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It is the only post-Special Branch court appearance that we know of by Melville, and it could well be that he had seen Steinhauer on that boat and knew that Steinhauer had seen him. If so, his appearance was a signal, almost a challenge to his German opposite number.

Quite soon after the trip to Ostend, Warrant Officer Parrott was sacked on Admiralty orders following an official inquiry. He and his wife moved to Battersea, to Juer Street off Parkgate Road near the Albert Bridge, and he began to send and receive mail through a newsagent's shop across the river in Chelsea. He made regular trips to Germany.
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In October or November he visited Hamburg. In November, the lodgings in Battersea were raided. Bank books were found; as a Warrant Officer he would have been paid around £20 a month, but there were records of mysterious deposits to his account as well as proof of the trip to Germany, and thirty-five guineas in cash in a writing desk. The formidable Mrs P had a word with the searchers and the guineas stayed put.
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Parrott, in the dock, underestimated the strength of the case against himself. He came up with cock-and-bull stories about who the man at Ostend was (someone apologising for the nonappearance of his date, a lady picked up at the Palace Theatre) and about questions he had promised to answer concerning the Firth of Forth (for a newspaper article). Earlier he had told the police that he met no one in Ostend, but he had been ‘protecting the identity of a lady'. The more excuses he made, the deeper the hole he dug himself into. The jury took only half an hour to find him guilty. Fortunately for him, the unlikely story of the seductive Mrs Hentschel had seized the imagination of Mr Justice Darling, who said ‘You abused the trust which was placed in you… Of any one in the service of the Crown it is impossible to imagine a graver offence than that…' and then sentenced him to four years, rather than the possible seven, of penal servitude because ‘I think you were probably entrapped'.
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There was a sequel. Hentschel went to Australia and in Steinhauer's account ‘for some time money was sent to him to keep him quiet'. Hentschel's contact in Berlin was Colonel Torner – Steinhauer himself. For several months German Secret Service funds leaked unproductively to Hentschel's antipodean hideaway; but one day in June 1913, an item appeared in a London paper stating that Colonel Torner, of the German General Staff, had been lost overboard in mid-Atlantic. Hentschel received a cutting in the mail. He wrote a threatening letter from Sydney to Berlin, to the effect that he was not born yesterday. His wife had had diphtheria; the medical bills were huge. He wanted either a stream of remittances, or ‘re-engagement under a different name, but the same salary'. If he didn't get either, he would go to the English newspapers or the English security services. And then ‘Germany will have a startling row'.

It was not the most diplomatic way to approach an employer. His letter was ignored. In October 1913 Hentschel turned up at Chatham Police Station and surrendered himself as a spy. He wanted to be arrested, he said. They told him to push off. So he went to London and walked into the police station in Old Jewry where somebody took him seriously and he obtained an audience with concerned authority, probably Cumming and/or Kell. In exchange for money he was able, according to Steinhauer, to tell them all about ‘his activities with Parrott from 1910 onwards'. He must have told them everything he knew, because when he appeared in court the prosecution – led, once more, by Archibald Bodkin – declined to pursue the case. Karl Hentschel and his wife, under her maiden name of Riley, remained on the list of persons to be jailed in case of war. At the outbreak of hostilities his address was listed as unknown and she was removed from the ‘jail' list and marked ‘search'. Hentschel, at least, had left to start a new life elsewhere.

By the end of 1912 Special Branch (which retained the power of arrest that MI5 officers did not have), Cumming, Kell and Melville were established in separate offices within half a mile of each other, strung along the north bank of a bend in the River Thames. Special Branch was of course at Scotland Yard, on the southern end of Whitehall close to the Houses of Parliament. Cumming was based a few hundred yards further north, high in a Victorian Gothic warren of offices called Whitehall Court that overlooked the river, from which he ran SIS – Secret Intelligence Service – agents overseas. Beyond Whitehall Court, past Charing Cross, the Thames swings east and in the 1920s the old Adelphi building, with its vaults and passages, ranged along the riverbank. In September 1912 Kell moved a few hundred yards west of Temple to the third floor of Watergate House, York Buildings, Adelphi. MI5 mail was forwarded from ‘Kelly's Letter Bureau, 54 Shaftesbury Avenue' (Kelly was a name he often used.) By the summer of 1913 he was a major with three captains working under him: Drake, Holt-Wilson and Lawrence. Drake was the one Melville would have most to do with. The other two gathered, filed and sorted information, but Drake was involved with action on known agents and counter-agents.

