More (#1) from Legacy of Ashes:

All over Europe, “a legion of political exiles, former intelligence officers, ex-agents and sundry entrepreneurs were turning themselves into intelligence moguls, brokering the sale of fabricated-to-order information.” The more his spies spent buying intelligence, the less valuable it became. “If there are more graphic illustrations of throwing money at a problem that hasn’t been thought through, none comes to mind,” he wrote. What passed for intelligence on the Soviets and their satellites was a patchwork of frauds produced by talented liars.

Helms later determined that at least half the information on the Soviet Union and Eastern Europe in the CIA’s files was pure falsehood. His stations in Berlin and Vienna had become factories of fake intelligence. Few of his officers or analysts could sift fact from fiction. It was an ever present problem: more than half a century later, the CIA confronted the same sort of fabrication as it sought to uncover Iraq’s weapons of mass destruction.

And:

Forrestal then went to an old chum, John W. Snyder, the secretary of the treasury and one of Harry Truman’s closest allies. He convinced Snyder to tap into the Exchange Stabilization Fund set up in the Depression to shore up the value of the dollar overseas through short-term currency trading, and converted during World War II as a depository for captured Axis loot. The fund held $200 million earmarked for the reconstruction of Europe. It delivered millions into the bank accounts of wealthy American citizens, many of them Italian Americans, who then sent the money to newly formed political fronts created by the CIA. Donors were instructed to place a special code on their income tax forms alongside their “charitable donation.” The millions were delivered to Italian politicians and the priests of Catholic Action, a political arm of the Vatican. Suitcases filled with cash changed hands in the four-star Hassler Hotel. “We would have liked to have done this in a more sophisticated manner,” Wyatt said. “Passing black bags to affect a political election is not really a terribly attractive thing.” But it worked: Italy’s Christian Democrats won by a comfortable margin and formed a government that excluded communists. A long romance between the party and the agency began. The CIA’s practice of purchasing elections and politicians with bags of cash was repeated in Italy—and in many other nations—for the next twenty-five years.

And:

One of the many myths about Operation Success [aka Operation PBSUCCESS; the US-led Guatemalan coup d’état], planted by Allen Dulles in the American press, was that its eventual triumph lay not in violence but in a brilliant piece of espionage. As Dulles told the story, the trick was turned by an American spy in the Polish city Stettin, on the Baltic Sea—the northern terminus of the iron curtain—posing as a bird watcher. He saw through his binoculars that a freighter called the Alfhem was carrying Czech arms to the Arbenz government. He then posted a letter with a microdot message—“My God, my God, why hast thou forsaken me?”—addressed to a CIA officer under deep cover in a Paris auto parts store, who relayed the coded signal by shortwave to Washington. As Dulles told the story, another CIA officer secretly inspected the hold of the ship while it docked at the Kiel Canal connecting the Baltic to the North Sea. The CIA, therefore, knew from the moment that the Alfhem left Europe that she was bound for Guatemala carrying guns.

A wonderful yarn, repeated in many history books, but a bald-faced lie—a cover story that disguised a serious operational mistake. In reality, the CIA missed the boat.

Arbenz was desperate to break the American weapons embargo on Guatemala. He thought he could ensure the loyalty of his officer corps by arming them. Henry Hecksher had reported that the Bank of Guatemala had transferred $4.86 million via a Swiss account to a Czech weapons depot. But the CIA lost the trail. Four weeks of frantic searching ensued before the Alfhem docked successfully at Puerto Barrios, Guatemala. Only after the cargo was uncrated did word reach the U.S. Embassy that a shipment of rifles, machine guns, howitzers, and other weapons had come ashore.

The arrival of the arms—many of them rusted and useless, some bearing a swastika stamp, indicating their age and origin—created a propaganda windfall for the United States. Grossly overstating the size and military significance of the cargo, Foster Dulles and the State Department announced that Guatemala was now part of a Soviet plot to subvert the Western Hemisphere. The Speaker of the House, John McCormack, called the shipment an atomic bomb planted in America’s backyard.

Ambassador Peurifoy said the United States was at war. “Nothing short of direct military intervention will succeed,” he cabled Wisner on May 21. Three days later, U.S. Navy warships and submarines blockaded Guatemala, in violation of international law.

And:

In the East Wing of the White House, in a room darkened for a slide show, the CIA sold Eisenhower a dressed-up version of Operation Success. When the lights went on, the president’s first question went to the paramilitary man Rip Robertson.

“How many men did Castillo Armas lose?” Ike asked.

Only one, Robertson replied.

“Incredible,” said the president.

At least forty-three of Castillo Armas’s men had been killed during the invasion, but no one contradicted Robertson. It was a shameless falsehood.

This was a turning point in the history of the CIA. The cover stories required for covert action overseas were now part of the agency’s political conduct in Washington. Bissell stated it plainly: “Many of us who joined the CIA did not feel bound in the actions we took as staff members to observe all the ethical rules.” He and his colleagues were prepared to lie to the president to protect the agency’s image. And their lies had lasting consequences.