The Expert Witness: Treason in Detroit: The odd and curious case of Max Stephan (part 2 of 2)

John Sase With Gerard J. Senick

“Laws are spider webs through which the big flies pass and the little ones get caught.”
— Honoré de Balzac, French novelist,
 playwright, short-story writer, and former apprentice at a law firm

In Part One of this series, we outlined the background of the case of Max Stephan, a Detroit restaurateur and Nazi-sympathizer who became one of the first American citizens to be found guilty of treason since the mid-nineteenth century. We also presented the ideology that helped to motivate Stephan and other subversives during World War II in Detroit, the Arsenal of Democracy. In this month’s column, we will conclude Stephan’s story, introduce some new characters from the Buchanan-Dineen espionage case of 1943, link Stephan with this ring, and raise questions about the unusual aspects of Stephan’s case.
The case of Stephan focused on his giving aid and comfort to Luftwaffe Lieutenant Hans Peter Krug, a young escapee from the Bowmanville POW Camp, which was near Toronto, Ontario. At the end of Part One, Krug had bused down to Windsor, had crossed the Detroit River, and had made it to the home of Mrs. Margareta Bertelmann, who lived near Jefferson Avenue and Alter Road. Krug knew her name and address from the care packages that she and her ladies’ auxiliary group sent to Bowmanville. Bertelmann’s group met regularly at the German Restaurant, the establishment owned by Max Stephan. The restaurant was located near the corner of East Jefferson at East Grand Boulevard within sight of the Belle Isle Bridge.

