Krueger's Men (23 page)

37 When the Soviet Union was starved: W. G. Krivitsky, “When Stalin Counterfeited Dollars,”
Saturday Evening Post,
September 30, 1939, 8ff.

37 the rogue nation North Korea: John K. Cooley, “The Rogue Money Printers of Pyongyang,”
International Herald Tribune,
October 24, 2005, 8. Mertin Fackler, “North Korean Counterfeiting Complicates Nuclear Crisis,”
New York Times,
January 29, 2006, 3.

40 dropped forged German ration books: [probably H. Merle] Cochran to Henry Morgenthau, Jr., quoting Britain’s Treasury representative in Washington,
Morgenthau Diaries
(1938–1945), vol. 306, leaf 4, FDRL. Lord Lothian, unsigned memorandum (prepared by Gerald Pinsent, British Treasury representative and financial counselor of the British embassy in Washington, according to subsequent memorandum to Morgenthau on September 14, 1940) to Morgenthau, September 12, 1940, ibid., leaves 180–82.

40 In 1943 Radio Berlin reported: “Berlin Raiders Accused of Adding Insult to Injury,”
New York Times,
May 29, 1943, 4. See also Auckland,
Air-dropped Propaganda Currency:
“a directive issued by the War Cabinet to the British/American psychological teams stated that on no account were German banknotes of any description to be completely forged.” During the war Auckland had actually encountered the counterfeits in North Africa (see p. 137 of this book). Afterward he was the editor of
Falling Leaf,
the journal of the PsyWar Society, and presumably had seen this secret directive or was told about it. The psychological warfare units nevertheless forged the face of German bills, and on the reverse printed propaganda slogans, sometimes bawdy (“Ich bin Hitlers Arschwisch…”).

41 Waley had the wit to put himself: So did the thriller writer Margery Allingham, who plotted her 1941 novel
Traitor’s Purse
(published in the United States as
The Sabotage Murder Mystery
) around Nazi counterfeits spread through Britain to destabilize the economy.

41 “Perhaps it is a fairy story”: Waley to Catterns, November 27, 1939, B/E PW 17/5.

41 In May 1939, as war loomed: Sir Frederick Phillips exchange with Catterns of Bank of England, 19 May 1939 et seq., PRO T 160/1344.

41 “could be silent in several languages”: Keynes’s obituary tribute to his colleague in the
Times
of London, quoted in Skidelsky, 146.

41 torpid superiority: When a wealthy American Anglophile proposed placing a Foucault pendulum in the well of the Bank in 1939 as a symbol of permanence, Edward Holland-Martin, an executive director who went by the nickname of Ruby, commented, “I am not quite sure what a Foucault pendulum is.” Correspondence of Edward Holland-Martin, B/E ADM 245.

41 the Bank had actually printed up excellent counterfeits: Herbert G. de Fraine of the Bank’s printing plant, quoted by Bloom, “Uncle Sam,” 350. Maurice (later Lord) Hankey, secretary to the War Cabinet, wrote in his diary on January 25, 1916, that an official identified only as Montagu — presumably Edwin Montagu, an MP then serving in the subcabinet post of financial secretary to the Treasury — “called on me to explain a scheme of his for placing forged German bank notes in circulation, in which I promised to try and help. It appears that the Governor of the Bank of England, with the knowledge of the Chancellor of the Exchequer and the Prime Minister, has produced some marvelous forgeries. It seems rather a dirty business, but the Germans deserve it and Napoleon used to do it. There is some reason to suspect that the Huns have played this game on us.” On January 27, Hankey also sought help from the British Admiralty’s intelligence chief in the scheme, a Captain Hall. Quoted in Roskill,
Hankey,
vol. 1, 246.

42 fear of public embarrassment if the device failed: Byatt,
Promises to Pay,
137.

42 slightly more than half of all notes in circulation:
Bank of England Quarterly Bulletin,
June 1967.

43 K. O. Peppiatt — who, like the Treasury’s Waley:
Who Was Who
and Peppiatt’s obituary notice in
The Old Lady,
September 1983, 144. This obituary in the Bank’s staff magazine was signed L. K. O’B, for Leslie O’Brien, Peppiatt’s successor as chief cashier and later the Bank’s governor, ennobled as Lord O’Brien. His obituary is also the source of the description of Peppiatt’s cool manner.

43 the cleverest man in England: See the author’s chapter on Keynes in
The Horizon Book of Makers of Modern Thought.

43 “always absolutely charming, always absolutely wrong”: Skidelsky, 554.

45 The chancellor recounted the conversation: Untitled memo initialed by Simon, April 6, 1940.

45 kill any other newspaper stories: On December 5, 1939, the Bank of England drafted a notice to newspaper editors, saying: “No information should be published without submission to censorship which is likely to undermine public confidence in any notes which are legal tender in the UK. In particular it should not be stated, without official sanction, or suggested that any series of currency or other notes are forgeries.” The very existence of such “D-notices” — Defense Notices — is secret even in peacetime, so it could not be ascertained whether one was actually issued, but official behavior such as Simon’s indicated that some kind of notice was in force. B/E ADM, Holland-Martin correspondence, p. 416A.

