The Smithsonian article was “Chez Chanel”, July 2001, p.60. It’s fairly brief on the war, including only the following paragraphs (which I hope aren’t too much to repeat):
"Three weeks after Nazi Germany invaded Poland in September 1939, starting World War II, Coco abruptly let everybody go, and shut down the House of Chanel.
The irony is that closing her doors became, as her biographer Axel Madsen notes, “Chanel’s treason.” First her workers, then the government, tried to force her to reopen–for la belle France, just as in the earlier world war. She bridled at such naivete, but she hadn’t counted on the worst. Turned against France, Hider’s blitzkrieg overran half of the country and the other half became a collaborationist mockery. A dozen Paris houses did collections in 1941 for black marketeers, and the wives and mistresses of German officers. Chanel stayed dosed, but, “I was wrong,” she recalled bitterly. 'Whey never stopped selling fashion during the war."
All her chic friends adjusted, with smooth loathing, to the war. The Wertheimers fled, but kept control of Les Parfums Chanel, selling Chanel No. 5 throughout the Reich and, without her knowledge, in the United States. Chanel lived, with German permission, at the Ritz.
Impulsively, she took up with a tall, blond German officer, much younger than herself, who spoke fluent French–Hans Gunther von Dincldage, nicknamed Spatz. A former diplomat, Spatz was always in civilian clothes, like as not an Abwehr counterespionage officer. Which means a spy, though how much of a spy, or even for which side, is unclear, since he mostly investigated the best wine cellars. “He isn’t German,” Coco claimed. “His mother was English.”
After Paris was liberated in 1944, Chanel was taken for three hours of questioning by the Free French about Spatz, long gone, but was released. Why did she never face charges of collaboration? Was her old friend Winston Churchill, who had met her through Westminster, her protector?"
The article goes on to reveal, incidentally, how the Wertheimers totally screwed her.