[Spooks] Before the CIA, There Was the Pond

[Al Fansome]

July 29, 2010

AP IMPACT: Before the CIA, There Was the Pond
	By THE ASSOCIATED PRESS

Filed at 10:39 a.m. ET		

NEW YORK (AP) -- It was a night in early November during the infancy of 
the Cold War when the anti-communist dissidents were hustled through a 
garden and across a gully to a vehicle on a dark, deserted road in 
Budapest. They hid in four large crates for their perilous journey.		

Four roadblocks stood between them and freedom.		

What Zoltan Pfeiffer, a top political figure opposed to Soviet 
occupation, his wife and 5-year-old daughter did not know as they were 
whisked out of Hungary in 1947 was that their driver, James McCargar, 
was a covert agent for one of America's most secretive espionage 
agencies, known simply as the Pond.		

Created during World War II as a purely U.S. operation free of the 
perceived taint of European allies, the Pond existed for 13 years and 
was shrouded in secrecy for more than 50 years. It used sources that 
ranged from Nazi officials to Stalinists and, at one point, a French 
serial killer.		

It operated under the cover of multinational corporations, including 
American Express, Chase National Bank and Philips, the Dutch-based 
electronic giant. One of its top agents was a female American 
journalist.		

Now the world can finally get a deeper look at the long-hidden roots of 
American espionage as tens of thousands of once-secret documents found 
in locked safes and filing cabinets in a barn near Culpeper, Va., in 
2001 have finally become public after a long security review by the Central Intelligence Agency.		

The papers, which the Pond's leader tried to keep secret long after the organization was dissolved, were placed in the National Archives
 in College Park, Md., in 2008 but only opened to the public in April. 
Those records plus documents obtained by The Associated Press in the 
past two years from the FBI, CIA and other agencies under the Freedom of
 Information Act portray a sophisticated organization obsessed with 
secrecy that operated a network of 40 chief agents and more than 600 
sources in 32 countries. The AP has also interviewed former officials, 
family members, historians and archivists.		

The Pond, designed to be relatively small and operate out of the 
limelight, appeared to score some definite successes, but rivals 
questioned its sources and ultimately, it became discredited because its
 pugnacious leader was too cozy with Sen. Joseph McCarthy and other 
radical anti-communists.		

The documents also highlight issues still relevant today: the rivalry 
among U.S. intelligence agencies that have grown to number 16, the 
government's questionable use of off-the-books operations with budgets 
hidden from congressional oversight, and the reliance on contractors to 
undertake sensitive national security work.		

Created by U.S. military intelligence as a counterweight to the Office 
of Strategic Services, the forerunner of the CIA, it functioned as a 
semiautonomous agency for the State Department after World War II and 
ended its days as a contractor for the CIA with links to J. Edgar Hoover's FBI.		

The organization counted among its exploits an attempt to negotiate the surrender of Germany with Hermann Goering, one of Adolf Hitler's
 top military leaders, more than six months before the war ended; an 
effort to enlist mobster Charles ''Lucky'' Luciano in a plot to 
assassinate Italian dictator Benito Mussolini;
 identifying the location of the German heavy water plants doing atomic 
research in Norway; and providing advance information on Russia's first 
atomic bomb explosion.		

There were other tangible successes, such as planting a high-level mole 
in the Soviet secret police and, in a major operation code-named 
''Empire State,'' the Pond paid a group of dissidents behind the Iron 
Curtain with CIA funds to obtain cryptographic systems to break coded 
messages from Moscow.		

But it was Pfeiffer's successful escape that was among the most 
high-profile operations, garnering headlines, although the Pond's role 
was kept secret for years.		

McCargar, a State Department official who secretly was the Pond's agent 
in Budapest, had been ordered to find a way to get Pfeiffer and his 
family out of the country. The Hungarian was the leader of a small but 
increasingly popular anti-communist party that had made gains in August 
elections, and he had begun to get death threats.		

McCargar coordinated the escape with the help of fellow State Department
 employee Edmund Price, also identified in the papers as working for the
 Pond. But it was McCargar, armed with a pistol, who drove them from 
Budapest, past four road blocks. At one, a Russian guard asked to see 
what was in the four crates. McCargar bribed him with cigarettes.		

