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Former sales representative of Crypto AG
Hans Werner Bühler (12 July 1941 - 27 July 2018)
was one of the top sales representatives of
Crypto AG (Hagelin) in Zug
(Switzerland), and also a Radio HAM — HB9XJ [4].
For Crypto AG, he frequently travelled the Arab countries
and Western Asia, selling cipher machines to countries like Saudi Arabia
and in particular Iran.
In March 1992, he was arrested in Iran on dubious grounds,
and was released 9 months later, in January 1993 after a bail
of US$ 1,000,000 had been payed.
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In the past, Bühler has repeatedly accused his former employer
of selling rigged equipment
– in popular terms: machines with a backdoor –
in interviews, television programs and charges with the
Swiss police. Crypto AG has always firmly denied any manipulation
with the machines, despite very strong indications to the contrary.
After his release from prison, he appeared to be traumatised.
He was convinced that Crypto AG had not done enough to enforce
his release, although evidence to the contrary has meanwhile surfaced.
But he did not know the entire story.
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In March 1994, Swiss investigative journalist Res Strehle published the book
'Verschlüsselt, Der Fall Hans Bühler' (Encrypted, the case of Hans Bühler)
in which he gives a detailed account of Bühler's imprisonment, the
interrogations, the bail of US$ 1,000,000 and his subsequent release nine
months later. The book coincided with broadcasts on Swiss and Austrian
national televison.
Unknown to Bühler, the company for which he worked so many years, had been
jointly purchased in 1970, by the German
Bundesnachrichtendienst (BND) and
the American Central Intelligence Agency (CIA),
in a secret transaction that has meanwhile become known as
Operation RUBICON.
This was done specifically to influence the cryptographic
algorithms of the equipment that was used by countries that were seen
by the intelligence services as valuable intelligence targets.
Unfortunately, Hans Werner Bühler would never learn the full story — he died
on 27 July 2018.
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The Hans Bühler Affair
HYDRA
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Hans Bühler was a highly valued sales representative at Crypto AG.
He knew his way in the Arab world.
According to a former CEO, he belonged to the top ten of the company.
On 14 March 1992, Bühler
– then 51 years old – left on a plane to Tehran (Iran) to do business
as usual. He had a return ticket and was to fly back six days later,
on 20 March 1992. But it was not to be.
Iran had always been one of Crypto AG's most loyal customers, despite
the fact that in 1979 the regime had changed, and despite recurring
rumours that American intelligence was reading CAG equipment.
They had questioned Bühler on several occasions, such as after the
La Belle Disco incident 1 in 1986, but there had never been any real trouble
with the Iranian authorities.
When Bühler did not return home on 20 March, the company started
making inquiries, and on 31 March they were informed by the Swiss Embassy
in Tehran, that Bühler had been arrested with three others 2 on the
grounds of spying, bribery, illegal contacts and illegal use of alcohol.
There was no mention of the suspicion of rigged CAG equipment whatsoever
(nor would there be later).
CIA later figured out, that Bühler had probably been a 'random' target,
as 'ransom' for an Iranian citizen 3 that had recently been arrrested
in Switzerland. When Bühler was first visited by Swiss consular officials
on 20 April, he was in bad mental condition.
CIA had no idea what Bühler knew about the BND/CIA involvement,
and was afraid that he would make incriminating statements.
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La Belle was a discotheque in West Berlin, where on 4 April 1986
a bomb exploded, that had alledgedly been planted by Lybian agents.
The bomb killed two and left 79 injured.
➤ Wikipedia
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Salimi Nejad (the owner of Hasliran – CAGs distributor in Iran),
Nejad's brother-in-law and an unnamed Iranian military officer.
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The Swiss had arrested an Iranian man by the name of Zeyal Sarhadi,
who had been accused of assasinating Shapour Baktiar – the former
Iranian Prime Minister – in France.
