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A Pledge Betrayed
Part 8: Generals Clay & Draper

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On July 30, 1947, General Clay announced that extraditions from the American zone would cease after November 1. Three weeks earlier the General had ordered JAG to end all war crimes trials by the end of the year. At that, time there still remained at least seven hundred murders of American airmen still uninvestigated. The reason given later for the closing of war crime trials was that by mid 1947 the American war crimes program had became entirely discredited, a victim of a vicious political campaign.53 Both the Chicago Tribune and Senator Joseph McCarthy were involved in the campaign to discredit the Malmedy massacre trial.

First to benefit from Clay’s decision to end extradition were seven Wehrmacht and SS generals. Almost no German generals were ever brought to trial by the United States or Britain. That does not include field marshals such as Goring. This group of German officers was wanted for the destruction of Warsaw in 1944 and the murder of thousands of Poles during the German retreat. Poland requested their extradition at the beginning of 1946. Unlike in other Eastern European countries, the trials in Poland had been fair as any in the west. A total of 1,172 men and women had been extradited to Poland to stand trial. Forty-two had been returned after acquittal. One of the generals named in the extradition request was General Heinz Reinefarth, the Butcher of Warsaw.

Before looking at how the trials were sabotaged it is revealing to look at why some Nazi criminals were never charged with crimes and actually promoted to new positions of power. A typical example is the case of Theodor Ganzenmuller. Ganzenmuller had taken part in the Beer Hall Putsch in 1923. During the war as Staatssekretar in the ministry of transportation, Ganzenmuller organized the train services for Auschwitz, Treblinka and other concentration camps. Himmler would personally telephone Ganzenmuller to work out problems in the transportation of the Jews to the death camps.

Seeking someone to rebuild the railways in the American zone, the US Transport Division shamefully proposed Ganzenmuller. Seven of the other members proposed were also in the automatic arrest category. Ganzenmuller’s name was only withdrawn after the State Department wrote an urgent letter. Dr Dorpmuller, Hitler’s minister of transport was appointed.

Such appointments of high former Nazis to positions of power in the post war occupation government and the later German government were rampant. Over fifty percent of those nominated by the American Legal Division were former Nazis in the automatic arrest category.

The only American reporting having problems finding suitable personnel to fill the new positions was Bernard Bernstein, head of the Finance Division. General Bickelhaupt of the American forces appointed Hermann Geitz to head up the communications division. Bickelhaupt was a former ATT vice-president. Bickelhaupt insisted that Geitz was indispensable. Geitz had been head of the German telephone company and before and during the war had bought equipment from ATT. At the last moment However, General Clay stepped in and blocked Geitz’s nomination.82

Colonel Clio Straight had been selected to run the prosecution of war criminals. Straight was a lawyer from Waterloo, Iowa with no experience in criminal cases. He had been drafted and even after career JAG officers were dispatched to Germany remained in charge. Straight had been given the order to wind up the trials by Colonel Claude Mickewaite. He had presumed the trials would last through 1948. Straight’s office was handicapped by a constant demobilization effort that had reduced his staff by fifty percent. Moreover,Straight complained that his staff was ill trained and not well qualified. The group’s work was constantly interrupted by repeated moves of headquarters. According to Straight, Micklewaite saw no glory in continuing the trials and because of the unpopular nature of the trials among top army brass refused to request additional manpower.

Mickewaite faced only one obstacle in his rush to close down the trails, Damon Gunn. Gunn had submitted a report to Washington on June 24, 1946 complaining that there were more than fifteen thousands war crimes suspects held at Dachau alone but only sixty-three trials involving roughly five hundred people had been held. In his report, Gunn had recommended an additional fifteen hundred trials involving a minimum of three thousand defendants. Gunn’s recommendation was dead the day it arrived in Germany. On Mickewaite’s suggestion Clay turned down the request personally.54

Straight remains ambivalent about the release of prisoners from Dachua. As late as 1982 Straight comment on the release of prisoners from Dachua as follows:

"I was ambivalent whether we should carry on or quit. We had established the principle and to carry on and try thousands would have been expensive. So when I got the orders, I sat the production line going. No special efforts were made. There was no method, no discussion about handling cases or bodies over to the Germans. We just plain turned them loose."54

Justice it seems had died with Roosevelt. Nuremberg established the principle of bringing war criminals to justice. However, once that principle was established little effort was expanded in seeking justice for thousands of victims. The war criminals were simply turned loose. Of course, with every new trial and every new defendant the risk of uncovering corporate America's treason increased.

