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SECR OFORN//X1
Moving Up to the Big Leagues
The Founding of the Office of Special
Operations (U)
Michael Warner and Kevin C Ruffner
At the end of World War II, the Truman administration dismantled the wartime Office of Strategic
Services (OSS), giving most of OSS to the War Depattment for "salvage and liquidation." The
foreign intelligence and counterintelligence capabilities of OSS went to the War Department as
the "Strategic Services Unit" (SSU). This new organization, however, waited in a state of
bureaucratic limbo for several months while the administration decided how to revamp the
nation's intelligence establishment. In early 1946, a rough consensus emerged: the Stations,
personnel and assets preserved in SSU would go to the newly created Central Intelligence Group
(CIG) to form the nucleus of a permanent foreign intelligence capability. (UPFOU0)
That consensus left much unsaid. How was this transfer to be accomplished in a secure and
efficient manner? Who would actually make the jump from SSU to CIG? Indeed, how would CIG
structure its foreign intelligence arm, and how would it operate overseas? Perhaps the primary
question was this: How long would it take before America had a peacetime human intelligence
capability comparable to that of its Allies and adversaries? (U//FOU0)
These questions had to be solved in haste by a small group of decisionmakers and managers who
were compelled to act with little guidance, limited consultation, and sketchy precedents for
reference. The ways in which they addressed the various dilemmas would hold lasting significance
for the subsequent development of the clandestine services of the CIA. By the beginning of the
Korean conflict in June 1950, CIA's Office of Special Operations (OSO) had taken enormous
strides, establishing not only Stations and procedures but also an operational strategy as well.
OSO had not, however, had much success against the Soviet target. The ways in which the
Agency dealt with this paradox would hold great significance for the development of CIA during
and after the war in Korea. (U//FOU0)
From War to Cold War
The SSU bridged the past and the future in the months after VJ Day. When OSS was disbanded on
1 October 1945, its overseas Stations and personnel were transferred overnight to the War
Department. Brig. Gen. John Magruder, Director of SSU, sent the Assistant Secretary of War an
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inventory of SSU's resources shortly afterward. SSU had major missions in London, Paris, Rome,
Vienna, Cairo, Chungking, Calcutta, New Delhi, and Rangoon, as well as smaller posts, liaison
details, and research teams scattered across Germany, the Low Countries, the Balkans, China,
India, and Indochina. In all, more than 5,000 employees of SSU were working abroad, virtually all
under various forms of military cover.1
Nothing changed immediately for men like Allen Dulles in Berlin, James Angleton in Rome, and
Winston Scott in London. SSU officers in the American occupation zone in Germany, for
example, continued to monitor local political activities, especially those of the Communist Party.
Members of SSU's counterespionage branch (X-2) gathered evidence for war crimes trials of Nazi
officials, searched for suspected members of Nazi underground movements, and helped recover
gold and art looted by the Germans throughout Europe. (S)
The targets of SSU shifted gradually away from wartime concerns to potential threats to American
security. This reorientation was directed from Washington but implemented in response to the
orders of local military and intelligence officials. Following a November 1945 conference in
Wiesbaden to discuss future SSU projects in Germany, for instance, X-2 officers were directed to
3
abandon German intelligence organizations and the chimerical Nazi underground.- SSU began to
collect on all foreign intelligence services. "It was, therefore, decided," Capt. Eric Timm reported
from Munich, that SSU in Germany:
would serve the future CIA [the projected, but not yet formed CIA] best by limiting its
primary targets to the gathering of information on personnel, activities, and
objectives of all intelligence services. This will enable a CIA to have at its disposal
central records of a worldwide nature concerning the various groups which come
within this purview.4(UNFOU0)
After a few months, it became clear that the main intelligence service of concern was that of the
Soviet Union. By March 1946, Sgt. Boleslav A. Holtsman, the lone SSU/X-2 representative in
Munich, finally learned that "our objective is the SIS" [Soviet intelligence services] and that "the
GIS [German intelligence services] was liquidated and is to cease to figure in our consideration."5
(S)
SSU's personnel situation was changing at the same time as its targets shifted. Many SSU officers
and enlisted personnel returned to the United States alongside the millions of soldiers and sailors
who were homeward bound for demobilization. Indeed, most of SSU's employees had left
government service by I March 1946, when SSU's roster stood at 1,734 (with roughly 400
overseas in 24 Stations).-6 Such rapid demobilization brought SSU into line with its personnel
targets, but General Magruder still wondered if the best people had been retained in the right jobs.
