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The gentleman's agreement
Secret deal between the NSA and Hagelin · 1939-1969

In the past there have been recurring rumours about a secret collaboration between the NSA and the Swiss company Crypto AG, founded in 1952 1 by the Swedish inventor Boris Hagelin. Former employees of the company have suggested that there were frequent visitors from the NSA, but allegations to this effect have always been firmly denied and substantial proof was never found.

In 2014, the NSA released more than 7600 documents [1], amounting to over 52,000 pages of historical material relating to the career of William F. Friedman (1891-1969), who is considered the dean of American Cryptology. More than 400 of these documents contain material about Boris Hagelin and/or Crypto AG. Although some documents have been fully declassified, most of them are still heavily redacted as, according to the NSA, they may contain information that could harm national security or any individuals or companies that are mentioned in those documents.

  1. Although Crypto AG in Zug (Switzerland) opened in 1952, the actual company structure had been created around 1950, shortly after Hagelin had moved to Switzerland in 1948 to work with Dr. Edgar Gretener.

Update February 2020 The story below is largely based on information from the Friedman Collection, and covers the period from 1939 to 1969 — the year in which Friedman passed away. It has since come to light – after a revealing broadcast by the German television station ZDF – that a year later (1970) Crypto AG was fully purchased by the German BND and the American CIA, each with an equal share. This project, which is seen by many as the intelligence coup of the century, was internally known as Operation THESAURUS (later: RUBICON). The article below covers 1939 to 1969. The period from 1970 to 2018 is described in a separate article [28].

The Gentleman's Agreement
Paul Reuvers and Marc Simons, 30 July 2015

In 2014, the NSA released more than 7600 documents related to the career of William Friedman, a former NSA employee who is commonly considered the dean of American cryptology. Among the released documents are several hundred letters between him and Boris Hagelin — a Swedish inventor who would eventually become a dominant supplier of cryptographic equipment, first through his Swedish company AB Cryptoteknik and later through his Swiss company Crypto AG.

It is known that Boris Hagelin and William Friedman were good friends. They had the same age, were born in the same part of the world – the Russian Empire, from which they had to flee – they shared a passion for cryptography and they both suffered from depressions. During World War II they were in close contact after Hagelin 'escaped' to the US in May 1940 and subsequently sold his patent rights to the Americans, allowing them to build the M-209 cipher machine [2][3]. Once the war was over, the two men maintained their friendly relationship, wrote each other (personal) letters, visited each other a number of times, and helped each other on several occasions.

Most of these letters are of a personal nature but some of them contain explicit NSA material. From the documents in the Friedman Collection it becomes clear that the AFSA (the predecessor of the NSA) and Hagelin were already negotiating an agreement of some kind as early as 1951. Although much of the agreement is still unknown, the article below proves the existence of a secret Gentleman's Agreement between the NSA and Hagelin/Crypto AG during the 1950s.

World War II   1939-1945
One of Hagelin's biggest achievements was the sale of M-209 cipher machines to the US Army. Based on the C-36 / C-38 – a small cipher machine with 6 pin-wheels – the M-209 was adapted to meet the requirements of the US Army. Although Hagelin would normally build all machines in his factory in Stockholm (Sweden), he allowed the American's to build the machine under licence.

On 10 May 1940, Hagelin travelled on the last ship from Europe to the US, with two prototypes of the C-38 in his lugguage. It would eventually evolve into the M-209 and would become the largest sale of the so-called C-machines he ever made [3]. The machines were built at the Corona plant of the L.C. Smith typewriter company in Syracuse, with a daily output of up to 500 units.

The image on the right shows a typical M-209 as it was used by the US during WWII. It has 6 pin-wheels at the front, each with a different number of steps, and a revolving cage with 27 bars.
The converter M-209

As Hagelin couldn't return to Sweden during the war, he stayed in the US where he spent his time serviceing the BC cipher machines 1 of some American organisation. When he returned to Sweden in 1944, more than 50,000 M-209 machines had been built by the Smith Corona Typewriter Company and by the end of the war, this amount had nearly trippled to a staggering 140,000.

To allow production of the M-209 and the BC-38 (shown on the right) in the US, and to avoid paying high tax fees in Sweden, Hagelin had transferred the full and royalty-free patent rights to the US Army, for the sum of US$ 3,023,410, of which US$ 2,548,225 was for him personally. The balance of US$ 475,185 went to the Hagelin Cryptograph Company (HCC) in Sweden [4]. 2

In return, the US Government granted Hagelin a royalty-free license for the production of M-209 and BC-38 machines and improvements thereof, so that he was still allowed to sell his invention.
The BC-38 cipher machine

It is worth noting that the machine did not provide absolute secrecy. During WWII, the Germans were able to decrypt a message in under 4 hours if they had received messages in depth 3 . This was not considered a problem however, as the M-209 was only used for tactical messages (e.g. field maneuvers) which had lost their significance by the time they were broken by the Germans.

  1. A BC cipher machine (e.g. a BC-38) was basically a C-machine (e.g. C-38) that was extended with a keyboard, a motor-driven mechanism and a double printer.
  2. The exact amount of the fees payed to Hagelin are difficult to determine from the papers, as the contract was reopened and renegotiated several times during the war [4]. In the end, Hagelin had to become a US citizen and pay US$ 700,000 in taxes to the US, in order to avoid paying much higher taxes in Sweden.
  3. In cryptanalysis, receiving messages 'in depth' means that two or more messages were intercepted that had been encrypted with the same key. In case of the M-209, two messages were enough to solve it.

Surplus   1947
Shortly after WWII, in 1947, many M-209 machines that were no longer needed by the US Army, started appearing on the US surplus market for prices as low as US$ 15. On 2 November 1947, in a letter to Friedman [5], Hagelin expressed his concern about the fact that the Dutch Purchasing Commission in the US had bought a first sample order of 100 units. Hagelin wrote the following:

If this goes on, our own business here will be ruined.
He also pointed out that this should not be possible as per agreement with the War Department. Friedman answered prompty and replied that this was clearly a mistake and that necessary steps had been taken to ensure that this would not happen again [6]. Nevertheless, the Dutch are able to pick up their order of 100 machines in New York a few days later, which were subsequently sent to the Dutch East Indies, which Hagelin reported to Friedman on 24 November 1947 [7].

The matter clearly worried Hagelin, as two weeks later, on 13 December, he wrote again to Friedman asking him to investigate the Automatic Radio Manufacturing Company in Boston, who appeared to be offering M-209 A machines for as little as US$ 2 each [8]. And two days later this was followed by another letter, after he has been informed by his Dutch agent that the Dutch Army had been offered 450 cipher machines M-209 from an undisclosed source for US$ 2 [9].

Although Friedman replied to him promptly, it seems there was little he could do. Although the US Army was free to sell the machines within the US, he reaffirmed that they had no intent to sell any surplus machines and that he had no idea who was offering them. He also suggested that the offered M-209 machines may have been unrepairable ones that should have been destroyed [10].

 The issue of the surplus M-209 returns in 1953

New developments   1950
Immediately after the war, Hagelin started improving his existing cipher machines by adding new features and, more importantly, improving security by implementing a new keying mechanism. This new mechanism caused irregular stepping of the cipher wheels and was therefore far less predictable than the regular stepping of the wheels in existing models like the M-209.

Hagelin's patent US 2,765,364 (was: US 188,546) for the new keying mechanism. Click to view the patent.

In August 1950, Hagelin wrote to Friedman about his recent developments and announced some new machines [11]. On 5 October 1950, he filed a patent for the new machine with the US patent office, followed by applications in Sweden and ten further countries [13]. The improved keying mechanism was ready in early 1951, as confirmed by Hagelin in a letter on 26 January [12].

Another new machine, under development in Stockholm at the time, is an automatic cipher machine for teleprinter circuits. The machine had a built-in C-line mechanical cipher machine that is used to create a 5-bit pseudo random code, which is mixed with the plaintext.

