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AFA 3: Reinhard Gehlen & His Organization

Part 1 45:14 | Part 2 41:09 | Part 3 46:10 | Part 4 47:15
(Record­ed June 21, 1984)

The third pro­gram in the series focus­es on the piv­otal role Hitler’s top spy­mas­ter (Gen­er­al Rein­hard Gehlen) and his orga­ni­za­tion played in post-World War II his­to­ry. In charge of all intel­li­gence on the East­ern Front dur­ing the war, Gehlen’s orga­ni­za­tion was adopt­ed by U.S. intel­li­gence after the war and became, in turn, the CIA’s intel­li­gence eyes and ears on the Sovi­et Union and East­ern Europe, the de-fac­to NATO intel­li­gence orga­ni­za­tion and the intel­li­gence ser­vice of the Fed­er­al Repub­lic of Ger­many, the BND. In this capac­i­ty, Gehlen was able to exert a pro­found influ­ence on the course of world events.

Despite a pledge to his Amer­i­can spon­sors not to employ war crim­i­nals, from the first, Gehlen did not hes­i­tate to uti­lize some of the worst offend­ers. SS colonel Otto Sko­rzeny put his post-war ODESSA net­work of SS men to work for Gehlen as part of the lat­ter’s oper­a­tion. This broad­cast doc­u­ments Gehlen’s use of Sko­rzeny and a force com­posed large­ly of vet­er­ans of Hitler’s “Final Solu­tion” to train the Egypt­ian intel­li­gence ser­vice, hav­ing under­tak­en the mis­sion on behalf of the CIA.

Pro­gram high­lights include: Gehlen’s cen­tral role in the cre­ation of Radio Free Europe; Gehlen’s employ­ment of Eich­man’s supe­ri­or in the Final Solu­tion, Otto Von Bolschwing; the BND’s employ­ment of Eich­man­n’s deputy Alois Brun­ner; the appoint­ment of Von Bolschwing asso­ciate Helene Von Damm to serve as White House spe­cial­ist for Pres­i­den­tial per­son­nel; Sko­rzeny’s cre­ation and train­ing of the first Pales­tin­ian ter­ror­ist groups while serv­ing on the Gehlen-CIA mis­sion in Egypt in the 1950’s; Gehlen’s use of Adolph Eich­man in the Skorzeny/CIA/Gehlen mis­sion in Egypt; text of a rare inter­view with Gehlen, in which he demon­strat­ed his unre­con­struct­ed Nazi sym­pa­thies; Gehlen’s piv­otal role in the estab­lish­ment of Radio Free Europe; a his­to­ry of Gehlen oper­a­tive Hel­mut Stre­ich­er, a for­mer SS offi­cer, whose intel­li­gence activ­i­ties ranged from the East­ern Front in World War II to the Bay of Pigs inva­sion; Gehlen’s work as a min­is­ter in “the Evan­gel­i­cal Church,” fol­low­ing his alleged retire­ment from the BND (Ger­many’s intel­li­gence ser­vice and the final incar­na­tion of Gehlen’s Nazi spy out­fit.


4 comments for “AFA 3: Reinhard Gehlen & His Organization”

  1. Almost 30 years have passed since then, and it’s still an excit­ing lis­ten­ing. Thanks!

    On a side-note, call­ing Russ­ian White move­ment “tzarist” is an over­sim­pli­fi­ca­tion of actu­al his­to­ry. Sim­ply put, the White =/= Impe­r­i­al. Many lead­ers of the Whites have par­tic­i­pat­ed in the Feb­ru­ary rev­o­lu­tion and forced Alex­ei’s abdi­ca­tion.
    The Whites, gen­er­al­ly speak­ing, were a com­bi­na­tion of great mul­ti­tude of groups, unit­ed only by their descent and a com­mon cause — oppos­ing the Reds. It does­n’t mean that there was­n’t any inter­nal strife between and among their var­i­ous fac­tions.
    Truth be told, most of the exiles who asso­ci­at­ed them­selves with the Whites, actu­al­ly sup­port­ed USSR in World War 2.

    Also I may be wrong, it seems like there’s a seri­ous mis­con­cep­tion about Impe­r­i­al Rus­sia in the West — just like about the USSR.

    Posted by Vitaly | April 24, 2013, 9:18 am
  2. http://www.jpost.com/Jewish-World/Jewish-News/German-court-blocks-release-of-secret-Eichmann-files-318088

    Ger­man court blocks release of secret Eich­mann files

    Clas­si­fied doc­u­ments report­ed­ly reveal West Ger­many intel­li­gence knew Eich­mann was in Argenti­na as ear­ly as 1952.

    The Ger­man Fed­er­al Admin­is­tra­tive Court vetoed a bid to release clas­si­fied for­eign intel­li­gence doc­u­ments that would reveal west­ern spies knew where Nazi war crim­i­nal Adolf Eich­mann escaped to after World War II, British media report­ed on Fri­day.

    The doc­u­ments are also thought to con­tain details about Eich­man­n’s kid­nap­ping from Argenti­na by Israeli Mossad agents in 1960, as well as details about a pos­si­ble col­lab­o­ra­tion between Israel and West Ger­many to pull the oper­a­tion off, accord­ing to reports.

    Eich­mann was respon­si­ble for the Nazi exter­mi­na­tion pro­gram that killed six mil­lion Jews in the Holo­caust. He coor­di­nat­ed the depor­ta­tion of Jews from across Europe to the exter­mi­na­tion camps.

    After his abduc­tion to Israel, he was put on tri­al and found guilty of war crimes. He was sen­tenced to death and hanged in 1962 — the sole exe­cu­tion in the State of Israel’s his­to­ry.

    The court deter­mined the Ger­man for­eign intel­li­gence agency was with­in its rights to black out pas­sages from the doc­u­ments, that were request­ed by Ger­man dai­ly Bild. The rul­ing fol­lowed a deci­sion from last year in which the court ordered the Fed­er­al Intel­li­gence Ser­vice to release clas­si­fied doc­u­ments.

    Bild report­ed that West Ger­man intel­li­gence knew Eich­mann was in Argenti­na as ear­ly as 1952.

    The CIA wrote to its West Ger­man coun­ter­part in 1958 that it had infor­ma­tion that Eich­mann is report­ed to live in Argenti­na under the alias ‘Clemens’ since 1952, doc­u­ments released in 2006 revealed. Eich­man­n’s actu­al alias was Ricar­do Kle­ment.

    The Ger­man intel­li­gence ser­vice said in response to the request to release the doc­u­ments that most of the files on Eich­mann were already pub­lic and only a small por­tion is blacked out due to laws on “pro­tect­ing state secu­ri­ty inter­ests,” accord­ing to reports in the British media.

    Posted by Vanfield | June 28, 2013, 1:13 pm
  3. Anoth­er Clas­sic episode check out my take on the top­ic based on Christo­pher Simp­son’s book ” Blow­back” I’m read­ing Simp­son’s sci­ence of coer­cion right now inspired by the great inter­views you did with him. The mass media and acad­e­mia one big psy­cho­log­i­cal war­fare oper­a­tion
    Nazis & the CIA

    Posted by Hugo Turner | June 18, 2016, 2:48 pm
  4. Rather amaz­ing sto­ry, though prob­a­bly has a lim­it­ed hang­out ele­ment as it is the Wapo. Copy­ing whole thing to avoid any pay­wall issues.

    Most inter­est­ing to me is that they main­tained the fronts through Leicht­en­stein.


    ...But what none of its cus­tomers ever knew was that Cryp­to AG was secret­ly owned by the CIA in a high­ly clas­si­fied part­ner­ship with West Ger­man intel­li­gence. These spy agen­cies rigged the company’s devices so they could eas­i­ly break the codes that coun­tries used to send encrypt­ed mes­sages.

    ....Crypto’s prod­ucts are still in use in more than a dozen coun­tries around the world, and its orange-and-white sign still looms atop the company’s long­time head­quar­ters build­ing near Zug, Switzer­land. But the com­pa­ny was dis­mem­bered in 2018, liq­ui­dat­ed by share­hold­ers whose iden­ti­ties have been per­ma­nent­ly shield­ed by the byzan­tine laws of Liecht­en­stein, a tiny Euro­pean nation with a Cay­man Islands-like rep­u­ta­tion for finan­cial secre­cy.


    For more than half a cen­tu­ry, gov­ern­ments all over the world trust­ed a sin­gle com­pa­ny to keep the com­mu­ni­ca­tions of their spies, sol­diers and diplo­mats secret.

    The com­pa­ny, Cryp­to AG, got its first break with a con­tract to build code-mak­ing machines for U.S. troops dur­ing World War II. Flush with cash, it became a dom­i­nant mak­er of encryp­tion devices for decades, nav­i­gat­ing waves of tech­nol­o­gy from mechan­i­cal gears to elec­tron­ic cir­cuits and, final­ly, sil­i­con chips and soft­ware.