The lack of prosecution of war criminals had the effect of turning the American zone into a sanctuary for war criminals. Three examples will suffice. On March 23, 1948, Lieutenant General Dratvin the deputy commander of the Soviet military mission requested in writing from Major General G.P. Hays, Clay’s deputy, the extradition of seventeen Russian collaborators. The collaborators were charged with shooting partisans and burning whole families alive in their homes. Dratvin supplied the addresses within the American zone of each collaborator. Hays rejected the request. On March 31, 1948, the US Legal Division had approved the extradition of four German officers to Yugoslavia for a series of murders. The director of intelligence canceled their extradition on political grounds. Finally, on June 15, Army Headquarters received a letter from a Lett refuge naming five former Lett SS and SD officers living in a displaced persons camp. The reply follows below.

"With the exception of atrocities committed in concentration camps which were located in the US area of control or overrun by US troops, the war crimes activities of headquarters do not entail prosecutions of criminals who committed offences against the civilian population of other countries…We thank you for bringing the matter to the attention of this headquarters."55

In short, no one gave a damn. However, Clay did not act in a vacuum in sabotaging the denazification program. As detailed earlier in this chapter, the Nazis counted on support from their agents and friends. In the Untied States those agents and friends were the same leaders of corporations that had continued to supply the Third Reich with munitions after the war broke out. The opposition in the America to the denazification and decartelization of Germany was led almost exclusively by the elite from corporations and State Department that had been the most active in financing Germany in the 1920s and 1930s.

This group had the means to employ effective lobbying techniques and to control the focus of the media. One tactic used was the sponsoring junkets for businessmen and politicians to Europe in order to study the problem of German recovery. American multinational corporations financed most of these junkets. Draper paid close attention to these visitors and provided them with privileged information. The reports from these junkets would mention the proven impossibility of decartelization and the need to reverse the Morganethau Plan before it had even been implemented.

A good example of these reports that had a large influence on shaping policy was A Report on Germany written by Lewis Brown, chairman of Johns-Manville Corporation. The report was extremely popular, making it onto the best seller list, and is still quoted today. The report was written in 1947 after Brown had toured Germany. The experts Brown consulted in his report read like a guest list for the Council on Foreign Relations: ATT’s Frederick Devereux, John Foster Dulles, Herbert Hoover, Sears Roebuck’s president, A.S. Barrowsthen serving as US Comptroller in Germany a host of British and Swiss banking authorities and 25 German industrialists. Brown’s lists of experts omitted labor leaders, small businessmen, leaders of a resistance movement and leaders of denazification and decartelization.

In his report, Brown attacked the French and USSR punishment of Nazis as brutal and indiscriminate. He claimed the denazification program was depriving Germany of the leaders it needed in the rehabilitation and reconstruction of Germany. Brown’s trip was unwritten primarily by General Electric’s chairman Philip Reed. Reed was regarded as one of the most influential industrial leaders in post war Germany. In addition to sponsoring Brown, Reed and the organization he led organized several conferences in 1946 and 1947. Typical of the delegates were the chairman of the National Association of Manufactures, chairman of National City Bank, the head of the International Chamber of Commerce and executives of Chase Bank. The one common denominator among the delegates was all had extensive dealings with Nazi Germany including General Electric.52

At the time General Electric owned about 25% of AEG and had extensive holdings in Germany. While Reed was arguing with the government against antitrust laws in Germany, GE faced thirteen criminal antitrust cases in the United States.

Following the war Clay accepted a trustee position for the Alfred P Sloan Foundation. Before accepting the position Clay surely must have known that the Sloan Foundation was connected to those that invested in Nazi Germany. Such an appointment immediately raises questions that it was a payoff for help in concealing American investments in Nazi Germany. The question like many others raised in this chapter cannot be answered with any degree of certainty  without further documentation that is either sealed in government vaults or hidden in the archives of the companies that armed Hitler.

While General Clay’s record on denazification is dismal at best, it would be considered exemplary in comparison with the record of General Draper. Draper’s appointment had been engineered by Secretary of War Stimson and Secretary of the Navy, Forestal. Forestal had been a former president of Dillon and Reed. Forestal was also one individual that Roosevelt had under surveillance.56 Draper was selected to head the economic division and the anti-cartel section within the division. In fact, Clay oftentimes found him opposed to Draper’s views and actions.

Theoretically, the anti-cartel section should have had easy going in breaking up German cartels. The American policy document, JCS 1067 directive and the three power Potsdam agreement were all adamant that the concentration of German industrial strength being destroyed forever. Unlike the debate over what constituted a war crime there was little disagreement over the fate of cartels. Simply, they were to be destroyed.