They arrived in Vienna, a hotbed of international intrigue, where the 
U.S. shared control with their allies, the French and the British, as 
well as the Soviets. Against this politically fraught backdrop, Pfeiffer
 and his family were taken to an airfield and spirited away to Frankfurt
 and on to New York. They arrived in the U.S. on Nov. 12 as heroes of 
the anti-communist opposition.		

One of the escapees, Pfeiffer's daughter, Madeline, told the AP she 
remembered sitting between her mother's legs in one crate and that she 
was given sleeping pills to keep her quiet.		

''It is strange to realize that I have lived though this, and that my 
parents lived through this,'' said Madeline Pfeiffer, 67, now living in 
San Francisco. On the 50th anniversary of their flight from Hungary, she
 said she sent McCargar a bottle of cognac -- what he and her parents 
drank after escaping. Two other dissidents were taken out with them.		

The head of the Pond was Col. John V. Grombach, a radio producer, 
businessman and ex-Olympic boxer who kept a small black poodle under his
 desk. He attended West Point, but didn't graduate with his class because he had too many demerits, according to a U.S. Army
 document. His nickname was ''Frenchy,'' because his father was a 
Frenchman, who worked in the French Consulate in New Orleans.		

The War Department had tapped Grombach to create the secret intelligence
 branch in 1942 as a foundation for a permanent spy service. Grombach 
said the main objectives were security and secrecy, unlike the OSS, 
which he said had been infiltrated by allies and subversives. It was 
first known as the Special Service Branch, then as the Special Service 
Section and finally as the Coverage and Indoctrination Branch.		

To the few even aware of its existence, the intelligence network was 
known by its arcane name, the Pond. Its leaders referred to the G-2 
military intelligence agency as the ''Lake,'' the CIA, which was formed 
later, was the ''Bay,'' and the State Department was the ''Zoo.'' 
Grombach's organization engaged in cryptography, political espionage and
 covert operations. It had clandestine officers in Budapest, London, 
Lisbon, Madrid, Stockholm, Bombay, Istanbul and elsewhere.		

Grombach directed his far-flung operations from an office at the 
Steinway Hall building in New York, where he worked under the cover of a
 public relations consultant for Philips. His combative character had 
earned him a reputation as an opportunist who would ''cut the throat of 
anyone standing in his way,'' according to a document in his Army intelligence dossier.		

In defining the Pond's role, Grombach maintained that the covert network
 sought indirect intelligence from people holding regular jobs in both 
hostile countries and allied nations -- not unlike the Russian spies 
uncovered in June in the U.S. while living in suburbia and working at 
newspapers or universities.		

The Pond, he wrote in a declassified document put in the National 
Archives, had a mission ''to collect important secret intelligence via 
many international companies, societies, religious organizations and 
business and professional men who were willing to cooperate with the 
U.S. but who would not work with the OSS because it was necessarily 
integrated with British and French Intelligence and infiltrated by 
Communists and Russians.''		

On April 15, 1953, Grombach wrote that the idea behind his network was 
to use ''observers'' who would build long-term relationships and produce
 far more valuable information than spies who bought secrets. 
''Information was to be rarely, if ever, bought, and there were to be no
 paid professional operators; as it later turned out some of the 
personnel not only paid their own expenses but actually advanced money 
for the organization's purposes.''		

The CIA, for its part, didn't think much of the Pond. It concluded that 
the organization was uncooperative, especially since the outfit refused 
to divulge its sources, complicating efforts to evaluate their reports. 
In an August 1952 letter giving notice that the CIA intended to 
terminate the contract, agency chief Gen. Walter Bedell Smith wrote that
 ''our analysis of the reports provided by this organization has 
convinced us that its unevaluated product is not worth the cost.'' It 
took until 1955 to completely unwind the relationship.		

Mark Stout, a former intelligence officer and historian for the 
International Spy Museum in Washington, analyzed the newly released 
papers and said it isn't clear how important the Pond was to U.S. 
intelligence-gathering as a whole. ''But they were making some real 
contributions,'' he said.		

Matthew Aid, an intelligence historian and author of ''The Secret Sentry: The Untold History of the National Security Agency''
 who has reviewed some of the collection, said there was no evidence the
 Pond's reports made their way to decision-makers. ''I'm still not 
convinced that Grombach's organization was a worthwhile endeavor in 
World War II and even less so when it went off the books,'' he said.		

What it may have lacked in quality and influence, however, the Pond certainly made up with chutzpah.		

