Wild Bill Donovan

by Douglas Waller

  Donovan began mulling the idea for Sparrow in the summer of 1943. Hungary had joined the Axis to be part of Hitler’s land grab and win territory from Romania. The Hungarian regent, Admiral Miklós Horthy, hoped to do it with as little of his force fighting the Red Army as he could get away with and not anger the führer. But as Hungarian losses on the Eastern Front mounted in 1943 and public resentment over Nazi exploitation of Hungary’s oil industry grew, Horthy and his new anti-German prime minister, Miklós Kallay, began casting out soundings in the West. Hungarian intermediaries in Bern and Stockholm had approached British envoys and OSS officers about a separate peace with the Allies.

  In July 1943, Alfred Schwarz offered up “a grandiose program,” as one top secret OSS report put it, to penetrate Hungary with espionage agents both to steal secrets and attempt to break the country away from the Axis. Schwarz had an agent who would serve as the key intermediary for this operation: Trillium, the flower code for a reputed Zionist named Andor Gross, alias Andre György, a chatty and somewhat disreputable intriguer who over the years had been a freelance courier for both the Allied and Axis intelligence services in Istanbul. In September, Trillium, who traveled freely between Istanbul and Budapest, reported to Schwarz that Lieutenant Colonel Otto von Hatz, a top aide from the Hungarian General Staff, would soon arrive in Istanbul as his country’s military attaché and was eager to establish a secret line to the Americans. On one of Trillium’s visits to Budapest, Hatz had promised him a pardon from smuggling charges Gross faced in Hungary if he could set up the communications link with the OSS. Schwarz gave his courier a radio set with an OSS cipher for sending coded messages, which he passed to Hatz. The colonel then told Trillium to tell Schwarz that the Hungarian General Staff was willing to slip intelligence to the OSS on the German army and that Prime Minister Kallay had personally instructed Hatz to report that Hungary was willing to join the Allies. By mid-December, Schwarz was meeting secretly with Hatz, who had arrived for his attaché job in Istanbul, and now proposed that the OSS infiltrate an agent into Budapest to be the conduit for the General Staff’s secrets on the German army and for negotiations to shift Hungary to the alliance.

  Donovan monitored the Hatz meetings closely from Washington. MI6, which had sneaked two agents into southwestern Hungary in November, also kept an eye on Hatz and wanted in on the secret conferences the OSS was having with him. Hatz, however, balked at another intelligence service being looped into his sensitive talks and Donovan saw no need to share him with the British, who hadn’t told the OSS about their two spies in Hungary. On December 5, the Joint Chiefs approved Donovan’s plan to infiltrate a team into Budapest, but with the proviso that they be under strict orders to make no promises on behalf of the United States.

  Alarm bells, however, began to tinkle ever so slightly. Dulles, who had long harbored doubts that the Allies could win over the Hungarians, warned on January 2, 1944, that Kolbe had delivered a Foreign Office report, which revealed Hatz was really working for the Nazis and stringing along Macfarland’s agents to feed the Germans intelligence on the Americans. Hatz also had a number of mistresses in Istanbul, Kolbe claimed, as well as a currency smuggling operation on the side because he was always personally short of cash. Donovan cabled Macfarland on January 7: Hatz “is working under orders to double-cross you.” Macfarland, however, insisted Hatz was an honest broker “not in sympathy with Nazi ideals,” he wrote Donovan. Yes, the Hungarian colonel has been talking to German intelligence, but he is actually a double agent, Packy believed, “only paying lip service” to the Nazis “in order to cover up his negotiations with us.” Macfarland convinced Donovan to let the Sparrow team jump.

  Friday night, March 17, Major Kirali fetched Duke and his comrades from their basement cell and escorted them upstairs to Ujszaszi’s office. The cordial intelligence chief, speaking in French, welcomed the men to Hungary and asked Duke for the American peace proposal. We have none, Duke told him as he was supposed to, “other than our regular terms of unconditional surrender.” The Sparrow team was there only to learn of the government’s plans and relay them along with any useful intelligence to Washington. Duke will be allowed to set up his radio at a secret location to begin transmitting, Ujszaszi told them. In the meantime, he had arranged a meeting on Monday with two cabinet members, who would lay out the government’s offer to switch sides. The men returned to their cells to wait.