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This situation lasted until 8 September 1992, when his bail was set
at US$ 1,000,000 pending further investigations. It allowed him to
leave the country, but he would have to return to Iran for his trial later.
CAG tried to bargain down the hight of the bail. The company was in no way
able to raise that much cash.
The BND was prepared to raise the US$ 1,000,000, as long as it would be
split 50/50 with the CIA.
But CIA officials were hesistant and were
afraid that it might be illegal. 1
On 6 October, CIA agreed to pay their 50% share,
but the White House rejected it the next day.
In the end, the BND raised the entire sum, 2 and transferred it to
Crypto AG,
through their covert mechanism, the Bundesvermögensverwaltung (BVV).
On 5 November 1992, Bühler was officially charged by the Iranians.
Two months later, on 5 January 1993, he arrived safely at Zürich airport.
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As a matter of principle, the American government never pays ransom.
However, Congress had never passed a law about it, as a result of
which is was simply a policy matter.
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BND had settled the matter in the hope to get half of it back from the
CIA at a later date, but this never happened. On the contrary: it led
to serious friction between the two parties.
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At the airport, he had a brief encounter with a journalist, who suggested
that something was clearly wrong with CAG equipment. Unknown to Bühler at
the time, he managed to slip a card with a phone number into Bühler's pocket.
Bühler was clearly traumatised by his time in the Iranian prison, where he
had been interrogated three times a day for the entire nine months. He had
told them everything about his Iranian contacts, which eventually led to
another 15 arrests.
Bühler felt that CAG had not fought hard enough for his release. 1
Despite a non-disclosure agreement with CAG, he started talking to the
press and accused Crypto AG of providing backdoors in their equipment
to the advantage of German and American intelligence.
At one point he even claimed that CAG wanted him to repay the US$ 1,000,000
bail, but withdrew that later.
Eventually he was fired by the CAG
CEO on 10 March 1993, much against the will of the BND/CIA.
They felt it would have been better to keep him close.
And they turned out to be right.
On 17 March, Bühler found the phone number is is pocket and rang it.
The call was answered by Peter Frutiger, the former head of research and
development at CAG, who had been fired 16 years earlier (to the day),
after improving algorithms against the will of his superiors
(NSA/CIA).
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The CIA thinks that his wife Vreni Blumer was behind this.
There is no evidence to support Bühlers claim. On the contrary;
occording to the files, CAG had done everything they could to
get Bühler released.
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When Frutiger was fired (on 10 March 1977), he had – unknown to BND
and CIA – raised charges
of manupulation of CAG equipment to the Swiss Ministry of Justice.
Although declining a formal investigation, the head of the Swiss
Bundespolizei (BuPo) quietly arranged to examine some CAG equipment.
They found that the algorithms were not what they should be, but it wasn't
enough to take the matter to court. It was clear though, that Frutiger's
charges were valid.
After the phone conversation with Frutiger, Bühler also decided to go to
the BuPo — the Swiss federal police — who contacted Swiss military
intelligence. Apparently certain high officials in the Swiss military
intelligence were aware of the German (BND) and American
(CIA)
role in Crypto AG and took a hand in protecting the relationship.
One of the officials informed the CIA that he had:
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"the ability to ensure that the official results of any
investigation will show no manipulation of the gear"
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They also informed CIA that, should the investigation be subcontracted
to ETH, they could handle four of the five cryptomathematicians
who could become involved in the investigation. BuPo officers later
visited the Crypto AG
factory and spoke with the CEO. They didn't probe
too deep and considered Bühler somewhat nutty.
On 15 November, Bühler informed CAG that he wanted to settle.
He received CHF 250,000 and had to sign an agreement that he would
not press for more money. It did not say anything about talking to
the press. Bühler signed it on 10 December 1993.
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But the settlement was not the end of it. On the contrary.
Later that month, Crypto AG discovered that Swiss investigative journalist
Res Strehle was writing a book about the affair, and had asked for an interview
with the company's CEO – Michael Grupe. But Grupe turned him down.
