World Famous Spy Scandals

by Vikas Khatri

  D. Late 20th Century

  In the mid-1970s, as a result of disillusionment with the Vietnam War, the Watergate scandal, and the policies of détente, many Americans began to question the role of the CIA. Mass-media disclosures of intelligence agency abuses and failures were followed by investigations by presidential commissions and congressional committees, which resulted in new guidelines for secret operations and a new structure for executive and legislative supervision. Controversy over the CIA’s role and control remains, however. One result is an ever-increasing amount of public information about intelligence services around the world.

  E. Espionage in Politics and Industry

  Intelligence and espionage are terms most commonly associated with national foreign policies, yet secret information is needed to make decisions in politics, commerce, and industry. Political parties have always been interested in the strategic plans of their opponents or in any information that might discredit them.

  Most large corporate enterprises today have divisions for strategic planning that require intelligence reports. Competitive enterprises are undeniably interested in the plans of their competitors; despite laws against such practices, industrial espionage is difficult to detect and control and is known to be an active tool for gaining such foreknowledge. Many of the tools of government intelligence work are used, including electronic surveillance and aerial photographic reconnaissance, and attempts are even made to recruit defectors.

  F. Implications of Modern Technology

  All forms and techniques of intelligence are now aided by an accelerating technology of communications and a variety of computing and measuring devices. Miniaturised cameras and microfilm have made it easier for persons engaged in all forms of espionage to photograph secret documents and conceal the films. Artificial satellites also have an espionage function—that of aerial photography for such purposes as detecting secret military installations. The vanguard of these developments is highly secret, but it is known that telephones can be tapped without wires, rooms can be bugged (planted with electronic listening and recording devices) without entry, and photographs can be made in the dark. Of course this same technology is used in countermeasures, and the competition escalates between those seeking secret information and those trying to protect it.

  In foreign embassies in sensitive areas, confidential discussions routinely take place in plastic bubbles encasing secure rooms, to protect the confidentiality of information. Intelligence agencies have long been known to be staffed with expert lip readers. Privacy of communications remains under constant assault by technological developments that offer threats to, but perhaps also promises for, human progress.

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  Vernon Kell: Curse of the Kaiser

  German agents began infiltrating Britain to prepare for World War I as early as 1902. The authorities took little interest. Then, with the setting up of MO5, later renamed MI5, the police at last found someone who took their espionage warnings seriously. And Vernon Kell, taking on the might of German intelligence single-handedly, realised Scotland Yard’s Special Branch men were vital allies. He started close co-operation with Superintendent Patrick Quinn. It paid off just 12 months later.

  Kaiser Wilhelm II came to London in 1910 for the funeral of King Edward VII. In his party, there was a naval captain known to be a spymaster. He was trailed to a seedy barber’s shop run by Karl Gustav Ernst in the Caledonian Road. It was an unlikely choice for a gentleman who only wanted a haircut. Kell applied for permission to intercept the barber’s mail. He discovered that Ernst was Germany’s intelligence post-master. Berlin sent him packages containing individual letters of instructions for their agents, to be posted in London. The agents sent back their reports via Ernst’s shop.

  Kell and Quinn then played a waiting game. Detectives kept watch on every agent unmasked, but it was vital not to alert them to this fact because the Germans would then replace them, or find new ways of contacting them. It was also important to trace every member of each agent’s network. Only when it became obvious that crucial secrets were about to be relayed to Berlin did the counterespionage forces strike. Where possible, information and instructions were merely doctored by the interceptors, sometimes using expert forgers from Parkhurst jail. But some arrests were essential – if there were none, the Germans might smell a rat.

  One of Kell’s problems was that espionage was not taken seriously by the law. German army lieutenant Siegfried Helm, caught red-handed making detailed sketches of Portsmouth’s dockyard defences, was merely bound over to keep the peace and released by a court. Spying in peacetime was not considered an offence.

