An early career image of Walter Lohmann
Born	(1878-12-30)30 December 1878 Bremen
Died	29 April 1930(1930-04-29) (aged 51) Rome
Cause of death	Myocardial infarction
Allegiance	Germany
Service / branch	Reichsmarine
Years of service	1897-1927
Rank	Captain
Unit	Naval Transport Division
Known for	Lohmann Affair

Walter Lohmann (born 30 December 1878 in Bremen; died 29 April 1930 in Rome) was a German Reichsmarine officer with the rank of captain. From 1920 to 1927 as commander of the Naval Transportion Division, Lohmann ran a secret rearmament and research program on behalf of the Ministry of the Reichswehr in an attempt to circumvent the Versailles restrictions. Lohmann's access to naval offices in Königsberg, Lübeck, Stettin, Hamburg, and Bremen gave him access to very specialized information and financial resources. He used this knowledge in his work in a way that was far beyond his authority and technical competence. Favoured by the interests of the Chief of Naval Headquarters, Admiral Paul Behncke, it led to uncontrolled scope for legal violations, criminal activity and high-handed action by individuals within the ministry. When his work was discovered in 1927, the scandal became known as the Lohmann affair in Germany and led to the resignation of Reichswehr Minister Otto Gessler in January 1928^[1][2] and director of naval command Admiral Hans Zenker.^[3] Lohmann himself was retired and his pension was cut, but he was never prosecuted, because to uncover the affair's true background would have been too great a risk. Completely impoverished, Lohmann died three years later of a heart attack.^[4] After he was relieved of duty, the clandestine rearmament programme was continued and expanded.

Lohmann was the youngest son of Johann Georg Lohmann (1830–1892), who was a director of the German shipping company Norddeutscher Lloyd^[5] and Clarissa Lohmann, née Frost (1838–1920), an English woman.^[6] His older brother was Alfred Lohmann (born 1870), who was president of the Bremen Chamber of Commerce.^[5]

After attending school, Lohmann joined the Imperial Navy as a naval cadet on 7 April 1897. After his officer training, he was deployed to the Far East: first in 1903 to the gunboat SMS Tiger, and then from 1910 as company commander in the German colony of Tsingtau. With the outbreak of World War I, he was appointed to the rank of Korvettenkapitän I artillery officer aboard the dreadnought Prinzregent Luitpold where he worked as a non-combat logistics specialist.^[7] In March 1918, he was transferred to the Imperial Naval Office (Reichsmarineamt), where he worked in the Navy Transport Division (See-transportabteilung in der Marineleitung) from December 1918.^[6]

Logmann was a cadet on the SMS Tiger gunboat

Lohmann was an logistics officer on the SMS Prinzregent Luitpold

As a representative of the Sea Transport Department in the General Naval Office, Lohmann took part in the maritime armistice negotiations in 1919 in England.^[8] While there he worked with the Permanent Naval Allied Armistice Commission (PANAC) organisation to enable German shipping to commence overseas lines, which were critical to the recovery of the German economy.^[9] Lohmann secured over 1000 travel authorisations to enable German ships to pass through the blockade of Germany.^[9] He was still in England when the Kapp Putsch occurred on 13 March 1920, so his career was not compromised. When he returned, he was appointed commander (Chef der Seetransportabteilung der Reichsmarine) of the Naval Transport Division (BS) on 28 October 1920.^[7]

He was also on very good terms with Chief of Naval Headquarters, Admiral Paul Behncke and this further consolidated his position, receiving significant promotion of himself and the field of work.^[8] At the time, Behncke required an overview of the merchant marine as he believed it still had a role even under the Treaty of Versailles.^[10] Behncke subordinated Lohmann to the Ministry for Reconstruction on 21 December 1920 with a request that he attend all meetings where commercial shipping was discussed.^[8] In May 1921, Lohmann managed to secure some shipping that had been seized by the British and used for prisoner of war transports that were returned to their former owners, which raised his reputation amongst his colleagues considerably and set a precedent for future purchases.^[11] In October 1921, he visited Leningrad to reach an agreement for the release of German shipping that were still considered seaworthy ^[12][7] with Leon Trotsky and foreign minister Georgy Chicherin.^[13] He also used the visit to determine if Germany and the Soviet Union could collaborate on the development of submarines during discussions with Yevgeny Berens.^[14] A further visit followed in May 1922, with a delegation to complete negotiations with the Russian Admiralty.^[7] While there, he met the German ambassador Ulrich von Brockdorff-Rantzau^[13] and informed him that due to the influence of Hans von Seeckt, negotiations with Trotsky and all official bodies had turned sour.^[14] During his visits, he became acquainted with Else Ektimov, a Russian women of German descent and arranged for her to return to Germany.^[12]