In the meantime, Bühler kept talking to (former) CAG employees,
and even contacted the former CEO, Heinz Wagner, who was very worried
that the operation was in danger and that even certain company
assets – such as the cryptomathematician ATHENA (cryptonym) – could
be exposed.
In early 1994, Bühler began claiming that the true owner of CAG
was not Siemens,
but the German BND, through an organisation called
the Bundesvermögenverwaltung (BVV). This worried CIA, as BVV
was indeed the mechanism that BND used to channel money to
CAG and to other clandestine operations. The BVV had also
transferred the US$ 1,000,000 bail
for Bühler's release to CAG.
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In early March 1994, CIA learned that Bühler was about to
publicly disclose the secret relationship between Crypto AG and
Western intelligence. The program would be aired on
Swiss and Austrian national televison on 23 March 1994.
The publication of Strehle's book:
Verschlüsselt, Der Fall Hans Bühler
(Encrypted, the case of Hans Bühler),
would coincide with the broadcast, to attract maximum attention.
Crypto AG's CEO Michael Grupe decided to face the charges head-on,
and agreed to be interviewed for the TV program, much against the
will of the BND.
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On 23 March 1994,
Bühler appeared on Austrian and Swiss television,
with an account of his treatment in the Iranian prison.
The program went on to explain that CAG equipment had been
manipulated by the Germans and Americans. Peter Frutiger was
interviewed, although only his silhouette was visible and his voice
had been distorted. He stated that his life might be in danger.
Next, Grupe was interviewed by a Swiss journalist. He denied all
allegations and dismissed them as warmed-over claims by
disgruntled employees. The claim that the Germans were manipulating
the equipment was dismissed as insanity. After all, Crypto AG
sold equipment to the German and Swiss governments and they
would never buy it, if it had been rigged by them.
And yes, foreign intelligence agencies had been visiting the company.
They were customers, and very good ones.
Grupe's appearance on TV was strong enough to cast doubt over the
allegations made by Bühler and Frutiger. On 7 April, Bühler repeated
his claims on Swiss radio, but the whole thing gradually slipped
into the background. The impact of Strehle's book was also muted,
by the sensational nature of some allegations, such as the
suspicious death of Bo Hagelin – the son of Crypto AG founder
Boris Hagelin.
With such unsupported claims, the book lost much of its credibility.
The CIA
and BND were now facing a dilemma. They could start a lawsuit
against Bühler, in order to stop him from making 'false' claims,
but they could also settle it with Bühler out-of-court. But the latter
option would be seen by customers as an admission of guilt. It would
be more credible to proceed with the lawsuit, but that could endanger
and eventually expose the entire operation.
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Triggered by the overheated media attention of March 1994, the Swiss police
initiated yet another investigation of the company.
They visited Crypto AG, obtained the official denials from the CEO,
and urged the company to let its salesmen stay out of trouble
during the investigation.
In the meantime, on 15 July 1994, CAG lawyers asked the Swiss court
for a restraining order against Bühler, so that he could no longer make
'false' charges against the company. On 19 July the restraining order
was issued. It was a temporary measure, pending a lawsuit against
Bühler.
The police interrogated Frutiger, as he was Bühler's primary source.
But by the time they got to him, Frutiger had become an erratic
witness. Frutiger explained his well-founded suspicions about the
integrety of the firm. He told them that when he studied at the ETH
during the 1960s, it had been a public secret that the firm was
compromised by Western intelligence. He spoke about the interventions
by NSA
and ZfCh people
— he even mentioned NSA's Nora Mackebee 1 —
whenever he tried to implement his own algorithms.
However, he was not able to provide any evidence.
Eventually, Frutiger got cold feet and started to alter his
statements. He said that the silhouette that was shown in the
television program was not his, and that the interview was a fraude.
He was put under pressure and claimed (again) that his life
was in danger. In the end, the police
came to believe that he had been throwing around false allegations,
and dismissed him as a witness.