Apart from the C-line pin-wheel mechanism – which is used here as a key stream generator – it also has a built-in 5-level paper tape reader that can be used instead. When the tape is filled with random characters, the device is converted to a One-Time Tape (OTT) cipher machine, or mixer.
Close-up of the interior, seen from the front right of the machine.

When properly used, OTT systems are theoretically unbreakable — they are based on the One-Time Pad (OTP) cipher — and provide the best possible protection for sensitive information. For this reason they were often used for diplomatic traffic. In practice however, especially in the early 1950s, the key tapes were sometimes made by means of mechanical — deterministic — methods.

The Hagelin Negotiations   1951
In February 1951, a prototype with the new keying mechanism, based on a modified M-209, was sent from Stockholm to the AFSA for evaluation. The new technology caused great upset, as it defeated the existing methods for solving pin-wheel cipher machines. AFSA was afraid that Hagelin might want to sell machines with this new technology to countries like the USSR [14].

At the same time, Hagelin was regarded a 'good friend' and a valuable source of information about other nations and their developments. In a USCIB meeting on 9 March 1951, it was reported that negotiations with Boris Hagelin were underway. On 22 May 1951, in a meeting at AFSA, the situation was discussed with various parties, including the CIA. At this meeting, Friedman presented a detailed analysis of the Hagelin Company and the current situation [14]:

  1. Hagelin is at that moment the only civil manufacturer of cipher machines in the world 1
  2. AFSA considers the Hagelin Company as a serious international player
  3. AFSA considers Hagelin's expanding market as a security threat
  4. AFSA considers Boris Hagelin a good and loyal friend
  5. Hagelin will continue to sell readable machines to all nations
  6. CIA will control the worldwide sale of the new unreadable 2 CX-machines
  7. Hagelin will receive US$ 700,000 as compensation 3
  8. Hagelin will provide information about all customers and sales
  9. Hagelin's offices and agents abroad may be used for information-gathering
  10. Hagelin's new technology will be considered for use by NATO
  11. Hagelin's OTT technology might also be of use to NATO
With respect to point (6) above, the report literally says:

      It would be to the advantage of the U.S. Government if the
proposed new or improved Hagelin cryptoequipments were prevented from being
developed, manufactured, and sold commercially on the open market.
Concerning point (9), it was even contemplated that it might be possible to gather intelligence from the USSR and its satellites, if Hagelin were allowed to sell to them — closely controlled, of course — but it was doubted whether the USSR would buy from a (former) American protegee.

  1. In this context, 'civil' has to be read as 'on the open market'. There were other manufacturers, such as Siemens and Philips, but their markets were largely controlled by their governments and the military.
  2. In this context, readable means that the cryptographic algorithms could be broken by the NSA. Also known as friendly. In contrast: algorithms that are not breakable by NSA, are called unfriendly or unreadable.
  3. This was negotiated by Stu Hedden, Hagelin's representative in the US, who would get US$ 250,000 of it. In 1952, Hedden became Inspector General at CIA.

Secrecy Order on Patent   1952
Friedman prepared a proposal for an agreement with Hagelin, along the terms that had been discussed. He put it before the USCIB and the AFSA Committee (AFSAC), but the latter turns it down. In June 1951, Friedman tried again, but despite his apocalyptic prospect — we will be blind within a few years — AFSAC turned it down again. This ended the negationations with the CIA. Despite all this, Hagelin acted as if a deal has been struck, and kept his part of the 'deal'.

But then, on 14 September 1951, things went horribly wrong when Hagelin's patent for the new technology (US 188,546) is placed under Secrecy Order at the request of AFSA, nearly a year after it was filed by Hagelin. Hagelin was very upset by this — he didn't know what to do. Friedman was furious as he saw a long-term relationship with a reliable and loyal friend being jeopardized.

Friedman commented that the patent had been filed in 10 other countries over which the US had no control, so there was no secrecy. He also argued that, if thousands of these systems are in use, it is unrealistic, if not absurd, to think that one could keep it secret. Further­more, the US could be liable to suit by Hagelin, with claims running into millions of dollars. Finally, on 27 March 1952, the Chief of the Office of Communication Security of AFSA withdrew the secrecy order and requested the relationship between the US and Mr. Hagelin to be reexamined [13].

Friedman's visit to Stockholm   1953
In 1952, the AFSA was dissolved into the newly established National Security Agency (NSA) and not much happened on the Hagelin-front. This changed in the summer of 1953 when – after the BRUSA 1 Conference of June 1953, the British intelligence service GCHQ highlighted the Hagelin threat and demanded quick action. With this report, Friedman went to the director of the NSA.

General Canine, the new NSA director, allowed Friedman to travel to Stockholm (Sweden) and Zug (Switzerland) to visit Hagelin's factories and discuss a possible agreement. Friedman arrived in Stockholm in October 1953 and toured the factory with Hagelin. He made an informal proposal to renew the negotiations and speak with General Canine directly. Hagelin agreed and on 17 November he and Friedman sailed on a passenger line from Le Havre (France) to New York.

On 5 December 1953, Hagelin, Friedman and Canine set down to discuss an agreement. They agreed to a denial operation:

  1. NSA will provide a list of proscribed countries (for CX and OTT machines)
  2. Hagelin can sell to other countries (including NATO, but no guarantees)
  3. Hagelin will receive compensation for lost sales 2
  4. Hagelin will provide details about customers, sales and future machines 3
  5. The deal will be valid for 6 months awaiting a formal written agreement
In addition, Hagelin agreed that, if and when he would decide to sell his company, the US would have the first right of refusal, and could approve any prospective buyer should the US decide not to buy. In addition, Hagelin suggested that NSA could develop the crypto heart for the CX-52. The deal was entirely to the US' advantage but two days later, to everyone's surprise, the USCIB rejected it. Some argued that NSA is not in the position to encourage NATO sales, whilst others did not want to disclose the list of proscribed countries as it would the reveal NSA's targets.

  1. BRUSA = Britain-USA (i.e. GCHQ-NSA).
  2. DIRNSA Canine suggested supplying surplus M-209 units, or an annual lump sum payment, but Hagelin was not happy with the latter as he didn't want to be payed for doing nothing.
  3. This includes early prototypes for evaluation by NSA.

US sales of M-209   1953
The 'situation' with the M-209 was not solved permanently and would return on several occasions in the following years. By October 1953, the US had received requests from several countries for the release of of M-209 machines, but pending Negotiations with Mr. Hagelin, the AFSA (by now: NSA) refused to do so [15]. This prompted the US Army to come up two months later with a list of countries that were currently using the M-209 and/or who had requested access to them [16]:

  • Philippines
    On 12 June 1951, the US Army supplied 229 converters M-209 to the Philippine Armed Forces with the consent of AFSA in addition to the 369 units that were already in use there at the time.

  • Uruguay
    On 6 October 1952, the Uruguayan Government wanted to buy 36 converters M-209, but this request was turned down on 14 October 1952, saying that the equipment was not available for sale.

  • India
    On 16 March 1951, India indicated that they wanted to buy M-209, M-209a and M-209b machines from commercial sources (presumably in the US) but that they wanted to have copies of the TM 11-380 manuals before doing so. The request was denied as it was addressed to the wrong department.

  • France
    On 23 september 1952, France wanted 450 converters M-209 in addition to the 1850 units that were already in use at the time. The request was turned down for several reasons. On 22 September 1953, France again put in a request for 350 units for use in French Indo-China. This request was turned down by the NSA as it might jeopardize current negotiations between the NSA and Mr. Hagelin in Sweden. The restrictions on France were later lifted on 12 January 1954 after approval from Hagelin (see below).

  • Portugal
    On 23 June 1953, Portugal requested clearance for a supply of modified M-209b converters, but this request was denied on legal grounds.

  • Türkiye
    On 16 August 1950, The Turkish Army requested procurement of M-209 machines or, if it was denied, suitable action to allow such machines to be obtained from commercial sources in Sweden. The request was denied, but the American CSP-845 strip cipher was offered as an alternative. On 22 May 1953, Türkiye put in a request for 600 M-209s, but it was turned down again, this time on the ground that it would exhaust US reserves.

