Krueger's Men

by Lawrence Malkin

  45 Peppiatt refused the offer of the French police: Copy of Peppiatt letter dated 9 Feb. 1940, Forged Bank of England Notes, PRO T 401/5.

  46 a plea from Vienna for help in finding refuge: Notes, Printing, Coin and Silver, 1935–47, Chief Cashier’s Policy Files, B/E C 40/889.

  46 the Bank banned the repatriation of its own banknotes: Promises to Pay, p. 142. Bank of England Archives G14/27 Committee of Treasury Files: Draft Notice, dated December 1939.

  CHAPTER 4: NOBEL PRIZE–WINNING IDEAS

  48 had already been received in the Oval Office: Steinbeck: A Life in Letters, 206–7.

  49 Letter from Steinbeck to Roosevelt: President’s Official File (OF)3858, Steinbeck, John, 1939–1940, FDRL.

  49 James Rowe: Ibid.

  50 a twenty-minute meeting with Roosevelt: White House Stenographer’s Diaries, 12 September 1940; White House Usher’s Diaries, 12 September 1940, FDRL.

  50 Steinbeck’s highly dramatized version: Steinbeck, “The Secret Weapon We Were AFRAID to Use,” 9–10. At least Steinbeck did not make the mistake of putting Roosevelt in a wheelchair. The president, whose legs were paralyzed by polio, moved around the White House in a wheelchair, but in the Oval Office he was lifted by his aides into an ordinary desk chair. Curtis Roosevelt (the president’s grandson), communication to the author.

  50 addressed them as Uncle Henry and Aunt Elinor: Ibid.

  51 Also at the meeting was Herbert G. Gaston: Gaston, confidential memorandum to Henry Morgenthau, September 12, 1940, Morgenthau Diaries, vol. 305, pp. 116–17 (reel 83), FDRL.

  52 blunt when the occasion called for it: During the first two desperate years of the war, Britain spent almost 90 percent of its gold and dollar reserves, and Churchill knew he could obtain financing only from the United States. Lord Lothian, returning in October 1940 from London with instructions to strike a deal with Washington, lost no time in going public. Deplaning at New York’s LaGuardia Airport, he greeted the waiting American reporters: “Well, boys, Britain’s broke. It’s your money we want.” Skidelsky, 96; chart of depleted reserves, 134. The precise figures for the declining reserves were £519 million in September 1939 at the start of the war, and £69 million on its second anniversary, September 1941, which was close to the low point of World War II. In dollars, at the official rate of $4.03 to the pound, that represented a collapse of Britain’s reserves from $2.09 billion to $279 million.

  52 memorandum prepared by Gerald Pinsent: Morgenthau-Lothian exchange and Pinsent memo, September 12 and 16, 1940, Morgenthau Diaries, vol. 306, 179–82 (reel 82) FDRL.

  54 Morgenthau quickly wrote to thank: Henry Morgenthau Jr. to Philip Kerr [Marquess of Lothian], British ambassador to the United States, September 16, 1940, Morgenthau Diaries, vol. 206, 179–82 (reel 84) FDRL.

  54 “a deadly little plan”: Steinbeck, undated letter to Archibald MacLeish, quoted in Steinbeck, 212. (The original was not found in MacLeish’s papers at the Library of Congress or in the MacLeish collection at Greenfield Community College in Greenfield, Mass.)

  54 The author would later encounter the president: Cliff Lewis and Carroll Britch, eds., Rediscovering Steinbeck: Revisionist Views of His Art, Politics, and Intellect (Lewiston, N.Y.: Edwin Mellen Press, 1989), 194 et seq. Cliff Lewis, Steinbeck: The Artist as FDR Speechwriter. For minority rights, see Jonathan Daniels, White House Witness, 1942–45 (New York: Doubleday, 1975), 234.

  54 dismissed him as a “spluttering” moneybags: Steinbeck, “The Secret Weapon.”

  55 Central Intelligence Agency had the idea: Financial measures “would include attempts to dislocate the enemy economy through… dumping of counterfeit currency to promote inflation, etc.” NARA CIA Crest Database, CIA-RDP79-01084A00100050002-1 [declassified June 13, 2000], p. E-6. “Foreign Economic Intelligence Requirements Relating to the National Security.”

  55 “Know Your Money” campaign: “Secret Service To View Fake Money Films,” Washington Post, January 8, 1940, 1.

  55 “sometime soon Germany and Japan may try to panic”: Life, August 24, 1942, 66.

  55 sent the German chargé d’affaires, Hans Thomsen: Pierrepont Moffatt, Chief, Division of European Affairs, memorandum of conversation with Dr. Hans Thomsen, German chargé d’affaires ad interim, January 26, 1940, NARA, RG 59, Central Decimal Files (1940–44) 811.5158/2612, box 3916.

