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  They did.

  Nachtstern, surprising himself with his frankness, asked Springer one day whether he thought they would ever leave the camp alive. Springer looked equally surprised at the question and replied, “You don’t think, Mr. Nachtstern, that the Germans will let you go back to Norway and tell about what happened in this block? No, only a miracle can save us. But anything may happen in this crazy world. For you young folks’ sake I hope the miracle will happen. As for myself I don’t expect much more in this life. I’m too old to start anew, sick and penniless as I am.”

  Nachtstern was depressed by the exchange until Glanzer, Richard Luka, and Fritz Schnapper called him over for a hand of cards. They joked that theirs was a very exclusive club, and since Schnapper was the oldest, he should be elected president. Glanzer extended the gallows humor: “We can also safely make him a member for life.” Schnapper growled in Yiddish: “Kish mir im tuchus” — Kiss my ass.

  A few months later, Dr. Rojzen, like most good doctors a man of some equanimity, succeeded in taking the edge off a similar, occasionally despairing exchange. “Luck or miracle, what’s the difference?” he concluded. “What counts is that I had already given up when I was saved. It’s the same with all the others who came here with me. We have a pretty good chance to survive, as I see it. Remember, we are the geese who lay the golden eggs. Don’t worry, they won’t get rid of us until the very end. Before that happens, a lot of things may come to pass.”

  They did.

  Chapter 8

  “THE MOST DANGEROUS EVER SEEN”

  To inspect the bound ledgers of the Bank of England’s transactions is to enter a lost world. Until World War I, some clerks, shabby in top hats and tailcoats, still used quill pens. Even when they modernized with steel nibs, copperplate script remained the norm, elegantly recording the exchange of notes in and out, true and false. From the slump of the early 1930s until the early 1940s, barely a dozen large counterfeit notes had reached Threadneedle Street instead of being stopped in commercial banks by tellers who were trained to spot them. In April 1941, new forgeries started appearing. They had been skillfully photographed and then printed by lithography, but were easily detected by their limp paper. Relatively few of these Type Z forgeries (as the Bank designated them) passed through the Note Office in the following months, and they caused little alarm. They were traced to the occupied territories of Belgium and France; the neutral transfer point of Switzerland; and to Palestine, then under British rule, having probably originated in occasional distributions by Operation Andreas.

  Then on September 21, 1942, just as Operation Bernhard was gearing up, nine forged ten-pound notes were accepted by banks in Tangiers, a colonial city of international rogues and smugglers at the northern tip of Morocco, just across the straits from Gibraltar. They were forwarded to London for credit and zipped right past the Bank of England’s own inspectors before the Bank’s Note Office bounced them. They were similar to but far more expert than the Type Z forgeries; the batch and serial numbers showed that real notes with those designations had already been cashed at the Bank by someone else. Craftsmen at the Bank’s St. Luke’s printing works studied them and declared them counterfeit. The new fakes were designated Type BB, and the deputy chief of the Note Issue Office reported they were “the most dangerous seen for many years.” Someone above him in the Issue Department, which supervised the offices handling the notes, upped the ante and wrote in the margin that “BB is the most dangerous ever seen.” Confirmation came from viewing the paper under a quartz lamp, which terrified Bank officials had sent one of their number rushing out to buy: the reproduction and printing were so close to perfect that flaws appeared only when a microscope was trained on the bills. According to the Bank’s own war history: “After prolonged microscopic examination of many specimens only one small consistent irregularity in the printing was found in this type (in the reproduction of the hair falling to the right side of the face of Britannia).”

