Krueger's Men (4 page)
More problematic was the British watermark, which varied in accordance with the alphanumeric combinations designating each issue of notes during the previous twenty years, the serial number of each individual bill, and the name of the man serving as chief cashier of the Bank of England. But when Langer attempted to figure out the precise relationship of these variables, he failed. Duplicating the blurry British watermarks was also no easy matter. The British sieves had been softened by years of use, while the new German copies left more distinct impressions. It took Langer more than a hundred trials to produce a watermark he found indistinguishable from the British.
The Britannia seal in the upper-left-hand corner, a line drawing of a demure young lady sitting on a throne and surrounded by a classical oval design, proved a similar challenge. The vignette, as numismatists call it, was based on an 1855 drawing by Daniel Maclise, a noted British painter of Victorian times. He gave his subject a girl’s classical innocence, some of which was lost when the Bank’s engravers balanced a crown above her head. At first Langer thought it would be simple to photograph a copy on a zinc plate and etch the lines in acid. He had two cameras, an extendable one with bellows that he had bought and another manufactured by Paul Drews, one of the German precision-engineering firms that were then the envy of the world. The cameraman was a professional named Artur Rau, who photographed five-, ten-, and twenty-pound bills many times over. “But it didn’t work,” Langer recalled. “Hundreds of original notes… were photographed and enlarged (to three times their size)… In each printing none of them looked alike… The first medallions looked in their original size very good; but in the enlargement! The young girl’s face looked like an old woman’s. It was as if it were hexed.”
After weeks of trials, Langer found an experienced engraver in his late sixties named Walter Ziedrich, who made what looked like an exact copy after six attempts. In the photo studio and the etching, engraving, and galvanizing rooms at Delbrückstrasse, copper plates were prepared and mounted on steel to prevent the delicate lines from blurring in the softer metal. Paper was delivered to the ground floor for printing on a flatbed press, then dried and “aged” by machines so the counterfeit banknotes could be bundled and sent for use. Once the presses got rolling, the shop was put under a foreman named August Petrich, a Nazi Party veteran who ran his own printing business. The civilian technicians at Delbrückstrasse arrived in neat work clothes, some even wearing ties. They proudly posed for photographs of themselves engraving and inking the plates, running the presses, and looking dedicated to the German war effort.
Naujocks thought the notes were to be dropped on Britain just before the expected invasion. But Hermann Goering, the chief of the Luftwaffe, knew very little of the plan, which was actually more grandiose in scope. Its code name, if nothing else, supports that view:
Andreas-Angelegenheit.
This translates literally as the “Andrew Affair” but is more usually referred to as Operation Andreas or Operation Andrew. The reference is to the X-shaped cross of Scotland’s St. Andrew in the British flag, which is overlaid by the cross of England’s St. George. Langer thought that the latter “canceled” the former, obviously not realizing they were meant to join symbolically as Great Britain’s Union Jack. (He ignored the third cross, of Ireland’s St. Patrick.) Although the German original of Langer’s report has not been found, a hurried English translation in 1945 stated: “We wanted to strike through the worth of the pound, thus make its value to nothing.” He explained the basic idea as follows: “Through the production of banknotes a business system [economy] can be ruined, especially if the falsification were so good that it was impossible to differentiate between the counterfeit and the original.” The counterfeiters, he wrote, believed they could help end the war with fewer casualties “through the collapse of Britain’s business.” There is no doubt he was right, at least in theory. If enough counterfeits were circulated to make all pound notes suspect — and it would have taken millions — the British people would have reverted to some primitive form of barter. Even the Bank of England realized that.
