Cicero the Spy squandered everything he received. Money went to mistresses, ex-wives, and children. Elyesa Bazna did try his hand at sensible businesses such as used cars, a construction partnership, and a luxury Turkish ski-and-spa resort near Bursa. But even as the first of five floors was being built, a supplier whose bills had been settled in pound notes sent them to his Swiss bank, which bounced them after consulting the Bank of England. Ruined, Bazna spent years defending himself. Criminal prosecutions were abandoned, but civil suits were pursued and he had to repay his victims. Even a concert of classical songs he gave to acclaim by audience and critics ended in financial disaster; his creditors seized the evening’s takings. In desperation he turned to the German consulate in Istanbul for reimbursement or a pension. A junior official demanded written proof of his services to Germany and then threw him out. Bazna persisted and in 1954 wrote Chancellor Konrad Adenauer, the founding statesman of the Federal Republic of Germany. In a servile, pleading letter to this confirmed anti-Nazi who had publicly apologized on behalf of the nation for “unspeakable crimes,” Cicero could not have come up with a more inappropriate justification for wartime spying: he said he did it out of sympathy for Germany. The German Foreign Ministry rejected his claim outright.
For five years, the British succeeded in hushing up their worst wartime security breach. The Foreign Office’s top career diplomat, Sir Alexander Cadogan, confided to his diary in 1945 that “Snatch, of course, ought to be court-martialled.” But Ambassador Hughe Knatchbull-Hugessen drew only a private reprimand and then — the old boys protect their own — was awarded a plum post as ambassador in Brussels to enjoy its delicious cuisine while postwar Britain lived on iron rations. In 1950, Ludwig Moyzisch, Cicero’s SS handler, published his memoirs, and the lid blew off. In a statement to Parliament of only forty-five words, the government had to admit through clenched teeth that the story was true.
Darryl F. Zanuck bought the film rights from Moyzisch, and Joseph Mankiewicz’s brilliant film Five Fingers quickly followed in 1952, starring James Mason as Cicero, which is mainly how he and his story are remembered, if at all. But as with most Hollywood productions, the real-life story was considerably more mundane than the screen version. Bazna did not even receive a payoff in the traditional form of a consultant’s fee. The production cost of the movie was about $1 million in real money — slightly less than the face value of the counterfeit pounds paid to Cicero.
Later, Bazna tried writing his own story and sought a collaborator in Munich, who in turn demanded confirmation from Moyzisch that Bazna had been Cicero. Brought together, they sized up what life had done to them in the sixteen years since the war ended. Bazna recalled: “We felt no particular sympathy for each other. Our great adventure had rewarded neither.” In vain, Bazna continued pursuing the West German government, suing for 1.7 million marks. He was working as a night watchman in Munich when he died in 1970 at the age of sixty-six, a humble Turkish Gastarbeiter in the country to which he had both given and lost everything.
But perhaps no greater loss was suffered than by the Bank of England. The most precious resource of any central bank is confidence in the money it issues, and the Nazis undermined it even from beyond the grave. They forced Britain to issue new five-pound notes with a metallic thread to help detect counterfeits, and what was worse, the Bank had to admit why. This was done in a press release on October 18, 1945, that blamed the “forgery of high sum Bank of England notes in Germany during the war.” Even before the war ended, stories persisted that the British were buying up the counterfeits at a rate of one real fiver for two fakes. This was probably too good to be true, but the story demonstrates the widespread recognition of the dilemma facing the Bank.
