Full opinion text
OPINION DURFEE, Judge Plaintiffs, as citizens of the United States, are former stockholders or successors in interest to former stockholders of the General Dyestuff Corporation of New York (GDC). In 1942, during the war with Germany, the stock of this company was vested or seized by the Alien Property Custodian of the United States under the Trading With the Enemy Act § 1 et seq. (1964). Under the Trading With the Enemy Act, the U. S. Alien Property Custodian (APC) in 1942 also vested title in the stock of General Aniline & Film Corporation (GAF), another American company engaged in the manufacturing of dyestuffs, chemicals and other products, and assumed titular control thereof. In 1954, after an exchange of stock, the U. S. Attorney General merged GDC into GAF. In 1965, the Attorney General sold the GAF common stock for over $329,000,000. The allocable portion of these proceeds now claimed by plaintiffs in this litigation is $22,227,483.15, with interest thereon from March 1965, when the Attorney General sold the GAF stock. Although a settlement of an earlier suit by plaintiffs in the United States District Court was effected in 1945 and 1951, these settlements and accompanying releases constitute no prohibition to the present action. Section 42(a) of the Trading With the Enemy Act confers jurisdiction on this court to hear and render judgment on these plaintiffs’ claims “ [Notwithstanding any statute of limitation, lapse of time, any prior decision by any court of the United States, or any compromise, release or assignment to the Alien Property Custodian, * * *.” Defendant has attempted to place the responsibility for unusual delay in this long protracted litigation upon plaintiffs. The original bill enabling plaintiffs to sue in this court after the earlier settlement of the District Court action in 1945 and 1951, was enacted by Congress in 1962, and plaintiffs thereupon filed their original petition in this court. Due to a jurisdictional defect in the bill, resulting from a Supreme Court decision, it was amended in 1964 by Congress, and plaintiffs then filed their second amended petition in this court on November 16, 1964. After further pleadings by both parties, defendant amended its answer on April 27, 1965, to add as a new affirmative defense, an alleged conspiracy by plaintiffs with I. G. Farben to cloak the ownership and control of GDC. Extensive pretrial conferences, orders and initial trial proceedings were carried on by Trial Commissioner McConnau-ghey, whose untimely death in 1966 required further time for Trial Commissioner Fletcher to become current with all the matters then unsolved in this complicated case. Further amendments were added to the pleadings. Thereafter, extensive and protracted investigations were conducted of records scattered throughout the Washington area and in Germany, with translation required for the German documents. Equally extensive trial sessions and conferences were required in Washington and in Germany. Proof was closed in August 1968, and briefs and proposed findings by both parties were not finally completed until March 1969. The Trial Commissioner then had to review an extremely long and complex case with extensive briefs by both parties, an immense record of over 2,800 pages of oral testimony and over 900 exhibits, many of which are themselves voluminous. The Commissioner filed his report in January 1970, including a 21-page opinion and 93 meticulous and necessarily complicated Findings of Fact. Thereafter, extensions of time for filing exceptions and briefs to the court were required, and the case was argued here at the October 1970 term. Much of the time required to present this mass of material was taken in thoroughly exploring the history of the business and political practices and motivations of I. G. Farben and its German predecessor for the past one hundred years. Defendant insisted that the court review this as an essential part of the “entire mosiac” of Farben’s devious international ventures in order to see GDC’s part of the pattern. While the Trial Commissioner correctly considered much of this mass of evidence to be of doubtful relevancy, it was admitted over plaintiffs’ continuing objections and covered in the findings where relevant. Certainly no onus for the long protracted litigation of this case can be ascribed solely to plaintiffs, despite defendant’s contention in this regard. We have determined that the Findings of Fact made by the Commissioner are amply supported by the record, and that where such findings consist of inferences based upon circumstantial evidence, these inferences may be reasonably drawn from the record. The court is also in agreement with the excellent opinion of Commissioner Fletcher, as herein modified and combined into a single opinion, and hereby adopts the same, together with his findings of fact with minor modifications, as the basis of its judgment for plaintiffs in this case. It is quite clear, of course, that the Government had the power to seize GDC’s stock in 1942 provided only that “adequate provision is made for a return in case of mistake.” Central Union Trust Co. v. Garvan, 254 U.S. 554, 566, 41 S.Ct. 214, 215, 65 L.Ed. 403 (1921); Stoehr v. Wallace, 255 U.S. 239, 41 S.Ct. 293, 65 L.Ed. 604 (1921). It is equally clear that, under § 9(a) of the Act, it is the claimant’s burden in a case to recover his vested property to show that he was not an enemy, an ally of an enemy, or the agent of either, and that he owned his property beneficially without enemy taint. Societe Internationale Pour Participations, Industrielles Et Commerciales v. Rogers, 357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958); von Clemm v. Smith, 255 F.Supp. 353 (1965), aff’d 363 F.2d 19 (2d Cir. 1966); Feller v. McGrath, 106 F.Supp. 147 (W.D.Pa. 1952), aff’d sub nom. Feller v. Brownell, 201 F.2d 670 (3d Cir.) cert. denied, 346 U.S. 831, 74 S.Ct. 24, 98 L.Ed. 355 (1953). The parties are in no disagreement with respect to these fundamental legal propositions. They disagree only as to whether plaintiffs have borne their burden of proof as delineated above. That question, admittedly complex, has been resolved in plaintiffs’ favor. Beneficial Interest It is undisputed that all of plaintiffs or their predecessors in interest held legal title to their respective GDC shares when the stock was vested in 1942 by the Alien Property Custodian. However, the Government contends that by means of a prior cloaking arrangement and conspiracy, plaintiffs in reality were holding their stock for the benefit of I. G. Farben, a German corporation, and an enemy national at the time plaintiffs’ shares were vested. Our ultimate conclusion is that plaintiffs or their predecessors in interest held beneficial, as well as legal ownership of their stock, and that there was no conspiracy as alleged by defendant at the time of seizure in 1942. Plaintiffs’ proof meets both tests of bona fide ownership and non-enemy status. Accordingly, they are entitled to recover here. However different the situation may have been before July 1939, when Ernest K. Halbach, as an American citizen, obtained complete majority control and direction of GDC, no cloak in favor of I. G. Farben existed thereafter with respect to the stock of GDC. No plaintiff or predecessor-shareholder was an “enemy,” and each had both legal and beneficial ownership, subject only to options in favor of GDC contained in several stockholders’ agreements in 1939, as will be later discussed herein. Early History of the German Dyestuff Industry The early history of the pioneer German dyestuff companies began in 1863, and within 10 years they had become the leading producers of coal-tar dyestuffs in the world. By 1916, these companies had formed a large cartel. Their largest customers were in the United States, and 90 percent of the. dyes sold here were purchased through United States sales corporations organized and controlled by members of this German cartel. Defendant offers this early history for an understanding of the clandestine practice by Farben’s predecessor companies, of secretly “cloaking” the actual ownership of their foreign sales companies pri- or to and after World War I. In 1925, these German manufacturers combined their companies into one of the most spectacular business cartels recorded in history, I. G. Farbenindustrie, A. G., generally referred to as “Farben.” With virtual nationalization of German industry in the 1930’s by Hitler’s Nazi Party, Farben became an essential and important factor in the Germanic aggression of the 1930’s and 1940’s. Far-ben’s final end as an operating cartel came with the German surrender on May 7, 1945, but its name remains a specter that has bedeviled the United States Government and its courts for many years, and persists throughout the record of this case. The Founding of General Dyestuff Corporation The history of GDC and its successive shareholders is important, and their connection with Farben must be examined in some detail. The formation of the company in 1925 as a dyestuffs sales organization was part of an overall plan for sales operations within the United States formulated by leading German chemical and dyestuffs manufacturers, the three most prominent of which were known by the abbreviated names of Bayer, Bad-ische and Hoechst. Also, part of the plan was the establishment of United States manufacturing plants to produce chemicals and dyestuffs with the help of German expertise and patents. Later in 1925, these German manufacturers combined their companies into the I. G. Farben cartel. The three founders of GDC were H. A. Metz & Co. (the U. S. sales representative for German Hoechst); Kut-troff, Pickhardt & Company, Inc. (the U. S. sales representative for German Badische); and Grasselli Dyestuff Corporation (later to become known as General Aniline Works, which in turn later became a manufacturing division of General Aniline & Film Corporation). The formalities of incorporating GDC under New York corporation laws were handled by H. A. Metz, a trusted U. S. representative (or, in the German language, a vertrauensmann) of German Hoechst. However, it was fully understood that GDC’s incorporation was undertaken by him on behalf of the three founding companies, each of which had been allotted 2,000 shares of the new company. Metz became the first president and later, the majority stockholder of GDC. The History of GDC up to 1939 An original employee, director and minor stockholder of GDC in 1926 was Ernest K. Halbach, a native-born United States citizen. Prior to 1926, he had been a trusted employee of Kuttroff, Pickhardt & Company, which became one of GDC’s founders, and the United States sales representative for German Badische. GDC's originally issued stock in 1925 was free and clear of options, but not for long. About nine months after the original issue, all the shareholders were asked to, and did execute direct option agreements on their stock to I. G. Far-ben. For present purposes, the important provisions of these option agreements were that Farben on demand could acquire the shareholders’ stock at a price of $100 per share, plus six percent interest; that the shareholder in turn could require Farben to purchase all, or any part of his stock on the same terms, and that the stock certificates could be held in escrow by Farben’s designee. Hal-bach executed such an option on his original 500 shares. Before his death in 1958, Halbach testified in prior proceedings which are part of the record herein, that he was originally opposed to the options to Farben. However, at the time (and for over a year thereafter) GDC was operating at a substantial deficit, and the book value of his shares for which he had paid $100 per share stood at only $72 per share. His business mentor and former employer, Adolph Kuttroff, persuaded him to sign the option by the argument that the new company’s future was uncertain, and that the only sure way to protect his $50,000 investment was to execute the two-way option whereby he not only could be forced to sell his stock to Farben but, in turn, he could force Farben to buy it from him at $100 per share plus six percent interest. In 1926, Halbach’s influence and power as a minority stockholder and officer of GDC was minimal at most, and he could scarcely have resisted the beginning of Farben’s plan to cloak its control over GDC even if he had so desired. His minimal participation in the 1926 stock options to Farben presents an entirely different situation from that of the later GDC stock options in 1939 when he owned the great majority of the company’s stock and controlled its operations. During this interim period, 1926 to 1939, GDC had become the exclusive importer in the United States of all I. G. Farben dyestuffs. In 1929, Farben caused to be organized in New York the American I. G. Chemical Corporation, later to be known as General Aniline & Film Corporation (GAF). American I. G. was originally formed as a holding company to raise American capital. Control was placed in a Swiss company, I. G. Chemie, which was indirectly controlled by Farben. Among the subsidiary companies of American I. G. was General Aniline Works (GAW), formerly Grasselli Dyestuff Corporation. GAW had the exclusive right to manufacture Farben products in the United States, and GDC was its exclusive sales representative selling GAW’s dyestuffs on a consignment basis. In 1931, H. A. Metz, who by that time had become the majority shareholder in GDC, sold his 4,100 shares to D. A. Schmitz for the sum of $430,000. D. A. Schmitz was a naturalized U. S. citizen and the brother of Hermann Schmitz, the German chief executive officer of I. G. Farben. The 4,100 shares remained subject to Farben’s option, were endorsed in blank by D. A. Schmitz, and deposited in escrow with Farben’s New York attorneys, Briesen & Schrenk, who handled these transactions. Although he had little qualifications for the job other than his brother’s influence, within a few years D. A. Schmitz became president of American I. G. He also became the majority stockholder in other Farbenconnected companies in this country, including Farben’s technical service corporation, Chemnyco, Inc. D. A. Schmitz was a principal Farben vertrauensmann (trusted friend), and through his German brother Hermann, was at all relevant times controlled by Farben. D. A. Schmitz formed a personal holding company under the name of The Marion Company (Marion) for the purpose of holding options on the stock of GDC and other companies connected with I. G. Farben. The original direct options held by Farben on GDC's stock were cancelled without consideration, and new options thereon running to Marion were executed by the GDC stockholders. The option price remained the same, i. e., $100 per share, plus six percent interest. Marion also obtained similar options on the stock of other Farben-connected companies, including