Treason in Detroit – The curious case of Max Stephan (episode 22, part two)
(Continued) ...
Meanwhile, Krug had arrived in Chicago. He made an effort to convince members of a national network of subversives that he was Lieutenant Krug. It appears that he convinced them. According to Krug, the subversives outfitted him with a new suit of clothes, gave him $100.00 in twenty-dollar bills, and sent him on his way to a memorized address in Philadelphia. From there, Krug traveled to another address in New York City, stating that he hoped to stow away on a neutral Swedish ship. As that possibility evaporated, Krug reversed direction, taking a route to Pittsburgh and through Cincinnati, Nashville, and Dallas, intending to cross into still-neutral Mexico at Laredo, Texas. From there, Krug planned to make his way to the German embassy in Mexico and then return home. Krug never made it to Laredo. In San Antonio, he stayed at a hotel. The unnamed proprietor (described in records as an overweight blonde woman) heard his accent, became suspicious, and called the FBI. Captured, Krug returned through the U.S. to Bowmanville.
At this juncture, the prosecution took a strange turn. Building the case against Stephan, the FBI sought to enlist the aid of Krug as a prosecution witness for the trial. Agents asked him to view the individuals involved. They instructed Krug to regard it as his duty to identify the guilty and clear the innocent. Note: Under the rules of the Geneva Convention, member nations could not force a Prisoner of War to testify against those who may have helped him/her while attempting to escape. If a prisoner were to step forward and to testify, s/he would have to do so voluntarily.
Krug volunteered to testify. Even though he was regular military, he was "Nazified." At Stephan's trial, Krug appeared in a full-dress uniform adorned with a swastika. In courtroom questioning, he affirmed that the British government had not made any promise of parole because of his testimony (Note: the British military shot down Krug off the coast of England). Also, Krug testified that he did not expect any special treatment from the Canadian government (his jailers) for his contribution. As with a military officer of any nation, Krug had the duty to attempt an escape. However, if one rises above the statutes of the Geneva Convention by volunteering to testify in a way that impugns anyone who gave aid and comfort, would this not jeopardize the chances of any other officers attempting to escape? Why would anyone in his/her right mind ever help a German escapee again? Why did the other officers at the POW camp, including a core group of members of the National Socialist German Workers Party (NASDP; aka the Nazi Party) not view this as a giant blunder in influencing Krug not to testify? While at Bowmanville, Krug had received a promotion to First Lieutenant before appearing in a new uniform with the proper accouterments reflecting his new rank at the Stefan trial. Who was his tailor? Curious. Curious, indeed.
In the fever of war and retribution, the jury found Max Stephan guilty of high treason as proscribed in Article III, Section 3, of the U.S. Constitution. Judge Tuttle sentenced Stephan to death by hanging. However, there were subsequent court appeals and direct communications by the American Civil Liberties Union and by various influential persons. These included the former Michigan governor, William Francis "Frank" Murphy, now Justice of the U.S. Supreme Court, and Solicitor General Charles Fahy. Consequently, President Franklin D. Roosevelt commuted Stephan's sentence from death to life imprisonment just eight hours before his scheduled hanging on 1 July 1943. Stephan died of bowel cancer in prison in 1952. Seven weeks later after the Stephan trial, FBI agents arrested leading members of the Buchanan-Dineen espionage ring in Detroit (see "Lipstick and Lies" below).
Theodore Donay, the pro-Nazi who gave money to Krug in Detroit, was convicted of assisting in the act of treason and received a total jail sentence of seven-and-a-half years. Margareta Bertelmann, a resident alien, was placed in an internment camp for the remainder of the war and then was returned to her native Germany. After leaving British custody, Hans Peter Krug returned to Germany in 1946. Upon leaving the military, he became a successful businessman near Dortmund.
