Joseph E. Persico

by Roosevelt's Secret War: FDR;World War II Espionage

  By the time Astor received his commission, Sir James Paget had been replaced as British espionage chief in America. His successor was a diminutive Canadian, William Stephenson. Diminutive, perhaps in stature, Stephenson was in all other respects a formidable character. His life is worth lingering over, since it would play a pivotal role in Roosevelt’s involvement in World War II espionage. William Samuel Stephenson had been born on January 11, 1896, and raised on the bone-chilling plains of western Canada. From his earliest school days, the boy exhibited that rare and admirable combination, depth of intellect and a taste for action. In high school, the “wee fellow,” as he was called, became both a bookworm and an athlete. With the outbreak of World War I, he marched straight from high school into the trenches, with the Royal Canadian Engineers. At age eighteen, he won a battlefield commission. Between his unit’s heavy losses and his natural leadership, he was promoted to captain by age nineteen. During his twentieth month at the front, Stephenson was felled in a gas attack and invalided back to England. His lungs, the doctors said, could not stand up to front-line conditions in the trenches. He was considered “disabled for life.”

  For most soldiers his situation would have marked an honorable end to war. Stephenson, instead, turned to the air campaign, volunteering for the Royal Flying Corps. He became an ace, scoring twenty-six kills. On July 28, 1918, Stephenson’s Camel was mistakenly shot down by a French observer aircraft. Wounded in the leg, the flier landed behind enemy lines and was taken prisoner, but managed to escape. Stephenson later became a boxer, earning the world amateur lightweight championship title. He settled in Britain, where twin talents for invention and commerce made him a millionaire before he was thirty. One of his companies, Pressed Steel, coincidentally drew Stephenson into espionage. Steel-buying missions brought him into Germany, where he found the pace of military production alarming. What he learned he fed back to Winston Churchill, who, in the years before the war, had made himself a Cassandra by warning his resistant countrymen that Germany was rearming and that Britain must be prepared to fight.

  As soon as Churchill became prime minister, Bill Stephenson was summoned to 10 Downing Street. He was to move to the United States and take Paget’s place under cover of the Passport Control Office, Churchill directed. His mission was to protect British property from sabotage, thwart German clandestine operations in the Western Hemisphere, but above all, to draw the United States into the war. Ian Fleming, the future creator of James Bond, and a Stephenson subordinate, described the man at the time as “very tough, very rich, single-minded, patriotic, and a man of few words.” Stephenson, upon his arrival in the United States that same May, set up shop in Room 3603 Rockefeller Center, and looked up Paget’s accomplice, Vincent Astor. Astor insisted that Stephenson stay at what he called his “broken-down boarding house,” the swank St. Regis Hotel.

  As his undercover activities began to stretch the thin disguise of a passport-control office, the U.S. State Department demanded that Stephenson register his organization. He acquiesced, identifying the operation as the inscrutable British Security Coordination. Later legend would have it that Churchill personally assigned Stephenson the code name Intrepid. The truth is rather more prosaic. Intrepid was the cable and telegraph address Stephenson’s BSC used over the wires of Western Union.

  Vincent Astor quickly reestablished with Bill Stephenson the cozy arrangement he had enjoyed with Sir James Paget. Indeed, it was from Stephenson that he learned of a cloud forming on his horizon. Late in 1940, the President allowed Admiral Anderson, as director of naval intelligence, to make an unusual covert appointment. Wallace Banta Phillips was a bald-headed, hunchbacked businessman with a mysterious past. Phillips claimed to have been an intelligence officer with the American Expeditionary Force in World War I. He thereafter settled in London, heading a rubber products company called Pyrene. During the years of peace, he conducted an industrial spy service and boasted that he had agents on his payroll stretching from the Soviet Union to Mexico, including seven former prime ministers. He had volunteered his services to his native land and was taken on by Anderson as a dollar-a-year man working out of New York City and given the title representative of the Special Intelligence Service of the Office of Naval Intelligence. In this position Phillips enjoyed unrestricted access to ONI’s secret files and funds.

