A Man Called Intrepid

by William Stevenson

  Ian Fleming, during one of his missions for British Naval Intelligence in that summer of 1941, had a ringside view of an incident that typified Stephenson’s dilemma. Being permanently silenced by British secrecy laws, Fleming described it later in fictional terms when he wrote about the two “justified killings” that earned James Bond his official double-O classification, which gave him a license to kill.

  The first was in New York—a Japanese cipher expert cracking our codes on the thirty-sixth floor of the R. C. A. building in the Rockefeller Center, where the Japs had their consulate. I took a room on the fortieth floor of the next-door skyscraper and I could look across the street into his room and see him working. Then I got a colleague from our organization in New York and a couple of Remington thirty-thirtys with telescopic sights and silencers. . . . His job was only to blast a hole through the window so that I could shoot the Jap through it. They have tough windows at the Rockefeller Center to keep the noise out. It worked very well. . . . I got the Jap in the mouth as he turned to gape. . . .*

  “The truth was,” Stephenson commented later, “Fleming was always fascinated by gadgets. We were building up our mechanical coding equipment. One floor down was the Japanese Consul-General. We knew he was sending coded messages by short-wave radio to Tokyo. With two of my assistants, I broke into the Japanese consular offices at three in the morning. Fleming came as an onlooker. We cracked the safe and borrowed the code books long enough to microfilm them.”

  To Stephenson, it was straightforward counterespionage. To Fleming, it was “the spectacle of the greatest of secret agents at work.” To Hoover, it was permissible only so long as he was taken fully into INTREPID’s confidence. Now, logic and caution decreed that the FBI should become part of an over-all system, not dominate it. Roosevelt wanted an end to fratricidal rivalries between the Army’s G-1, the Navy’s ONI, the State Department, Immigration and Customs’ security, and the Treasury’s Secret Service. There had been no central agency to survey all their work. Even the Federal Communications Commission, monitoring foreign broadcasts, frequently failed to reach those who would benefit from its recoveries. Bill Donovan took over, and tried to bring order out of this chaos, first as head of the Office of the Coordinator of Information, which later became the Office of Strategic Services, OSS.

  “Hoover keenly resented Donovan’s organization when it was established in July 1941,” observed the BSC Papers. “He feared it would hurt the authority of the FBI, particularly in South America. . . . Realizing he could attack Donovan’s agency most effectively by attacking what was then its mainstay, INTREPID, he began to treat it with hostility and his purpose was to suppress the British operations. He had the backing in the Roosevelt Administration of those who were latently anti-British and with the help of the Assistant Secretary of State, Adolf Berle, he worked toward a legal method of dissolving BSC and thus ending Donovan’s fledgling agency.”

  The conflict began to hamper INTREPID’s operations in mid-1941, a crucial time. Hoover decided to force disclosure of BSC operations and began to seek legal ways of doing so. He did not know what he was asking, for he was not conscious of the full extent of the training and build-up of secret armies in Europe, or of ULTRA, whose reports of enemy intentions did not reveal the source. He knew many channels had now opened between Washington and London, and that BSC’s functions had changed and expanded. The British fear was that by sticking to the letter of the law he would require them to put on paper a full account of their activities, which would inevitably get into the enemy’s hands, or to shift intelligence headquarters elsewhere—an almost impossible task, for by now Rockefeller Center was employing 2,000 full-time specialists at the hub of global networks.

  There was a third alternative. Stephenson could recapture Hoover’s good will by confiding more British secrets orally, on a personal basis. This was not easy. Within the British intelligence establishment in London were not only those who feared American indiscretions. There were also Soviet agents, or their pawns, who regarded Hoover as an anti-Communist zealot to be secretly undermined. When Soviet agents moved into key posts in London, they began the deliberate sabotage of Anglo-American intelligence collaboration—a campaign that never ceased, and a situation never fully exposed until long after the war, when two British diplomats, Guy Burgess and Donald Maclean, defected to Russia and thereby started investigations that reached back to wartime espionage.*

  The secret-warfare chiefs in London were themselves fearful of too full and frank disclosures to their American colleagues, still poised between peace and war. Stephenson presented the arguments for action at the top on both sides of the Atlantic. President Roosevelt was persuaded that intelligence was the front line of U.S. defense and that the U.S. would depend for some time on British expertise. Churchill was persuaded that the FBI had been invaluable in fighting pro-Nazi forces in the Americas and must be kept friendly. Hoover had gone far beyond his duties to wrestle with the Third Reich. To judge what it would cost Britain to have Hoover as an enemy, it was necessary to see what he had done as a friend.

