The Defence of the Realm (12 page)

The last German spy convicted before the outbreak of war was also probably the most successful. Frederick Adolphus Schroeder, alias Gould, had been born in Germany of an English mother and German father, and after service in the German army had settled in England. Following the failure of various business ventures, he began dabbling in part-time espionage early in the twentieth century. By 1906 he was on the books of the Nachrichten-Abteilung as an ‘observer' (
Beobachter
) of Sheerness and Chatham.
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His most productive period, however, began in 1908 when he became licensee of the Queen Charlotte public house in Rochester, frequented by naval personnel from Chatham. In Steinhauer's professional opinion, Schroeder:

was not a man whom anyone would take for a spy. Had you met him in the street you would have turned round to look at him and said to yourself: ‘What a finelooking fellow!' Broad-shouldered, bearded, nature – plus twelve years in the German Army – had given him a big, athletic frame and a pleasant, cheery manner.
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In May 1912, on Steinhauer's recommendation, Schroeder was given a formal contract by ‘N' and a regular salary of £15 a month. The two men became close friends. One undated letter from Steinhauer (probably among those intercepted by Kell's Bureau) concludes: ‘You are always welcome to us. My children are always asking when Uncle Gould is coming.' From June 1912, Schroeder sent regular fortnightly reports to Berlin, mostly via Wilhelm Kronauer, one of ‘N's' forwarding agents on whom Kell had obtained a Home Office Warrant. Just as he began sending the reports, Melville's assistant detective, John Regan, disguised as a sailor, succeeded in befriending Schroeder, who, he reported, talked freely (if inaccurately)
about how German money was being used to foment a British revolution. It appears to have taken more than a year for the Bureau to discover that, as well as submitting written reports to Steinhauer, Schroeder and his common-law wife, Maud Sloman, also travelled regularly to the continent to meet Steinhauer and other ‘N' officers.
⁹⁴
In February 1914, however, an intercept revealed that Sloman was about to leave for Brussels with a gunnery drill book, charts of Bergen and Spithead, and plans of cruisers. Mrs Gould (as Sloman styled herself) was arrested on 22 February as she was on the point of boarding the Ostend boat train at Charing Cross Station, and found in possession of classified documents.
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Schroeder was arrested on the same day and many more documents were found in his attic. Steinhauer's ‘blood ran cold' when he learned of their discovery. According to Steinhauer, Schroeder had provided ‘more information on naval matters than all other spies put together'. Among the classified documents referred to at his trial were ‘important matters relating to engines, engine-room and engine arrangements of battleships'. In April 1914 Schroeder was sentenced to six years' hard labour.
⁹⁶

