the hazards of private spy operations the pond: running ... · the hazards of private spy...

66Three successive

government agenciesfound that having such

an independentintelligence operationwas more trouble than

it was worth.

99

DECLASSIFIED AND RELEASED BY

CENTRAL INTELL I GE N CE AGENCY

SOURCESHETHODSEXEMPT ION 110

- NAZI WAR CRIMES 01 IICLODDRG

DATE 2007

All statements of fact, opinion, or analysisexpressed In Studies In Intelligence are those ofthe authors. They do not necessarily reflectofficial positions or views of the CentralIntelligence Agency or any other US Governmententity, past or present. Nothing in the contentsshould be construed as asserting or implying USGovernment endorsement of an article's factualBtatetnents and Interpretations.

Mark Stout is an analyst in theInstitute for Defense Analyses.He has served in the Directorateof Intelligence in CIA.

Studies in Intelligence (2004)

The Hazards of Private Spy Operations

The Pond: Running Agents for State,War, and the CIAMark Stout

Editor's note: The career of John"Frenchy" Grombach has longbeen a mystery that apparentlywould never be solved, given thesecrecy of his actual work and theexaggerations of his memoirs andcollaborators. Mark Stout haslabored valiantly in publiclyavailable sources and, with thehelp of other historians, in per-sonal collections to outlineGrombach's activities. This arti-cle presents his findings. In late2001, however, voluminousrecords of Grombach's semi-pri-vate intelligence organizationwere found in a barn in Virginia.Those records are now at the CIA,which, after reviewing them forlingering security concerns, willtransfer them to the NationalArchives. Mr. Stout had access tothe newly discovered recordsbefore he left the Agency in 2003.1

"I first saw Budapest in the sum-mer of 1946. I came as a covert'agent, a member of an Americanintelligence organization—therethen being no CIA—which hassince ceased to exist." With thissentence in A Short Course in theSecret War, foreign service officerJames McCargar began to de-scribe his brief career as a case

1 The author thanks Professor ChristopherSimpson (American University), JamesMcCargar, Michael Warner, and HaydenPeake for their kind assistance and en-couragement in this project. ProfessorSimpson shared many documents from hisfile on Grombach.

officer in Hungary. He had asecret second job with an espio-nage organization known to thefew who knew of it at all as "ThePond."2

Sadly, most of the Pond's 13-yearhistory is lost. This obscurity wasintentional. When the Pond wascreated in early 1942, the UnitedStates had very little experiencewith intelligence, and the notionof a spy agency which would benot only officially unacknowl-edged, but actually unknown,appealed to some people in Wash-ington. These people were •repelled by the larger-than-lifepublicity hound William Dono-van and his "Oh So Social"intelligence agency. For a prece-dent they looked instead toforeign intelligence services suchas the British MI-6, which theythought was more discreet andwhose chief was never named inthe press.

In accordance with this philoso-phy, the Pond spent most of itsexistence not as a governmentagency, but as a private sectororganization, operating withinreal companies with names such

2 Christopher Felix, (pseud. for James Mc-Cargar), A Short Course in the Secret War(Lanham, MD: Madison Books, 2001), 156.The book was first published in 1963. Mc-Cargar added footnotes in a 1987 edition,giving identifying information, althoughhighly incomplete, about the intelligenceorganization in which he served.

Studies in Intelligence Vol. 48, No. 3 69

The Pond

as the Universal Service Corpo-ration. 3 This practice contributedsubstantially to obscurity andsecurity. However, three succes-sive government agencies foundthat having such an independentintelligence operation—and,worse yet, one run by a pugna-cious, conspiratorial ideologue—was more trouble than it wasworth, and the notion of having atruly secret intelligence organiza-tion never did catch on in theUnited States.

A Perpetual, A Far-SeeingService

The true believer who headed thePond for its entire existence wasborn in 1901, a Frenchman, theson of the French consul in NewOrleans. At the age of 18, theyoung John (or Jean) Grombachrenounced his claim to French cit-izenship and became anAmerican when he went to WestPoint. There he was an athleticstar, but the day before gradua-tion it was found that he hadeight more demerits thanallowed. The authorities decidedto give him a B.S. degree butdeprive him of a conunission.4Nonetheless, not long after grad-uation he wangled a commission

'Julius Mader, Who's Who in CIA (Berlin,DRG: Julius Mader, 1968); Grombach Dia-ries, 1947 frontispiece, and 19 February1947, Grombach Papers, USMA Library,Manuscript Collection. The 1946-55 dia-ries are in boxes 3 and 4.

"Outline of (Jean) John V. Grombach,"Charles G. Stevenson Papers, Box 6, Fold-er "Grombach," US Military Academy (US-MA) Library, Manuscript Collection(hereafter Stevenson Papers).

anyway and spent five years onactive duty as a military policeofficer, including time in the Pan-ama Canal Zone, where he wasassistant provost marshal andassistant G-2, his first involve-ment with intelligence.3

Grombach left the regular armyin 1928 and joined the New YorkNational Guard. In 1929 he wentto work for a subsidiary of CBSand Paramount Publix, where hewas so successful that he wasable to start several radio pro-gram production companies of hisown.6 Grombach kept his hand inthe intelligence business, how-ever, with a "highly confidentialsecret" project in 1937 for theState Department, and in 1940he authored an article in Infan-try Journal which discussed therole of radio in warfare and, inparticular, described how innocu-ous-sounding broadcasts could beused to convey secret messages.7

In 1941, with war looming,Grombach was inducted backinto the Army as a captain. 8 Onthe eve of war, he was the moraleofficer of the 27th Infantry Divi-sion, which had been formedfrom the New York NationalGuard. After Pearl Harbor,friends recommended him to the

5 Memorandum AcoS G-2, Governors Is-land, New York, Subject "Grombach, JohnV." 23 September 1958, Stevenson Papers.6 "Outline of (Jean) John V. Grombach."7 Grombach to Brigadier General StephenFuqua, 19 November 1973, courtesy ofChristopher Simpson (hereafter Simpsonfile); "Grombach, Captain John V, The In-visible Weapon,'" Infantry Journal, July—August 1940: 340-44.8 "Outline of (Jean) John V. Grombach."

