Source: J. Edgar Hoover confidential files
Also apparent from these records is that copious information on the people monitored by the Bureau had been sent to the agencies where the suspects were employed. And while such information would have been of critical importance in every venue of the federal government, in few places were the stakes as high for the security of the nation as at the U.S. State Department—frontline agency in the now rapidly mounting Cold War with Moscow and its global apparatus.
CHAPTER 12
Inside the State Department
AT THE close of World War II, the federal government, like other American institutions, faced problems of conversion to the ways of peace, or what were thought to be such. Nowhere were the changes more abrupt, or fraught with meaning for the future, than at the venerable, rococo quarters of the “old” U.S. Department of State (now the Executive Office Building), due west of the White House.
Despite the peculiar early security episodes discussed in Chapter 6, the department of that era still had a reputation as a conservative place, famous for its straightlaced ways and regard for custom. Beginning in late 1944, however, State would undergo an extreme makeover that drastically transformed this image. The process took a quantum leap in July of ’45, when Edward Stettinius stepped down from a brief caretaker stint as Secretary, to be replaced by South Carolina’s James F. Byrnes, a former senator and Supreme Court justice and power in the Democratic Party. A few weeks later, the veteran diplomat Joseph Grew would resign as Under Secretary, to be succeeded by Dean G. Acheson, a relative newcomer to the department. These top-level changes, coming in rapid-fire succession, would have profound impact on U.S. policy overseas and security practice on the home front.
Though Byrnes was an experienced politician with few equals then or later, he perforce knew little about the inner workings of the State Department and made no great attempt to change this, managing things through a few trusted aides he brought in to help him. His generally hands-off approach became the more so as he left the country for long spells, attending meetings on global postwar problems. In his absence, whoever was Under Secretary would be Acting Secretary, wielding day-to-day control of the department. Thus the near-simultaneous double switch at the top two positions meant Dean Acheson was now in many respects, if not quite all, the dominant figure at State.
This transition was of critical nature, as Grew and Acheson were then about as far apart on certain pressing issues as could be imagined. Though of similar social and educational background (Groton and Harvard for Grew; Groton, Yale, and Harvard Law for Acheson), they were of different generations and saw things through different lenses. Grew was a respected old-line figure, a forty-year member of the diplomatic corps, and doyen of the Foreign Service. A man of traditional views and courtly mien, he was often at odds with so-called progressives of that day, both in and out of the department.*67
Most to the present point, Grew was the official at State who in June of 1945 blew the whistle on the Amerasia culprits, saying there had been a noise in the “chicken coop” and that a serious effort was under way to crack down on such offenders. While his role in the affair was otherwise tangential, it ignited a furious outcry by radical elements in the press, denouncing him as a reactionary and calling for his resignation. Two months after this protest erupted, Grew did in fact resign, to be followed rapidly to the exits by some of his closest allies. A mainstay of the older diplomatic culture had been removed from office.
Dean Acheson, a well-connected Washington lawyer and former Treasury official, was of another breed entirely. He had been in the State Department only since 1941—one-tenth as long as Grew—but had already made his mark as a rising figure and point man for the “progressives.” This may come as a surprise to modern readers, accustomed to recent books and essays portraying him as a Cold War hawk and ardent foe of Stalin. In 1945, when he assumed the reins of State, Acheson had a very different profile. He was known as an advocate of conciliating Moscow, in sharp contrast to hardliners in the diplomatic corps who wanted to take a tough anti-Red stance in the postwar era. The nature of this backstage struggle would be described by former Assistant Secretary of State Adolf Berle, testifying in the case of Alger Hiss:
As I think many people know, in the fall of 1944 there was a difference of opinion in the State Department. I felt that the Russians were not going to be sympathetic and cooperative…. I was pressing for a pretty clean-cut showdown then when our position was strongest. The opposite group in the State Department was largely the men—Mr. Acheson’s group, of course, with Mr. Hiss as his principal assistant in the matter…. I got trimmed in that fight, and as a result, went to Brazil, and that ended my diplomatic career.*68 1
Though Acheson and his defenders would try to fuzz over or explain away these Berle comments, they would in substance be confirmed by observers from all points on the political compass (J. Edgar Hoover, the Social Democratic New Leader, and left-wing journalist I. F. Stone, to name a few). Mainly, however, they were confirmed by Acheson’s own acts and statements once he attained a measure of de facto power. In this respect, arguably his most important move was to name John Carter Vincent, a close ally of John Service and the Amerasia/IPR contingent, as head of State’s Far East division. This was virtually a coup d’état all by itself, as Asia specialists at odds with Vincent were soon out of the department altogether or shunted to the sidelines. Thus, in the wake of the Amerasia scandal, elements aligned with Sol Adler’s roommate had emerged on top, while opponents of the Service-Vincent faction were all but banished.†69
These high-level changes, decisive as they were, would be accompanied by other intramural wrangles in which Acheson was a central player. With World War II concluded, the makeshift units thrown together at the outset were dismantled and their staffers shuffled off to other bureaus—the State Department first and foremost. As of October 1945, some 13,000 transferees from OSS, OWI, and other wartime agencies would descend on the department, and while the bulk of these were eventually mustered out, a residue of about 4,000 would remain there. As the interim units had been well salted with identified Communist Party members and fellow travelers, the security woes hatched in the war would thus come home to roost at State.‡70
To deal with this enormous problem, an ill-sorted managerial team had lined up for postwar duty under Byrnes. Given primary responsibility for the merger and its tangle of security issues was the new Deputy Assistant Secretary of State for Administration, J. Anthony (Joe) Panuch. A New York lawyer previously with the War Department dealing with intelligence matters, Panuch reported to Donald Russell, a key aide and South Carolina political ally of Byrnes. Panuch thus had a direct line to the top, which he wasn’t hesitant in using. Under Panuch in turn was another new appointee, already met with, former Treasury lawyer Samuel Klaus. A somewhat elusive figure, Klaus would wield indefinite but substantial power as counsel to the newly formed Advisory Committee on Personnel Security (ACOPS), in essence the ruling body for security affairs in the department.
