Churchill's Spy Files

by Nigel West

  On 29 March Liddell considered the matter further, and minuted his revised views about the wisdom of mentioning the activities of F Division, for fear that Churchill might raise a matter with Herbert Morrison regarding the Communist Party, about which the Home Secretary had not been briefed. The topics of security and intelligence were regarded with great suspicion by the Labour Party, many members of whom either had been close to the Communist Party of Great Britain, or held views shaped by the events surrounding the defeat of Ramsay MacDonald’s administration in October 1924 following publication of the notorious Zinoviev letter. In these circumstances Liddell exercised characteristic caution so as to avoid political controversy:

  I enclose a draft report for the Prime Minister in accordance with Mr Duff Cooper’s letter. I do not know what you feel about contributions from other Divisions. Personally I think there are difficulties in putting forward anything from F Division since, if the Prime Minister were to discuss the subject with the Home Secretary, the latter would be extremely annoyed that he had not received prior notification on a matter for which he was primarily responsible, and this would place us in bad odour with the Home Office.

  It is perhaps for consideration whether we should send a copy of our report to C. I am not anxious to do so if it can be avoided. On the other hand CSS is constantly seeing the Prime Minister, who might well discuss the contents of our report with him where it indirectly impinges upon SIS work.

  Lastly, I think it would be better if instead of leaving this report with the Prime Minister, Mr. Duff Cooper showed it to him personally and then took it away. It would not take more than 5 minutes to read, and if there were any supplementary questions or queries they could either be dealt with on the spot or conveyed to Mr. Duff Cooper who could refer them back to ourselves.

  You may wish to have a talk about these various problems with the officers concerned before submitting the draft to Mr. Duff Cooper.

  By 2 April the first MI5 report, one of twenty-five drawn up before the end of the conflict, had been drafted, as Liddell recorded:

  I saw Duff Cooper and took him the report for the Prime Minister. He seemed quite satisfied with its form and contents. I impressed upon him the degree of secrecy which should be attached to it and the necessity therefore of ensuring that it was seen by the Prime Minister only. At first he had thought of sending it to Desmond Morton. I said I thought it would be far preferable if he handed it to the Prime Minister himself. He would then be able to answer any supplementary questions and ascertain the Prime Minister’s reactions. From what he said I do not think that he intends to leave the report with the Prime Minister. In any case he will ask for its return. I told him that if it went to Desmond Morton it was highly probable that he would take a copy and send it to C. While there was no real objection to this it might possibly cause a certain amount of trouble.

  Although Liddell appears to have welcomed the principle of winning the Prime Minister’s ear, if only briefly, he was obviously very anxious to exclude Morton from access, as he undoubtedly would have informed Stewart Menzies, who in turn would have been bound to confide in Section V, the SIS branch that dealt with MI5 daily on the most sensitive of issues, such as the ISOS intercepts and the management of double-agents. Section V’s notoriously prickly chief, Felix Cowgill, was already highly proprietorial about sharing his section’s gold dust, and would have been horrified at the prospect of Churchill being entrusted with such delicate secrets as the true identities of agents.

  The ticklish task of selecting cases for submission to Churchill was assigned by Liddell to his trusted assistant, Anthony Blunt, who must have relished the prospect of being given a pretext to range far and wide across the Security Service, and elsewhere, to assemble the appropriate material for the Prime Minister. Few spies in history could ever have been presented with such a spectacular opportunity to call for files, question colleagues and demand briefings on topics that would otherwise be completely outside the ambit of his duties. Quite simply, Blunt, who had been a Soviet agent since 1936, was granted a licence to delve into just about any operational issue that caught his interest. As Liddell’s personal assistant he enjoyed a lofty viewpoint anyway, and his role in directing the TRIPLEX project1 provided him with access to some of the organisation’s most delicate sources, but his added responsibility, of drafting the monthly reports, must have seemed heaven-sent. His MI5 colleagues already accepted that he routinely acted in Liddell’s name, and this additional responsibility must have greatly added to his already exalted status.

