Last year the Guardian newspaper revealed that Private Eye ‘may have been used to smear Wilson’. The former editor, Richard Ingrams, told reporters:
“Looking back on it, it’s obvious that the Eye could have been used by MI5, but it’s hard to be concrete.”
Its hard to be concrete because nobody bothered to look at what Private Eye did produce in the crucial years 1974-76. Having now read the entire Eye output of the seventies, it is clear the Eye was a major outlet for the MI5 material (1)
As we showed in previous Lobsters a mouthpiece for this material on the Eye was Auberon Waugh. Waugh’s tiresome response has been to deny all knowledge of MI5/6 involvement and claim that his column was just guesswork and speculation. The material is far too numerous to be an example of public schoolboy jolly japes.
Although no evidence has been produced which directly links Waugh to the Intelligence services, the circumstantial evidence is highly suggestive. He has written, “Perhaps I should explain that I tried to join the Foreign Service soon after coming down from Oxford in 1960 and was firmly rebuffed, despite a recommendation from Sir Roger Hollis, of the rival Security Service, MI5.” (2) Waugh was close to the Hollis family. Roger’s brother Christopher was a godfather to Waugh and the two lunched together. (3)
Waugh perhaps means MI6 when he refers to the Foreign Service. This makes sense as his uncle, Alec Waugh the author, had worked for MI6. Another relative Auberon Herbert had worked in intelligence in the Middle East. His father, Evelyn Waugh, had knowledge of intelligence during the war and the family moved in intelligence circles which included Tom Driberg, a regular informant to the Eye (and MI5) and Roger Fulford, an ex-colleague of Hollis. Waugh’s first job on the Editorial Staff of the Daily Telegraph is rather like an internal posting for MI6. (4)
Waugh’s closest colleague on the Eye was the Grovel contributor, Patrick Marnham. According to another ex-colleague, Peter McKay, “Driberg was a homosexual, and at the Eye he nursed an unrequited passion for Patrick Marnham.”(5)
The first indication that the Eye may have been used appeared in the official history of the Eye written by Marnham. He wrote that
“(Wilson’s) … return as Prime Minister in March 1974 was followed by a barrage of anonymous information concerning his activities since the 1940s. Where this came from was never discovered, but it was extremely detailed and convincing, and as much of it as could be checked proved generally reliable. In retrospect, and in the light of Wilson’s belief that his own office was at the time being bugged by MI5, it seems likely to have been supplied by someone with connections to the security service”.
Although Marnham couldn’t be sure that the original source of the material was MI5, he did, in fact, know the identity of the supplier. In his book on Lord Lucan, ‘Trail of Havoc’, published in 1987, he wrote: “The first of the Secret Service information packs to reach Private Eye had come by the way of The Times in 1974. A reporter on the paper had started to check the allegations, established that they were plausible but then decided that the story would be better handled by Private Eye“.
The Times in the 1974-76 period featured many articles on aspects of what we now know as the MI5 plots. Christopher Walker, later the paper’s correspondent in Moscow, wrote well informed articles on intelligence affairs and Christopher Sweeny, now working in Australia, did the first major feature on the Czech intelligence defector Josef Frolik. Marnham has not revealed, as far as I am aware, the identity of The Times journalist who gave him the MI5 packs.
Marnham’s book reprinted three extracts from the alleged MI5 documents. As can be seen, the amount of detail they contain certainly suggests some kind of official agency as being the most likely culprit. These were not the normal anonymous note. Their construction and the use of an old typewriter is very reminiscent of similar documents Colin Wallace was putting together in Northern Ireland, on behalf of Information Policy, as part of Clockwork Orange. There is the same blend of known facts, intriguing new information, and the subtle insertion of ‘black’ material. All of which is held together, or given a ‘spin’, by the addition of a ‘theme’.
The theme, according to Marnham, was as follows:
“The period covered was immediately after the war, when the country was going through a severe economic depression. At the time the United Kingdom suffered from a shortage of foreign currency and manufacturing resources. The few people who could get permission to import heavily rationed raw materials or finished goods were almost bound to be millionaires. The necessary licences were issued by the Board of Trade, and from October 1947 to March 1951 that person was Harold Wilson. It was during his term of office that Wilson first met several of the men who were later to support, and to benefit from, his political career”.