Huge stashes of counterfeits were uncovered as Allied troops settled into Austria and Germany. Private Allen Cramer of the U.S. Army was guarding a bridge over the Danube when his buddies discovered a chest full of twenty-pound notes. Immediately they debated whether to carry off a lot if it was real, or only a little as souvenirs if it was phony. They correctly decided a little would do, but even though “we knew it was counterfeit, we somehow felt very rich.” In Frankfurt, U.S. Secret Service agent George McNally was led to twenty-three coffin-size boxes on a German truck, with manifests describing their contents. McNally alerted the British and soon received a phone call from the Bank in London. He described his discovery and heard a gasp over the line. The Bank quickly dispatched the chief of its printing plant, Patrick J. Reeves, described by McNally as “a tall, angular and reserved gentleman.” Reeves dryly reported that on Friday, June 8, 1945, he counted £26 million in counterfeit notes, accompanied by a box of tools to make the plates. He methodically compared the dates, serial numbers, and the Bank’s own code numbers on the bills, calculating that as many as sixteen additional crates might be missing with millions more in false pounds. The vast scale of the operation literally stared him in the face. In McNally’s somewhat more vivid description, Reeves went “from box to box, riffling the notes between his fingers. Finally he stopped and stared silently into space. Then for several seconds he cursed, slowly and methodically in a cultured English voice, but with vehemence. ‘Sorry,’ he said at last. ‘But the people who made this stuff have cost us so much.’”
Reeves was joined by two officers from Scotland Yard’s forgery branch, a chief inspector and a sergeant (appropriately named Minter). They toured the concentration camp complex to which the counterfeiters had been shuttled during their final, uncertain days as prisoners. They discovered the small Redl-Zipf camp had been burned down but were still able to enter its network of tunnels. They began to piece together the jigsaw puzzle of the prisoners’ stories. Then McNally, on behalf of the U.S. Treasury, started asking the British uncomfortable questions: How many counterfeits were produced? What were the losses? Had the counterfeits broken through the barrier of exchange controls into Britain’s home territory?
The questions were passed to Peppiatt of the Bank, who consulted the British Treasury, which in turn joined with the Old Lady, at least in public, to hide what was fast becoming a national embarrassment. (Even bookies at the London dog tracks had stopped accepting fivers.) Instructions arrived from Edward Playfair, a senior Treasury official, to stiff the outsiders: “I am sorry, as I do not want them to think us uncooperative: but this is a very domestic kind of matter. We at home keep such information inside a very narrow circle, and neither divulge it nor seek to obtain similar information from others.” This explanation landed on the desk of Charles A. Gunston, who was on leave from the Bank to serve as chief British financial officer for the Allied Control Commission in Germany. A top scholar at Winchester and Oxford, and a brilliant linguist (German, French, Spanish, Portuguese, and, as a hobby later in retirement, Bardic Welsh), Brigadier Gunston not only understood the situation but could express it in plain English. Next to his instructions to tell this to the Americans — or, to be precise, not to tell them — he wrote in a neat, scholarly hand, “Let sleeping dogs lie. CAG 14 Sep 45.”
Occasionally those dogs barked, but the principal sound for almost half a century was the silence of an embarrassed cover-up. Even when the Allied Control Commission in Austria wanted to prosecute a gang of seven men for passing false pound notes in 1946, the commission’s Public Safety Branch had to plead with the Bank to release enough counterfeits to present as evidence at the trial. When counterfeit pounds of a new type turned up the same year through the Polish Consulate in France, Peppiatt wrote to Scotland Yard demanding immediate action, adducing “the shocks our notes have taken in recent years and are still taking.” Like an outraged spymaster in a patriotic thriller, the normally restrained functionary proposed: “I am hopeful that you may have available a suitable fellow who could take it up and make a real job of it, i.e., to get at the source of supply which is after all always the real target.” But a foreign consulate presents a delicate target, and Ronald Howe, the deputy commissioner in charge of relations with foreign police forces, proce
eded via the more discreet French police judiciaire instead of using the more adventurous types demanded by Peppiatt. Howe had also been relieved to learn that the unfortunate Hans Adler, the Austrian counterfeit expert whose services had been disdained by Peppiatt before the war, had survived in the Netherlands. Howe noted, “He will be a most useful contact from our point of view.” Better late than never.
