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You are Never Going to Be Able to Run an Intelligence Unit:
SSU Confronts the Black Market in Berlin

by KEVIN CONLEY RUFFNER

Abstract

When the Western Allies occupied the city of Berlin in July 1945, an enormous underground economy sprang up almost overnight.  Cigarettes, nylons, food, liquor, and, above all, wristwatches became most sought after objects in Berlin’s black market.  American military personnel enjoyed easy access to such goods and Soviet soldiers had money to burn.  Individual GI’s became rich off of their earnings, although the U.S. Army incurred an estimated $300 million additional costs as a result of the black market in Germany.
More than most American military personnel, those who served in U.S. intelligence agencies, such as the Office of Strategic Services (OSS), could draw upon both clandestine funds and the increased travel opportunities for personal gain.  In September 1945, only days before OSS’s disbandment, the U.S. Army arrested two OSS officers as suspects in a black market ring.  In one of the most expansive investigations in OSS’s short history, a board of officers convened in Germany to examine the activities of Maj. Andrew Haensel and Capt. Gustave A. Mueller.  The board reviewed the convergence of intelligence and criminal activities in early post-war Berlin and heard testimony from a number of OSS officers, including Allen Dulles, Richard Helms, and Frank Wisner, who later rose to senior positions in the Central Intelligence Agency.
Using recently-declassified OSS records (including the personnel files of the two officers, Kevin Conley Ruffner brings to life this little-known event. While the scandal in the Peter Unit (the Secret Intelligence section in Berlin) received little publicity after 1946, it foreshadowed the larger problem of the black market’s deleterious effects on intelligence collection at the dawn of the Cold War.