The Gehlen Organization, Part 2: Peter and Paul

True Spies, Episode 178: The Gehlen Organization, Part 2 - Peter and Paul

NARRATOR: 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 from SPYSCAPE Studios: The Gehlen Organization, Part 2 - Peter and Paul.

NORMAN GODA: The funny thing about this is Gehlen was spectacularly unsuccessful during World War II and predicted Soviet operations partly because the Soviets were feeding the Germans disinformation. He learned nothing.

NARRATOR: November 1953. East Berlin. At an East German government press conference, officials present two men to the watching world. The Stasi have arrested each of them in the past few months and now, the captives are telling their story. Both are agents for the Gehlen Organization. In the months leading up to the press conference, they had disappeared. The Gehlen Organization informed the CIA that they must have been kidnapped. But the truth was very different.

NORMAN GODA: Two of Gehlen's counterintelligence officers defected to East Germany.

NARRATOR: And now the two officers were denouncing the Gehlen Organization and the West. For the first time since his arrest by US troops in 1945, self-styled ‘master spy’ Reinhard Gehlen was vulnerable.

NORMAN GODA: What that seemed to show Gehlen, as stubborn as he was, was that there were moles in the Gehlen Organization. 

NARRATOR: And to make matters worse...

NORMAN GODA: He really wasn't equipped to find out who they were. 

NARRATOR: In this, the second part of True Spies’ look at the Gehlen Organization - the West German intelligence service founded after World War II - we’ll hear how it became one of the most controversial spy networks of the post-war period.

NORMAN GODA: This is really one of the most incredible spy stories of the Cold War. It's almost unbelievable.

NARRATOR: By 1949 former Nazi General Reinhard Gehlen had secured what he coveted most for his fledgling West German intelligence network: CIA sponsorship. Codenamed ‘Utility’ by his American counterparts, Gehlen portrayed himself every inch the upstanding Prussian staff officer that so impressed many of his American patrons.

NORMAN GODA: And he never played the game with the Americans of being an independent actor, at least not when he wanted something.

NARRATOR: This is Norman Goda, a professor of history and holocaust studies at the University of Florida. He has studied Nazi Germany and intelligence for over 30 years.

NORMAN GODA: The Gehlen Organization, as far as the CIA was concerned, was not going to just go off on its own, set its own agenda, make its own policy, run its own operations.

NARRATOR: Before co-opting the organization, the CIA had told Gehlen that it wanted the names of everyone inside. When it did take over though, the CIA soon saw how difficult this would be.

NORMAN GODA: The Gehlen Organization never kept a central registry of who they hired. And the idea behind this was if the Soviets rolled up one network, they would only get that network. They wouldn't get the entire organization. 

NARRATOR: But James Critchfield, the CIA officer tasked with overseeing Gehlen, wasn’t wholly convinced by this logic. He, and many others in the Agency, thought the organization was protecting former Nazis on its payroll.

NORMAN GODA: If it ever got out that this was an organization that was riddled by former Gestapo, former SD, and people who had real criminal backgrounds, it would be a tremendous embarrassment to the US occupation authorities.

NARRATOR: And many in the CIA questioned Gehlen’s true motives.

NORMAN GODA: Maybe they want to undertake revanchist operations against the Soviets. After all, the eastern parts of Germany had been amputated from Germany, and the Soviet zone was the Soviet zone. Is it committed to democracy? We know their anti-Soviet right and that's fine. But was it going to serve US interests? Nobody really knew.

NARRATOR: Critchfield confronts Gehlen about both shady personnel and poor, unauthorized intelligence work in many of his departments but he’s met with a fierce response from the German spy.

NORMAN GODA: He told Critchfield that the questions that the Americans were asking were questions that he was not going to answer. And he simply wasn't going to cooperate.

NARRATOR: Not wanting to cut the organization loose completely, Critchfield concluded it was better not to push the matter further. Instead, he would do what he was trained to do - he would spy on the Gehlen Organization.

NORMAN GODA: This was ostensibly allied with them but was insubordinate at the same time. This is the irony.

NARRATOR: By now the Gehlen Organization had moved out of US military barracks and was based at a former Nazi villa in Pullach, Bavaria. So Critchfield moves in.

