The Billion Dollar Spy: A True Story of Cold War Espionage and Betrayal

by David E. Hoffman

  16. Jerrold L. Schecter and Peter S. Deriabin, The Spy Who Saved the World: How a Soviet Colonel Changed the Course of the Cold War (New York: Scribner’s, 1992). This is the definitive work on Penkovsky, based on the CIA’s files. Also see Richard Helms, “Essential Facts of the Penkovskiy Case,” memo for the Director of Central Intelligence, May 31, 1963, and Oleg Penkovskiy, The Penkovskiy Papers (New York: Doubleday, 1965), which is based in large part on Penkovsky’s meetings with the U.K.-U.S. team. A recent account is Gordon Corera, The Art of Betrayal: The Secret History of MI6 (New York: Pegasus Books, 2012), 135–83. Also see Leonard McCoy, “The Penkovsky Case,” Studies in Intelligence, CIA, date unknown, declassified Sept. 10, 2014, and “Reflections on Handling Penkovsky,” author and date unknown, Studies in Intelligence, CIA, declassified Sept. 3, 2014. Declassified CIA documents are available at www.foia.cia.gov, and documents older than twenty-five years via CREST, a CIA electronic search tool available at the National Archives, College Park, Md.

  17. The officer code-named compass arrived in Moscow in October 1960. His cover was to be the superintendent—basically, a glorified janitor—at America House, a dormitory-like building for U.S. embassy marine guards and others. Inexperienced, he found it rough going. In his letters to headquarters, he proposed that the prospective new agent toss packages of sensitive intelligence materials over the twelve-foot wall of America House at night, and he would be on the other side to catch them, a strange suggestion given that the building was under KGB surveillance. compass could find no other dead drop sites in Moscow and complained about his personal misery. Two months after his arrival, he had failed to make contact. On February 5, 1961, he finally tried to telephone Penkovsky at home. It was a Sunday morning. His instructions were to call at 10:00 a.m. and speak in Russian; instead, he called at 11:00 a.m. and spoke in English. Penkovsky had little English and never used it at home; he told the caller he didn’t understand and hung up. The whole compass effort was a dead end.

  18. Hart, The CIA’s Russians, 59–60.

  19. McCoy, “Penkovsky Case,” 3.

  20. Ibid., 5.

  21. Christopher Andrew, “Intelligence and Conspiracy Theory: The Case of James Angleton in Long-Term Perspective,” keynote address at a conference, March 29, 2012, Washington, D.C., sponsored by the Woodrow Wilson Center and the Georgetown University Center for Security Studies. McCoy suggests that Penkovsky’s arrest must have shaken the Soviet leadership in September–October 1962 because they did not know what he had passed to the United States. McCoy says the arrest might have undermined Khrushchev’s confidence in his response to President Kennedy. “The timing of Penkovskiy’s arrest gave Kennedy the upper hand,” he wrote. McCoy, “Penkovsky Case,” 11.

  22. Penkovsky moved about in high-level Moscow military circles, including the family of General Ivan Serov, the former KGB chief who now headed the GRU, and thus gave the West a sense of the thinking of Soviet military leaders.

  23. Schecter and Deriabin, Spy Who Saved the World, 147. Examples of the positive intelligence that Penkovsky provided are in Bird and Bird, “CIA Analysis,” 13–28, and the associated document collection. McCoy offers a detailed account of the positive intelligence gleaned from the operation. A more skeptical view of Penkovsky’s contribution to the Cuba crisis is offered by Len Scott, “Espionage and the Cold War: Oleg Penkovsky and the Cuban Missile Crisis,” Intelligence and National Security 14, no. 3 (Autumn 1999): 23–47.

  24. Unknown author, “Reflections on Handling Penkovsky,” Studies in Intelligence, CIA, date unknown, declassified by the CIA Sept. 3, 2014. This monograph was written by the CIA case officer who arrived in June 1962. See p. 53.

