Spy Master #1

Allen Dulles, the Nazis, and the CIA

Cory Panshin
February 2005

Supreme Court Justice Arthur Goldberg once stated that "The Dulles brothers were traitors."  Some historians believe that Allen Dulles became head of the newly formed CIA in large part to cover up his treasonous behavior and that of his clients. 
-- Christian Dewar, Making a Killing

Just before his death, James Jesus Angleton, the legendary chief of counterintelligence at the Central Intelligence Agency, was a bitter man.  He felt betrayed by the people he had worked for all his life.  In the end, he had come to realize that they were never really interested in American ideals of "freedom" and "democracy."  They really only wanted "absolute power."

Angleton told author Joseph Trento that the reason he had gotten the counterintelligence job in the first place was by agreeing not to submit "sixty of Allen Dulles' closest friends" to a polygraph test concerning their business deals with the Nazis.  In his end-of-life despair, Angleton assumed that he would see all his old companions again "in hell."

Michael Hasty, Paranoid Shift

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The study of the past is beset by uncertainty.  Experts on ancient inscriptions can easily get into arguments over whether or not two prominent people with the same name were actually a single individual.  The student of modern history doesn't normally run into such problems because our lives today are so well documented.  But suppose that most present-day records were to be lost in the course of time, leaving only a few  semi-mythic narratives.  In that case, future historians might well conclude that the only way to make sense of the twentieth century was by assuming that there were actually two Allen Dulleses.

One Allen Dulles, they would tell us, was the head of a powerful group of covert agents who served the great American Republic at mid-century.  The other, who lived and worked slightly earlier, had been dedicated to promoting the interests of the Nazi Reich, which was the sworn enemy of the Americans.  Despite the coincidence of names, there could obviously have been no connection between them.

We, with our documentation intact, have no choice but to accept that these two Allen Dulleses were one and the same.  But the price of our superior knowledge is that for us the twentieth century threatens to make no sense at all.

How do we begin to untangle this puzzle?  Perhaps it would help if we went back to the start.

Allen Welsh Dulles was born to privilege and a tradition of public service.  He was the grandson of one secretary of state and the nephew of another.  But by the time he graduated from Princeton in 1914, the robber baron era of American history was coming to an an end, ushered out by the Sherman Anti-Trust Act -- which had been used in 1911 to break up Standard Oil -- and by the institution of the progressive income tax in 1913.  The ruling elite was starting to view government less as their own private preserve and more as an unwanted intrusion on their ability to conduct business as usual.  That shift of loyalties in itself may account for many of the paradoxical aspects of Dulles's career.

Dulles entered the diplomatic service after college and served as a State Department delegate to the Paris Peace Conference of 1919, which brought a formal end to World War I.  The Versailles Treaty which came out of this conference included a provision making it illegal to sell arms to Germany.  This displeased the powerful DuPont family, and they put pressure on the delegates to allow them to opt out.  It was Allen Dulles who finally gave them the assurances they wanted that their transactions with Germany would be "winked at."

Dulles remained a diplomat through the early 1920's, spending part of that time in Berlin.  However, he left government service in 1926 for the greener pastures of private business, becoming a Wall Street lawyer with the same firm as his older brother, John Foster Dulles.

By the middle 20's, Germany had started recovering from the effects of the war and its postwar economic collapse, and the great German industrial firms were looking like attractive investment opportunities for wealthy Americans.  W.A. Harriman & Co., formed in 1919 by Averell Harriman (son of railroad baron E.H. Harriman) and George Herbert Walker, had led the way in directing American money to German companies and had opened a Berlin branch as early as 1922, when Germany was still in chaos.  At that time, Averell Harriman traveled to Europe and made contact with the powerful Thyssen family of steel magnates.  It was to be a long-lasting and fateful partnership.

The Thyssens' steel business had suffered greatly from Germany's defeat, and old August Thyssen had decided to guard against future setbacks by creating a system of private banks.  He founded one in Berlin and another in the city of Rotterdam in the Netherlands.  In the wake of Harriman's trip, a third bank was added to the network, the Union Banking Corporation, founded in New York in 1924 with George Herbert Walker as president.  Having their own personal banking system made it easy for the Thyssens to move assets around, launder money, conceal profits, and evade taxes.

By 1926, W.A. Harriman was doing so well that Walker gave his son-in-law, Prescott Bush, the gift of making him a vice president.  In 1931, W.A. Harriman merged with a British firm to create Brown Brothers, Harriman, and Prescott Bush became a senior partner.  During the 1930's, Brown Brothers, Harriman would increasingly direct its clients' investments to German companies.  The Rockefeller family was prominent among these clients, and Standard Oil developed particularly close connections with the chemical giant I.G. Farben.

