Krueger's Men

by Lawrence Malkin

  Because of classic intelligence compartmentalization, Kolbe did not know Cicero’s identity; probably only Moyzisch did, or at least had a good idea of the identity of his precious source. Dulles told Roosevelt that the Germans had penetrated the president’s recent discussion with Churchill about using Turkish airfields. For his part, Churchill wondered whether Sir Hughe had inadvertently let something leak. The British Foreign Office’s chief of security and a Scotland Yard detective descended on the Ankara embassy in January and questioned all personnel. Security was declared grossly deficient, but Bazna hardly figured in the investigation. He seemed too obsequious and unlettered to fall under the suspicion of the visiting grandees, who were looking for a professional spy. On their orders, the ambassador’s safe was fitted with an alarm. Bazna quickly figured out how to disable it by pulling the fuse to the electricity supply. The British secret service planted a fake document in Snatch’s safe, “Peace Feelers from Bulgaria,” complete with the forged signature of Foreign Secretary Anthony Eden, but Cicero never took the bait, moving more cautiously when he resumed his clandestine photography, and finally giving up in March 1944. He tried to squeeze one more payment out of Moyzisch for the details of the embassy’s new alarm system, but no sale.

  During his brief but spectacular career as Cicero, Elyesa Bazna had produced negatives of between 130 and 150 British telegrams classified as Secret and Most Secret, for which he was paid about £300,000. That was a fortune at a time when an upper-middle-class family man in England could maintain a comfortable establishment with servants on an income of £1,000 a year. Bazna spent with some abandon on mistresses but prudently kept most of the money flattened under the carpet in his servant quarters, then transferred it to a bank vault. After a decent interval he resigned from the embassy and dropped from sight. He was never identified as Cicero during the course of the war.

  For their money, the Nazis received about what they paid for in fake currency, which is to say not much. Von Papen could use knowledge gleaned from Knatchbull-Hugessen’s dispatches to inform his own diplomacy with the Turks, but not too obviously, lest he arouse suspicion. The pilfered dispatches did provide reassurance that Britain was making no progress in persuading Turkey to enter the war, and this could have been of military value if properly used. General Alfred Jodl, chief of German military operations, recorded in his diary early in 1944 that “results from Cicero” convinced him his eastern Mediterranean flank was safe from British attack. Germany therefore could move divisions from the Balkans to Western Europe against the invasion everyone knew was coming soon. (The invasion code name, Overlord, did slip out of one dispatch but without the essential clue of where and when it would be launched.) Hitler was not as convinced as Jodl because the dictator had himself been left in doubt whether Cicero’s information was genuine by the turf battles raging among his own intelligence agencies. By the time Hitler agreed that it was safe to move the Balkan divisions to the west, it was too late. Cicero’s dispatches might also have provided Germany’s code-breakers with a mother lode of cryptanalytical data, but they proved useless because the British used one-time pads to change the key in every transmission. So, wrote the espionage historian David Kahn, one of history’s greatest spies “did not — could not — fundamentally alter the course of events.”

  While Cicero was Operation Bernhard’s last hurrah, the activities of Friedrich Schwend’s distribution network grew more frantic. One of the money-launderers in Bratislava buried his stock of counterfeit bills in the garden of a friend’s house and made a dash for Prague on April 11, 1945, leaving Bratislava one day ahead of the Russians. SS headquarters in Munich, which was much closer to the dirty deals, came to believe that Schwend’s men were skimming large amounts to salt away money and gold for themselves. Wilhelm Hoettl regularly crossed into Switzerland, and his colleagues said he deposited money there for his chief, Ernst Kaltenbrunner.

  Because of the Nazis’ unbridled greed in flooding south-central Europe and the Balkans with fakes, pounds had become deeply suspect currency. By 1944, the total production of Bernhard counterfeits amounted to 13 percent of the £1 billion worth of real notes then in circulation. Even if only half those forgeries were actually distributed by the SS, at least one pound out of twenty in circulation would have been false. If they had circulated widely in the British Isles, such a high proportion of fakes certainly would have been enough to grind, if not completely strip, the financial gears of the British economy. (In those days virtually no worker had a checking account, and most shops dealt in cash; credit cards were unknown.) But the British public had been warned by their newspapers about large-scale German counterfeiting, and the forgeries circulated most widely on the embattled Continent, especially in the Mediterranean basin and Hungary, where the proportion of fakes was far higher and the pound even more deeply suspect.

