Q. Dr. Hohberg, you not only have a contract as an auditor, but within your contract you also have a duty to advise the management in economic matters. What do you mean by this?
A. It is an organizational arrangement with Pohl that it was my order to find ways and means in order to revise this financially highly unstable enterprise, and it was my duty by contract to make propositions how the management could work in accordance with the regulations, and to revive the enterprise eventually.
Q. You were active not only as an auditor but also as a taxation expert. Were you classified as an auditor and as a taxation expert?
A. Yes. In Germany we have the taxation law which is known as the Reich Taxation Law. It states in paragraph 107-A that we are admitted as an auditor quite automatically, and we are really assistants in taxation matters.
Q. Was there any connection between your activity as an auditor, and as a taxation expert?
A. I said before that taxation regulations are different in Germany from the commercial laws. In the case of taxation law we must make two distinct definitions between static and dynamic laws. We must make a difference between taxation on the spot check then the taxation in a long run. On the basis of taxation jurisprudence in Germany, the fact is that nobody must know better his taxation than the chief of what he can know, because on the commercial balance sheet, if he is not in a position to put on a large company on the taxation sheet, then he does on the commercial balance sheet, for taxation of the two things are so closely connected that the taxation balance sheet and the commercial balance sheet can be drawn up only by the same man.
DR. HEIM: If the Tribunal please, I am extremely sorry that I must tarry along with this very difficult matter but in order that you will know and probably want to understand what the defendant did for the DWB, knowledge of these things, of these legal regulations is essential in order to understand his action, and his activity from a legal point of view.
BY DR. HEIM:
Q. Witness, were there any special professional risks connected with advising people in taxation matters?
JUDGE PHILLIPS: I just want to be certain I got the date correct. What date did you state that you entered into a contract with Pohl? I have it, you entered into this contract in the summer of 1940, is that correct?
THE WITNESS: I worked first not under Pohl but for Moeckl and Weidenbach.
Q. I understand that. I understand that, but I am now talking about when you made your contract with Pohl?
A. On 10 May, 1940.
Q. You resigned or finished your contract on 30 July 1943?
A. Yes, that is correct, 30 July 1943.
Q. Now did you resign, or did you just complete your contract at that time?
A. No, Your Honor, I did not complete the contract. The contract had gone on, but I was transferred to the Wehrmacht by request.
Q. You went to the Army?
A. Yes.
Q. Did you go to the Army as a soldier, or did you go as an auditor?
A. As a soldier.
Q. As a soldier. You served the remainder of the war as a soldier of the Wehrmacht?
A. Yes, I remained with the Army for the rest of the war, but in the end of August 1944 Dr. May, who had by that time been imprisoned by the Gestapo, for a year and who had been dismissed from the SS took me back into the Air Ministry at Berlin. I was working on retire ment, as we all it, in the aviation program.
Q. You were not in the service in any capacity when you resigned and went into the Army in July 1943?
A. No, only certain financial claims went on before.
BY DR. HEIM:
Q. Witness, were there any special professional risks connected with the activity as a consultant in taxation matters. I would like you to answer that question as briefly as possible, as the matter was up previously.
A. According to the Reich Taxation Laws, especially under paragraph 109, the taxation consultant is personally responsible and liable for all taxations in which he advises people, and according to the Reich Law he would be the sole debtor. Of course I had to watch these taxation experts all the time carefully.
Q. On the basis of these legal liability regulations, was there any special method that you could follow in the taxation matters?
A. This matter, of course, did have a special method, and because of the amount of risk and because of the laws you could lose your whole fortune yourself. In this capacity these taxation consultants in their activity must be extremely careful. You know that in order to accept plenty of debtors, and to supervise most precisely the various officials, that is necessary in order to insure myself against the risk.
Q. What was the results of these canceled checks on taxation declarations?
A. The results were that all taxation reports addressed to finance offices before they were signed by an official of the DWB were checked up by me, and, anything more difficult I dictated myself, but I did not sign them. They were mostly signed by Dr. Wenner, or some other employee of the DWB; also it was logical that these taxation matters whenever possible were discussed daily in Berlin. This is the reason for the strange practice that I attended the conferences in these matters, where I took part every day, and it took place in Berlin.
