Payson and Macpherson Want To Set Up Intelligence Front For The OSS – International Economic Institute

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Overview

This CIA declassified document concerning OSS activities was recovered from the internet archive. It document was declassified in 2004.

This document is titled: Memorandum Covering Conversation between Mr. James E. MacPherson, Mr. DeVecchi and Mr. Hughes, Aug. 1, 1944

It is from: N/A to N/A –  Not able to be determined due to missing page 3. However, by process of elimination, by which names aren’t in the first 2 pages of the doc, we can tentatively deduce that it is going either from or to or between Devecchi and Hughes.

Please note: Unfortunately when Paul Wolf originally uploaded this and listed it under the Morale Operations Branch on his old site the third page image never uploaded properly.

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Document details

DATE: 1 August 1944

CIA # – 32176

NAMES (or titles) mentioned:

General Donovan
Whitney Shepardson
Walter Langer
James E. MacPherson
Mr. Devecchi
Mr. Hughes
Mr. Payson.

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Interesting points from documents –

Paul Wolf, who was in possession of all 3 pages, had this to note about this document –

Proposal for using a front corporation to channel AP news (illegally).

Payson and Macpherson set up a New York corporation known as the International Economic Institute, Inc. name changing shortly to International Economic Services Inc, also a New York corporation, with its accounts arranged with Chase Bank. Macpherson is the President, there are five directors, three of whom are “dummy” directors.

It sounds like this MacPherson character was running (or trying to) some sort of scheme, or even some sort of set up to sting the OSS with illegal activity. Using dummy directors, illegally feeding them information, even planting paid government personnel, any or all of which if caught would cause some serious credibility problems for the OSS.

Whoever is writing this document didn’t miss that, but what I find interesting is just how concerned he was with even the idea of being “subjected to severe criticism”.

He also used an interesting term I hadn’t heard of before, “tie-up”, to represent what it would mean if they did work together in this scheme.

Here’s the whole text, incomplete though it is.

I explained to Mr MacPherson that I had had been directed by General Donovan, Mr. Shepardson and Dr Langer to discuss in further detail the proposal made to General Donovan and others in Washington, on Friday 28 July, by Mesers Payson and MacPherson. In the course of a lengthy conversation, Mr MacPherson outlined his ideas as to his own set-up and how this might be of help to certain branches of the OSS. Mr Payson was not present, having been called out of the city.

Apparently Mr MacPherson has had an Associated Press membership through a small paper which he has run in New England. A short time ago, he arranged with the Press Association, which is controlled by the Associated Press, to work out a contract whereby he was to secure all of the copies of all of the intake by the AP from foreign sources. Mr Payson was drawn into the picture to supply the necessary money as Mr Macpherson’s plans involved a rather substantial overhead. As a result, the contract, made by the Press Association with MacPherson personally, was extended to Payson and MacPherson who have set up a New York corporation now known as the International Economic Institute, Inc. This name will be changed shortly to the International Economic Services, Inc, a New York corporation, having an account arranged with the Chase Bank. Mr MacPherson is the President of the corporation and there are presently five directors, three of whom, I understand, have been named by Mr Payson (it would appear, at the moment, that these are “dummy” directors). For the present, I also understand, My Payson is neither a director nor a stockholder. I gather that he has made substantial loans to the company and has an option to purchase 50% of the stock at some later date.

The contract with the Press Association will make available to MacPherson the daily AP intake, which he estimates at approximately one million words per diem; it also gives him the right to make special inquiries back to the field through the Associated Press. It is the purpose of the International Economic Services, Inc, to start an economic news letter or business service somewhat similar to that put out by Whaley-Eaton and by Kiplinger. Mr MacPherson expects to start work in about two weeks, with a staff of some twenty men plus the necessary clerical help. Apparently however, the staff has not been selected as yet and we were not able to get from him any names of economists or analysts who would be associated with him. He hopes to be ready late in September to be in a position to solicit subscriptions from various banks, industrial firms, institutions, etc. He estimates that the cost of this annual subscription will be $50 to $75.

I asked Mr MacPherson if it would be possible for us to secure a twenty-four or forty-eight hour intake of the AP materials which I could have examined by the R&A Branch as a sample of how much real meat was in this material. Mr MacPherson gave it as his opinion that under his contract the rough or raw material could not be passed over in bulk to anyone else. He stated that his idea was to have his staff analyze the material and pick out items which they thought might be of interest to us. He stated also that, at our direction, his staff could be on the lookout for material on such subjects as we might direct. He also stated that, at our direction, his staff would, of course, cable back into the field, through AP channels, to make special inquiry on matters desired by us.

Mr MacPherson stated again that neither he nor Mr Payson wanted to make any money on an arrangement with us but, of course, would have to charge for any extra expense involved by this tie-up. When asked for an approximate estimate of the cost, he said he was unable, at this time, to venture any opinion as the cost would really depend on how much we used this service both from and to the field.

