According to many accounts, Colepaugh grew up in a family that was very pro-German and often listened to propaganda broadcasts from Berlin. After graduation from Admiral Farragut Academy, he briefly attended MIT. He served 14 months in the United States Merchant Marine. In 1942, he was arrested in Philadelphia for draft evasion. He enlisted in the United States Navy but was discharged "for the good of the service" in 1943. The next year he spent working at a watch factory, and then a farm. In 1944, fearing being drafted by the Army, he signed on as a crew member of the "SS Gripsholm" and sailed to Lisbon, where he went to the German Embassy and requested to join the German Army, saying that he renounced his US citizenship and owed his allegiance to Germany. In Berlin, he was recruited by the Foreign Intelligence Service, Amt VI, who saw that he was given extensive firearms and espionage training.