Enemies: A History of the FBI

by Tim Weiner

  The Abwehr’s officers played into America’s hands. They radioed orders to Sebold to open a bank account in New York and to serve as a paymaster for the spy ring. This gave him control over the ring’s operations and ready access to its thirty-three agents.

  The FBI set up a sting operation built around a dummy company, wiretaps, and hidden cameras—financed in part by the unwitting Abwehr and underwritten by President Roosevelt’s close friend Vincent Astor.

  Astor already was working as a spy for FDR. An heir to one of America’s great fortunes, Astor had won a commission from the president to coordinate intelligence operations in New York. In his capacity as director of Western Union, he organized the interception of international cable traffic, in violation of federal law. In Bermuda, where he owned a vast estate, Astor ran an equally illegal operation with British intelligence, opening diplomatic pouches and international mail carried on ships and airplanes stopping on the island en route to and from the United States. In New York, at the West 42nd Street headquarters of Newsweek, the magazine Astor owned and operated, he gave a suite of three sixth-floor offices to the FBI.

  The Newsweek building became the headquarters of the Diesel Research Corporation, run by William Sebold, financed by $5,000 checks sent to New York by Abwehr agents in Mexico, and wired with hidden microphones and cameras by the FBI. Sebold used the offices to pay the members of the ring and receive their reports. Couriers delivered messages to Sebold that showed the movements and the whereabouts of every valued member of the ring.

  The FBI recorded eighty-one meetings between Sebold and the Abwehr’s agents at Diesel Research, with moving pictures and still photographs shot through a trick mirror, and with hundreds of reels of audiotape recorded with hidden microphones. Within the year, the FBI had arrested them all.

  Successes in counterintelligence were rarely as smashing as the Sebold case. The investigation opened Hoover’s eyes to the power of deception in warfare.

  “SPIES, SABOTEURS AND TRAITORS”

  The FBI’s shortwave radio communiqués with the Abwehr also began providing clues that the Germans were running spies in Mexico, Brazil, and Peru. Hoover used that information to create a new global intelligence operation.

  Hoover’s crucial ally was Adolf A. Berle, a tough-minded assistant secretary of state. Berle ran the intelligence side of American diplomatic affairs; he served as State’s liaison to the FBI, the army, and the navy; before that, he had held the Latin America portfolio. He was one of the brainiest members of FDR’s brain trust. And though he was a high-minded Harvard liberal, the kind of man Hoover loved to hate, Berle won Hoover’s trust as well. They shared the quality of the clandestine mind.

  In May 1940—as France fell to the Nazis, the British faced attack, and the newly installed prime minister, Winston Churchill, reached out for American help—Hoover and Berle talked about setting up a worldwide American intelligence agency. The Atlantic coasts of the Americas were rife with U-boats; five months before, German and British ships had battled in the mouth of the Río de la Plata in Uruguay.

  Berle proposed that the FBI investigate Nazi spies from Havana down to Rio de Janeiro. The FBI already had sent one special agent down to Mexico City, where he had started working with the chief of police and the Interior Ministry to find German spies and subversives, and another to Rio, where he was training the Brazilian secret police.

  Hoover and Berle brought in Brigadier General Sherman Miles, the chief of army intelligence, and Rear Admiral Walter Anderson, head of navy intelligence. Hoover and the military men had been squabbling over their responsibilities and authorities. Their coordination was scattershot, their sharing of secrets scant. General Miles and Hoover particularly detested one another. The army and the navy fought one another on principle. But, prompted by Hoover, they all brought the question of worldwide intelligence back to the president. It was already on his mind.

  On May 26, 1940, in one of his fireside chats, the radio addresses that were heard by tens of millions of Americans, FDR had let his thinking show.

  “Today’s threat to our national security is not a matter of military weapons alone,” the president told the American people. “We know of other methods, new methods of attack.

  “The Trojan Horse. The Fifth Column that betrays a nation unprepared for treachery.

