Churchill's Spy Files

by Nigel West

  1st May 1943

  * * *

  The Prime Minister’s reaction to this report was described by Petrie to Dick White on the afternoon of 5 May:

  Mr Duff Cooper sent for me at 4 p.m. this afternoon and returned to me the second report on MI5 activities, which he showed to the Prime Minister to-day. He told me that the PM showed a deep interest in the matters summarised in the report and mentioned one or two specific comments as follows:

  1. Re: Menezes – ‘why don’t you shoot him?’ On being advised that there were reasons why we wanted to retain the goodwill of the Portuguese Government who had taken action against Axis agents in Portugal and were probably taking further action, he said ‘well drive a hard bargain’.

  2. He was impressed by our success in nominating the head of the German Sabotage Organisation, work against Gibraltar.

  3. Re. Ben Greene – ‘Why don’t you lock him up?’ query had to be dealt with tact.

  4. He specially noted that we had advised energetic action to compete with the lack of signals security in the Service departments and other official W/T users.

  5. Both Mr Duff Cooper and the Prime Minister are most anxious to know when the first word is heard from ZIGZAG.

  Although Frank Steiner was, according to the report, assessed for his likely value as a double-agent, it seems that the idea was stillborn. Steiner’s MI5 file, headed Frank Domien Steiner, alias Jacob Steinbach, reveals his unsavoury background, which dated back to his arrival in England during the First World War and his resettlement in Croydon as a refugee. On his return to Belgium he had worked as a journalist, a language tutor, a salesman selling cosmetics, electrical appliances and Kleen-Ezi brushes. He had also acted as a tout for some Ostend brothels and traded on the black market. In April 1940 he entered into a marriage of convenience with a German Jew, Gertrude Schneider, with whom he had been living for the past two years. Previously she had been engaged to a Swiss journalist, a director of Radio Geneva, by whom she had an illegitimate child.

  Soon afterwards Steiner was sent to work as a translator in a German optical instrument factory, the Steinheil works in Munich, but in September 1941 he was approached by an Abwehr officer, Joseph Köchling, who was impressed by his fluency in English and by the fact that his maternal uncle was the former Deputy Chief Constable of Blackpool, Ben Hannan. Köchling recruited Steiner as an agent, using as leverage an implied threat against his wife, who was moved to Freiburg, and against his parents in Antwerp.

  According his version of events, Steiner had set out for Portugal, hoping to reach the Congo, but had been detained in Spain at the Miranda del Ebro prison until September 1942, when he had returned to the Netherlands. On his second attempt he turned up in Lisbon in March 1943 and contacted the British for a passage to England. During his interview at the Passport Control Office with an SIS officer he divulged enough of his role as an Abwehr spy to ensure he attracted attention and gained a priority visa for air travel to Poole in April. Upon arrival he was escorted to Latchmere House and interrogated by the commandant, Robin Stephens, who recommended caution. MI5 knew from an ISOS intercept referring to a source code-named JACQUES that the day Steiner had received his entry permit, 4 April 1943, he had telephoned the news to Richard Schubert, his German contact in Lisbon, but he took a week to volunteer this vital information. In fact MI5 was well informed about Steiner long before his arrival, a report having been sent by the Defence Security Officer in Gibraltar, Tito Medlam, warning that two of his sources, one a Czech volunteer, the other a Belgian Sueté agent, had denounced Steiner when he had been a fellow inmate at the Miranda camp. According to Medlam’s information, passed to London in August 1942, Steiner was a Nazi spy who intended to travel to England.

  Even though Steiner identified another spy, Lucien Rombaut, as a fellow Abwehr recruit, he was considered too unreliable to be run as a double-agent, and spent the rest of the war in detention. He provided an enormous amount of detail concerning Abwehr personalities, premises and procedures, which turned out to be accurate, but he was never entirely trusted and made a poor impression on those that interviewed him. After the war he was flown back to Belgium where he faced collaboration charges and was sentenced to death, but he was reprieved and given a life term.

  Because his name was associated with several other cases of interest, MI5 tried to find Steiner’s Abwehr contact, Joseph Köchling, after the German surrender, but it seemed that he had been caught by the Soviets and had died in captivity.

