THE GREAT NAZI COUNTERFEIT PLOT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP58-00453R000200130002-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: November 17, 2016
• Document Release Date: August 10, 2000
• Sequence Number: 2
• Content Type: MAGAZINE

The Great Nazi Counterfeit Plot
By Major George J. McNally, USA With Frederic Sondern, Jr.
PEW DAYS after the surren-
I_ der of Adolf Hitler's armies,
an excited U. S. Counter-
Intelligence officer in Austria called
.my office at SHAEF headquarters in
Frankfurt. A German captain, he re-
ported, had turned in a truck loaded
with millions of dollars' worth of
British bank notes. Huge amounts
of currency, he added, were floating
Gcoaca McNar.i.v, before joining the Army
in 1942, had been an agent of the U. S. Secret
Service, specializing in tracking down counter-
feiters. In 1945 the Army picked bins to protect
our troops in Europe from the counterfeiting
of currency which always thrives during mili-
tary invasions and occupations.
IReur.Rlc SONniRN, JR., a Reader's Digest
Roving Editor, has written many of the out-
standing stories to come out of Central Europe.
fantastic llitruraler- scheme to corrupt
ii itain's economy daring the late war
around in the Eons River; house-
holders and Allied troops were busy
fishing it out.
Startled and puzzled, I rushed to
the place where the German cap-
tain and his truck had been taken.
There, in 23 stout boxes about the
size of coffins, were bundles and
bundles of Bank of England notes.
A quick tally of the hoard -- aided
by neatly written manifests tacked
inside the cover of each case -
showed that it totaled no less than
21 million pounds sterling!
It was impossible for me to deter-
mine, even under a powerful magni-
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pp Qerastih t rniis action. T-1"e gave no camp at Ebensee, 40 miles away,
more details, and the British press just a few days before the German
was discouraged from inquiring surrender. We got to Ebensee fast.
further. But every one of our counterfeiters
The facts were that in three years was gone. The commandant there,
the Nazis had printed incalculable knowing that American troops were
numbers of false English notes which already in the area, had pretended
were wrecking fortunes, snarling to accept the order to gas all 140
banks and industries, and costing the men, but had taken no action. When
British Treasury millions of pounds. the camp was liberated, the counter-
With this much background in- fetters had simply walked out, each
formation, we began a search for the in his own direction.
men and machinery behind the huge Fortunately, the camp records
counterfeiting operation. had been kept with typical German
Finding the machinery was, by precision, even through the last mad
chance, not difficult. The German days of the Reich. The names and
captain who had surrendered the birthplaces of this strange band
boxes of bank notes told us he had were listed. Now began a search
received them from an SS officer which lasted for months, and took
whose truck had broken down near us to the four corners of the former
the village of Redl Zipf. Ile had Nazi empire.
been instructed to dump them in a One by one we rounded up more
nearby lake. That was all the cap- than 40 of the most important of
taro knew. We went to Redl Zipf -- the counterfeiters. Little by little,
and discovered one of the under- we checked and pieced together
ground networks of storage corri- their sometimes almost incredible
dors and workshops that honey- testimony. And then we hit the
combed the Alpine redoubt where jackpot. From various of our wit-
the Nazis had intended to make nesses, we learned that a Czech
their last stand. There, in Gallery named Oskar Skala - a political
i6 - a 200-foot-long tunnel stretch- prisoner of the Nazis - had been
ing off a big shaft bored into the chief bookkeeper of the operation.
side of a mountain -- we found We found him, with the help of the
bank-note presses and other ma- Czechoslovakian police, peacefully
chinery. But no plates, no paper, no selling beer in a little town near
records. "Now all we have to do, Pilsen. Skala was more than co-
old boy," said Reeves, "is to find operative. A methodical man, he
the chaps who ran this place." had kept in a tiny notebook a day-
Inquiries in Redl Zipf revealed by-day description of the work of
that all the men who had worked the forgers. The final pieces of the
in the subterranean factory had fantastic story of Operation Bern-
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"government and the banks with the
serious problem of separating the
good from the bad without causing
an economic upset. Fortunately, by
the time enough notes were availa-
ble, the Luftwaffe had been driven
from the air over Britain and the
project was dropped.