"We are like an old man: the fat isn't in the right place to be handsome," he told his staff meeting
in January 1946.2 (UHFOU0)
Formulating a Strategy
In the spring of 1946, the US intelligence establishment, such as it was, had to confront two
issues. First was how to organize and staff the clandestine office in such a way that enhanced the
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security of operations and personnel which retained strong associations with the defunct but now
widely publicized OSS. Second was to how gather intelligence on Stalin's Soviet Union, a
growing threat to the United States. The organization that would have to confront these two
dilemmas was the newly formed CIG and its chief, the first Director of Central Intelligence (DCI),
RADM Sidney W. Souers. (U//FOU0)
Souers had a crowded agenda when he became DCI in January 1946, but one of his first tasks was
to decide what to do with the Strategic Services Unit. General Magruder had recommended that
the tiny CIG adopt certain components of SSU while the War Department liquidated the rest!
Souers's overseers in the National Intelligence Authority soon appointed a panel to evaluate SSU
and the feasibility of Magruder's idea. A six-man team, headed by Brig. Gen. Louis J. Fortier, met
with SSU's leadership in early 1946, and their discussions were recorded in what appears to be an
edited but contemporaneous transcript.2 Anxious for the survival of their outfit and the future of
American intelligence--as well as for their own careers--General Magruder and his lieutenants
answered the Fortier team's questions with patience and candor. The result was a remarkably frank
assessment of progress to date and a revealing glimpse of plans for the future. (C)
General Magruder prefaced the discussions with an explanation of how SSU had salvaged the
pieces of OSS in an ongoing agency. "Always in the back of our thinking," he admitted, "was the
idea that a central agency would emerge." In demobilizing OSS's administrative functions, for
instance, "we thought in terms of maintaining experienced specialized service, personnel, and
administrative units that would serve in the future not only for clandestine activities but for any
other activities that a central agency might require." 12 (S)
After Magruder's introduction, the chiefs of SSU's espionage and counterintelligence branches
briefed the Fortier team on their activities. They had to provide plenty of context to help the
Board's members to understand these arcane professions, which America (that is, OSS) had
learned in World War II only with prolonged British tutelage and plenty of trial and error. One
committee member, for example, asked the chief of Secret Intelligence (SI), Whitney Shepardson,
how SSU would go about the posting of an American spy in a faraway place like Bulgaria.
Shepardson explained how, and used this opening to mention that the capability to collect
clandestine intelligence from human sources was a fragile asset that had to be husbanded for truly
national purposes:
I think one of the things we have had to learn is how misleading the idea of
"coverage" is. At first you think it desirable to cover a lot of areas with a lot of
people. But with experience you come to ask what interest of the United States is at
stake in Bulgaria, and [t] hen you ask what part of it can best be served by secret
intelligence. We believe here that this job deals primarily with the security of the
United States, and, therefore, that we are concerned with the intentions and
capabilities of the powers who alone or in combination might influence the basic
interests of the United States by bringing us into a war situation.
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Later in the discussion, the Board returned to SSU's cover problems from the wartime OSS. "I
wonder," mused one board member, "if there is a lesson to be learned concerning the security of
the man or concerning improvements in cover or operation." Shepardson had an answer ready.