Admiral Paul Behncke interests converged with Lohmann, who had a significant influence on him

Lohmann reached an agreement with Trotsky

Foreign Minister Georgy Chicherin

Lohmann discussed collaborating on submarine development with Yevgeny Berens, Commander of Soviet Naval Forces

Ambassafor Brockdorff-Rantzau was kept informed of Lohmanns discussions

Hans von Seeckt, did much to ensure Lohmanns negotiations with Soviets command didn't go to plan

At the time there were two prevailing views in German Naval Command. The official strategy developed and advanced by the Chief of the Fleet Department Wilfried von Loewenfeld [de] and supported by Admiral Hans Zenker was to build Deutschland-class cruisers, unofficially known as "pocket battleships" by the British and officially called armoured ships in Naval Command, that were officially in accordance with restrictions imposed by the Versailles treaty.^[15] These diesel driven ships were lightly armoured but heavily armed with six 11-inch guns and were to be fast with a range that exceeded any other cruiser or capital ship of the period.^[15] In this way, Loewenfeld and Zenker hoped to tie up the French Navy in support of their merchant fleet in the Atlantic, while keeping the sea lanes clear in the north of Scotland to ensure it wouldn't be subject to any further naval blockades.^[15] It also had the added benefit of what was known as "Bündnisfähigkeit" (alliance capability), i.e. should there be an alliance, the vessels would make a strong contribution to that alliance.^[15] By technically staying inside the terms of the treaty, they hoped to persuade the signatories of the treaty, Great Britain, USA, France, Italy and Japan to accept Germany into the group of countries with a navy and thus abolish the restrictions.^[13] Lohmann along with Rear Admiral Arno Spindler [de], Director of submarines advocated for a rapprochement with the Soviet Union as they believed it could provide prohibited war materials and at the same time, improve economic ties with Germany.^[13] However Lohmann's views were rejected by Naval Command.^[13] Although his views were not welcome, he had a remarkably free hand as the officer responsible for relations with Moscow.

The Occupation of the Ruhr beginning in 11 January 1923, failed to dent Lohmann's career.^[11] The Reichsbank provided 100 million gold deutsche marks to the Reichswehr for the possible escalation of hostilities, which never occurred. At the end of the occupation, the monies were never returned, instead what remained was shared amongst the services. By that point Behncke trusted Lohmann completely and in early 1923, assigned the Reichsmarine's share of what constituted black funds, amounting to 10 million Reichsmarks for Lohmann to administer.^[11] Other monies were collected by the Reichsmarine during that period by the sale of warships and submarines that were scrapped.^[7] This raised the black funds to 25million marks.^[12] A further deposit of 2.5million Reichmarks (RM) from Reichstag coffers along with 2.25million from other sources was provided for distribution by Lohmann, bringing the total to 29.75million marks.^[16]

When he received the funds, Lohmann began to gradually develop a plan under the title "Principle of Reconstruction", to both finance and secure prohibited war materials, believing he could count on receiving further funding totaling 40-50million marks in the future.^[17] A 1926 ministry memorandum "Denkschrift über die Notwendigkeit der Beschaffung eines langfristigen Kredites zur Sicherstellung gewisser militärisch notwendiger Marinebelainge, denen aus verschiedenen Gründen beim Ordentlichen Marinehaushalt nicht Rechnung getragen Werden kann" (Memorandum on the necessity of obtaining a long-term loan to secure certain militarily necessary naval assets which, for various reasons, cannot be taken into account in the regular naval budget) illustrated Lohmanns financial concept.^[17]

Lohmann planned to finance the operation by seeking private business loans which he would use to create businesses whose income would fund the expansion.^[17] The businesses would be structured in such in a manner to build trust abroad, populate the Naval supply chain correctly with armaments and at the same time, provide intelligence of the capabilities of foreign industry. The 1926 memorandum described how the plan was split into two categories; surface vessels that were required and subsurface vessels i.e. U-boats required.^[17] For each individual type of craft, code words and sentences were used in identifying the vessel types, to hide their existence, e.g. U-boats were classed as "auxiliary vehicles under the water".^[18] To move quickly to production of naval vessels, i.e. the event of war, prototyping would be used and the companies that supplied the construction materials would be financially secured.^[18] The ministry calculated that a budget of 50million Reichmarks would be needed over a 10year period, for the supply of 16 large vessels, 10 medium vessels and 100 smaller vessels.^[18]

