The Tango War

by Mary Jo McConahay

  By far, it was the enigmatic Wilhelm Canaris who knew the Latin continent the best. The son of a well-off industrialist, bred to move into the manufacturing elite of the Ruhr Valley’s new steel industry—makers of ships, weapons, steam engines, and trains—young Wilhelm overcame his father’s protests to fulfill a desire he had nurtured since boyhood: to go to sea. In 1907, at age twenty, fresh out of the strict officers’ training academy of the German Imperial Navy on the Baltic Sea, Canaris set off on his first voyage as adjutant to the captain of the light cruiser Bremen, bound for Central America.

  Always good at languages, Canaris immersed himself in Spanish and used it with locals he met amid the white-painted wooden buildings and lush palms of the Gulf ports of Mexico and lands to its south. In South America, the captain took young Canaris along on visits inland, where he met New World Germans and Germanophiles, ranchers, and businessmen. Canaris’s shipboard title also included the term “intelligence officer,” a duty that then meant little more than noting what other ships were present in harbors. But Canaris did more than the minimum. By absorbing a wide sweep of information useful for military intelligence, seeing firsthand the lay of the land, and making contacts, he began to construct what would become the Latin American espionage network.

  And he made an important visit to the United States, serving on the cruiser Dresden.

  In September 1909, the Dresden was among hundreds of ships gathered on the Hudson River to commemorate the three hundredth anniversary of the founding of New York and centenary of Robert Fulton’s first steamboat. Canaris, in the dress whites of an Imperial German Navy officer, watched closely from on deck. Before him, U.S. naval might was purposefully on display.

  More than thirty countries sent warships to the celebration; small Latin nations such as Cuba and Guatemala sent their entire tiny navies. At a time when most houses were not yet wired for electricity, nights turned magical with maneuvers on the river, ships’ masts illuminated amid a display of fireworks. Wilbur Wright soared up and down the river and looped around the Statue of Liberty as hundreds of thousands of New Yorkers watched their first airplane flight. The regatta, parades, and exhibitions were staged to promote New York as a world-class city, but Canaris was also witnessing something else.

  Germany possessed a fleet that reached to the Eastern Pacific, and Great Britain called itself the ruler of the seas, but the U.S. Navy was announcing its hegemony in the Americas, the capacity to control regional seas and back up decisions made in Washington. And the capacity to support its allies, should the need arise.

  Five years later, Canaris performed feats of quick thinking and endurance in South America that would give him a near-mythical fame for survival. Early in World War I, the Dresden, sailing in the German East Asia Squadron under command of the legendary Admiral Graf Maximilian von Spee, was the only ship to escape the German defeat at the Battle of the Falklands.

  English battleships chased the Dresden for a hundred days until they cornered it in the bay of an island called Más a Tierra and set the ship aflame. The German captain, stalling for time to transfer his dead and wounded ashore and scuttle the ship, sent Canaris in a rowboat under fire to treat with the British captain. In perfect English the junior officer discussed points of maritime law about his hors de combat ship with the British commander until the German crew were evacuated, explosions set, and the Dresden sank, denied to the enemy. The English crew treated Canaris with extreme politeness, he later recalled, despite his relatively low rank, leaving him with a lasting positive impression of His Majesty’s Navy.

  The crew of the Dresden was held on Más a Tierra, a speck in the sea so isolated that the English author Daniel Defoe once used it as a symbol of the end of the earth, where Robinson Crusoe washed ashore. But Canaris soon escaped to the mainland.

  On foot and horseback, disguised as a peasant, he trekked across the Andes through icy wind, growing gaunt with bouts of malaria until he reached Argentine Patagonia. Changing disguises, posing as a young widower bound for Europe, Canaris took a train a thousand miles north to Buenos Aires and booked passage to neutral Holland. The British forced his Dutch liner into Plymouth to remove suspected Germans, but “Mr. Reed Rojas”—Canaris—who spoke fine English, remained aboard, landing safely in Rotterdam. He reported for duty at Imperial Navy headquarters at Kiel, on the Baltic. Honored with an Iron Cross and promoted to commandant, he was given a say in his subsequent assignment. He chose intelligence.