    The Swiss firm made mil­lions of dol­lars sell­ing equip­ment to more than 120 coun­tries well into the 21st cen­tu­ry. Its clients includ­ed Iran, mil­i­tary jun­tas in Latin Amer­i­ca, nuclear rivals India and Pak­istan, and even the Vat­i­can.

    But what none of its cus­tomers ever knew was that Cryp­to AG was secret­ly owned by the CIA in a high­ly clas­si­fied part­ner­ship with West Ger­man intel­li­gence. These spy agen­cies rigged the company’s devices so they could eas­i­ly break the codes that coun­tries used to send encrypt­ed mes­sages.

    The decades-long arrange­ment, among the most close­ly guard­ed secrets of the Cold War, is laid bare in a clas­si­fied, com­pre­hen­sive CIA his­to­ry of the oper­a­tion obtained by The Wash­ing­ton Post and ZDF, a Ger­man pub­lic broad­cast­er, in a joint report­ing project.

    The account iden­ti­fies the CIA offi­cers who ran the pro­gram and the com­pa­ny exec­u­tives entrust­ed to exe­cute it. It traces the ori­gin of the ven­ture as well as the inter­nal con­flicts that near­ly derailed it. It describes how the Unit­ed States and its allies exploit­ed oth­er nations’ gulli­bil­i­ty for years, tak­ing their mon­ey and steal­ing their secrets.

    The oper­a­tion, known first by the code name “The­saurus” and lat­er “Rubi­con,” ranks among the most auda­cious in CIA his­to­ry.

    “It was the intel­li­gence coup of the cen­tu­ry,” the CIA report con­cludes. “For­eign gov­ern­ments were pay­ing good mon­ey to the U.S. and West Ger­many for the priv­i­lege of hav­ing their most secret com­mu­ni­ca­tions read by at least two (and pos­si­bly as many as five or six) for­eign coun­tries.”

    From 1970 on, the CIA and its code-break­ing sib­ling, the Nation­al Secu­ri­ty Agency, con­trolled near­ly every aspect of Crypto’s oper­a­tions — pre­sid­ing with their Ger­man part­ners over hir­ing deci­sions, design­ing its tech­nol­o­gy, sab­o­tag­ing its algo­rithms and direct­ing its sales tar­gets.

    Then, the U.S. and West Ger­man spies sat back and lis­tened.

    They mon­i­tored Iran’s mul­lahs dur­ing the 1979 hostage cri­sis, fed intel­li­gence about Argentina’s mil­i­tary to Britain dur­ing the Falk­lands War, tracked the assas­si­na­tion cam­paigns of South Amer­i­can dic­ta­tors and caught Libyan offi­cials con­grat­u­lat­ing them­selves on the 1986 bomb­ing of a Berlin dis­co.

    The pro­gram had lim­its. America’s main adver­saries, includ­ing the Sovi­et Union and Chi­na, were nev­er Cryp­to cus­tomers. Their well-found­ed sus­pi­cions of the company’s ties to the West shield­ed them from expo­sure, although the CIA his­to­ry sug­gests that U.S. spies learned a great deal by mon­i­tor­ing oth­er coun­tries’ inter­ac­tions with Moscow and Bei­jing.

    There were also secu­ri­ty breach­es that put Cryp­to under clouds of sus­pi­cion. Doc­u­ments released in the 1970s showed exten­sive — and incrim­i­nat­ing — cor­re­spon­dence between an NSA pio­neer and Crypto’s founder. For­eign tar­gets were tipped off by the care­less state­ments of pub­lic offi­cials includ­ing Pres­i­dent Ronald Rea­gan. And the 1992 arrest of a Cryp­to sales­man in Iran, who did not real­ize he was sell­ing rigged equip­ment, trig­gered a dev­as­tat­ing “storm of pub­lic­i­ty,” accord­ing to the CIA his­to­ry.

    But the true extent of the company’s rela­tion­ship with the CIA and its Ger­man coun­ter­part was until now nev­er revealed.

    The Ger­man spy agency, the BND, came to believe the risk of expo­sure was too great and left the oper­a­tion in the ear­ly 1990s. But the CIA bought the Ger­mans’ stake and sim­ply kept going, wring­ing Cryp­to for all its espi­onage worth until 2018, when the agency sold off the company’s assets, accord­ing to cur­rent and for­mer offi­cials.

    The company’s impor­tance to the glob­al secu­ri­ty mar­ket had fall­en by then, squeezed by the spread of online encryp­tion tech­nol­o­gy. Once the province of gov­ern­ments and major cor­po­ra­tions, strong encryp­tion is now as ubiq­ui­tous as apps on cell­phones.

    Even so, the Cryp­to oper­a­tion is rel­e­vant to mod­ern espi­onage. Its reach and dura­tion helps to explain how the Unit­ed States devel­oped an insa­tiable appetite for glob­al sur­veil­lance that was exposed in 2013 by Edward Snow­den. There are also echoes of Cryp­to in the sus­pi­cions swirling around mod­ern com­pa­nies with alleged links to for­eign gov­ern­ments, includ­ing the Russ­ian anti-virus firm Kasper­sky, a tex­ting app tied to the Unit­ed Arab Emi­rates and the Chi­nese telecom­mu­ni­ca­tions giant Huawei.

    This sto­ry is based on the CIA his­to­ry and a par­al­lel BND account, also obtained by The Post and ZDF, inter­views with cur­rent and for­mer West­ern intel­li­gence offi­cials as well as Cryp­to employ­ees. Many spoke on the con­di­tion of anonymi­ty, cit­ing the sen­si­tiv­i­ty of the sub­ject.

    It is hard to over­state how extra­or­di­nary the CIA and BND his­to­ries are. Sen­si­tive intel­li­gence files are peri­od­i­cal­ly declas­si­fied and released to the pub­lic. But it is exceed­ing­ly rare, if not unprece­dent­ed, to glimpse author­i­ta­tive inter­nal his­to­ries of an entire covert oper­a­tion. The Post was able to read all of the doc­u­ments, but the source of the mate­r­i­al insist­ed that only excerpts be pub­lished.

    The CIA and the BND declined to com­ment, though U.S. and Ger­man offi­cials did not dis­pute the authen­tic­i­ty of the doc­u­ments. The first is a 96-page account of the oper­a­tion com­plet­ed in 2004 by the CIA’s Cen­ter for the Study of Intel­li­gence, an inter­nal his­tor­i­cal branch. The sec­ond is an oral his­to­ry com­piled by Ger­man intel­li­gence offi­cials in 2008.

    The over­lap­ping accounts expose fric­tions between the two part­ners over mon­ey, con­trol and eth­i­cal lim­its, with the West Ger­mans fre­quent­ly aghast at the enthu­si­asm with which U.S. spies often tar­get­ed allies.

    But both sides describe the oper­a­tion as suc­cess­ful beyond their wildest pro­jec­tions. At times, includ­ing in the 1980s, Cryp­to account­ed for rough­ly 40 per­cent of the diplo­mat­ic cables and oth­er trans­mis­sions by for­eign gov­ern­ments that crypt­an­a­lysts at the NSA decod­ed and mined for intel­li­gence, accord­ing to the doc­u­ments.

    All the while, Cryp­to gen­er­at­ed mil­lions of dol­lars in prof­its that the CIA and BND split and plowed into oth­er oper­a­tions.

    Crypto’s prod­ucts are still in use in more than a dozen coun­tries around the world, and its orange-and-white sign still looms atop the company’s long­time head­quar­ters build­ing near Zug, Switzer­land. But the com­pa­ny was dis­mem­bered in 2018, liq­ui­dat­ed by share­hold­ers whose iden­ti­ties have been per­ma­nent­ly shield­ed by the byzan­tine laws of Liecht­en­stein, a tiny Euro­pean nation with a Cay­man Islands-like rep­u­ta­tion for finan­cial secre­cy.

    Two com­pa­nies pur­chased most of Crypto’s assets. The first, CyOne Secu­ri­ty, was cre­at­ed as part of a man­age­ment buy­out and now sells secu­ri­ty sys­tems exclu­sive­ly to the Swiss gov­ern­ment. The oth­er, Cryp­to Inter­na­tion­al, took over the for­mer company’s brand and inter­na­tion­al busi­ness.

    Each insist­ed that it has no ongo­ing con­nec­tion to any intel­li­gence ser­vice, but only one claimed to be unaware of CIA own­er­ship. Their state­ments were in response to ques­tions from The Post, ZDF and Swiss broad­cast­er SRF, which also had access to the doc­u­ments.

    CyOne has more sub­stan­tial links to the now-dis­solved Cryp­to, includ­ing that the the new company’s chief exec­u­tive held the same posi­tion at Cryp­to for near­ly two decades of CIA own­er­ship.