"There are lessons to be learned all right, but not from the experience of those wholesale wartime
groups who were doing a mass production business." He had in mind the operations of the
brilliant OSS Station chief in Switzerland, Allen Dulles, who had three dozen officers working for
him in various nominal Embassy jobs. "I don't believe," said Shepardson, "that 50 percent of these
people were able to keep their identity and work from the knowledge of German agents in
Switzerland." "And probably none were kept from the knowledge of the Swiss police, who were
in many cases of vital help to our personnel and operations," General Magruder interjected.11 (5)
Two weeks later, the Fortier Board concluded its fact-finding meetings with a session on SSU
operations in Europe and East Asia. briefed on Europe, (b)(3)
and his remarks once again alerted the Board to the extent to which SSU's links to the former OSS
had compromised its operations.
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"The liquidation o (b)(3)
the Mission to France," for example, presented various "headaches which inevitably hang over
from an organization which at one time included over 1,200 people and extensive supply dumps."
One of the toughest problems was that of SSU officers with French wives who now did not want
to return to the States; "Usually they are the people we are trying to weed out," Gilpatric noted.il
(S)
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(b)
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The National Intelligence Authority soon authorized CIG and SSU to arrange something like what
Fortier and Magruder had envisioned. The process worked its way to a conclusion over the course
of the next year. In July 1946, CIG created a new entity called the Office of Special Operations.
Headed by Assistant Director for Special Operations (ADSO) Col. Donald H. Galloway, OSO was
intended to become the new clandestine foreign intelligence service.12 Key personnel in SSU
were given joint appointments in OSO, allowing them to do their jobs for both organizations
simultaneously. OSO "interviewed" all SSU employees and listed the desirable candidates for
CIG; the rest were released by SSU. On 20 October 1946, OSO effectively "rehired" all the
remaining personnel of SSU. Six months later OSO took over SSU's remaining headquarters
personnel in Washington and sorted the overseas field stations into geographic teams for
administrative purposes.11 The German Mission, for example, fell under the Central European
branch of OSO, known as Foreign Branch M.12 (S)
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Foreign Liaison Dilemmas
OSO's efforts to establish a clandestine service on a secure and professional basis also had to
confront the various problems with liaison relationships. The old OSS in wartime had learned that
certain activities (particularly in counterintelligence work) depend on close and confidential
dealings with foreign services. Such contacts continued after the Axis surrender. In January 1946,
for instance, General Magruder noted that SSU had ties with 10 foreign intelligence services (all
wartime Allies) and "certain relations" with the services of four additional countries that had
stayed neutral during the war.19- The difficulty for OSO would be that of maintaining profitable
liaison links while severing or altering--in as secure a manner as possible--those relationships that
were not productive enough to conserve. (S)
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OSO stuck to its principles for liaison contacts even in the face of temptations to compromise
them. The Office's leadership confronted this dilemma even when they examined their most stable
and mutually beneficial intelligence alliance: that with Britain's Secret Intelligence Service (SIS,
sometimes called MI-6). The end of the war had prompted simultaneous re-evaluations of the
relationship on both sides of the Atlantic. London wanted no competition from SSU or any
American service in the far-flung lands of the Empire; British authorities, for instance, politely
dissolved Southeast Asia Command and evicted SSU's Detachment 404 and other military cover
outfits from India and Singapore. In other areas, however, British liaison contacts seemed almost
too ingratiating. Senior SSU officials in the summer of 1946 fended off what must have
seemed--to a young intelligence agency--tempting British proposals for joint operations and
operational commands. Col. William W Quinn, who had became the Director of SSU after
General Magruder's retirement, subsequently hinted why when he complained that SIS seemed to
want something that was:
Typical of the "liaison" type of penetration wherein the preponderance of coverage
being in favor of the US the British desire to tap same as their greatest source. (This
liaison technique is not followed in areas where the British have preponderance of
coverage and need no help from anyone.)