It is unthinkable that such a bold plan would have been launched without Hitler’s approval. Langer confirmed that “the Fuehrer personally gave [the] orders.” Others have taken it even further than that, into a realm that is too entertaining to ignore but probably too good to be true. According to the former SS officer Wilhelm Hoettl, Heydrich put the plan in writing and sent it to Hitler. The dictator, Hoettl reported in his 1955 memoir, “minuted in his scratchy hand in the margin of Heydrich’s proposal: ‘Dollars no. We are not at war with the U.S.A.’ and scrawled his name.” This story has been picked up by most authors, but there is no evidence for it anywhere else. Although Hitler’s observation accords with his strategy of surrounding and isolating the United States instead of attacking it from across the sea, writing it down would have been totally out of character — as Hoettl himself admitted. Historians are still searching for Hitler’s written order for the liquidation of European Jewry — also supposedly issued to Heydrich. They will probably never find it. Hitler rarely put any orders on paper; he simply told his adjutants what he wanted, and the orders often got garbled because they were not always clear to begin with. In most cases it was hardly necessary for him to have written anything. His ranting against the Jews, for instance, had been in print since 1925 in
Mein Kampf;
the book was literally the nation’s bible — at weddings, instead of a family Bible, every couple in Germany got a copy — the royalties for which were the basis of Hitler’s fortune. All around him were waiting to execute his every whim. If they were not certain of Hitler’s precise command, an educated guess was usually possible.
Thus, when in January 1942 Heydrich held the infamous conference at Wannsee, the Berlin suburb where the Reich Security Service maintained a guesthouse, his purpose was not to approve the final solution to the Jewish problem, for which he probably needed only a few terrible words; it was instead to coordinate the complex and murderous work of fractious, turf-protecting bureaucracies in carrying out a
Fuehrerbefehl
(leader’s order) and there was only one leader in Nazi Germany. The Finance Ministry conference that had set Operation Andreas in motion in the opening days of the war was another such interagency meeting, through which bureaucracies of all nations put directives in motion. In approving the orders for the counterfeiting operation, just as at Wannsee, only Hitler’s fingerprints are lost to history.
Hoettl later disparaged his own memoir as mere journalism and said that while the background and “some details… are based on actual events,” it had a strong “literary make-up.” He had a good ear for a quote even if he had to put it in someone else’s mouth. The fact is that the first time he ever heard of Operation Andreas was in September 1940, a year after it was given the go-ahead and Alfred Naujocks was already on the way out.
Wilhelm Hoettl was a failed Austrian academic who had parlayed his historian’s knowledge of the Balkans into a job as SS chief of intelligence in Vienna. Through the war and afterward, he was an incorrigible peddler of information to whatever naive secret service would buy it. A 1952 entry in his CIA file bespeaks collective exasperation. One Simon Graham wrote on U.S. Army stationery: “His reports normally consist of a fine cobweb of fact, heavily padded with lies, deceit, conjecture and other false types of information. This organization will have absolutely nothing to do with Dr. Hoettl or any members of his entourage. He is persona non grata to the American, French and British elements in Austria.” But this type of rascal was naturally attracted to Operation Andreas’s honeypot of money and probably helped contribute to its failure.
At this point mythology again muddies the trail. Some accounts include the dramatic story of a young German soldier sent in civilian clothes for a wild week in neutral Zurich, where food was more plentiful than in wartime Berlin. He was carrying a false Swiss passport and a packet of pound notes manufactured at Delbrückstrasse. The Germans tipped off the watchful Swiss about the false passport, hoping they would run a check on the currency. To Delbrückstrasse’s delight, the counterfeits passed. A story in the London
Evening Standard
of January 7, 1941, reported that the Bank of England was consulting with Scotland Yard after the paper’s Geneva correspondent discovered that “the Swiss police are trying to track down a gang of forgers of British notes.” The Swiss were as slow to react as the British. The Swiss Bankers Association did not issue a warning against sterling counterfeits for almost two years. A Bank of England official blithely told the
Standard
that the Bank had not seen any such counterfeits or even heard about them. Two months later the Bank was still nodding, its own guarded account reporting: “By 1 March 1941 a trial parcel had been accepted at a Swiss bank as genuine with, apparently, confirmation obtained from the Bank of England that the numbers etc. tallied with notes still outstanding in the Bank’s registers.” Hardly an eyebrow cocked at the Bank.