Chemny-co. Marion’s shares in turn were optioned to Greutert, a Swiss bank closely connected to Farben. All the stock certificates remained in escrow with Far-ben’s New York lawyers, Briesen & Schrenk. According to Halbach’s testimony before the APC investigators and others, he at first refused to sign the Marion option agreement submitted to him because he saw no sense to it. However, eventually he was persuaded to sign it upon assurance that the old Farben options would be cancelled. He thought it preferable that GDC stock should be optioned to an American company (Marion) rather than to a foreign one (Far-ben). The above described setup of companies and stock options remained substantially the same until 1938 when plans were made to dissolve Marion. The options which it held on GDC’s stock were cancelled without consideration, and were transferred to Chemnyco, Farben’s technical service corporation in the United States. Although the book value of GDC’s stock at this time was considerably more than $100 per share, the option price to Chemnyco remained at the familiar $100 per share plus six percent interest. As usual, the shares were endorsed in blank and deposited in escrow with Farben’s lawyers, Briesen & Schrenk, in New York City. There can be little doubt at this point in time that Farben continued to have the power to take direct control of GDC whenever Farben’s management might desire to do so. The Events of 1939 The year 1939 was to see some important changes in the ownership of GDC’s stock. The threat of war had become more imminent, and eventually, on September 3, 1939 the Western Powers declared war on Germany. Farben’s management began to re-examine its longstanding policy of disguising its control over foreign companies. Some high-ranking Farben officials including in particular, Dr. Kurt Krueger, had concluded that in the event of war between Germany and the United States, there was nothing Farben could do to prevent the seizure of any American company in which it held either a direct or indirect interest. They believed Farben’s only hope was to relinquish all its interests, direct or indirect, to trusted American friends relying on them to do nothing harmful to Farben’s business interests or helpful to its competitors. This change in Farben policy was an adoption of Dr. Krueger’s view that the shareholders of Farben's foreign sales representatives, such as GDC, should be trusted friends, but should also be completely independent and without any legal ties to Fai’ben. In a report to the Reich Ministry of Economics entitled, “Measures to protect the stockholdings of our foreign sales companies”, dated July 24, 1939, Farben explained this as a change in policy “which deliberately envisages the abolishment of all legal ties of a direct or indirect nature between us and the stockholders of the sales companies.” This growing change in German viewpoint probably accounts for the fact that earlier in the summer of 1939 Chemnyco cancelled its stock options on GDC’s stock without consideration, which meant that Chemnyco gave up its right to purchase for $600,000 GDC stock with a book value then in excess of $2,850,000. Another important change in Farben policy occurred at this time. For the first time since the beginning of GDC stock ownership in 1926, the stock certificates were removed from escrow with Farben’s New York law firm, Briesen and Schrenk, and delivered to GDC. Thus, for the first time, GDC and its stockholders gained actual possession and control of their own stock, certificates in 1939. Also, during this period of time, D. A. Schmitz sold his majority shares to GDC itself for $100 per share, resulting in a complete change of control over GDC. This was part of Farben’s plan for “the abolishment of all legal ties of a direct or indirect nature between us and the shareholders of the sales companies.” D. A. Schmitz as a majority stockholder and Chairman of the Board of Directors of GDC in 1939, was also a director and President of GAF from whom GDC bought the major part of the German dyestuffs it sold in America. D. A. Schmitz, as explained earlier, was also the brother of Hermann Schmitz who was President of I. G. Chemie, Far-ben's Swiss holding company organized to raise capital for Farben outside of Germany, and an important Farben official. Because of this obvious conflict of interest and his close ties with Farben management, Schmitz was advised by GAF attorneys to dispose of his GDC stock, and did transfer his 4,100 shares to GDC at $100 per share. Thereupon, Halbach purchased from GDC an additional 1,200 shares at $100 per share, which purchase made him the majority stockholder. At the same time, at Hal-bach’s invitation, several key employees also bought stock from GDC’s treasury, although their purchases were much smaller in amount than Halbach’s purchase. At the conclusion of these 1939 transactions, Halbaeh held 2,100 shares of GDC stock which constituted the majority of all outstanding shares. For the first time since his employment by the company in 1926, Halbaeh had the ultimate power to completely control GDC. Also, for the first time since he joined in executing the original options to I. G. Farben in 1926, Halbaeh (along with the minority shareholders) had actual physical possession of the stock certificates representing the number of shares owned. These transactions gave effect to Farben’s express intention of abolishing “all legal ties of a direct or indirect nature” between it and the shareholders of its sales companies. We should at this point make reference to defendant’s contention that no German sales organization, including those owned or controlled by Farben, was ever liquidated or sold in the sense of being completely released from control or domination, once it had been cloaked. It is true that German law required an industrialist who desired to sell or liquidate a foreign holding, to apply to the Government before proceeding with the disposition of that asset. According to Dr. Gustav Schlotterer, a high official in the Reich Ministry of Economics of the German Government, who was presented as defendant’s witness, no such application was ever made by Farben in relation to GDC even though violation of that law would presumably involve severe penalties. Defendant concludes that no application was necessary because GDS was cloaked under German law prior to 1939 and alleges that, in fact, the stock transactions of that year brought no change in the company’s status vis-a-vis Farben. Plaintiffs advance the polar position that no application was necessary because GDC was never cloaked nor dominated by Farben and, hence, Farben released no right, title or interest in GDC in 1939. We believe the answer lies somewhere in between. As war clouds continued to gather over Europe in 1939, Germany’s demand for foreign currency, which had always been substantial, increased sharply. The massive import programs which supported the war effort and the country’s ever expanding indebtedness represented the two primary drains on Germany’s foreign exchange reserves. Especially coveted were the so-called “free currencies,” such as dollars and pounds, which were regarded as legal tender throughout most of the world. These conditions made it mandatory for Germany to maintain whenever possible, all foreign sales organizations in. countries such as the United States, which were primarily responsible for the sale and distribution of German exports. It