Q. In these taxation matters in the DWB, were there any particular difficulties which you came across?
A. I am afraid that I can give the Tribunal an explanation of these only in a complicated manner, but I shall be as brief as I possible can. At my suggestion Pohl ordered that the various individual companies should be regulated by what was known as a contract regulating profits and loss. We called them normal corporation contracts.
Q. Dr. Hohberg, what special difficulties arose in a technical respect?
A. The special difficulties only consisted of the fact that the whole amount of work accumulated on Mondays, when the DWB was suddenly founded. In order to deal with this problem, there was only one man there. He was Dr. Wenner, and the assistant whom he called in, and I was there as a consultant. Then there was that corporation law in Germany which was relatively unknown, and that these two things had to be worked in. Only in the course of many years it became possible to have these taxation matters adjusted under legal regulations. For all practical intent and purposes, these corporation laws amounted to nothing else but that the whole of the taxation regulations were centralized in a company and the DWB.
Q. Will you please tell us in one sentence what the corporation law is?
A. You have a corporation law in the concept of German Commercial Law if and when an enterprise becomes dependent in financial organizational matters, and becomes dependent in such an extent that it includes economic matters, and that it requires the character of a sub-department. Therefore, the subsidiary company no longer has a will of its own, as it were.
Q. In order to obtain a fair knowledge of your activities in the DWB I think it is necessary for me to ask you this: The question of the corporation law, is that the same thing as according to taxation matters, or are they different?
A. No, the corporation law is extremely difficult in Germany. It must result in the fact that of about forty companies of a concern, the legal basis was established, and that some of these companies have formed a taxation unit of their own in order to hand over the turnover tax. A smaller number of companies form another corporation for taxation purposes, and a smaller part of a concern forms a corporation for a corporation taxation, and for other taxation there was no possibility of that sort at all with such income, for instance, coming from the enterprises it had to pay its tax independently. I explained this one to show how highly complicated this matter is.
Q: Now, what is the result of these many differences within the taxation practices for the DWB?
A: The result is that apart from the concerns based on commercial law, we had special concerns which are based on different taxation laws which were entirely different, depending on their taxation practices, and the smallest complex therein is in the taxation theory complex.
Q: If I have followed you, the DWB was, so to speak, the internal financial office for some of the subsidiary companies, is that right?
A: Yes. The DWB at that time when I was the auditor had practically no other task at all. With the help of these contracts, it only created the possibility to adjust the losses of the companies, of one company by the profits of another company. What happened within the framework of what was known as the DWB in my time really no longer had anything to do with normal business management.
Q: To how many subsidiary companies did this apply to?
A: The closest taxation relationship, namely, the corporation taxation applied to 20 of about 40 companies. These 20 companies had about 80 enterprises and roughly 90 percent of the total profits were comprised therein.
Q: That is enough. Did you have time, in view of all these activities, to bother about anything else which were not part of your tasks as an auditor and economic consultant?
A: I worked in the sense that I visited the auditors who did auditing work and saw them for two or three days a week, and so I was in Berlin as often as possible in order to assist the taxation expert, Dr. Wenner, as much as possible.
Q: Why did you not wait when you concluded these con tracts concerning loss and profit until the taxation matters of the DWB were regulated.
Why were you in a hurry?
A: As far as I am told, as far as turnover tax and purchase tax was concerned, this centralization applied at once. In other words, when the DWB was founded, the taxations had to be worked out in a central office, and the DWB was therefore faced with an enormous amount of work. In the case of corporation taxation, it was quite different. The adjustment between loss and profit as far as corporation taxes was concerned depended on the former contract of profit regulations. In Germany -- and I don't know whether that is so in America -- we have the institution that you must report your losses every two years. Therefore, if you suffer a loss in 1938, the last moment you had to make a report was 1940 in order to have the taxation aspect adjusted. Had I not asked Pohl to draw up these contracts for 1940 we would have quite unnecessarily lost many hundreds of thousands of Marks before 1939.
Q: When these contracts were concluded, was it the purpose to revive the subsidiary companies of the DWB which were heavily in debt?
