Washington D.C., February 19, 2020 - Reporting last week in The Washington Post and Germany’s ZDF public television channel mentioned a 1951 meeting between Crypto AG’s Boris Hagelin and American cryptographer William Friedman, the noted cryptanalyst who was acting as a representative of U.S. intelligence, at Washington D.C.’s Cosmos Club. This meeting reportedly built the foundation of a “gentlemen’s understanding” between Hagelin and the United States to control the company’s cryptographic devices. This agreement would ultimately lead to the joint CIA/BND purchase of Crypto AG upon Hagelin’s retirement in 1970.
Documents from William Friedman’s collection shed light on the years before Hagelin’s retirement and the level of cooperation between the two men. Discussions begin on the issue of surplus M-209 cryptographic devices, designed by Hagelin, in the aftermath of World War II (Documents 1, 5, 6). Both sides sought to control this surplus stock, U.S. intelligence agencies to restrict cryptographic capability to friendly nations, and Hagelin to avoid flooding his own market. As these discussions evolve, the topic of Crypto AG’s improved CX-52 devices is raised (Documents 9, 10, 11). A memorandum from the United States Communications Intelligence Department (USCID), obtained through FOIA, authorizes Friedman to make a proposal to Hagelin (Document 8) during a trip to Crypto AG’s headquarters in Zug, Switzerland, which is detailed in Friedman’s papers (Documents 13, 14). This proposal, accepted without delay by Hagelin, is believed to be the first agreement between Crypto AG and the United States to intentionally limit the effectiveness of cryptographic equipment sold to certain customers.
While the specific method by which the CX-52 was limited is unknown, documents from Friedman’s collection support the theory that different versions of instructional materials were provided to different “tiers” of CX-52 customers, altering the strength of the machine’s encryption in practice. Letters reveal instructional material was being provided to Crypto AG from external sources (Documents 17, 23) and the U.S. was kept informed of the company’s sales and marketing efforts, particularly through Boris Hagelin’s son, Boris Jr, known as “Bo” to Friedman.
Later correspondence reveals that Boris Hagelin began to feel limited by this arrangement, particularly with regard to his ability to compete with the German technology giant, Siemens (which would later play a key role in the CIA’s ownership of Crypto AG), in a range of nations (Documents 19, 20).
William Friedman retired in 1958, at which point others within the U.S. intelligence community took up correspondence with Crypto AG’s leadership. The documents from Friedman’s collection were initially donated to the George C. Marshall Foundation Library by Friedman and his wife, Elizebeth, herself a remarkably accomplished cryptanalyst listed in the NSA’s Cryptologic Hall of Honor as “America’s first female cryptanalyst.” Both avid Shakespeare enthusiasts, the couple would also come to be known jointly for cryptologic analysis into claims that the bard had not written the plays which were attributed to him.
The document collection was found by author James Bamford while conducting research for the 1982 book Puzzle Palace. The U.S. government argued that these documents had been released in error and reclassified them under EO 12356, a move that was challenged unsuccessfully in court by the American Library Association. The collection has since been re-released and is available through The George C. Marshall Foundation and the National Security Agency.