  • Latin America
    M-209 converters were in use by the Governments of Ecuador (1947), Venezuela (1948), Argentina, Columbia and Peru (1951). Some training was given to those countries, although this was strictly prohibited, as reconfirmed in a memo of 17 February 1953.
The request for M-209 machines from France in September 1953 was denied by the NSA pending negotiations with Hagelin. Although there was not yet a deal in place between the NSA and Hagelin at that time, on 12 January 1954, the restriction for France was lifted after Boris Hagelin had given his consent. This allowed the French to buy more M-209 machines for Indo-China [17].

Gentleman's Agreement   1954
In the meantime, Hagelin further developed his new machines and was ready to take them into production. The first one was the C-52. It was similar to the old M-209, but had removable pin-wheels. The next one was the CX-52, which was similar, but featured the new keying mechanism.

The order of the pin-wheels could be swapped and it was even possible to have up to twelve different wheels to choose from. The machine was suitable for the 26 letters of the Latin alphabet. Each wheel had a different number of segments and advanced in an irregular manner.

In a memorandum of 5 February 1954, the NSA expressed its concerns about the newly released Hagelin machines, in particular the CX-52, the TC-52 and the planned TC-55. Friedman was asked to liaise and make a proposal to Hagelin on behalf of the director of the NSA (DIRNSA).
The much-feared CX-52 with irregular wheel stepping

It was also agreed that Friedman would use his personal stationary and private address for any correspondence with Hagelin, in order not to ring any bells when official NSA letters arrived in a small European town [16]. In anticipation of the outcome, Hagelin and DIRNSA entered into a Gentleman's Agreement or, as they called it, a Gentleman's Understanding, for a period of 6 months, during which time the details of the renewed Hagelin Negotiations would be finialised.

Although the exact details of the negotiations with Hagelin have not yet been declassified, it must have been a very serious matter, as it took the NSA twelve months, rather than the anticipated six months, to come up with a suitable proposal. Finally, in February 1955, Friedman went to Zug (Switzerland) for a 'personal' visit to Boris Hagelin, with the intent to present him a new proposal.

In the meantime, in June 1954, the Analytic Equipment Technical Committee — who are tasked with breaking alien cipher systems — asks their research team to review the current codebreaking equipment and evaluate the impact of any newly developed cipher machines, such as the CX-52. In their final report of 15 November 1954, the special study group reported on page 18 [27]:   The Hagelin C-38 is well covered at present by computer
programs and special-purpose machines.  Any CX-52 traffic that appears
will tax our present facilities severely.  It will require more compli-
cated, faster programs; and most of the present special-purpose equipment
will not be applicable.

The following information was extracted from the report that Friedman filed on his return to the US, on 15 March 1955. Unfortunately, much of this report has been redacted, but fortunately, there are three versions of this document, each of which has been redacted differently [18]. As a result we are able to fill-in some of the gaps and get a more complete picture. In February 2020, we were able to fill in even more of the gaps, after the revelation of Operation Thesaurus/Rubicon — the secret purchase of Crypto AG by BND and CIA.
Friedman's visit to Zug   1955
21-28 February 1955

In late 1954, NSA director Ralph Canine advised that the Hagelin negotiations should begin again. On 17 December, the USCIB authorised a visit to Zug, where Friedman would propose a new deal: in return for controlled sales, USCIB will authorise a statement to NATO that, if properly used, the CX-52 provides good security. USCIB hopes that this proposal will satisfy Hagelin.  More...

On 21 February 1955, Friedman arrived in Zug (Switzerland) and stayed at Hagelin's home for a full week, during which time they discussed cryptography, business and private matters. Boris Hagelin's son, Bo, was also present during some of the meetings. During these meetings, Friedman asked about the differences between the various machine variants and about the customers that these machines were sold to. Finally, he put the authorised proposal forward.

Move to Switzerland
At this point in time, the factory in Stockholm (Sweden) was manufacturing the current C-line of machines (C-52 and CX-52) with a capacity of 60 to 80 machines per month. Besides these machines, the Stockholm plant had also received an order for 500 to 1000 old C-446 machines. Hagelin was about to close down the factory in Sweden and move the entire production and the production facilities over to a new building in Zug (Switzerland) as soon as it would be ready.

The top floor of the new building would be converted into an appartment for Sture Nyberg, the current plant manager in Stockholm, who would move to Zug with his family to become the new plant manager there. It was Hagelin's intention to let his son Boris Hagelin Jr. (Bo) take over the company when he himself would retire in two years time when he reaches the age of 65.

The message that the old C-446 is to be taken into production again, plus Hagelin's suggestion that he might want to make more, and sell them to other countries, clearly pleased Friedman.
The interior of the C-446-A, seen from the right.

Being very similar to the M209, Friedman reported about the C-446: This model is, of course, easier to solve than the new models. Production of the C-446 machines would be completed in Sweden, even after the move to Zug is complete, where the Johannes Gauge Company had taken over the building and the workers, and had been given the tools, jigs and dies on loan.

New technology
Amoung the things Friedman wanted to discuss, were the capabilities of the new machines, in particular the C-52 and CX-52, and the various variants of these machines. For this, Friedman and the Hagelins agreed to use specific (secret) designators, which are actually suffixes to the model name. First of all, Hagelin recognised the following two classes of C-line machines:

  • Class 1
    Where all keywheels advance the same number of steps. In the case of the M-209, the C-446 and a particular version of the C-52, the advance is 1 step. The machines in this class are not to be equipped for operation with One-Time Tape (OTT).

  • Class 2
    Where stepping is irregular and where OTT readers are provided, as well as equipment for producing OTT tapes. These machines use the new technology.
Class 1 machines
  • M-209
    No longer in production but still in use with the US Army and some of its customers. Available in large quantities on the surplus market.

  • C-446
    No longer in production but still in use by some countries, including The Netherlands. Would be taken into production again for a limited period, following an order for 500 to 1000 units by the Foreign Office and the Department of Defense of The Netherlands.

  • C-52
    By default, this model is compatible with the M-209 and C-446, but can also be made to function with interchangeable pin-wheels and with pin-wheels that have a larger number of elements (steps) than M-209 and C-446. The C-52 can be supplied with more than 6 pin-wheels and may also have more slide bars than the M-209 and C-446.
Class 2 machines
The Class 2 machines, i.e. the various CX-52 versions, were given a secret designator that was not printed on the model number plate of the device. In the list below, this secret designator is printed as a lower case suffix.

  • CX-52a
    This model is supplied with Standard A slide bars, which produce irregular or varying angular displacements of the key wheels, each wheel advancing 0, 1, 2, 3, 4 or 5 steps on each operation. This is the default and most secure version of the machine.

  • CX-52b
    This model is supplied with Standard B slide bars, which produce regular or fixed anglular displacements of the key wheels, all advancing the same number of steps, but the number of steps may be any one from 1 to 32. It is weaker than the a-variant.

  • CX-52c
    This model is compatible with the old types of C-machines, the M-209, the C-446 and a certain version of the C-52. It is the weakest of the models.

  • CX-52ak
    This is basicially a CX-52a that is enhanced with the so-called Complementary feature (here written as 'Komplimentary'), also known as the Hüttenhain feature. 1

  • CX-52bk
    This is a CX-52b that is enhanced with the Hüttenhain 1 feature. This variant is built by HELL (licenced by Hagelin) for the German and Austrian market for which HELL has an exclusive contract. It is the only version that is approved by Dr. Erich Hüttenhain 1 for use by the German Bundeswehr (Army), where it is known as the HELL H-54.

  • CX-52ck
    CX-52c with Hüttenhain feature. 1

  • CX-52/10
    This is a 10-digit numbers-only variant of the CX-52. These machines can be of the a, b or c type and may have the complementary feature as well. For example: CX-52ak/10.

  • CX-52/30
    This is a 30 character version of the CX-52, suitable for the Arabic (and possibly Russian) alphabets. For example: CX-52/30 Arabic.