A: Yes, but only as long as losses still existed. At the same moment, when there were no more losses, a spirited and active business management could have concluded quite easily this or that contract concerning profits. That is to say, before the end of the year, the management if it does not want the enterprise to suffer any taxation damage has to think over whether this or that contract could not be terminated in order to avoid high taxation losses, which in Germany amounted to nearly 95 percent on the top level.
Q: When you terminated your activities as auditor of the DWB were the contracts changed in any way?
A: I am not quite sure because I don't know what happened after I left. I heard only very little. All I know is that the taxation expert, for some reason or other, was dismissed and sent to the front. This was Dr. Wenner who was my friend.
Q: When you were in the DWB, did you come across any tax evasion?
A: No, not in my time. When we discuss the so-called "balance cash", I shall talk about this again. Here we have the case of a fairly considerable tax evasion, but that was after my time. When I compiled the list of the duties which the management had to fulfill, I pointed out that fact and drew their attention to it.
Q: Was there any other field for which you had the responsibility in the DWB other than concerned as an auditor?
A: Yes, that was to supervise price regulations on the basis of another law, but only in as far as I audited the annual reports. For instance, in the so-called Office W-II, another auditor ordered it. Therefore I had no responsibility at all as far as the prices were concerned.
JUDGE PHILLIPS: While you were talking about the W offices, the Witness Cruse, C-r-u-s-e, I think it is, testified for the prosecution that he worked in Office W-1 under Mummenthey for some time, and that during the time that he worked in this office, under Memmenthey, that he wrote a number of communications to you. What were those communications about, if he did write to you?
A: Your Honor, what I understood the witness to say is that he received letters from me which I had written to Office W-I. The German earth and stone works.
JUDGE PHILLIPS: I was referring to my notes and I may have gotten his testimony wrong or it may have been translated wrong, but I had that he wrote communications to you, but you say that you wrote them to him.
A: The correspondence with which we are concerned there is probably a very extensive one. The problem there was, Your Honor, I audited with five people the German earth and stone works, and I found out that enterprise which was based on a capital of 20,000 marks had a loss of 500,000 marks already; and the auditing showed that the actual loss was bigger still. I believe it amounted to eight or nine millions, which, of course, on the basis of 20,000 marks of capital is a bit much. And on that basis, we corresponded quite a lot between the management of DEST AND W-I.
JUDGE PHILLIPS: So, the communication then was in regard to your audit of enterprises under W-I, and you were writing to that Amt in regard to that audit?
A: Probably, and also if I may add this: The office group W-1 was the central authority for all enterprises of the Earth and Stone Industry. That is to say, the correspondence about my auditing in matters Bohemia, Allach went automatically to the management of the groups firm in W-I; therefore the correspondence was probably very large.
BY DR. HEIM:
Q: Witness, all questions concerned with price regulations, will you please tell us what regulations apply to you and were important to you as an auditor?
A: In Germany there was a so-called War Economy Regulation, and under that Regulation there was paragraph 22, which said that prices had to be adjusted to the requirement of war conditioned industry.
The result of that was that apart from tax reports by the enterprises, there was a new, additional declaration necessary which was what was called a declaration of profits. But the money was not received by the finance offices of the first instance, but the economic organization such as group industry, group commercial and so forth which were Reich organizations. It said that all excess profits based on excess prices since the first of September 1939, when war broke out, had to be deducted and that was my responsibility. I would like to point out here that meant considerable difficulties for the work of an auditor because to work out and figure out an excess profit is an extremely difficult thing to do, if you don't have sufficient evidence from the books available.
Q Apart from the general price regulations, Witness, there were other regulations. Will you please tell us very briefly what regulations these were and what was their significance for your work as an auditor of the DWB?
A There were a large number of price regulations in Germany, but the most important ones from my point of view as an auditor were those concerning prices when deliveries were made to the public agencies. The whole of the DWB concerned, with a few exceptions, supplied the public agencies, such as the Wehrmacht, which is the reason why I had to pay such attention to these special price regulations concerning deliveries to public agencies.
Q What were the practical results of these regulations from the point of view of auditing the Economic Enterprises?