  The first big FBI-BSC operation had been to knock out the key German intelligence outpost in Mexico, which directed Nazi subversion and espionage in the United States and co-ordinated these activities with similar campaigns in Latin America.

  * Casino Royale, the first James Bond thriller, was seen by Stephenson in manuscript. “It will never sell, Ian,” he told Fleming. “Truth is always less believable. . . .”

  * Donald Maclean was a senior British diplomat who passed atom secrets to the Russians and was whisked out from under British security noses in 1951. He then went to work for the Soviet Foreign Service, taking Guy Burgess with him to Moscow. Twelve years later, Kim Philby escaped to Moscow after being exposed as a Russian agent inside British intelligence. The dreadful irony is that Hoover, between 1941 and 1945, several times requested investigation of British intelligence officers associated with Philby, on the grounds that they seemed determined to damage Anglo-American co-operation.

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  As it had been in World War I, the Latin-American republic of Mexico was, in the summer of 1940, once again a springboard for troublemakers instructed from Berlin. Unfortunately for the German spy masters, there were more instructions than money. The outpost had run out of hard currency.

  “It seems funny in retrospect,” Stephenson said later. “But the Mexican operations were not at all funny at the time, because German agents were breaking the economic blockade, smuggling thousands of tons of oil through Mexican ports, and directing a formidable network of clandestine radios. Their field officer was a big monocled Junker, a relative of that pretentious ass Franz von Papen, the dilettante politician who was also a failure as spy master, soldier, and diplomat. Von Papen directed spies and saboteurs in the U.S. and Canada during the First World War and now he was intriguing against the oldest of German intelligence chiefs, Admiral Canaris.* It was Canaris who sent von Papen’s cousin to Mexico. Colonel Friedrich Karl von Schleebruegge moved into a posh house at 142 Donata Guerra in Mexico City. He knew how to spend funds—for his own amusement. His staff were experts but they needed a hell of a lot of money, which they weren’t getting. Joachim Hertslet worked out of the German Legation, arranging oil for Germany by way of Japan and Siberia, and also through the blockade to Italy before she came into the war.

  “Hertslet was a real problem to us before the cash ran out. He set up secret U-boat refueling bases in the Caribbean. He had influential friends. When I looked into his barter agreements, dating back to early 1938, I was impressed by his commercial ingenuity. He’d been swapping German industrial products for oil for two years.

  “Then there was a sabotage expert who moved to Mexico after working for the New York company of H. Bischoll. While in New York, he taught Irish workers to damage docks and factories supplying Britain. His name was Karl Rekowski, and he needed hard cash to pay saboteurs inside the States.

  “We’d set up a currency blockade. Th
e Mexican outpost couldn’t operate unless it had local currency for places like Colombia, Ecuador, Nicaragua. Hoover and I pooled our information. A lot came from intercepted wireless traffic in codes we’d broken. The so-called ‘Bolivar’ net, for instance, transmitted to Germany such perishable intelligence as ship movements. It was tantamount to the German U-boats being directed onto target. . . .

  “There’s always two sides to secret radio transmissions. If the enemy doesn’t know you’re listening, he gives things away. What he was telling us now was that for all the success of their Mexican station, the Germans there were going bankrupt.”

  The German director turned for help to the Washington embassy of the Fascist Italian government, which in October 1940 was still enjoying a “correct” relationship with the State Department. The news was brought by Hoover, who dropped into the Stork Club one evening. He seldom drank more than a single shot of Jack Daniel’s, usually with a close and trustworthy friend like Walter Winchell. This night he sat alone until one of Stephenson’s go-betweens turned up. “Tell Bill we’ve got something for him,” said Hoover.

