CHAPTER 1 CONTINUED

German Espionage Ring Captured

In January 1943, Kurt Frederick Ludwig and eight of his associates were sentenced to terms of imprisonment ranging from five to 20 years after their convictions on charges of espionage in the United States.

The case began when British Imperial Censorship at Bermuda intercepted a letter destined for Spain. The writer of the letter signed it as "Joe K." Laboratory tests of the letter found secret writing on the reverse side that provided the identities and the cargoes of ships leaving New York harbor for Great Britain. Subsequent letters written by "Joe K." were intercepted. The return address on all the letters was determined to be fictitious.

The FBI's investigation was going nowhere until March 18, 1941, when two men attempted to cross a busy street near Times Square in New York City. One, a middle-aged man wearing horn-rimmed glasses and carrying a brown briefcase, carelessly stepped in front of a taxi and was fatally injured. His companion, unconcerned over the fate of his friend, grabbed the brown briefcase and swiftly disappeared into the crowd.

The injured man was identified as Julio Lopez Lido. His body was unclaimed for a time but the Spanish Consulate in New York finally buried him. His companion, who ran from the scene of the accident, called the hotel where the injured man was staying and asked that his room be kept intact until further notice. In the meantime the hotel management informed the local authorities, and they began a check of the mysterious circumstances surrounding the traffic accident.

Local officials discovered documents in the hotel room, which they turned over to the FBI. The Bureau was able to determine that Lido was actually Capt. Ulrich von der Osten, a Nazi army officer who had entered the United States via Japan only a month prior to his death. Capt. von der Osten was to direct the activities of a group of spies in the United States.

The FBI was also able to identify the man who ran from the accident scene as Kurt Frederick Ludwig. Ludwig continued von der Osten's work by sending information to the Third Reich. Ludwig made a practice of visiting the docks in New York Harbor and along the New Jersey coast where, from his observations, he could report information to Germany concerning the identities of ships and the nature of their cargoes. He also visited various Army posts in the New York area where he observed the strength of the armed forces, their identities, the quality and quantity of their weapons, and any other details, which he believed would be of interest and value to his superiors.

The FBI conducted surveillance on Ludwig to determine his contacts. On one occasion during May 1941, he took an extended trip to Florida accompanied by Lucy Boehmler, an 18-year-old girl of German origin, who acted as his "secretary" and, as a matter of fact, assisted him in preparing the secret messages to his superiors and in maintaining detailed records covering his observations. On the trip they passed through Army camps, aviation fields, and industrial centers engaged in manufacturing wartime material.

When he arrived in Miami, Ludwig contacted Carl Herman Schroetter who was waiting for the call, having been briefed by a Dr. Ottis when Schroetter visited Germany two years before. It was through Schroetter that Ludwig was able to report to Germany concerning the progress being made constructing the naval air base near Miami.

Another of Ludwig's associates was Rene C. Froehlich, an enlisted man in the US Army stationed at Governor's Island in New York Harbor. Froehlich picked up Ludwig's mail when the latter was out of town.

Mrs. Helen Pauline Mayer had previously assisted Ludwig in gathering information on aircraft construction from plants located on Long Island. Her husband had returned to Germany via Japan and became stranded there when Russia entered the war. Mrs. Mayer was preparing to follow her husband to Japan when the FBI arrested her.

Hans Helmut Pagel and Frederick Edward Schlosser, two youths of German origin and Nazi ideologies, assisted Ludwig in making observations of various docks and military establishments in the New York area and in mailing communications to the mail drops abroad. Karl Victor Mueller also assisted in mailing letters.

Last, but not least, Maj. Paul Borchardt of the German Army helped Ludwig prepare the secret writing messages. Borchardt served in the German Army from 1914 to 1933, when he claimed he was discharged because of his non-Aryan extraction. He entered the United States as a refugee, claiming to have escaped from a German concentration camp and aided by friends to escape the Third Reich. Borchardt held lengthy conferences with Ludwig at Borchardt's residence. At the time of his arrest, the FBI found secret writing materials in his apartment.

During August 1941, Ludwig began a cross-country trek, surveilled by the FBI. He traveled as a hunted man, forcing his car along country roads through the Midwest at speeds of 90 miles-per-hour. Using the back roads became a chore for Ludwig who, when he stopped at a cabin in Yellowstone Park, decided to destroy any incriminating evidence he had but was not successful. Proceeding to Missoula, Montana, the next day he stored his automobile, shipped his entire luggage except for the bare necessities to relatives on the East Coast, and continued his journey by bus. A search of his car revealed an expensive shortwave radio receiver.

In view of indications that Ludwig was thinking of departing the United States when he reached the West Coast, the FBI at Cle Elum, Washington, arrested him on August 23rd.

Ludwig and his associates were subsequently indicted in Federal Court in New York City on charges of conspiracy to violate the Espionage Statutes. Ludwig, Froehlich, and Borchardt were sentenced to 20 years each. Mayer, Mueller, and Pagel each received 15 years while Schlosser received a sentence of 12 years, Schroetter received 10 years, and Lucy Boehmler was sentenced to five years.

Counterintelligence Operations

In line with his accepted responsibility for providing necessary intelligence to the War Department and US Army, the Assistant Chief of Staff (ACofS) G-2 had always been called upon to perform the opposite mission of preventing our own military information from falling into improper hands. This latter function naturally included required staff supervision over all counter-measures taken to detect espionage, sabotage, or subversion aimed at any part of the military establishment. While the need for the Military Intelligence Division (MID) to explore the foreign aspects of such matters was duly recognized by higher authority, these same authorities kept insisting that military personnel should not become implicated in domestic counterintelligence unless the operations were plainly traceable either to the Army itself or to industrial plants engaged in defense production. Nevertheless, the Joint Army-Navy Board was permitted to prepare an extensive plan for censoring international communications to and from the United States in the event of war, and the departmental intelligence officials participated actively in this significant security effort.²⁵

The difficult problem of how best to protect personnel of the military establishment from subversion or potential subversion likewise soon came to the fore. Derived generally from a provision contained in the so-called Hatch Act of 2 August 1939, making it illegal to employ in any government capacity persons holding membership within a "political party or organization which advocates the overthrow of our constitutional form of government," the Army had adopted a firm policy of excluding Communists and Communist sympathizers entirely from its ranks. After passage of the Selective Training and Service Act on 16 September 1940, however, this policy needed careful reexamination in light of enforced induction into the military service. Hence, during June 1941, it was announced that pending a final determination in each individual case, "persons strongly suspected of membership in the Communist Party or who appeared to be consistent followers of the Communist Party line" would not be assigned on sensitive duty or granted an officer commission.²⁶ At the same time, instructions were issued covering the proper processing of discharges for subversive Civil Service personnel,²⁷ while correspondence was initiated between the ACofS G-2 War Department General Staff (WDGS) and key G-2s in the field about the possibility of discharging subversive enlisted men under current Army regulations.²⁸

With this then representing the general military security situation just prior to Pearl Harbor, the sudden opening of the war found the Counter Intelligence Branch of MID divided into six main sections designed respectively to handle matters bearing upon Domestic Intelligence, Investigations, Plant Intelligence, Safeguarding Military Information, Special Assignments, and Corps of Military Police. It was not only a separate and distinct element established directly under the ACofS G-2 but also on the same level as the corresponding Intelligence Branch.²⁹ On the other hand, it had recently lost several earlier functions through relinquishing its public information duties to the newly organized Bureau of Public Relations and transferring a number of operational activities to the Office of the Provost Marshal General. Effective 1 January 1942, it also witnessed the favorable consummation of a major counterintelligence project for the US Army in the development of a Counter Intelligence Corps (CIC) from the former Corps of Intelligence Police. The ACofS G-2 could thus assume direct staff control over a suitable troop means to uncover and investigate espionage, sabotage, or subversion within the military establishment.

