The Defence of the Realm

by Christopher Andrew

  . . . Wilson asked if it would help us in any way if he was to have a word with Kagan and warn him about talking to the Russians. I said that I thought it might be a good thing to do because nobody’s secrets were safe when they were in the hands of a man as garrulous as Kagan.8

  One of K5’s main impressions from the meeting was ‘Wilson’s high regard for this Service which he has mentioned on a number of occasions’. This impression, however, may have been somewhat misleading. Presumably disconcerted by the discovery that a friend who had been one of the most regular visitors to Number Ten throughout his previous six years as prime minister had been passing on gossip about the Labour government to the KGB, Wilson was anxious to show that he himself had a proper regard for national security. He told K5 that, while at Number Ten, he had asked Security Service technicians to investigate the television set because of his concern that it could be used for ‘technical attack’ by a hostile intelligence service. ‘This’, noted K5, ‘enabled me to mention the case of . . . a Lithuanian employed in the Electrical Dept. in the House of Commons who had been introduced to Vaygauskas by Kagan. Wilson seemed startled by this information but I assured him that it was under investigation.’ Wilson, K5 concluded, ‘is obviously under no illusions about Kagan’s business honesty’.9

  Immediately after K5’s meeting with Wilson, Hanley discussed the Kagan case with the PUS at the Home Office, Sir Philip Allen. Both were baffled as to why, despite being well aware of Kagan’s dishonesty and indiscretion, Wilson continued to see him regularly.10 Director KX (John Allen) concluded that Kagan was: ‘clearly a target of the highest importance for the K.G.B. because of his close association with Mr Wilson and other Labour Party leaders. I do not believe Kagan has been, or is now likely to become, a conscious Soviet agent but I am sure he has been a valuable source of intelligence.’11

  Why Wilson was attracted to such dubious characters still remains something of a mystery. His official biographer, Philip Ziegler, concludes that ‘He enjoyed the company of flamboyant self-made men; and where he would have been ill at ease in the company of a traditional backwoods Tory peer, a swashbuckling adventurer, especially if Jewish, appealed to him.’12 Wilson continued to enjoy their company even when, as with Kagan, he was ‘under no illusions about [their] business honesty’. When Wilson’s press officer, Joe Haines, surveyed the Prime Minister’s personal guests at the Guildhall ceremony on 12 December 1975 to confer on him the Freedom of the City of London, he ‘looked around to see if Inspector Knacker of the Yard was keeping the ceremony under observation’.13 Even after Kagan was sentenced to ten months in jail for fraud in 1980, Wilson’s friendship with him continued. On at least one occasion after Kagan emerged from jail, the two men jointly entertained a member of the Soviet Trade Delegation at the House of Lords.14 As late as 1986 two major British embassies complained to the FCO Security Department of Wilson’s personal involvement with another company which had ‘a dodgy reputation’, was notorious for ‘sharp practice’ and had a chairman whose ‘disgraceful’ behaviour had caused diplomatic problems.15

  Apart from Kagan, the business friend of Wilson of most concern to the Security Service during his final term as prime minister was Rudy Sternberg who, like Kagan, had made a fortune out of trade with the Soviet Bloc and had received a knighthood in 1970 on Wilson’s recommendation. In the Service’s view, Sternberg had made his money ‘by methods which seem frequently to have been on the fringe of respectability’.16 In 1961, he led a committee otherwise composed of MPs and peers to the Leipzig Trade Fair, to the great satisfaction of the East German Communist regime, which was not recognized in the West. As Sternberg’s entry in the Dictionary of National Biography records: ‘It was a role he clearly relished and he drove around Leipzig in a Rolls-Royce flying the Union Jack. Whether or not he intended it, the delegation’s presence provided a valuable propaganda coup for a regime craving international recognition and acutely embarrassed the British government.’17

  In May 1974 Robert Armstrong, then Wilson’s principal private secretary, asked the DG, Sir Michael Hanley, whether there was ‘anything we ought to know’ about Sternberg, who was currently ‘seeking to bend the Prime Minister’s ear’ – apparently ‘to seek accreditation as an unpaid, unofficial, confidential and irregular liaison between the Prime Minister and the top leadership of the Soviet Government/Communist Party and other Eastern European Governments/Parties’.18 Hanley replied that, though there was no evidence that Sternberg had been recruited as an agent:

  It is a measure of the interest taken in him by the Soviet bloc intelligence services that of the many Soviet bloc officials with whom he had been in contact over the years, at least thirty-two are intelligence officers or suspected intelligence officers. With some of these he has been on first name terms and remained in touch after they have left the UK.19

  The Security Service strongly advised that Sternberg should not be given access to any information classified ‘Confidential’ or above.20 ‘Sternberg’s ambitions’, it believed, ‘render him vulnerable to Soviet bloc pressure.’21

  Despite opposition from Robert Armstrong,22 Sternberg received the peerage he appeared to crave in the 1975 New Year Honours List. As Philip Ziegler observes, his elevation as Lord Plurenden ‘caused particular offence, since it was well known that Sternberg had contributed generously to Wilson’s office expenses during the period in opposition’.23 Strange and sinister rumours about Sternberg circulated around Whitehall. Bernard Donoughue, Wilson’s senior policy adviser, noted in his diary that Sternberg was ‘reported by the Downing St private office as being a Soviet spy’, and on another occasion that ‘The Foreign Office have told me privately that he is a double agent.’24 Joe Haines also recalls that, when Wilson announced his intention to make Sternberg a peer, ‘a shocked Foreign Office official protested to me, knowing I would tackle Wilson about it, that Sternberg was a Soviet spy. When I raised it with Wilson, he said cheerfully that he had always thought so too, but that when he checked with the security services he had been told Sternberg was a double agent.’25 There is no evidence that the Security Service ever suggested to the Prime Minister that Sternberg was a double agent. Wilson’s tendency to conspiracy theory may have led him to reach that conclusion for himself.

  Among Wilson’s other disreputable business friends who had made their fortunes from East–West trade was Harry Kissin, who, like Kagan and Sternberg, had helped to finance his private office.26 Kissin was one of Wilson’s confidants during his final term.27 Soon after Wilson returned to Number Ten, the cabinet secretary, Sir John Hunt, asked Hanley for a report on Kissin. Hanley replied that, though, unlike Kagan, Kissin’s security record ‘hardly amounts to an adverse one’, he was ‘obviously not a man to be trusted with confidences’ – in other words, entirely unsuited for a role as Prime Minister’s confidant.28 The DG doubtless had in mind Kissin’s indiscretions to, and corrupt use of, prostitutes. According to an agent whom the Service considered reliable, ‘When Kissin comes to [a brothel] on pleasure bent – always two girls at a time – he invariably uses the telephone in his Rolls Royce . . . to establish that the talent at his disposal has already arrived.’29 Kissin also employed prostitutes to entertain foreign business contacts. In August 1968, according to an agent report, he asked ‘a fashionable tart’ to ‘be nice’ to one of his business friends. She was reported to have been ‘nice to him shortly afterwards’.30 Kissin also hired call-girls to entertain Asian contacts as well as a senior diplomat of an Asian country where he had business interests.31 He appears to have passed on confidential information acquired during his conversations with Wilson to at least one call-girl agency. He was reported to have boasted (accurately or inaccurately) to one prostitute in September 1973 ‘that he is contributing money in support of Wilson’s mounting campaign to boost the Liberal Party and so alienate wavering Tories [from voting Conservative] before the next election. At the same time, Kissin said that “Wilson is not the man he was. He is ill.”’32

>   After Wilson’s return to Number Ten in February 1974, Kissin was confident of a peerage in the Birthday Honours List. Unsurprisingly, however, his nomination ran into opposition – probably (as in the case of Sternberg) from Robert Armstrong or Sir John Hunt, or both.33 The peerage, however, duly arrived – doubtless at Wilson’s insistence. On receiving congratulations from one of the brothels he frequented,34 the newly ennobled Lord Kissin of Camden promised to call round for a champagne celebration.35 Kissin continued both to use call-girls to entertain his foreign contacts (as well as himself)36 and to talk indiscreetly to them about his confidential conversations with the Prime Minister. In January 1975, for example, he was reported to have revealed ‘a lot’ about the John Stonehouse case, though claiming that he was now ‘fed up with Harold Wilson’.37 Wilson, however, was not fed up with Kissin and continued to meet him regularly.38