  • CX-52/RT
    This is the Random Tape or One-Time Tape (OTT) variant of the machine.
HELL H-54 (CX-52bk) aside a CX-52ak (right)

  1. During WWII, Dr. Erich Hüttenhain was the chief cryptologist of the Third Reich. After the war, he was employed by the newly established German Intelligence Agency, Organisation Gehlen (OG), which in 1956 became the Bundesnachrichtendienst (BND).

Customers   1955
One of the goals of Friedman's visit to Zug, was to find out what models Hagelin was selling to which customers. When asked, Hagelin gave a full rundown of his current customer base, without any hesitation, and provided details of the machines he has sold or was currently selling to them:

  • Egypt
    Negotiating for 50 x C-52 and 10 x BC-52
  • Jordan
    10 x C-52, 20 x BC-52 (UK is paying for this order)
  • Iran
    No agent, no interest
  • Iraq
    Negotiating for 50 to 200 x C-52 with Arabic characters
  • Syria
    50 x C-36 1
  • Saudi Arabia
    No agent, no sales yet
  • India
    Interested in C-52 and BC-52
  • Pakistan
    Waiting for C-52 for Hindustani (29 or 30 characters)
  • Belgium
    200+ x CX-52a, 100 variable type wheels for C-446
  • France
    80 x CX-52a, 20 x CX-52a/10 (for study), interested in HX
  • Portugal
    5 x CX-52a
  • Italy
    Awaiting NATO viewpoint on CX-52
  • Greece and Türkiye
    Interested, documentation sent. Trip postponed.
  • Holland
    500 to 1000 x C-446, some with OTT (C-446/RT)
  • Dutch Army
    Interest in CX-52 and BCX-52.
  • United Kingdom
    2 x CX-52
  • Germany and Austria
    H-54 supplied by HELL (CX-52bk) 2
  • Sweden
    Will replace their C-446 by CX-52 units (long-term)
  • Spain
    Interested in C-52, no orders yet
  • Eire
    2 x CX-52
  • Indonesia
    20 to 30 x C-52 (waiting for order)
  • Poland and Hungary
    2 x C-446 each 3
  • Jugoslavia
    Interested in C-machines 4
  • Central America
    Not much interest (see below)
  • Costa Rica
    2 x C-446
  • Cuba
    Initially interested, but no sales
  • Mexico
    Currently trying to raise interest
  • Venezuela
    About to order some machines
  • Brazil
    60 x CX-52c, interested in 500 more
  • Argentine
    13 x CX-52c
  • Chile
    Not much interest, will buy some
  • Peru
    Interested in 200 x CX-52
  • Paraguay
    No interest
  • Uruguay
    5 x CX-52, 2 x BC-52 (first experience with crypto)
  • Columbia
    100 x CX-52, 40 x BCX-52
  1. Being asked by Friedman where he got the old C-36 machines from, Hagelin replied that they had found some in the basement of the plant in Stockholm.
  2. The CX-52bk (or HELL H-54) was the only model that was approved by Dr. Erich Hüttenhain for use by the German Bundeswehr (Army).
  3. The head of Swedish COMINT, Rossby, didn't think the Russians were helping their satellites with cryptographic advice or material. Friedman decided not to comment on this.
  4. At this point, Hagelin was treating Yugoslavia the same as the Arab countries, but Friedman suggested to treat them as a satellite of the USSR (Russia). Hagelin replied: That's OK with me if you want it that way.

Teleciphering equipment
As announced in 1950, Hagelin now also produced equipment for the online/offline protection of teleprinter circuits. During the meeting, Hagelin told Friedman that the TC-52, which had been in production for a while, would soon be replaced by the improved TC-55. Both machines offer two types of encryption: built-in pin-wheel encryption and, as an option, One-Type Tape (OTT). The NSA was clearly worried about the availability of automatic OTT equipment to certain countries.

Pocket cipher device
Both Hagelins were very enthusiastic about a new pocket cipher device that was currently being developed. It uses six notched discs and operates just like the C-machines, albeit without the slide bars. The cipher discs would be made of plastic and should be user-configurable. Furthermore, Hagelin Sr. hoped to be able to add a small paper strip printer to the design.

Although Hagelin Sr. gave the impression that he invented the machine himself, his son Bo told Friedman in a private conversation, that it was actually his idea and that it was initially rejected by his father in 1951. The idea came to mind after repeated requests from various customers for a cipher machine that would fit a pocket.

A competitive pocket cipher machine – HC-9 – had just been introduced by the Swedish company Transvertex. It was developed by Vigo Lindstein, a former Hagelin employee, and appeared to be under evaluation by NATO.
The Transvertex HC-9, a portable cipher machine developed in Sweden by Vigo Lindstein, a former Hagelin employee.

According to Bo, this prompted his father to come up with an even smaller device, of which he now claims the invention. When Bo suggested that it was actually his idea, and that he would like to receive some royalties from it, his father had become furious, Bo told Friedman in confidence. Patents for the new machine, designated CD-55, had been filed and it would soon be taken into production. Various models were being considered, including one – if possible – with OTT.

Siemens and Halske
Many other interesting points were raised during the various meetings between Friedman and Hagelin on this visit, such as the modification of the B-211 for the French, and the production of HX and CX machines by the private French company Societé Electronique Automatisme (SEA).

Another point that was raised, is the current situation with Siemens and Halske. Although the German Siemens company clearly was a competitor of Hagelin, there were strong connections and there were frequent exchanges of information between the two companies, some of which in relation to the work of Dr. Erich Hüttenhain, the former Cryptologist of the Third Reich who now works for the German Intelligence Service, the Bundesnachrichtendienst (BND).

At several moments in history, Hagelin contemplated selling his company to Siemens, but this never happened. In the talks with Friedman, Hagelin mentioned that the relations with Siemens and Halske had been formalised in a signed contract. As a result, Siemens would not make any crypto­machines themselves and Hagelin would refrain from producing teleprinter machines. In this contract, the market for teleciphering machines had been divided as follows:

Siemens alone
  • West Germany
  • West Austria
  • Jugoslavia
  • Portugal
  • Ireland
  • America (all except Brazil, USA and Canada)
  • Africa (all except Egypt)
  • Asia (all except India, Indonesia and China)
  • Australia
Crypto AG alone
  • France
  • Italy
  • Switzerland
  • Sweden
  • Norway
  • Benelux 1
  • Brazil
  • Egypt
  • India
Siemens and Grypto AG together
  • Denmark
  • Greece
  • Spain
  • Indonesia
Areas not yet agreed
  • Finland
  • Russia and all satellites
  • East Germany
  • China
  • USA and Canada

  1. Benelux is the abbreviation for Belgium, Netherlands and Luxemburg.

The Hagelin Deal   1955
On the evening of 25 February, after having been Hagelin's guest for several days, Friedman felt the time had come to place the NSA proposal before Hagelin, or as he wrote in his report:

... the real object of my visit to Zug
He began by thanking Hagelin for his patience and for keeping his part of the Gentleman's Agreement, despite the fact that the NSA had exceeded the deadline. NSA had been struggling for more than twelve months – rather than the anticipated six – to work out a proposal that would be satisfactory for them (the NSA) as well as perhaps acceptable to Hagelin. They had hit upon a simple one that Friedman was now authorised to present to Hagelin.

Hagelin replied by thanking Friedman for the appreciation and understanding of his position and for various favours that were done for him and his family, in particular for his son-in-law Conradi and for his wife's cousin Miss Barth, who had been given a position at the NSA or the US Army.

Friedman then conveyed to him practically verbatim the terms of the proposal authorised in USCIB: 29.14/29 of 27 December 1954. He told Hagelin that he did not have to decide right away, and that he could take some time to think it over, but to his great surprise, Hagelin accepted the proposal then and there, without any reservations or desire for modifications.

