How we tricked the Nazi spies

The Untold Story of — 

  • The enemy agents we turned against Hitler
  • The ocean capture of two big shot Germans 
  • The revelation of Duce’s desert battle order 
  • The cracking of baffling invisible writing

Col. W. W. MURRAY September 15 1949

How we tricked the Nazi spies

The Untold Story of — 

  • The enemy agents we turned against Hitler
  • The ocean capture of two big shot Germans 
  • The revelation of Duce’s desert battle order 
  • The cracking of baffling invisible writing

Col. W. W. MURRAY September 15 1949

ON A dark night in the fall of 1943 a Nazi U-boat broke the lonely surface of the Bay of Chaleur off Quebec’s Gaspé coast. A small boat slipped away from the dim outline of the hull and pulled silently toward the shore line. A stocky man with steel-grey eyes and high Prussian cheekbones, dressed in the uniform of the German Marines, stepped from the boat which returned to the U-boat, leaving him alone among the rocks and shingle.

He bent over a small trunk which had been unloaded with him and began to fiddle with the hasp. From the trunk he rolled some civilian clothing, a wad of Canadian money, a sheaf of forged documents and a short-wave sending set. For the man on the beach was a spy.

Few Canadians know that Nazi espionage agents infiltrated this country during the war years. Now, however, it’s possible to reveal their stories in part, and tell how intelligence personnel in Canada were able to induce some of them to work against their masters.

COLONEL W. W. MURRAY, O.B.E., M.C. and bar, was Canada’s first Director of Military Intelligence and commander of the Canadian Intelligence Corps from July, 1942, when the corps was formed, until demobilization. At the beginning of the war he was Canada’s Chief Cable Censor — a post he relinquished to act as General Staff Officer, Class One, in charge of the Military Intelligence Section at National Defense Headquarters. As such he is particularly well-fitted to tell the exciting story which appears for the first time in these pages. Old Maclean's readers will recognize Colonel Murray as a frequent contributor in the years following World War I. A veteran of that war (when he won the Military Cross twice) he was a member of the Ottawa Press Gallery until he took up his new military post in 1939.


Canadian intelligence work during the war was top secret. Some of it still is. Those engaged in it had some strange wartime chores: Once we kept two high Nazis bottled up on a tanker at the Cape Verde Islands until the British were able to capture them. In 1939 Canadian cable censors were able to present the British War Office with details on the strength and position of Mussolini’s armies months before Italy declared war. We co-operated in the detection of the “flyspeck,” one of the most cunning hidden-letter dodges ever invented, and our needle-in-the-haystack search of a Nazi POW camp in Alberta yielded a tiny matchbox full of an incredible secret writing material.

But the man on the beach was part of what was perhaps the most dramatic chapter of the intelligence story. Call him Hans Schmidt, which could be his real name, although we were never certain that we actually learned it.

Back in the early 30’s he was a drifter in Toronto. His estranged wife was still living there when Schmidt became a spy.

Schmidt had headed for Germany where jobs were plentiful soon after Hitler came to power. He was drafted before the war and in 1942 was transferred to Rommel’s Afrika Korps, which he loathed.

As a soldier he was a washout. Liquor and women landed him in the regimental bastille time after time. The sand, the heat, and the flies knocked his morale to zero.

One day he faced a serious charge for theft. At this point he was confronted with f.wo alternatives: He could take the rap, or he could join the despised Abwehr, the Nazi espionage outfit that recruited the riffraff of the German nation. Schmidt “volunteered” for the Abwehr.

He was transferred to Germany and turned over to the Erst Marine, t he Abwehr's training unit that specialized in skulduggery. He was taught, radio at Lubeck, near Hamburg and then attended a spy school near Brussels.

On graduation day he was handed his first job —a tough one. He was to be landed by submarine on the Canadian coast, make his way to a large centre and send information back to Germany by short wave.

Schmidt spent his embarkation leave on a riotous binge in Paris. Then he went aboard the U-boat. As an Abwehr member he was despised; he had no caste with the snooty German naval oificers who treated him as a pariah. A throbbing hang-over didn’t help any.

By the time he was unceremoniously dumped on the bleak and lonely stretch of Gaspé shore miles from anywhere he had little enthusiasm for spying. His early capture in a little hotel in New Carlisle, Que., points up, as well as anything, the stupidity of the German intelligence arm. An alert RCAF man on the train into New Carlisle noticed the European cut of Schmidt’s clothes, his clipped accent, his obvious nervousness when spoken to, and became suspicious of him right away.

