Krueger's Men (6 page)
At almost the same time, early in April 1940, Herschel Johnson’s London memorandum about a real plot to counterfeit British pounds was passed to the U.S. Treasury and virtually ignored. Johnson, a career diplomat from an old Southern political family, was so highly regarded by the British that he was remembered into the twenty-first century by the Churchill biographer and British statesman Roy Jenkins. Nevertheless, the American embassy was told curtly by State Department officials that they were “cognizant of such stories as have appeared in the press, but have been unable to substantiate them” — because no one had tried to pass counterfeit pounds in Washington! Among those initialing that inane memo was the State Department’s senior economic official, Adolf A. Berle, who had joined the New Deal in 1933 from Columbia University as one of the professors in what became known as Roosevelt’s idea-spinning brain trust.
Then, over New Year’s of 1941, came a sign that some sort of forgery operation really was happening in Germany. As many as two dozen members of a gang were arrested in neutral Turkey for passing counterfeits in denominations of one, five, and ten pounds. The gang included a Chilean diplomat and a number of attractive women with false passports, leading the Turkish police to order all foreign nannies — most of them German — to leave the country after questioning.
The police reported that as much as £150,000 worth of false notes originating in Germany and Italy had been circulated in Bulgaria, Romania, and Yugoslavia. Moreover, they remarked on the superior quality of the German notes, a sign that they may have been products of Operation Andreas. The Turks made it clear they believed this was part of a Nazi plot to undermine the pound. The Bank of England took note of the roundup and clipped the story from the London
Evening Standard
for its files. A week later another story in the same newspaper reported that counterfeits in denominations as high as £100 were circulating in Switzerland. The Bank of England clipped that story, too, assured the newspaper that none of the counterfeits had made their way to England, and then called Scotland Yard.
The American imagination was proceeding on similar lines, and the same arguments were rehashed. Early in 1941 the
New York Times
ran a typically tut-tutting editorial about the increase in the number of reichsmarks in circulation, with the consequent danger of inflation (as if that were the worst crime then being committed in Germany!). On January 25 a reader named Henry D. Steinmetz wrote that it might not be a bad idea for the British to throw a little fuel on the fire, print up “a few score billions of excellent counterfeit mark notes” and dump them on Germany to undermine its economic morale. He was put down five days later by another reader, Manfred A. Isserman, who pointed out that the RAF had already dropped forged ration cards on Germany, and the damage done by dropping counterfeit money would be minimal because rationing made money less important; moreover, the Germans might retaliate and harm Britain’s much freer economy.
Letters also arrived in Washington from personages high and humble as soon as war broke out. Two weeks after Pearl Harbor, Private N. E. Cortright of the Weather Squadron at Langley Field, Virginia, sent a handwritten plan to shower “exact duplicates of the enemies [
sic
] paper money,” enumerating nine potential benefits in economic disruption and weakened resistance. His superiors commended his “patriotism and sincerity” and saw to it that his letter was forwarded up the chain of command, where it eventually reached Lieutenant Colonel Robert A. Solborg in the infant office of the Coordinator of Information, predecessor of the Office of Strategic Services (OSS), America’s wartime espionage agency. (Like all spy shops in those days, it masqueraded behind an inoffensive name.) Solborg commented dryly in a handwritten note that “Mr. Morgenthau said we are not in the counterfeiting business.” He kept the letter on file anyway.
On January 6, 1942, Colonel (later General) William Donovan, who had been named chief of the espionage services, was forwarded a letter from a “very able Colorado publisher” by that state’s Senator Edwin C. Johnson, a member of the Military Affairs Committee. Once again, the letter writer thought he had a brilliantly original idea: flood Germany with fake marks. Donovan replied on the basis of advice from his economic section chief, Emile DesPres, deploying many of the familiar arguments against its effectiveness: tight German control, rationing rather than lack of money as the cause of scarcity, and finally the risks of retaliation. These were elaborated in a letter to the president from Donovan’s deputy, G. Edward Buxton, who warned: “Distribution is a major problem as dropping from planes is inefficient, and success seems to depend on a widespread underground penetration of the country by agents. The program seems promising if done on a large scale at a moment of crisis in Germany or Japan. In occupied countries it might produce more distress to the conquered than to the conquerors.”