  Several months later, on March 19, 1941, FDR finally formalized Vincent Astor’s nebulous role. He informed ONI, MID, the State Department, and the FBI that “As Area Controller for the New York area, Commander Vincent Astor, U.S.N.R. is designated.” Astor was given an office at 50 Church Street and lofty-sounding authority. He was to assign intelligence priorities, resolve conflicts, act as a clearinghouse, and be informed before the other four agencies could make any new espionage contacts. His authority had been granted without the President’s first consulting the military intelligence chiefs or J. Edgar Hoover, omissions that would scarcely ensure Astor of a warm welcome into the field.

  For all his newfound authority and intimacy with FDR, Astor was about to experience what all Roosevelt associates eventually learned: He was privy to only part of the total man. No sooner did he assume his new mandate when someone he described as the “number one man” in British intelligence, doubtless Stephenson, tipped him off about the emergence of a potential rival in Wallace Phillips. On April 20, Astor dispatched a car and driver from New York to hand-deliver a letter to Hyde Park, where the President was spending the weekend. In it he begged for “just 5 minutes worth” of the President’s time the next day. He appended a note asking FDR’s other secretary, Grace Tully, if the President might send his reply back via the driver on his return to the city. In the meantime, he said, he would wait at home for a phone call. Taking no chances, should the requested meeting or call fall through, he appended a six-page longhand letter that began, “Dear Mr. President, One might suppose that I would leave you in peace while trying to get a rest in Hyde Park. However, here is a situation which I do not feel justified in keeping from you, for if it went wrong I believe it could result in a real scandal and be just what the isolationists would like. The situation concerns a Mr. Wallace Phillips.” Astor went on to inventory Phillips’s sins. “He claims to be very rich and to be a great friend of Churchill and most of his war cabinet… . He claimed that he a) had frequent contacts with you, b) was a great friend of J. Edgar Hoover who gave him the run of F.B.I. files, c) had access to MID, ONI and FBI files in New York.” Astor revealed that he had already confronted Phillips personally, and that the man appeared unabashed and unapologetic about his behavior. “Since then I have discovered the following from P. himself,” Astor went on, “a) he has entire charge of expenditures of the Navy’s ‘secret’ fund (about $100,000), b) he alone selects agents to be sent abroad, c) he refuses to allow the FBI to check these men, d) in my opinion he pays his agents exorbitantly ($4,000–6,000 per year) plus $10 per day plus travel expenses… . Furthermore, in my opinion, for what it’s worth, Mr. P. is unreliable in his statements, indiscreet, and a social climber, which is a dangerous combination for one in his position.” Astor’s final comment reveals FDR as the master manipulator looking down from above onto his subordinates scurrying around like mice in a maze. “I have reported the whole matter to Admiral Anderson (3rd Dist.) who is just as worried as I am,” Astor closed. Yet, it was Anderson who had hired Phillips in the first place, with FDR’s approval. Astor’s torpedo had misfired before it was launched. Phillips continued his services for ONI.

  Not only did Vincent Astor face rivals in Phillips, the ONI, MID, and FBI, but a new competitor was about to enter FDR’s clandestine service. John Franklin Carter had first met Roosevelt in January 1932 after writing a profile of the then New York governor for Liberty magazine. The piece prompted an impressed FDR to invite Carter to Albany just as the governor was beginning to emerge as a Democratic candidate for the presidency. Carter told FDR, “You’re going to be elected President.” Roosevelt, he later recalled, “wasn’t quite a
s sure as I was.”

  Carter had been born in Fall River, Massachusetts, in 1897, one of seven children of an Episcopalian minister. He attended Yale with Stephen Vincent Benet, Thornton Wilder, Archibald MacLeish, and Henry Luce and thereafter was rarely out of sparkling company. Carter worked for just one month on a new magazine called Time, launched by his classmate Henry Luce, before he left to join The New York Times. Carter became an ardent New Dealer and in 1936 went to work as a speechwriter and idea man for Henry Wallace, then secretary of agriculture. He was described by a colleague as “brilliant, cynical, occasionally cockeyed and always exciting.” After leaving government, Carter started a syndicated column, “We the People,” written under the pen name Jay Franklin. His office in the National Press Building was just blocks from the White House.

