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CHAPTER
3 CONTINUED
ARTIFICE: James Angleton
and
X-2 Operations In Italy11
In the summer of 1943, as Allied forces reached Italian soil, U.S.
Army counterintelligence warned GIs, "you are no longer in
Kansas City, San Francisco, or Ada, Oklahoma, but in a European
country where espionage has been second nature to the population
for centuries."
One soldier who did not need this warning was James J. Angleton,
a 26-year-old second lieutenant in the Office of Strategic Services
(OSS), whose code name was ARTIFICE. Not only had the young man
spent the better part of his adolescence in Italy, but in the year
since he had joined X-2, the counterespionage branch of the OSS,
Angleton had picked up a precocious mastery of the discipline, earning
the respect of his British mentors and his American supervisors.
James Jesus Angleton
PHOTO
When Angleton first arrived in Italy, the administrative head of
all OSS counterespionage in that country cabled the X-2 office in
London: "Air much clearer."12 Enthusiasm greeted
Angleton's assignment to the field, as it seemed to portend an improvement
in the condition of X-2's local operations. In early October 1944,
X-2's operational headquarters in London had received a series of
signals from which Angleton's supervisors concluded that the 17-man
X-2 Rome unit needed a firm hand. (see box below)
In the fall of 1943, X-2 London received three ominous signals
from the field. The Rome unit's monthly report for September betrayed
a sense of having fallen behind events. Though the Germans were
sending fewer agents into Allied territory, the local X-2 authorities
were describing them as "considerably more dangerous"
and had warned Washington that each one therefore required more
investigation to pin down. Meanwhile, British MI6 officers, who
had three of their own counter-espionage field units in Italy,
were reporting low morale among their American counterparts. Finally,
London received an urgent plea for help from the overall chief
of X-2 in Italy, Maj. Graham Erdwurm, who believed that the working
relationship necessary to conduct counterespionage in Italy were
lost because of weak management of the unit. The Rome representative
of British counterespionage, it was argued, was increasingly reluctant
to share his most secret sources. At the time of Angleton's arrival,
the name of the X-2 field unit in Italy was SCI Z. It was derived
from the term, Special Counter-intelligence (SCI) unit, which
X-2 employed for its French field teams. In October 1944, SCI
Z had one substation, located in Florence.
Unlike the military, which would not reach its next target city,
Bologna, for another 5 months, Allied counterespionage was not in
a holding pattern in Italy in the fall of 1944, and X-2's responsibilities
were expanding.13 The area under Allied occupation had
still to be rid of German informants left behind by the Sicherheitsdienst
and the Militarisches Amt when they fled North.14 In
the addition, the counterespionage services bore the burden of identifying,
catching, and interrogating the linecrossers that the German military
was pushing across no man's land to collect order of battle information.15
Amid the pressure for more and better information about German spies,
the OSS's Italian counterespionage detachment had suffered a crisis
of confidence and was losing the respect of other counterespionage
services.16 London wanted Angleton to turn the Rome unit
around in 6 weeks so that X-2 could handle the enemy intelligence
agents out of the Po Valley and then be able to do its part when
it came time to liberate northern Italy.17
Nearly half a century later it may seem difficult to understand
why the now legendary James Angleton inspired not only the trust
of men many years his senior but was viewed as a source of wisdom
by those around him. With a very few notable exceptions, the current
image of James Angleton is that of a rigid, overrated, ideological
menace. (The thesis of Tom Mangold's book, Cold Warrior, James
Angleton: The CIA's Master Spy Hunter, is that Angleton was
an ideological cold warrior whose ability to differentiate between
possible threats and probable threats deteriorated after he learned
that his British colleague H.A.R. "Kim" Philby was a Soviet
penetration agent.)18 Yet the operational files from
his Italian posting, which are now in the National Archives, reveal
a different man and leave little doubt as to why he was called to
the field in 1944.
Angleton provided an adept field operative. The mission that was
only to take 6 weeks lasted 3 years. In the last year of the war,
Angleton rose from chief of the X-2 unit in Rome to chief of all
OSS counterespionage in Italy. By the age of 28, as bureaucratic
initials and superiors were changing in Washington, he became chief
of all secret activity, intelligence and counterintelligence, in
Italy for the Strategic Services Unit (SSU), the successor of the
OSS.19 Although field promotions are not always dependable
indicators of operational success, Angleton's rise to the top of
all American secret activity in Italy paralleled a remarkable expansion
of U.S. counterespionage capabilities in that strategically important
country. By the end of 1946, Angleton, or those directly responsible
to him, had amassed over 50 informants and had penetrated 7 foreign
intelligence services, including Tito's Otsek Zascita Naroda (OZNA),
the French Service de Documentation Exterieure et de Contreespionage
(SDECE), and the Italian Naval Intelligence Service, the Servizio
Informazione Segreta (SIS).20 Concur-rently, through
liaison channels, Angleton was receiving regular reports from various
Italian intelligence services that included intercepts of foreign
agent radio traffic and information about Soviet and Yugoslav intelligence
ciphers.21
In this paper, we will review four representative operations to
illustrate and evaluate Angleton's activities in Italy. As will
be demonstrated, a general study of these operations delimits the
contours of a consistent approach to counterespionage. Also discernible
in these operations is Angleton's understanding of the role of counterespionage
in defending U.S. interests. A study of his Italian career therefore
serves not only as a primer on what the OSS and the SSU achieved
in counterespionage in Italy but also as an introduction to the
world view, and professional skills of the man who would come to
dominate American counterespionage for a generation.