When Friedman offered him to ask DIRNSA to confirm the deal in a formal letter, Hagelin replied that he didn't want anything with respect to this deal on paper. Although the contents of the proposal authorized in USCIB: 29.14/29 are still classified, we now know the details:

  • From 28 February 1955 onwards, the agreement between NSA and Hagelin is official
  • The deal is secret and is open-ended (i.e. no end-date)
  • Hagelin will refrain from selling to proscribed countries 1
  • Hagelin will not be payed for this
  • Hagelin will continue to supply information to NSA
  • NSA will write the brochures and manuals for the CX-52 models [21] 2
  • NSA will approve CX-52 for NATO (if properly used)
  • NSA will write the 'proper usage' manual for for NATO 3
In addition to this, we can make the following 'educated guesses':

  • Hagelin will continue to receive personal favours for him and his family
  • Hagelin will be able to buy back several lots of M-209 machines
  • Bo Hagelin Jr. has asked for a TYPEX machine which Friedman hopes to find for him
  • The US Army will place a large order for C-52 and CX-52 machines
  1. Hagelin will not sell secure machines (like CX-52 and OTT machines) to countries on this list.
  2. These manuals were written by Dr. Harold J. Stukey and Francis A. Raven of the NSA [16].
  3. In order to make best use of their machines, Hagelin usually released a manual for 'proper usage'. For the machines used by NATO, it was agreed that NSA would write this manual. This could imply that Hagelin received NATO orders as part of the deal with the NSA, but this can not be confirmed at present.

CX-52 Manuals
In the past, Hagelin had noticed that some of his customers were not using their cipher machine to the best of its abilities. For example: the configurable pins on the pin-wheels and the lugs on the sliding bars can be set up in such a way that the cipher period 1 is shortened. In order to avoid such situations, Hagelin issued a manual for 'proper usage' for each of his machines.

One of the outcomes of the Hagelin Deal was that NSA would provide the manual for 'proper usage' of the CX-52. The manual would be written by Dr. Harold Stukey and Francis A. Raven, two high ranking cryptologists at NSA. Although this can be seen as a gesture of courtesy on behalf of the NSA, it is far more likely that it was used by NSA to weaken the cipher by manipulating the instructions for best use. It took the NSA seveal months to complete the manual, during which time Friedman regularly kept Hagelin informed about the progress.

During the meeting, Hagelin was clearly worried about the proper use of his machines by NATO. He asked Friedman how he could assure that NATO uses the devices properly. Friedman answered that he does not need to worry and that the NSA will take care of that too. This means that NSA would also write the instructions for best use for NATO. This fits in with the NSA's desire of the 1950s to improve the overall cipher security of their NATO partners, in particular that of France. 2

  1. In cryptography, the cipher period is the time it takes for the key stream to repeat itself.
  2. At this point, France was known to use weak cipher systems and/or use their stronger cipher systems in an improper manner, as a result of which many NATO secrets had leaked to the USSR (Russia). Various memos in the Friedman Archive confirm that NSA was determined to fix this leak.

Bo the spy
It is worth noting, that during Friedman's visit he became aware of problems in the relationship between father Boris and son Bo. He made two remarks: (1) Bo had acquired the exclusive sales rights of the new portable CD-55 cipher machine, and (2) Bo offered to spy by providing copies of internal correspondence, if that would help to cement the relationship with the Americans.

The first remark (CD-55) would eventually get in the way of a smooth relationship with the Americans, who regarded Bo Hagelin as an unguided missile, more inclined than his father to sell to the highest bidder, rather than to a friendly nation [28].

Friedman's retirement   1955
On his return from Zug on 3 April 1955, Friedman suffered a heart attack and was hospitalised, which delayed the implementation of parts of the agreement. After he was discharged from the hospital, Friedman worked from his home for a while and wrote to Hagelin several times.

Later that year, in August 1955, Friedman officially retired from the NSA but remained working for the agency as a consultant. Due to his bad health — he had a serious heart condition — he was no longer able to handle Hagelin directly and was forced to take a step back. He was replaced by Dr. Lawrence (Larry) Shinn, who would later be replaced by Howard Barlow.

Down the drain
The Hagelin deal had imploded the moment Friedman entered the hospital. The first problem was the deal that NSA would write the manual for proper use for NATO. The organisation strongly objected and refused to do so. On 24 May Canine expressed Friedman's and his own dismay. But to no avail. NSA disliked the USCIB agreement and Sinn wrote a letter to Hagelin, asking him to stop informing potential customers that NATO approval was forthcoming. Clearly, it was not.

NATO was rolling out AFSAM-7 (KL-7) and not some mechanical Hagelin machine. Sales of CX-machines to NATO countries would eventually dry up. Another problem was the list of proscribed countries. The COMINT department of NSA protested, as this was actually a list of targets, which NSA was very reluctant to share with anyone, least of all an uncleared foreigner. In late 1955, Sinn was ordered to visit Hagelin in an attempt to repair the broken relationship. He appologised for NSA's inability to keep their part of the bargain, and – to his surprise – Hagelin accepted.

During Sinn's visit, Hagelin was asked about sales of CX-machines to Egypt, that had been brought to the NSA's attention, but Hagelin said he knew nothing about that.

Bo's move to the US   1956
Although Hagelin initially wanted to let his son Bo take over control of the company after his planned retirement in 1957, he had his doubts about the competence of his son and feels it would be better to let him run his own business for a while. He suggested that Bo should handle the Latin American crypto market, before taking over the company completely. Bo, meanwhile married to his American wife Edith, moved to Washington where he set up his own business.

Friedman's visit to Zug   1957
22 September 1957

Broken promises
Dr. Lawrence Shinn, who replaced Friedman after his retirement, only lasted throughout 1955. After a couple of visits to Hagelin, in which he tried to repair the broken relationship, he was replaced in 1956 by Howard Barlow, an NSA COMSEC engineer who had previously travelled Europe together with Friedman, to check out crypto firms. But like Sinn, Barlow didn't last.

It was clear that Hagelin was not happy. The Americans were not promoting the CX-machines to NATO (on the contrary), surplus M-209 machines were still 'leaking' onto the market, his main competitor Siemens was selling to countries that Hagelin was not allowed to sell to, and French intelligence people had rumoured that the Americans and British services disliked Hagelin.

Sales of CX-machines to denied countries in 1957

In the meantime, the new CX-machines were piling up in his warehouse. In early 1956, Hagelin began to covertly sell them to denied countries. By late 1957 he had sold 347 machines to Asian and Middle East countries. In addition, he started selling to Latin American countries, but since the US did not want to admit that these were targets, there was nothing NSA could do about it.

Friedman returns
In the summer of 1957, during a planned visit of Barlow to the factories in Stockholm and Zug, Hagelin specifically asked for Friedman to meet him in Zug in order to continue the talks with regard to the Gentleman's Agreement, and to see the latest developments. Friedman was recalled from retirement and arrived in Zug on 22 September 1957, authorised to modify the agreement. He stayed at Hagelin's home for a week, during which many subjects were discussed [22].

During this week, Hagelin himself briefly travelled to Paris for a meeting with the French Army, where he received a large order for cipher machines. On his return he reported the French order to Friedman. During Hagelin's absence, Friedman had visited the factory and laboratories and was shown the latest developments by manager Sture Nyberg and chief developer Oskar Stürzinger.

Hagelin and Friedman spoke at great length on a variety of subjects, customers and competitors. Friedman seemed to be very interested in what Siemens was doing with respect to their online OTT systems and how they were handling the problem of radiation (TEMPEST).

Re-injection patent
The first thing to be discussed between Hagelin and Friedman, was patent 2,802,047 that Hagelin has filed in the US in October 1953 and that had been granted just last month. Although it was granted in the US, the patent had been declined in Japan and Hagelin was wondering why.

The patent describes a cipher machine in which more contacts are used on the cipher wheels than are actually needed, and where the extra contacts of the output of the drum are looped back to the input. This method can be described as re-entry or re-injection and would be used in Hagelin's new HX-machine that was underway.

Friedman was shocked when he saw the patent, but didn't share that with Hagelin. The principle of re-injection was registered by the US around 1940 in a secret patent, so Hagelin's attempt should have raised a declaration of interference.
The American AFSAM-7 (later: KL-7) that uses the re-injection patent

The re-entry principle was conceived during WWII by Albert Small, whilst working for the Army Signal Intelligence Service (ASIS), trying to solve the high-level Japanese diplomatic Purple cipher. It is covered by US Patent 2,984,700 and has since been used at the heart of the high-level American cipher machine AFSAM-7 (later: KL-7) shown above, that was also adopted by NATO.