NORMAN GODA: Critchfield set up something called the Pullach Operations Base ostensibly to give Crutchfield access to Gehlen whenever he wanted. In fact, the Pullach operation base spied on Gehlen's headquarters.

NARRATOR: With no names of Gehlen personnel forthcoming, Critchfield improvises.

NORMAN GODA: The Pullach operations base and Gehlen's headquarters actually shared a courtyard and camera equipment was set up so that the CIA could see who was going in and coming out of Gehlen's headquarters.

NARRATOR: Before long, Critchfield and his men become concerned by what - or, more accurately, who - they see.

NORMAN GODA: They spotted people like Otto von Bolschwing, for example, who had worked under Adolf Eichmann.

NARRATOR: To this day, most of the details of this particular piece of counterintelligence are still classified. But we do know that Critchfield expanded his operations beyond courtyard cameras and soon he came across a particularly rich source of information.

NORMAN GODA: Once Germany was sovereign, after October 1949, all of these Gehlen officials had to be paid. And they weren't going to get paid under their false names. You had to be paid under your real name. 

NARRATOR: To prepare for a possible takeover of the organization, the West German government sent two accountants to Pullach to begin auditing Gehlen’s books. Critchfield’s team ultimately gained access to the resulting files and pieced their own picture of the organization together. What they saw shocked even the most cynical among them.

NORMAN GODA: Hundreds of former SS, SD, and Gestapo were working in the Gehlen Organization who had been on roving shooting squads on the Eastern Front, who had killed large numbers of Jews in these operations.

NARRATOR: Among the names were men like Emil Augsburg, an SS functionary convicted of war crimes in Poland. Gehlen had hired him as chief specialist on Soviet intelligence tactics, giving him the alias Dr. Alberti. The Americans were appalled, but not in the way you might think

NORMAN GODA: The moral issue came up, But ultimately, it wasn't US intelligence officials saying to themselves, “My God, how could we possibly hire a person like this?” The problem was more that they thought hiring a person like this would come back to bite them in one way or another. These were nationalists. Some of them were very sympathetic to the old idea of Nazi-ism. This could possibly be the germ of a resistance association.

NARRATOR: Fed up, the CIA moved to replace Gehlen with a more malleable figure. But by this point, Reinhard Gehlen’s cozy relationship with the West German government insulated him from any fallout.

NORMAN GODA: You really see someone who has figured out how to play the game right. He runs to the German government and he didn't run to just anybody in the German government. He ran to the office of the German chancellor, met the right people, formed the right relationships, and gained their confidence. 

NARRATOR: In August 1951, a senior CIA officer traveled to West Germany to meet with Hans Globke, secretary of state and right-hand man to Chancellor Konrad Adenauer. “Is Gehlen acceptable to Adenauer?” the CIA agent asked. “Absolutely,” Globke replied. The CIA now knew that Reinhard Gehlen would likely become head of the official intelligence agency of West Germany - a key American ally during the Cold War. Keeping the relationship cordial seemed the wise move long term. So that October, Critchfield invited Gehlen for a tour of the US.

NORMAN GODA: Critchfield’s view was, “Well this is who we've got. And so we have to smooth the feathers where we can.”

NARRATOR: The two men watch the World Series at Yankee Stadium, drink at Chicago’s finest speakeasy, marvel at the Redwoods in Sequoia National Park, and meet with CIA director Bedell ‘Beetle’ Smith in Washington, D.C.

NORMAN GODA: The CIA was still spying on him. But on the surface, anyway, it was important to maintain this image of two entities that were working together and give him the image of equality.

NARRATOR: But the thaw in relations was not to last. In November 1953 two Gehlen spies appeared at the East German press conference, spies that Gehlen said were kidnapped while operating in the Soviet zone. But they hadn’t been kidnapped at all. They were double agents returning to the East. For the CIA, the press conference was only the start - it was convinced there were many more moles in the Gehlen Organization - especially in its counterintelligence unit.

NORMAN GODA: Which went under the very vanilla name of General Administration L. Generalvertretung L. 

NARRATOR: GVL in particular was full of former SS and SD men. And the CIA was sure that many of them were just as anti-American as they were anti-anybody else, an opinion shared by the Soviets.