The German Secret Service officers, compared with the British, had a fatal flaw: arrogance. The glass ceiling of class was present in the SSB too, but Melville was respected. When, in 1909, an extra layer of management was introduced and his involvement with agents overseas diminished, MacDonogh took pains to include him in the new MI5 set-up; he knew the value of his broad experience and took his opinions seriously, and so did Kell. Melville was allowed to run his own show
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in Temple Chambers, later with the help of Regan and, from 1913 onwards, another ex-policeman called Fitzgerald.

Steinhauer, on the other hand, bemoaned more than once the stupidity of his superiors in Berlin. The notorious strutting conceit of the Prussian military and naval top brass, personified in Kaiser Bill, seems really to have existed. Why else would German intelligence have refused to listen to the common-sense view of an experienced policeman like Steinhauer? They were completely taken in by Wilhelm Klauer: a puny, unqualified, Portsmouth tooth-puller who lived off the earnings of his wife, a prostitute. He offered to spy for Germany. Steinhauer, having looked into the man's background and mode of life, advised against having anything to do with him, but Berlin went over his head and started sending him money. When Klauer (in England he was known as Clare) was asked for the results of the latest British torpedo trials, he asked his German hairdresser friend Levi Rosenthal to help. Rosenthal nodded wisely, appeared to go along with the plan, and told a friend of his – a town councillor – that he had been approached.

Not only had Rosenthal a sharp eye for a dangerous situation, but he was unable to read and write; Klauer could not have picked a more unsuitable partner in crime. Acting on instructions, Rosenthal strung him along; Klauer was watched by Melville & Co. and led into a trap. He got five years' hard labour.

Steinhauer, by his own account, had no idea that Klauer had ever been hired, or arrested, or jailed; so when he went to Portsmouth to check up on him out of curiosity in June 1913, three months after the trial and the publicity, he almost got arrested.
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Klauer was otherwise insignificant, but MI5's next major case was the most important spy the British had yet brought to justice. In Steinhauer's view Frederick Adolphus Gould ‘was able for something like eleven years to forward to Germany more information on naval matters than all our other spies put together'. He was a tall, powerfully-built man who had spent twelve years in the German navy, and his real name was Schroeder. But he spoke English like a native, for his mother was English. According to Steinhauer, Gould had worked for the German Secret Service in the 1890s and stopped, and had then been reintroduced to them by an Englishman of dubious motive called Stevens. Stevens worked for France and Russia and around 1902 obtained some British naval information which he induced Gould to offer to Germany. Steinhauer claims that he frightened Stevens into the background by tricking him into thinking that Melville and Special Branch were onto him, waited a while and then turned his own attention to Gould. It was Gould who had been showing Steinhauer around Chatham Dockyard in 1902 on the occasion when Le Queux spotted the German policeman.

Walking boldly into the enemy's lair, so to speak, was typical of Gould. He was just a little too reckless. But his material was reliable and informative, and in 1908 he persuaded the German Secret Service to set him up as landlord of a pub at Chatham. This was the Queen Charlotte, from which he passed on tidbits of gossip from the naval ratings who were his customers until the end of 1913.

According to Steinhauer, Schroeder worked with Stevens all along, and his decision to leave the Queen Charlotte came when their partnership was dissolved. Stevens's involvement begs questions, but at any rate Gould's recklessness now proved his downfall, because the pub's incoming tenant found incriminating documents in the attic and informed the authorities. The papers included maps and a letter to ‘Dear St' (Steinhauer) asking for money.

If Schroeder had indeed parted company with Stevens he was continuing in business on his own, because at his new address at Merton Road, mail was still passing to and from the German Secret Service. Through an intercepted telegram it was learned that Mrs Schroeder would soon be delivering material to ‘Schmidt' (a Steinhauer alias) in Brussels. She was arrested at Charing Cross Station.