But there were other former employees that agreed to cooperate with
the police. One former engineer — who had worked for the company for
27 years — claimed to have proof for CIA
and BND manipulation with
respect to the
MCC-314 bulk encryptor
(of which the forward
synchronisation system had indeed been rigged), but
claimed he was unable to produce the evidence, due to his
non-disclosure agreement with CAG.
Another one claimed that the algorithm of the
CRM-008 voice encryptor
had been rigged by the German ZfCh, and called
it cryptographic castration.
The investigation went on, and even CAG board members were interrogated.
But on 20 December 1994, the police chief reported to the Ministry of
Justice, that there were no grounds for further investigation.
As far as the Swiss government was concerned, the Bühler case was closed.
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Nora Mackebee was indeed one of the NSA's experts who had visited
Crypto AG, under the cover of
Intercom Associates, which was a
CIA cover company, staffed by CIA and NSA people.
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In the meantime, CIA was still reluctant to start with a lawsuit
against Bühler — it could expose the entire operation — but on
11 August 1994 they finally decided to proceed. The strategy was to
draw out the process for years, in the hope that Bühler would eventually
become exhausted – or out of money – and settle out-of-court.
Almost a year later, in July 1995, the Swiss court ruled that both
sides had to prove their points. Bühler had to prove his allegations,
and Crypto AG had to prove that their equipment had never been
manipulated by Western intelligence services.
But then, in late September 1995, CIA got an unexpected break.
Bühler had been interviewed by American journalist Scott Shane of
The Baltimore Sun, who was doing a series of articles about the
NSA. This was clear violation of Bühler's restraining order,
and opened the door to an out-of-court settlement.
Bühler hesitated, but finally gave in. From now on he had to
stay away from the press; every violation would cost him CHF 100,000.
He would declare that there were no grounds for his accusation
that Crypto AG had been involved in intelligence activities.
CAG would pay his legal bills up to a maximum of CHF 150,000.
With the settlement, Hans Büler had been silenced.
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But even with Bühler out of the way, the matter wasn't over.
Scott Shane – the journalist of The Baltimore Sun – continued to probe
(former) Crypto AG employees for further information.
And he was about to expose one of the most secret US intelligence operations
to the American public.
On 10 December 1995, the article appeared in The Baltimore Sun,
the home newspaper of many NSA employees who lived in Maryland.
It was just as damaging as CIA
and NSA had feared.
It even mentioned Nora Mackebee — a former NSA officer —
and linked here to Intercom Associates,
a CIA cover company under which
NSA
and CIA people had operated in relation to the
Crypto AG business. She (and others) had visited the company to
give 'advise' on cryptographic algorithms.
At NSA headquarters in Fort Meade, it was the talk of the town for
many days. It is rumoured that lower NSA staff bought extra copies of
the newspaper, to read what they were not supposed to know.
Crypto AG's CEO Michael Grupe, issued the usual public denial statements.
He attributed the allegations to 'disgruntled employees' and claimed
that everything was 'pure invention'.
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The Hans Bühler Affair — within BND
and CIA known by the codename
HYDRA —
was by far the most damaging
one in the history of Operation RUBICON. 1
Not only for the secret that Crypto AG
— codenamed MINERVA —
was actually owned by BND
and CIA,
but also for the relationship between these two services.
It caused the BND to reconsider its position, and has contributed to
the BND's decision in December 1993, to terminate the joint
venture with the CIA immediately. 2 From 4 July 1994 to 2019
the Swiss company Crypto AG was solely owned
by the American CIA.
➤ More about Operation RUBICON
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The operation was initially known as THESAURUS, but in 1987,
this was changed to RUBICON.
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Note that this happened during the course of the Bühler Affair.
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© Crypto Museum. Created: Tuesday 12 January 2016. Last changed: Sunday, 15 November 2020 - 13:42 CET.
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