OSS intelligence flow chart from declassified files at the National Archives

When the OSS Meant Business for Spies

Last week when Congress awarded its Congressional Gold Medal, its highest honor, to the long-defunct Office of Strategic Services, the citation recounted the agency’s contribution to winning World War II. But the OSS has long contended with a mixed reputation and many critics. After the war ended, the agency’s records remained classified for six decades. Made public only 10 years ago, those more than 35,000 files show how the OSS venture in U.S. spycraft mimicked the private sector, from HR policies to media strategy, and relied on business contacts from Chanel to Time magazine.

Shaken by the Pearl Harbor attack and the intelligence gaps it revealed, FDR created the Office of Strategic Services in June 1942, modeling it on the British example. As America’s first spy agency created outside the military, the OSS started with an unusually broad mandate and its founding director, William “Wild Bill” Donovan, went about recruiting citizens from across the private sector. He tapped an eclectic mix of sources to create a truly international network, and meanwhile within the government sparred for turf with J. Edgar Hoover and the FBI.

Donovan, a decorated infantry veteran of World War I, had become a high-end corporate attorney in Buffalo with wealthy business clients before FDR gave him the OSS mission. For the new agency, Donovan drew on industries as varied as cosmetics, banking, and the media. Donovan even recruited banking magnate Paul Mellon for intelligence work, and his staff enlisted shipping-line staff as ears to gather sensitive, timely information. The agency’s recruiters placed a premium on a candidate’s organizational skills.

As the agency set up shop through the summer and fall of 1942, OSS recruiters rifled their wheeldex files (later called rolodexes) and made lists of businesses with offices in the war’s crucial geographies: the Far East, Europe, the Middle East. Neutral countries were prime for OSS infiltration: where governments dealt with both the Axis and the Allies, agents aimed to understand the trade channels. In some neutral countries like Portugal, Spain and Turkey, standard U.S. government jobs offered poor cover for spywork: Foreign Service employees faced more restrictions in their movements around Madrid or Lisbon than private citizens. Operatives cabled Washington complaining they lacked scope to sniff out black markets. They needed corporate jobs for cover.

Nobody embodied the OSS profile more than H. Gregory Thomas, a youngish cosmetics executive who worked for Chanel in New York before taking a position with its European division in August 1940. Born in Manhattan, educated in Switzerland and holding degrees from Cambridge and the Sorbonne, Thomas was the classic urbane businessman, fluent in several languages and wine connoisseurship. When he joined Chanel in Europe two months after Hitler invaded France, Thomas told the New York Times that his new assignment was studying the industry’s future needs and essential oils shipments from Europe. In reality, he was already a corporate spy, with the task of securing the formula for Chanel №5 and ingredients for making it in the U.S. while the Nazis held France. Thomas traveled undercover, arriving in Paris under the name Don Armando Guevaray Sotto Mayor.

Thomas, with his contacts on both sides of the Atlantic, was a natural to manage the agency’s Spain-Portugal desk.

Commerce statistics got scrutinized through the lens of spycraft. In late 1942 U.S. strategists pored over trade figures from Spain and Portugal, hoping to tip the war’s outcome. With Spain still weakened by civil war, a German occupation was a very real danger. Hitler viewed Portugal as a main source of tungsten (then known as wolfram), a material crucial to Germany’s war industry. The Axis Powers already held North Africa; if Hitler got a foothold in Portugal and Spain, he would not only secure that resource but seal off the Mediterranean to the outside world.

In that shadow background of undeclared war on the Iberian Peninsula, business intelligence was often the greatest prize. Hoover, loath to cede territory to Donovan, went on offense into business data: he showered classified memos on the OSS director with economic minutiae –on everything from Portuguese tinplate (Germany offered to buy Portugal’s entire production) to platinum (informants reported contraband platinum smuggled into Lisbon, allegedly from the United States!) and tungsten exports. Hoover even sent memos about Portuguese imports of Brazilian animal hides.

Beneath his bland features and receding hairline, Donald Downes was a colorful figure in the OSS recruitment operation. A member of Yale’s class of 1930 (a credential helpful for OSS membership), Downes read voraciously and rose quickly to debates of world affairs. After college, he worked as a schoolteacher in New England before applying to the Office of Naval Intelligence. He came across a bestseller titled The Strategy of Terror, which described Hitler’s own spy network throughout the democratic countries. Downes read the book twice, finding that it explained profoundly things he had witnessed on trips to Europe.