Grombach as a West Point cadet.US Military Academy Photograph

Army's G-2, and as a resultGrombach soon was ordered toWashington.3

For the first six months of 1942,Grombach was on part-time loanto the Coordinator of Informa-tion (COI), Col. WilliamDonovan's organization, whichwould soon be renamed the Officeof Strategic Services (OSS). Dur-ing this time the War Depart-ment was getting a new intelli-gence effort off the ground, onetailor-made for Grombach's secre-

9 LaVarre to Miles, 8 December 1941 andGrombach to "Bill" (LaVarre), 31 January1977; George S. Smith memorandum toPersonnel Officer, G-2, Subject: "OfficerPersonnel," 24 January 1942. Grombach'sassignment was made official in Ralph C.Smith memorandum to Adjutant General,Subject: "Detail of Major John V Grom-bach," 16 February 1942, Simpson file.

70 Studies in Intelligence Vol. 48, No. 3

The Pond

tive tendencies. The concernedagencies had earlier agreed that"secret intelligence" (what wetoday call clandestine intelli-gence collection), would be thepurview of COI. However, inearly 1942, the jealousies andcomplaints of various agenciescoalesced into a serious move todismember Donovan's group. Inearly March, the Joint Chiefs ofStaff adopted as their position aproposal to abolish the COI anddistribute most of its partsamong the JCS and the services.Under this proposal, the fate ofthe secret intelligence functionwould be decided in consulta-tions between the chiefs and theState Department.12

The Army's G-2, Maj. Gen.George Strong, was one of thosemost committed to disestablish-ing the COI while he attemptedto move in on Donovan's turf bycreating his own secret intelli-gence service. More discreet thanthe COI, it was to operatecooperatively with the StateDepartment and undercut therationale for a COI clandestinecollection unit. In the spring of1942, as the fate of COI hung inthe balance, Brig. Gen. HayesKroner, the head of the WarDepartment's Military Intelli-gence Service, was given "officialapproval and direction," almostcertainly by his immediate supe-rior, Gen. Strong, to establish asecret intelligence organization.By October the OSS had a new

15 Bradley F. Smith, The Shadow Warriors:OSS and the Origins of the CIA (New York:Basic Books, 1983), 117-19.

66`. . . at the beginning of1944, only those in theWar Department and

the State and thePresident's office, the

President himself, whohad to approve

operations knew itexisted.'

99

lease on life and was around forthe long haul. That month, Kro-ner's guidance was expanded: hewas now to establish "a perpet-ual, a far-seeing, a far-distant,continuing secret intelligenceservice."" In other words, Kro-ner was to establish a long-term,albeit secret rival to Donovan'sagency.

Kroner selected Grombach tohead this new organization "par-ticularly because [he] could takesuch instructions, that all of thisshould be done under the termsof the highest secrecy." 12 With aninitial allocation from the WarDepartment of $150,000 for 1942,Grombach set to work establish-ing the organization and soonhad in place a structure thatwould continue largely

U National Security Act of 1947, Hearingbefore the Committee on Expenditures inthe Executive Departments, 80th Con-gress, First Session, on H.R. 2319,27 June1947 (Washington, DC: US GovernmentPrinting Office, 1982) (hereafter NationalSecurity Act), 54. The transcript of theseclosed hearings was lost until a copy wasfound many years later in CIA files. It wasdeclassified and published by the HousePermanent Select Committee on Intelli-gence.12 National Security Act, 54.

unchanged for nearly 13 years.12It started out under the "realcover" of the Coverage and Indoc-trination Branch, to whichGrombach had already beenassigned. By the end of the war ithad become the Special ServiceBranch. At some point, certainlyby 1946, "the Pond" became thename generally used by the fewwho knew anything at all aboutthe group. Grombach probablyselected this name as a diminu-tive form of "Lake" which was thecover term he used for the G-2.14

From the very beginning, Grom-bach split his time betweenWashington and the Pond'soffices in New York City. Afterthe war Grombac.h would estab-lish the Universal ServiceCorporation in New York, but itis not clear if the Pond's wartimeoffices there were under commer-cial or official cover. In any event,the various security measuresworked well in the United States.Gen. Kroner testified after thewar that "when I left the direc-tion of that office at thebeginning of 1944, only those inthe War Department and theState and the President's office,the President himself, who had toknow by virtue of approving cer-tain operations, knew ite)dsted." 12 In Washington, thePond's day-to-day connectionwith the department wasthrough the Division of Foreign

Grombach Diaries, 9 August 1949.14 When CIA was formed, Grombach re-ferred to it as `'Bay," another body of waterwith which his little Pond later became af-filiated.'5 National Security Act, 54.


The Pond

Activity Correlation (FC), which,during the war, fell under theauthority of Assistant SecretaryAdolf Berle, the department'sintelligence coordinator. Thedirector of naval intelligencelater said that the Army nevertold the Navy about the Pondeither.

We found out about it only byaccident and against thewishes of the Army.... Theynever offered the Navy theservices, never offered to makeit available to meet our needs...not one single bit of infor-mation that was obtained bythat Army agency ever cameto the Navy.16

A few people at FBI headquar-ters were also in on the secret, asthe Pond produced some reportspertaining to domestic security.In early 1947, an FBI informerhappened to be in a Pond office inNew York and saw people typingwhat looked like intelligencereports. The FBI's assistant spe-cial agent in charge wassuspicious and ordered furtherinquiry, unaware that the wholething was well known to MickeyLadd, chief of the FBI's DomesticIntelligence Division, an ally ofGrombach.17

Overseas, the Pond had caseofficers under various types ofcover. 18 The Pond set itself apartfrom the OSS by reaching anagreement with the State

18 National Security Act, 68." Mumford (FBI) memorandum to Ladd,23 April 1947, obtained through FOIA.

66In 1942, with a Sovietmilitary intelligence

officer who haddefected in 1937,

[Grombach] identifieda 'list of Soviet agentsworking in the OSS.'