To maintain the strictest secrecy in financing, when a particular project was started, only the defence minister and the finance minister were informed verbally of the details and nature of the loan. No paper trail was created. Then the department head would be informed and they would be responsible for signing the loan agreement and ensuring any legal details were correctly dealt with.^[18] Once the loan was secured, the repayment details were hidden in the naval budget, under a category of spend that couldn't easily be monitored or audited.^[19]

Although Article 191 of the Versailles Treaty was formulated explicity to forbid Germany access to submarine technology, by the time the treaty was abolished in September 1935, Naval Command had 12 manned u-boats in operation with a further 16 under construction.^[14]

Naval architect Hans Techel moved his engineers to the Netherlands once the IvS started to receive firm orders

Robert Moraht ran the holding company Mentor-Bilanz GmbH that managed the IvS contracts

In the spring of 1922, the NV Ingenieurskantoor voor Scheepsbouw (IvS), a design office established by the Reichsmarines, initially in Kiel, was created in order to maintain and develop German submarine design expertise, something that could only be done abroad and at the same time, circumvent the limitations established by the Treaty of Versailles.^[20] It was founded as an umbrella organisation by three German shipyards, AG Weser in Bremen, Friedrich Krupp Germaniawerft owned by Krupp in Kiel and AG Vulcan Stettin (located in Stettin and Hamburg).^[21] Many of the submarines designed in World War I were designed by Hans Techel [de] and built at the Germania shipyard in Kiel.^[22] The IvS established contracts with two Dutch shipyards, De Schelde in Vlissingen and Fijenoord in Rotterdam and specified that 25% of the construction costs would be paid to IvS in fees for each submarine design.^[22] Without the help of these shipyards and others like it, Germany wouldn't have been able to develop new submarine designs during the period of the treaty.^[23]

The design office initially had difficulties attracting new orders and almost went bankrupt.^[22] The Reichsmarine specified exactly what type of submarines it would require in the future and had instructed the design office on what to build.^[22] The company signed contracts with Argentina, Italy, Estonia at below market price and Spain for six submarines. However, none of the designs led to firm orders.^[22] In spring 1925, the first construction order came from Turkey to build 2 500-ton submarines in the Fijenoord shipyard. To ensure the yards were competitive going forward, Lohmann provided 1,000,000RM as startup funding.^[21] Naval Command decided to build the submarines below cost as there was some doubt as to whether Turkey could pay the construction costs.^[22] When the contract was signed, 12 German engineers from the Kiel shipyard including Techel opened a design office in The Hague, to design the first u-boat.^[22]

In 1925, Lohmann worked with Reichsmarine officer Robert Moraht [de] to secure a submarine contract from the Soviet Union worth 30-50 million RM that had been held back for more than 2 years.^[21] At a meeting in 8 June 1925 between Moraht, the IvS and Turkish representives secured the financing needed to build the Turkish submarines.^[21] These contracts ensured the financial stabilty of IvS. When the funding announcement was made, respresentatives of the three German shipyards approached Naval Command with a request to leave the IvS consortium due to financial constraints in Germany, leaving Naval Command to assume the entire project risk.^[24] To manage the 28% of shares that Naval Command held in the IvS and all other submarine contracts, Lohmann created the holding company Mentor-Bilanz GmbH in 1925 that was managed by Robert Moraht.^[25] At the end of 1925, a submarine department was founded in Naval Command and ran by Admiral Arno Spindler to manage the company within the military.^[24]

By June 1927, Lohmann clearly understood that Naval Command had to develop a series of prototype submarines that could be tested and optimised during sea trials. ^[26] The prototype would be then be sold and the money used to design and construct a new superior prototype. The first was a 755-ton submarine that began in the Cadiz shipyward in the beginning of February 1929.^[26] By 1930, the plan had faltered when Prime Minister of Spain Miguel Primo de Rivera died, resulting in the completed u-boat being sold to Turkey at a loss.^[26] Even after Lohmann left Naval Command in disgrace, the prototypes were still being designed and built. They led to a professionalisation of the submarine service, utimately leading to a 900-ton IvS designed unit, that eventually became the Type IX submarine. When World War II began, Naval Command was amply prepared for submarine warfare due to this interwar work.^[26]

Although the Treaty of Versailles prohibited the formation of the German airforce, Lohmann still took steps to maintain naval air power.^[27] In 1925, he purchased 76% of the shares^[28] in the aircraft manufacturer Caspar-Werke, located in Travemünde.^[27] The purchase of the shares was managed by Berliner Bankverein AG and the deal arranged in a manner to ensure the Reichswehr did not appear as the main shareholder.^[28]