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As a result of these efforts, the new OSO started life with a handpicked staff and fewer potentially
compromising links to OSS and foreign liaison services. Indeed, the dissolution of SSU and the
creation of OSO went so well that the new clandestine service, at least in Washington, began life
with few links to the past and to other US Government agencies�including other offices in CIG
(and later CIA). Colonel Galloway in August 1946, for instance, ordered OSO officers "to confine
their contacts and visits to other offices of CIG to the minimum necessary to transact official
business." n Outside observers--who of course could not see the new OSO--were left wondering
why the United States was dismantling entire foreign intelligence organizations that had served
with distinction in World War II. A New York Times story in May 1947, for instance, quoted
anonymous sources complaining that the National Intelligence Authority had "compelled the War
Department to liquidate its worldwide secret intelligence network" [SSU] as well as the FBI's
Latin American intelligence operations. "Security restrictions," the article noted, "made it
impossible to obtain an appraisal of the quality of the replacements and the efficiency of the new
system."L (U//FOU0)
Under Foreign Eyes
The shifting status of SSU and its components, combined with the wholesale demobilization of
American overseas military units and facilities, greatly complicated clandestine operations in this
period. Money was not really a problem; both SSU and OSO soon had enough to pay their bills.
The main difficulty was providing overseas cover for intelligence personnel. From the outset,
SSU's leaders envisioned a worldwide intelligence service, with Stations in every important
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region. The new service would need to post hundreds of officers abroad, and it needed to provide
plausible cover for every one of them.a/
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From Theory to Practice
With an organization established and cover arranged, the OSO crafted a strategy to guide its
activities. Over the course of 1946, the leadership of SSU and CIG pondered what sort of
intelligence service the new office should become. Their conclusions--which they had previewed
for the Fortier survey team that February--were ready to be presented to the Station and mission
chiefs as a coherent whole in early 1947. That January, DCI Vandenberg and OSO's top leaders
journeyed to CIG's German Mission headquarters in Heidelberg to explain the plans to the
assembled European Station chiefs. (5)
(S)
set the context for the Heidelberg conference (b)(3)
discussions with a lecture explaining the detailed new operational guidance. He He suggested that
OSO needed to set aside the habits ingrained in wartime and apply new doctrines for peacetime
intelligence collection. The duty of OSO was to serve policymakers in Washington by establishing
"permanent control[led] sources of information of top quality in those fields which OSO is
informed are essential to the security of the United States Government." OSO Stations had to
abandon their current commitments to provide "tactical" intelligence to the occupation forces and
the local legations, and instead concentrate on priorities set in Washington.il- Assets should be
"controlled" by professional, US intelligence officers (and not run anonymously by middlemen
who sold the information gathered by their agents, real or fake, to the highest bidder). The quality
of reporting, not its quantity, was the new emphasis; Penrose dramatized this point by calling for a
50-percent cut in the volume of reports. Operational direction would be centralized in
Headquarters, which would vet all recruitments and review all proposals. (S)
A few weeks later, corded his feelings about the Heidelberg conference and its
implications for OSO:
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Without question, we are preparing to enter the big leagues in the intelligence
business. For a considerable period of time during the war, the American service was
recognized as being a necessarily weak but growing concern. By now we should have
at least reached the period of adolescence, and we must make vigorous efforts to
achieve maturity in the shortest possible time. Such maturity can be attained only
through the establishment and long-continued maintenance offirm policies of
operation, changes in which will be made only in response to changing conditions
and not because of a rapid turnover of personnel. Professionalism in the American
intelligence service is a sine qua non if we are to be accepted on anything
approaching an equal basis by other professional services with longer histories.-43
(S)
Testing the New Order in the Field
Theory collided with practice as OSO assumed control of SSU's field operations and initiated its
own activities. OSO's leaders had two major tasks: to build, as fast as possible, a worldwide
clandestine service and to create from scratch a capability to collect intelligence on the Soviet
Union. The difficulties involved in doing both missions simultaneously forced Galloway, Quinn,
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Helms, and Rositzke, and their colleagues to accept a series of compromises as they
pondered the constitutive decisions that would shape the new office. The ramifications of the
Heidelberg conference and earlier decisions on cover and targets would soon appear in places as
distant as
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Conclusion
OSO's creation and early course embodied the consensus among America's handful of intelligence
professionals that clandestine operations constitute a national, strategic asset that should be
managed from Washington. The fragility of human source intelligence--its rarity and potentially
great value--suggested to the cadre of experienced intelligence leaders that espionage should be
tightly controlled and used only for the most important tasks. These officers sought to cut it away
from potentially compromising liaison contacts and potentially distracting tasking from local
American commanders and diplomats. (C)
The high goals of this strategy were perhaps too ambitious for the limited resources available to
CIG and the early CIA.
