Fellers used the Military Intelligence Code No11, together with substitution tables. The Italian codebreakers had a unit called Sezione Prelevamento (Extraction Section). This unit entered embassies and consulates and copied cipher material. In 1941 they were able to enter the US embassy in Rome and they copied the MI Code No11. A copy was sent to their German Allies, specifically the German High Command's deciphering department – OKW/Chi. The Germans got a copy of the substitution tables from their Hungarian allies and from December 1941 they were able to solve messages. Once the substitution tables changed they could solve the new ones since they had the codebook and they could take advantage of the standardized form of the reports. Messages were solved till 29 June 1942 and they provided Rommel with so much valuable information that he referred to Fellers as his ‘good source’.The British realized that a US code was being read by the Germans when they, in turn, decoded German messages containing information that could only have come from the US officials in Egypt. The Americans however were not easily convinced that their representative’s codes had been ‘broken’ and it took them months before they changed Colonel Fellers code.
The Germans didn’t know that the Brits had solved messages enciphered on their Enigma machine and thus had different ideas about who betrayed their codebreaking success. Wilhelm Flicke, who worked in the intercept department of OKW/Chi wrote in TICOM report DF-116-Z about this case:During the war there was stationed at the Vatican a diplomatic representative of the U.S.A. who stood in radio communications with Washington like any other ambassador or minister. In a radiogram sent to Washington in June 1942, enciphered by means of a diplomatic code book, one could read of a conversation which representative of the Vatican had had with an Italian of high position. During this conversation the Italian had mentioned that the Germans could read the most important cryptographic system of the American Military Attaché. The American representative had learned this at the Vatican through a Vatican official and was therefore warning the American War Department against any further use of this cryptographic system.
Weisser (a cryptanalyst of OKW/Chi) also said that it was the Italians who betrayed the German success in his report TICOM I-201:
Did the Germans have a reason to mistrust their Italian allies?It seems that the answer is yes. On July 24 1942 Leland B. Harrison, US ambassador to Switzerland, sent a telegram to assistant secretary Gardiner Howland Shaw (who was in charge of the State Departments cipher unit) warning him that an Italian official had met with Harold Tittmann (US representative to the Vatican) and had told him that the US diplomatic code used by the embassy in Egypt was compromised.