The Gehlen Organization, Part 1: Dr. Schneider

True Spies, Episode 177 - The Gehlen Organization, Part 1: Dr. Schneider

This is True Spies, the podcast that takes you deep inside the greatest secret missions of all time. Week by week, you’ll hear the true stories behind the operations that have shaped the world we live in. You’ll meet the people who live life undercover. What do they know? What are their skills? And what would you do in their position? I’m Daisy Ridley and this is True Spies from SPYSCAPE Studios. The Gehlen Organization, Part 1: Dr. Schneider.

GERALD STEINACHER: We all hope that justice is done and served. But that's not what happened. That's a reality that's hard to swallow.

NARRATOR: New York City, October 10, 1951. Over 60,000 baseball fans are packed into Yankee Stadium to watch the sixth and final game of the World Series. Arch rivals the Yankees and the Giants are facing off in what would be legendary player Joe DiMaggio’s last major league match. Like many at the game - players and fans alike - DiMaggio’s life was upended by World War II, as he swapped the baseball plate for military bases around the US. But among the adoring crowd, there’s a man experiencing his first-ever American sporting event. Slim, receding hairline, mustache, and dark glasses. He could’ve been anyone. But this man's experience of war was very different from the illustrious centerfielder’s. In fact, he wasn’t even on the Allies side.

NORMAN GODA: He was a captain in 1936 when Germany started expanding and in 1940 he became the adjutant to the chief of General staff.

NARRATOR: And as the war progressed, he advised the Führer, Adolf Hitler, personally, on Soviet military positions. By the spring of 1945, even when defeat was certain, he considered joining a guerilla outfit to fight the Allied occupation of Germany.

NORMAN GODA: These were people who thought, ‘This isn't over yet.’ We think of World War II as ending in 1945 and that's it. Done. Nazi Germany is over. But these were nationalists. Some of them were very sympathetic to the old idea of Nazi-ism. 

NARRATOR: And yet, some six-and-a-half years later, here this former Nazi General was enjoying that most American of pastimes - baseball - among his former foes. But he wasn’t alone. Standing on one side was a Nazi comrade. And on the other? An agent from the CIA had invited the two Germans to the US.

GERALD STEINACHER: How is this possible? It's just mind-blowing. 

NARRATOR: In this two-part special, True Spies tells the story of the Gehlen Organization, the clandestine German intelligence network that sprang out of the cinders of the Third Reich.

NORMAN GODA: Initially, one could see this as kind of a stop-gap measure during a period of geopolitical uncertainty in Central Europe. But it winds up becoming something that gets out of control.

NARRATOR: You’ll hear how the Americans sponsored the very same men they had fought against just months before - and what’s more, the worst of the worst.

NORMAN GODA: They were hiring members of organizations that were in the process of being declared criminal. The SS, the SD, members of the Gestapo, personnel who had been on roving shooting squads on the Eastern Front, who had killed large numbers of Jews in these operations.

NARRATOR: And you’ll hear about the man behind it all. The man at Yankee Stadium: Reinhard Gehlen. 

NORMAN GODA: Gehlen built himself up as sort of a master spy, a master intelligence officer.

NARRATOR: An enigmatic figure, Gehlen abstained from alcohol, laughed little, and carried himself like an aristocrat.

NORMAN GODA: But some of the conversations Gehlen had seemed completely unhinged. 

NARRATOR: It’s early April 1945, six years before the baseball game at Yankee Stadium. The end of the Nazi regime is only weeks away. With the Soviet Army advancing on Berlin, Adolf Hitler retreats to the ‘Führer bunker’. There he is briefed on the strength of the Russian forces. “The Soviets will soon have the capital surrounded,” one of his advisors says. “Defeat is inevitable.” But Hitler rejects that verdict and fires the man who delivers it - Reinhard Gehlen - for his ‘defeatist’ attitude. As head of the intelligence unit [Wehrmacht] ‘Foreign Armies East ’, Gehlen was responsible for building a picture of the Soviet forces on the Eastern Front and now, he’s cast aside.

NORMAN GODA: Not that his post was needed by April 1945. Any Germans who wanted to see the Red Army could pretty much see them in their living rooms by that point. 

