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  Gerald Selous, the commercial counselor at the British embassy in Bern, had asked the Political Department about the results of the “opening of safe deposits” as promised by Stucki and ordered by a decree issued on November 30, 1945. Selous also asked for the results of the census of German assets: the bank accounts, shares, gold, jewelry, works of art, patents, businesses and property. Schwab’s reply was familiar, although his tone had become markedly more unyielding. The census, he explained, was delayed because some German-owned companies valued their property at just SF1 and because lawyers and bankers refused to breach the secrecy laws. Even though Schwab parroted the line that the banks showed “no bad faith,” he knew that they would readily abandon the secrecy laws if it was deemed politically expedient. For example, Bernhard Sarasin, the new president of the Bankers Association, would disclose to Petitpierre the accounts of the Parti du Travail, the left-wing radicals, because the indiscretion served the banks’ political interests.

  Those double standards, Feig observed, extended to the Switzerland’s treatment of the stateless Jews. Claimants, seeking to retrieve their property under the new rules, were finding that Swiss officials ignored not only the official Nazi documents proving their statelessness, but even existing documents in Swiss police files. The exemptions from the new rules promised to persecuted Jews were proving to be a farce; meanwhile the non-Jewish Germans were protected. To combat the Swiss, Feig had sought allies in Whitehall, sounding out W. A. Brandt at the Ministry of Economic Warfare on the possibility of publicly raising the threat of sanctions. Brandt’s rejection of this idea had been abrupt, and diplomats in the American embassy had resisted Feig’s entreaties to exert pressure on the British. In desperation, he wrote to Washington suggesting that President Truman appeal to Clement Attlee, the British prime minister, to join in issuing a threat to impose sanctions on Switzerland. His recommendation was ignored. The omens for the impending showdown between the Allies and Switzerland were not encouraging for the crusaders.

  9

  WASHINGTON SHOWDOWN

  In the early days of March 1946, Walter Stucki, director of Switzerland’s Political Department, was more verbose, more agitated and more aggressive than usual. Snapping at his subordinates and lording it over his political master Max Petitpierre, Stucki was preparing for his appearance in the spotlight. In an unexpectedly cold, formal manner, the American government had invited Switzerland to send a delegation to Washington to negotiate a settlement of the outstanding differences: the Allies’ demand for the heirless assets, the Nazi loot, the gold and the German property. For all sides, it was the moment of truth, the moment of reckoning. Stucki, the self-admiring patriot, was steeling himself for a showdown to save his country from the demands of the Anglo-Americans, a breed for whom he felt little affection or respect.

  Switzerland faced serious problems. Stocks of coal, grain and raw materials were running low. The freeze on Swiss assets in the United States and the Allies’ blacklist of 1,500 Swiss companies had crippled some manufacturers and caused unemployment. Safehaven, the Allies’ demand for the heirless assets, the Nazi loot, the gold and the German property, could damage the Swiss economy. During their preparatory discussions, Professor William Rappard, the American-educated economist at Geneva University, cautioned Stucki, “We should resist the Allies on everything.” That, Stucki felt, was self-evident. Defiance was his maxim.

  Stucki’s instructions, formulated under his own influence, were to negotiate the end of the Allies’ controls, to protect the Swiss economy and to prevent Switzerland from bearing any burden arising from the war. Banking secrecy was to be defended. The heirless assets, the Nazi loot and the gold were not to be surrendered, and he was to defy every demand to liquidate the German assets. Switzerland, Stucki was told, would never recognize the Allies’ claims to German assets. “We are not tolerating the confiscation of property belonging to people who have trusted Switzerland,” the traditionalists told him. Swiss sovereignty and neutrality could not be infringed. He would even refuse to distinguish between genuine German property and loot, stolen by Nazi thugs and squirreled away by Swiss accomplices.

  There was, Stucki was assured by the government’s lawyers, “no legal basis for the Allied demands,” especially since the Finance Ministry had produced evidence that Switzerland had not been enriched by the war. For that purpose, statistics were being compiled to give the false impression that Switzerland had imported from Germany more than it had exported to Germany. No one in Bern had mentioned, however, that Switzerland had, unlike its neighbors, not become poorer. That reality did not interest Stucki. Anticipating a good fight, he brusquely rejected the idea of offering compensation voluntarily to the Allies. Only as a last resort would he draw on the government’s authority to offer as a goodwill gesture between SF200 million and SF250 million toward Europe’s reconstruction. But that would be offered, he insisted, only after he had staged a dramatic breakdown in the negotiations.