Le Tour de Troit
On Friday, 18 April 1942, Bertelmann called Stephan between 9 and 9:30 a.m. He arrived at her home by automobile between 9:30 and 10 a.m. Reportedly, the Bertelmann home was the only private residence that Lieutenant Krug had entered during his time in Detroit. During his brief stay, Bertelmann provided Krug with $20 and some fresh underwear.
It was at the Bertelmann home that Krug met Stephan for the first time. Stephan suggested to Krug that he abandon his impossible escape plan and give himself up. Was Krug considered a porcupine that Stephan wished to toss into the lap of someone else? Soon, Stephan reversed his position for no apparent reason. He invited Krug to remain in Detroit as his guest until Monday. Stephen explained further that he wanted Krug to be the featured speaker at a Sunday-night meeting of the Schwaben Society, a German cultural/social group. At this meeting, Stephan wanted Krug to tell about life in Germany, his war experiences, and his escape. What Stephan did not reveal to Krug at this time was that an inner core of pro-Nazis planned to remain at the restaurant after midnight to celebrate the Fuhrer’s birthday, which was on 20 April. Krug declined this invitation.
Stephan drove young Krug back to the German Restaurant. Krug did not have the address of the restaurant with him. This seems odd because Stephan had sent the packages prepared by the ladies’ auxiliary group to Bowmanville POW Camp from his restaurant. Stephan then sent Krug, who had slept very little in the past three days, on a walking tour of downtown Detroit. Apparently, Krug made this 2.5 mile walk in broad daylight while continuing to wear the overalls in which he had escaped.
After his walk, Krug returned from downtown by trolley before noon. Shortly thereafter, Stephan and Krug began their whirlwind tour of the near eastside of Detroit, a trip that they would make in Stephan’s car. The pair made stops at six commercial establishments. Their first destination was the A.W. Lenz Company. Here, Stephan would pick up dishes, glassware, and crockery for the meeting of the Schwaben Society on Sunday evening. While at the Lenz Company, Stephan asked the proprietor, William C. Lenz, to call the Michigan Central railroad station and ask for departure times to Chicago for that day. The purpose of this indiscreet inquiry, which could have been made by Stephan himself, remains unknown. Lenz reported back that the trains left at 4 p.m. and 11 p.m. Per testimony, Stephan and Krug made plans for his departure at 4.
Next, the pair made a stop to purchase a small traveling bag for Krug at the shop of a Jewish merchant (name not known). The Jewish community had been very active against the Bund and its leader Fritz Kuhn during the 1930s, picketing the German Consul in Detroit with signs that read “We Don’t Want Hitler Spies in Detroit.” Following their purchase, Stephan and Krug headed to Haller’s Café at 1407 Randolph on the northeast corner of Gratiot at the lower end of Harmonie Park; Stephan had known August Haller, the proprietor, for about ten years. During the Saturday lunch-hour, thirty patrons were at the restaurant. Rather than sit at a less-exposed table, Stephan and Krug took seats at the bar. They were served two rounds of boilermakers (whiskey with a beer chaser) by Haller himself. Perhaps the drinks on a fairly empty stomach and apparent lack of sleep left Krug a bit inebriated: After he and Stephan left the restaurant, Krug had to return to retrieve his new traveling bag, which he had was given to Haller, who placed it behind the bar. It would have been easier for Krug to leave the bag in the back of Stephan’s car before entering the restaurant. Did he leave it with Haller for a reason?
Next, Stephan and Krug drove to the Fortschrittsbund (Progress Federation) Hall at 3003 Elmwood Street, which was located at the northwest corner of Elmwood and Arndt Street on the near eastside. Like dozens of German societies in America, the Fortschrittsbund had started as a singing organization. The hall served as a community gathering-spot for drinking and for singing traditional folk songs. Krug and Stephan continued to drink at the hall. This continued midday drinking led Krug to slip into speaking German rather than English, an error about which Stephan warned him. This seems unusual because the hall catered to patrons of German and Hungarian descent. Could getting Krug tipsy while introducing him to a circle of friends have been Stephan’s ploy to confirm the lieutenant’s identity? We ask our readers to recall Stephan’s earlier career in the German National Police. Furthermore, a wanted poster with Krug’s picture on it had been issued the previous day. Krug’s appearance did not match the image on this poster. Stephan already knew that he was being watched by the FBI because of his involvement with various German organizations. Due to this, did Stephan suspect that this Krug may have been an impostor?
Following a repast of coffee and cake, washed down with a round of schnapps, the travelers left the Hall and drove four blocks to the Europe (previously the German-American) Import Company. This business was owned by Theodore Donay and was located at 3152 Gratiot Avenue, one block south of Mack Avenue. Of all the contacts made thus far on that Saturday, Donay was the most outspoken pro-Nazi/anti-Semite that Krug had met on his excursion. Ultimately, Donay’s behavior that afternoon would be his undoing in this affair. Dietrich Rintelin, the assistant to Donay at Europe Import Company, had become a Confidential Informant T-1 for the FBI. Donay had contributed another $20 to Krug, an act that Rintelin had witnessed. Later, Donay was accused of giving “aid and comfort to the enemy.” When Donay was arrested and brought to trial, Rintelin would serve as a witness for the prosecution. More immediate to the Stephan case, Rintelin notified the FBI about Krug on Saturday at 6:03 p.m. However, agents did not take action until 30 hours later. Though Krug had departed by that time, the FBI rounded up close to two dozen celebrants at the Hitler birthday party in the wee hours of Monday morning.
Upon leaving the Europe Import Company, Stephan suggested taking Krug to the eleven-room “gentleman’s establishment” at 54 Duffield. Then owned by Mrs. Alvina Ludlow, the house is now a vacant lot on the north-side service drive of the Fisher Expressway between Woodward Avenue and Park Street). As it was the twenty-second birthday of Lieutenant Krug, Stephan proposed that the services provided by the female associates of Mrs. Ludlow would make a good birthday present for the young escapee, who had been imprisoned for almost two years. Mrs. Ludlow announced that she had one room available, though she would need to call in Mrs. “Peggy” Merrifield, a 40-ish woman, to take the engagement. Merrifield arrived twenty minutes later by cab. At this point, Stephan and Krug abandoned their plan for a 4 p.m. train departure. Interestingly, Krug and Merrifield only met together in their assigned room for a few minutes. At his trial, which was presided over by U.S. District Court Judge Arthur J. Tuttle, Krug testified that he did not find Merrifield attractive enough to complete their transaction. Later, Judge Tuttle requested that all testimony about this episode be struck from the trial records because, as he claimed, it would have endangered the innocence of any young readers of the court transcript. Huh? Mrs. Ludlow’s establishment was located two streets north of the Fox Theatre, one street west of the still-affluent Brush Park (Piety Hill) community, and a stone’s throw from St. John’s Episcopal Church. Given these facts, could the Judge have been concerned that the reputation of a number of third parties in the other ten rooms may have been implicated by court records?
After their brief visit to Mrs. Ludlow’s establishment, Stephan and Krug did not arrive back at the German Restaurant until about 6 p.m. This leaves almost two hours that are not accounted for, given the ten-minute drive from Woodward Avenue back to the German Restaurant. By the time that Krug was partaking of his smoked-pork-loin-and-sauerkraut dinner, the waitress, Mrs. Erna Schwartz, and the cook, Christina Klein, were beginning to understand the identity of Mr. Krug from news reports and talk in the restaurant. At Stephan’s trial, Schwartz testified that he instructed her to escort Krug out of the rear door of the restaurant. At around 9 p.m., she pointed him toward the Field Hotel, which was located one street away on Field, one half-block north of Jefferson Avenue. Registering as Hans Müller, Krug presumably remained at the hotel for the remainder of the night.
On Sunday, Stephan and Krug departed for downtown Detroit at 8 a.m. After stopping at a barbecue restaurant for a breakfast of chicken dinners, Stephan took Krug to the Greyhound Bus Station at the northwest corner of Grand River Avenue and Washington Boulevard. There, Stephan bought Krug a ticket to Chicago and saw him off.