Another journalist at the Eye, Martin Tomkinson, recognised this theme and where it was leading. Tomkinson told the Guardian: “he had a security service contact who ‘hinted that Wilson was far too interested in promoting Anglo-Soviet trade.’ ” (6)
The men who were to benefit were all what were known as ‘East-West Traders’. The clear aim of the documents was to tie Wilson to these East-West Traders with the implication that they co-operated too closely with the Soviet Block. “As we sorted through this material, we were directed back over the years to the Groundnut Scheme, the Lynskey Tribunal, the export to Russia of top-secret Rolls Royce engines, the Leipzig Trade Fair and the opening of the Soviet Trade delegation in London – after a quarry whose name changed on every page. Was it the KGB?” (7) Indeed it was. The East-West Traders were considered to be too close to the Soviet Union and were seen as little more than ‘fellow travellers’. Some were looked on by MI5 as being under the control of the KGB. The prime suspects were Sir Rudy Sternberg, Lord Plurenden, who died in 1978, and Lady Beattie Plummer. It was believed that Sternberg used his import and export business with the Eastern block as a cover for intelligence activities. He probably did, but not for the KGB, an idea MI5 wished to promote. Wilson was to discover later that Sternberg was, “One of ours”, meaning MI6. A not uncommon practice among East-West Traders.
Notes
Having tantalised us with the revelation that he was in receipt of the MI5 documents, Marnham then suggests that they weren’t used. “Some of the documents they released reached Private Eye, but that paper’s investigations ground to a halt for lack of corroborative evidence. The paper is frequently accused of failing to check its stories, here was a case where the failure of its inquiries caused it to keep silent.” It’s not true to say that the Eye stayed silent. With only one exception all the stories which Marnham outlined appeared at some stage in the pages of the Eye. They never went as far as MI5 might have hoped but the gradual drip, drip of the material had its cumulative effect on the Wilson administration. It was left to others, Chapman Pincher and Richard Deacon, to produce the full blown smears.
- Guardian 15/8/87. This collection of material should not be assumed to be comprehensive. While Wilson and co. were the major targets, Edward Heath, Maurice Oldfield and Jeremy Thorpe were also victims.
- Independent 16/5/87
- Spectator 22/10/88. It is surprising that no one has yet written a biography of Roger Hollis. When they do the role of his brother will have to be taken into account. Christopher was a supporter of the British Union of Fascists and frequent contributor to Action (See Comrade No.13 1988). He was also involved with Kenneth de Courcy and his publishers World Review. Either Christopher was genuine in his far-right views or was an MI5 mole acting for his brother.
- When in the mid-seventies the Washington Post referred to London newspapers as being flooded with Intelligence assets it was pointing the finger at the Daily Telegraph.
- Pages 18-19, ‘Inside Private Eye‘ Peter McKay (Fourth Estate 1986).
- Guardian 15/5/87
- The full details of these various episodes, which are essential for a full understanding of the Wilson plots, will be revealed in a forthcoming Lobster book. It is worth noting that:
- The failure of the Groundnut Scheme was used as the basis of a smear campaign in 1951. Those tarnished included the former Communist John Strachey and his close friend Leslie Plummer, an East-West Trader. The scientific adviser to the scheme, and at the time a financial supporter of the Tribune, was Victor Rothschild. Attempts were made to raise the issue during the 1964 election, but Wilson, who had a very tenuous link to the scheme through the timber merchant Montague Meyer, quickly stamped on the smear.
- The Lynskey Tribunal concerned corruption in the Board of Trade and provided an opportunity to smear Wilson who, in fact, had acted completely honourably. Over the years there have been veiled references in gossip to Wilson but no substantial published material, though there were some peculiar letters from a Wilson enemy Hartley Shawcross. What the Tribunal did reveal was the involvement of the newly created Foreign Office propaganda unit, IRD, within the Labour movement.
- There was considerable press interest in 1962 in the East-West Traders who went to the Leipzig Trade Fair. Questions were asked in the House of Commons and much was made of their close relationship to the, then, unrecognised East German government.
Spectator February 14 1976
NOTEBOOK
While left-wing journals – doubtless innocently – have been helping assassination squads to identify CIA agents throughout the world, attention has been diverted from what the other side are up to over here. In fact, just four years and five months after the Conservative Government expelled 105 Soviet KGB and GRU (military intelligence) officers from Britain, the Russian spy network is back at full strength. There are nearly 200 Soviet-controlled spies known to be operating in this country. Many enjoy a tenuous ‘cover’ as trade delegates, journalists, marine specialists, tourist office spokesmen, or even bank officials. But the hard corps, who are known to Sir Michael Hanley, the Director-General of MI5, as the ‘Red Army’ are based at the London Embassies of the Soviet Union and her satellites. The KGB’s British headquarters is at the Soviet Embassy in Kensington Palace Gardens. The consular section nearby is staffed exclusively by KGB men, and others are to be found at the Soviet trade delegation offices in Highgate.
British officials take a particular interest in a number of names, such as counsellor Vladimir Kotliar and the two deputy trade representatives, Vladimir Pavlov and Valentin Matitson. Ten of the Soviet embassy’s eighteen second and third secretaries and attaches are also KGB officers. The six assistant Service attaches are all members of the GRU, the intelligence directorate of the Soviet General Staff. The once flourishing spy centre at the Czechoslovak embassy in London is no longer totally trusted by the KGB, but the military and air attaches there, one Colonel Miroslav Merhaut and Major Gustav Opremcak, are still being very helpful.
