When the FBI Spent Decades Hunting for a Soviet Spy on Its Staff

A tip provided by a double-agent for the KGB set off one of the most self-destructive mole hunts in FBI history

“There was one file on our man in the FBI,” the ex-KGB man says. “He was retired and living in Queens.” That man, he says, was the mole. (Grant Delin)
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With a thousand agents, New York was the FBI’s largest field office. “There were about six or seven Soviet squads with maybe 20 or 25 people on each,” says an FBI counterintelligence agent assigned to New York at the time. “Some were looking at the U.N., some were looking at Americans the Soviets contacted. Plus lookout squads and a squad that did surveillance. There were maybe 50 people combined on each squad, so with six or seven squads there were over 300 agents looking at the Soviets—which means everyone on those squads was a potential suspect.” Including FBI agents working against Eastern European targets, the number of logical suspects totaled about 500.

Of course, everyone named Dick had to be investigated. “Dick McCarthy became the first suspect, because of his name,” says Walter C. “Goose” Gutheil, a New York FBI counterintelligence agent for 26 years until he retired in 1978. Richard F. McCarthy, who worked on a squad that targeted the GRU, Soviet military intelligence, assumed the mole hunters investigated him but says they never interviewed him. “I hope I was a suspect—they had to look at people with the first name,” he says. “I had an attitude, if I knew who it was I would have belted him.” Any FBI man who spied for the Russians, he added, would have to be “a psycho.”

About the only other thing the mole hunters knew was that on the night Kulak walked into the FBI office, he said Dick was out meeting with the KGB. That reassured Kulak that he wasn’t talking to the mole, whose identity and appearance he didn’t know, and gave Hengemuhle and Palguta a clue, however slight. They could try to narrow the field of suspects by determining who was on the street at that hour. “You’d want to see who worked that day based on timecards, when did they sign in, what was on their timecard,” says former FBI agent Edwin L. Worthington, who reviewed the files on UNSUB Dick in the mid-1980s as a headquarters official responsible for investigating penetrations of U.S. intelligence.

Although Hengemuhle and Palguta held their mission closely, word got around as they delved into counterintelligence agents’ backgrounds, the cases they handled and their possible vulnerabilities to recruitment by the KGB. For security reasons, the mole hunters worked from a windowless back room in the New York FBI office, in an area set apart from the rest of the floor. “It was supposed to be secret, but everyone knew about the search,” Major says. James A. Holt, a counterintelligence agent in New York at the time, says the mole hunt shattered morale: “There was consternation in the New York office because everybody knew they were under the gun, that they were being looked at.”

One reason for the apprehension is that many agents worried that the investigation might uncover other sins that would get them in trouble—a drinking problem, an extramarital affair. An agent who lived through the mole hunt recalled hearing about “one guy who used to go to a bar every morning before he reported to work.”

It also became apparent that the bureau was wiretapping its own men. After James E. Nolan Jr. arrived in New York as a counterintelligence agent in 1964, he needed a place to live and wanted to make a call about an apartment. Under J. Edgar Hoover, the FBI prohibited agents from using bureau phones for personal calls. So Nolan went downstairs to the building’s garage to use the pay phone. He happened to be with another agent who had worked longer in the New York office.

As Nolan started to pick up the phone, his colleague whispered: “Don’t use that one.” And then he told Nolan about the hunt for UNSUB Dick. Nolan, who years later became a deputy assistant director of the FBI, concluded that if the bureau was tapping the pay phone in the garage, it probably would not stop there—or overlook the agents’ office phones.

David Major learned about UNSUB Dick while he was assigned to the FBI’s Newark office in 1972. “I was doing a stakeout on a kidnapping,” he says. “We were doing the stakeout on the Bayonne Bridge. I was with an agent who had previously worked in the New York office. It was 2 or 3 in the morning, and the agent started telling me about the case. He got very emotional, because as a result of the case he was transferred to Newark. I was told by this agent that a significant number were transferred out of New York because of the search for UNSUB Dick. Later I was told of another agent on the West Coast who had been transferred for the same reason.” Those transfers—away from access to the bureau’s Soviet counterintelligence operations—were made “to be on the safe side,” he says.

Meanwhile, the investigation seemed to be getting no closer to its target. Then in 1964 or ’65 a second KGB agent, Valentin Lysov, alleged that the FBI had been penetrated, but again offered no details. The mole hunters decided to try something new—a “dangle” operation, in which they would send an FBI agent posing as a turncoat to offer his services to the KGB, in the hope that any conversations that resulted would elicit some clues to the identity of UNSUB Dick.


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