  In Budapest, where the Hungarians picked up the BBC’s broadcasts, a five-dollar bill could be exchanged for a five-pound note on the black market by the late autumn of 1944. That meant sterling had collapsed by about 75 percent from the official rate, which was about $4 to the pound. Even a fledgling Budapest trader later known as George Soros had been alerted to German-made counterfeit pounds by rumors racing through the markets. Soros, famous a half-century later as the Man Who Broke the Bank of England for trading against sterling at a profit of almost $1 billion, was only fourteen years old when his father used him as a runner during that chaotic final autumn of the war. With George’s youth less likely to arouse suspicion, he was sent out one day carrying a heavy gold bracelet to trade on commission for cash. He brought the bracelet to a ring of escaped French prisoners of war operating out of a local café. They left the young man with supposed security of £5,000 while they went off to examine and perhaps fence the bracelet. There he sat, tormented by fear that he had been fleeced with fake banknotes. The money turned out to be real, or at least his father’s clients accepted it as genuine. Soros never forgot the sheer thrill of the deal. But someone, somewhere, most likely ended up with a fistful of counterfeits and a very rude shock.

  By now it was becoming obvious that the sharp end of the multimillion-pound sting had been blunted by overuse and pure greed, a reflection of the disintegration of the Reich. Hitler himself, secreted in his command post in East Prussia and then his bunker in Berlin, counted on some miraculous reversal of fortune to divide the armies closing in on him. His final throw on the battlefield was his offensive in the Ardennes in December 1944, a sudden thrust that we know as the Battle of the Bulge, to recapture the Belgian port of Antwerp and choke off the Allied supply line. Individual freebooters like Schwend were quietly detaching themselves from the collapsing central will of the Reich and focusing on surviving with their loot. Even Himmler tried to make a separate peace with the Western Allies, using Schellenberg as a go-between with the mad offer of the lives of thousands of concentration camp prisoners to save the SS and his own skin. Anyone who could roll the dice one last time did so, and those in charge of Operation Bernhard were no exception.

  Chapter 11

  THE DOLLAR DECEPTION

  June 6, 1944. D-Day. Cut off from the rest of the world, the prisoners in Block 19 listened to the news over the loudspeaker in absolute and ambivalent silence. With the characteristic distortion of a totalitarian regime, Radio Berlin announced: “The Bolsheviks’ allies have launched a dastardly attack against Europe from the West. The German defenders, with fanatic determination and passionate devotion, will defeat that attack.” And so on, reporting the enemy losses on the Normandy beachhead, the collapse of the Allied offensive east of Rome (which had in fact just fallen to the Allies), and the crushing of “the Tito-bandit armies” (which had finally begun coordinated and merciless attacks on Yugoslavia’s German occupiers). What did the Normandy landings mean for these 120-plus hostages then working in Operation Bernhard? Would their implacable masters redouble their efforts in order to maximize their gains, or destroy the evidence that much sooner and send t
hem up the chimney? Would the invasion advance the date of their liberation or the date of their death? There was no clue.

  At one point Berlin ordered production stopped for two days. The alarmed men were quickly soothed by Krueger, who appeared and told them the British had spotted the serial numbers on the counterfeit pounds (as indeed they had) and had warned their own banks (as they actually had not, at least not in much detail). To keep the wheels turning in Block 19, Krueger invented temporary tasks for the counterfeiters. They separated sheets of Nazi propaganda stamps that had already become collectors’ items in Sweden; the cross atop the King of England’s crown had been replaced by a Jewish Star of David. They sorted boxes of documents confiscated by the Gestapo in occupied countries. Abraham Krakowski came across (and hid proudly in his shirt) a 1921 letter from Vladimir Jabotinsky, the founder of an aggressively nationalist group of Zionists. Felix Tragholz, assigned to sort official documents for copying as forgeries, collapsed when he was shown photographs of his two brothers and a sister, because he realized it meant they had been deported from Vienna and most likely were dead. He was denied permission to hold on to this last keepsake. And chief bookkeeper Oskar Stein spotted one important sign: After the Allied invasion, Berlin began ordering notes delivered in the millions rather than thousands. He recorded these shipments in his secret register but did not know whether the SS was vacuuming up the Sachsenhausen stacks prior to liquidating the operation or simply augmenting the flood of counterfeits.

