IOP SEeREf tJ s 1tB.icl:D rAiA?kl • • • L. I Lv VI 1 L I 

'l'QP SitJMf : U,S, ;§TBS OlftX 

MEMORANDUM F<li: Chief, AFSA-o2 

SUB.TIC!: Hagalln machillea, study of 

AFSA-orJr/ef 

2 July 1951 . /. 

EO 3.3(h)(2) 0) 

PL 86-36/50 U$0J:3605 

Reterenae& T/S AFSA •mo to Director, CIA, aert.l 0001541 

dated 2S June 19511 eub3s Regot1at.1011s with Mro 

Hagelin \ ' 

-1. In view o£ paragraph 2 ot the reterence, it\18 desired 

that you review APSA1 a position with respect to it•· Cl'fptanalytic potential in handling t.ratt1c enciphered on crypto-maohlnea manutact.ured and eold by A. B. Cryptoteknik (the Hage11n.°2Lto- grapb Company) of Stockholm and submit on or before 1 S.ept. er 

1951: 

ao An operations plan tor 1~ena1fying AFSA'a preeent e~tc:rta to solve ~· traffic enciphered by the current ll&gal.in macbinea; 

2. The plans lhould be carefully integrated and should 

indicate: . 

a. The eatimted approximate number of additional 

personnel tba t ay be required and bow they would be employed; 

bo The additional or new cryptanalytic machines er 

aids that may be reqliired to assist in sol~iono 

c. Tb& estimated approx:lMte amount ot additional 

apace and t\mda required for a. and b. _ . 

3 • It ia dea:lred that AFSA-<>3 1 · APSA-001' and 1;he Chief 1 

AFSA•14 •••1st in this project b7 panicipat~n,g in con.ferencea 

pertaining thez.-eto and in the preparation ot the final plans o 

A preliminary repcrt ia desired not later than 31 Jul7 19Slo 

\\\\ 

~ 'Z. St;ni;_ 

CoeJ' to: 

))m ~!PSA-OOA Al'SA-OOS 

AFSA-OOC 

APSA-<>O'l 

URL B,·STORE aear·Acllliral, u.s. Havr Direo~ar, Armed rcrcea security Agency 

E'1ES SN\:'' TOP SECRET • U. S. 11 

Declassified and approved for release by NSA on 11-06-2014 pursuant to E .0. 1352a 
TOP SECBETn::A.~RN 

ll. ~c E'IES ONLY 22~1951 

1EUCEANDU1f FOR: See Tlintributian Liat 

SUBJECT: Negotiations w1 th ?':r'. Hagelln 

ENCIDSTJRE: Draft Report bJ'· Vii 1 l iam F. Friedman, Technical . Consultant. to 'JmAFSA on the Aktiebolaget Cryptotobdk, Stockholm, Sweden (The Hagelin 

Ceyptograph Comp&DJ") 

1. A .meeting has been called b.Y DmAFSA tor the purpoae ~ 

diacua1ing tho encloauro aid aaaiating OIRAFSA in eatabliehing the 

position he should take at thia time in regard to the eubject 

negotiations. 

2. The meeting will be held in tho gsA Conference Room 

(l.9-12S), on 23 1Jq 1951 at 1400 houre. 

3. DIRAFSA desires that ,.au review the enclosure in ad.1rance . ot the meeting ao as to be prepared to participate in the d:l.acusaion. 

1+. '!he enclosure should NOT he circulated within your office 

or division~ 

AFSA-OOA f8. 

AFSA-OOB 

AFSA-000 Copy 4 ~ 

- ~ -...,-

AFSA-o2 (Capt.. Holtwick) 

AFSA-<>21 (?:r. Rowlett) 

AFSA-03 (Capt. Harper) 

AFSA-o/+A (Dr. Sinkov) 

AFSA-41 (Ur. Austin) 

.APSA-11 (Ca.pi;. Goodwin) 

AFSA-14 ( C'api; • DJer) 

Copy for: nIRAFSA 

TOP SECRET ACORN 
TOP SECRET 

-u. t fYEI lllltr-

-fl. 8. ftB DIY-
TOP s111tllM:Q6

1tCORN ii. s. EYES BNLV-

,RL;PORT BY YiILI.IbLl F • FRI&>t.:A.N, TECHNICAL COl~SU1TAl~T, TO TIIE DI!~C'.l'OR, 

ARI.:SO FORCES SECURl'l!I .1\GENCI ON T:EW; AICrIEBOLAGET CRYPTOTEKNII<, STuOKHOW, 

SWEDEtl ( The Hagelin CrrJPtograph Compaey) dated 22 1'1q 1951 

EO 3.3(h)(2) 

PL 86-36/50 USC 3605 I~IDEX TO CONTENTS 

REPORr TO THJ!: DIRAFSA 

THE PROBLEM 

FAC'l'S B.EARI?lG O.N Tfll'.; FROBLEM A!JD DISCUSSION 

CONCLUSIONS 

RECOf,'JUENDATIOlIS 

ENCLOSURE nA" (TO BE PROl.UJ.£,G1\'lED) 

