Produced and directed by Billy Wilder, it starred William Holden, Don Taylor, Robert Strauss, Neville Brand, Harvey Lembeck, and Peter Graves (Strauss and Lembeck both appeared in the original Broadway production); Wilder also cast Otto Preminger in the role of the evil camp commander.
The movie was adapted by Wilder and Edwin Blum from the Broadway play by Donald Bevan and Edmund Trzcinski who were both prisoners in Stalag XVII-B. (Trzcinski appears in the film as a prisoner.) The play was directed by José Ferrer and was the Broadway debut of John Ericson as Sefton. It began its run in May 1951, continued for 472 performances and was based on the experiences of its authors, both of whom were POWs in Stalag 17B in Austria.
Stalag 17 begins on "the longest night of the year" in 1944 in a Luftwaffe prisoner-of-war camp located somewhere along the Danube River. The story of a Nazi spy in Barracks Four is narrated by Clarence Harvey "Cookie" Cook (Gil Stratton).
The lives of the prisoners are depicted in a somewhat sanitized way. They receive mail, eat terrible food, wash in the latrine sinks, and collectively do their best to keep sane and defy the camp's cruel and ruthless commandant, Oberst von Scherbach (Otto Preminger). They use a clandestine radio, smuggled from barracks to barracks throughout the entire camp, to pick up the BBC and the war news. (The antenna is their volleyball net.) Their German guard, Sergeant Schulz (Sig Ruman), confiscates the radio, another success for the "stoolie," whoever he is.
Sefton bribes the guards to let him spend the day in the women's barracks in the Russian section of the camp. The other prisoners spot him through Sefton's own telescope and conclude that this is his reward for having informed the Germans about the radio. When he returns, he is accused of being a spy. At that moment, von Scherbach pays a visit to the barracks to apprehend new prisoner Lieutenant James Dunbar (Don Taylor), who had previously told the other prisoners that he had blown up a German ammunition train while he was being transported to the camp. The men are convinced that Sefton divulged Dunbar's act of sabotage to the Germans, and they viciously beat Sefton, after which he is ostracized. His considerable property is taken and redistributed to the rest of the prisoners. Sefton then decides to investigate and uncover the identity of the spy in order to clear his name. Eventually he remains in the barracks during a fake air raid and successfully discovers the identity of the spy: the barracks security chief, Price (Peter Graves), who Sefton overhears conversing with Schulz in German and divulging the means by which Dunbar destroyed the ammunition train.
Sefton divulges the theory to his only friend in the camp, Cookie. He points out that the stoolie may not be an American traitor at all but a German spy posing as an American to ferret out information. However if he reveals and proves Price is the stoolie the Germans would simply remove him and put him in another camp.
On Christmas Day, the men find out that SS men are coming to take Dunbar to Berlin for interrogation. The entire camp creates a distraction and Dunbar is freed and hidden. Nobody but the compound chief Hoffy (Richard Erdman) knows of Dunbar's whereabouts, and he refuses to divulge the information to anybody, even the supposedly trustworthy Price. Dunbar is thus successfully kept from the Germans despite extensive search efforts. After von Scherbach threatens to raze the camp to find Dunbar, the men decide one of them must help Dunbar escape. Price volunteers for the job, and when he appears to have convinced the other prisoners to let him do it, Sefton reveals him as the spy. After accusing Price, Sefton asks him "When was Pearl Harbor?" Price knows the date, but Sefton traps him by quickly asking what time he heard the news. Without thinking, Price betrays himself by answering 6 p.m. — the correct time of the attack in Berlin, Germany, and not Cleveland, where he claims to have come from. After that, Sefton reaches into Price's jacket pocket and extracts the "mailbox" used to exchange messages with the Germans, a hollowed-out black chess queen.
With his fellow POWs convinced of Price's guilt, Sefton decides to take Dunbar out of the camp himself, first because he likes the odds of escape and second due to the reward he can expect from Dunbar's wealthy family. The men give Sefton enough time to get Dunbar out of his hiding place (the water tower above one of the camp latrines) then throw Price out into the yard with tin cans tied to his legs. The ruse works: Price is killed in a hail of bullets (to the later consternation of von Scherbach and Schulz) by camp guards who believe him to be Dunbar or one of the other prisoners, creating a distraction that allows Sefton and Dunbar to cut through the barbed wire and make their escape.
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