Angleton's approach can be best understood as the implementation
of what might be called "Total Counterespionage." The
young Angleton was a political Realist.22 He assumed
that all governments have secrets that other governments want. The
nature of a particular government influenced its capacity though
not its desire to spy. When Angleton asked why a country spied,
he did so not in search of moral justification but because countries
often betray intentions in what they spy for.23 The agnosticism
of his view of the threat supported a broad view of the means necessary
to protect U.S. interests. He believed that a counterespionage service
had to have an insatiable appetite for information about foreign
activities so as to be in a position to restrict, eliminate, or
control the ways by which other states collected their intelligence.
The operations chosen represent the principal sources of counterespionage,
as a form of information and as a type of activity, available to
Angleton in the years 1944-46. The first involves Angleton's exploitation
of ULTRA-class intelligence. In other word's how he made best use
of the fact that he could read many of the radio messages of his
adversaries in the German Intelligence Services. The second is the
SALTY case. SALTY, aka Capitano di Fregata Carlo Resio, was the
pivot of Angleton's broad-based liaison with the Italian Naval Intelligence
Service. The SALTY case illustrates how Angleton used cooperation
with other services to expand his knowledge of foreign intelligence
activities. The third is an example of a successful penetration
operation that involved another Italian naval officer, whom we shall
call SAILOR. And, finally, a second look will be taken at the notorious
Vatican case, VESSEL or DUSTY, which was also a penetration operation
but one that failed.
Before turning to these operations, it is useful to note that the
end of the Second World War divided Angleton's career in Italy in
two. Until August 1945, most of Angleton's operations were the extension
of a program of military security.24 As experts in the
personnel and methods of the enemy, X-2 officers assisted the more
numerous and large units of the U.S. Army's Counterintelligence
Corps in locating and neutralizing German and Italian Fascist agents.
X-2 officers were in a position to direct aspects of the Army's
security program because of their access to a more extensive archive
of counterespionage information. In addition, X-2 case officers
had received instruction in the arts of doubling and controlling
enemy agents, skills that Army counterintelligence officers did
not have. When the army picked up an agent, an X-2 officer was called
in to assess the agent's potential as a double agent. If the results
of the review were affirmative, the X-2 branch assumed responsibility
for the agent. Yet even in these double agent cases, security considerations
predominated, and X-2 officers operated with the elimination of
the foreign service as their goal.25
After the war, Angleton's concern became almost entirely "long-range
counterespionage," in effect the surveillance of all foreign
intelligence operations in Italy. The rationale for broad coverage
was that the cessation of hostilities had brought the replacement
of armies by intelligence services as the means by which countries
challenged each other. This change in the international system blurred
the traditional lines between positive intelligence and counterintelligence.
With threats ill-defined, X-2's penetrations assumed added significance
as sources of clues as to the intentions of other states.26
Angleton noted the case with which the intelligence services of
the continental powers adjusted to peacetime. In September 1945
he wrote, "(a)s military commitments are gradually discharged,
there is a sharp increase in the number of long-term espionage suspects
which is accompanying the transitional phase to normalcy.27
Angleton found that in the wake of the collapse of Italian power,
the unsettled nature of Mediterranean politics invited intervention
by secret services. In his reports to Washington, Angleton underlined
that the governments of France, Italy, and Yugoslavia were deploying
their secret services to maximum their territorial and political
advantages before the stabilization of borders and regimes.28
Besides providing insight into the way in which states defined
their interests, Angleton's adoption of broad counterespionage coverage
in peacetime facilitated controls over the movements of likely foreign
long-term agents.29 On the strictly security side, Angleton's
principal concern was that members of those long-range networks
not be permitted to obtain American secrets either through penetration
of an American facility in Italy or through the emigration of part
of the network to the United States.
Linking these two periods of Angleton's field career was his talent
for exploiting liaison and penetration for counterespionage purposes.
Neither activity produced information in hermetically sealed compartments.
The sources of counterespionage information available to Angleton
interacted constantly to produce a better picture of the adversary.