ENCLOSUlt:: ''B" 

ItJTRODUC'l'ORY ~.itd!.S 

TH~ oom:u.r POSSIBILITIES 

THE OOf.~SEC POSSIBILITIES 

ASSESSfJEUl OF ADVANTAGES 1 Dl&DVAf~AGES, A..'ll> 

RISKS 

FI?lAL REMARKS 

Annex 1 

ENCLOSURE non 

Annexes 1-S (not included in document) 

ENCLOSURE 11D1t 

Paragraph§. l,tgos 

1•4 

l 

2 

3 

4 

1-2 

3-8 

1-3 

1 

l 

l·J 

3 

44 

5-20 

5-6 

6-12 

4-5 6-10 

6 10-ll 

7-8 ll•l.2 

9 

10 

11-18 

19-22 

1•10 

12-l.3 

14-15 

15-19 

19-20 

21•23 

24-28 

29-34 

ii. S. EYES BNLf 

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TOP SEM-BIF-A-ft60RN 

i=o 3.3(h)(2) 

PL 86-36/50 USC 3605 U. '· ErES ONLY 

-. -

I 

__ , 

Br 

WILLIAM F. FRIEDJWll 

TECHNICAL cc&lULTANT 

TO '11IE 

DIREC'.l'Cft, WR PORCE9 smmrn AGENCY 

ON 'l'HI 

AKTIEBOLAGET CRYP'J.'OTEDII, STOCimOLJ.f, 9"EDEN 

('!'he Hagelin Czo7ptogra.ph Canpan,y) 

Betenncea: (a) uscm 13/15? 

(b) APSAC: 66/15 

(c) APSACt 66~0 

(d} Al'SAC: 66/23 

'l'HE FROBLEU 

l~ a. To Cletermine the advantages, d18advantaps, and riaka to the 

u.s.I 

b. To ..... ~ aciTant8.gea, dhadftfttagea, am riakaJ 

c. To determine 

and. 

d. To nal.uate and rem.- an op1nicm aa to the auitab11tt7 or a 

PACTS BEARiftC ON '.l'RE .·PRC>BLD AND DISCUSSION 

2. See Encloau.re •JJft. 

CONCLlBIORS 

3. It 1a concluded that: 

a. It would be to the adYallt.ap of tba U.S. Gonrment it the 

~ new or 1mprowd Rlgel1n ~ts 11181"8 prevmted frm being 

U. ~- t 1·Es ONLY 

TOP SECRET ACORN 
.... ······················ 

REF ID:A60611 · 

TOP SECRET ACORN U. S. EYES 8NlY 

and the RCC 1n the produot.icm ot --ndoation securif;J' equipnent, ror 

poaelble ~ 1n connect!• with NATO requiremente, as well aa 

tar the poelible Ull8 of u.s. militar,r and airil agencies .. 

e. Aeae...,t of the adftntallee1 cUsadnntagea, and risk:8 ftl"l"8llta 

accepting theae netmf 

EO 3.3(h)(2) 

PL 86-36/50 USC 3605 

2 U. S. EYES ONLY 

TOP SECRET ACORN 
g. 'lhe cost ot the ccmtanplated deal, t'T00,000, 9'Nld ~be 

axcesatw, in ri• ot its potential benetita to the u.s. Oaterl111lent, 

h. '.lhe Dlrectar, A:rm9d Porcea Seoar.ltr Agenoy (OSA} ebould tar-

. ward t.h1a Repc:rt to the Director or c.t.ral. ?nte1ligenoe and to the other 

.lllanbera ot USCD tor intaraticm. 

j. It a cleal 1s canawted, thla project llhoal4 be given a code 

m.- and be SQl"l'GQDded 111th CCllD'l" apeo1al eenrlflT reatr!otiana. 

4. It ia recaimmded that,: 

. a. Enclosare •A11 be tca ll&td9d to tbe D1nctcr ot Central iint.ell.1-

b. 'l'bie repart be t~ecl to USCD tor t.be intonation of member 

agencl.9a other than CIA and APSAJ 

d. 'lbia project be Uld.plcl a .,... nama and be /given apaota1. 

OOllDIT •carit7 pret.eetlcm. 

EO 3.3(h)(2) 

PL 86-36/50 USC 3605 

EO 3.3(h](2) 

PL 86-36/50 USC 3605 

TOP SECRET ACORN 
REF ID:A60611 

RESTRICTED 

[iaoMULGATIOlt OF ENCLOSURE "A" WILL BE EFFECTED BI~ DlRAFsA 

FOLLOWING Tm: Jir&.""'TlllG ON VIF.DNFS>AY123 MARCH 195J} 

4 

Enclosure to AFSA.•OOT Staff Stwtr 

dtd 22 lllq' 1951 

RESTRICTED 

ENCLOSURE II A It 

--~~---- _.......__ _______________________ _ 
TOP JiJ{illu~~ ~{j-oRN EO 3.3(h)(2) 

PL 86-36/50 USC 3605 FAQTs s2.:eiuua 011 T1L; r30m.μ:. AN.J l)lscuss10N U. S,. EYES ONLY 

I 

INTRODUCTO.RI Ri:l.LulI{S 

1. At the Sixty-first Ueeting o£ USCIB, held on 9 March 1951, a 

statement regarding certain negotiations with Mr. Boris c.w. Hagelin, 

hereinafter re.ferred to as Bagel.in, who is sole owner of the Hagalin 

Cryptograph CompaJ>i1 (HCC),waa presented b,y a representu.tive of the 

Armed Forces Security Agency (AFSA) , on behalf or the USCIB Coordinator. 