99

Department which allowed for-eign service officers (FS0s) toserve as case officers. TheseFSOs had their own sources offunds and did not have to tell thechief of mission what they weredoing, although some did. Theyhad remarkably little trainingand a great deal of indepen-dence. James McCargardescribes his arrival in 1946 atthe legation in Budapest, where acollege friend was serving. Soonthe friend was given a new post-ing and asked McCargar if hewould like to become the Pond'sofficer in Budapest. McCargaraccepted, and, without any spe-cial training, he inherited anetwork of Hungarian assets.19

Despite the close relations withthe State Department, Grom-bach, ever secretive, placed

18 For a reference to commercial cover ge-nerically, see Callison (OSS) memorandumto Andrews, 28 November, 1944, NationalArchives and Records Administration(NARA), RG 263, Troy Papers, Box 10,Folder 1. See also Anthony Leviero, "Ar-my's World Intelligence Ring ReportedHalted by New Agency," New York Times,21 May 1947: 1.11 James McCargar, oral history interview,Foreign Affairs Oral History Collection,Georgetown University Library, 1995(hereafter McCargar OH), 113; GrombachDiaries, 27 June 1946.

particular emphasis on commer-cial cover. Several companiesprovided cover for the Pond, butthe only identifiable one is N.V.Philips Gloeilampenfabrieken. ADutch company, Philips helpedfund the Pond and otherwiseassisted its operations. 20 AfterPearl Harbor, the company hadapproached the OSS and the WarDepartment G-2 offering its help.It worked with both until, on31 October 1942, Gen. Strongwrote to Donovan demandingthat the OSS cease all contactwith Philips, leaving them exclu-sively to G-2, that is to say, toGrombach. Despite the unhappi-ness of his subordinates,Donovan acquiesced. Philips wasa good partner for the Pond andworth fighting for because it hadsubsidiaries all over the world,including in occupied countries.In short, Philips offered access tointeresting places. 21

Fighting in the WarDepartment

From his first months in the WarDepartment, Grombach was con-stantly on the lookout forcommunist subversion, a propen-sity that repeatedly createdfriction with others. In 1942,with Alexander Barmine, aSoviet military intelligenceofficer who had defected in 1937,he identified a "list of Sovietagents working in the OSS." But

28 Grombach to Murphy, 17 February 1956,Simpson file.21 Various documents in NARA RG 226,Entry 210, Box 359, folder 1.


The Pond

1942 was a desperate time, andthe accusations of a mid-rankingArmy ideologue did not cut muchice in Washington. The accusa-tions brought only a reminderthat the Soviet Union was nowAmerica's ally. 22

Grombach stayed on the trail ofsubversion, however. As the warprogressed and the Pond beganto collect intelligence from over-seas, Grombach found, to hisdismay, that 80 percent or moreof his reports about the SovietUnion and communism werebeing "eliminated"—not used inintelligence analyses and notpassed to consumers. 23 This wasideologically offensive to Grom-bach and ran contrary to hisphilosophy of intelligence. As hewrote later, while in the midst ofa similar dispute with the CIA:

Intelligence is the gatheringof data on selected subjectswithout regard to correct-ness. Nor can intelligence belimited to the subjects indi-cated for investigation butodds and ends of sometimesunrelated data provide thecement that binds the mosaic.It is therefore impossible toeliminate any material, nomatter how far-fetched it may

22 Grombach to Sokolsky, 28 May 1953,George E. Sokolsky Papers, Box 57, Folder"Grombach, John," Hoover Institution Ar-chives (hereafter Sokolsky papers).23 Grombach to Yeaton, 10 February 1977,Ivan D. Yeaton Papers, Box 5, Folder"Grombach," Hoover Institution Archives(hereafter Yeaton Papers); LaVarre toPatrick J. Hurley, 12/8/45, Patrick J. Hur-ley Papers, Box 98, Folder 6, University ofOklahoma, Western History Collection.

appear to be at a givenmoment. How one can elimi-nate anything within a fewdays after its receipt is diffi-cult to understand.24

The culprit in these "elimina-tions" was Col. Alfred McCor-mack, the G-2's "Director of Intel-ligence"—in charge of what wetoday call all-source intelligenceanalysis, with whom Grombachwould feud throughout the war.23Grombach "pulled a fast one" andwas able to track McCormack'salleged misdeeds by striking adeal with a sergeant who ranMcCormack's incinerator. Thisdeal allowed Grombach to collectall the eliminated reports and seethe comments that McCormackand his staff had written onthem. 26

McCormack earned great respectfrom Secretary of War Stimsonand Army Chief of Staff Mar-shal, but it is hard to imagine aman more certain to draw Grom-bach's disdain. McCormack hadbeen a partner in a prominentNew York law firm alongsideJohn McCloy, who would becameassistant secretary of war.Shortly after Pearl Harbor,

24 Blind memorandum, October 14,1952,Sokolsky Papers. The author of this memois not identified, but it is quite clearly writ-ten in Grombach's style.

SRH 185, "War Experience of Alfred Mc-Cormack," excerpt in James L. Gilbert andJohn P. Finnegan, U.S. Army Signals In-telligence in World War II: A DocumentaryHistory (Washington, DC: Center of Mili-tary History US Army, 1993), 118-9 and126-7.26 Grombach to Yeaton, 10 February 1977,Yeaton Papers.

McCloy asked McCormack toreview the US signals intelli-gence system. The result soimpressed McCloy that he hadMcCormack commissioned in1942 as a colonel and got himassigned to the G-2. That McCor-mack did not share Grombach'sview of communists would havebeen enough to antagonize thehead of the Pond, but McCor-mack's appointment to colonelwould also have been irksome toGrombach, who by 1942 hadlabored 19 years on active dutyand in the National Guard with-out achieving that rank.27

Late in the war, Grombach beganto work "Project 1641," a study ofcommunist subversion in the USgovernment. The resulting mono-graphs included a "detailed list"of reports eliminated by McCor-mack and his subordinates. Italso named numerous allegedcommunists, including two work-ing for McCormack. Grombachturned the names over to theFBI, which investigated them in1945. Other people named ascommunists in Project 1641 wereAlger Hiss, Carl Marzani (a com-munist in the OSS who, shortlyafter being transferred to theState Department in late 1945would be convicted of havingdenied this fact under oath), andJohn Stewart Service (a Chinahand later forced out of the State

27 McCormack, Winthrop Laflin, "TheState Department Loses the Lead in Na-tional Intelligence, 1945-46: A Case Studyof Decision-Making and Influence in theFederal Government," unpublished manu-script, March 1967, CIA Historical Intelli-gence Collection.


The Pond

Department under pressure fromSenator Joseph McCarthy).Finally, the monographs called onthe inspector general to investi-gate McCormack. 28 In the wakeof this incendiary project, Grom-bach was called before hissuperiors on 15 June 1945 andaccused of discrediting an officerof the Military Intelligence Ser-vice to outsiders and ofunauthorized disclosures of clas-sified information. He deniedboth allegations. No investiga-tion took place and that seemedto be the end of the matter.

