13 Hitler called his military chiefs: Reitlinger, 97.
14 “What now?” Kershaw, Hitler, 223.
14 Approximately $3 billion more came from German Jews: A fascinating if speculative accounting of prewar Jewish wealth in Europe was compiled by Helen B. Junz for the Independent Committee of Eminent Persons (known as the Volcker Commission). Its conclusions were published in 1999 as Report on Dormant Accounts of Victims of Nazi Persecution in Swiss Banks; see its Appendix S, pp. A-127–206. The committee was headed by Paul Volcker, former chairman of the board of governors of the U.S. Federal Reserve System, who appointed Junz, a former U.S. Treasury economist and herself a survivor of the Holocaust. She reckoned prewar Jewish wealth in Austria, the Netherlands, Germany, Hungary, and France at $12.9 billion and estimated that the Germans got all but $3 billion of it.
15 Hitler even prohibited German espionage: Kahn, Hitler’s Spies, 347.
15 “which everyone knows and can trust”: Churchill speeches in the spring of 1925, quoted by Kindleberger, 341.
CHAPTER 2: OPERATION ANDREAS
17 Marshal Mikhail Tukhachevsky, a Bolshevik hero: Höhne, 230–32. In addition to Churchill, some Nazis believed the story, among them Walter Schellenberg and Wilhelm Hoettl of SS intelligence, as evidenced by their memoirs. The tale of the Tukhachevsky forgery also made its way into the mythology of Operation Bernhard through its most important Western popularizer, Murray Teigh Bloom, in a 1956 Harper’s magazine article, “Bernie and Solly,” reprinted a year later in Bloom’s history of great counterfeits, Money of Their Own.
17 Marked money with a face value in the millions: Schellenberg, The Labyrinth, 28.
18 Heydrich was the son of a provincial: Höhne, 161–64; Reitlinger, xvii, 31–35.
18 the considered view of Schellenberg: Schellenberg, 11–14.
19 But Hitler ignored, perverted, and even rejected: Taylor and Shaw, 238.
20 the man who fired the first shots of World War II: Kahn, 280–81; Reitlinger, 122; Höhne, 227, 264; Peis, The Man Who Started the War, 94–100; Crankshaw, Gestapo, 101.
21 the muscle man in the kidnapping: This was the notorious Venlo affair. Major Richard Stevens and Captain S. (Sigismund) Payne Best of British Secret Intelligence were lured to the German border at Venlo, the Netherlands, in the belief that they had intelligence from anti-Nazi officers whom they had been cultivating in the hope of promoting a coup against Hitler, the prevention of which was a prime mission of the SS. After a gun battle, Naujocks and his SS men captured the two officers and rammed their big Buick across the frontier barrier. Stevens and Payne Best were held in concentration camps for the remainder of the war and interrogated for what they knew about British intelligence.
21 the security service’s technical section: Section F of the foreign intelligence service of the RSHA (Reich Central Security Office). The section’s Bureau 4 forged documents and therefore was ordered to produce counterfeit currency. In 1939 Himmler and Heydrich divided the RSHA into six departments, or Amter: Amt I handled personnel and training; Amt II administration and economic and judicial affairs; Amt III internal security; Amt IV was the notorious Geheime Staatspolizei, the secret state police popularly known as the Gestapo; Amt V the Kriminalpolizei, known as the Kripo; and Amt VI the Auslandsnachrichtendienst, or foreign intelligence service. Amt VI was the RSHA’s own espionage service, which ran spy networks and performed sabotage. Officers of these departments were generally members of the Sicherheitsdienst, the SD (Security Service).
The most infamous of these disparate security organizations brought under Heydrich’s command was, of course, the Gestapo. This secret police did not originate with the Nazis. In the 1920s it was Department IA of the Prussian political police under the Weimar Republic, and its job was the surveillance of Communists. What made the Gestapo notoriously evil after Hitler snuffed out Germany’s ill-fated experiment with democracy was the power quickly assumed by the Nazis to arrest and hold anyone in “protective custody” without trial or even explanation. Himmler later devised a means to make some victims vanish forever in Nacht und Nebel — night and fog — so that relatives would never even know where their loved ones were buried. (See Reitlinger, 38, and Crankshaw, 15.) Once established, this technique did not go away. In South America during the counterterrorist regimes in the 1970s, suspects were arrested, tortured, and dumped anonymously into the sea from airplanes or buried in common graves, a fearsome weapon that turned the word disappear into an active verb. Students of antiterrorist activities in Britain and America after September 11, 2001, may find a chilling similarity in powers claimed by the executive branch to arrest and detain suspects without charge in the two nations with the deepest traditions of habeas corpus — the Latin term for the state’s obligation to produce a prisoner and publicly explain why he is being held, and a foundation stone of Anglo-Saxon law. This dubious claim was overruled by the highest courts in both countries, but only after several years and not definitively.