All of this should have given the green light for the presses to roll at Delbrückstrasse, but in fact Operation Andreas was already foundering. Naujocks had begun falling out of favor with Heydrich almost a year before. Early in April 1940, Naujocks and his boss, the genial chief of SS foreign intelligence Heinz Jost, were called into Heydrich’s office and asked to produce false Norwegian notes as quickly as possible. Naujocks said that would take at least four months. As Jost described the scene, Heydrich, “as usual, lost his temper, insulted Naujocks and told him he could go to hell with all his alchemist’s humbug if he couldn’t produce the notes within a week.” Naujocks was gone in six months. He would have been shipped to a frontline SS regiment except that anyone who knew so many state secrets was barred from combat duty to forestall the risk of capture and interrogation. As for Heydrich, Hitler made him “Reich Protector” of Bohemia and Moravia, the western half of Czechoslovakia, in September 1941. Heydrich adopted carrot-and-stick policies of increasing the rations of Czech workers and farmers while putting down the middle-class resistance with such brutality that he became known as “the Butcher of Prague.” The Czechoslovak government-in-exile parachuted in two agents from London, who assassinated him in May 1942. The following month, the population of Lidice was liquidated and the town leveled in retaliation.
Albert Langer, meanwhile, soldiered on, although to little effect. One Communist author reported the Delbrückstrasse factory was diverted to counterfeiting rubles after Hitler invaded the Soviet Union. Langer, who left around 1942 with back problems, claimed that during his tenure his factory produced 200,000 five-pound notes and 200,000 ten-pound notes, or about £3 million in false notes. They were mixed with real notes and sent for appraisal to banks and other institutions, none of which, he insisted, “could distinguish between them.” Langer may have been exaggerating the quality of his product, or the bank tellers may have been nearsighted or simply lazy, but he had no doubt that his real problem lay in a lack of leadership: “It became more and more unorganized. Personal betterment came before everything else, and in all probability treason too.” It is almost an axiom of secret espionage that such slush funds are skimmed by those in control of the money, and Operation Andreas ran true to type. Noted Langer: “Thievery was present but it was the high SS functionaries and not the workers.”
But the fundamental fault had been there from the start. A civilian print worker who had been drafted to serve in Operation Andreas reported that he had six different SS bosses after Naujocks left. And Artur Rau, the photographer, believed the work was farmed out to private firms, including August Petrich’s own print shop. Everywhere in Nazi Germany, ideology, personal loyalty, and deadly office politics were the order of the day. This struggle for preferment was only natural in a society where only one voice counted. Anyone who could win Hitler’s ear won his favor, and it did not pay, to say the least, to raise uncomfortable questions with his favorites about his decisions or theirs. A few months after the Nazi surrender, a graphic account appeared in a Frankfurt newspaper quoting the unnamed print worker explaining why Operation Andreas failed.
One would now assume that the men who wanted to finance puppet governments with counterfeit money, carry out sabotage and win wars, would at least have selected the right experts for this work. But the fact was that here too, where the most exact technical knowledge is indispensable, National Socialist [Nazi] Party people had more say than technicians. The failure of SD [Sicherheitsdienst — Security Service] Division VI F [4] showed in the continual change of directors. If the technicians suggested something that did not suit the SS members, the work was first done according to the plans of the SS men. Not until things could no longer continue did the technicians receive a hearing. Thus Dr. Langer, who surrounded himself with a scientific nimbus and engaged in the identifying of numbers, serials, borders, dates, and signatures of documents, was soon dismissed.
Operation Andreas languished for about a year until Himmler himself formally revived it in July 1942, drawing on an extraordinary pool of skilled workers who were most unlikely to skim the money or question the orders of their commander.