In a slight twist only a month later, the irrepressible Donovan — he was not known as Wild Bill for nothing — asked Roosevelt for permission to drop fake lire over Italy to undermine Benito Mussolini’s tottering Fascist government. But unlike the Nazis, Donovan saw the plan more as propaganda than as outright economic warfare against a resolute enemy, proposing to deliver the counterfeits with great fanfare so the Italians would “look at their money and decide for themselves which is good and which is bad.” He appended a brief, staff-written history of counterfeit money as a weapon of war: the Reds and Whites in the Russian civil war, the Hungarian government’s counterfeiting of French francs during the 1920s, and of course the scheme used by Pitt against the French revolutionaries cited by Churchill. Unlike Churchill, however, Donovan’s researcher was careful to note in his opening summary that Pitt’s was the only authenticated scheme to inflate an enemy’s currency and disrupt his economy, but it was still “generally regarded as having failed.”
Donovan had already recruited a Boston industrialist, Stanley P. Lovell, as his director of research and development. Lovell’s first job was to manufacture false passports, ration books, and other documents essential to all secret agents operating behind enemy lines. The original proposal for a secret forgery factory seems to have come from a young New York lawyer actively prosecuting organized crime, whence the idea may well have sprung. America’s supreme commander in the Pacific, General Douglas MacArthur, requested 10 million counterfeit pesos in Japanese occupation currency. The assignment went to Lovell. His team was headed by a master printer named Willis Reddick, a reserve officer from Springfield, Illinois, to which he added a member of the Kimberly-Clark paper family and the president of the Papermakers’ Institute. Lovell prudently decided he needed Treasury approval, which, as he wrote in his memoirs, was “vital to us if we weren’t to be closed up and arrested as soon as we started work.” After all, the United States was a solemn signatory to anticounterfeiting treaties, and the Treasury held the dollar’s reputation in its hands as well.
Lovell quickly got through to Morgenthau, who agreed to ask Roosevelt. The Treasury secretary instructed Lovell: “You come over here tomorrow at eleven o’clock. If I say, ‘The President has a cold and I was unable to see him on your problem,’ that means he allows you to go ahead full speed. If I say, ‘I took that matter up with the President and he refuses authorization,’ that means exactly what I say.” The next day, Lovell presented himself at Morganthau’s huge office to discover him accompanied by some of his senior deputies among at least ten potential witnesses. As Lovell entered, Morgenthau swung around and introduced him clearly as “Dr. Lovell of the OSS.” In an exquisite minuet of bureaucratic deniability, Morgenthau continued: “Now, on that matter you asked me about, I was unable to see the President for approval because he has a cold. Do you understand that, Dr. Lovell?” The newly anointed chief forger replied: “Yes, I do, Mr. Secretary, and thank you.”
Lovell was hardly elated: “I suddenly realized how utterly exposed I was. If anything misfired, if our forgeries and duplicates were to be discovered by some newspaper columnist, and a wave of criticism be loosed against such ‘un-American’ activity, then Secretary Morgenthau had more than a dozen witnesses to say he had not taken up my problem with President Roosevelt. If anything went wrong there was but one sacrificial goat… me.” Lovell had no need to worry. With White House help, the nation was successfully scoured for currency paper made of kudsu and mitsumata, fibers then grown only in Japan. (Kudsu later infiltrated the American South, where its spelling morphed into
kudzu
and it became a botanical pest.) Bills were printed and circulated via the Philippine underground to undermine the occupation pesos. MacArthur’s request for counterfeit currency was the only one known to have been put in writing during World War II. Not even Morgenthau could persuade his own friend and boss, President Roosevelt, to protect him with a signed order. Later, the general’s compliments were passed to Donovan, and in turn to Lovell. But the counterfeit coup of 10 million pesos ultimately mattered little except to Morgenthau’s conscience and MacArthur’s ego, both as inflated as the currency of the Occupied Philippines. The Japanese themselves were already printing 1 million occupation pesos a month, drowning MacArthur’s forged American contribution to the occupation currency, which totaled about 100 million pesos — and was rising.
