Santa Cruz spymaster, Peanut Gang , Madam ‘H’
County district attorney George W. Smith resorted to innovative measures to capture a notorious German spymaster.
Santa Cruz County became an unlikely center for World War I espionage activities. But county district attorney George W. Smith resorted to innovative measures, leading to the capture of one of the most notorious German spymasters in America.
In early 1917, Chief of Police Frank Hannah told Smith of a network of German “listening posts” in Santa Cruz sending daily reports to Germany on the evening train. Yet there were no laws against espionage until June 15, 1917 (two months after the nation’s entry into the war April 6, 2017) so tracking
such activities was the only recourse in the meantime. In cooperation with the U.S. Bureau of Investigation (now FBI), Smith organized a county Secret Service chapter in March 1917 called “The American Protective League.” None of the 300 agents knew who else was a member, and were assigned six to each sector.
One suspicious group was the Marxist “Industrial Workers of the World” union, called “Wobblies” for their notorious use of dynamite and firebombs. They’d been trouble in the past, and now often congregated at a Pacific Avenue and Lincoln Street peanut stand, which secretly distributed their literature for
the overthrow of Capitalism, and all unions but theirs. Chief Hannah once grabbed a cigarette from a teenager at the booth, saying “Boy’s shouldn’t smoke.” The fellow was mute, and wrote on a pad “I am not a boy!”
While this was a legal assembly, Smith feared their tactics, and in November requested a San Francisco detective service to send an undercover agent who spoke German and knew Wobblie politics. “Agent 18” came, a German who barely spoke English, and was so convincing, even Smith and Hannah were almost afraid to trust him.
After infiltrating, Agent 18 reported the “Peanut Gang”
was a German listening post, the “boy” was a woman in disguise, and a suspicious Russian in military puttees, white hat, and Van Dyke beard-and-mustache, made frequent night trips to the wharf. Lacking evidence against the Wobblies, Chief Hannah used an “obstruction of public walks” law to demolish the peanut stand in March, 1918. Many Wobblies briefly protested, then left town. Agent 18 stayed to see what the Russian was up to.
Smith was in Watsonville when he received a frantic phone call from his wife that a “crazy German” was at their house, demanding to talk to the D.A. Smith immediately
drove back to Santa Cruz, where he found Agent 18, who said excitedly in a thick German accent, “I have found their big van at Beck’s!”
Agent 18 said the Russian was living in the abandoned Market Street brewery, as a guest of Carl Beck. He was Franz Schulenberg, a local resident on-and-off for 14 years as a cabinet maker, movie extra, and now a miner. Schulenberg carried a precious gems book, and made horseback trips into the mountains. Yet when Agent 18 questioned him, Schulenberg’s responses showed he knew nothing of mining. Smith decided to keep him under surveillance.
Shadowing
Schulenberg frequented the Saddle Rock restaurant in the St. George Hotel, so Smith tipped off its proprietor, fellow Croatian patriot George Carstulovich. Plying Schulenberg with Rhein wine and Wagnerian music, Carstulovich recalled his own service in the Austrian navy, parading in 1898 at the emperor’s 50th Anniversary ceremony in Vienna. Believing Carstulovich German, Schulenberg confessed he was at the Anniversary as a German officer in the Brandenberg Guards.
Agent 18 tracked Schulenberg
to a meeting in the back of the “Arian Music Hall” on Front Street. Schulenberg tried to stoke resentments over mistreatment of local Germans.
But club members said antipathy had fallen off when Mayor A.A. Taylor organized the “Society of Santa Cruz” to consolidate support for the war effort with local groups, including three German societies who were strongly pro-American.
At last convinced Schulenberg was a German spy (not Russian), Smith contacted authorities, who arrived on Dec. 5. Afraid of compromising the case if Schulenberg had American citizenship, they got Carl Beck’s permission to search Schulenberg’s room while he was out. They found an arsenal of weapons, U.S. army uniforms, German guns and binoculars, and under a pile of clothes in a box labeled “green pumice” was 150 sticks of dynamite. A consul letter stated Schulenberg was a German-born representative of the Imperial German government, to be shown all due privilege. letters revealed his handler was a mysterious woman known as Madam “H.”
Even more incriminating was a letter addressed to Hindu terrorist leader, Ram Chandra. California experienced a rash of bombings in December 1917 and 30 Marxist Wobblies were arrested for bombing the back wall off the governor’s mansion in
Sacramento. Additionally, 34 Hindu terrorists were captured in another bombing conspiracy, and their leader Ram Chandra was assassinated while on trial in a San Francisco courtroom. And all were connected to Schulenberg, called the most dangerous German spymaster in America. Learning he was discovered, the pursuit was on.
