Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion (43 page)

The next day, Moreton sent a coded message to his bosses in Bordeaux: POSTAL PACKAGES ARRIVED AND HOUSED WELL STOP FATHER AND SON LEFT THE DAY BEFORE YESTERDAY DIRECTION DAKAR WITH MANY FAMILY MEMBERS STOP HARD TO LODGE HERE STOP AWAIT YOUR INSTRUCTIONS FOR GRANDSONS STOP.
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It was called the miracle of Dunkirk, but others in the United Kingdom viewed it as something other than a miracle with regard to Churchill’s handling of the war. During nine days in May and June 1940, a ragtag armada of ships evacuated 338,226 Allied forces from under the noses and guns of Nazi armies to Britain to fight another day. The new Prime Minister Winston Churchill had no illusions that his country had suffered a horrific setback. In a speech to the House of Commons on June 4, 1940, he called the events in France “a colossal military disaster,” and added “wars are not won by evacuations.”
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Many members of the British establishment at the time did not think Churchill was up to the job of leading the country in wartime. He had just botched the Allied effort to help the Norwegians in their struggle against Hitler. The day after the new prime minister’s appointment, John Colville, his private secretary, wrote in his diary: “There seems to be some inclination at Whitehall to believe that Winston will be a complete failure and that Neville [Chamberlain] will return.”
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The failure on the continent, though, led some nervous Britons to reach for their gold. Mrs. Edith Parr, a housewife from the Isle of Wight, wrote in a letter to the
Times of London
, “Let us beat our enemies by learning from them. The Italian women, in the Abyssinian War, gave up their wedding rings, receiving in exchange rings of baser metal.” Kingsley Wood, the Chancellor of the Exchequer, picked up the idea, and argued that it might raise £20 million for the war effort. Churchill rejected that extreme measure unless it became necessary to shame the Americans into coming to his country’s aid, but he still liked to quote Lord Macaulay’s poem “Horatio at the Bridge”:

Romans in Rome’s quarrel

Spared neither land nor gold.
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The British were already aware of the Nazi gold strategy and the importance of getting the Bank of England’s reserves out of the country and to safety abroad. In addition, Britain was custodian of hundreds of tons of bullion for other nations, much of which had just been sent over for safekeeping in the past three years. Always lurking in the back of the minds of British leaders, however, was the fate of the White Star Line’s
SS Laurentic
during World War I. Launched in 1908, the ship at first carried passengers from Liverpool to Canada, but in the Great War it became an armed merchant cruiser. On January 25, 1917, the vessel hit two mines north of Ireland and sank within an hour. It was carrying 43 tons of gold stowed in the second-class baggage room. After the war, Royal Navy divers recovered most, but not all, of the bullion. That tragedy was never far from the minds of the men making decisions about what to do with Britain’s gold now that the German threat had finally reached their shores.
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While the United States was the destination of choice for the British bullion, America’s strict neutrality stance caused complications. The obvious alternative was Canada, a member of the British Commonwealth and, just like the U.S., an ocean away from the war. It was also close to the U.S., the world’s major supplier of war materiel, which was demanding payment upon delivery in gold or hard currency for its weapons.

The Bank of Canada had only recently become a member of the club of world central banks, opening its doors on March 11, 1935. Graham Towers, thirty-eight, was the first governor. He naturally looked to London for guidance, and Britain’s legendary Montagu Norman became his tutor. Early in 1936, British officials first voiced interest in shipping gold abroad for national security reasons and began sending £2 million a month.
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Canada was also an important gold producer, and Norman indicated he wanted to buy some at auction. By the end of 1936, the Bank of England had deposited 3,304 bars in Ottawa, and a year later that number was up to 4,748 bars.
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The Bank of Canada, in effect, became the shadow Bank of England for the duration of the war.

Immediately after the
Anschluss
in March 1938, the Bank of England’s Harry Siepmann asked the Bank of Canada if his country might purchase, transfer, and ship “up to an amount of $250,000,000 or more” of gold to them. Towers informed Canadian Finance Minister Charles Dunning about the request, who answered that his country was “most willing to be of assistance in any way we can.”
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The pace quickly picked up. One shipment arrived on May 9, 1938, just in time to go into the bank’s new vault located under Wellington Street in Ottawa. Trains took bullion from the docks in Halifax directly to the capital, with Royal Canadian Mounted Police guarding the operations. When a journalist noticed the train pulling into the station, the event became big news. After that, the bank was more discrete.

By the end of 1938, Britain had parked 10,219 bars in Ottawa, and Belgium, France, and Switzerland were inquiring about shipping their own bullion. In December 1939, the Swedish National Bank also asked about sending some.
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The Bank of Canada at the beginning of 1940 had just three foreign gold accounts, but by the end of the year, it had eleven.

Sir Frederick Phillips, undersecretary of the British Treasury, proposed in an early 1939 memo that the government take private gold holdings, foreign currencies, and internationally marketable securities to Canada in order to “prevent the export of domestic capital.” All British residents would be “required to offer gold coin or bullion in their possession for sale to the Treasury.” Securities would also have to be sold to the state “at a prescribed sterling price.”
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The measure passed Parliament with little public notice. John Colville, a cabinet insider, wrote in his diary the next day, “Yesterday the Government obtained permission from the House to take over fuller power than any British Government has ever possessed. The purpose is largely that if we are invaded, or otherwise in extremis, the rights of individuals and institutions must not be allowed to stand in the way of the country’s safety.”
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At the time, Prime Minister Neville Chamberlain was anxious to solidify ties to both Ottawa and Washington. While Canada was a member of the British Commonwealth, he wanted to make sure the country would participate if there were a new war with Germany. He was also wanted to strengthen relations with President Franklin D. Roosevelt. So at Chamberlain’s urging, King George VI and Queen Elizabeth in the spring of 1939 traveled across the Atlantic to visit both countries. It would be the new, and nervous, monarch’s first venture onto the international stage. He had only recently been thrust on the throne after his older brother abdicated, and British leaders were concerned about how well the royal couple would perform in its new roll. He had a stammer and was socially ill at ease.