  A flood of counterfeits soon followed. In January 1943, the Bank’s clerks wrote their litany in stately copperplate. “On 19th January 1943 a forged £5 note was discovered in the Sorting Office…” “On 21st January 1943 a forged £10 note numbered 20.740 and dated 19 April 1938 was presented by Nat. Pro. [The National Provincial Bank] Bishopsgate in their charge received No. 154 and paid. The forgery was not discovered until…” “On 27th January 1943 a forged £5 note numbered 12.783 dated 5 May 1938 was detected in the sorting office.” “On 27th January 1943 a forged £10 note 17.644 dated 19 April 1934 was detected by Miss Strong…” And so on. The Bank quietly stopped issuing all notes over five pounds, ostensibly to prepare for postwar controls on the international use of sterling. The real reasons were discreetly hidden. The chancellor of the exchequer, Kingsley Wood, gave a brief reply in writing to a prearranged question in Parliament about forged notes, reporting that the number circulating in the country was both decreasing and insignificant. Even in the Bank’s own archives, extracts from the minutes of its senior management committee are completely silent on forgeries of any kind, from Sir Kenneth Peppiatt’s presentation of a memorandum on one-pound forgeries on January 10, 1940, until his first damage assessment after the war, more than five years later. The Bank had taken it virtually as an article of faith that its notes could not be counterfeited, just as Germany was certain that its Enigma machine made its codes unbreakable. Both, of course, were wrong. Although the British level of hubris reached only that of David Low’s famously pompous cartoon character, Colonel Blimp; the Germans’ misjudgment proved fatal. Once the flood of Bernhard notes became so great that it started lapping at English shores, the Old Lady actually got a look at her illegitimate German progeny. Like any well-bred matron facing scandal, she slammed the front door and kept a stiff upper lip.

  Wood was narrowly correct in his statement to Parliament that forged pounds were causing few problems in Britain. But the war raged in the rest of Europe, and by this point enough Bernhard forgeries were circulating to buy large amounts of gold, other valuables, and scarce raw materials, or to be used in SS espionage operations. Inside Sachsenhausen, the exact number and sum of the forgeries — 8,965,085 notes with a total value of £134,610,945 — were recorded meticulously by Oskar Stein in his secret diary. That would be $545 million at the official rate of exchange; in today’s money at least $6 billion. Less than 10 percent — only £10,368,445 — were top-grade notes actually forwarded to Berlin, but even this was more than $40 million at the wartime rate of exchange, enough to build a small flotilla of submarines.

  This is Stein’s summary of the total Sachsenhausen production:

  £5 3,945,867 notes = £19,729,335

  £10 2,398,981 notes = £23,989,810

  £20 1,337,335 notes = £26,746,700

  £50 1,282,902 notes = £64,145,100

  Total 8,965,085 notes = £134,610,945

  Of that total, the following amounts were sent to RSHA (Reich Central Security Office), Berlin:

  £5 264,863 notes = £1,324,315

  £10 176,561 notes = £1,765,610

  £20 141,046 notes = £2,820,920

  £50 89,152 notes = £4,457,600

  Total 671,622 notes = £10,368,445

  Stein kept no record of how many millions more of almost indistinguishably lower quality notes were plucked from the Sachsenhausen safe and passed into the market.

  On September 15, 1943, almost a year to the day after the BB forgeries were first detected, a Yugoslav officer named Dusko Popov arrived in London, opened his bags in front of his British handlers, and dumped out a large cache of silk stockings, a sealed radio set, various written reports, and two packets of money, twenty $100 bills and £2,500 in five-pound notes. Popov was a double agent, and one way he diverted suspicion was to demand hefty payments from his German masters so they would believe his motive for spying was purely monetary. For the British, Popov operated under the code name Tricycle in Lisbon to establish a secret escape route through neutral Portugal for Yugosla
vs supporting the Allies, but things had gotten too hot for him. He had flown to London and put himself under the protection of his spymasters. The British found Popov a perch at the Yugoslav legation in London, from which they sent him on missions back to Lisbon. They also sent 500 of his five-pound notes to the Bank of England for inspection and were promptly told that 152 of the notes were counterfeits, which were immediately mutilated. Popov’s espionage handlers were nonplussed by his declaration that he had obtained them from a bank in Lisbon. They suspected he had won the pounds and dollars gambling in Portugal’s seafront casinos and obtained them on its black-market exchanges, and as one handler scrawled beneath Tricycle’s financial statement, “I do not think it worthwhile to pursue further up the trails of the payments.” After all, spies also know how to fiddle their expense accounts.

  But how did such sums get into circulation? Enter Friedrich Paul Schwend, man of many aliases and one of history’s great confidence men. Schwend, or Schwendt, or Dr. Wendig, or Major Kemp, or, on rare occasions, Fritz Klemp, had an international financier’s ability to juggle millions casually, which is precisely what he did before World War II. He was born in 1906 in a village near the edge of the Black Forest in Swabia, whose people speak a flat German dialect and know how the world works. Of medium height, blond, slender, hook-nosed, and in his mid-thirties, Schwend was strongly motivated by adventure and risk. In 1929, employed as a mere gas station mechanic, he defied his family to marry into the local aristocracy. His bride was the Baroness von Gemmingen-Guttenberg, a niece of Baron Konstantin von Neurath, a conservative politician who served as foreign minister of the Weimar Republic and continued seamlessly in office under Hitler to help give Germany’s new dictator a cloak of respectability.

