"What the hell is the Navy doing here?”

That’s how U.S. Navy radioman Richard Rutan was greeted when he stepped down from a C-47 plane in central China in June 1944.

The question was somehow fitting for Rutan, a member of the Sino-American Cooperative Organization, or SACO.

Its official insignia, after all, was a string of punctuation marks on a pennant, like cuss words in a comic strip, symbolizing SACO’s unofficial slogan, “What the Hell?”

Rutan’s arrival at Lüliang drew a crowd of Army Air Forces men eager to greet the first plane ever to land at the new base.

He was almost as baffled about his presence on the desolate airstrip as they were. A few days earlier, the 21-year-old had been at Guilin, about 300 miles inland from Hong Kong, intercepting Japanese code with a dozen other radio operators when his officer tapped him on the shoulder and told him to get his gear together.

He flew into Lüliang with orders to find the major in charge and request private space without offering an explanation. To his astonishment, the major handed him the keys to an empty building.

For the next two days, Rutan struggled to assemble a radio station, relying on bits of information he could recall from courses he had taken stateside. He couldn’t ask for help because no one, not even the major, was to know what he was up to. When the radio finally crackled with a signal, it seemed like a miracle.

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“Let me tell you, it was a proud moment when I received that first piece of Japanese code,” Rutan recalled.

The "What-the-Hell!" pennant used by Naval Group China during World War II. (U.S. Naval History and Heritage Command)

As a SACO man, he was part of a top secret network of Navy men, along with a handful of Marine and Army personnel, who worked hand in hand with the Nationalist Chinese to fight the Japanese occupation of China.

They were sent to China, beginning in 1943, to spy on the Japanese and collect weather data for the U.S. Pacific Fleet.

Weather reporting was no less important than the espionage :in naval warfare, an accurate prediction could be the difference between victory and defeat.

Led by Capt. (later Rear Adm.) Milton “Mary” Miles, SACO quickly expanded its role, fighting the Japanese on the mainland in exchange for protection of SACO’s weather and radio stations by the Chinese army.

The Japanese weren’t the only threat: the operation was undermined from the very beginning by factions within the U.S. Army, the Office of Strategic Services (OSS), and the State Department — which demanded to know what the hell the Navy was doing on the ground in China.

But by the end of the war, some 2,500 SACO men had served in China, not only cracking intercepted Japanese code and gathering crucial meteorological information but blowing up enemy supply depots, laying mines in rivers and harbors, rescuing downed American pilots, and training thousands of Chinese peasants in guerrilla warfare.

“Among all the agencies in China,”Miles later said,“SACO had clearly done the most against the enemy with the fewest men and the smallest material resources.”

Milton Edward "Mary" Miles (April 6, 1900 - March 26, 1961)

The Sino-American Cooperative Organization was the brainchild of Capt. Miles and Gen. Dai Li, second in command to Generalissimo Chiang Kaishek and head of Nationalist China’s secret service, the Bureau of Investigation and Statistics.

Mary Miles began serving in China right after graduating from the U.S. Naval Academy in 1922. (He got his odd nickname — a reference to silent screen actress Mary Miles Minter— there as a plebe.)

Over 18 years, he earned a reputation for getting things done while winning the respect of locals. Average-sized, with an open, amiable face, he looked more like a supply clerk than the leader of a daring spy mission.

But in April 1942, Adm. Ernest J.King,the Chief of Naval Operations, sent Capt. Miles to China with two objectives: gather intelligence about the Japanese occupation and collect meteorology data on the mainland to forecast the weather in the Pacific.

Reporting directly to the Joint Chiefs of Staff, Miles was to contact Dai Li, who would help him set up the necessary stations.

Almost as an afterthought, King told Miles to take every opportunity to cause trouble for the Japanese while he was at it.

Japan had occupied China since 1937 and was firmly entrenched there by the time it attacked Pearl Harbor. American military leaders believed the Allies would eventually have to root out the Japanese occupiers through a full-scale invasion of China.

To do so, they needed to know the lay of the land and everything possible about enemy and friendly forces alike.

In the Pacific, the Japanese had a meteorological advantage over the Allies, thanks to Japanese weather stations ranging from Manchuria to Indochina, which allowed them to accurately predict conditions at sea.

The U.S. Navy needed to level the playing field. If they could get weather data from as far west as Mongolia, their forecasts would trump those of Japan.