was these foreign outlets which provided Germany with large accumulations of foreign currency. Thus, it is no wonder that Germany attempted to regulate the sale of foreign interests. However, these regulations became impossible to enforce as general conditions in Germany gradually deteriorated. The reasons are quite understandable. Germany was completely dominated by a single dynamic force who, as it was later revealed, was truly the world’s most deadly madman. His erratic behavior wrought utter confusion and genuine fear within Germany itself. Every determination of any importance was made by Hitler or his handful of sycophantic lackeys. Nevertheless, for some time the Government left unheeded the desperate pleas of German industrialists who prayed for protective measures which would insure against confiscation of foreign assets in the event of war. A cloaking decree issued on September 23, 1938, which offered German industry some measure of the cloaking protection it sought, was quickly cancelled once the Sudeten crisis passed, and the Munich Agreement was concluded. This brief respite deluded the German people into believing that Hitler once again had miraculously avoided the threatened holocaust at the last moment. However, when the euphoric mood which gripped the German people after Munich began to dissipate, the innermost fears of these industrialists long ago expressed and ignored, began again to be realized. In most eases, there remained insufficient pre-war time to effect the extensive conditioning and preparation necessary to an effective program of economic warfare. With the outbreak of war in Europe in September of 1939, the German Ministry of Economics issued top secret directives that cloaking of foreign assets through German companies abroad was a matter of “urgent concern.” This cloaking device aroused formidable political opposition within the German Government. The powerful foreign organization of Hitler’s Nazi Party, the “Auslands-Organization,” (AO), contended that the futility of cloaking efforts had been proven in World War I, including the risk of the “dummy” refusing to return the property, whereas refusal to cloak left open the opportunity of reclaiming the property when peace was established or at least being compensated for the loss. To the AO, cloaking was only a pretext on the part of private business to deprive the German firms abroad of their German character and to free them from German influence. The AO reproached Farben in this respect with “particular acrimony.” This powerful political opposition against cloaking foreign companies placed the Ministry of Economics in a delicate position within Hitler’s government, and it thereafter considered cloaking applications with a strict view on a case by case basis. According to a high-ranking Government official of the German Ministry of Economics: With the outbreak of war, serious doubts arose as to whether we had been right in refusing cloaking measures offhand or at least applying as strict a test as we had done. We asked ourselves if we should not to have helped private business in their endeavor to safeguard their foreign property instead of hampering them. We were openly blamed for having allowed German property abroad to be seized by the enemy. Thus the gear was reversed by 180 degrees and the circular order of September 9, 1939 was issued. It opened the sluices, and this meant that now, in the intricate war situation and in a brief space of time * * * things had to be done which could have been brought about, if at all, only by calm consideration and long-hand preparation. Strictly speaking, the order was an act of sheer desperation * * *. [Emphasis supplied.] Predictably, these frantic last-minute attempts at cloaking with Government approval proved singularly unsuccessful. The Reich Ministries were no longer willing or able to monitor the actions of German industry. Thus, official control over cloaking and other dispositions of foreign enterprises steadily decreased by both circumstance and design. By 1939, virtually no Government regulation remained in force. German industrialists were endowed with wide discretionary authorizations to safeguard their foreign interests in any reasonable manner. Dr. Schlotterer, defendant’s own witness, so testified: “ * * * we left to the firms such measures as they considered proper and right. * * * With increasing danger, of course, we were put in the position where we had to give the firms more and more scope.” Left to their own devices, Farben embarked on an advanced program of liquidation of foreign properties into the hands of “completely independent” but nevertheless “trusted friends.” As outlined above, this was the policy advocated by high-ranking company officials such as Dr. Kurt Krueger. Thus began the series of complex events, commencing with the cancellation of Chemnyco’s options on the GDC stock and the sale of said stock to GDC by D. A. Schmitz, with which we are now primarily concerned. This new policy approach, developed in the late 1930’s, combined with the chaotic conditions that existed in 1939, enabled Farben to allow cancellation of these options and sale of GDC stock without application to or consultation with the Reich Ministry of Economics within the German Government. Dr. Schlotterer also testified that strict compliance with German law required the filing of an application with his Ministry of Economics in order to effect any substantial change in stock ownership of a foreign sales company, even if the transaction was intended as a cloak rather than a sale, liquidation or other final disposition of property. However, he stated that he knew nothing about the change in ownership of GDC stock which took place in 1939. If those 1939 transactions were intended to be a cloaking of GDC, then Dr. Schlotterer thought that Farben would have filed a written application with his Ministry as it had done in other instances, for example, as in the case of GAF. Yet, to his knowledge, such an application with respect to GDC was never filed by Far-ben, and this is also a fact established by the record. The substance of Dr. Schlotterer’s testimony was confirmed by Dr. Kurt Krue-ger. Dr. Krueger recalled that any change or substitution of trustee shareholders of a foreign sales company without the permission of the Reich Ministry of Economics would constitute a direct violation of the German foreign exchange laws. Presumably, this would apply to the substitution of Ernest Hal-bach for D. A. Schmitz as majority shareholder of GDC if, in fact, this was merely a continuation of Farben’s cloaking procedure. Farben’s complete lack of communication with the German Government visa-vis GDC further supports our conclusion that Farben’s relationship with GDC, before and after 1939, was at all times separate and distinct from the relationships it maintained with its other foreign interests, especially sales organizations. Indeed, plaintiffs cite numerous other instances in which Farben would have been considered in direct violation of the principle and spirit of German law if, in fact, GDC was being operated as a German firm abroad exclusively serving German interests. For example, Dr. Schlotterer testified that from 1936 on, German firms were not allowed to retain any surplus funds abroad without authorization; yet, it was clear that during this time and without any German authorization, GDC had accumulated a substantial capital surplus, and