By now the Bank was worried about more than just its reputation for standing behind that inscription on every note that “promises to pay the bearer” (in gold, in times past). Edward Playfair, who had all the appropriate Treasury credentials — a brilliant Cambridge classics scholar with a mordant disdain for lesser intellects — remarked that the Bank was “hypnotised by looking at their own beautiful notes.” He was on his way to a two-year tour with the occupation authorities and was incensed that his country, which had bankrupted itself in a fight to the death against the Nazis, might have to compensate former enemies “in order to meet the Bank of England’s pride.” The Bank was painfully aware of the huge potential damage to its reputation if it refused to redeem pounds from unsuspecting foreign banks that had been bilked by the almost perfect forgeries. The Treasury, for its part, put severe limits on any foreign withdrawals based on the presentation of real pound notes, pinching every penny of foreign exchange to feed and rebuild the nation, which had been left exhausted by its victory.
In due course a typically obscure British compromise emerged: prewar pounds only would be exchanged in the “allied” countries of Belgium, Czechoslovakia, Denmark, Greece, and Norway, where, not coincidentally, very few counterfeits had circulated.* Where the counterfeits had been most concentrated, the restrictions were more severe. Exchange arrangements were nonexistent in Yugoslavia, Italy, and Hungary, the latter two under the guise that they had been enemies. Because of suspected Nazi accounts in Switzerland, tight restrictions were enforced there.
But the fakes and even new fakers kept popping up for many years, especially in neutral or pro-Nazi countries that had sat out the war. A regular trade developed in phony fivers that were believed to have been shipped by Swiss banks and officials in Madrid and Rome, then pitched at a discount to unsuspecting buyers along the Mediterranean littoral with the story that they had been hidden during the war and now could be redeemed by the British. From Stockholm, Harry Söderman, director of Sweden’s National Institute of Technical Police, bombarded Scotland Yard with telegrams and letters giving details of Swedish businessmen who had been stuck with counterfeit pounds. And a Hungarian refugee from Budapest arriving in Switzerland in 1946 tried to have a friend change £2,000 at a bank. Could he have been one of the Soros family’s clients? No one can ever know, but the refugee soon learned to his chagrin that his pound notes were fakes.
The largest number of counterfeits were dredged up from the depths of the Toplitzsee, preserved in its deoxygenated waters fed by sulfur springs. In 1967 a bundle of Bernhard pounds with a face value of £5 million was found abandoned inside the organ of the San Valentino church in Merano. Argentina, which sheltered many Nazis after the war, also absorbed their counterfeiting tricks during its own Dirty War against leftist guerrillas in the 1970s and 1980s. Ricardo Coqueto, a carpenter, escaped execution in the notorious Naval Mechanics’ School in Buenos Aires because he not only learned to forge official credentials but “I can remember making British sterling notes.”
For more than half a century, the Old Lady uttered hardly a word about the whole distasteful matter, rather like a well-bred duchess ignoring a spot of red wine spilled on her linen tablecloth. The Bank’s archives appear to have been deliberately purged, or worse. A 1949 memorandum reports that two officials destroyed not only an unrecorded quantity of forged banknotes but “photographic copies and records of the plant engaged in the production of the High Sum Plates and Notes.” Peppiatt retired from the Bank in 1957 and became a director of Coutts & Co. (a bank whose most distinguished private client was the Queen of England). In old age he particularly enjoyed playing a mean hand of bridge, which is what he was doing in 1983 on the afternoon of the day he died peacefully at the age of ninety. His obituary in the Bank’s house organ, The Old Lady, did not breathe so much as a whisper about the most singular event in his career.
This obituary was written by his successor as chief cashier, Sir Leslie O’Brien (later promoted to governor and ennobled). Along with the Bank’s other senior executives he continued believing that many of the Bank’s own records of the Bernhard counterfeits could not be found. The official explanation was that they had been lost or handed over to the security services. Right into the twenty-first century, Sir Eddie George, O’Brien’s successor as governor, insisted that it was “conspiracy theory” to suggest that the Bank might have a file copy of the 1945 report from its own man Reeves. In fact, the Foreign Office did have one and declassified it in the 1970s.