One of the outfit's most unusual informers was a French serial killer named Marcel Petiot, Grombach wrote in a 1980 book.		

The Secret Intelligence Branch, as he referred to the Pond, began 
receiving reports from Petiot during the war. He was a physician in 
Paris who regularly treated refugees, businessmen and Gestapo agents, 
but he also had a predilection for killing mostly wealthy Jews and 
burning their bodies in a basement furnace in his soundproofed house. He
 was convicted of 26 murders and guillotined in 1946.		

Nevertheless, Grombach considered him a valuable informer because of his contacts.		

One cable discovered among the newly released papers appears to confirm 
the Pond was tracking Petiot's whereabouts. In the undated memo, the 
writer says Petiot was drawn by a Gestapo agent ''into a trap to be 
arrested by the Germans.'' Petiot was briefly arrested in 1943 by the 
Gestapo.		

Such sources were often feeding their reports to top operatives -- often
 businessmen or members of opposition groups. But there were also 
journalists in the spy ring.		

Ruth Fischer, code-named ''Alice Miller,'' was considered a key Pond 
agent for eight years, working under her cover as a correspondent, 
including for the North American Newspaper Alliance. She had been a 
leader of Germany's prewar Communist Party and was valuable to the Pond 
in the early years of the Cold War, pooling intelligence from 
Stalinists, Marxists and socialists in Europe, Africa and China, 
according to the newly released documents.		

But it was the help from businesses in wartime that was essential to penetrating Axis territories.		

The Philips companies, including their U.S. division, gave the Pond 
money, contacts, radio technology and supported Grombach's business 
cover in New York. Philips spokesman Arent Jan Hesselink said the 
company had business contacts with Grombach between 1937 and 1970. He 
added that they could not ''rule out that there was contact between 
Philips and Grombach with the intention of furthering central U.S. 
intelligence during the war.''		

The Pond laid the groundwork and devised a detailed postwar plan to 
integrate its activities into the U.S. Rubber Co.'s business operations 
in 93 countries. It is unknown if the plan was ever carried out. The 
Pond also worked with the American Express Co., Remington Rand, Inc. and
 Chase National Bank, according to documents at the National Archives.		

American Express spokeswoman Caitlin Lowie said a search of company 
archives revealed no evidence of a relationship with Grombach's 
organization. Representatives of the other companies or their successors
 did not respond to requests for comment.		

The Pond directed its resources for domestic political ends, as well.		

In the 1950s, Grombach began furnishing names to McCarthy on supposed 
security risks in the U.S. intelligence community. By then, the Pond was
 a CIA contractor, existing as a quasi-private company, and the agency's
 leadership was enraged by Grombach's actions. It wasn't long before the
 Pond's contract was terminated and the organization largely ceased to 
exist.		

The CIA withheld thousands of pages from the National Archives 
collection of Grombach papers, including eight rolls of documents on 
microfilm; the National Security Agency kept back devices used to send 
coded messages. The CIA also declined a Freedom of Information Act 
request by the AP detailing its relationship to the Pond, which the AP 
has appealed.		

Grombach wrote to the Hoover Institution Archives at Stanford University,
 dated June 10, 1977, indicating most of his classified papers would go 
to the American Security Council Foundation, an anti-communist group 
that works on national security policy. Grombach died in 1982.		

Henry A. Fischer, the council's executive director, said safes at the 
683-acre Longea Estate -- site of the council's former Freedom Studies 
Center -- were mistakenly removed by contractors hired to transfer the 
contents of its Boston, Va., library. He said he had been told by staff 
of the error when FBI agents were called to examine them. ''I have no 
idea what they were going to do with them.''		

FBI historian John Fox said only one safe was removed from the property 
by the contractors and drilled open, its contents turned over to the 
CIA, which informed the bureau about the discovery in December 2001. Fox
 said the FBI recovered four other safes from the council and took them 
to Quantico to be opened. After an investigation, Fox said the remaining
 documents were transferred to the CIA.		

----		

Associated Press writer Toby Sterling in Amsterdam contributed to this report.		

----		

Online:		

National Archives Research Catalog: http://www.archives.gov/research/arc/		

CIA ''Pond'' article: http://bit.ly/cx5VIX		

John Grombach obit, see p. 132: http://bit.ly/cOnWW5		
 		 	   		  
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