  The purpose in reproducing all the Prime Minister’s monthly MI5 reports here is to give a comprehensive picture of what the Security Service shared with Churchill, and when. As we shall see, Petrie and his subordinate Liddell exercised considerable discretion in what went to Downing Street, and to give the bigger view each report is accompanied by a commentary to reveal the background to some of the events, operations and individuals which are referenced. Very often, particular agents and defectors were not identified by their true name, so this annotated version is intended to leave the reader rather better informed than Churchill.

  A few of the cases selected for the Prime Minister’s attention will be familiar to aficionados of wartime espionage, but the majority will be entirely new to historians. They shed fascinating light on the global aspect of MI5’s wartime activities, demonstrating the value of some hitherto relatively unknown officers, such as Colonel Henderson, the Defence Security Officer in Trinidad who, operating from Bretton Hall in Port of Spain’s Victoria Avenue, interdicted numerous Axis spies en route to and from South America. These spies underwent a preliminary interrogation before being passed to HMS Benbow, the Royal Navy’s shore establishment, for a voyage to England and incarceration at Camp 020.

  By convention, the identities of MI5 personnel were not disclosed in reports likely to be circulated outside headquarters, so Churchill had little way of knowing that, for example, the officer sent to the United States in April 1943 to advise on American port security arrangements was George Denham, or that the head of MI5’s counter-sabotage branch mentioned in several reports was Lord Rothschild. By filling in the gaps, and drawing pen-portraits of such remarkable men as HARLEQUIN and COLOMBINE, not to mention the rather lesser-known double-agents as FIDO, HAMLET and METEOR, it is hoped that more light will be shed on the somewhat misunderstood, murky relationship between the First Secretary of the Treasury and the Security Service.

  THE MONTHLY

  REPORTS

  1

  FIRST REPORT,

  2 APRIL 1943

  Entitled Report on Activities of the Security Service, the document, with a paragraph redacted, covered several topics and established a standard format of arrested spies and imminent espionage cases, and introduced the concept of controlled enemy agents:

  Spies arrested since September 1939

  It is believed that while the many Germans who returned to their country when on the outbreak of war took with them a most exact knowledge of the state of our re-armament and the potential output of our factories they left no live spy organisation behind them. Being without up-to-date information, after their defeat in the Battle of Britain, the Germans again resorted to their former system of individual spying. Since September, 1940, attempts at penetration have been persistent. In all 126 spies have fallen into our hands. Of these eighteen gave themselves up voluntarily, twenty-four have been found amenable and are now being used as double-cross agents. Twenty-eight have been detained at overseas stations, and eight were arrested on the high seas. In addition twelve real, and seven imaginary persons have been foisted upon the enemy as double-cross spies. Thirteen spies have been executed, and a fourteenth is under trial.

  NEW ARRESTS.

  (1) MENEZES

  This spy was a clerk in the Portuguese Embassy, London. He was working for the German and Italian Secret Services, to whom he sent reports written in secret ink in private letters sent through the Portuguese diplomatic ba
g. For a period during which we were able to assure ourselves that the reports which he was sending were harmless, we watched his operations and finally on an occasion when he had obtained an interesting item of news which duly showed up in a letter, his career as a spy had to be ended. Through the wholehearted collaboration of the Portuguese Ambassador Menezes was arrested and made a full confession. The Portuguese Government having waived his diplomatic privilege, he has now been committed for trial.

  (2) DE GRAAF

  This Canadian traitor, of Dutch parentage, was detected by our interrogation staff on entering this country. He confessed to having worked for the German Secret Service for more than two years, during which he had insinuated himself into an Allied escape organisation for our prisoners of war which he is believed to have betrayed to the enemy. He was in addition a well trained saboteur.

  (3) BATICON, LASKI, PACHECO Y CUESTA

  The existence of these three spies on ships bound for South America was revealed by material supplied from special sources. They were successfully identified at our Trinidad control, and are being sent to this country for interrogation.