  “Spies, saboteurs and traitors are the actors in this new strategy. With all of these we must and will deal vigorously.”

  On June 3, 1940, Berle went to Hoover’s office at FBI headquarters. They had “a long meeting on coordinated intelligence,” and they agreed, as Berle wrote in his diary, “that the time had come when we would have to consider setting up a secret intelligence service—which I suppose every great foreign office in the world has, but we have never touched.” Eight days later they approved a plan, hastily drawn up by their lieutenants, to create something without precedent in the history of the United States.

  The FBI would operate a spy agency under the deepest cover. Its existence would not be acknowledged. To an outsider, it would look like a corporation based in New York with branch offices throughout the world. Its international representatives would stealthily gather information based on secret assignments sent from headquarters, without knowing who would read it back in the United States. It would be called the Special Intelligence Service.

  Once again the president put nothing in writing. He told Berle on June 24, 1940, that the FBI was now responsible for foreign intelligence in the Western Hemisphere from the Texas border down to Tierra del Fuego. The army and the navy would carve up the rest of the world.

  “The President said that he wished the field to be divided,” Berle reported. It was a fateful phrase. The juggler had dropped the ball.

  12

  “TO STRANGLE THE UNITED STATES”

  HOOVER ESTABLISHED THE Special Intelligence Service (SIS) on July 1, 1940, with funds from a secret account created by the president. Congress knew nothing about it. No law authorized it. Very little was written about it, outside a secret FBI history compiled after World War II and kept classified for more than sixty years.

  The plan was impressive on paper, but it ran headlong into reality. This was not the FBI’s kind of war.

  Hoover gave the leadership of the SIS to one of his favorite lieutenants, Percy Foxworth, the smooth-talking and courtly thirty-three-year-old special agent in charge of the New York bureau. Everyone called him Sam. Born and raised in Mississippi, Foxworth looked like a purebred bull terrier; he bore more than a passing resemblance to a younger J. Edgar Hoover.

  Foxworth was a social animal, comfortable chatting with a countess or the chief of the Cuban secret police. He had cultivated members of Manhattan’s upper crust; his closest contacts included Vincent Astor and Nelson Rockefeller, the Chase bank heir newly appointed as an assistant secretary of state for Latin American affairs, in charge of cultural and commercial relations. Rockefeller was a perfect front man for the SIS: an incalculably wealthy man with commercial connections and diplomatic credentials throughout the Western Hemisphere. FDR wanted Rockefeller to use his name and his wealth, which included oil and industrial holdings, to counter the economic and political influence of Germany and Japan.

  Hoover wanted Foxworth to find out how to spy against the Axis. Roughly one million Germans and Japanese lived in Brazil, Argentina, Chile, and Peru. They ran mines that produced gold and silver, along with rare and crucial war materiel like platinum and industrial diamonds. The Japanese had shipping routes that ran from Mexico down to Antarctica, and the Germans had considerable clout with South American leaders who favored the jackboot and the goosestep.

  In August 1940, with Rockefeller acting as real estate broker, SIS set up shop as the Importers and Exporters Service Company, doing business in Room 4332 at 30 Rockefeller Plaza in New York. On the surface, Importers and Exporters offered to help clients develop international trade opportunities. In reality, the company was the clearinghouse where FBI agents from acr
oss the country picked up their cover assignments for their secret overseas missions. They would go out as reporters for Newsweek, with the blessing of the magazine’s boss, Vincent Astor. They would pose as stockbrokers for Merrill Lynch. They would pretend to be executives for the United Fruit Company, the Armour Meat Corporation, American Telephone and Telegraph, or U.S. Steel. Under these covers, they would identify Nazi and Soviet spy rings operating from Mexico and Cuba down to Brazil and Argentina. In their spare time they would mine and refine nuggets of secret information on politics, economics, and diplomacy.