One of the outstanding victims of
Kruger's Grade One money was the
now-famous "Cicero" -- the Alba-
nian professional spy, Eliaza Bazna,
who was valet to the British Ambas-
sador in Ankara during the war, and
who became, he thought, the high-
est-paid spy in history when he
received #300,000 from German
Intelligence for secrets he filched
from the Ambassador's safe. An-
other, more typical, victim was a
Swiss businessman who accepted in
perfectly good faith British pounds
worth a quarter of a million dollars
from an irreproachable Turkish
bank. The pounds were accepted in
turn by a Swiss bank, eventually
worked their way through several
other neutral countries to Bank of
England headquarters in Thread-
needle Street. There Major Kruger's
product was finally detected by an
alert teller. In some cases, however,
Sachsenhausen Grade One notes
actually went from Germany into
a neutral country, from there into
England, back into another neutral
country, and finally to Germany
once more - without detection at
any point along the way.
Even as Operation Bernhard
flourished, however, Major Kruger
was worried. His.plant was produc-
COUNTERFEIT PLO 7' 29
ing 400,000 notes a month and the
total stipulated by Himmler would
soon be reached. Whereupon the
Major conspired with his foremen to
slow down the presses and to con-
demn large quantities of first-class
notes as faulty. "If we don't slow
down," he said to his bookkeeper
and principal lieutenant one day,
"I will be sent to the front to fight
and you will all be shot. That would
be a great pity." It was fortunate
for the Bank of England that he felt
that way. Several hundred thousand
Grade One notes which might have
been circulated were secretly packed
away in big wooden boxes at Krii-
ger's orders.
To keep Operation Bernhard
working at full capacity, Kriiger
embarked on another project which
had been on his list for some time -
the counterfeiting of American dol-
lars. But they found it a tougher
job. The paper used in U. S. cur-
rency has never been successfully
imitated, and the best paper mills in
Germany, after exhaustive research,
could turn out only a crude facsim-
ile. Moreover, even the most skilled
of Kruger's men found they could
not produce the highly complicated
engraved plates and colored inks
which were needed.
Somewhere in Germany or in one
of the occupied countries, Kruger
reasoned, there must be at least one
professional counterfeiter with ex-
perience in American notes who
could break this impasse. The Ges-
tapo and Himmler's other secret
services began a search. In a German
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"prisoners of Operation Bernhard
stoked a big incinerator with records
and inferior counterfeits. A squad
sank the printing plates deep in
Lake Toplitz. But, at the last, these
men could not bring themselves to
destroy the finest of the fake notes,
the hoard that Kruger had set aside
to avoid the appearance of overpro-
duction. As one of the counterfeiters
told us later, "they were so beauti-
ful." Coffin-sized boxes of them were
loaded on trucks whose drivers were
ordered to bury them in suitable
places in the neighborhood from
which they could be recovered at
some future time.
One of the truckloads was that
'which was turned in to us by the
German captain. Some simply dis-
appeared. Others were dumped into
the Enns River by frightened SS
men who only wanted to get into
civilian clothes and be on their way.
In the turbulent Alpine stream,
swelled by spring freshets, these
boxes of Grade One notes were
broken open by the rocks - and
people from roundabout delightedly
began fishing.
Our investigation at an end, we
made a tally of Operation Bern-
hard's total production. It was star-
tling. According to Oskar Skala's
notebook and the corroborating evi-
dence of other Kruger workers, the
Major's plant turned out almost
nine million Bank of England notes
with a face value of approximately
140 million pounds sterling - then
the equivalent of $564,000,0001 Six
million dollars' worth went to Tur-
key and the Near East; $12,000,000
worth were distributed by 6-F-4 in
France and the Low Countries;
$30,000,000 worth paid German bills
in Spain, Portugal, Switzerland and
the Scandinavian countries. Another
$250,000,000 worth escaped burning
at Redl Zipf and was either fished
out of the Enns River by Austrians,
Russians, Americans and British, or
cached by SS men for future use.