Cheez It, the Feds!
Stephan returned to his restaurant to prepare for the meeting of the Schwaben Society that evening and the more private birthday celebration afterward. The Schwaben meeting commenced at 6 p.m. By midnight, twenty celebrants remained in order to celebrate their Fuhrer’s birthday. Just as the celebration was heating up, FBI agents entered the back room and told the guests to accompany the officers to FBI headquarters downtown by way of waiting transportation.
The FBI had been accumulating information on pro-Nazi activities for two years before the entry of the United States into World War II. The major work of the Bureau was the compilation of what was known as the National Security Index of potential subversives. This list included the name of Max Stephan. After the U.S. had entered the war in early December 1941, the FBI increased surveillance and conducted occasional raids. One of these raids was the roundup at the German Restaurant on 20 April 1942. It included Margareta Bertelmann, the woman who had supplied Krug with money and underwear when he stopped at her home. On the eve of Hitler’s natal day, Bertelmann was waitressing at the German Restaurant; in testimony, it was discovered that she did so under pressure by Stephan. After being taken to headquarters for questioning, all attendees at the restaurant were released, except for Max Stephan.
Meanwhile, Krug had arrived in Chicago. He was making an effort to convince members of a national network of subversives that he indeed was Krug. It appears that his convincing worked. According to Krug, the subversives outfitted him with a new suit of clothes, gave him $100 in twenties, 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. Apparently, as that possibility evaporated, Krug reversed direction. He took a route to Pittsburgh and on through Cincinnati, Nashville, and Dallas with the intention of crossing into still-neutral Mexico at Laredo, Texas. From there, Krug planned to make his way to the German embassy 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 blond woman) heard his accent, became suspicious, and called the FBI. Captured, Krug was returned by the U.S. to the POW camp in Canada.
At this juncture, the prosecution took an odd turn. In the process of building their case against Stephan, the FBI sought to enlist the aid of Krug as a witness for the prosecution. Agents asked him to view the individuals involved. They instructed Krug that he might regard it as his duty to identify the guilty and to clear the innocent. Note: Under the rules of the Geneva Convention, a prisoner of war could not be forced to testify against those who may have helped him/her while attempting to escape. If a prisoner were to step forward and 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 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 (Krug was shot down off the coast of England). In addition, he testified that he did not expect any special treatment from the Canadian Government (his jailers) for his contribution. As a military officer, like a military officer of any nation, it would be Krug’s duty to attempt escape. However, if one rises above the Geneva Convention and volunteers to testify in a way that impugns anyone who gave aid and comfort, would this not jeopardize the chances of other officers attempting to escape? Why would anyone in their right mind help a German escapee ever again? Why did the other officers at the POW camp (including a core group of NASDP party members) not see this as a giant blunder and influence Krug not to testify? Instead, Krug, who was promoted to a level comparable to First Lieutenant while at Bowmanville, showed up at court in a new uniform complete with the proper accoutrements of his new rank. 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 various influential persons. These included former Michigan governor Justice William Francis “Frank” Murphy of the U.S. Supreme Court and Solicitor General Charles Fahy. Consequently, President Franklin D. Roosevelt commuted Stephan’s death sentence to life imprisonment just eight hours before his scheduled hanging on 1 July 1943. Seven weeks late, the Buchanan-Dineen espionage ring was arrested.
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. He rose to become a successful businessman near Dortmund.