The East German espionage service, which is controlled by a former Gestapo officer, is assisted by Gunter Wille, first secretary for consular affairs, Hans Nobel, the Commercial Counsellor, and Roland Haufe, a commercial attache.
Hungary’s military and air attache in London, Lieutenant-Colonel Karoly Meszaros, submits regular reports to his military masters in Budapest. They, in turn, are controlled by locally based staff officers of the GRU.
One could go on about the Polish and Rumanian embassies, but the most interesting KGB recruits are perhaps the Cuban diplomats. Castro’s ‘intelligence service’ was handed over to the Soviet espionage machine in the summer of 1966. And it was the KGB’s best buy for years. Cubans in London and Paris have helped run arms shipments to the IRA – and supplied passports to Palestinian guerrilla factions. Its seventeen diplomats are under constant surveillance.
It wasn’t only in the Eye that dubious material appeared in the 1974-76 period. Auberon Waugh wrote in 1978, that only the Spectator and Private Eye would be ‘prepared to print …. the full story of “counter-espionage” in our time’. The Spectator, in which Waugh had a column, published this astonishing Notebook piece. There is only one source for material of this kind.
In 1971 the British expelled 105 Soviet diplomats. According to Chapman Pincher, “The KGB’s reaction was swift and predictable…. it concentrated on increasing its efforts through the satellite agencies, the Czechs in particular.”
In 1974, “The Czech situation was drawn to Heath’s attention by Julian Amery, who told him that MI5 had proof of the blatant abuse of diplomatic privilege by thirteen ‘diplomats’ including the ambassador, but Heath decided against any public use of it.” It had been intended to use the publicity during the 1974 election campaign. The idea appears to have been to link the spying activities to the rise in industrial action including the Miners strike – Gold from Prague and Communist influence. But Heath, according to Pincher, was so confident of victory that the idea was dropped. Something along similar lines did appear in The Times just before the election, ‘CIA men in Britain checking on Subversion’. A week later the Times carried an exclusive interview with the Czech defector Frolik who talked about infiltration of the Labour Movement by Soviet Bloc intelligence.
Pincher again, “News of the Czech treachery and the thirteen expulsions did not leak out until after the Tory defeat.” And leak they did. The Eye reported (6/9/74): “The cloak and dagger atmosphere which has been hanging around the Czech embassy in London may be ending. In recent months 9 Czech diplomats (?) have suddenly returned home. Now the Ambassador himself, Dr Miroslav Zemla, will bring the total to 10, though his departure will not be undignified and he observed the usual diplomatic protocol by giving his goodbye party at the Embassy last week.” There followed a number of detailed snippets on the activities of the Czech Embassy – See 20/9/74 and 16/5/75.
The theme behind the leaking was that Wilson and the Foreign Secretary, Callaghan, were weak on Soviet spying and that they were constrained by the Party’s extreme left wing (See Pincher ‘Their Trade is Treachery’ Page 233). It was also because Wilson was too close to the Soviets. Private Eye revealed (28/11/75) in a piece on another KGB spy case that a deal had been struck “in order to prevent lurid espionage cases that might spoil relations between the Brezhnev and Wilson regimes.” Two months later appeared the Spectator article.
* * *
Private Eye never went as far as naming Sternberg or Plummer as a KGB agent. The libel laws would have prevented any such smear. But following Sternberg’s death in 1978, Richard Deacon (Donald McCormick) had no such qualms in his book The British Connection – which was later withdrawn. Deacon, who has always been very sympathetic towards MI5, wrote: “One of the most notorious of post-war fellow travellers was Rudi Sternberg….behind much East-West traffic at this time was the sinister figure of Rudi Sternberg….Some leakages of information were traced to Sir Rudi……”(Pages 237-9)
Was there any truth to any of this? According to Marcia Falkender, Wilson made enquiries about Sternberg (Wilson was not a friend of Sternberg): “The result was that far from being a spy, Sternberg was using his Iron Curtain contacts in a way that was helpful to Western Intelligence”. (Page 255 Inside Story Chapman Pincher). Was he just helpful or did he work for MI6? The East-West Traders had been infiltrated by both Intelligence Services since the fifties, as the memoirs of Greville Wynne, John Stonehouse and Commander Courtney – all traders – make plain.
Private Eye
10/1/75
Looked at from one angle Sir Rudy’s peerage is an agreeable completion of a circle of Wilson’s old friendships.