The company had some initial success with the Caspar C 24 that won the Deutschlandflug [de] competition, although the company never became profitable even with the injection of new funding by Lohmann.^[27] The department that built the C24 was expanded and became a new standalone legal entity that was attached the ministrys naval aviation department,^[27] Gruppe BSx (Allgemeines Marineamt Seetransportabteiling) and funded by Lohmann.^[29] In 1925, Lohmann secured a 3.5million RM loan from Deutsche Bank, to build an seaplane manufacturing facility in Altenrhein, Switzerland, to develop the Dornier Do X, in a joint project between Dornier Flugzeugwerke and Luftschiffbau Zeppelin. Profits from the project were accrued by Lohmann. The Ministry of Economics (Reichswirtschaftsministerium), the Reich Ministry of Labour and the Reich Ministry of Transport were involved in establishing the project.^[30]

By 1927, Lohmann had invested 1.5million RM in Caspar-Werke, but the company was losing money.^[31] He decided to divest the shares and began negotiations with Hamburg America Line (Hapag) but was unable to secure a sale.^[31] The company continued operating after Lohmann left the ministry in 1927^[32] as a test centre for seaplanes, aircraft catapults and naval radio equipment.While he was negotiating the sale, he worked on the development of catapult launchers on passenger ships.^[30]

Lohmann was directly involved as both financier and mastermind in the secret development of speedboat armaments in violation of the Versailles Treaty.^[31] Lohmann became involved in 1923, when he tried to sell the Reichsmarine speedboat flottilla to the Soviet Union as they were in violation of the treaty, but they were uninterested.^[30] In 1924, Lohmann founded Travemünder Yachthafen AG (Trayag) in the northern German port of Travemünde on the Priwall Peninsula, to provide mooring berths and manufacturing facilities for the development of a new speedboat design. At Trayag, 13 speedboats that were equipped with torpedo tubes were designed with unofficial funds procured by Lohmann. The initial cost for establishing the project was 450,000RM and yearly cost for development approximately 150,000 to 200,000RM.^[33] To ensure the speedboats did not appear as official Reichsmarine shipping, they were registered as owned by the Lohmann founded, Navis GmBH, a covert shipping and administrative company.^[30][9] The extensive testing program on each design that was run by Trayag on behalf of the Reichsmarine was intended to provide the basis for future Schnellboot construction. In 1925, Lohmann purchased a shipyard in Wagria and formed "Neustädter Slip GmbH" as an additional repair base and training facility for technical personnel.^[30] This was followed up in February 1925 by Lohmann forming the German High Seas Sports Association [de] (HANSA).^[34] As part of that organisation, the Hanseatic Yacht School [de] was established to train personnel in seamanship^[35] and radio communications.^[36] In 1926, Lohmann paid the Motor Yacht Club of Germany (Motoryachtclub von Deutschland e.V.) 60,000Reichsmarks to recommend the speedboats being developed by Trayag to club members.^[37] Lohmann also paid for the design of a 1000 hp engine by MAN SE.^[30]

Lohmann had contact with the Swedish munitions, i.e. gunpowder manufacturer, Skänska Bomullskrutfabriks A.B (SK), in Landskrona, ostensibly to secure the supply of various mines and hand grenades.^[38] At the end of 1922, Lohmann through Otto Sprenger began negotiations with Carl Tranchell, the director of SK to collaborate on certain naval projects.^[38] Lohmann wished to establish an out-of-country testing operation where he could conduct experiments of a type that couldn't be done in Germany.^[38] The agreement detailed that Tranchell would make his facilities and personnel available to Lohmann, who would provide specialist personnel via Sprenger along with the design itself that would be provided free and both Lohmann and Tranchell would provide the sum necessary to fund the experiments together.^[38] In early 1923, agreement was reached and it was decided together to create Carola AG, to supply munitions developed from the collaboration and from Skänska Bomullskrutfabriks A.B itself.^[38] Lohmann together with Sprenger conducted sales negotiations with Japanese companies.^[38] They also sales in Brazil, Uruguay and Argentina.^[38]

At the end of 1925, a report was published by the German admiralty that identified a need for three oil tankers that could maintain a minimum speed of 16knots.^[39] Correspondence between John T. Essberger [de], the officer in charge of naval tankers, a department civil servant and an engineer examined the idea of building the oil tankers in a way that they could be used as aircraft carriers known as "aircraft mother ships" as well as "fast boat mother ships".^[39] To maintain the contract, Lohmann provided 6.5 million Reichsmarks to the Schichau-Werke shipyard in Elbing, 3 million of which were assigned to build one small tanker.^[39] Lohmann's financial engineering ensured that extra money in the contract used to cover interest payments on his loans, were returned to him. By 5 October 1926, Lohmann was the managing director.^[39] During his management tenure, Lohmann produced a smaller tanker using funds from the Reich Ministry of Economy.^[40]