For a long while Kruger master-
pieces which had been salvaged
from a watery grave and not sur-
rendered kept turning up at British
race tracks, in European black mar-
kets, even in New York foreign-
exchange houses. That is why the
Bank of England had to do what it
did. With the Bank of England's
prestige once again secure, the story
of Operation Bernhard can be told
with safety.
New five-pound notes - with a
fine metallic thread drawn through
them by a secret process, and as
counterfeit-proof as any money can
be-have replaced the old cur-
rency. By a heroic effort the Bank
of England rescued Britain's credit
and staved ofa desperate attempt to
sabotage Allied economy.
But for the British, and for our-
selves, Operation Bernhard was a
near thing. And it could happen
again.
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 MAMA AND GRANDM M
R Approved Fotr eh200(~e0~8a25hec1A -RPPv g53R0002001she002-8 painte it
Seventeen, he
smiled and said, "She's helping me. guessed. Had she painted more?
We're friends." Oh, many more, but she had given
I sat on the little wooden stool them all away. People seemed to like
my father had made for me when them. But she wouldn't hear of try-
I was a child. I felt more alone than ing it again. She was too old.
I had ever felt in my life. If any- That's how Mama and Grandma
thing was to be done to help my Moses got acquainted. On an im-
mother I knew that I had to do it. pulse I wrote to Grandma Moses,
And I knew that I couldn't. all about my father, and about my
I wished that I could pretend I mother, and about my mother feel-
was still a child, sitting on the stool ing that she was too old to paint.
watching my father carve some- In just the time it takes for letters
thing beautiful for me. I wished to travel by air mail from Georgia
that there might still be, close by, to upstate New York and back, my
some power greater than I on which mother was reading the answer. She
I might call for help. wanted to know who this woman
"Please, God," I said, "send me was, and how she happened to kno\%
an idea, and whatever it may be I about her and to write her a letter.
will accept it and do my best to And then she smiled at some of the
carry it out." things Grandma Moses said about
I waited for a long time. I suppose age and art and putting up straw-
1 didn't really believe there would berry preserves and painting, and
be an answer, and was a little ashamed how the last two were much the
of myself and of my prayer. I shooed same. And that she had never ceased
the cow away and closed the win- to marvel at being paid for doing
dow. As I fumbled my way to the something which was such fun to
door, I stubbed my toe on a board do. About being too old to paint,
that protruded from the stacks of she said, why, heavenly day! She
wood against the wall. It was a square didn't even begin until she was 77.
of about three feet, an inch thick, My mother thought it was won-
with tapered edges. I lifted it free, derful for Grandma Moses to be a
and saw that it was a painting, oil on world-famous artist after having got
wood, which my mother had done started so late in life. But she repri-
when she was a girl. I recognized mandcd me gently for having both-
the scene: a brook, a meadow, a ered the dear old soul and asked me
house and trees where I had played to put the letter away in some
in my childhood. And then I re- "good, safe place." Then she leaned
membered my prayer. back in her chair and shut her eyes.
The first sparkle came back to As I looked down at her face, so
my mother's eyes when she saw tired and sad, so withdrawn from
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Ing glass, whether the notes were tured by highly skilled craftsmen r
genuine or not. I called my British and distributed by a remarkably
colleagues in Frankfurt, and shortly well-organized gang.
afterward had a telephone call direct Then a German spy was arrested
from the Bank of England. When I in Edinburgh. He had been flown by
described the find, there was a long- seaplane to the Scottish coast and
drawn gasp at the other end of the had come ashore in a rubber boat.
wire. Soon a representative of the The suitcase he carried was stuffed
Bank arrived from London - a tall, with bank notes - the finest fake
angular and reserved gentleman money the Bank of England had
named Reeves. ever seen.
We took Reeves to the heavily The Bank now realized that it
guarded room where the treasure was up against the German Govern-
was deposited, and he began going ment itself, and that the very credit
from box to box, riffling the notes of Britain might well be at stake.