  Because of the tight compartmentalization of Operation Bernhard, the name Schwend meant nothing to Stein or any of the other prisoners. What they already knew, however, was that Krueger wanted to expand his counterfeit arsenal to dollars. The new scheme had begun quietly in May 1944, when part of the Block 18 dormitory was cleared for the new dollar workshop, but the work was not going well. This hardly disturbed the Dollar Group (as they quickly became known), who knew the task they faced was challenging. Many false starts would be made, some deliberately. Some prisoners even suspected that Krueger was fully aware of the prospective delays. The longer he could keep his eponymous operation going while every able-bodied man was being called to defend the Reich, the longer he could avoid frontline duty. One prisoner remembered hearing him worry about what would happen if he had to shut down Operation Bernhard: “I will have to go to the front and you will be killed.”

  U.S. hundred-dollar bills presented a much more complex task for the counterfeiters than copying the plates for the large, black-on-white five-pound notes and then printing them on a flatbed press. The face of Benjamin Franklin, with his high forehead and knowing smile, is far more challenging to an artist than Bloody Britannia. Furthermore, the bill is engraved with minute details that are excruciatingly difficult to copy. Not only was detailed work demanded on the black-and-white obverse, but also on the green reverse side that gives American bills their nickname. The stiff crinkly paper used by the Bureau of Engraving and Printing in Washington is shot through with microscopic bits of silk thread to add strength, differing from the British bills. Perhaps most challenging of all, the Bureau employs a printing technique known as intaglio. In this process, great pressure forces special ink from the tiny, meticulously engraved strokes on the copper plates into the paper itself, whereupon the thick liquid actually forms a microscopic bas-relief with a distinctive sheen. The bill’s almost imperceptible ridges can actually be felt by running a fingernail lightly across the surface or peering at it slantwise against a strong light.

  However tiny they were in physical fact, these ridges loomed large to Krueger’s Dollar Group. They tried to hurdle them with a process known as phototype or collotype, then widely used in Europe and known in Germany as Lichtdruck, “light-printing,” which was especially suitable for long runs of a thousand or more prints from a single plate. The small group tried to adapt the phototype techniques that their chief, Abraham Jacobson, had mastered before the war when he managed his own print shop in Holland. The system is similar to lithography; both work on the principle that oil and water do not mix. Krueger brought in a civilian technician for ten half-day lectures and practice sessions. He had no other choice. It took months to engrave a metal plate for intaglio printing, to say nothing of the time needed to learn the technique. This process was then the only possible shortcut.

  Unfortunately for the counterfeiters — or perhaps fortunately, for none really knew the odds on their lives — Lichtdruck was still not sharp enough to cut corners quickly or precisely enough. At first the glass plate is covered with gelatin impregnated by a light-sensitive solution of potassium bichromate and ammonia, then dried in heat of about 120 degrees. Under a bright lamp, a photographic negative is laid on top of the dried gelatin. The darker areas harden, while the others soften according to the strength of the light passing through the negative. When glycerin is applied, it is absorbed by the soft areas to prevent them from soaking up ink. To repel ink in these lighter, softer areas, the plate absorbs moisture from the atmosphere in the pressroom, which therefore must be kept at a high humidity. Ideally the press should be set in a closed location protected by concrete walls, not the slats of a wooden barracks — a difficulty that provided one of many excuses exploited by Jacobson, the only one who fully understood the process.