By December 1913 the Counter-Espionage Bureau's secret Register of Aliens was almost complete except for London (where about half the aliens lived), and Kell wrote to the Home Office ‘to express our gratitude to the Chief Constables and their Superintendents for the excellent work they have done for us during the last three years' and to request that their local registers ‘be kept under constant current revision'.
⁹⁷
Kell's original plan to use police forces around the country to compile a secret register of all aliens from probable enemy powers (chiefly Germany) had proved difficult to complete because of the scale of the exercise and the limited resources of both Bureau and police. The Home Office had also insisted that no alien was to be asked any question ‘of an inquisitorial nature'.
⁹⁸
The results of the National Census of 1911, however, made it possible to complete a more limited and focused Register of Aliens. During 1913 the Census returns were used to record the particulars of all male aliens aged eighteen and above of eight nationalities (in particular Germans and Austrians) living in areas which would be closed to aliens in wartime. Information on aliens taken from the Census was then circulated for checking to chief constables, who were also asked to take note of those on the Register in their areas.
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Kell's Registry entered the aliens information received from the 1911 Census and chief constables on what were known as ‘Special Cards': the beginning of MI5's card index. The Registry was among the most up to date of its era. In preference to the long-established ledger-based systems,
Kell was one of the first to adopt what was then the cutting edge of data management, the Roneo carding system.
¹⁰⁰
Each alien was allocated a Roneo card with serial number and basic information: name, nationality, date of birth, family particulars, address (home and business), place in the household (whether householder, lodger or servant), trade or occupation, and details of any employers. Any additional information was written on the back of the card. Cards were updated when further information arrived from chief constables. Colour-coding and symbols were added to the cards to enable speedy identification of the level of threat each alien was believed to pose. A yellow wafer-seal indicated a possible suspect, subject to periodic reports from chief constables; a red wafer-seal identified those on a ‘Special War List' of high-risk enemy aliens, subject to special regular reports from chief constables and to surveillance after the outbreak of war. If, in addition to the red seal, the card was marked with a cross (X), the alien was to be searched on the outbreak of war; if with two crosses (XX) he was on a wartime arrest list sent to chief constables. A small hole punched in a yellow seal indicated that the alien was no longer on the suspect list; a hole in a red seal meant removal from the Special War List.
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A majority of the German spies detected by the Counter-Espionage Bureau in the few years before the First World War did not come to trial. Those caught
in flagrante
while procuring classified information were prosecuted under the 1911 Official Secrets Act. Rather than arrest most other identified members of Steinhauer's network, in particular Karl Ernst and the ‘postmen', Kell tried to maintain up-to-date information on their whereabouts and monitored their correspondence in order both to trace their contacts and to be in a position to cripple German espionage in Britain at the outbreak of war.
¹⁰²
Premature arrests risked revealing to the Nachrichten-Abteilung the extent of his knowledge of the existing agent network and leading it to set up a new and more secure network which would be more difficult to penetrate. For that reason Kell also preferred to warn off ‘N's' British sources rather than bring them to trial. He complained in August 1912:

Owing to the fact that it is impossible in this country to hold trials for espionage and kindred offences in camera (as is the custom in continental countries) it was considered contrary to the interests of the State to bring these men to trial, which would have entailed a disclosure of the identity of our informants and other confidential matters.
¹⁰³

The most important of these ‘confidential matters' was that, thanks to Churchill's change in the HOW system, letter checks were far more
frequent than before and had compromised much of Steinhauer's network. Doubtless to Kell's dismay, some of the contents of intercepted letters were used as evidence in the trials of Schultz and Graves.
¹⁰⁴
The Times
report on the Gould trial referred to a number of letters signed ‘St' (though not to the fact that Gould's papers included a signed photograph of their author, Gustav Steinhauer). On 27 March a warrant was taken out for Steinhauer's arrest under the Official Secrets Act on a charge of having procured Gould to obtain information which might be useful to an enemy.
¹⁰⁵
Though Steinhauer later claimed that he had known his letters were being read,
¹⁰⁶
the arrests of his agents on the outbreak of war demonstrate that he was unaware of the scale of the interception of his correspondence with them. During the July Crisis which followed the assassination of the heir to the Austro-Hungarian throne, Archduke Franz Ferdinand, on 28 June 1914 and precipitated the First World War, Steinhauer made a last, daring visit to Britain to contact some of his agents. Kell knew from intercepted correspondence that a jute salesman using the name ‘Fritsches' (previously identified as a probable alias of Steinhauer's) was travelling in Britain, but he lacked the resources to mount close surveillance of all the likely points on Steinhauer's route, and he escaped undetected.
¹⁰⁷
Steinhauer later boasted of how, disguised as a gentleman fisherman rather than a jute salesman, he travelled as far north as Kirkwall.
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On 29 July, six days before Britain entered the First World War, Kell's Bureau began sending chief constables ‘warning letters' with lists of suspected German agents and dossiers on those to be arrested.
¹⁰⁹
During the final days of peace Kell remained in his office at Watergate House twentyfour hours a day, sleeping surrounded by telephones, and – according to Constance Kell's unpublished memoirs – ready to order the arrest of twenty-two identified German spies as soon as war was declared.
¹¹⁰
But for the co-operation established by Kell with chief constables since 1910 the rounding up of the core of Steinhauer's agent network would have been impossible. Never before in British history had plans been prepared for such a large number of preferably simultaneous arrests of enemy agents at diverse locations. With a total staff of only seventeen (including the caretaker) on the eve of war, Kell depended on local police forces for much of the investigation and surveillance which preceded the arrests as well as for the arrests themselves. Nowadays hundreds of Security Service staff and police officers would be required for such a large operation. Kell, however, had neither the staff nor the modern communications systems required to remain in close and constant touch with all the police forces involved. Unsurprisingly, six police forces took independent initiatives.
The Portsmouth police jumped the gun by arresting one of those on Kell's list (Alberto Rosso, alias ‘Rodriguez') on 3 August, the day before Britain went to war. On or soon after 4 August other local police forces arrested seven additional suspects they had identified (apparently on flimsy evidence) whose arrest had not been ordered by Kell.
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Kell's original arrest list no longer survives, but was later reconstructed by the interwar Registry from MI5 files.
¹¹²
Following the premature arrest of Rosso on 3 August, nine further arrests ordered by Kell were made on the 4th, five on the 5th and five more over the next week. The final arrests were made on 15 and 16 August, bringing the total to twenty-two.
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The total included one suspect who was not on the original arrest list: the previously unidentified husband of a female German agent, Lina Heine, who was discovered in her company when she was arrested.
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One spy on the original arrest list, Walter Rimann, a German-language teacher in Hull, was later discovered to have taken the ferry to Zeebrugge on 1 August and never returned to Britain. His intercepted correspondence over the previous two years had revealed recurrent nervousness about his own security, following revelations about Steinhauer's British operations during espionage trials.
¹¹⁵

