Legacy of Ashes (The History of the C.I.A.) Read online

  On March 12, 1947, Truman made that speech, warning a joint session of Congress that the world would face disaster unless the United States fought communism abroad. Hundreds of millions of dollars had to be sent to shore up Greece, now “threatened by the terrorist activities of several thousand armed men,” the president said. Without American aid, “disorder might spread throughout the Middle East,” despair would deepen in the nations of Europe, and darkness could descend on the free world. His credo was something new: “I believe that it must be the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures.” Any attack launched by an American enemy in any nation of the world was an attack on the United States. This was the Truman Doctrine. Congress rose for a standing ovation.

  Millions of dollars started flowing to Greece—along with warships, soldiers, guns, ammunition, napalm, and spies. Soon Athens became one of the biggest American intelligence posts in the world. Truman’s decision to fight communism overseas was the first clear direction that American spies received from the White House. They still lacked a strong commander. General Vandenberg was counting the days until he could take over the new air force, but he delivered secret testimony to a handful of members of Congress in his last days as director of central intelligence, saying that the nation faced foreign threats as never before. “The oceans have shrunk, until today both Europe and Asia border the United States almost as do Canada and Mexico,” he said, in a turn of phrase repeated, eerily, by President Bush after 9/11.

  In World War II, Vandenberg said, “we had to rely blindly and trustingly on the superior intelligence system of the British”—but “the United States should never have to go hat in hand, begging any foreign government for the eyes—the foreign intelligence—with which to see.” Yet the CIA would always depend on foreign intelligence services for insight into lands and languages it did not understand. Vandenberg ended by saying it would take at least five more years to build a professional cadre of American spies. The warning was repeated word for word half a century later, in 1997, by Director of Central Intelligence George J. Tenet, and Tenet said it again upon resigning in 2004. A great spy service was always five years over the horizon.

  Vandenberg’s successor, the third man to hold the post in fifteen months, was Rear Admiral Roscoe Hillenkoetter, sworn in on May Day 1947. Hilly, as everyone called him, was a miscast man. He exuded insignificance. Like his predecessors, he never wanted to be director of central intelligence—“and probably never should have been,” says a CIA history of the era.

  On June 27, 1947, a congressional committee held secret hearings that led to the formal creation of the CIA at summer’s end. It spoke volumes that not Hillenkoetter but Allen Dulles—a lawyer in private practice—was selected to conduct a secret intelligence seminar for a few select members of Congress.

  Allen Dulles had an “Onward, Christian Soldiers” sense of patriotic duty. He was born into the best family of Watertown, New York, in 1893. His father was the town’s Presbyterian pastor; his grandfather and his uncle both had served as secretary of state. The president of his college, Princeton, was Woodrow Wilson, later to be president of the United States. Dulles had been a junior diplomat after World War I and a white-shoe Wall Street lawyer in the Depression. By virtue of his carefully cultivated reputation as an American master spy, built as the OSS chief in Switzerland, he was regarded by the Republican leadership as the director of central intelligence in exile, in the way that his brother John Foster Dulles, the party’s principal foreign policy spokesman, was seen as a shadow secretary of state. Allen was genial in the extreme, with twinkling eyes, a belly laugh, and an almost impish deviousness. But he was also a duplicitous man, a chronic adulterer, ruthlessly ambitious. He was not above misleading Congress or his colleagues or even his commander in chief.

  Room 1501 of the Longworth Office Building was sealed off by armed guards; everyone inside was sworn to secrecy. Puffing away on his pipe, a tweedy headmaster instructing unruly schoolboys, Allen Dulles described a CIA that would be “directed by a relatively small but elite corps of men with a passion for anonymity.” Its director would require “judicial temperament in high degree,” with “long experience and profound knowledge”—a man not unlike Allen Dulles. His top aides, if they were military men, would “divest themselves of their rank as soldiers, sailors or airmen and, as it were, ‘take the cloth’ of the intelligence service.”

