Show Notes

COLD OPEN

Pengo picked up his hash pipe and took one last hit.  

He was seated in front of his desk in room 256 at the Hotel Schwiezerhof in West Berlin. ​​It was late fall, 1986. 

Pengo wasn’t his real name. It was the 18-year-old’s hacker alias. He’d been rising up the ranks of West Berlin’s hacking scene, but today could make him a legend. 

Are you ready? We can’t make him wait.

Pengo glared. His associate, Peter Carl, 31, hovered over his shoulder. He’d been pestering Pengo like this all night.

I told you I was.

Peter eyed an open briefcase. Inside were a bunch of floppy disks, a magnetic cassette tape full of data, and about 30 pages of printouts. The results of Pengo’s all-night hacking session. 

Is that it? Peter asked, doubtful.

You barely gave me twelve hours!

Peter sighed, snapped the briefcase shut, and gripped it by the handle.

Let’s go, then.

The thirtysomething and the teenager left the hotel. One was wearing a blazer and slacks. The other was dressed in a standard West German hacker’s uniform: black hoodie, black jeans, and big black boots, with spiky hair and a metal chain around his waist.

The pair headed for the nearest U-Bahn subway station. Inside, they lined up at a checkpoint that allowed passage between the two halves of the city.

Ordinarily, if a West Berliner wanted to visit East Berlin, they would have to apply for a pass at least a day in advance and pay a fee of 25 marks.

But when they reached the front of the line, Peter simply flashed his passport and the border guard waved them through. Pengo wasn’t sure how Peter was able to do that, but he had to admit he was impressed. 

After two trains, a ten-minute walk, and a last-minute joint, Pengo and Peter arrived at a building that looked residential.  

Let me do the talking. There’s a lot of money riding on this.

Pengo nodded. Peter knocked on the door, and a secretary let them in.

He’s ready to see you.

The secretary brought the West Germans into an office, where a well-dressed man in his forties with black hair was waiting. 

He didn’t look like a KGB agent, but that was probably the point.

Hello, Sergei. This is my hacker.

Sergei stood and shook Pengo’s hand with a smile. 

Good to meet you. 

He spoke German with a Russian accent. Everyone took a seat.

Pengo tried to shake off the effects of the hash and the weed. Sure, they helped him focus while hacking, but right now they were making him tense. 

Peter put the briefcase on the desk and opened it.

Sergei, you are gonna love this. It’s…uh…kid, tell him what it is.

On the floppy disks, you’ll find security software from Digital Equipment Corporation Singapore. On the magnetic tape, you’ll find a PAL assembler from France.

Sergei’s eyes glazed over. Peter had told him Sergei barely knew anything about computers.

It’s a program used to create microchips, Pengo explained. 

Sergei still looked lost. Peter sensed he was losing interest.  

But that’s just the start. This kid has hacked into…tell him all the places you’ve hacked into.

Pengo rattled them off: a semiconductor maker called Mostek; a technology company called Teradyne; aerospace manufacturer Thompson-Brandt; electronics manufacturer Phillips; chemical company Union Carbide; the SLAC laboratory at Stanford; Fermilab in Chicago; and the Massachusetts Institute of Technology.

This kid can even make you an account at the Jet Proposition Laboratory for just 150,000 marks.  

Jet Propulsion Laboratory, Pengo corrected.

Right, that. Or, he can teach your guys how to do this hacking stuff!  

Sergei folded his hands.

It’s all very interesting. But as I said, what we’re really looking for is the source codes for UNIX and VMS.

Peter looked at his hacker, eyebrows raised. 

I could get them. But it would go a lot faster with a high-speed data connection.

Sergei smiled.  

Why don’t you see what you can do with this, and then we’ll talk.

Sergei handed them an envelope. Inside was 3,000 marks, or about $1,500.

Now, let’s get something to eat. 

Sergei got up. Peter picked up the envelope, trying to hide his disappointment.

It was no million marks—but it was something. Dreamed up in a haze of hash smoke, their plan was now in motion. But Pengo, Peter, and their associates were playing a dangerous game. 

On this episode: West German hackers, the KGB, Berkeley scientists, and enough hash to kill a police horse. I’m Keith Korneluk and this is Modem Mischief. 

INTRODUCTION

You're listening to Modem Mischief. In this series we explore the darkest reaches of the internet. We'll take you into the minds of the world's most notorious hackers and the lives affected by them. We'll also show you places you won't find on Google and what goes on down there. This is the story of Project Equalizer.