  Schwend’s new connections catapulted him into wealth and let him circulate on the margins of celebrity. As was the fashion in his right-wing milieu, he joined the Nazi Party in 1932. He moved to Los Angeles to administer the personal finances of his wife’s aunt, one of the Bunge sisters, who had an Argentine grain fortune that eventually grew into an international agribusiness conglomerate. Managing her money earned him $50,000 a year, a huge sum during the Depression. There he also befriended the German consul general, Georg Gyssling, who invited him to parties with Hollywood stars. At the same time, Schwend also sent memoranda to Nazi leaders with unwelcome arguments against the Party line of economic self-sufficiency. Schwend is said to have caught Goering’s attention briefly with his nonconformist views, and no doubt the Gestapo’s as well.

  Schwend lived for a short time in New York City (in the comfortable but unfashionable Queens district of Woodside, where there was a small German colony). On the side he also traded arms in China and the Balkans, then moved to Italy in 1938 to represent the interests of his wife’s aunt. He contracted to buy rice, flour, and industrial materials for the Germans; at least half his trades took place on the black market, where he could increase his profits by using Bunge dollars. Schwend based himself at his estate on the picturesque Istrian peninsula in Abbazia, an Adriatic sea-and-ski resort now known as Opatija and part of Croatia. It was then part of Italy, and much earlier was the Riviera of the Austro-Hungarian Empire. There this lover of highborn women and well-bred horses lived a comfortable life at the Villa de Nevoso, “a beach ideal for sun-bathing, my yacht at anchor outside.” Unfortunately for him, the war dried up the flow of Bunge dollars from America, and his titled wife divorced him. He soon found another, Hedda Neuhold, the daughter of a wealthy Austrian engineer whom he joined as a partner in various businesses.

  In the summer of 1940, as Hitler conquered France, Benito Mussolini, Italy’s Fascist dictator, joined the war in hopes of a seat at the victors’ table. The Wehrmacht took up Alpine positions peering down on Germany’s new ally, invaded Greece, and thus put Yugoslavia in a pincer by using their Italian allies as the principal occupying force. Croatia became the stronghold of the murderous Ustashe nationalists who allied themselves with Hitler. Resistance began among monarchist Serb partisans known as Chetniks (the word derives from fighters against the Ottoman Turks until an independent Yugoslavia was created after World War I). But the Nazis soon co-opted some of the Chetnik officers, while their Yugoslav peasant conscripts resented being there at all.

  Schwend meanwhile plied his trade on behalf of the Abwehr in the section known as the Devisenüberwachtungstelle, literally, the Authority for the Oversight of Foreign Currency. In that job he was supposed to ferret out hard currency from Croatia and deposit it in Switzerland to buy war materiel. Schwend operated among other countries through customs, presumably by giving inspectors a percentage for tipping him off to smugglers. He performed with such zeal that Siegfried Kasche, Germany’s minister in the Croatian capital of Zagreb, bitterly complained to his diplomatic superiors in Berlin. This intruder, Kasche griped, was throwing his weight around to line his own pockets. Kasche reported that Schwend was invoking high but unidentified connections in Rome “very compellingly” to muscle into Jewish businesses and threatening anyone who stood in his way with a transfer to the Russian front. (Each must have recognized the other as a nasty piece of work; after the war Kasche was executed for his zeal in deporting Croatian Jews to the gas chambers.) When the Abwehr told the German Foreign Office that Schwend had already been dumped as “unreliable,” Kasche demanded “energetic measures” to get rid of him and stop him from besmirching the Reich’s good name.

  Schwend then went looking for new adventures with an Austrian named Rudolf Blaschke. They had worked together in Croatia, and now they concocted a scheme to trick British agents into buying spurious plans for a new U-boat. Schwend argued that if his plot had succeeded, the British would have been duped into diverting resources for unnecessary defenses. The Gestapo, suspecting him for his business and social contacts with the enemy and unaware that this time he was trying to scam British agents, slapped him into an Austrian jail in the spring of 1942. Schwend might have been executed if not for his old comrade Willi Gröbl, an SS money-launderer in Italy who was buying up weapons. Gröbl urgently needed Schwend’s talents to help him manage the expected flow of Bernhard pounds. Schwend said he had never traded counterfeit before, but he nevertheless transferred his always fungible allegiance to Walter Schellenberg’s SS intelligence unit. By autumn, just as Bernhard Krueger’s presses in Sachsenhausen were starting to roll, Schwend was back in Italy and in business in a big way.

