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Abstract
This article deals with the relationship between business and government during the Third Reich in making policy toward attempts by German companies to protect their foreign assets. In contrast to the widely held view of many professional historians and journalists, we argue that business engaged in these efforts largely without governmental assistance, indeed often in the face of resistance from the regime, since for the most part companies set up structures that were contrary to the wishes of the National Socialist political bureaucracy. Although some of the evidence we present here is known to historians, much of our interpretation of the data has not penetrated professional accounts of the period. The cloaking story, moreover, has implications for contemporary multinational business. As the Second World War approached, fear of expropriation became a more important motivation for cloaking, but even in the late 1930s German managers created these structures for a variety of commercial reasons. Firms are still confronted by a myriad of pressures and political risks, not the least of which are those posed by their own home countries' actions that affect the value of their foreign assets. We argue here that one of the commercial objectives of German businesses' cloaking efforts was to reduce the political risk of the actions of the country in which they were incorporated.
Notes
1 For an extensive discussion of the evolution of views on business's role in the Third Reich see Kobrak and Schneider, “Big Business and the Third Reich: An Appraisal of the Historical Arguments,” 141–173.
2 See, for example, LeBor, Hitler's Secret Bankers, 148–149. Some popular histories go so far as to link cloaking to some of the most heinous crimes of the Third Reich. LeBor argues that camouflaging structures of German companies were integral to Nazi efforts to cheat German and non-German citizens of their assets through banking relations in Switzerland. Relying on an Economic Ministry (RWM) memo of 9 September 1939 – written just after World War II began – LeBor concludes that the plan to cloak business interests was inspired by government authorities.
3 See, for example, Borkin, The Crime and Punishment of I.G. Farben, 164. A member of the prosecution team at Nuremberg, Borkin argued that IG Farben, the ‘backbone of Germany's war economy’, attempted to cloak its business activity in order to intensify ‘efforts of the Nazi government to strengthen Germany at the expense of other nations’. Farben officials were acquitted of this charge, but the view that cloaking was part of 'government efforts' has persisted.
4 König, Interhandel, 128.
5 Ibid., 34 n.18.
6 Aalders and Wiebes, The Art of Cloaking Ownership, 22.
7 Ibid., 27.
8 Wilkins, “German Chemical Firms in the United States from the Late Nineteenth Century to the Post-World War II Period,” 285–323.
9 Ibid., 314–315. In her book, written after seeing the manuscript for Kobrak's book on Schering AG, Wilkins modified the description to reconcile Kobrak's findings with Julius Weltzien's comments, reported by Eugene H. Clay. Her source was Charles R. Clark's memo (dated December 26, 1942), File D-631-1, Acc.65A1063, Box 267, RG 131, (Dept. of Justice). See Wilkins, 1914–1945, 416 and 819, n.313 for the more recent, clearer version. We have discussed these documents, which the authors have not seen, with Professor Wilkins, and come to the common conclusion that, if Göring's office indeed ordered the sale of Schering's U.S. operations, the German government was probably just interested in the sale to produce foreign exchange, not for cloaking purposes. We believe that the U.S. government officials were anxious to connect companies as much as possible with the interests of the Nazi regime.
10 For a summary, see Uhlig et al., Tarnung, Transfer, Transit.
11 Ibid., 59.
12 Ibid., 499.
13 Ibid., 54.
14 Ibid., 55. The Swiss authors point to two other consequences of cloaking connected with the conflicting interpretations of its origins. They claim that Tarnung gave German companies the ideal option of maintaining after the war and perhaps even believing themselves that they had been obliged to hide the ownership of their foreign subsidiaries from the Nazi government or, alternatively, that their activities were corporate attempts to disobey government directives. It seems clear, however, that some companies, such as the electro-technical concern Bosch, namely through its employee Carl Goerdeler who was one of the ‘men of 20 July 1944’, did indeed use their camouflage structures to seek contacts with opposition groups against Hitler. Scholtyseck, Robert Bosch und der liberale Widerstand gegen Hitler. Uhlig et al. also make reference to this story in Tarnung, Transfer, Transit, 55 n.8, and 73 n.73.