But the clues that quickly led to his capture were a wad of $1,100 in largesize Canadian bills (the Germans thought we were still using them), and a matchbook which advertised a Paris restaurant.

When the Quebec Provincial Police came for him they found another discrepancy: he carried an Ontario motor license although his National Registration Card showed him living in Saskatchewan. These documents and other letters on his person had been taken from Canadians at Dieppe after the raid of Aug. 17, 1942.

On his arrest Schmidt became tremendously excited. He was wearing civilian clothes but asked if he could return to the landing spot and exhume his trunk. He wanted to put on his marine uniform to claim immunity from execution as a spy by being able to represent himself as wearing a recognized uniform. This was refused.

It was the job of the Intelligence Corps to induce Schmidt to change bosses. But first it was necessary to dampen the ardor of the public relations people. The American FBI had captured Nazis landed from U-boats and this had been well publicized. Our own PR’s felt that Canada should also get some credit in the Press. A Chicago paper telephoned for details and one Canadian correspondent of an American periodical actually got by with a brief item on the capture. But there were no further leaks—we had reason to keep the story secret for we needed to use the spy.

Schmidt was given two alternatives: be tried as a spy or work for our side. He took the latter. He was set up in a Montreal apartment with his shortwave set and fed well. We began to concoct phony messages for the Germans.

His Yankee Bills Were Hot

It is interesting to note what the Germans wanted to know about wartime Canada. The Abwehr asked Schmidt to report on the British Commonwealth Air Training Plan— the number of cadets in training, the types of aircraft being used, any changes in the machines.

Through Schmidt we sent information that was already well-known. Bits out of trade returns, names and records of various commanders, recruiting figures and so on.

At one point the Abivehr was insistent that another Canadian division was mobilizing in the Maritimes. We knew of course, that this wasn’t so, but we obliged the Germans by telling them that the Seventh Division was training in Nova Scotia.

The Germans always wanted to know how morale was in Canada. Schmidt invariably informed them that morale was high.

When Schmidt’s usefulness was over —about a year later-—he was sent to England and we lost track of him.

Soon after the Schmidt incident, a second German spy landed from a U-boat on the New Brunswick coast. He had no difficulty making his way to Montreal but again Germany’s faulty intelligence got him into trouble.

There had apparently been confusion at Abivehr headquarters about whether he should operate in Canada or the U. S. (The Germans seemed to confuse the two countries.) At any rate, instead of giving him Canadian currency they’d handed him U. S. funds. With currency regulations at their tightest, he soon learned that the U. S. bills would draw suspicion to him.

Unable to change the money legally he frequented Montreal brothels in an attempt to make change. In a raid on a brothel he was collared as a “found in,” and released on bail. Terrified at the risk of exposure he jumped bail and made for Ottawa. Here he lived in a small hotel and moved freely about the city.

Again, he encountered the currency difficulty and, finally, with the American bills burning a hole in his pocket, he took a girl friend across the Ottawa River into Quebec, on a picnic, and buried his money. It’s probably still there because he promptly forgot exactly where he’d hidden it.

Now he was almost broke. He moved into a cheap boardinghou.se and finally decided to give himself up. He took police and Naval Intelligence men back to the New Brunswick coast where they dug up his radio equipment. It had never been used. The spy was eventually transferred to the United Kingdom.

A third German agent—call him Walfisch — entered Canada from Buenos Aires in 1943. He had been in German Southwest Africa when war was declared and moved at once to South America where he came in contact with Abwehr agents. British Intelligence got wind of him, through letters he wrote, and he was plucked off the boat at Halifax.

Walfisch agreed to do counterespionage work. A short-wave sending set was provided and tried out at a farm near Aylmer, Ont., but it failed to operate successfully. Intelligence men then got him a job in Toronto where his employers did not know he was an espionage agent.

He sent information to his German friends in Buenos Aires by mail and cable under our orders. Often we had to ease his cables and letters past the censors. Invariably he was given stale or deceptive news (which he transmitted in the form of an open code, ostensibly describing various goods for shipment). His usefulness waned when the operators in South America got suspicious and stopped sending him money.

Earlier in the war, in 1939, our cable and postal censors had helped in the capture of two high-ranking Nazis. Our men couldn’t legally censor cables that didn’t originate in Canada but they could and did monitor them.

One day they picked up a sizzling exchange between a ship in one of the harbors of the Cape Verde Islands off Africa and an American oil company in New York which had chartered it.

