Grombach and the Pond

Some Unknown History of the United States: The FDR years 1933 to Apr. 1945, 2nd edition. By Richard L . McManus (Published 2019)

THE POND

Richard L. McManus

In the spring of 1942, Brigadier General Hayes Kroner, the head of the Intelligence Branch, G2, Department of War selected Army Captain John V. Grombach to head a new foreign intelligence organization in addition to the Office of Strategic Services. Major General George V. Strong agreed to this new foreign intelligence group known by the name the “POND”. It functioned as a semi-autonomous contractor for the State Department after World War Two and ended its days as a contractor for the CIA with links to J. Edgar Hoover's FBI.

Captain Grombach had spent five years as an assistant provost marshal and assistant G2 and left the Army in 1928. In 1941, he got back into the Army, working in Army, G2 staff.  He also worked at the Coordinator of Information (COI) in early 1942. On June 13, 1942, Roosevelt split the functions and created two new agencies: the Office of Strategic Services (OSS), and the Office of War Information. That latter worked to worked to promote patriotism, warn about foreign spies and recruiting women into war work.  Those who supported POND would not work with the OSS because it was necessarily integrated with British and French Intelligence.

The POND's day-to-day connection with the State Department was through its Division of Foreign Activity Correlation, which, during the war, fell under the authority of Assistant Secretary Adolf Berle, the department's intelligence coordinator. The Army never told the Navy about the POND.  Only those who had a need to know in the War Department, State, the President's office, knew that the POND intelligence outfit existed.

On February, 13, 1942, Adolf Berle received information from the FBI that a British Security Coordination (BSC), MI-6 officer Dennis Paine, had been investigating him in order to get dirt on him. Paine was expelled from the United States.

Berle reported to Sumner Welles on March 31,1941: the head of the British Security Coordination, William S. Stephenson is nominally, in charge of providing protection for British ships, supplies etc. But in fact a full size secret police and intelligence service is rapidly evolving. BSC had officers in Boston, New York City, Philadelphia, Baltimore, Charleston, New Orleans, Houston, San Francisco, Portland and probably Seattle.

Berle said, “We know that to the existing offices there are now reporting a very considerable number of regularly employed secret agents and a much larger number of informers, etc. we likewise know that the information is by no means limited to the work of safeguarding ships and munitions, but enters into the whole field of political, financial, industrial, and probably military intelligence... I have reason to believe that a good many things being done are probably in violation to our espionage acts." 

Berle warned Welles that "should anything go wrong at any time, the State Department would be called upon to explain why it permitted violation of American laws and was compliant about an obvious breach of diplomatic obligation... Were this to occur and a Senate investigation should follow, we should be on very dubious ground if we have not taken appropriate steps." However, Roosevelt refused to close BSC down.

Berle had already warned Cordell Hull, the Secretary of State that "British intelligence has been very active in making things appear dangerous in South America. We have to be a little on our guard against false scares."

Grombach became a businessman who specialized in selling political and economic intelligence derived in large part from old boy networks of former German SS officers, former Hungarian Axis spies, and members of the National Alliance of Russian Solidarists (a group of young Russian far-right anti communist, to the State Department, the CIA, and corporate customers in the United States and Western Europe.

After the war Grombach would establish the Universal Service Corporation in New York, but it is not clear if the POND's wartime offices there were under commercial or official cover. Grombach's espionage network operated through, and was partially financed by, the N. V. Philips corporation of the Netherlands and its American affiliate, Philips North America. 

Grombach worked under the cover as a public relations consultant for Philips.This was the same major electronics manufacturer that had provided a channel for his clandestine wartime operations. The Pond also worked with the American Express Co., Remington Rand, Inc. and Chase National Bank, according to documents at the National Archives. It had clandestine officers in Budapest, London, Lisbon, Madrid, Stockholm, Bombay, Istanbul and elsewhere.

The POND reached an agreement with the State Department which allowed foreign service officers to serve as case officers. These foreign service officers had their own sources of funds and did not have to tell the chief of mission what they were doing, although some did. They had remarkably little training and a great deal of independence.

During the late 1940s one of Grombach's contract agents was SS General Karl Wolff, a major war criminal who had gone into the arms trade in Europe after the war.  A second primary component of Grombach's private intelligence apparatus was a large group of Hungarian anti-communists. Grombach worked simultaneously under contract to the Department of State and the CIA.