But Germany remained the prize target for America’s amateur spies. The U.S. Treasury’s Secret Service, already forewarned, more wisely asked the OSS to stay on the lookout for counterfeit dollars. Miles Copeland, an OSS and later a CIA operative who retired to England after the war, recalled later to Murray Teigh Bloom, the leading American author on the subject, that “everyone in the OSS had the same idea: let’s counterfeit German notes,” and the idea was still kicking around long after it had been discredited. (Copeland, who believed that this great brainstorm had been blocked by a mysterious German-American bankers’ cartel, became in retirement a public purveyor of hare-brained excuses on behalf of American intelligence, or so he was regarded by journalists serving in London during the 1960s and 1970s.) Willis Reddick, the master printer, could feel the wartime pressure mounting on his boss Lovell. Even as late as 1944, an Army Air Force major sent Donovan a carefully reasoned plan for Allied bombers to drop forged reichsmarks along with their high explosives, to promote German inflation. As Reddick later told Bloom:
I went down to the Bureau of Engraving. I said we were exploring the idea of flooding Germany with counterfeit Deutschmarks [
sic
] and what did they think. They thought I was crazy. But they did some figuring, how many millions of notes we’d have to do to make any kind of impression in a country the size of Germany. It was hopeless. When you got right down to it, even if they could turn out the notes on the Bureau’s presses — of course they’d have to stop making U.S. notes — the delivery problem was impossible. We’d have to be sending bombers day and night all over Germany and letting them hurl out bales of money. And then all the Germans would have to do is issue a new series of notes and our stuff would be dead. It wouldn’t be cheap, either. Just making the notes would run $10 million.
Such logic was out of fashion in Germany. The Nazis had not forgotten their dream of an easy victory through financial sabotage, and they finally found the perfect field commander for their counterfeit war.
T
HE
C
OUNTERFEIT
C
HAIN OF
C
OMMAND
B
ernhard Krueger, an obscure SS officer, was by his own uncontradicted boast “the greatest counterfeiter the world has ever known.” But he also conceded that he would be a mere footnote to history, and indeed he even looked like one. No Aryan demigod, Krueger stood 5 feet 8 inches. His receding hair was not blond but dark, his deceptively innocent doe eyes brown, not blue. The Allied file card on him for postwar Nazi hunters described him as slightly bowlegged. When jailed after the war, Krueger peered into the camera for his mug shot with a smirk on his thick, slightly sensual lips, as if he was both relieved and proud finally to have been noticed and unmasked. Anticounterfeiting police in Britain, France, and the United States expressed their grudging admiration for both the quality and the quantity of the pound notes produced under his supervision. “I do not say this with any particular conceit… I followed orders, as any soldier must. But, I must admit that I was proud of our final product. We did make beautiful banknotes.” This was no doubt the highlight of his life. Forty years later, he said with undiminished satisfaction: “It was technical perfection.”
Where others had failed, Krueger succeeded by bending or breaking the most barbarous Nazi rules to protect his workers. But mostly, he was the right man for the job. Born November 26, 1904, he was the son of a telegraph inspector from whom he inherited a methodical nature and a technical bent. Unlike his predecessor Albert Langer, who had to bone up on printing techniques in a fortnight, Krueger was trained as a mechanic and engineer at the technical college in Chemnitz. The city, in the far southeast of Germany, stood on the medieval salt route to Prague, but more significantly, it was on the banks of the river Elbe, which gave it a bleaching monopoly in the Middle Ages. This turned Chemnitz into a textile manufacturing center with a long history. After the industrial revolution, it also became an engineering center, producing some of Germany’s renowned machine tools, as well as the nation’s first railroad locomotive. Thus Krueger was steeped in the German traditions of precise and meticulous craftsmanship that would produce Leica cameras, Mercedes automobiles, and even today, printing presses and mechanical looms that are world renowned. He certainly never would have fallen for one of Goering’s mad ideas such as saving steel by constructing locomotives out of concrete.
By profession an engineer of complex textile machinery, Krueger was familiar with factory life at three different Chemnitz companies. He had also worked in Poland and France during the 1920s. But in the economic crisis of 1929, he lost his job at the B. Ascher company and immediately applied to join the Nazi Party. Two years later he was accepted as a member, inducted into the SS, and immediately assigned to the technical section, setting up communications networks and listening stations to monitor foreign broadcasts. This brought him into the ambit of intelligence. His industry and efficiency earned him rapid promotion to master sergeant within three years and an officer’s commission in four.
Krueger appeared in occupied France in September 1940 as a Hauptsturmfuehrer, the SS equivalent of an army captain. By November, he was forwarding packets of French identity cards and other forms to Alfred Naujocks in Berlin. But Krueger’s principal task was to obtain and forge passports and other identity papers of enemy and neutral nations including the United States; these were often obtained from drunken or drugged sailors. (Some of the best work, indistinguishable from the originals except by experts with special examining tools, fell into Allied hands after the war and was deposited in the U.S. National Archives.) Krueger moved in high circles as well as low. He was authorized to visit the former French foreign office on the Quai d’Orsay and consulates of conquered Western European countries. The visiting card of Pierre Laval, the most notorious of the French politicians who collaborated with the Nazis, was later found among Krueger’s papers.