  * * *

  The Allied spymaster J. Edgar Hoover had a trajectory that appeared as plodding as Canaris’s was exciting. Yet Hoover, too, in his early years lived in an atmosphere of war that inspired him for the rest of his life.

  On July 30, 1916, when Hoover was twenty-two, a notable act of World War I sabotage occurred in New York Harbor. The Black Tom explosion, named for the island where it occurred, has been called the first terrorist attack on U.S. soil. German saboteurs planted dynamite and delayed-release pencil bombs—ingenious devices no bigger than a cigar—at a munitions depot on the island where arms headed for the Allies were stored. The explosion sent pillars of fire into the sky, killed seven and injured hundreds, leveled blocks in downtown Manhattan, and damaged the Statue of Liberty, leaving Americans in shock. The German saboteurs who blew up Black Tom were based in Mexico. With this horrific sabotage fresh in his mind, J. Edgar Hoover began work a few months later at what would be a lifetime at the Justice Department.

  As Hoover settled into the first steps of his career, another World War I event, the Zimmerman Telegram, warned Americans that German activities in the Western Hemisphere must be closely watched. In January 1917, the Kaiser’s foreign secretary, Arthur Zimmerman, advised his ambassador in Mexico City that unrestricted submarine warfare in the Atlantic against the British was about to begin. If the United States joined the war as a result, Berlin’s ambassador should offer the Mexican president a deal: join Germany and Japan against the United States, and Mexico would receive financial aid and the return of territory lost to the Americans a few decades before in Arizona, Texas, and New Mexico. The Zimmerman Telegram was intercepted and decrypted by the British and shared with the Americans, helping to trigger U.S. entry into the European war.

  A third-generation civil servant, unobtrusive in behavior, young Hoover often was the last to leave the office. Sometimes his superiors at the U.S. Justice Department War Emergency Division, whom he was always anxious to please, discovered he had come in to work weekends, too. Hoover labored unflaggingly, writing notes and filling boxes, file cabinets, and entire rooms with confidential data to keep his country safe, sometimes including dirt on political officeholders or their families, a habit he would continue. He rose quickly, becoming head of the Alien Enemy Bureau with authority to jail without trial foreigners deemed disloyal. In 1924, President Calvin Coolidge named Hoover director of the Justice Department’s General Intelligence Division, forerunner of the FBI, to track domestic radicals. He was twenty-nine years old.

  SPECIAL INVESTIGATION SERVICE—THE ROUGH START OF THE SIS

  The brief of the FBI was domestic, but as the next war drew nearer, Hoover inserted himself into meetings among military intelligence agency chiefs about who would take the lead in foreign espionage. The FBI already was tracking suspected spies in the United States. “The best way to control Nazi espionage in the United States is to wipe out spy nests in Latin America,” he would say. Hoover argued with the military chiefs, made private approaches for the FBI to Roosevelt, lobbied Assistant Secretary of State for Latin American Affairs Adolf A. Berle. Finally Roosevelt, frustrated at the infighting, made the FBI the sole agency responsible for foreign intelligence in the Western Hemisphere. Hoover christened the new spy unit the Special Intelligence Service (SIS).

  To hide its real purposes, the SIS opened a fictitious firm in the summer of 1940 called “Importers and Exporters Service Company” in the same Rockefeller Center building that housed the BSC, which was far smoother in its operations. With
in a month, SIS agents took the phony sign off their door to fend off a stream of salesmen and ad men who were coming to solicit business. They also realized they were unprepared for the new mission. “The Bureau discovered upon undertaking the program that there was a complete absence of any accurate data or details concerning the true extent or nature of subversive activities, current or potential, in Latin America,” said an internal report written in 1962. And there was the issue of language. Agents took crash courses at Berlitz or brief language studies through their cover companies such as General Motors, Firestone, or Pan American, but most headed for the field woefully lacking in Spanish or Portuguese.

  Masquerading as businessmen or as journalists, the would-be sleuths relied on written, encrypted messages to send their information. British security censors who maintained a facility in Bermuda to quick-check all correspondence leaving Latin America became suspicious of missives written by the agents; urgent messages were delayed while bona fides were checked. At FBI headquarters, proper reagents that might reveal what was written by agents in secret ink were still at “an experimental stage.”

