Hamann's ministerial responsibilities for trade and supply proved impossible to accomplish in a state that was becoming increasingly isolated, especially after reforms which left East and West Germany with different currencies. The Single list election process introduced for the 1949 assembly election and repeated for the 1950 General Election, as well as the proclamation at the SED party conference in July 1952 encountered no public opposition from Hamann, however. Like others in the LDPD he placed all his hopes in a rapid reunification of the country which would reverse the anti-democratic and illiberal measures being implemented by the East German government under Walter Ulbricht. In 1952 Hamann was arrested, because he had "systematically sabotaged the people's welfare" (""planmäßige Versorgung der Bevölkerung sabotiert""). He was relieved of his responsibilities and expelled from the LDPD. More than two years of "investigatory detention" at the Hohenschönhausen Jail followed. In July 1954 he was sentenced, in a secret trial, to ten years in prison, but he was pardoned in October 1956 and let out. In May 1957 he fled to the German Federal Republic (West Germany). Hamann died in Munich a couple of months after his seventieth birthday. His grave is in the at Bad Godesberg (Bonn). In May 1990 the successor organisation to the LDPD, the short-lived Association of Free Democrats, formally rehabilitated Karl Hamann. Legal rehabilitation by the Berlin regional court followed in August 1991. The Karl Hamann Foundation for Political Education in Brandenburg was named in his honour.