  * * *

  The case of William Craven may also have been of interest to the Prime Minister, although it was one that had almost entirely escaped MI5’s attention until it appeared in court. Craven apparently had known Walter Reinhardt, the German consul in Liverpool, who had been withdrawn in June 1939 after he had been implicated in an attempt in April to recruit William Patrick Kelly as a spy. Employed at the huge Royal Ordnance munitions factory at Chorley as a bricklayer, 30-year-old Kelly had stolen plans of the plant and then approached Reinhardt who, with some reluctance, had passed on his offer to sell the information to the Abwehr. He then had been seen to meet Abwehr representatives in Cologne, and was arrested as soon as he returned to England. Kelly had pleaded guilty to breaches of the Official Secrets Act and was sentenced to ten years’ imprisonment. A former BUF member, Craven was a 28-year-old farm labourer in Gloucestershire who had been detained for a month in September 1939 under the 18B regulations, and then again in June 1940 and April 1941. Naturally, all mail addressed to the German legation in Dublin was subject to interception, and Craven’s offer had landed him in jail. However, MI5 had played absolutely no part in the investigation or prosecution, and had been completely unaware of the matter until it reached the courts. However, as Liddell pointed out, it was the Home Office’s decision, opposed by MI5, that had freed Craven and given him the opportunity to land himself in even greater trouble:

  Craven’s release was strongly opposed by ourselves, and Sir Alexander Maxwell minuted the file to the effect that it was a pity that MI5 took such an unbalanced view, and had not got a liberal outlook. The effect on Craven of the Home Office’s liberal outlook has been to get him a life sentence instead of merely internment for the duration of the war.

  * * *

  The detention of Ben Greene, of the famous Berkhamsted family, proved infinitely more complicated, and a matter of some embarrassment for MI5, especially when Greene, who had been imprisoned for eighteen months as a Nazi sympathiser on the word of an unscrupulous informer, Harald Kurtz, took his case to the House of Lords and won. The version delivered by Petrie to Churchill is a somewhat partisan view of litigation brought by a pacifist and Quaker who had been entrapped by Kurtz and his companion, Friedl Gärtner, a fellow Austrian.

  Having examined the evidence, the Home Office had released Greene, but the failure of his subsequent legal action for libel and false imprisonment did not reflect on the monstrous injustice he had suffered. When cornered by Greene’s solicitor, Kurtz had admitted that he had been paid by MI5 for every suspect he denounced. To have told Churchill that MI5 had felt vindicated is quite a misrepresentation of what had really happened.

  * * *

  Of the three double-agents mentioned, ZIGZAG had made an appearance in the first report, and the brief account of his adventure aboard the City of Lancaster’s voyage from Liverpool did not reveal anything like the full story, which received much attention from Guy Liddell. The version given to Churchill omitted to mention that ZIGZAG, who was supposed to desert his ship in Lisbon, had not told MI5 about a bomb he had placed aboard the vessel in Lisbon, and had only confided in the master, leaving MI5 to learn about the scheme from ISOS, as Liddell recalled on 21 March:

  Ewen Montagu has informed J.C. Masterman about a Lisbon-Berlin message in which it is suggested that an agent should put explosive or incendiary coal on board a ship on which he is serving as steward. The agent is clearly ZIGZAG since the message implies that he is identical with the individual who did
the Mosquito job and that he cannot go back to England. He is to slip away as soon as the job is done and go on to Paris. This all fits with ZIGZAG’s set-up. The difficulty is to know what appropriate action should be taken and I am trying to ascertain when the City of Lancaster is likely to leave Lisbon, since if there is sufficient time we might send an officer out. I have also asked Gergie to put a rush on the Berlin-Lisbon service in order that we might get a reply at the earliest possible moment. The message to Berlin was dated 19 March. Later I heard from Ferguson that he was proposing to send a wire to Ralph Jarvis informing him that Abt. III were proposing that ZIGZAG should sabotage his ship, and asking him whether ZIGZAG had informed the ship’s captain. If not, without indicating the slightest knowledge of the enterprise, it was suggested that the captain should be told to ask ZIGZAG (1) if, and when he was going to desert (2) whether he had contacted the Germans yet and if so with what result, and (3) had he any messages for the captain to take back to England. At that moment I was discussing the whole problem with Ewen Montagu, Ronnie Reed, J.C. Masterman and Ian Wilson. At first we thought that a telegram might be sent to Jarvis explaining to him the position and suggesting that he should arrange discreetly for the master to meet him at a suitable rendezvous for a purpose of arranging a still more discreet meeting between Jarvis and ZIGZAG, bearing in mind that the latter was probably being followed. Ralph Jarvis should show ZIGZAG the signal from Frank Foley and say that he came with other instructions from Reed to ascertain whether ZIGZAG has successfully contact the Germans and if so, what instructions he had had at Lisbon. On no account was ZIGZAG to be asked questions about sabotage. If he failed to come clean about the plan to sabotage his ship, he would be placed in irons by the captain and brought back here. On further reflection we thought that it would be better to send Reed who had the advantage of knowing the whole case and of knowing ZIGZAG personally. This would avoid the difficulty of Jarvis or any of his people, who must be known to the Germans, making contact with ZIGZAG and would have the additional advantage of giving ZIGZAG no way out. If he were approached by anyone else he might not feel under obligation to tell them a story which he thought he had already dealt with in his own way. On the other hand, however, if he failed to disclose what had happened to Reed we should have to assume that he was definitely wrong. In any case we felt that Reed’s presence in Lisbon could not be otherwise than a help to Jarvis.

  Ferguson, in consultation with Frank Foley, seems to have some doubts about the necessity or indeed the advisability of Ronnie Reed going out but promised to let me have their decision in the morning. Meanwhile, the German reply dated 17.35 on 20 March 1943 had come in saying that the plan devised by the Abwehr in Lisbon had been approved by headquarters. We also learned from the Ministry of War Transport that the ship is not likely to be unloaded before 27 March.

  I spoke to Ferguson again at about 7 o’clock, [XXX] suggesting that he should send off a wire to confirm the time of departure of the ship and ensure that as soon as ZIGZAG deserted the matter should be reported. I had in mind that if he deserted in the immediate future we should have to take a more sinister view of his part in the suggested enterprise.

  Thus MI5 was confronted with the prospect of having been duped by ZIGZAG, and the consequences of his sabotage of a cargo vessel as it sailed for its next destination, Gibraltar. Accordingly, Liddell was determined that ZIGZAG should be confronted, and the next day persuaded SIS to send Ronnie Reed to Lisbon:

  I was not able to get hold of Felix Cowgill at all till 3 o’clock. He was at first rather reluctant to agree to Ronnie Reed going to Lisbon and thought the telegram would do just as well. I pointed out to him that unless ZIGZAG was confronted with Ronnie Reed we should never be quite certain whether he was right or wrong. If he saw Reed he could have no possible excuse for not telling him about the suggested sabotage incident. I said I thought that no harm could possibly be done by sending Reed who knew the case and the man intimately. He and Jarvis could work out the best method of approach after his arrival. Cowgill eventually agreed. I then rang Herbert Hart and succeeded in getting a place for Reed on tomorrow morning’s plane.

  Reed’s task was to find ZIGZAG and give him an opportunity to disclose his sabotage role without compromising ISOS. With this in mind he flew to Lisbon, but by the time he had arrived ISOS had shown that ZIGZAG had left for Hendaye and Paris. In his absence Reed went straight to the docks, as Liddell reported:

  Two telegrams have at last arrived from Ronnie Reed. He has seen the captain who stated that he had been approached by ZIGZAG, but that in view of his instructions he would not have said anything to anyone except Reed. The sabotage project was suggested to the Germans by ZIGZAG. He had obtained a bomb which the captain had in his safe. Reed would bring it back by air. He suggests that we should stage some sabotage incident when the boat gets back to Liverpool. Victor Rothschild, in conjunction with SOE, is trying to devise some means of doing this without causing damage to the ship.

