The Defence of the Realm (47 page)

For several months SIS in The Hague mistakenly believed that it was on the verge of a spectacular success which would more than compensate for the loss of Putlitz. Soon after the outbreak of war Major Richard Stevens, the SIS head of station, and his colleague Captain Sigismund Payne Best were contacted by Germans claiming to be senior army officers engaged in a plot to remove Hitler from power. The plotters were in reality officers of the Sicherheitsdienst (SD, the SS security service) who successfully deceived Whitehall as well as SIS. Sir Nevile Bland, the British minister in the Netherlands, wrote to congratulate the Chief of SIS, Admiral Quex Sinclair, on the choice of Stevens to conduct the negotiations with the plotters: ‘Stevens is being quite admirable: you couldn't have done better when you chose him.'
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Lord Hankey, Minister without Portfolio but with special responsibility for the intelligence services in Chamberlain's War Cabinet (and previously a long-serving cabinet secretary), was equally enthusiastic, describing a secret report by Sinclair on Stevens's and Best's negotiations with the bogus German conspirators as ‘one of the most cheering documents I have read'.
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Chamberlain too was in optimistic mood, apparently interpreting the German overtures as evidence of growing awareness by the enemy that ‘they
can't
win.' ‘I have a “hunch” ', he wrote on 5 November, ‘that the war will be over by the spring.' Four days later, at a meeting with the supposed German dissidents at Venlo on the Dutch–German border, Stevens and Best were kidnapped by the SD and taken to Germany where they were later given starring roles by the Gestapo in a publicity stunt involving an alleged attempt on Hitler's life.
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Extract of letter (tested for invisible ink) from the German-born British subject and MI5 agent ‘Susan Barton' in the Netherlands to her case officer in London, ‘Dorothy White' (the pseudonym by which she addressed Dick White). ‘Barton' seemed on the point of obtaining a job with the German naval attache in The Hague but was recalled for fear that she had been compromised, following the capture of two SIS officers.

The first that John Curry (probably like other Security Service officers) knew of what had happened was when he read a report in
The Times
that two British officers had been captured at Venlo. Curry immediately rang up SIS to ask if Stevens and Best were the officers concerned.
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The main immediate anxiety of the Security Service leadership in the wake of the Venlo kidnap was for its agent ‘Susan Barton',
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whose identity was known to Stevens. Liddell noted on 12 November: ‘The danger is that Stevens generally carried a list of agents in his vestpocket. Nobody knows at the moment what he had on him.' For her own safety Dick White recalled ‘Barton' to England, thus ending her hope of penetrating the German embassy.
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Despite the kidnap of Stevens and Best, SIS and the Foreign Office still failed to realize they had been taken in. Radio messages from the bogus conspirators, making no mention of Venlo, continued to reach SIS. Finally, on 22 November the SD tired of continuing the charade and sent a mocking radio message to tell SIS it had been duped. ‘So that's over,' Cadogan noted in his diary, though he still thought the original approach from anti-Hitler plotters might have been genuine but subsequently ‘taken over' by the Gestapo.
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The SD's tactical triumph, however, was a strategic mistake. Instead of kidnapping Best and Stevens, German intelligence could have maintained the illusion of SIS and Whitehall that they were in contact with influential opponents of Adolf Hitler and used that illusion as the basis of a long-term deception.

Even after the Venlo débâcle, there seems to have been no serious attempt by either SIS or MI5 (both at the time heavily overstretched) to examine the evidence for Putlitz's conviction that the SIS station in The Hague was either penetrated or, at the very least, leaking highly classified intelligence.
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In particular, no suspicion fell on the assistant to the SIS head agent, Folkert van Koutrik, who had been recruited by the Abwehr as a double agent (codenamed WALBACH) in October 1938.
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Van Koutrik had
betrayed both Putlitz and SIS's longest-serving German agent, Dr Otto Krüger, a retired naval officer who was run by the SIS station in The Hague. Krüger committed suicide in prison shortly after confessing that he had worked for SIS for twenty-one years.
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After the German invasion of the Low Countries in May 1940, van Koutrik and his wife fled to Britain, probably at the instigation of the Abwehr, which doubtless hoped to continue using him as a double agent.
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Van Koutrik, who still aroused no suspicion in SIS or MI5, gave a heroic (though fraudulent) account of his selfless devotion to duty while working as an SIS agent in the Netherlands before his flight:

Certainly within the last two years I worked in constant danger, as the Nazi-power grew bigger and bigger, but I stayed on the job and did my utmost.