The outsize white fivers with the postwar metal thread were finally superseded in 1957, to great public outcry. British traditions were falling away like pieces of the Empire, and this was no exception. It took another two generations for the Bank to acknowledge that the five-pound note was not much good as money anyway. In 1998 John Keyworth, head of the Bank’s museum, admitted: “Not only did you have to fold it into your wallet, but many shopkeepers would insist on your writing your name and address on it because it was so easy to fake.” Yet the Bank’s own promotional film boasting in the late 1990s about how it had maintained the security of its banknotes over the centuries dared not even mention the name Bernhard. The cover-up continued until the old guard died off. Finally, in March 2003, the Bank publicly conceded in a brief but frank account of Operation Bernhard on its website that the scheme had indeed threatened the wartime stability of sterling and that “significant numbers [of counterfeits] found their way into circulation and were a constant headache for the Bank and other financial institutions for years to come.”
No one can say the prisoners came out of it well, but they had learned how to gain strength from hope. In Block 19, Salomon Smolianoff had filled his idle hours working on the mathematical probabilities of roulette with Jacob Laskier, a Polish office worker good at figures. They were certain they could devise a system to break the bank at Monte Carlo, which Smolianoff tried after the war but failed. He seems also to have tried to get back into his old game. He wrote his mentor, Professor Miassojedoff, now living under the name Eugene Zotow, in the postage-stamp country of Liechtenstein. Miassojedoff drew, painted, and had, quite naturally, designed some of its postage stamps. Neither could obtain a visa to visit the other, so they arranged to meet at the Swiss border in March of 1946 but could only gaze across a no-man’s-land separating them by some 125 feet. Smolianoff claimed to be organizing an exhibition of exiled Russian artists and wrote his friend asking for paintings, but the police figured he really meant a more instantly exchangeable form of art and kept an eye on him.
Sometime in 1946, Smolianoff settled in Rome and in February 1947 married Carlotta Raphael, daughter of an old Italian Jewish family and widow of a professor of engineering. In May the Italian police questioned him about his black-market sale of a five-hundred-dollar bill. He spun a complex tale of exchanging it on behalf of his wife who had been left more such bills by her late husband; of an intermediary who said a bank had certified the money as genuine; and of yet another woman who took a five-hundred-dollar bill to the United States, where it was declared counterfeit. The Italian police seized the money, and in September 1947 Smolianoff took ship for South America. The next year Miassojedoff/Zotow was convicted in Liechtenstein of counterfeiting hundred-dollar bills, the court wisely ignoring an exculpatory statement from Smolianoff in Montevideo. The International Criminal Police Commission in Paris issued a wanted circular for Smolianoff as a notorious international counterfeiter in March 1948. But he was already working in Uruguay with his brother-in-law, a bookseller, who helped him peddle Russian icons that he occasionally claimed to have uncovered (how they would have turned up i
n South America was not immediately explained). The professor sailed to join his prize student in 1953 but died just after his arrival in Buenos Aires. In 1955 Smolianoff and Carlotta moved on, settling in Porto Alegre, Brazil, to manufacture toys. Smolianoff stayed straight because his firm and expert counterfeiter’s hand was gradually weakened by Parkinson’s disease, of which he died in 1978.
The lives of most of the other prisoners took a more prosaic turn, although there was an occasional dash of celebrity. Oskar Stein, the meticulous bookkeeper, was already running his own bar in Pilsen when interrogators came to question him soon after the war. Hirsche and Moshe Kosak, two brothers who were typesetters, emigrated to America and spent their lives working for the Yiddish newspaper Vorwerts in New York. Felix Cytrin, the chief engraver of Block 19, entered the United States in 1950 as a displaced person; the Secret Service kept him under surveillance almost until his death in New Jersey in 1971. Norbert Levi adopted the name Norbert Leonard, gravitated back to the high life, and spent some time as a photographer for Aristotle Onassis. Hans Kurzweil, chief of the bindery that produced fake passports, got revenge of a sort. When SS officer Hoettl published his book reporting falsely that Krueger had used criminals to forge sterling, Kurzweil sued and won on the basis of a sworn deposition from Krueger that he had not. Kurzweil’s legal victory in a Viennese court deprived Hoettl of his government license to run a school, which he had to close.
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