  C. Agents Expected

  Similar material reveals German plans for despatching two new spies to this country and two saboteurs to be landed by submarine on the coast of Palestine. Suitable arrangements have been made for their reception.

  D. Controlled German Spies (‘Double-Cross Spies’)

  (1) Through a double-cross spy in this country a deal was concluded with the German Secret Service in Madrid, by which £2,500 were paid to the spy here and 250,000 pesetas were put at our disposal in Madrid. This deal was arranged through the unconscious help of the Spanish Assistant Military Attaché in London, who took with him in the diplomatic bag a letter of introduction to the principals in Madrid, on the back of which was a message to the German Secret Service in secret ink.

  (2) ‘ZIGZAG’, an Englishman was dropped as a spy by parachute in October 1942 near Thetford. Extensive information was already in our possession before his arrival, so that his confession on giving himself up could be immediately checked. It was found possible to collaborate with this spy in deceiving his former masters, who were persuaded to believe that he did in fact perform the mission for which he was sent here, namely to sabotage the de Havilland Mosquito factory at Hatfield. The agent has now been sent back to the Germans via Lisbon, and it is expected that he will be given another similar mission in British or Allied territory.

  (3) On the night of 20 March 1943 a wireless set of new design, £200 in notes, and sabotage equipment were dropped by parachute in Aberdeenshire for MUTT and JEFF, who are double-cross spies of Norwegian nationality. The German aircraft flew low over the exact spot indicated by us to the German Secret Service.

  (4) On 10 March 1943 one of our agents who has been recruited by the German Sabotage Service in Spain had a faked explosion arranged for him in Gibraltar. The German Sabotage Service gave him some SOE equipment with which to carry out this act of sabotage. As in a previous case where an act of sabotage was staged for another of our Gibraltar agents, this apparently successful enterprise has caused extreme satisfaction in German and Italian circles.

  [XXX]*

  Important new information about the organisation and methods of the German Secret Service has been obtained from two of its former members. Both these individuals have been induced to collaborate, and as one of them, an officer of the German General Staff, had been chief of an enemy Secret Service base, his revelations were particularly sensational. As a ‘book of reference’, it is believed his services will continue to prove of great value.

  C. General Security Measures

  (1) The Security Service has prepared a memorandum, running to sixty-eight printed pages, including diagrams, on the technical counter-measures to be taken against possible enemy sabotage. This memorandum has been circulated to our Defence Security Officers in the most important posts in the Empire. A special section dealing with the defence of shipping against sabotage has been further circulated to all ports in which we have representatives, both in England and overseas.

  (2) On the strength of information about TORCH supplied by the Security Service, the Director of Military Intelligence has issued a strong warning against careless talk about future operations. This warning was based on Security Service investigations which showed that a disturbing amount of loose talk had taken place before the invasion of North Africa.

  (3) On the return of a special adviser who had been sent to the Middle East to survey the security position there, the Security Service are implementing his recommendations by sending three officers to the area, two of whom will plan and direct the examination of aliens, who arrive in that area from occupied Europe at the rate of about 900 a month, and the collection of intelligence from them. A third officer will supervise the investigation of Axis espionage. The existing organisation in Middle East requires strengthening on both these sides of the work.

  (4) By arrangement with the Director of Military Intelligence the Security Service is supplying certain of its officers who have recently been put through special training courses in preparation for their future work, which will be to act as advisers on general security measures and on the technical aspect of counter-espionage and counter-sabotage work, both to the GHQ Ib staff of future expeditionary forces and to the staff of the Chief Civil Affairs Officer in the area behind the lines. The Director General considers that, with diminishing risks at home, these officers should be released for the purposes stated.

  On the following day, Liddell was pleased with Churchill’s reaction, which had been scrawled on the bottom of the third and final page:

  Duff Cooper has returned our report for the Prime Minister with a letter saying that the Prime Minister would like to have further details about Wurmann. The Prime Minister has minuted the report in his distinctive red ink: ‘Seen. Deeply interesting. W.S.C.’ Duff seems to think it has been a great success.