Big Shots in the Boiler Room

The ship had been German but had l>een transferred to Panamanian registry shortly before the war began—a common German dodge to disguise some of her merchant fleet. Her crew was made up of 23 Germans trying to get back to Germany.

Chased into St. Vincent, Cape Verde—a neutral port—the ship was forced to stay there or risk being sunk by a British destroyer the instant she poked her nose outside the three-mile limit.

The oil company was alarmed at the prospect of having to pay the stranded crew wages until they could get to Hamburg and off the payroll—hence the cables. We continued to read the messages and finally learned that accommodation was booked for about half the crew on a small steamer, the Guinea which put into St. Vincent on Christmas Eve, 1939, bound for Portugal. We kept the British informed.

In January 1940, when the Guinea came abreast of Gibraltar, a British destroyer overhauled her and ordered her into Gibraltar harbor. Sure enough, two of the men aboard were big-shot Nazis who had been disguised as seamen. They cooled their heels behind British bars for the duration.

At about the same time Canadian postal and cable censors were helping to uncover the strength and position of Italian troops. This was accomplished in an ingenious and unusual way. It had its inception in Mussolini’s plan to bolster Italy’s supply of American dollars.

Mussolini had appealed to Italians in the U. S. to deposit American dollars to the Italian Government’s credit and at the same time name a beneficiary in Italy. The Italians would then give the beneficiary the equivalent of the money in Italian lire—plus a bonus of 40%. Many Italians took advantage of this money-making scheme.

Soon lists of names, each bracketed with a sum of money, began to pour through cable circuits between the U. S. and Italy. Most of these cables went through North Sydney, Canso or Halifax in Nova Scotia. The cables were copied and sent to Ottawa for study.

Italian soldiers and sailors were prominent in these lists. And, as U. S. bankers insisted on complete identification, our men would encounter items like this: “Lieutenant Giuseppe Ravioli, Fourth Company, Third Battalion, Ninth Regiment, Bersaglieri, Bolzano, $1,000 from . . .”

At once we knew that the Ninth Regiment of Bersaglieri was stationed at Bolzano, south of the Brenner Pass. Immediately, the Chief Telegraph Censor went into a huddle with the Chief Postal Censor and found that similar information was coming through the mails—from Italian nationals in Canada.

Soon particulars of the Italian army were being card-indexed and colored pins began to go up on maps. The pins were thickest on the French frontier; and there were concentrations of troops shown in the Piedmont, in Lhe vicinity of Aosta, Novara and Turin and on the Mediterranean Coast. Similarly the invasion routes to Yugoslavia were becoming crowded. There was heavy mobilization around Gorizia, Udine and Belluno. We were able to plot Mussolini’s dispositions in the Libyan desert and in Ethiopia.

Paragraphs on a Pinhead

At the same time interceptions revealed that Italy was buying mules from dealers in Kansas (for mountain warfare, presumably). Others revealed that an Italian naval mission was negotiating for Venezuelan oil, and contracts for boots and army blankets were being let with New England firms.

These fragments helped fill out the picture of war preparation and every scrap of information was cabled daily to London.

Cables and letters were easy to censor. But the Germans had a more ingenious means of communication. They called it the briefpunkt (letterdot). We referred to it as the “flyspeck.”

It turned up first in a letter intercepted early in 1942. It came from a “business house” in Lisbon—a port that boiled with intrigue—and was addressed to a man with a Slavic name in New York. It merely confirmed by mail a cablegram that had been sent earlier.

The censors were suspicious. The document was given every known chemical test without result. Experts enlarged the writing photographically, then scrutinized the script laboriously. It revealed nothing. About to admit defeat they noticed two minute dots, “flyspeeks,” near the edge of the paper. Examination of them brought sensational results.

One dot revealed itself as a microscopic piece of film. Scaled free from the paper and enlarged it turned out to be the photographic negative of a half sheet of foolscap, filled with typescript.

In German, it was a series of questions about the Commonwealth Air Training Plan. It might sound unbelievable but a message of 200 words had been reduced to such microscopic size that the film containing it could dot an “i.”

A variety of secret writing methods were employed by hardened Nazi prisoners in Canada and the largest section of Canadian postal censorship was assigned to examine POW’s mail. Incoming letters told us about the enemy. Outgoing letters told us what the enemy wished to know.

A Riot at Lethbridge

Many prisoners used simple materials such as lemon or onion juice which were invariably detected. One prisoner named Haufmeyer used to write innocuous letters, but added extra material between the lines in invisible ink made of fruit juice and water. This material always contained a list of names and addresses of other prisoners who had been making anti-Nazi comments and was intended for the use of the Gestapo.