    A CyOne spokesman declined to address any aspect of Cryp­to AG’s his­to­ry, but said the new firm has “no ties to any for­eign intel­li­gence ser­vices.”

    Andreas Linde, the chair­man of the com­pa­ny that now holds the rights to Crypto’s inter­na­tion­al prod­ucts and busi­ness, said he had no knowl­edge of the company’s rela­tion­ship to the CIA and BND before being con­front­ed with the facts in this sto­ry.

    “We at Cryp­to Inter­na­tion­al have nev­er had any rela­tion­ship with the CIA or BND — and please quote me,” he said in an inter­view. “If what you are say­ing is true, then absolute­ly I feel betrayed, and my fam­i­ly feels betrayed, and I feel there will be a lot of employ­ees who will feel betrayed as well as cus­tomers.”

    The Swiss gov­ern­ment announced on Tues­day that it was launch­ing an inves­ti­ga­tion of Cryp­to AG’s ties to the CIA and BND. Ear­li­er this month, Swiss offi­cials revoked Cryp­to International’s export license.

    The tim­ing of the Swiss moves was curi­ous. The CIA and BND doc­u­ments indi­cate that Swiss offi­cials must have known for decades about Crypto’s ties to the U.S. and Ger­man spy ser­vices, but inter­vened only after learn­ing that news orga­ni­za­tions were about to expose the arrange­ment.

    The his­to­ries, which do not address when or whether the CIA end­ed its involve­ment, car­ry the inevitable bias­es of doc­u­ments writ­ten from the per­spec­tives of the operation’s archi­tects. They depict Rubi­con as a tri­umph of espi­onage, one that helped the Unit­ed States pre­vail in the Cold War, keep tabs on dozens of author­i­tar­i­an regimes and pro­tect the inter­ests of the Unit­ed States and its allies.

    The papers large­ly avoid more unset­tling ques­tions, includ­ing what the Unit­ed States knew — and what it did or didn’t do — about coun­tries that used Cryp­to machines while engaged in assas­si­na­tion plots, eth­nic cleans­ing cam­paigns and human rights abus­es.

    The rev­e­la­tions in the doc­u­ments may pro­vide rea­son to revis­it whether the Unit­ed States was in posi­tion to inter­vene in, or at least expose, inter­na­tion­al atroc­i­ties, and whether it opt­ed against doing so at times to pre­serve its access to valu­able streams of intel­li­gence.

    Nor do the files deal with obvi­ous eth­i­cal dilem­mas at the core of the oper­a­tion: the decep­tion and exploita­tion of adver­saries, allies and hun­dreds of unwit­ting Cryp­to employ­ees. Many trav­eled the world sell­ing or ser­vic­ing rigged sys­tems with no clue that they were doing so at risk to their own safe­ty.

    In recent inter­views, deceived employ­ees — even ones who came to sus­pect dur­ing their time at Cryp­to that the com­pa­ny was coop­er­at­ing with West­ern intel­li­gence — said the rev­e­la­tions in the doc­u­ments have deep­ened a sense of betray­al, of them­selves and cus­tomers.

    “You think you do good work and you make some­thing secure,” said Juerg Spo­erndli, an elec­tri­cal engi­neer who spent 16 years at Cryp­to. “And then you real­ize that you cheat­ed these clients.”

    Those who ran the clan­des­tine pro­gram remain unapolo­getic.

    “Do I have any qualms? Zero,” said Bob­by Ray Inman, who served as direc­tor of the NSA and deputy direc­tor of the CIA in the late 1970s and ear­ly 1980s. “It was a very valu­able source of com­mu­ni­ca­tions on sig­nif­i­cant­ly large parts of the world impor­tant to U.S. pol­i­cy­mak­ers.”

    A denial oper­a­tion

    This sprawl­ing, sophis­ti­cat­ed oper­a­tion grew out of the U.S. military’s need for a crude but com­pact encryp­tion device.

    Boris Hagelin, Crypto’s founder, was an entre­pre­neur and inven­tor who was born in Rus­sia but fled to Swe­den as the Bol­she­viks took pow­er. He fled again to the Unit­ed States when the Nazis occu­pied Nor­way in 1940.

    He brought with him an encryp­tion machine that looked like a for­ti­fied music box, with a stur­dy crank on the side and an assem­bly of met­al gears and pin­wheels under a hard met­al case.

    It wasn’t near­ly as elab­o­rate, or secure, as the Enig­ma machines being used by the Nazis. But Hagelin’s M‑209, as it became known, was portable, hand-pow­ered and per­fect for troops on the move. Pho­tos show sol­diers with the eight-pound box­es — about the size of a thick book — strapped to their knees. Many of Hagelin’s devices have been pre­served at a pri­vate muse­um in Eind­hoven, the Nether­lands.

    Send­ing a secure mes­sage with the device was tedious. The user would rotate a dial, let­ter by let­ter, and thrust down the crank. The hid­den gears would turn and spit out an enci­phered mes­sage on a strip of paper. A sig­nals offi­cer then had to trans­mit that scram­bled mes­sage by Morse code to a recip­i­ent who would reverse the sequence.

    Secu­ri­ty was so weak that it was assumed that near­ly any adver­sary could break the code with enough time. But doing so took hours. And since these were used main­ly for tac­ti­cal mes­sages about troop move­ments, by the time the Nazis decod­ed a sig­nal its val­ue had like­ly per­ished.

    Over the course of the war, about 140,000 M‑209s were built at the Smith Coro­na type­writer fac­to­ry in Syra­cuse, N.Y., under a U.S. Army con­tract worth $8.6 mil­lion to Cryp­to. After the war, Hagelin returned to Swe­den to reopen his fac­to­ry, bring­ing with him a per­son­al for­tune and a life­long sense of loy­al­ty to the Unit­ed States.
    Even so, Amer­i­can spies kept a wary eye on his post­war oper­a­tions. In the ear­ly 1950s, he devel­oped a more advanced ver­sion of his war-era machine with a new, “irreg­u­lar” mechan­i­cal sequence that briefly stumped Amer­i­can code-break­ers.

    Marc Simons, co-founder of Cryp­to Muse­um, a vir­tu­al muse­um of cipher machines, explains how secret mes­sages were cre­at­ed using the Hagelin CX-52. (Stanislav Dobak/The Wash­ing­ton Post)Alarmed by the capa­bil­i­ties of the new CX-52 and oth­er devices Cryp­to envi­sioned, U.S. offi­cials began to dis­cuss what they called the “Hagelin prob­lem.”

    These were “the Dark Ages of Amer­i­can cryp­tol­ogy,” accord­ing to the CIA his­to­ry. The Sovi­ets, Chi­nese and North Kore­ans were using code-mak­ing sys­tems that were all but impen­e­tra­ble. U.S. spy agen­cies wor­ried that the rest of the world would also go dark if coun­tries could buy secure machines from Hagelin.

    The Amer­i­cans had sev­er­al points of lever­age with Hagelin: his ide­o­log­i­cal affin­i­ty for the coun­try, his hope that the Unit­ed States would remain a major cus­tomer and the veiled threat that they could dam­age his prospects by flood­ing the mar­ket with sur­plus M‑209s from the war.

    The Unit­ed States also had a more cru­cial asset: William Fried­man. Wide­ly regard­ed as the father of Amer­i­can cryp­tol­ogy, Fried­man had known Hagelin since the 1930s. They had forged a life­long friend­ship over their shared back­grounds and inter­ests, includ­ing their Russ­ian her­itage and fas­ci­na­tion with the com­plex­i­ties of encryp­tion.

    There might nev­er have been an Oper­a­tion Rubi­con if the two men had not shak­en hands on the very first secret agree­ment between Hagelin and U.S. intel­li­gence over din­ner at the Cos­mos Club in Wash­ing­ton in 1951.

    The deal called for Hagelin, who had moved his com­pa­ny to Switzer­land, to restrict sales of his most sophis­ti­cat­ed mod­els to coun­tries approved by the Unit­ed States. Nations not on that list would get old­er, weak­er sys­tems. Hagelin would be com­pen­sat­ed for his lost sales, as much as $700,000 up front.

    It took years for the Unit­ed States to live up to its end of the deal, as top offi­cials at the CIA and the pre­de­ces­sor to the NSA bick­ered over the terms and wis­dom of the scheme. But Hagelin abid­ed by the agree­ment from the out­set, and over the next two decades, his secret rela­tion­ship with U.S. intel­li­gence agen­cies deep­ened.

    In 1960, the CIA and Hagelin entered into a “licens­ing agree­ment” that paid him $855,000 to renew his com­mit­ment to the hand­shake deal. The agency paid him $70,000 a year in retain­er and start­ed giv­ing his com­pa­ny cash infu­sions of $10,000 for “mar­ket­ing” expens­es to ensure that Cryp­to — and not oth­er upstarts in the encryp­tion busi­ness — locked down con­tracts with most of the world’s gov­ern­ments.