NARRATOR: This is Norman Goda, professor of history and Holocaust studies at the University of Florida. As Goda notes, Gehlen knew the Third Reich’s demise was now certain and so, he crafted an insurance policy.

NORMAN GODA: He started making plans for the postwar world. He began having caches of documents hidden in various places in Bavaria.

NARRATOR: What were these documents? Intelligence files on the Soviet military that Gehlen’s department had gathered throughout the war. After being banished by Hitler in April 1945, Gehlen retreated to Bavaria with his family. Then, on May 23, he came down from his mountain hideout and surrendered to an American officer. When the Twelfth United States Army Group’s intelligence division heard of Gehlen’s capture, it had him transferred to its interrogation center in Wiesbaden. There Gehlen meets a captain tasked with debriefing persons of interest - and he is stunned by what Gehlen has to say.

NORMAN GODA: Gehlen shows up claiming to have tremendous caches of valuable information on the Red Army itself.

NARRATOR: To the Americans, this is gold dust.

NORMAN GODA: The US Army knew almost nothing about the Soviets, or the Red Army, or Soviet intentions, or much about the Soviet order of battle, or anything like that. The Soviets had been an ally and even OSS had not thought it ethical to spy on the Soviets.

NARRATOR: The two US officers sense an opportunity both for their own careers and for broader US intelligence. The captain goes to the camp’s commanding officer with news of the hidden cache of files. While the US and the Soviets were technically still allies in 1945, there were many on both sides who thought a war between these two ideological foes was inevitable.

GERALD STEINACHER: Germany was destroyed, the factories were destroyed, the cities were destroyed.

NARRATOR: This is Gerald Steinacher, professor of history at the University of Nebraska-Lincoln.

GERALD STEINACHER: But the German know-how was still there. The German experts were still there. And everybody wanted to have access to this German expert, mostly for the military industry. There was a kind competition, an international competition. Who gets the best experts?

NARRATOR: So, the two US officers agree to Gehlen’s demands. In exchange for giving up the files, Gehlen was to be treated less like a prisoner than as an employee of the Americans.

NORMAN GODA: They began protecting Gehlen. They took his name off of the prisoner list. And they encouraged him to reestablish contact with other officers from Foreign Armies East.

NARRATOR: Over the next month, Gehlen tracks down all of the key members of his staff, including one Hermann Baun.

NORMAN GODA: One of the most important officers in Armed Forces intelligence for gathering information from the Eastern front.

NARRATOR: Meanwhile, his US handlers retrieved nearly all of the intelligence files Gehlen had buried across southern Germany. But they weren’t finished there. After learning that the Pentagon had ordered the retrieved files to be flown to Washington D.C. for evaluation, they pitched the idea of Gehlen himself going too. The Pentagon agreed. And so, on August 21, 1945, less than four months after VE Day, Nazi General Reinhard Gehlen and five of his officers boarded a DC-3 military plane belonging to General Eisenhower’s chief-of-staff and flew to America.

NORMAN GODA: Where they were technically prisoners of war, but were treated very well with picnics and excursions into Washington and that sort of thing.

NARRATOR: To avoid detection by the Soviets, who were looking for Gehlen, he traveled under the pseudonym ‘Richard Garner’. For Gerald Steinacher, the bizarre scene had a logic to it - albeit a crude one.

GERALD STEINACHER: One of the challenges that the Allies faced was, as I call it, an intelligence gap between 1945 and 1947. The Americans had a wartime Secret Service - the Office of Strategic Services (OSS). And that became a very powerful and a huge organization. But already, by the end of 1945, the Americans decided to shut down the organization. The idea was, “Yeah, now the war is over we don't need such a huge foreign intelligence service anymore.” The Soviets had a very good intelligence service and the Americans did not so they had to improvise. 

NARRATOR: Based at Fort Hunt Virginia, codename P.O. Box 1142, Gehlen and his men got to work.

NORMAN GODA: They were asked to start writing reports on the Red Army. And together, they wrote about 350 reports amounting to something like 4,500 pages. And all of this was considered very valuable. 

NARRATOR: Alongside his intelligence reports, Gehlen starts to charm his American handlers.

NORMAN GODA: Gehlen, he knew the language to adopt, namely, “I'm working for you. I will be fully cooperative. We want our operations to be helpful to the Americans because we have this common enemy in the Soviets.” 