Lipstick and Lies
We have titled this section in homage to the delightful spy mystery of the same name by Margit Liesche (Poisoned Pen Press, 2009). This semi-fictional work assisted my (Dr. Sase's) factual research on the infamous World War II espionage ring in Detroit headed by Countess Grace Buchanan-Dineen. The group, rounded up and tried in 1943, had direct, consequential connections to the Max Stephan case. Specifically, Theodore Donay of the Europe Import Company befriended Dr. Fred William Thomas, a core member of the Buchanan-Dineen espionage ring. Furthermore, Thomas associated with Max Stephan at his restaurant. The story of the surveillance, arrest, and trials of members of this ring provides pertinent details that may explain some of the oddities of the Stephan case.
In a press release of 24 August 1943, the United States Department of Justice announced, "Special Agents of the Federal Bureau of Investigation, climaxing an investigation begun in 1939, today arrested three persons in Detroit, Michigan, on charges of wartime espionage." The press release cites arrest-warrants charging violations of the Wartime Espionage Statute. The arrests included the following: Dr. Fred William Thomas, a surgeon and physician, age 44, residing at 4631 Audubon Road in the English Village neighborhood on the east side of Detroit; Mrs. Theresa Behrens, the German-Hungarian Secretary of the International Center of the YWCA, residing at 5050 Harvard Road about a half-mile north of Dr. Thomas; and Grace Buchanan-Dineen, a well-heeled socialite and lecturer, age 34, living at 7716 East Jefferson Avenue in an apartment building one block away from the Stephans's restaurant.
A descendant of French nobility, Countess Grace Buchanan-Dineen, had been trained carefully in espionage activities in Budapest and Berlin. Her instruction included microphotography, communication methods, gathering vital information, using secret inks, and developing a pretext for her movements throughout the United States. This pretext included Buchanan-Dineen becoming a lecturer on grace, charm, and manners to society ladies in Metro Detroit and elsewhere in the United States. Nevertheless, her real assignments included:
1) Location of munitions
2) Location of airplane factories, their production, and the number of employees
3) Location of military camps and naval bases
4) All available information concerning helium
5) Convoy composition and sailing dates
6) Information on medical supplies exported
The Countess's recruiter from the German Espionage Service, Sari deHajek, provided Buchanan-Dineen with a notebook containing the names and addresses of some 200 prominent and influential persons residing in thirteen states and the District of Columbia. However, within a month after arriving in Detroit from Europe in 1941, Buchanan-Dineen was contacted by the FBI. Subsequently, she cooperated fully with the Bureau and served as a double-agent. The Countess forwarded all information to her espionage superiors in Germany. However, she was operating under the surveillance of the FBI. Therefore, the FBI and the U.S. Army and Navy Intelligence Services cleared all information sent to Germany by the Countess.
Long known to the FBI in Detroit, Dr. Thomas associated with the successive leaders of the German-American Bund. These included the aforementioned Fritz Julius Kuhn, and Gerhard Wilhelm Kunze, a natural-born American. Thomas also associated closely with Fritz Heiler, the German Consul in Detroit. Notably, Thomas was close to Max Stephan, who hosted Bund meetings at his business establishment. Thomas served as a speaker at these meetings. Furthermore, the Justice Department reported that he "followed a prominent Detroit religious leader [unnamed] around to various meetings [in 1938 and 1939], speaking on behalf of National Socialism and defending Nazi Anti-Semitic atrocities."
Born to German parents in Yugoslavia, Theresa Behrens came to the United States in 1913. In 1929, she became a naturalized citizen in Detroit. The Justice Department reported, "On numerous occasions, Mrs. Behrens assisted in contacting persons and in gathering information desired by the spy ring." The report continued by stating that she "enthusiastically entered into arrangements to contact persons who had or could obtain the information desired by the German espionage group system and [that] no one in the Detroit group was more active than she, in lining up sources of information."
Questions Concerning the Stephan Case
1) The Countess had close contact with Behrens and Thomas. As a result, Theodore Donay met and assisted Peter Krug during his escape. Therefore, when did the Countess and the FBI become aware of Stephan and Krug's daytime tour around Detroit?
2) Did the FBI have all of the information that they needed about Stephan and Krug before receiving the report from Confidential Informant Dietrich Rintelin, the store assistant to Donay?
