Bermuda was a crossroads of communication, a center for the interception of other people’s messages. There, the material was sifted and transmitted to Stephenson in New York. “One of the best results of collaboration between Stephenson and Hoover,” the BSC Papers recorded, “was in this field. . . . BSC began early to provide the FBI with material from its various sources—in particular correspondence intercepted and studied by Imperial Postal and Telegraph Censorship stations in Bermuda, Trinidad and Jamaica without which the FBI would have been severely handicapped, for there was no postal censorship in the United States. . . . For their successful prosecution of several espionage cases during 1940 and 1941 the FBI owed obligation to BSC. They reciprocated generously. . . .”
There was nothing colonial about Bermuda despite the use of the word “Imperial.” The islands boasted the oldest parliament outside London, and volunteered their loyalty to the monarch. The people were descended from settlers who, among thousands who paused to search for fresh water and food, remained there instead of continuing 500 miles farther west to what is now North Carolina. By the 1930s Bermuda was a refueling base for air and sea transport. Stephenson saw it as a main artery in the circulation of transatlantic traffic, and in 1940 applied the tourniquet. Americans found their correspondence with Europe mysteriously delayed. Others, gradually aware of what was happening, protested at this inspection of personal and private affairs. But the FBI backed Stephenson when Hoover began to haul in a rich harvest of agents and smugglers.
Bermuda was also an outstation for British agents operating the South America Network. Their routine radio traffic was always in danger of interruption. Their low-power transmitters were inadequate for direct communication with London. Much of their intelligence was of direct concern to the United States, and presidential statements reflected the growing volume of intelligence from this source. To a pro-Nazi ambassador who scoffed at any suggestion of Nazi expansion into the Americas, Roosevelt said: “Hitler is the most devastating and all-pervading conqueror and destroyer in the last thousand years. We believe there is no geographic limit whatsoever to his infamous plans.” He spoke to the Senate of the vast proportions of the Führer’s program and “the savagery of his unlimited objectives.” He pictured Hitler’s “march of invasion across the earth with ten million soldiers and thirty thousand planes.” He produced maps taken from German agents showing a Nazified Latin America, indicating how the Panama Canal was to be captured and how German bombers would be within striking range of U.S. cities.
The raw material for these declarations filtered through the Bermuda station, which expanded when Stephenson was still unsure that Americans would tolerate large operations on U.S. soil.
Laboratories were buried under several Bermuda hotels, with the Princess as headquarters. Teams of experts read the microdot messages sent by German spies, extracted letters from tightly sealed envelopes and put them back again without leaving a trace, developed the secret inks that in staggering variety were the staple of Axis espionage, and in other ways helped to trap agents and frustrate operations against British life lines. Since Bermuda straddled the transatlantic routes, Flying Clippers refueled there en route to Lisbon, which was the largest neutral hotbed of spies. Diplomatic bags passed that way under the protection of international agreements on the sanctity of ambassadorial mail—but the sealed bags were not immune to the fingers of skilled investigators. To make sure that even more diplomatic bags passed through these interception points, Stephenson awarded the FBI with continuous pertinent information.
Stephenson picked up Pierre Laval’s daughter there in November 1940. Laval, later to be executed as a French traitor, was bargaining at the time with Hitler, and his daughter was carrying confidential papers between Nazi-occupied France and the United States, papers that foreshadowed the role of pro-Nazi French collaborators in the Americas. Asked what made him suspect the courier, Stephenson pointed out that Laval had been mentioned to him years earlier as a potential German puppet by SS General Alfred Rosenberg.
Donovan used Bermuda for stopovers during his frequent journeys across the Atlantic. In the winter of 1940 he was shown “something of singular importance.” The case stuck in his mind as an example of what could be accomplished by those with prodigious memories who could leap to conclusions with an agility that was incomprehensible to more pedestrian minds.