Some hitherto obscure reference in an intercepted message might
begin to make some sense, for instance, when compared to an interrogation
reported gained from an Allied service. One always hoped for a snowball
effect; a deciphered message might lead to penetration operations
that brought the release of even more data.30
Angleton's most important course of counterespionage was the product
of both liaison and penetration. Code-named ISOS or PAIR, this was
a steady stream of deciphered German intelligence messages, mostly
but not exclusively sent by members of the Abwehr, the German military
intelligence service.31 ISOS or PAIR belonged to the
now famous ULTRA family of signals intelligence. These decrypts
were a British triumph and came to Americans only as a consequence
of the un-precedented Anglo-American collaboration that underwrote
the Allied conduct of the Second World War.32 When the
advent of joint military operations in 1942 transformed the security
of American field operations into a British concern, the British
made the decision to share their best intelligence with Washington.33
In exchange for this material, the British required that the OSS
imitate their own foreign counterespionage organization. In practice
this meant establishing X-2, a self-contained unit with separate
communications channels, whose management at all levels, from staff
to line officer, was indoctrinated into ULTRA.34 Recalling
ULTRA four decades later, Angleton described it as "the superior
source" that undergirded all counterespionage operations.35
Angleton's own London apprenticeship had exposed him to the conventional
wisdom among Allied counterespionage chiefs that, at least in this
war, signals intelligence was the basis of all serious counterespionage.36
From late 1941, readable German intelligence messages were coming
to the offices of British counterespionage in bales. By May 1944
the British were circulating 282 of these decrypted messages a day.37
These decrypts created a sense of confidence among counterespionage
officers who, perhaps for the first time in military history, believed
that a complete understanding of the enemy's intelligence resources
was within their grasp. Although sometimes incompletely deciphered
and when fully deciphered often filled with code names instead of
real names, these messages provided a bird's-eye view of the number
of agents the enemy sent into the field and the information that
his networks were providing him.38
In Italy, Angleton made a distinctive contribution to the problem
of managing this sensitive information. Like many Allied counterespionage
officers, he understood that the British sister services employed
ULTRA information. Operationally, this meant striking a balance
between the protection of this superior source with the requirement
of exploiting it to catch spies. As chief of X-2 Rome, Angleton
conceived and produced a series of special manuals for use by Army
counterintelligence investigators that went a long way toward solving
this problem. Between January and April 1945, Angleton developed
the concept of the "Key," an easy-to-revise compendium
of information about the various German and Fascist Italian intelligence
services that could be shown to officers not indoctrinated into
ULTRA.39 The trick was to comb POW interrogations for
corroboration of facts first learned from ULTRA. Once a detail had
been found in a less sensitive place_a SECRET interrogation report
instead of a TOP SECRET ULTRA decryptit could be disseminated
more widely.40
The fact that ULTRA materials were the most important products
of liaison in the war against Fascist agents did not negate the
value of the other cooperative relationships formed by Angleton
in the field. For intelligence as well as operational reasons, the
counterespionage officer had an incentive to develop liaison channels.
Angleton recognized that the requirement of specific information
about the real names, aliases, addresses, missions, modes of payment,
and weaknesses of foreign agents placed demands that even the miraculous
deciphered messages could not meet. Germany signals, of course,
revealed only some of what had to be known about espionage activity
Mussolini's rump government. But even where it was a matter of detecting
a German-trained and German-supplied agent, the intricate details
required to track the agent down were less commonly the product
of signals intelligence than the interrogations of capture intelligence
officers, agents, and subagents. As X-2 was only one cog in the
Allied counterintelligence machine, Angleton had to rely on liaison
channels for most of these interrogations. The ratio of his small
number of interrogators to the number of suspects being processed
at any given moment meant that only the most important cases became
the direct responsibility of X-2. Accordingly, X-2 had to make its
influence felt indirectly, through interrogation aids such as the
"Keys," which guided Army interrogators, or through joint
operations with other counterespionage services with the effect
of maximizing the number of interrogation reports available to X-2.
Angleton's experience in Italy affirmed the principle that liaison
is the most efficient way to expand the sources of a counterespionage
service. Intelligence cooperation has the potential of opening archives
to a service that it could not have created on its own without a
massive investment of labor and capital, if at all. Liaison among
counterespionage services has the added inducement that it is the
only way for a foreign service to have systematic access to the
myriad of banalities routinely collected by domestic institutions
that often prove essential in determining the bona fides of a source.
Hotel registration lists, airplane manifests, passports and visa
information can all be used to detect suspicious activities by individuals
or to test the biographical information of suspect agents with whom
you have come into contact. The epitome of such liaison is the police
file, which, when corrected for the political or cultural biases
of the originating institution, can be the most important source
of biographical, or "personality," information.41
Having learned the value of liaison as a desk officer in London,
Angleton wasted no opportunity once in the field to broaden X-2
contacts with Allied and friendly services. Of particular importance
to him were the under-developed links to the Italian services. Under
certain circumstances a foreign service will decide to put its operational
resources at a counterespionage officer's disposal. Until 1946 this
was mandated for the Italian police and all Italian military intelligence
services.42 The challenge for X-2 was to provide the
basis for a continuation of such collaboration past the life of
the mandate.