Although officially Hagelin should not be aware of the existence of the AFSAM-7, in later talks he mentioned that many of its operators are experiencing contact problems with the rotors. 1 This proves that Hagelin was well aware of the existence of the machine and that he might have been aware of the re-injection principle being used in it. He also explained how he conceived the idea after a trip to Bonn in 1952, were he was told something 2 by Dr. Huttenhain, followed by discussions with his chief developer Oskar Stürzinger, but stressed that it was his own idea.

 More about the KL-7

  1. This is actually correct; KL-7 was notorious for its many contact problems if the maintenance instructions were not strictly followed.
  2. It is currently unclear what Hüttenhain told Hagelin on this occasion, or what Hagelin discussed with Stürzinger afterwards, as the original document is redacted at this point. It is entirely possible though, that Hüttenhain was talking about the AFSAM-7. The same principle was later also used in the Russian Fialka.

Problems with Bo
From his arrival on the 22nd, it had been clear to Friedman that there were problems between Boris Hagelin Sr. and his son Bo. Since arriving in the US, where he now handled the sales of cipher machines to the Latin American countries, Bo had been spending too much money (privately) and had even asked Boris for US$ 25,000 as an advance payment on his inheritance.

After sending the US$ 25,000 plus another US$ 5,000 to Washington, Hagelin, irritated by his son's financial conduct, said that no more money was to be sent to him. According to Boris and his wife Annie, the problems were largely due to compatibility issues with Bo's American wife Edith. Dr. Hell, who had visited Bo in the Spring of 1956, had reported that Bo was homesick for Switzerland and wanted to return to Europe, but that his wife Edith had insisted to stay.

Hagelin confined to Friedman that he had contemplated merging his business with Siemens as he was tired of being the only whipping boy. Once merged with Siemens, they could take over the handicaps imposed by limitations and restrictions as to whom I can sell what machines, Hagelin said. Friedman asked whether he has thought of merging his business with Hell, but Hagelin rejected the idea, as Hell was in a different kind of business. Siemens would be more suitable.

Unknown to his son Bo at this point, was Hagelin's decision to finally move the activities from the Stockholm factory fully over to Zug, as he wanted all developments and operations in a single place. If they wanted, the Stockholm employees were allowed to move to Zug as well. Although Hagelin initially wanted to handover management of the company to Bo, he didn't see that happening in the nearby future, as a result of which he had to stay on for several more years.

Friedman also seemed to have trouble with Bo, as he reported to Hagelin that Bo was currently visiting every legislation and embassy in Washington in order to 'educate' them with instructional literature about proper usage of the equipment. There was one document in particular that bothered the NSA, and Friedman asked Hagelin what he can do about it. Hagelin replied that, whilst Bo is a citizen of the United States, the NSA is in a far better position to handle the issue.

OTT machines
Friedman and Hagelin had long discussions about Siemens and their use of OTT equipment. Hagelin had heard that Siemens was about to sell OTT equipment to a country behind the Iron Curtain, and wanted to know whether this was true. It was then that he learned that the German Government had given Siemens the green light to sell their OTT equipment, including suitable OTT generators, to every country in the world, except for the USSR and its satellite states.

Hagelin thought that his company would follow suit. Siemens was currently developing an OTT key tape generator for the German Government designed by Hüttenhain. For other customers they would order the key tape generators from Hagelin. Alternative generators were currently being developed at Lorenz, Olivetti and OMI. 1

Hagelin had developed OTT extensions for most of his existing cipher machines. This means that the pin-wheels of machines such as the C-446, the C-52 and the CX-52 could be removed and replaced by an optional drop-in OTT adapter.
Click to see more

Friedman was clearly impressed by the mechanical quality of the OTT assemblies and the relative ease with which they could be installed. He thought that they could be suitable for NATO countries and their allies. Asked again about Siemens, Hagelin revealed that they have already sold OTT equipment to Yugoslavia and probably also to Egypt and India. It would later turn out that on a recent trip to Yugoslavia, Sture Nyberg had made a large sale for Hagelin as well.

  1. Is is currently unknown what type of key tape generator was being developed by Dr. Hüttenhain (as this is redacted). Apparently neither Hagelin nor Friedman were aware that Willi Reichert was meanwhile developing the only true random generator for OTT production, the so-called 'Würfel' (dice).

Three categories
Something that was completely new to Friedman and that he had not heard from Hagelin in any of his earlier conversations or letters, was the fact that Crypto AG now produced three different versions of each of their machines. Hagelin himself had initially thought that two categories would have been sufficient, but after talking with NATO people, Nyberg and Stürzinger had decided that three would be better. The three types or categories are:

  1. Best security
    Machines for the West or West-oriented countries, including NATO members and NATO-friendly countries. These machines will be the best Crypto AG can produce. They will offer the maximum flexibility with regards to usage, and will have OTT capability where appropriate. These machines will also be properly shielded against unwanted radiation (TEMPEST) and will be supplied with instructions for proper usage.

  2. Medium security
    Machines for the friendly neutral countries. These machines are not as flexible as the Type I machines. Countries belonging to this category have not yet been determined, but Finland, Switzerland and Pakistan are suggested.

  3. Low security
    These machines offer the lowest quality and flexibility. They will have a simpler keying mechanism and can not be equipped with an OTT option. The Middle East, Asia, USSR and satellites fall into this category, as do Indonesia, India and Egypt.
Lacking NSA cooperation with respect to writing the manuals, Hagelin reported that he has done it himself. The brochures, instruction manuals and guidelines for proper usage would be different for each category and would have 'secret marks' to make them distinguishable. According to Hagelin it would be difficult but necessary, to record which version each country is using.

The pocket devices
The pocket cipher devices, that Hagelin had talked about on their previous meeting in 1955, were now ready and in production. There are two different versions, the CD-55 and CD-57, that are cosmetically identical. In other words: the average user will not be able to tell them apart.

The CD-55 would be available to all customers in all countries, and would be housed in a green case. It's operation is similar to that of the C-38, C-446 and M-209 and the machine would therefore be easy to break or solve by the NSA.

The second variant is the CD-57 that is built around the new keying mechanism, similar to the one used in the CX-52, although from the outside this is not visible. In addition, the CD-57 can be converted into an OTT machine quite easily, by removing the keying mechanism and replacing it with a drop-in OTT adapter.
Pocket Cipher Device CD-57

The CD-57 is housed in a grey case 1 and would only be available to NATO (friendly) countries. Although it was intially planned to have a small built-in printer, this was dropped in the final version. Instead, the operator now reads the output from an revolving alphabet disc at the front. Furthermore, the cipher discs are now made of aluminium rather than plastic. According to Boris Hagelin Sr., the small CD machine would be suitable for secret agencies and small army units.

  1. According to Hagelin, the CD-55 is housed in a green case, whilst the CD-57 is grey. He probably refers to the colour of the Hamerite paint here. For NATO, the CD-57 was also avaialable in olive green.

Willi Reichert
Before Friedman arrived in Zug, he had made a brief stop in Frankfurt where he was brought up to speed by his colleagues at NSAEUR and ASAE. They informed him about a certain Willi Reichert, who was selling surplus WWII Siemens T-52 machines (also known as Geheimschreiber, Tunny and Sturgeon) to the French. He asks Hagelin whether he knows Willi Reichert.

Hagelin replied that he doesn't know him personally, but that he doesn't think very high of him as he sells to both sides. Hagelin thought that Reichert had some kind of 'secret cache' from which he obtained the old machines and spare parts, but that his supply was about to dry up.

It is unknown why NSA was interested in Willi Reichert, but it must have been around this time, that Reichert had obtained a patent for a noise generator, from Dr. Werner Liebknecht at Lorenz. Reichert needed it to build a true random number generator for the creation of OTT tapes for the German Government in Bonn. He built a successful business from this and would later move his company to neutral Austria, where it existed until 2018 as Mils Electronic.