3) Given the sting operation that the FBI had been developing since 1939, was the appearance of Krug in Detroit treated as a "fly in the ointment," jeopardizing the real sting?
4) Did Dr. Thomas, Mrs. Behrens, and other core operatives perceive Krug as a potential threat to exposing the high-level espionage operation in Detroit, Chicago, and elsewhere?
5) Was the lower-echelon Max Stephan ordered to put Lieutenant Krug on public display at ten places of business before Krug left for Chicago by bus? This routine would have made him an easy catch for the FBI while diverting attention away from the real espionage activities in the Buchanan-Dineen ring.
6) Did Judge Tuttle strike the testimony of Krug and Stephan's time at the house of Mrs. Ludlow to protect members of the community and, as he suggested, "the eyes of the youth who may read the trial transcripts"? Conversely, did he receive pressure from above because the Ludlow house figured into the sting operation that the FBI had been developing?
7) Given that Krug passed through or stopped in eight of the thirteen states represented in the book of 200 prominent contacts now known to the FBI, did the Bureau allow this short-leash sojourn by Krug to facilitate and to solidify their bust of August 1943?
8) Was Stephan set up as an appeasement to the FBI, the sacrifice of a small fish after the Bureau refrained from making an easy arrest of Krug in Detroit?
9) Did Lieutenant Krug (recently promoted by the High Command during his incarceration) receive orders from his superiors to rise above the rules of the Geneva Convention? Did he testify voluntarily against Stephan to protect the flow of espionage information from the Arsenal of Democracy?
10) Did Stephan "rat out" his superiors in the Detroit espionage network in a gallows-side confession on the day that his execution was commuted to life imprisonment?
Auf Wiedersehen
As we close our episode this month, we may ask, "What is the takeaway for attorneys and researchers in Law, Economics, and related fields?" In the case of Max Stephan, as with most issues, there are historical perspectives that we must understand. The sociological, economic, political, and anthroposophical elements should remain as a matter of reflection. When holes in the facts and observations appear, we often find additional information looming just around the corner. To understand the Stephan case fully, we need to examine and trace not only Stephan's personal history. We must study the development of the underlying ideology that continues to rear its head in ways that motivated Stephan and others eighty years ago.
We hope that the story of Stephan, Krug, and related individuals helps our readers to see the relevance of this case to what has been happening recently in our country. Note: The paperback books are available at Amazon and elsewhere: "Peter Krug & Max Stephan: Nazis, Espionage, and Treason in Detroit" by John F. Sase (ISBN-13: 978-1546776642, SASE Associates, LLC, 2017); "No Ordinary Crime: An Authentic Tale of Justice Influenced by War Hysteria" by James R. Wilson (James R. Wilson Publishing, 1989); and "Lipstick and Lies" by Margit Liesche (Poisoned Pen Press, 2009).
Finally, present day court-watchers searching for current intrigue on either side of the aisle may find the detailed list of thirteen criminal cases interesting as future history: (https://www.justsecurity.org/75032/litigation-tracker-pending-criminal-and-civil-cases-against-donald-trump/, updated on Mar. 5, 2021)
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Dr. John F. Sase teaches Economics at Wayne State University and has practiced Forensic and Investigative Economics for twenty years. He earned a combined M.A. in Economics and an MBA at the University of Detroit, followed by a Ph.D. in Economics from Wayne State University. He is a graduate of the University of Detroit Jesuit High School (www.saseassociates.com).
Gerard J. Senick is a freelance writer, editor, and musician. He earned his degree in English at the University of Detroit and was a supervisory editor at Gale Research Company (now Cengage) for over twenty years. Currently, he edits books for publication (www.senick-editing.com).
Julie G. Sase is a copyeditor, parent coach, and empath. She earned her degree in English at Marygrove College and her graduate certificate in Parent Coaching from Seattle Pacific University. Ms. Sase coaches clients, writes articles, and edits copy (royaloakparentcoaching.com).
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