21 Naujocks’s technical command put him in charge: Copy of replies by Alfred Naujocks to Bank’s questions, B/E PW 17/5 Forgery: 12 July 1929–11 December 1963.
22 Nebe had ultimately walked out: Jost, PRO KV 2/104.
22 Langer… had served in Austria’s code-breaking: Isolde Langer (widow of Albert Langer), interview by David Kahn at her home in Austria, September 14, 1973. Kahn has generously provided his notes to the author.
22 to build a code-breaking machine: “Translation of Report Dated 22.6.1945 by Dr. Albert Langer of Valden am Woerthersee on the Technical Section of Amt VI of the RSHA,” NARA, RG 226, entry 109, box 66, folder XX 11587–99 (22 June 1945 — Langer), hereafter cited as Langer report. This report is somewhat hysterical under the shock of defeat, although the anonymous U.S. intelligence officer who summarized it found the report “very entertaining reading.” Langer, born April 29, 1895, in Graz, Austria, was assigned NSDAP number 614388 on May 1, 1938, only six weeks after the Anschluss between Germany and Austria (NARA, RG 242, MFOK, roll M-81, frame 1532).
22 mental processes in curing cancer and another: War Room Comment on Langer report.
23 Langer, a fragile, thin, bespectacled man: Or so Naujocks remembered him almost five years later. M.I.5. Interim Interrogation Report on the Case of Alfred Naujocks, NARA, RG 226, entry 108B, folder 2082 XX 3980, pp. 36–37.
23 Langer wrote in the only official account: “The Counterfeiting of the Pound,” NARA, RG 226, entry 155, box 2, folder 13. Internal evidence confirms Langer is the author of this unsigned and undated eleven-page Top Secret memorandum, which is the source of information attributed to him in this chapter unless otherwise noted. The memo was probably composed in 1952 or 1953. He had regained his mental equilibrium (partly through the security of postwar employment by U.S. intelligence in Germany, according to his wife) and gave a more coherent account of events that occurred “12½ years back.” In the unsigned report, he described himself as the technical director reporting to Naujocks, and the only civilian in the operation aside from the printers, etchers, and other craftsmen. This description fits Langer precisely. Documents at the National Archives in the same box from the files of the wartime Office of Strategic Services and its successor, the Central Intelligence Agency, make it clear that the CIA’s Eastern European section was trying to get to the bottom of the Germans’ World War II counterfeiting operations once and for all, probably to ensure that they had not somehow been taken over by Communist espionage after the war. See the memo from E. Parmly III of the CIA’s Eastern European section, October 8, 1953, and the reply from McGregor Gray, October 26, 1953, NARA, RG 226, entry 155, box 2.
24 (footnote) A wrinkle in this story has been repeated so often: The story first appeared in Hoettl, Hitler’s Paper Weapon, 27.
25 an 1855 drawing by Daniel Maclise: Byatt, Promises to Pay, 96.
25 a professional named Artur Rau: Translation of a Report Given to the American Authorities (by Capt. [Serge] S. G. Michel, French liaison officer, who i
nterviewed Rau), p. 23 (see paragraph 11), NARA, RG 65, box 62, no. 937.
26 engraver in his late sixties named Walter Ziedrich: Identified by Langer only by last name in his written account but named in full as an RSHA employee in its telephone directory (July 1943) of the technical section headquarters on Berkaer Strasse (ext. 331). Langer’s extension was 208, Schellenberg’s 251 (and his home number 80-79-84). The directory is in NARA, RG 242, T-175 (Records of the Reich Leader of the SS and Chief of the Kriminalpolizeiamt), roll 232. RSHA 1943 directory begins at frame 2720276 and ends at 2720417, where Ziedrich’s name is listed.
26 Paper was delivered to the ground floor: Diagram accompanying Naujocks’s replies to questions submitted on December 14, 1944, by Kenneth Peppiatt, chief cashier of the Bank of England, to Sir Norman Kendal of Scotland Yard, for Naujocks’s interrogation, B/E PW 17/5.
26 August Petrich, a Nazi Party veteran: Born in Berlin in 1901, joined NSDAP (Nazi Party) (no. 5584607) on May 1, 1937, Captured German Records of the NSDAP, NARA, RG 242, roll A3340-MFOK-QO68 Ortsgruppen.
