The ups/downs of the entrepreneur & her business.

In 1939, at the beginning of World War II, Chanel closed her shops. She believed that it was not a time for fashion.During the German occupation Chanel resided at the Hotel Ritz, which was also noteworthy for being the preferred place of residence for upper echelon German military staff. She also maintained an apartment above her couture house at 31 rue Cambon. During that time she was criticized for having an affair with Hans Günther von Dincklage, a German military intelligence officer who arranged for her to remain in the hotel. Chanel was herself a Nazi intelligence operative, Abwehr Agent 7124, code name “Westminster".

World War II, specifically the Nazi seizure of all Jewish-owned property and business enterprises, provided Chanel with the opportunity to gain the full monetary fortune generated by "Parfums Chanel" and its most profitable product, Chanel No. 5. The directors of "Parfums Chanel," the Wertheimers, were Jewish, and Chanel used her position as an “Aryan” to petition German officials to legalize her claim to sole ownership. On 5 May 1941, she wrote to the government administrator charged with ruling on the disposition of Jewish financial assets. Her grounds for proprietary ownership were based on the claim that “Parfums Chanel “is still the property of Jews”…and had been legally “abandoned” by the owners.“I have,” she wrote, “an indisputable right of priority…the profits that I have received from my creations since the foundation of this business…are disproportionate…[and] you can help to repair in part the prejudices I have suffered in the course of these seventeen years.”Chanel was not aware that the Wertheimers, anticipating the forthcoming Nazi mandates against Jews had, in May 1940, legally turned control of “Parfums Chanel” over to a Christian, French businessman and industrialist, Felix Amiot.

Ultimately, the Wertheimers and Chanel came to a mutual accommodation, re-negotiating the original 1924 contract. On May 17, 1947, Chanel received wartime profits of nine million dollars from the sale of Chanel No. 5, an amount equivalent to some nine million dollars in twenty-first century valuation. Further, her future share would be two percent of all Chanel No. 5 sales worldwide. The financial benefit to her would be enormous. Her earnings would be in the vicinity of twenty-five million dollars a year, making her at the time one of the richest women in the world. Chanel’s friend and biographer Marcel Haedrich provided a telling estimation of her wartime interaction with the Nazi regime: “If one took seriously the few disclosures that Mademoiselle Chanel allowed herself to make about those black years of the occupation, one’s teeth would be set on edge".

In 1943, after four years of professional separation, Chanel contacted Lombardi, who was living in Rome. She invited Lombardi to come to Paris and renew their work together. This was actually a cover for "Operation Modellhut," an attempt by Nazi spymaster Walter Schellenberg to make secret contact with Lombardi's relative Winston Churchill. When Lombardi refused, she was arrested as a British spy by the Gestapo. Chanel was later charged as a collaborator, but avoided trial due to intervention by the British Royal family.

Haute Couture suit circa 1960, designed by Chanel. Chanel was a very close friend of Walter Schellenberg to the extent that when he died of cancer penniless in Turin, Chanel paid for his funeral. Some references suggest that Coco Chanel had close contact with another Nazi, Walter Kutschmann, who was responsible for the murder of thousands of Poland's Jews early in World War II. He was transferred to France in 1943 where he became Chanel's Paris SS contact. Kutschmann made frequent trips to Spain with Chanel with large sums of money passing between them.