Angleton's efforts at deepening liaison with the Italians built
upon the accomplishments of others, especially those of his own
father, Lt. Col. James Hugh Angleton. From late 1943 through half
of 1944, the senior Angleton served as X-2's representative in discussions
with Marshal Pietro Badoglio and leaders of the Italian military,
including the army's intelligence service, the SIM.43
Over the course of his brief career in X-2 (he had left Italy by
the time his son landed in Caserta), Lt. Colonel Angleton drew upon
the excellent contacts he had developed in the 1930's as the owner
of National Cash Register's Italian subsidiary and as president
of the American Chamber of Commerce for Italy.44 Following
the elder Angleton's lead, son Jim's predecessors as unit chief
in Rome, Andrew Berding and Robinson O. Bellin, established a measure
of collaboration with all five principal Italian intelligence services:
the three Italian military services, the police of the Ministry
of the Interior (the Pubblica Sicurezza) and the Royal Counterespionage
Service, or the Carabinieri.45
Young Angleton considered his immediate predecessor, Bellin, overcautious
in dealings with the Italians. Angleton's first important policy
decision after arriving in late October 1944 was to overturn Bellin's
recommendation that the Marine Unit, a maritime paramilitary arm
of the OSS, suspend its operations in Italy. The source of the problem
was that the unit had earlier recruited a number of Italian naval
saboteurs. When one of these recruits was discovered to be a Germany
agent, X-2 and the OSS Security Office in Caserta concluded that
the OSS Marine Unit was insecure. So daunting was the task of checking
the bona fides of the rest of the Italian group, because ULTRA apparently
provided very little on the Italian services, it was thought best
to close down the entire OSS marine detachment.46
Angleton understood these concerns but was willing to take a leap
of faith in order to deepen X-2's relationship with the SIS. It
was a calculated risk. The war had turned against the Germans, and
only the most hardened Fascists would resist the call for assistance
from the rejuvenated Italian military. Betrayals were still possible,
but their cost had to be weighed against the potential rewards of
liaison. The Italian Royal Navy had the key to dismantling the German
intelligence and sabotage network north of Florence. ULTRA information
showed that the Germans were planning to leave Italians behind in
strategic centers with missions to report on Allied military movements
to headquarters in northern Italy and Austria.47 Other
information pointed to Prince Valoerio Borghese, a former Italian
naval officer, as possibly being responsible for setting up part
of this organization.48 Borghese, the chief of the naval
sabotage unit, the Decima Flotilla MAS, had not surrendered with
the rest of the Italian Royal Navy in September 1943. He and most
of his men, who were famous for their underwater assaults against
British shipping, had stayed in the north to serve Mussolini's Salo
Republic. The SIS knew the biographies of Borghese's group and could
predict which men might be vulnerable to an approach by an Allied
field agent.49
Angleton's reversal of policy, implying U.S. confidence in the
Italian Royal Navy, opened the door to wide-ranging joint operations
with the SIS under Capitano di Vascello Agostino Calosi.50
Italian Naval Intelligence was eager to work with the OSS as Angleton
was with them. In November 1944, Calosi's chief of intelligence,
Capitano di Fregata Carlo Resio, approached Angleton with two offers
of assistance.51 First, he said he could provide four
trained radio operators for future penetration operations in the
north. Second, he urged that the OSS Marine Unit take over the Italian
"GAMMA" frogman school at Taranto, which would soon be
closed down. Resio suggested that with the equipment and the training
staff from Taranto, the OSS could prepare its own naval sabotage
group for operations in the Pacific.
By early January 1945, this liaison was producing counterespionage
information in addition to operational opportunities. As he began
providing reports based on SIS files, Resio earned the sobriquet
SALTY.52 The first batch of SALTY reports dealt primarily
with two theme: one was the threat of communist insurgency and Soviets
support for same; the other, the existence of a Fascist residue
that had to be wiped off the Italian slate.53
The SALTY reports brought criticism upon Angleton's head for having
exceeded his brief. The references to Soviet activity embarrassed
Washington, which, in February 1945, cleaved to a policy of not
collecting counterintelligence on allies.54 In its first
assessment of Resio's information, X-2 headquarters lectured young
Angleton on the possibility that this information was politically
inspired. The SIS, they cautioned, had long been considered royalist
and anti-Soviet: "(t)herefore, it seems possible that this
information may well be in the nature of a propaganda plant.55
Moreover, at a time when Washington was eager for information to
confirm the governing assumption that the Germans planned to continue
a twilight struggle from the mountains of Austria, Resio's information
seemed at best premature. Washington was testy:
We would rather like to know from you whether you feel that
all of this information actually ties in with German activities,
either in the present or along the lines of future operations.
Without an explanatory tie-in and evaluation, much of this information
seems to be rather meaningless.56
Angleton reacted to the upbraiding by never again forwarding to
Washington any political intelligence received from SALTY.57
Plan IVY, which was the culmination of the wartime collaboration
developed between X-2 and SIS by Angleton and Carlos Resio, did
meet Washington's criteria. The plan involved the use of Italian
naval resources to penetrate Borghese's XMAS network in the north.
Resio introduced Angleton to IVY, a source in Florence who had worked
in Borghese's XMAS.58 IVY provided six radio sets.59
For the period after the liberation of the north, he offered XMAS
scouts who were to dress as U.S. enlisted men and be assigned to
target teams being assembled for Genoa, La Spezia, Trieste, and
Venice. These scouts were to assist X-2 in tracking down Borghese's
stay-behind network.60
Plan IVY also involved Pubblica Sicurezza and partisan contacts.