    It was a clas­sic “denial oper­a­tion” in the par­lance of intel­li­gence, a scheme designed to pre­vent adver­saries from acquir­ing weapons or tech­nol­o­gy that would give them an advan­tage. But it was only the begin­ning of Crypto’s col­lab­o­ra­tion with U.S. intel­li­gence. With­in a decade, the whole oper­a­tion belonged to the CIA and BND.

    brave new world

    U.S. offi­cials had toyed since the out­set with the idea of ask­ing Hagelin whether he would be will­ing to let U.S. cryp­tol­o­gists doc­tor his machines. But Fried­man over­ruled them, con­vinced that Hagelin would see that as a step too far.

    The CIA and NSA saw a new open­ing in the mid-1960s, as the spread of elec­tron­ic cir­cuits forced Hagelin to accept out­side help adapt­ing to the new tech­nol­o­gy, or face extinc­tion cling­ing to the man­u­fac­tur­ing of mechan­i­cal machines.

    NSA cryp­tol­o­gists were equal­ly con­cerned about the poten­tial impact of inte­grat­ed cir­cuits, which seemed poised to enable a new era of unbreak­able encryp­tion. But one of the agency’s senior ana­lysts, Peter Jenks, iden­ti­fied a poten­tial vul­ner­a­bil­i­ty.

    If “care­ful­ly designed by a clever cryp­to-math­e­mati­cian,” he said, a cir­cuit-based sys­tem could be made to appear that it was pro­duc­ing end­less streams of ran­dom­ly-gen­er­at­ed char­ac­ters, while in real­i­ty it would repeat itself at short enough inter­vals for NSA experts — and their pow­er­ful com­put­ers — to crack the pat­tern.

    Two years lat­er, in 1967, Cryp­to rolled out a new, all-elec­tron­ic mod­el, the H‑460, whose inner work­ings were com­plete­ly designed by the NSA.

    The CIA his­to­ry all but gloats about cross­ing this thresh­old. “Imag­ine the idea of the Amer­i­can gov­ern­ment con­vinc­ing a for­eign man­u­fac­tur­er to jim­my equip­ment in its favor,” the his­to­ry says. “Talk about a brave new world.”

    The NSA didn’t install crude “back doors” or secret­ly pro­gram the devices to cough up their encryp­tion keys. And the agency still faced the dif­fi­cult task of inter­cept­ing oth­er gov­ern­ments’ com­mu­ni­ca­tions, whether pluck­ing sig­nals out of the air or, in lat­er years, tap­ping into fiber optic cables.

    But the manip­u­la­tion of Crypto’s algo­rithms stream­lined the code-break­ing process, at times reduc­ing to sec­onds a task that might oth­er­wise have tak­en months. The com­pa­ny always made at least two ver­sions of its prod­ucts — secure mod­els that would be sold to friend­ly gov­ern­ments, and rigged sys­tems for the rest of the world.

    In so doing, the U.S.-Hagelin part­ner­ship had evolved from denial to “active mea­sures.” No longer was Cryp­to mere­ly restrict­ing sales of its best equip­ment, but active­ly sell­ing devices that were engi­neered to betray their buy­ers.

    The pay­off went beyond the pen­e­tra­tion of the devices. Crypto’s shift to elec­tron­ic prod­ucts buoyed busi­ness so much that it became addict­ed to its depen­dence on the NSA. For­eign gov­ern­ments clam­ored for sys­tems that seemed clear­ly supe­ri­or to the old clunky mechan­i­cal devices, but in fact were eas­i­er for U.S. spies to read.
    Ger­man and Amer­i­can part­ners

    By the end of the 1960s, Hagelin was near­ing 80 and anx­ious to secure the future for his com­pa­ny, which had grown to more than 180 employ­ees. CIA offi­cials were sim­i­lar­ly anx­ious about what would hap­pen to the oper­a­tion if Hagelin were to sud­den­ly sell or die.

    Hagelin had once hoped to turn con­trol over to his son, Bo. But U.S. intel­li­gence offi­cials regard­ed him as a “wild card” and worked to con­ceal the part­ner­ship from him. Bo Hagelin was killed in a car crash on Washington’s Belt­way in 1970. There were no indi­ca­tions of foul play.

    U.S. intel­li­gence offi­cials dis­cussed the idea of buy­ing Cryp­to for years, but squab­bling between the CIA and NSA pre­vent­ed them from act­ing until two oth­er spy agen­cies entered the fray.

    The French, West Ger­man and oth­er Euro­pean intel­li­gence ser­vices had either been told about the Unit­ed States’ arrange­ment with Cryp­to or fig­ured it out on their own. Some were under­stand­ably jeal­ous and probed for ways to secure a sim­i­lar deal for them­selves.

    In 1967, Hagelin was approached by the French intel­li­gence ser­vice with an offer to buy the com­pa­ny in part­ner­ship with Ger­man intel­li­gence. Hagelin rebuffed the offer and report­ed it to his CIA han­dlers. But two years lat­er, the Ger­mans came back seek­ing to make a fol­low-up bid with the bless­ing of the Unit­ed States.

    In a meet­ing in ear­ly 1969 at the West Ger­man Embassy in Wash­ing­ton, the head of that country’s cipher ser­vice, Wil­helm Goe­ing, out­lined the pro­pos­al and asked whether the Amer­i­cans “were inter­est­ed in becom­ing part­ners too.”

    Months lat­er, CIA Direc­tor Richard Helms approved the idea of buy­ing Cryp­to and dis­patched a sub­or­di­nate to Bonn, the West Ger­man cap­i­tal, to nego­ti­ate terms with one major caveat: the French, CIA offi­cials told Goe­ing, would have to be “shut out.”

    West Ger­many acqui­esced to this Amer­i­can pow­er play, and a deal between the two spy agen­cies was record­ed in a June 1970 memo car­ry­ing the shaky sig­na­ture of a CIA case offi­cer in Munich who was in the ear­ly stages of Parkinson’s dis­ease and the illeg­i­ble scrawl of his BND coun­ter­part.

    The two agen­cies agreed to chip in equal­ly to buy out Hagelin for approx­i­mate­ly $5.75 mil­lion, but the CIA left it large­ly to the Ger­mans to fig­ure out how to pre­vent any trace of this trans­ac­tion from ever becom­ing pub­lic.

    A Liecht­en­stein law firm, Marx­er and Goop, helped hide the iden­ti­ties of the new own­ers of Cryp­to through a series of shells and “bear­er” shares that required no names in reg­is­tra­tion doc­u­ments. The firm was paid an annu­al salary “less for the exten­sive work but more for their silence and accep­tance,” the BND his­to­ry says. The firm, now named Marx­er and Part­ner, did not respond to a request for com­ment.

    A new board of direc­tors was set up to over­see the com­pa­ny. Only one mem­ber of the board, Sture Nyberg, to whom Hagelin had turned over day-to-day man­age­ment, knew of CIA involve­ment. “It was through this mech­a­nism,” the CIA his­to­ry notes, “that BND and CIA con­trolled the activ­i­ties” of Cryp­to. Nyberg left the com­pa­ny in 1976. The Post and ZDF could not locate him or deter­mine if he is still alive.

    The two spy agen­cies held their own reg­u­lar meet­ings to dis­cuss what to do with their acqui­si­tion. The CIA used a secret base in Munich, ini­tial­ly on a mil­i­tary instal­la­tion used by Amer­i­can troops and lat­er in the attic of a build­ing adja­cent to the U.S. Con­sulate, as the head­quar­ters for its involve­ment in the oper­a­tion.

    The CIA and BND agreed on a series of code names for the pro­gram and its var­i­ous com­po­nents. Cryp­to was called “Min­er­va,” which is also the title of the CIA his­to­ry. The oper­a­tion was at first code-named “The­saurus,” though in the 1980s it was changed to “Rubi­con.”

    Each year, the CIA and BND split any prof­its Cryp­to had made, accord­ing to the Ger­man his­to­ry, which says the BND han­dled the account­ing and deliv­ered the cash owed to the CIA in an under­ground park­ing garage.

    From the out­set, the part­ner­ship was beset by pet­ty dis­agree­ments and ten­sions. To CIA oper­a­tives, the BND often seemed pre­oc­cu­pied with turn­ing a prof­it, and the Amer­i­cans “con­stant­ly remind­ed the Ger­mans that this was an intel­li­gence oper­a­tion, not a mon­ey-mak­ing enter­prise.” The Ger­mans were tak­en aback by the Amer­i­cans’ will­ing­ness to spy on all but its clos­est allies, with tar­gets includ­ing NATO mem­bers Spain, Greece, Turkey and Italy.