  55 a report by the Turkish ambassador: Letter from the Turkish Ambassador to the United States by Ambassador Mehmet Munir Ertegün to the Office of the Adviser on International Economic Affairs, April 3, 1940, ibid., 811.5158/2630. In 1947, Ertegün’s twenty-four-year-old son Ahmet founded Atlantic Records in Washington, D.C.

  56 reporter called “black bourses”: “Europe Is Nervous Over Bogus Money,” New York Times, January 26, 1940, 6.

  56 Herschel Johnson’s London memorandum: Herschel Vespasian Johnson II (1894–1966), born in Atlanta and named after an ancestor who was a governor of Georgia, served in the U.S. Army in World War I, and was U.S. minister to Sweden, 1941–46; U.S. ambassador to Brazil, 1948–53. He also served as acting chief of the U.S. mission to the United Nations in its crucial formative years, 1946–48. In 1940 Johnson was chargé d’affaires ad interim, in charge of the U.S. embassy in London following what Roy Jenkins (and many others) called the “unlamented” departure of Joseph P. Kennedy as ambassador. Jenkins, Churchill: A Biography (New York/London: Penguin, 2002), 262.

  56 the American embassy in London was told curtly: James Clement Dunn, Assistant Secretary of State, to American Embassy in London, Confidential Memorandum (No. 100), April 1, 1940, NARA, RG 59, Central Decimal File 811.5158/2612, box 3916.

  56 arrested in neutral Turkey for passing counterfeits: “Turkey Rounds up Counterfeiters in Plot to Debase British Pound,” New York Times, January, 2, 1941, 2. London Evening Standard, January 2, 1941, copy in B/E C 12/111. Headline and page number obscured.

  56 a Chilean diplomat and a number of attractive women: “Chilean Diplomat Vanishes in Turkey,” New York Times, January 19, 1941, 16.

  57 as high as £100 were circulating in Switzerland: “Forged Bank Notes in Switzerland: Yard Warned,” London Evening Standard, January 7, 1941, B/E C 12/111.

  57 a typically tut-tutting editorial: “Paper Money in Germany,” New York Times, January 11, 1941.

  57 another reader, Manfred A. Isserman: New York Times, January 30, 1941. Isserman would later serve as an interrogator at the Nuremberg war crimes trials.

  57 Private N. E. Cortright of the Weather Squadron: Letter from Cortright [no addressee], December 22, 1941, NARA, RG 226, entry 9, box 28, folder 46. This folder also contains the comments on Cortright’s letter.

  58 a letter from a “very able Colorado publisher”: Edwin C. Johnson, Senate Committee on Military Affairs, to William J. Donovan, Coordinator of Information, January 6, 1942; Emile DesPres, interoffice memo to Dr. James P. Baxter re letter from Johnson to Donovan, January 9, 1942, NARA, RG 226, M-1632, roll 23, frames 644–45.

  58 These were elaborated in a letter to the president: G. Edward Buxton, Acting Director, OSS Washington Director’s Office, to the president, July 14, 1943, NARA, RG 226, M-1632, roll 3, frames 644–45.

  58 permission to drop fake lire: William J. Donovan, Coordinator of Information, Memorandum for the President (No. 269), February 19, 1942, NARA, RG 226, M-1072; Report titled “Historical Instances of Political Counterfeiting,” February 11, 1942, is not attached to the Donovan microfilm copy of his memo; original copy in President’s Secretary’s Files, Subject File: Office of Strategic Services Reports, February 12–20, 1942 (box 148), FDRL.

  59 Lovell’s first job was to manufacture: Lovell, Of Spies and Stratagems, 23–27.

  59 a young New York lawyer: Murray L. Gurfein, “Project for a Secret Printing Press,” memorandum to Hugh R. Wilson and Allen W. Dulles, July 13, 1942, NARA, RG 226, entry 92, box 102, folder 22, no. 9373 (Paul Wolf of Washington, D.C., first located the document at the National Archives). Wilson noted that the project “deserves real study.”
Gurfein’s memo was passed to David Bruce, soon to be sent to London as chief liaison with British espionage. “Let’s implement it,” wrote Bruce, and they did, since no self-respecting espionage agency could operate without forged passports and similar paraphernalia. Gurfein, then an assistant district attorney working in the office of the racket-busting Thomas E. Dewey, tacked on a supplementary suggestion noting recent “discussion of the possibility of creating artificial inflation in enemy countries through the manufacture and distribution upon a large scale of the enemy’s currency.” He also concluded that introducing counterfeit might be practical in a weak country like Italy, and his contribution to the debate was to suggest funneling it through the black market. (This was around the same time the Nazis returned to their far more serious counterfeiting scheme.) Gurfein would soon enter the armed forces as an intelligence officer. He had a distinguished postwar legal career, first serving as an assistant to Justice Robert Jackson at the Nuremberg War Crimes Trials. In 1971, shortly after being appointed a federal district judge, Gurfein made the historic decision refusing to stop the presses when the Pentagon Papers were first printed by the New York Times. His last law clerk was the young Michael Chertoff, himself later a federal judge and secretary of homeland security in the administration of President George W. Bush.

