CLOAK AND DOLLAR Cloak and Dollar A HISTORY OF AMERICAN SECRET INTELLIGENCE SECOND EDITION Rhodri Jeffreys-Janes Yale University Press New Haven & London Copyright© 2002 by Rhodri Jeffreys-Janes. New material to Second Edition copyright© 2003 by Rhodri Jeffreys-Janes. All rights reserved. This book may not be reproduced, in whole or in part, including illustrations, in any form (beyond that copying permitted by Sections 107 and 108 of the U.S. Copyright Law and except by reviewers for the public press), without written permission from the publishers. Set in New Caledonia Roman type by Keystone Typesetting, Inc. Printed in the United States of America. ISBN 0-300-10159-7 (pbk.: alk. paper) Ubrary of Congress Control Number: 2003105922 A catalogue record for this book is available from the British Ubrary. The paper in this book meets the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Ubrary Resrouces. 10 9 8 7 6 5 4 3 2 Contents Acknowledgments vii Look Back in Terror: A Preface to the Second Edition xi 1. The American Spy Considered as a Confidence Man 1 2. The Washington Style 11 3. Allan Pinkerton's Legacy 24 4. Did Wilkie Crush the Montreal Spy Ring? 44 5. U-1: The Agency Nobody Knew 60 6. Burns, Hoover, and the Making of an FBI Tradition 81 7. H. 0. Yardley: The Traitor as Hero 99 8. Pearl Harbor in Intelligence History ll5 9. Hyping the Sideshow: Wild Bill Donovan and the OSS 131 10. Allen Dulles and the CIA 154 11. Cuba, Vietnam, and the Rhetorical Interlude 179 12. Did Senator Church Reform Intelligence? 205 13. The Casey-Reagan Era: From History to Victory 232 14. The Real American Century? 255 Abbreviations to Notes 289 Notes 291 Bibliography 327 Index 343 Acknowledgments There is a family myth about Tom Watkins. He was my Grandad, or, in Welsh, Tadcu. In the 1930s he was blacklisted for having led a coal miners' strike. He walked all over Wales, England, and Scotland look­ ing for a job. But the list followed him, and, in that depressed decade, he could find no paid employment. That was why he became a profes­ sional snooker player. Snooker in those days had the same kind of shady reputation as its American cousin, pool. Tadcu would arrive in a new town, play a cou­ ple of games with conspicuous incompetence, lose a bit of money. Then came the Sting. Someone would bet too much against him, and lose. Tadcu would scoop up his gains and move on rapidly to the next town. The thirties snooker emporia shared the dim lighting of the coal levels, but not the comradely trust and support. One day, having accu­ mulated a princely sum through his hustling activities, Tadcu met a member of the equine doping fraternity who convinced him that a cer­ tain mare would win against long odds. Tadcu placed his all on the four-legged promise. The action ruined Tom Watkins's character. The horse lost, Tadcu "took the Pledge" (promised God he would never touch another drop of alcohol) and became a staunch member of "The Chapel" to the end of his days. I did say, "family myth." The whole story is unreliable. For exam­ ple, I now know that Tadcu was a pillar of The Chapel before he took up snooker. Did this imbue him with a semblance of rectitude, making him an even more formidable exponent of the Sting? Or was the whole l'iii Acknowledgments Sting-and-horse story made up or exaggerated by disapproving family members to discredit Tadcu in the eyes of a younger generation?-it had, of course, the reverse effect, and it is appropriate to begin this book by paying tribute to Tom Watkins . •••• All this suggests that the Confidence Man is rather a pervasive character, not one to be found only in America. But my argument in this book is that in the United States, he has had an impact in an area desperately in need of honest analysis yet endemically prone to con­ spiracy and dissimulation-namely, secret intelligence. In writing this interpretive history of American secret intelligence, it was my great good fortune to have benefited from having taught the subject to succeeding generations of able and enthusiastic students. Some of those students' dissertations and publications are listed in the notes and bibliography, and it would be invidious to single out individ­ uals here, as so many of my students have been an inspiration to me over the years. I would like to thank not only the students but also professional colleagues who have offered me an enormous amount of advice. That help streamed in over a period of three decades, much of it in relation to my earlier publications in the field. But here I might mention those who specifically advised me on the concepts and new research behind the current work: James V Compton, A. Walter Dorn, Ralph Erskine, Meredith Hindley, Frederick P. Ritz, Gwenda L. Jeffreys-Janes, Loch K. Johnson, Frederick M. Kaiser, Marc Karson, W. Scott