NARRATOR: He even won over his direct supervisor at Fort Hunt, an Austrian-born US Army captain whose father had been killed by the Gestapo.

NORMAN GODA: While the top generals were besmirched by Hitler's war, and while a number of field marshals and colonel generals were tried at Nuremberg, people like Gehlen never were. He represented the myth of the ‘clean Army’.

NARRATOR: And there’s another myth about Gehlen, one that his initial US Army handlers bought into completely.

NORMAN GODA: He more or less reinvented himself as the official in German intelligence who knew the things that the Americans didn't know about the Soviets.

NARRATOR: But the reality was quite different.

NORMAN GODA: There's no nice way to put us. Gehlen got every major projection wrong in his capacity as the head of Foreign Armies East. He did not see the Soviet pincer movement coming at Stalingrad in late 1942 which was a complete disaster for the Germans, the German offensive at Kursk in July of 1943? Gehlen completely misjudged the strength of Soviet armor.

NARRATOR: Indeed, Gehlen predicted a quiet summer on the Eastern Front in 1944 only for the Soviets to launch their biggest offensive of the entire war.

NORMAN GODA: He had no training in real intelligence. And in the case of Gehlen's group, they depended on what different armies saw at the front. Anything that they couldn't see, Gehlen didn't really know. 

NARRATOR: There were some in US intelligence who knew about the incompetence of men like Gehlen. But they knew nothing of his work at Fort Hunt, a classified military base. The US Army was in sole charge of the American-occupied zone in Germany itself and they kept competing US intelligence organizations out of the loop, allowing Reinhard Gehlen to continue building his legend.

NORMAN GODA: He learned more and more how to play the role - not of a staff officer who only made the rank of general in December of 1944, but a spymaster of sorts who had all the answers and could get more.

NARRATOR: Meanwhile Gehlen’s point man, Hermann Baun, was reassembling his network of agents in Germany’s Soviet zone. 

NORMAN GODA: Baun was fluent in Russian. Most Germans, including Gehlen, did not know a word of Russian, so he was very useful.

NARRATOR: Codenamed Operation Rusty, after his US handler’s newborn son, Baun’s network, though, was soon growing out of control.

NORMAN GODA: Baun had a very decentralized way of hiring. He would hire people who would then recruit people, who would then recruit people. And as you got further and further down the line, it wound up being friends, recruiting friends, people who after the war were suddenly without employment. You couldn't go back to your old job in the SS or the Gestapo.

NARRATOR: In a German economy decimated by the war, trade was largely done through barter. And by January 1946, Baun was asking his US handlers for a monthly allowance of 300 kg of coffee, 25,000 cigarettes, and 10,000 matchboxes - all to pay for his swelling network of unvetted spies in the Soviet zone.

NORMAN GODA: The problem with that was that the hires, generally speaking, used false names.

NARRATOR: And so, the US unwittingly became the sponsor of many of the same SS and Gestapo officers they had fought against just months previously. Even the US Army’s intelligence branch, the CIC [Army Counter Intelligence Corps], was at first unaware of Operation Rusty. Indeed one of the CIC’s main tasks immediately after the war was to arrest Nazi officers. And soon they were increasingly coming across such officers carrying American intelligence documents. The CIC agents became only more startled when ordered to simply release these men.

GERALD STEINACHER: We have to say, a cynical cost-benefit analysis that American intelligence at that point said, “Well, is this Nazi war criminal more useful for us as an intelligence source now because he claims to be an expert on Soviet communism or shall we put him on trial for the crimes that he committed?” And, in many cases, they decided to recycle this person for early Cold War purposes and shield him from prosecution and use him as an intelligence asset.

NARRATOR: And it was Reinhard Gehlen who was about to profit the most from this American cynicism. In July 1946, he flew back to Germany with authorization to formally reconstitute his former Foreign Armies East network, along with Hermann Baun’s spy ring. Before long it was being called the Gehlen Organization.

NORMAN GODA: The Gehlen Organization was expected to get intelligence on the Soviet occupation forces in the eastern zone of Germany. They also got a fair amount of signals intelligence from Soviet radio traffic concerning the movement of aircraft and that sort of thing, which you needed Russian speakers for. And again, this is done at a time when American intelligence officers are being reintegrated into civilian life and you have new intelligence officers showing up who don't even know German, much less Russian. 