    Mind­ful of the lim­i­ta­tions to their abil­i­ties to run a high-tech com­pa­ny, the two agen­cies brought in cor­po­rate out­siders. The Ger­mans enlist­ed Siemens, a Munich-based con­glom­er­ate, to advise Cryp­to on busi­ness and tech­ni­cal issues in exchange for five per­cent of the company’s sales. The Unit­ed States lat­er brought in Motoro­la to fix balky prod­ucts, mak­ing it clear to the company’s CEO this was being done for U.S. intel­li­gence. Siemens declined to com­ment. Motoro­la offi­cials did not respond to a request for com­ment.

    To its frus­tra­tion, Ger­many was nev­er admit­ted to the vaunt­ed “Five Eyes,” a long-stand­ing intel­li­gence pact involv­ing the Unit­ed States, Britain, Aus­tralia, New Zealand and Cana­da. But with the Cryp­to part­ner­ship, Ger­many moved clos­er into the Amer­i­can espi­onage fold than might have seemed pos­si­ble in World War II’s after­math. With the secret back­ing of two of the world’s pre­miere intel­li­gence agen­cies and the sup­port of two of the world’s largest cor­po­ra­tions, Crypto’s busi­ness flour­ished.

    A table in the CIA his­to­ry shows that sales surged from 15 mil­lion Swiss francs in 1970 to more than 51 mil­lion in 1975, or $19 mil­lion. The company’s pay­roll expand­ed to more than 250 employ­ees.

    “The Min­er­va pur­chase had yield­ed a bonan­za,” the CIA his­to­ry says of this peri­od. The oper­a­tion entered a two-decade stretch of unprece­dent­ed access to for­eign gov­ern­ments’ com­mu­ni­ca­tions.

    Iran­ian sus­pi­cions

    The NSA’s eaves­drop­ping empire was for many years orga­nized around three main geo­graph­ic tar­gets, each with its own alpha­bet­ic code: A for the Sovi­ets, B for Asia and G for vir­tu­al­ly every­where else.

    By the ear­ly 1980s, more than half of the intel­li­gence gath­ered by G group was flow­ing through Cryp­to machines, a capa­bil­i­ty that U.S. offi­cials relied on in cri­sis after cri­sis.

    In 1978, as the lead­ers of Egypt, Israel and the Unit­ed States gath­ered at Camp David for nego­ti­a­tions on a peace accord, the NSA was secret­ly mon­i­tor­ing the com­mu­ni­ca­tions of Egypt­ian Pres­i­dent Anwar Sadat back to Cairo.

    A year lat­er, after Iran­ian mil­i­tants stormed the U.S. Embassy and took 52 Amer­i­can hostages, the Carter admin­is­tra­tion sought their release in back-chan­nel com­mu­ni­ca­tions through Alge­ria. Inman, who served as NSA direc­tor at the time, said he rou­tine­ly got calls from Pres­i­dent Carter ask­ing how the Aya­tol­lah Khome­inei regime was react­ing to the lat­est mes­sages.

    “We were able to respond to his ques­tions about 85 per­cent of the time,” Inman said. That was because the Ira­ni­ans and Alge­ri­ans were using Cryp­to devices.

    Inman said the oper­a­tion also put him in one of the trick­i­est binds he’d encoun­tered in gov­ern­ment ser­vice. At one point, the NSA inter­cept­ed Libyan com­mu­ni­ca­tions indi­cat­ing that the president’s broth­er, Bil­ly Carter, was advanc­ing Libya’s inter­ests in Wash­ing­ton and was on leader Moam­mar Gaddafi’s pay­roll.

    Inman referred the mat­ter to the Jus­tice Depart­ment. The FBI launched an inves­ti­ga­tion of Carter, who false­ly denied tak­ing pay­ments. In the end, he was not pros­e­cut­ed but agreed to reg­is­ter as a for­eign agent.

    Through­out the 1980s, the list of Crypto’s lead­ing clients read like a cat­a­logue of glob­al trou­ble spots. In 1981, Sau­di Ara­bia was Crypto’s biggest cus­tomer, fol­lowed by Iran, Italy, Indone­sia, Iraq, Libya, Jor­dan and South Korea.

    To pro­tect its mar­ket posi­tion, Cryp­to and its secret own­ers engaged in sub­tle smear cam­paigns against rival com­pa­nies, accord­ing to the doc­u­ments, and plied gov­ern­ment offi­cials with bribes. Cryp­to sent an exec­u­tive to Riyadh, Sau­di Ara­bia, with 10 Rolex watch­es in his lug­gage, the BND his­to­ry says, and lat­er arranged a train­ing pro­gram for the Saud­is in Switzer­land where the par­tic­i­pants’ “favorite pas­time was to vis­it the broth­els, which the com­pa­ny also financed.”

    At times, the incen­tives led to sales to coun­tries ill-equipped to use the com­pli­cat­ed sys­tems. Nige­ria bought a large ship­ment of Cryp­to machines, but two years lat­er, when there was still no cor­re­spond­ing pay­off in intel­li­gence, a com­pa­ny rep­re­sen­ta­tive was sent to inves­ti­gate. “He found the equip­ment in a ware­house still in its orig­i­nal pack­ag­ing,” accord­ing to the Ger­man doc­u­ment.

    In 1982, the Rea­gan admin­is­tra­tion took advan­tage of Argentina’s reliance on Cryp­to equip­ment, fun­nel­ing intel­li­gence to Britain dur­ing the two coun­tries’ brief war over the Falk­land Islands, accord­ing to the CIA his­to­ry, which doesn’t pro­vide any detail on what kind of infor­ma­tion was passed to Lon­don. The doc­u­ments gen­er­al­ly dis­cuss intel­li­gence gleaned from the oper­a­tion in broad terms and pro­vide few insights into how it was used.

    Rea­gan appears to have jeop­ar­dized the Cryp­to oper­a­tion after Libya was impli­cat­ed in the 1986 bomb­ing of a West Berlin dis­co pop­u­lar with Amer­i­can troops sta­tioned in West Ger­many. Two U.S. sol­diers and a Turk­ish woman were killed as a result of the attack.

    Rea­gan ordered retal­ia­to­ry strikes against Libya 10 days lat­er. Among the report­ed vic­tims was one of Gaddafi’s daugh­ters. In an address to the coun­try announc­ing the strikes, Rea­gan said the Unit­ed States had evi­dence of Libya’s com­plic­i­ty that “is direct, it is pre­cise, it is irrefutable.”

    The evi­dence, Rea­gan said, showed that Libya’s embassy in East Berlin received orders to car­ry out the attack a week before it hap­pened. Then, the day after the bomb­ing, “they report­ed back to Tripoli on the great suc­cess of their mis­sion.”

    Reagan’s words made clear that Tripoli’s com­mu­ni­ca­tions with its sta­tion in East Berlin had been inter­cept­ed and decrypt­ed. But Libya wasn’t the only gov­ern­ment that took note of the clues Rea­gan had pro­vid­ed.

    Iran, which knew that Libya also used Cryp­to machines, became increas­ing­ly con­cerned about the secu­ri­ty of its equip­ment. Tehran didn’t act on those sus­pi­cions until six years lat­er.



    Unit­ed States


    Doc­u­ments indi­cate that more than 120 coun­tries used Cryp­to AG

    encryp­tion equip­ment from the 1950s well into the 2000s. The files don’t

    include a com­pre­hen­sive list but iden­ti­fy at least

    62 cus­tomers.





































    Ivory Coast






    Sau­di Ara­bia



    South Korea












    Vat­i­can City

    Rep. of the Con­go


    South Africa







    Unit­ed Nations


    The records show that at least four coun­tries — Israel, Swe­den, Switzer­land and the Unit­ed King­dom — were aware of the oper­a­tion or were pro­vid­ed intel­li­gence from it by the Unit­ed States or West Ger­many.
    The irre­place­able man

    After the CIA and BND acqui­si­tion, one of the most vex­ing prob­lems for the secret part­ners was ensur­ing that Crypto’s work­force remained com­pli­ant and unsus­pect­ing.

    Even while hid­den from view, the agen­cies went to sig­nif­i­cant lengths to main­tain Hagelin’s benev­o­lent approach to own­er­ship. Employ­ees were well-paid and had abun­dant perks includ­ing access to a small sail­boat in Lake Zug near com­pa­ny head­quar­ters.

    And yet, those who worked most close­ly with the encryp­tion designs seemed con­stant­ly to be get­ting clos­er to uncov­er­ing the operation’s core secret. The engi­neers and design­ers respon­si­ble for devel­op­ing pro­to­type mod­els often ques­tioned the algo­rithms being foist­ed on them by a mys­te­ri­ous exter­nal enti­ty.

    Cryp­to exec­u­tives often led employ­ees to believe that the designs were being pro­vid­ed as part of the con­sult­ing arrange­ment with Siemens. But even if that were so, why were encryp­tion flaws so easy to spot, and why were Crypto’s engi­neers so rou­tine­ly blocked from fix­ing them?

