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CHAPTER 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 bag. 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.

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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 double agent 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 with 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.

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.

The de Graaf case was unusual in many respects. He was born in Saskatchewan in November 1918 to Dutch parents – farmers who returned to Amsterdam in 1928 – and he acquired a British passport in 1933. When the Germans occupied the Netherlands he was employed as a bookkeeper, and in June he was interned at Schoorl because of his dual citizenship. After ten days in detention de Graaf applied for his release, on the grounds that he was more Dutch than British, and he was interviewed by the Sicherheitsdienst in The Hague. Threatened with incarceration at a concentration camp, and anxious to support his elderly parents, de Graaf agreed to his recruitment and underwent a lengthy training course in sabotage and clandestine communications. In 1941 he made contact with an underground escape line that assisted his travel via Toulouse, where he spent six weeks, to the Spanish frontier in February 1942. He stayed in Barcelona for two months, supported by the British consul. Upon his arrival in Madrid he presented himself at the British embassy, where he was employed by Sir Peter Norton Griffiths for eight months as an accountant in the office of the military attaché, Brigadier W.W.T. Torr.

In December 1942 he sailed from Gibraltar for Gurock on the Llanstephan Castle and was arrested upon arrival when a search revealed the ingredients for secret writing. He was transferred to Brixton and then moved to Camp 020 where, during his sixth interview, he confessed to his role as a German spy, and admitted having sent three letters to his German controllers, one from Chalon and two from Toulouse.

A detailed interrogation was conducted by Helenus Milmo, who reported on 12 February 1943 that:

... since de Graaf's arrival at Camp 020 very substantial progress has been made and we are now in a position to say that this man is an infinitely more important enemy agent than we had originally thought. We are still a long way from obtaining the full truth from him and the extraction is proving a laborious process but from the admissions so far obtained de Graaf has shown himself to be one of the best trained enemy agents who have so far fallen into our hands. Thus he has admitted to having received instruction in political propaganda work, secret ink writing, wireless telegraphy, codes, sabotage, and the use of firearms. Moreover he has confessed to having been in contact with an interesting and important variety of German Secret Service personnel and to have written no less than three letters to the Germans at a time when he was employed on highly confidential work in the British Embassy at Madrid whilst awaiting repatriation to this country.

De Graaf's admission to an espionage role, and having attended some forty classes on radio technique, opened the possibility of a prosecution under the 1940 Treachery Act, and a death sentence, but there was a complication, as the 020 commandant, Robin Stephens, warned on 27 February:

The position has been reached where a case could be put forward for prosecution under the Treachery Act. The prosecution, however, is much complicated by the astonishing action taken by the British Embassy in employing this German spy for eight months in the Embassy with access to information on the escape routes. De Graaf relies upon a satisfactory recommendation from the Embassy to bear out his defence that he never intended to work against the Allies. At the same time it must be borne in mind that de Graaf has admitted possession of Pyramidon which was handed to him by the German Secret Service for purposes of secret writing.

Thus, having conceded that he had been sent on a sabotage mission, de Graaf's embarrassing defence was that he had never intended to spy, even though there was evidence from MI9 that he had compromised a major British escape network, having gained access to the information while employed by Brigadier Torr:

Whilst employed at the British embassy in Madrid, this man was responsible for passing to the enemy information about an escape route from occupied territory and was directly responsible for the arrest by the Germans of probably the most important British agent operating this route who was responsible for the very marked success which it had achieved over the course of the last year.

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Excerpted from "Churchill's Spy Files"
by .
Copyright © 2018 Nigel West.
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