Siemens engineers had recently discovered that radiation from a cipher machine (both acoustic and electromagnetic) could lead to unwanted leaking of information. In some cases it had turned out to be possible to recover most of the plaintext from an intercepted signal, in particular when using landlines for transmission. During his short stay in Frankfurt, Friedman was updated on the subject and he now wanted to find out how much Hagelin knows about this topic.

Hagelin seemed to be well-informed as he told Friedman pretty much the same as what he had learned in Frankfurt. Like Siemens, Hagelin was now taking the necessary precautions to shield the machines against such radiation. According to Hagelin, the French were also aware of the problem, but didn't take it very seriously. For Friedman this confirmed the French situation. 1

Although Friedman acted as if this whole radiation issue was new to him, he must have been familiar with it, as it was known at NSA for quite some time, and had certainly been exploited by them. Unintended leaking of information, or unwanted emanations, is also known as TEMPEST.

  1. For a number of years, high-level NATO information had been leaking to the USSR (Russia) due to insufficient cipher security by the French (see also above).

Visit to France
Whilst Friedman was his house guest, Hagelin left him for a couple of days for a scheduled meeting with the French Interdepartmental Committee on Cryptography in Paris. On his return, sooner than expected, he gave Friedman an account of his business with the French, and shared with him that he had just received an order for about US$ 250,000 for CX and TC machines. The machines were intended for use by the French Army, the Air Force and the Foreign Office.

Whilst in Paris, he briefly discussed his Gentleman's Agreement with the French, who told him that they too would be very happy if he would refrain from selling certain machines to certain countries, but that they had no legal means of forcing him to do so. Despite this, they give him substantial orders for equipment, not just one or two like the US, Hagelin jokingly added.

Barlow's visit
Friedman's intervention was appreciated by Hagelin, and the relationship with Howard Barlow – his new NSA contact – improved. In November 1957, Barlow visited Zug again to talk with Hagelin and they parted as good friends. On his return in Washington, Barlow reported that he thought Hagelin was also pressed with sales restrictions by the French and Swedes. His was certain of Hagelin's loyalty towards the Americans however, as he was well aware of the M-209 threat.

The aftermath   1958-1993
In the following years, Friedman's health deteriorated, sending him in and out of the hospital. As a result, he would be unable to visit Hagelin in Europe in the foreseable future and did most of his work from the study in his home. Financial (tax) issues prevented him from travelling on his own expense and the agency wouldn't permit him to visit Hagelin anyway, he wrote in 1961.

In 1962, Friedman picked up a consultancy job at RCA and started thinking about leaving his collection to some organisation. After Princeton University turned down his offering, he decided to come over to Zug (Switzerland) and work with Boris Hagelin on writing the latter's biography. He even wanted to move to Europe permanently, but this never happened. He loved the US more.

On his return to the US, Friedman wanted work out the notes and tape transcripts of Hagelin's biography, but recurring health problems prevented him from doing so. In spring 1966, Hagelin's wife Annie didn't feel well and after a short illness she died on 29 November 1966, just a month after she and Boris had moved into their new appartment in Minusio (Switzerland).

In 1967, Friedman found the Marshall Foundation willing to accept The Friedman Collection and look after it. In September 1967, Elizabeth Friedman wrote that Bill now had dayly visits from a typist of the foundation, who was taking down his oral history. Bill was too weak to write or type himself but he was feeling better. She also wrote that Bo was having troubles with his wife Edith, and that Bill was being plagued by newly released books by David Kahn and Farago. Apparently both men had approached Friedman several times and he had difficulty fighting them off.

In May 1968, Hagelin planned a trip to the US and was invited to Friedman's home again. He wanted to talk about the activities in Zug and about new technologies, such as integrated circuits that they were now using in their devices. On his arrival on 8 October however, Friedman had just suffered another heart attack, so they had to meet in the hospital in Washington.

Over the past 10 years, the relationship between Boris and his son Bo had not been too well, to put it mildly. Although they wrote each other occasionally, and no longer fought over the CD-57 patent issue, they each did their business in their own part of the hemisphere. Friedman on the other hand, had built quite a good relationship with Bo in recent years and saw him regularly.

In March 1969, Friedman's health had improved enough to write a long letter to Hagelin in which he commented that Bo had recently mentioned that he hadn't seen his father in the past 5 or 6 years, whilst he (Bill) had seen him at least three times in the recent past. He hoped the two would see each other again soon and spend some time together. A month later, he returned the hand-written biography of Hagelin to Zug, as he has no energy left to finish it. He hoped Boris would find a good biographer to complete it. In November 1969, Friedman died at the age of 78.

Sadly, Bo died the next year in a fatal car accident. Soon after that, Boris Sr. resigned from the board of Crypto AG and finished his memoirs a few years later in 1979, first in German [2] and then in 1981 in the English language [3]. By the time he dies on 7 September 1983 – aged 91 – he leaves behind a healty company with customers in over 130 countries. He leaves a legacy of beautifully crafted mechanical cipher machines, but he also leaves Crypto AG his clouded past.

UPDATE — Unknown to Friedman, Boris Hagelin had meanwhile opened negotiations with the CIA and the German BND about procurement of his company. On 12 June 1970, the CIA and BND secretly purchased Crypto AG as part of a secret operation codenamed THEASAURUS (later: RUBICON), just six months after Friedman's death. Bo Hagelin, who was against the deal with the CIA and BND, died in a car crash five months later.
Der Fall Hans Bühler   1992
In 1992, Crypto AG sales representative Hans Bühler, was arrested in Iran on the suspicion that the Hagelin cipher machines used by the Iranian Government were flawed, or in more popular terminology: that they contained a backdoor. A loose remark of US President Ronald Reagan about evidence against Libya made them to believe that Crypto AG was cooperating with the US.

Bühler, fully unaware of any manipulation with the machines, was interrogated three times a day for nine months and was finally released in 1993, after the bail of US$ 1,000,000 was payed by Crypto AG. This incident is certainly not the finest period in the history of Crypto AG.

Immediately after Bühler's release from prison and his subsequent return to Switzerland, he was fired and, in addition to that, the company wanted him to repay the US$ 1,000,000. Bühler then decided to go public and confined his story to a book that is published in 1994 [23].
Cover of the book 'Verschlüsselt, Der Fall Hans Bühler'

The Swiss Federal Police, the Bundesanwaltschaft, investigated the matter and questioned several people, and reported that no irrefutable evidence against Crypto AG was ever found. The outcome of the investigation however, remains classified to this day and repeated requests from journalists for public disclosure of the results of the investigation have been denied so far.

Since Hans Bühler went public, some of his former colleagues have decided to come out as well. Former software engineer Jürg Spörndli confirmed that the company was visited frequenty by NSA specialists and that on several occasions he was instructed by his manager to swap a crypto­graphic algorithm that he had developed, for an alternative one that was clearly weaker [24].

In 2008, Crypto Museum had the priviledge to have a private talk with Oskar Stürzinger, former chief engineer at Crypto AG and first employee of Boris Hagelin when he established his company in Switzerland [25]. When asked about the case of Hans Bühler, he confirmed that the company had frequent visits from NSA people who had meetings with software engineers and that on some occasions he wasn't even allowed to be present in the room. He said it made him feel uneasy. 1

Stürzinger also confirmed that since the Bühler case had become publicly known, there have been governmental investigations. As a result, the current management of Crypto AG had taken the necessary measures to ensure that this should never happen again. He was confident about that.

 More bout the Hans Bühler affair

  1. It has since become clear that Oskar Stürzinger was fully aware of CIA/NSA involvement at the time [28].

From the evidence found in the documents from the Friedman Archives [1] — (partly) released by the NSA in 2014 — it has become clear that some kind of agreement existed between the NSA and Hagelin as early as 1951 and that this agreement was reviewed and/or renewed several times, in any case in 1955 and in 1957. This agreement was never confined to paper and did not have a termination date, and it is likely that it continued after Hagelin's death in 1983.