15 Dealing with nearly all aspects of camouflage, collaboration, transfer and transit, the most comprehensive studies on the role of Switzerland as a ‘safe haven’ for German assets during the Third Reich were published in 25 volumes by the Independent Expert Commission (UEK) Switzerland – Second World War, Zurich: Chronos, 2001–2002.
16 See, for example, Feldenkirchen, Werner von Siemens, and Hayes, Industry and Ideology, 334–335. Hayes devotes two pages to cloaking and relies on Borkin for much of that discussion. Although Hayes points out that some of IG Farben's efforts to keep its international operations functioning and under its control were deemed to be defeatist by government officials and that permission, when granted, was only qualified. Companies had to make sure that they continued to remit profits, which IG Farben sometimes did by funding German government offices abroad, an act that may be seen as an attempt to placate a recalcitrant Ministry of Economics. Two excellent more recent works about companies in the financial sector are virtually silent about the activities of those companies in the area of cloaking or aiding clients' efforts in cloaking. Feldman, Allianz and the German Insurance Business, and James, Die Deutsche Bank im Dritten Reich.
17 Wüstenhagen, “German Pharmaceutical Industries in Latin America,” 80–103; Kobrak et al., “Business, Political Risk, and Historians in the Twentieth Century,” 3–21.
18 Wilkins, The History of Foreign Investment in the United States, 1914–1945, 48. As Wilkins also explains, the cloaking of German companies and the manner in which data was collected may have obscured the amount of German investments in the United States during the inter-war period.
19 James, The German Slump, and Kobrak, “Foreign-Currency Transactions in the Aftermath of the First World War,” 25–42.
20 Bundesarchiv Berlin-Lichterfelde (hereafter Barch B), R 3101 Anh./alt. R7 Anh. MCC/399. Some Documentary Evidence of Cloaking Activities of the Nazi Government. Many of these documents served as the basis of a memorandum. Interesting, the very title indicates the author's conclusion. (We will often refer to his covering letter as the US Memo.)
21 Ibid., 2.
22 Uhlig et al., Tarnung, Transit, Transfer, 71, describe the bureaucratic procedures used to cloak the firm Friedrich Deckel, a Munich producer of precision tools and machines.
23 Aalders and Wiebes, Art of Cloaking, 11.
24 Barch B, R 3101 Anh./alt. R7 Anh. MCC/399, Some Documentary Evidence of Cloaking Activities of the Nazi Government.
25 Wilkins, The History of Foreign Investment in the United States to 1914, 169–171.
26 Both the author of the US Memo and Uhlig et al., Transfer, Tarnung, Transit, refer to cloaking before World War I, but the authors of this article have seen very little evidence of companies hiding the ownership of their assets before or after America's entry into World War I. At most, some companies may have tried to reduce their net in-country investment. It should also be remembered that before World War I there were very few German subsidiaries in the United States or elsewhere. The existence of more subsidiaries may have made ‘cloaking’ in the sense we will use it seem more imperative and, therefore, more widespread.
27 Uhlig et al., Transfer, Tarnung, Transit, 53–54.
28 König, Interhandel, 108. He refers to D. O'Reilly, “IG Farben,” unpublished manuscript, 1998, who dates the active use of the term Tarnung by both the German concerns and bureaucracy to 1937/1938 when the danger of war increased.
29 Aalders and Wiebes, Art of Cloaking, 9.
30 We will not deal here with all financial transactions linked with cloaking and discussed by Uhlig et al., Transfer, Tarnung, Transit.
31 König, Interhandel, 54–56 and 56 n.94.
32 Borkin, Crime and Punishment of IG Farben, 183.
33 Kobrak, National Cultures and International Competition, 143–184. During this period, Schering operated under several different names. For simplicity's sake, we will refer to the whole group of companies as Schering AG, even though the reorganized firm first took the name in 1937.
34 In 1930 the German Reichsbank estimated the total amount of German assets abroad (deutsches Auslandsvermögen) around RM (Reichsmark) 11–13 billion. Uhlig et al., Tarnung, Transfer, Transit, 44 n.52.
35 Spoerer, Von Scheingewinnen zum Rüstungsboom, 104–107.
36 Kobrak, National Cultures and International Competition, 280–287.
37 ‘US Memo’, 2.