With America still leery of joining the war in 1940 (Charles Lindbergh gave dozens of speeches for the America First isolationist movement), Downes applied for a job with British Naval Intelligence. He got a teaching position in Istanbul as cover. At a time when four out of five Americans opposed war with Hitler, Downes was in the minority, helping a British-led spying agency operate on both sides of the Atlantic. For not informing U.S. authorities of his activities for the British when he returned to the United States in 1941, Downes risked being jailed on treason charges.

Then the Pearl Harbor attack changed everything. Suddenly America was with the Allies, and Downes could go legit, bringing his international contacts to the new U.S. spy agency. He quickly moved up in the ranks.

Downes had expansive ideas about how intelligence could shape the war in Europe. Much more than just gathering information for military strategy, he saw the potential for the OSS to help overthrow enemy governments and even neutral regimes. He pressed his colleague Allen Dulles in a classified memo in July 1942: “Why do we not take proper steps to get into the hands of our millions of allies in Europe the materials of destruction? . . . The contacts exist.”

“If we could . . . supply the organizations willing and anxious to set a prairie-fire of resistance in Europe, we could, I feel, get far greater results more quickly than any other way,” he wrote. Downes concluded his argument by recommending the OSS establish a special section that would provide Franco’s opponents with tools for an uprising in Spain, “even possibly with a full-dress revolution.”

One of Downes’ contacts was a Yale friend named Robert Ullman, who worked for the news agency Pathé in Manhattan. An office inside Ullman’s, accessible day or night, suited Downes’ needs perfectly. Like many in Donovan’s fold, Downes guarded against other U.S. agencies’ prying eyes, and the news office offered protection: “It thus provided maximum security against a search by FBI, or worse, some enemy organization.” Downes told his friend, “It’s important secret work for the government, and you mustn’t mention my presence to anyone.”

Besides recruitment, Downes helped the OSS mount a “ships observer” program to monitor ports. Following the lead of British Intelligence, the agency set up listening posts in major harbors, with the aim of infiltrating shipping. Downes explained the process: “The ships of a neutral country are carefully watched and the sailors tailed when they take shore leave. One or two sailors are discovered to have cousins, uncles, or sweethearts in the city.” Once investigators had that information, they probed whether the sailor’s contact was a U.S. friend or enemy. Then they applied blackmail pressure to get the sailor’s help passing messages or reporting suspicious activity.

A typical ship’s crew had mixed loyalties: some sailors had worked for the Spanish Republican side in Spain’s civil war, while others quietly rooted for the opposition in Portugal, where Oliveira Salazar ruled with an iron fist. OSS agents found sailors sympathetic to the Allied cause through exiled political groups, particularly the Basques. After Spain’s civil war, Franco’s Nationalists had executed many Basques. Many who escaped were hungry for revenge. A crew member befriended by an OSS agent “could observe enemy vessels under repairs; content of cargoes and their destination; bomb damage; civilian morale” and maybe, if he could get time alone in the ship’s radio room, he might discover if the captain had betrayed Allied ship locations to the enemy. Ship observers provided proof that Spain was refueling Axis submarines with oil from Allied sources, noted Downes: “oil granted as appeasement to Franco, and under his solemn promise not to allow a drop to fall into enemy hands.”

Robert Ullman showed how an OSS agent’s life in New York could fit inside a publishing career: an apartment on the Upper East Side off East Fiftieth Street (under the auspices of Pathé News); expense receipts for lunches and taxis to Penn Station, train fare to Washington (lower berth), breakfast (fifty cents), hardware (fifteen cents), phone, tips. Memos wrangling with the accountant over unused bus tickets to Connecticut and Long Island. Memos confirming appointments, including a sit-down with the agency’s director, Colonel Donovan, to discuss “the Foreign Nationalities problem.”

At one point the OSS placed an ad in the New York Times for a photo contest, inviting snapshots of military installations in Europe, with the promise of a spread in Life magazine.

Ullman and Downes vetted applicants for spy positions with journalist cover jobs in Lisbon, Madrid, Stockholm, and Dublin. They submitted classified notes of their interviews with candidates, including one from Time magazine. Downes later rated his accomplishments in recruitment even higher than his “counter-espionage snooping,” saying he was much more satisfied with his record hiring “personnel for OSS staff and for overseas missions.”

Downes arranged passage for OSS informants to Europe, sometimes on merchant ships as sailors. Gregory Thomas would authorize $200 to each sailor to reach a specified point where the sailor would jump ship and await instructions. The OSS would pay for their services onward (at a rate comparable to a U.S. Army captain’s salary, Thomas stipulated).