To build the other two larger tankers, an agreement was reached between Lohmann and the Bremen-based private bank Schröder-Bank [de], owned by Johann Friedrich Schröder [de], that was facilitated by the Bremen finance minister for a loan of 12million RM.^[40] Bremen-based AG Weser shipyard was to receive the contract to build them.^[40] As part of the agreement, it was decided the Navy was to construct a steamer at Norddeutscher Lloyd.^[40] To finalise the deal, the Bremen finance minister insisted that the loan agreement was approved by naval director Erich Raeder and Reich Finance Minister Heinrich Peckert [de]. At a meeting of 6 May 1926, Lohmann explained his plan of using a 12million loan to construct two large tankers.^[40] But Raeder and Peckert were looking for extra value from the contract and stipulated that two smaller tanker would be built alongside the one large tankers.^[40]

By buying two smaller tankers, instead of a third large tanker as already planned, Lohmann used the savings to create the Berlin Oil Transport Company that he owned outright, the Bremen Oil Transport Company that he also owned, as well as a freight forwarding company.^[40] In mid-1926, Lohmann had plans to create a vertically integrated oil company similar to BP but the idea was abandoned, due to the complexities of the plan and the huge amount of monies involved to finance it.^[40] Although at the same time he continued to invest in the oil transport companies.^[41]

Another aspect of Lohmann's vision was the subsidising of in-shore pleasure craft that could be modified for naval operations. That included ensuring the ships were capable of a minimum speed of 18 knots, being available for naval exercise for at least 14 days per year and have basic structure that could be converted for naval operations, for example to store ammmunition in a magazine, or the ability to support deck guns up to 160 tons.^[41]

When the rotor ship Barbara [de; pl] was commissioned, half the monies for construction were arranged by Lohmann from the Reichmarine budget and half was provided by the Reich Ministry of Economics.^[41] At the same time, the funding also covered the end of life maintenance of the decommissioned minelayer SMS Albatross and the construction of the steamships MV Bessel (initially known as the Sorrento) and Amalfi ^[a] at A.G. Weser. The Barbara was built by the shipyard A.G. Weser in Bremen.^[43] Lohmann's wife conducted the ceromonial launch of the ship.^[41]

The Barbara's first voyage to Italy and Spain were used by Lohmann to sell the idea of rotor cargo ships to various contacts and used a film created by Phoebus Film to promote them. His first port of call was to meet the Spanish king Alfonso XIII.^[44] Lohmann also met with Benito Mussolini in November 1926 to discuss an order for an 11000ton tanker that would use the rotor mechanism, but nothing came of the meeting.^[44]

As well as funding many different capital projects, Lohmann ensured that suitable personnel were trained in an on-going basis, an activity that was a clear violation of Article 177 of the Treaty of Versailles.^[44] The Hanseatic Yacht School [de] in Neustadt was established in 1925 to train personnel in seamanship and radio communications in speedboats. Military personnel were sent to be trained by the High Seas Sports Association (HANSA) in Berlin.^[34] Lohmann believed that early training of sailors was important as it gave them the ability to issue orders later in life, in a way that was effective.^[34] As well as providing training for sailors to a military standard, naval pilots were also trained in Neustadt.^[34] Lohmann provided 60000marks to train an initial 60 students.^[34]

Central to Lohmann's ability to organise and run a successful naval defence organisation was the Navis company.^[45] Navis not only maintained ownership of Lohmanns clandestine assets, for example speedboats, but also transacted private business with other organisations.^[45] However, Lohmann established several other companies for clandestine work for specific purposes. The first of these companies was "Mentor-Bilanz", an ultra-secret organisation in 1925^[45] that purchased Amsterdam based Aerogeodetic (Naamlooze Vennootschap Aerogeodetic) that manufactured gyroscopes.^[46] He established a Berlin branch of the organisation in 1926.^[46] In February 1925, Lohman founded Tebeg (Technische Beratung und Beschaffung GmbH) to run the naval defence economy with company shares held by Navis.^[47] Tebeg's remit was to "draw up a comprehensive armament plan that would regulate the securing and distribution of raw materials, manufacturing facilities and workers" and was funded to the tune of 120,000marks that came from various departments within the Reichsmarine.^[47] The rearmamenent plan developed by Tebeg called for the fasted possible commissioning of submarines.^[47]