The most pressing military security problem right after Pearl Harbor was to achieve a satisfactory coordination of effort among the principal governmental agencies involved. The declaration of martial law in Hawaii, formation of Defense Commands on both coasts of the United States, and imperative need to provide adequate protection for the Panama Canal had altered security conditions so that the current MID-ONI-FBI Delimitation Agreement was no longer strictly applicable. Gen. Lee, the Acting ACofS G-2, therefore, took immediate steps to ascertain J. Edgar Hoover's personal views regarding the effect of martial law on FBI jurisdiction within the territory of Hawaii. The FBI chief replied that he considered his agency was now relieved of entire responsibility for conducting investigations of "espionage, sabotage and all other national defense operations" therein. He had already instructed the Special Agent in Charge in Honolulu to make available to the appropriate military authorities all information, data, and material at hand, while affording them the full benefit of experience and observations gained before the war declaration. Furthermore, this same Special Agent in Charge was not to start any new investigations or carry out any additional investigative work, which might be considered as impinging upon the national defense field.³⁰

Despite this indication of willing cooperation between the FBI and military intelligence officials in Hawaii, there was still a considerable amount of uncertainty and friction with reference to the exact delineation of investigative responsibilities that should hold among the numerous departmental counterintelligence groups functioning throughout the Western Hemisphere. This was especially true on the West Coast of the United States for security activities taking place in the Western Command and Alaska.³¹ Finally, effective 9 February 1944, Gen. Raymond E. Lee, Adm. Theodore Starr (Ping) Wilkinson, and Hoover executed a new Delimitation Agreement to replace the previous one of 28 June 1940. Although this latest agreement retained most of the basic features of its predecessor, it also listed three different situations under which a national security plan might be called upon to operate. These were during a "Period of Martial Law," "Periods of Predominant Military Interest Not Involving Martial Law" and "Periods of Normal Conditions."³²

Under this new agreement, where there was already martial law, as in Hawaii, the Military Commander admittedly possessed complete authority to coordinate all intelligence activities of governmental agencies and assign missions to them within the limits of their respective personnel and facilities. In areas prominent only as potential theaters of operations, however, such as the West Coast of the United States and Alaska, the Military Commander was now limited to requesting information from the three participating agencies "as he may desire and they may be able to furnish." Moreover, during periods of normal conditions, MID would continue to perform the following security missions:

1. Investigation and disposal of all cases in these categories (espionage, counterespionage, subversion, and sabotage) in the military establishment including civilian employ, military reserve, and military control.

2. The investigation of cases in these categories involving civilians in the Canal Zone, the Republic of Panama, the Philippine Islands, and the Alaskan Peninsula and islands adjacent including Kodiak Island, the Aleutian and Probilof Islands, and that part of the Alaskan Peninsula, which is separated by a line drawn from Iliamna Bay northwest to the town of old Iliamna and thence following the south shore of Lake Iliamna to the Kvichak River to Kvichak Bay.

3. Informing the FBI and ONI of any other important developments.³³

Meanwhile, there were other important develop-ments occurring in connection with the overall military security effort. On 8 December 1941, the Secretary of War ordered into effect certain portions of the existing Army-Navy Board plan for censoring international communications, and, shortly thereafter, the President requested Hoover to assume temporary charge of all national censorship operations.³⁴ The approved plan called for the Army to exercise censorship control over postal and landline communications under a civilian Director of Censorship but the War Department was far from ready to accomplish either of these difficult tasks except on a very small scale. Although MID had recently taken several useful steps in preparing for possible wartime censorship, its censorship section still consisted of only two officers. Nevertheless, a Basic Field Manual 30-25 (Counterintelligence), which presented detailed instructions for the initiation and conduct of military censorship, was in troop hands,³⁵ and a modified form of military censorship was operating successfully for the American units stationed at bases leased from the British in March 1941.

The Army commenced a token showing of postal censorship at a number of selected post offices across the nation on 13 December 1941. Shortly afterwards, upon passage of the First War Powers Act, the President created an Office of Censorship and appointed Byron Price to be its Director. The same Executive Order also formed a Censorship Policy Board, composed of the Postmaster General (Chairman), Vice President, Secretary of the Treasury, Attorney General, Secretary of War, Secretary of the Navy, and the Directors of the Office of Government Reports and the Office of Facts and Figures, to advise Price on policy matters and provide for necessary coordination and integration of censorship activities among all interested agencies of the US Government.³6 Several Army officers, especially trained in censorship work, were then assigned to the Office of Censorship for full-time duty, including Col. (later Maj. Gen.) W. Preston Corderman, who was promptly designated by Price as Chief Postal Censor. MID, therefore, soon became deeply embroiled in all phases of both the national and military censorship efforts.

MID responsibilities relative to visa and passport control operations were likewise expanding at a rapid rate. This important security progress, based upon a Presidential Proclamation dated 14 November 1941, was being administered by the Department of State and required War Department cooperation mainly in the form of detailing military representatives to serve on a wide variety of working committees. Theoretically most of the operational functions concerning this program had already been transferred from MID to the Office of the Provost Marshal General (PMG) but, because of shortages in personnel and funds available for such purpose, orders were not issued to implement the directed changes until 5 December 1941. Even then it was estimated that the PMG offices of the corps areas would not be ready to perform any travel control investigations for more than three months.³⁷ Thus, MID Military Intelligence Service (MIS) not only continued to process all travel control requests submitted to the War Department for clearance but also participated fully in the numerous interagency committees connected therewith.

The PMG was similarly occupied at this same time in taking over several other domestic investigative functions from MID, such as those pertaining to applications for civilian employment within the military establishment or in industrial facilities working on classified projects for the War Department. Since MID was the only departmental agency authorized to contact the FBI regarding Army security matters, it also remained actively involved. Besides, the ACofS G-2 insisted on gaining complete control of counterintelligence investigations showing any evidence of subversion or disloyalty and still retaining the sole function of clearing all applicants for Army commissions. With the CIC growing steadily and at CIC section of the Counter Intelligence Group actually performing at CIC Headquarters, MID was now able to direct the accomplishment of security investigations of every type, even those of a most sensitive nature.