A young English girl, Nadya Gardner, had fished in the stream of letters and caught one from New York to the cover name used by Reinhard Heydrich. “Heydrich was that most sinister chief of the most vicious of Hitler’s terrorist agencies,” Stephenson said later. “Heydrich’s power as an opponent in the secret wars had been underestimated. He was the monster who outgrew his masters—‘The Prince of Shadows,’ Admiral Canaris, and ‘The Crown Prince of the Order of the SS,’ Heinrich Himmler. He was not known at the time of Donovan’s visit to be dabbling in foreign intelligence, although his path had crossed mine on prewar missions into the Ruhr.”
The discovery of his real activities was to prove illuminating, the final results devastating. Heydrich was spying on Germany’s own spies.
“After we had exposed his agent Dr. Westrick, Heydrich became uneasy,” said Stephenson. “We made him more uneasy by planting evidence that suggested Westrick had been betrayed by other Nazi agents in the United States.”
The intercepted letter, to “Lothar Frederick, I, Helgolaender Ufer, Berlin,” had been submitted to normal chemical tests in the hotel’s basement. These failed to confirm the presence of any secret ink. Yet there was something about the typewritten letter that aroused Nadya Gardner’s suspicions. She knew nothing about Heydrich’s cover name and address. She did have an instinct for the stilted phrases and odd sentence structures that frequently betray a spy.
The girl pointed out these oddities. The letter was in English. Here and there, words were used that translated directly from the German, as if the writer absent-mindedly slipped into native habits of thought. He had signed himself “Joe K.” He sounded like an ordinary American, except for this peculiarity of expression and his interest in the movements of Allied shipping.
Joe K.’s handwriting was studied by the Bermuda teams. More letters were intercepted, addressed more often to Spain and Portugal than to Berlin, with return addresses to nonexistent New York commercial houses. The chemists still failed to develop any secret writing. Gardner, believing the letters contained something, persisted in her search for invisible inks. The chemical team was led by Dr. Enrique Dent, who finally tried an old iodine-vapor test that was now almost forgotten. The mysterious Joe K. was indeed employing one of the oldest invisible inks, made from powdered pyramidon, which was sold by druggists as a simple painkiller. In March 1941, another Joe K. letter, to a cover address in Portugal, was intercepted, with details of American aircraft supplied to Britain. The secret writing disclosed that a duplicate letter had been sent through China by way of “Smith.” The FBI managed to intercept just such a letter and another for Mr. Smith in China with a precise plan of U.S. defenses at Pearl Harbor.* Still nobody knew who Joe K. was.
A letter dated April 15, 1941, addressed to Manuel Alonso in Madrid, carried two pages of shipping reports in secret ink, and seemed to come from the same source. Another letter the following week reported 70,000 British troops in Iceland and thanked the unknown recipient for sinking the S.S. Ville de Liege. It listed types of U.S. aircraft now going to England and spoke of convoy systems from Halifax in Canada.
The FBI, working on a different series of Bermuda intercepts, concentrated on a letter written March 20, 1941, reporting that someone called “Phil” had been knocked down by a taxi while trying to cross Broadway at Times Square. Another car had then run over him. The visible part of the letter sounded matter-of-fact. The secret writing between the lines conveyed a note of panic.
Meanwhile, the manager of the Hotel Taft in New York had reported curious circumstances surrounding the traffic death of a certain Julio Lopez Lido. Police wer
e puzzled by the suggestion that Lido had been run down deliberately. The hotel register showed that Lido claimed Shanghai as his place of residence, and Spain as his native land. Supplied with information from the Bermuda intercepts, the investigators put facts together but succeeded only in producing more questions. Was the dead man “Mr. Smith of China”? Or was he Joe K. himself? And was the death car driven by a British agent?
Rather reluctantly, BSC indicated that Lido was known as a German agent using the cover name “Phil.” The spy had been “removed from circulation.” The FBI asked to see the file on the dead agent. He was Ulrich von der Osten, a captain in German military intelligence. He had a brother in Denver, Colorado, who was put under FBI surveillance. The dead man’s luggage had contained a notebook, and in it was the phone number of a New York shop. Investigators learned that the shop had been recently sold, and recalled a phrase, “My aunt sold her store,” in the Joe K. letter reporting Lido’s accident. The letter had warned the recipient that “it is not advisable to send her any more mail but my other friends and relatives are still in business.”