NORMAN GODA: And the Soviets tried to penetrate the Gehlen Organization right from the start. They targeted counterintelligence.

NARRATOR: CIA liaison officer James Critchfield confronts Reinhard Gehlen again, demanding all the names in GVL. For once, Gehlen relents.

NORMAN GODA: And as of this moment in 1953, he begins working a little bit more closely with the CIA again, and the CIA tries to help him figure out who might be working with the Soviets.

NARRATOR: Gehlen agrees to disband GVL and bring most of its members under a tighter leash at Pullach headquarters. Even after receiving the names of war criminals like Emil Augsburg though, Critchfield and the CIA made no attempt to get any of them sacked. It’ll come as no surprise to regular True Spies listeners that the CIA of the time wasn’t exactly averse to consorting with ex-Nazis themselves.

NORMAN GODA: The Americans had a number of operations themselves going on in the 1950s using former Nazis. And from time to time, there were actually arguments between American judicial officials on the one hand and American intelligence officials on the other. And the judicial officials from time to time would say, “We can't believe you have a relationship with so-and-so.” Nevertheless, the relationship would continue.

NARRATOR: Even the British Secret Service was sounding the alarm. But, ultimately, the only concern the CIA had was whether these former Nazis were in fact double agents.

NORMAN GODA: And that they could cause embarrassment down the road.

NARRATOR: Indeed, by 1954, Soviet penetration of the Gehlen Organization blew up again in spectacular fashion.

NARRATOR: February 1954, Vienna. A freight train leaves the city’s central station packed with cargo. But on board, there’s more than just raw materials and packaged goods. Hidden in one box is KGB agent Peter Deriabin. Arriving in the American zone, Deriabin requested asylum from authorities. Soon after, he was flown to America for debriefing and he dropped a bombshell on his interrogators.

NORMAN GODA: He told the Americans that there were two moles in the Gehlen Organization codenamed Peter and Paul.

NARRATOR: The CIA’s worst fears about Gehlen had been realized.

NORMAN GODA: And the Americans decided that they were going to find out who this was. 

NARRATOR: But the CIA doesn’t want its fingerprints on the investigation. If it got out that the CIA was penetrating the Gehlen Organization, the Agency knew that Reinhard Gehlen would be outraged, potentially acting further beyond its control. So, the CIA asked Gehlen’s old sponsor to do it instead. 

NORMAN GODA: This was kind of the odd thing is that the CIA wanted the CIC, that's the US Army Counterintelligence Corps, to run this operation against the Gehlen Organization. 

NARRATOR: So the CIC, Gehlen’s first American patron, start to penetrate the organization instead.

NORMAN GODA: And they recruited a guy named Ludwig Albert. 

NARRATOR: Now an agent in Gehlen’s counterintelligence unit, Ludwig Albert was part of the Wehrmacht’s secret field police during the war.

NORMAN GODA: A behind-the-front criminal organization that was supposed to take care of Partisans and Jews.

NARRATOR: But to the CIC Albert is a promising source. His intel on Gehlen’s penetration looks solid and it points in the direction of one person in particular - a man called Heinz Felfe.

NORMAN GODA: Heinz Felfe was a former SS officer. He was hired into the Gehlen Organization because he already had SD comrades in it and he begins to make his way up the ladder in the Gehlen Organization. Felfe was actually in headquarters in the counterintelligence section by 1953.

NARRATOR: After a little more digging, Albert is adamant.

NORMAN GODA: The mole is Heinz Felfe. Felfe is the one who is disrupting counterintelligence organizations and the counterintelligence mission of the Gehlen Organization. And Felfe is also the one giving the Soviets information. They could have gotten it from no place else.

NARRATOR: While ongoing, the CIC keeps the investigation under wraps, not briefing the CIA on any developments. 

NORMAN GODA: And the Americans were more and more convinced that Albert was right and that Felfe was the mole. 

NARRATOR: But then, in mid-1955, the investigation got blown apart.

NORMAN GODA: West German authorities went into Albert's home. They found all kinds of microfilms and other kinds of things that Albert wasn't supposed to have including wads of cash. He was arrested. 