Sir Leslie Plummer, Labour MP for Deptford who died in 1963 before Wilson could make him Foreign Secretary as promised, was an old friend of Sternberg’s. Plummer had run the disastrous Ground Nuts scheme for the Attlee government, and his wife “Beattie” (a close friend of Marcia Williams) used to work for Sternberg. After her husband’s death Wilson duly made “Beattie” a life peeress. She too is now dead, but touchingly her former employer succeeds her in the Lords.
The Daily Telegraph also noted that Sternberg “has devoted much energy to trade with countries behind the Iron Curtain, particularly in East Germany. In the 50s and 60s he was in the limelight for enlisting the support of MPs of both major parties”.
Among these MPs were Burnaby Drayson who has been Tory member for Skipton, Yorks, since 1945, is Ian Mikardo’s pair and chairman of the Parliamentary All Party East-West Trade Committee. Brig. Terence Clarke, former Tory MP for Portsmouth West, and Will Owen, the Labour MP for Morpeth who resigned in 1970 when he was tried and acquitted of spying, were also among Sternberg’s supporters.
Sternberg has also used his East European contacts to help Wilson’s political visits to Romania, Bulgaria and Czechoslovakia. He set up Wilson’s visit to Prague in 1973 which resulted in the release of the clergyman suspected of smuggling, the improbable Rev. David Hathaway (see Eye 297)
Private Eye
18/10/74
Even by the low profile standards of other big business backers of the Labour Party, Sigmund Sternberg – reputed donor of £25,000 a year ago towards the Wilson Think Tank – is little known.
This may not be altogether surprising as what is known suggests there may be little to enamour him to staunch Socialists – apart from his wallet.
Sternberg – like Wilson’s ennobled business friends Sir ‘Gannex’ Kagan, Lord Harry Kissin of commodity merchants Guinness, Peat, Sir Rudi Sternberg of the Sterling chemical group and John Mayer C.B.E. of timber merchants Montague L. Meyer – is from a middle-European Jewish background with some little knowledge of trading with Eastern Europe. Wilson gained much knowledge of these matters and the regulations and import licences concerned while President of the Board of Trade 1947-51, and later as a consultant to Meyers.
Spectator
22/4/78
But it needs administrative cooperation, of course, to allow officers of the Security Service to give evidence, and everything points to the conclusion that successive British governments have tended to use MI5 less for the protection of the realm against espionage and subversion than, through its public school tradition of omerta, as a means of covering up its own lapses. Perhaps one day we will learn the true history of the counter-espionage effort under Harold Wilson, and why the only MP or senior official they ever chose – or were allowed – to arrest was poor old Will Owen, who later turned out to be innocent. Owen, it will be remembered, was on the pay roll of the Dominion Export Trust run by Sir Rudi Sternberg (later Lord Plurenden), organiser of the Leipzig group of MPs and paymaster of many interesting people besides. On this occasion the Security Services appear to have arrested the wrong man and he was the only person of any public importance they chose – or were allowed – to prosecute.
* * *
Private Eye
17/9/76
According to an Italian magazine, two English politicians were friendly with the Lockheed company which has proved so generous in its donations to statesmen in Holland, Italy, Japan and West Germany.
The Englishmen, both renowned former Labour Cabinet Ministers, were given the pseudonyms ‘Pointer’ and ‘Powder’.
It would not be fair to reveal, as the Italian magazine did, the true identities of silver-tongued, emotional and excitable ‘Pointer’ or of pragmatic frank, sincere ‘Powder’.
10 JUN 19762163:CODE:ROME, JUNE 10, REUTER — THE NAMES OF FORMER FRENCH PRESIDENT GEORGES POMPIDOU, FORMER BRITISH PRIME MINISTER HAROLD WILSON AND FORMER WEST GERMAN CHANCELLOR LUDWIG ERHARD ALL FIGURE IN A CODE BOOK USED BY THE LOCKHEED AIRCRAFT CORPORATION, ACCORDING TO THE POLITICAL ITALIAN WEEKLY PANORAMA.TODAY’S ISSUE OF THE MAGAZINE REPRODUCES LARGE PARTS OF THE CODE BOOK, PHOTOCOPIES OF WHICH, PANORAMA SAID, WERE OBTAINED ON JUNE 4 FROM A DISSATISFIED LOCKHEED EMPLOYEE.THE CODE REPRODUCED BY THE MAGAZINE LISTS M POMPIDOU AS COSMOS, MR WILSON AS POINTER, AND HERR ERHARD AS HALIBUT FORMER BRITISH FOREIGN MINISTER GEORGE BROWN FIGURES AS POWDER.
* * *
On 10th June 1976, not long after Wilson’s resignation, this intriguing telex rattled out of the Reuter news service. Although it landed on the desks of all the major papers not one of them published the merest hint of its contents. No doubt the libel laws had an effect. Others, correctly, thought it was a fake, but who did the faking?