  Early in 1941, Carter tested out on undersecretary of state Sumner Welles a scheme that had been percolating in his mind as America seemed fated for war. He told Welles that the various intelligence services were “pretty well loused up and floundering around. There might be a use for a small and informal intelligence unit operating out of the White House without titles without any bullshit… .” Besides, Carter believed that since he had worked hard to get FDR elected for the controversial third term, he deserved something. Welles passed Carter’s idea along to the President, who immediately asked the columnist to stop by the White House. Carter had a head start before he even met with the President. He did not like the State Department, nor did FDR. Roosevelt found its policy guidance rigid and excessively neutral. State, in his judgment, was defeatist, reflected in the pessimism of his envoy to Britain, Joe Kennedy. He suspected department careerists of leaking secrets to the isolationists, and he had distrusted State’s notoriously porous Gray code even before the Tyler Kent episode. The President was aware of the old story that as far back as the 1920s the American consul in Shanghai made his retirement speech to the diplomatic community in this code, his remarks understood by all. More important, FDR believed the department was poorly equipped to conduct intelligence abroad. A young Dean Acheson, who would one day rise to secretary of state, noted, “Techniques for gathering information differed only by reason of the typewriter and the telegraph from the techniques which John Quincy Adams used in St. Petersburg and Benjamin Franklin was using in Paris.”

  Carter made his pitch to the President for the informal White House intelligence ring and found FDR receptive. Roosevelt was aware that during World War I President Wilson had been secretly advised by a body called The Inquiry. At its peak, The Inquiry numbered 126 scholars, scientists, and literary figures, including the historian Samuel Eliot Morison and the journalist Walter Lippmann, currently writing for The New Republic. Its members worked out of anonymous quarters in Manhattan and prepared confidential peace terms and redrawn maps of Europe for Wilson to pursue in the postwar era. To FDR, what Carter was proposing had the ring of The Inquiry. The man seemed to know everybody—officials, diplomats, the entire press corps domestic and foreign, and corporate executives all over the globe. He also had access to the National Broadcasting Company’s worldwide shortwave network. And FDR grasped that Carter’s profession offered the perfect cover for delivering intelligence, a Washington journalist coming to the White House occasionally to interview the President.

  On February 13 the President approved the establishment of “a small special intelligence and fact finding unit” under Carter. He also arranged for plausible deniability. As Carter described FDR’s terms, “The overall condition was attached to the operation by President Roosevelt that it should be entirely secret and would be promptly disavowed in the event of publicity.” It was left to Adolf Berle at State, FDR’s intelligence handyman, to implement the Rube Goldberg apparatus the President had concocted. That year’s military appropriations act included an “Emergency Fund for the President,” from which FDR transferred $10,000 to the State Department. State was then to finance Carter, ostensibly by buying from him surveys on conditions in various countries, with Germany leading the list.

  On February 20, a week after FDR had approved Carter as his newest spy, Berle described to his superior, Sumner Welles, his less than impressive first encounter with the columnist. “Jay Franklin (J.F. Carter) came in to see me today. He stated as a result of his conversation with the President and with you, and preparatory to the work he had been asked to do, he had spent some seven hundred dollars, and that he would be broke by the end of this week… . He wanted an advance of some kind against the compensation which he would eventually receive for his work. Accordingly I lent him seven hundred dollars.” Berle concluded, “I am not, of course, familiar with what the President has asked him to do, nor do I wish to be… .”

  Carter was cast in the Roosevelt mold—quick, bright, bold, passionate in his beliefs, with the passion leavened by practicality and a sense of humor. The new spy’s assignments roved indiscriminately. Besides collecting intelligence, FDR wanted Carter to do political analysis, evaluate new weapons, troubleshoot military bottlenecks, and monitor other intelligence operations. It would no doubt have surprised and saddened Vincent Astor to learn that the President specifically asked Carter to keep an eye on his old friend’s operation.

  After several months, Carter had only eleven full-time agents on the payroll in his determination to keep the operation compact. He managed a clever multiplier effect by obtaining from the U.S. Passport Division the names of persons given visas for travel to foreign countries and those of foreigners coming into the United States. Carter’s operatives would then coach willing outward-bound travelers in what to look for abroad, and would question arriving foreigners willing to describe military and industrial conditions, particularly in the Axis countries.