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In the "hard targets," however, the Office accomplished little. Given the simultaneous
lack of high-grade signals intelligence on the Soviet Union and China, American policymakers at
the beginning of the Cold War had little knowledge of the intentions and capabilities of their main
adversaries. (S)
Considering that the United States developed the modem discipline of foreign intelligence only
after Pearl Harbor, it is truly impressive that CIA had a professional, worldwide clandestine
service operating at all by 1950. OSO had started with a clean slate, carefully maintaining security
and planning rational collection priorities and strategies in 1946-47. When the Korean conflict
began in June 1950, OSO was by no means the equal of the Soviet foreign intelligence
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apparatus--or perhaps even the British--but it was "competitive," and improving steadily.
The
formation of the Office of Policy Coordination (OPC) in 1948 to conduct covert action--followed
by the vast expansion of OPC and OSO activities after 1950--further muddied the waters. The
compromises made in OSO's early years would influence CIA's clandestine capabilities for
decades to come. (C)
Notes
John Magruder, Director, Strategic Services Unit, to John J. McCloy, Assistant Secretary of
War, "Strategic Services Unit as of 1 October 1945," 9 October 1945, reprinted in Department of
State, Foreign Relations of the United States, 1945-1950, Emergence of the Ingelligence
Establishment (Washington, DC: Government Printing Office, 1995), pp. 237-242. (Hereafter
cited as FRUS).
LI) Secretariat, SSU, "The Office of Strategic Services on VE Day-VJ Day," 11 March 1946,
Director of Central Intelligence Records, Job 80R01731R, Box 36, CIA Archives and Records
Center (hereafter known as CIA ARC) (S).
1-11 As early as 27 September 1945, OSS field stations received the following directive: "The
conversion of this agency from a wartime to a peacetime basis brings with it a shift in emphasis in
counter-espionage targets. No longer are the German and Japanese Intelligence Services the focal
point of our attention. Instead, all foreign intelligence services, and personnel connected thereto,
now become the legitimate object of observation and study for this Branch " JJ1 to All Field
Stations, 27 September 1945, X010-927
14-11st Lt. Sidney H. Lenington, Deputy Chief, SSU/X-2, Germany to SAINT, Washington,
"Semi-Monthly Reports," 12 December 1945, LMX-005-1130, enclosing Timm to Commanding
Officer, SSU/X-2 Germany, "Semi-Monthly Operations Report SCI Munich," 15 November 1945,
LMX-005-1130, in WASH-REG-INT-163, Record Group 226, Records of the Office of Strategic
Services, Entry 108A, Box 275, (no folder listed), National Archives and Records Administration
(NARA).
151 SAINT, AMZON to SAINT, Washington, "Review of Activity Since 10 December 1945 to 10
September 1946," 17 September 1946, enclosing AB-43, Munich to AB-51, AMZON, "Review of
Activity Since 10 December 1945 to 10 Sentember 1946" 10 September 1946, L-010-910
CIG, "Report of Survey of Strategic Services Unit under CIG Directive No. 1" [the Fortier
Report], 14 March 1946, reprinted in FRUS, p. 259 (U). The number of stations is adduced from
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the fact that X-2 had 24 missions at that time, and that SSU had 23 stations in May 1946;
"Office of Special Operations: Origins and Establishment,
1941-1947," April 1973, an unpublished, draft manuscript prepared for the Clandestine Services
Historical Program and filed in CIA History Staff as CSHP-2.229, pp. 125, 160. (S)
al The SSU staff meeting minutes for 24 January 1946 are cited in CSHP-2.229, p. 49. (S)
1?-) S. Leroy Irwin, Interim Activities Director, War Department, to John J. McCloy, Assistant
Secretary of War, "Tentative Plan for Disposition of Strategic Services Unit," 28 January 1946,
reprinted in FRUS, p. 250 (U); see also CSHP-2.229, pp. 80, 111. (S)
�President Truman's advisers were the Secretaries of State, War, and Navy, plus his personal
representative, Adm. William Leahy of the Joint Chiefs of Staff; they met together as the National
Intelligence Authority and commissioned the Fortier Board in "CIG Directive number 1" of 19
February 1946. That directive and the Board's 14 March 1946 report are reprinted in FRUS, pp.