NARRATOR: Given the cover of the humdrum-sounding South German Industrial Development Organization, Operation Rusty had become the Americans’ eyes and ears in Germany’s Soviet Zone.

NORMAN GODA: Initially, one could see this as a stopgap measure during a period of geopolitical uncertainty in Central Europe but it winds up becoming something that gets out of control.

NARRATOR: On December 19, 1946, Edwin Sibert, a Major General in the Twelfth United States Army, was in New York. Despite the festive atmosphere ringing throughout the city, Sibert was anxious. Heading to a classified location, he met with two associates he had called to see urgently. There he shared his concerns. Operation Rusty - a.k.a. the Gehlen Organization - was out of control. Reinhard Gehlen and his right-hand man Hermann Baun claimed to be running over 500 agents in the Soviet zone. And yet...

NORMAN GODA: US Army oversight personnel were generally between two and 10. 

NARRATOR: We don’t know nearly enough about who they’re hiring and what those hires are doing, Sibert said. The two men sitting opposite him were from the Central Intelligence Group or CIG, a newly formed agency that would be renamed the CIA the following year. One of them was Allen Dulles, soon to become head of the CIA. Dulles had met Gehlen during the latter’s time at Fort Hunt and was impressed by what he saw. Sibert, who was now working for the CIG, suggested to Dulles that they take over the Gehlen Organization, perhaps even relocate it to US soil. And what’s more, the cash-strapped US Army was desperate to get Gehlen off its books.

NORMAN GODA: Very quickly, it became unaffordable because Gehlen wanted a yearly outlay of $2.5m and the US Army at best could do half a million dollars. 

NARRATOR: But listening to Sibert’s proposal, Dulles and his colleague were unsure, pointing out the dangers of the operation. “We’ll need a full investigation before we can move forward,” they agree. The following May, the report landed on their desks. It read:

NORMAN GODA: The tactical intelligence in the Soviet zone is good. The problem is that this organization is not an American subsidiary. The organization exists for Gehlen's interests, which meant German interests, which at that time meant the interests of a bunch of people who were not necessarily committed to the idea of democracy.

NARRATOR: Despite these misgivings, the report’s author recommended the CIG, soon to become the CIA, take over the organization.

NORMAN GODA: The problem for any US intelligence organization that wanted to oversee the Gehlen Organization was that the Gehlen Organization already existed. You couldn't put it back into the bottle. It was already active. It already had thousands of members.

NARRATOR: If the Americans simply cut Gehlen adrift then that would likely do even more damage.

NORMAN GODA: This could possibly be the germ of a resistance association. If it's a tiger, then you have to hold the tiger by the tail as best you can. 

NARRATOR: And again, Gehlen had charmed his US overseers. The report recommended he become the sole head of the organization, sidelining his right-hand man Hermann Baun.

NORMAN GODA: Gehlen was the officer. Gehlen was the one with the bona fides that a guy like Baun simply never had. So when Gehlen was talking to the CIA about sponsorship, he sort of half admitted, ”Yeah, there might be some bad apples in the organization, but those guys were all hired by Hermann Baun. They weren't hired by me. And if you sponsor me, I will be a good scout. I will root these elements out.”

NARRATOR: Despite the recommendation, the CIG stall. No decision is made to take on Gehlen, who continues to operate as he pleases. Only now, he’s in sole charge.

NORMAN GODA: When the US authorities in the Army wanted to talk to the top person in the Gehlen Organization, of course, they talked to Gehlen. 

NARRATOR: With Baun now a junior player, Gehlen built his spymaster myth further, giving himself a new cover name - Dr. Schneider. It wasn’t long before he encountered more problems though. By the fall of 1947, there was a new sheriff in town.

NORMAN GODA: He got another overseer, an officer by the name of Liebl.

NARRATOR: And Liebl was not charmed by Gehlen. A brash US combat veteran, Liebl lectured the Germans on the stupidity of his superiors during the war.

NORMAN GODA: And Liebel wanted names. He wanted to know who Gehlen was hiring. The US Army really didn't want to have an intelligence organization that was riddled with SS and Gestapo, and he wanted to figure out how many of these were in there because, at the very least, it could become an embarrassment to the US Army.