Also in the security shop were a group of old-line staffers who had been around a while, had their own ideas on how to do things, and would eventually clash with the new appointees. Members of this seasoned force included Frederick Lyon, director of the Office of Controls (the supervisor of security operations), Robert Bannerman (the main security officer), and Chief Special Agent (CSA) Thomas Fitch, the top in-house investigator. This trio by common repute took a hard-line stance on security cases, as opposed to the more lawyerly, civil libertarian views of Klaus (and to some degree Panuch) and were in frequent contact and close alignment with the FBI. The security setup thus had several interacting parts, which didn’t always work together.
Among the first of the problems Joe Panuch set out to handle was the huge group of staffers from OSS—numbering more than 1,000 people—now on the department payroll. As Panuch knew about the troubles that existed in this service, notorious in intelligence circles, the mere fact of ha
ving that many of its alumni on board at State was a cause for trepidation. However, Panuch had an even bigger problem with the new arrivals, putting him on collision course with the Acheson forces and touching off an internecine brawl that would split the department down the middle.
At issue in this dispute was an ambitious plan to deploy the staffers from OSS as the new intelligence arm of State, with powers overriding the traditional reporting and analytical functions of the geographic bureaus.*71 As Acheson would one day make clear, he was an éminence grise behind this plan, if not in fact the main one, while Panuch would become its chief backstage opponent. Using his pipeline to Donald Russell and thence to Byrnes, Panuch went to work to scotch the OSS proposal. After peppering Russell with memos highlighting the security dangers involved and the problems with the personnel brought in by the merger, Panuch and his departmental allies would win this struggle, but at a sizable cost to be exacted later.2
Running parallel with this internal conflict, Panuch and members of his security squad were waging a daily battle to deal with countless individual security cases, mostly though not entirely resulting from the merger. This led to other intramural quarrels, these within the division itself. Ironically, given Panuch’s incessant warfare against the OSS intelligence scheme and other like proposals, he and Klaus would be perceived by the old-line staffers as softballs on security issues. Repeated disagreements between these internal factions on how to handle cases would produce a series of deadlocks and halfway measures fertile of many future troubles.
Into the hands of this divided team there now flowed, beginning in the latter weeks of 1945, an urgent stream of FBI reports about alleged security risks, CP members, and Soviet agents said to be in the department, derived from the Bentley/Amerasia probes and featuring cases from the merger, though including some indigenous cases also. Based on these data and their own researches, State’s security sleuths picked up the trail of numerous suspects. By the spring of 1946, they had the goods on such significant Cold War figures as Alger Hiss, Maurice Halperin, Mary Jane Keeney, Gustavo Duran, Robert Miller, and Carl Marzani—all named in official reports as Communist agents and all now on the rolls at State. And these were only six of many; overall, it would appear, the security team set up case files on several hundred people.
These cases spawned a lot of paperwork, as Robert Bannerman, Klaus, Panuch, and others traded memos on the suspects. Such of these papers as have survived and been discovered are revealing. Among the most important—and longest—is the 106-page memo written by Klaus in the summer of 1946, reviewing the security scene at State, summarizing cases, and urging changes in procedure.*72 Its most riveting passages concerned security data being provided to the department by the FBI, suggesting a truly massive penetration:
It is important to note that the department is entirely and practically exclusively dependent on FBI for the type of information which comes from surveillance, wide coverage, and the use of unusual methods of interrogation and investigation…. FBI is the sole repository of such information, therefore, as the identity of Communist party members, of sympathizers and fellow travelers, of espionage cases, and of undisclosed foreign agents.