  25. Wallace and Melton, Spycraft, 36–39.

  26. Unknown author, “Reflections,” 57; McCoy, “Penkovsky Case,” 9.

  27. Wynne was sentenced to eight years in prison but released in a spy swap in 1964.

  28. A large literature exists on Angleton. This account draws upon Tom Mangold, Cold Warrior: James Jesus Angleton: The CIA’s Master Spy Hunter (New York: Simon & Schuster, 1991); David C. Martin, Wilderness of Mirrors (New York: Harper & Row, 1980); David Robarge, “Cunning Passages, Contrived Corridors: Wandering in the Angletonian Wilderness,” Studies in Intelligence 53, no. 4 (2010); and another CIA study, whose author has not been disclosed, “James J. Angleton, Anatoliy Golitsyn, and the ‘Monster Plot’: Their Impact on CIA Personnel and Operations,” Studies in Intelligence 55, no. 4 (2011), released via the National Security Archive, Washington, D.C. Also see “Moles, Defectors, and Deceptions: James Angleton and His Influence on U.S. Counterintelligence,” report on a conference held at the Woodrow Wilson Center and co-sponsored by the Georgetown University Center for Security Studies, March 29, 2012, Washington, D.C. Also see Robert M. Hathaway and Russell Jack Smith, “Richard Helms as Director of Central Intelligence,” Center for the Study of Intelligence, CIA, 1993, 103.

  29. Robert M. Gates, From the Shadows: The Ultimate Insider’s Story of Five Presidents and How They Won the Cold War (New York: Simon & Schuster, 1996), 34. Also see Robarge, “Cunning Passages.”

  30. Burton Gerber, interview with author, Oct. 25, 2012.

  31. Although the tunnel had been compromised from the start by George Blake, the KGB’s agent inside British intelligence, the Soviets apparently allowed use of it to proceed unhindered, wanting above all to protect their source. For an official account of the tunnel operation, see “The Berlin Tunnel Operation, 1952–1956,” Clandestine Services History, Historical Paper No. 150, June 24, 1968, declassified in part by the CIA in 2012, included as doc. No. 001-034, chap. 1, in the document collection accompanying Bird and Bird, “CIA Analysis.” Some previous accounts have claimed the intelligence take from the tunnel was contaminated with disinformation. In an authoritative account, Murphy, Kondrashev, and Bailey, Battleground Berlin, say the operation “did in fact produce a large amount of badly needed and difficult to obtain military intelligence” in a period before such material became available from the U-2 overflights and satellite imagery. They also report that the KGB had its own, secure channels for communications, but the military and the GRU used lines that were tapped by the West.

  32. Anne Applebaum, Iron Curtain: The Crushing of Eastern Europe, 1944–1956 (New York: Doubleday, 2012), 64–87. Robarge, in “Cunning Passages,” says “by fixating on the Soviets,” Angleton “largely ignored” other adversaries, including the East German and Czech services.

  33. Haviland Smith, correspondence with author, June 5, 2013. Smith’s pioneering influence is also well described in Benjamin Weiser, A Secret Life: The Polish Officer, His Covert Mission, and the Price He Paid to Save His Country (New York: PublicAffairs, 2004), 74–78.

  34. David Forden, interview with author, Feb. 6, 2013.

  35. Bruce Berkowitz, “The Soviet Target—Highlights in the Intelligence Value of Gambit and Hexagon, 1963–1984,” National Reconnaissance: Journal of the Discipline and Practice, no. 2012-UI (Spring 2012): 110–12. Much of this innovation was in response to the lack of good human intelligence inside the Soviet Union. In 1954, President Eisenhower established a panel to study the possibility of surprise attack, headed by James Killian of MIT. The panel concluded, “We must find ways to increase the number of hard facts upon which our intelligence estimates are based, to provide better strategic warning … we recommend adoption of a vigorous program for the extensive use, in many intelligence procedures, of the most advanced knowledge in science and technology.” See National Security Policy, doc. 9, “Report by the Technological Capabilities Panel of the Science Advisory Committee,” Feb. 14, 1955, in Foreign Relations of the United States, 1955–1957, Volume XIX (Washington, D.C.: Government Printing Office, 1990).

  36. Martin L. Brabourne, “More on the Recruitment of Soviets,” Studies in Intelligence 9 (Winter 1965): 39–60.

  37. Paul Redmond, “Espionage and Counterintelligence,” panel 3, at U.S.
Intelligence and the End of the Cold War, a conference at the Bush School of Government and Public Service, Texas A&M University, College Station, Nov. 18–20, 1999.

  38. Jerrold M. Post, “The Anatomy of Treason,” Studies in Intelligence 19, no. 2 (1975): 35–37. A later effort is by William Marbes, “Psychology of Treason,” Studies in Intelligence 30, no. 2 (1986): 1–11.

  39. Milt Bearden and James Risen, The Main Enemy: The Inside Story of the CIA’s Final Showdown with the KGB (New York: Random House, 2003), 22–24, discusses the Gerber study and its conclusions.