  59 “vital to us if we weren’t to be closed up”: Lovell, 24.

  60 only one known to have been put in writing: Bloom, “Uncle Sam,” 352, 356.

  61 to stay on the lookout for counterfeit dollars: Ulius L. A. Moss, in an OSS interoffice memo to Major David Bruce, October 13, 1942, forwarded the request of the U.S. Secret Service to “get all reports possible on enemy counterfeiting of occupied or other nations’ currency.… The Secret Service fears an eventual flood of counterfeit American money.” NARA, RG 226. Major David K. E. Bruce, then director of the U.S. Secret Intelligence Branch, later director of the OSS in London, was a political patrician who later became a distinguished postwar American ambassador to France, West Germany, and London.

  61 Copeland, who believed that this great: Bloom, ibid., 352–53.

  61 an Army Air Force major: Major Clifford H. Pangburn, letter to Major General William J. Donovan, July 6, 1944, accompanied by memo “General Plan for Morale Operations Against Germans as Holders of Cash,” NARA, RG 226, M-1499B, reel 221, frame 32,043 (first located by Paul Wolf).

  61 Reddick, the master printer, could feel the wartime pressure: Bloom, ibid.

  CHAPTER 5: THE COUNTERFEIT CHAIN OF COMMAND

  63 “the greatest counterfeiter the world has ever known”: “I Was the World’s Greatest Counterfeiter,” by Bernhard Kruger (sic) as told to Murray Teigh Bloom. Bloom, an experienced reporter and World War II counterintelligence agent, met with Krueger more than a decade after the war, having already made himself an expert on counterfeiting and published a minor classic on the subject, Money of Their Own. He interviewed Krueger and chose to turn his notes into a first-person account under Krueger’s name for greater impact (and tabloid sales). Later Bloom posed more detailed questions, to which Krueger replied in German. They were never cast into narrative form, but the two kept up an extensive correspondence in the hope of making a film. Bloom has kindly allowed me to view and quote from the surviving fragments, which cover Operation Bernhard during only the first year of Krueger’s involvement. These have been translated by Ingeborg Wolfe and are referred to in these notes as “Krueger fragments,” with the pagination referring to the copies of the original German pages in the author’s possession.

  63 described him as slightly bowlegged: PRO WO 354/26, Judge Advocate General’s Office, Military Deputy’s Department: War Crimes, Europe, Card Indexes of Perpetrators, Witnesses and Accused, Second World War, Box: Kruber-Lamschultz, 1942–48.

  63 peered into the camera for his mug shot: PRO WO 309/1772, Judge Advocate General’s Office, British Army of the Rhine War Crimes Group (North West Europe) and predecessors: Registered Files (BAOR and other series) Detention Report 208 449, Bernhard Friedrich Walter Krueger. He was arrested at 8 p.m., November 26, 1946, and photographed three months later.

  63 “It was technical perfection”: Krueger interview filmed in 1984 and included in the German television documentary Der Fluch des Toplitzsees (The Curse of Lake Toplitz), broadcast on ZDF in 2003.

  63–64 Born November 26, 1904: Krueger’s birthplace was Riesa, Germany, and his parents were Franz and Wella Marx Krueger. NARA, RG 242, A-3343-SSO, roll 217A. Krueger’s SS number was 15,249, his NSDAP number 528,739. His thick SS file is devoted almost entirely to disciplinary action involving a drunken episode at a restaurant in Stettin in 1938 (Lebenslauf), which did not impede his rapid promotion in a service known for its brawlers and sadists.

  64 constructing locomotives out of concrete: Speer, Inside the Third Reich: Memoirs, 268.

  64 By profession an engineer of complex textile machinery: The details of Krueger’s career — broadly confirmed in Bloom’s articles — are contained in a dossier on Krueger compiled immediately after the war by United States, British, and French intelligence as part of a fuller description of Operation Bernhard. Judging by the spelling and military abbreviations, the dossier was written by an American official attached to Supreme Allied Headquarters in Paris, but the most complete version was located in the Swiss Federal Archives in Bern: E4323 (A) 1988 Band 73 F11.1 (Appendix “A 1”). A slightly shortened version on a different typewriter is in the U.S. National Archives (RG 260, box 451, 950.31) and carries an anonymous handwritten notation “From the report of Capt. [S. C.] Michel, French Army.” Michel was probably with the U.S. Counterintelligence Corps detachment of the 80th U.S. Infantry Division, which is credited in the postwar report with doing “elaborate work” on the investigation.

