The Billion Dollar Spy: A True Story of Cold War Espionage and Betrayal (3 page)

The letter was delivered to the CIA, which was suspicious at first. They knew the Soviets had been deeply embarrassed by the Popov case. Was the letter a trap? A decision was made at headquarters to contact the writer, but at the time the CIA did not have a streetwise operative in Moscow. The U.S. ambassador in Moscow, Llewellyn Thompson, was adamantly opposed to the assignment of any CIA personnel to the embassy. Eventually, in the autumn of 1960, an arrangement was worked out to send a young officer from the Soviet division at headquarters to Moscow, expressly to make contact with Penkovsky. The officer did not speak Russian very well. The CIA gave him a code name:
compass
. He screwed up, drank heavily, and failed to make contact.
17

Penkovsky was frustrated. He had written his first letter to the Americans in July 1960, and he spent weeks looking for someone to deliver it. “I stalked the American Embassy like a wolf, looking for a reliable foreigner, a patriot,” he recalled.
18
After he handed the letter to Cox on Red Square in August, Penkovsky waited and waited for the CIA to respond. He heard nothing. He tried to pass his information through a British businessman, then a Canadian, without success. He was growing desperate.

Finally, on April 11, 1961, Penkovsky slipped a letter to a British businessman that was addressed to the leaders of the United States and the United Kingdom. The businessman, Greville Wynne, shared the letter with the British Secret Intelligence Service, or MI6, which provided the letter to the CIA. The American and British services decided to work together to run Penkovsky as a spy.

Nine days later, Penkovsky came to London as head of a six-man Soviet trade delegation shopping for Western technology—steel, radar, communications, and concrete-processing techniques. It was a tense time; the CIA’s Bay of Pigs invasion in Cuba had just failed. On arrival, Wynne met Penkovsky at the airport, and Penkovsky immediately handed an envelope to him. It included descriptions and diagrams of the latest Soviet missiles and launchers. Later that evening, Penkovsky left his room at the sprawling Mount Royal Hotel on Oxford Street in London and walked to room 360. He knocked on the door, wearing a business suit, white shirt, and tie. When he entered the room, he was greeted by two British and two American intelligence officers. “You know now that you are in good hands,” a rumpled, heavyset American reassured Penkovsky. He was Kisevalter. Penkovsky replied, “I have thought about this for a long time.”

In the conversations that followed, Penkovsky told the American and British officers that his career as a Soviet intelligence officer had gone off the rails, and he was bitter. His father died when he was only four months old, and his mother had told him it was from typhus. But papers had been found about a year earlier showing that his father had served as a first lieutenant in the White Army, fighting against the Bolsheviks, which threw Penkovsky’s loyalty into doubt. He was accused of covering it up. An assignment to India fell through, and he was shunted aside. He loathed the KGB.

On two extended visits to London, first in April and May and then in July and August, and one trip to Paris in September and October 1961, Penkovsky spoke to the British and American intelligence officers for 140 hours in smoke-filled hotel rooms, which produced twelve hundred pages of transcripts. Penkovsky also delivered 111 rolls of exposed film. In Moscow, he used a tiny Minox commercial camera to photograph more than five thousand pages of secret documents, almost all of them about the Soviet military and taken from the GRU and military libraries. Penkovsky was filled with zeal and took risks, once photographing a top secret report right off the desk of a colonel who had momentarily stepped out of his Moscow office.

Not all the conversations with the American and British officers went smoothly. In one of the early sessions at the Mount Royal Hotel, Penkovsky presented a bizarre plan to hold Moscow and the entire Soviet leadership hostage. He wanted to deploy twenty-nine small nuclear weapons in random fashion throughout Moscow in suitcases or garbage cans. The United States was to provide the weapons, instruct him on welding them into the bottom of garbage cans, and provide him with a detonator. With difficulty, he was talked out of the fantasy.
19