  Sitting in his study at Number Ten on his first day back in office, Wilson told Kissin: ‘There are only three people listening – you, me and MI5.’39 Though MI5 was not, of course, listening in to the Prime Minister and had never actively investigated him, it still had a file on him which recorded, inter alia, his past contacts with Communists, KGB officers and other Russians. Hanley went to even greater lengths than Hollis or FJ to conceal its existence within the Security Service. In March 1974 the DG instructed that the card referring to the file should be removed from the Registry Central Index, with the result that: ‘A look-up on Harold Wilson would therefore be No Trace.’ Outside the DG’s private office and – probably – the Board of Directors, the existence of the file was known only to F2, K10 and the Legal Adviser, Bernard Sheldon.40 Access to it required the personal permission of the DG. Though the file was never used to undermine Harold Wilson, Hanley’s decision to preserve it, approved by Sheldon, would doubtless not have been approved by either the Home Secretary or the Prime Minister.

  Wilson’s main suspicions on returning to power, however, were directed far less at the Security Service than at the CIA and the South African intelligence service, BOSS, both of which, he believed, were up to no good in London. The CIA, he wrongly suspected, partly as a result of misleading press reports, was seeking to penetrate British trade unions.41 Hanley responded to the Prime Minister’s suspicions by submitting two reports. The first concluded that ‘The reports of alleged CIA activities in trade unions are unsubstantiated. The head of the London CIA station has specifically denied them, and we have no reason to disbelieve him.’ The second report stated that the Security Service had no liaison with South African intelligence but kept a close watch on its activities in Britain, ‘mainly, but not entirely, for the purpose of keeping Ministers informed about South African activities which could cause political embarrassment’.42 Wilson was unconvinced.

  Wilson and Marcia Williams (ennobled in 1974 as Lady Falkender) were also preoccupied by the belief that the Prime Minister’s former security adviser George Wigg was behind press attacks on her. Without informing the Security Service, Wilson went to the extraordinary lengths of hiring private detectives to put Wigg under surveillance. Wilson’s press officer, Joe Haines, recalls that:

  One evening in the middle of the [May 1974] Ulster crisis, Wilson went off to have a private dinner with George Wigg, leaving behind in Number 10 a gathering of ministers and top military brass who were discussing the total collapse of civil order and authority in Northern Ireland . . . Wilson took with him information on Wigg’s mistress and second family, collected by private detectives. He threatened to expose Wigg if he did not lay off Marcia. The visit was a curious priority for a Prime Minister in the middle of an Ulster crisis.43

  Among other scandals which Wilson contemplated publicizing through planted parliamentary questions in order to distract the media from what he saw as its persecution of Marcia Williams were allegations that the Liberal leader, Jeremy Thorpe, had been threatened with blackmail as a result of his homosexuality. Donoughue told him ‘he should forget this muckraking and not stoop to the gutter levels of the press.’44

  Despite Wilson’s conspiracy theories about intelligence, the Security Service regarded its relationship with him as ‘perfectly friendly’ until soon after the election of October 1974 (the second of the year), which gave Labour, previously without an overall majority, a majority of three (less precarious than it seemed because of the apparent improbability of all the minority parties in the Commons combining with the Conservatives to oppose the government). Over the past few months the Prime Minister had been brooding over an article by Chapman Pincher entitled ‘Ministers in Security Risk Shock’, published on 21 May, claiming that security doubts about some junior ministers had led to restrictions on their access to classified material. During his first period in office, Wilson had become enraged and obsessed by leaks to Pincher, wrongly suspecting that the source was the Security Service.45 He made the same mistake during his final term. On this occasion, the probable source for Chapman Pincher’s story was the maverick, extreme right-wing, retired Deputy Chief of SIS, George Young, who had become an embarrassment to his former Service and had lunch with Pincher on the day before the article appeared. Wilson, however, told the cabinet secretary, Sir John Hunt, on 17 October that he knew the story had been leaked to Pincher by the Security Service. Hunt replied that the Service was unlikely even to know what restrictions had been imposed,46 but warned Hanley that he doubted whether he could shake the Prime Minister’s conviction that the Service was to blame.47 Wilson continued, however, to seek information from the Security Service about some of his own colleagues. In November 1974 he made inquiries about Defence Secretary Roy Mason’s mistress.48 In February 1975 he asked that the Labour MP Eric Heffer ‘be warned off having contacts with the Communist Party’, of which he had once been a member, but did not wish to issue the warning himself. Hunt and Hanley agreed that, on the contrary, any warning should come from the Prime Minister.49 Wilson was also anxious that Ron Hayward, general secretary of the Labour Party, whom he privately regarded as ‘one of the vainest and silliest men’ he knew,50 should be warned about his contacts with the CPGB.51