  Americans had “the raw material for building the greatest intelligence service in the world,” Dulles said. “The personnel need not be very numerous”—a few hundred good men would do the trick. “The operation of the service must neither be flamboyant nor over-shrouded in the mystery and abracadabra which the amateur detective likes to assume,” he reassured the members of Congress. “All that is required for success is hard work, discriminating judgment, and common sense.”

  He never said what he really wanted: to resurrect the wartime covert operations of the OSS.

  The creation of a new American clandestine service was at hand. President Truman unveiled the new architecture for the cold war by signing the National Security Act of 1947 on July 26. The act created the air force as a separate service, led by General Vandenberg, and a new National Security Council was to be the White House switchboard for presidential decisions. The act also created the office of secretary of defense; its first occupant, James Forrestal, was ordered to unify the American military. (“This office,” Forrestal wrote a few days later, “will probably be the greatest cemetery for dead cats in history.”)

  And, in six short and sketchy paragraphs, the act gave birth to the Central Intelligence Agency on September 18.

  The CIA was born with crippling defects. From the outset, it faced fierce and relentless opponents within the Pentagon and the State Department—the agencies whose reports it was supposed to coordinate. The agency was not their overseer, but their stepchild. Its powers were poorly defined. No formal charter or congressionally appropriated funds would come for nearly two more years. The CIA’s headquarters would survive until then on a subsistence fund maintained by a few members of Congress.

  And its secrecy would always conflict with the openness of American democracy. “I had the gravest forebodings about this organization,” wrote Dean Acheson, soon to be secretary of state, “and warned the President that as set up neither he, the National Security Council, nor anyone else would be in a position to know what it was doing or to control it.”

  The National Security Act said nothing about secret operations overseas. It instructed the CIA to correlate, evaluate, and disseminate intelligence—and to perform “other functions and duties related to intelligence affecting the national security.” Embedded in those eleven words were the powers that General Magruder had preserved in his end run around the president two years before. In time, hundreds of major covert actions—eighty-one of them during Truman’s second term—would be driven through this loophole.

  The conduct of covert action required the direct or implied authority of the National Security Council. The NSC in those days was President Truman, the secretary of defense, the secretary of state, and the military chiefs. But it was an evanescent body. It seldom convened, and when it did, Truman was rarely at the table.

  He came to the first meeting on September 26, as did a very wary Roscoe Hillenkoetter. The CIA’s counsel, Lawrence Houston, had warned the director against the growing calls for covert action. He said the agency had no legal authority to conduct them without the express consent of Congress. Hilly sought to limit the CIA’s overseas missions to the gathering of intelligence. He failed. Momentous decisions were being made in secret, often over breakfast on Wednesdays at Secretary of Defense Forrestal’s house.

  On September 27, Kennan sent Forrestal a detailed paper calling for the establishment of a “guerrilla warfare corps.” Kennan thought that although the American people might never approve of such methods, “it might b
e essential to our security to fight fire with fire.” Forrestal fervently agreed. Together, they set the American clandestine service in motion.

  “THE INAUGURATION OF ORGANIZED POLITICAL WARFARE”

  Forrestal called Hillenkoetter into the Pentagon to discuss “the present widespread belief that our Intelligence Group is entirely inept.” He had good reason. The mismatch between the CIA’s capabilities and the missions it was called upon to carry out was staggering.

  The new commander of the CIA’s Office of Special Operations, Colonel Donald “Wrong-Way” Galloway, was a strutting martinet who had reached the apex of his talent as a West Point cavalry officer teaching equestrian etiquette to cadets. His deputy, Stephen Penrose, who had run the Middle East division of the OSS, resigned in frustration. In a bitter memo to Forrestal, Penrose warned that “CIA is losing its professionals, and is not acquiring competent new personnel,” at the very time “when, as almost never before, the government needs an effective, expanding, professional intelligence service.”

  Nevertheless, on December 14, 1947, the National Security Council issued its first top secret orders to the CIA. The agency was to execute “covert psychological operations designed to counter Soviet and Soviet-inspired activities.” With this martial drum roll, the CIA set out to beat the Reds in the Italian elections, set for April 1948.