According to former CIA Inspector General Lyman Kirkpatrick, ex-military intelligence man working in POND succeeded in creating "one of the most unusual organizations in the history of the federal government. It was developed completely outside of the normal governmental structure, [but it] used all of the normal cover and communications facilities normally operated by intelligence organizations, and yet never was under any control from Washington." By the early 1950s the US government was bankrolling Grombach's underground activities at more than $1million annually (about $9 million in 2015 dollars).

The POND produced some reports pertaining to domestic security. Mickey Ladd, the chief of the FBI's Domestic Intelligence Division, was an ally of Grombach. POND was involved in an attempt to negotiate the surrender of Germany with Hermann Goering, more than six months before the war ended. 

 

It was also involved in an effort to enlist mobster Charles “Lucky” Luciano in a plot to assassinate Italian dictator Benito Mussolini. Pond conducted an operation to identify the location of the German heavy water plants doing atomic research in Norway; and an operation that provided 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.

A POND source, Marcel Petiot, a Parisian doctor, learned from a Polish patient that the Soviet NKVD had massacred 18,000 Polish officers in the Katyn Forest. Petiot also reportedly identified a number of Nazi spies who had been sent to the US, and this aided the FBI to arrest and to turn some of them (make double agents out of them). According to Grombach, in May 1942, Petiot reported that the Germans were producing missiles at Peenemunde; the information, he asserted, allowed other POND assets to photograph the site from Norwegian fishing boats.

In the summer of 1946, foreign service officer, James McCargar who was stationed in Budapest, Hungary inherited a network of POND’s Hungarian contract agents. Hungary was a major target of POND operations both during and after the war. During the war the POND had a network of sources in the Hungarian government and Hungarian army intelligence providing information from places such as Berlin, Warsaw, and Budapest, including order of battle information provided by Hungarian military attachés and Hungarian observers with the Wehrmacht (the German Army). The Hungarian reporting flowed through Lisbon, a key hub of POND activity.  They were even able to provide transcripts of Hungarian cabinet meetings.

In 1947, James McCargar exfiltrated Hungarian anti-communist party's political leaders out to Western Europe. When the communists finally consolidated their power later that year, McCargar, working with a Central Intelligence Group officer posted in Vienna, exfiltrated 75 Hungarians.

McCargar with the help of fellow State Department employee Edmund Price, was ordered to get Zoltan Pfeiffer and his family out of the country. Zoltan Pfeiffer was the Hungarian leader of a small but increasingly popular anti-communist party that had made gains in August 1947 elections, and he had begun to get death threats. The family drove to Vienna and from there they were taken to an airfield and spirited away to Frankfurt and arrived in New York on November 12, 1947.

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.

In September 1951, the POND started a collection effort in Uruguay and Argentina centered on a "tested reliable European diplomat" with extensive intelligence experience.

Ruth Fischer, code-named Alice Miller, was considered a key Pond agent for eight years, working under her cover as a correspondent. 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 Stalinist, Marxists and socialists in Europe, Africa and China. 

In 1945 Grombach began to work an operation codenamed, Project 1641, a study of communist subversion in the US government. He wrote reports that included names of numerous alleged communists to the FBI, and they investigated these people. Grombach passed to the House Committee on Military Affairs the names of fifteen War Department, G2 officers whom he suspected of disloyalty. The committee talked with Grombach and investigated his allegations. In March 1946, the committee made public Grombach's charges. Grombach had developed connections to US Senator Joseph McCarthy’s right-hand man, Roy Cohn and with columnist George Sokolsky, a confidant of McCarthy.  Cohn was the chief counsel to the Government Committee on Operations of the Senate. McCarthy was trying to discredit Robert Stevens, the Secretary of the Army.

During the McCarthy-CIA fight, Dulles organized a group to keep tabs on McCarthy's activities and to feed US Senator McCarthy disinformation. James Angleton described his concerns about Grombach to James McCargar who ran the POND Hungarian operation in Budapest.

Angleton arranged to provide McCargar with false information, supposedly acquired in France, which would appear derogatory to CIA. Angleton hoped Grombach would pass the materials to McCarthy, who then would use them. They could then be discredited, embarrassing the senator and hopefully throwing him off the CIA. McCargar's mission was successful. 