The cartel section also employed Captain Norbert Bogdan, a vice-president of Schroeder Bank’s New York branch. Schroeder had close ties with the I.S. Stein bank, owned by Baron Kurt von Schroder. Von Schroder had channeled funds to the Nazis before their seizure of power and was instrumental in introducing Hitler to von Papen in a meeting that paved the way for Hitler’s appointment to chancellor. Allen Dulles was also a director of Schroeder and had been employed by Sullivan and Cromwell, another Wall Street firm that funded the Nazis. Draper surrounded himself with like-minded aides. His electronic specialist was Frederick Devereux, a senior official from ATT. His steel expert was Rufus Wysor, the president of Republic Steel, which had a long history of cartel agreements. Indeed Wysor once asked a rival, "Whats Wrong with cartels anyhow?"


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William Draper was a former investment banker with Dillon and Reed, which had a long history of doing business with Germany and the Nazis. While at Dillon and Reed, Draper was appointed as director, vice president, and assistant treasurer of the German Credit and Investment Corp (GCI). GCI served as a short-term banker for Thyssen and the German Steel Trust. Draper did not intend to ever implement Roosevelt’s directive calling for the dismantling of German cartels and industry. In one case, Draper ordered the dismantling of an I.G. Farben poison gas plant to cease.

However, within Draper’s cartel section there were three dedicated individuals who worked diligently to dismantle the Nazi cartels. Both Russell Nixon and Bernard Berstein resigned by December 1945 as a protest over the failure of Draper to implement decartelization measures. Berstein worked within the banking section, and had reported to General Clay in September 1945 that his team had removed ninety-five hundred employees who were proven Nazis from the banking system. However, Berstein demanded stricter measures, and the removal of US officials that refused to implement the denazification program. Additionally, Berstein claimed too many Nazis remained in control of the banks. Clay refused to take tougher measures and Berstein resigned once it was clear nothing was going to be done.

James Martin chose to remain and fight for decartelization. Martin’s position was undoubtedly weakened by the resignations of Nixon and Berstein. What Martin had failed to account for was the strength of opposition from his own side. British and American bankers and industrialists had worked with their Nazi partners openly until the war broke out. The majority of this clique of businessmen continued working with the Nazis clandestinely after war broke out. These businessmen saw little reason why they should not pick up where they left off. The amounts of investment by American corporations in Germany were staggering. In 1939, American corporations held controlling interest in German corporations worth at least four hundred million dollars

Up until mid 1946, Martin could have defeated Draper if two conditions had been satisfied. First Martin would have needed the information about German corporations necessary to organize a breakup. Secondly, the Americans would have had to control the Rhur district in which the large steel and coal trusts were located. Instead, the Rhur district was under British control.

Draper’s British counterpart was Sir Percy Mills. British industry indeed had their man in control of the Economic Division in Mills. Mills arrived in Germany with no formal directive to remove Nazi businessmen. Mills was unrepentant about appointing former Nazis to control industries. Mills selected industrialists he had last met in 1939 to fulfill these positions. According to SHAEF (Supreme Headquarters Allied Expeditionary Force) Mill’s selected industrialists should have been under arrest.

Typical of Mill’s appointments was Wilhelm Zangen, a Nazi Party member since 1927. Zangen employed of slave labor at Mannesmann. Another appointee, Ernst Ponsgen was selected to direct the steel industry. Hitler awarded him with the Eagle Shield, the Nazis highest economic award in 1941. The citation for his award quotes his "extraordinary services in arming Germany."

Martin feared very essence of fascism ---the corporate state. The Antitrust division estimated one hundred industrialists and six major banks controlled two thirds of the German economy. This concentrated power made it easy for the Nazis to mobilize for war.

Martin’s assessment was controversial. British and American politicians and military officials were divided about the relationship between the corporations and the Nazi government.

Martin and Nixon arrived in Frankfurt at the end of April 1945. They discovered that while I.G. Farben’s headquarters had escaped any bombing damage the records stored there were being dumped out of windows and burnt in the courtyard. SHAEF had decided to use the building as a headquarters and had ordered it cleared of refuse. Before they could dismantle I.G. they needed documentary evidence, those records were vital for their task. Moreover, the surviving records took two years to assemble.