The object of using them together with Resio's assets was to extend
X-2's coverage in the north. Angleton's plan was to work with the
SIS, the Pubblica Sicurezza in Rome, and those branches of the OSS
that had been active informants among the partisans with a view
to reestablishing contact with as many friendly assets in Fascist
territory as possible. Once the liberation had begun, X-2 intended
to send its few officers to the north to meet up with these contacts,
who were expected to be able to facilitate the "raccolta"(collection)
of enemy agents and archives.61
Despite the assistance of the Italian SIS, Plan IVY did not live
up to its promise. The credit instead went to the British and Italian
military intelligence for capturing the heart of Borghese's organization.62
Plan IVY also incurred unexpected costs that would only have been
warranted had there been more operational successes. Because IVY's
network had not sufficiently coordinated its activity with the partisans
in the north, some of its members were arrested and executed despite
their work for the Allies.63 One positive byproduct of
IVY for X-2, however, was that Prince Borghese turned himself over
to the OSS.64 Until the Italian government forced his
return for prosecution in the fall of 1945, he served as an X-2
source on the backgrounds of various members of the Italian military
and diplomatic elite.65
After the war, Angleton intensified his cultivation of the Italian
Royal Navy. This took many forms. He offered the use of X-2 as a
postal service to Agostino Calosi, whose brother had been taken
to the United States to advise the U.S. Navy on building torpedoes.66
When someone in the Italian SIS requested a copy of the American
trade journal that happened to have an article on welding ships,
Angleton cabled Washington to have it dug out of the Library of
Congress.67 Another way of currying favor was to sponsor
a hard-earned vacation for a friendly naval contact. In the summer
of 1945, X-2 sent the head of B Section, the cryptographic service
of the Italian Royal Navy, and his wife to the south of Italy.68
This minor investment seems to have paid off. By 1946 Angleton
could report that as part of an exclusive arrangement with Section
B, he had received a partial reconstruction of a Yugoslav cipher
table and was likely to see solutions to messages sent by the Soviets
to their field agents.69
By 1946 Angleton had developed at least 10, and possibly as many
as 14, informants in the SIS.70 This network was inexpensive
as it was productive. Angleton reported in the fall of 1945 that
he did not pay for anything that he received from the Italian Intelligence
Service. Simply by turning over some cigarettes or operational goods,
he could gratify his opposite numbers without humiliating them.
Angleton wrote in one of his general reports:
A few such items represent the equivalent of month's pay to
an Italian Intelligence officer. In practice, $500 worth of operational
supplies has the operational value of $50,000 worth of Lire or
more. This method of payment is generally in use by other intelligence
services.71
Angleton's superiors echoed his pride in the liaison system of
X-2 Italy. When taking stock of all liaison relationships in 1946,
the leadership of X-2 deemed Angleton's liaison with the Italian
intelligence community, including the SIS, the "most spectacularly
productive" of any maintained by the organization.72
The SALTY case represented how liaison could be used to fill in
gaps in ULTRA information. Another way was by means of penetration.
Reading the enemy's mail, as typified by signals intelligence like
ULTRA, was only one of the forms of penetration available to Angleton.
In the handbook of an X-2 officer there were another four ways to
penetrate a foreign service; first, by placing an agent within the
foreign service; second, by exploiting captured agents; third, by
capturing foreign intelligence documents; and finally, by capitalizing
on security lapses by enemy representatives in neutral (third) countries.73
Angleton's most productive penetration aside from ULTRA in the
years 1944-46 involved an agent in place. As Angleton knew, the
"agent in place," or mole, has distinct advantages as
a means of penetration. This kind of operation can potentially combine
the virtues of access to high-level information and operational
flexibility. Signals intelligence has the former, but it is also
a static penetration. The agent in place, on the contrary, can direct
his activities in conformity with the shifting priorities of the
counterespionage service. Like signals intelligence, the last three
kinds of penetration captured documents, interned enemy personnel,
the fortuitous security breach lack the dynamism of the agent
in place. While excellent sources, they can provide only snapshots
of the foreign service. The double agent is the only form of penetration
that can compete with the flexibility of the agent in place. But
since, by definition, he or she is not an officer of the foreign
service and operates only in the field, there is little chance of
parlaying the agent's new loyalties into a high-level penetration.
Angleton expected that, like the other forms of penetration, the
penetration agent could serve an important epistemological function.
In practice, the responsibility of the X-2 officer to protect the
integrity of the U.S. intelligence community meant checking the
channels of information to headquarters to weed out deception or
just bad intelligence. Angleton's term for this was "controlling
information."74 OSS field stations were beset with
streams of information, of varying accuracy, from agents of uncertain
credibility. Without a system of knowledge, a field officer found
himself blindly picking and choosing among these details. There
could be little certainty at the best of times for the analyst of
current events, but for Angleton there was a way to reduce the possibility
of error. If one could control another agent in the same office,
or at least one likely to receive similar information, then the
veracity of the first source's reports could be tested. The game
of multiple penetration required patience and meticulousnesstraits
associated with Angleton's later hobbies of orchid-breeding and
fly-fishing.
Angleton's prize agent in place realized the epistemological potential
of his type. An SIS officer, he provided a check on the products
of the important liaison with Italian naval intelligence. Angleton
code-named him JK1/8, but for simplicity's sake, we shall refer
to him as SAILOR.75
The passionate debate over the future of the monarchy in
Italy, which followed the defeat of Nazi Germany and the Fascist
puppet state in northern Italy, undermined the unity of the Italian
Royal Navy. Many in the navy, which Angleton himself described as
"the stronghold of Monarchism," opposed an Italian republic.76
Angered by the militant monarchism of his superiors, a young republican
in Carlo Resio's intelligence section took matters into his own
hands and offered a confidential liaison to Angleton. From the summer
of 1945, this officer supplied X-2 with information that cut across
the grain of what was received from official Italian Royal Navy
sources.