A Select Senate Committee recommended that McCarthy be censured on two of the 46 counts for contempt of the Subcommittee on Rules and Administration and for his abuse of Major General Ralph W. Zwicker in 1954. MG Zwicker  had refused to answer some of Senator McCarthy's questions. Thereupon McCarthy retorted that Zwicker's intelligence was that of a "five-year-old child," and that he was "not fit to wear that uniform."  Army Secretary Stevens ordered Zwicker not to return to testify at the McCarthy's hearing.  

MG Zwicker was a distinguished officer and highly-decorated battlefield hero of World War Two, and McCarthy’s abuse provoked anger from many quarters, including the Army and President Eisenhower, who shortly thereafter initiated the Army–McCarthy hearings that led to McCarthy's downfall and censure. McCarthy had also charged three members of the Select Committee with “deliberate deception and fraud “... that the special Senate session ... was a “lynch party,” and had characterized the committee "as the “unwitting handmaiden, involuntary agent and attorneys in fact of the Communist Party”…  On December 2, 1954, the Senate voted to condemn McCarthy on both counts by a vote of 67 to 22.

On August 15, 1954 the CIA Inspector General Lyman Kirkpatrick decided to have it out with Colonel John Grombach. He confronted him about the contacts with McCarthy. And on January 1, 1955 all POND operations came to an end after thirteen years of operations, except two operations that were briefly continued by the CIA. 

*** 

 http://www.nbcnews.com/id/38470605/ns/us_news-security/t/cia-there-was-pond/

(Blowback; Christopher Simpson; Collier [Macmillan] {SC}

Another author who has written about Grombach is Glen Yeadon, with research from John Hawkins, in the book called The Nazi Hydra in America: Wall Street and the Rise of the Fourth Reich. Excerpt:

John Grombach headed another Nazi infested organization with close ties to this group. Grombach a former G2 officer recruited former Nazi SS officers, Hungarian Axis Quislings, and Russian nationalists. His network of former Nazis produced intelligence offerings for the State Department, the CIA and corporations. Grombach’s operation originally began as a G2 operation to rival the CIA but soon evolved beyond that. Although much of Grombach’s funding did come from the United States government, he received a large amount of funding from N. V. Philips Gloeilampenfabrieken corporation of the Netherlands and its American affiliate, Philips North America. One of Grombach’s prized assets was Karl Wolff, a major war criminal.

Grombach had visions of grandeur with his eye on holding the position of Director of the CIA. High on his list of political targets were those that implemented President Truman’s containment policy. Grombach viewed people such as George Kennan and Charles Bohlen as too soft on communism. He found ready allies in McCarthy and Jenner. By the 1950s, Grombach and his network of Nazis specialized in gathering dirt. He would then leak the smears to his political allies. The chief beneficiary being Joe McCarthy.

 *****

The Pond spent most of its existence not as a government agency, but as a private sector organization, operating within real companies with names such as the Universal Service Corporation, a company mentioned in a book written in 1936 by Arthur L. Bell, who ran a "cult" called Mankind United. Mankind United was a classic Ponzi money-raising scheme operating primarily in California. IRS sued for tax evasion, and Bell filed a lawsuit to remove liens filed against him in 1940. According to UPI in a December 1940 story:

Bell contended that "Mankind United" was not a personal moneymaking scheme but a non-profit organization composed of many men working under the same philosophy of life and business, but Henry Wallace, former deputy collector of internal revenue and the first witness, estimated Bell's income at $200,000 a year for five years.

He said he followed Bell around the San Francisco area to various "Mankind United" meetings and that he had seen as much as $4,000 collected at a single meeting. The money went into various bank accounts maintained by Bell under aliases and one of the accounts received $55,000 within three months, Wallace said.

Convicted of sedition in 1944, Bell went to jail while his followers in 1948 organized Christ's Church of the Golden Rule, with headquarters at the 3,100-acre Palomarin ranch on Bolinas Bay in California. 