NARRATOR: But Gehlen doesn’t play ball. He flatly refuses to give up any names. “This is an issue of German sovereignty,” he tells Colonel Liebl.

NORMAN GODA: This is a very interesting thing to say in 1947 because Germany was not a sovereign state. It was completely occupied by the four powers.

NARRATOR: Liebl persists while taking every opportunity to remind Gehlen who’s in charge. But while not a brilliant spy, Gehlen was a canny operator.

NORMAN GODA: And one of the things Gehlen did at this particular juncture, aside from just being obstreperous, was to find dirt on Liebl.

NARRATOR: Gehlen discovers that Liebl’s wife was doing deals on the black market, an offense for any American citizen.

NORMAN GODA: And Gehlen had written proof of this and showed it to Liebl and Liebl backed off.

NARRATOR: Soon after, Gehlen gets Liebl transferred. And not only that, his new overseer is one of his first supporters - the colonel he first revealed his trove of buried files to.

NORMAN GODA: In this way, Gehlen maintained a hands-off relationship with the US Army.

NARRATOR: By now, the Gehlen Organization had moved out of military barracks to more opulent surroundings - the former villa of Hitler confidant Martin Bormann just outside Munich.

NORMAN GODA: In a place called Pullach. 

NARRATOR: Filled with reminders of the Third Reich, even the German eagle over the villa’s front door was still in place. Although no longer holding the swastika it had once carried, American visitors noted it as an apt motif for Gehlen’s headquarters. Once settled in, Gehlen set his sights on his next prize - CIA sponsorship. Much of the new agency was opposed to Gehlen outright but soon, events turned in the latter’s favor.

NARRATOR: In the spring of 1948 the Soviet Union announced its withdrawal from the four-power administration of Berlin, blocking land access to the capital and sparking one of the first flashpoints of the Cold War: the Berlin Airlift.

NEWS ARCHIVE: By June 28, the only way into Berlin was by air and the first RAF aircraft started this colossal undertaking - according to many predictions an impossible one to maintain for any length of time, especially during winter.

NARRATOR: With Allied military efforts now stretched, the US Army was more desperate than ever to unload responsibility for Gehlen.

NORMAN GODA: And this is where the Army pressure comes in because the Army told the CIA, “Look, we're done with this thing. We're cutting ties. We can no longer do this. You either want it or you don't.”

NARRATOR: To sweeten the offer, the Army even embellished Gehlen’s record, saying it was the pillar of all US intelligence work in East Germany. Many in the CIA weren't exactly keen on Gehlen though.

NORMAN GODA: There were people within the CIA who said, “This is a risky idea because from what we hear of this organization is not made up of the good Germans. We really don't know what is going on within this organization.” 

NARRATOR: But even Gehlen’s critics couldn’t deny that the situation had changed drastically.

GERALD STEINACHER: The new enemy is the Soviet Union and communism. 

NARRATOR: Gerald Steinacher again.

GERALD STEINACHER: And we need all the resources we get to fight this new enemy. 

NORMAN GODA: And nobody knew what Soviet intentions were. You really had to have the tactical intelligence from the Soviet occupation zone. 

NARRATOR: So the CIA sends another man to evaluate the Gehlen Organization, a Colonel named James Critchfield.

NORMAN GODA: And James Critchfield had all of a month to make a study of this. And Gehlen, of course, said all the right things because he wanted CIA sponsorship. He certainly came to understand how one got their bread buttered. 

NARRATOR: Critchfield makes no mention of the former SS and SD suspected to be operating within Gehlen.

NORMAN GODA: The US authorities who oversaw Gehlen were hardboiled officials. They wanted intelligence. They wanted an organization that would serve US purposes. And whether people were Nazis or not was secondary to that.

NARRATOR: Critchfield recommends that the CIA take Gehlen on.

NORMAN GODA: He, too, came to the conclusion the organization cannot be disbanded. It's better to have control than not. 

NARRATOR: Backed up by the Chief of Staff of the US Army and the Secretary of Defence, the CIA agrees to Critchfield’s proposal. On July 1, 1949, the Gehlen Organization officially came under CIA sponsorship but it had several stipulations.