  Until the last moment, Stucki had resisted pressure from the Bankers Association to include a banker in his delegation. “The bankers don’t have a good reputation in America,” he told Schwab, “and their mission in 1944 didn’t have an outstandingly good result.” Having secured government support for his disdain, Stucki refused to meet a delegation of bankers before his departure. That chore was to be assigned to others. Schwab endorsed his friend’s antipathy. “It’s amazing. The bankers now say that they’ve got ‘important information’ about the German assets. They’ve never said a word until now!” But Stucki was warned by Alfred Hirs, the central banker: “We’re always going to be Germany’s neighbor and we shouldn’t allow ourselves to become a tool of the Allies.” The bankers, said Hirs, should be included in the delegation. Stucki was contemptuous. The banks, he snapped, refused to obey the government. “Only 400 out of 2,200 safes have so far been opened. We’ve got to force this issue.” But in the hours before his departure, Stucki had been reminded of his status, and Eberhard Reinhardt of Crédit Suisse and another banker had decided to travel to Washington. The banker had little cause to fear Stucki’s ambitions. Shortly before flying to Washington, Stucki had been approached by a German who had lived in Switzerland for many years. “If you can protect our fortune,” said the German, “then Switzerland would be entitled to one quarter of it.” He intended to oblige.

  The eleven Swiss delegates, led by Stucki, flew from Zurich, leaving a country that seemed as prosperous as ever. The landscape was unaltered by war, and the shops sold food and luxuries that had still not reappeared across the frontier. Having brilliantly resisted the overwhelming demands of both sides during the war, Switzerland had no intention of succumbing to any threats or of sacrificing its profitable interests—at least not without a bitter fight.

  Stucki was greeted in the United States by the Washington Post’s description of him as “Al Capone.” Randolph Paul, the American representative, a former assistant secretary at the Treasury, was more polite.

  Born in upstate New York, Paul, a short, humorless man, was one of America’s most prominent tax lawyers who relaxed by chopping wood on his small Maryland estate. He was famous for winning remarkable tax breaks for rich clients and then petitioning Congress to close the loophole he had just exploited. As a tax lawyer Paul had had no experience of negotiating a governmental agreement, although he took comfort from the State Department’s briefing—which was mistaken—that Stucki was “strongly pro-American and pro-British.” Paul’s guard was also lowered when he found that, contrary to a Foreign Office brief, Stucki also spoke English and French—and by the visitor’s opening expressions of humility.

  Calculating how to soften Paul’s instinctive antagonism, Stucki conceded during their introductory meeting at the State Department that there had been mistrust of Switzerland for the “crime” of not fighting in the war. Disparaging the malicious critics who alleged that Switzerland “harbored sympathies for the Germans,” Stucki pleaded that the Allies should recognize Switzerland
as the world’s “oldest and most freedom-loving democracy.” With rising emotion, the Swiss expressed his “dismay” that the Allies mistrusted a “small and economically helpless country” that had not succumbed to Nazism or to any Nazi decree to hand over the property of the nationals of the occupied countries. The law was sacrosanct, he said, and just as Switzerland defied the Nazis to protect foreign-owned property, it was obliged to resist the Allies despite the Allies’ good intentions. “Switzerland is a keeper of right and of morality,” he concluded. In no way could it be bound by the laws and demands of a foreign country, whether Nazi Germany or the United States. Switzerland’s economic survival depended upon protecting those who had faith in the country and invested their assets in it.

  “Thank you,” replied Paul politely. America could effortlessly suffocate Switzerland’s economy, and his two colleagues, Sy Rubin and Orvis Schmidt, were eager to utter such harsh threats in order to extract the loot and the heirless assets. A note to Paul from Fred Vinson, the Treasury secretary, Morgenthau’s successor, advocating the threat of sanctions, strengthened their resolve. “It is our view,” wrote Vinson, “that without sanctions, no matter how tough we talk, they will know that it is really a bluff and will act accordingly.” The only constraints on Paul and the two crusaders were the State Department, unenthusiastic about even threatening sanctions, whose silence was ominous, and the two other Allied negotiators.