  40. Ibid., 23–24. On Blee, see Weiser, Secret Life, 7–9.

  41. Wallace and Melton, Spycraft, 87–102.

  42. Ibid., 87–96. Wallace is the former director of the CIA’s Office of Technical Service.

  2: Moscow Station

  1. Martha Peterson, The Widow Spy: My CIA Journey from the Jungles of Laos to Prison in Moscow (Wilmington, N.C.: Red Canary Press, 2012). Also see Bob Fulton, Reflections on a Life: From California to China (Bloomington, Ind.: Authorhouse, 2008), 61.

  2. Martha Peterson, interview with author, Oct. 12, 2012, and Widow Spy.

  3. Fulton, Reflections, 72–76.

  4. Peterson, Widow Spy, 174, and interview.

  5. Robert Fulton, interview with author, May 12, 2012. The encounter at the gas station was January 12, 1977. Moscow station to headquarters, Jan. 13, 1977, 131150Z; Fulton, Reflections.

  6. Royden, “Tolkachev,” 5–33. This is an unclassified version of a larger, classified monograph about the case.

  7. Ibid., 6. Royden reports the CIA had several other operations planned in Moscow in the months ahead and did not want to jeopardize them; moreover, the new administration of President Jimmy Carter was preparing to send Secretary of State–designate Cyrus Vance to Moscow for arms control talks and did not want a spy dustup to interfere.

  8. Moscow station to headquarters, Feb. 18, 1977, 181010Z.

  9. Royden, “Tolkachev,” 6–7; Fulton, Reflections, 79.

  10. James M. Olson, interview with author, Nov. 2, 2012.

  11. Peterson, Widow Spy, 241–42.

  3: A Man Called Sphere

  1. After the arrests and Peterson’s expulsion, the CIA carried out an internal review of the Ogorodnik compromise and that of the agent caught a few months later. The CIA official Duane R. Clarridge, who participated in the internal review, says the panel concluded “the agents’ own actions had brought about their downfall.” See Clarridge, A Spy for All Seasons: My Life in the CIA (New York: Scribner, 1997), 167–68. Later, it was learned that Ogorodnik was betrayed by Karl Koecher, a Czech man who came to the United States in 1965 with his wife, saying they were fleeing communism, but who was actually working for the Czech intelligence service and the KGB. Koecher attended Columbia University and obtained a job translating for the CIA. As part of his contract, he was given transcripts from telephone taps to translate. Some of the calls he translated pointed to a Soviet diplomat in Bogotá as a source for the CIA. This information led the KGB on a hunt that eventually pointed to Ogorodnik, who was probably arrested in the early summer, before Peterson was ambushed at the bridge. See Peterson, Widow Spy, 241. Koecher was arrested in 1984 and, with his wife, was included in a nine-person prisoner swap with the Soviet Union in 1986 that brought the release of the dissident Anatoly Shcharansky. Koecher received a life sentence that was reduced to time served on the condition he participate in the swap and never return to the United States.

  2. John T. Mason Jr., The Reminiscences of Admiral Stansfield Turner, U.S. Navy (Retired) (Annapolis, Md.: U.S. Naval Institute, 2011). This is a set of twenty oral history interviews with Turner, courtesy the U.S. Naval Institute.

  3. Loch K. Johnson, A Season of Inquiry: Congress and Intelligence (Chicago: Dorsey Press, 1988).

  4. John Raneleagh, The Agency: The Rise and Decline of the CIA (New York: Simon & Schuster, 1987), 234, reports that Carter had asked General Bernard Rogers, but he declined and suggested Turner.

  5. Stansfield Turner, address to the U.S. Naval Academy Class of 1947, Nov. 13, 1980, Washington, D.C. Also see Stansfield Turner, Secrecy and Democracy: The CIA in Transition (Boston: Houghton Mifflin, 1985), 15, and Mason, Reminiscences, 744–48. On Carter’s mind-set, see Raneleagh, Agency, 634–35.

  6. For details of the satellite programs, see F. C. E. Oder, J. C. Fitzpatrick, and P. E. Worthman, The Gambit Story (Chantilly, Va.: Center for the Study of National Reconnaissance, 2012), and R. J. Chester, A History of the Hexagon Program: The Perkin-Elmer Involvement (Chantilly, Va.: Center for the Study of National Reconnaissance, 2012). Also Stansfield Turner, Burn Before Reading: Presidents, CIA Directors, and Secret Intelligence (New York: Hyperion, 2005), 161.