NARRATOR: Ludwig Albert, the CIC’s mole catcher within Gehlen was, in fact, the mole. And more than that, Heinz Felfe got the tip-off that caught him.

NORMAN GODA: And it turned out that he worked with the East Germans.

NARRATOR: And soon after, Albert was dead.

NORMAN GODA: His wife said if he can't explain all of this, then he can hang himself, which Albert did.

NARRATOR: The CIC had been duped.

NORMAN GODA: Albert was telling them, “Felfe’s the mole. Felfe’s the mole. Felfe’s the mole.” But when Albert got arrested, the counterintelligence corps felt, “Well, looks like Albert was the mole. Right. And that we were backing the wrong horse here all along.” 

NARRATOR: But the investigation is still private. The CIC haven’t shared any of their work with the CIA. And, now embarrassed, they kept it that way.

NORMAN GODA: Because the whole thing made them look bad. We had been buying this bill of goods from this guy who winds up getting arrested and hanging himself. So the US Army Counterintelligence Corps, they were not really anxious to advertise the fact that they had been taking down all of this false information that was coming from Albert. 

NARRATOR: By now, James Critchfield and his team had worked with Heinz Felfe for some time. They knew he was a dependable ally in the fight against the Soviets. And with the mole caught, Felfe and his boss Reinhard Gehlen are vindicated.

NORMAN GODA: Felfe was now the hero who had uncovered the mole in West German counterintelligence. And so he gained Gehlen's confidence all the more after this. And Gehlen gained Adenauer’s confidence and Globke’s confidence all the more after this as well.

NARRATOR: Shortly after Albert’s death, Felfe was promoted.

NORMAN GODA: He winds up heading up counterintelligence for the Gehlen Organization. 

NARRATOR: Felfe devises several ingenious plans to foil the Soviets.

NORMAN GODA: He ran these big, bold, brazen organizations.

NARRATOR: Including one involving an East German spy, codenamed Lena. Felfe proposes to Gehlen that, through Lena, they give the Soviets so-called ‘build-up material’.

NORMAN GODA: That is intelligence that the Soviets already know, but is nonetheless true.

NARRATOR: This would establish Lena’s credibility in the eyes of the Soviets.

NORMAN GODA: And in return, Lena will get important intelligence from the Soviets.

NARRATOR: Felfe runs the scheme for years with Gehlen’s approval.

NORMAN GODA: The Soviets were giving Lena information on who their spies were in the Federal Republic.

NARRATOR: Who are then rounded up by the West German authorities.

NORMAN GODA: Which, by the way, made Gehlen look very, very good. The more Felfe is doing this, the more Gehlen can go to the federal Chancellor's office and say, “Oh, let me tell you what we're doing here. These big operations are bringing the Soviets to their knees.” 

NARRATOR: As one of Gehlen’s top agents, the Americans invite Heinz Felfe to Washington, D.C.

NORMAN GODA: And he visited the CIA with a delegation from the Gehlen Organization. And he offered to share information and maybe work with the CIA. The CIA was very happy to work with Felfe because Felfe claimed to have all of these sources in East Germany and so they began to share information.

NARRATOR: But 1956 was momentous for another reason also, as Reinhard Gehlen’s Organization changed hands once again.

NORMAN GODA: West Germany got its full sovereignty in 1955 and in 1956, the West German state officially took over the Gehlen Organization. 

NARRATOR: Giving it a new name in the process.

NORMAN GODA: Bundesnachrichtendienst, or Federal Information Office, or the BND for short. 

NARRATOR: The stars and stripes that flew over Gehlen’s Pullach compound were replaced by the red-black-gold tricolor of the Federal Republic of Germany. For the first time since 1945, Gehlen’s Organization was off America’s books. But only a few years after becoming an official part of the West German state, the Soviets came back to haunt the Gehlen Organization in another way.

NORMAN GODA: In 1959, a very important Polish intelligence official named Michael Goleniewski made his way West and defected and started getting debriefed by the CIA. 

NARRATOR: And soon enough, like Peter Deriabin before him, this defector also has a bombshell to share about Gehlen’s network. He tells the CIA how a KGB colleague had once bragged that of the six BND agents who had visited America in 1956, two were in fact KGB. Looking at the six names, the CIA remembers that Heinz Felfe was one of those on the US trip.