The War Department and Army reorganization of 9 March 1942, which created the MIS and formed Headquarters Army Ground Forces (AGF), Army Air Forces (AAF), and Services of Supply, Army Supply Forces (SOS (ASF)), served to complicate the counterintelligence picture in many different ways. It soon became clearly apparent that the entire program stood in need of a thorough reexamination, especially from the standpoint of command responsibility and coordination procedures. A new basis War Department directive, therefore, on the subject of "Counterintelligence Activities," was prepared and issued to the major commands during June 1942. This directive not only announced that the MIS "will supervise all counterintelligence activities of the War Department" but also cautioned field commanders they would be held responsible for "counterintelligence coverage within their commands" to include taking the following measure:

Establishment of a Counter Subversive system; transmission of information emanating from this source; preliminary investigation of complaints or suspicion of subversive activities; safeguarding of information which, if released, would be detrimental to the war effort; and reference of cases arising within these categories to Counter Intelligence Corps representatives for investigation.³⁸

Under these new conditions the departmental intelligence authorities could continue to claim a high degree of direct control over counterintelligence activities at certain fixed stations within the zone of interior, such as schools, training commands, supply establishments, etc., but this was no longer true for the more flexible ground tactical or air commands. Commanders of the latter elements were thus instructed to forward prompt security reports to MIS simultaneously through both the intelligence and command channels of communications. Likewise, with reference to the extent of counterintelligence operations that should be carried out by the Headquarters of AGF, AAF, SOS (ASF), and major overseas commands, the War Department directive declared, as follows:

d. The Commanding Generals of the Ground Forces, Air Forces and Services of Supply may establish and maintain a counterintelligence staff organization for the purpose of a liaison between their respective headquarters and the War Department Military Intelligence Service, and for such staff counterintelligence field inspections and other special operations as the Commanding Generals of the Ground Forces, Air Forces and Services of Supply may direct.

e. Beyond the territorial limits of the United States commanders of Theaters of Operation, Base Commands, Defense Commands, Departments and units of any type not under the control of the foregoing commanders are responsible for counterintelligence security coverage within their units, and will prescribe methods of operations. They will keep the Military Intelligence Service, War Department, fully informed of conditions arising within their commands.³⁹

In June 1942, the MIS Counterintelligence Group consisted of four main subgroups representing Administration, Domestic Intelligence, Safeguarding Military Information and Operations, with each of these subgroups divided into several functional branches or sections. According to the newly imposed concept, although the ACofS G-2 remained charged with "policies concerning" military security matters, he was not supposed to exercise any direct supervision over the Counterintelligence Group of MIS. This proved to be a most impracticable arrangement because the principal officers of that group were not only members of policymaking security committees but also acted regularly as departmental liaison and coordinating authorities with other counterintelligence agencies of the government. Hence, Gen. George Veazey Strong simply ignored the existing instructions and chose to maintain a close personal relationship with all key MIS officers occupied in security matters. Officially, however, an additional echelon of command had now been placed between the ACofS G-2 and his Counterintelligence Group in the person of the Chief, MIS.

Besides accomplishing customary administrative tasks for the Group Chief and functioning as an office of record, the Administrative Branch of the Counterintelligence Group had been given a number of special assignments not normal to operations of the other three branches. Personnel of this branch were thus often utilized by the Group Chief to assist in the preparation of counterintelligence summaries or estimates.⁴⁰

There were also several different sections or branches loosely grouped together under the broad designation of Domestic Intelligence for performing the following assigned tasks:

1. Subversive Agents Section_to maintain a card index file on subversive agents and thereby keep MIS abreast of the latest developments within that particular field over which FBI had primary jurisdiction.

2. Research and Summary Section_to act as the official intermediary between MIS and other governmental agencies in determining the amount or kind of security information that should be furnished to each.

3. Counterintelligence Corps Section_to execute special security missions for the combat arms of the Army.

4. Visa and Passport Branch_to provide information from MIS files for guiding the State Department in the issuance of visas, passports, exit permits, and other related travel instruments.

5. Investigative Review Section_to study reports of security investigations and submit recommen-dations regarding the final disposition of subversive or potentially subversive individuals under War Department control.

6. Evaluation Branch_to present, either periodically or upon specific request, summaries and estimates of the counterintelligence situation, including such matters as fifth-column activities and racial anta-gonism within the United States or its possessions.

7. Plant Intelligence Branch_to prepare studies on counterintelligence matters in connection with American war industry and additionally, to process alien personnel security questionnaires and pass upon requests for permission to visit important war production plants.⁴¹

Likewise, four main subordinate branches were currently assembled under the general heading of Safeguarding Military Information, as follows:

1. Censorship Branch_to prevent the passage of any military information of value to the enemy and evaluate intercepted information for appropriate dissemination.

2. Safeguarding Military Information Branch_to establish policies and procedures designed to prohibit the enemy from obtaining information about our own forces.

3. Security Branch_to supervise the security of military information through physical means and educate all personnel in the importance of this special aspect of information protection.

4. Communications Branch_to handle matters bearing upon clandestine radio stations, interception measures, radio countermeasures, technical facilities for monitoring, development of security devices, Aircraft Warning Service, and identification or recognition methods.⁴²

As its name implies, the Operations (later Investigation) Branch of the Counterintelligence Group was primarily concerned with the actual conduct of security investigations. It not only executed, directed, and coordinated all investigations of such type falling under the jurisdiction of MIS but also received reports of similar investigations performed in the field by Corps Area and Department counterintelligence personnel. During the first seven months of 1942, due to the rapid Army expansion and consequent tremendous increase in the military security progress, the workload of this branch doubled in total size. On 30 July 1942, therefore, the Group Chief found it necessary to submit an urgent plea to the Chief, MIS, for 100 additional clerks and stenographers. In justifying this extraordinary request, he called attention to the following investigative chores that were now facing his Operations Branch:

a. High priority request to clear 300 officers, enlisted men and civilian employees for duty in OPD.

b. Chief Signal Officer forwarding approximately 1000 names per week for clearance to attend Radar Schools.

c. Army Air Force forwarding at least 1000 names per week for clearance to receive training on classified equipment, such as the bombsight.

d. AGO forwarding the names of all newly appointed officers, graduates of Officer's Training Schools and others at a rate of approximately 12,000 per month. With 25,000 names of newly commissioned officers still awaiting clearance, the branch is accumulating an average of five new cases for every one it completes.⁴³

By early 1943, it had become manifest that the MID (MIS) counterintelligence effort was in prompt need of a major overhaul and readjustment. The matter remained extremely complicated, however, because of the continuing indefinite status of MIS in relation to MID, as well as persistent pressures from higher authority for the departmental agency to relinquish all domestic intelligence activities and confine its counterintelligence functions strictly to policy supervision. This type of pressure had already taken the form of a detailed survey made by Bureau of the Budget management personnel covering MIS operations with particular reference to domestic intelligence and safeguarding military information.⁴⁴ The study had resulted in a number of conclusions and recommendations pointing toward the desirability of combining certain operational counterintelligence duties within MIS and transferring several others to outside agencies.

The Chief of the Counterintelligence Group, MIS, not only registered a substantial exception to most of these Bureau of the Budget recommendations but also noted that they seemed to be "based almost entirely on consideration of procedures and economy and overlooked the principles and techniques of intelligence."⁴⁵ Notwithstanding, on 26 November 1942, the Deputy Chief of Staff forwarded a memorandum to the ACofS G-2 and PMG instructing them jointly as follows:

1. PMG to discontinue the use of MIS files in making future loyalty checks and deal directly with the FBI. Similarly, PMG is now authorized to receive any investigative reports from FBI that might assist in discovering plant subversives.

2. MIS to rely entirely on FBI summaries, special reports and personal contacts to satisfy that portion of the counterintelligence function previously obtained from individual FBI investigative reports.

3. MIS to discontinue the receipt and filing of all FBI investigative reports unless they fall under the following classification:

a. Reports of subversive activities outside the United States.

b. Reports of subversive activities implicating a member of the military forces, a person just entering the military forces or an employee of the War Department.