`through his fingers. Finally he For decades banks all over the world
stopped and stared silently into had been using Bank of England
space. Then for several seconds he notes almost like gold; frightened
cursed, slowly and methodically in a Europeans and Asiatics had hoarded
cultured English voice, but with them against bad days. Now hun-
vehemence. dreds of thousands of pounds of fake
"Sorry," he said at last. "But the . British money were circulating out-
people who made this stuff have cost side of Britain. If doubt were cast
us so much." on the integrity of these notes in
From that moment Reeves, three neutral and Allied countries, par-
detectives from Scotland Yard and ticularly in the middle of a war, the
I collaborated in piecing together result might prove extremely dan-
the fantastic story of Operation gerous not only to Britain but to the
Bernhard, the biggest hoax that Allied cause. Eventually, the Bank
one government had ever perpetra- had to bow to the inevitable.
ted on another. The whole financial world was
First, I was told that during 1943 jolted when the Bank announced
an alarming number of counterfeit that it was withdrawing from cir-
English bank notes had been finding culation all its bank notes of all
their way to London from Zurich, denominations and would exchange
Lisbon, Stockholm and other neu- them for five-pound notes of a new
tral centers. They had begun to design. After a certain date all old
come in batches of #ioo,ooo or notes would cease to be legal tender.
more, and the quality of the fakes To a confused Parliament, Brit-
had been improving steadily. Soon ain's Chancellor of the Exchequer
it was clear to the Bank's experts explained guardedl that wide-
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Early in the war SS Fi hrer Hein- ing plants was set up. Plates were
rich Himmler had created in his engraved with meticulous care. A
innermost headquarters Office 6-F-4, German press manufacturer inter-
an organization whose aim was to rupted war production to supply the
corrupt Great Britain's economy by necessary precision machinery. A
counterfeiting her bank notes on a famous paper concern, after many
large scale. The project really hit its trials, succeeded in reproducing the
stride when Major Bernhard Kriiger fine, light Bank of England paper
came in as executive director in 19.12. with its elaborate watermarks.
Kriiger was a young, resourceful Office 6-F-4 sent experimental
Nazi who saw in the problems which batches of the Bernhard product to
were delaying 6-F-4 a fascinating Gestapo representatives in German
challenge. One of the difficulties had embassies and consulates in Turkey,
been the recruiting of the highly Spain, Switzerland and Sweden with
skilled, specialized personnel needed instructions to try them on the local
for a big counterfeiting plant; the banks. Most of the notes were ac-
experts at the Reichsbank and the cepted without question. Himmler
Reich Printing Office - most of was jubilant.
them strait-laced old Prussian civil Now, as the notes came off the
servants - rebelled at the idea of presses, they were meticulously in-
actually printing another nation's spected and graded. Grade One, the
money, even in wartime. Kruger best, were distributed by 6-F-4 for
had a solution: A number of Ger- purchases in neutral countries and
many's outstanding printing tech- as operation money for the more ini-
nicians were in concentration camps portant of I-Iimnmler's spies and sabo-
because of their racial origin; such tours abroad. Grade Two notes,
men could be put to work - - and at which had slight imperfections but
the same time be kept quiet. were still excellent fakes, were dis-
Bernhard Kriiger rounded up tributed to Gestapo units in occupied
these technicians, promised them countries to buy information and
pfefcrential treatment for the rest subsidize collaborationists. who liked
of their lives, and had them trans- to have Bank of England notes on
ported to the Sachsenhausen con- tap in case anything went wrong.
centration camp at Oranienburg Grade Three notes, still an ex-
near Berlin. There, in an isolated trernely'deceptive forgery, were ac
compound known as Block t9, sur- cumulated and stored for an espe-
rounded by charged barbed-wire cially fantastic project of Himmler's:
fences and picked guards from ' the` they were to be dumped on the
notorious Deathshead Brigade sworn British Isles from planes! Himmler's
to absolute secrecy, Operation Bern- hope was that people all over the
hard got clown to business. island would pick. them up and try
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prison they found Solly Smolianoff, Gallery i6 behind Redl Zipf. By:_
a gypsy by birth and a first-class that time American troops were al-
counterfei.ter. Solly had never been ready closing in on the redoubt.