  And in the field the appearance of the SIS “businessmen” gave them away. They were uniformly young, unmarried, fit-looking, and suspiciously not in the U.S. military at a time of national conscription. As their number grew, Hoover managed to get many agents attached to U.S. embassies and consulates as “civil attachés” or “legal attachés,” to the disgust of some in the State Department, who were unhappy with intelligence activities they could not control. Before World War II, “legal attachés” did not exist at U.S. embassies, but they have been there ever since, spreading from Latin America to around the world, giving the FBI a permanent presence abroad.

  Between the talents of the famous Canaris and the shortcomings of his own SIS, Hoover had plenty to worry about. But his Latin America turf was also being challenged by an old rival, William Donovan, founder of the OSS, which would someday be the CIA.

  OSS: THE MEXICAN EXCEPTION

  Standard operating procedures were almost taboo in OSS. Effective action was the sole objective.

  —R. HARRIS SMITH, OSS: The Secret History of America’s First Central Intelligence Agency

  In the 1930s, the joint Army-Navy MAGIC cryptography project to decode Japanese secret communications revealed that the Japanese had extensive surveillance networks in Latin America. In case of war with the United States, MAGIC revealed, Mexico would become the center of regional spying. The navy, which had maintained an attaché at the U.S. Embassy in Mexico City since 1937, was concerned about Mexico’s West Coast. Despite his jealousy over control of Latin American espionage, Hoover did not object to early ONI surveys and information collecting in Baja California beginning in April 1941.

  The rugged Baja peninsula, and the sleepy Mexican ports that we know today as glamorous resorts such as Acapulco and Manzanillo, held potential for Japanese infiltration because of their strategic location on the Pacific. Navy spies discovered such a Japanese presence among a plethora of suspicious fishing companies.

  On July 11, 1941, Roosevelt appointed Colonel William Donovan to head an intelligence office called “Coordinator of Information,” COI. Donovan chafed when he realized Hoover’s hegemony over Latin America left his COI agents no room to operate in Mexico or Central or South America. The limitation violated Donovan’s principle that “in modern war, all phases of the military activity of a belligerent must be world-wide in scope.” Even when the COI became the OSS in 1942, charged with collecting and analyzing information required by the Joint Chiefs of Staff and conducting special operations, Latin countries were forbidden to Donovan. His new global intelligence service would be absurdly truncated without covering an entire continent, he pointed out—one connected to the United States at that. He argued in vain.

  Competition over Latin America between Hoover and Donovan beginning with Mexico contained the seeds of jurisdictional arguments between the FBI and the CIA that continue to this day.

  * * *

  The chief of the OSS brought a colorful personal history to the argument, and a strong character. Canaris once remarked that of all the Allied leaders, he most would have liked to know William J. Donovan. Adolf Hitler, who once met Donovan, made it understood that he always feared and hated him more than any other American.

  As a dashing twenty-nine-year-old lawyer from Buffalo, Donovan formed a cavalry unit in the New York National Guard that fought in the ranks of General John J. Pershing against Pancho Villa on the Mexican border. During World War I, he led assaults and rescues as an infantry officer in France that earned him the Medal of Honor, celebrity at home, and confirmed a nickname that stayed with him all his life—“Wild Bill.”

  Dissention between Hoover and Donovan began between the wars when Wild Bill was briefly Hoover’s boss at the Justice Department. Their characters were impossible to reconcile. When Franklin Roosevelt became president, he exchanged information with Donovan and depended on his assessments of tensions in Europe. Hoover, jowly and officious, often used the press to blow his own horn, deliberately pushing his role in FBI successes. He probably winced to see how effortlessly Donovan, silver-haired, square-jawed, gallant, and physically magnetic, became a public celebrity when his World War I heroics were splashed across the silver screen in a 1940 Warner Bros. hit, The Fighting 69th.