  The FBI had noticed money being withdrawn from New York banks by Italian diplomats. Now it appeared that a total of $3,850,000 had been collected for transfer across the Mexican border in small bills.

  Hoover was powerless to interfere legally. Any action he took would have to be behind official backs. Could he tail the Italian Embassy couriers who were picking up the money, on the grounds that he suspected the funds were to finance subversive activities? “Yes,” said presidential adviser Ernest Cuneo. “If the Italians move the money physically to Mexico, it can be confiscated by Stephenson’s men once it crosses the border.”

  This was more than relaying a presidential view. Cuneo was an international lawyer and knew how far the rules could be stretched.

  Three couriers were to carry the money in diplomatic bags, the FBI reported. An Italian Embassy secretary would take $1,400,000 to Mexico City. Two consuls would proceed with the rest to New Orleans. If the consuls took ship south, there was nothing to be done. The Italian government had a perfect right to transfer funds in case of a possible U.S. government freeze. The President wanted the move frustrated but he could not be publicly associated with a breach of diplomatic niceties. The British Embassy was afraid of repercussions, too. So the FBI went quietly about its business of watching the Italian Embassy, and BSC warned its agents in Latin America to stand by.

  The three Italian couriers traveled to Brownsville, Texas, followed by FBI agents. The secretary took the train to Mexico City. Stephenson warned his man inside the Mexican Police Intelligence Department to have the single courier interrogated the moment he stepped over the border. The secretary cheerfully exploited his diplomatic privileges. His outraged cries when the police defiled the sanctity of his diplomatic pouch were heard as far away as Rome. The Mexican government blamed the inexperience of a clerk and put the money into a blocked account. With that, the German network centered on Mexico City collapsed.

  One-third of Nazi espionage funds for Mexico thus vanished. The sums involved were exceedingly large for that period and in that part of the world. Stephenson waited to pounce on the remaining $2,450,000, carried by the two consuls, who had boarded a ship for Rio de Janeiro. His man in Rio extracted from the Brazilian foreign minister a promise that the money would be given “special protection.” But just in case, a pair of Stephenson’s agents raced to the east Brazilian port of Recife, then known as Pernambuco, where the ship was expected to pick up cargo.

  “Both agents were keen types,” Stephenson recalled. “Their job was quite simple. Steal the money. Nobody doubted they would faithfully make the dangerous journey home, turn in the money, and then itemize every cent in their own expense accounts. When you select an agent, you pick him first for his integrity. You’re operating in a lawless underworld. But you trust your men. Every detail of the operation was worked out for these two. They planned to slip aboard the ship at Pernambuco, grab the diplomatic bags, and make a run for it. But the Brazilian foreign minister double-crossed us. A request was issued to the ship’s agents in Rio to reroute her. She never stopped at Pernambuco. Instead, the Italian couriers were met at Rio and escorted to their embassy. A couple of million dollars slipped through our fingers. Such hard currency would buy the Nazis an awful lot in those days—not just the vital commodities which we were trying to stop from reaching German industry, but propaganda and informers. A police chief could be had for a few hundred dollars.”

  From this first FBI collaboration abroad with British intelligence, Hoover concluded that he could dominate the over-all U.S. intelligence effort. He liked to be responsible for delivering to U.S. armed forces’ intelligence units any material obtained from Stephenson. With the FBI stamp of approval, it was more readily accepted—which in those early days was all that Stephenson wanted. “Hoover was in the war from the beginning,” Stephenson said later. “He planted British deception material among Washington officials who talked too much. London would ask me to ask Hoover to palm off some rumor like the one about glass balls to be dropped from bombers. The balls supposedly contained a new explosive of tremendous heat which could not be extinguished. This eventually reached the Germans and may have discouraged plans to use poison gas on London. There were, of course, no glass balls.”

  In this crucial period, the war at sea was going so badly that sixteen Axis vessels sheltering in Mexican ports were far more of a potential threat than might appear to Washington’s detached observers.