Lucas, Gary Marx, Ernest R. May, Hobert J. McMahon, Kevin O'Brien, David Painter, Eileen Scully, David Stafford, Nancy Tucker, Wesley Wark, Hobin \V. Winks, and Marilyn B. Young. My gratitude also extends col­ lectively to four readers who from the perspective of their special expertise supplied comments on portions of the original draft. These were Jane Adler, Douglas M. Charles, Frank Cogliano, and Tom Wales. My Edinburgh colleagues Owen Dudley Edwards and Robert Mason offered advice and supplied a critique of the preface to this edi­ tion. The anonymous reader for Yale University Press supplied an acute, informed, and timely critique of the draft manuscript. In New Haven and New York, Lara Heimert and Sydelle Kramer were most supportive as editor and agent, respectively. Acknowledgments ix Although this book aims to synthesize the scholarship of others and some of my earlier work, it draws also on additional research, which means that the list of librarians to whom I am indebted has grown. The following librarians and archivists were unstinting in the expert sup­ port they gave me in my research for the present book, and I would like to thank each one of them: Marty Barringer and Nicholas Scheetz, Georgetown University Library; John Earl Haynes, Manuscript Division, Library of Congress; Alan Kucia and Jenny Mountain, Churchill Archives Centre, Churchill College, Cambridge; Kristine Marconi, Seeley G. Mudd Library, Princeton University; and Jennie Rathbun, Houghton Library, Harvard University. As ever, research and writing need financial support, and in the case of the current project, I was fortunate. My acknowledgments and gratitude are due to the Canadian Bureau for International Education for the award of a Commonwealth Visiting Fellowship in pursuit of intelligence histmy, to the University of Edinburgh for grants from the Moray Fund and the Arts-Divinity-Music Faculty Group Fund, and to the Arts and Humanities Hesearch Board of the British Academy for a Hesearch Leave Award. Although my culinmy and dishwashing activities continued unabat­ ed in the course of the writing this book, my family gradually noticed that I was distracted by a rival activity. To say that they welcomed my inattentiveness would be to overstate the case. But my wife Mary was an inspiring pillar of support, while Rowena, Gwenda and Effie were as tolerant as one has a right to expect. To all of them, my love. Look Back in Terror A Preface to the Second Edition September 15, 2002, seemed an ordinary Sunday in Washington, D.C. At 10.30 A.M. a line of about eighty citizens wound expectantly around the corner of 9th and F Streets. The raindrops from a dying tropical storm had all but stopped, and the street vendor outside the International Spy Museum was beginning to regret having stocked up with so many umbrellas. In well-marshalled batches, the citizens entered the already crammed museum and bought their tickets: $11 full price, military and intelligence staff $9, and children $8. Once inside and having passed through the "cover" room to acquire a fake false identity, small boys of all ages had a wonderful time. With true love shining from their eyes, they stared at 007's Aston Martin DB5, with its twin machine guns and tire-shredders, at the CIA's rectal tool kit, and at sinister-looking Soviet listening devices. They clambered through a secret tunnel. They lin­ gered in rooms called Red Alley, Disinformation, and Wilderness of Mirrors. With eyes averted, however, they hastened past another chamber of even greater horrors. It was populated entirely by mothers and small girls and labelled Sisterhood of Spies-the museum's cre­ ators had shrewdly identified and highlighted the fact that women could "keep secrets" and be useful spies, too. The private businessman responsible for the museum, Milton Maltz, had clearly done his research. In fact, a board including CIA and FBI personnel had helped him develop his project. Nobody who visited the museum could escape the message that in this era of renewed terror, espionage is enjoying a boom. In the words of the xii Preface to the Second Edition museum leaflet, America is threatened by "poisonous snakes," and the spy "is needed more than ever." The adjacent upmarket restaurant, the Zola, offered a comple­ mentary theme. It was named for the novelist who attacked French spy hysteria and anti-Semitism in the 1890s. But its menu carried a less cosmopolitan message: we provide American food. Outside the restau­ rant, automobiles cruising along F Street-and indeed all over America-reinforced the patriotic theme, as they displayed the Stars and Stripes and the slogan "United We Stand." It may have seemed ordinary, but in reality September 15, 2002, was one day in a sequence of many months in which the United States was gripped by a national hysteria.