45 Peppiatt refused the offer of the French police: Copy of Peppiatt letter dated 9 Feb. 1940, Forged Bank of England Notes, PRO T 401/5.

46 a plea from Vienna for help in finding refuge: Notes, Printing, Coin and Silver, 1935–47, Chief Cashier’s Policy Files, B/E C 40/889.

46 the Bank banned the repatriation of its own banknotes:
Promises to Pay,
p. 142. Bank of England Archives G14/27 Committee of Treasury Files: Draft Notice, dated December 1939.

C
HAPTER
4: N
OBEL
P
RIZE
–
WINNING
I
DEAS

48 had already been received in the Oval Office:
Steinbeck: A Life in Letters,
206–7.

49 Letter from Steinbeck to Roosevelt: President’s Official File (OF)3858, Steinbeck, John, 1939–1940, FDRL.

49 James Rowe: Ibid.

50 a twenty-minute meeting with Roosevelt: White House Stenographer’s Diaries, 12 September 1940; White House Usher’s Diaries, 12 September 1940, FDRL.

50 Steinbeck’s highly dramatized version: Steinbeck, “The Secret Weapon We Were AFRAID to Use,” 9–10. At least Steinbeck did not make the mistake of putting Roosevelt in a wheelchair. The president, whose legs were paralyzed by polio, moved around the White House in a wheelchair, but in the Oval Office he was lifted by his aides into an ordinary desk chair. Curtis Roosevelt (the president’s grandson), communication to the author.

50 addressed them as Uncle Henry and Aunt Elinor: Ibid.

51 Also at the meeting was Herbert G. Gaston: Gaston, confidential memorandum to Henry Morgenthau, September 12, 1940,
Morgenthau Diaries,
vol. 305, pp. 116–17 (reel 83), FDRL.

52 blunt when the occasion called for it: During the first two desperate years of the war, Britain spent almost 90 percent of its gold and dollar reserves, and Churchill knew he could obtain financing only from the United States. Lord Lothian, returning in October 1940 from London with instructions to strike a deal with Washington, lost no time in going public. Deplaning at New York’s LaGuardia Airport, he greeted the waiting American reporters: “Well, boys, Britain’s broke. It’s your money we want.” Skidelsky, 96; chart of depleted reserves, 134. The precise figures for the declining reserves were £519 million in September 1939 at the start of the war, and £69 million on its second anniversary, September 1941, which was close to the low point of World War II. In dollars, at the official rate of $4.03 to the pound, that represented a collapse of Britain’s reserves from $2.09 billion to $279 million.

52 memorandum prepared by Gerald Pinsent: Morgenthau-Lothian exchange and Pinsent memo, September 12 and 16, 1940,
Morgenthau Diaries,
vol. 306, 179–82 (reel 82) FDRL.

54 Morgenthau quickly wrote to thank: Henry Morgenthau Jr. to Philip Kerr [Marquess of Lothian], British ambassador to the United States, September 16, 1940,
Morgenthau Diaries,
vol. 206, 179–82 (reel 84) FDRL.

54 “a deadly little plan”: Steinbeck, undated letter to Archibald MacLeish, quoted in
Steinbeck,
212. (The original was not found in MacLeish’s papers at the Library of Congress or in the MacLeish collection at Greenfield Community College in Greenfield, Mass.)

54 The author would later encounter the president: Cliff Lewis and Carroll Britch, eds.,
Rediscovering Steinbeck: Revisionist Views of His Art, Politics, and Intellect
(Lewiston, N.Y.: Edwin Mellen Press, 1989), 194 et seq. Cliff Lewis,
Steinbeck: The Artist as FDR Speechwriter.
For minority rights, see Jonathan Daniels,
White House Witness, 1942–45
(New York: Doubleday, 1975), 234.

54 dismissed him as a “spluttering” moneybags: Steinbeck, “The Secret Weapon.”

55 Central Intelligence Agency had the idea: Financial measures “would include attempts to dislocate the enemy economy through… dumping of counterfeit currency to promote inflation, etc.” NARA CIA Crest Database, CIA-RDP79-01084A00100050002-1 [declassified June 13, 2000], p. E-6. “Foreign Economic Intelligence Requirements Relating to the National Security.”

55 “Know Your Money” campaign: “Secret Service To View Fake Money Films,”
Washington Post,
January 8, 1940, 1.

55 “sometime soon Germany and Japan may try to panic”:
Life,
August 24, 1942, 66.

55 sent the German chargé d’affaires, Hans Thomsen: Pierrepont Moffatt, Chief, Division of European Affairs, memorandum of conversation with Dr. Hans Thomsen, German chargé d’affaires ad interim, January 26, 1940, NARA, RG 59, Central Decimal Files (1940–44) 811.5158/2612, box 3916.