  Before dawn Sunday morning, however, they were rousted from their beds and ordered to dress quickly for a meeting upstairs with Ujszaszi. The general, who had not slept all night, looked white as a sheet and on the verge of tears when they walked into his office. Three German panzer divisions have just crossed the Austrian border into Hungary and will soon be in Budapest along with 240 Gestapo agents, Ujszaszi told the Americans. Escape at this point was impossible. The best he could do was hide their radio sets and code books and have the agents mixed in with the other Allied aviators the Hungarians held as war prisoners to pretend they had been shot down—which hopefully would keep them from being arrested and tortured by the Gestapo as spies.

  German intelligence, which knew of Ujszaszi’s contacts with Duke, had kept Hitler fully informed of the Hungarian government’s peace feelers to the West. The führer had earlier summoned Horthy to Berchtesgaden and bluntly told him he could no longer “stand aside and watch the Hungarian government make attempt after attempt to come to terms” with the enemy. He browbeat Horthy into accepting the German divisions and replacing his prime minister with a Nazi sympathizer.

  In Istanbul, Macfarland hustled to contain the damage. Hatz, who had been in Budapest when the German divisions entered, returned to Turkey on March 28, but showed no interest in talking to Schwarz any longer about Hungary leaving the Axis. He had a few army documents on Hungarian troop deployments at the Eastern Front to pass to Dogwood, but they appeared to be “chicken feed,” spy jargon for worthless intelligence a service’s double agent supplied to the enemy to make it appear he was cooperating. Otherwise, Hatz dropped suspiciously out of sight. Macfarland worried about Andor Gross as much as he did the Sparrow team. Trillium had been trapped in Budapest when the Germans invaded and Macfarland knew the shady courier would sell out the OSS operation if the Gestapo captured him. Schwarz finally arranged for a friendly Turkish transport company in Budapest to vouch that Trillium was an employee so he could obtain a visa and be smuggled out.

  The Sparrow team’s ruse worked only for a week. As Duke, Suarez, and Nunn boarded a bus with other airmen for the ride to Frankfurt and the Luftwaffe’s interrogation center, a Gestapo agent arrived and ordered them off. They were taken away handcuffed and eventually delivered to a Budapest jail the Nazis had commandeered. Duke stuck to his cover story through several interrogations until his Gestapo questioner, tired of the lies, finally said: “You look like an intelligent guy. There is no use kidding each other and beating about the bush. Here is the story.” He tossed across the table a twenty-page typewritten statement made by Ujszaszi, who had been imprisoned. Duke read it carefully. The document spelled out the entire Sparrow operation. But Ujszaszi had not told them the team was from the OSS because Duke had never disclosed that to him. Thinking through his next move quickly, Duke looked up from the pages and confirmed what Ujszaszi had already revealed, but he stayed vague about his organizational affiliation, claiming their team was from Air Force intelligence on a special diplomatic mission for the Joint Chiefs of Staff and State Department.

  That line appeared to work. An intelligence officer from Vienna arrived two weeks later to interrogate Duke on the OSS. “It’s a well-known organization in America run by ‘Wild Bill’ Donovan,” he told the Vienna officer. As far as he knew they specialized in collecting economic and political information from around the world, like a research company. “This seemed to satisfy him and he went away happy,” Duke recalled. A Berlin Wehrmacht officer who specialized in the American army showed up next with questions on how many soldiers the United States had in England.
Duke didn’t have a clue, but by now he had become adept at spinning yarns for his interrogators. As the officer furiously scribbled notes, Duke told him in as much detail as he could dream up that England probably had three million soldiers who would launch against France in a simultaneous attack with the Soviets marching west from the Eastern Front and the Allies moving north from Italy, so “Germany will be squeezed in from all sides.” That turned out to be the Allied strategy but Duke had not told him anything the German high command didn’t already know. The officer left satisfied but skeptical the Americans could pull off the landing in France.