It was not the end of the matter.That fall, President Truman abol-ished the OSS and sent itsResearch and Analysis Branch tothe State Department. Heintended having the StateDepartment form the center ofthe nation's post-war intelli-gence establishment. Secretary ofState Byrnes named AlfredMcCormack to head up thedepartment's "Interim Researchand Intelligence Service." Grom-bach passed to the HouseCommittee on Military Affairsthe names of 15 G-2 officers whohad followed McCormack to theState Department and whom hesuspected of disloyalty. The com-mittee talked with Grombach

28 Memo G-2 Personnel Security Branch,G-2, Subject: "Grombach, John Valentine,"1 June 1955, declassified, courtesy ofChristopher Simpson; Memo Collins to As-sistant Chief of Staff for Intelligence, Sub-ject: "Grombach, John Valentine,"30 September 1958; LaVarre to Patrick J.Hurley, 12/8/45; John V. Grombach, TheGreat Liquidator (New York: Zebra Books,1980), 108-9.

46Grombach somehowbegan to suspect theBritish were opening

the pouches.

99

and investigated his allegations.In March 1946, just as McCor-mack was facing enormousopposition from the old guard ofthe Foreign Service, whichopposed creation of an intelli-gence office independent of theregional offices, the committeemade public Grombach's charges,though without mentioning hisname. McCormack entered a verypublic feud with the committee'schairman and resigned the nextmonth.29

Pond Operations

Most of the available informa-tion on Pond operations duringWorld War II comes from Grom-bach's writings many years later,particularly his book, The GreatLiquidator, published in 1980.The book recounts the story ofMarcel Petiot, a Parisian doctorwho was a Pond source—and alsoa serial killer, who was tried, con-victed, and guillotined in 1946.Petiot passed on gossip obtainedfrom his patients and contacts inParis, who included German

29 Grombach Diaries, notes for a letter to"Bill" on the pages for 20-25 April 1946;"House Group to Drop 'Pro-Soviet' Hear-ings,"New York Times, 26 March 1946: 24;"Denies Bureau Aides Have Pro-Soviet Bi-as," New York Times, 21 March 1946: 12.'House Group to Drop 'Pro-Soviet' Hear-ings," New York Times, 26 March 1946: 24.

Abwehr officers posted in Parisand refugees from the east. Inthe book, Grombach made a vari-ety of interesting claims aboutthe nature of Petiot's informa-tion. In 1942, for example, Petiotreported a story he had heardfrom a Polish patient that theSoviet NKVD had massacred18,000 Polish officers in theKatyn Forest. The Pond reportedthis to War Department head-quarters, where McCormacksuppressed it, in Grombach'sview, because it showed theSoviet Union in a negative light.Petiot also reportedly identified anumber of Abwehr agents whohad been sent to the US, allow-ing the FBI to turn some ofthem.38

According to Grombach, in May1942, Petiot reported that theGermans were producing mis-siles at Peenemunde; theinformation, he asserted, allowedother Pond assets to photographthe site from Norwegian fishingboats. During the war, informa-tion gleaned by the Pond'snetworks in Norway and Swedenwas brought to the United Statesin the diplomatic pouch fromStockholm via London. On theStockholm to London leg, Britishcouriers carried the pouches.Grombach somehow began tosuspect the British were openingthe pouches. He arranged to havean unopened pouch sent to theFBI for analysis. The Bureauconfirmed that it had beenexpertly opened and resealed.

89 Grombach, The Great Liquidator, 107-8and 116-7.


The Pond

Thereafter American courierscarried the pouches.31

Hungary was a major target ofPond operations both during andafter the war. During the war thePond had a network of sources inthe Hungarian government andHungarian army intelligence pro-viding information from placessuch as Berlin, Warsaw, andBudapest, including order of bat-tle information provided byHungarian military attaches andHungarian observers with the.Welumacht. The Hungarianreporting flowed through Lisbon,a key hub of Pond activity. AnFS0 working with the Pond inLisbon, Edward S. Crocker,served as a conduit betweenAdmiral Horthy, the leader ofHungary, and US officials inWashington on the progress ofHorthy's attempts to extricate hiscountry from the war. Grombachbelieved that several Pond opera-tions out of Lisbon were"seriously sabotaged" by Col. Sol-borg, the controversial OSSrepresentative there, who laterwas military attache. Indeed,Grombach thought he had "verygood reason to believe [that Sol-borg] was a deep buried foreignsecret agent." As a result, thePond moved some of its opera-tions out of Lisbon to Madrid andBeme.32

After the war, in early 1946,McCargar became a Pond caseofficer in Hungary. He inherited

31 Grombach, The Great Liquidator, 116;Grombach to Yeaton, February 25,1977,Yeaton Papers.

66In a paper titled 'Post-

War IntelligenceAims,' Grombach'sexecutive officer

argued that the Pondshould live on.

99a network of assets, but it washeavily weighted toward theHungarian aristocracy. With theleftists firmly in control and sup-ported by the occupying Sovietarmy, this was not satisfactory.33McCargar set out to expand thenetwork, which he was able to doby the fall of 1946. These sourcesreported on the infighting amongthe parties of the left and on thecommunists' slow and inexorabletakeover. They were even able toprovide transcripts of Hungariancabinet meetings.34

Some of McCargar's sources wereeager for tangible US support intheir struggles against the com-munists. One, a Socialist memberof the communist-dominatedTrade Union Council, believed

Grombach to Fuqua, 19 November 1973,Simpson file; `Paraphrase of State Depart-ment Cable" 842 Lisbon to Secretary ofState, Washington, 18 March 1944, NARA,RG 319, Entry 58,270/7/26/06-7 Box 36,Folder 1; compare with Nicholas Horthy,Admiral Nicholas Horthy: Mernoim Anno-tated by Andrew L. Simon (Safety Harbor,FL: Simon Publications, 2000), 253-7, atwww.net.hu/corvinus/lib/horthyihor-thy.pd

Felix, 170-75; also, McCargar OH, 113-4.34 "Their Man in Budapest: James McCar-gar and the 1947 Road to Freedom,"Hungarian Quarterly, XLII, No. 161(Spring 2001), published onhttp://www.hungary.com/hungq/no161/038.html;_Felix, 195-200.