A I had to convince myself all the prices checked up, were in accordance with legal regulations of what was known as NSOE. The NSOE are the regulations about prices on the basis of self cost for public agencies from 1938. If these prices were not in accordance with the regulations, I, as an auditor had to see to it that an entry was made accordingly on the debit side as a liability to be paid to the price commissioner. Both the Air Ministry and the remainder of the Wehrmacht in order to audit prices of armament orders, had to have a large number of auditors. If I, as an auditor, gave these certificates namely that the balance sheet was correct and listed all liabilities and the auditors suddenly came across an item of debt, then I personally would again be liable as a professional auditor for any auditing action up to 100,000 marks, which was the reason why I paid great attention to these regulations.
Q What was the connection between the application of this regulation?
A In Germany in war time we had completely abnormal conditions where prices were concerned. For instance, a shell could cost 100 marks with one company, but exactly the same shell could cost 200 marks with another company.
The reason was because the basis of it was selfexpense and that was the task of my auditing concern.
Q On the basis of what regulations did you work out wages? What was it you had to pay particular attention to?
A In these regulations, it was laid down very precisely what had to be made part of these prices. It could only be made part of it what could be paid for, that is to say, only wages could be made part of this balance sheet which were actually being paid. Wages of inmates could be made part of it too which were being paid, which is the reason why, as a matter of course, I had to deal with these inmate wages. That was part of my legal obligation as an auditor.
Q On the basis of these facts, could you draw the conclusion that the auditor was responsible for the set-up and management of the enterprises which he audited, or at least had an important influence on it?
A The auditor has no influence on the production and management of an enterprise. His responsibility consisted of the fact that in the case of deficient management, or deficient organization, or deficient bookkeeping, or wrong prices, he had to note that in his certificate, because he would be responsible up to 100,000 marks.
Q If I followed you correctly, Witness, it was your task to acquaint yourself when you audited an enterprise with all costs of production in the enterprise concerned?
A Well, I could not do anything else. I could not help it, because otherwise I would not be in a position to issue my certificate, which is the reason why, in many cases, I had to refuse my certificate.
DR. HEIM: If the Tribunal please, this dull matter is now over and now let us go in medias res.
Q Witness, on 10 May 1940, you and Pohl concluded your contract as an auditor. When did you start in your activity as an auditor in the Economic Enterprises?
A I went back to Koenigsberg after I signed my contract, and I began on 14 May 1940.
Q Where was your office?
A I had two offices in Berlin. One, the general one, was in my apartment, for which I had reserved three rooms and the second one, the DWB, was in Lichterfelde-West in the office of the WVHA. That was also where the DWB was located.
Q In order to do your work as an auditor of the DWB were you given any assistants and colleagues?
A Yes, I had every right to expect this on the basis of my contract. Some of them were civilians, civilian employees, and later on they were people who were assigned to me by the Waffen SS. All of them had been fully trained. I thought the matter over very carefully whether I should employ auditors myself, but I thought the risk was too great, because, after all, we were dealing with the SS, and I didn't know whether perhaps the next day this assignment would be taken away from me again.
Q What did you do when you started your work?
A First of all, I did one auditing piece after the other. I need not give you the names of the enterprises. Then in the case of the Sudetengau I evaluated the enterprises and we adjusted the Czech Crowns to Reichsmarks. I also audited a number of enterprises which were not part of the DWB, such as the ones which I have mentioned before within the scope of the Reich Association, Maria Schul, Benedictine Monasteries, and so forth.
Q What were the results if you made a brief and superficial summation? What was the impression you gained from the enterprises concerned?
A The position is described in Document Book II, Exhibit 22, in a report by the Chief of Office III-A. Many of these enterprises were heavily in debt. Many of them had no money. Some of them had not kept their books for months. Many enterprises had never handed over tax declarations. Almost all of them had very little capital. Several of them were heavily in debt, out of all proportion with their capital, and large amounts of foreign capital were endangered therefore. I might mention here that I audited in certain cases and had to interrupt it and discontinue it again because the books simply could not be audited at all. I then put my auditors into these enterprises in order to bring the books up to date. That was what I did in the beginning.
Q What about the management, bookkeeping, and so forth? What were the financial habits of these companies?