  Kell campaigned for changes in the Official Secrets Act, and in 1911 it was amended to cover collection of information which might be useful to an enemy in future wars. Kell could now prosecute such spies as Dr Armgaard Karl Graves, jailed for 18 months at Edinburgh for snooping on the Navy’s Rosyth base and collecting information about weapons from Glasgow companies; Heinrich Grosse, tried at Winchester in 1912 after amassing a huge dossier on ships, submarines and artillery at Portsmouth; and Frederick Adolphus Schroeder, imprisoned for six years in April 1914. As Frederick Gould, he used German intelligence funds to buy the Queen Charlotte public house in Rochester, near the top-secret Chatham dockyard, in 1902. Kell had known about him since 1911, but only pounced when his wife set out by train for Brussels with sensitive data on guns, cruisers and minefields in her bag.

  Kell’s finest hour came when war was declared on August 4, 1914. Before dawn on the following day, he and the Special Branch, now led by Sir Basil Thomson, had arrested Ernst the barber – paid £ 1 a month by the Germans – and 23 other spies. Germany’s entire intelligence network in Britain were wiped out as agents were seized in London, Newcastle, Barrow in Furness, Portsmouth, Southampton, Brighton, Falmouth and Warwick. German armies battling the French near Mons were amazed to encounter British troops when they tried to outflank their enemy. The British Expeditionary Force had slipped unnoticed across the Channel to the trenches. The furious Kaiser exclaimed: ‘Am I surrounded by dolts? Why have I never been told we have no spies in England.’ Gustav Steinhauer, who called himself the Kaiser’s Master Spy, had no answer.

  The Germans tried to form a new network, but with little success. Kell and Thomson supplemented their vigilance with newspaper propaganda campaigns whipping up spy hysteria, and reports of suspect neighbours flooded in. One spy, posing as a Norwegian journalist, was suspected because he was too quiet in his rooms. Detectives discovered invisible ink in a bottle marked gargling lotion.

  Two Dutchmen arrived in Portsmouth, posing as cigar salesmen. Their reports to Rotterdam were disguised as orders, 5,000 Coronas representing five warships about to sail. Kell’s postal censors were puzzled by the sudden popularity of cigars in Hampshire and detectives were called in. The two spies were arrested and shot. Another agent toured Britain as a music hall trick-cyclist. Censors discovered messages in invisible ink on English song sheets he was sending to Zurich.

  Kell made brilliant use of another detected spy. Carl Hans Lody, a German naval reserve officer who had been living in America, landed in Scotland posing as an American tourist in September, 1914. He immediately sent a telegram to his contact in Sweden saying, ‘Hope we beat these damned Germans soon.’ It was a suspicious communication between representatives of countries supposed to be neutral. Lody was tailed as he travelled round England. The watchdogs could not believe their luck when they discovered he was sending to Germany as fact a British propaganda story stating that Russian troops were landing in Scotland to reinforce the Allies in the European trenches. Lody was later nicknamed the spy who cost Germany the war. Two divisions were withdrawn to watch Channel ports for the Russian arrival, weakening the Kaiser’s forces for the vital Battle of the Marne which the Germans might otherwise have won. Lody was eventually arrested and shot at the Tower of London in November 1916.

  British intelligence also detected the amorous activities of over-rat
ed sex spy, Mata Hari. Gertrud Margarete Zelle, born in Holland, took the name Mata Hari (it meant Eye of the Morning) when she became an erotic dancer in Paris. During the war, she cashed in on the pleasure sex gave her by sleeping with important military figures on both sides, and selling what they told her to the enemy. In Paris, Berlin and Madrid, she plied her erotic espionage trade, though the secrets she passed were seldom of much value. In 1916, her ship to Holland docked at Falmouth, and she was escorted to London for interrogation. If she persisted in consorting with the Germans, she was warned, she would be in trouble. Mata took no notice. She was later arrested by the French, and shot on 15 October, 1917.