had declared stock dividends in 1940 and 1941 to all of its U. S. stockholders which increased their interest in GDC’s surplus by 125 percent. Consolidated Dyestuffs Corporation, Limited (Canada) In addition, although GDC and Consolidated Dyestuffs Corporation, Limited (CDC) — Farben’s Canadian sales organization — maintained comparable positions in the hierarchy of Farben’s foreign network of sales organizations, there were certain critical differences in the way Farben actually treated them which merit further elaboration. CDC’s stock was first held by nominees whose purchases were initially financed by the Farben constituent companies, Badisehe and Hoechst. Later the shares were held in the names of trusted persons of Farben, the shares having been endorsed in blank and held for the account of I. G. Farben. The nominal shareholders from inception included Ernest K. Halbach, and in April 1936, D. A. Schmitz took the place of Wilfred Grief as the nominal holder of one share of CDC. The nominal shareholders had executed statements to the effect that their shares and any dividends thereon were the property of I. G. Farben. In 1936, discussions were held between the management of the Canadian company and I. G. Farben representatives concerning the recapitalization of the corporation in order to bring about participation of residents of Canada in the corporation and to transfer direct ownership from I. G. Farben. In accordance with these negotiations, various companies were considered as suitable for the ownership of the recapitalized shares of CDC. The Axe Trading Company, Ltd., London (Axe) was selected because the British character of CDC would be better preserved through its being held by an English corporation rather than by an American or Dutch concern. In July of 1936, pursuant to the foreign exchange law and decree of the German Government, Farben requested permission from the German Government to transfer the capital stock of CDC to Axe, subject to the reservation of a reciprocal right of repurchase by Farben. Under the proposed plan, Axe was to purchase the entire issued stock of CDC and convert 500 shares thereof into six percent redeemable preferred stock. Axe would then sell to CDC’s directors five qualifying shares of the capital stock and all the preferred stock, the latter stock being subjected to an option in Axe’s favor to repurchase it with a corresponding right of the stockholders to demand that Axe repurchase. As a director, Halbach was to acquire one qualifying share of the capital stock and 50 shares of the preferred stock. In essence, the above described plan was carried out, the stock purchase by Axe being financed by a loan from Far-ben. By an agreement dated November 20, 1936, Axe granted Farben the option, irrevocable for 30 years, to repurchase at $100 per share the 1,995 shares of CDC’s stock which would remain in Axe’s name after it had sold 505 shares to the CDC directors, including Halbach. Those 505 shares were paid for by Hal-bach and the other directors in cash, who then executed options to repurchase in favor of Axe with a reciprocal right to require Axe to repurchase. By means of the options described above, CDC remained under Farben’s potential control until the majority of its shares were seized by the Canadian Government in 1939. All Farben transactions with CDC stock were reported to and were subject to the approval of the Reich Ministry of Economies (as was required of all companies with cloaked foreign interests). By contrast, the Schmitz 1939 sale of GDC shares to GDC itself, and the cancellation of the Chemnyco options on GDC stock were neither reported to nor licensed by that Ministry. Further, an official report of two German tax officials concerning Farben’s stock subsidiaries referred to the fact that the shares of Farben’s Canadian sales company, CDC, were carried as an asset on Farben’s balance sheets, and that its dividends had been taxed by the German Government. No such statements were made with respect to GDC despite its surplus and declaration of stock dividends. We note finally that although the Canadian Government seized the stock of CDC in 1939, Halbach and the other directors were allowed to retain their CDC shares. It is fair to assume that Hal-bach’s shares of CDC also would have been seized if the Canadian Government’s investigation had uncovered any questionable relationship between Hal-bach and Farben. This bolsters our conclusion that Halbach was a loyal American citizen who was free at all times from the domination or controlling influence of I. G. Farben. In 1939, Farben requested permission from the German Government to drastically alter its existing relationships with its foreign sales companies. In a report dated July 24, 1939 to the Reich Ministry of Economics, Farben stated its new proposal for cloaking: For these reasons we have come to the conclusion that real protection of our foreign sales companies against the danger of sequestration in wartime can only be obtained by our renouncing all legal ties of a direct or indirect nature between the stockholders and ourselves — which at present give us the right of access to the stocks of our sales companies — and replacing these legal relations by transferring the right of access to these assets to such neutral agencies as by virtue of their personal connections with us of many years standing, in some cases even covering decades, will give us the absolute guarantee that in spite of their complete independence and neutrality they will never dispose of these assets otherwise than in a manner entirely in accordance with our interests. [Emphasis supplied.] * * * * * * We should appreciate it, if in consideration of the afore-mentioned summarized reasons, you would now agree to the structure suggested by us, which deliberately envisages the abolishment of all legal ties of a direct or indirect nature between us and the stockholders of the sales companies. [Emphasis supplied.] We give especial emphasis to Farben’s statement in 1939 that it would transfer its existing right of access to the stocks of its sales companies to trusted neutral agencies. This is precisely what Farben did with GDC in 1939. From 1926 to 1939, during all of Far-ben’s manipulations of GDC stock through its subsidiaries, the Marion Company and Chemnyco, all of the GDC stock was held in escrow in New York by Farben’s U. S. law firm, Briesen & Schrenk, although the GDC stock options held by Farben were transferred to Marion, and by it to Chemnyco. At this point there is little doubt that Farben continued to hold the power to take direct control of GDC at will and that Far-ben still had “beneficial ownership” of the stock. However in 1939, in what was probably one of the wartime “acts of desperation” described herein by a high German official, Farben caused Chemnyco to cancel its GDC stock options without consideration. For the first time in the history of GDC since 1926, Farben in its own words transferred its “right of access to the stock certificates”, and the stock was removed from escrow with Farben’s lawyers in New York, and delivered to GDC. For the first time since 1926, Halbach acquired actual possession and control of his majority stock certificates, free from stock options to Far-ben or any of its subsidiaries. From 1939 on, Farben received no benefits from GDC because much of GDC’s capital surplus was thereafter distributed to Halbach and its other American stockholders