4. Plant Intelligence Branch of the Counter-intelligence Group to be abolished.

5. Present relationships between G-2 and FBI to remain unchanged, except for the direct PMG-FBI communication as described.⁴⁶

In compliance with this terse directive, Gen. Strong ordered immediate abolishment of the Plant Intelligence Branch and assigned its residual research functions to the Evaluation Branch. Since the ramifications of the rest of the directive were so far reaching and even threatened to compromise the terms of the current MID-ONI-FBI Delimitation's Agreement, which was originally based on an Executive Order, he felt further constrained to inform the Deputy Chief of Staff along the following lines:

…With reference to paragraph 3 of your directive, it is to be noted that an exact and literal compliance will include discontinuance and filing of all FBI investigative reports now received from FBI on the following subjects:

a. Espionage.

b. Counter Espionage.

c. Counter Intelligence.

d. Sabotage.

e. The activities of registered foreign agents and non-registered foreign agents.

f. Unethical conduct of military attaches or other accredited foreign personnel.

g. Subversive activities occurring on military reservations in which military personnel are not implicated.

h. Subversive activities involving destruction of War Department property by sabotage or other means.

i. Subversive activities resulting in interference with transportation of raw materials or the production and distribution of war material.

j. Subversive acts committed by civilians outside the military establishment that may affect adversely members of the military establishment.

k. Activities of individuals suspected of propaganda influencing military personnel under military control.

l. Investigative reports of a similar nature pertaining to subversive activities within the United States but not implicating members of the Army or employees of the War Department.⁴⁷

While Gen. Strong may have been inclined to overstate his case in this particular protest, it does seem plainly apparent that the departmental administrative authorities had not thought the matter out to a proper conclusion before issuing their 26 November 1942 directive. That they were really more interested in saving personnel spaces than in giving careful consideration to the difficult functional problems of the ACofS G-2 also becomes evident in view of the following inadequate reply he received from them on 2 December:

…2. This directive will not be interpreted to authorize the continuation of present practices, which involve the scrutinizing, and filing of a vast number of FBI individual investigative reports.

…3. Questions on the procedure to be followed in transferring the files can be answered by referring to the contents of the MIS study prepared by the Bureau of the Budget and forwarded to G-2 under date of October 17, 1942.⁴⁸

The irony is that at the very time the Deputy Chief of Staff's Office was trying so determinedly to reduce MID (MIS) domestic counterintelligence activities, the agency was gathering added responsibilities within the same field from other sources. For example, during May 1942, the Deputy Chief of Staff, acting for the Secretary of War, authorized the ACofS G-2 to form a Special Information Branch in MIS to monitor telephone conversations taking place at all War Department buildings. This not only called for the installation of a considerable amount of special switchboard equipment but also required a force of 10 officers, 53 enlisted women, and one civilian in order to perform the monitor duty. With a total of 12,000 lines made available to them for surveillance, these personnel were soon averaging about 3,000 such missions per day and submitting as many as 4,550 reports for a single month of activity.⁴⁹

Other instances of this marked trend toward MID (MIS) acquiring further counterintelligence responsibilities were:

1. In May 1942, there were four interdepartmental primary committees and five review committees operating under the Visa Division of the State Department, with MID (MIS) represented on each. Since plans were being made to require all American seamen traveling to and from foreign ports to hold valid passports, the Passport Division of the Department of State appointed a new interdepart-mental committee for the purpose of processing such applications. This meant the assignment of one more MID (MIS) officer on travel control duty. Likewise, when a Maritime Labor Committee composed of the Secretary of State, Attorney General, and War Shipping Administrator became gravely disturbed over the alien seamen situation, especially in regard to their immigration status, jumping ship, deportation, etc.,⁵⁰ it led to the creation of another inter-departmental committee charged with "considering problems incident to the entry into the United States of all aliens and citizens brought by neutral or chartered vessels." Lemuel Schofield was designated by the Attorney General to function as chairman and coordinator for this committee, with Lt. Col. G.D. Dorroh, Chief of the Visa and Passport Branch of the Counterintelligence Branch, and MIS named by the Secretary of War to represent the War Department on it.⁵¹

2. Effective 2 June 1942, because of the ever-increasing demands for trained censorship officers, the ACofS G-2 was granted permission to establish a Censorship School at Fort Washington, Maryland, under the direction of the Counterintelligence Group, MIS. It was then estimated that a minimum of fifteen additional officers would be needed for operating this new facility.⁵²

3. During August 1942, when the US and Japanese Governments entered into an exchange agreement to repatriate certain interned nationals, it became necessary for MID (MIS) to join with the State Department, ONI, and FBI in screening all personnel slates pertaining thereto.⁵³

4. On 13 November 1942, the function of deter-mining what war production information should be released to various governmental or non-govern-mental agencies, as well as maintaining uniform security standards for information of that nature, was transferred from the Bureau of Public Relations (BPR) to MIS. A "Committee for Protection of Information" had been performing this counterintelligence task in the BPR since 11 July 1942.⁵⁴

It must not be presumed from the continuing drive by higher authority to reduce the MID (MIS) domestic security effort that the Counterintelligence Group was engaged solely in operational-type activities. As a matter of fact, one of the most difficult features of the entire affair lay in attempting to separate its so-called general staff functions from those that were considered to be operational. For example, the Evaluation Branch of the Counterintelligence Group was a true research unit and directly involved in the production of military intelligence both for departmental and Army use. Having been charged with maintaining "a comprehensive picture of the total subversive situation prevailing in the United States and territories wherein American troops are stationed," it not only prepared studies on subversive elements but also disseminated finished intelligence bearing upon that subject in the form of numerous reports, bulletins, and summaries. To assist in accomplishing this mission, the branch established close liaison with corresponding units in "ONI, FBI, Office of National Censorship, Department of Justice, Internal Revenue and Department of State" and constantly sought to acquire an intimate knowledge of the following "subversive or potentially subversive groups":

1. Nazi 2. Communist 3. Fascist 4. Japanese 5. Falange 6. Hungarian 7. Ukranian

8. White Russian 9. Vichy France 10. Korean 11. Bulgarian 12. Syrian 13. Domestic Fascist 14. Negro55

With MID (MIS) already in the process of being gradually divested of its domestic intelligence function, there was a natural and parallel expansion of ASF operations within the same field.⁵⁶ When ASF (SOS) was first created in March 1942, the ACofS G-2 still retained direct control over military intelligence activities throughout the US Army, so there appeared little need for an intelligence unit at Headquarters, ASF, except for a small group capable of handling local security matters. By April 1943, however, it was obvious that some sort of a central G-2 agency would be required to satisfy ASF responsibilities in connection with PMG, Service Command, and National Guard Bureau domestic intelligence activities, as well as to take positive steps in meeting the growing demand for better coordination of the technical intelligence effort. Effective 20 April 1943, therefore, the Commanding General announced the establishment of a Security and Intelligence Division in Headquarters, ASF, and designated Col. James M. Roamer to be its director. Shortly thereafter, the name of this new staff unit was shortened to the Intelligence Division, and it became organized into a Technical Intelligence Branch, Counter Intelligence Branch, and Security Control Group.⁵⁷

Even though the Director of Intelligence, ASF, was now being held responsible by his own commander for "military intelligence in the Army Service Forces," MID (MIS) continued to exercise a considerable degree of direct staff supervision over intelligence operations within the service commands, as well as the CIC personnel assigned there. Col. Leslie R. Forney, the newly designated Chief of the Counterintelligence Group, MIS,⁵⁸ however, had embarked upon a program aimed at curtailing several activities which he felt were either a duplication or might better be decentralized to some other agency of the military establishment. For example, arrangements were soon completed to transfer a highly trained group of CIC officers and enlisted men to the Manhattan Project without reserving any MID (MIS) control over them, and, early in July 1943, all operational security functions that would normally be executed by a service command for the Washington, D.C. area were shifted from MIS to Headquarters, Military District of Washington.⁵⁹