  Paul Charguéraud, France’s temperamental representative, had limited sympathy for the Swiss and especially for Stucki, the friend of Pétain and Vichy, who symbolized the pro-Nazi inclinations of the Swiss-Germans. Swiss solidarity with the Germans had, in the Frenchman’s opinion, never disappeared and was confirmed by Switzerland’s concealment of Nazi loot taken from France and traced to Switzerland, transiting occasionally to South America. But the French diplomat knew that, while Stucki would evince similar contempt toward Frenchmen who had opposed Vichy or who posed as brave members of the resistance, his own championing of French interests would be undermined by Paul, whose distaste for France sneaked out in caustic comments.

  Paul’s animus was not as evident against Francis McCombe, the minor British civil servant from the Economic Warfare Department, whose appointment signaled Britain’s lack of interest. The selection of McCombe, an expert on the administration of charities and a passionate tennis player, but no celebrity, was Whitehall’s insult to the crusaders. To Rubin’s irritation, in their preliminary meetings McCombe emphasized that since Britain’s paramount concern was to increase world trade, the remaining restrictions on Switzerland would have to be removed by the end of June. The Labor government’s opposition to any sanctions against Switzerland, he said, had been decided “at the very highest level.” Sanctions, the British embassy had earlier told the State Department, were “not an appropriate weapon.” Those State Department officials who were sympathetic to the crusaders had wanted to summon Lord Halifax, the British ambassador, “and give him a good dressing-down.” Their wish was disregarded. Rubin, nevertheless, was aghast. Switzerland had been dragged to Washington only because of the freeze, the blacklist and the threats, and now the British were unapologetically proposing to demolish the armory. An urgent telegram from the American embassy in Bern explained McCombe’s instructions. The Swiss government had just agreed that Britain could buy Swiss francs for sterling rather than gold, an important concession for a bankrupt nation. McCombe’s only interest, Rubin realized, was to terminate the negotiations promptly with the promise of reparations for Britain from the German assets.

  Naturally, Stucki took comfort from the hint of divisions among the Allies, but Paul’s introductory remarks raised the tension in the room. Regardless of the principles of neutrality, said the American, it could not be used to “shield the aggressor or his property.” America’s claim—“rigidly fixed,” asserted Paul—was that Germany’s assets should be used to “repair the injuries” it had caused. German assets in Switzerland were German, not Swiss, and the only issue was whether the Swiss would cooperate in finding and selling those assets. “The Allies,” continued Paul, “are paying millions for food imports to keep the Germans alive. That’s a real sacrifice. There is no reason why German assets in Switzerland should not be used to pay for the food.”

  “We propose,” said Paul, “a joint commission to enforce sales and inspect Switzerland’s banks and vaults for looted property and gold.” Paul was demanding nothing less than direct interference by the Allies in Switzerland’s most sacred internal affairs. “Until then,” concluded Paul, “sanctions will remain and, if necessary, new ones will be imposed.”

  Stucki’s digestion of Paul’s warning was interrupted by McCombe’s coos about Britain’s “admiration and gratitude” for the Swiss Red Cross and recollections of Britain’s “many friends in Switzerland.” Charguéraud limited his welcome to similar gratitude for Swiss help during the war. Stucki seized the cue. “Switzerland,” he replied, “fully recognizes a great moral obligation toward the innocent victims of this war; she does not deny furthermore that she owes an immeasurable debt of gratitude to the Allies for their victorious efforts.” Stressing the humanitarian endeavors already undertaken, he pledged the country to spend more, “although there is no legal but only a moral obligation.” The signal of defiance had been given. Feelings of unease had been heightened.

  Formal negotiations started on March 22 in the austere, functional atmosphere of Room 1009 in the State Department. To the waiting press, Paul spoke of being “greatly impressed with the cooperative attitude” of Stucki and with his willingness to “get on with the business.” Once the doors had closed, the fate of the German assets ignited the first row.

  Switzerland’s “enormous losses” during the war, said Stucki, totalled SF4 billion, including SF501 million for “war damages” suffered by Swiss nationals. Against that staggering sum, Switzerland claimed all the German assets in Switzerland, worth SF1 billion, including the “contents of safe-deposit boxes” valued at SF76.600.