ACT ONE

A year earlier, Pengo arrived at a different hotel. This one was in Hamburg, and it was hosting the second annual convention of the Chaos Computer Club. 

At the time, the CCC was the premiere West German hacker group. They didn’t hack for money. Founded by libertarian Wau Holland, the CCC believed that information should be free. And, if you’re looking for another hacker who also wanted information to be free, check out our three-part series on Julian Assange.

 The CCC styled themselves as Robin Hoods of the digital age, and Pengo desperately wanted to be one of them.

Pengo’s real name was Hans Hubner. Born in 1968, he was part of the first generation of West German teenagers who got access to personal computers, made by Commodore, IBM, and Apple.

These were hundreds of times slower than the top-of-the-line computers owned by companies, governments, and universities. They were bicycles versus hot rods. 

But Pengo and hackers like him knew how to hotwire those hot rides and take them for joyrides. Pengo frequently spent all-night hacking sessions breaking into those forbidden networks, then bragged about it on BBS message boards. Ultimately, he wanted to become the best hacker in West Germany.            

When a CCC member invited him to their second annual convention, he jumped at the chance. He took a hiatus from his university studies and hitched a ride to Hamburg.                        

At the convention, hackers would gather in hotel rooms with their computers for competitive hack-a-thons, or just to shoot the shit between panels.

In one of these rooms, Pengo wound up next to a tall, thin twenty-year-old with a worried face. 

Hey. I’m Hans. But you can call me Pengo.

The hacker looked at him blankly.

It’s, uh, from an arcade game. You play as a penguin named Pengo. You push blocks of ice and get attacked by sno-bees.

Pengo blushed. Why hadn’t he picked a cooler name?

But the hacker just pulled out a big brick of hash.

Want some?

Pengo definitely did.

The hacker’s name was Karl Koch, but he went by the alias Hagbard Celine. That’s a character from a 1970’s novel series called The Illuminatus! Trilogy. It’s a satire about the Illuminati controlling the Earth. Hagbard Celine is the sworn enemy of the Illuminati, as well as the captain of a golden submarine.

Only…Hagbard didn’t seem to think it was a satire.

As Pengo got to know him, it seemed like Hagbard thought the Illuminati was real. That it was his duty to expose them. That he was Hagbard Celine.

Hagbard definitely had some…interesting views, but otherwise, Pengo and Hagbard hit it off.

As a hacker, Pengo could see that Hagbard was more of a brute force type of operator, one who didn’t write code himself—he couldn’t write and execute a malicious virus, for example.

Hagbard was obsessed with breaking into America’s ARPANET computer systems, which housed some of the US military’s most sensitive research. This, he believed, would shed light on who was really controlling the world’s governments.

Hagbard invited Pengo to crash at his place in Hanover. They could hang out, hack, and chill with his other friends. Pengo eagerly accepted, and the new pals headed to Hanover.

In Hanover, Hagbard lived in an apartment he’d inherited from his parents. Both of them passed away from cancer by the time he was 16. He didn’t seem to have a steady job, but then again neither did Pengo. 

Hagbard introduced Pengo to his friends. They were:  

-Dirk-Otto Brzezinski, or “Dob” as they called him. He was 25. He was more of a programmer than a true hacker. Originally from West Berlin, he had avoided West Germany’s mandatory military service by splitting his time between his home city and Hanover and West Berlin. With no permanent address, the bureaucracy would never catch him. On the other hand, living an itinerant lifestyle left him horribly depressed.

-Then there was Markus Hess. He was 24 and came from a conservative middle-class family. Of all of them, he seemed the least likely to be a computer hacker. He worked as a programmer at a small software company in Hanover called Focus.  

-And finally, there was Peter Carl, 31. He didn’t know a thing about computers. But he was a natural salesman. In his day job, he worked as a dealer at a Hanover casino. He also used to move a little hash. Just served a nine-month stretch for it, in fact. 

Over two weeks in Hanover, Pengo and Hagbard partied with Dob, Markus, and Peter. The Kraftwerk was pumping, the hacking was plentiful, and so was the hash—but not for Markus, who stuck to beer. 

SFX: Kraftwerk blaring, or something that sounds like it. (Techno/Punk)

Markus was the newest to hacking. Pengo and Hagbard showed him the ropes. 

They taught him how to steal Network User Identifications, or NUIs. At the time, West German Internet users all needed their own NUI. 

Often, these had passwords that were easy to guess. For hackers, it was a way to log onto the Internet as someone else. 