But Penkovsky took his espionage mission seriously and demonstrated to the CIA how a single clandestine agent could produce volumes of material. When asked if he could obtain copies of the Soviet General Staff journal
Military Thought
and urged to look for the secret version, Penkovsky asked if the CIA also wanted the top secret version. The CIA didn’t know there was one. Penkovsky provided almost every copy of the journal, in which Soviet generals debated concepts of war in the nuclear age.
20
His reports provided critical insights into Soviet intentions during the 1961 Berlin blockade, informed the West for the first time about the existence of the all-important Military Industrial Commission, which made decisions about weapons systems, and provided key technical details of the R-12 medium-range missiles that the Soviet Union sent to Cuba in the fall of 1962, especially the range of the missiles and time required to make them operational. Penkovsky’s intelligence, code-named
ironbark
and
chickadee
, was a key ingredient in decision making as President Kennedy stood up to Khrushchev during the Cuban missile crisis.
21
Penkovsky’s information on the Soviet medium-range missiles was included in the President’s Daily Brief in the third week of October 1962. Additionally, Penkovsky’s information, along with the first reports from the new Corona spy satellite, debunked the myth that the Soviet Union was churning out intercontinental ballistic missiles like sausages, as Khrushchev had boasted. The “missile gap” didn’t exist.

Penkovsky was, at the time, the most productive agent ever run by the United States in the Soviet Union.
22
The CIA and MI6 agreed to pay him $1,000 a month for intelligence worth millions.
23
After the meetings in the hotel rooms in London and Paris, the operation moved into a second phase in which Penkovsky was run in Moscow. The British businessman Wynne, who visited the Soviet Union periodically, met with Penkovsky, collecting intelligence and passing it to MI6. But Penkovsky was eager to deal directly with the American and British intelligence services in Moscow.

The CIA was not ready. Ever since the disaster of
compass
, a replacement officer had been in training, but the replacement pulled out at the last minute, leaving the CIA empty-handed at a critical juncture. “We had an increasingly desperate and very valuable agent out there and no one in a position to contact him,” recalled a CIA officer who was involved at the time.
24
The agency also still lacked suitable spy gear for the operation.
25

While the Americans had played the preeminent role in the meetings in London and Paris hotel rooms, the British came to dominate the operation in Moscow. According to the CIA officer, “MI6 was able to do what we could not—devise and carry out a cover operational plan for the case.” The British chose Janet Chisholm, wife of the MI6 station chief, to be Penkovsky’s case officer. She met with Penkovsky a dozen or so times, at British embassy receptions and a cocktail party, at the nearly empty delicatessen shop of the Praga restaurant, at a secondhand shop, in a park, and in apartment building foyers, often under difficult conditions, with her three children in tow. Penkovsky passed film cassettes concealed in a box of chocolates for the children. He seemed frenetic and driven; the CIA worried that he was meeting too often with Mrs. Chisholm. When the CIA finally deployed a trained officer to Moscow at the end of June 1962 to work on the Penkovsky case, the officer’s work was short-lived. Penkovsky was last seen by the CIA at a U.S. embassy reception on September 5, 1962, and then disappeared.
26

He fell under suspicion by the KGB, which had put Mrs. Chisholm under surveillance. They had drilled a pinhole in the ceiling of his apartment study and put a camera there to monitor him. Another KGB camera in a nearby building photographed him in his apartment. A search discovered the Minox camera, as well as methods for encrypting messages, and a radio receiver he had been given for clandestine communications from the West. Penkovsky was arrested in September or October 1962. He was tried publicly and convicted of espionage, then executed on May 16, 1963.
27

At almost the same time that Penkovsky was talking to the American and British officers in the hotel rooms, two more Soviet officers volunteered to become spies for the United States, both outside the Soviet Union. In 1961, Dmitri Polyakov, a Soviet military intelligence officer assigned to the United Nations, offered his cooperation in New York and became an agent whom the FBI gave the code name
tophat
. Then, in 1962, Alexei Kulak, a KGB scientific and technical officer, volunteered in New York to the FBI in exchange for cash. He became the FBI’s agent
fedora
. Both
tophat
and
fedora
were important and valuable assets for the CIA and the FBI at different times in the 1960s and 1970s, but they were largely handled beyond the Soviet borders. In the back alleys of the world, it was possible for the CIA to recruit agents and spies, and to exploit volunteers, but not yet in the very center of the Soviet Union, on the streets of Moscow.