From October 1920, i.e. shortly after he was promoted, Lohmann worked to centralise intelligence gathering within Naval Command, so he could influence decisions. His first success in November 1920 was to reroute reports from the Rücktransporten von Kriegsgefangenen (Krifa) prisoner of war ships to the sea transport division.^[48] He also succeeded in persuading the London Naval attache to forward reports that would be a good source of intelligence.^[48] In December 1920, he tried to recruit Bremen senator Heinrich Bömers [de] as a channel to Naval Command for forwarding the intelligence, but failed.^[48] In Juy 1921, the commander of the Bremen Naval Command informed him that reports passing between the command and the Bremen foreign office would be an ideal source of intelligence.^[49] Lohmann used this new channel to indirectly influence the Federal Foreign Office in Berlin.^[49]

This was followed by the payment of a stipend to the representatives of the Naval Transportion Division in Saint Petersburg and Leningrad to report on the movements of the Red Army and Soviet Navy.^[49] However, Lohmann was never satisfied with the quality of reports that the representatives were sending but would still make special requests, for example, in June 1924 he requested the composition of the Russian naval officer corps.^[50] After trying to financialise the naval transportation office in St Petersburg and failed, Lohmann attempted to establish a Russian company known as "Merotwal" (illegal under Russian law) that was to be used to pay agents of the naval representatives and at the same time, rent out a fleet of Reichsmarine cars that had been left in Saint Petersburg, before the war. ^[51] In essence, it was an attempt to coordinate German-Soviet trade relations with a Lohmann associate "Lambert" in Berlin and at the same time earn more money. Lohmann attempted to keep the arrangement secret from both the Federal Foreign office and the German consulate in Saint Petersburg, but the venture failed when his associate was arrested in December 1923 for violating the foreign trade laws, in an operation not connected to Lohmann.^[51] Lohmann never returned to the venture after the winter break, due to unexpected resistance from within Naval Command, the low value of the intelligence he was receiving and other failures.^[51]

He also received intelligence reports from the German diplomat Heinrich Karl Fricke who served in the German consul in Cartagena, Spain. Fricke reported on the Spanish government, the Navy, the Admiralty as well as providing economic news regarding the speedboat market in Spain.^[51] Through Fricke, Lohmann was able to bribe spanish officials to award a contract to Navis to salvage the Spanish battleship España^[52] that ran aground off Cape Tres Forcas in 26 August 1923.

The spanish industrialist Horacio Echevarrieta, collaborated with Lohmann who saved his shipyard from bankruptcy

King Alfonso XII sought to buy German armaments that included submarines

General Miguel Primo de Rivera sought to modernise the Spanish military after the Spanish failures in the Rif War

Canaris was naval command envoy in Madrid and supervised the contracts signed between Lohmann and the Spanish government

German foreign Minister Gustav Stresemann favoured Lohmanns contracts with the Spanish although other ministers in the cabinet disagreed

In 1925, Lohmann began to collaborate on projects with the Spanish businessman and industrialist Horacio Echevarrieta^[53] and established a joint holding company that would manage it.^[54] Through contacts with King Alfonso XIII and General Miguel Primo de Rivera, Echevarrieta had won a contract, arranged by Lohmann, to build a 750 ton submarine by German technicians in Cádiz, based on the PU-111 model designed in 1918,^[55] that would be designed by I.v.S for German Naval Command.^[53] Echevarrieta became bankrupt as his shipyard "Echevarrieta y Larrinaga Shipyard" was chronically underfunded and couldn't fufill the contract, so Lohmann arranged to provide the full costs of the contract through Naval Command.^[53] The submarine with designation submarino E-1 was sold by Echevarrieta to Turkey when Miguel Primo de Rivera fell from power, to partially recoup costs^[53] when he failed to receive an order for a further six submarines promised by German Naval Command

The first project that Lohmann completed in 1925-1926 and supervised by Wilhelm Canaris, was the construction of a torpedo factory in Cadiz, in which German Naval Command Torpedo Research Institute played a major role in developing.^[53] The factory was able to develop two production ready torpedo models that were used in World War II. Lohmann wrote:

"In order to support Echevarrieta in this project, which is very important for us, and to enable him to compete against the increasingly strong influence of the English through particularly favorable financing offers, I got him a long-term loan from the Deutsche Bank with the help of a counter-guarantee from the Reich".^[53]

While German Foreign Minister Gustav Stresemann and Finance Minister Peter Reinhold [de] were generally in favour of the collaboration, other members the German foreign office believed that Echevarrieta's contracts with the English government made him unsuitable as a business partner, particularly in light of the UK's attempts to disarm Germany.^[54] However, King Alfonso XIII expressed an interest in purchasing German naval armaments, for example fire-control systems, which swayed their decision to continue the collaboration.^[54] Lohmann planned to expand the factory to develop aircraft capable of dropping a torpedo as well as develop new speedboat models. Several speedboats were sent for testing at Echevarrieta's Cadiz shipyard.^[54] Even after Lohmann departed his position, Echevarrieta was willing to build 8 new speedboats to a new design produced by the Trayag successor company.^[54]