in the form of stock and cash dividends until GDC was vested in 1942. There is no evidence or record of any claim anywhere or any time of “beneficial ownership” by Farben during this period 1939 to 1942. Thus, from 1939 to 1942, Farben enjoyed no benefits, tangible or intangible, such as stock options, direct or indirect, from GDC. It had no right of access to the GDC stock and, most importantly, there was no possible method by which Farben could wrest from Ernest K. Halbach the absolute majority stock control over GDC without his consent, and this, we believe, would have been inconceivable. Finally we can point to a particularly graphic example which illustrates conclusively that GDC did not conform to the definition of a cloaked company as it was understood before 1939 and administered within Farben’s empire of foreign subsidiaries or after its proposed reformulation, as quoted above, in 1939. In response to the other radical proposals advanced by Farben on July 24, 1939, the Reich Ministry of Economics insisted upon assurances that in the execution of these new proposals, Farben would continue to have full control over their foreign companies. In reply, Far-ben declared that it would retain “unrestricted influence upon the foreign companies” and added: We declare, moreover, that the decisive real influence we shall have on the foreign sales companies even after the carrying out of the new measures [presumably the severance of all legal ties], will be sufficient in every respect to answer the requirements of the German governmental and party authorities with regard to personnel and political questions. We shall always be able to eliminate from our sales business those individuáis who are unsuitable or suspect because of their political position■ * * *. [Emphasis supplied.] We emphasize that portion of the statement which was obviously regarded as an indispensable prerequisite to any cloaking operation. At that time, it was necessary not only to satisfy the strict requirements of the German Government which historically viewed cloaking with much skepticism, but also to assuage the inflexible foreign party organization, the AO, which firmly opposed cloaking under any circumstances. Nevertheless, in complete and total disregard of this express declaration and in sheer violation of the most basic principles and philosophical tenets of the Nazi ideology of terror, GDC openly defied that portion of the September 9, 1939 cloaking order which emphatically banned the employment of any Jewish person by a cloaked company: “Of course, the companies are required to see to it that no Jewish foreigner be employed by any German firm that is to be cloaked.” [Emphasis in original]. Indeed, in 1938, Halbach hired one Gerardo E. Niesser in GDC’s sales department in New York after he had been discharged by Farben from its Chilean offices in 1938 because he was a Jew. Mr. Niesser not only continued to be employed by GDC after September 9, 1939, but became GDC’s export manager. We need not recall in detail the genocidal policy practiced against the Jewish people by the Nazis to infer that in 1939 the German Government, Farben and for that matter, any German who valued his life, would consider any Jew to be an individual who was “unsuitable or suspect because of their political position * * x-» Recognizing fully Hitler’s fanatical devotion to the extermination of “Jewish” as a religious or even abstract concept, we cannot believe that Farben would have permitted the employment of a Jewish individual as export manager, or in any other position, in any company, cloaked or not, in which it maintained command influence. We must remember that Halbach engaged Mr. Nies-ser after he had been released from prior Farben employ because he was a Jew, and subsequently Halbach placed him in a sensitive and prominent position within GDC’s sales department. Whatever equivocations one might advance in regard to Hitler’s numerous domestic and war strategies, it has yet to be suggested that the Fuehrer's policy towards the Jewish people was anything less than absolute genocide. Thus, we are forced to conclude that Halbach’s operation of GDC in this regard was in complete and open disregard of the directives of both the German Government and Farben as to Jewish people. Certainly, if it still controlled GDC, Farben would have known that its U. S. agent employed a Jewish export manager which it had previously discharged in compliance with Nazi directives. In any event, we cannot believe that this is the type of situation which Farben would have permitted to continue if it retained even a modicum of control over GDC. The only fair inference to be drawn is that Farben was powerless to remedy this situation because it did not retain any beneficial ownership of GDC nor did it possess any control or influence over its daily operations. Defendant also relies upon certain entries contained in Farben's so-called books or registers of participations to prove that plaintiffs never truly had beneficial ownership of GDC notwithstanding these stock transactions. These books were secret company records containing terse, and somewhat obscure, entries regarding Farben interests in literally hundreds of companies throughout the world up to the year 1939. The information reflected in these books was gathered from various sources such as file folders in which diverse information pertaining to different industrial interests of Farben was haphazardly accumulated, company records, published changes in company status as required by German law, annual business reports of I. G., and most importantly, orders of the high Farben officials directly responsible for the maintenance of these books. This conglomeration of facts was compiled and typed on loose sheets which were later bound. If a change thereafter occurred, it would be reflected by a handwritten entry. Indeed, both registers submitted for our consideration are replete with handwritten additions and deletions. The two books in evidence, the latest bearing the date of December 1938, contain substantially identical entries showing GDC to be a 100 percent “I. G. Kon-sortial” interest. The word “Konsortial” meant that the company shares were held by Farben trustees. In relation to these registers, the court was able to consider the testimony of one Hans Piotrowski, a Farben official who maintained the actual registers until August 1939, and one Dr. Walter Hoyer who was, for sometime, Piotrowski’s immediate superior and presumably the source of much of the information entered upon these registers by Piotrowski and his successor. After an exhaustive analysis of the testimony of these witnesses and the books themselves, we have concluded that they have little probative value, if any. Neither witness could vouch for the accuracy of any information relayed to him by his superiors which eventually was recorded in these registers. Although the facts concerning a foreign enterprise (such as GDC) were provided by the head of that particular Farben department which monitored the foreign company’s operation and acted as liaison between it and the parent company, they were never checked for accuracy before they were recorded. This may account for the numerous errors and inconsistencies which could not be reconciled by these witnesses. In fact, Dr. Hoyer freely admitted that when a Farben official required accurate and complete information concerning a particular foreign company associated