After the loss of Penkovsky, the CIA entered a long, unproductive period in Moscow. A major cause for this was the overwhelming influence of James Angleton, the counterintelligence chief at headquarters. He threw the CIA into a state of high paranoia and operational paralysis. A tall, thin, quirky man, gentle to friends and inscrutable to others, Angleton cut a distinctive figure in owlish eyeglasses, dark suits, and wide-brimmed hats. He lorded over his own autonomous office, keeping his files locked and separate from the rest of the CIA, sitting at a desk piled with dossiers and shrouded in blue haze from chain-smoking. He enjoyed two hobbies, growing orchids and twisting elaborate flies for trout fishing. Over twenty years as the CIA’s chief of counterintelligence, from 1954 to 1974, Angleton created an extraordinary mystique about himself and his work. Secretive, suspicious, and tenacious, he became obsessed with the belief the KGB had successfully manipulated the CIA in a vast “master plan” of deception. He often spoke of a “wilderness of mirrors,” a phrase he borrowed from T. S. Eliot’s 1920 poem “Gerontion,” to describe the layers of duplicity and distrust that he believed were being used by the KGB to mislead the West. In 1966, Angleton wrote that an “integrated and purposeful Socialist Bloc” had sought to spread false stories of “splits, evolution, power struggles, economic disasters [and] good and bad Communism” to a confused West. Once this program of strategic deception had succeeded, the Soviet Union would pick off the Western democracies, one by one. Only the counterintelligence experts, he said, could stave off disaster. Angleton’s suspicions permeated the culture and fabric of the CIA’s Soviet operations division during the 1960s, with disastrous results. Two directors of the CIA, Allen Dulles and Helms, let Angleton have his way. Angleton felt that no one and no information from the Soviet KGB could be trusted. If no one could be trusted, there could be no spies.
28

Counterintelligence is essential for any spy agency to prevent penetration from the same espionage methods it uses against others. In the Cold War, that required a combination of outward vigilance, watching every move of the KGB and deceiving it when possible, and inward skepticism, ensuring the CIA was not swallowing any deceptions or double agents. Ideally, counterintelligence went hand in hand with collecting intelligence, yet there has always been a natural tension between them. A case officer might have painstakingly recruited an agent to produce a fresh stream of “positive intelligence,” the fruits of spying, only to find a counterintelligence officer raising questions about whether the source could be trusted. The CIA needed both, but Angleton’s counterintelligence juggernaut became overpowering in the 1960s; everything was labeled suspicious or compromised.

Angleton’s adult life was forged in the world of deception. After graduating from Yale, he became an elite counterintelligence officer based in London for the wartime Office of Strategic Services, the OSS. There he witnessed the astonishing British deception operation against the Nazis known as Double Cross. The British identified German agents and turned them against the enemy, effectively neutralizing Nazi intelligence collection. After running agents in Italy, Angleton returned to headquarters to become the CIA’s chief counterintelligence officer. He believed a massive KGB “strategic deception” was being played out against the United States. His friendship with Kim Philby might have played a role. In the 1950s, the British MI6 officer had been a confidant of Angleton’s. Then, in 1963, Philby was revealed to have been a KGB spy, and he fled to Moscow. The CIA had long suspected Philby, but the confirmation might have been taken by Angleton as more evidence the KGB was on the march—everywhere.

The strongest influence on Angleton, however, was Anatoly Golitsyn, a mid-level KGB officer who defected in 1961. Golitsyn spun a vast web of theories and conjecture that reinforced Angleton’s suspicions of a KGB “master plan” to deceive the West. At the CIA, others called it Angleton’s “monster plot.” Golitsyn said that every defector and volunteer to come after him would be part of the master plan. Certainly, the KGB did attempt deceptions, but Angleton pumped fear to new heights. In 1964, he initiated a hunt for a mole inside the CIA to find what Golitsyn asserted were at least five and perhaps as many as thirty agency officers or contractors who were Soviet penetrations. None were ever found, but several careers were ruined. Among those who came under suspicion was the first Moscow station chief and the Soviet division chief; both were later cleared. When another KGB officer, Yuri Nosenko, defected in 1964, he was incarcerated and interrogated by the CIA for more than three years because of doubts raised about his bona fides by Angleton and Golitsyn.