Though the identification of the twenty-two German agents arrested in August 1914 on Kell's instructions owed much to police investigations,
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the key role usually belonged to Kell's Bureau. At least seventeen (probably more) of the twenty-two had been subject to letter checks under HOWs obtained by Kell which provided the most reliable method of monitoring their contacts with the Nachrichten-Abteilung.
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In the run-up to war Kell's Bureau had also begun to influence government policy, helping to draft legislation ‘to prevent persons communicating with the enemy' and restrict the movement of aliens, which was rushed through parliament after the outbreak of war.
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The twenty men and two women arrested represented espionage threats of very different orders of magnitude. All, however, with the possible exception of Lina Heine's husband, had been in contact with German intelligence and thus clearly represented potential wartime espionage risks. The Nachrichten-Abteilung had no doubt that its British operations had been struck a devastating blow. Gustav Steinhauer later acknowledged that at the outbreak of war there had been ‘a wholesale round-up of our secret service agents in England'.
¹¹⁹
The Kaiser, he recalled, was beside himself with fury when told the news of the arrests:

Apparently unable to believe his ears, [he] raved and stormed for the better part of two hours about the incompetence of his so-called intelligence officers, bellowing:
'Am I surrounded by dolts? Why was I not told? Who is responsible?' and more in the same vein.
¹²⁰

Steinhauer is scarcely likely to have fabricated such a devastating denunciation of his own incompetence.

In the less than five years since the founding of the Secret Service Bureau, Kell had transformed British counter-espionage. He had begun by chasing phantoms. Few, if any, of the first cases his Counter-Espionage Bureau examined involved real spies. By 1912, however, the Bureau was fully focused on actual German espionage. The cases of Parrott and Schroeder, among others, demonstrate that, if unchecked, the Nachrichten-Abteilung might well have collected an impressive amount of intelligence on the strengths and weaknesses of the Royal Navy. The expanded HOW system for authorizing letter checks and the data-management system of the Registry laid the foundations for MI5's future development. The small scale of the Bureau's resources made its achievements the more remarkable. Its staff were fewer in number than the spies whose arrest it ordered in August 1914.