W
HITEHALL AND THE
O
LD
L
ADY
I
n the most celebrated of all wartime memoirs, there is no mention of a Nazi counterfeiting plot, perhaps because it does sound rather like a child’s game in the midst of a battle to the death. Less than a week after the Wilhelmstrasse meeting approved the Nazi plan, and certainly without any knowledge of it at that moment, Britain’s First Lord of the Admiralty wrote a confidential letter on stationery adorned with the traditional anchor and crown. The First Lord was the civilian politician responsible for the Royal Navy and maintained his office and private apartments in Admiralty Arch. This grand piece of imperial architecture abuts Whitehall and bridges the Mall linking Buckingham Palace with Trafalgar Square, which memorializes the Navy’s greatest victory over an earlier European dictator. The letter was carried a few hundred yards down Whitehall to the office of Sir John Simon, the chancellor of the exchequer in the cabinet of Prime Minister Neville Chamberlain.
Private 24 September [1939]
My dear John,
I hear from many quarters a plan for scattering forged notes of marks in bundles or tempting little packets in Germany from our aeroplanes, like Pitt spread his assignats. I cannot fully think out the consequences of this but I should think it would be just as good as leaflets. I should very much like to know how it strikes you.
Yours sincerely, Winston S. Churchill
The Right Honourable Sir John Simon G.C.S.I., G.C.V.O., O.B.E., K.C., M.P.
Churchill, whose curiosity and inventiveness were rarely equaled by politicians of the twentieth or any other century, had just returned to the government in the beloved office he held during the World War of 1914–18. Simon quickly passed Churchill’s letter to David Waley, principal assistant secretary in the British Treasury, after scrawling a request on it:
“Mr. Waley for obsvns, pl. JS 28/ 9.”
Waley, who ranked near the top of the civil service meritocracy that formed Britain’s highly efficient permanent government, was the same man who two months later would receive the secret memo from Athens detailing Germany’s counterfeiting plot.
Those who recall the daily challenges of financing the war during that critical period still cherish the close comradeship of those arduous days. They mastered the intense intellectual challenge with the help of their unpaid adviser, John Maynard Keynes, or Maynard as he was known to all, a tall, elegant conversationalist and polemicist equally familiar in the banks of the City of London and the world of British ballet. This attention to wartime finance should come as no surprise in the country that literally invented the study of political economy. Before Keynes revolutionized economic thought about tradeoffs, it was a series of indisputable propositions: the Iron Law of Wages, Say’s Law that supply creates its own demand, the Law of Comparative Advantage, and so on. They were like medieval notions of a static universe before Newton’s discovery of the laws of motion.
The Treasury was led mainly by first-class scholars who knew and understood this intellectual history. Many had begun their careers as tax officials, which meant they had a feel for the attitude of the public toward the demands of the state. This practical experience was good training for the administration of the sacrifices demanded for the nation’s survival, and they felt themselves to be, above all, practical men. But, as Keynes wrote at the conclusion of his masterpiece,
The General Theory of Employment, Interest and Money,
“practical men, who regard themselves as quite exempt from intellectual influences, are usually the slaves of some defunct economist.” He converted them by applying his talent for argument and administration to countering the terrible forces of depression and war.
David Waley, born Sigismund David Schloss, was a member of a distinguished German-Jewish financial family long settled in England. He graduated from Balliol, Oxford’s most intellectual college and a principal supplier of brainpower to the British elite. Waley adopted his mother’s name during the anti-German hysteria of World War I, just as the British royal family changed its name from Battenberg to Windsor and its nonroyal members anglicized their names to Mountbatten. Waley had served in that war as a frontline officer and was decorated for bravery with the Military Cross. He had never felt the need to conceal his background as he made his career at the Treasury, where his colleagues called him Siggie. When Waley later received the Athens memo, he would seek a reaction from a quite different institution, the Bank of England, a clubby hub of finance that the Treasury regarded as decidedly inferior.