A brief history of the negotintions v1ith Ha.gelin forms Enclosure ncn to 

this reportJ 1n Reference (a) w:Ul bo found the minutes dealing with this 

item of the agenda of the meeting. 

2. a. These negotiations haw now resulted 1n a draft memorandum 

or agreement, a copy of which forms Enclosure "D" o£ this report. Brietly, 

under this draft, for the J)01mnt ot $700,000 plus a "beat efforts" undertald.ng with respect to the surplus commercial sale of M-209 machines, the 

u.s. ·would 

I U. S. EYES ONLY 

Enclosure to AFSA.;.()()'l staf'f s~ s ENCLOSURE •s• 

dtd 

22 

llrq 

19\'0-P SECRET ACORN 

-~--------------------------··' 
: 

U. 1>. f rES ONLY 

b. Each ot tbeae categoriea ~potential benef'ita will non be 

studied in detail. 

b. '!be HCC 1e now the onl.y firm in the world which develops, manutacturea, and comnercialq aella CJ".YPt.ogr&phic equipnent. 1h• firm is 

wll-eetabliahed and hae attained a position ot importance in the COMSEC 

equip:ent, field. Since the end ot hostilities in World War II, tragelln 

has made a number ot 1nnnt.:1on1 am 1e contemplating developing, m.nutactur.tng, and sel.llng improY8d model.a ot present Hagel.in •chinea and certain 

new VJ>e• ot achinea. 'Dleee will be brief'q described tn the next paragraph, and diacuaaed onq insotar u concema t.heir bearing ori the problem. 

under conaideration. 

S. a. '!he HCC ia preparing to mnafacture- and aell an !mprwad model 

ot the present C-)8 machine, in which not onq the new ke)'ing mechanism but 

3.3(h)(2) 

PL 86-36/50 USC 3605 

6 8CLOSUBB•P 

.· ,:··· ON~ Y 

TOP SECRET ACORN 
mep Sn1'}iilh~~6011.6HeRv T ritJ n OB I At ..L, -11-~--l--l~--1H11t1-

alao several additional complicating teat.urea would be incorporated. 

'!be ettect ot this on U.S. sources ot CC>Jm11Two11ld probabq be illlpoM;ant, aa 

dillcueaed belan: 

b. 'nie HCC propoaea to employ the new keying mecbani• aa a basis 

tor the control or the CJ'7Ptogr&phic elemnts of not only the/nar Jlmdel 

C-38 but aleo ot several nart t1J>9s ot cipher machines. In pe.rticular, the 

using the new ke;ring 

-----------------------' 

mechanim. '.ft1e poeaible ettecta are diacuaaed below: 

3.3(h)(2) 

PL 86-36/50 USC 3605 

EO 3.3(h)(2) 

PL 86-36/50 USC 3605 

7 INOLOSURS•P 

TOP SECRET ACORN 
I 

I 

[ 

TOP,. SEe1¥t~tA~*CbRN _______ I ait,hllifi:ll':-n~ 

It is possible that two or three 7ears 

will be required £or development and that several 7ears will elapse 

before· this machine would be amlable tor sale. 

(2) ;";fith regard tor 

/ At present the HCC has a development model ,____~~~~~~~~~~~ 

1n which t.he new keying mechanism has been incorporated. However, 

I It is not possible, vdtbout more detnUGd ....___~~~~~~~~~~~----' 

information, to e'Val.uate the security o£ this ne\7 machine. 

c. The llCC has developed a model of the C-38 which uses a perforated 

'ttlpe tor ke)'ine control instead o£ the present "pin and lug" kqing mechanism. 

•One-time" uae of the tape will produce a "one-time s-Jstem" and, provided tbe 

tapes are proper~ made, messages enciphered on such a machine will be unsolvableii A key-tape generator has also been developed for pi-oducing tho tapes 

to be used.with this w.achino. I 

d. The HCC has also developed a machine for producing "one•time pads0 

of the numerical typel 

for "literal pads". The principles underlying the model .:;lreat\f produced are 

good but turthor study an:l more details are necessary before -.~ f'irm secur1 ty 

evalu.."ltion can be made. r 

provided the machines are so constructed as to assure non-predictability of 

keying sequence. 

e. It is true that the tr.s. an.i the U.K. Governments are nowtaking 

steps to improve the Cui•'l>EC of the other members of NA:.ro and the result of 

EO 3.3(h)(2) 