Lipstick and Lies
We have titled this section as homage to the delightful spy mystery of the same name by Margit Liesche (Poisoned Pen Press, 2009). This is a work that assisted my (Dr. Sase’s) factual research of the World War II espionage ring in Detroit that was headed by Countess Grace Buchanan-Dineen. This ring, which was rounded up and tried in 1943, has direct and consequential connections to the case of Max Stephan. Specifically, Theodore Donay, the owner of the Europe Import Company, had befriended Dr. Fred William Thomas, a core member of the Buchaneen-Dineen espionage ring. Furthermore, Thomas associated with Max Stephan at the German 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 states that they were arrested on 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-healed socialite and lecturer, age 34, residing at 7716 East Jefferson Avenue in an apartment building one block away from the German Restaurant owned by Max Stephan.
A descendant of French nobility, Countess Grace Buchanan-Dineen, had been trained carefully in espionage activities in Budapest and Berlin. Her instruction included methods of communication, gathering vital information, using secret inks, microphotography, and the development of a pretext for her movements throughout the United States. This pretext became that of a lecturer on charm, grace, and manners to the society ladies of Detroit and elsewhere in the United States. In her lectures, Buchanan-Dineen used popular materials such as the fashion/makeup bible Personality Unlimited: The Beauty Blue Book by Veronica Dengel (John C. Winston Co., 1943), which was the most famous book of its kind at the time. Nevertheless, her real assignment included:
1. Location of munitions and airplane factories, their production, and number of employees
2. Location of military camps and naval bases
3. All available information concerning helium
4. Composition and sailing dates of convoys
5. 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, all of the information sent to Germany by the Countess first had been cleared by the FBI as well as by the U.S. Army and Navy Intelligence Services.
Long known to the FBI in Detroit, Dr. Thomas was an associate of the successive leaders of the German-American Bund, Fritz Julius Kuhn, a naturalized U.S. citizen from Munich, and Gerhard Wilhelm Kunze, a natural-born American. Thomas was also a close associate of Fritz Heiler, the German Consul in Detroit. Importantly, Thomas associated with Max Stephan, who hosted Bund meetings at his restaurant. Thomas was noted as a speaker at these meetings. In addition, 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.” It continued by stating that she “enthusiastically entered into arrangements to contact persons who had or could obtain 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.”