that a total communist takeoverwas inevitable, and he wanted tocreate an underground networkthat would operate in a commu-nist Hungary. He sought radiosto keep in contact with the Westwhen the time came. In May1947, McCargar returned toWashington for consultations,first with the head of ForeignActivity Correlation Division,then with Grombach himself.Grombach vetoed the provision ofradios but was willing to enter-tain other forms of support. Hefelt, however, that he lacked theauthority to approve such activi-ties, and he allowed McCargar tobrief Charles E. Bohlen, counse-lor at the department. Bohlennixed the idea, but he said hewould consider allowing McCar-gar to exfiltrate Hungarianpolitical leaders who had lost thebattle against communism andsome of McCargar's sources.When the communists finallyconsolidated their power laterthat year, McCargar, workingwith a Central IntelligenceGroup officer posted in Vienna,brought out 75 Hungarians.35

Move to the State Department

Pursuant to the Pond's charterthat it should be a "a perpetual, afar-seeing, a far-distant, continu-ing secret intelligence service," inDecember 1943, Charles Steven-son, Grombach's executive officer,had already laid out a plan of

3'5 Felix, xii, 220,262; author's interviewwith McCargar, 19 January 2003, Wash-ington, DC.


•The Pond

action for the post-war period. Ina paper titled "Post-War Intelli-gence Aims," he argued that thePond should live on. Stevensonbelieved that G-2 would have topay close attention to Germanyand Japan to prevent them fromagain trying to "conquer theworld." He did not mention theSoviet Union, but he clearly hadit in mind when he argued thatthe intelligence system shouldalso be on the lookout for othernations that may seek "worlddomination" through "revolutionor conquest."

In order to do all this, it would benecessary to maintain a "secret,independent, and exclusive" sys-tem for the clandestine collectionof intelligence. This systemshould not be the OSS, Steven-son thought, though he admittedthat the Pond was "infinitesi-mal" by comparison, and its workhad proceeded slowly, not justbecause of the lack of resources,but also because "an efficientsecret intelligence system cannotbe built overnight." However, thismethodical approach was nowbeginning to show results andhopefully these results wouldallow G-2 to be chosen as thepost-war secret intelligenceagency. Significantly, Stevensonsuggested that if G-2 were notallowed to do this, then StateDepartment should receive thenod. 36

se Lt. Col. C. G. Stevenson memorandum,"Post-War Intelligence Aims," NARA RG59, Entry 1491, Box 1, Folder "Post WarIntelligence Plans."

66By early 1947,

the Pond was underserious pressure.

99

Shortly after the war ended,Stevenson's plan, indeed thePond's very existence, was chal-lenged. In 1946, Director ofCentral Intelligence Hoyt Van-denberg started to consolidatepower in the CIG. He consultedthe secretary of war and con-vinced him that the CIG shouldbe a more robust organizationand in particular that clandes-tine collection should be cen-tralized there. Confident nowthat the National IntelligenceAuthority (NIA)—the real deci-sion making authority—would dothe right thing, Vandenberg tookthe matter to the IntelligenceAdvisory Board (JAB), which con-sisted of the intelligence chiefs ofthe services, the State Depart-ment, and the FBI. The G-2, Gen.Chamberlin, opposed centraliza-tion of clandestine collection, but,with the secretary of war hold-ing the opposite view, he had noroom to maneuver. In late June,the JAB unanimously agreed thatcentralization should take place,and the next month the MAagreed.37

37 National Security Act, 6 and 46; C. Tho-mas Thorne Jr., et al., eds., Foreign Rela-tions of the United States, 1945-1950:Emergence of the Intelligence Establish-ment, (Washington, DC: United StatesGovernment Printing Office, 1996), 369—92.

Before any attempt was made toclose the Pond, however, its"group chiefs" came to Vanden-berg and said they would like towork for the CIG. Vandenbergtook this under advisement,though it is doubtful that he con-sidered it very seriously. Not longthereafter, a CIG "operative" wasin a bar, apparently in France,and overheard several peopletalking about intelligence opera-tions. After they left, the CIGoperative approached the bar-tender, who provided the namesand addresses of the Pond offic-ers. The incident was reported toVandenberg. Given this horriblelack of discretion, Vandenbergtold Congress, he was certainlynot able to incorporate the Pondinto the CIG.39

By early 1947, the Pond wasunder serious pressure. Grom-bach wrote in his diary inFebruary "[CIG] on tail—out toget me."39 He was right. In AprilVandenberg and Adm. RoscoeHillenkoetter (Vandenburg'ssoon-to-be successor) signed ajoint letter to the G-2 that itssecret intelligence operations"should be discontinued with theleast practicable delay?" 4° ThePond was so desperate that forthe first time it publicly revealedits existence, leaking word to theNew York Times that the NIAhad "compelled the War Depart-ment to liquidate its world-widesecret intelligence network."

a8 National Security Act, 8.39 Grombach Diaries, 19 February 1947.

NARA RG 263, Entry "DCI Documents,"Box 6, Folder 500 "Regarding Diary RearAdmiral R.H. Hillenkoetter."


The Pond

Despite its "important contribu-tion," the Pond was being"supplant[edr by the new CIG.Its dissolution was said to be "dif-ficult and expensive."'

In the end Grombach and hisallies lost the battle, and theCIG's exclusive authority overclandestine operations, which ithad not yet really exercised, wastransferred to the new CIA,which had every intention ofexercising it. Nonetheless, in late1947 or early 1948 the Pondsomehow found a new sponsor,the State Department, whichsecretly funded the organization,though at only $100,000 per year,a pittance compared with the$600,000 the War Departmenthad pumped into the project inits last year there.42

The Pond was controversial atthe State Department, at leastamong the few people who knewabout it. According to McCargarit was the "subject of some burn-ing discussions at the top levelsof the Department," which wasrumored to be having troublehiding the Pond's budget withinits own. Christian Ravndal, thedirector general of the foreignservice, at one point askedMcCargar to brief a skepticalNorman Armour, assistant secre-tary for political affairs, on themerits of the Pond."

By the fall of 1950, the bloomwas definitely off the rose in

41 Leviero.42 Grombach Diaries, 29 June 1948 and9 August 1949.43 McCargar OH, 152-3.

By the fall of 1950, thebloom was definitely

off the rose inGrombach's

relationship with theState Department.