The politically involved question of controlling subversive or potentially subversive personnel, notably Communist Party members and consistent followers of the Communist Party line, kept plaguing the department security officials.⁶⁰ A fixed policy in this regard had been announced on 19 May 1942, which not only emphasized the practice of assigning suspect enlisted men to elements other than the Army Air Forces, Signal Corps, Chemical Warfare Service, Armored Force, Tank Destroyer Command, or Airborne Command but also formed special units within the service commands for transferring "potentially more dangerous individuals" and giving them duties "with no opportunity of effective subversion."⁶¹ Likewise, in bending every possible effort to keep disloyal personnel from holding commissions as officers, the following instructions were issued:

When careful and complete investigation has established that a commissioned officer, whether on active duty or not, is so lacking in loyalty, character, integrity or discretion that for him to continue to hold a commission in the Army of the United States is considered a detriment to the National war effort, recommendation for his discharge will be forwarded immediately to the War Department.⁶²

The list of elements to which potential subversives could not be assigned was shortly extended to include the Amphibious Corps, Ports of Embarkation, Staging Areas, Officer Candidate Schools, and any unit or organization alerted for foreign service or service in Alaska. The problem of preventing Communists from gaining admittance to the Officer Candidate Schools, however, continued to pose serious difficulties because under the current system commissions were being granted at these schools automatically to all graduates and without any prior reference to MID (MIS) for a security check.⁶³ Moreover, with the Party line having undergone a convenient switch to provide for full cooperation with the Allied war effort right after the German invasion of Russia, more and more Communists and fellow travelers were seeking to qualify for entrance into such schools. As a matter of fact, strict application of the adopted policy of segregating potential subversives had already been softened somewhat, even for noncommissioned officers, in an avowed attempt to conserve manpower.⁶⁴

Outside pressures were now rapidly building up in all directions with reference to this sensitive subject. It was argued, for example, that the segregation policy had merely tended to relieve Communists from the hazards of combat duty and even encouraged the dissemination of Communist doctrine throughout the country.⁶⁵ Although the Chief of Counterintelligence Group, MIS, still held that every effort should be made to minimize the number of Communists receiving commissions, he believed officers of such type who were already commissioned should "no longer be discharged except in aggravated cases."⁶⁶ On the other hand, early in April 1943, the ACofS G-2 forwarded a SECRET directive through intelligence channels to the major commands reiterating among other things that persons proved to be, or suspected of being, Communists or adherents to the Communist Party line would not be permitted to attend or to remain in Officer Candidate School.⁶⁷

Despite the fact that the recipients of this new letter were cautioned to exercise extreme care in preserving its security and greatest discretion in carrying out its provisions, the Communist Party launched an immediate and violent propaganda campaign against Army counterintelligence procedures. Spearheaded by the Veterans of the Abraham Lincoln Brigade organization, this campaign took the form of heavy attacks in the so-called liberal press along with a flood of critical letters addressed to the White House, Cabinet, Congress, and high officials of the War Department.⁶⁸ Accordingly, some 40 cases concerning individuals of alleged subversive connections who had either been removed from Officer Candidate Schools or failed to receive a commission upon graduation, were resubmitted to the Secretary of War's Personnel Board for the stated purpose of determining whether or not any injustice had occurred. These cases were also subject to final review by the Office of the Deputy Chief of Staff, acting in consultation with the Assistant Secretary of War. While the Personnel Board, under the chairmanship of former Chief of Staff Gen. Malin Craig, sustained all but one of these earlier actions, the final reviewing authority confirmed only 25 of them.⁶⁹ In registering an emphatic dissent from a recent request for reconsideration forwarded to his Board by the Office of the Assistant Secretary of War, which recommended that three Communists should be granted Army commissions, Gen. Craig seems to have summed up the entire matter in most expressive terms, as follows:

This is one of a number of cases of individuals who have been denied commissions because of Communistic ideas, affiliations, or leanings. For twenty years or more the policy of the War Depart-ment, in time of peace, has been to prevent men of this character serving in the Armed Forces. Since the war they have been allowed to fight for the country through induction or enlistment. While they should be allowed to fight for the country that is not, of itself, any reason why they should be commissioned. It is a well-known fact that men of this type cannot be trusted in many such respects, in spite of what they may profess at any particular time. They will deny Communistic affiliations when it suits their purpose, or even refrain from such affiliations when it suits their purpose or the orders of their leaders, thus advancing the general cause. This unreliability, if nothing else, is sufficient cause for excluding them from commissions in the officers' corps of the Army. It is further unwise to introduce into the Armed Forces as commissioned officers, men who are tainted with political ideas which are abhorrent to the vast majority of the citizens of the United States, whose whole-hearted allegiance to the United States is at least questionable, and whose methods are such as to resort to insidious and undercover operations to gain their ends.⁷⁰

With the military security effort now coming under increased criticism from all sides, the Deputy Chief of Staff, on 16 July 1943, directed the Inspector General, Maj. Gen. Virgil L. Peterson, to conduct a thorough investigation of the situation and make appropriate recommendations on:

The existing organization, scope of activities, and operating procedures of the Directors of Intelligence of the Service Commands and their offices, including military personnel allocated by the Service Commands for such duty, counter intelligence corps police attached to the Service Commands by G-2, civilian employees allotted by the Service Commands, and civilian employees made available by allocation of funds by G-2; the relationship between the Military Intelligence Division, War Department General Staff (Counterintelligence Branch) and the officers of the Directors of Intelligence of the Service Commands.⁷¹

Additional oral instructions were likewise given him on 11 August and 7 September 1943, for extending his investigation so as to cover:

The investigative functions of the Provost Marshal General at Service Commands and the possible duplication and overlapping of the investigative functions with those made by the intelligence personnel allotted to the Service Commands; the C/S System; and the correlation of intelligence of the Service Commands, those of the Army Air Force units and installations and Army Ground Force, and the Military Intelligence Division, G-2, WDGS.⁷²

In making this directed counterintelligence study, Gen. Peterson concentrated upon examining the Investigation and Review, Situation, and CIC Branches of MID (MIS) in order to ascertain their strength, organization, and command relationships with security personnel stationed at the service commands.⁷³ He found that the Investigation and Review Branch currently consisted of 29 non-CIC officers and 30 civilians. Similarly, the CIC Branch, now located at Baltimore but still furnishing a number of key personnel for the CIC Advanced Training School in Chicago, was composed of 64 CIC officers and 31 civilians. There were also 368 officers, 2,598 enlisted men, and 770 civilians engaged in intelligence activities within the service commands, the majority of them being carried as War Department overhead. In Peterson's opinion, MID (MIS) was exercising a close control over most of these personnel in the performance of their assigned military security duties.⁷⁴

The Inspector General remained especially critical of the fact that such centralized direction of the counterintelligence effort within the zone of interior was in direct violation of basis command principles for the US Army. He also felt that the countersubversive detection system as called for under TM 30-205 infringed upon these same command principles, so the existing organization should be turned over to the individual commanders for use at their own discretion. Furthermore, he considered that both the PMG and CIC were conducting many unnecessary and unproductive security investigations and including too much nonfactual data under their final investigative reports. Derived from these several conclusions, therefore, he recommended a number of fundamental changes in counterintelligence procedures for the zone of interior, which were all promptly approved by the Deputy Chief of Staff without any prior reference to the ACofS G-2.⁷⁵

On 14 December 1943, new War Department orders on basic counterintelligence functions within the zone of interior were issued, as follows:

1. The ACofS G-2, WDGS, will continue to exercise general staff supervision over counterintelligence policies and activities throughout the military establishment.