38 Aalders and Wiebes, Art of Cloaking, 9–18.
39 Barch B, R 3101/33063, Correspondence of Schering AG with the AO and the RWM, summer 1941, 107–124. Founded in 1925, the Società Italiana Prodotti Schering SA, Mailand was seized by the Italian state after the end of the war and in 1951, in a public auction sold to Ledoga S.p.A., a subsidiary of the Italian concern Lepetit. Not until 1969 did Schering AG buy its old subsidiary back from Lepetit. Aus Berlin in alle Welt, 191–194.
40 For references see Uhlig et al., Tarnung, Transfer, Transit, 39–43.
41 Aalders and Wiebes, Art of Cloaking, 9, like many others, acknowledge the important role of German taxes to the whole history of cloaking but oddly still maintain that the regime was behind cloaking.
42 See, for example, Kobrak, National Cultures and International Competition, 345, for a discussion of Schering's relationship to the Dutch hormone company, Organon.
43 See for the Swiss partners, dummy corporations, trustees, etc. Uhlig et al., Tarnung, Transfer, Transit, 74–80.
44 Aalders and Wiebes, Art of Cloaking, 18–19.
45 Kobrak, National Cultures and International Competition, 146–148.
46 Ibid., 296–341.
47 Uhlig et al., Tarnung, Transfer, Transit, 61 n.27.
48 Barch B, R 3101 Anh./alt. R7 Anh. MCC/399, Some Documentary Evidence of Cloaking Activities of the Nazi Government, 8–11.
49 Kreikamp, Deutsches Vermögen in den Vereinigten Staaten, 215–239.
50 Newton, The Nazi Menace in Argentina, 365.
51 Rubin, “Allied–Swedish Accord on the German External Assets, Looted Gold, and Related Matters,” 56–61. Cited in Aalders and Wiebes, Art of Cloaking, 17 n.23.
52 Uhlig et al., Tarnung, Transfer, Transit, 363–372, 381. For a discussion of foreign figures on German assets see ibid., 372–374.
53 Barch B, R 3101 Anh./alt. R7 Anh. MCC/399, Some Documentary Evidence of Cloaking Activities of the Nazi Government, 7–8. The author of the US Memo was summarizing comments made in several German government documents.
54 In Switzerland, the German partners had to count on Sfr 1,000 per year for every Swiss straw man or cut out (Strohmann) participation in the cloaking. Administrative fees could be lower and reach only Sfr 500. The big banks expected high-risk compensation for their involvement. In one case, the German owner offered 50 per cent of his Sfr 1.5 million fortune for the ‘good services’ of ‘his’ Swiss bank. Uhlig et al., Tarnung, Transfer, Transit, 76 n.83, and 83. Acting as cut outs for IG Farben in the administration board (Verwaltungsrat) of IG Chemie, in the 1930s the Credit Bank of Zurich and the Swiss Banking Union got Sfr 30,000 per annum, nine times more than an industrial worker and four times more than a manager (Verwaltungsrat) of the Swiss Bank. König, Interhandel, 53.
55 König, Interhandel, 230 and 398. Take, for example, the IG Chemie case in Switzerland. In order to protect its assets in the US in June 1940, IG Farben cancelled its contract (Bindungsvertrag) with IG Chemie, ending its obligations. Nevertheless, in the next three years, Swiss trustees worked in the interest of the German concern by doing little ‘favours’. In spring 1943 these activities stopped, however, and the two firms separated completely. From the German point of view, the intention existed to reactivate the relationship after the war. Although IG Chemie was never a cloaked company, in the sense that hidden German control was not secured by a formal right to re-buy the shares when desirable (Rückkaufoption), the IG Farben managers always saw the separation from IG Chemie as an ‘open option for the future’, relying on the same attitude on the Swiss side. This was an error. After the war, the Swiss company dealt independently with the US government over compensation for the loss of its American subsidiary, the former IG Farben subsidiary General Aniline and Film (GAF) the rescue of which has been the reason for the German company to loosen its ties with IG Chemie in 1940. After the sale of GAF in 1965, the Swiss received US$ 122 million (after taxes).
56 Wüstenhagen, “German Pharmaceutical Industries in Latin America,” 77–103, and Aalders and Wiebes, Art of Cloaking, 11.