Mr MacPherson then discussed, at some length, his desire to have space in the International Building, 630 Fifth Avenue, chiefly, I gather, because of the name of his company, the International Economic Services Inc and, also because the International Building is directly opposite the AP Building. I explained to him the situation here and I think convinced him that we had no available space which could be sub-let to him (he wants something over 2,000 square feet). Mr MacPherson then asked me if I knew where he could buy any furniture and office equipment. Quite frankly, I got the impression that all he had now was a good idea without office space, staff, clerical help or equipment. Since the value of his Service, as he proposes it, would depend on the quality, standing and character of his staff, I would be reluctant to recommend any tie-up until I had a chance to survey his personnel and sample his product. At one point in his conversation, he suggested that possibly R&A might want to put some of their people in his office as members of his staff to be paid by us but I told him that I thought, in his own best interests as well as ours, this would be most inadvisable. I pointed out that in a competing news service such as he proposes to set up Government paid personnel in space rented by him might render both of us subject to severe criticism. In this connection, I think

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Other Images and People

It should be noted that a corporation search of both opencorporate’s and NY state’s database did not yield any incorporation records for either of the above two entities mentioned.

International Economic Institute, Inc. or International Economic Services Inc.

However, guess where I did find proof that that second re-named one existed? In British intelligence asset and American journalist William Allen White’s newspaper – the Emporia Gazette of 5 October 1944. Seems he had an employee named Frank C. Clough who happens to have been working literally almost directly for Elmer Davis and the Office of War Information’s Censorship Office – Elmer being himself one big-deal Round table asset. A Cecil Rhodes scholar no less!

Frank C. Clough

image from Emporia Gazette 14 October 1938

The news blurb below says that Clough “resigned” to go work as the managing editor for this International Economic Services that our OSS document was directly talking about being worried about being exposed IF they had intelligence assets working for it that were paid by the government. Having Clough, who not only was in tight with two different British intelligence assets (White and Davis) appear to “resign” to now go work doing ILLEGAL (funneling information) to the OSS?

This – is a bombshell.

It seems the OSS went for it after all, or they wouldn’t have taken such a high-ranking Elmer Davis man to put him IN this place, yah? That’s what it’s looking like to me.

And the fact that the ONLY result whatsoever in all the newspapers at newspapers.com (which is like all of them, pretty much) happens to be also British intelligence William Allen White’s paper?

That’s ugly.

There is an interesting story in the Manhattan Mercury about the biography Clough had published about his boss White, and how White’s cars always have a 13 on the license. The fact that this article talking about it was on 13 October 1941, is rather tongue-in-cheek on someone’s part, that’s for sure.

Then there’s the fact that the image I included of Clough above, was part of an announcement that Frank had been elexted to the executive committee of the Associated Press Managing Editor association. The announcement notes that “Other directors of the association are mostly managing editors of large metropolitan dailies.

That’s our first clue something is up here, because why him? The Emporia Gazette was a podunk paper, by comparison basically. I say clearly this is one of those same “perks” William Allen White had at his disposal due to his traitorous service to certain members of British intelligence (and British nobility).

Clough was first assigned to the Office of Censorship just before it became part of the Office of War Information, an intelligence activity split out of the original COI (which became the OSS) in June of 1942.

This news announcement from the Iola Register (Kansas) 25 February 1942 talks about his assignment.

 

What’s interesting to me is why him? Why did he suddenly get chosen for this job? I think it had more to do with William Allen White and his long-time British intelligence connections, and somewhat being his right-hand man than it did with anything else.

He later ends up in the OWI Press division, as we see from his writing in Journalism Quarterly 20 September 1943, p. 222 “Operations of the Press Division of the Office of Censorship:”

He ended up in the middle of a press dispute deemed a threat to the Manhattan Project (building the nuclear bomb) – found here

Kind of an interesting story actually.

Over the next two months, more leaks about atomic power occurred in the Indianapolis News, New York Herald-Tribune, Columbus (Ohio)Dispatch,and Minneapolis Tribune.The latter was easily the most troublesome. Not only was it from a paper that had two former employees of the Office of Censorship, Bill Steven and William Mylander, but it showed the problem that publications had in determining what could be printed even when they were extremely familiar with the atomic power directive of June28, 1943.An August 24 editorial-page column in the Tribune,which was bylined by five staff members including Mylander, noted that the government’s War Production Board had announced that itw as imposing controls on the sale of uranium. It continued:

“To the average citizen this fact is neither interesting nor important. To physicists it’s a scalp tingler. The uranium atom has shown more promise than any other of yielding to science’s quest for a key to release sub-atomic energy.A race was on between Axis and United Nations scientists before war broke, and success had rewarded British-American efforts on a highly experimental basis. All known explosives are popgun affairs compared to the dreadful power sub-atomic energy might loose.”

When the Army pointed out the column two days later, the Office of Censorship immediately ordered postal censors to not export that issue of the Tribune outside of the United States.Price, who only rarely became involved in the day-to-day press censorship problems, wanted to “climb them hard” for what he considered a bad “bust,” and the Army offered to send an officer to the paper to “put the fear of God” into the editors.