In closing, we feel that we should say a few words in Hagelin's defense. Given the fact that he had a very good relationship with the Americans — in particular with Bill Friedman — and that they brought him his initial fortune by allowing him to supply cipher machines to the US Army during WWII, it seems only natural that he remained loyal to his old friends. From the correspondence between him and Friedman, we get the impression that he was a man of his word, and that he did what he did with the best intentions with respect to safety in Europe and in the rest of the world.

The above story is the result of extensive research in the Friedman Collection of Official Papers by the British Broadcasting Corporation (BBC) and Crypto Museum in July 2015. It was the subject of a radio program that was aired on 28 July 2015 on BBC Radio 4 [26]. In an official reaction to the BBC, Crypto AG issued the usual deniel statements:

... whatever happened in the past, this is certainly not happening today [...] mechanisms have been put in place, to prevent this from happening in the future.
In 2020 however, the German TV station ZDF revealed that since 1970, the company was jointly owned by the German BND and the American CIA, and since 1994 exclusively by the CIA [28]. It means that for many years, Western intelligence services were able to manipulate the algorithms of Crypto AG's products and read the communications of many of its customers. Although the company also sold unreadable 1 equipment, the list of countries that had access to such secure technology became shorter every year. According to the NSA, all encryption should be readable.

 For further details on this topic, please refer to our follow-up story Operation RUBICON.

  1. In this context, readable means that the cryptographic algorithms could be broken by the NSA. Also known as friendly. In contrast: algorithms that are not breakable by NSA, are called unfriendly or unreadable.

  • Boris Hagelin Sr.
    Founder and initial owner of Crypto AG.

  • Boris (Bo) Hagelin Jr.
    Son of Boris Sr. who was supposed to take over the company in due course. Died in a car accident in 1970, just five months after Boris had sold Crypto AG to BND and CIA.

  • William (Bill) Friedman
    Cryptologist during WWII. Worked for AFSA and later for NSA. After his retirement he remained an NSA consultant.

  • Oskar Stürzinger
    First employee of Hagelin in 1952 after the company had moved to Zug (Switzerland). Head of developments at Crypto AG. Worked for Gretag before joining Hagelin.

  • Sture Nyberg
    Hagelin's factory manager in the Stockholm factory, later factory manager in Zug.

  • Dr. Erich Hüttenhain
    Former Cryptologist of the Third Reich who later worked for the German Intelligence Service, the Bundesnachrichtendienst (BND).

  • Hans Bühler
    Top Crypto AG sales representative who was arrested in Iran in 1992 on the suspicion that Crypto AG equipment had a backdoor.

  • Dr. Rudolf Hell
    Inventor of the Hellschreiber and the fax. Also manfacturer of the H-54 cipher machine under licence from Hagelin. Had an exclusive contract for the supply of these machines to the German Army (Bundeswehr).
AFSA   Armed Forces Security Agency
Predecessor of the NSA (1949-1952).
ASA   Army Security Agency
DIRNSA   Director of the NSA
Common abbreviation for the director of the National Security Agency (NSA), also referred to as Director, NSA.
USCIB   United States Communications Intelligence Board
ASAE   Army Security Agency Europe
  1. Declassified by NSA on 17 June 2014 (EO 13526).

  1. NSA, William F. Friedman Collection of Official Papers
    Retrieved July 2015. 1

  2. Boris Hagelin, Die Geschichte der Hagelin-Cryptos
    Original manuscript by Boris Hagelin in German language. Zug, Fall 1979.

  3. Boris Hagelin, The Story of Hagelin Cryptos
    English translation of the above. BCW Hagelin, Zug, Spring 1981. Later edited by David Kahn and published in Cryptologia, Volume 18, Issue 3, July 1994, pp 204-242.

  4. Collection of M-209 patents and license agreements
    A66684. Declassified by NSA on 11 June 2014 (EO 13526).

  5. Boris Hagelin, Personal letter to William Friedman, 2 November 1947
    A2263076. Declassified by NSA on 30 July 2014 (EO 13526).

  6. William Friedman, Personal letter to Boris Hagelin, 8 November 1947
    A2263080. Declassified by NSA on 30 July 2014 (EO 13526).

  7. Boris Hagelin, Personal letter to William Friedman, 24 November 1947
    A2263085. Declassified by NSA on 30 July 2014 (EO 13526).

  8. Boris Hagelin, Personal letter to William Friedman, 13 December 1947
    A2263092. Declassified by NSA on 30 July 2014 (EO 13526).

  9. Boris Hagelin, Personal letter to William Friedman, 15 December 1947
    A2263095. Declassified by NSA on 30 July 2014 (EO 13526).

  10. William Friedman, Personal letter to Boris Hagelin, 21 December 1947
    A2263097. Declassified by NSA on 30 July 2014 (EO 13526).

  11. Boris Hagelin, Personal letter to William Friedman, 9 August 1950
    A58956. Declassified by NSA on 14 July 2014 (EO 13526).

  12. Boris Hagelin, Post-War development work on ciphering devices by Boris Hagelin
    26 January 1951. A72379. Declassified by NSA on 8 July 2014 (EO 13526).

  13. Release of Hagelin US Patent Application 188,546
    27 March 1952. A66665. Declassified by NSA on 10 June 2014 (EO 13526).

  14. William Friedman, Negotiations with Mr. Hagelin
    22 May 1951. Includes full report about AB Cryptoteknik, Stockholm, Sweden. A60611. Partly declassified by NSA on 6 November 2014 (EO 13526).

  15. James H. Douglas, Release of the M-209 to Foreign Nations
    Memorandum for the record, 15 October 1953.
    A66649. Declassified by NSA on 23 January 2015 (EO 13526).

  16. Thomas M. Larner, Converters, M209
    Memorandum for Director, National Security Agency. 15 December 1953.
    A66618. Declassified by NSA on 11 June 2014 (EO 13526).

  17. Ralph J. Canine, Release of M-209's to the French
    12 January 1954. A66647. Declassified by NSA on 10 June 2014 (EO 13526).

  18. William Friedman, Report of Visit to Crypto AG (Hagelin) 21-28 February 1955
    15 March 1955. TOP SECRET. Draft version with hand-written changes.
    A2436259. Partly declassified by NSA on 22 July 2014 (EO 13526).

  19. William Friedman, Report of Visit to Crypto AG (Hagelin) 21-28 February 1955
    28 March 1955. TOP SECRET. Final version.
    A2436243. Partly declassified by NSA on 22 July 2014 (EO 13526).

  20. William Friedman, Report of Visit to Crypto AG (Hagelin) 21-28 February 1955
    28 March 1955. TOP SECRET. Adapted final version.
    A60616. Partly declassified by NSA on 20 June 2014 (EO 13526).

  21. Captain I. T. McDonald, USAF, 16 June Comments of Mr. Friedman
    Memorandum for Colonel Davis, 17 June 1955.
    A62443. Declassified by NSA on 17 June 2014 (EO 13526).

  22. William Friedman, Hagelin Negotiations (draft)
    Report about Friedman's visit to Zug, 18 December 1957.
    A60669. Partly declassified by NSA on 20 July 2014 (EO 13526).

  23. Res Strehle, Verschlüsselt, Der Fall Hans Bühler
    Switzerland, 1994. ISBN 3-85932-141-2.

  24. Line Dugstad & Osman Kibar, Den skjulte partneren
    Dagens Næringsliv. Website. 2 january 2015 (updated 13 February 2015).

  25. Crypto Museum, Interview with Oskar Stürzinger
    Basel, 7 November 2008.

  26. BBC Radio 4, Document - The Crypto Agreement
    Evidence of a secret deal between Crypto AG (Hagelin) and the NSA.
    28 July 2015, broadcast, presented by Gordon Corera.

  27. S.S. Snyder, Report of Special Study Group on FARMER-NOMAD
    15 November 1954. TOP SECRET FROTH. Page 18.
    Partly declassified by NSA on 16 June 2014 (EO 13526).

  28. Crypto Museum, Operation RUBICON
    February 2020.
  1. This link might be disfunctional, as the NSA keeps changing its URLs.

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