The government claimed it owed $95,000 in back taxes for 1956, about $1,800 for 1957 and about $2,000 for 1958. Mankind United  had raised $4,000,000, at least $3,000,000 of which was used to purchase real estate, including the Continental Building on 4th and Spring Street in Los Angeles--which claimed to be tax-exempt. By 1961 Christ's Church had stacked up some $98,800 in back taxes allegedly owed, plus a $4,750 penalty, on profits from business operations of businesses like the Petaluma Laundry: 

At the age of 18, the young John (or Jean) Grombach--born in 1901, son of the French consul in New Orleans--became an American citizen and went to West Point. Leaving the Army, in which he was in G2 intelligence, in 1928, he joined the New York National Guard. A year later he went to work for a subsidiary of CBS and Paramount Publix. In April 1928 the Charleston Gazette wrote of the various movie-making companies:

The biggest war in motion picture history is on, and movie theatre-goers everywhere are affected. "Independent" movie exhibitors, led by the Theatre Owners' Chamber of Commerce, are taking the initiative in the hostilities, seeking to overthrow what they openly term monopolistic combines of production and distribution of photoplays.

Producers control directly more than 2,000 of the 17,000 motion picture theatres in the United States. These are, for the most part, the key theatres, the largest theatres in the most important cities and towns. In addition, through booking arrangements, financial affiliations, partial stock ownership and managerial "understandings," they virtually control thousands of other theatres.

The principal producers—Paramount, Metro-Goldwyn-Mayer, United Artists, Fox, Universal—are in the theatre business. First National Pictures was organized originally by a group of theatre owners. So that "independents" are compelled to deal "with interests that are their competitors in theatre operation buisness, and to take what they can get. Naturally, producers are inclined to favor the theatres they own themselves....

Paramount, through its theatre department, known as Publix, owns 370 theatres; Universal is estimated to have 300: Loew, 150, and Pathe-deMille-FBO-Keith, about 600. The Keith-Albee vaudeville interests, controlling Pathe-DeMille, recently took over operation of FBO (Film. Booking Offices) with such financial giants as the Radio Corporation of America, Westinghouse Electric and General Electric interested financially. The DuPonts also have been putting some of their surplus funds into the film companies.

What can the "Independents" do against the powerful line-up? Well, they can close their theatres, greatly reducing the revenue of the producers, and probably bankrupting themselves. Or they can promote legislation for their relief. (This they are trying to do.) Or they can, by subtle means, enlist public sympathy in their behalf. Or they can produce their own films. This last seems to be the obvious remedy, but it is the most difficult one.

One step taken by "Independents" which may affect the whole situation to their advantage, is the organization of a co-operative group of independent exhibitors with a centralized purchasing power. At present this movement is confined to greater New York. Aaron Sapiro, the California co-operative marketing expert, has been called in to direct the organization work.

A hope of the independents is that foreign restrictions on releases of American film will cut into the revenue of the big producers to such an extent that they will be forced to rely upon the independents to a greater extent for the margin between loss and profit.

Outstanding figures in the battle are Adolph Zukor, president of Paramount; William Fox, Nicholas Schenck, successor of the late Marcus Loew as head of the Loew-Metro-Goldwyn, and brother of the head of United Artists; Carl Laemmle, president of Universal, who could, if he would, tell the independents something about licking the giant, for he had to battle it himself.

The year 1928 was the year of talkies in the picture business. Donald Crafton in his book The Talkies: American Cinema's Transition to Sound, 1926-1931 refers to the period as "merger mania," and the "tentacular structure" of the studio system.

***

For the first six months of 1942, Grombach was on part-time loan to the Coordinator of Information.

Brig. Gen. Hayes Kroner, the head of the War Department's Military Intelligence Service, was given "official approval and direction," almost certainly by his immediate superior, Gen. George Strong, to establish a secret intelligence organization. By October the OSS had a new lease on life and was around for the long haul. That month, Kroner's guidance was expanded: he was now to establish "a perpetual, a far-seeing, a far-distant, continuing secret intelligence service."

In other words, Kroner was to establish a long-term, albeit secret rival to Donovan's agency.

Kroner selected Grombach to head this new organization "particularly because [he] could take such instructions, that all of this should be done under the terms of the highest secrecy."