  Paul was convinced of Swiss perfidy, and his reply was abrupt: “Switzerland’s claims are most uncertain and of doubtful value.” McCombe agreed: “These proposals are not adequate and are unacceptable.” Even in the smallest detail, Stucki’s declaration was untrue. The contents of the 2,663 safes that had been opened contained SF84 million in cash, and in addition the investigators had found valuable jewelry and paintings whose value had not yet been assessed. Although the dishonesty of Stucki’s claim was still unknown to Paul and McCombe, both dubbed the Swiss diplomat with a more appropriate name: “Sticky.”

  Undeterred, Stucki replayed his emotional lament: “I do not want to hide our great disappointment with the Allied attitude. The miserably strong Allies have various ways of making life difficult for us and eventually we will be forced to concede to any demands. But do not forget Roosevelt’s message in Christmas 1943: ‘The doctrine that the strong shall dominate the weak is the doctrine of our enemies—and we reject it.’”

  “Switzerland’s claims,” replied Paul sternly, unaffected by the sentimental reference to the president, “must be greatly scaled down.” Switzerland was entitled, he conceded, to repayment of some debts, but it would not be allowed to profit from the war. Realizing that agreement would not after all be easy, he saw an advantage in exposing Switzerland’s weaknesses: the gold and the loot. “At least $200 million of gold transferred by Germany to Switzerland,” he told Stucki, “was looted, although we believe that the real figure is much larger.”

  Investigations of the Reichsbank’s incomplete records by American and French groups had failed to establish precise statistics about the bank’s genuine reserves and its loot, but the evidence of Swiss dishonesty was nevertheless conclusive.

  In Berlin, William Dunkel, an American attached to the Financial Intelligence Branch of the U.S. military government, had recovered some of the Reichsbank’s ledgers. With the help of Albert Thoms, the head of the Reichbank’s Precious Metals Department, Dunk
el tried to discover the fate of the Belgian gold. Pages from the ledgers had been removed, but he soon established that the gold, delivered to the Reichsbank in twenty-four shipments, had been resmelted over eighteen months. When that chore had been completed in August 1944, with all the ingots date-stamped 1937, their destination was recorded as Switzerland. Dunkel had, however, been unable to establish precisely how much gold had been seized by the Nazis from Austria and Czechoslovakia, or how much gold remained in Germany at the end of the war—in the Reichsbank’s vaults and in hiding places. The British estimate was $252 million, while the American estimate was $293 million. But in preparing for the Washington conference the Allies produced credible calculations. Having assumed that at the outbreak of war Germany’s gold reserves were worth at most $160 million (although the more likely amount was $120 million), they believed that Reichsbank had acquired during the war between $579 million and $661 million of looted gold: from Belgium $223 million, Holland $161 million, Italy $84 million, Czechoslovakia $50 million, Austria $46 million, Russia $23 million, Poland $12 million, Luxembourg $5 million, and Danzig $4 million, and “large amounts” from private safes and from the Balkan countries, including Yugoslavia.

  According to the Reichsbank records, between $398 million and $410 million of gold had been shipped to Switzerland. From Bern, gold worth $138 million had been reexported to Spain and Portugal. On the most conservative estimate—and thus the estimate “most favorable to Switzerland,” the National Bank in Bern had accepted “an absolute minimum” of $185 million in looted gold and more probably $296 million.

  Included in the looted gold sold to Switzerland was Belgian gold worth $223 million and Dutch gold worth $100 million. Some of that gold was shipped on by the Swiss to Turkey, Spain and Portugal. Of the 3,859 ingots that arrived in Lisbon from Bern, including at least 1,180 Dutch and 673 Belgian bars, 318 were still stored in their original Dutch wrappers. The Portuguese, reported one British investigator, were “visibly worried” because the looted gold lay in the vaults “as if the bank held the Mona Lisa itself without even retouching it.” The Portuguese government was adamant in its claim that the gold had been obtained from Switzerland in good faith and refused to approve its return. By contrast, the Spanish government handed over one ton of gold to the U.S. government in December 1945 to be flown immediately to Frankfurt, and kept the remaining seventy-three tons. The Swiss National Bank admitted nothing.