Next, they showed him how to use a stolen NUI to break into a mainframe. 

The McDonald Douglas Corporation owned a data network called Tymnet. It connected computers all over the world. For universities and companies, Tymnet made information sharing easier than ever.

To log on, all you needed was a NUI and a Tymnet phone number—and Tymnet made its phone numbers public. It was like they’d left their front door wide open, but never expected anyone to actually come inside. 

Markus loved exploring new computer systems, but he could also program. Once inside a computer, Markus could run operating system commands and write programs that combed the system for security weaknesses. Once discovered, Markus could exploit them and create new accounts, giving him “super user” status. This gave him access to virtually any computer in the network. 

He created super user accounts at various American universities and research labs. Many of these had network connections to American military bases and government facilities.

Pengo spent more and more time in Hanover, neglecting his studies in West Berlin. For Pengo, the hacking was little more than joyriding. He didn’t get into it to steal or break anything. He just wanted to be the best hacker in West Germany. For Hagbard, it was about learning the world’s secrets, and hopefully exposing the Illuminati.

For Dob and Markus, it was more like a programming challenge–and for Markus, the more hacking he did, the more addicted he got.

But Peter Carl saw an opportunity. One night in early 1986, while passing a hash pipe with Dob and Hagbard, Peter Carl made a suggestion.

What if we…marketed our talents?

They waited for him to continue.

There’s so much information, so much software. Just sitting there, waiting to be taken. You know there’s a software embargo in East Berlin. I’m thinking, we sell them some American software that their country desperately wants.

You want to sell to the goddamn Soviets? Hagbard said. They’re part of the two-power system that oppresses the world!

That’s the point, Peter said. Right now, there’s a power imbalance between the USA and the Soviets. By giving the Soviets American software, we’re evening the score. We’ll call it…Project Equalizer.

Peter, how would we even get this stuff to the Soviets? Dob asked

We’ll contact the KGB. There’s got to be someone at the embassy in Bonn, right? We could go there.

What, you just rock up to the Soviet embassy with stolen documents and software? Hagbard asked. How would we even get through the checkpoint?

I’ll slip a note to the border guard in my passport. It’ll say I want to do business with the KGB.

Where did you read that, in a spy novel? Hagbard said. Peter glared.

Dob held up his hand to calm them down.

How much money do you think could be in this?
Peter took another hit.

Oh, I’d say at least a million marks.

And it was agreed.

The plan would start with just the three of them. Keep things small. They could bring in Pengo and Markus later, if necessary.

They decided they needed a “demonstration package” that could be used to entice the Soviets into buying stolen information from them.

In 1986, most computer users were still unaware of the risks of having weak computer passwords. Often, a hacker like Hagbard only needed to figure out a username, guess a password, and he was in. And since employees’ names were publicly available, it was simple.

With Hagbard’s rudimentary, password-guessing level hacking skills, the trio were able to steal access codes for the SLAC laboratory at Stanford, the US Department of Energy, and the Defense Department’s Optimis Computer.

They also provided sensitive documents, with titles like: “Radioactive Fallouts in Areas 9a and 9b” and “Propellants of ICBMs.”

By the end of summer, 1986, they had everything they thought they needed. Now, all Peter Carl had to do was get it to East Berlin. Secrecy was the key. If anyone found out what they were doing, they could face fines, jail time, or worse.

But Peter Carl and the Hanover hacker crew didn’t know they had already attracted attention. 

In late August, 1986, 36-year-old Clifford Stoll, biked to work at Lawrence Berkeley Laboratory in Berkeley, California. It was the same route he’d taken to work every day for the past several years. He wore his standard grubby t-shirt, jeans, cheap sneakers, and long hair.

Cliff was an astronomer. Until recently. He worked at Lawrence designing telescope optics for the Keck Observatory in Hawaii. But then, his funding ran out.

He was jobless. But he had computer skills. So, he took a systems administrator job at Lawrence, in the basement of the same building. He and two computer engineers ran twelve mainframes that supplied computing power to more than 1,000 of Berkeley’s scientists and researchers.

Today was his second day on the job. A job he was barely qualified to do.

Cliff huffed and puffed his way up the last few hundred feet up the hill to Lawrence. He arrived, stowed his bike, and hurried to his office, hoping he wouldn’t bump into his supervisors, Wayne and Dave. 

He’d chosen a windowless basement office instead of one with a view of the Golden Gate Bridge, specifically because he could sleep under the desk unsupervised. 