11. S. EYES ONlf PL 86-36/50 USC 3605 
t. The e.ttecta or 81'1 expanding market tor Hagelln machines should 

not be owrlooked, especial~ aa regards the poasibilitq that they will be 

purchased 117' certain of the aatellltes ot the U.s.s.a. It is 1D1Clerstood 

th4t Poland, tor example, is now a potential HCC ouatomer. It vould certai.nq 

awllable to such countzlea, 

g. What has~ said in the preceding eubparagraph applies part!.• 

cul.ar]3 it the proposed new ~a of Bagel1n machinos were adopted and used 

by u.s.s.a. satellites, or b,r non-NATO governments currentl,r friendly to 

the 11.s. Trattic 1n the new rotor machine, for example, would probabJ.¥ be 

entirely unroadable. 

h. ~, 1t the HCC should pu't on the market a good one-time tape 

machine and good equipment for making the tapes, or a good one-time pad 

p1"0duo1ng mohine, their "1deepread use muld, in a tn 7ears, probabJ.7 make 

pO 3.3(h)(2) 

PL 86-36/50 USC 3605 n o. ~ ~. EYES ONLY 

EO 3.3(h)(2) 

PL 86-36/50 USC 3605 

9 ENCLOSUR& "B" 

EO 3.3(h)(2) 

PL 86-36/50 USC 3605 

TOP SECRET ACORN 
aontinuation of present sources. U. S. EYES ONLY 

Gath@r!ng of mptslogic t.nbpia1 !at;e113gep 

6. a. During the past 2' 7881'8 lfagelln• 1n axploiting the producte 

ot the HCC, baa estabUahad oontaot with the cryptologic authorities and · 

agencdes of mD1' gowrmanta. It appears that some of the agencies mth 

which Hagel1n has dealings are not so secur1tJ-ld,nded as w are, and 

certain general or apecitio mttars are disclosed to h1m as information 

about which there is no &•01"907• He bu thus been able to gather not·cmq 

eeneral ideas with respect to the size and actiT1t1ea of the organisations, 

their attachmnt, etc., ba.t alao spec111.o :lntorm.Uon as to chief person•15-

t1as1 equipment, practices, requiremnts, eto. 

c. 'lhe HCC haa.agenciea in sewrW. countries 1n each hemisphere. 

· These also serft as 1nf'ormat1on-pthor1ng elements. 

EO 3.3(h)(2) 

PL 86-36/50 USC 3605 -It S. EYES ONlt 

TOP SE~RET AC<ffms ·• 
•• I\..,. be poedble to gain teolmical. 1ntellleiimce applicable to 

the Cl7P1i0log10 agencies ot u.s.s.a. •telUte countries. In this connection, 

______________ l:repre~tat1ws ot tM U.S.S.il. baw .. 

'Viaited the HCC ainoe 19461 desir!ng 1ntormat1on as to new HCC de'Velopmenta 

and procluota. 

t. It elloiJld aleo be a4d8c1 that the HCC ~ recei "88 requests 

~or speoJ.fio ~. \ 

11 

• 7. a. the ue ot cipher mobinea tor OOl.SiC pUrpOaes 1a at--"1\y S.Uorea-

•inl with greater 8*0hald.saUon ot aft1oe 1m'k 1n pmral. U 'the go~ 

b. In tb1a oomeotd.on, it abou14 be noted thtlt not onl.J' doea tba Boo 

IOU.cdt badm•, mt al.80 soma~·• oomee without aolicitation from 

jOWl'lmllta deld.r1na apealfio dewloplmlta or !mprowmente. fbie .ld.tua.tion 

.....__ ___ __, I 

EO 3.3(h)(2) 

PL 86-36/50 use 36oeTOP 

11. S. f YES OHL ~L 

SEC$ET ACO~~• PL 86-36/50 USC 3605 
~~JR: A,.6CWJ.J. TOP SEUit~·1· ACJvRN ti. S. EYES ONLY 

s. The pdtential OOIIfi benefits menticned above are those which are 

more or less obvious. It is impossible to ant1ci.pate or prognosticate all 

the COllIMT benofital 

J I The diaad'f'antages am/or risks inherent in such an 

\ 

arrangement will be treated 1n pangrapha 10-1, beloll. 

TSE CDISEC POSSIBILITM 

9. a. llaplin has pl'OWd tdmaelf a al.ewr engt"HP and deaiper, 

as wall aa a Cl7Pli0grapher with some a~tlon o£ tba teclmlcal intn• 

oeo!.ae - pltfall.a in tbs CCllSIC fSeld. I I 

. - impro19cl teat...• tor the mdltied Ll-209 (or C-38) •oldne. iltbouch &FSA 

!a still at~ng the protoV:Pe !mprowd 0-38 maoldne aatalt"8d b,v Hagelin 

ear:q in 1951, it ia ~ permluible tia nate that it :represcts cond• 

denbl.e ~ owr the present 0-38 (or u-209). Al'Si'a p1'9881lt C01iiSBC 

interest 1n this imp.rowel model llee 1n tbs poaaiblli'V ot inoorporating 

the nn k81'1Dg •cha"'• and oerta1D o\her re~ pzrop0aecl additional new 

features 1n an AFSA dewl.opmant aalled the Mecbard.cal Cipher J:aob1ne (1"11), 

which is ba:l.ng designed apecdftcal.q t~ the U.S. J.1arine Carps and to~ 

limited use 1J.v the u.s. 11av. It is quite probable that the original. u.a. 