26 They proudly posed for photographs: The photos ended up in the custody of the FBI in 1945, along with falsified documents that FBI agents in Europe thought could help track fleeing Nazis. Many of the fake passports, visas, entry permits, and so on, were copies of documents from South American nations, some perhaps lifted from diplomats cavorting at Salon Kitty. NARA, RG 65, Class File 65-47826-297, boxes 50, 51, section 12 (4 parts).
26 Naujocks thought the notes: B/E PW 17/5.
26 code name… Andreas-Angelegenheit: Langer report.
27 Even the Bank of England realized that: John Keyworth, curator of the Bank of England museum, in an essay “The Sinews of War” (regarding the documentary film The Great Nazi Cash Swindle, http//:www.channel4.com/history/microsites/H/history/n-s/swindle.html) writes: “If the original plan had been carried out… everyday life would have been severely disrupted as people lost confidence in banknotes, and large areas of the country would have reverted to barter.”
27 According to the former SS officer Wilhelm Hoettl: See Hoettl, Hitler’s Paper Weapon, 21. The same quote (“Dollars no.”) is repeated on behalf of Naujocks, also without any source, in Peis, 137. The quote also appears in Bloom, Money of Their Own. No evidence whatever, either in a document or in the direct report by any German, including Hoettl himself, has been found in research for this book to substantiate that Hitler ever made this comment. This has not stopped it from appearing in many repetitions of this tale.
27 Hitler rarely put any orders on paper: Kershaw, 33.
28 it had a strong “literary make-up”: Deposition for trial of Adolf Eichmann taken at Bad Aussee, Austria, June 22, 1961, by Senior Judge Egon Kittl, www.nizkor.org/hweb/people/e/eichmann-adolf/transcripts/Testimony-Abroad/Wilhelm_Hoettl-08.html.
28 One Simon Graham wrote: Miriam Kleiman and Robert Skwirot, Interagency Working Group Researchers, “Analysis of the Name File of Wilhelm Hoettl,” p. 6, n. 36, NARA, RG 263.
29 Evening Standard: B/E C 12/111, Note Issue Files.
29 The Swiss Bankers Association did not issue: Counterfeit circular No. 961 (in French and German), Basel, December 3, 1942. Copies provided to the author by James Nason of the SBA.
29 the Bank was still nodding: Byatt, Promises to Pay, 147. This authorized account was written by the retired records adviser of the Bank and published under its auspices. After its publication, members of the press and public seeking information about the wartime counterfeits were directed to the book, and only to it, by the office of the Archivist until his retirement in 2003.
30 “as usual, lost his temper”: interrogation of Jost, PRO KV 2/104.
30 the Delbrückstrasse factory was diverted to rubles: Mader, Der Banditenschatz (The Bandit’s Treasure), 59. Julius Mader was a propagandist writer with connections to the Stasi, East Germany’s security service.
30 left around 1942 with back problems: Kahn interview with Isolde Langer.
30 about £3 million in false pounds: This is also the figure given in an unpublished memoir by Bernhard Krueger, the SS officer who revived the counterfeiting operation in 1942. See notes to chapter 5.
30 “It became more and more unorganized”: Langer report.
31 a graphic account appeared in a Frankfurt newspaper: Frankfurter Rundschau article, December 24, 1945, NARA, RG 65, box 51, Class File 65-47826-378.
CHAPTER 3: WHITEHALL AND THE OLD LADY
33–34 Churchill letter to Simon: “Suggested distribution by aeroplane of forged German currency notes over German territory. 1939 Sept. 6–1945 Feb. 1,” PRO T 160/1332. Unless otherwise noted, this and other letters, internal Treasury memoranda, and exchanges with the Bank of England cited here and in the following paragraphs are lodged in this file at Britain’s Public Record Office in Kew. Most of the originals of the Bank’s correspondence on the subject are missing from its archives or, if they remain, have not been declassified.
35 Keynes wrote at the conclusion: John Maynard Keynes, The General Theory of Employment, Interest and Money (1936; reprint, New York: Harcourt, Brace & World, 1964), 383.
36 not the first time the English had thought: Bloom, Money of Their Own, 236.
37 During the American Civil War, confidence men: Currency exhibit, Federal Reserve Bank of San Francisco, 2001.
37 When the Soviet Union was starved: W. G. Krivitsky, “When Stalin Counterfeited Dollars,” Saturday Evening Post, September 30, 1939, 8ff.
37 the rogue nation North Korea: John K. Cooley, “The Rogue Money Printers of Pyongyang,” International Herald Tribune, October 24, 2005, 8. Mertin Fackler, “North Korean Counterfeiting Complicates Nuclear Crisis,” New York Times, January 29, 2006, 3.