2. Subject to the above and such other exceptions as may be made by appropriate WD authority, all functions and activities of the CIC within the zone of interior will become the responsibility of the Commanding General, ASF.

3. Investigative functions hitherto executed separately by the CIC and PMG will be consolidated into a single staff agency under each service command.

4. All CIC personnel attached or stationed in service commands but performing ASF activities, other than those selected by the ACofS G-2, WDGS, for advanced training or overseas duty, will be transferred from the CIC and assigned to the service command.

5. Civilian personnel presently assigned to MID (MIS) but located in service commands and performing ASF activities, will be transferred to the service command.

6. Military and civilian personnel of the Counterintelligence Group, MID (MIS), as mutually agreed upon between the ACofS G-2 and CG, ASF, will be transferred to the ASF.⁷⁶

Under the new counterintelligence situation, CIC personnel could now be utilized, with certain specific exceptions, only in theaters of operations. Notwithstanding, the ACofS was still held responsible for coordinating the procurement and shipment of CIC units for CIC duty and the administration of CIC specialized training to be conducted at Camp Ritchie, Maryland.⁷⁷ His means for accomplishing these retained functions had been effectively removed, however, through the complete abolishment of CIC Headquarters, which was in reality the CIC Section of the MIS Counterintelligence Branch and CIC Staging Area at Fort Holabird, Baltimore, Maryland.⁷⁸ To make matters worse, the existing military security system was badly upset not only by the sudden decision of TM 30-205 countersubversive instructions but also under an utterly impractical provision of the approved IG study directing that, within available time and manpower limits, "all reports and attached memoranda of investigation made by the Counter-intelligence Corps be reviewed, pertinent, verified information be extracted, and the original and copies be recalled by the War Department and destroyed."⁷⁹

The departmental intelligence agency was also soon shorn of its traditional military censorship functions. Despite the fact that censorship operations were providing it with a sizable amount of useful information, the agency remained actively involved in the procurement, training, and assignment of censorship officers for the US Army. By May 1943, it had become feasible to establish an "Officer Pool for Censorship Personnel" and thus give the total censorship program a sorely needed degree of flexibility. Nevertheless, effective 21 March 1944, higher authority ordered the transfer of this officer pool to ASF, as well as the related function of handling censorship supplies. For the time being, MID (MIS) was still permitted to receive information directly obtainable from censorship sources for assistance in producing intelligence but, on 25 July 1944, even this responsibility was shifted to ASF, along with all duties pertaining to the procurement, training, assignment, and supply of CIC personnel.

Prior to the imposed MID reorganization during the summer of 1944, therefore, which sought to form a truly separate MIS under a new ACofS G-2 (Gen. Bissell), the departmental intelligence agency had already lost most of its military security functions. With MID limited solely to the execution of general staff type duties, the theory was that the ACofS G-2 could now perform his basic counterintelligence mission acting through a single security specialist within the G-2 Policy Staff. Hence, effective 3 June 1944, the Counterintelligence Group, MIS, was abolished and Col. Forney, plus two officer assistants and two clerks, became Group III (Security) Policy Staff, MID.⁸⁰ For a brief period after this, there was a small Security Branch, MIS, placed under the Supervisor of Source Control to accomplish certain representation and liaison tasks;⁸¹ but, on 24 July 1944, when the final transfer of all counterintelligence functions to ASF was announced, the ACofS G-2 decided to move this group back into MID. Major considerations calling for such action at that particular time were then given, as follows:

a. Uncertainty as to the permanence of the decentralization that had been effected.

b. Need of an agency to handle unusual and important security matters which could not be handled at a lower level.

c. Need for an agency to perform a small number of security functions that had not been decentralized or transferred to other MIS branches on or before 24 July 1944.⁸²

Thus, even though Gen. Bissell had himself served on the War Department committee charged with reorganizing MID (MIS), it did not take him long as ACofS G-2 to realize that some sort of a counterintelligence unit would be essential to the proper functioning of the departmental intelligence agency regardless of views expressed by higher authority. While the new Security Branch, MID, never included more than three officers and always worked in close conjunction with the G-2 Policy Staff, it promptly inherited a number of more or less operational security tasks along the following lines:

a. Assisting the ACofS G-2 in security matters of great delicacy, such as; investigating serious leaks of highly classified information, supervising from a security standpoint the movements of very important persons, handling the initial security aspects of Japanese balloon incidents, interviewing the captured German agents (Gimpel and Colepaugh), and maintaining liaison with the FBI relative to secret intelligence operations.

b. Screening reports of security violations discovered by the MID (MIS) telephone monitoring service and forwarding them to appropriate action agencies, normally Joint Security Control.

c. Establishing and enforcing a revitalized internal security system within MID (MIS) itself.

d. Determining whether or not War Department approval should be granted to requests for using technical methods of surveillance in certain investigative cases, as required by official orders. These methods might include the interception of mail while under military control or the use of mechanical overhearing devices at military reservations.

e. Serving as G-2 members on the OWI Security Advisory Board and the Secretary of War's Review Board, with the first named board having been formed to advise federal agencies other than the War and Navy Departments about security problems and the latter to review appeals submitted by War Department civilian employees discharged under Public Law 808, 77th Congress, for reasons of national security.

f. Processing miscellaneous counter-intelligence matters, for example, individual loyalty cases referred to the ACofS G-2, clearing requests from the Census Bureau for authority to conduct surveys in areas of military interest and answering questions concerning the release of military information through the BPR.⁸³

The need for having a small group of counterintelli-gence specialists readily available in MID was well illustrated by the sudden demand to dispose of so-called Japanese balloon incidents from the military security standpoint. In an effort to bolster homefront morale following the Doolittle air raid on Tokyo, the Japanese authorities had hit upon the idea of floating free balloons laden with high explosive and incendiary bombs against American territory. The original plan was to launch these balloons from submarines stationed offshore but, when this proved to be impracticable, they were released from Japan itself. Some 9,000 balloons were eventually launched, with only a small percentage of them ever reaching the North American continent. They were first reported during November 1944 and naturally caused a considerable amount of speculation within intelligence circles as to their exact purpose. One popular theory was that they might be germ carriers in an opening of bacteriological warfare but another was they were being used to introduce Japanese agents into this country.⁸⁴

Following a hasty series of interdepartmental consultations, it was decided that the first step in combating these Japanese missiles should be to request a voluntary censorship of all public news media. This would serve to deny the Japanese any accurate evaluation of their balloon capabilities and minimize whatever propaganda value might accrue to them from the project. The Western Defense Command was then given the mission of taking appropriate defensive measures and collecting information on all located balloons. The FBI also carried out extensive investigations, while various scientific agencies of the government joined in examining the balloons to determine their technical characteristics. During December 1944, Maj. Ray V. Jones and 2nd Lt. Charles H. Allison of the Scientific Branch, MIS, were ordered to devote their entire effort toward reporting on the balloon situation, and it was not long before a total of seven officers and two clerks were fully occupied in this same type of work.⁸⁵