There was still no link with Joe K. The most the FBI could learn was that the “aunt” who “sold her store” had a nephew named Fred Ludwig. But where was he? The phone directories were full of Ludwigs. Then a German agent in Lisbon cabled in code to FOUZIE NEW YORK. A BSC contact in the New York cable office obtained the address of FOUZIE. He was Fred Ludwig—aged forty-eight, born in Fremont, Ohio, educated in Germany, and returned to New York in March 1940 to organize a Nazi spy ring. He recruited subagents through the German-American Bund and drew expenses from the German Consulate through an intermediary whom he met usually at Child’s Restaurant on 34th Street. His director was the dead von der Osten. Joe K. was Ludwig.
Someone had disposed of von der Osten, a native-born American traitor who had become an officer and secret agent for a foreign government. In this period of neutrality, however, deeper FBI probing would have led to acute embarrassment. The case, coming early in FBI-BSC collaboration, became a textbook example of manipulative techniques. The British knew more than they dared tell about the German Consulate’s internal business. There was a limit to what they could do about a spy ring themselves. They neither wished to compromise their sources inside German organizations nor could they afford to be caught trespassing on American tolerance to the point where it might lead to a public outcry. Von der Osten’s death and the alert minds in Bermuda were enough to propel the FBI into action.
Bermuda could examine 200,000 letters during a single stopover of a westbound Clipper; another 15,000 letters on the same flight could be subjected to clinical tests. All trace of examination had, of course, to be eliminated. The whole object would have been defeated if the enemy guessed that this clandestine traffic was being examined. It was a curious game, because one-half of the correspondence, that from enemy territory, was not always available.
Analysis of the case confirmed SS General Reinhard Heydrich’s overriding authority in all branches of German intelligence, secret police work, and the Nazi party’s internal security. He now dominated Admiral Canaris, the man assumed to be running Germany’s professional intelligence organization. Canaris was eventually hanged for allegedly taking part in an assassination attempt against his Führer. But he had by then lost real power. It was in Heydrich’s hands. This vital piece of information was to prove particularly hazardous to Heydrich.
* This was not the Pearl Harbor questionnaire disclosed by double agent TRICYCLE to the FBI on behalf of his British masters, and which led to false accusations that President Roosevelt knew beforehand about the planned Japanese attack, TRICYCLE’S story comes later.
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Bermuda was thrust politically into the war at sea when U.S. and British Naval Intelligence officers met there in early 1941 to fight the U-boats lurking under the sun-glazed mirror of the Atlantic. The devastating submarine attacks on supply convoys threatened to break Britain before she could become the springboard for invading Fortress Europe as projected by ABC-1. Eleven months before official U.S. entry into the war, American naval chiefs were seeking further ways to give discreet support to their secret allies.
The Battle of the Atlantic meant life or death to the British, still recovering from the narrow squeak of the Battle of Britain. The life lines from America were almost severed. The crusty U.S. Chief of Naval Operations, Admiral Ernest J. King, was torn between sympathy and his own responsibility in the Pacific, where the Japanese seemed to be preparing for aggression.
The British knew that if they seemed on the verge of collapse from starvation, any responsible American strategist would be justified in tossing ABC-1 overboard. It was therefore a time for frank disclosures.
The meeting in Bermuda, at the Royal Navy base near the ancient town of St. George’s, was held under the old fort whose cannon still faced toward traditional enemies in Europe. The British sought to demonstrate that behind the grim headlines a successful campaign was being fought in secret. They revealed their machinery for decoding German signals gathered by radio nets directed from Bermuda, having already received from the U.S. Army’s Signal Intelligence Service a model of the Japanese version of Enigma. This had been sent aboard Britain’s newest and most powerful battleship, King George V, in January 1941, for final installation at Bletchley.