  The Prime Minister’s interest in Richard Wurmann was entirely justified, as he was one of the most unusual cases dealt with by MI5 during the conflict, and a special summary was prepared (see Chapter 27).

  This first report was MI5’s opportunity to educate Churchill about the breadth of the organisation’s activities, demonstrate its competence, and compete with SIS’s daily briefings and deliveries of decrypts, usually juicy diplomatic telegrams, carefully selected by Menzies for his consumption. In terms of double-agents, four cases were mentioned by name, being the Norwegians MUTT and JEFF, and the safe-cracker Eddie Chapman, code-named ZIGZAG, then on his first mission to England, having arrived by parachute in December (not October, as stated) 1942. Unnamed is the doubleagent who extracted £2,500 from his Abwehr controller in Madrid. This was surely a reference to GARBO, although his case would not be introduced for another three months, and to a scheme known as Plan DREAM that involved the Spanish assistant military attaché conspiring to circumvent the Bank of England’s currency regulations with a syndicate of London fruit merchants. Simply, Leonardo Muñoz wanted to send money to Spain, but was willing to pay a nominee in London if he was paid the same sum, plus a generous commission, in Spain. The concept had been inspired by Cyril Mills, in November 1942, as Guy Liddell had noted in his diary:

  Cyril Mills talked to me about a plan he had on foot for getting money for GARBO. Apparently some fruit merchant here who is known to Muñoz, the Spanish assistant military attaché, wishes to transfer money from this country to Spain. It is suggested therefore that this money should be handed over to GARBO and that the German secret service should credit the fruit merchant with pesetas. Quite a large sum of money is likely to be involved. This is known as Plan DREAM.

  By the end of January 1943, after complicated negotiations, DREAM had started to look like a practical proposition, as Liddell recorded on 1 February:

  Muñoz, the Spanish military attaché, is returning to Spain on Monday, and for the purpose of Plan DREAM we have arranged for him to take w
ith him a letter of introduction. GARBO is to send a letter giving a new address at which Muñoz can be contacted and the money is to be deposited with Charles Russell & Company. Muñoz will then send a telegram to his contact in London to say that one has received the pesetas and that the sterling may now be released to the notional Mr Wills, in other words Cyril Mills. On the back of Muñoz’s letter there will be a message in secret ink about which he will know nothing. The Germans will be notified about the existence of this message.

  This transaction, supposedly brokered by the City solicitors Charles Russell & Co., where Richard Butler had worked before joining MI5, was completed without a hitch, and ten days later MI5 received the £2,500, an impressive coup that obviously merited inclusion in the report to Churchill. Indeed, the operation was so successful that it would be repeated again several times to fund GARBO’s burgeoning network and expenses.

  As if to emphasise MI5’s remit across the Empire, Petrie described the three spies seized in Trinidad, Baticon, Laski and Pacheco, who would reappear in the third report, and the anticipated arrival of a pair of agents to be landed by a U-boat in Palestine. In the event, neither turned up, and the subject was not mentioned again.1

  Such discretion, drawing a veil over an operation that had gone awry, and concentrating on proven success stories, would become a feature of the reports. The de Graaf case is an early example, as Guy Liddell had recorded on 23 January 1943, and there were some aspects to it, such as his temporary employment at the British embassy in Madrid, which had been omitted from the version submitted to Churchill:

  Buster Milmo reported at the Wednesday meeting that there had been a large influx at Camp 020. The main increase is in spies going to South America. He mentioned the case of Johannes de Graaf, a Belgian who had come down an escape route and had been temporarily employed at the British embassy in Madrid. De Graaf admitted that he had been in contact with the Abwehr but said that he had done so in order to escape. He was carrying pyramidon and tooth-picks. He was caught through a clever link-up on the information index at the Royal Victoria Patriotic School which showed that he had been put on the escape route by someone known already to be working for the Abwehr. He is now beginning to come clean. He was highly trained both in espionage and sabotage and appears to have corresponded with German occupied territory after his arrival in Madrid.