Krueger’s talents had obviously been noticed by his superiors, because Langer invited him to a meeting in May 1941, when Operation Andreas was on the skids. In July, Krueger had been put in charge of the SS foreign intelligence service’s own forgery department creating foreign passports and identity papers for Nazi agents abroad. It was designated Section VIF4 in that highly structured Nazi way, giving the appearance of order and legitimacy.
*
In the autumn of that year he visited military intelligence posts in unoccupied France, recruiting agents, searching archives, and possibly trying to set up a network to smuggle the Andreas counterfeits into neutral countries.
On May 8, 1942, Krueger was summoned “on an urgent matter” to the office of Walter Schellenberg, the chief of SS foreign intelligence, and given the most challenging assignment of his life. He suspected something special and probably sinister as he was being driven to Schellenberg’s office on Berkaer Strasse in Charlottenburg. He thought of spiders spinning their webs in the sun’s early-morning rays to trap their prey, a sight which, he recalled, had always aroused the suspicions of his superstitious mother.
At thirty-two, Schellenberg was six years younger than Krueger and like him had been driven into the Nazi Party by hard times. The seventh child of a Saarbrücken piano manufacturer whose business had slumped, he switched his studies from medicine to law because it offered the possibility of a steady career in government service. In 1933, the year Hitler came to power, Schellenberg applied for a government grant to do his apprenticeship in a law office and was advised that membership in the Party would advance his career. He enrolled in the SS because he felt it was composed of “the better type of people.” Schellenberg was soon mingling with them as a young agent in the industrial Ruhr district on Germany’s western edge, where foreign economic intelligence flowed in from the overseas branches of German industrial companies. He quickly became SS chief Reinhard Heydrich’s favorite and a regular fencing partner, catapulted to his office and rank from master sergeant to brigadier general in four years as a reward for ingenuity and courage. Among his exploits were kidnapping two British intelligence officers in 1939 at Venlo just across the Dutch border with Germany and pumping them for information about their secret organization. He tried to lure the Duke of Windsor from Portugal to Germany in 1940 to be held in reserve as a puppet king of England for Hitler’s occupation, but the British spirited the duke away just in time to become governor of the Bahamas for the duration. Schellenberg also supervised a remarkably savvy Gestapo handbook for the prospective occupiers. Its arrest wish-list of 2,820 individuals indicated a surprising understanding of the British establishment, for it included not only the obvious political leaders but influential financiers, academics, and even artists, from Noël Coward to Virgina Woolf.
Schellenberg had taken over SS foreign espionage from the easygoing Heinz Jost on the day Hitler’s armies invaded Russia. In the chain of command, he was only two levels below Himmler, who had the formal title of Reichsfuehrer SS and reported only to Hitler. Schellenberg, an activist bubbling with plots, stood 5 feet 9 inches in his dashing black SS uniform, his pasty face nicked with dueling scars. He walked with a brisk gait but maintained a low-pressure demeanor. That sociable manner was deceptive. Schellenberg had a headquarters staff of five hundred operating around the clock, three shifts a day. He was the perfect spy chief, usually skeptical of raw information and silent about his successes. Not only did he present a rare combination of daring and administrative ability, he knew how to use technology and was proud of it: forgery of all sorts, miniature cameras and secret inks, communications and wiretapping. He was particularly proud of his ingeniously catalogued file of half a million cards on individual agents, contacts, and cases, readily accessed via an electrically powered system. He passed along the German post office’s transcript of a radiotelephone conversation between Churchill and Roosevelt. He even claimed he tapped the undersea Atlantic cable for convoy schedules to guide the U-boat wolf packs.
Schellenberg’s office, although deeply carpeted and luxuriously furnished, was both a communications hub and a fortress. He had a direct telephone line to Hitler’s chancery and many less important places (including his own home). Hidden microphones were embedded in the walls, lamps, and his desk. The windows were covered with a wire mesh connected to an alarm system triggered by photoelectric cells scanning the office. Two buttons controlled a warning siren and, if that did not summon the guards in time, two machine guns built into the desk were trained on all visitors as they advanced toward him.
There had been many challenges to the German production of counterfeit notes, one of which had been guaranteeing secrecy as well as technical reliability. Drawing staff from the trained civilian labor pool had not been particularly successful. But there was one group that might fit the task perfectly. As Krueger entered Schellenberg’s lair, the senior officer addressed him politely and without ceremony in his controlled tenor. “Please sit down, Krueger. I have asked you to come to me to transmit an important order from the Reichsfuehrer SS [Himmler], which I received personally from him late last night. This order directs that the necessary measures be taken immediately for the fabrication of English pound notes. Production must begin in the shortest possible time. To this end, the Reichsfuehrer SS has ordered a secret printing press to be set up in KZ [Concentration Camp] Sachsenhausen. The workforce is to be taken from the reservoir of prisoners of Jewish descent.”