57 Kobrak, “The Foreign-Exchange Dimension of Corporate Control in the Third Reich,” 33–46.
58 Barch B, R 3101 Anh./alt. R7 Anh. MCC/399, Some Documentary Evidence of Cloaking Activities of the Nazi Government, 2–3.
59 The US Memo refers to 30, but Uhlig et al., Tarnung, Transfer, Transit, 61 n.27 say that in 1939 there were 25 Devisenstellen without Vienna and Warsaw.
60 Barch B, R 3101 Anh./alt. R7 Anh. MCC/399, Some Documentary Evidence of Cloaking Activities of the Nazi Government, 3.
61 The importance of this order is often overlooked. Wüstenhagen, “German Pharmaceutical Industries in Latin America,” 77–103.
62 Keep in mind that in this period the use of the term Tarnung in German business correspondence could be observed for the first time.
63 See repeated battles described in Kobrak, National Cultures and International Competition, 296–341, and Wüstenhagen, “German Pharmaceutical Industries in Latin America,” 88–94.
64 Hauptarchiv Deutsche Bank, Frankfurt (hereafter HADB F) 1823, S1911, Niederschrift, Aufsichtsrat meeting, 16 Dec. 1937.
65 The same sort of story has been documented for IG Farben and the Robert Bosch company. Uhlig et al., Tarnung, Transfer, Transit, 60 n.25.
66 Barch B, R 3101/34452, Letter to Reichstelle für Devisenbewirtschaftung, 16 Dec. 1937, concerning Runderlass 152/36, Schering New York (SCNY), Schering New Jersey (SCNJ), Sherka.
67 Barch B, R 3101/34452, Reichstelle für Devisenbewirtschaftung, various correspondence.
68 Uhlig et al., Tarnung, Transfer, Transit, 63 n.34, quote the example of Helmuth Voss, the owner of Lehmann & Voss & Co., who was convinced that history would repeat itself. Relying on his trustee in the US, a German-born American citizen, he hoped to re-establish business the same way as had happened after 1918.
69 Barch B, R 3101 Anh./alt R 7 Anh. MCC/399, Some Documentary Evidence of Cloaking Activities of the Nazi Government, 3.
70 Ibid. (translation of German in US Memo).
71 Ibid. (translation of German in US Memo).
72 According to Uhlig et al., this special section was headed by the Nazi hardliner Gustav von Schlotterer. See Uhlig et al., Tarnung, Transfer, Transit, 58, who refer to O'Reilly, “IG Farben,” unpublished manuscript, 1998, 162; also König, Interhandel, 109. In contrast, the documents reviewed by us contain information about a special section (Referat V, Dev. 2), the official in charge was Regierungsrat Dr Hofmann. RWM order of 28 Sept. 1938 to Unterabteilung V. Barch B, R 3101 Anh./alt R 7 Anh. MCC/399. It should be noted that already in February 1938 the Reichsdevisenstelle (Reich Office for Foreign Exchange Control) in Berlin was abolished. In its place, the Hauptabteilung Aussenwirtschaft (Section for Foreign Economics) was set up to supervise and execute German foreign economic policy. Consisting of three sections, the Devisenabteilung (Section for Foreign Exchange), stood in the centre of cloaking activities. See undated and unsigned memo re: National Archives, Maryland (Suitland) [hereafter NARA], RG 260 Property Control and External Branch, Box 7. Location: 390/44/20/04, Report on the Berlin Devisenstelle, [1945].
73 Barch B, R 3101 Anh./alt. R7 Anh. MCC/399, Some Documentary Evidence of Cloaking Activities of the Nazi Government, 4.
74 Barch B, R 3101 Anh./alt R 7 Anh. MCC/399, RWM order of 12 Oct. 1938 to Devisenstellen.
75 Barch B, R 3101 Anh./alt R 7 Anh. MCC/399. Some Documentary Evidence of Cloaking Activities of the Nazi Government, 4.
76 Barch B, R 3101/34452, Letter from Schering AG to the RWM, 28 Sept. 1938, 24–28.
77 Barch B, R 3101/34452, Schering to RWM, Department of Foreign Exchange, 8 Nov. 1938, 41.
78 Ibid.
79 Barch B, R 3101 Anh./alt R 7 Anh. MCC/399, Some Documentary Evidence of Cloaking Activities of the Nazi Government, 5. See also Uhlig et al., Tarnung, Transfer, Transit, 60.
