How a Nazi Spy Double-Crossed FBI Chief J. Edgar Hoover

January 28, 2021 Topic: History Region: Americas Blog Brand: The Reboot Tags: World War IINazi GermanyFBIJ. Edgar HooverSpiesEspionage

How a Nazi Spy Double-Crossed FBI Chief J. Edgar Hoover

The ruse lasted for much of World War II.

Here's What You Need to Know: Although Koehler never had access to any atomic secrets, his superiors in Germany considered him the best spy they had during the war.

Throughout his lifetime, FBI Director J. Edgar Hoover always boasted that no enemy agent, either spy or saboteur, ever operated at large in the United States during World War II. The FBI’s record against spies and saboteurs was perfect, Hoover insisted. Clandestine enemy activity had been “kept under control” throughout the war, and no “military secrets” had been smuggled out of the country by either German or Japanese agents. Any and all spies who entered the United States had been captured and rendered harmless.

Hoover never found out how wrong he was. For nearly two years, a German agent had sent hundreds of reports from a secret radio transmitter in New York to contacts in Germany. And nobody in the FBI, including Hoover, ever found out.

A Sleeper Agent in the City That Never Sleeps

The agent who managed to send all that information, right under the FBI’s nose, was anything but a super spy. He was a 51-year-old Dutch national named Walter Koehler, a fat, bald, near-sighted little man with horn-rimmed glasses and bad teeth. Although he had been trained in espionage, Koehler owed at least part of his success to good luck and the complacency of J. Edgar Hoover.

Koehler had been chosen to go to the United States on an espionage assignment mainly because of his technical and engineering background. German intelligence knew that American scientists had been experimenting with nuclear fission for some time. Articles in U.S. scientific journals, along with stories in the New York Times and other newspapers, described atomic energy in general terms and also discussed the power of an atomic bomb as a weapon. A German spy named Alfred Hohlhaus had also sent a number of reports on American nuclear research, along with as much information as he could get regarding the U.S. atomic program. Hohlhaus, incidentally, also operated without the knowledge of J. Edgar Hoover or the FBI. The Luftwaffe was especially interested in knowing if the United States was close to making a bomb.

To find out, German intelligence decided to send Walter Koehler to the United States. Koehler had studied engineering and is usually described as being technically minded. He had also worked for German intelligence during World War I, which gave him several years of practical experience in espionage in addition to training and instruction in “spy school.” Just as important as his technical background and his experience, Koehler had also spent several years in the United States. He was a sleeper agent in New York from the late 1930s until 1941.

Koehler was recalled to Germany in 1941 because of some irregularities in his bookkeeping. His superiors wanted to know why he was not able to account for some of the funds that he had been issued for operating expenses. The explanation Koehler gave must have been quite a good one; whatever it was, it kept him out of prison. Or maybe German intelligence needed someone with a devious nature and decided to put it to work for them instead of against them.

After being chosen for his new assignment, Koehler was given a sort of cram course in nuclear physics, a class in the basics of atomic energy and technical terms related to it. In the summer of 1942, he was sent on his way to New York via Madrid. It was decided that his wife would go with him. Mrs. Koehler’s presence was part of Koehler’s disguise. No one would ever think that a fat, middle-aged man and his plump wife might actually be German spies.

Turning Himself In

Mr. and Mrs. Koehler would need visas before they could to enter the United States. These could be applied for in Madrid, before the Koehlers left for New York. They took a train to Madrid, where Koehler presented himself at the U.S. consulate to apply for permission to enter the country. The entire procedure was normal and routine at first; no one questioned the false identification documents that had been provided by German intelligence. When Koehler sat down to be interviewed by a member of the consulate’s staff, however, Koehler shattered the routine and left the young official speechless with astonishment.