A Management and finances at this time were not too good. In certain cases the managers were not sufficiently trained. Bookkeeping, as I said before, was entirely confused and those were the conditions which I found.
Q What about the handling of taxes in these enterprises? What did you find there?
A In several enterprises all taxation matters had been completely neglected. The obvious reason was that both the employees and the directors of these companies had no idea what their obligations as managers were under commercial law, and the thing to do was to bring things into order.
Q Were there any enterprises which had no legal concepts of commercial law, at all?
A Yes, that also existed. For instance the enterprise of the German Equipment Works, which at that time had not been made part of this concern in Dachau and a similar enterprise in Ravensbrueck, there the position was that it seemed the economic enterprises had gone beyond all control.
The management could do as it pleased, as long as the superior department was agreeable. It could take out money or capital from the enterprises, as much as it wanted to. That is the reason why I made these efforts to put these enterprises back on a commercial basis. Unfortunately this was a special part of the matter.
THE PRESIDENT: And we will hear the last of it on Monday morning at 9:30.
THE MARSHAL: The Tribunal will recess until 0930 Monday morning.
(The Tribunal adjourned until 14 July 1947, at 0930 hours.)
Official Transcript of Military Tribunal II, Case 4, in the matter of the United States of America, against Oswald Pohl, et al., defendants, sitting at Nuernberg, Germany, on 14 July 1947, 0930-1630. Justice Toms, presiding.
THE MARSHAL: Persons in the courtroom will please find their seats.
The Honorable, the Judges of Military Tribunal II.
Military Tribunal II is now in session. God save the United States of America, and this Honorable Tribunal.
There will be order in the court.
JUDGE TOMS: Let the record indicate that the defendant Fanslau is absent from this session of the court at the request of his counsel, and by leave of court.
DR. HEIM: I don't know whether this Tribunal has just received the document books for defendant Heim.
JUDGE TOMS: No.
DR. HEIM: I shall now continue with the examination of the defendant Hohberg as witness on his own behalf.
HANS HOHBERG - Resumed.
CROSS EXAMINATION (continued) BY DR. HEIM:
Q. At the conclusion of the Friday session you were testifying as auditor of the economic enterprises of Pohl. When you were the auditor, at the time were there any enterprises which did not have any legal form as prescribed by the commercial law?
A. We had already given to discussion, this question of the true enterprises which should not have a status according to the commercial law. I made a suggestion to Pohl with regard to these two enterprises, that they should be given a status in accordance with the commercial law. The conclusion was very important, because once these enterprises had received a legal status, it was impossible to remove any part of the substance of the capital invested there.
However, before that time that could be done.
Q. What main tasks had to be solved at first as the result of the insight which you gained at that time?
A. My main task now was as it had been based on the carrying out of the official auditing which was then prescribed by the law. Besides that, however, I also had to take care of two main tasks. One task was the centralization of the files and the shares of the company in order to clarify the point as to whom the shares of this stock belonged. The second was the clarification of the financial matters of the companies which had gone into debt.
Q. What collaborators did you use in order to solve these questions, and just how did you divide all the work between your collaborators?
A. No one was there to audit the DWB, besides Pohl and Loerner who carried out the entire management of the business. However, compared with the previous time nothing had changed in the way in which this business was carried on. As a temporary collaborator in the handling of these two main tasks, which I had just mentioned, I appointed several of my auditors to carry out this work, on a temporary basis, until by order of Pohl they were officially taken over, by the DWB. On the part of official auditing, they carried out part time work in their use at some other auditing in spare time. Otherwise, I am to point out that this field of tasks that was carried out was within the DWB. That is to say, the internal finance office took care of these things. That is, more literally speaking, it was a department which consisted of one man, and then the statistical office which had approximately six or seven men and which was carrying out something additional. Amongst these people were four young girls. If the Prosecution thinks that the concern was to be directed by these few people, it's wrong and impossible from the point of view of personnel.
Q. Witness, what impression did you get, at the time when the DWB had not as yet been established, with regard to the ownership conditions with the companies and the financial investments there?
A. I did not gain any clear impression at all. Every one of the shareholders claimed to be the trustee for someone, and he had borrowed the capital for these companies from some place or other. For example, he took it from a company, let us say that it was the company for the care of German Cultural Monuments or from the "Property Company Economic Assistance" with the Reichsfuehrer-SS, or he would have borrowed the money from some other party.