80 See Kümmel, Transnationale Wirtschaftskooperation und der Nationalstaat, 44, table 7.
81 Barch B, R 3101 Anh./alt R 7Anh. MCC/399 Report of the Oberfinanzpräsident, Kassel (Foreign Exchange Office Frankfurt/M.) to RWM, 11 Dec. 1939.
82 (Misstrauensvotum gegen den Sieg der deutschen Waffen). Barch B, R 3101/33064, Letter from AO Berlin to RWM, 13 Nov. 1939.
83 A copy of the order is attached to Barch B, R 3101 Anh./alt R 7 Anh. MCC/399, Some Documentary Evidence of Cloaking Activities of the Nazi Government. Only 40 copies were made and sent out numbered to each collector of Internal Revenue. Ibid., 5.
84 Barch B, R 3101, Anh./alt R7 Anh. MCC/399, Draft order of the Minister of Economics to Devisenstellen, dated 9 Sept. 1939. Re: Sicherung deutschen Auslandsvermögens. We quoted the English translation in Some Documentary Evidence of Cloaking Activities of the Nazi Government, 5.
85 Quoted in Aalders and Wiebes, Art of Cloaking, 10. Nevertheless, in June 1940 IG Farben broke away from its Swiss subsidiary IG Chemie. Although König argues that this was a true separation without cloaking strings attached, it is our contention that from the German side it was always seen as a sort of Tarnung because the IG Farben management, which relied on the loyalty of its Swiss partners, thought the split was the only way to rescue its US assets. Thus, IG Farben hoped to re-establish its business in the US after the war, an argument that they also used to convince the German authorities of the deal. König, Interhandel, 90–107, 398.
86 Barch B, R 3101/33063, Letter from AO Management to AO Office in the RWM, 5 Nov. 1941, 123.
87 Ibid., 123–124.
88 Wüstenhagen, “German Pharmaceutical Industries in Latin America,” 81–102.
89 (Die Tarnung deutscher Auslandsbeteiligungen hat sich nicht bewährt. Im allgemeinen ist sie als solche erkannt worden und hat entsprechende Gegenmaßnahmen der interessierten feindlichen Stellen ausgelöst, ohne dass es den neutralen Tarnungsstellen gelungen wäre, dies zu behindern.) Barch B, R 3101/33064, Minute of RWM, Berlin, Aug. 1943, 223. See also Uhlig et al., Tarnung, Transfer, Transit, 85.
90 Barch B, R 3101/33064, Minute of RWM, Berlin, Aug. 1943, 223.
91 Barch B, R 3101/33064, Secret Order of RWM to Foreign Exchange Offices, 14 March 1944, 233.
92 Barch B, R 3101/33064, RWM to Devisenstelle Frankfurt/M, 16 Dec. 1944, 365.
93 See, for example, Barch B, R 3101/33064, Letter of Section III, Foreign Exchange Office 4, to Section III, Foreign Exchange Office 7, Berlin, 4 Jan. 1944, 329.
94 Barch B, R 3101/33174, Letter from RWM to Oberfinanzpräsidenten, Berlin, 5 May 1944, 45–46.
95 Herbst, Der Totale Krieg und die Ordnung der Wirtschaft, 448–449. Herbst assumed that the Industriereferat, which had been in charge of the data collection inside the RWM, began its activities only in late summer 1944. But the above quoted letter of 5 May 1944 suggests an earlier start date.
96 Barch R 3101/33174, 80, Letter of RWM to Oberfinanzpräsident Württemberg, Berlin, 19 Dec. 1944.
97 Barch B, R 3101 Anh./alt. R7 Anh. MCC/399, Letter from Dr Hees (RWM) to SS-Gruppenführer Ministerialdirektor Otto Ohlendorf, 3 Feb. 1945. For Ohlendorf see Herbst, Der Totale Krieg und die Ordnung der Wirtschaft, 182–187.
98 Recently, König, Interhandel, 108, warned against ‘demonizing’ (dämonisieren) IG Farben.
99 See Kershaw, The Nazi Dictatorship, and Neumann, Behemoth.
100 Uhlig et al., Tarnung, Transfer, Transit, 70.