with Farben, he would rely on the original records which were kept for every company, rather than upon the registers. In addition, the witness stated that corrections, substitutions or deletions were made in each new and up-dated register which was printed periodically. He could not state whether there existed a book of participations which might have been compiled after December 1938. As to the specific entry listing GDC as a 100 percent “I. G. Konsortial,” we may assume that it was correct when originally recorded. However, all evidence available indicates that these registers were not kept up-to-date after 1938 as Germany became further embroiled in the international conflict. This accounts for the lack of modification of the 1938 GDC entry which would have otherwise reflected the highly significant changes which occurred in 1939. We must remember that GDC was located in the United States. Thus, any information relating to its internal structure in 1939 would have originated there. In fact, as international relations deteriorated, the normal flow of commercial communication was seriously impeded. Nowhere was this more evident than in the United States. As conditions worsened, the reliability factor of the information transmitted correspondingly diminished. At that time, no one was in a better position to assess this situation than Dr. Hoyer. When questioned about possible changes in the capital organization of GDC in 1939, Dr. Hoyer responded: The ZA office [which was responsible for the registers] would certainly have recorded any changes in the capital set up if they had come to their attention but when War started, and it started in 1939, something happened which I think happened in America, too, that an excessive secrecy prevailed and communications were just withheld and especially, I would say, that information as to changes in participation or capital set up, especially in America, would just not fall under the sort of information that was freely circulated any more. [Emphasis supplied] . * * * X- X- -K All I said before was that at the time these records were made, the information reflected therein was correct as to the information available to the ZA office. Any later changes, of course, the ZA attempted at all times to reflect such changes but during wartime it is possible that it did not get all the information to make them. [Emphasis supplied]. This testimony is particularly significant because we are dealing with a GDC entry in the register made in 1938 which clearly should have been changed in order to keep the books accurate as to the highly significant events in 1939. It is, however, quite understandable that, under the conditions that persisted in 1939, information describing a change in the capital structure o,f an American sales organization was never reported nor recorded in the registers. To further illustrate that these registers were totally unreliable and were not kept up-to-date, at least past 1938, we note the occurrence of two significant events in 1939, and the fact that one was recorded in these registers, and one was not. In November 1939, the American I. G. Chemical Corporation merged with its manufacturing subsidiary, General Aniline Works, to form GAF. This change is reflected in the 1938 register. More importantly, however, we have previously stated that in 1939 the Canadian Government seized four-fifths of the outstanding shares of stock of Consolidated Dyestuffs Corporation (CDC), Farben’s Canadian sales organization. Yet, the latest book of participations in evidence does not reflect this drastic change in Farben control over CDC but, to the contrary, continues to list CDC as a 100 percent “I. G. (Konsortial)” interest. In any event, we regard these books of participations as no more than shorthand guides of dubious reliability which were used by Farben officials for quick and handy reference, and which were kept up-to-date, at least after 1938, only as conditions permitted. They were never considered complete nor entirely accurate by the men directly responsible for their maintenance, particularly after 1938. As such, they are virtually worthless to refute plaintiffs’ explicit evidence as to Halbach’s acquisition of complete majority control of and beneficial interest in GDC in 1939. In September 1939, Walter Duisberg, former treasurer of GAF, purchased 900 shares of GDC’s stock which made him the second largest stockholder. Duis-berg was the son of one of the founders of I. G. Farben, and was a highly trusted vertrauensmann. Later, Duisberg sold a portion of his shares back to GDC and still later in 1941, had contracted with the company to sell it the balance, but the Treasury Department blocked the latter transaction. Defendant asserts that Duisberg as a stockholder was also a Farben agent who could be relied upon to take over control of GDC for Farben if Halbach died or retired. However, the record is clear that Halbach was opposed to this; Duis-berg was asked to resign as a director, and did so. After December 1941, he could have been outvoted by the other minority stockholders in the event of Halbach’s death or resignation, and they were also opposed to any control of GDC by Duisberg. If the 1939 stock sale to Duisberg was relied upon by Farben to retain control of GDC, it failed because of Halbach’s outspoken opposition to Duisberg’s potential control over GDC as a stockholder or director. At the time of these stock purchases from GDC, all the shareholders entered into a stockholders’ agreement which granted to GDC the option to purchase at $100 per share plus six percent interest from the date of the last dividend, áll of the shares of any stockholder who desired to sell, who died, or who ceased to be a director, officer or employee of GDC. Between 1939 and 1941, several modifications were made to the stockholders’ agreement, but the option price of $100 per share plus six percent interest from the date of the last dividend was never changed. During this period, a few new shareholders were added, including Hal-bach’s friend and physician, Dr. St. George, and the president of a GDC supplier, George A. LaVallee. Defendant has referred to these new stockholders as being “completely subservient to the wishes of E. K. Halbach” and “entirely responsive to the will of E. K. Halbach.” Insofar as the affairs of GDC were concerned, these statements (and many like them) describing Hal-bach’s dominating position are no doubt true. What counsel for defendant have refused to do, however, is to carry their argument to its own logical conclusion. When in August 1939, Halbach acquired the majority shares in GDC, subject only to an option running to GDC itself, Hal-bach’s dominance (long sought by him) was indeed complete. That dominance, however, extended not only over the minority shareholders, directors and officers of GDC. It likewise extended, so far as GDC was concerned, over all individuals and corporations having had anything to do with GDC in the past. If Halbach and the other shareholders were merely Farben nominees with Far-ben holding beneficial ownership of the GDC stock, one would assume that there was some way by which Farben could have taken control of the company. However, there is nothing in this record to indicate that Farben could have done so, after August 1939, without Halbach’s acquiescence. Assume that the APC had not seized GDC’s stock, that Farben had survived World War II and that the Hal-bach family trust