From the very beginning, Grombach split his time between Washington and the Pond's offices in New York City. After the war Grombach would establish the Universal Service Corporation in New York, but it is not clear if the Pond's wartime offices there were under commercial or official cover. In any event, the various security measures worked well in the United States. Gen. Kroner testified after the war that "when I left the direction of that office at the beginning of 1944, only those in the War Department and the State and the President's office, the President himself, who had to know by virtue of approving certain operations, knew it existed."

In Washington, the Pond's day-to-day connection with the war department was through the Division of Foreign Activity Correlation (FC), which, during the war, fell under the authority of Assistant Secretary Adolf Berle, the department's intelligence coordinator. The director of naval intelligence later said that the Army never told the Navy about the Pond either.


------




Wild Bill Donovan: The Spymaster Who Created the OSS and Modern American Espionage,
by Douglas Waller. (New York: Free Press, 2011), 466 pp., endnotes, bibliography, photos,
index.

Donovan of OSS was the first of four biographies of ‘Wild Bill’ Donovan.18 It claimed to be the full story, and few in the public knew otherwise. The second and third made similar assertions, adding new details about OSS operations and bureaucratic battles.19 Was there anything new left to say? The existence of a fourth biography suggests an affirmative answer, and author Douglas Waller calmly  and carefully documents this position. The principal difference, however, is one of focus.

Waller is concerned more with Donovan the man than with OSS operations. The result depicts an ambitious, brave, hard-charging Donovan, who almost by accident created America’s first foreign intelligence service. It was only after completing two fact-finding trips to Europe for President Roosevelt that the idea occurred to him. With the encouragement of the British, Waller writes, Donovan convinced the president to establish the Office of the Coordinator of Information (COI), which became the OSS after the United States entered WW II.

The book concentrates on five aspects of Donovan’s life. The first concerns his military career, his success as a Wall Street lawyer, and his political ambitions prior to serving Roosevelt. The second deals with the bureaucratic battles he fought and the egos he ruffled as he struggled to establish COI (later, OSS), and then to maintain its existence in the face of vigorous opposition from elements in the War Department and the FBI. 

Here we learn that the Army never accepted the OSS role and formed its own foreign intelligence service—nicknamed “The Pond”—under the control of Major John ‘Frenchy’ Grombach, a man Donovan had once fired. Donovan’s other biographers do not mention the Grombach episode, which was treated in this journal in 2004. 20 Donovan’s battles with Hoover and the FBI are also described in detail.

On the operational side, Waller mentions Operation Kangaroo, a collection effort that defied an agreement with Hoover not to operate in Latin America, a topic covered in this book for the first time.

The third aspect of Donovan’s life treated in this book, and for the first time, dealt with his many dalliances with women, something Waller did not try to hide. Their impact on Donovan’s marriage did not do him credit.

The fourth part of the Donovan story concerns his frustrated attempts to create and head a postwar intelligence service after President Truman abolished the controversial OSS. Here, Hoover again enters the picture, and Waller leaves little doubt that it was Hoover who spread the rumor to the press that such a service would result in a domestic Gestapo, a charge that applied more to Hoover’s own ambitions to direct an all-encompassing, postwar intelligence operation. Donovan’s hopes were
dashed forever when neither Truman nor his successor appointed him to head the new CIA.

The final phase of Donovan’s career that Waller covers is his service as ambassador to Thailand. Although in his late 60s, Donovan was still difficult to control. The concluding chapter covers Donovan’s debilitating sickness that led to his death in 1959.

Wild Bill Donovan is absorbing reading. It is documented with primary sources, though the
format used makes it impossible to tell what fact a particular document supports. In all other respects, it is a major contribution to the intelligence literature.

John V. Grombach

The War Department had tapped Grombach to create the secret intelligence branch in 1942...

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.

--------------------

The Great Liquidator

(ISBN 10: 0385132719 / ISBN 13: 9780385132718 )

John V. Grombach

This is a chilling, painstakingly researched story of Dr. Marcel Petiot, a psychotic genius who succeeded in confounding both the Gestapo and the Resistance in France during WWII by killing over 150 people in Paris and taking $15 million in spoils from his victims, many of them Jews. John Grombach was head of the Secret Intelligence Branch of the War and State Departments in France during this time. The book's condition is As New with no signs of wear. The binding is very tight. The black DJ has a few small tears and some fading on both front and back. Bookseller Inventory # 000600
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AP reporter Cristian Salazar explains the documents