99Grombach's relationship with theState Department. Despite abrief hope during the summerthat the department mightincrease its annual funding tohalf a million dollars, Grombachhad a serious dispute with the RArea, as INR was called at thetime. 44 In September 1950, heentered a diatribe into his diarythat he had been accused of somesort of malfeasance; he railed atwhat he described as a hoax,frame-up, or communist plot, andhe warned the R Area against"starting [the] whole businesswithout proper proof or evi-dence." He told his diary that hewould "deny everything," and helaid out two possible outcomes:that the Pond would wrap up itsoperations over a six-monthperiod and that the CIA would beinformed, apparently of thePond's continued existence. Inthe latter case, however, hewarned that "we cannot beresponsible for blown fuses,arrests, compromise, seriousembarrassments to [the] State[Department] nor any means ornecessary actions we may have totake to protect ourselves [and]our people."45

That same month, Grombachapproached the G-2 noting that a

" Grombach Diaries, 9 July 1950.45 Grombach Diaries, 8 September 1950.

"certain government agency" hadbeen funding its operations, butthe money was drying up. Heoffered to work for the Armyagain, for $20,000 a month, add-ing that if the Army wasn'tinterested, perhaps it could rec-ommend to DCI Walter BedellSmith, that CIA pick up the con-tract. The Army took Grombach'soffer seriously but in Januarybacked off after consulting withJ. Raymond Ylitalo, assistantchief of the department's Secu-rity Division, which by this timehad inherited the Pond liaisonrole. Asked to evaluate thePond's material Ylitaloresponded that "in all frankness[he] could describe it in only oneword, `crap.'"46

The CIA Takes Over

Though it is not clear whetherthe Army recommended Grom-bach to DCI Walter Bedell Smithor not, Grombach was soon prop-ositioning the CIA, and State wassoon preparing to hand off thePond to a new sponsor, one fromwhom it had until recently beenhiding the Pond's very existence.Smith asked his deputy, AllenDulles, to consider the Pond'swork and make a recommenda-tion. Dulles turned the task overto Lyman Kirkpatrick, who ulti-mately recommended hiring thegroup, a recommendation hewould later regret. 47 The two

44 Director, Plans, Programs and Securitymemorandum to Assistant Chief of Stafffor Intelligence (US Army), 5 September1958, Simpson file.


The Pond

sides turned to Adolf Berle, whoby then had left the StateDepartment to practice law. 45 Inlate March 1951, Dulles, Kirk-patrick, Grombach, his deputy,and a State Department officerinitialed an agreement in Berle'soffice.49

Grombach's relationship withCIA was rocky from the start. Itmust have been difficult forGrombach to subordinate him-self to someone he found asloathsome as Allen Dulles, whoin 1947 had testified before Con-gress in favor of centralizingclandestine collection in the CIA,directly opposing Grombach's tes-timony at the same hearing.Grombach, while admitting thatDulles had significant intelli-gence experience, thought theGestapo had "covered him like atent" when he was the OSS manin Switzerland. 55 In private cor-respondence Grombachcomplained bitterly about the"egomania of a really very stupidand morally dishonest tho [sic]allegedly religious family:" theDulles'.51

Grombach again was angered bythe wholesale "elimination" ofmany Pond reports, the sameconcern he had had about AlfredMcCormack during World War II.

47 Lyman B. Kirkpatrick, The Real CIA(New York: The Macmillan Company,1968), 150.49 Adolf Berle Diaries, 28 September 1948,University of Maryland Library.49 Berle Diaries, 22 March 1951.99 Grombach to Sokolsky, 22 July 1954,Sokolsky Papers.

Grombach to Sokolsky, 6 November1956, Sokolsky Papers.

66The fear of Grombachand his associates thatCIA sought to 'discover

and take over' theirsources was not as

'paranoid' asKirkpatrick suggested.

99In fact, the first CIA liaisonofficer with the Pond was aformer McCormack subordi-nate. 52 For example, Grombachclashed with the CIA over theideological reliability of OttoJohn, the head of Germany'sinternal security service. Withgrim satisfaction Grombach laternoted that John defected (appar-ently—the circumstances remainmurky to this day) to East Ger-many shortly after meeting inWashington with Allen Dulles.53

A similar case involved Pond col-lection from South America. InSeptember 1951, the Pondstarted a collection effort in Uru-guay and Argentina centered ona "tested reliable European diplo-mat" with extensive intelligenceexperience whom Grombachcalled "DAHL." lb Grombach'sannoyance CIA "eliminated"much of the reporting fromDAHL's network. Particularlyirksome was the Agency's rejec-

62 "The Otto John Case," Unpublishedmanuscript, Simpson file. This undated,unsigned manuscript was clearly writtenby Grombach or a close associate; internalevidence puts it at late 1954; McCormackto May, 16 March 1946, NARA, RG 59, En-try 1561, 25W62/04/03, Folder "Col. Mc-Cormack vs. Congressman A. May"5° "The Otto John Case," including Appen-dices A and B.

tion of a stream of reportingindicating that a particular Uru-guayan official was a communist.CIA sent back comments such as"conjecture based on source's evi-dent bias against [the official]who, according to the weight ofevidence here, is definitely anti-Communistic." Ultimately, CIAinstructed the Pond to "stop[these] reports until source sendssome proof." Grombach saw thisas not only more CIA incompe-tence and 'softness but alsoprotection of a man he believed tobe a recruited CIA asset. InGrombach's telling, the man waslater publicly revealed to be acommiinist.54

Grombach was also irked thatthe CIA repeatedly urged him toname the Pond's sources. LymanKirkpatrick later wrote that thePond tended to change sourcedescriptions on "the rather para-noid grounds that we would beable to discover the real source ifthey provided identical descrip-tions on each report from thatsource." This behavior onlyincreased the Agency's desire tofind out who they really were.55From the Pond's point of viewthis was an unacceptabledemand. Not only would it "breakfaith" with their sources, but it"would also destroy the organiza-tion's usefulness as a secretintelligence collecting agency andindependent check." Moreover,"even if sources were divulged,

64 "Memorandum Concerning Handling ofOur Counter-Intelligence Reports fromUruguay," 11 August 1952, appended to"The Otto John Case.""Kirkpatrick, 150.