  *

  The boldest covert operation that FDR had been pursuing, while America was still technically neutral, was unknown to either Carter or Astor, the FBI, or the military intelligence branches. Back in July 1940, Treasury secretary Henry Morgenthau had dined with the British ambassador, Lord Lothian, Henry Stimson, and Frank Knox. Lothian had conducted a clever campaign of ingratiating himself with Americans, among whom Morgenthau, because of his closeness to FDR, had become a prime target. The British peer, born Philip Henry Kerr, was fifty-eight at the time, a tall, big-boned man with a high brow and Roman nose, every bit the lord. Despite his rank and wealth, Lothian had quickly grasped that Americans were much taken with bluebloods exhibiting a just-plain-folks demeanor. Thus he wore a battered gray fedora, drove his own car, and bought his own train tickets when traveling in the United States.

  That July evening, during an after-dinner conversation, Lothian pointed out to Morgenthau that though Japan’s belligerency and territorial ambitions were obvious, the United States was still selling fuel to the Japanese. Lothian then dropped a bombshell: “If you will stop shipping aviation gasoline to Japan,” he offered, “we will blow up the oil wells in the Dutch East Indies so that the Japanese can’t come down and get [them]… . At the same time the Royal Air Force could concentrate its bombing attacks on German plants producing synthetic gasoline.” Caught in this three-way squeeze, the Axis powers would simply run out of gas. The United States was not at war with Japan, nor was Britain. The ambassador’s proposal could be seen as nothing less than blatant aggression against the Japanese. The scheme, Morgenthau later confided to his diary, left him with his “breath … taken away.” If the British “would blow up the wells, it would simply electrify the world and really put some belief in England… . [I]f we don’t do something and do it fast, Japan is just going to gobble up one thing after another.”

  The next day, Morgenthau went to the White House to test Lothian’s idea on FDR. The Treasury secretary, a Jew, had become a hard-line interventionist, prompted in part by what Hitler was doing to his co-religionists in Europe. He later told FDR, “[T]his thing might give us peace in three to six months.” The President thereupon launched into a monologue lasting half an hour, during which he astonished Morgenthau with h
is pinpoint knowledge of oil deposits around the world. FDR also told him that he had been thinking for months of blockading all of Europe, “just leaving a small channel open directly to England through which all ships would have to pass… .”

  Morgenthau’s visit had run overtime, and Stimson, Knox, and Sumner Welles were outside the office waiting to see the President. FDR asked Morgenthau if he minded if they came in. “By all means, they are great guys,” he answered. With the others ushered in, the President casually floated the Lothian proposal, without mentioning Morgenthau’s role. To the Treasury secretary’s delight Stimson favored taking a hard line against Japan. But Welles was aghast and warned that so rash a move would cause Japan to declare war on Great Britain. The meeting had been vintage Roosevelt—elicit several opinions, the more contrary the less likely FDR was to go off on a wrongheaded course. The debate over Lothian’s proposed swap, an American fuel embargo for British destruction of the Dutch East Indies oil fields, ended in an Oval Office stalemate.

  Still, the President hankered after the near impossible, hurting Japan without provoking war. The next opportunity rose in December 1940. Roosevelt was outraged by Japan’s indiscriminate bombing of Chinese cities and the aerial machine-gunning of helpless civilians. Morgenthau wrote in his diary: “… [H]e [FDR] has mentioned it to me that it would be a nice thing if the Chinese would bomb Japan.” China’s leader, Generalissimo Chiang Kai-shek, had sent Morgenthau a plea for five hundred U.S. aircraft. With airpower, Chiang argued, he could retake Canton and Hankow. He could threaten bases on Hainan and Formosa, even Japan itself. Chiang’s request had been delivered to Morgenthau by the generalissimo’s American air advisor, Claire Chennault, a former U.S. Army Air Corps captain. As Chennault explained to Morgenthau, the objective was to “burn out the industrial heart of the [Japanese] Empire with firebomb attacks on the teeming bamboo ant heaps of Honshu and Kyushu.” The Treasury secretary had close ties to the Chinese ambassador to Washington, T. V. Soong, Chiang’s brother-in-law. Soong wanted Morgenthau to sell Chiang’s proposal to FDR. Morgenthau leveled with the ambassador. “Well, his asking for 500 planes is like asking for 500 stars.” Still, he took the Chinese proposal to the President, who put one question about Chiang to Morgenthau: “Is he still willing to fight?” Yes, Morgenthau assured him, “that is what the message is about.” “Wonderful,” the President replied. “That’s what I’ve been talking about for four years.”