  By May 1944, the Gestapo had tired of questioning Duke and his team. They were shuffled off to Colditz Castle, a comfortable but heavily guarded prison near Leipzig for VIPs, where they remained until a U.S. Army division finally liberated them on April 16, 1945. Duke had a lot of time sitting in his cell to think about the blown operation. It was clear to him that Hitler’s intelligence operatives knew early on about the Sparrow mission and that the leak likely came from Turkey. Who had compromised them, he wondered?

  The fear that operations in Turkey had been compromised grew in Donovan as well. But in late fall 1943, he was preoccupied with conspiracies in his own organization as well as the other war in Asia.

  Chapter 21

  Asia

  AFTER HIS LONG journey abroad for the Salerno landing and visits to his Mediterranean stations, Donovan stayed at his desk in Washington for just a month. Late Tuesday morning, November 9, 1943, he boarded his plane once more for a flight to his first important stop, Cairo. Roosevelt planned to meet Churchill and Chinese Nationalist leader Chiang Kai-shek in the Egyptian capital before the president and prime minister conferred with Stalin in Tehran on November 28. From Cairo, Donovan planned to fly to Asia.

  Back in Washington, a joke began making the rounds at headquarters. If the flag in front of the Q Building were raised and lowered every time Donovan “packed his flight bag, it would require a full-time color guard operating on day and night shifts.” Midlevel employees in OSS headquarters hardly knew their director, who seemed to be an absentee landlord. Donovan’s visits to his overseas stations proved to be terrific morale builders. Donovan also became an important umbilical cord for them to decision makers in Washington. With an Air Force plane at his disposal, long-distance travel no longer was a barrier for a man who loved to jump aboard it at a moment’s notice and fly to an exotic spot. Word soon spread among OSS officers abroad that Donovan also liked a female for the night during his foreign stops. “You knew to have women at the receptions Donovan attended,” recalled Rolfe Kingsley, one of his Middle East operatives. “He’d take care of the rest of it.”

  Donovan was as chaotic a manager as could be found. Sherman Kent, a Yale historian in the research office, once found a line from Shakespeare that read: “Confusion now has made its masterpiece!” “That’s us!” he exclaimed. Agents in the field overlooked 109’s lack of organizational skills because he was such an overwhelmingly charismatic leader. Back in Washington, however, Donovan’s inner circle had begun grumbling by the fall of 1943 about the work piling up on his desk while he was away. The OSS was growing into a large government bureaucracy with 4,500 employees by August. More than four thousand cables soon sailed back and forth between headquarters and overseas posts every month.

  When Donovan was away, he put Ned Buxton, his World War I comrade and a deputy director, nominally in charge, but Buxton, though competent and levelheaded, was not a forceful or energetic man. By August 1943, complaints began to pile up over how the organization was being run. Donovan knew he had a problem. Buxton on August 25 sent him an unsettling memo from George Platt. Because he prepared monthly intelligence summaries for Donovan, Platt was plugged into scuttlebutt from all quarters and he warned of “a deterioration of morale in OSS.” The reason: No one “with the exception of those who are very close to the General can put his finger on anything concrete that the organization has accomplished.” The OSS started out as a “closely-knit family bristling with ideas” but with the influx of people and wide-ranging missions, that esprit de corps has faded and “apathy toward this endeavor” has seeped in. Ellery Huntington warned his boss that the organization suffers from “a dangerous lack of cohesion,” which “will require some changes at the top.” Reorganization plans had been bumping around headquarters since spring. Most of the proposals from his advisers recommended reducing the flood of people with direct access to Donovan. Brigadier General John Magruder, a thin and nervous man with a bulbous nose and trembling hands, had been brought in to oversee the Secret Intelligence, X-2 counterintelligence, and Research and Analysis branches. Magruder also was a meticulous Army officer, convinced from the first day he walked into OSS headquarters that the agency was spread too thinly and Donovan had his finger in too many pies.