40 dropped forged German ration books: [probably H. Merle] Cochran to Henry Morgenthau, Jr., quoting Britain’s Treasury representative in Washington, Morgenthau Diaries (1938–1945), vol. 306, leaf 4, FDRL. Lord Lothian, unsigned memorandum (prepared by Gerald Pinsent, British Treasury representative and financial counselor of the British embassy in Washington, according to subsequent memorandum to Morgenthau on September 14, 1940) to Morgenthau, September 12, 1940, ibid., leaves 180–82.
40 In 1943 Radio Berlin reported: “Berlin Raiders Accused of Adding Insult to Injury,” New York Times, May 29, 1943, 4. See also Auckland, Air-dropped Propaganda Currency: “a directive issued by the War Cabinet to the British/American psychological teams stated that on no account were German banknotes of any description to be completely forged.” During the war Auckland had actually encountered the counterfeits in North Africa (see p. 137 of this book). Afterward he was the editor of Falling Leaf, the journal of the PsyWar Society, and presumably had seen this secret directive or was told about it. The psychological warfare units nevertheless forged the face of German bills, and on the reverse printed propaganda slogans, sometimes bawdy (“Ich bin Hitlers Arschwisch…”).
41 Waley had the wit to put himself: So did the thriller writer Margery Allingham, who plotted her 1941 novel Traitor’s Purse (published in the United States as The Sabotage Murder Mystery) around Nazi counterfeits spread through Britain to destabilize the economy.
41 “Perhaps it is a fairy story”: Waley to Catterns, November 27, 1939, B/E PW 17/5.
41 In May 1939, as war loomed: Sir Frederick Phillips exchange with Catterns of Bank of England, 19 May 1939 et seq., PRO T 160/1344.
41 “could be silent in several languages”: Keynes’s obituary tribute to his colleague in the Times of London, quoted in Skidelsky, 146.
41 torpid superiority: When a wealthy American Anglophile proposed placing a Foucault pendulum in the well of the Bank in 1939 as a symbol of permanence, Edward Holland-Martin, an executive director who went by the nickname of Ruby, commented, “I am not quite sure what a Foucault pendulum is.” Correspondence of Edward Holland-Martin, B/E ADM 245.
41 the Bank had actually printed up excellent counterfeits: Herbert G. de Fraine of the Bank’s printing plant, quoted by Bloom, “Uncle Sam,�
�� 350. Maurice (later Lord) Hankey, secretary to the War Cabinet, wrote in his diary on January 25, 1916, that an official identified only as Montagu — presumably Edwin Montagu, an MP then serving in the subcabinet post of financial secretary to the Treasury — “called on me to explain a scheme of his for placing forged German bank notes in circulation, in which I promised to try and help. It appears that the Governor of the Bank of England, with the knowledge of the Chancellor of the Exchequer and the Prime Minister, has produced some marvelous forgeries. It seems rather a dirty business, but the Germans deserve it and Napoleon used to do it. There is some reason to suspect that the Huns have played this game on us.” On January 27, Hankey also sought help from the British Admiralty’s intelligence chief in the scheme, a Captain Hall. Quoted in Roskill, Hankey, vol. 1, 246.
42 fear of public embarrassment if the device failed: Byatt, Promises to Pay, 137.
42 slightly more than half of all notes in circulation: Bank of England Quarterly Bulletin, June 1967.
43 K. O. Peppiatt — who, like the Treasury’s Waley: Who Was Who and Peppiatt’s obituary notice in The Old Lady, September 1983, 144. This obituary in the Bank’s staff magazine was signed L. K. O’B, for Leslie O’Brien, Peppiatt’s successor as chief cashier and later the Bank’s governor, ennobled as Lord O’Brien. His obituary is also the source of the description of Peppiatt’s cool manner.
43 the cleverest man in England: See the author’s chapter on Keynes in The Horizon Book of Makers of Modern Thought.
43 “always absolutely charming, always absolutely wrong”: Skidelsky, 554.
45 The chancellor recounted the conversation: Untitled memo initialed by Simon, April 6, 1940.
45 kill any other newspaper stories: On December 5, 1939, the Bank of England drafted a notice to newspaper editors, saying: “No information should be published without submission to censorship which is likely to undermine public confidence in any notes which are legal tender in the UK. In particular it should not be stated, without official sanction, or suggested that any series of currency or other notes are forgeries.” The very existence of such “D-notices” — Defense Notices — is secret even in peacetime, so it could not be ascertained whether one was actually issued, but official behavior such as Simon’s indicated that some kind of notice was in force. B/E ADM, Holland-Martin correspondence, p. 416A.
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