    In 1977, Heinz Wag­n­er, the chief exec­u­tive at Cryp­to who knew the true role of the CIA and BND, abrupt­ly fired a way­ward engi­neer after the NSA com­plained that diplo­mat­ic traf­fic com­ing out of Syr­ia had sud­den­ly became unread­able. The engi­neer, Peter Frutiger, had long sus­pect­ed Cryp­to was col­lab­o­rat­ing with Ger­man intel­li­gence. He had made mul­ti­ple trips to Dam­as­cus to address com­plaints about their Cryp­to prod­ucts and appar­ent­ly, with­out author­i­ty from head­quar­ters, had fixed their vul­ner­a­bil­i­ties.

    Frutiger “had fig­ured out the Min­er­va secret and it was not safe with him,” accord­ing to the CIA his­to­ry. Even so, the agency was livid with Wag­n­er for fir­ing Frutiger rather than find­ing a way to keep him qui­et on the com­pa­ny pay­roll. Frutiger declined to com­ment for this sto­ry.

    U.S. offi­cials were even more alarmed when Wag­n­er hired a gift­ed elec­tri­cal engi­neer in 1978 named Men­gia Caflisch. She had spent sev­er­al years in the Unit­ed States work­ing as a radio-astron­o­my researcher for the Uni­ver­si­ty of Mary­land before return­ing to her native Switzer­land and apply­ing for a job at Cryp­to. Wag­n­er jumped at the chance to hire her. But NSA offi­cials imme­di­ate­ly raised con­cerns that she was “too bright to remain unwit­ting.”

    The warn­ing proved pre­scient as Caflisch soon began prob­ing the vul­ner­a­bil­i­ties of the company’s prod­ucts. She and Spo­erndli, a col­league in the research depart­ment, ran var­i­ous tests and “plain­text attacks” on devices includ­ing a tele­type mod­el, the HC-570, that was built using Motoro­la tech­nol­o­gy, Spo­erndli said in an inter­view.

    “We looked at the inter­nal oper­a­tions, and the depen­den­cies with each step,” Spo­erndli said, and became con­vinced they could crack the code by com­par­ing only 100 char­ac­ters of enci­phered text to an under­ly­ing, unen­crypt­ed mes­sage. It was an aston­ish­ing­ly low lev­el of secu­ri­ty, Spo­erndli said in an inter­view last month, but far from unusu­al.

    “The algo­rithms,” he said, “always looked fishy.”

    In the ensu­ing years, Caflisch con­tin­ued to pose prob­lems. At one point, she designed an algo­rithm so strong that NSA offi­cials wor­ried it would be unread­able. The design made its way into 50 HC-740 machines rolling off the fac­to­ry floor before com­pa­ny exec­u­tives dis­cov­ered the devel­op­ment and stopped it.

    “I just had an idea that some­thing might be strange,” Caflisch said in an inter­view last month, about the ori­gin of her sus­pi­cions. But it became clear that her prob­ing wasn’t appre­ci­at­ed, she said. “Not all ques­tions appeared to be wel­come.”

    The com­pa­ny restored the rigged algo­rithm to the rest of the pro­duc­tion run and sold the 50 secure mod­els to banks to keep them out of the hands of for­eign gov­ern­ments. Because these and oth­er devel­op­ments were so hard to defend, Wag­n­er at one point told a select group of mem­bers of the research and devel­op­ment unit that Cryp­to “was not entire­ly free to do what it want­ed.”

    The acknowl­edg­ment seemed to sub­due the engi­neers, who inter­pret­ed it as con­fir­ma­tion that the company’s tech­nol­o­gy faced con­straints imposed by the Ger­man gov­ern­ment. But the CIA and BND became increas­ing­ly con­vinced that their rou­tine, dis­em­bod­ied inter­fer­ence was unsus­tain­able.

    Cryp­to had become an Oz-like oper­a­tion with employ­ees prob­ing to see what was behind the cur­tain. As the 1970s came to a close, the secret part­ners decid­ed to find a wiz­ard fig­ure who could help devise more advanced — and less detectable — weak­ness­es in the algo­rithms, some­one with enough cryp­to­log­i­cal clout to tame the research depart­ment.

    The two agen­cies turned to oth­er spy ser­vices for poten­tial can­di­dates before set­tling on an indi­vid­ual put for­ward by Sweden’s intel­li­gence ser­vice. Because of Hagelin’s ties to the coun­try, Swe­den had been kept apprised of the oper­a­tion since its out­set.

    Kjell-Ove Wid­man, a math­e­mat­ics pro­fes­sor in Stock­holm, had made a name for him­self in Euro­pean aca­d­e­m­ic cir­cles with his research on cryp­tol­ogy. Wid­man was also a mil­i­tary reservist who had worked close­ly with Swedish intel­li­gence offi­cials.

    To the CIA, Wid­man had an even more impor­tant attribute: an affin­i­ty for the Unit­ed States that he had formed while spend­ing a year in Wash­ing­ton state as an exchange stu­dent.

    His host fam­i­ly had such trou­ble pro­nounc­ing his Swedish name that they called him “Hen­ry,” a moniker he lat­er used with his CIA han­dlers.

    Offi­cials involved in Widman’s recruit­ment described it as almost effort­less. After being groomed by Swedish intel­li­gence offi­cials, he was brought to Munich in 1979 for what was pur­port­ed to be a round of inter­views with exec­u­tives from Cryp­to and Siemens.

    The fic­tion was main­tained as Wid­man faced ques­tions from a half-dozen men seat­ed around a table in a hotel con­fer­ence room. As the group broke for lunch, two men asked Wid­man to stay behind for a pri­vate con­ver­sa­tion.

    “Do you know what ZfCh is?” asked Jel­to Burmeis­ter, a BND case offi­cer, using the acronym for the Ger­man cipher ser­vice. When Wid­man replied that he did, Burmeis­ter said, “Now, do you under­stand who real­ly owns Cryp­to AG?”

    At that point, Wid­man was intro­duced to Richard Schroed­er, a CIA offi­cer sta­tioned in Munich to man­age the agency’s involve­ment in Cryp­to. Wid­man would lat­er claim to agency his­to­ri­ans that his “world fell apart com­plete­ly” in that moment.

    If so, he did not hes­i­tate to enlist in the oper­a­tion.

    With­out even leav­ing the room, Wid­man sealed his recruit­ment with a hand­shake. As the three men joined the rest of the group at lunch, a “thumbs up” sig­nal trans­formed the gath­er­ing into a cel­e­bra­tion.

    Cryp­to installed Wid­man as a “sci­en­tif­ic advi­sor” report­ing direct­ly to Wag­n­er. He became the spies’ hid­den inside agent, depart­ing Zug every six weeks for clan­des­tine meet­ings with rep­re­sen­ta­tives of NSA and ZfCh. Schroed­er, the CIA offi­cer, would attend but tune out their tech­ni­cal bab­ble.

    They would agree on mod­i­fi­ca­tions and work up new encryp­tion schemes. Then Wid­man would deliv­er the blue­prints to Cryp­to engi­neers. The CIA his­to­ry calls him the “irre­place­able man,” and the “most impor­tant recruit­ment in the his­to­ry of the Min­er­va pro­gram.”

    His stature cowed sub­or­di­nates, invest­ing him “with a tech­ni­cal promi­nence that no one in CAG could chal­lenge.” It also helped deflect the inquiries of for­eign gov­ern­ments. As Wid­man set­tled in, the secret part­ners adopt­ed a set of prin­ci­ples for rigged algo­rithms, accord­ing to the BND his­to­ry. They had to be “unde­tectable by usu­al sta­tis­ti­cal tests” and, if dis­cov­ered, be “eas­i­ly masked as imple­men­ta­tion or human errors.”

    In oth­er words, when cor­nered, Cryp­to exec­u­tives would blame slop­py employ­ees or clue­less users.

    In 1982, when Argenti­na became con­vinced that its Cryp­to equip­ment had betrayed secret mes­sages and helped British forces in the Falk­lands War, Wid­man was dis­patched to Buenos Aires. Wid­man told them the NSA had prob­a­bly cracked an out­dat­ed speech-scram­bling device that Argenti­na was using, but that the main prod­uct they bought from Cryp­to, the CAG 500, remained “unbreak­able.”

    “The bluff worked,” the CIA his­to­ry says. “The Argen­tines swal­lowed hard, but kept buy­ing CAG equip­ment.”

    Wid­man is long-retired now and liv­ing in Stock­holm. He declined to com­ment. Years after his recruit­ment, he told U.S. offi­cials that he saw him­self as “engaged in a crit­i­cal strug­gle for the ben­e­fit of West­ern intel­li­gence,” accord­ing to the CIA doc­u­ment. “It was, he said, the moment in which he felt at home. This was his mis­sion in life.”