NORMAN GODA: And the CIA began to study Felfe seriously at this point. And they began tapping his phone and they began following him.

NARRATOR: And before long, the CIA discovers some irregularities in Felfe’s life.

NORMAN GODA: They began to figure out that he had more money than he really ought to have and that he had a second home right on the Austrian border, strangely enough.

NARRATOR: At first, the CIA kept the investigation from Gehlen, as the CIC had done with its mole hunt back in 1954. But by early 1961, the CIA felt it had no choice but to tell Gehlen their suspicions of Felfe. After all, the BND was now independent. Reluctantly, Gehlen starts his investigation.

NORMAN GODA: Ironically, the BND investigation picks up the old threads from the Albert case in 1954. All the stuff that Albert had told the CIC in 1954, which everyone discounted after he was arrested, now they're looking at it again. 

NARRATOR: And in this new light, Ludwig Albert’s accusation of Felfe started to make more sense.

NORMAN GODA: Albert was a triple agent. It's hard to say where his real loyalties were, but they were probably ultimately with the West German state because Ludwig Albert told the Americans the mole was Heinz Felfe.

NARRATOR: But Felfe’s counterintelligence operations against the Soviets were bold, not the sort you would expect from a Russian mole.

NORMAN GODA: When you think of a penetration agent, you think of some guy passing envelopes or leaving them on a park bench, or slipping somebody some microfilm or something like that. This was a guy who was actually running operations, and operations which seemed to be very successful.

NARRATOR: Nonetheless, Gehlen investigates Felfe’s operations.

NORMAN GODA: And they began to review the Lena business.

NARRATOR: Remember Lena? The operation Felfe devised where he would give the Soviets apparently insignificant ‘build-up’ information via their double agent, hoping the Soviets would offer up valuable intel as a result.

NORMAN GODA: They began to figure out, “Hmm, the people who have been getting arrested never seemed to be really important Soviet spies. Whereas the stuff we're handing over seems to be important stuff.”

NARRATOR: A stark realization dawns on Gehlen’s investigators.

NORMAN GODA: Well, the build-up information that Felfe said the Soviets already knew? A lot of it they didn't know and the Soviets were giving Lena information on who their spies were in the Federal Republic. But the Soviets gave Lena pawns, decoys.

NARRATOR: Gehlen now sees that something similar may have happened during the first serious mole hunt back in 1954, which ultimately led to Ludwig Albert.

NORMAN GODA: And so what was going on here was that the Soviets had two agents in West German counterintelligence. One was Felfe, one was Albert. And when the trail got too hot on Felfe, who was the more valuable of the two, they burned Albert. And it begins to occur to them that they had arrested a decoy and that the more important Soviet official had always been Felfe. 

NARRATOR: Eventually, even Gehlen can’t ignore the suspicions of his counterintelligence chief any longer.

NORMAN GODA: In August of 1961, the Berlin Wall is built to the complete surprise of West German intelligence.

ARCHIVE: A wall of East German police stands at the Brandenburg Gate. All communication between the eastern sector and those of the west has been cut as though by a knife. 

NORMAN GODA: This is kind of what your counterintelligence person is supposed to figure out. 

NARRATOR: In November 1961, the West German police arrest Heinz Felfe along with the man who recruited him to the Gehlen Organization’s counterintelligence unit who, it turned out, was also a Soviet spy. Comparing their backgrounds, the West Germans notice a striking parallel in the two men’s lives.

NORMAN GODA: Both of them were SS officers and both of them were in Dresden, which the Allies had bombed. So they had a bone to pick with the Allies.

NARRATOR: After his arrest, it becomes clear just how damaging Felfe was as a Soviet double agent.

NORMAN GODA: Felfe was not only burning West German agents who were working in East Germany, he also started burning CIA agents. The Soviets would not arrest them right away, but would arrest them from time to time and feed the others disinformation as well.

NARRATOR: The West Germans come to the same conclusion that Ludwig Albert gave the CIC back in 54’ - it is likely that the BND’s entire Soviet counterintelligence operation was penetrated by none other than the Soviets.