Koehler told his interviewer that he was a German espionage agent and that he wanted to turn himself over to the American authorities. This threw the entire process into a cocked hat; it was no longer just an ordinary matter for some junior official, but a request for political asylum. The vice counsel was summoned to hear what else Koehler had to say and was as amazed as his predecessor had been. Koehler’s story sounded like something out of a Hollywood film.

He was being sent to the United States to set up a secret radio station, Koehler explained, and he went on to say that his job would be to send reports on U.S. troop departures for overseas. But, he went on, he did not want to work for the Nazis. The only reason that he accepted the assignment was to escape. He was Roman Catholic and anti-Nazi in German-occupied Holland, which did not offer a very promising future. He wanted to get away before he said or did something that landed him in a concentration camp. Instead, he wanted to work against the Nazis as a double agent, sending authentic-sounding information to Germany that was actually false.

To prove that he really was a bona fide German agent, Koehler showed the consulate staff the paraphernalia that he had been issued by German intelligence—his code book, the operating manual for his radio, his schedule for transmitting reports to his contact in Germany, and $6,230 for operating expenses.

The consulate staff believed Koehler but did not know what do with him or his wife. Finally, after talking it over for some time, they decided that the best thing would be to contact the U.S. State Department in Washington. As soon as the staff at the State Department heard the phrase “German spies,” they immediately telephoned the FBI.

A Rough Journey to America

When J. Edgar Hoover heard the story, he recommended that the Koehlers be granted their visas. Hoover did not really care if Walter Koehler was a spy or a refugee. As far as he was concerned, Koehler was an opportunity for publicity, and he would take full credit for any harm Koehler did to the German intelligence network.

With Hoover’s full knowledge and blessing, the Koehlers boarded a neutral Portuguese ship in August 1942 and began their trip to New York. But midway across the Atlantic, Koehler developed a severe case of pneumonia, so severe that the captain decided to send for help. The ship did not have the medical staff to treat anyone in Koehler’s condition, so the captain hoisted the international distress signal, hoping that a passing ship would see it and come to assist.

Fortunately for Walter Koehler, a U.S. Coast Guard vessel happened to be close by and went to investigate. The Coast Guard removed Koehler from the Portuguese ship and rushed him to a hospital in Florida. No one notified the FBI, however. When the Portuguese ship docked in New York, federal agents were highly annoyed, to put it mildly, when they discovered that Walter Koehler was not on board. It took some frantic searching and a few threatening telephone calls from J. Edgar Hoover before Koehler was located.

The FBI’s German Agent

As soon as Koehler recovered from his pneumonia, the FBI set him up as their very own German agent. The Bureau gave Koehler his own radio station on Long Island, installed in a large secluded house, and surrounded it with a solid wall of security. No one was allowed anywhere near the station except a handful of carefully screened FBI agents. Guard dogs patrolled the grounds. Three agents ate, slept, and lived in the house; one man was always on duty to keep watch.

Koehler was not allowed to send his own messages to Germany. Hoover did not trust him. An FBI agent who had learned to copy Koehler’s “fist,” his own unique way of pounding out dots and dashes on the telegraph key, sent the reports and signed Koehler’s name. When the first message was sent, on February 7, 1943, Koehler was not even present. Five days later, Koehler’s contact in Hamburg sent a reply, conveying his “thoughts and good wishes” and admonishing Koehler to use “caution and discretion” when sending future signals. Koehler never saw it.

A steady stream of reports was sent to Germany by federal agents. A schedule had been arranged. Signals would be sent by the FBI every Saturday or Sunday at 8 am to Koehler’s contact in Hamburg. Replies would then be radioed by Hamburg on the following Friday or Saturday at 7 pm. Among the items sent to Hamburg on a regular basis were weather reports, data on ships under construction and undergoing repairs, and troop departures for the British Isles, along with unit identification and insignia. Most of this would either become common knowledge—U.S. Army insignia would not remain secret very long after American troops came ashore on D-Day—or had been doctored to alter the facts. All information that was sent had been cleared by the armed forces and classified as harmless.