Capt. (later Rear Adm.) Milton “Mary” Miles and Gen. Dai Li of the Sino-American Cooperation Organization. (U.S. Naval History and Heritage Command)

Dai Li was the key to the mission’s success.

He had some 20,000 agents throughout Asia; the United States could not hope to accomplish anything without his cooperation, which the Navy had secured through Chiang Kai-shek.

Miles had reason to be leery of Dai.

The State Department’s dossier on him claimed he hated foreigners, regularly ordered assassinations, and maintained a concentration camp full of personal enemies.

It also contained evidence that Dai had executed his own mother — twice — which cast doubt on everything else Miles had read.

He decided to reserve judgment until he met the general in May 1942. Miles discovered in Dai Li a man who spoke directly and kept his word.

“You didn’t have to drink tea with him for two days to find out what he meant,”said Miles.

The two men were to form a relationship so intimate that Miles eventually met the general’s mother and was a guest in her home.

Dai Li is remembered for the intelligent, intimidating look in his eyes and his dark complexion. Though a small man by American standards, he had an erect military bearing that contrasted almost absurdly with his delicate hands.

In spite of a destitute childhood, he had risen to the top of his class at the military academy where Chiang Kai-shek was headmaster, and later became the Generalissimo’s most trusted confidant.

A few weeks after Miles met Dai, the two men toured China’s southern coast,and took cover in a clump of trees between rice paddies during a Japanese bombing raid.

As they hunkered down with planes roaring overhead, they talked, through a Chinese interpreter, about what each hoped to gain through their relationship.

The U.S. Navy needed to set up radio and weather stations from the South China Sea to the most remote reaches of the country’s interior, and they needed protection.

Chiang Kai-shek’s soldiers needed arms and training. A well-equipped and organized Chinese army would be ready to squeeze the Japanese from the rear when the Americans invaded.

Dai Li also wanted his secret service agents to learn modern crime detection techniques, and both sides wanted to harass the Japanese.

Dai proposed a cooperative plan, to which Miles instantly agreed. They would set up camps together, staffed with U.S. Navy instructors who would transform 50,000 Chinese peasants into disciplined guerrilla soldiers. Upon graduation, each soldier would receive a new American firearm.

Dai Li’s soldiers and agents would help establish and protect the Navy’s weather and spying stations, and the newly trained guerrillas would fight the Japanese.

With a handshake — and the approval of President Franklin D. Roosevelt nearly a year later — Miles’s covert little mission was transformed into a major ground operation.

Gen. Dai Li was named director of SACO and Capt. Miles as deputy director.

Known at the outset as the "Friendship Project," then later as "SACO-Sino-American Cooperative Organization," the group operated over a vast terrain extending from Indo-China to the Gobi Desert. (U.S. Naval History and Heritage Command)

Miles believed it was fitting that Dai should be number one, because SACO was operating in his country, although in practice they made decisions jointly.

SACO thus became the first and only U.S. military unit ever to serve under Chinese command in time of war, and Miles believed the arrangement fulfilled his orders from Adm. King to win Dai’s cooperation and badger the Japanese in any way he could.

But his spontaneous deal-striking and generous spirit — along with a bit of backroom wheeling and dealing in Washington — also laid the groundwork for turf wars among the U.S. military services that would hamper SACO’s operations throughout the rest of the war.

For Miles wasn’t the only American trying to set up an intelligence operation in China. Then-Col. William Donovan was struggling to establish his fledgling OSS in Asia.

Blocked from the Pacific Theater by the Army and Navy, he viewed Miles’s relationship with Dai as an opportunity to gain a foothold on the continent.

He persuaded Adm. King’s deputy to name Miles coordinator of the OSS in East Asia, and Dai’s agent in Washington agreed.

The appointment became official on September 22, 1942, although Miles didn’t find out about his new role until November.

William Joseph "Wild Bill" Donovan, Head of the OSS. (National Archives)

Meanwhile, Gen. Joseph Stilwell, commander of the China-Burma-India Theater, viewed the operation with mixed feelings. Although the OSS sought to put Stilwell in overall command of SACO, he demurred, knowing that Dai Li would not countenance any meddling with his relationship with Miles.

But Stilwell had lingering doubts about the Navy’s role in his theater, particularly Dai Li’s smuggling activities. The stage was set for the success — and dysfunction — that followed.

Saco Headquarters was built 15 miles north of Chongqing, at Happy Valley, the site of Dai Li’s private residence and what his critics called his personal prison camp.