When we had to leave Holland which was a matter of hours, together with my wife, (who expected a baby) I destroyed all reports, lists and valuable documents, which took us all the availalble
[sic]
time. . . . I drove my wife and children as well as the family [of the SIS head agent Adrianus] V[rinten] t[h]rough the town, whilst bombing and machinegunning was going on, safe aboard of the ship which brought us over to England.

I am proud to say that, for my part, not a piece of paper, which could lead to the arrest by Germans of our agents, was left in my house. My wife and I, we did not think of ourselves but of the people we left behind. We left the house only with a small case with some children-cloth[e]s.
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Once in England, van Koutrik was quickly taken on by the Security Service to work for E1c, making ‘special enquiries' about the flood of foreign refugees.
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To protect himself against any possible suggestion of responsibility for leaking intelligence from the SIS station, van Koutrik pointed a finger of suspicion at Vrinten, who, he claimed, had destroyed only ‘a small part' of his files, seeming more interested in packing ‘six or eight big cases' of his possessions to take with him to England.
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While working for the Security Service, van Koutrik sought to strengthen his claim that Vrinten, currently employed by the security service of the Dutch government in exile, was unreliable; he reported on a number of occasions that Vrinten was asking him ‘indiscreet questions'.
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For the first time in its history, MI5 was thus penetrated in May 1940 by a German agent – a month before it recruited the Soviet agent Anthony Blunt, of whose past record it was also unaware.
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While van Koutrik was not in the Blunt class, his previous record as the Abwehr's most successful agent operating against British targets, combined with his continuing ability to avoid attracting suspicion, demonstrate that he posed a serious
potential security risk to the Security Service. Though very few details survive of his work for MI5, a note of December 1940 records E1c's total confidence in his commitment to the Allied cause: ‘Since his employment by this Office his duties have been varied, though his greatest success has been as an Agent. In that capacity he has always been very resourceful and I should say that he has always displayed a perfectly genuine faithfulness.' What caused concern in E1c was not van Koutrik's loyalty but his abrasive personality: ‘He has frequently antagonised and offended Officials who might otherwise have been extremely helpful.'
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In August 1941 van Koutrik was sacked from the Security Service with one month's salary on the pretext that there was no longer work for him to do. ‘Is this the way the Government shows her appreciation?' he wrote sarcastically. ‘Very generous indeed.'
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For several months in 1942 Koutrik went on to work for SIS, also interrogating refugees.
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Scarcely had van Koutrik been dismissed than the pre-war German agent William John ‘Jack' Hooper, a British-Dutch dual national who had also worked for the SIS station in The Hague, was taken on by the Security Service. Hooper had been dismissed by SIS in September 1936 – he claimed unfairly – after the scandal caused by the suicide of the head of station, Major H. E. Dalton, and the discovery that Dalton had embezzled SIS funds.
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After his dismissal Hooper volunteered his services to Soviet intelligence, which employed him as an agent during 1937 before breaking contact with him – probably as the result of the defection of a GRU officer who knew of his recruitment. While working for Soviet intelligence, Hooper had also made contact with the Germans and worked as an Abwehr agent in 1938–9. A post-war investigation, largely based on the interrogation of German intelligence officers, revealed that Hooper had disclosed to the Abwehr both that Dr Otto Krüger was an SIS agent (probably shortly after van Koutrik had already done so), and that Soviet intelligence had penetrated the Foreign Office Communications Department (a fact he had learned while working for the NKVD). While working for the Abwehr, Hooper simultaneously tried to mend his fences with SIS by revealing to them also the existence of a Soviet spy in the Communications Department. Initially his intelligence was not taken seriously. When it was shown to be correct, SIS revised its view of Hooper and re-engaged him as an agent in October 1939. After the German conquest of the Netherlands, Hooper, like van Koutrik, moved to Britain. In 1941 he was taken on by the Security Service as an agent-recruiter based (after a trial period in London) in Glasgow.
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Though the Security Service had, unwittingly, taken grave risks in
employing van Koutrik and Hooper, it seems to have suffered little, if any, damage from either case. During post-war interrogations senior Abwehr officers were frank about van Koutrik's work for them up to his departure for England in May 1940 but gave no indication that it continued afterwards. It would have been difficult as well as very risky for van Koutrik to have renewed contact with the Abwehr from Britain, and he may well have been unwilling to take the risk. A post-war inquiry by SIS concluded, however, that, while working for the Dutch security service, he had been ‘disloyal to the Dutch Government in exile', though it gave no details:

He was released after a period of detention by the Dutch authorities after returning to Holland after its liberation merely because the Dutch found it impossible on the existing evidence to bring him to court.

. . .

The man has blood on his hands.
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As in the case of van Koutrik, Hooper's previous career as a German agent was eventually discovered by the Security Service as a result of post-war interrogations of Abwehr officers.
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Again like van Koutrik, it seemed highly improbable that Hooper had tried to renew contact with the Germans after his move to Britain. In August 1945, a month before Hooper was confronted with the evidence against him and sacked, Petrie reported to ‘C':

With the exception of one incident involving rather serious indiscretions with a woman [Hooper's mistress] and a general tendency to high expense claims, I have had no trouble with Hooper and have no reason to suspect that he has been acting other than in the interests of this country. His work, which has been carefully supervised, has in fact been extremely good.
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The success of both van Koutrik and Hooper in penetrating the Security Service, following the earlier humiliation of SIS at Venlo, demonstrates the opportunities available to German intelligence during the first year of the war to mount its own Double-Cross System.
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It would not have been difficult for the Abwehr to make arrangements for van Koutrik to communicate with it after he moved to England, for example by writing under a pseudonym to a cover address in a neutral country. The threat to reveal to the British that he had betrayed both Krüger and Putlitz would have been likely to ensure van Koutrik's continued collaboration. But the opportunity was missed. Nor is there any evidence of a sustained attempt to retain Hooper as an Abwehr agent after the outbreak of war.
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During the first year of the war there was an extraordinary transformation in the balance of intelligence power between Germany and Britain,
marked most dramatically by the fact that ULTRA, the SIGINT obtained from decrypting the variants of the German ‘Enigma' and other high-grade enemy ciphers, began to come on stream in May 1940, the month when Churchill became prime minister. While Germany threw away at Venlo the opportunity for a major, long-term penetration of British intelligence, the Security Service was in the early stages of establishing the spectacularly successful British Double-Cross System.
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The Double-Cross began a few weeks after the outbreak of war when the double agent SNOW met his Abwehr case officer, Major Nikolaus Ritter, in Rotterdam and arranged a further meeting in October to which he promised to bring a Welsh saboteur.
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MI5 sent to the second meeting a retired Swansea police inspector, codenamed GW,
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who successfully posed as a Welsh nationalist explosives expert anxious to sabotage English targets. SNOW and GW returned to England with money, an Abwehr code and microphotographed instructions which included leads to what turned out to be the only two remaining German agents still resident in Britain.
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MI5 identified both. The first, Mathilde Krafft, a German-born British national who was used by the Abwehr to forward money, was put under surveillance but not arrested immediately for fear of compromising SNOW and in the hope that she might produce leads to other agents; she was later interned in Holloway Prison.
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The second, codenamed CHARLIE, was a British businessman who had been pressured into working for the Abwehr by threats to a German relative and was easily turned into a double agent by MI5.
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The code supplied to SNOW and GW later helped GC&CS to discover the basic construction of Abwehr hand ciphers, which were later regularly broken and assisted the capture of other German agents. The first Abwehr decrypt was circulated by GC&CS (which had relocated to Bletchley Park at the outbreak of war) on 14 April 1940. To produce the decrypts, which continued for the rest of the war, a new section was set up at Bletchley, headed by the veteran codebreaker Oliver Strachey. The decrypts became known as ISOS (‘Intelligence Service Oliver Strachey'), informally referred to by some of those with access to it as ‘ice'; its initiates were said to be ‘iced'.
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