In her possession were found an English Admiralty chart of Spithead, a gunnery drill book, and certain confidential drawings dealing with the engine rooms of battleships which had clearly been obtained by someone connected with espionage.

Schroeder, entirely ignorant that his wife was in custody, was also arrested shortly afterwards. When the police came to search his house they discovered more fatal documents. Valuable as he had been as a spy, he had been unutterably simple when it came to destroying traces of his guilt. The police found in his possession a paper containing a list of thirty-odd highly important questions relating to the English navy which no man in his sane senses would have kept about him.
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Steinhauer's account must be treated with caution as it was edited and given a decidedly pro-British, pro-Melville slant by Sidney Felstead seventeen years after these events. Felstead's account was approved by Basil Thomson, the jingoistic Scotland Yard Assistant Commissioner in charge of the CID from 1913. Readers were kept in ignorance of MI5 or the Special Section within it, as Steinhauer refers to Special Branch, and Melville, but never explains exactly who Melville is working for.

Steinhauer's MI5 file shows that Gould's capture was the most important so far.

In March 1914 after Gould's arrest, F Reimann [Steinhauer], a traveller in jute, wrote to William Schutte, son of Steinhauer's agent Heinrich Schutte, stating that he was coming to England and asking whether it was worth while coming down to Portland. The reply was to be sent to the Wilton Hotel, but on 29th March Reimann wrote to the hotel from Antwerp asking the management to forward letters to Hamburg, and it is doubtful whether he ever came.

His correspondence with agents here during the latter half of March shows that he was aware of danger in coming here. The Times' report on the Gould trial mentioned the following documents:

Incriminating letters signed ‘St' dated 1904.

Friendly letters signed ‘St' dated 1914.

A picture postcard photograph of Gould's correspondent dated 8th December 1913.

A Cabinet photograph on the back of which the words London, February 1913 were written in ink.

The fact that this photograph represented a man in police uniform and was signed ‘G. Steinhauer' was not reported.

On 4th April 1914 the Continental Daily Mail, also reporting the trial of Gould, referred to the search made by the British Secret Service to establish the identity of the agent who signed himself Schmidt, RH or CF, Peterssen, P, and Richard, aliases used by Steinhauer in the Gould, Grosse and Parrott correspondence.
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Steinhauer was being told in no uncertain terms via the
Continental Daily Mail
that SSB existed, was onto him, and had evidence to bring a case against him. On 26 March Steinhauer's photograph was circulated to Dover, Folkestone, Queenborough and Harwich and evidence submitted to the DPP. A solid case would also require proof that he had actually procured Gould to obtain information which might be useful to an enemy, and in support of this telegrams were produced in which Gould had asked for money for his services in 1912 and Steinhauer had sent it by registered post. There were also letters to Holstein. On 27 March an arrest warrant was issued.

Three months later, on 28 June, the Austrian Archduke Franz Ferdinand was shot at Sarajevo and, thanks to the network of protective agreements now in place, war between the superpowers was imminent: but when? Steinhauer was ordered back to England.

At the end of June, 1914… I found myself on the Belgian coast anxiously asking how I should get into England, in what guise, and more important still, how I could trick my old foe at the War Office in Whitehall.

I knew him, oh yes, and he knew me. Would he, or some of his men armed with my photograph, be waiting for me at Dover?

Well, yes. His book claims that he put the British off the scent with fake postcards to be sent via the Caledonian Road. Whatever he did, it worked; he did at least get to London unnoticed. There, he claims that he went to Becker's Hotel in Finsbury Square where a jumpy waiter called Albrecht wanted him gone because Scotland Yard men were hanging around. Steinhauer moved on. He visited Mrs Hentschel at Chatham but she

…was anxious only that I should be gone, for, as she said bitterly, the English people had given her a terrible time ever since the exposure of Parrott.

Another spy, a Sittingbourne photographer called Losel, was also ‘very uncomfortable and anxious to get rid of me'.
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It seems that by this time fear was overtaking the network. Most of these minor players recognised that war was coming and when it did, they could risk long jail sentences or worse. They were sorry they had ever got involved.