As he reached his office, he heard a voice behind him. 

You’re late.

Shit. It was Wayne. Cliff turned. 

I need you to take a look at something. There’s a discrepancy in the accounting software. Someone used .75 cents worth of computer time without paying.

Grand theft, huh?

Figure it out, Cliff, and you’ll amaze everyone.

Wayne handed Cliff some papers detailing the accounting error and headed off.

Cliff assumed it was just a glitch in the accounting software. The homebrew software was written by bored summer students. There was probably a rounding error somewhere. A missing fraction of a penny that, in bulk, could add up to .75 cents. 

But as Cliff dug through the company’s accounting software, he discovered a user named “Hunter,” who had no billing address. Strange. Sure enough, this Hunter had used the .75 cents without paying.

Nobody could have created the Hunter account without administrative access. He asked Wayne and Dave if they’d done it.

It wasn’t me, Wayne said. RTFM

RTFM stood for “read the fucking manual.” Wayne was full of acronyms like that.

Cliff was puzzled. He deleted the Hunter account and moved on.

The next day, Wayne got an email from a government facility based in Maryland called Dockmaster.

Dockmaster claimed that someone from Lawrence had broken into their system.

Wayne passed it on to Cliff. He compared the access logs with the times when Dockmaster said the break-ins occurred. There was only one Lawrence user active at that time: Joe Sventek.

Dave knew of him. Joe Sventek was a former employee. He’d taken a job in England more than a year ago.

There was no way a trusted former employee would use his old account to break into a facility connected to Lawrence’s network.

The truth dawned on Cliff: someone hacked into the system.

Cliff assumed it was a Berkeley student, some prankster. But maybe it was someone with more malicious intentions. They could Lawrence’s network to steal sensitive documents at hundreds of other facilities–or, simply destroy their computer networks.

Cliff had to get to the bottom of it, before the hacker could do any damage.

ACT TWO

What if I told you that I had access to a team of hackers who can get you the most sensitive secrets of the United States government?

Peter Carl sat across from Sergei inside the Soviet trade mission on Unter den Linten in East Berlin. 

It was early September. That day, Peter had borrowed Dob’s car and driven it to East Berlin. He’d talked his way into the trade mission, and now he was making his pitch to what he assumed was the resident KGB agent. 

But rather than look interested, Sergei just looked confused. 

What’s a hacker? 

Peter paused. How the hell would he explain this?

Well, you know what a computer is, right? 

Of course I do.

And you know that many of them are connected to each other, right?

…not really, but continue.

Well…look, I’m not a computer guy. But, I have a team of people who can break into American computers and steal information on them. We have a little “demonstration package” full of passwords and documents from American universities and government agencies.

But you don’t have it with you?

It’s in West Berlin. You know, we could also provide general hacking know-how. All we’re asking for is one million marks.

Well, I can’t just hand you a million marks for something I’ve never seen and don’t quite understand. Let me see your passport.

Peter handed it over warily. Sergei took notes.

Present this at the Friedrichstrasse and Bornholme Strasse border crossings and you’ll be waved through. We’ll be in touch.

And with that, the meeting was over. Two days later, Peter returned with the demonstration package and gave it to Sergei. This time, Sergei gave Peter 300 marks for his expenses, and then took him out for a meal.

After two weeks, Sergei finally had a response from Moscow.

They wouldn’t be paying a million marks for the demonstration package. They also weren’t interested in learning hacking techniques. But there was specific information they were interested in.

Sergei pulled out a list and read it off.  

Nuclear weapons, radar techniques, and the Strategic Defense Initiative. We also want software from the Ashland Tate and Borland companies. But most of all, we want the source codes for VMS and UNIX.

We can do that, Peter said confidently.

He had no idea if his hackers could actually do that. He had no idea what any of that stuff was.

Sergei paid Peter 600 marks and took him out for another meal.

Over dinner, he gave Peter photographs of a young woman and a child. These were Peter’s cover story. If anyone asked why he was visiting East Berlin so much, he would say he was visiting his girlfriend and son, then produce the photo.

Peter and Sergei met weekly at a residential building on Leipzigerstrasse. Often, Peter brought nothing to the meetings. He still got paid for expenses, and they still went out for a meal. They even became friendly. Peter learned Sergei had two kids and loved fishing.  

Above all, the Soviets wanted the source codes for two operating systems: UNIX and VMS.

At the time, VMS was the operating system for the VAX line of computers, which ran many military bases and government laboratories. Having the access code would allow the Soviets to discover exploits they could then use to hack into the system.