NORMAN GODA: This means that the Soviets can pretty much run anything in West Germany. And your top counterintelligence officer who was supposed to stop this is actually stopping a bunch of red herrings so that the real Soviet intelligence operations can proceed unhindered. So this is huge.

NARRATOR: Over the course of their trial, Felfe and his colleague admit to passing over 15,000 classified documents to the Soviets. Soon the CIA is rocked by another revelation.

NORMAN GODA: The British hired Felfe in 1945.

NARRATOR: And tasked him with penetrating the West German Communist Party.

NORMAN GODA: The problem was he was also working for the German Communist Party in the British zone. And then the information that he was collecting for the British, he was selling to other intelligence organizations. 

NARRATOR: After learning of this, the British Secret Service dropped Felfe but they didn’t alert any of their Allies to him. And so, Felfe was able to become one of the most significant double agents of the Cold War. Felfe was convicted of treason in 1963. 

NORMAN GODA: And the newspapers are running stories. How many other SS officers were in the Bundesnachrichtendienst as well? This was a tremendous scandal. 

NARRATOR: And not least for Reinhard Gehlen, the man who had promoted and vouched for Felfe.

NORMAN GODA: Adenauer starts to wise up. He starts talking about Gehlen's stupidity, Gehlen's incompetence. And so Gehlen became more and more isolated. 

NARRATOR: Now calling Gehlen ‘the runt’, West German Chancellor Adenauer even dragged the local US ambassador out of a luncheon to humiliate him over the Americans’ hiring of such an idiot as Gehlen in the first place.

NORMAN GODA: Gehlen was an intelligence failure for decades and an intelligence failure on a grand scale. And it resulted from opportunism, venality on Gehlen's part, schmoozing the right people on Gehlen's part, and a reluctance to exercise real oversight - first on the part of the Army, then on the part of the CIA, and then on the part of the West German government.

NARRATOR: After a few more years clinging on at the top, Gehlen retired in 1968 forever tainted by the Felfe affair.

NORMAN GODA: This guy was playing Chutes and Ladders while the Soviets were playing advanced chess and he simply never caught up, and ran the organization in such a way that it never would.

NARRATOR: But to many, including in the CIA, he was still a treasured warrior in the Cold War against the Russians. To mark his retirement, the CIA threw a banquet for Gehlen in Washington, D.C., thanking him for his years of service. After leaving the BND though, Gehlen didn’t go quietly.

NORMAN GODA: In 1971 Gehlen releases his memoirs.

NARRATOR: But for a true spy like Reinhard Gehlen, the taste for deception was ever-present.

NORMAN GODA: His memoirs, they're wonderful as a series of lies and half-truths, and as a Cold War period piece. And here he represents himself once again as the master spy. Every mistake he made in World War II? Those were all Hitler's fault. He got every prediction right but Hitler just wouldn't listen. But he also makes the argument that the Felfe case was really overblown. The press blew it up into something that it never really was. “They were out to get me afterward” and that sort of thing. 

NARRATOR: At his lakeside retreat in southern Germany, Gehlen was only too happy to serenade the occasional visiting journalist with stories of his life’s work. Once, when asked how he reflected on his career, Gehlen said, “I can only be grateful to fate. I don’t know what fundamental mistakes I have made.”

NORMAN GODA: It's a very interesting story of this staff officer who keeps his head down and does his job on the eastern front, who really wasn't up for the task. Who reinvents himself under American tutelage in 1945 and begins to fall in love more and more with his own image, but who never understood how intelligence really worked, was never really up to countering the way the Soviets did business.

NARRATOR: The legacy of Reinhard Gehlen - aka Dr. Schneider, Utility, and Richard Garner - lives on to this day. The BND still has a base at the Pullach compound that Gehlen set up at just after World War II and clearly much of the Gehlen Organization’s work is still too sensitive, even over 65 years later.

NORMAN GODA: There's still stuff that was never declassified and that may never be declassified.

NARRATOR: I’m Daisy Ridley. Next time on True Spies, you’ll hear all about the Soviet agent who had a direct link to Stalin, the Japanese Prime Minister, and Adolf Hitler.