From the beginning, the investigations into I.G centered about two directors, Herman Schmitz and von Schnitzler. Von Schnitzler was located by Nixon and eventually faced trial after making several confessions and conflicting statements. Judge Curtis Shake ruled to ignore those statements in von Schnitzler’s trial claiming the accused was trying to help the allies by what he thought they wanted to hear.57 The tribunal of judges of the I.G Farben case in which twenty-three directors of I.G Farben faced trial consisted of Curtis Shake Supreme Court justice of Indiana, James Morris Supreme Court justice of North Dakota and Herbet, Law School Dean at Louisiana State University.

The prosecutor was outraged over the decision. All twenty-three were acquitted of waging an aggressive war, ten were acquitted of all charges, the remainder were found guilty of lesser charges. Only four were found guilty of employing slave labor. Judge Herbert wrote a dissenting opinion.

Prosecutor, Josiah E. DuBois, Jr. was particularly irate with Morris, who questioned the pace of the prosecutors' presentations and the relevancy of much of their evidence. Judge Merrell, an Indiana lawyer was the alternate judge and concurred with Herbert. The sentences were extremely light with some sentences being only a year and a half long. Herbert’s dissenting opinion ran 114 pages. An excerpt from it follows.

"I concur in the acquittals on charges of planning and preparation of aggressive war. I concur, though realizing that on the vast volume of credible evidence, a contrary result might as easily be reached by other triers of the facts who would be more inclined to draw the inferences usually warranted in criminal cases. The issues of fact are truly so close as to cause genuine concern whether or not justice has actually been done.

While concurring in the acquittals, I cannot agree with the factual conclusions of the Tribunal. I do not agree with the majority's conclusion that the evidence falls far short

Utilization of [slave] labor [by Farben] was approved as a matter of corporate policy. To permit the corporate instrumentality to be used as a cloak to insulate the principal corporate officers who approved and authorized this course of action from any criminal responsibility therefor is a leniency in the application of principles of criminal responsibility which, in my opinion, is without any sound precedent under the most elementary concepts of criminal law. . . . The evidence shows Farben's willing cooperation in the utilization of forced foreign workers, prisoners of war and concentration-camp inmates as a matter of conscious corporate policy."58

In his criticisms of Morris, DuBois charged the judge was more preoccupied with the threat of Russian communism than in justice.

In June 1956, Draper returned to Germany from Washington with a new economic team. All the new members were harsh critics of the punitive policies. Draper’s Economic Division had not broken apart a single cartel. Among them was Lawrence Wilkinson, the new head of the industry branch. Wilkinson was sharply critical of decartelization claiming it would hinder German economic recovery. He claimed that like denazification it achieved nothing and only built resentment. Wilkinson aligned himself with Britain’s Percy Mills. According to Martin Wilkinson and Draper conspired with Mills to raise certain issues in the Four-Power discussions, which would give Draper a suitable pretext for seeking Washington’s agreement to change American policy.59

In September 1946, General Clay reprimanded Draper for telling visitors that denazification and decartelization were responsible for Germany's dire economic conditions. Clay’s reprimand had no effect. On November 13, Sir Cecil Weir cabled the American embassy in Washington that Draper had assured him that it was just a matter of time before American policy fell into line with British policy. Weir was soon to replace Mills. A month later Willard Thorp, an assistant secretary of state informed the British that the State Department was doing its best to keep the wild men in check. In addition, in November the Republicans won control of both houses of congress tilting American policy in favor of big business and cartels. The Four-Powers law against cartels approved in January 1947 fit the lax British policy towards cartels.

Martin held off resigning until May 1947. Draper appointed Philip Hawkins, his son-in-law and a relative of the du Ponts as Martin’s successor. Upon his return to Washington, Martin continued to fight for decartelization. He and some of the remaining members of the decartelization branch testified before the Fergusson Committee. Arrayed against him were those that produced largely false statistics to prove German industry was unused and any further breakups would force the American taxpayer to subsidize Germany. Fergusson’s report however, ignored the easy option and blamed Hawkins and Wilkinson for deliberately sabotaging the decartelization policy. The report recommended their firing. In retaliation, Wilkinson fired Martin.

Wilkinson in turn fired two members of the remaining decartelization team that had testified against him. Alexander Sacks one of those fired stated; "They have done what ever they could by innuendo and misstatement, to discredit a program, which they did not understand or like."60 At the same time Wilkinson dismissed 120 of the section’s staff, leaving just twenty-five remaining in Germany. Draper was promoted to assistant secretary of war. As assistant secretary, Draper proceeded to dismantle the antitrust campaign against the Japanese multinational corporations instituted by MacArthur.