Peter knew someone who was a VMS expert: a teenager who went by the handle Pengo. Sergei wanted to meet him. 

Peter returned to the Hotel Schwiezerhof and summoned Pengo. Sure, Pengo didn’t appreciate being left out of the plan initially, but with money on the table, he put aside the hard feelings.

Not wanting to return to Sergei empty-handed, Peter and Pengo had a hash-fueled all-night hacking session.

Pengo hacked into the Digital Equipment Corporation Singapore’s system and stole a security program called SecurePak. This gave the user the ability to make accounts with administrative privileges. He also stole the schematics for a software program used to manufacture microchips.

They hoped it would be enough to impress Sergei. Once again, Peter asked for a million marks. Sergei gave him 4,000.

Sergei reiterated that what the Soviets wanted most of all was the source codes for VMS and UNIX.

Pengo would keep trying, but Peter Carl and Dob were losing faith. They had already lost faith in Hagbard, whose increasing drug use and paranoia made his productivity plummet.

Maybe it was time to turn to Hagbard’s other friend, Markus Hess.

Dob and Peter put the idea to Markus one night over beers. 

We think there could be money in the hacking we were doing. Interested? 

Who’s paying you? 

That’s not important. Are you in? 

Hess thought about it. He’d just seen the movie War Games, in which an American hacker breaks into NORAD and starts a nuclear war. 

Well…do you still have that account at the Lawrence Berkeley Laboratory that I made? 

Peter and Dob smiled. Markus was in. 

Oakland FBI. Fred Wyniken speaking. 

Agent Wyniken, hello. You don’t know me, but I’m a systems admin at the University of Berkeley. 

Cliff Stoll explained the situation.

Stoll and his supervisors could have deleted the Joe Sventek account and cut off the hacker’s access. Instead, they decided to allow the hacker to continue breaching the system, so they could track them. Stoll’s bosses gave him three weeks to catch the hacker. 

Since learning that a hacker had stolen Joe Sventek’s account, Cliff probed the system to figure out how the hacker found a way in. 

The hacker used an exploit in a word processing software program called GNU to grant themselves super-user status. 

This allowed them to create the Hunter account without the billing address, which they then used to steal .75 cents worth of Internet time. They’d even read Stoll’s emails.

But the situation was much more serious than that.

In 1986, the Lawrence Berkeley Laboratory was mainly a nuclear physics lab, home to three massive particle accelerators. 

Decades earlier, Lawrence created nuclear material for the Atomic bomb. In the 1950’s, it created several new elements. These days, Lawrence wasn’t doing classified research.

But via its Tymnet Internet connection, LBL was connected to several labs that did do classified research. It was also connected to military bases that housed classified information. 

Cliff tracked the hacker as they logged onto Lawrence’s network and read nuclear physics data—nothing classified, but surely proprietary. Worse, he’d used Lawrence’s Tymnet connection to connect to several military bases. There was the Anniston Army Depot in Alabama. The White Sands Missile Range in New Mexico. Air Force Systems Command Space Division In El Segundo, California.

But Wyniken was unimpressed. 

You’re calling the FBI because you lost .75 cents in computing time?

No! Someone’s been breaking into our systems!

If you can demonstrate a loss of more than a million dollars, or if someone’s prying through classified data, then we’ll open an investigation. Until then, leave us alone.

Wyniken hung up.

Next, Stoll called the Oakland DA’s office. They were more receptive. The DA agreed to file a search warrant. This would allow Stoll to trace where the hacker was coming from.

But the warrant would take weeks. And even with the warrant, tracking them would still be difficult. The hacker seldom logged onto the network for more than a few minutes. It wasn’t enough time to conduct a wiretap. 

Stoll was getting frustrated. Time was running out. 

Meanwhile, in West Berlin, Peter Carl and Dob were getting desperate. By fall 1986, the Soviets had only paid them a few hundred marks. Barely enough to cover the bills at the Hotel Schwiezerhof. 

Markus Hess was their best bet. He’d spent his time using the Lawrence Berkeley Lab Internet hookup to break into various US military installations. But he hadn’t yet been able to discover anything truly sensitive, like nuclear secrets. 

They needed Hess to grab the big prize: source code for either UNIX or VMS.

Markus knew little about VMS. But he did have a way to get UNIX.

At the time, there were different varieties of UNIX used in different regions of the world, all using slightly different programming languages. Berkeley had its own variety, called “Berkeley UNIX.” Most computer users on the West Coast used it.