The Pond

CIA's concept and approach areso violently monopolistic andcompetitive that it uses dishon-est, unethical, and ridiculousmeans to eliminate reports, dis-cover and sabotage operationsand attempt to discover and takeover systems, nets and source inthe field."56

The fear of Grombach and hisassociates that CIA sought to"discover and take over" theirsources was not as "paranoid" asKirkpatrick suggested. From theend of World War II to the early1950s, the CIA and other West-ern intelligence agencies faced amajor problem with "papermills." These were small privateintelligence organizations thatsold reports from unnamed but"well-placed" sources behind theIron Curtain. The CIA had toexercise some quality control,and it found that rather thaninvestigating the substance ofeach report it was often morefruitful to investigate the opera-tional mechanism which hadproduced it. The Agency's modusoperandi was to buy a fewreports from the middleman andif the material seemed interest-ing, to try to identify his sourcesso their bona fides and accesscould be assessed directly. Thiswould entail extensive investiga-tion, perhaps even wiretaps andphysical surveillance. 57 By thetime CIA ended its relationshipwith Grombach it had deter-

68 "The Otto John Case."57 Richard Helms, A Look Over My Shoul-der (New York: Random House, 2003), 92—99.

66Grombach knew his

situation wasuntenable, and he

did not enjoyworking for Dulles.

99

mined that one of the Pond'snetworks was feeding directedinformation and that many of thePond's other sources were "papermills."58 It may have been a CIAinvestigation of DAHL that led tothe end of that operation; by thefall of 1953 Grombach was com-plaining to his diary about"falsehoods" about DAHL andblaming the CIA station chief forthe fact that DAHL could neverbe sent back to Montevideobecause he was "irrevocabl[y]absolutely burned."56

Grombach also clashed with theCIA over the Pond's relationshipwith the FBI. Since 1942, thePond had given the FBI copies ofall of its reports that dealt withcounterintelligence. The CIAreaffirmed this practice in 1951,when it signed its contract withGrombach. However, in April1952, the Pond sent to CIA andFBI a report about a French offi-cial who had recently met inWashington with senior Ameri-cans. This official had beenspreading around Paris thedetails of his conversations,including DCI Smith's frank com-ments about the US IntelligenceCommunity. Angered by thisindiscretion, CIA ordered the

68 Kirkpatrick, 153.Grombach Diaries, 14 September 1953

and 14 October 1953.

Pond to stop forwarding itsreports to the Bureau. Grombachdid not comply, arguing privatelythat "this was not a case of turn-ing over [to the FBI] governmentclassified information—but ofgiving information reaching us,as a private organization fromour private sources in the field, tothe organization responsible forthe internal security of theUnited States." Accordingly, inApril 1953 behind CIA's back, thePond sent a memorandum to theFBI warning it of an impendingCIA-sponsored visit by Otto Johnto Washington in order thataction might be taken to preventhim from seeing US classifiedinformation.60

By January 1953 Grombachfeared that the Agency might notrenew its annual contract, whichwas up in August. His inclina-tion was to appeal to DCI Smith,with whom he had a generallypositive relationship. However,Smith's health was failing, andGrombach decided to wait until asuccessor was named and try towork with a new, more vigorousDCI. 61 A new DCI did take overon 26 February 1953. Unfortu-nately for Grombach, it was AllenDulles, who continued to be con-cerned about the quality of thePond's reporting and the identityof its sources. Grombach, for hispart, continued his annoyinghabit of reporting derogatoryinformation on CIA personnel or

89 "The Otto John Case," includingAnnexes G and J.

Grombach to Sokolsky, 20 January 1953,Sokolsky Papers.


The Pond

on foreigners he suspected wereCIA assets.

Grombach knew his situationwas untenable, and he did notenjoy working for Dulles. So heturned to a like-minded individ-ual on Capitol Hill, SenatorJoseph McCarthy. Though Grom-bach's appointment books showthat he had regular direct con-tact with a few members ofCongress and sporadic contactswith several others, there is noevidence that McCarthy was oneof them, at least until 1954.What Grombach did have wereconnections to McCarthy associ-ates, including a closerelationship—featuring frequentleaks of Pond materials—withcolumnist George Sokolsky, aconfidant of both McCarthy andhis right-hand man, Roy Cohn.62In January 1953, Grombachwrote to Sokolsky: "If my con-tract as consultant in myextracurricular field winds up asof August 15, 1953, I would liketo place my experience, contactsand abilities, and perhaps myorganization, at the disposal ofCongress.. .Perhaps you can verycautiously and delicately discussthe availability of 'an anony-mous party'.. .being available ona part-time basis."63

These blandishments soon cameto the attention of the CIA, whichwas very displeased. 64 The

" Grombach to Sokolsky, 13 August 1954,Sokolsky Papers, Box 57, Folder "Grom-bach, John."83 Grombach to Sokolsky, January 20,1953, Sokolsky Papers, Box 57, Folder"Grombach, John."

The Agency had goodreason to be angered,because that summer

Senator McCarthyturned his sights on it.

99

Agency had good reason to beangered, because that summerSenator McCarthy turned hissights on it. In July, he calledAllen Dulles to Capitol Hill andgave him a list of 12 alleged secu-rity risks working for the CIA.Dulles brought the list back toHeadquarters and told LymanKirkpatrick to investigate. AsKirkpatrick studied McCarthy'slist and the allegations madeabout the people on it, he experi-enced a sense of deja au. "Wewent back and checked the filesand sure enough some of thephrases were identical to so-called 'dirty-linen' reports thatthe [Pond] had fed to us aboutour own people, and some of thenames were identical with thosethat the [Pond] regarded as sinis-ter."66 Kirkpatrick concluded thatGrombach was feeding McCarthy.

The precise truth remains murky,but the evidence suggests thatMcCarthy or his staff may havesought a face-to-face meetingwith Grombach to which the lat-ter was reluctant to agree. Inmid-October 1953, Grombachwrote in his diary that someunspecified dispute "must besolved" because at stake were thePond itself, his personal reputa-tion, and the security of the CIA.