55 a report by the Turkish ambassador: Letter from the Turkish Ambassador to the United States by Ambassador Mehmet Munir Ertegün to the Office of the Adviser on International Economic Affairs, April 3, 1940, ibid., 811.5158/2630. In 1947, Ertegün’s twenty-four-year-old son Ahmet founded Atlantic Records in Washington, D.C.

56 reporter called “black bourses”: “Europe Is Nervous Over Bogus Money,”
New York Times,
January 26, 1940, 6.

56 Herschel Johnson’s London memorandum: Herschel Vespasian Johnson II (1894–1966), born in Atlanta and named after an ancestor who was a governor of Georgia, served in the U.S. Army in World War I, and was U.S. minister to Sweden, 1941–46; U.S. ambassador to Brazil, 1948–53. He also served as acting chief of the U.S. mission to the United Nations in its crucial formative years, 1946–48. In 1940 Johnson was chargé d’affaires ad interim, in charge of the U.S. embassy in London following what Roy Jenkins (and many others) called the “unlamented” departure of Joseph P. Kennedy as ambassador. Jenkins,
Churchill: A Biography
(New York/London: Penguin, 2002), 262.

56 the American embassy in London was told curtly: James Clement Dunn, Assistant Secretary of State, to American Embassy in London, Confidential Memorandum (No. 100), April 1, 1940, NARA, RG 59, Central Decimal File 811.5158/2612, box 3916.

56 arrested in neutral Turkey for passing counterfeits: “Turkey Rounds up Counterfeiters in Plot to Debase British Pound,”
New York Times,
January, 2, 1941, 2. London
Evening Standard,
January 2, 1941, copy in B/E C 12/111. Headline and page number obscured.

56 a Chilean diplomat and a number of attractive women: “Chilean Diplomat Vanishes in Turkey,”
New York Times,
January 19, 1941, 16.

57 as high as £100 were circulating in Switzerland: “Forged Bank Notes in Switzerland: Yard Warned,” London
Evening Standard,
January 7, 1941, B/E C 12/111.

57 a typically tut-tutting editorial: “Paper Money in Germany,”
New York Times,
January 11, 1941.

57 another reader, Manfred A. Isserman:
New York Times,
January 30, 1941. Isserman would later serve as an interrogator at the Nuremberg war crimes trials.

57 Private N. E. Cortright of the Weather Squadron: Letter from Cortright [no addressee], December 22, 1941, NARA, RG 226, entry 9, box 28, folder 46. This folder also contains the comments on Cortright’s letter.

58 a letter from a “very able Colorado publisher”: Edwin C. Johnson, Senate Committee on Military Affairs, to William J. Donovan, Coordinator of Information, January 6, 1942; Emile DesPres, interoffice memo to Dr. James P. Baxter re letter from Johnson to Donovan, January 9, 1942, NARA, RG 226, M-1632, roll 23, frames 644–45.

58 These were elaborated in a letter to the president: G. Edward Buxton, Acting Director, OSS Washington Director’s Office, to the president, July 14, 1943, NARA, RG 226, M-1632, roll 3, frames 644–45.

58 permission to drop fake lire: William J. Donovan, Coordinator of Information, Memorandum for the President (No. 269), February 19, 1942, NARA, RG 226, M-1072; Report titled “Historical Instances of Political Counterfeiting,” February 11, 1942, is not attached to the Donovan microfilm copy of his memo; original copy in President’s Secretary’s Files, Subject File: Office of Strategic Services Reports, February 12–20, 1942 (box 148), FDRL.

59 Lovell’s first job was to manufacture: Lovell,
Of Spies and Stratagems,
23–27.

59 a young New York lawyer: Murray L. Gurfein, “Project for a Secret Printing Press,” memorandum to Hugh R. Wilson and Allen W. Dulles, July 13, 1942, NARA, RG 226, entry 92, box 102, folder 22, no. 9373 (Paul Wolf of Washington, D.C., first located the document at the National Archives). Wilson noted that the project “deserves real study.” Gurfein’s memo was passed to David Bruce, soon to be sent to London as chief liaison with British espionage. “Let’s implement it,” wrote Bruce, and they did, since no self-respecting espionage agency could operate without forged passports and similar paraphernalia. Gurfein, then an assistant district attorney working in the office of the racket-busting Thomas E. Dewey, tacked on a supplementary suggestion noting recent “discussion of the possibility of creating artificial inflation in enemy countries through the manufacture and distribution upon a large scale of the enemy’s currency.” He also concluded that introducing counterfeit might be practical in a weak country like Italy, and his contribution to the debate was to suggest funneling it through the black market. (This was around the same time the Nazis returned to their far more serious counterfeiting scheme.) Gurfein would soon enter the armed forces as an intelligence officer. He had a distinguished postwar legal career, first serving as an assistant to Justice Robert Jackson at the Nuremberg War Crimes Trials. In 1971, shortly after being appointed a federal district judge, Gurfein made the historic decision refusing to stop the presses when the Pentagon Papers were first printed by the
New York Times.
His last law clerk was the young Michael Chertoff, himself later a federal judge and secretary of homeland security in the administration of President George W. Bush.