Americans never saw the prison. They were barred from certain areas of the compound. In a lovely setting of stony hills, green terraces, and flowerbeds, an armed Chinese sentry was stationed on every footpath 24 hours a day.

Within months, Happy Valley grew into a full-blown military headquarters with everything from a health clinic to a photo lab.

To Miles, SACO’s success rested on personal respect. During his earlier service in China, he had cringed at Americans who thought they could run the country better than the Chinese, whom they considered lazy and dull-witted.

Miles knew that attitude would destroy his vision, and from the start, he refused to accept any “old China hands.”

“One sour grape will spoil a good bowl of rice,” Miles said, quoting Confucius.

He formulated a profile of the ideal SACO man: strong and fit, smart, and multi-talented, with at least two professional skills and one useful hobby. He had to be able to endure deprivation, work in secrecy, and be “a little crazy.”

Recruitment was as shadowy as the operation itself.

Few Americans knew that the “Rice Paddy Navy,” as SACO came to be known, existed — including the men destined for duty in China, who volunteered only for “prolonged and hazardous duty.”

Photographer’s Mate Roger Moore only learned his destination when he had his first lesson in Chinese aboard a ship bound for Calcutta, SACO’s jumping-off point for men and supplies.

After a harrowing flight “over the Hump,” from India across the Himalayas to China, he became Miles’ personal photographer at Happy Valley and ran the photo lab. He trained Chinese recruits to use firearms and Kodak cameras, and wrote an instruction manual that was translated into Chinese.

In Burma, Generalissimo and Madame Chiang Kai Shek and then-Lt. Gen. Joseph W. Stilwell, Commanding General, China Expeditionary Forces, on April 19, 1942 in Burma. (National Archives)

SACO’s operation in India grew as needs in China evolved.

It proved easier to manufacture some materials in India than ship them from the United States. A new plant in Jorhat produced liquid oxygen, converting some into gas for flights over the Hump. Most of it was transported in liquid form to conversion stations near where it would be used to avoid airlifting the heavy canisters.

A Navy factory made batteries for the hundreds of radios scattered across China. With a shelf life of nine months, batteries made in the United States were nearly spent by the time they finished a six-month journey to China, but they arrived only a few weeks old when made in India.

At Camp Knox in Calcutta, new arrivals got their first taste of the exotic, riding around in rickshaws while preparing for duty in China. They exchanged their crisp Navy whites for Army khakis without insignia or rank.

They learned simple rules to avoid cultural gaffes that would undermine the spirit of SACO: Don’t yell or say “Chinaman” or “coolie.” Never show anger or criticize anything directly, unpardonably rude behavior in Chinese culture. And no matter what, get along.

Cmdr. William C. Hagey, Rear Adm. Milton E. Miles and Lt. Elmo R. Zumwalt Jr., .on the docks at Shanghai, China, October 1945. (National Archives)

SACO established 70 meteorology stations throughout China, working out of caves, abandoned buildings, and military camps. Isolated teams of two or three men transmitted data three times a day to Happy Valley, where information was analyzed and relayed to the commander in chief of the Pacific.

Several of the stations grew into weather and training camps. Camp 4 housed the most remote and most important weather station, in Inner Mongolia, at a former Catholic mission on the edge of the Gobi Desert and a month’s truck ride from the nearest city, Xi’an.

When Miles and Dai flew in to visit, their plane was the first that had ever landed there. Located 400 miles north of Tokyo, Camp 4 could track weather patterns crossing central Asia to the Pacific sooner and more accurately than the Japanese.

The 12 men stationed there created their own universe. In summer they rode naked on bareback Mongolian ponies, and in winter they wore sheepskin parkas over suits made from woolen blankets to endure indoor temperatures below freezing.

Making do with what they had, on one occasion they fired bazookas mounted on the ponies’ backs at a line of Japanese armored trucks.

Motor Machinist’s Mate Matthew Komorowski-Kaye was stationed at Camp 3, a weather station and training facility in an abandoned Buddhist monastery guarded by six of Dai Li’s Loyal Patriotic Army soldiers.

One day he received orders to escort a convoy 1,000 miles to the east to Nationalist Chinese Column Five, which had not received supplies in more than a year.

They set out in five old Chevy trucks, but as pelting rain turned the roads to rivers of mud, they had to abandon the trucks and resort to footpaths.