  Donovan took the suggestions for improving morale and operations to heart. He had his own ideas for streamlining intelligence gathering overseas, based on what he had seen during his travels. Before he left for the Salerno landing in September he asked his executive committee, composed of his top advisers, to respond to an idea he had for freeing up his branch chiefs in Washington from the paperwork burying them so they could pay more attention to operations and long-range planning. When he returned to Washington in early October a six-page memo sat on his desk, drafted by a half dozen top advisers on this committee. In addition to Magruder, they included Donovan’s pollster and organizational guru, Elmo Roper, and Charles Cheston, a strong-willed Smith Barney executive Donovan had hired earlier in the year as another deputy director to deal with personnel problems.

  But the memo was not what he hoped for. As he read each page Donovan scrawled angry notes on the side with his pencil. Magruder & Co. had ignored his ideas for tinkering with the organization and instead they proposed radical surgery that he felt would strip the agency down and move him out. “The plain facts are that the OSS has grown too big and is engaged in too many diverse activities,” the memo asserted. The sprawling growth was causing “a morale problem within the agency” and would eventually lead to embarrassments with the OSS “undertaking operations, which may exceed its capabilities.” What was supposed to be a small cohesive unit had become “a holding company” with a hodgepodge of different endeavors that Donovan had put together, bearing no relation to one another save for the fact that they all reported to him. For example, the Operational Group, which launched commando attacks abroad, and the Foreign Nationalities branch, which interviewed refugees in the United States for intelligence, had about as much in common as Mark Clark’s “5th Army and Chase National Bank,” according to the memo. It recommended the reorganization Magruder wanted. The OSS would return to its espionage and research roots: collecting and analyzing intelligence for the military and spying on the Axis services. Units like the Foreign Nationalities branch would be sent to the State Department and the Operational Group commandos to the military, where they logically belonged.

  Then came the real punch in the gut, which Magruder spelled out in a more detailed memo lying underneath the first one. Donovan would become what amounted to a chairman of the board, dictating broad policy for an OSS whose spy operations would be organized and run by Magruder and other deputies. A military-like chain of command would be put in place. Donovan’s days of personally running spy networks, swooping into overseas stations to shake them up, issuing direct orders to agents, bypassing branch chiefs to phone underlings, allowing practically anyone to walk into his office with an idea, and landing at beaches would be over.

  Donovan had hatched enough coup attempts overseas to smell one in his own organization. He learned that other senior OSS aides, such as Huntington, backed Magruder and his gang of six. The spymaster huddled with loyalists, who included Ed Putzell (his gatekeeper) and Ole Doering (his general counsel and confidant). The day before he boarded his flight for Cairo, Donovan summoned his secretary, Eloise, to his office and dictated one of the most biting memos h
e had ever written, which he had her deliver to Magruder. He began by sarcastically saying that whoever dreamed up the analogy that the OSS was like a holding company “knows nothing about a holding company.” The gang of six’s proposed organization “is one way of running the show, but it is not the way that considered experience over a period of months indicates is the best way to run it,” he continued. The OSS “is not a bank and should not be run as a bank. It is not a War Department and should not be run as that.” The agency was an unconventional warfare outfit, which had to remain “flexible to meet any particular ends, and so long as I have anything to say about it, it is not going to be wed to any particular scheme or put in any particular niche.” Donovan refused to slim down his organization or distance himself from his agents and the details of their operations. He was open to any reorganization plan that would make the OSS more effective, “but this report does not do it.”

  Donovan had a right to be angry. For the entire U.S. military, key war fighting decisions were being made not by Marshall but by Eisenhower, MacArthur, and the other theater commanders in the field. For the OSS, the center of gravity had shifted as well from Washington to the overseas stations in London, Cairo, Algiers, and Chungking. Donovan’s instinct to be abroad rather than chained to his desk with his headquarters staff was justified. A war leader leads from the front. Donovan had glaring managerial weaknesses, to be sure, but the fact remained—and he knew it—that without his enthusiasm, aggressiveness, and charisma the OSS would not have gotten this far. And it would make little headway in the future if he were gone. Donovan later made minor organizational changes, delegating some of his authority and giving top aides more power in his absence. But he refused to release his reins on the organization or to ground his plane. He squelched what Doering nicknamed the “Palace Revolt”—for the moment.