I'm embarrassed to say I'd never heard of this:

"In the early 1980s, the Naval Investigative Service was investigating homosexuality in the Chicago area. Agents discovered that gay men sometimes referred to themselves as 'friends of Dorothy.' Unaware of the historical meaning of the term, the NIS believed that a woman named Dorothy was at the center of a massive ring of homosexual military personnel. The NIS launched an enormous hunt for Dorothy, hoping to find her and convince her to reveal the names of gay servicemembers."

Via Lawyers, Guns, and Money.