  The CIA told the White House that Italy could become a totalitarian police state. If the communists won at the ballot box, they would seize “the most ancient seat of Western Culture. In particular, devout Catholics everywhere would be gravely concerned regarding the safety of the Holy See.” The prospect of a godless government surrounding the pope at gunpoint was too awful to contemplate. Kennan thought that a shooting war would be better than letting the communists take power legally—but covert action modeled on communist techniques of subversion was the next best choice.

  The CIA’s F. Mark Wyatt, who cut his teeth on this operation, remembered that it began weeks before the National Security Council formally authorized it. Congress, of course, never gave a go-ahead. The mission was illegal from the start. “In CIA, at headquarters, we were absolutely terrified, we were scared to death,” Wyatt said, and with good reason. “We were going beyond our charter.”

  Cash, lots of it, would be needed to help defeat the communists. The best guess from the CIA’s Rome station chief, James J. Angleton, was $10 million. Angleton, partly reared in Italy, had served there with the OSS and stayed on; he told headquarters that he had penetrated the Italian secret service so deeply that he practically ran it. He would use its members as a bucket brigade to distribute the cash. But where would the money come from? The CIA still had no independent budget and no contingency fund for covert operations.

  James Forrestal and his good friend Allen Dulles solicited their friends and colleagues from Wall Street and Washington—businesspeople, bankers, and politicians—but it was never enough. Forrestal then went to an old chum, John W. Snyder, the secretary of the treasury and one of Harry Truman’s closest allies. He convinced Snyder to tap into the Exchange Stabilization Fund set up in the Depression to shore up the value of the dollar overseas through short-term currency trading, and converted during World War II as a depository for captured Axis loot. The fund held $200 million earmarked for the reconstruction of Europe. It delivered millions into the bank accounts of wealthy American citizens, many of them Italian Americans, who then sent the money to newly formed political fronts created by the CIA. Donors were instructed to place a special code on their income tax forms alongside their “charitable donation.” The millions were delivered to Italian politicians and the priests of Catholic Action, a political arm of the Vatican. Suitcases filled with cash changed hands in the four-star Hassler Hotel. “We would have liked to have done this in a more sophisticated manner,” Wyatt said. “Passing black bags to affect a political election is not really a terribly attractive thing.” But it worked: Italy’s Christian Democrats won by a comfortable margin and formed a government that excluded communists. A long romance between the party and the agency began. The CIA’s practice of purchasing elections and politicians with bags of cash was repeated in Italy—and in many other nations—for the next twenty-five years.

  But in the weeks before the election, the communists scored another victory. They seized Czechoslovakia, beginning a brutal series of arrests and executions that lasted for nearly five years. The CIA station chief in Prague, Charles Katek, worked to deliver about thirty Czechs—his agents and their families—over the border to Munich. Chief among them was the head of Czech intelligence. Katek arranged to have him smuggled out of the country, stuffed between the radiator and the grille of a roadster.

  On March 5, 1948, while the Czech crisis was exploding, a terrifying cable came to the Pentagon from General Lucius D. Clay, chief of American occupation forces in Berlin. The general said he had a gut feeling that a Soviet attack could come at any minute. The Pentagon leaked the cable and Washington was swamped by fear. Though the CIA’s Berlin base sent a report reassuring the president that there was no sign of any impending attack, no one listened. Truman went before a joint session of Congress the next day warning that the Soviet Union and its agents threatened a cataclysm. He demanded and won immediate approval of the great undertaking that became known as the Marshall Plan.

  The plan offered billions of dollars to the free world to repair the damage done by the war and to create an American economic and political barricade against the Soviets. In nineteen capitals—sixteen in Europe, three in Asia—the United States would help rebuild civilization, with an American blueprint. George Kennan and James Forrestal were among the plan’s principal authors. Allen Dulles served as a consultant.

  They helped devise a secret codicil that gave the CIA the capability to conduct political warfare. It let the agency skim uncounted millions of dollars from the plan.

  The mechanics were surprisingly simple. After Congress approved the Marshall Plan, it appropriated about $13.7 billion over five years. A nation that received aid from the plan had to set aside an equivalent sum in its own currency. Five percent of those funds—$685 million all told—was made available to the CIA through the plan’s overseas offices.