to the United States, but he spe- Solly Smolianoff was never to use
cialized in producing "American" the plates he had so lovingly fabri-
notes of such outstanding quality cated.
that they had more than once conic Late one day Major Kruger --in
to the attention of the U. S. Secret a fast Alfa Romeo convertible and
Service. He had been jailed by sev- accompanied by a striking blonde ---
eral European countries for making roared into the concentration camp
them, at the mouth of the Redl Zipf cave.
Solly found Block 19 paradise, Hurriedly he gave orders from
"Imagine," lie said to his colleagues, Himmler himself: Every trace of
"a counterfeiting plant gu(irded by Operation Bernhard was to be ob-
the police!" literated. All records were to be
By the end of 1944 Sully was destroyed, fake currency and un-
ready with a $5oo and a $ino bill printed bank-note paper burned,
that experts at the Reich Printing plates and dies sunk in the deepest
Office and 6-F-4 found eminently part of nearby Lake Toplitz. All 140
satisfactory. Operation Bernhard members of Operation Bernhard were
tooled up for production of these to be taken to the Ebensee concen
notes. tration camp and killed.
But now the. tide of war was turn- The Major, composed and polite
in:; against the Reich. Berlin was as always, apologized for not being
being bombed more heavily every able to supervise the details himself.
day, and Sachsenhausen was within He had, lie said, urgent business
the target area. Himmler wanted to elsewhere. The Alfa Romeo wzis
shut down Operation Bernhard, but loaded with genuine Bank of En
Kruger persuaded his chief to let land and Swiss notes - acquired, we
him move the plant and men to one subsequently learned from his sub.
of the new underground factories in ordinates, through black-market op-
the redoubt area of the Austrian orations in occupied capitals; its
Alps. The Major argued that in glove compartment was filled with
case of a collapse Office 6-F-4 could excellently forged passports. The
be extremely useful to good Nazis car streaked away in the direction of
by providing foreign money and ex- Switzerland. Master Counterfeiter
pertly forged credentials of every Kruger has never been heard of
kind. since, despite the concentrated ef-
The transfer from Saclisenhausen forts of half a dozen police forces
took several months. It was April to find him.
1945 before Operation Benih:crd For three days after the Major
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Where do ideas that are wonder a get er, -new it wou
Mama and
Grandma Moses
Condensed from
Lifetime Living
Frances Davenport
W [IIEN my father died, three
Y Y years ago, I had the flu and
was unable to make the cross-con-
tinent trip to my home in north
Georgia. Several weeks later, when
I did get there, I found my mother
sitting in Dad's old chair by the
window, her hands folded, and a
look on her face which said clearly,
"I'm going to die." Remembering
how happy their life had been to-
to change her mind.
How small she was! I had never
known how pitiful and forlorn a
human being could look huddled in
a leather chair so many sizes too big.
I knelt beside her and held her
hands. "Don't cry, darling," she
said. "Everything's all right." Then
she quickly retreated to that faraway
place where she was already begin-
ning to feel more at home. I felt that
if I left her she would get so far
away I never would be able to bring
her back.
Nothing that had ever happened
to her before had seemed to touch
her youth and vibrant love of life.
Energy had flowed from her fingers.
And maybe, I thought, it all sprang
from the same source, and now
that the source was gone maybe
nothing could be done about it.
I couldn't stand it. I went for a
walk in her rose garden, which had
always been so dear to her heart,
and I saw weeds growing where they
had never dared to grow.
I went to the carpenter shop back
of the hedge, where my father used
to work. Everything was neat and
clean, just as he'd left it; his tools
were carefully put away; the pieces
of wood were arranged in even
stacks along the wall. I opened the
Dutch door which looked out onto
a neighbor's pasture, as he used to
do. And the neighbor's cow poked
her head in and looked at me mourn-
fully. I remembered asking Dad once
how he could stand a cow watching
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