SAILOR represented the ideological agent. Apparently, he was not
paid for is information.77 Nor is there evidence that
SAILOR intended this connection with Angleton to advance his own
career in intelligence. On the contrary, 8 months into his work
as a penetration agent, SAILOR mused about resigning from the navy
to join his brother in South Africa.78 SAILOR's reports
betray an antimonarchist bias, reflecting a deep suspicion of his
colleagues and concern for the future of the Italian republic.79
In the year for which there is evidence of his work for X-2, SAILOR
strengthened Angleton's ability to monitor Italian efforts to rebuild
an intelligence capability.80 Notably, on three occasions,
he revealed secret Italian intelligence activities and then maneuvered
himself into a position from which he could act as X-2's eyes and
ears.
As his first operational contribution, SAILOR disclosed contacts
between the Italian and the Soviet intelligence services after the
Italian Armistice. At the start of his work for Angleton, SAILOR
had offered to turn over the files on his meetings with his Soviet
counterpart in Istanbul, Akim Nihailov.81 A few months
later, this offer matured into a prospective penetration of the
Soviet services. The Soviets attempted to reestablish contact with
SAILOR in Rome in the fall of 1945. SAILOR informed X-2, which then
monitored the relationship.82
The second major disclosure attributable to this penetration came
when SAILOR warned the Americans that anti-Communist Albanians had
approach the Italian Royal Navy for money and weapons to attempt
the overthrow of Enver Hoxha's regime. Angleton's official contacts
also reported this approach. Thus Angleton found himself being asked
by both SAILOR and the Italian partners for guidance as to what
the Italian response should be. In order to control this relationship
between the SIS and the Albanian dissidents, Angleton risked disclosure
of his own penetration by boldly recommending that SAILOR be the
liaison between the two groups. SAILOR's superiors agreed, and for
nearly a year, X-2 was able to monitor these discussions through
SAILOR.83
Finally, SAILOR revealed an old secret to Angleton that he had
learned while serving in the codes and ciphers section of Italian
naval intelligence. He told the story of DURBAN, a mysterious source
who had supplied British and French codes to the Italian in 1939
and 1940 through a cut out, or intermediary, known as Max Pradier.
SAILOR recalled this case because in 1945 Max Pradier attempted
to reestablish contact wit the Italians, and SAILOR thought the
United States might wish to participate.84 When the Italians
later decided to reactivate Pradier, SAILOR was well-positioned
to report on the kinds of ciphers that Rome was requesting.85
These operational gifts aside, SAILOR's principal value lay in
enabling James Angleton to master the important liaison with Resio
(SALTY) and the rest of the SIS. SAILOR was in a position to reveal
weaknesses in the service for Angleton to exploit.
In January 1946, SAILOR told Angleton that the Italian Minister
of the Navy had announced in a meeting with his chiefs of staff
that the United States was "the only friend of CB-Land (Italy)."86
As it was U.S. policy on the terms of a peace treaty with Italy
that had occasioned this comment, Angleton reacted to this intelligence
by requesting from Washington all speeches by U.S. Secretary of
State James F. Byrnes and other significant U.S. foreign policymakers
that highlighted the American predisposition to a soft peace. Intending
to mount a serious campaign, Angleton asked to be forewarned by
cable of any government speech seemingly favorable to Italy that
he could use to convince the Italian intelligence services that
"their loyal collaboration with our service works to better
their dubious position at the peace table."87 Thinking
past the peace treaty, Angleton felt that this close liaison could
be preserved if the Italians believed that the United States had
done everything possible to limit reparations to be paid by Rome
and to rescue the eastern province of Venezia Guilia, even if neither
demand was met in the treaty.88
Additionally, SAILOR improved the value of the X-2/SIS liaison
by providing a filter through which Angleton could assess the quality
of the information he was receiving from the Italian Royal Navy.
Intelligence from SAILOR confirmed that the elite of the SIS was
actively supporting the Italian monarchy.89 This put
Angleton on his guard in dealings with his naval informants. While
many factors may have contributed to this caution, SAILOR's reports
no doubt influenced Angleton's growing suspicion of the quality
of political intelligence from the Italian Royal Navy. By the fall
of 1945, Angleton's reports to headquarters began to reflect the
reserve that Washington had earlier shown, without much cause, toward
SALTY. Lumping the SIS with all other Italian intelligence services
in a criticism of the political biases of the Italian intelligence
community, Angleton cautioned his desk chief in Washington:
The services have used every event, incident to the Italian
Revolution, as propaganda material to indicate Russia's subversive
intentions of preventing the reestablishment of "law",
"order", and democracy in Italy. At no time have the
various items of intelligence (when submitted to the test) been
proven to be other than consciously composed for the purposes
of provocation.90
SAILOR was a successful operation. But not all of Angleton's attempts
at penetration produced positive results. Whereas SAILOR could be
considered a complete penetration by Angleton, the notorious VESSEL
case illustrated the problems associated with an incomplete penetration.
This case pushed Angleton to the limits of his ability to meet his
own high standards of counterespionage, with severe consequences
for U.S. intelligence.