255-271 (U). The transcript of the Board's sessions is Strategic Services Unit, "Factfinding
Board--Minutes of Meetings," February-March 1946
&MI "Factfinding Board--Minutes of meetings," minutes of 20 February 1946 morning session, p.
2.(S)
(11)
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Ibid., pp. 15-16(5)
(13) SSU, "Factfinding Board--Minutes of Meetings," minutes of 6 March 1946 session, p. 11
(Secret).
&41 Ibid., p. 12.(S)
Oil Ibid., p.2. (S)
Ibid., p.6. (S)
111) The title "Assistant Director" is equivalent to the modem CIA position of "Deputy Director,"
denoting a rank subordinate only to the Director of Central Intelligence and the Deputy Director of
Central Intelligence. The second-in-command at OSO held the title "Deputy Assistant Director for
Special Operations," or DADSO. (U)
OSO hired all of SSU's remaining field personnel but onlyJpersons in SSU
headquarters. Various administrative offices of CIG acquired an additional SSU personnel in
Washington. SSU ceased to exist as an active intelligence organization on 11 April 1947.
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CSHP-2.229, p. 206. (S)
0-21 Washington 1147 to AMZON Vienna, Bern, 17 June 1946
gui
John Magruder to S. Leroy Irwin, Interim Activities Director, War Department, "Assets of
SSU for Peace-time Intelligence Procurement," 15 January 1946, in Michael Warner, ed., The CIA
Under Harry Truman (Washington, DC: Center for the Study of Intelligence, 1994), p. 23.
Magruder listed the 10 services as "the British, French, Belgian, Czech, Danish, Dutch,
Norwegian, Polish, Siamese, and Indo-Chinese"; the four neutrals were the services of the Swiss,
the Swedes, the Spanish, and the Turks. (U)
(21'
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g_Q Galloway's order--CIG Administration Order No. 8, 5 August 1946, is quoted in CSHP-2.229,
pp. 244, 261. (S)
Anthony Leviero, "Army's World Intelligence Ring Reported Halted by New Agency," The
New York Times, 21 May 1947, t 1. (U)
Q41 SSU planning documents from the fall of 1945 specifically discuss a worldwide intelligence
mission; see CSHP-2.229, p. 56 (Secret). See also the "Fortier Report" of March 1946, re(b)(1 )d
in FRUS, p. 267 (Unclassified). (S) (b)(3)
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a2.1
(30'
(31)
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(32
(33)
(34)
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(35
(36
(37
213,
9-1 Ibid., p.311. (S)
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The new guidance was codified in General Operational Instruction no. 1, approved by
Galloway three weeks earlier. See ibid., p. 307. (S)
(41'
M, 3 February 1947
here was echoing the March 1946 statement by the Fortier Report that CIG needed "a plan which
will permit the special development of purely clandestine intelligence operations...leaving more
overt United States Government intelligence collection activities to other agencies prepared and
authorized to act in the field with a minimum of embarrassment to the United States." Central
Intelligence Group, "Report of Survey of Strategic Services Unit Under CIG Directive No. 1" [the
Fortier Report], 14 March 1946, reprinted in FRUS, p. 266. (S)
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to Richard M. Helms, Chief, Foreign Branch
CSHP-2.229, pp. 297-299. (S)
(43
to Colonel Galloway, "Report on European Trip," 22 February 1947,
(44'
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Michael Warner and Kevin C. Ruffner serve on the CIA History Staff
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