  It was a global money-laundering scheme that stayed secret until well after the cold war ended. Where the plan flourished in Europe and in Asia, so would American spies. “We’d look the other way and give them a little help,” said Colonel R. Allen Griffin, who ran the Marshall Plan’s Far East division. “Tell them to stick their hand in our pocket.”

  Secret funds were the heart of secret operations. The CIA now had an unfailing source of untraceable cash.

  In a top secret paper sent to perhaps two dozen people at the State Department, the White House, and the Pentagon on May 4, 1948, Kennan proclaimed “the inauguration of organized political warfare” and called for the creation of a new clandestine service to conduct covert operations worldwide. He stated clearly that the Marshall Plan, the Truman Doctrine, and the CIA’s covert operations were all interlocking parts of a grand strategy against Stalin.

  The money that the CIA siphoned from the Marshall Plan would finance a network of false fronts—a façade of public committees and councils headed by distinguished citizens. The communists had front organizations all over Europe: publishing houses, newspapers, student groups, labor unions. Now the CIA would set up its own. Those fronts would recruit foreign agents—the émigrés of Eastern Europe, refugees from Russia. These foreigners, under CIA control, would create underground political groups in the free nations of Europe. And the underground would pass the flame to “all-out liberation movements” behind the iron curtain. If the cold war turned hot, the United States would have a fighting force on the front lines.

  Kennan’s ideas caught on quickly. His plans were approved in a secret order from the National Security Council on June 18, 1948. NSC directive 10/2 called for covert operations to attack the Soviets around the world.

  The strik
e force Kennan conceived to carry out that secret war received the blandest name imaginable—the Office of Policy Coordination (OPC). It was a cover, serving to veil the group’s work. It was placed inside the CIA, but its chief would report to the secretaries of defense and state, because the director of central intelligence was so weak. The State Department wanted it to carry out “rumor-spreading, bribery, the organization of non-communist fronts,” according to a National Security Council report declassified in 2003. Forrestal and the Pentagon wanted “guerrilla movements…underground armies…sabotage and assassination.”

  “ONE MAN MUST BE BOSS”

  The biggest battleground was Berlin. Frank Wisner worked ceaselessly to shape American policy in the occupied city. He urged his superiors at the State Department to undertake a stratagem aimed at subverting the Soviets by introducing a new German currency. Moscow was sure to reject the idea, so the postwar power-sharing agreements in Berlin would collapse. A new political dynamic would push the Russians back.

  On June 23, the Western powers instituted the new currency. In immediate response, the Soviets blockaded Berlin. As the United States mounted an airlift to beat the blockade, Kennan spent long hours in the crisis room, the double-locked overseas communications center on the fifth floor of the State Department, agonizing as cables and telexes flashed in from Berlin.

  The CIA’s Berlin base had been trying unsuccessfully for more than a year to obtain intelligence on the Red Army in occupied Germany and Russia, to track Moscow’s progress in nuclear weapons, fighter jets, missiles, and biological warfare. Still, its officers had agents among Berlin’s police and politicians—and most important, a line into the Soviet intelligence headquarters at Karlshorst in East Berlin. It came from Tom Polgar, the Hungarian refugee who was proving himself one of the CIA’s best officers. Polgar had a butler, and his butler had a brother working for a Soviet army officer in Karlshorst. Creature comforts such as salted peanuts flowed from Polgar to Karlshorst. Information flowed back. Polgar had a second agent, a teletypist in the Soviet liaison section at the Berlin police headquarters. Her sister was the mistress of a police lieutenant who was close to the Russians. The lovers met in Polgar’s apartment. “That brought me fame and glory,” he remembered. Polgar delivered crucial intelligence that reached the White House. “I was completely certain, in the Berlin blockade, that the Soviets would not move,” he said. The CIA’s reports never wavered from that assessment: neither the Soviet military nor their newly created East German allies were readying for battle. The Berlin base did its part to keep the cold war cold in those months.