It was into this heady atmosphere of high-level investments and financial manipulation that Allen Dulles entered when he joined the firm of Sullivan and Cromwell in 1926.  He would become the lawyer for the Thyssens' Rotterdam bank and would also represent other German firms, including I.G. Farben.

However, there was a serpent in this businessmen's Eden, and its name was Adolph Hitler.  August Thyssen's son and successor, Fritz Thyssen, was an enthusiastic supporter of Hitler and had been funding the Nazi Party since 1923.  Other German industrialists would do the same.  It is hard to say to what extent the American investors shared Thyssen's enthusiasm, though it seems likely that most of them were swayed less by ideology than by the prospect that Hitler would be good for business.  Either way, the outcome was that many wealthy and powerful Americans wound up supporting a regime that would ultimately become their own nation's enemy, and investing in the very firms that would provide the core of that regime's military machine.

Early in 1933, both Dulles brothers attended a meeting in Germany where German industrialists agreed to back Hitler's bid for power in exchange for his pledge to break the German unions.  A few months later, John Foster Dulles negotiated a deal with Hitler's economics minister whereby all German trade with the United States would be coordinated through a syndicate headed by Averell Harriman's cousin.  With the Nazis enforcing a favorable climate for business, the profits for Thyssen and other companies soared, and the Union Banking Corporation increasingly became a Nazi money-laundering machine.  In 1934, George Herbert Walker placed Prescott Bush on Union Bank's board of directors, and Bush and Harriman also began to use the bank as the basis for a complex and deceptive system of holding companies.

The Hamburg-Amerika shipping line, which Harriman and Walker had controlled since 1920, had a particularly high degree of Nazi involvement in its operations.  In 1934, a congressional investigation revealed it to have become a front for I.G. Farben's spying, propaganda, and bribery on behalf of the German government.  Rather than advising Walker and Harriman to divest themselves of these tainted assets, Prescott Bush hired Allen Dulles to help conceal them.  From 1937 on, the Dulles brothers would serve Bush and Harriman in all their covert dealings with Nazi firms.  They also performed similar cloaking services for others, like the Rockefellers.

It goes without saying that Harriman, Walker, Bush, and Dulles were morally tainted by their connections with German firms like Thyssen and I.G. Farben, since they both funded and profited from Hitler's crimes against humanity.  However, their entire enterprise was corrupt in a more subtle sense as well, in that its very basis was financial fraud on an unprecedented scale.  That would have been true even if Hitler had never come to power.  The real significance of adding the Nazis to the equation was that it upped the stakes, both increasing the potential rewards for the participants and forcing them into increasingly elaborate deceptions to conceal their frauds.

The American government was not the only object of these deceptions.  In the late 1930's, Fritz Thyssen, worried about the economic impact of the oncoming war, started concealing his assets.  He placed many of them under the names of distant relatives in Holland and also moved large amounts of cash through his family's Rotterdam bank and from there to the Union Banking Corporation in New York.  He was aided in this by Prescott Bush, George Herbert Walker, and Allen Dulles.

Thyssen was not the only German who felt an impulse at this time to protect his wealth against the gathering storm.  My best friend in high school was the granddaughter of German Jewish refugees, and she used to tell me with relish about how her grandparents cannily put their property into the hands of various non-Jewish friends before fleeing Europe and then returned after the war to reel it all back in.  But Thyssen was no sweet old Jewish granny, and his machinations and those of his American friends amounted to treason against both nations.

After the attack on Pearl Harbor in 1941 brought the United States into the war, the close associations of so many of its leading industrialists with German firms began to catch up with them.  For example, it was discovered that Standard Oil had engaged in a cartel with I.G. Farben to produce artificial rubber and gasoline from coal for the Nazis.  They had renewed this agreement even after war broke out in Europe in 1939 and had supplied certain patents to the Germans while keeping them hidden from the U.S. Navy and American industry.

John D. Rockefeller, Jr., the principal owner of Standard Oil, claimed he had no involvement in day-to-day operations, leaving the blame to fall entirely on company chairman William S. Farish.  Farish -- whose daughter was married to Averell Harriman's nephew -- pled "no contest" to charges of criminal conspiracy in March of 1942 and agreed to make the patents available in the US.  However, fresh revelations kept coming out, and Farish was called repeatedly to testify before a Senate committee investigating national defense.  His health broken by the increasingly hostile questioning, he collapsed and died of a heart attack in November 1942.

At the same time, in October of 1942, Prescott Bush was charged with running Nazi front groups, and all shares of the Union Banking Corporation were seized by the U.S. Alien Property Custodian.  The elaborate system of holding companies which Bush and Harriman had created in association with the bank started unraveling as well.  Things were looking very bad for the old gang.

But just then, Allen Dulles worked a miracle.  (to be continued ... some day ... when I figure out how he managed the trick)