ccmtraota with BapU.n (tboee ot 1941/~) pel"lllt the V.8. to use hi• 

reoent l111pl'O"f91J811a on 'tk' 14-209 without ad41t1onal recompenae to himJ it la 

also true that Jlap11n 1aa indicated he waald not cont.eat tbia point. Bownar, 

S.t mat be noted that the u.s. aontemplates us.:'ng tboae 1mprowd featuree 

not 1n tbe u-209 1'lllt in the llCLi - a quite d1tterent machine. Y.'hether tb1a 

obance• the patent situation is not clear. In mv cue, howewr, Hagelin•a 

oonsultatiw asa1stance 1n working out the 1noorporation 0£ theae :lmprovemn'li8 

in t.he ma, and in other speed.al oaaea, woulcl probabJ1' be quite uaeful. 

o. When the AlSA 4nelopmont known aa AFSaUl-7 bu been oompletecl 

and the mcldnea haw bean procurec1 and distributed to holders, our large 

stock o£ ll-2098 1l1ll beao• aftllable for other purposes or usages. It the 

8Ul'p].m Y.209a ware connrted to mod!tiecl 11-209&, pr!nci~ perhaps tr 

EO 3.3(h)(2) b. S. EYES ONLY 

PL 86-36/50 USC 3605. 

12 llCLOS1BE •• 

TOP SECRET ACORN 
. 

. 

T6P ·sE~:A~RN _,. iU7 .L ~ v" u. S. EYES 8Nl:V1nOOl'pOl"ating the new Bagel1n key.ing mecbanisa, th<JT ml.ght be g1 WD to .NATO 

aom'tr.lea tor uae 1n.low-lewl .NATO or low-lewl national communicatiol'lS. 

PoeaibQ- the 11-209 might be used :ln enarypUng NATO wather tratt10. We 

probabl7 haft a sufficient stock to supply all Xt\TO armed .foroes w1 th these 

machines. The HCC might be ueeful. 1n working out the incorporation o:f the 

improwlllenta, 41.thoush-it has been stated b.r Bap,elln. ~t, from an Oft8S.nearing 

point of View, 1~ would be more practicable to build 11achinee anev rather 

than attempt to mod1fJ' the present onea. Perhaps additional work along these 

linea will demomtr~te the feu1bU1tq of 1noorporat1ng the impro'ftlllants, oicertain o£ thea, in our present ll-209s • 

t. As ·indioatecl 1n connection with the potential CUIIIfl benefits, 

it is not possible to foresee all tho potontial. Cvt:SOO bene.f1 tsl 

EO 3.3(h)(2) 

U. S. EYES ONl.Y PL 86-36/50 USC 3605 

13 

BICLOSUBE 11P 

TO·P SECRET ACORN 
from the nature of oerta1n :rlsks that must be faced. The r1aks are three-told• 

(1) Posa1ble waste of llOJ'l91' .- The deal would coat $7001000 and 

......__ ________ ____.! and (b) unforeseen contingencies might ariae to · 

prewut., obstruct, or reduce its et'tioaq, there would be the r!ak tha\ 

the moncv TIObl.d haft been apeut;. 1n w1D. This risk 18 d1acusaad 1n 

detail 1n paftgl"apha 11•1.4 below. 

C2ll I 

...___ ____ .,...._ I ___ ____, 11'ble r1at is cliaoa-4 ill 4etail ill ~h " 

in detail in paraaraph 16 below. 

·b. There 1a amtber ap~ «lgn1ficant Id 1n reality un1mportant 

diaaclvantage the pl.acing of a 

llmlt.atlon <m u.s. cH.apoaiUon ~ surplus 11-209 machinea. \ 

...____,...____,,_..,....-_____________ __.I •undertakes to use its best 

etto:rta to prO'V8Jlt the sarplus sale or other d1spoa1t1on for priiiate or comme.roW ,.. am/or resale of arq U-209 macblnes IJO\'I owned bT the um tad States or 

&1'J7Ag&n• thereQf.11 This condition, while appearing to be a limitation on u.s. 

!'!ghtt, ia real.]1' 1n turtherance o£ u.s. inte1'9ste. 

,______,.. _________ ____, it :la exist:lna pollq not to pernd.t these 

mcbines to be sold as sarplus equlinmt. •mer 1 to tld.s JSac.Losmw .aaa • 

~ on this point. 

o. One other cliaad:vantage mq be Mntioned, vis., the additional. 

administr-"1t1w burdens 1rh1oh llll18t be auumed ~ the u.s. 1t i'ul.l adwntap 

is to be tatanl 

I 
REF ID: A60 611 u .c E~' -S eul.Jl TOP SECRET ACORN. ~.Yt no 

studJr reports, etc. This would 1nwlve additional personnel, not JDSD71 bu.t 

• 

perhaps two or three persons. 

