Churchill's Spy Files

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.

[XXX]*

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

C. General Security Measures

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

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

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

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

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

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

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

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

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