At the same time, Downes helped with OSS snooping within the United States. Independent of the FBI’s surveillance of Italian-, Japanese- and German-born citizens, Downes worked to expose Italian American sympathizers of Mussolini. He used his contacts in Italian enclaves in New England to draw up a list of names and addresses in Springfield, Massachusetts, for people suspected of supporting Mussolini. His list included doctors, fruit vendors, mechanics, a notary public, a watchmaker, and a municipal court interpreter. Other OSS agents reported on Italian communities in other U.S. cities including Baltimore, conducting informal polls of citizens in shops and on the street about their sympathies. At a time when Italian Americans had to register with the government as enemy aliens, these surveys had a thinly-veiled air of intimidation.

Far from the modern image of spies as young loners and martial-arts experts, the profile of a strong OSS job candidate looked more like a mid-level office manager. According to the OSS human resources manual, interviewers assessed applicants with questions like, “Has he a good head for business? How much does he know about the transportation of supplies?” Other criteria included “absence of annoying traits” and ability to tolerate physical danger (“gunfire, bombing”) and discomfort. The OSS wanted a workforce “diversified in respect to age, sex, social status, temperament, major sentiments, and specific skills, but uniform in respect to a high degree of intellectual and emotional flexibility.”

Training for recruits for undercover work typically included an orientation film (directed by John Ford) showing scenarios in which actors demonstrated wrong-headed judgment. In one, a cocky adventurer named Charlie shows overconfidence and carelessness memorizing his cover story. We follow him as he gets a sobering wake-up call on attention to detail. Charlie bides his time establishing his cover as a fisherman in the harbor of Porto. When he gets his chance to make contact with Nazi operatives on the waterfront, Charlie’s sloppiness betrays him and he winds up hiding in the shadows beneath a dock, isolated and scared for his life.

“Undercover: How to Operate Behind Enemy Lines,” an OSS training film

Like Switzerland, Portugal stayed neutral, courted by both sides throughout the war. Germany used a combination of commercial carrots and sticks to woo Portuguese businesses, and it worked. The portion of Portugal’s trade exported to Germany soared from under 2 percent in 1940 to nearly 25 percent in 1942. So information about Portugal’s economy was a focus of OSS intelligence-gathering, background material that could be vital if the Iberian Peninsula became a battleground. Hoover continued to deluge Donovan with notes about Portuguese ship manifests and tungsten exports. And the British Press Office in Lisbon devoted manpower to summarizing German-language press reports about the Portuguese economy and the social volatility caused by market shortages and inequality.

Lisbon was awash with spies. Later-famous snoops such as Ian Fleming, Graham Greene and Kim Philby were busy sleuthing for the British. Greene managed the Portugal desk for MI6, working for Philby. Greene had no grasp of the Portuguese language or people, but he combed index cards for names of Axis spies and sorted out bad records. His main job was to file the intelligence reports from Lisbon, sometimes adding comments like “Poor old 24000, our Man in Lisbon, charging around like a bull in a china shop, opening up vast vistas of the obvious.” His novel Our Man in Havana was based on that experience. Some said that Lisbon resembled the simmering intrigue of Casablanca the film more than the real Casablanca.

In early 1943, an OSS recruiter interviewed another international businessman born overseas. The discussion covered Melchor Marsa’s childhood in Catalonia, his citizenship (finalized in the 1920s, twenty years after his arrival), his employment record, and his views of politics and business. The OSS agent came away impressed by Marsa’s intelligence, “quick responsiveness and an easy manner.” Van Halsey recommended Marsa to his supervisor in a classified memo as a man who “certainly knows his way around in business and political circles in Spain and Portugal.”

Gregory Thomas, the Chanel man, would know how to use him. Marsa would report to MacPherson Gardner, another OSS man in Portugal, who worked as an investment fund manager before the war and whose hobby was photographing European cathedrals.

The practice of recruiting foreign-born Americans for sensitive roles seemed to reflect a 180-degree reversal from the OSS surveys of immigrant communities, but shifting sands were to be expected. As Downes wrote in a memo to Donovan, espionage was a “strange netherworld of refugees, radicals and traitors. There is neither room for gentility nor protocol in this work. Utter ruthlessness can only be fought with utter ruthlessness; honor, honesty, carefulness and sincerity must be left to the fighting forces and the diplomats.”