  Three days later, Reed was back in England, and reported by telephone to Liddell:

  Ronnie Reed has rung up to say that he is in Bristol. He says that the captain of the ship had been interrogated four times by the shipping office and had denied that he knew anything about the ZIGZAG affair. He affected to be extremely annoyed that an agent had been put on his boat without his knowledge. He was in fact acting on strict instructions that he was not to divulge the fact of ZIGZAG’s connection with British Intelligence. He was much relieved to see Reed. The piece of coal has been sent round via Gibraltar as Ralph Jarvis was nervous about its being taken on the aircraft in case it had some delay mechanism.

  With the immediate drama over, and the bomb safely in the ands of SIS, Liddell gathered his senior staff together on 28 March to discuss the episode:

  I saw Dick White, Victor Rothschild, T.A. Robertson and Ronnie Reed about the ZIGZAG case. It seems that the captain has played his part well and he even instructed ZIGZAG to cause trouble on the ship. ZIGZAG threatened to attack one of the other stewards with a knife, and the incident ended in a brawl, and the steward was laid out. We discussed whether a fake explosion should take place at Gibraltar or Liverpool. There is an advantage in doing it at Gibraltar since the information could easily leak back to the Germans. On the other hand, this is a disadvantage in that since certain people, members of the crew and possibly others, might have to be in the know, the fact that the explosion was a fake might get back too easily to the Germans. We eventually decided to take no action in Gibraltar and work some scheme which can be put into operation as soon as the ship reaches Liverpool. The piece of coal was notionally placed on some spot where it would not be thrown into the boilers until the ship was well out to sea. ZIGZAG has explained this to the Germans. Our methods of communication with him now are by code advertisements in The Times and through practice messages which he hopes to be able to send from Paris to Nantes.

  * * *

  The other two double-agents introduced in Petrie’s second report were HAMLET and METEOR.

  HAMLET was Dr Johann Koessler, a wealthy Jewish businessman and former cavalry officer in the Austrian Army who joined the air force in 1916. He then obtained a law degree from Vienna University and married an immensely wealthy Jewish woman of Russian origin. However, anti-Semitism and the confiscation of assets forced him to move first to Milan and then to Brussels, where he rebuilt his commercial activities by exploiting his inventions, including lemonade powder marketed as Limonesco, before his Abwehr-sponsored departure to Portugal.

  Koessler was also a double-agent who in 1941 had asked a British insurance broker, Ronald Thornton, code-named MULLET, to approach the British on his behalf. A third member of the network was PUPPET, an executive at Palmolive named Hans Fanto, who was supposedly Koessler’s source in England, but in fact relied upon MI5 to supply him with plausible information. Both MULLET and PUPPET operated through HAMLET, based at a villa in Estoril with his wife, but were controlled by an Abwehr officer, Julius Ha
gemann, in Brussels where Koessler was known as KOLBERG and A-1416, and Fanto was code-named FAMULUS. Born in Belgium and the owner pre-war of a travel agency in Aachen, Hagemann had become a naturalised German and would be arrested and interrogated at Camp 020 in May 1945.1

  The HAMLET case would turn out to be one of the most complex challenges ever confronted by MI5, not least because Koessler remained at the Palacio Hotel in Estoril while his agent, Thornton, was established in an MI5 flat in Nell Gwynne House in Chelsea. As it turned out, joint management by two intelligence organisations of complicated double-agents was far from an ideal scenario, and Petrie’s summary prepared for the Prime Minister was neither comprehensive nor accurate, for Koessler was never formally a member of the Abwehr. As he would indignantly remind SIS, he had not undergone any Abwehr training, and had never visited an Abwehr office.

  A 46-year-old inventor and the owner of a number of valuable chemical patents who was keen to market his special non-stretchable bandages and a degrading process, Koessler had been incarcerated by the Nazis in 1938 for three weeks during the Anschluss, but had been allowed to travel to Portugal in November 1941. There he had encountered Thornton, an insurance broker travelling with his wife, their three children and his mother-in-law, and intending to travel to England. Koessler had represented himself as a well-connected anti-Nazi with peace proposals, and had persuaded Thornton to approach the British authorities on his behalf. He was also asked to deliver some gold items to HAMLET’s children.