  65 forwarding packets of French identity cards: Krueger to Naujocks, 23 November 1940, NARA, RG 226, entry 155, box 2, folder 13.

  65 obtain and forge passports and other identity papers: “German Police–Germany,” NARA, RG 65, Class File 65-47826-294, section 12 (4 of 4), box 50 (declassified in 2003). In Schellenberg’s memoir, The Labyrinth, 364, he tells the story of an Allied interrogator who refused to believe he had never visited the United States, showing Schellenberg an American passport in his name, complete with visas. Stumped momentarily, Schellenberg remembered that Krueger’s technical department had presented him with this fake passport in 1943 as its first perfect product.

  65 designated Section VIF4: Kahn, Hitler’s Spies, 262.

  65 visited military intelligence posts in unoccupied France: SFA, E4323 (A), “Part I,” p. 3.

  65 Krueger was summoned “on an urgent matter”: Krueger fragments, 1.

  66 The seventh child of a Saarbrücken piano manufacturer: Background and description of Schellenberg from Kahn, 255–61.

  66 “the better type of people”: Schellenberg, Labyrinth, 3.

  66 foreign economic intelligence flowed in: Kahn, 92.

  66 Its arrest wish-list of 2,820 individuals indicated: Schellenberg, Invasion 1940, xxvi, 175.

  67 Schellenberg’s office, although deeply carpeted: Schellenberg, Labyrinth, 214–15.

  68 As Krueger entered Schellenberg’s lair: Krueger fragments, 1–5, describing the encounter and exchanges with Schellenberg.

  69 Far from being elated: Krueger fragments, 6–10, 36–38. Krueger, “I Was the World’s Greatest Counterfeiter,” part 1, June 8, 1958.

  70 “the narrow gate between duty and crime”: Krueger, 1984 ZDF interview.

  71 he visited Delbrückstrasse 6A: Krueger fragments, 49–52.

  72 In Himmler’s personal daybook: Himmler, Der Dienstkalender Heinrich Himmlers 1941/2.

  73 ceaselessly engaged in bureaucratic empire-building: Kershaw, 313.

  74 He loved imaginative but untried projects: Speer, 144.

  74 Cash was also donated: Baron Kurt von Schröder, letter to Himmler, submitted in evidence at the Nuremberg trials; copy of newspaper account of the “Friendly Circle” forwarded to the ch
ief of the U.S. Secret Service, NARA, RG 87, box 69, folder 109, Germany through 1937.

  75 had to beg for a loan of 80,000 marks: Höhne, 421–22.

  75 yielded only 178 million reichsmarks: Milton Goldin, “Financing the SS,” 9. (Reichsmarks are converted at the official — and notional, as well as artificially high — rate of 40 U.S. cents.) See also Taylor and Shaw, 202, 218.

  76 “wasted as a result of unrealistic fantasies”: Schellenberg, Labyrinth, 367–69.

  76 Goering’s Luftwaffe was not even able to resupply: Reitlinger, 233.

  76 the perfect cover for the scheme: In his extensive postwar interrogation, Schellenberg barely mentioned the plan to dump the counterfeits on Britain and concentrated on how they were otherwise employed. NARA, RG 226, Schellenberg OSS IRR Personal XE001752, Appendix VII, “Financial Affairs of the RSHA and Amt VI.”

  77 The following directive soon went out: A photo of the original is published opposite p. 82 in Mader, Banditenschatz. Mader, who had contacts with the propaganda and security services of the former German Democratic Republic, wrote the book to draw attention to Nazi criminals — former forgers, including Krueger — still living in the West. He cites many Western publications, but to make his book more credible, the Stasi presumably supplied him with some Nazi documents in its files, and this would have been one of them.

  77 signed by Lieutenant Colonel Hermann Dörner: Although the name Dörner is illegible in the printed copy of the order, it was certainly signed by Obersturmbannfuehrer (Lieutenant Colonel) Hermann Dörner, chief of the technical division of foreign intelligence. SFA, E4323(A) 1988 Band 73, F11. See Part IV, “List of Personalities.” See also Burke, Nazi Counterfeiting, 7; Sem and Mayer, Report on Forgery in Sachsenhausen Concentration Camp, 9. The latter is based on extensive interviews by Czech police immediately after the war.