Earlier in 1976 Wilson had sent a secret letter to the CIA with a list of questions. One of them related to the Lockheed scandal and the possibility of British politicians being involved. The CIA replied that, “while inquiries to date had suggested that no one was bribed, there was a possibility that ‘something went on’. ” (p20 Inside Story)
The only reference appeared in an obscure magazine, Verdict No.6 Oct. 1976, which published a page from the codebook.
None of the material in this article need necessarily have come from the security service, though its theme – East-West Traders – is too close to the Marnham notes to be a mere coincidence. Cleverly, all the traders are linked back to Wilson. Guilt by association.
Ian Mikardo had long been a target of both the Labour Party right-wing and MI5. It is believed that Mikardo, a member of the National Executive, was one of those on the list of fifteen MPs and candidates given to MI5, in 1961, by George Brown and Hugh Gaitskell for investigation as crypto-communists.
Mikardo had been a member of Keep Left and a leading Bevanite in the fifties. More importantly, he was an executive member of the left-wing group Victory for Socialism which campaigned amongst the rank-and-file in the Party. It was the VFS which the Gaitskellites saw as the real threat and the base for fellow-travellers in the party. Jo Richardson was the secretary to both the Bevanites and the VFS.
Private Eye 5/4/74Politics
Chairman Mick
Ian Mikardo Ltd:
“Not as nice as he looks” It is not only Labour cabinet ministers who have interesting business connections. The newly-elected Chairman of the Parliamentary Labour Party, Ian Mikardo, is no slouch when it comes to lining his pockets.
Mikardo reached his new eminence (“a triumph of the left”, Times 22nd March) after a dodgy election. The rules were changed at the last minute to allow him to win on first ballot. This change of rules was personally approved by Harold Wilson, who has not lost any of his old ability to distinguish which side his bread is buttered.
So far from being a simple Socialist politician, Ian Mikardo is an extremely wealthy man who has acquired his fortune largely through his parliamentary connections. Ian Mikardo Ltd was founded by the newly arrived member for Reading in 1946 as “agents for overseas exporters”. It specialised in trade with East Germany. Mikardo was, and still is, a 2 1/2% commission man who provides British exporters with the essential introductions to the Communist state purchasing departments. Ian Mikardo Ltd was one of the earliest recognised channels to the East German market, and at one time he had a near monopoly of the business.
The point of Anglo-East German trade from the German point of view was political. The East Germans wanted a lobby in Western business circles and particularly in parliamentary business circles. Mikardo was the ideal man to introduce such customers from the United Kingdom, and in the event British MPs proved to be among the most seduceable. After the 1962 Leipzig Trade Fair, government concern about MPs abuse of their parliamentary status in this area became so great that a parliamentary warning was issued by Edward Heath, then Lord Privy Seal. But Ian Mikardo Ltd soldiered on its lucrative course. It is a £300 private company with three director-shareholders, but in April 1971 (the last available return) despite having a pre-tax profit of only £400 it managed to pay directors’ emoluments of £16,300 – up from £9,350. The directors are Ian Mikardo, his wife Mary, and Miss Jo Richardson, the newly elected Labour MP for Barking.
Jo Richardson has been a business/ political associate of Mikardo’s for years. She describes herself as an “export manager” (she recently returned from Sofia) and she also is a long-standing member of the Tribune group.
The fact that Ian Mikardo Ltd was founded in 1946, in the early days of the Labour government, is of coincidental interest. For this was the period when a number of other businessmen who are friends of Harold Wilson got their start in life. (Wilson was President of the Board of Trade from 1947 to 1951). The similarities between the careers of some of these men were pointed out in Socialist Worker (30/3/74). Like Mikardo, they are all East European Jewish immigrants who started up in trade with the Iron Curtain countries between 1947 and 1951. There is Harry Kissin, a millionaire commodity broker, chairman of the Guiness Peat Group; Sigmund Sternberg, chairman of the Mountstar Metal Corporation; Sir Joseph Kagan (knighted by Wilson in 1970), chairman of Gannex Textiles Ltd; and Montague Meyer, the timber merchant who later employed Wilson for eight years as his parliamentary specialist in East-West trade. There is also Eric Miller, chairman of the Peachey Property Corporation (see Eye 294) who once employed Reginald Maudling’s wandering boy, Martin, and who lent Wilson his helicopter during the election campaign. And there is Sir Frank Schon, former chairman and co-founder of Marchon Products Ltd and Solway Chemicals Ltd, which secured valuable East European trading contracts during the immediate post-war years. Wilson knighted Sir Frank in 1966, and later made him chairman of the National Research Development Corporation.