  7. Turner’s insistence on this analytic approach to the military balance was highly unusual and triggered a major dispute in a 1980 intelligence estimate. See Gerald K. Haines and Robert E. Leggett, Watching the Bear: Essays on CIA’s Analysis of the Soviet Union (Washington, D.C.: Center for the Study of Intelligence, 2003), 169.

  8. Gates, From the Shadows, 138.

  9. A month after taking office, Turner asked Williams to carry out a “thorough review” of how the espionage branch was operating. Turner recalls that Williams reported back that it was operating ethically and soundly, which he shared with Carter. Turner, Secrecy and Democracy, 197. But Williams was viewed with suspicion for his questions about personal behavior, CIA officials told the author. Williams had worked at the Naval War College with Turner.

  10. Turner said, “Too many old-timers were hanging on.” The directorate had done its own study in 1976, calling for a cut of 1,350 positions over five years, but no action was taken by Bush. Turner eliminated 820 positions over two years, with 17 persons fired, 147 forced into early retirement, and the remainder leaving by attrition as people were moved elsewhere. The decision was made in August 1977, but notices were given on October 31, 1977, in what became known as the Halloween Massacre. An abrupt, two-paragraph letter was sent to the employees being cut, which Turner later acknowledged was “unconscionable.” Turner, Secrecy and Democracy, 195–205.

  11. Jack F. Matlock Jr., correspondence with author, Dec. 2, 2012; Dick Combs, interview with author, Sept. 27, 2013; James Schumaker, correspondence with author, Sept. 23, 2013, and blog post in “Personal Recollections of the Moscow Fire,” from MoscowVeteran.org. Schumaker was special assistant to the ambassador. Hathaway was decorated by the CIA with the Intelligence Star for his actions to protect the Moscow station.

  12. Bearden and Risen, Main Enemy, 26.

  13. Sandra Grimes and Jeanne Vertefeuille, Circle of Treason: A CIA Account of Traitor Aldrich Ames and the Men He Betrayed (Annapolis, Md.: Naval Institute Press, 2012), 59. The authors were both longtime staff members in the CIA’s Soviet division.

  14. Gardner “Gus” Hathaway, interview with author, June 10, 2011.

  15. The Kulak case had a complex history involving both the FBI and the CIA. Under J. Edgar Hoover, the FBI regarded him as an authentic agent, while the CIA was skeptical, driven by Angleton’s doubts. These positions changed after Angleton was removed and Hoover died. The FBI began to doubt whether Kulak could be trusted. The suspicions stemmed from vague comments he made on a phone call between New York and Washington, on a Soviet phone line that had been tapped by the FBI, according to a source with direct knowledge. Meanwhile, the CIA conducted a study of the case and concluded that Kulak was genuine and could be run in Moscow. Grimes was one of those who carried out the study. See Grimes and Vertefeuille, Circle of Treason, 55–57.

  16. Ibid., 55–61.

  17. “Foxbat/Lt. Belenko Update,” Oct. 12, 1976, released to author under FOIA, Air Combat Command, Department of the Air Force, Aug. 25, 2014; Pacific Air Forces, “History of the 475th Air Base Wing, CHO (AR) 7101, Vol. III, 1 July–31 Dec. 1976,” 316, released to author under FOIA, June 12, 2
014.

  18. Hathaway, interview with author, June 10, 2011.

  19. “Evaluation of Information Provided by cksphere,” memo, CIA, Dec. 29, 1977.

  20. Moscow station to headquarters, Jan. 3, 1978, 031450Z.

  21. Ibid.

  22. “Memorandum for: Director of Central Intelligence,” CIA, Jan. 3, 1978.

  4: “Finally I Have Reached You”

  1. Hathaway, interview with author, June 10, 2011.

  2. Royden, “Tolkachev,” 8.

  3. Moscow station to headquarters, March 2, 1978, 021500Z. This cable, a translation of Tolkachev’s note, refers to the “faculty” in Kharkov but more precisely means the “department,” which I have substituted.

  4. Royden, “Tolkachev,” 8.

  5. Nina Guilsher Soldatenov, “Our Family History,” unpublished, courtesy Catherine Guilsher, April 5, 2013.

  6. Catherine Guilsher, interviews with author, March 30, 2011, and April 5, 2013.