11. a. With re1'erence to the risk mentioned 1n paragraph 10.a(l), it 

is clear that as regards tbe potential benet1ts vbich might now from the 

l1r t-here was certainty' as to their realization, a 

would be veil worth undertak:lng, nan at considerable cost. Howewr, it is olm.ous that not on1T 

can there be no such certaint)-, but also that the probabili v of reaping the 

potential benefits is undeterminable, since DlllCh would depend upona 

12. a. With resard to the tactor ~ J.ntegrit)", it aan be stated aith 

eame usurance tbat 1n prnlous deallnp \'11th Bagelin he has demonstrated 

his trustworth1Desa and good tdth. All who have talked with him agree that, 

although a good trader, ho can be relied UpOD to execute, in 300d :taith and 

to the fullest extent ot his ab111't1', the tams ot UV' aereement to which he 

is a willlng party. As regards the integrity of Bagel.in Junior, there ia 

not on17 no reason to entertain d-.JUblia on this score but also the parental 

oontrol. exerc1 sad over b1m is such that tor the term ot the agreement at least 

there should be no d1tt1cultiee. 

b. Wit.h regard to other personnel or the nee, we haw the assurance 

ot the Hagellna that none ot them, aaw, poaaibl3, Mr. c.E. Lindmark, is 

capabale ot 1nwnt1ng or dewloping new ideas in the CUt.iSIC equipment field. 

r; ____ _ 

EO 3.3(h)(2) 

PL 86-36/50 USC 3605 

15 acwsuu•• 

TOP SECRET ACORN 

OGA 
13. With regard to the bearing that the action which the u.s. Go'fGl"D118Dt is t-aHng with respect to IATO com1cat1ons 

the follow.1ng ocanent 'llJtq' be pertinents Bagelln ma o.neloped -------

and 18 &awl.oping oertain ~graphic 8q1dpnent whioh• 

In the cue ot the pzo-Sov.let natrS.ons. the 

• possible effects, whether tor bat.tar or wone, of Bagel1D1s clewlopments are, 

• 

aonatdarah 8Upp0se that some 11811-equipped £1rm shoulcl deoicle to go into the 

COJ!SEC equipment luaineaa and become a coq>etitor o£ the HCC. !hen1 either, 

as bav.lnc been a poor 1nwstnent. The latter would, no doubt, be the 

----

decision. 

b. TbG chances tor the oacurrenoe ot this CCl'ltingenoy 1 however, are 

s-.ll 5.n id.• of tha head•etart tile HCC now has and the oomparatiwq very 

lJ.mitecl market for CU;~.F..0 equipu.ent. Moreover, ewn should it. occur, the 

probe.bilit.J' that the new firlll 1111.l haw dewlopad, t.ested, manufactured, and 

be readT to sell its neu product 1n qwmtitq "1tb1n a Wl"J' t• years 1a ra1iher 

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small, if our experience in such matters is taJ".on into account. ii. .rfS ONLYc. Ot.her con1;1ngello1es vbich would nnlHf7 or lldn1mize the benefits 

For example, the SVedish ---------------------' 

Govermraent,, or concaivabq the u.s.s.a., m1ght take owr the HCC. SUppc.3e 

the rormr oocurss in this ewnt, 1t 1s high~ probable that the Slledish 

Gowrnment T«>Uld take action 

Suppose the u.s.s.R. should, as a result of war, take owr the HCC • . ......__ _ ____. 

The or.vptanaqtio situation 0£ the U.S. vis a vis the u.s.S • .tl. and its various 

satellites leads to the a88L1Ji;ption that ue might be no vorae off than we are; 

and it is conceivable that ·119 might be bettor otr. 

d. The foregoing tour paragraphs discuas \he risk mentioned 1n paragraphs 10.a. (1). There remain to be disCUHed the risks mntioned in paragraphs 

10.a. (2) and (3) 1 and these will be aaaesaed 1n the next t1Jo paragraphs. 

15. With regard to the possible damage t.o u.s. comm security in going 

I The u.s. has control owr this 1n ---------------------! 

16. With regard to the r.lslt of political repercasaicms, it ls true that 

\to oarta1n go"V81'D1118Dta nov f'!'i~ with this Gowmment 1 there might .......__ ___ __. 

- be undesirable repercuasions. But here again, the ~J 11s 

not beliewd to be aerlou.a,, 1n 'f'iew ot the nmrka made in paragraph 12J mid U' 

...__ ________ ____,, ____ ___.It.be damage to our tri~ relations 

would proba1>13' not. be ane:re. As to the risk ot undesirable political raper-

~ tlW.t might reault._I _____________ ____,,.,.._.....-;;;.. ___ __. 

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f the grav.11;J' ot ......__ ___________________ _ this risk lies entire]1' within the control of the v.s., s1noe it will be 

directly propol'tional to the EIJttent and mturel .__ __ ---:::==========::::i..--

und ertak en. This risk is not an unawidable oonoomitarrt;J.....__ ______ _ 

it can be mlninal, or entire~ abaent1 it the u.s. · abooae not to tn_ t.o t.aka 

advantage ot all the opportunitieal I 

l'I. !he IJl'eoedinc a1z paragra;rJhs paw tba .., f'or mJdng a Jmpeot 

1lll1 not haw been ~ :ln 'fBln. Howewr, it 1a IV oonaiclarecl op1111on t.bat, 

tald ng into aocaant (a)\ 

\that it 

!a not 1naclvisablei to asnm tb9 riaka• m1j.__ ___ - _ ____,,, _____ __.I 

1n expectation that the llo~·f'or beneftte 1dll be rea.Ueecl. 