Who is he?
Born in Germany in 1875, Schulenberg joined the Navy in 1893. In 1904 he learned his brother Carl, being disciplined by Lieut. Wilhelm von Brincken for a minor infraction, stood barefoot in the snow until he died of exposure. Schulenberg deserted to Santa Cruz and Santa Barbara, vowing vengeance.
When World War I began in July 1914, Schulenberg volunteered for espionage at the German consulate in San Francisco where von Brincken had become military attache. He was sent to Germany for training at Wilhelmstrasse headquarters, then Madam “H” assigned him to oversee secret U.S. radio posts reporting to Berlin on U.S. maneuvers and vulnerabilities.
In December Schulenberg met Ram Chandra, who financed Schulenberg’s trip to Seattle, where he blew up a munitions barge in Puget Sound, and delivered 50 high-powered rifles with silencers to confederates in Canada. In Feb. 1915, Schulenberg advertised to purchase Seattle-area land for a colony of 300 Latino families; but the families were actually Hindu revolutionaries. Since India’s independence movement supported Britain in the war, Germany backed Chandra’s Hindu terrorists to help build Germany’s Asian empire. The Hindus’ Canadian espionage campaign was delayed while looking for land.
Mexico declined a German offer to return U.S. border states from California to Texas, if Mexico became Germany’s staging ground for invading the U.S. So in 1917, as part of a fallback plan to seize Baja, Schulenberg built a radio communications post on Mexico’s west coast, and stock-piled explosives in the California border town of Calexico. These were later used in bombings in Texas, Chicago, and the Welland Canal connecting Lake Erie to Lake Onterio. In March he was in Germany for three weeks plotting with the head of the secret service, then returned to California.
When the U.S. entered the war in April, 1917, Schulenberg adopted the alias “Malina,” and divided his time between San Jose and Santa Cruz. Posing as a miner, Schulenberg first rented a house on Branciforte Avenue.
His “Handbook of Precious Stones,” found in the possession of other German spies, was used as a code book. His “wife” was a seductive 35-yearold brunette (Madam “H”) who spoke English with a French accent. Their “girl” was Beebe Bean, a 45-year-old woman who passed for either a teenage boy or girl, usually mute to hide her German accent. A visitor said the house was completely bare inside, with the floor covered with sound-muffling blankets. Schulenberg supplied dynamite to local Wobblies and Hindu conspirators, but the house burned in June.
Schulenberg tried to get a foothold in Mexico’s oil wells in July, then in August searched for a Hindu colony site in Santa Barbara, failing on both counts. He came to Santa Cruz in mid-November, staying at the abandoned Market Street brewery as a guest of an unsuspecting Carl Beck, who’d known him 14 years. With hideouts, disguises and schematics, Schulenberg was on the verge of a major bombing campaign.
Schemes
His first three targets were the Santa Cruz wharf, the new Davenport potash plant, and a county bridge while a Monterey troop train crossed it carrying communications experts. Then he planned to blow up docks in San Diego, San Francisco, Portland, Seattle and British Columbia, and kill his nemeses van Brincken.
But plans were delayed when his “Rio” speedster ended up in a Santa Cruz repair shop. Tipped off that authorities were closing in, he took the car before the job was done. But Smith telephoned the San Jose sheriff, who arrested Schulenberg in December with bridge plans, guns, 46 pounds of dynamite, three timers and three detonators. He was held under presidential warrant in San Francisco.
At the same time, Madam “H” escaped arrest in San Francisco, called “another Mata Hari” after the German spy executed that year in France. Beebe Bean was arrested on Dec. 28 in men’s clothes. A Los Angeles hermit was arrested for murdering a Hindu witness against Schulenberg, and revealed the true name of Madam “H,” a woman seen several times in Santa Cruz, whom Smith had even danced with at a Fourth of July picnic! She was arrested on Jan. 13, 1918, mailing incriminating letters south of Fresno at the Hanford post office, and identified as Eliza Quistorf, the estranged daughter of a Bonny Doon man. She was released, only to disappear.
Van Brincken fingered Schulenberg as the chief spymaster. Schulenberg confessed to several bombings, was sentenced to death, then deported after the war in a prisoner exchange. He ended up as a Mexican munitions maker and German spy, dying in the 1929 explosion of his Calexico ammo-dump.