  Only one spy escaped the notice of Kell and Thomson – they only learned about him when he wrote his memoirs back in Germany in 1925. Jules Silber could pass as an Englishman after travels in India, America and South Africa. He fought for the British in the Boer Wars, which helped gain him a job in the postal censor’s office when he turned up in London in 1914, offering his services. He regularly sent the Kaiser dossiers on what he learned from reading other people’s letters. His own mail went undetected because he could stamp it ‘passed by the censor’. Silber’s most spectacular success was warning Germany about the Q-ships. A girl wrote that her brother was involved in a strange scheme to put guns on old merchant ships. Silber posed as a censor to call on her and warn against future indiscretions. Before he left, she had revealed all he needed to know about the innocent-looking cargo carriers camouflaged to protect Atlantic convoys against German submarine attack.

  Silber’s information was a rare naval coup for the Kaiser’s fleet. For most of the war, British Naval Intelligence under Admiral Sir Reginald Hall – nicknamed Blinker because of a nervous tic in one eye – ruled both the ocean and air waves. Hours after hostilities began, a British ship sliced a hundred yards of cable out of Germany’s main under-water telecommunications link with the outside world. This forced the Kaiser’s forces to send messages by radio, which could be intercepted at listening stations along the English south coast. The messages were then decyphered in Room 40 of the Admiralty building in London, using naval code books taken during an engagement with the German cruiser Magdeburg on 26 August.

  Hall got his hands on the enemy’s diplomatic code when a German guerrilla harrying British forces in Turkey fled abandoning his baggage. When a new German transmitter began broadcasts from Brussels, using another code, Naval Intelligence learned that the staff included a British-born cypher clerk called Alexander Szek, who still had relatives living near Croydon in London. Szek agreed to copy the code book, piece by piece. When he completed the task, he vanished. Mystery still surrounds exactly what happened. The British said the Germans discovered his treachery and executed him. French sources claimed that a British agent smuggled Szek out of Brussels to prevent the Germans to learn their code, then pushed him off ship in the middle of the English Channel to ensure he stayed silent. Another version is that he died in a hit-and-run ‘accident’ in a Brussels side street. Whatever the cause, Szek’s death proved that the British no longer considered espionage a game. It was now a matter of life and death.

  Control of the German codes enabled Admiral Sir Reginald Hall to fool the Kaiser with deliberately false messages. In September, 1916, he arranged for one of his agents to leak an emergency code to the Germans, then signalled that ships were sailing from Dover, Harwich and Tilbury with troops to invade the north Belgian coast. To authenticate the information, he had 25 special editions of the Daily Mail newspaper printed, with a spurious story about preparations at ‘an East Coast base’. Copies were smuggled to Holland, and passed surreptitiously to German agents. The ploy worked almost too well. The German High Command detached a large force from the trenches and moved it to the coast. But a War Office agent, not told of the subterfuge, warned Whitehall the movement heralded a plan to invade England. The War Office started preparing to evacuate south-east England until it was let in on Hall’s secret.

  Hall’s most significant part in winning the war was the Zimmermann Telegram. The code Szek provided enabled Room 40 decipherers to read a message from the German Secretary of State, Arthur Zimmermann, to his ambassador in Mexico City in January, 1917, warning that unrestricted submarine attacks on neutral Atlantic convoys were about to start, and instructing the envoy to organise Mexican attacks on the southern United States if America entered the war. Hall ensured that the message reached the White House in a way which clearly proved it was not a British invention. Together with the sinking of the liner Lusitania, the telegram forced the United States to abandon its policy of isolation three months later. It was the turning point in Allied fortunes.

  Hall, Thomson and Kell had done as much as anyone to earn the victory that finally came on 11 November, 1918. They were abetted by Commander Mansfield Cumming, first chief of the Special Intelligence Section, later MI6, which was founded in 1912 for offensive espionage abroad. One of his agents is said to have alerted Hall’s Naval Intelligence to the possibility of using Alexander Szek to obtain the Kaiser’s code. His name was Sidney Reilly.

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  Coomar Narain Episode

  John Galbraith, the former American Ambassador in India, once remarked that the bureaucracy in India can be treated as an extension of western espionage network. At that time, this statement seemed to be absurd. When the above episode came to surface, it proved that the assessment of Galbraith was correct to some extent. This is the astonishing story of an espionage ring whose tentacles reached from the office of the President of India to the secretariat of the Prime Minister.