His list was most useful to us in separating the “white” and “grey” prisoners from the “blacks” who were ardent Nazis.

“Lily-white” prisoners (those proven anti-Nazi) were trained first in small numbers at Ottawa and Hull and later, in much larger numbers, in Sorel, Que., in psychological warfare work. Many of them were listed in Haufmeyer’s letters. There were about 150 of them and their job was to prepare pamphlets and make recordings for distribution in Germany and in prison camps in Canada. They learned democratic administration and were eventually sent back to Germany to work during the occupation under security officers.

But all the secret writing wasn’t as easily broken as Haufmeyer’s fruit juice. In 1944 a specially sensitized paper introduced into POW camps frustrated these methods, but about the same time the Germans developed a baffling counter agent which the special paper could not detect.

The clumsiness of a German sergeant-major in the notoriously “black” camp at Lethbridge, Alta., gave us the clue that tracked it down. Writing to a friend in Berlin he had accidentally pressed too heavily on the paper, tearing it slightly.

An alert censor in Ottawa detected this. But it was a long time before the letter yielded anything to analysts.

Finally it disclosed an entirely new chemical compound which could be detected only after minute examination. This meant that every one of thousands of letters might have to be subjected to chemical examination each week—a virtual impossibility.

British authorities were alarmed. Preparations for the Normandy invasion were in progress. It was absolutely necessary to get a sample of the mysterious compound.

Canadian security personnel began a thorough search of prisoners’ belongings in Lethbridge. But the prisoners grew ugly and rioted—pushing, mobbing and striking the searchers who, according to the Geneva Convention, couldn’t enter an enclosure with weapons unless to make an arrest or quell a disturbance. As this was billed as a “routine search” our men were unarmed and had to withdraw, abandoning all that they picked up.

But one sergeant in the veterans’ guard managed to hide a small matchbox containing a gumlike substance in his mouth. This was the only thing that came out of the search, but it was what we were looking for.

The stuff was known as “A. V. Putty” and the matchbox contained complete instructions for its use. The putty was wrapped around a pencil point and used with feather lightness on the paper. It could be overwritten with ink without being affected. The instructions also advised that letters containing the putty writing must carry j a code word to advise the recipient to I look for a secret message.

When the putty was uncovered the code word being used was grosstadt (large city)—a word that could be slipped innocuously into an ordinary sentence.

The putty had come into the camp in plumstones lying in jars of plum jam. Actually these stones were clever plastic creations. It’s interesting  to note that when occupation authorities combed Berlin they found in the basement of a house the factory where j these stones were made.

The POW camps served as a constant source of information to the Canadian Intelligence Corps. Letters to captured German generals (there were half a dozen in Canada) were particularly productive. German censors apparently had an ingrained awe of big shots and examined their mail only perfunctorily.

The generals’ wives wrote chatty letters telling of other high-ranking German officers — their promotions, decorations, commands, movements and relations with Hitler. This information fitted easily into the intelligence jigsaw puzzles.

One U-boat captain had a lady friend who operated a boardinghouse in Hamburg which was frequented by other captains. She might hint, for example, that such-and-such a captain wasn’t coming back. Intelligence immediately knew that his craft had left Hamburg. In some cases we were able to build up almost complete nominal rolls and records of U-boat crews from the gossip of garrulous ' landladies.

How to Measure Morale

It was the custom of German post- offices to return undelivered mail to the sender. Often these returned letters’ to prisoners in Canada contained the thoughtful penciled notation of a German postal worker that the addressee had moved to some other city. This usually meant that the addressee’s place of employment had been bombed j out. Intelligence, by tracing this man’s job would be able to find, for example, if a certain industry had moved from Frankfurt to Chemnitz.

This information finally became available to the extent that the postal ' censors were able to put out a weekly report on the movement of German wartime industries.

Sometimes the German post offices were blitzed so badly that entire bags of mail intended for somewhere else would arrive by mistake in Canada through a neutral country, having been switched accidentally with mail intended for POW’s here. Once mail intended for Germans on the Russian front landed in Canada. As the censorship was light—the mail being intended for domestic use only—the haul of information was substantial.

We were also able to measure German morale by the contents of the letters. Every once in a while a spate of mail breathed fire and slaughter against the Allies and vowed eternal trust in der Fuehrer. When this happened we knew things were going badly in der Vaterland.