A counterfeit five-pound note produced by the Nazis. It's almost impossible even for an expert to distinguish a top-quality Bernhard counterfeit from a real note.(Courtesy of Colin Narbeth & Son, London.) Click to Enlarge.

Krueger's Men:
The Secret Nazi Counterfeit Plot and the Prisoners of Block 19

This tale of true crime, which inspired the Academy Award winning film, "The Counterfeiters" is told here in full for the first time, stripping away the myths and illuminating the ironies of the scheme known as Operation Bernhard, which was named for the  SS officer who ran it.   It also contains a political allegory for today. As the greatest counterfeiting operation in history took shape inside an authoritarian government,  a tightly knit, self-reinforcing group pressed ahead with only the most perfunctory internal discussion.  The result was a technical success but a strategic flop and, in the crowning irony, an espionage blowback. Contrast that with the vigorous discussion inside Allied councils on whether to wage their own counterfeit war on the enemy. Even the most clever and imaginative military plans demand scrutiny through the critical questioning essential to democratic government.

Only a fortnight after the start of World War II, at a meeting that has remained a secret for more than half a century, officials of German finance and Nazi espionage approved an audacious plot to bring down the world's financial system. Hundreds of millions of forged British pounds were to become a weapon of war. Operation Bernhard not only became the greatest counterfeit scheme in history but the most wide-ranging and bizarre, with its own gallery of rogues.

Bernhard Krueger as a young SS officer (left), and in a mug shot taken by the British after the war. Photo Credit: British National Archives

Major Bernhard Krueger, a meticulously correct SS engineer, ran a production line of Jewish prisoners in Sachsenhausen concentration camp near Berlin. The millions of forged notes they printed were laundered through a Nazi confidence man with the help of Jewish agents who concealed their origins. Toward the end, one of Europe 's most accomplished professional forgers, the only career criminal in the operation, was brought in to counterfeit dollar bills.

In London, the arrogant grandees at the Bank of England could not believe their pound notes could be forged with such expertise and in such quantity. Even George Soros, the great speculator who broke the Bank of England fifty years later, almost got bilked as a boy on the Budapest black market. In one of the crowning ironies of many, after the war Golda Meir protected a millionaire Jewish money-launderer from British authorities in what was then known as Palestine.

Sir Kenneth Peppiatt, chief cashier of the Bank of England, whose signature appeared on every pound note--real and forged." (Bank of England photo)

The plot was hatched in Berlin on September 18, 1939, behind the imposing stone facade of what had once been Kaiser Wilhelm's Finance Ministry. Walther Funk, a pudgy former financial journalist whose principal task was keeping German industry in Hitler's camp, was the only one to register the least objection because he feared the counterfeit notes would upset his task of milking Hitler's conquered territories. Josef Goebbels, Hitler's propaganda minister, was not present but feared the "grotesque plan" might be turned against Germany 's own fragile finances by the Allies. In fact, Winston Churchill and Franklin D. Roosevelt toyed with the idea of counterfeiting enemy currency but their advisers rejected it.

Nevertheless, the second-rate minds of Nazi espionage believed they could weaken the pound as the trading standard and store of value underpinning the British Empire. Bullies and incompetents were at first put in charge of the operation. After several false starts, Krueger, a textile engineer, figured out how to match the paper, printing, and design of the impressive British notes. He found his forgers in Jewish death camps on the orders of SS Reichsfuehrer Heinrich Himmler. Some were plucked from Auschwitz by Krueger himself, who courteously addressed them with the formal German Sie.

The SS planned to keep the operation secret by killing them when the job was done. The prisoners worked with the knowledge that they were marked for death when they had finished their jobs. " From the start, they wondered whether they should stretch out their work and risk execution for sabotage, or perform efficiently and thus hasten their own deaths. No one ever knew for sure where Krueger stood, but by keeping the operation going, he kept himself from being sent to the Russian front. What all these men said and thought as they lived under this sword of Damocles makes chilling, personal drama.

From 1942 to 1945, the Germans forged more pound notes than all the reserves in the vaults of the Bank of England--132 million pounds, equal to about 15 per cent of all genuine notes in circulation and enough to cast suspicion on all of England 's paper money. They were worth $650 million at the wartime rate of exchange and six or seven billion dollars in today's money. By 1943 the Luftwaffe was almost kaput, so instead of pursuing their original goal of dropping the counterfeits on England to cast suspicion on real pound notes, the SS used the fakes to finance its own espionage service--whose discoveries Hitler ignored like all bad news--and to undermine and eventually absorb the German military's own intelligence corps. The SS specialized mainly in dirty tricks and, true to the nature of the Nazis' gangster regime, in skimming money to enrich themselves. So many counterfeit pounds flooded the black markets on the European continent and North Africa that Britain's currency came under widespread suspicion abroad, and its value plunged.

This undated and uncredited photo showing Barracks 18 and 19 enmeshed in barbed wire is believed to be in the Archives of the former Soviet Union.

The British defense was as weak as it was unprecedented. Normally nations at war guard their currency by prohibiting its export. Instead, the British imposed a wartime blockade on bringing pounds into the country to prevent the counterfeits from infecting the economy. Scotland Yard was powerless, and so was Interpol. Its Vienna headquarters had fallen into Hitler's hands when he swallowed Austria in 1938. The Nazis even fooled Swiss bankers, whom the British left swinging in the wind rather than let their secret defenses against counterfeits become known.

By the end of the war, Operation Bernhard had left its imprint. Through one of the Jewish money launderers, the Jewish underground passed on thousands of counterfeits to help the ingathering of exiles to Palestine and the purchase of war materiel for the nascent Israeli army. The Bank of England was so embarrassed by the massive counterfeit that it not only burned the fakes but some of its files. In the continuing and futile search for Nazi loot and bank records deep in the Alpine lakes where the SS dumped millions of forged bills, the financial and political ripples continued into this century.

Krueger's Men is based on interviews with survivors, unpublished memoirs, and previously classified files in official archives, some of which are reproduced on this website. False leads have been floated by Holocaust hucksters and false information on the internet. Film and print versions tell only part of the story, and some of that incorrectly. It now can be told in full from the inside, with its characters drawn from life. Like much Nazi lore, it stimulates the perverse fascination with Nazi totalitarianism and its infantile fantasies of absolute power, and it teeters on the edge of life and death to its final moments.