Based on articles by an FBI agent, a ring of spies in America working for Germany is eventually caught by the FBI.
In 1937 Mary McLaughlin in Scotland forwards mail to Karl Kassel (Paul Lukas) in New York. Kassel speaks for the new Germany, and Nazis salute. Kurt Schneider (Francis Lederer) writes to Germany to become a spy. German officers cable Franz Schlager (George Sanders) on a ship to contact Schneider. The captain buckles to the Nazis and their Gestapo. Kassel speaks against the U. S. Constitution, and a debate turns violent. Helen Schneider criticizes her husband for not working, but Schneider tells Werner Renz (Joe Sawyer) he is a German spy and asks for the military code. Schneider calls for statistical Army medical reports. Schlager calls on Schneider and gets information, paying him $50 a month. Greutzwald (Willy Kaufman) questions German policies; but Kassel has the Gestapo send him back to Germany. Kassel is summoned to Berlin and is put in charge of propaganda in America to cause unrest. Schneider writes to McLaughlin as Sword, but she is arrested by British intelligence.
Ed Renard (Edward G. Robinson) of the FBI suggests that Sword will be found in German groups. Schlager tells Schneider to make passports. Schneider calls to get blank passports; but police are alerted and follow the package to him. Schneider is arrested, and his home is searched. Renard compares letters and gets Schneider to talk. Werner is arrested. Renard learns that Schlager did not sail but picks up his assistant Hilda Keinhauer (Dorothy Tree) and searches her baggage. Renard calls on Dr. Kassel and finds his files on important men and their bloodlines. Hilda says that Kassel gave Schlager military information. Kassel agrees to talk about spies. Renard arrests two Gestapo men and many others.
Hitler invades Austria in March 1938. Lisa Kassel accuses her husband of leaving with another woman. Dr. Kassel is sent on a case, but the Gestapo beat him and send him to Germany. Lisa tells Renard. The German ship refuses to give up Kassel, and Germans have Kassel say that the FBI tortured him. Dr. Krogman (Sig Ruman) tells Hilda to say she was forced to sign a false confession. A witness is abducted by the Gestapo. In a trial Kellogg (Henry O'Neill) prosecutes Schneider, Werner, Hilda, and Max Helldorf for spying for Germany. The Nazis invade Poland and other nations. The four are convicted and sentenced. In the final scene Renard tells Kellogg that Nazis are like an absurd nightmare.
This film served as an obvious warning to Americans
about the growing Nazi threat and realistically shows how efforts
to combat fascism often use similar methods of a police state
in fighting the menace.