That’s when Komorowski-Kaye got a close-up look at the human pack trains that moved most of the supplies for SACO. More than 100 Chinese porters materialized to carry the gear in bundles suspended from the ends of poles resting on their shoulders.

For bulky things like torpedoes, up to six men would carry the load using a contraption of ropes and sticks.

Trekking from village to village, they were hospitably received by Dai Li’s agents at every stop, and each morning a new set of porters appeared. It was nonetheless grueling: when they finally reached the column after 30 days, Komorowski-Kaye had dropped 30 pounds.

His experience was not unusual. SACO men regularly hiked hundreds of miles, suffering battered feet in their boots while the Chinese made the same treks in straw sandals without raising a blister.

They also cruised the rivers in motorized sampans, rode horses and camels, and parachuted into remote sites.

Lt. Gen. Claire Chennault’s famous Kunming-based Flying Tigers, which became the 14th Air Force, grew to love SACO. (National Archives)

Even as Saco men deployed throughout China, Miles’s fractious relations with SACO’s sister services were making the delicate operation far more difficult to carry out than it should have been.

At first, Miles had viewed his OSS title as a bonus for SACO.

After all, he was already gathering information on the Japanese, including troop numbers and movements, supply lines, and coastal fortifications. His coast watchers tracked Japanese navy and cargo ships and submarines. In fact, he was so successful that the Japanese put a bounty on his head, and no less than four attempts were made on his life in China during the war. It made perfect sense for him to work closely with America’s nascent spy agency.

But the connection only caused him grief.

As a loyal Navy man, Miles gave all information to Naval Intelligence before passing it on to the OSS. He didn’t share most of what he learned from Dai’s agents with anyone because it seemed to be of no military use.

Donovan thought Miles was holding out on him, and it appears Donovan only wanted to use Miles as an entrée to China. He secretly installed his own agents, infuriating Dai, who accused the Navy of betrayal.

Miles complained in bitter terms to Washington, and Miles was removed from his OSS appointment in December 1943.

From then on, Donovan and Miles were enemies. Donovan painted Dai Li as a thug to his contacts in the State Department and worked the military brass to have the plug pulled on Miles and SACO.

At the same time, although Gen. Stilwell had initially supported the SACO agreement, he didn’t like Miles’ subordinate position to Dai or Dai’s tendency to recruit pirates and smugglers as agents.

He also decided he didn’t like the idea of U.S. Navy men operating on the ground. So he quietly blocked the delivery of supplies.

SACO depended on the Army for material flown over the Himalayas and, although promised 150 tons per month, Miles’s requisitions were repeatedly canceled by desk officers in Washington or bound up in red tape.

He even cut a deal to loan four Navy planes to the Army to help lift the tonnage, but Stilwell’s men refused the offer.

The internal conflict left more than 1,000 specially trained Scouts and Raiders (the Navy’s special warfare commandos) stranded in Calcutta for the last five months of the war; one SACO officer led his patrol of Chinese fighters on a raid of U.S. Army supplies to keep from starving.

Despite this American-induced sabotage, Miles soldiered on, and SACO grew to 18 camps that served as bases for military operations and training.

Even those dedicated to other missions, such as laying underwater mines, trained Chinese soldiers to use and maintain firearms, take pictures, serve as medics, set sophisticated explosives, and run ambushes.

Chinese soldiers, their bodies lying in grotesque heaps, were mowed down by Japanese machine gun fire in the bitter fighting which preceded the capture of Tientsin by Japanese troops, August 1937. Following the 1937 invasion of China, Japanese troops continued to wage war there until Sept. 2, 1945. (U.S. Naval History and Heritage Command)

Happy Valley had the largest training center, graduating classes of up to a thousand every couple of months, and several camps in central China were devoted entirely to training and guerrilla missions.

Trainees arrived at camp undernourished. Because they were small and could not communicate directly, the Americans at first considered them simple and childlike.

It was this jingoist attitude Miles had hoped to avoid, and it evaporated quickly when work began. The Chinese proved to be excellent marksmen, and the Americans were astonished by their stamina and night vision.

“You probably laughed at the coolie as he rhythmically went hopping along carrying a couple of loads at either end of his yo-yo pole but you soon had a lot of respect for that little joker when he walked you into the ground, you carrying nothing and him carrying between 80 and 100 pounds,” recalled Lt. Cmdr. Stanley McCaffrey.

To build teamwork, the American instructors ate Chinese food with chopsticks alongside their Chinese partners.