  The day was Army day and the date was January 15, 1985. The lawns of the Army Headquarters were crowded by almost all the important personalities in India. The President was there and so was the Prime Minister. Senior members of the Union cabinet rubbed shoulders with high ranking army officers, defence advisors of different Embassies in New Delhi and senior administrative officers of Government of India. The Principal Secretary to the Prime Minister, Dr. P.C. Alexander was engaged in conversation with the Secretary of the Defence Production Department. The military attache of the French Embassy, Col. Alain Bolley was standing nearby.

  Also present were a large number of agents of the different intelligence agencies in India. Their eyes were fixed on these people. This was being done for the last two months under a 24 hour surveillance plan. This strict surveillance was rewarded within two days, when the biggest spy scandal in the history of Free India was unravelled and left the entire nation stunned.

  During the night of 16th January, the Intelligence Bureau raided the offices of S.L.M. Maneklal situated at 16, Hailey Road. This firm represented many industrial machinery manufacturers of western Europe. It may be mentioned that the firm of S.L.M. Maneklal had prospered at a phenomenal rate during the last few years. Two persons, who were found drinking there, were arrested. One of them was Coomar Narain, a liaison officer of the firm of Maneklal and the other was P. Gopalan, Personal Assistant of the Principal Secretary to the Prime Minister.

  Immediately after this, the team of detectives arrested Jagdish Chandra Arora from his residence. He had to be awakened from his sleep. Arora was Personal Assistant to the Secretary of the Defence Production Department. The arrests and searches continued for the whole day on 17th January. These operations could be completed only during the night of 17-18 January.

  On January 18, 1985, the Prime Minister Rajiv Gandhi reached the Parliament and gave details of this episode to the members of that august body. The Prime Minister was visibly upset but his mood was confident as most of the persons involved in this nefarious activity had been nabbed. He regretted that many persons occupying positions of trust in the government had turned out to be traitors to the motherland.

  The military attache of the French Embassy was asked to leave the country. Consultations and analysis started about the foreign involvement in this spy scandal. The administration was really worried about the involvement of so many officers occupying re
sponsible posts in this conspiracy. They were, T.N. Kher, Personal Secretary to Dr. P.C. Alexander, the Principal Secretary to the Prime Minister, S. Shankaran, Assistant to the Press Secretary of President Zail Singh; two assistants of the Prime Minister’s secretariat – A.K. Malhotra and Udai Chand; Jagdish Tewari, who was a senior assistant in the Economic Affairs Department and Jagdish Chandra Arora who was a personal assistant in the office of the Secretary of Defence Production Department.

  Kher had been in service for fifteen years and lived in an excellent house in Pamposh colony. Gopalan lived in Ramkrishnapuram. Coomar Narain lived in his own two storeyed house in the posh locality of Defence colony. He also had an agricultural farm in Mehrauli area.

  After a thorough investigation, it was confirmed that Coomar Narain was the leader of this gang. He was getting a salary of Rs.7000 per month from his employers but greed for more money led him into spying work. At the time of his arrest in the office at Hailey Road on 16th night, three confidential documents were found in the brief case of Gopalan. These documents were prominently marked ‘Secret’. The other documents recovered from Coomar Narain’s office in the raid on January 17 are listed below:

  Confidential reports of Intelligence department, Research and Analysis Wing (RAW) and Defence Ministry including 23 bottles of expensive foreign Scotch and Rs. 1,02,890 in cash were found.

  A report of the Research and Analysis Wing sent by the Deputy Director of Cabinet Secretariat and addressed to the Principal Secretary of the Prime Minister was found.

  Extremely confidential report sent to Principal Secretary, Alexander by Shri R. K. Bhatia, Deputy Director of Intelligence department was found. This report was based on secret information received upto 10th January. It was related to surveillance of the activities of the terrorists.

  The report from Intelligence department dated January 15, 1985, containing details of some speeches was also found.