Britain used the George VI trip as an opportunity to move some gold to North America. On March 29, Undersecretary Phillips sent a letter to the Admiralty proposing the “dispatch of vessels to Canada in connection with His Majesty’s visit.” The original plan was to send fifty tons of bullion on two escort ships accompanying the Royal Mail ship
Empress of Australia
, which would be carrying the king and queen. His Majesty, though, considered that too risky and scaled back the project. The accompanying
HMS Southampton
carried 1,207 boxes of bullion, while
HMS Glasgow
had 1,000. That still amounted to £30 million of bullion. Bank of England trucks carried the treasure to the departure harbor for the royal party, but no one noticed the special cargo.
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The king and queen were big hits in both countries. Large crowds greeted them as they visited every province in Canada, and Roosevelt, who believed strongly in personal diplomacy, laid everything on thick for the first visit of a sitting British monarch to its former colony. The king and queen visited the World’s Fair in New York City and also spent four days at FDR’s home in Hyde Park, New York. During a picnic fit for a king, the president enthusiastically pushed his majesty to try his first hotdog.

The royal trip, though, was only a brief, happy hiatus from war. The Nazi invasion of Poland on September 1, 1939, increased the urgency for getting more British gold out of Europe. Later that month, Sir John Simon, the Chancellor of the Exchequer, sent a letter to Winston Churchill, the new First Lord of the Admiralty, alerting him to the need for moving more bullion across the Atlantic. He wrote urgently, “It is essential for us to ship gold to the value of £40 million . . . from South Africa via England to North America as early as possible.” South Africa was the world’s largest bullion producer in addition to being a member of the Commonwealth. Simon went on to explain that the country had “a great hoard at Ottawa, but as you know the demands on it in recent months were enormous.”
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War Cabinet Secretary E. E. Bridges on October 6, 1939, urged stepping up shipments to the new world. He wrote: “It will be for the Treasury in collaboration with the Bank of England, and the Foreign Office, to examine the possible means of getting the bullion and negotiable securities into the same place of safety. The transport of many hundreds of tons of bullion presents a difficult problem and the loading would take a long time.” The plan was Britain would also evacuate the gold of Belgium, Holland, and other countries that had sent their own bullion to London for safety. Bridges wrote that the total weight would amount to about 1,800 tons, and said that the evacuation was a matter of the “utmost importance” and “would present a considerable problem if it had to be undertaken in a hurry when transport facilities were disorganized.”
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The Chamberlain government agreed with the Bridges suggestion, and the British navy turned over the job of shipping it to Captain Augustus (Gus) Agar, a holder of the Victoria Cross, the country’s highest military honor. He received it for almost single-handedly sinking a Soviet cruiser in World War I. Tall, lean, and courtly, Agar credited his naval success to growing up the last of thirteen children. At the time, he commanded the
HMS Emerald
, which was on blockade duty in the North Atlantic, which was infested with U-boats. His ship and the
HMS Enterprise
, commanded by his friend Captain Jack Egerton Broome, were ordered to head for Plymouth “with all dispatch.”
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Once there, the two captains were told to stock up on supplies and get ready for the new assignment. Only Agar knew what it was. Just before sailing, a small railway truck pulled up to the dock alongside the two ships and began offloading cases of what was described as “special secret explosives.” At 3:00 A.M., sailors started carrying packages weighing about 130 pounds each onto the vessel, while policemen carefully counted the cargo both at the delivery truck and then again at the ship. The speculation among crew members was that they were headed to Freetown, Sierra Leone or the East Indies. Only Agar knew the cargo was bullion and that they were really going to Canada. Once out at sea, the two vessels rendezvoused with a cruiser and a battleship. The convoy arrived in Canada a week later. During the trip the crew faced heavy seas and dense fog. The
Emerald
lost overboard many pieces of equipment, including a lifeboat. The four ships, though, proudly steamed into the Halifax harbor, which was already packed with nearly one hundred British vessels carrying war goods or food back home. Royal Canadian Mounted Police and a special train were waiting at the dock and quickly spirited the gold away.

After the Canadians left, the four commanders chatted about Britain’s historic Order in Council rule dating back to the Napoleonic Wars, which gave ship captains carrying bullion one-eighth percent of the cargo’s value when it was safely discharged. In May 1936, Agar’s friend Captain Charles Morgan had rescued Emperor Haile Selassie, and his gold, when he escaped from Ethiopia. At the end of the voyage the emperor offered to pay the captain the traditional fee. Morgan, though, politely declined to take it. The officers in Halifax jokingly lamented that the British Treasury a few years before had cancelled the Order in Council regulation. Agar later wrote in his autobiography, “Otherwise Jack Egerton Broome and myself might have collected quite a nice little sum for our retirement.”
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Thirty British gold shipments took place in the year between King George VI’s visit to Canada and the May 1940 Nazi invasion of the Low Countries. All of them went to Canada, and most were valued at only £2 million or £3 million. But more—much, much more—was soon heading that way.
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Only two weeks after the Nazi invasion of Western Europe, the situation for Britain looked ominous. Dutch, Belgian, and French defenses had quickly crumbled, and the Germans were marching toward Paris. A British cabinet meeting on May 21 was realistic and pessimistic. On May 21, Sir Alex Cadogan, the Permanent Undersecretary for Foreign Affairs, wrote in his diary, “A miracle may save us: otherwise we’re done.”
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