When they took to the field, they carried porter poles over their shoulders and donned the baggy peasant clothes and circular straw hats favored by Chinese farmers.

Some even took Atabrine tablets to yellow their skin. They didn’t expect to fool anyone face to face, but the disguises helped them blend into the landscape.

After graduation, Navy instructors accompanied guerrilla groups of 10 to several hundred men on missions to harass the Japanese.

Japanese mounted unit, circa 1937, in Shanghai. Japan invaded China on July 7, 1937 and carried out counter-guerrilla operations until Sept. 2, 1945. (Courtesy of Rear Adm. J.P. Walker, U.S. Naval History and Heritage Command)

Miles made a special trip to congratulate a SACO-led group of 200 soldiers and plainclothes spies that had plagued a force of 5,000 Japanese for weeks.

The spies had entered the occupied town every day, loitering in teahouses and selling vegetables. Relying on the intelligence the spies had gathered, guerrillas ambushed foraging parties by day and blew up stockpiles of food and arms by night.

Believing that his starving troops were surrounded, the Japanese commander surrendered and was shocked to hand over his sword to a ragged American leading a small Chinese force.

In the Dongting Lake region where a key north–south railway line intersected the Yangtze River, a group of SACO guerrillas called the Yangtze River Raiders blew up Japanese supplies shipped by rail and river barge.

They threaded along goat paths in the dark past the campfires of Japanese patrols to reach the rail line and set their charges.

As one officer summarized their tactics: “Set off explosives and run like hell.”

Ensign John Matmiller recruited four Chinese soldiers for another daring bombing mission.

After practicing for weeks, they waited until dark aboard a junk across Xiamen Harbor from a docked Japanese freighter. Wearing packs of explosives on their backs, they swam to the freighter and set time-delayed charges beneath the water line, and then hightailed it back to the junk.

As they were hauled aboard, four huge explosions boomed across the harbor, and the freighter sank.

If the airman who had greeted Rutan wondered what the hell the Navy was doing in the middle of China, Lt. Gen. Claire Chennault’s famous Kunming-based Flying Tigers, which became the 14th Air Force, grew to love SACO.

Its network of radio operators and Dai Li’s agents among Chinese river pirates, fishermen, and villagers risked their lives to rescue dozens of downed American airmen behind enemy lines and deliver them to the SACO camps and surveillance stations.

Ultimately, Saco’s intelligence gathering on Japanese troop movements and strengths was in part for naught: After the atomic bombs were dropped, the United States never had to invade China in order to push out the Japanese.

Nonetheless, the men of SACO secured the Chinese coast at war’s end before coming home with stories that topped anything an adventure writer could dream up, and an impressive tally of accomplishments.

Capt. Irwin F. Beyerly is congratulated by Gen. Chien Ta-Chun, Mayor of Shanghai, after presentation of a medal on behalf of Generalissimo Chiang Kai-Shek for the meritorious part he played in the Sino-American Cooperative Organization (SACO), Feb. 21, 1946. (National Archives)

Indeed, Miles’ number-two, Capt. I. F. Beyerly, estimated (perhaps generously) that between June 1944 and July 1945 alone, SACO men and trainees killed 23,540 Japanese, destroyed 209 bridges and 84 locomotives, sank 141 ships and river craft, and rescued 76 Allied pilots and crew.

The weather reports played roles at Okinawa, Iwo Jima, and Leyte Gulf, a fierce battle in which the Navy sank four Japanese carriers in October 1944.

Coast watchers supplied information that Adm. Bill Halsey used to sink 40 more Japanese ships on January 1, 1945.

Casualties were astoundingly low. One American SACO man died in China, and one was captured but survived the war.

But there was one other major casualty: Mary Miles himself.

After three years of running such an incredibly complex and critical operation, all while staving off attacks from Stilwell, Donovan, and various assassins — not to mention the Japanese — Miles suffered a mental breakdown while wrapping up SACO in September 1945.

Fortunately, it was short lived. Promoted to rear admiral at war’s end, he went on to direct Foreign Missions and Pan American Affairs for the U.S. Navy before retiring in 1958.

But he always considered his work setting up and running SACO with Dai Li (who died in a plane crash in 1946) to be the most important thing he had ever done.

In a 1957 letter to SACO veterans shortly before he retired, Miles called it “the greatest and the most unusual experience that I have ever had in these 40 years of Navy life.”

This story originally appeared in the December 2010 issue of World War II Magazine, a sister publication to Navy Times. To subscribe, click here.