    That same year, Hagelin, then 90 years old, became ill on a trip to Swe­den and was hos­pi­tal­ized. He recov­ered well enough to return to Switzer­land, but CIA offi­cials became wor­ried about Hagelin’s exten­sive col­lec­tion of busi­ness records and per­son­al papers at his office in Zug.

    Schroed­er, with Hagelin’s per­mis­sion, arrived with a brief­case and spent sev­er­al days going through the files. To vis­i­tors, he was intro­duced as a his­to­ri­an inter­est­ed in trac­ing Hagelin’s life. Schroed­er pulled out the doc­u­ments “that were incrim­i­nat­ing,” accord­ing to the his­to­ry, and shipped them back to CIA head­quar­ters “where they reside to this day.”

    Hagelin remained an invalid until he died in 1983. The Post could not locate Wag­n­er or deter­mine whether he is still alive. Schroed­er retired from the CIA more than a decade ago and teach­es part-time at George­town Uni­ver­si­ty. When con­tact­ed by a reporter from The Post, he declined to com­ment.
    The Hydra cri­sis

    Cryp­to endured sev­er­al mon­ey-los­ing years in the 1980s, but the intel­li­gence flowed in tor­rents. U.S. spy agen­cies inter­cept­ed more than 19,000 Iran­ian com­mu­ni­ca­tions sent via Cryp­to machines dur­ing that nation’s decade-long war with Iraq, min­ing them for reports on sub­jects such as Tehran’s ter­ror­ist links and attempts to tar­get dis­si­dents.

    Iran’s com­mu­ni­ca­tions were “80 to 90 per­cent read­able” to U.S. spies, accord­ing to the CIA doc­u­ment, a fig­ure that would like­ly have plunged into the sin­gle dig­its had Tehran not used Crypto’s com­pro­mised devices.

    In 1989, the Vatican’s use of Cryp­to devices proved cru­cial in the U.S. man­hunt for Pana­man­ian leader Manuel Anto­nio Nor­ie­ga. When the dic­ta­tor sought refuge in the Apos­tolic Nun­cia­ture — the equiv­a­lent of a papal embassy — his where­abouts were exposed by the mission’s mes­sages back to Vat­i­can City.

    In 1992, how­ev­er, the Cryp­to oper­a­tion faced its first major cri­sis: Iran, belat­ed­ly act­ing on its long-stand­ing sus­pi­cions, detained a com­pa­ny sales­man.

    Hans Buehler, then 51, was con­sid­ered one of the company’s best sales­men. Iran was one of the company’s largest con­tracts, and Buehler had trav­eled in and out of Tehran for years. There were tense moments, includ­ing when he was ques­tioned exten­sive­ly in 1986 by Iran­ian offi­cials after the dis­co bomb­ing and U.S. mis­sile strikes on Libya.

    Six years lat­er, he board­ed a Swis­sair flight to Tehran but failed to return on sched­ule. When he didn’t show, Cryp­to turned for help to Swiss author­i­ties and were told he had been arrest­ed by the Ira­ni­ans. Swiss con­sular offi­cials allowed to vis­it Buehler report­ed that he was in “bad shape men­tal­ly,” accord­ing to the CIA his­to­ry.

    Buehler was final­ly released nine months lat­er after Cryp­to agreed to pay the Ira­ni­ans $1 mil­lion, a sum that was secret­ly pro­vid­ed by the BND, accord­ing to the doc­u­ments. The CIA refused to chip in, cit­ing the U.S. pol­i­cy against suc­cumb­ing to ran­som demands for hostages.

    Buehler knew noth­ing about Crypto’s rela­tion­ship to the CIA and BND or the vul­ner­a­bil­i­ties in its devices. But he returned trau­ma­tized and sus­pi­cious that Iran knew more about the com­pa­ny he worked for than he did. Buehler began speak­ing to Swiss news orga­ni­za­tions about his ordeal and mount­ing sus­pi­cions.

    The pub­lic­i­ty brought new atten­tion to long-for­got­ten clues, includ­ing ref­er­ences to a “Boris project” in Friedman’s mas­sive col­lec­tion of per­son­al papers, which were donat­ed to the Vir­ginia Mil­i­tary Insti­tute when he died in 1969. Among the 72 box­es deliv­ered to Lex­ing­ton, Va., were copies of his life­long cor­re­spon­dence with Hagelin.

    In 1994, the cri­sis deep­ened when Buehler appeared on Swiss tele­vi­sion in a report that also fea­tured Frutiger, whose iden­ti­ty was con­cealed to view­ers. Buehler died in 2018. Frutiger, the engi­neer who had been fired for fix­ing Syria’s encryp­tion sys­tems years ear­li­er, did not respond to requests for com­ment.

    Michael Grupe, who had suc­ceed­ed Wag­n­er as chief exec­u­tive, agreed to appear on Swiss tele­vi­sion and dis­put­ed what he knew to be fac­tu­al charges. “Grupe’s per­for­mance was cred­i­ble, and may have saved the pro­gram,” the CIA his­to­ry says. Grupe did not respond to requests for com­ment.

    Even so, it took sev­er­al years for the con­tro­ver­sy to die down. In 1995, the Bal­ti­more Sun ran a series of inves­tiga­tive sto­ries about the NSA, includ­ing one called “Rig­ging the Game,” that exposed aspects of the agency’s rela­tion­ship with Cryp­to.

    The arti­cle report­ed NSA offi­cials had trav­eled to Zug in the mid-1970s for secret meet­ings with Cryp­to exec­u­tives. The offi­cials were pos­ing as con­sul­tants for a front com­pa­ny called “Inter­comm Asso­ciates,” but then pro­ceed­ed to intro­duce them­selves by their real names — which were record­ed on notes of the meet­ing kept by a com­pa­ny employ­ee.

    Amid the pub­lic­i­ty onslaught, some employ­ees began to look else­where for work. And at least a half-dozen coun­tries — includ­ing Argenti­na, Italy, Sau­di Ara­bia, Egypt and Indone­sia — either can­celed or sus­pend­ed their Cryp­to con­tracts.

    Aston­ish­ing­ly, Iran was not among them, accord­ing to the CIA file, and “resumed its pur­chase of CAG equip­ment almost imme­di­ate­ly.”

    The main casu­al­ty of the “Hydra” cri­sis, the code name giv­en to the Buehler case, was the CIA-BND part­ner­ship.

    For years, BND offi­cials had recoiled at their Amer­i­can counterpart’s refusal to dis­tin­guish adver­saries from allies. The two part­ners often fought over which coun­tries deserved to receive the secure ver­sions of Crypto’s prod­ucts, with U.S. offi­cials fre­quent­ly insist­ing that the rigged equip­ment be sent to almost any­one — ally or not — who could be deceived into buy­ing it.

    In the Ger­man his­to­ry, Wol­bert Smidt, the for­mer direc­tor of the BND, com­plained that the Unit­ed States “want­ed to deal with the allies just like they dealt with the coun­tries of the Third World.” Anoth­er BND offi­cial echoed that com­ment, say­ing that to Amer­i­cans “in the world of intel­li­gence there were no friends.”

    The Cold War had end­ed, the Berlin Wall was down, and the reuni­fied Ger­many had dif­fer­ent sen­si­tiv­i­ties and pri­or­i­ties. They saw them­selves as far more direct­ly exposed to the risks of the Cryp­to oper­a­tion. Hydra had rat­tled the Ger­mans, who feared the dis­clo­sure of their involve­ment would trig­ger Euro­pean out­rage and lead to enor­mous polit­i­cal and eco­nom­ic fall­out.

    In 1993, Kon­rad Porzn­er, the chief of the BND, made clear to CIA Direc­tor James Woolsey that sup­port in the upper ranks of the Ger­man gov­ern­ment was wan­ing, and that the Ger­mans might want out of the Cryp­to part­ner­ship. On Sept. 9, the CIA sta­tion chief in Ger­many, Mil­ton Bear­den, reached an agree­ment with BND offi­cials for the CIA to pur­chase Germany’s shares for $17 mil­lion, accord­ing to the CIA his­to­ry.

    Ger­man intel­li­gence offi­cials rued the depar­ture from an oper­a­tion they had large­ly con­ceived. In the Ger­man his­to­ry, senior intel­li­gence offi­cials blame polit­i­cal lead­ers for end­ing one of the most suc­cess­ful espi­onage pro­grams the BND had ever been a part of.

    With their depar­ture, the Ger­mans were soon cut off from the intel­li­gence that the Unit­ed States con­tin­ued to gath­er. Burmeis­ter is quot­ed in the Ger­man his­to­ry won­der­ing whether Ger­many still belonged “to this small num­ber of nations who are not read by the Amer­i­cans.”