A Few Questions in Respect to the Stephan Case
1. The Countess had close contact with Behrens, Thomas, and, as a result, Theodore Donay who met and assisted Peter Krug in his escape. Therefore, when did the Countess and the FBI become aware of the daytime excursion of Stephan and Krug around Detroit?
2. Did the FBI have all of the information that they needed about Stephan and Krug before they received the report from Confidential Informant Dietrich Rintelin, the store assistant to Donay?
3. Given that the FBI-sting operation had been developing since 1939, was the appearance of Krug in Detroit simply treated as a fly in the ointment that could have jeopardized the real operation?
4. Did Dr. Thomas, Mrs. Behrens, and other core operatives perceive Krug perceived 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 public places of business before Krug left for Chicago by bus? This would have made him an easy catch for the FBI while diverting attention away from the true 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 in order 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, who recently had received a promotion from the High Command during his incarceration, receive orders from his superiors to rise above the rules of the Geneva Convention and to testify voluntarily against Stephan in order 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?

American Revival
Following the end of World War II, the NSDAP went far underground for five years. In 1950, the international national Socialist movement re-emerged with the reformation of the Thule-Vril-Gesellschaft (Thule-Vril Society). This society was founded in Vienna by German SS veteran Wilhelm Landig under the authority of Reinhard Gehlen, former Major General of the German Wehrmacht and head of military intelligence. This transpired in the wake of Operation Paperclip, a project of the United States Office of Strategic Services that transferred a couple of thousand German scientists, medical doctors, engineers, and intelligence officers to the U.S., and the disappearance of approximately 10,000 SS officers after the war.
In 1959, the American Nazi Party was founded by George Lincoln Rockwell, a former U.S. Navy officer, politician, and activist. During the 1960s and 1970s, the movement grew slowly in the United States. By the 1980s, the national Socialist movement had returned to Detroit. As the organization sought to recruit new members from their offices in Southwest Detroit, numerous demonstrations occurred for and against the movement in Detroit and Ann Arbor. The current surviving permutation is the National Socialist Movement, which was founded in 1974 by Robert Brannen and Cliff Herrington, former members of the American Nazi Party before its decline. Currently, the organization is headquartered in Southeast Detroit (zip code: 48213) and is under the leadership of Jeff Schoep, who assumed his position as Commander in 1994 at age 21.

Auf Wiedersehen
As we close this month’s column, we may ask, “What is the take-away for attorneys and researchers in law and related fields?” In the case of Max Stephan, as with most cases, there are historical perspectives that must be understood. The sociological, economic, political, and anthroposophical elements should be a matter of reflection. When there appear to be holes in the facts and observations, there is often additional information looming just around the corner. In order to fully understand the Stephan case, we need to examine and to trace not only Stephan’s personal history, but the development of the underlying ideology that motivated his actions and those of many others. Furthermore, with Monday-morning quarterback hindsight, we can attempt to fill many voids with intelligence-gathering in respect to related cases-specifically, the Buchanan-Dineen matter.
In Part One of this article, we referred to the old riddle of the man who walks into an old-time drugstore. We promised to finish this riddle in Part Two. Here are the pertinent details: A man enters the drugstore and proceeds to take a seat at the soda-fountain counter. The owner walks over to the man to take his order. The man, who has the hiccups, tells the druggist that he would like a glass of water. The druggist, who knows the man and his recurring problem with hiccups, pulls out a revolver loaded with blank cartridges, aims it at the seated man, and pulls the trigger. Following a loud bang, the startled man realizes that his hiccups are gone. He stands up, thanks the druggist, and walks out of the store. End of story.
We ask our readers to note the parallel between this story and the odd and curious case of Max Stephen. Both are riddles with a twist. However, in Stephan’s case, some of the pertinent details of the riddle remain unsolved for seventy years. Curious. Curious, indeed.
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Dr. John F. Sase of SASE Associates, Economic Consulting and Research, earned his MBA at the University of Detroit and his Ph.D. in Economics at Wayne State University. He is a graduated of the University of Detroit Jesuit High School. Dr. Sase can be reached at (248) 569-5228 and by e-mail at
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 more than 20 years. Currently, he edits books for publication and gives seminars on writing. Mr. Senick can be reached at (313) 342-4048 and by e-mail at