18. a. Enclo~ •n•,J I was preparecl 

bl' CIA in collaboration/Id.th J.!11'. Hedden cm 17 llQ' 19Sl. lt "presents an 

improwment on t.be f'1rst draft and., nth one exception, it Sncludea all the 

aateguants and features reco.-n4ed by tm DUaotor, AJ'SA 1n hia memorandum ot 

6 April. 1951 to tbs D1notOr Of Central Intolligence •(Annex S to lnolosure 

"C"). This ~pt.ion ls 1n regard to the terms of pqmnta the Director, 

AFSA reoomeiicted that the oons1derat1on be paid in • .,. equal annual 

installments J ClA/!':lnda this not onl1' UDD80888817 but also undesirable 

from its/point/of' n•. S1noe f'a1tbtul part°ormnca rests iii- this caae cm 

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FINAL~ 

19. In ~- of the cent.ant ot paragraphs 11 to 18 abow, it 1a bel1eftd 

that the Diroctor, AFSA ahou1d adv.lae the Director ot Central Intelligenoe that 

the] I (&lolom •D") :ls aatlaf'actorr and that, although 

he atllL---l-ra-~- .... -./---------1------,laa a gamble 9 he deems it to be worthwhile. 

20./ :In view ot the interest which USCIB has 1n this matter, it is deemed 

d:es!rable to aulldt We report to the Board mereq as information. lt ia not 

---~ neoee81ll7 tor the Director. AFSA to submit it to USCIB; tor apP}:"O'fal or 

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ii. :». ErIS RNl¥-

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II. ~. EYES ONLY 

to attempt to obtain the concurrence or even an expression ot endorsement 

22. In view ot the tact that the primary objects I 

I it 1s advisable that this project be given a cover name and 

----- be surrounded with special. security safeguards beyond those applicable to 

COL::tl;T codeword information or material. AS £ew Al''SJ\ per~onnel as practicable 

should be perm! tted to know I I or 

any of its details. 

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RESTRICTED 

M?S'fMSfii9 - BOOK 1lSG -25 FEB 46 SENT OUT BY ocs~. DIV. SUPPLY 

COJil'.mOL .BRA.~W 

'f'ARI 98567 

CM-OUT-9SS67 

CONVERTER lf-209 IS CLASSIFIED HR.BY AS ~m.rrARY TYPE I. DESIRE ALL 

CLASS A AND B STOCKS BE RETURNED TO U.S. ALL CLASS C STOCKS AND Al'lY 

CLASS A AND B STOC&S NOT RETURNED VJILL BE DESTROYED. FOR SECURITY 

RFASONS NONE SHOULD BE DF£LARED SURP.tm TO ANY DISPOSAL AGENC!'. 

21 

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AMNEX 1 TO 

ENCLOSURE nB" 

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1. a. During World War II, the u.s. Armed Forces extenaiveq em.pl.oyed tor 

lcm-eehelon camn1m:lcationa.a aipher machine known aa Converter Mo-209. 

'l'beae macldtiea 'ftre manufactured bJ' the L.C. Smith anl Corona 'l)peWriter 

Co. at Groton, New York, undel" U.S. patents owned by l~. Boria c.r·. 

Hagelln, a citisen ot Swaden and aola owner ot the Hagelin Cryptograph 

Cmpan,y (HCC) ot Stockholm.* AppJ"GXi.mate]T 72,000 J!-209 1& were m.nut'actured tor tJie Armed l'orc•. About 60,000 machines are still on hand, in 

serviceable comition. '.l'he detaile o£ the contracte involved in ~· 

procurement ot the M-209 are riven in Aan8Z l to this lncl.0811\'9. 

b. The :M-209 is practicalq identical with a acdel (C-38) malnlfactured 

and sold on the open market by the HOO in Tarioua parts ot the world, 

but tbua ta prtnclpal.q in Europe. 

2. a. In ita operatione in the cormnmications intelligence (COMDT) field, 

.APSA ha• knowledge or the exteuift use ot t.he C-38 machine b7 Yarloua 

f'oreign goyermente. 

3. a. Soon atter the close ot hoatilitiu, 1'9. Hagel.in initiated research 

and d..aiopnent work with a ri• to 1mproring the c-3a ( ar 1~09) and to 

producing Mir t.7Pe• ot cipbn' mach1naa tar conmercial. axploitaticn. 

b. 'Dlroach intcnal ccntact between a !Biber ot APSA and Jll'. Hagelln 

&CIJ8 ot a-. Hagelin•a new ideaa tor C1"J]>tolog1c devices came to the 

at.tent.ion ot APSA, and wre etudied to ucertain tbe1r aecur1 t.y. The 

re8Ulta ot such atudiea were not. CODlmmicated to Ml-. Hagelln. 

