I'm not a historian, but I've read several books on this subject so I think I could give an educated answer.

From the sources I've looked at it was largely due to the threat the Soviets posed. These war criminals, as monstrous as they were, could have been valuble assets in a possible war against the Soviets. They had invaded the USSR, they knew how the Soviets fought first hand. They were tactically and ideologically important.

The parole of war criminals was not unique to Germany either. Notorious Japanese war criminals, [including Japanese ambassador to Nazi Germany Hiroshi Ōshima who was responsible for making the killing of shipwrecked seamen official policy] (http://en.wikipedia.org/wiki/Hiroshi_%C5%8Cshima#Supporting_war_crimes), were also released at the same time. Considering that Nazi scientists who employed slave labour and Japanese scientists who experimented on people were exonerated and were not even put on trial after the war, it's not surprising the West released them. It's better we have them than the Soviets, as they rationalised.

If you want to read on it further one of the books I'd recommend is [Sheldon H Harris': Factories of Death] (http://www.amazon.co.uk/Factories-Death-Japanese-Biological-American/dp/0415932149). He talks about how and why the West protected Japanese war criminals from prosecution after the war. While the book is not about German war criminals it would still answer part of your question, or at the very least set some context for the post-war world.