  The fundamental difference between Donovan and Hoover, however, was over what an intelligence agency should be about, and how it should be run. Bill Donovan believed in strategic intelligence, analysis, covert action, tradecraft, and sabotage, which gave the OSS an advantage abroad over the more dogged, policeman-like methods of the FBI. Wild Bill was against bureaucracy, against hierarchy. Any way an OSS agent could get the job done was acceptable. In contrast, Hoover believed most in fact-finding and exposure of targets, like composing the blacklists of “enemy aliens.” Hoover, however, the ultimate bureaucrat, was able to strengthen his political base at home to Donovan’s disadvantage precisely because he knew how to manage the Washington bureaucracy. Each man began keeping a dossier on the other.

  Unwilling to keep to Hoover’s rules, Donovan sneaked his operation into Mexico with the aid of a civilian with a rich life history, Wallace Phillips, who was running a local operation for the Office of Naval Intelligence. Phillips graduated from West Point, studied at the Sorbonne and served in World War I, and—unlike many American spies at the time—had experience in espionage. He was a rubber-company executive, but he also ran his own independent industrial intelligence organization whose clients paid him for information on business competitors. Phillips’s secret agents—“including seven ex-Prime ministers,” as he liked to boast—reported from the Soviet Union to the Balkans to Mexico. In Mexico, Phillips wrangled a lucrative private arrangement with President Ávila Camacho to find employees for the leader’s small special service to track subversive activities. In late 1941, Phillips decided to pass his private agency, called “K Organization,” as a single package over to Donovan’s OSS, with the blessing of the ONI. Phillips became Donovan’s director of espionage. All—Phillips, Donovan, and the navy—kept the maneuver secret.

  Immediately after Pearl Harbor, Hoover dispatched seven agents to Mexico to cover “Baja California and other danger points from the standpoint of possible enemy landing or subversive activities.” By February 1942, more than two dozen agents were working secretly under Donovan in Mexico. His analysts reported valuable information: wealthy and influential Mexicans, they said, anti-Yankee and very Catholic, tilted totalitarian, not democratic. The only Mexican sectors with potential as allies for Washington were the organized labor movement and the Communist Party.

  * * *

  Sometimes the tug-of-war between Donovan and Hoover undermined operations that might have served the Allied cause. In 1943, the OSS wanted to place operatives from its ultrasecret Insurance Intelligence Unit in Buenos Aires and Santiago. The OSS unit not only aimed to discover the structure of Nazi war finances but
also mined German insurance companies’ records wherever they could find them for strategic data such as tide tables or weapons plant blueprints, important for Allied planners to attack industries and enemy cities. German insurance firms, heavy financers of the war, managed almost half of the world’s policies from Berlin to Bangkok. The Nazi business was handled in Switzerland, but much of the money was laundered in Latin America, especially Argentina. The FBI turned down Donovan’s request.

  Just because the maverick Donovan did not have permission did not mean he refrained from sending secret agents not only to Mexico but to the rest of Latin America as well. In 1954, when the CIA orchestrated a right-wing coup against a democratically elected leftist president in Guatemala, one of the perpetrators, an agent named Joseph Rendon, proudly told reporters he had first warned against communist infiltration there a decade before, during the war, when he was on an OSS mission in the country.

  * * *

  Donovan’s spies were officially forbidden to operate in the field in Latin America, but his OSS division called R&A (Research and Analysis) studied the world from its Washington headquarters and maintained an active Latin America desk. For R&A work, the OSS begged, borrowed, or stole experts from America’s finest universities, museums, and research laboratories, bringing their expertise to information gathered from other government agencies and from spies abroad. R&A reports went to the president with recommended actions.

  The R&A Latin America desk under historian Dr. Maurice Halperin was one of the agency’s most productive. Halperin produced a damning report about U.S. diplomacy in Mexico. Combined with the rivalry between the OSS and the FBI, the report earned him the everlasting ire of J. Edgar Hoover, who charged Halperin after the war with being an agent for the Soviet Union.

  Using the R&A desk, Wild Bill created another way into Mexico. Donovan always saw film as a tool to stir patriotism, intimidate the enemy, and promote his OSS. If his spies could not have free rein, Donovan could at least shoot a film or two in Mexico as research for R&A and snoop at the same time. When the navy suggested a need for photographic surveys and a propaganda film in Mexico, Donovan was ready.