An oil transport company was also planned in detail with Echevarrieta.^[54] As part of the contract, the shipbuilder AG Wasser had to build two oil tankers, designed to be fast naval supply steamers. They were financed by the Spanish government for Spain who insisted they be built in Cadiz.^[54] In spring 1927, Canaris explored the idea of establishing a naval shipyyard in Cadiz to build the ships but the idea was abandoned.^[54] Canaris commented:

"The German Navy has recently been working on drawing up design plans for tank steamers that could be converted quickly and at low cost into transport and aircraft mother ships with sufficiently high speeds in the event of mobilization. M.L. is prepared to make these plans available to you [Echevarrieta] and will send them to you in the near future".^[54]

Lohmann arranged a 15million Reichsmarks loan from Deutsche Bank to fund the joint holding company and demanded that the arrangement remain strictly confidential "because certain military interests of a highly secretive nature are to be taken into account".^[56] Lohmann and Canaris were involved in other business negotiations with Echevarrieta. In the summer 1927, Canaris provided a summary of communications for Naval Command involving Echevarrieta, where they discussed the film industry, naval mine production, and trawler design.^[56] They also discussed establishing a civilian airline with aircraft production by Lufthansa, Junkers to build the planes and Mercedes to build the engines. Echevarrieta established the Madrid based airline, Iberia, Compañía Aérea de Transportes, that was incorporated on 28 June 1927 with a capital investment of 1.1 million pesetas by Echevarrieta and Deutsche Luft Hansa holding 27% of the shares.^[57] When these negotiation were formalised, Lohmann would arrange the financing.^[56] The exploitation of the Spanish colony of Rio Muni was also discussed and Lohmann used his private captital in a contract.^[56]

In October 1926, Lohmann began working closely with Paul Lohmann (no relation), a German businessman and arms dealer.^[58] In April 1927, together with the Polish owners of a patent "Huragan mill patent", Lohmann created several joint holding companies to exploit the new invention for the firing of puliverised coal dust in a mill.^[58][59][60] Lohamm provided funding of 620,000RM to build a prototype which was contracted to Weser AG, but a practical unit could not be built and the monies were lost.^[58] Lohmann believed both the army and navy would be interested and stated of the invention:

"the army command was particularly interested because these mills would probably make it possible for even the smallest unit in the field to immediately grind confiscated or found grain and bake it into bread".^[58]

In the summer of 1927, Lohmann received funding of 10,000RM for further patent evaluation that involved a fuel testing study, which exprimented with a secret fuel mixture suitable for burning in the mill. He received a further 200,000RM loan in the expectation that the device coud be marketed. In July 1928, Lohmann sought to market the mill in America, as he believed it would be attractive as a product that could be supported by the coal mining sector. In that way, he planned to use it to build a ship patents company with the "Huragan mill patent" as the first patent in the companies portfolio. It was to be designed as an offshoot of the maritime transport department who planned to patent their ship designs and licence those designs in America.^[61] However the device didn't work^[61] and the companies were forced into bankruptcy.^[62]

In the autumn of 1924, Lohmann began working with property developer and estate agent Karl Reichenbach. Lohmann leased the Marble House cinema in Berlin for the German film production and distribution company Phoebus Film^[61] from Reichenbach, who was paid 40,000 RM in commission, In February 1925 in collaboration with Admiral Wilhelm Kahlert [de] director of the Naval office, Lohmann purchased a residential property at Lützowufer 3, next to Naval Command that was as used to host Navis, Hansa and Tebeg personnel. The property cost 588,000RM including fees and rent, which was below market value.^[63] At the time it would have been illegal to purchase residential property without the use of black funds.^[63] Reichenbach was asked to keep the arrangement secret.^[63] Lohmann also purchased a property at Tiergartenstrasse 16 for 1.9 million RM, located at the rear of the Ministry of the Reichswehr. Again far below market value in a attempt to stop it being purchased as the new American embassy and free up space for the Reichswehr ministry.^[63]