In those days the Bank of England was an official hybrid, owned by its member banks in the way that stock exchanges are still owned by brokerage firms. The Bank recruited young men of good family who had to be nominated by one of the Bank’s directors. Few went to university, and they were known mainly for being trustworthy and dependable, especially if they could count pound notes without making mistakes. The Bank had the important responsibility of not only printing Britain’s pound notes but also regulating their supply to protect the nation’s currency against inflation. Its legendary caution and discretion, its top-hatted doormen guarding its entrance at the crossroads of London’s financial center, lend credence to its nickname “The Old Lady of Threadneedle Street.” Situated along what was once a medieval lane named for the artisans who worked there, the Old Lady symbolizes Britain’s financial district like a huge, sleepy Edwardian elephant. Its original structure was dressed up with dome and pillars by Sir Herbert Baker, close colleague of Sir Edwin Lutyens in designing and building New Delhi, the model par excellence of an imperial outpost. The public buildings of Lutyens and his disciples were to architecture what the romantic nationalism of Sir Edward Elgar’s compositions were to music. The Bank’s dome is topped by a gilded statue of the globe-girdling Ariel, the magical Shakespearean messenger who (in the majestic words of the Bank’s own guide to its museum) “is the symbol of the dynamic spirit of the Bank carrying credit and trust over the world.”
As Churchill reminded Simon in his letter, this was not the first time the English had thought of counterfeiting enemy currency. In 1794 Prime Minister William Pitt approved counterfeiting huge amounts of French assignats, which were originally printed as promissory notes against property of the nobility seized by the revolutionaries and traded inside the country as money. Napoleon retaliated by counterfeiting British pounds and filtering them through neutral ports. It was but one episode in the long history of official forgery that continues to this day. In 1470, when the Duke of Milan warred on the great commercial empire of Venice, he counterfeited its money to undermine its bankers. Frederick the Great of Prussia counterfeited the currency of his enemies, and the British also flooded the rebellious American colonies with counterfeit notes during the Revolution. During the American Civil War, confidence men made a killing on each side by crossing to the other with counterfeit Union or Confederate bills. Reds and Whites counterfeited each other’s currency during the Russian civil war of 1918–1921. When the Soviet Union was starved for foreign currency a decade later during its first Five-Year Plan, Stalin ordered $10 million worth of bogus U.S. hundred-dollar bills printed, partly to finance his secret service abroad. His financial agent in the United States was caught, convicted, and sentenced in 1934 to fifteen years in jail, although the full story did not come out until a Soviet general defected five years later. These tactics can be traced to the ancient world, when the Greek city-states forged enemy silver coins in base metals. They persist today in the rogue nation North Korea, which has been printing bogus American hundred-dollar bills since the 1970s on a press purchased from a Swiss company.
Churchill himself received a polite put-down from Simon in less than a fortnight. Addressing his Admiralty colleague in his own hand on October 4, 1939, the nation’s chief financial officer informed “My dear Winston” that the Treasury had carefully examined his idea, “and I am bound to say that, on balance, I think the Noes have it.”
John Simon was an intelligent but indecisive lawyer who sometimes made marginal comments on his official papers in Latin verse. (When Churchill succeeded Chamberlain, Simon was kicked upstairs to be lord chancellor, the head of the judiciary.) Simon enclosed a closely argued memorandum based on the thinking of Ralph Hawtrey, the Treasury’s chief economist. First of all, Hawtrey warned, dropping counterfeit reichsmarks would discredit Britain politically in the eyes of neutral nations. On a practical level, the memo continued, “the difficulty with forged currency always is to introduce it into circulation.” Further, in a totalitarian society anyone trying to spend such a windfall would come under immediate suspicion, so most of the notes would be turned in, and the operation would therefore offer little hope of debasing the enemy’s currency. If the Germans nevertheless decided to retaliate by dropping counterfeit pounds, “we could then cry quits, except the discredit would apply to us.” The Treasury mandarins played their own version of three-dimensional chess with the idea for half a year, but Hawtrey seems to have made the decisive move in a memo to his Treasury colleague David Waley in April 1940: “It strikes me that this is a game at which two can play, and we’re probably not the best at it.”