Harold Wilson, Ian Mikardo and Jo Richardson are not the only “Labour left-wingers” to specialise in the import-export trade. There is also Arthur Latham MP (Tribune group), the tortured conscience of Paddington North; and there is Arthur Lewis MP (West Ham), the hammer of Scotland Yard, whose import-export company Arthur W.J. Lewis Ltd is active in East-West trade.
PS (Harold Wilson thinks of the member for Poplar so often that he once spelt the Gilbert & Sullivan opera MIKARDO throughout a review he wrote for the Evening Standard).
* * *
During the war J. H. Wilson, an Oxford PEP graduate, was reserved to work at the Ministry of Works and, in 1943, was made Director of Economics and Statistics at the Ministry of Fuel & Power. In the same year <blank> became Principal Assistant Secretary at the <blank>On becoming a MP in 1945 Wilson was appointed Parlty. Secy. to the Minister of Works whilst <blank> became <blank> to Attlee. In March 1947 Wilson was made Secretary for Overseas Trade; <blank> became <blank> Secretary to the <blank> where he continued until, in Attlee’s second government he became <blank> to the <blank>; meanwhile, in October 1947, Wilson had become President of the Board of Trade, a post he retained until March 1951 when he handed over to Shawcross, who held it until the Attlee government fell six months later. Thus Wilson and <blank> served concurrently for four years or more at the BOT and the <blank> respectively.
There is, of course, more to that seemingly innocent coincidence. Although much older than Wilson, <blank>, too, was an Oxford socialist, an anti-European, and a member of Labour’s <blank> set.
For four years Wilson had ultimate responsibility for all decisions affecting Britain’s overseas trade whilst <blank> had almost ultimate responsibility and was certainly in the critical position in the <blank> that might support the <blank>, and vice-versa.
One of the MI5 typed sheets which was passed on to Patrick Marnham (below). The missing name is Douglas Jay. Someone, presumably Marnham, blanked out his name. Why Jay, who was on the right of the party and didn’t like Wilson, should be included is a mystery.
2/9/77
IntelligenceTreasury Trove
James Callaghan’s bland declaration of confidence in the efficiency and integrity of the Security Service shrouds a major Whitehall spy mystery.
It involves a highly secret investigation centred on twin “targets”: Harold Wilson’s personal and political staff – and the Treasury. [A]
Neither featured, of course, in Mr Callaghan’s statement which was carefully confined to recent Fleet Street revelations.
Now the PM and the Director-General of the Security Service, Sir Michael Bowen Hanley, are confident they have ridden out the storm.
Other, less powerful beings in Whitehall are not so sure. Too many people now know what really happened.
And they all appreciate the significance of the affair’s key date – July 21, 1969. On that historic day, a heavily-built, balding man, his wife and young son arrived at Washington’s Dulles Airport. The trio were escorted through customs by armed agents of the CIA and the Secret Service and quietly introduced to their host – the then CIA Director, Richard Helms.
He was jubilant. Major Josef Frolik, an 18-year veteran officer in the Czech Statni Tajna Bezpecnost (STB) – State Secret Security – was safely “home”. .
And throughout the following months, the disillusioned defector revealed all he knew about his spy service’s espionage operations in the West.
But he had barely begun when Helms contacted the senior “diplomat” based at the British embassy whose real function was to liaise between the Secret Intelligence Service, MI6, and the CIA. [B]
Frolik’s general revelations were fascinating. But his information about the Czech set-up in London verged on the explosive. He claimed that a Minister, two other Labour MPs and a batch of trades union leaders had been recruited by the STB. Several of them were so useful that the KGB had insisted on taking over control.
But until the MI6 representative’s report reached Whitehall, his additional disclosure that the list of STB agents in London also included a civil servant working in the Treasury was given low priority, compared to the political revelations.
The Frolik Dossier was read with particular interest by the then Home Secretary – Mr Callaghan – who held departmental responsibility for MI5’s counter-espionage operations. [C]
For evidence supplied by the Czech defector, who spent 14 years on the “British Desk” at STB headquarters before being transferred as “labour attache” at the Czech embassy in London, confirmed an MI5 theory that the Communists had a key agent within the Treasury.
For years, he had supplied the Czechs and the KGB with details of Top Secret economic decisions concerning defence, foreign and domestic policy.
Treasury chiefs were shocked at the news that they had innocently harboured a spy. And their concern was shared by former Chancellor – Mr Callaghan – who had ruled the department from 1964 to 1967. [D]
But as a Labour Party mandarin, he also felt a sense of relief.
For until Frolik confirmed the MI5 Treasury theory, both he and Wilson had feared that the source of the high-level leaks was within No.10 itself.
From the early days of the first Wilson administration, the clutch of personal and political advisers, staff – and friends – which Labour’s then Prime Minister brought into Downing Street had worried MI5.