  The FBI was hiring hundreds of new men, increasing its ranks by 80 percent. It grew from 898 agents in 1940 to 1,596 agents in 1941. By 1943 the Bureau had tripled in size, with 4,591 agents backed by 7,422 staffers. But the number whose training and experience qualified them to serve in the Special Intelligence Service was vanishingly small. The mismatch between the men and the mission was tremendous. Hoover said so himself.

  “We certainly picked some fine lemons in our original selection for SIS” was the way he put it.

  Foxworth wanted 250 agents at his command as soon as possible; eventually, the SIS would grow to nearly 600 strong. But over the course of the first year, he found only 25 men who fit the bill. Few FBI agents spoke foreign languages. Few knew their way around foreign countries. Few knew how to act like a stockbroker or a steel executive. Posing as a reporter was simpler: you carried a pen and a pad, asked questions, and wrote things down; every FBI agent could do that. But Newsweek could hardly staff every foreign bureau in the hemisphere with Hoover’s agents. And there was no time to learn to live your cover, as a good spy must.

  Two of Hoover’s top intelligence aides, Stanley Tracy and W. Richard Glavin, met in a conference room outside Hoover’s office at FBI headquarters. They were joined, implausibly, by the poet Archibald MacLeish, who as the wartime Librarian of Congress under FDR created a Division of Special Information to provide basic data on foreign countries to American intelligence officers. The three men stared at a large map on an easel showing the twenty nations of Central and South America.

  Dallas Johnson, Foxworth’s clerk, took notes as Tracy selected “the names of agents that he knew of that might well fit in to each of these places,” Johnson remembered. “We’d pull the personnel files down on the people, say, with Spanish language capability,” he said. “If they looked like they were good prospects, then we’d send them in to Foxworth to look over. And that’s how the first agents then were pulled out.” Johnson recorded the names of the men with potential on the blue paper Hoover used for his “Do Not File” files. (Hoover had created this ingenious system in the name of secrecy. The “Do Not File” documents were never indexed, so the originals could be destroyed without a trace, and the records of the most sensitive operations—involving espionage, buggings, break-ins, wiretaps, and political investigations—could be protected in the event of outside inquiries from the courts or Congress. The system survived until Hoover’s death.)

  “In the beginning,” the FBI’s own secret history of the SIS recounts, “agents selected for these Latin American assignments were brought into Washington from the Domestic Field and furnished with brief training.” Very brief indeed: they learned about the country of their assignment from thin dossiers that might include old reports from military or naval attachés, a sheaf of newspaper clippings, and a tourist handbook. As for training on the targets of their intelligence work, there was next to none: “It was not as a rule possible to brief the Agents with regard to subversive activities and conditions of this kind for the reason that such information was not available in the United States.”

  “There had arisen in the United States considerable apprehension with regard to the extent of Nazi penetration and Nazi activities throughout Latin America,” the secret history continues. But “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.”

  On December 29, 1940, during a fireside chat, FDR underscored the urgency of protecting the Americas. “There are those who say that the Axis powers would never have any desire to attack the Western Hemisphere,” the president told the American people. “That is the same dangerous form of wishful thinking which has destroyed the powers of resistance of so many conquered peoples. The plain facts are that the Nazis have proclaimed, time and again, that all other races are their inferiors and therefore subject to their orders. And most important of all, the vast resources and wealth of this American Hemisphere constitute the most tempting loot in all of the round world.”

  If and when the United States joined the battle, the plan was to go after Germany first, with blockades at sea, bombing from the air, and covert operations in occupied France. That plan demanded close liaison between American and British intelligence services.