* '!be SWediah Vede nam of the t1na ie AkU.ebolagot CJ:7ptotekn:!k (A. B. 

er,ptat.eladle) • 

Baaloaar8 to AIS&-00! llCLOSUBB •09 · 

Staff ~ dtd 22 118.Y 19'1 

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4. a. cri S Februa17 1950, representatives. or AFSA met with a •PiVSMifJNLY 

ot the Engineering and Technical Service, ottice or the Chief Signal 

Officer, and a representative ot Mr. Hagelin, to discuss the possibilit7 

of providing Mr. Hagelin with· one or more M-209s so that he could 

incorporate embodiments of certain ot bis ideas tor improving the 

security ot the M-209. '!he desired machines were not made available but 

!Ir. Hagelin obtained one :f'l'Olll tl\e t. C. Sm! th CcmpaliJ". 

b. On 8 Januar.v 1951, an M-209, modif'ied ·hlr the HCC to incorporate a 

new ke7ing mecbanim, was received by APSA and prompUy subjected to 

at11d7. Although the security studies haft not- been completed, it is 

clear that the new ke;ying mechani• propoaed by the HCC would great.l;y 

increase the overall security ot messages encrypted by the modi.tied 

mchine. 

5. a. It was learned that the HCC l\'aS preparing not only to manufacture 

and sell new models incorporating the :improved keying mechani•, but 

also to praduce several new cipher machines ot considerable security, 

whiCh also eJDplo;r the new key.1ng mechanism. 

. ·- ---

b. It was also learned that patent applications on the new keJ'ing 

mechanism had been tiled in several countries (U.S., Switzerlam, France, 

Itaq) and 

d. In January 1951, Mr. Hagelin, accompanied by his son Boris Hagelin, 

Junior, came to Washington for the purpose ot_discussing with AFSA the 

results ot the stud7 or the modified 11-209. The7 wre told that the 

study wa.1 not complete and no report was yet available. 

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'Director, AFSA, who decided to place the •tter betore the Armed Forcea 

Security Council {APSAC). 

6. ·a. t:m 29 J&DDaJ7 1951, at the 26th !!eating ot AFSAC, J,!r. Friedman, on 

bebalt ot the D!rector, APSA, made a preaentation regarding this matter 

(Annex 2 to th1a Bnclosure). I 

b. '!he ldnatee ot the di11CU11eion at the H.PSAC meeting form reference (b) 

to this report. 'Jtae decision reached was as follows: 

"DPDISIOR: APSAC authorised the Chairman to contact the 

l:>irector, :t.ral Int.e ce with a view 

his Yi 

together with a 81JJ111ary prepared ·by CIA (Annex 3 to this ihclosure) •. 

---

EO 3.3(h)(2) 

c. On 16 FebrUar;r 1951, the Director, AFSA aubrd.tted prella1nary conants 

__________ I in:licating specific points which should be amended 

or added, tor purpoaee of further diacuaaion in a second conference to be 

ente ren.lts ot the conterenee are 

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OGA 

···---·-.. --~.-~--.. ~-~~~--~~~~----------------------
U. S. EYES ONLYS. a. . On 9 ?larch at the 6lst Meeting ot the United States Conmunications 

Intelligence :Board (uscm), a briet presentation or this subject was 

.made tor the information ot the manbera ot USCIB, by Mr. Friedman, on 

behalt or the Director, APSA. No comments were made on the presentation. 

'lbe minutes or the discussion at the meeting rorm reference (a) to this 

report. 

b.. OD 29 !larch 1951, the Directar, AFSA submitted a Report. on this 

Mtter to the members ot AFSAC (reference (c)) and the memoran:lum waa 

discussed at the 3oth Meeting of APSAC, on 6 April 1951. The minutes ot 

the diacuasion rorm reference (d ) to this report, a reading ot which 

discloses that: 

(l) Sneral members ot APS.AC were doubtful or the advieabilit7 ot 

mald.ng a deal which would cost t?00,000 and in which there was no 

(2) l'everthelesa, it was recognised that there was a possibilit7 

or reaping benef'it•I I am, thererore, 

although AFSAC •.d unwilling to approve and thus to endorse the 

reconwendationsiin AFSAC 66/20, it agreed u tol.lows: 

9. a./ On 6/ April 1951, the Director, APSA tornrded to the Director ot 

c~ Intelligence apecific recommendations based upon a detailed 

EO 3.3(h)(2) 

atud7 j jreterred to in Paragraph 7,2 above. A 

cow of these reccxnmendationa, which dealt principal.11' Td.th additional 

11ateguards thought to be'desirable ror incorporation in the ct'a.tt rormi. 

ie attached as Annex S to th1a Enclosure. 

b. ts. 10 ..ti)Zil lS·!;"l.t i.l.!! Director, AJ'SA f'O!"Warded to the Director of 

Central Intelligence a memorandum (see Annex 6 to this Enclosure) 1D 

which he summarized the broad considerations invol 

~d ~l, 1'1fied his v.lews concernμig them. 

d. S. EYES OHl y 

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