And the security men suspected that one of them might be betraying Cabinet economic decisions to an Iron Curtain Intelligence service. At that time, prior to Frolik’s defection, there seemed to be no other solution.
A major security operation was mounted to track down the suspected No. 10 spy.
Counter-espionage officers maintained surveillance over Downing Street staff. People they met out of office hours were checked. There is no doubt that some telephone “intercepts” were authorised. Most of them were of domestic telephones.
This, it appears, is how the No. 10 “bugging” legend began. [E]
The whole affair may account for Wilson continuing aversion to the Director-General of Security Services – MI5’s full title.
In the end, its officers found no spies in No. 10. So they switched to the only alternative – The Treasury. Possible suspects were eventually narrowed down to one, ideally placed official. And Frolik provided the final confirmation.
Yet, curiously, the civil servant was never charged under the Official Secrets Act. The defector – now living under CIA protection in the United States – believes he is still working in the Treasury!
The department will not comment either way. Whitehall security sources put forward two theories for the spy’s failure to stand trial.
He was not under Frolik’s direct control and thus the Czech’s evidence would be hearsay and inadmissible in court.
Or – and we are unlikely ever to know the truth – the then Government decided not to prosecute the spy as a trial might reveal that MI5 once suspected that Mr Wilson had innocently introduced a Communist agent into No. 10. [F]
[A] This article was almost certainly based on MI5 sources. Confirmation of that view comes from studying a similar article which appeared in the Sunday Telegraph ten years later (3/5/87). The paper stated that the article was based on senior MI5 sources. It read, “The security service defended itself publically for the first time by claiming that, far from seeking to de-stabilise the Wilson government, the so-called ‘plotters’ were carrying out their security service duties by ‘checking out’ some members of the then Prime Minister’s circle.”
The Sunday Telegraph went on to report the concerns of MI5 about various East-West Traders including Rudi Sternberg. Although the article did not mention the Treasury spy, the parallels between the two pieces are striking. Here was MI5’s second line of defence; the first being that MI5 had no involvement at all.
[B] The ‘diplomat’ was Christopher Curwen who is now chief of MI6. Curwen is due to retire when he will presumably be found a security post in the Cabinet Office.
[C] Is this one of the reasons why Callaghan has not added his voice to the calls for an inquiry? Was Callaghan too sympathetic to MI5’s concerns over Wilson’s circle?
[D] Was there a Treasury spy, or was this the pretext, the necessary piece of bureaucratic paper, which enabled MI5 to mount their surveillance operation? Evidence that there was no spy is suggested by reading Richard Deacon’s book The British Connection which in turn was obviously based on MI5 generated material. The right-winger manages to get in all the smears. “Lady Plummer, who was herself of Eastern European origin….. In the first Wilson administration she soon found favour at No.10 Downing Street, where she was a frequent visitor. In 1965 she was made a life peeress and continued to specialize in East-West trade and the subject of racial integration. Because of her links behind the Iron Curtain and her frequent calls at No.10, she was the subject of some suspicion in security circles as a possible source of leakages of Treasury and Board of Trade classified information. MI5 were alarmed by her close contacts with Sternberg and her close friendship with, and influences on, Harold Wilson…..Some leakages of information were traced to Sir Rudi and it was then discovered that Lady Plummer had acted as courier for him and passed on the intelligence to offices in East Germany.” (Pages 237-239)
Pincher had access to similar material: “Her contacts with the East Germans were such that she was regarded by the security authorities as a Communist agent of sympathy and she was a frequent and welcome visitor to the Soviet embassy.”(Inside Story, Page 346)
[E] During his first administration Wilson discovered that MI5 had bugged and kept under surveillance a number of Labour M.P.s. Wilson put an end to the practise. The Security Service solution to this reversal was to bug the phones of friends of these M.P.s and, in particular, members of the so-called Wilson Circle.
[F] This prophetic passage appeared in Auberon Waugh’s column in the Spectator (22/4/78). Waugh was writing about the ‘counter-espionage effort under Harold Wilson’.
“One would have thought that within the whole vast organisation there was one man who knows the full story of ‘counter-espionage’ in our time and is prepared to spill the beans, whether from anti-socialist motives or simple old-fashioned patriotism.”
Did Peter Wright read this?
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Here is another MI5 document leaked to Patrick Marnham. MI5 blamed Wilson for selling 55 Rolls Royce engines to the USSR in 1947. The engines were apparently copied and later fitted to MIG fighters which flew in the Korean War. Wilson had, in fact, been operating on the instructions of Sir Stafford Cripps. American and Conservative politicians later accused Wilson of ‘Socialist treachery’. It appears that this particular smear didn’t appear in Private Eye in the seventies. It was part of club circuit gossip and the only printed reference appeared in 1986.
