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  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 recrui
ted 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.