Schellenberg had already informed the Sachsenhausen camp commandant that Krueger would be arriving the following day. Then he told the SS captain, who was sitting across the mahogany desk with increasing and perhaps evident discomfort, that he had been chosen because he was already working successfully as a forger. Schellenberg continued: “Krueger, seize this task with both hands; it will demand everything you have. You have my full confidence.” And as a sign of his trust, Schellenberg announced that it would be named Operation Bernhard, after Krueger. This kind of eponymous honor was routine in Nazi Germany, where power was the only organizing principle. It elevated such operations to the personal fiefdoms that became a driving force in Hitler’s administration.
The use of a name also fixed responsibility. Krueger realized he was being handed a poisoned chalice, but it would also be suicide to refuse. “Brigadefuehrer! You have presented me with a very difficult task, which I cannot reject. It is an order behind which stands the Reichsfuehrer SS himself. Remembering the soundless demise of Operation Andreas which was begun with so much hope, I really do not know whether another attempt will end in failure like the first. It depends as much on the skills of the prisoners as on the abilities of the leaders.”
Krueger thought once again about that early-morning spider and exacted one concession. Fully aware of the quarreling SS leadership and bureaucratic chaos that had defeated his predecessor, Krueger insisted, “Please allow me, Brigadefuehrer, to ask for complete freedom in all technical organizational matters. You know that many cooks spoil the broth. Since I am to be held responsible for the operation of this project, I need a clear answer to this.” Schellenberg replied: “Krueger, all decisions are in your hands alone, no one else’s.”
Far from being elated, Krueger spent a sleepless night. Skeptical from the start, he was immediately struck by the “cold calculation” of Himmler’s order to use Jewish prisoners. He saw Reinhard Heydrich’s hand behind it, even though Heydrich was in Prague (and would be mortally wounded by assassins late that very month). Predictably, neither Schellenberg nor Krueger had received a written order, and the latter knew he never would see one. But he also realized immediately that, successful or not, at the conclusion of the operation bearing his name the Jews would be slaughtered and thus “the mouths of the prisoners were to be sealed forever.”
This, he also knew, presented him with his own unique prisoners’ dilemma, far more subtle than the technical problems of producing passable counterfeits. He would have the unquestioned power of life and death over the Jewish printers, engravers, photographers, accountants, and other specialists in his charge. How would he obtain the best results from these skilled and intelligent men? By promises or threats? By good treatment or bad? His experience in industry told him that disgruntled workers could slow down and even sabotage production. And these Jews would know it, too — that the longer they could keep Operation Bernhard going, the longer their lives might last. After the war, Krueger reflected on his task:
In order to achieve my purpose, I could not stand there and say: “I trust you, trust me!” Impossible. They would not have believed a word, me with the [German] bird on my sleeve and the [SS] Death’s Head on my cap. At most, they would have thought me a complete idiot.
There are situations where a human being may not reveal his principles or his thoughts without endangering himself. This danger was always acute in associating with prisoners. For my purposes, tolerance was the only way to obtain their human understanding without endangering discipline. If I could succeed in winning their trust, then Operation Bernhard would certainly succeed. That was my motto, my key to success, but also my secret.
Whatever his postwar thoughts, Krueger’s wartime behavior confirms that he was not belatedly trying to turn himself into a humanitarian, and that he had stepped cautiously through “the narrow gate between duty and crime.” Krueger was no Oskar Schindler (that confidence man who saved his Jewish employees while sweating them in his factory). He was no Adolf Eichmann, either, although he made no effort to lift the death sentence hanging over his prisoners. Bernhard Krueger was an SS officer. His orders were not to save souls but to print money. A shrewd modern manager, he left the hard task of disciplining his workers to the guards who served as his middle managers, while he motivated the prisoners in their exacting jobs by appearing as a deus ex machina to dispense justice and rewards, and above all to offer praise and promise hope. All other civilized standards of behavior and judgment, from the Ten Commandments to the Prussian penal code, having been suspended, only the raw imperative of survival prevailed. Virtually everyone’s goal in life was simply to hold on to it. In such a moral vacuum, uncertainty is the dominant condition, and irony the only possible optic through which to view people like Krueger — to say nothing of the prisoners caught in the maelstrom.