84 Grombach Diaries, 10 May 1953.88 Kirkpatrick, 151-2.

Strangely, however, he went on,"McCarthy['s] approach I havealways turned down but if thisgoes in [I] will definitely do so[sic] to protect myself. "66 Theindirect contacts went on, how-ever. In December 1953,Grombach sent Sokolsky a mem-orandum containing a long list ofcomplaints about wartime com-munist influence in the G-2,focusing particularly on AlfredMcCormack and his subordi-nates. A Sokolsky assistant wroteon it "attached is a copy for Roy,"a probable reference to RoyCohn. 67 Four months later, Grom-bach discussed the president, thePond, McCarthy, and Project1641 with Jack Clements, editorof the conservative AmericanMercury. Project 1641 was poten-tially a hot topic at the timebecause the Army-McCarthyhearings were then underway.68

During the McCarthy-CIA fight,Dulles organized a group to keeptabs on McCarthy's activities andto feed the senator disinforma-tion. James Angleton and JamesMcCargar, who by this time wasout of government, were lunch-ing one day, when Angletonmentioned that he knew of theother's work with the Pond inHungary. Angleton described hisconcerns about Grombach andasked McCargar to meet withGrombach from time to time andreport back. But Angletonwanted something more. He

Grombach Diaries, 14 October 1953.67 Blind memorandum, December 1953,Sokolsky Papers, Box 57, Folder "Grom-bach, John."88 Grombach Diaries, 23 April 1954.


The Pond

arranged to provide McCargarwith false information, suppos-edly acquired in France, whichwould appear derogatory to CIA.Angleton hoped Grombach wouldpas& the materials to McCarthy,who would use them. They couldthen be discredited, embarrass-ing the senator and hopefullythrowing him off the CIA. Inorder to provide a pretext forgiving this information to Grom-bach, McCargar was to hint thathe wanted back in the intelli-gence game.

McCargar met several times withGrombach. As he related it yearslater, Grombach was "absolutelyfurious at the CIA" for a varietyof reasons and he "kept threaten-ing to go to McCarthy. And hedid." Two or three times McCar-gar successfully passed thephony reports. Between report-ing on Grombach andmisinforming Grombach, McCar-gar's mission was deemed sosuccessful that Angletonarranged a meeting with Dullesat Dulles' home on WisconsinAvenue. There, the DCI wasextravagant in his praise, "you'vesaved the Republic," he toldMcCargar.69

Finally, in 1954, the CIA decidedthat it had had enough of Grom-bach's scheming andquestionable products and wouldnot renew the Pond contractwhen it ended on 15 August.Kirkpatrick decided to have it

"Author's interview with McCargar andBurton Hersh, The Old Boys: The Ameri-can Elite and the Origins of the CIA (NewYork: Charles Scribner's Sons, 1992), 327.

66Finally, in 1954

the CIA decided that ithad had enough of

Grombach's schemingand questionable

products.

99

out with Grombach. He con-fronted him about the contactswith McCarthy. "After a bit ofblustering and blowing," Grom-bach admitted that he had giveninformation to McCarthy andthat it was not only his right todo so, but also his responsibility."He went on to say that he hadproposed to Senator McCarthythat his entire organization workfor the Senator in doing nothingbut investigating employees ofthe United States govern-ment."" Grombach's diaryindicates that shortly thereafterhe met with McCarthy, but nohelp was forthcoming from thesenator. 71

Not long after, on New Year'sDay 1955, all Pond operations,came to an end, save two thatCIA continued briefly. Grombachtried to find new sponsors andsuggested that if the security andexistence of the Pond were pro-tected, it could be used as anemergency wartime intelligencesystem. He found no takers. Thelast two operations ended on 30April and with them ended thePond's idiosyncratic existence."

70 Kirkpatrick, 152-3,71 Grombach Diaries, 27 July 1954.

Assessing the Pond

The record of the Pond appears tobe largely one of failure andimpermanence. Grombach was astrong proponent of a trulysecret, unacknowledged espio-nage organization and createdthe Pond along those lines. How-ever, that strategy never caughton as the US Intelligence Com-munity took shape. In 1946, atleast one senior officer of theStrategic Services Unit (the onlycomponent to survive the dissolu-tion of OSS after the war)proposed precisely such a set-up,but the suggestion was rejected.The Pond would not have been agood candidate to fill the role inany event." Even in 1946 few inWashington knew of the exist-ence of the group, which was stillvery small and with few orunknown successes and a leaderwho had created numerousenemies.

The story of the Pond demon-strates the importance ofcollection as an official functionof the US government whereverpossible. The Pond joins a longlist of intelligence organizationsover the past 60 years—thepaper mills of the early Cold War,the Gehlen organization in itsearly years, and more recentlythe Iraqi National Congress are

72 Grombach Diaries, frontispiece, 1955;John Bakeless, draft Grombach obituary,and "The Otto John Case," Simpson file.73 Warner, Michael, "Prolonged Suspense:The Fortier Board and the Transformationof the Office of Strategic Services," TheJournal of Intelligence History, Summer2002: 72.


The Pond

all candidates for inclusion onthis list—that have been able topeddle tainted intelligencebecause their operations wereinsufficiently transparent inWashington. As was the casewith many of the others, thePond's independence allowed it toplay one American agency offagainst another, in this case par-ticularly the FBI and the CIA.The Pond's exclusive ownershipof its product meant that Grom-bach could disseminate to theFBI or other agencies informa-tion that the CIA might havebeen able to determine was bad.

66The story of the Pond

demonstrates theimportance of

collection as an officialfunction of the US

government whereverpossible.

99Such independent organizationswould be justified, indeed wouldbe indispensable, if they were theonly ones capable of providinguseful information or other intel-ligence benefits. Did the Pondmeet that test? The words andactions of such men as Ray Yli-

tab, Lyman Kirkpatrick, andAllen Dulles suggest that theanswer is no. However, the avail-able record provides no real wayof checking their assertions;almost no Pond reporting isavailable, and the file on Pondoperations is comparably thin. Itwould be analytically dangerousto allow our assessment of thePond to depend primarily on theassertions of its enemies.Accordingly, the question of thePond's contributions to the his-tory and development of USintelligence must remain open,just a crack.

In 1967, the superintendent of the US Military Academy (left) and the Comman-dant of Cadets from 1919-23 (second from left) awarded Grombach the diploma orig-inally denied him. On the right stands Charles Stevenson, Grombach's executiveofficer during WWII. Grombach died in 1982.

US Military Academy photograph.

82

Studies in Intelligence Vol. 48, No. 3