  Schwend’s real boss was Reinhard Heydrich’s successor, an Austrian SS bully named Ernst Kaltenbrunner, of intimidating stature (6 feet 7 inches) and utter loyalty to Himmler. He carried the dueling scars appropriate to the face of an RSHA chief and a taste for the bureaucratic wars, which he conducted continuously against his foreign intelligence chief Schellenberg over how to spend the new Bernhard pounds, needed at that moment to set up a German intelligence network in Italy. Hitler had forbidden German espionage to operate there as long as Mussolini was in power, but now the Fascist regime was trembling. Introduced to the two feuding commanders by Wilhelm Hoettl, Schwend immediately impressed them as someone who, like themselves, could operate on a grand scale. “And yet his conversational style was not brilliant; he affected, deliberately it seemed, the dry manner of a businessman who thought only in figures, and he employed no gestures,” recalled Hoettl, who was soon to be Schwend’s nominal superior, based in Vienna as chief of SS intelligence for Italy and the Balkans.

  Late in November 1942, a man who gave his address as Vaduz, Liechtenstein — then as now the capital of an anachronistic state known for dealings as shady as its steep Alpine valleys — changed some pound notes at the Banque Fédérale in Geneva without incident. A few days later the same individual tried to change £10,000 in notes of small denominations at the American Express office in Zurich. This naturally attracted the attention of the management and, in short order, the Swiss counterfeit police and Switzerland’s central bank. The notes were examined and declared “clever forgeries,” in the words of Sam Woods, an American di
plomat with ties to intelligence who was based at the consulate in Zurich. Washington was less interested in counterfeit pounds than the possibility of fake dollars, but the Swiss Bankers Association immediately sent a circular to all its members warning them to exercise the “greatest caution” in accepting English five- and ten-pound notes. Specimens were sent to the Bank of England, which confirmed with little detail or explanation that they were forgeries. They expressed their sympathy for the Swiss, but the bulk of the circulation was on the Continent and not in England — so why help the counterfeiters improve their product by disclosing their mistakes? Rather unhelpfully, the Old Lady told the Swiss National Bank to test the paper under ultraviolet light and rely on the “feeling and the texture of [the] paper.”

  The fakes were more of the dangerous Type BB counterfeits, and it did not take the Swiss police long to collar the man from Vaduz. He turned out to be Rudi Blaschke, who had no compunction about fingering Schwend. But they had their story ready: Blaschke said Schwend gave him the notes in Croatia, where Schwend had received them from an agent who claimed to have got them from a Turk in Istanbul, who in turn said he had received them from an agent in Iran, where — as everybody surely must know — British and Russian occupation armies were circulating counterfeit money. The Swiss, perhaps speaking the language of diplomacy, said they believed him. But Woods didn’t. He telegraphed the State Department that Schwend and Blaschke were probably German agents.

  Woods was absolutely right. In fact, Schwend could have been the model for the clichéd agent straight out of a spy novel, that suavely dressed man at the table in the rear under the slowly rotating ceiling fan, with a huge roll of bills in his pocket and a stream of supplicants, some swaggering, others unctuous, all eager to sell him something for hard cash. Schwend, Rudi Blaschke, and Rudi’s brother Oskar continued to haul suitcases full of fake pounds into the Vienna SS office, count them out, rough them up, and keep them in stock there until needed. But Schwend was nowhere as much at ease as in disputed territory, trading with rival warlords and trying to come away the winner in any deal. The territory of Istria, his second home, was a no-man’s-land of partisans, bandits, and the feckless Italian occupiers who had no stomach for Mussolini’s war. Kaltenbrunner asked Schwend to buy as many guns as he could for the always cash-starved SS, and Schwend swooped down the Adriatic coast into Croatia, buying arms from the Yugoslav partisans. The Bernhard pounds, of course, were Schwend’s currency of choice, and no one seemed to question their authenticity. They were quickly passed by the peasant deserters from hand to hand, mainly in exchange for food.