    The Snow­den doc­u­ments pro­vid­ed what must have been an unset­tling answer, show­ing that U.S. intel­li­gence agen­cies not only regard­ed Ger­many as a tar­get, but mon­i­tored Ger­man Chan­cel­lor Angela Merkel’s cell­phone.
    Alive and well

    The CIA his­to­ry essen­tial­ly con­cludes with Germany’s depar­ture from the pro­gram, though it was fin­ished in 2004 and con­tains clear indi­ca­tions that the oper­a­tion was still under­way.

    It notes, for exam­ple, that the Buehler case was “the most seri­ous secu­ri­ty breach in the his­to­ry of the pro­gram,” but wasn’t fatal. “It did not cause its demise,” the his­to­ry says, “and at the turn of the cen­tu­ry Min­er­va was still alive and well.”

    In real­i­ty, the oper­a­tion appears to have entered a pro­tract­ed peri­od of decline. By the mid-1990s, “the days of prof­it were long past,” and Cryp­to “would have gone out of busi­ness but for infu­sions from the U.S. gov­ern­ment.”

    As a result, the CIA appears to have spent years prop­ping up an oper­a­tion that was more viable as an intel­li­gence plat­form than a busi­ness enter­prise. Its prod­uct line dwin­dled and its rev­enue and cus­tomer base shrank.

    But the intel­li­gence kept com­ing, cur­rent and for­mer offi­cials said, in part because of bureau­crat­ic iner­tia. Many gov­ern­ments just nev­er got around to switch­ing to new­er encryp­tion sys­tems pro­lif­er­at­ing in the 1990s and beyond — and unplug­ging their Cryp­to devices. This was par­tic­u­lar­ly true of less devel­oped nations, accord­ing to the doc­u­ments.

    Most of the employ­ees iden­ti­fied in the CIA and BND his­to­ries are in their 70s or 80s, and some of them have died. In inter­views in Switzer­land last month, sev­er­al for­mer Cryp­to work­ers men­tioned in the doc­u­ments described feel­ings of unease about their involve­ment in the com­pa­ny.

    They were nev­er informed of its true rela­tion­ship to intel­li­gence ser­vices. But they had well-found­ed sus­pi­cions and still wres­tle with the eth­i­cal impli­ca­tions of their deci­sions to remain at a firm they believed to be engaged in decep­tion.

    “Either you had to leave or you had to accept it in a cer­tain way,” said Caflisch, now 75, who left the com­pa­ny in 1995 but con­tin­ues to live on the out­skirts of Zug in a con­vert­ed weav­ing fac­to­ry where she and her fam­i­ly for many years staged semi­pro­fes­sion­al operas in the barn. “There were rea­sons I left,” she said, includ­ing her dis­com­fort with her doubts at Cryp­to and her desire to be home more for her chil­dren. After the lat­est rev­e­la­tions, she said, “It makes me won­der whether I should have left ear­li­er.”

    Spo­erndli said he regrets his own ratio­nal­iza­tions.

    “I told myself some­times it may be bet­ter if the good guys in the Unit­ed States know what is going on between these Third World dic­ta­tors,” he said. “But it’s a cheap self-excuse. In the end, this is not the way.”

    Most of the exec­u­tives direct­ly involved in the oper­a­tion were moti­vat­ed by ide­o­log­i­cal pur­pose and declined any pay­ment beyond their Cryp­to salaries, accord­ing to the doc­u­ments. Wid­man was among sev­er­al excep­tions. “As his retire­ment drew near, his covert com­pen­sa­tion was sub­stan­tial­ly increased,” the CIA his­to­ry says. He was also award­ed a medal bear­ing the CIA seal.

    After the BND’s depar­ture, the CIA expand­ed its clan­des­tine col­lec­tion of com­pa­nies in the encryp­tion sec­tor, accord­ing to for­mer West­ern intel­li­gence offi­cials. Using cash amassed from the Cryp­to oper­a­tion, the agency secret­ly acquired a sec­ond firm and propped up a third. The doc­u­ments do not dis­close any details about these enti­ties. But the BND his­to­ry notes that one of Crypto’s long­time rivals — Gre­tag AG, also based in Switzer­land — was “tak­en over by an ‘Amer­i­can’ and, after a change of names in 2004, was liq­ui­dat­ed.”

    Cryp­to itself hob­bled along. It had sur­vived the tran­si­tions from met­al box­es to elec­tron­ic cir­cuits, going from tele­type machines to enci­phered voice sys­tems. But it strug­gled to main­tain its foot­ing as the encryp­tion mar­ket moved from hard­ware to soft­ware. U.S. intel­li­gence agen­cies appear to have been con­tent to let the Cryp­to oper­a­tion play out, even as the NSA’s atten­tion shift­ed to find­ing ways to exploit the glob­al reach of Google, Microsoft, Ver­i­zon and oth­er U.S. tech pow­ers.

    In 2017, Crypto’s long­time head­quar­ters build­ing near Zug was sold to a com­mer­cial real estate com­pa­ny. In 2018, the company’s remain­ing assets — the core pieces of the encryp­tion busi­ness start­ed near­ly a cen­tu­ry ear­li­er — were split and sold.

    The trans­ac­tions seemed designed to pro­vide cov­er for a CIA exit.

    CyOne’s pur­chase of the Swiss por­tion of the busi­ness was struc­tured as a man­age­ment buy­out, enabling top Cryp­to employ­ees to move into a new com­pa­ny insu­lat­ed from the espi­onage risks and with a reli­able source of rev­enue. The Swiss gov­ern­ment, which was always sold secure ver­sions of Crypto’s sys­tems, is now CyOne’s only cus­tomer.

    Giu­liano Otth, who served as CEO of Cryp­to AG from 2001 until its dis­mem­ber­ment, took the same posi­tion at CyOne after it acquired the Swiss assets. Giv­en his tenure at Cryp­to, it is like­ly he was wit­ting to the CIA own­er­ship of the com­pa­ny, just as all of his pre­de­ces­sors in the job had been.

    “Nei­ther CyOne Secu­ri­ty AG nor Mr. Otth have any com­ments regard­ing Cryp­to AG’s his­to­ry,” the com­pa­ny said in a state­ment.

    Crypto’s inter­na­tion­al accounts and busi­ness assets were sold to Linde, a Swedish entre­pre­neur, who comes from a wealthy fam­i­ly with com­mer­cial real estate hold­ings.

    In a meet­ing in Zurich last month, Linde said that he had been drawn to the com­pa­ny in part by its her­itage and Hagelin con­nec­tion, a past that still res­onates in Swe­den. Upon tak­ing over oper­a­tions, Linde even moved some of Hagelin’s his­toric equip­ment from stor­age into a dis­play at the fac­to­ry entrance.

    When con­front­ed with evi­dence that Cryp­to had been owned by the CIA and BND, Linde looked vis­i­bly shak­en, and said that dur­ing nego­ti­a­tions he nev­er learned the iden­ti­ties of the company’s share­hold­ers. He asked when the sto­ry would be pub­lished, say­ing he had employ­ees over­seas and voic­ing con­cern for their safe­ty.

    In a sub­se­quent inter­view, Linde said his com­pa­ny is inves­ti­gat­ing all the prod­ucts it sells to deter­mine whether they have any hid­den vul­ner­a­bil­i­ties. “We have to make a cut as soon as pos­si­ble with every­thing that has been linked to Cryp­to,” he said.

    When asked why he failed to con­front Otth and oth­ers involved in the trans­ac­tion about whether there was any truth to the long-stand­ing Cryp­to alle­ga­tions, Linde said that he had regard­ed these as “just rumors.”

    He said that he took assur­ance from the fact that Cryp­to con­tin­ued to have sub­stan­tial con­tracts with for­eign gov­ern­ments, coun­tries he assumed had test­ed the company’s prod­ucts vig­or­ous­ly and would have aban­doned them if they were com­pro­mised.

    “I even acquired the brand name, ‘Cryp­to,’ ” he said, under­scor­ing his con­fi­dence in the company’s via­bil­i­ty. Giv­en the infor­ma­tion now com­ing to light, he said, this “was prob­a­bly one of the most stu­pid deci­sions I’ve ever made in my career.”

    The company’s liq­ui­da­tion was han­dled by the same Liecht­en­stein law firm that pro­vid­ed cov­er for Hagelin’s sale to the CIA and BND 48 years ear­li­er. The terms of the 2018 trans­ac­tions have not been dis­closed, but cur­rent and for­mer offi­cials esti­mat­ed their aggre­gate val­ue at between $50 mil­lion and $70 mil­lion.

    For the CIA, the mon­ey would have been one final pay­off from Min­er­va.

    Report­ing for this sto­ry was done in col­lab­o­ra­tion with Peter F. Mueller, a jour­nal­ist and doc­u­men­tary film­mak­er based in Cologne, Ger­many. Julie Tate in Wash­ing­ton con­tributed to this report.

    Posted by CinqueAnon | February 14, 2020, 9:50 am

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