The smaller version of Bletchley buried under Bermuda’s hotels was visited by the American cryptologist William Friedman on his way back to the United States. Friedman had collapsed from mental strain, and in January 1941, he was ordered home to rest in Walter Reed General Hospital. But he made use of this temporary setback; and reports of his nervous breakdown allowed him to work quietly behind the scenes for closer collaboration between the ULTRA organization and the still understaffed and ill-equipped U.S. service agencies. A month after the secret ABC-1 talks, Friedman went to Bermuda.
He had seen in Bletchley how the U-boat campaign might be defeated by intelligence. With his uncanny sense of how situations might develop, he was sure that the German submarine menace was mounting. In the following year, 1942, the figures proved him right when 1,644 vessels sailing on Britain’s account were sunk. In a catastrophic engagement lasting one night, twenty-one merchantmen went down. These losses would have been much greater if U.S. co-operation had not begun so much sooner. In February 1941, Bermuda began to weave together the intelligence gathered by U.S. radio monitors and those of the British, between them covering the U-boat fleets.
German U-boats were controlled from a central operational base to which reports on British convoys were radioed. These reports, from Nazi agents and observation posts, were analyzed and the U-boats instructed accordingly. The development of radio made the U-boats more flexible. But radio also gave the eavesdroppers a picture of their movements. U-boat commanders were careless in using radio, pinning their faith on the Enigma coding machines that each submarine carried. Even if a submarine were captured with its Enigma intact, the Germans assumed that nobody could work out how the coding-machine drums were constantly changed.
In addition to some decoding of Enigma signals, the British were locating submarine positions by taking bearings on their radio transmissions. This coverage was immensely increased when U.S. stations began to feed information through BSC and Bermuda.
In order to make captured German seamen talk, they were shown details of their own service records, bits of gossip, the names of their friends, details of their training, and even their domestic problems. The British interrogators supposed that this mass of detailed background—surely the most thorough reconstruction of an enemy’s routine affairs—was due to a complex system of indexing, interrogation of earlier prisoners, and intelligence from spies inside the German Navy. There was such an index, intended to duplicate the German U-boat command’s documentation center. Much of the information, however, was recovered through ULTRA and the substation in Bermuda. The seeming strength of the U-boats—their use of radio—had become a major weakness. Wh
ereas German land and air forces could switch to landlines and couriers to reduce the mass of signals on the eve of a major operation, naval forces had to depend on radio links. The seemingly trivial details of, say, Torpedoman Schmidt’s two-day training pause at Brest, would be filed away for the time when a member of an ULTRA Watch recalled this item and put it together with a new signal recording Schmidt’s transfer to a supply ship in mid-Atlantic. Schmidt’s expertise in a particular type of torpedo, plus the presence of the “milch cow” supplying U-boats at sea, and other bits of information would produce an updated picture of German intentions.
Stephenson realized that it was not enough to disclose the product of these deductions. American “clients” might justifiably show skepticism unless they knew how this material was obtained. The answer was to let Bill Donovan and high-ranking U.S. officers see the system at work. In this way, it was possible to circumvent a rule that there should be no “trading” of naval intelligence by British officers. Those responsible for passing intelligence to their American colleagues were not supposed to receive information in return because competitive methods might have disastrous effects on security. “Security was directed at keeping Anglo-American cooperation out of the newspapers,” wrote Donald McLachlan, who was on the personal staff of the British Director of Naval Intelligence. “Publicity which might alert the rivals and critics of Roosevelt could mean disaster.”
In essence, Bermuda’s methods were those of Bletchley. The requirements were first to hear the enemy U-boat traffic, then unscramble the gobbledygook, and finally analyze and distill information from the terse messages. The three functions were separate: signals, cryptography, intelligence. There was an additional absolute requirement that whenever intercepted information was acted upon, there must be a cover story to account for the acquisition of the knowledge. The Germans must not guess that the movements of the U-boat packs could be closely followed and even anticipated. If an enemy submarine surfaced under a waiting bomber, there had to be some acceptable explanation, however false, that would fool the enemy.
A Man Called Intrepid Page 22