The rough outlines of the VESSEL case are well known to students
of the OSS.91 In the fall of 1944, Col. Vincent Scamporino,
the head of the Secret Intelligence Branch (SI) of the OSS in the
Mediterranean, began to receive reports from a man who purported
to be in touch with an information service in the Vatican. The reports
drew the interest of policymakers in Washington, among whom was
President Franklin d. Roosevelt, who took the reports to be reproductions
of actual Vatican documents. When the documents turned out to be
fabrications, the OSS suffered some humiliation.
What is less well known is that this humiliation might have been
avoided had bureaucratic politics not prevented James Angleton from
assuming control of this operation from the start. Shortly after
Scamporino had brought his first Vatican reports, James Angleton
began to receive nearly identical reports from his own cut-out,
or intermediary, Fillippo Setaccioli, alias DUSTY.
The source of all this Vatican information, both that received
by Angleton through Setaccioli and what Scamporino was sending to
Washington as VESSEL information, was a former journalist named
Virgilio Scattolini, who directed the Social Center of Catholic
Action in the Vatican.92 Scattolini had sold bogus Vatican
information to various newspaper wire services before the war and
with the liberation of Rome sought to reestablish this lucrative
trade.93
Shortly after his introduction to Setaccioli, Angleton learned
that DUSTY was not Scattolini's sole middleman. When Angleton shared
the first reports from Setaccioli with SI Italy, Scamporino revealed
that his service had been receiving almost identical information
from two other sources, one of which SI had code-named VESSEL.94
Two considerations rendered the Scattolini case a matter of the
highest importance to Angleton. First, if, as then appeared likely,
the Vatican material was genuine, it represented a leakage of secrets
about U.S. activities in the Vatican.95 Scattolini had
boasted to Setaccioli of being able to report on Myron Taylor, the
U.S. representative to the Holy See. Second, the fact that Scattolini
was not the only middleman complicated any attempt to control Scattolini
and U.S. secrets.
Angleton believed that his case required at least limiting Scattolini's
Vatican operation to one middleman, DUSTY, whom he believed he should
control. Angleton had three good counterespionage reasons to want
to restrict the information to one channel. The OSS could thus screen
all of Scattolini's outgoing reports for information detrimental
to Allied interests. With this channel under its control, X-2 would
acquire the capability to uncover all of Scattolini's clients, most
of whom were foreign intelligence officers in Rome. At some later
date, X-2 could employ this channel to plant information on selected
foreign intelligence services.96
Scamporino rejected Angleton's plan.97 The risk inherent
in shifting from the middleman VESSEL to Angleton's middleman, Scattolini,
made the plan seem inadvisable. The pressure on Scamporino not to
fail was great. VESSEL's information gave the OSS the ear of President
Roosevelt, who from January 1945 received reports that were entirely
the raw intelligence "take" from this source in the Vatican.98
The traditional rivalry with X-2_based on SI's ignorance of ULTRA
and subsequent mistrust of X-2's aloofness__encouraged the conclusion,
moreover, that Angleton's approach to handling the Vatican information
was a veiled attempt to monopolize Scattolini.
As a consequence of Scamporino's decision to defer to DUSTY, from
January 1945 until August 1945 the OSS paid two middlemen for the
same information.99 Had a doubling of OSS expenses on
Vatican information been its only cost, this interbranch rivalry
might have been excusable. The actual damage was much greater because
the squabbling between the SI and X-2 prevented the OSS from controlling
Scattolini directly. The preclusion of an inside check on the quality
of the VESSEL material rendered even more difficult the already
challenging task of evaluating information from the Vatican. Since
the departure of the German intelligence bureaucracy from Rome and
the internment of Germany's diplomatic corps in the Italian capital,
ULTRA could provide very little to Scattolini's information. From
the ease with which Scattolini's lies were accepted, one can conclude
that the American intelligence community had few other sources on
Vatican affairs.100
Angleton tried unsuccessfully to "control" the Vatican
information. At the time that he had suggested putting all of the
Vatican middlemen out of business save one, Angleton had also advocated
direct contact with Scattolini.101 Given Scattolini's
Fascist past, Angleton was confident that the fabricator could be
compelled to work for the U.S. government. Angleton never had the
chance to test this proposition, however, because of SI's opposition
to anything that might threaten the VESSEL operation. In the hope
of overturning SI's veto, Angleton spent a good deal of time in
February, March, and April 1945 fruitlessly arguing the case for
turning Scattolini into a double agent. Finally, even fate conspired
against Angleton. When it appeared that Gen. William J. Donovan,
the Director of OSS, might agree at least to let X-2 place an American
penetration officer in the Vatican to watch over Scattolini, President
Roosevelt's unexpected death caused Donovan to cancel his trip to
Rome, and the whole plan fell flat.102
Fortunately for the U.S. government, Scattolini ultimately made
a mistake that took the luster off his material. In mid-February,
Scattolini, who apparently did not know the identities of all of
his consumers, passed a report through VESSEL on a meeting between
Myron Taylor and the Japanese representative at the Vatican, Harada
Ken.103 The State Department was astonished when it received
this VESSEL report because Taylor had not reported this particular
contact. When Taylor denied ever having met the Japanese representative,
the VESSEL material finally fell under suspicion, and the OSS decided
to curtail its distribution severely.104 President Roosevelt,
however, continued to receive VESSEL reports on the Far East, as
did the other Washington consumers of this material.105
For no apparent reason, it was thought that, though unreliable about
European matters, VESSEL could be trusted when it came to Japan.
