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Prior to the formation of the OSS, American intelligence had been conducted on an ad-hoc basis by the various departments of the executive branch, including State, Treasury, Navy and War. They had no overall direction, coordination, or control. The United States Army and the United States Navy had separate code-breaking departments ([[Signal Intelligence Service]] and OP-20-G) that not only competed, but refused to share break-throughs. Also, the original code-breaking operation of the United States Department of State, MI8, run by Herbert Yardley, had been shut down in 1929 by Secretary of State Henry Stimson because "gentlemen don't read each other's mail". President [[Franklin D. Roosevelt]] was concerned about American intelligence deficiencies. On the suggestion of Canadian spymaster [[William Stephenson]], the senior representative of British intelligence in the western hemisphere, Roosevelt directed Stephenson's friend [[William J. Donovan]], a [[World War I]] veteran, Republican, and New York lawyer, to draft a plan for an intelligence service.  

Prior to the formation of the OSS, American intelligence had been conducted on an ad-hoc basis by the various departments of the executive branch, including State, Treasury, Navy and War. They had no overall direction, coordination, or control. The United States Army and the United States Navy had separate code-breaking departments ([[Signal Intelligence Service]] and OP-20-G) that not only competed, but refused to share break-throughs. Also, the original code-breaking operation of the United States Department of State, MI8, run by Herbert Yardley, had been shut down in 1929 by Secretary of State Henry Stimson because "gentlemen don't read each other's mail". President [[Franklin D. Roosevelt]] was concerned about American intelligence deficiencies. On the suggestion of Canadian spymaster [[William Stephenson]], the senior representative of British intelligence in the western hemisphere, Roosevelt directed Stephenson's friend [[William J. Donovan]], a [[World War I]] veteran, Republican, and New York lawyer, to draft a plan for an intelligence service.  

OSS had a dismal security reputation. Established agencies like the [[FBI]] and [[Military_intelligence#United_States_Army|G-2]] believed that Donovan's oddball outfit, built as it was from scratch with not a few corners cut in the hiring of its staff, had to be riddled with [[subversion (political)|subversives]] and spies. This rap was not wholly fair; OSS headquarters was not in fact penetrated by Axis agents, and its field security (at least in Europe) was adequate. Nevertheless, X-2 hunted the agents of Axis—not Allied—services. Soviet sympathizers and even spies worked in OSS offices in Washington and the field. Some were hired precisely because they were [[Communists]]; Donovan wanted their help in dealing with partisan groups in Nazi-occupied Europe. Others who were not Communists, such as Donovan's aide [[Duncan Lee]], Research and Analysis (R&A) labor economist [[Donald Wheeler]], Morale Operations Indonesia expert [[Jane Foster Zlatowski]], and R&A Latin America specialist [[Maurice Halperin]], nevertheless passed information to Moscow. OSS operations in [[China]], moreover, were badly penetrated by Communist agents working as clerical and housekeeping staff, or training in OSS camps for operational missions. <ref>[http://webroots.org/library/usamisc/oss-cia0.html ''The Office of Strategic Services: America's First Intelligence Agency''], Michael Warner, CIA History Staff, Center for the Study of Intelligence, Published: United States Central Intelligence Agency, 2000. </ref>

OSS had a dismal security reputation. Established agencies like the [[FBI]] and [[Military_intelligence#United_States_Army|G-2]] believed that Donovan's outfit, built from scratch with many corners cut in the hiring of its staff, had been penetrated with [[subversion (political)|subversives]] and spies. At least fifteen Soviet agents penetrated the OSS, with the actual number more likely around twenty. <ref>[http://www.johnearlhaynes.org/page58.html Exchange with Arthur Herman and ''Venona'' book talk], Joint Herman and Haynes Book Talk,  Borders, Washington, D.C., February 2000,</ref>

 

Soviet sympathizers and spies worked in OSS offices in Washington and the field. Some were hired precisely because they were [[Communists]]; Donovan wanted their help in dealing with partisan groups in Nazi-occupied Europe. Others who were not Communists, such as Donovan's aide [[Duncan Lee]], Research and Analysis (R&A) labor economist [[Donald Wheeler]], Morale Operations Indonesia expert [[Jane Foster Zlatowski]], and R&A Latin America specialist [[Maurice Halperin]], nevertheless passed information to Moscow. OSS operations in [[China]], moreover, were badly penetrated by Communist agents working as clerical and housekeeping staff, or training in OSS camps for operational missions. <ref>[http://webroots.org/library/usamisc/oss-cia0.html ''The Office of Strategic Services: America's First Intelligence Agency''], Michael Warner, CIA History Staff, Center for the Study of Intelligence, Published: United States Central Intelligence Agency, 2000. </ref>

The OSS purchased Soviet code and cipher material (or Finnish information on them) from émigré Finnish army officers in late 1944. Secretary of State [[Edward Stettinius, Jr.]]'s protested this violated an agreement President Roosevelt made with the Soviet Union not to interfere with Soviet cipher traffic from the U.S. Donovan might have copied the papers before returning them the following January but there is no record of [[Arlington Hall]] receiving them, and CIA and NSA archives have no surviving copies.

The OSS purchased Soviet code and cipher material (or Finnish information on them) from émigré Finnish army officers in late 1944. Secretary of State [[Edward Stettinius, Jr.]]'s protested this violated an agreement President Roosevelt made with the Soviet Union not to interfere with Soviet cipher traffic from the U.S. Donovan might have copied the papers before returning them the following January but there is no record of [[Arlington Hall]] receiving them, and CIA and NSA archives have no surviving copies.