Hess’s software company, Focus, also used Berkeley UNIX. It already was widely available to companies and universities in the West. He figured there was no harm in passing it along, so he agreed. 

A month later, Dob took Hess for a walk and explained what was really going on.

The UNIX source code was sold to the East, Dob said. And that means you’re in it with us now.

What exactly had Peter and Dob gotten him into?

Back in Berkeley, Clifford Stoll was struggling to make progress. 

Lawrence laboratory finally got a search warrant to wiretap Tymnet’s phone lines and trace the call—but because the hacker’s sessions were so brief, it was nearly impossible to do. Every time the hacker would log onto Lawrence, Cliff would race to the phone and call Tymnet, but it would be too late.

Stoll and Tymnet traced them to one of four countries in Europe: England, Spain, Germany, or France. But that was as close as they could get. 

One night, an exhausted Cliff was taking a shower with his girlfriend, a 24 year old law student named Martha. As she shampooed his hair, he heard the familiar ping of his pager. It was alerting him that the hacker had breached the system, once again.

Don’t you dare, Martha warned.

But Cliff got out. Still dripping wet, he raced over to the phone and called his contact Steve at Tymnet. 

Steve tried to trace the call, but the hacker had again vanished.

Dejected, Cliff wandered back into the bathroom and rejoined Martha.

I’m sorry, sweetheart.

Honey, we’ve got to do something about this. We can’t let this guy keep yanking us around. And all those spooks in suits you keep talking to—what have they ever done to help? We have to take this into our own hands.

But what can we do without the government’s help?

A sly grin formed on Martha’s face. She adopted a fake Russian accent, a la Boris and Natasha from Rocky and Bullwinkle. 

Darlink. I tink I hev a plan. It’s called Project…

She looked up.

Showerhead.

…and a note from my writer, Jim Rowley on that last scene: “this is all verbatim. I would never write a scene like this.” Sure, Jim, sure. We believe you…

Cliff would set a trap, Martha explained. The hacker wanted military secrets. So, they would create a document full of false information—one that was so big, the hacker would have to spend hours digesting it.

Cliff and Martha got out of the shower, dried off, dressed, and biked up to the computer lab. There, they dug up troves of real military documents—none of them classified—and changed them to contain nothing useful.

Overall, the documents appeared to be a contract for Lawrence to run the computers for a new Star Wars missile defense project. The hacker wouldn’t be able to resist.  

A few days later, Cliff was having a cappuccino when his pager beeped. The Joe Sventek account was active again, and the hacker had found the file.

Cliff ran to the phone and called Steve.

Steve? Get a trace going. This one is going to take a while.

A few minutes later, Steve called back.

Cliff? They’re in Germany. They’re using a stolen Datex line from the University of Bremen. I called the Bundespost, and they traced the origin: Hanover.

ACT THREE

On June 27, 1987, at about six p.m., Markus Hess was sitting at his desk in his office at Focus, the Hanover software company. He was ready to go home. Tonight, he was going to take another crack at trying to find the VMS source code.  

Suddenly, the door opened. It was his boss, company president Udo Flohr.

He brought a crowd: four local cops, two members of the Bundeskriminalamt (which is West Germany’s FBI), and a district attorney.

Markus could guess why they were here.

Udo, to his credit, didn’t seem to believe Markus had done anything wrong. If anything, he looked outraged that the cops would even accuse his employee.

Markus, these…gentlemen are saying you did something? What the hell is going on?

The District Attorney pulled out a search warrant.

You’re under investigation for computer fraud. This allows us to search your office and home, and confiscate any items that might be evidence.

Markus said nothing.

This is insane, Udo said. You can’t have access to my company’s entire computer system. I’m sending our attorney over to your house, Markus. We’ll handle this.

Again, Markus said nothing. The police searched his office for four hours before moving on to his home, where Markus brewed everyone a pot of coffee.

By midnight, they confiscated Hess’s office computer, two home computers, and dozens of documents.

The next day, the company attorney issued a formal complaint about the search. Markus was allowed to return to work the next day at a new workstation.

The incident scared Markus away from hacking. He was done breaking into computers. But lifting software from his workplace and passing it on to Sergei? The money was just too easy. Markus continued providing software to Peter Carl, who continued selling it to the Soviets.

Sergei handed over $25,000 for the Berkeley UNIX source code. And Peter Carl desperately needed it.

Recently, Peter Carl lost his day job as a casino dealer in the wake of a table-fixing scandal. Now, the money from selling software to the Soviets was his only source of income. He badly needed his hackers to produce results. 