  London had practiced the arts of deception in espionage, diplomacy, and military intelligence since Queen Elizabeth I reigned in the sixteenth century. British intelligence officers schooled Hoover’s emissary, Hugh Clegg, in the tracking and detection of spies, the protection of manufacturing plants and shipping ports, the compiling and maintenance of lists of suspect citizens and aliens, the installation of hidden cameras for surveillance photos, the placement of undercover agents at embassies and consulates, and the undetected opening of mail. While Clegg went to spy school in London, Hoover sent two reports to the White House outlining British plans to sabotage the Axis and predicting British aims “to be in a position at the end of the war to organize the world, particularly Europe, on an economic basis for the purposes of rehabilitation, profit, and the prevention of the spread of Communism.” Hoover’s Special Intelligence Service chief, Percy Foxworth, flew south with a delegation led by Nelson Rockefeller for a two-month tour of the Americas. Using a false passport, he visited fourteen nations where the SIS was trying to spy on the enemy. He reported back to Hoover in February 1941. His assessment was dismal. The agents were floundering. They had no idea of where they were, or what they were supposed to do.

  The FBI knew there were Nazis to be hunted. But it did not know where to hunt, or how.

  “The volume of intelligence information from each Agent was in the beginning and for some time thereafter quite small and of little real value,” the secret SIS history says. “The Agents were, of course, more or less completely unfamiliar with the countries in which they were trying to operate and usually very deficient with regard to the use of the language thereof. The chance of worthwhile accomplishment in the way of local orientation and the establishment of worthwhile informants and sources of information naturally required considerable time. Meanwhile, of course, the Agent, who was usually alone in the particular country to which he had been assigned, was possessed of a very poor pretext for clandestine operations.… The Bureau learned through very difficult experience that virtually any information referred to a diplomatic officer of the State Department, the Army or the Navy … would invariably result in denunciation of the information as well as its source.”

  Hoover sensed a failure in the making. On March 15, 1941, he tried to get rid of the Special Intelligence Service.

  Hoover told Attorney General Jackson that the SIS should be handed over to army or navy intelligence. But Hoover had no takers for the job of policing the Americas. The army and the navy had their hands full trying to decipher the intentions and the capabilities of the Germans in Europe and the Atlantic and the Japanese in Asia and the Pacific. He repeated his recommendation three weeks later, saying that “the Bureau is marking time in so far as any extension of its coverage in the Latin Americas is concerned.”

  The spread of Soviet communism in the United States remained Hoover’s greatest concern. Among the ever-growing list of his responsibilities was the wiretapping of the Russian diplomatic posts in the United States, including Amtorg, the Soviet economic and commercial office in New York, which spent mil
lions of dollars buying American technology.

  In April 1941, the FBI opened an espionage investigation into Amtorg, spurred by a British intelligence alert. A twenty-nine-year-old American, a Princeton dropout named Tyler Kent, had served for six years as a clerk at the American embassies in Moscow and London. The British, on the trail of a suspected Nazi agent, had followed the suspect to Kent’s London flat. When they broke into the room and searched it, they found copies of 1,500 American diplomatic cables, codes, and ciphers. Kent had spent his career pilfering encoded communiqués and handing them over to Soviet and Axis agents; thanks to his work, Moscow and Berlin could read the American diplomatic code used for secret communications between London and Washington.

  Among Kent’s stolen documents was a British intelligence report on Soviet agents working for the chief of Amtorg’s New York office, Gaik Baladovich Ovakimian, a forty-two-year-old chemical engineer. On May 5, 1941, the FBI arrested Ovakimian on a charge of violating the Foreign Agents Registration Act, which required people spreading foreign propaganda in the United States to register with the Justice Department. But before the FBI had a chance to interrogate him, he was released on $25,000 bail into the custody of the Soviet consul general in New York. Ten weeks later, after Hitler invaded the Soviet Union, the State Department ordered the charges dropped as a diplomatic gesture toward Moscow. Ovakimian left New York, never to return.

  Back in Moscow, he became the chief of Soviet intelligence operations against the United States.

  A successful interrogation and prosecution of Ovakimian would have changed history. Not until the end of the decade did the FBI understand that he had served as the Soviet spy chief in New York and a leader of Soviet intelligence in North America since 1933; that he had established American espionage networks of safe houses, recruiters, and couriers; that his rings ran throughout the United States, Mexico, and Canada. Though Stalin’s purges had torn Soviet intelligence apart in the 1930s, Ovakimian had endured.