  Wilson’s suspicions about the Security Service were inevitably strengthened by his briefings on the sensational FLUENCY investigations into Hollis and Mitchell. The impact on Wilson was all the greater because during his first term as prime minister he had not been told about the investigation of Hollis – despite the fact that Hollis had been DG for his first year at Number Ten.52 Wilson was entitled to feel that he should have been informed of the suspicions that Hollis had been a Soviet agent. In early August 1975 Wilson wrote on Sir Burke Trend’s review of the Hollis and Mitchell cases, ‘This is very disturbing stuff, even if concluding in “not proven” verdicts.’53

  The discovery that important secrets had been kept from him by Hanley’s predecessor and the inevitable suspicion that there might have been more that he was still not being told encouraged Wilson’s belief that the Security Service was concealing from him its habit of leaking discreditable information about his government to Chapman Pincher. Soon after reading Trend’s report, the Prime Minister complained to Hanley ‘about the sort of things which Chapman Pincher seemed to know about’. These included alleged security concerns about the Minister for Overseas Development, Judith Hart, and – in Hanley’s words – ‘something, I could not make out what, about Lady Falkender’.54 Joe Haines was told by Robert Armstrong that ‘the security services still had not completed Marcia’s positive vetting and that the PM was intervening to try to stop it. Robert is not certain that she would pass and is very jumpy about what to do.’55 Though Hanley assured Wilson that no member of the Security Service was authorized to have any dealings with Chapman Pincher, Wilson’s suspicions deepened and darkened. Sir John Hunt was so concerned by Wilson’s continuing ‘paranoiac suspicions’ of the Security Service that he arranged a meeting between Wilson and Hanley in the summer of 1975 in an attempt to clear the air but to no effect.56 As Hanley later recalled, they had ‘a terrible ro
w’: ‘I could not get off the hook. He got the idea I was his worst enemy. I did not know what to do.’ For a time the DG contemplated, but in the end rejected, the idea of resignation.57

  Wilson’s undisguised loathing of Hanley was, in many ways, out of character. Donoughue wrote of the Prime Minister: ‘He could be accessible, warm, kind and humorous, which drew the affection and loyalty of those who worked for him. He had absolutely no side or any of the pretensions or assumptions of grandeur that sometimes accompany high office.’ But, Donoughue noted, Wilson was also a conspiracy theorist who suffered from ‘near paranoia about plots by various imaginary and genuine enemies’.58 Conspiracy theorists are inherently unfitted for the ultimate responsibility which fell to Wilson as prime minister for the management of the British intelligence community.

  By December 1975, a crisis-ridden month which he later described as ‘the most hectic and harrowing’ of his time as prime minister, Wilson was convinced that there was a plot to discredit and destroy him and his government, probably involving more than one intelligence service. Wilson’s official biographer describes him as ‘reasonably certain that elements of MI5 were doing the donkey work, though at what level he did not know’. He suspected that BOSS and a dirty-tricks department in the CIA were also involved.59 In the United States 1975 became known as the ‘Year of Intelligence’, during which, according to the Director of Central Intelligence (head of the CIA), William Colby, ‘The CIA came under the closest and harshest public scrutiny that any such service has ever experienced . . . anywhere in the world.’ Revelations of a series of sensational CIA dirty tricks made front-page news around the world–among them assassination plots against Fidel Castro and several other foreign leaders. Senator Frank Church, chairman of a Senate committee of investigation, compared the CIA to ‘a rogue elephant on the rampage’ – conveniently overlooking that most of the rampage, assassination plots included, had been authorized if not instigated by the White House.60 Though there was no authenticated evidence of dirty tricks targeted against Britain, Wilson believed that he was a victim of them. When Senator Church visited London, Wilson made a series of ‘wild insinuations’ about CIA operations.61