There were several narrow escapes from publicity leaks, occasioned mainly by items appearing in small local newspapers, but on the whole the voluntary censorship policy turned out to be notably successful. The news gradually did get around, however, so more positive countermeasures were indicated. A "word of mouth" campaign was adopted, based upon British methods recently devised to educate the public about the V-1 bomb without furnishing the Germans any specific information pertaining to landing areas or bomb damage. This supplementary system remained sufficient until six members of a single family were killed while tampering with an unexploded bomb they had stumbled across in the Pacific Northwest, an event which forced the War Department to release a carefully guarded statement on the subject. Finally, when the Japanese discontinued launching their balloons in April 1945, the matter was slowly allowed to fade from the national scene, with no serious security breach having ever occurred.⁸⁶

Gen. Bissell replaced Gen. Strong as the ACofS G-2 on 21 February 1944, just in time to become actively involved in the mounting dispute over the status of Communists and fellow travelers within the US Army, especially whether or not they ought to hold officer commissions. Accordingly, two months later, he addressed a memorandum to the Deputy Chief of Staff which not only recommended continuance of the policy to exclude these personnel from sensitive duty assignment and attendance at Officer Candidate Schools but also asked for the discharge under existing Army regulations of officers "who are proven to be members of the Communist Party or to have consistently followed the party line or otherwise indicated they have submitted themselves to the discipline of the Party."⁸⁷

Nothing came of this initial attempt to classify Communists and fellow travelers specifically as disaffected personnel but embarrassing questions in the matter kept pouring into MID from other military security agencies.⁸⁸ It was thus deemed advisable to submit a more detailed memorandum on the subject to the Chief of Staff in the hope of securing more suitable authority for controlling them. This new memorandum, as originally drafted, took note of the fact that a decision was made on 11 May 1944 by the Assistant Secretary of War in rejecting the removal of a veteran of the Abraham Lincoln Brigade from Officer Candidate School directly contradicted an 8 March 1944 decision in a practically parallel case.⁸⁹ Since MID had recently found that 81 officers, five WAC officers, 1,181 enlisted men, and 49 enlisted women were "so thoroughly imbued with the principles of Communism as to constitute a danger to security," it appeared necessary to clarify their future military status. The belief was that enlisted men of such character should be retained in the service and given combat duty but the officers eliminated. It was recognized, however, that the latter step might not be expedient at this particular time.⁹⁰

Before signing this proposed communication to the Chief of Staff, Gen. Bissell chose to discuss it personally with McCloy. As a result, Col. Forney received further instructions to prepare a detailed staff study on Communists in the Army, which would seek a definite answer to the problem but recommend what was right rather than expedient. When this had been duly accomplished to Gen. Bissell's satisfaction, the study was sent to McCloy for added comment prior to its consideration by the Chief of Staff. The Assistant Secretary of War then wrote a lengthy memorandum for that purpose but, on 10 June 1944, returned all the papers to the ACofS G-2 expressing a desire to talk over the matter again after Gen. Bissell had read his contemplated remarks. Shortly thereafter, the ACofS G-2 conferred with Col. Forney about the study and made the following points:

a. The staff study was accurate and the action recommended was justified.

b. It was inexpedient to raise the question at the present time due to the possibility of offending Russia and thus bringing about action on the part of that country unfavorable to the war effort.

c. It was inexpedient to risk publicity on this question in an election year.

d. There could be no retraction officially of the War Department's long standing attitude toward communism.

e. That some means had to be found to settle the question in the field that would not embarrass the War Department.⁹¹

In view of these conflicting factors as mentioned by the ACofS G-2, Col. Forney suggested that the staff study should be quietly dropped and informal steps taken to prevent at least for the time being any Communist cases arising in the field which might embarrass the War Department.⁹² With Gen. Bissell approving this course of action, Col. Forney then proceeded to contact the principal intelligence officers of the three major commands and orally explained the newly adopted policy to them. Although this informal system did work out fairly well for a few months, by the latter part of November 1944, it was plainly apparent that the lower echelons were again becoming restive at the lack of support being provided by the War Department in their Communist security cases.⁹³ On 23 November 1944, therefore, Gen. Bissell decided to reopen the question with McCloy and to recommend the issuance of official orders for maintaining a "desired status in this matter."⁹⁴

McCloy agreed that it was now practicable to publish formal instructions to the Army on the subject of Communists but he remained dissatisfied with some of the wording contained in the letter submitted by the ACofS G-2 to accomplish this purpose. He wished to assure that the basic consideration for taking any security action was not the propriety of the individual's opinions but his loyalty to the United States, including a willingness to accept combat duty.⁹⁵ Hence, despite Gen. Bissell's forceful argument that the War Department should conform to a decision of the Attorney General and regard Communism per se as constituting disaffection,⁹⁶ the instructions which were finally issued to the Army on 30 December 1944, consisted mainly of the following statement written word for word by McCloy himself:

The basic consideration is not the propriety of the individual's opinions, but his loyalty to the United States. Membership in, or strict adherence to the doctrines of, the Communist Party organization is evidence that the individual is subject to influences that may tend to divide his loyalty. However, many good soldiers are subject to conflicting influences. Such influences must be appraised in the light of the individual's entire record. No action will be taken under the reference letter that is predicated on membership is or adherence to the doctrines of the Communist Party unless there is a specific finding that the individual involved has a loyalty to the Communist Party as an organization which overrides his loyalty to the United States. No such finding should be based on the mere fact that the individual's views on various social questions have been the same as the views that the Communist Party may have advanced. Except in clear cases, no action should be taken against persons who are being trained for combat assignments and have demonstrated a high degree of ability to serve the United States in that manner, including a willingness to accept combat duty.⁹⁷

The order specifying this more liberal War Department attitude toward Communists and fellow travelers in the US Army was classified SECRET but it soon leaked to the press. During the national uproar which followed, the entire matter came under close scrutiny by a House Committee on Military Affairs authorized to study progress of the war effort. On 22 February 1945, Maj. Gen. James A. Ulio, the Adjutant General, acknowledged existence of the new policy in a letter addressed to Representative George A. Dondero of Michigan. He claimed, however, that known or suspected Communist personnel had not proved to be any source of difficulty and were loyally supporting the war effort, so there seemed little justification for not using their services to the utmost of individual capacities.⁹⁸ Both the Assistant Secretary of War and ACofS G-2 subsequently appeared before this same Congressional Committee in defending the position taken by the War Department. Although a preliminary report of the Committee as published early in July 1945 was extremely critical of that position, no important change occurred in it for the rest of the wartime period.⁹⁹

Thus, at the war's end, the ACofS G-2 not only had been deliberately divested of all his operational counterintelligence functions but also was no longer able to control the basis terms of Army security policies. Moreover, because the departmental military intelligence agency was unfavorably organized to collect, evaluate, and disseminate domestic intelligence information, he could not properly execute his inherent mission of keeping the Chief of Staff fully informed on Army security matters. With it becoming increasingly clear to most of the departmental intelligence authorities that no effective dividing line could now be drawn between their foreign and domestic counterintelligence responsibilities, this imposed handicap held especially serious implications for the future.

Nevertheless, it must be granted that a definite need had been shown early in the war for decentralizing the departmental counterintelligence effort within the zone of interior and permitting other staff groups or field agencies to undertake as many operational security tasks as possible. Neither could there be any convincing argument advanced against the generally accepted thesis that each individual commander should remain free to provide for the military security of his own command. The national security clearance program had rapidly developed into such a cumbersome and complicated process that the departmental intelligence officials could never hope to keep up with it under a system of centralized control. They were soon bogged down, therefore, in a bewildering array of individual security clearance procedures to the extent that they could seldom find time for performing counterintelligence duties of a more fundamental nature.