  Jacobson, a balding, methodical Dutchman, explored many variations in more than two hundred trial press runs. He was careful not to disclose an intrinsic flaw in the scheme: that the microscopic crystals of the chemical would by themselves blur the sharply etched lines characteristic of a genuine bill. As a reserve army captain who had served in the Dutch underground, Jacobson had learned elusive patience during several years outwitting the Nazis before his capture in 1943. His printing experience had won him a reprieve from a death sentence, and he had every intention of using it to survive until liberation.

  With Jacobson’s skill, the experiments were subtly sabotaged by improperly mixed gelatin and bad photography. Another trick he favored was ordering unnecessary equipment that he knew might take weeks to deliver. Once he ordered a hygrometer “and after some time I got six of them.” His chief photographer was the former fashion photographer Norbert Levi, who, despite his name, was not Jewish. The tall, blond, blue-eyed, easygoing Berliner had been condemned to death as one of a ring of food-stamp counterfeiters, then reprieved and sent to Block 19. The third essential member of the Dollar Group was Adolf Burger, a Jewish printer from Bratislava who already knew that his wife had been murdered at Auschwitz. All realized their very existence depended on delivering the next generation of counterfeits, but not whether their chances of survival would improve by producing them sooner or later.

  Krueger himself discovered their savior. On August 25, 1944, a short, stateless fifty-seven-year-old Russian with a heavy-lidded poker face and ears like envelope flaps was registered as an inmate at Sachsenhausen. After a fortnight or so in quarantine, his skeletal body was as filthy as that of any other newcomer from the many less privileged camps, but he nevertheless seemed somehow different. Krueger had probably found him by combing the International Criminal Police Commission’s files of counterfeiters whom Heydrich had refused to employ for Operation Andreas, then pulled the Russian into his group as quickly as he could. After all, a day, even an hour, could have meant the difference between life and extermination for Smolianoff.

  “Good afternoon, you tonsorial beauties,” said the new arrival with a smirk, alluding to the contrast between the forgers’ barbered hair and his own shaven head. He was led to a table, mounted it, dropped his prison rags, and was formally greeted by Max Bober, the former Berlin printer whose geniality and quick tongue earned him the role of presiding at camp entertainments.

  “Welcome to our clan, Tovarisch,” said Bober.

  “I’m thankful for the great and undeserved honor.” The Russian smiled, addressing his new comrades in their lingua franca, which was German. The impromptu master of ceremonies then announced that the new prisoner would be anointed, and proceeded to
paint the naked, standing body with random designs in printers’ ink, asking the newcomer who and what he was.

  “Dear brothers, I am overwhelmed by the royal reception accorded my humble person here today. I come from that famous health resort Mauthausen, summoned by special messenger to work here. I have no knowledge of what you work at here, but I have an idea. By profession I am a counterfeiter and am recognized, even by my enemies, as a master in the field.”

  And in this fashion, in September 1944, Salomon Smolianoff entered the world of Block 19 and was immediately assigned to Jacobson’s Dollar Group. He was not the last of the counterfeiters — a final dozen prisoners would arrive in October — but he was by far the most intriguing. Smolianoff, known to the police across Europe by half a dozen aliases, was the only career criminal behind the wire mesh that enclosed these otherwise respectable artisans and tradesmen. In less extraordinary circumstances, they also would have been adjudged criminal conspirators in the greatest counterfeiting operation in history. But as they all knew, this genuine criminal was probably their last chance to stretch out their unique enterprise.

  Smolianoff was born on March 26, 1887, in Poltava, now part of Ukraine. His father, Isaak, was a Jewish ritual slaughterer. From his earliest years he showed extraordinary artistic talent, and at the age of sixteen became a pupil of Ivan Miassojedoff, who had followed in his own father’s artistic footsteps. Young Miassojedoff had been awarded Russia’s Prix de Rome, his work was exhibited in St. Petersburg, and he was making a career in Kiev and Odessa as a teacher and painter of mystical nudes and mythical scenes in imitation of antiquity. When his world was upended by the Russian Revolution, Miassojedoff fled west and lost everything, while his prize pupil remained for several years in the new Soviet Union, finally escaping in 1925 via Istanbul to Berlin.