Q. Did you make any suggestions at the time in order to effect an improvement in these conditions?
A. In order to clarify this matter, I suggested to Pohl that all trustees should be relieved of their shares in the companies and that they should be included in a holding company. Then, at least all the shares would be located in one single hand.
Q. What reasons were decisive at the time for this suggestion - that is to say, to carry out a centralization of the economic enterprises?
A. Well, it was impossible to clarify the picture and the status of the various companies up to now. The business managers could handle their business as they liked to, and now at least they were placed under some sort of control.
Q. Were there any other reasons for you to make this suggestion?
A. Well, I wanted these companies to be centralized. The second reason was that we tried to have the status of all companies clarified as to the so-called conditions for the adjustment of profits and losses which I have already mentioned. These contracts could only be concluded when a superior, a general holding enterprise, existed. According to German tax law such a company is called an "Organtraeger".
Q. At the time, did you already have clarity about the legal character of the real owner of the individual shares of the company, and did you have clarity about the origin of the shares that were contained in the company?
A. I never did gain any clarity about the ownership conditions with regard to the shares of the company. About the question of the ownership conditions, as far as the holding companies were concerned, I assume that later examination will show that a certain development took place in this respect, that is to say, that conditions varied.
Q. What opinion did you gain later on this subject?
A. According to the sources of the funds which were used to pay for the initial capital - after all, we had several increases of capital with the DWB - first of all, here we had the Party, and in the other case, the German Reich would dominate the picture. It was like a horse race in which one horse leads and then the other horse is in the lead. The SS itself never was the owner of the property. Therefore, it was only possible that either the German Reich or the Party was the owner.
Q. Your Honor, I shall refer to this question later on in detail.
Witness, when you planned this centralization, did you meet with any resistance?
A. The centralization of the companies into a holding company, with all its consequences, was not a very agreeable thought to the business managers of the enterprises. Part of them were afraid of the control which was to be carried out, and they preferred to have a lack of clarity regarding their work. Several letters were written by various business managers which opposed my plan of centralization and which were to destroy it.
Q. Can you give us an example of that?
A. Well, here I am thinking of the DEST. The business manager of this enterprise, Dr. Salpeter, was at the same time a partner in this company. That is to say, he was a trustee partner. Pohl had issued regulations and instructions, according to which several matters which were carried out in this business had to have Pohl's approval. However, when Salpeter did not like to do that, Pohl could never exercise any supervision over that.
Since Salpeter was a partner in the company, he could practically dismiss himself as a business manager.
Q. Did you already pursue a certain aim at that time?
A. Aside from the social aim of the concern, which I have already described, I myself pursued the aim of turning the concern into a concern of the Reich.
Q. In this case, did the financial system of the SS have to be reconstructed, or were any other matters involved in this question?
A. The invested personal capital was very little with regard to the capital as a whole which had been invested. For example, the DEST had RM 20,000 of its own capital. The balance of the DEST and its obligations amounted to, altogether, RM 20,000,000, and later on, even considerably more. Therefore, we have a scale here of one to one thousand. If this company had become bankrupt, then this bankruptcy would not have concerned the SS at all, aside from the RM 20,000 which had been lent. However, the German Reich would have suffered the more as a result of this bankruptcy and, of course, the small taxpayer also would have sustained a loss.
Q. You therefore said that in this case it was not necessary to reconstruct the financial structure of the SS but that other interests were involved in this case. To what extent did the latter apply?
A. After all, the SS had not invested any money in these enterprises. The little money which the SS had put into the enterprise had been borrowed. The big loans of the Reich were important here. For example, the loan from the General Construction Inspector or the Gold Discount Bank, or the numerous loans of the German Red Cross. Of course, these loans would have been lost, but not the money of the SS.
Q. Finally, the German Economic Enterprises GMbH, were established. They, in short, were the DWB. When did this happen?
A. This must have been at the end of June 1940, as can be seen from the documents.
Q. I am now coming to the establishment of the DWB. Dr. Hohberg, who were the founders of the DWB?