Instead, the Press Division’s Frank Clough called the Cowles Newspapers’Washington bureau and spoke to Mylander, who said he found nothing wrong with the item because war experiments were not mentioned. Clough admitted such experiments did not appear, but he claimed that a reader could see the word “war” between “every word and every line” and that definitely made it a violation. Mylander still disagreed.

Therefore, Clough wrote Steven, the managing editor of the Tribune,and demanded to know why the short piece was published and asked for an assurance that such a “slip-up would not reoccur. Steven’s reply, in which he refused to make any promises, was testy. Like Mylander, he found nothing wrong with the item because it referred to pre-war matters and war experiments were not mentioned.Then, he said:

But I dislike arguing the matter on a basis like this.Censorship is not a science of semantics; it is a serious matter of keeping key facts from the enemy. The special requests, as Iunderstand them, are designed to indicate areas in which special danger may exist in publication of information….I cannot believe that the war is better served, the enemy unenlightened,or the general cause of voluntary censorship strengthed by insisting that newspapers shall not mention the element uraniumor pre-war experiments involving it…. Now maybe we’ve blundered .. ..Admittedly, we were in a field posted by censorship with signs of “Proceed With Care.”But it is my contention we did so proceed; that nothing of value to the enemy was published.

I am sending a copy of this to Bill Mylander, and I will ask him to take not more than two of you guys to lunch on the expense account and you tell him if we published something that really helped the Nazis.

The matter ended with the head of the Manhatten Engineer District, Gen. Leslie Groves, visiting John Cowles, one of the owners of the Cowles newspaper chain, to try to convince him of the seriousness of the paper’s story. His visit was effective. No more such articles appeared in any of the Cowles’ papers for the remainder of the war.

Well.

Ole Clough had quite the pull to bring in General Groves himself.

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Clough is mentioned in several books out there in regards his OWI work, like in despatches to Jack Lockhart and James S. Russell.

After the war, he ends up being the managing editor of Speidel Newspapers in Palo Alto, Ca. Perhaps an “after the war” perk of his own now?

Truman Library day book

1. Date: 4-17-1947 Time: 3:45 pm
The President received Member of the American Society of Newspaper Editors. The following attended:

Frank C. Clough, Speidel Newspapers, Palo Alto, California

By the 1950’s, he somehow ended up being one of the owners of Reno Newspapers Inc., as per announcement for creating Reno Evening Express in October 1954.

He retired in 1957 when Speidel Newspapers closed his Palo Alto office.

Next up –

Our other named people in this document were:

General Donovan
Whitney Shepardson
Walter Langer
James E. MacPherson
Mr. Devecchi
Mr. Hughes
Mr. Payson.

Donovan, Shepardson and Walter (not the same as William) Langer are already well-described in other analyzed OSS documents, articles, book chapters and posts here at the blog. Let’s see if there’s any info available on those other 4 names.

James E. MacPherson

Several things found, but none of them are definitive that this is the same guy.

Mr. Devecchi

Looks like his name was Robert, and he appears to have been OSS as he is mentioned in General William Donovan, selected OSS documents 1941-1945 RG 226 entry 180.

Per his 1967 NY Times obituary he was an investment banker with Smith, Barney and Co.; a Yale graduate; and it confirms he did indeed work for the OSS.

Uncle was Yale man Richard Holden Follis. (Found here on p. 143)

Devecchi (and his son apparently) was also a member of the Council on Foreign Relations = British Round Table and intelligence connections.

 

Mr. Hughes.

There are any number of Hughes in the OSS Personnel Database, but I’m pretty sure this is John C. Hughes, as shown sending a letter to William Donovan on OSS letterhead in 1944.

Lt. Colonel John C. Hughes – head of the OSS New York office where Donovan was.
John c. hughes  vietnam 1965 correct
John C. Hughes briefing feb 10 1965
From left, Lieutenant Colonel John C. Hughes briefing McGeorge Bundy and General William C. Westmoreland on the recent Vietcong attack on Pleiku, South Vietnam, February 10, 1965

John is mentioned in this analyzed OSS document – Planting Articles in Foreign editions of Time, New York Times, etc..

He was the Chief of OSS New York Area Branch; later US Permanent Representative on North Atlantic Council; Board Chairman, Free Europe Committee Ref: Bernard Yarrow papers )

See below excerpt:

In November 1942 Mr. Yarrow resigned his assistant district attorney post and joined the Office of Strategic Services (OSS), a United States World War II intelligence agency and a predecessor of the Central Intelligence Agency. General William Donovan, the Director of the Office of Strategic Services, designated Yarrow as a special assistant, a post where Yarrow readily consulted Donovan and other high ranking OSS officials. He worked in the New York Division of OSS, reporting to John Hughes, head of the Division.

 

Mr. Payson.

Nothing found.

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Images and PDF files

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For those who don’t know – OCR stands for Optical Character Recognition and when that is done on images, it makes it so you can search the images for certain words or phrases that you are looking for.

Here is an OCR’d PDF file of all the pages of this document.

PDFOSS Men Payson and Macpherson Set Up Intelligence Front – International Economic Institute
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Following are the individual images of the document, for those who prefer to look at them that way.

(click to enlarge)

 

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