NORMAN GODA: And this is what they communicated to Gehlen: “We will take you on but you will cooperate - not like you did with the Army. You will cooperate. You will hand over personal files when we want to see them. You will limit your operations to the things that are useful to us. Anything else we will allow you to do only on a case-by-case basis.”

NARRATOR: Gehlen agrees to every demand.

NORMAN GODA: And so what the CIA kinda thought it was getting in 1949 was a valuable tactical intelligence unit.

NARRATOR: Once under its control though, the CIA finds a very different organization to the high-functioning intelligence outfit portrayed by the Army.

NORMAN GODA: The other Gehlen operations - there were about 120 of these the CIA thought were not in East Germany. And of those 120, the CIA very quickly concluded that about 90 were completely useless. 

NARRATOR: Critchfield, Gehlen’s new handler, confronts him.

NORMAN GODA: And was basically trying to tell Gehlen, “Look, for all of your talk about being a master spy and how we don't know what we're doing and you do, this is a second-rate organization.” Those were the words he used.

NARRATOR: But soon after, Gehlen responds, telling Critchfield...

NORMAN GODA: “Look, we understand this business better than you do, and we can't run for your approval of every single little thing. We're going to hire who we hire and we're going to run the operations that we want to run because we're on the front lines, right? We're staring down the Soviets right now. We have to make snap decisions. We don't have time for all of your red tape.” I mean, this is someone who is getting a more and more inflated picture of himself. And Gehlen goes, “Well, who the hell are you? You're just an overseer. You're an office boy.” Which was quite a thing to say coming from someone who had gotten every single intelligence assessment wrong during every critical period of World War II. 

NARRATOR: With CIA pressure coming to bear though, Gehlen knows he needs leverage. But he also knows where to get it.

NORMAN GODA: Germany became a sovereign state in October 1949. And just when this relationship with the CIA is getting very difficult, he starts cozying up with the most important people in the new state.

NARRATOR: And one of them is a man named Hans Globke.

NORMAN GODA: Globke himself was a compromised figure. He was an Interior Ministry official who had written legal opinions on the Nuremberg Laws from 1935, saying that Jews could not be citizens. 

NARRATOR: But Globke is now Secretary of State, right-hand man to the West German Chancellor Konrad Adenauer.

NORMAN GODA: Gehlen started to get appointments with Globke and he actually did become personal friends with Globke as well. And more and more Adenauer and Globke had confidence in him.

NARRATOR: Globke starts to buy into the myth Gehlen has built up around himself.

NORMAN GODA: In Globke’s calendar, Gehlen was always referred to as Dr. Schneider. This was the cover name that he used, which suggests that Globke was much more taken with the game of spycraft than he ever was with really providing oversight.

NARRATOR: And again, geo-political events played right into Gehlen’s hands. In June 1950, Soviet-backed North Korea invaded the US-backed South.

GERALD STEINACHER: The first major military confrontation between the blocs.

NARRATOR: And that confrontation threatens to escalate into direct conflict.

NORMAN GODA: The worry was if North Korea is attacking South Korea with the blessings of Joseph Stalin, then how long can it be before East Germany attacks West Germany?

NARRATOR: Encouraged by the Allied powers, the West German government presses ahead with remilitarizing. It even has designs on joining a new Western military alliance Nato.

NORMAN GODA: Nato was formed in 1949 but the Korean War sort of put the ‘o’ in Nato. Adenauer really wanted to take advantage of this because a military commitment would tie West Germany to the Atlantic Alliance. They began thinking in terms of a defense establishment, which means that they started thinking in terms of an intelligence establishment.

NARRATOR: This was music to Reinhard Gehlen’s ears.

NORMAN GODA: And so, when Gehlen goes to the office of the German chancellor and starts talking about the importance of his organization and the benefit that it can be geopolitically to the new Germany, he's really pushing on an open door. 

NARRATOR: Despite Gehlen’s cavalier attitude to his US superiors then, the latter knew that cutting ties with him may prove counterproductive in the future.

NORMAN GODA: The problem again is you can't put this particular genie back in the bottle.

NARRATOR: So, Critchfield and the CIA take another approach to grappling with Gehlen.

NORMAN GODA: And so this is when the CIA decides to start spying on the Gehlen Organization.

NARRATOR: Next time on True Spies, the cat and mouse between Reinhard Gehlen and his American sponsors heats up.