In mid-1943 the OSS stumbled into a snafu in Spain. Downes recruited Spanish and Portuguese sailors for an undercover operation with the code name Banana. He sent agents by ship to Malaga in June, an advance team for a rebellion against Franco that would restore the Spanish Republic and gain Spanish support for the Allies. Operation Banana’s first wave of insurgents was to be followed by a second wave of agents skilled in communications and guerrilla warfare. The British arranged for a Portuguese trawler to take the insurgents across the strait from Algiers. With the support of exiled Spanish Republican president Juan Negrin, Downes launched a shipment of radio equipment and small arms from Morocco to Malaga. But at the last moment, the British ambassador in Spain got cold feet and refused to risk diplomatic ties with Franco; he pulled back the British-provisioned boat. With the clock ticking, Downes gathered a desperate flotilla of rowboats, rubber rafts, and a fishing vessel and set off from the beach between Algeria and the Spanish Moroccan zone. But it was too little, too late. The advance team had been captured by Franco’s agents, and the insurrectionists were arrested as they landed. Under torture, several named Downes.

Downes moved on to more successful operations in Italy but the Spanish incident caused turmoil in Washington diplomacy. Donovan denied any OSS knowledge of the coup attempt. When pressed with the facts, though, he admitted OSS complicity but spun the story as a rebellion intended to protect Spain against a German attack. Still, the humiliation further pushed Franco closer toward alignment with Hitler.

Eventually complaints about the looseness of OSS operations grew louder. Critics called its collection of amateurs and private citizens “Oh So Social.” Roosevelt ordered a review. Having ignored complaints about the agency’s lack of discipline, he finally had an officer look into the allegations in 1944. The resulting report stated that the OSS had achieved results in espionage and covert operations, but concluded it should be shut down. Ironically, the rationale given for closing it was to prevent “serious harm to citizens, business interests and national interests of the United States….”

Still, Donovan pressed his case, arguing that the agency, in some form, had a role in peacetime. He went to Harry Truman, the new president himself, to offer his ideas. Truman’s people stalled Donovan for weeks. Finally Donovan pushed through to meet the new president on May 14, 1945. In his no-nonsense style, Truman congratulated Donovan on his wartime contributions but said “the OSS belongs to a nation at war.” Truman expressed his view that international spying was “un-American.” When Donovan pressed his folder containing his ideas for post-war intelligence into Truman’s hands, the President took one look, thanked Donovan for his service, and tore the envelope in half. He then handed the two halves back to Donovan.

Donovan’s statue now stands in the Virginia headquarters of his agency’s successor, the Central Intelligence Agency. His staff went their separate ways. Gregory Thomas returned to Chanel, establishing the Fragrance Foundation in June 1949. The late Aline Romanones, born Marie Aline Griffith, started with the agency as a cipher clerk, encoding messages in the Madrid office. After hours, her social life brought her to parties with Spanish aristocracy, and she continued as an undercover agent before marrying into that aristocracy. “My work was uncovering pro-Nazis within the Spanish aristocratic social world,” she wrote in an email last year. Her exploits and post-war lifestyle stoked an enduring image of mystery and glamor, and a New Yorker item by Jennifer Egan in June 2017, “The Countess’s Private Secretary.”

Gardner MacPherson, the former investment banker, made the transition to the CIA, serving in Paris and Washington before retiring in 1968. He retired quietly to Castine, Maine.

OSS memorial in the CIA headquarters, with statue of “Wild Bill” Donovan

Donald Downes was unbowed. “Very often in history,” he wrote, “the fate of nations has depended on the success of a small anonymous group, who have taken their lives in their hands to carry out an espionage mission to save their homes or to serve an ideal.” After the war Downes went into a real publishing career, authoring a memoir about his spy exploits titled The Scarlet Thread, as well as paperback novels and screenplays. He’s credited as the scriptwriter for two Hollywood films, Orders to Kill and The Pigeon That Took Rome, with Charlton Heston. Downes died in Los Angeles at 79.

The OSS had other Hollywood connections, and its alumni spun its wartime record as a stunning success in the entertainment industry, with books and a 1946 Alan Ladd film, O.S.S. Written and produced by Richard Maibaum, a former captain in the Signal Corps, the film lionized a young operative played by Ladd. (After OSS training, Ladd’s character gets sent to France to blow up a train tunnel and becomes entangled in an affair with another agent played by Geraldine Fitzgerald.) Maibaum went on to create Hollywood’s ultimate socialite spy, James Bond, with writing credits on a dozen films in the franchise, from Dr. No to License to Kill.

David A. Taylor is the author of Cork Wars, about immigrants, industrial espionage and three families caught up in World War II. The book comes out in November 2018 from Johns Hopkins University Press. See more of his work in Smithsonian and follow him on Twitter: @dataylor1.

Author & filmmaker on history, culture, food & travel. https://linktr.ee/dataylor1 Blog: https://davidataylor.org/blog/

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