Peter Carl wasn’t happy that Markus Hess’s workplace was raided by police, but Hess was still the only one of the Hanover hacking crew who was actually delivering the goods.

Well, sort of. After the theft of the Berkeley UNIX source code, Hess passed along another operating system called Minix to Sergei, who paid 4,000 marks. When Sergei learned that it normally retailed for 120, he was furious.

Then, Hess passed along the source code for a European variety of UNIX. Sergei paid 2,000 marks. Later, Sergei learned that the software was available in the public domain. He warned Hess and Peter not to pull a scheme like this again.

But that was still better than what Dob, Pengo, and Hagbard were offering. 

Dob was never much of a hacker, and he was losing motivation. Then, after a vacation to Kenya, West German police finally caught up to him for shirking his mandatory military service. He was arrested at the airport and held for nine days.

Pengo was having his own legal troubles. After the all-night hacking session at the Hotel Schwiezerhof hadn’t produced any results, he continued to try to hack into Western computer systems for Sergei, but hadn’t found anything worthwhile. Then, in December 1987, three West German police officers roused him from his sleep at his father Gottfried’s apartment.

The West German police had learned of Pengo’s habit of stealing Network User Identifications–or NUIs. They confiscated Pengo’s equipment, but thankfully they didn’t seem to grasp the full extent of his hacking operations.

After his brush with the law, Pengo had enough. He stopped hacking for Sergei entirely.

Pengo was done trying to become West Berlin’s top hacker. Now, he wanted to use his computer skills to go straight. 

With another friend named Clemens, Pengo started a company called NetMBX. They helped businesses set up computer networks.

In early 1988, Pengo and Clemens landed their first big contract with a West German police station in Munich. The cops didn’t seem to realize that Pengo was a lawbreaker. They were just happy to have someone to set up their network. 

Then there was Hagbard. Since 1987, he had been in and out of psychiatric centers. A romantic relationship with an American diplomat had fallen apart and left him despondent. Due to his heavy drug use, he was becoming a liability. Sergei wanted Peter Carl to cut him out of the group entirely.

By early 1988, the Hanover hacking crew had dwindled to Peter Carl and Markus Hess. They were starting to think it was time to leave it all behind.

But in April, a West German magazine called Quick published a story about the Hanover hacking case, with Markus as the subject. 

Thankfully, since he was the subject of a police investigation, the article couldn’t identify him by name. He was identified as “Matthias Speer.” But the article had his photo. Soon, reporters figured out his real name. He stopped answering the phone.

Hagbard, meanwhile, was spiraling. 

His years of heavy drug use depleted his inheritance. Desperate for money, he approached the journalists behind the Quick article and offered to tell his side of the story. He also put them in touch with Pengo.

For Pengo, the Quick article had him freaking out. He might not have been named in the piece, but he was heavily involved. He’d sold actual software to the Soviets. Now, here were three journalists asking to interview him.

He agreed to be interviewed, but really he wanted to find out what the reporters knew.

Turns out, they knew more than he’d thought.

Not only did Hagbard blab to the press about their involvement, he gave the journalists internal police memos from the station in Munich—the one from Pengo’s NetMBX job.

Hagbard had asked Pengo to borrow them, only to turn around and give them to journalists to prove he was a capable hacker. Pengo would be pissed, if he didn’t feel sorry for him.

But the situation was getting serious. Pengo couldn’t just do nothing. One of the journalists helped Pengo set up a meeting with a lawyer. 

The lawyer agreed that Pengo was in legal jeopardy. It was only a matter of time until the police connected him to the case.  

Then, he told Pengo about a wrinkle in West German law.

In West Germany, almost anything could be considered espionage—especially selling software to the Soviets. But the law contained an amnesty provision: if someone who committed espionage turned themselves in before the espionage was discovered, they could avoid jail time.

But this came with a cost: he’d have to inform on his friends.

Sure, he wasn’t all that close with Markus, Dob, or Peter. But Hagbard had become one of his best pals. He knew his friend was struggling. Could Pengo betray him?

Pengo had no choice. He took the lawyer’s advice.

But when Pengo and the lawyer approached the West German police with their offer, they learned that Hagbard had already made the same decision.

Hagbard betrayed them first.

On May 23, 1988, Hagbard got into a Volkswagen and headed off to make a delivery.

Since going to the police, he’d taken a menial position as a messenger for a conservative political party—something the anarchy-minded Hagbard would never ordinarily do.