Neither Angleton nor X-2 bore direct responsibility for the fact
that the President of the United States received a weekly diet of
fabricated reports up to the closing down of SI's VESSEL operation
in the summer of 1945. A counterintelligence service is ill-equipped
to judge the merits of political intelligence. In short, X-2 could
better evaluate the messenger than the message. Primarily at fault
were analysts in the OSS Research and Analysis Branch in Washington,
whose access to more political information put them in the best
position to discredit this material.
While the course of the VESSEL case validated his operational approach,
Angleton should not retrospectively escape personal responsibility
in the Scattolini case. Despite his admonitions to Scamporino, he
shares SI's trust in the basic veracity of what Scattolini was selling.
Only he can be blamed for the decision to continue disseminating
Scattolini's material after VESSEL, the OSS middleman, was fired
in the summer of 1945. Thereafter Setaccioli was the sole source
of these so-called "Vatican cables to Angleton.106
Instead of simply using them to detect foreign intelligence officers
in Rome, Angleton held at the view that Scattolini's material was
a valuable source of political intelligence. He gave the Vatican
reports a high evaluation, shared them with the U.S. Embassy in
Rome, and decided to leave Scattolini alone.107 Why Angleton
passed up his long-awaited chance to employ Scattolini as an U.S.
agent, at least to bolster his confidence in the man's access to
information, is unclear. As a result, a final reckoning for the
Vatican material was delayed at least until 1946. Ultimately, a
CIA postmortem on the case concluded that Scattolini's reports had
contributed to "informing, misinforming and thoroughly confusing
those individuals responsible for analyzing Vatican foreign policy
during the period involved."108
The counterespionage officer who emerged from the four preceding
X-2 operations is at odds with the fabled James Jesus Angleton of
the Mole-Hunt of the 1960s.109 As evidenced by his treatment
of information gained through liaison with salty and other Italians,
Angleton did not view World War II has a hiatus in the struggle
against international communism.110 In fact, at no time
was the young second lieutenant transfixed by a single enemy, Communist
or Fascist.111 His instinctual reaction to DUSTY, it
will be recalled, had been to control him in order to monitor all
foreign intelligence activities in Italy.
Further evidence of Angleton's pragmatism was the healthy skepticism
with which he treated his sources. Aware of the political context
in which he was working, Angleton was sensitive to the twin needs
of collecting from sources of all political persuasions and correcting
for their political biases. In October 1945, with the benefit of
information from SAILOR, he regretfully remarked that the doctrine
of military necessity had led to an almost exclusive set of intelligence-producing
liaison relationships with the Italian military services, which
represented the monarchist right wing of the Italian political spectrum.112
Since it was likely that Italy would become a republic with the
center-left inheriting power, Angleton articulated his worry that
X-2 faced being shut out of important Italian information.113
The success or failure of a counterespionage unit is not a simple
determination. One ought to resist the tendency to award laurels
to Angleton and X-2, for example, simply because the OSS and the
rest of the U.S government escaped serious Fascist penetration.114
After all, the avoidance of penetration may be more the reflection
of the weakness of the opponent's intelligence service, or more
appropriately in wartime, it may likely be the consequence of one
side's military prowess. Nevertheless, standards of competence can
be set. If they are exceeded, then the service or the individual
counterespionage officer can be said to have been truly exceptional.
In his use of ULTRA material and other products of liaison and
penetration operations, Angleton demonstrated a firm grasp of the
principles of effective counterespionage. He knew both how to make
use of the intelligence that he had and how to develop new sources.
Throughout, his objective was to extend his coverage of foreign
activities likely to affect U.S. interests. This implied an exacting
definition of counterespionage, which obliged the field officer
to monitor all foreign intelligence-gathering in strategic areas
and to control every possible channel through which an adversary
might acquire American secrets.
This sureness of touch also had its negative side. It nourished
a self-confidence that occasionally led Angleton astray. The VESSEL
debacle showed that Angleton could relax his principles if he became
personally involved in a case. Once Scamporino and the rest of SI
had lost their claim to the Vatican material, Angleton backed away
from his previous bureaucratic position of stringent checks on Scattolini
and ran the operation through the man whom he believed, Setaccioli
(DUSTY). Perhaps, too, some arrogance contributed to his decision
not to secure the coordination of the IVY plan with the Parisians
in the spring of 1945.
Angleton's mistakes in Italy, however, did not diminish his role
as exemplar in the development of counterespionage as an American
profession. As demonstrated through his operations with X-2 in Italy,
Angleton's concept of total counterespionage discouraged the myopia
that can lead intelligence services astray. His approach to counterespionage
neither necessitated a principal enemy nor was biased politically
to expect a great threat from any particular country. Grounded in
empirical evidence and historical memory, the world according to
Angleton was flexible, open-ended. Though not looking for threats,
Angleton as a young man was in a position to perceive them whenever
and wherever they arose.
END
OF CHAPTER 3
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