  “The survival of Axis freighters making blatant use of Mexican ports might encourage a belief that Britain is powerless in the area,” reported INTREPID. “The Royal Navy cannot patrol Mexico’s territorial waters. Enemy ships stand a good chance of slipping through our blockade, scoring a moral victory that might influence fence-sitters. Four of the ships are German and twelve are Italian. The vessels are tied up in Vera Cruz and Tampico. This would be a bad time for them to break out. We get a lot of information out of friends in Mexico who sympathize with Britain. Mexico provides good coverage of the pro-Axis leaders in Latin America. If the ships escape, our stock in Mexico goes down and certain facilities will be discontinued.”

  “Take appropriate action,” replied London.

  A couple of Canadians appeared in BSC’s Broadway office, having crossed into the U.S. by way of the International Bridge near Watertown, New York, where American border officials turned a blind eye to bits of metal and plastic explosives in the trunk of their car. The metal was magnetized, and the plastic was made in the “spy factory” near Toronto. When assembled, the frames and plastic became limpet mines, which would cling to the steel plates of a ship’s hull. The two Canadians, underwater demolition men, began their journey to Mexico with a briefing from Stephenson, who had spoken directly with President Roosevelt, convincing him that the State Department’s fear of diplomatic scandal was outweighed by America’s need to impress the Mexicans with American strength in the event of war in the Pacific. It was then arranged that a British “naval adviser” should go to the U.S. Office of Naval Intelligence with a formal request that U.S. destroyers help prevent the Axis vessels from escaping. Roosevelt’s part was kept out of it; instead, Secretary of the Navy Frank Knox appeared to respond to Navy recommendation that four destroyers patrol the area.

  On the night of November 15, 1940, the four German ships attempted to slip out through the Gulf of Mexico. They were confronted with blinding searchlights directed from what they took to be hostile warships. One German vessel, the Phrygia, caught fire and sank. The crews of the other three ships, back in Tampico next day, claimed they had been intercepted by British warships. Just what did happen to the Phrygia was never made clear. There were no other warships in the region except the U.S. destroyers. It was their searchlights that surprised the fleeing Germans. The Mexicans drew the conclusion that the United States was fighting alongside Britain, but not openly. It was a conclusion not displeasing to Ro
osevelt. He was alarmed by Nazi propaganda that the United States would never resist attack or help South American countries in danger. The incident conveyed its message to Berlin while escaping the attention of most Americans, still fighting shy of involvement.

  Two of the remaining German ships tried to break out again a month later. German intelligence had identified the U.S. destroyers, and Berlin wished to demonstrate that the United States feared an open confrontation. The German ships were ordered to sail in broad daylight. This time, the U.S. destroyers merely shadowed them, transmitting their position hourly until British warships could be directed from operations elsewhere. The British made the capture, and the Americans remained ostensibly neutral. The Mexican government expropriated the remaining thirteen Axis vessels so fast that the Canadian team of saboteurs had no need to carry out their own orders.

  Hoover was disappointed about the saboteurs, whose passage through the United States was made under FBI protection. His uneasiness about ONI working directly through Stephenson with the Royal Navy was tempered by the fact that he had been kept fully informed. The FBI’s counterespionage tentacles were creeping into South America, even though the State Department was not happy about it.

  Stephenson had created a Ship’s Observer network in which one member of every crew sailing out of Western Hemisphere ports reported to INTREPID when anything suspicious occurred. These reports were shared with the FBI and added to Hoover’s prestige. The FBI director was given credit for the arrest and execution of the first British traitor caught in a U.S. port. He was George Thomas Armstrong, a thirty-two-year-old sailor who sold convoy information to the German consul in New York. Part of his price was that German U-boats did not torpedo him. Armstrong was an ardent Communist, and in this period before Russia was attacked, he had followed the Communist line of opposing his native England’s continuance of the war. He was allowed to sail back to England, where Scotland Yard picked him up. He was hanged in Wandsworth Jail on July 9, 1941.