The job was a stabilizing force in his life. He continued to struggle with drug addiction. His inheritance squandered, he was living in an apartment paid for by West German police. In his paranoid, conspiracy theory-driven mind, he was in more danger than ever.

Hagbard left the office in the morning. By four o’clock, his coworkers began to worry that he hadn’t come back. They called the police, who organized a search party.

Nine days later, Hagbard’s body was found burned beyond recognition. Apparently, he’d doused himself in gasoline and lit himself on fire. 

There was no suicide note. Later some would point to this as evidence of foul play.

But Hagbard’s choice of date was significant. In The Illuminatus Trilogy, the number 23 is important symbolically. As one character explains, “All the great anarchists died on the 23rd day of some month or other.”

ACT FOUR

It’s said that the Berlin Wall fell on November 9, 1989. 

Here’s what really happened that day: The East German parliament was busy revising its travel restrictions to open up the border between the East and the West. Then, a parliament spokesperson mistakenly told reporters that the changes were in effect. Before the mistake could be corrected, border guards opened the gates.

Thousands of East Germans immediately flooded to the city’s checkpoints. Unwilling to fire on them, the guards opened the gates and let them through. The wall would be torn down in the following weeks.

Two months later, in January 1990, Peter Carl, Markus Hess, and Dirk-Otto Brzezinski, aka Dob, had their trial.

Their trial took place in a different Germany than the one in which they’d committed their crimes. After months of investigation, West German authorities determined that the Hanover hacker ring had stolen almost no software that was classified or proprietary. Clifford Stoll was flown in to testify, but his testimony failed to tie the trio to any outright theft.  

In their own defense, Peter, Markus, and Dob claimed they weren’t motivated by money. The United States had a technological edge in the Cold War, and they were merely trying to but merely a desire to “balance the scales

The judge was unconvinced by their argument, but also wasn’t interested in a harsh punishment. After all, the Hanover hackers had sold software to the Soviet Union, a country that was about to collapse.

Peter was sentenced to two years in prison and a 1,500 mark fine. Markus got 20 months a 10,000 mark fine. And Dob got 14 months and a 5,000 mark fine. None of them actually had to serve their time; they got probation.

For Pengo, aka Hans Hubner, the suicide of his friend Karl Koch aka Hagbard Celine deeply unsettled him  In the decades since, Pengo has sworn off hacking and pursued a career as a systems administrator—the same kind of job Cliff Stoll had. Pengo hasn’t kept in touch with the surviving Hanover hackers. 

While the official investigation ruled Hagbard’s death a suicide, Hagbard’s supporters have speculated that he was murdered by the Soviets. This has never been proven. But it feels appropriate that the longtime conspiracy theorist was himself the subject of conspiracy theories. And, hey, it wouldn’t be the first time someone was murdered by Russians.

As for Cliff Stoll, he enjoyed his 15 minutes of fame from the case. He published a book about his experiences, and starred in a PBS documentary about it—which, if you’re an astronomer, is the equivalent of having a threeway at the Playboy Mansion. Something I never got to do which is one of the great regrets of my life.

By the time Project Equalizer was over, the KGB paid just 90,000 marks to the five members of the Hanover hacker ring. When the Soviet Union finally fell in December 1991, the Western software embargo fell with it. Within a few years, the software that the Hanover hackers sold to the Soviets would all become available in Russia anyway.

Even so, Project Equalizer exposed some fundamental flaws within the structure of the Internet. Systems were originally built by academics for the purpose of sharing information. Security was an afterthought. As the general public became more connected, even amateur hackers like the Hanover hacker ring could still cause serious problems. In the years to follow, other hackers would do a lot more damage

CREDITS

Thanks for listening to Modem Mischief. Don’t forget to hit the subscribe or follow button in your favorite podcast app so you don’t miss an episode. This show is an independent production and is wholly supported by you, our listeners and the best way to support the show is to share it. And another way to support us is on Patreon. For as little as $5 a month you’ll receive an ad-free version of the show plus bonus episodes exclusive to subscribers. Modem Mischief is brought to you by Mad Dragon Productions and is created, produced and hosted by me: Keith Korneluk. This episode is written and researched by Jim Rowley. Edited, mixed and mastered by Greg Bernhard aka Comrade McDumDum. The theme song “You Are Digital” is composed by Computerbandit. Sources for this episode are available on our website at modemmischief.com. And don’t forget to follow us on social media at @modemmischief. Thanks for listening!