Although Ulrich Fritze was fine with the purchases, the April 1926 business deal that Lohmann arranged with Reichenbach and the German banking firm Schneidler for the purchase of an abattoir was described by Fritze as "grotesque".^[63] Lohmann paid 485,000 RM for the business while Reichenbach provided 15,000RM in equity. However, Reichenbach would have made a yearly return of 199,000 RM which Lohmann would only make a return on 131,000 RM.^[63] The business was facing losses and needed to expand to survive. In September 1926, Reichenbach suggested that formation of a company that could sell bacon to England.^[64] Lohmann seized on the idea as he hoped to both disrupt the lucrative Danish bacon business to England and at the same time build a fleet of refrigerated merchant ships that could be converted in the event of war into troop ships.^[62] Lohmann approached Admiral Zenker to discuss the idea who found it to be ill-conceived but Lohmann continued anyway. In February 1927, Lohmann formed a holding company, the Berliner Bacon Company with an total investment of 750,000RM by July 1927.^[64] Lohmann continued to invest in the company, but falling pork prices forced the company into bankruptcy, eventually costing the treasury 1.25million RM.^[64] In May 1927, Lohmann made a further investment on the advice of Reichenbach in a mine, totalling 340,000RM but the venture failed resulting in bankruptcy^[65] in the early 1930s.

Lohmann worried about how secret his business deals were. He considered the Deutsche Bank, where he obtained his largest loans, too large to effectively maintain that confidentiality. Lohmann believed that Deutsche Bank was too risky as it held foreign assets, that left it open foreign auditors who could potentially discover his loans.^[65] He had little trust in the Bremen based Schröder Bank, as he considered it too remote and outside his control, so he decided what he needed was his own small reliable bank with no foreign holdings.^[65] In 1923, he began searching for a suitable bank that he could purchase sufficient shares to gain control of the board.^[65] Berliner Bankverein bank, established as Berliner Makler-Verein in Berlin in 1877 met his needs.^[66][65] After meeting the board in January 1924, Lohmann sought the advice of the directors of Wasser AG in February 1924, when Fritz Saalfeld, a director of the bank, sent Lohmann a financial analysis of the banks holdings.^[65] In 1924, Lohmann invested 1.5million RM into the bank but it was later discovered by an auditor that the balance sheet had been embelished and the bank was effectively bankrupt. A futher loan on 500,000RM in 1925 failed to secure the banks liquidity and it was finally put into liquidation in 1928, resulting in a loss of 2million Reichmarks to the German treasury.^[67]

General Heye wanted stricter financial planning and cost controls for the secret rearmanent programme

Saemisch (on the right) recommended that the military create a budget for its secret rearmaments that would be controlled by parliament

After the Lohmann affair, there was a wholesale revision of financing, financial planning, cost controls and auditing of secret rearmament programmes within the Reichsmarine.^[67] Even before Lohmann activities were exposed in 1927, Chief of Army Command Wilhelm Heye in February 1926 called for better controls and closer political involvement in financial planning and this was further reiterated by President of the Court of Audit Friedrich Saemisch who wished to be released from official secrecy during the investigation.^[67] Saemisch recommeneded that "in future a secret budget be drawn up for the secret expenditure of the Wehrmacht. In order to prevent mismanagement, this budget and its use should be monitored by a representative each of the Reich Minister of Defense, the Reich Minister of Finance and the Court of Auditors. A small committee of party leaders would be informed and a link with parliament would be established".^[68] The government reformed the proposal to preclude the party leaders and formed the regulation, stating the corresponding expenditure "will be covered by the overall responsibility of the Reich Cabinet when the Reich budget is drawn up and will require its express approval. In order to make it easier for the Reich ministers to ensure that such expenditure is used in accordance with the agreed purpose, a committee will be formed to which the ongoing monitoring of the use of the funds in question will be entrusted. The committee will be composed equally of members of the department of the responsible minister, the Reich Finance Ministry and the Court of Auditors".^[68]

During a business trip to Italy, Lohmann died of a heart attack in Rome on 29 April 1930, at the age of 52.^[69]

• "Newspaper articles about Walter Lohmann". Hamburg World Economic Archive (in German). Hamburg: Leibniz-Informationszentrum Wirtschaft (ZBW). Retrieved 18 September 2023.

• Budraß, Lutz (1998). Flugzeugindustrie und Luftrüstung in Deutschland 1918 - 1945 [Aircraft Industry and Air Armament in Germany 1918 - 194]. Schriften des Bundesarchivs (in German). Vol. 50. Düsseldorf: Droste. ISBN 9783770016044.
• Puig, Albert Presas i (2008). "Technological Transfer as a Political Weapon: Technological Relations between Germany and Spain from 1918 to the early 1950s". Journal of Modern European History. 6 (2): 218–236. doi:10.17104/1611-8944_2008_2_218. ISSN 1611-8944. JSTOR 26265872.
• Stöckel, Kurt (1954). Die Entwicklung der Reichsmarine nach dem ersten Weltkriege (1919–1935) Äußerer Aufbau und innere Struktur [The Development of the Reichsmarine after the First World War (1919-1935) - External Structure and Internal Structure] (Phd thesis) (in German). Gottigen: University of Göttingen.

• Walter Lohmann Archive