FBI has prepared a chart, now in the possession of Mr. Bannerman, which purports to show the number of “agents,” “Communists,” “sympathizers,” and “suspects” in the State Department as of May 15, 1947.†73 The tabulation shows:
Agents
20
Communists
13
Sympathizers
14
Suspects
77
Bannerman states that by July 12 (the date of my interview), the numbers had been reduced to the following:
Agents
11
Communists
10
Sympathizers
11
Suspects
about 74
Since a considerable number of the persons so characterized came with the interim agencies [i.e., the wartime units], continued reductions in force might dispose of more of these.3
These comments were startling in themselves, but other findings made them more so. Klaus was right about the chart, but erred as to its authors. In fact, the chart was the department’s own creation, drawn up for its internal uses (though utilizing Bureau data). According to the Bureau records, it provided clues, not only as to the number of cases being handled, but also something of their nature. As one FBI account explained it:
…the chart in question was prepared by the State Department and it was noted that it very plainly states that it was prepared in the Reproduction Branch of the State Department and carries the title, “Top Secret, U.S. Department of State, Preliminary Survey of Communist Infiltration, Prepared May 15,1946”…. The employees were divided into two groups: (1) Soviet Underground Intelligence Connections. (2) Amerasia. There are four charts in all…. None of the charts appeared to be a finished product but appeared to be worksheets. The employees are broken down into categories of agents, Communists, sympathizers and suspects. Of the agents (20) and Communists, (13), the State Department has compiled lists (attached). They have not yet been able to compile lists of the sympathizers (14) and suspects(77). They are presently working on this.4
In the lists referred to, set forth in this and other Bureau memos, virtually all the names have been blacked out. However, in one version, the identities of two people named as “agents” are given: Alger Hiss and Mary Jane Keeney. Since both were pro-Soviet apparatchiks, as shown by an extensive record, this would seem to be the meaning here of “agents.” If 20 moles like Hiss and Keeney had tunneled in at State—plus two dozen others named as Communists or sympathizers, plus 77 further suspects—the problem was obviously immense. Nor was it especially comforting to reflect that, two months after this roster was assembled, there were 11 alleged agents and 10 identified Communists still lingering on the department payroll.
These revelations, however, were not the only eye-catching aspects of Bannerman’s chart and Klaus’s memo. Also of interest, and indicative of the in-house conflict, were the thoughts expressed by Klaus about this mother lode of cases. The FBI, he said, hadn’t furnished sufficient proof of its assertions. As to State’s own security cops, he added, they took a too-simplistic view of things—were too ready to draw adverse judgments from uncorroborated data. State, he argued, had to do more of its own gumshoeing, in more sophisticated manner, not just rely on rap sheets from the Bureau.
THE KLAUS REPORT
An excerpt from the 106-page memo State Department official Samuel Klaus prepared in the summer of 1946, later read into the Congressional Recordby Joe McCarthy, showing the number of “agents” and “Communists” then said to be in the department.
Source: McCarthy Papers I
When these comments reached the Lyon-Bannerman forces and the FBI, they drew predictably heated answers. Lyon and Co. thought the FBI investigations of Communist-lining suspects were adequate and solid and, though following up to add details, had no Klaus-like qualms about the information received from Hoover. They also thought Klaus’s calls for more elaborate data and lengthier investigations were stalling out the process when prompt and vigorous action was needed. This view appears in several Bureau memos, including one from Hoover assistant Mickey Ladd in October of 1946, based on a talk with Frederick Lyon.
With respect to security matters, said Ladd, “there appears to be the start of a good internal feud” at State. As Lyon told it, he had received instructions to dig up more information on “some 15 or 20 individuals, among whom was Alger Hiss, indicating their implication, if any, in the Amerasia case.” Lyon’s comment on this was that there was already plenty of information on these people, and “that———and———were attempting to build a paper record to cover up their inactivity in firing Communists in the State Department.”*74 5
Lyon’s chat with Ladd reflected something further: active mistrust of Panuch and Klaus, and reluctance to provide them da
ta—suggesting suspicions and concerns beyond mere intramural friction. This lack of feedback would become a chronic theme of Klaus, who blamed the Lyon-Bannerman forces for blocking his own allegedly more sophisticated efforts even as they blamed him for stalling.†75
Contributing to this paralyzing clash of views were the differing laws and standards earlier noted: On the one hand, the old Civil Service rule that an employee’s “political opinions” were nobody’s business, compounded by the difficulty of firing someone without protracted legal combat. On the other, the Hatch Act–era standard of “reasonable doubt,” saying a government job was a privilege not a right, and that when doubt arose on security grounds the employee could and should be ousted. Further complicating matters was that, in a Civil Service hearing for dismissal, information behind the charges would be disclosed, thus revealing the nature of the data the FBI had gathered. The Bureau was opposed to this, as investigation of the Bentley cases was ongoing.
In an attempt to cut this Gordian knot, Congress in July of 1946 passed, with the assent of Byrnes and Donald Russell, what became known as the “McCarran rider” (drafted by Democratic senator Pat McCarran of Nevada). This gave the Secretary of State the power to discharge, at his discretion, any employee of the department, irrespective of Civil Service rules, if he thought the national interest required it. This theoretically broke the security logjam, but in practice didn’t, as State, both then and later, seemed terminally loath to use the power it was given. Dispute about the McCarran rider, when it should be invoked, and why it wasn’t, would be central to security wrangles for years thereafter.
Blacklisted By History Page 19