The principal trouble lay not so much in recognizing that a difficult functional problem did exist but more in the various courses of action which were adopted by higher authority to meet it. Since outside influences and personnel economy considerations were often allowed to carry an overriding weight in reaching major decisions on military security matters, it became practically impossible to develop an effectual system for protecting the Army from harmful subversion. Besides, back of the enforced curtailment of departmental counterintelligence operations as dictated by many self-appointed experts holding no detailed intelligence background, lurked the readily perceptible outline of a Communist inspired drive aimed at eliminating all MID (MIS) activity within the domestic intelligence field regardless of consequences. The combined result was a departmental agency inadequately equipped to fulfill its essential counterintelligence responsibilities during most of World War II. With well-organized subversive elements representing both an actual and potential danger to ultimate military success, this was certainly not the proper time to reduce MID (MIS) capabilities for exposing or blocking them, yet that is exactly what did take place.

FBI Wartime Operations

A review of FBI intelligence work during World War II would not be complete without brief mention of several other activities. In 1940, President Roosevelt authorized the FBI with the approval of the Attorney General to conduct electronic surveillance of "persons suspected of subversive activities against the Government of the United States, including suspected spies."¹⁰⁰ The Federal Communications Commission denied the FBI access before the war to international communications on the grounds that such intercepts violated the Federal Communications Act of 1934.¹⁰¹ However, military intelligence had secretly formed a Signals Intelligence Service to intercept international radio communi-cations, and Naval intelligence arranged with RCA to get copies of Japanese cable traffic to and from Hawaii, although other cable companies used by the Japanese refused to violate the statute against interception before Pearl Harbor.¹⁰² Moreover, the FBI developed "champering" or surreptitious mail opening techniques, and the practice of surreptitious entry was used by the FBI in black bag operations.¹⁰³

Several basic internal memoranda and agreements spelled out the policies governing the relationships between FBI and military intelligence in this period. The military concentrated more heavily on what it perceived as potential threats to the Armed Forces, while the FBI developed a wider and more sophisticated approach to the gathering of intelligence about "subversive activities" generally. An example of the Army's policy was an intelligence plan approved in 1936 for the Sixth Corps Area, which covered Illinois, Michigan, and Wisconsin. It called for the collection and indexing of the names of several thousand groups, ranging from the American Civilian Liberties Union to pacifist student groups alleged to be Communist-dominated. Sources of information were to be the Justice Department, the Treasury Department, the Post Office Department, local state police, and private intelligence bureaus employed by businessmen to keep track of organized labor.¹⁰⁴ The joint FBI-military intelligence plan prepared in 1938 stated that the Office of Naval Intelligence and the Military Intelligence Division (G-2) were concerned with "subversive activities that undermine the loyalty and efficiency" of the Army and Navy personnel or civilians involved in military construction and maintenance. Since ONI and MID lacked trained investigators, they relied before the war on the FBI "to conduct investigative activity in strictly civilian matters of a domestic character." The three agencies exchanged information of interest to one another, both in the field and at headquarters in Washington.¹⁰⁵

The FBI, ONI, and MID entered into a Delimitation Agreement in June 1940 pursuant to the authority of President Roosevelt's 1939 directives. As revised in February 1942, the Agreement covered "investigation of all activities coming under the categories of espionage, counterespionage, subversion, and sabotage." It provided that the FBI would be responsible for all investigations "involving civilians in the United States" and for keeping ONI and MID informed on "important developments…including the names of individuals definitely known to be connected with subversive activities."¹⁰⁶ As a result of this Agreement and prior cooperation, military intelligence could compile extensive files on civilians from the information disseminated to it by the FBI. For example, in May 1939 the MID transmitted a request from the Ninth Corps Area on the West Coast for the names and locations of "alien and disloyal American sabotage and espionage organizations" planning to take advantage of wartime hardships to overthrow the Government, "citizens opposed to our participation in war and conducting antiwar pro-paganda," and potential enemy nationals who should be interned in case of an "international emergency."¹⁰⁷

Moreover, despite the FBI-military agreement, the Counter Intelligence Corps of the Army (CIC) gradually undertook wider investigation of civilian "subversive activity" as part of a preventive security program, which used voluntary informants and investigators to collection information.¹⁰⁸

The FBI developed a substantial foreign intelligence operation in Latin America during the war. On June 24, 1940, President Roosevelt issued a directive assigning foreign intelligence responsibilities in the Western Hemisphere to a Special Intelligence Service (SIS) of the FBI. SIS furnished the State Department, the military, and other governmental agencies with intelligence regarding "financial, economic, political, and subversive activities detrimental to the security of the United States." SIS assisted several Latin American countries "in training police and organizing antiespionage and antisabotage defenses." When another foreign intelligence agency, the Office of Strategic Services (OSS), was established in 1941, it sought to enter the Latin American field until President Roosevelt made clear that jurisdiction belonged to SIS.¹⁰⁹

There was constant friction throughout the war between the FBI and the OSS. Despite the President's order, OSS operatives went to Latin America. Within the United States, OSS officers are reported to have secretly entered the Spanish Embassy in Washington to photograph documents. The FBI Director apparently learned of the operation, but instead of registering a protest he waited until OSS returned a second time and then had FBI cars outside turn on their sirens. When OSS protested to the White House, the President's aides reportedly ordered the embassy project turned over to the FBI.¹¹⁰ A similar incident occurred in 1945 when OSS security officers illegally entered the offices of Amerasia magazine in search of confidential Government documents.¹¹¹ This illegal entry made it impossible for the Justice Department to prosecute vigorously on the basis of the subsequent FBI investigation, for fear of exposing the "taint," which started the inquiry.

Director Hoover's most serious conflict with OSS involved a weighing of the respective needs of foreign intelligence and internal security. In 1944, the head of OSS, William Donovan, negotiated an agreement with the Soviet Union for an exchange of missions between OSS and the NKVD (the Soviet intelligence and secret police organization). Both the American military representative in Moscow and Ambassador W. Averell Harriman hoped the exchange would improve Soviet-American relations.¹¹² When Hoover learned of the plan, he warned Presidential aide Harry Hopkins of the potential danger of espionage if the NKVD were "officially authorized to operate in the United States where quite obviously it will be able to function without any appropriate restraint upon its activities." The Director also advised Attorney General Biddle that secret NKVD agents were already "attempting to obtain highly confidential information concerning War Department secrets." Thus, the exchange of intelligence missions was blocked.¹¹³ The FBI was also greatly concerned about the OSS policy of employing American Communists to work with the anti-Nazi underground in Europe, although OSS did dismiss some persons suspected of having links with Soviet intelligence.¹¹⁴

The FBI was not withdrawn from the foreign intelligence field until 1946. At the end of the war President Truman abolished the Office of Strategic Services and dispersed its functions to the War and State Departments. The FBI proposed expanding its wartime Western Hemisphere intelligence systems to a worldwide basis, with the Army and Navy handling matters of importance to the military. Instead, the President formed a National Intelligence Authority with representatives of the State, War, and Navy Departments to direct the foreign intelligence activities of a Central Intelligence Group. The Central Intelligence Group was authorized to conduct all foreign espionage and counterespionage operations in June 1946. Director Hoover immediately terminated the operations of the FBI's Special Intelligence Service, and in some countries SIS officers destroyed their files rather than transfer them to the new agency.¹¹⁵

CONTINUE CHAPTER 1