Churchill’s suggestion had not been the only one. Bright ideas had begun streaming into Whitehall as soon as war was declared on September 3, 1939. The first to reach the Treasury was prompted by news of leaflet raids over Germany. On September 6, Robert Chapman, a retired colonel, wrote his MP from his home in rural Sunderland with a proposal to scatter large amounts of counterfeit marks in low denominations “to cause consternation and help to get the [German] people into a state of unsettlement and fear.” He conceded that the Germans might retaliate but remained confident that it would be far more difficult for the Germans to duplicate the high-quality paper of British banknotes. Chapman’s letter landed on Waley’s desk, and he circulated it in the department. One Treasury man, quivering with such outrage that his signature is deemed illegible by the official archivist, commented, “War may be war, but I should have thought we should not indulge in this sort of business.” The following day, a noncommittal reply was dispatched to Colonel Chapman assuring him that “all suggestions from any quarter are always welcome.” Across the Treasury’s file copy in a neat hand, another official harrumphed: “Ingenious but not British.”
Indeed. In Brussels, a friend of the British ambassador coyly signing his letter “A Belgian ‘neutral,’” urged his British friends to wage the war against Hitler “with imagination.” He proposed an airborne mechanism, complete with automatic timer, to scatter packets of counterfeit reichsmarks at one-mile intervals. Not surprisingly, Britain’s Ministry of Economic Warfare weighed in with its own proposal, and so did the chief of the secret service, Stewart Menzies, an elderly and not particularly competent superspy whose network was riddled with Soviet agents. For more than a year, other complex schemes to undermine German currency arrived from patriotic worthies in the best neighborhoods of London and retired officers like Colonel Chapman tending their estates in the shires.
Other suggestions carried aggressive titles like “Means of Overcoming the Hun.” That particular letter was sent in May 1941 by a Royal Air Force pilot on behalf of his wing commander, H. B. Maund, obviously flush with the aerial victory in the previous autumn’s Battle of Britain. Maund felt confident enough to suggest that Britain’s credit was good enough for the nation to borrow an astonishing $3.5 billion in gold from the United States and issue currency in shiny new coins instead of printing pound notes. Maund argued that this would prevent the Germans from dropping their own printed counterfeits. All these brainstorms received a polite brushoff, although one Treasury official privately gave the wing commander more credit than “the present prime minister” — Churchill — for his foresight in devising an ingenious if financially implausible scheme to forestall German retaliation.
The barrage of suggestions not only tried official patience but created its own form of internecine warfare. With the German war machine unable to loot Russia as profitably as the richer and more pliable nations of occupied Europe, the propaganda people at the British Foreign Office sought permission to discredit German currency by dropping forged bills, some with lewd messages. Waley was still opposed because “we should look rather silly when we were found out.” He passed the suggestion to Keynes, with whom he worked closely as a specialist in international finance. Keynes had a greater understanding than any purely public servant of how the activities of the Treasury and the Bank interacted with the real world of finance, and of the importance of the fine balance between economic liberty and social justice. From his days as a young Treasury official, he also understood how government worked, and to him, counterfeiting must have seemed like a reversion to precisely the type of the moral barbarism against which Britain was fighting. He gave the idea the back of his hand: “Mr. Waley: I agree with your comments. The proposal to introduce forged currency has been made at least a hundred times before and always rejected for good and sufficient reasons. JMK 28.5.42.”
Right through the war, the Treasury doubted the British could successfully pull such a trick on the Germans, while realizing that Britain’s less tightly controlled society remained vulnerable to enemy counterfeits. Some limited experimentation took place. From time to time, Britain’s secret “black propaganda” units dropped forged German ration books to disrupt the official food distribution system. In 1943 Radio Berlin reported one of these air-drops and warned that anyone caught using fake ration cards could be executed for sabotaging the war effort. Similar penalties could be imposed for holding foreign currency without official permission, so the British knew that the Nazis would retaliate mercilessly against their own people for passing counterfeit foreign bills. They were the defense mechanisms of the totalitarian state; no British government could countenance such draconian punishments against its own people, even in wartime.
