Royal Oak was the home of the pro-Nazi priest Father Coughlin and a hot bed for pro-Nazi groups. Dondero described the trials as a result of Jewish and communist treachery. He singled out ten lawyers from the I.G. Farben case including the leading prosecutor Josiah D u Bios whom he called a known left-winger from the Treasury Department who had been a student of the Communist Party. Dondero became something of an art critic in the late 1940s and 1950s, dismissing modern art as communist inspired. He labored to censor the worked of abstract artists.

Also, based in Dondero’s district was Dow Chemical. Dow had several cartel arrangements with I.G. Farben and feared that the trial could lead to exposing its full collaboration with I.G and the Nazis. The British ICI Ltd firm was also implicated in the Farben trial. However, the British Foreign Office breathed a sigh of relief when the Times discreetly omitted any reference to ICI in its reporting of the I.G. Farben case.

The choice of Clay and Murphy to head up their respective positions in the Control Council was largely engineered by the State Department. Their appointments were more of a political decision, which testified to the power of the pro-fascist faction within the State Department. The reader should note that Clay was the only four star general never to have conducted a combat command. While Clay served in Europe during the war, he was a rear echelon general in charge of supply.

Both Clay and Murphy once appointed to their posts were largely responsible for convincing Truman that a punitive peace was unwise, and they immediately set about sabotaging the denazification program. Once the Kennan doctrine emerged in 1946 Clay and Murphy both embraced it. Early in 1946, General Clay banned the dismantling of German industrial plants for reparations. Both men had a large influence in escalating the emerging Cold War. Especially General Clay who in 1948 issued a warning to Washington that "war may come with dramatic suddenness." Clay’s frantic war warning message was based on an exaggerated threat assessment from Gehlen that the Soviets were mobilizing large numbers of troops in Eastern Europe. Gehlen was a former Nazi officer in charge of intelligence on the eastern front, recruited by the OSS/CIA.

The rehabilitation of Hermann Abs by General Clay could be considered as the most damning act of sabotaging the denazification program. While Abs was never associated with the concentration camps or the horrors of the Holocaust, he was the single figure within the Nazi empire that made it all possible. Abs was the Nazi banker. Without the financial magic of Abs, the Nazis would have faced a financial crisis that would have brought the Third Reich crumbling down. Clay complained that he was never able to make Abs the financial minister of the new German government due to American public opinion. However, he was successful in placing Abs as head of the Reconstruction Finance Corporation (RFC). Th RFC was somewhat outside the realm of the government but was the sole instrument in the distribution of funds for Germany from the Marshall Plan.