From ‘Trail of Havoc‘ by Patrick Marnham(Viking, London 1987, p97)
For instance, in 1947, the year in which Wilson had become responsible for all overseas trade, the Rolls Royce jet engines were the best in the world, far in advance or anything in Russia or America. In 1947 even within the RAF such equipment was listed by security grades and none could be exported to foreign countries without surmounting two obstacles – the first a security clearance from the Air Ministry and the second the granting of a special export licence from the Board of Trade.
Surprising, then, that not just one but two RR engines – the Nene and the Derwent – were able to be exported to Russia in 1947, to be copied, incorporated into Russia engineering know-how, and thereafter manufactured there without any licence payments coming back to RR. This give-away not only enabled the Russians to catch up very rapidly with the superior technology in jets then possessed by the British, but also enabled her to save the enormous R & D costs that the British people had spent in developing such products. It is not known whether the Russians actually paid for these ‘exports’ but even if they did so they paid for only one example of each engine. What is known is that RR themselves objected, the Asst. Chief of Air Staff (Intelligence) objected, other Service Ministries objected – but that all were over-ruled and that the Board or Trade granted the necessary licences.
It would be interesting to see the Board of Trade, Foreign Office and Treasury papers relating to this particular incident; possibly Rolls Royce documents are no longer available. Certainly no evidence can be called from the Russians themselves. Nor – short of seeing documents long dead, perhaps now destroyed – will probably anyone discover what and how many other arrangements were arrived at in those years between the Board of Trade, the Russian Trade Delegation, and British traders such as, for instance, timber importers.
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Extract from ‘Armed Truce: The Beginnings of the Cold War 1945-46’by Hugh Thomas
public man on the Left, was at heart half a Marxist. Nor did Sir Stafford Cripps, the influential President of the Board of Trade, appear to have much faith in the future of capitalism. On the strength of having been the ambassador of rapprochement with Russia in 1940, Cripps had used a slogan in the election of 1945, that ‘with a Labour government, we should have much better relations with Russia’.(71)
One minister soon concerned in relations with the Soviet Union was Harold Wilson, the young President of the Board of Trade. His first indication of the nature of power politics came early in his time in office when the Soviet Union wished to buy jet aircraft engines which had strategic uses – the turbine blades were made of a secret steel called ‘Mnemonic 80’. The Foreign Office ‘fought like cats’ to prevent this, but the Board of Trade believed that exports were more important than ideology. The minister approved the idea in the absence of Ernest Bevin in Moscow. These engines were subsequently copied in the new MIG fighters used by Russia all over the world.(72) It was one of the most valuable exploitations by the Soviet Union of the interval between war and open realisation of a ‘cold war’.
Left is an extract from ‘Armed Truce: The Beginnings of the Cold War 1945-46‘ by Hugh Thomas. Once a socialist, Thomas has been chairman of the Thatcherite Centre for Policy Studies since 1979. Lord Thomas, obviously unaware of its significance, told us that he received the information in 1986 from a ‘confidential source’. “My informant was in the Foreign Office at the time, 1947. He told me Bevin was away, when the Foreign Office gave approval.” (Letters 25/6/88 & 11/8/88)
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These pieces right have also appeared though they do not mention Wilson.
Top-right a snippet by Dr. Kitty Little (See Lobster 16 for more on Little) from a pamphlet, ‘Treason at Westminster‘, published by the extremist Lady Birdwood.
The other is from an article by Peter Dally in Asian Outlook (March 1988). Both Dally and Birdwood were involved as British reps to the World Anti-Communist League.
From pamphlet, ‘Treason at Westminster‘, by Dr Kitty Little1. The provision of technology and industry for Soviet military requirements:
This is something that covers a far wider range of materials and products than just guns and weapons. The necessary power supplies, all forms of transport, machine tools, electrical equipment and a host of other items are just as important.
The first of the post-war Agreements was the 1947 Trade and Finance Agreement (Cmnd 7439, 1948) (2), under which a railway system and power stations, together with the equipment required for their operation, were exchanged for a certain amount of grain. The Agreement contained the phrase “such further goods as may be agreed”. Those further goods included Rolls-Royce Derwent and Nene engines, copies of which were used in the Chinese air force planes in the attack on Korea a few years later. The inclusion of such open-ended phrases has been a constant feature of British Agreements with the Soviet Union ever since.
An extract from one of the documents sent to Private Eye in 1974, apparently by MI5
From article by Peter Dally in Asian Outlook, March 1988
It is perhaps worth recalling that when, during the Korean war, the UN and their allies, including UK and US troops, were being attacked by Moscow supplied MIG fighters, it was the British who had so obligingly supplied the original Rolls Royce jet engines. We British wanted to make a friendly trade gesture to that nice ‘uncle Joe Stalin’. How many allied lives that stupid gesture cost has never been assessed, or if it has, it has remained ‘classified’.