had not been created; to state that Halbach would have voluntarily turned over to Farben the highly successful company which he had built, and ultimately controlled after 1939, would be an incredible conclusion. Far-ben’s only “trump card” would have been to refuse supplies of dyestuffs to GDC after 1939, a weak reed indeed, when one considers the respect accorded by the American dyestuffs industry to Hal-bach’s admitted ability to sell dyestuffs, be they Farben products or those of any other manufacturer. It is clear that Farben considered Halbach to be one of its trusted American friends, or ver-trauensmann, and up to 1939, he may have been in a strictly business sense. GDC bought most of the dyestuff products it sold in the United States from Farben companies. Nonetheless, it runs counter to human nature, as well as all the inferences permissible from this record, to conclude from this fact that Hal-bach would in 1939, or thereafter, have voluntarily relinquished to Farben his stock control of GDC for a mere $100 per share plus six percent interest. The GDC Stockholders’ Agreements Defendant also points to the GDC stockholders’ agreements as supporting its contention that plaintiffs never had any beneficial interest in their GDC stock beyond the $100 per share plus six percent interest option price. The argument is that the “intrinsic value of the stock vested” never exceeded that amount, a proposition which defendant claims is supported by the testimony of its two acknowledged experts on stockholder agreements in close corporations, Professor Israels and Dean O’Neal. This is not true. Two stock dividends had substantially increased plaintiffs’ interest in the GDC surplus. When this was brought to Dean O’Neal’s attention on cross-examination, he readily agreed that the .value of the stock was thereafter “more than double” what it had been before. Defendant’s counsel place considerable emphasis on the testimony of Professor Israels that he had never seen a stockholders’ agreement where the fixed price contained in the agreement was substantially lower than the book value of the stock, and on Dean O’Neal’s conclusion that the GDC stockholders’ agreement was “a hybrid sort of arrangement” because, among other reasons, an employee-stockholder “can be taken out by the exercise of the option, and that option can be made exercisable by discharging the employee.” That there is nothing illegal or sinister about such provisions in a stockholders’ agreement, however, is clear from the decision in Martin v. Graybar Electric Company, 285 F.2d 619 (7th Cir. 1961). That case involved a stockholders’ agreement containing provisions very similar to the GDC agreements. The stock of Graybar Electric Company was entirely owned by its employees and pensioners, and it was subject to an option in favor of Graybar whereby, in the event of a stockholder-employee’s “death * * * or cessation of employment other than retirement on a pension,” the company was entitled to purchase all his stock for the original $20 per share purchase price plus accumulated dividends. Martin, a long-time Graybar employee, owned some of its stock, part of which he had acquired by purchase and part by stock dividends. All his shares were subject to the above-described option. For the stock which he purchased, he had paid $20 per share, and as the court put it at 285 F.2d at 622: * * * All of the stock was worth more than $20.00 a share at the time it was acquired by plaintiff; some of it had a value greatly in excess of that amount. Plaintiff as well as other employees could purchase at this low price because of the option which was expressly related thereto. * * * Following his voluntary resignation from the company, Martin endeavored to repudiate the option agreement on the ground that “the stock was worth more than the option price and he wanted more money.” 285 F.2d at 623. He was unsuccessful in this effort. The Seventh Circuit affirmed the action of the District Court dismissing Martin’s action and decreeing specific performance of the option agreement in Graybar’s favor. The court held that, under the law of New York (the applicable law in the case), the option agreement did not constitute an unreasonable restriction on the transferability of Graybar’s stock and was not part of an illegal plan to control the employees’ free choice of action. Due to the strong similarity between the GDC and Graybar option agreements, this case is persuasive authority in favor of plaintiffs’ position that the GDC’s stockholders’ agreements were fair and reasonable to all concerned. Indeed, defendant’s expert, Dean O’Neal, agreed that a shareholders’ agreement between GDC stockholders was “certainly justified” and, while the Dean himself would have made some specific provision for succession to control, he thought that the agreement so far as it went, was a “reasonable” one. Also during this period, 1939 to 1941, two stock dividends were declared which had the effect of substantially increasing the stockholders’ respective interests in GDC’s large surplus. Specifically, for each share purchased in 1939, a stockholder by 1941 had two and one-quarter shares. This meant that anyone, including Far ben, who desired to purchase GDC stock after 1941 would be required to pay 125 percent more than he would have paid in 1939 to acquire the same percentage of the total amount of GDC stock. It is fair to assume, therefore, that had the stockholders’ agreements been part of a scheme or conspiracy to cloak the true beneficial ownership of GDC stock and thereby allow German interests, such as Farben, to repurchase the stock after the war, then they would have contained a standard antidilution clause providing for a pro rata reduction in the per share price in the event of a stock dividend or other similar reclassification. We conclude that the 1939 stockholders’ option agreements were legal, fair and reasonable, and that plaintiffs all acquired the full beneficial interests in their GDC stock. The Events of 1940-1942 Halbach’s testimony in a prior proceeding, which is part of the present record, was that in 1940 he was asked by two Farben officials to travel to Genoa, Italy in order to devise a plan which would break the British blockade of Germany by shipping dyestuffs to GDC via Siberia. Halbach stated that his main concern was to keep his GDC American consumers who had been using these Farben dyestuffs in their goods, “going on them” by a continuous supply through these shipments. However, Hal-bach refused to accept any responsibility for the shipments via Siberia. Instead, he insisted that he buy the goods from Farben in Japan with freight, insurance and all other costs of shipment to be paid by Farben. Upon delivery to GDC in Japan, the goods would be shipped to America on American ships by GDC. Farben’s two officials eventually agreed to Halbach’s terms. To close the deal, however, Halbach exacted an added five percent discount on Farben’s prices, from which GDC realized a profit of $250,000 on these shipments at Farben’s expense. Although a secret code for communications was adopted in order to avoid detection by the British who were holding U. S. mail to the Continent at Gibralter for censorship, the details of these transactions between Halbach and Farben were never concealed. On his return to the United States, Halbach went immediately to the National City Bank of New York, and explained the plan to its President and 'Vice